Author: therawinformant

The A2 Milk Company Ltd (ASX: A2M) share price is synonymous with growth investing. It has gained a remarkable 3436% since listing in early 2015. A2 Milk’s share price has been largely unaffected by the COVID-19 pandemic this year, with the New Zealand based company benefitting from some serious tailwinds.

As the All Ordinaries (INDEXASX: XAO) has lost ground, dropping over 9% since the start of the year, the A2 Milk share price gain of 38% can be seen as all the more impressive.

What tailwinds have caused A2 Milk to rise?

The A2 Milk share price has seen consistent growth over the year, pushing aside worries surrounding COVID-19 and embracing the tailwinds resulting from the pandemic.

With the fear of impending lockdown restrictions in early March, consumers rushed to supermarkets to strip shelves bare and stockpile necessities. As a result of this rapidly changing consumer purchase behaviour, A2 Milk saw revenue soar for Q3. 

Furthermore, the company’s China segment delivered some strong revenue figures in Q3. Transacting in US dollars, this segment benefitted from a sharply depreciating New Zealand dollar through March which saw revenue favourably impacted. 

The coronavirus crisis also helped reduce A2 Milk’s overhead costs. These tracked lower than expected due to travel restrictions and planned recruitment, particularly in China, being delayed. Despite the uncertainty surrounding the pandemic, the company still managed to announce further, upcoming expansion into the Canadian market.

A2 Milk share price rising on strong financial results

In February, A2 Milk’s share price posted gains of more than 6% with the company announcing strong, half year results. Some of the highlights of this release were as follows:

• Total revenue increased to NZD$806.7 million which was an increase of 32%
• EBITDA also increased up 21%

These results showed the company had made substantial gains in both revenue and earnings. Strong performances were reported in the key product segments of infant nutrition and liquid milk across core markets.

Later in April, the company provided the market with another positive trading update in which it noted continued strong revenue growth across all key regions, particularly with respect to infant nutrition products sold in China and Australia. The company also increased its predicted full year EBITDA margins up to 31-32%. 

What now for A2 Milk?

Despite its recent strong, share price growth, I believe investors in A2 Milk still have cause for optimism. Short term, a level of panic buying has returned, thanks to the recent COVID-19 outbreaks in Melbourne, which is likely to benefit the company’s revenue and share price. Longer term, there is growing, global demand for premium dairy products, particularly infant formula in Asia, and A2 Milk is continuing to cement its international presence. Since the end of June, the A2 Milk share price has continued its impressive run to currently trade at $19.80.

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• a2 Milk and 1 other quality ASX share to buy right now

Motley Fool contributor Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why the A2 milk share price gained 38% in the first half of 2020 appeared first on Motley Fool Australia.

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If you’re looking to make your first investment in the share market, then you’re in luck.

I believe there are a good number of ASX shares which have the potential to generate strong returns for investors.

If you have just $500 to invest, then I would suggest you think long-term. This is because brokerage costs will inevitably eat into your profits if you are constantly buying and selling shares.

But which shares should you buy? I think these 3 ASX shares would be great long-term options for a $500 investment:

Electro Optic Systems (ASX: EOS)

Electro Optic Systems is an exciting company which I believe could be destined for big things. It is Australia’s largest aerospace company and the largest defence exporter in the Southern Hemisphere. I’m a big fan of the company due to its highly experienced team and the long-established partnerships it has with major global aerospace giants. Another big positive is that it has just entered into contract negotiations with the Australian Government for the acquisition of 251 Remote Weapon Stations and related materiel. Combined with its massive backlog of work, I believe it is well placed to deliver solid earnings growth over the next few years.

Nearmap Ltd (ASX: NEA)

Another option to consider buying with the $500 is Nearmap. It is an aerial imagery technology and location data company with operations in the ANZ and North American markets. Although FY 2020 has been a tough year and it is going to fall short of its original guidance, this underperformance was largely out of the hands of management. In light of this, I think investors should look beyond this short term weakness and focus on its very positive long term outlook. Nearmap’s high quality software has given it a leading position in a highly fragmented market currently worth $2.9 billion per year. This is materially more than the annualised contract value (ACV) of $103 million to $107 million it now expects to achieve in FY 2020. Furthermore, Nearmap has the option to increase its addressable market by expanding into other territories in the future.

NEXTDC Ltd (ASX: NXT)

NEXTDC is an innovative data centre-as-a-service provider which I think could be a great option for a $500 investment. It has a growing number of centres in key strategic locations across Australia which are providing the infrastructure platform for the digital economy. Demand for capacity in its centres has been so strong this year the company has had to bring forward expansion plans. This appears to have put it in a position to report a very strong full year result next month. And with the cloud computing boom expected to accelerate over the next decade, I believe NEXTDC is well-placed to deliver strong earnings growth for the foreseeable future.

More reading

• 4 excellent ASX growth shares to buy in FY 2021
• Why the Electro Optic Systems share price fell 16% in June
• 3 exciting ASX tech shares to buy and hold for a decade
• Why I would buy Nearmap and this mid cap ASX share right now
• Pointerra share price soars 77% on $2.5 million placement to tech entrepreneur

James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Electro Optic Systems Holdings Limited and Nearmap Ltd. The Motley Fool Australia has recommended Electro Optic Systems Holdings Limited and Nearmap Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Where to invest your first $500 into ASX shares appeared first on Motley Fool Australia.

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ASX share prices are always changing, so the best investment pick may change as the values change.

For much of the last four months one of my preferred investment ideas was Pushpay Holdings Ltd (ASX: PPH). However, the strong Pushpay share price performance has meant I’m now looking at other shares as investment ideas.

It’s getting harder to choose good value ideas right now because of how strongly the high quality growth companies have performed.

But I still think there are some good choices out there. I’d happily invest in these two ASX share ideas today:

Share 1: Vitalharvest Freehold Trust (ASX: VTH)

This is an agricultural real estate investment trust (REIT) which is currently invested in berry and citrus farms. These farms are among the largest in Australia. Food is important, particularly in these COVID-19 times. 

There is a value play here. At 31 December 2019 the REIT said its net asset value (NAV) was $0.95 per share. This means, assuming the same NAV, the Vitalharvest share price is trading at a 20% discount to the NAV.

What’s of more interest to me is the Primewest Group Ltd (ASX: PWG) involvement. The fund manager has come in to take over the management whilst also taking up a sizeable stake of the food REIT.

It plans to change the name to Primewest Agri-Chain Fund and invest in a wider group of different assets (not just farms) including processing and manufacturing facilities for food, food and beverage packaging facilities and storage facilities related to food. It may also find opportunities in New Zealand, not just Australia.

I think the shift to new management and taking on an acquisition strategy could be a smart move to diversify Vitalharvest’s asset base. Primewest is going to aim for high-quality locations with long-term leases for the ASX share.

Using the current distributions for 2020, it offers a distribution yield of 6.25%.

Share 2: Bubs Australia Ltd (ASX: BUB)

I think plenty of ASX growth shares right now are a bit too pricey to get into my portfolio. However, I think Bubs is well placed to become a much larger business over the long-term.

It’s an infant formula business with a specialty in goat milk products. I’m encouraged by the growing distribution network that Bubs has created to get its range of products out to as many consumers as possible. It’s now sold through Coles Group Limited (ASX: COL), Woolworths Group Ltd (ASX: WOW), Baby Bunting Group Limited (ASX: BBN), Chemist Warehouse and Alibaba.

It usually takes a while for consumers to become aware of, and trust, a new infant formula brand. Bubs’ current distribution network has good growth potential for the next few years as it builds its brand presence.

I’m also excited by the new (cow) organic grass fed infant formula that Bubs has launched, which opens up a much larger addressable market for the company.

Recent growth has been really good for the ASX share. In the quarter ending 31 March 2020, quarterly revenue grew by 67% year on year to $19.7 million. Revenue was up 36% compared to the previous quarter.

I think Bubs has a very profitable future ahead, particularly as its gross margin keeps improving as the ASX share gets bigger with more products sold.

The fact that it’s now cashflow positive is a pleasing milestone because it means its impressive $36.4 million cash balance won’t be eaten up from just running the day to day operations of the business. It can be invested for further growth.

Bubs is growing strongly in other markets outside of China, such as Vietnam. I’m not suggesting that Bubs is going to become as large as A2 Milk Company Ltd (ASX: A2M), but I think it’s on a very good growth trajectory.

Foolish takeaway

If growth is your main aim then I think Bubs looks like a compelling ASX share with a long-term investment timeframe. Vitalharvest looks like a solid dividend option at today’s share price, plus it’s trading at a nice discount to the NAV.

More reading

• 4 excellent ASX growth shares to buy in FY 2021
• Got $3,000? Here are 3 great ASX shares to buy
• 3 ASX shares to buy for the next decade
• Bubs and 1 other exciting small cap ASX share to buy
• 2 fantastic ASX growth shares to buy with $2,000

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX. The Motley Fool Australia owns shares of and has recommended BUBS AUST FPO. The Motley Fool Australia owns shares of A2 Milk and COLESGROUP DEF SET. The Motley Fool Australia has recommended PUSHPAY FPO NZX. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post 2 ASX shares I’d love to buy right now appeared first on Motley Fool Australia.

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