Author: therawinformant

I’ve been looking at initial public offerings (IPOs) recently to see how you would have fared if you invested in them.

The last one I looked at was Altium Limited (ASX: ALU), which has rewarded its IPO investors handsomely over the last couple of decades. This is even after a few major hiccups over the years.

Today I thought I would take a look at private hospital operator Ramsay Health Care Limited (ASX: RHC).

Ramsay Health Care.

Ramsay Health Care came into existence in 1964 when founder Paul Ramsay purchased a guesthouse on Sydney’s North Shore called Warrina House and converted it into a psychiatric hospital.

Over the next decade and a half the company expanded its psychiatric hospital business before diversifying into medical and surgical businesses. In 1978 the company built its first surgical hospital – the Baringa Private Hospital in Coffs Harbour.

Fast forward to today and Ramsay is one of the largest healthcare companies in the world with a total of 480 facilities across 11 countries.

The Ramsay IPO.

In September 1997 Ramsay Health Care floated on the Australian Stock Exchange.

Details of the IPO are surprisingly limited, but according to Yahoo Finance, Ramsay’s shares were trading at an adjusted price of $1.15 on September 30 1997.

This means that $10,000 invested into Ramsay’s shares on that date would have yielded you 8,696 shares.

This afternoon Ramsay’s shares are changing hands at $67.22. Which means those 8,696 shares have a market value of almost $585,000 today.

In addition to this, although Ramsay has deferred its dividend for FY 2020 due to the pandemic, in time I expect its dividend to return to normal and then begin its growth trajectory again.

This will be good news to long term investors, because in FY 2019 the company paid dividends of $3.30 per share.

This means those 8,696 shares generated total dividends of $28,700 in FY 2019. Not bad for a $10,000 investment back in 1997!

More reading

• ASX 200 climbs 1% in positive start to the week
• Why the Ramsay share price is climbing
• How to invest $5,000 in ASX 200 healthcare shares today
• 5 ASX 200 winners and 5 losers of the week
• These small cap ASX shares could be stars of the future

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Altium. The Motley Fool Australia has recommended Ramsay Health Care 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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The Cochlear Limited (ASX: COH) share price is edging lower today as the company announced it has been denied an appeal rehearing in its US patent infringement case.

While the S&P/ASX 200 Index (ASX: XJO) is currently storming 1.92% higher on the back of COVID-19 vaccine news, the Cochlear share price is down 2.54% for the day at $184.21.

Previous developments

This morning’s announcement relates to Cochlear’s ongoing court battle with Alfred E. Mann Foundation for Scientific Research (AMF) and Advanced Bionics (AB).

In November 2018, the US District Court in Los Angeles ruled against Cochlear and awarded damages totalling approximately US$268.1 million to AMF and AB. The company appealed this decision soon after.

Prior to this, the case had been dragging on for years. Back in 2014, a jury found that a group of Cochlear’s implants, sound processors, and software infringed 2 of AMF’s patents. Since then, there have been numerous rulings in favour and against Cochlear.

The result of the appeal of the November 2018 decision was finally handed down in March this year, with the US Court of Appeals for the Federal Circuit in Washington D.C. affirming the previous decision. As such, the court ordered the Cochlear to pay the US$268 million of damages to AMF and AB.

At the time of the announcement, the company stated in an ASX release it would “seek an en banc review by the full Court of Appeals in a petition for a rehearing”.

What did Cochlear announce today?

This morning, the company revealed that the US Court of Appeals had denied its petition for a rehearing of the appeal.

The judgement will become final on 26 May 2020 and Cochlear will now pay approximately US$280 million, which includes post-judgment interest. The company noted that it has committed loan facilities available to fund the payment.

Meanwhile, a decision is still pending in the US District Court on AMF and AB’s application for pre-judgment interest of US$123 million and attorney fees of $15 million. Cochlear has opposed both applications and the associated calculation methodology for the amounts.

As there is significant uncertainty over whether Cochlear will be forced to make these payments, the company is treating this exposure as a contingent liability on its balance sheet.

More reading

• The ASX big bank stock most likely to outperform in the COVID-19 recovery
• Should you throw $3,000 into Altium shares today?
• 3 ASX shares to instantly diversify your portfolio
• Are ASX 200 travel shares in the buy zone?
• Is the Bega Cheese share price a strong ASX buy today?

Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. The Motley Fool Australia has recommended Cochlear 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.

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One investment thematic that I’m excited about is the cloud computing boom.

The global public cloud services market is expected to grow materially over the next decade as more infrastructure migrates to the cloud.

I believe this growth means that companies exposed to the cloud computing market could be positioned perfectly to profit.

Two shares which I expect to benefit greatly from this boom are listed below:

Megaport Ltd (ASX: MP1)

Megaport could be a great way to play this thematic. It is a leading provider of elasticity connectivity and network services through a growing number of data centres globally. Its network as a service offering allows customers to increase and decrease their available bandwidth in response to their own demand requirements. This basically means that customers can ramp up their bandwidth at busy times and reduce it when demand is low.

This is proving very popular with companies that don’t want to be locked into fixed service levels on long-term contracts. So much so, the company recently reported a 10% quarter on quarter increase in revenue to $15.2 million. This was driven by a 6% lift in customer numbers to 1,777 and a 12% jump in total services to 15,531. Also rising strongly was  Megaport’s monthly recurring revenue. It was up 19% quarter on quarter to $5.4 million at the end of March. Given the tailwinds it is experiencing, I believe it is well-placed for further strong growth over the coming years.

NEXTDC Ltd (ASX: NXT)

Another way to gain direct exposure to the cloud computing market is NEXTDC. It is an innovative data centre operator with world class centres in key locations across Australia. Thanks to the strong demand for data centre services, NEXTDC has been expanding its network at a solid rate over the last few years.

And with the cloud market expected to continue growing materially for many more years to come, demand for space in its centres looks set to maintain its upwards trajectory. Another positive is that the company has consistently been making its operations more efficient by generating greater revenue per square metre and megawatt over the last few years. I’m confident there will be more of the same in the coming years, which should drive strong earnings growth as it scales.

More reading

• These ASX 200 shares are up over 40% in 2020
• Why I would buy these exciting ASX growth shares right now
• Why a buy and hold strategy for ASX shares is best
• Should you invest in super or your ASX share portfolio?
• The smartest ASX shares to buy if you have $2,000

James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT FPO. 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 coronavirus crash the ASX has gone through in 2020 has, so far, proved many things. But one of the most pertinent (in my view) is the importance of having a diversified and risk-adjusted portfolio.

A portfolio of ASX shares is always open to attack from so-called ‘black swan’ events; occurrences (like the coronavirus) which no-one can predict or plan for. For example, having a portfolio with large exposure to travel-related shares might not have raised too many eyebrows in 2019. But in 2020? It’s a different story.

So here are 3 ASX shares that I think anyone can add to their portfolio and instantly see increased diversification and a debasing of concentrated risk.

MFF Capital Investments Ltd (ASX: MFF)

MFF Capital is a Listed Investment Company (LIC) that holds a portfolio of predominantly US-based shares. Some of these include MasterCard, Visa, Home Depot, Wells Fargo, and Microsoft, but overall MFF holds around 20 companies.

Just by buying shares of MFF, you are getting exposure to this diversified portfolio of US shares – something that will instantly increase your own portfolio’s diversification. Most ASX share portfolios are underweight in US and international shares as well, so this company is an easy way to increase your geographical exposure.

Washington H. Soul Pattinson & Co Ltd (ASX: SOL)

‘Soul Patts’ is one of the best shares on the ASX in my view. The company is very old, having listed on the (then) Sydney Stock Exchange back in 1903 as a chemist. Today, Soul Patts has well and truly branched out from pharmacies and now owns significant chunks of a variety of quality ASX businesses. These include TPG Telecom Ltd (ASX: TPM), Brickworks Ltd (ASX: BKW), BKI Investment Company Ltd (ASX: BKI), and New Hope Corporation Ltd (ASX: NHC).

Thus, I think Soul Patts is a great company to hold for broad exposure to the Australian economy. It might also be a strong alternative to an S&P/ASX 200 Index (ASX: XJO)-based ETF for any investor not keen on heavy exposure to ASX banks and miners.

iShares Global 100 ETF (ASX: IOO)

This ETF holds nothing more or less than the 100 largest companies within the advanced economies of the world. It’s dominated by US shares like Apple, Alphabet, and Amazon, but also has companies like Toyota, Nestle, and Samsung to spice things up.

All of the companies in iShares Global have got to where they are today by being highly successful in their fields. Whilst large companies do fail, I still think that size gives a lot of safety, especially in these uncertain times. As a result, I don’t think any investor can go wrong by including this ETF in a well-balanced portfolio.

More reading

• Are ASX 200 travel shares in the buy zone?
• Is the Bega Cheese share price a strong ASX buy today?
• ASX 200 storms 2% higher: Big four banks jump on COVID-19 vaccine news
• This ASX 200 tech share is sinking 5% lower after its half year update
• 3 ASX 200 dividend shares I’d buy today

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Alphabet (A shares), Magellan Flagship Fund Ltd, Mastercard, Visa, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Mastercard, Microsoft, and Visa and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, and Mastercard. 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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On Monday I looked at three ASX shares that brokers have given buy ratings to this week.

Unfortunately, not all shares are in favour with them right now. Three that have just been given sell ratings are listed below.

Here’s why these brokers are bearish on them:

Air New Zealand Limited (ASX: AIZ)

According to a note out of UBS, its analysts have retained their sell rating but lifted the price target on this airline operator’s shares to 60 New Zealand cents (55.5 Australian cents). The broker now expects Air New Zealand’s cash burn to be less severe than previously expected. However, the full extent of its cash burn will depend on how quickly travel markets return to normal. In light of this, it sees no reason to change its rating at this stage. The Air New Zealand share price is trading at $1.16.

Commonwealth Bank of Australia (ASX: CBA)

A note out of Goldman Sachs reveals that its analysts have reiterated their sell rating and $56.40 price target on this banking giant’s shares. Goldman remains bearish on Commonwealth Bank due to its strong deposit franchise. It believes this leaves it more vulnerable to the medium term impact of lower rates. In addition to this, it notes that the bank has the highest exposure to more competitive mortgages and its CET1 ratio is softening. Combined, it doesn’t believe the bank deserves to trade at such a premium to its peers. Commonwealth Bank’s shares are changing hands at $60.30 today.

National Storage REIT (ASX: NSR)

Another note out of Goldman Sachs reveals that its analysts have put a sell rating and $1.56 price target on this storage provider’s shares. The broker believes that trading conditions will remain challenging due to economic uncertainty. Especially given the prospect of higher unemployment. Goldman expects National Storage to post a 15% decline in underlying earnings in FY 2020 and then a 2% decline in FY 2021, before rebounding 9% in FY 2022. National Storage’s shares are trading at $1.71.

More reading

• How to invest $10,000 in ASX 200 shares today
• 4 ASX 200 shares exposed to a fall in house prices
• The newspaper killers: 3 ASX 200 online classifieds shares dominating the market
• Forget term deposits and buy these top ASX dividend shares
• 3 industries that may never recover from COVID-19

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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The Baby Bunting Group Ltd (ASX: BBN) share price is surging higher today after the retailer provided a business update. At the time of writing, Baby Bunting shares are trading 14.98% higher for the day at $3.07 on the back of continued sales growth throughout the COVID-19 pandemic.

Online sales boom

This morning, Baby Bunting provided an update on its business performance during the second half of FY20. From the period between 30 December 2019 and 17 May 2020, the company posted total sales growth of 13.2% and comparable-store sales growth of 8.1%. Meanwhile, online sales in this period represented 17.3% of total sales – an impressive 66% jump compared to the prior corresponding period.

On a year-to-date basis, total sales growth is 10.3% while comparable-store sales growth comes in at 3.4%. Baby Bunting noted this sales performance reflects the less discretionary nature of the baby category.

Breaking down online sales further, the company saw online sales increasing from 12.4% of all sales before 23 March 2020 to 22.4% of sales through the following 2-month period to 17 May 2020. This represents an increase in online sales of 121% during this period, year over year.

Baby Bunting’s click and collect service is also proving to be a popular option, with around 42% of all online orders ending up as click and collect transactions at its stores.

However, the company noted that online sales have lower gross margins due to higher freight fulfilment costs compared to in-store sales.

All stores remain open

Throughout the coronavirus pandemic, all Baby Bunting stores have remained open but the company has adapted to the various social distancing and hygiene measures.

According to today’s release, individual store performance has been mixed, while stores located in shopping centres and selected stores in Victoria and New South Wales have been affected by lower foot traffic.

In terms of buying trends, CEO Matt Spencer said there was strong initial demand for lower margin consumable products, such as baby wipes and nappies. As the lockdown period progressed, the company experienced a ramp-up in purchases of products for the nursery, including cots, furniture, toys, and bedding. Now that restrictions are beginning to be eased, demand for travel-related products, such as prams and car seats, has started to recover.

Capital expenditure program

In anticipation of future cash flow pressures, Baby Bunting introduced a prudent cost management program in March and April. However, now that the impact of COVID-19 on financial performance has become clearer, the company has decided to recommence capital expenditure that had previously been paused.

These costs are largely associated with the roll-out of the new brand across the full store network. The new brand features a more contemporary and gender-neutral logo and the roll-out is expected to be completed by the end of Q1 FY2021.

What’s next for Baby Bunting?

On 23 March, Baby Bunting withdrew its FY20 earnings guidance due to the uncertain nature of the COVID-19 pandemic. Despite the stellar sales result, the company notes that it remains difficult to anticipate consumer behaviour and the associated effect on sales, gross margin, and expenses. Therefore, no guidance will be provided for FY20.

The back end of the financial year (ending 30 June 2020) is traditionally Baby Bunting’s largest and most important promotional period.

Importantly, the company highlighted that its balance sheet remains strong with approximately $35 million in undrawn debt facilities.

More reading

• 3 top ASX growth shares you should never sell
• Bubs share price rockets 10% higher on Coles agreement news
• Fund managers have been buying these ASX shares this week

Motley Fool contributor Cathryn Goh 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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