Author: therawinformant

Does the S&P/ASX 200 Index (ASX: XJO) just follow the United States markets? Do we even need to watch the ASX when we could really just watch the Dow Jones or the Nasdaq?

These are the questions we’ll be answering today.

If we look at the recent performance of the ASX 200 index (the largest 200 Australian shares) in conjunction with the S&P 500 Index (the largest 500 American shares), some striking resemblances do become apparent.

Just take a look at this graph of the ASX 200 – represented here by the iShares Core S&P/ASX 200 ETF (ASX: IOZ).

Now, compare this with the S&P 500 – represented here by the iShares S&P 500 (AUD Hedged) ETF (ASX: IHVV)

Look familiar?

Digging a little deeper, the ASX 200 and S&P 500 both had their 2020 peaks on 20 February (Australian time).

Then, the ASX 200 fell 36.53% between 20 February and 23 March where it found its bottom for 2020 so far.

The S&P 500? It fell 33.92% over the same period and also found its lowest point for the year on 23 March.

Since then, the ASX 200 has risen approximately 35% off these lows. The S&P 500 is up ~43%.

So we have a same-day peak, a same-day trough and very similar gains and losses in between for both the US and Australian markets in 2020.

My forensic conclusion? Eerily similar.

What does this mean for ASX 200 investors?

As much as we might like to think that our own Aussie markets are independent of the US, the data doesn’t suggest this conclusion.

Of course, there will always be localised nuances that move each market independently of the other. But on the ‘big issues’, it would appear that the American dog is wagging the ASX tail most of the time.

That, in turn, means that we all need to be watching the US markets like a hawk in my view (or more accurately, like a dove). The US Federal Reserve has been pumping an unprecedented amount of cash into the American financial system – far more than our own Reserve Bank of Australia (RBA) has been doing here. This, I think, is partly responsible for the massive rally in US shares we have seen over the past 2½ months. And it will also likely be the most influential force driving the markets over the rest of the year, in my opinion.

So if you’re aspiring to be a ‘serious investor’ but you don’t take an active interest in what the US markets are doing, it’s probably a good idea to change that habit. As much as we’d like to think of ourselves as ‘independent’ of the US, the data shows this is not really the case.

More reading

• ASX 200 up 0.45%: Harvey Norman declares special dividend, gold miners race higher
• Why you can’t afford not to invest in ASX 200 shares in 2020
• These ASX shares could defy the market sell-off this morning
• Is the Woodside Petroleum share price cheap today?
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

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As I’ve mentioned here previously, day trading can generate strong returns, but statistically it creates far more losers than winners.

As a result, if you’re interested in building your wealth, I would suggest you skip trading and focus on buying and holding ASX shares over the long term.

With that in mind, I have picked out three ASX shares that I believe could provide strong returns for investors over the next decade and beyond:

a2 Milk Company Ltd (ASX: A2M)

The first ASX share that I would buy is a2 Milk Company. I believe it could be a fantastic long term investment option due to the long runway for growth it has thanks to its expanding fresh milk footprint and the growing demand for its infant formula. The latter is experiencing particularly strong demand in the China market. And while its sales in the country have grown very strongly in recent years, it still only has a reasonably small market share. I expect it to capture a greater slice of the key market in the future and for this to drive strong earnings growth.

Kogan.com Ltd (ASX: KGN)

Another ASX share to consider buying is Kogan. It is a growing ecommerce company which has been benefiting greatly from the structural change that is happening in the retail industry. This change has been accelerated by the pandemic and looks set to underpin strong earnings growth for Kogan for many years to come. In addition to this, this morning the company announced a $115 million capital raising. It intends to use the funds to acquire businesses that will add value and drive further growth.

Pushpay Holdings Group Ltd (ASX: PPH)

A final ASX share to look at buying is this donor management platform provider. Over the last few years Pushpay has carved out a leadership position in the church sector. This has led to increasing demand for its offering and driven exceptionally strong sales growth. The good news is that it has a sizeable market opportunity to grow into. And combined with a recent acquisition and the benefits of scale, I believe its earnings will grow at a rapid rate over the coming years.

More reading

• 3 ASX shares to buy for the big shift to contactless payments
• 3 companies with great intangible asset moats
• ASX winners and losers from last week’s rally
• Kogan announces $115 million capital raising to fund future acquisitions
• Can Kogan.com survive Amazon?

James Mickleboro 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 Kogan.com ltd. The Motley Fool Australia owns shares of A2 Milk. 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.

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At lunch on Wednesday the S&P/ASX 200 Index (ASX: XJO) has fought back from a tough start and is pushing higher. The benchmark index is currently up 0.45% to 6,173.2 points.

Here’s what is happening on the market today:

Big four banks out of form.

The big four banks look to have run out of steam on Wednesday. All four banks are trading lower at lunch and are acting as a drag on proceedings. Investors may be taking profit after some incredible gains over the last couple of weeks. The worst performer in the group is the Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price with a 1% decline. This morning Goldman Sachs downgraded its shares to a neutral rating from buy on valuation grounds.

Harvey Norman sales update.

The Harvey Norman Holdings Limited (ASX: HVN) share price is charging higher after the release of a sales update this morning. That update revealed that its Australian stores have performed very strongly during the pandemic. As of 31 May 2020, the Harvey Norman Australian franchise network had delivered a 17.5% increase in sales in the second half. Things weren’t quite as positive overseas due to forced closures. In addition to the sales update, the board declared a special dividend of 6 cents per share. This will be paid to shareholders later this month.

Gold miners race higher.

Australia’s leading gold miners are charging higher today after the gold price rebounded overnight. Traders were buying the precious metal ahead of the U.S. Federal Reserve’s June meeting this week. The central bank is expected to announce further stimulus measures which are likely to be supportive of the gold price. Gold Road Resources Ltd (ASX: GOR) and Saracen Mineral Holdings Limited (ASX: SAR) shares have been particularly positive performers today.

Best and worst ASX 200 performers.

The best performer on the ASX 200 at lunch is the Saracen share price with a 10% gain. This follows the rebound in the gold price. The worst performer is the Worley Ltd (ASX: WOR) share price with a 5% decline. Investors have been selling the engineering company’s shares following the release of its investor day update this morning.

More reading

• Does the ASX 200 just follow the US markets?
• Are Aussies still withdrawing cash like crazy?
• Why Flight Centre, Smartgroup, Woodside, & Worley shares are dropping lower
• Why CSL, Harvey Norman, IPH, & Saracen shares are charging higher
• ASX winners and losers from last week’s rally

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

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A few months ago Aussies were rushing to withdraw cash from ASX banks like crazy.

In the second half of March 2020 people were withdrawing large amounts of cash, sometimes millions of dollars at a time. COVID-19 was causing investors and the general public to freak out.

It was reported that banks, such as Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB) had to use more security vans to deliver funds to branches so that people could withdraw cash.

What’s the situation now with Australians withdrawing cash?

The Reserve Bank of Australia (RBA) releases a monthly update about the total value of ATM cash withdrawals in the country.

According to the stats, ATM cash withdrawals dropped from $9.24 billion in March 2020 to $6.41 billion in April 2020. A drop of just over 30%.

I think the fall can probably attributed to several different things. Some people had already withdrawn the cash they needed. People just weren’t spending as much money in April. Aussies were being encouraged to use their card to pay for things rather than cash, particularly with the contactless function.

Paying by card is usually more convenient for consumers. Physical cash is fairly easy to lose. I’d much rather have cash in the bank earning (a little bit of) interest rather than have physical cash these days.

Tyro Payments Ltd (ASX: TYR) is one of the ASX businesses trying to help change the retail environment to become more digital.

It’s clear that Australian confidence is returning. Time will tell whether that confidence is well placed.

Since 23 March 2020 the CBA share price has risen by 33%, the Westpac share price has gone up by 41%, the ANZ share price has jumped 49% and the NAB share price has risen by 47.5%. ASX banks could rise even further from here. They’re still down significantly from their previous prices. But I think there could be even better opportunities out there. 

More reading

• ASX 200 up 0.45%: Harvey Norman declares special dividend, gold miners race higher
• How to be like Warren Buffett and not lose money investing in ASX 200 shares
• Afterpay share price overbought says analyst
• Why the CBA share price is lagging its big four cohorts
• The smartest ASX shares to invest $10,000 in right now

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 Tyro Payments. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

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ASX shares can provide exposure for investors to the big shift to contactless payments.

Mastercard recently did a survey which showed that consumers are making a shift to contactless payments for regular purchases as people look for safer ways to pay for things.

According to Mastercard, around 80% of people now use contactless payments. In the Asia Pacific region, tap and go transactions in the region grew 2.5 times faster than non-contactless transactions in grocery and drug store categories between February and March.

Perhaps of most interest, Mastercard revealed that 75% of us said that we’ll continue to use contactless payments after the coronavirus pandemic is over. That doesn’t mean cash is totally dead yet. There are certain groups of society that will probably prefer to keep using cash like the elderly.

ASX shares that could benefit from the shift to contactless payments

Afterpay Ltd (ASX: APT)

The buy now, pay later (BNPL) ASX share is revolutionising how we pay for products. Obviously the instalments method is the main difference. But the Afterpay system provides a contactless way to pay for products too.

Afterpay continues to generate excellent growth year after year. The Afterpay share price is up another 5% today and it has grown by 108% over the past year. It’s one to watch but I really don’t know if it’s good value to buy today.

Pushpay Holdings Ltd (ASX: PPH)

Pushpay is an electronic donation business. The ASX share enables people to digitally donate, so they don’t have to be there in person to give their cash. That’s helpful in today’s climate. 

At the moment Pushpay’s focus is on US churches. Americans are very generous with their tithing. There is a large market for Pushpay to target. Management think the revenue opportunity there for the longer-term amounts to $1 billion.

Pushpay can grow into other donation sectors too. US churches aren’t the only opportunities out there. I’m excited by how much Pushpay can grow its profit margins over the next few years.

MFF Capital Investments Ltd (ASX: MFF)

A listed investment company (LIC) wouldn’t strike you as one of the best ways to get exposure to the growth of contactless payments. But I think the ASX share could be a very good way to get that exposure.

Why would MFF Capital be so good? At the end of May 2020, Visa made up 18.5% of MFF’s portfolio and Mastercard made up 16.2% of the portfolio. That means more than a third of the LIC is exposed to contactless payment businesses. I believe Chris Mackay will continue to lead MFF Capital to strong long-term returns. 

Foolish takeaway

I think each of these ASX shares have exciting growth potential thanks to their link with contactless payments. At the current share prices I’d be happy to buy shares of Pushpay and MFF Capital.

More reading

• 3 top ASX shares to buy now to get rich later
• Afterpay share price overbought says analyst
• The Sezzle and Pointsbet share prices have hit new, all time highs. Time to invest?
• How to become a millionaire before your parents with ASX shares
• Why I would buy Afterpay and these exciting ASX tech shares

Tristan Harrison owns shares of Magellan Flagship Fund Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and PUSHPAY FPO NZX. 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.

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Warren Buffett, the chair and CEO of Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B), is often regarded as the greatest investor of all time.

Though he’s pushing 90, Buffett has shown no signs of slowing down or of stepping back from the game of investing – which he’s been at since he was a child.

As such, I think Warren Buffett is someone we should all look up to and strive to learn from. It’s not just anybody who can build a ~US$476 billion company over a lifetime, after all.

Buffett has dished out a smorgasbord of folksy anecdotes and investing advice over his long career. But for me, one of his quotes stands above all else and it goes something like this: “The first rule of investing is don’t lose money and the second rule of investing is don’t forget the first rule – and that’s all the rules there are.”

Sounds absurdly simple, doesn’t it? You might even be forgiven for dismissing this ‘rule’ as plain old common sense.

But within it lies the true secret to never losing money on the share market, one of the biggest bugbears that holds most people back from investing in the first place.

Everyone knows the share market is a volatile place to have your money. Yes, most of the time it does go up. But it’s those periods where the market crashes and investors’ portfolios lose 10%, 20% or 30% of their value in short periods of time that really scare most people. Fair enough too.

But when Warren Buffett made this remark back in 1985, he also made a follow up remark which is often left out of this quote. He also said, “If you buy things for far below what they’re worth and you buy a group of them, you basically don’t lose money”.

And that’s the real secret to unlocking the wisdom of Buffett’s paramount rule.

Again, it sounds so simple – buying things below what they’re worth…

But this is where things get tricky (and lucrative). It’s the function of the stock market to put a value on individual companies. Most of the time, the market gets it right. But not always. It’s finding these discrepancies that really made Buffett wealthy and it’s how you can follow in his footsteps.

Invest in the ASX 200 like Warren Buffett

Consider the recent market crash we’ve just gone through. Back on 23 March, the market placed a value of $53.44 per share on Commonwealth Bank of Australia (ASX: CBA). Yesterday, the market was valuing CommBank’s shares at $72.20.

Now CommBank’s business hasn’t really changed since then. But its market value has. Anyone who exploited this detachment would be sitting on a healthy 35% gain today by following in Buffett’s footsteps and buying something below what it’s really worth.

Betting against the crowd is never fun or easy. But it’s how you can really get some healthy outperformance in your portfolio.

More reading

• Afterpay share price overbought says analyst
• Why the CBA share price is lagging its big four cohorts
• 3 top ASX shares for growth, income, and value investors to buy today
• Is the CBA share price a buy right now?
• The ASX bank dividend recovery may be better than what the market thinks

Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Berkshire Hathaway (B shares) and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short June 2020 $205 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Berkshire Hathaway (B shares). 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.

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The S&P/ASX 200 Index (ASX: XJO) has recovered from a sizeable decline at the open and is pushing higher. At the time of writing the benchmark index is up 0.35% to 6,166.5 points.

Four shares that have failed to follow the market higher today are listed below. Here’s why they are dropping lower:

The Flight Centre Travel Group Ltd (ASX: FLT) share price is down just over 2% to $17.12. This is despite there being no news out of the travel company today. However, prior to today, its shares were up over 55% since this time last month. I suspect that some investors have decided to take a bit of profit off the table today.

The Smartgroup Corporation Ltd (ASX: SIQ) share price has fallen 4.5% to $6.67. This morning the salary packaging and fleet management company released its annual general meeting presentation. This presentation included its guidance for the first half. According to the release, first half net profit is expected to be $32 million. This will be a decline of 21% from its profit of $40.5 million in the prior corresponding period.

The Woodside Petroleum Limited (ASX: WPL) share price is down 2% to $24.16. This decline appears to have been driven by a pullback in oil prices today. According to CNBC, the WTI crude oil price is down 1.5% to US$38.38 a barrel. This could have been driven by a warning by Goldman Sachs that a 20% oil price correction might already be underway.

The Worley Ltd (ASX: WOR) share price is down almost 5% to $10.14. This follows the release of its Investor Day presentation this morning. Within the presentation management advised that it has postponed all non-essential capital expenditure. One broker that remains positive is Credit Suisse. On Tuesday it upgraded the company’s shares to an outperform rating with a $10.50 price target.

More reading

• Afterpay share price overbought says analyst
• The smartest ASX shares to invest $10,000 in right now
• These ASX shares could defy the market sell-off this morning
• Is the Woodside Petroleum share price cheap today?
• ASX 200 jumps 2.4%, unloved shares keep rising

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. 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.

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One of the best investing books I think you can read is Pat Dorsey’s The Little Book That Builds Wealth.

The book is an excellent guide for identifying businesses with robust economic moats or competitive advantages. Economic moats surround many of the best-performing companies in the world. Companies like Apple (NASDAQ: AAPL) and Xero Limited (ASX: XRO). Companies that we wish we had discovered a decade ago! 

Why you should own businesses with economic moats

In his book, Dorsey explains how economic moats protect companies from the fierce attack of competitors to help them to earn above-average returns on the cash they invest:

“Just as moats around medieval castles kept the opposition at bay, economic moats protect the high returns on capital.”

If a company has less competition it can charge a higher price for its products and spend less money on marketing. Now, imagine owning a portfolio full of companies like this, earning high returns year-in, year-out. What impact could that have on your wealth?

What are intangible asset moats?

One important economic moat which can be difficult to spot is the intangible asset moat.

Intangible assets are things like brands, patents and regulatory licenses which cannot be easily matched by competitors. These can create what Dorsey calls, ‘mini monopolies’. They prevent competitors from making and selling the same products and provides the company with pricing power.

3 companies with strong intangible asset moats

Blood product company CSL Limited (ASX: CSL) is an example of a company with a strong intangible asset moat. Through research and development, as well as acquisitions, CSL holds the rights to produce and sell lifesaving medicines and immunotherapies.

These rights aren’t impenetrable. Patents can be challenged and have a finite life. However, because CSL has a diverse portfolio of products, rather than relying on a single product, the moat is far more robust.

Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) is another company supported by a moat of patents. The Fisher & Paykel Healthcare share price has surged over 300% in the last 5 years and the respiratory device manufacturer has been known to battle with rival ResMed Inc (ASX: RMD) over patent infringement.

If patents are the moat around the castle, regulatory licencing is the crocodile swimming in the waters. Regulatory licencing increases the barrier to entry for healthcare companies like CSL. It does this by requiring products to get regulatory approval for sale, but with no restriction on what price products can be sold for.

Finally, milk product company A2 Milk Company Ltd (ASX: A2M) is an example of a company with a growing brand for which customers are willing to pay a premium. Along with an impressive supply chain, the a2 milk brand is very hard for competitors to replicate.

Foolish takeaway

Although intangible assets are hard to see, they can create valuable economic moats that help us to build wealth. A great way to test if an intangible asset gives a company true protection is to ask, “does it give the company pricing power and is it sustainable?”

More reading

• Why CSL, Harvey Norman, IPH, & Saracen shares are charging higher
• 3 top ASX shares for growth, income, and value investors to buy today
• 5 things to watch on the ASX 200 on Wednesday
• How to become a millionaire before your parents with ASX shares
• Why the CSL share price continues to trail the ASX 200

Regan Pearson owns shares of A2 Milk and Xero.

You can follow him on Twitter @Regan_Invests.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. and Xero. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended ResMed Inc. 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.

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