Category: Stock Market

2020 was a banner year for global tech companies. While lockdowns, border closures and travel restrictions wreaked havoc across broad sectors of the economy, many tech companies saw demand for their services increase.

In the US, there was the much-publicised success of Zoom Video Communications Inc (NASDAQ: ZM), which grew from relative obscurity to become a globally recognised brand during the pandemic – almost as ubiquitous as Uber Technologies Inc (NYSE: UBER) or Facebook, Inc. (NASDAQ: FB).

In Australia, we had our success stories too. There was the continued – and sometimes baffling – explosion in the price of Afterpay Ltd (ASX: APT) shares, as well as a new generation of previously under-the-radar tech stocks like Megaport Ltd (ASX: MP1), Nitro Software Ltd (ASX: NTO) and Whispir Ltd (ASX: WSP).

However, as economies – particularly the US – begin to emerge from the other end of this pandemic, there has been a cyclical shift away from growth companies and back towards value investing. Anxiety around inflation and the potential for rising interest rates has only compounded this pattern – and sent the share prices of some former market darlings tumbling lower.

Appen Ltd (ASX: APX)

The Appen share price has had a shocking past few months. After surging to an all-time high price of $43.66 last August, Appen shares have shed close to a whopping 70% of their value, and are now trading at just $13.43.

The AI and machine learning company struggled last year. Although it originally flagged that earnings before interest, tax, depreciation and amortisation expenses (EBITDA) for the full year ended 31 December 2020 would be in the range of $125 million to $130 million, the company was forced to make a downgrade later in the year. EBITDA eventually came in at just $108.6 million.

Altium Limited (ASX: ALU)

It might be surprising to see Altium on this list. Along with Appen, it is part of the much-vaunted WAAAX group of ASX tech companies, and had delivered consistently high returns to shareholders prior to COVID-19.

However, it has also struggled since the pandemic started. After delivering 8 straight halves of double digit revenue growth, Altium reported a 4% decline in revenue (versus the prior comparative period) for the half-year ended 31 December 2020.

Altium will be hoping the decline is only a temporary blip. Its share price has dropped almost 20% already this year, and is worryingly close to its 52-week low price of $23.66.

Nuix Ltd (ASX: NXL)

Embattled tech company Nuix has had a tough start to life on the ASX. Since listing in early December, 2020 for around $8, its share price has plunged almost 60% to just $3.37 as at the time of writing.

On paper, it’s a pretty exciting company operating in the niche field of data analytics and digital forensics. However, it disappointed shareholders with its first-half FY21 results, in which it reported a revenue decline of 4% versus the prior comparative period (to $85.3 million).

Nuix soon admitted that it no longer believed it could hit its original target for full year revenue of $193.5 million, and was forced to downgrade its forecast for FY21 to between $180 million and $185 million.

More reading

• Nuix (ASX:NXL) share price crashes 12% after downgrading guidance again
• How are the ASX WAAAX shares performing in 2021?
• 2 excellent ASX growth shares named as buys
• Why the Nuix (ASX:NXL) share price tumbled 5% today
• What happened at the Appen (ASX:APX) AGM today?

The post These 3 beaten down ASX tech shares are trading near historic lows appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3ySwD8n

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

These days, a growing number of people are taking the plunge and investing in cryptocurrencies. And while there are many digital currencies worth exploring, Bitcoin (CRYPTO: BTC) remains among the most popular. In fact, you may be thinking of putting some money into Bitcoin yourself. But before you do, make sure to address these key questions.

1. What’s your motivation?

It’s one thing to buy Bitcoin if you feel that it aligns with your overall investment strategy. Or, you may feel that adding it to your portfolio will provide you with some asset diversification, especially if, at this point, you’re only invested in stocks. But if you’re going to buy any cryptocurrency, you should have a specific reason for doing so. This shouldn’t be one of those situations where you plunge into an investment because you keep hearing that other people are doing it.

2. Do you understand the risks involved?

Like all cryptocurrencies, Bitcoin’s price can be very volatile. And while the same can be true of stocks, Bitcoin may be more easily influenced by individual movers and shakers than the shares of well-established companies. Recently, Tesla (NASDAQ: TSLA) CEO Elon Musk tweeted that his company would no longer be accepting Bitcoin payments for its popular electric cars. That single piece of news sent the token’s value on a downward spiral. And while there are comparable situations in which one piece of breaking news can clobber a stock’s value, Bitcoin has greater potential to fall victim to extreme price oscillations. That doesn’t mean you shouldn’t buy it — but you should be well aware of the risks before you do.

3. Have you compared it to other cryptocurrencies?

Bitcoin may be one of the more easily recognized cryptocurrencies today. But familiarity with a name doesn’t automatically make it the right choice. Look into other, newer cryptocurrencies before deciding which is the best one for your investment portfolio.

4. What’s your plan once you own it?

When you buy stocks, it’s important to have a strategy. You may, for example, adopt the buy-and-hold approach — load up on quality stocks and keep them in your portfolio for years or decades. Similarly, you should have a strategy for owning Bitcoin. Do you aim to hold it for a long time, ignoring its short-term moves in the hopes that it becomes a long-term store of value? Or do you regard it as a shorter-term investment that you intend to sell quickly for a profit (if you can)? Plot out your game plan before moving forward.

5. What would happen to your finances if Bitcoin were to plunge?

Much of Bitcoin’s future value hinges on whether it becomes a widely accepted form of currency or not. And right now, we really don’t know what its future holds. As such, if you’re going to buy it, you need to be prepared for the possibility that its price might decline drastically. That may not happen, but it’s a risk you need to reconcile yourself to before you invest. So ask yourself: Would losing most or all of the money you plan to put into Bitcoin stop you from retiring when you want to? Would such a crash in its value prevent you from achieving other major items on your long-term agenda, like buying a house, or paying for a child’s education? These are things you ought to think through as you consider how much of your money you want to commit to any cryptocurrency. Have the answers clear in your mind before you buy.

Bitcoin could end up being not just an appropriate investment for you, but a rewarding one. Just make sure you address these questions before putting money into it.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• ASX 200 Weekly Wrap: ASX record highs tumble like… Costa shares
• Cathie Wood thinks Bitcoin could reach $500,000. Is she right?
• Apple (NASDAQ:AAPL) job ad sparks Bitcoin rumours among enthusiasts
• 1 in 4 Aussies surveyed want their salary paid in Bitcoin
• Why 1 analyst thinks the recent crypto collapse is not so different from 2017

The post Answer these 5 questions before investing in Bitcoin appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

from The Motley Fool Australia https://ift.tt/2R4rjOa

The Nuix Ltd (ASX: NXL) share price is tumbling lower again on Monday after downgrading its guidance just over a month after a previous downgrade.

At the time of writing, the investigative analytics company’s shares are down 12% to a new record low of $2.97.

This means the Nuix share price is now down a whopping 75% from its 52-week high of $11.86.

What did Nuix announce?

According to the release, Nuix is now expecting pro forma revenue of $173 million to $182 million in FY 2021. This compares to its 21 April guidance of $180 million to $185 million.

It’s a similar story for its annualised contract value (ACV), which is now forecast in the range of $165 million to $172 million. This is down from its previous guidance of $168 million to $177 million.

One positive, though, is that its pro forma earnings before interest, tax, depreciation and amortisation (EBITDA) guidance is unchanged since last month at $64.6 million to $66.6 million.

Why is Nuix downgrading its guidance?

The release explains that several key factors have affected the revised forecasts. This includes the expected timing of closure of some upsell opportunities and new potential customers.

Furthermore, it notes that there remains uncertainty in relation to both the structure and timing of a small number of large customer upsell opportunities, including whether these may result in multi-year deals during FY 2021.

Management has also warned that the revised forecasts are susceptible to a number of risk factors relevant between now and 30 June 2021. These include final customer negotiations of products and licence types, timing of deals and potential foreign exchange rate variability.

Nuix’s CEO, Rod Vawdrey, commented: “We understand the importance of meeting financial forecasts. There’s a near-term level of uncertainty regarding the precise timing, shape and scope of some large and anticipated customer contracts coming to fruition in the next few weeks. We expect to capture most of the revenue which remains under current negotiation with these customers either by financial year-end or early in our new financial year. We remain confident in the long-term outlook for the company.”

More reading

• Why the Nuix (ASX:NXL) share price tumbled 5% today
• Another Nuix (ASX:NXL) crisis: Federal Police called in
• Why Carbon Revolution, Fisher & Paykel, Nuix, & Paradigm are tumbling lower
• Why the Nuix (AX:NXL) share price is pushing higher today
• The week that’s been for the Nuix (ASX:NXL) share price

The post Nuix (ASX:NXL) share price crashes 12% after downgrading guidance again appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3fzYum6

The REA Group Limited (ASX: REA) share price is on the move on Monday morning.

At the time of writing, the property listings company’s shares are up almost 1% to $165.71.

Why is the REA Group share price pushing higher?

Investors have been bidding the REA Group share price higher today following the release of an update on its Malaysia and Thailand operations.

According to the release, the company has entered into a binding agreement to combine its Malaysia and Thailand businesses with Asia’s largest online property portal group, PropertyGuru.

Under the proposed transaction, REA Group will transfer ownership of its Malaysia and Thailand entities to PropertyGuru in exchange for an 18% equity interest in the Singapore-based company. REA Group will also take one seat on the PropertyGuru Board.

PropertyGuru currently operates marketplaces in Singapore, Vietnam, Malaysia, Thailand and Indonesia. Management notes that the combined businesses will have access to a deeper pool of expertise, technology and investment, which it believes will accelerate innovation and provide enhanced digital solutions to home seekers, property agents, and developers.

It also notes that the transaction will provide REA Group with a strategic shareholding in a larger, more diversified company in a region that continues to experience rapid digital transformation across the real estate sector.

REA Group’s CEO, Owen Wilson, commented: “Building on the success of our operations in Malaysia and Thailand, this transaction presents a unique opportunity to create the most compelling digital property classifieds company in Southeast Asia and accelerate the next wave of proptech innovation across the region.”

What now?

The agreement contains customary termination events and is conditional on REA Group’s divestment of its 27% interest in 99 Group. It is the operator of 99.co, iProperty.com.sg, and rumah123.com. REA Group will retain ownership of its Hong Kong and Myfun businesses.

The transaction is expected to result in an overall gain on divestment of approximately $10 million.

More reading

• 2 blue chip ASX 200 shares analysts rate as buys
• Property is booming, is the REA Group (ASX:REA) share price a buy?
• REA Group (ASX:REA) share price hits record high on FIRB approval
• 2 blue chip ASX shares that analysts rate highly
• 2 ASX 200 shares analysts rate as buys

The post REA Group (ASX:REA) share price higher on Asian update appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3pcHLc0

The A2 Milk Company Ltd (ASX: A2M) share price has come under pressure again on Monday.

At the time of writing, the fresh milk and infant formula company’s shares are down 0.5% to $5.51.

This means the a2 Milk share price is now down 72% from its 52-week high of $20.05.

Why is the a2 Milk share price under pressure today?

This morning a2 Milk announced that it was aware of media reports revealing that a potential class action against the company is being investigated by Slater & Gordon Limited (ASX: SGH).

As things stand, the company advised that it is not aware of any legal proceedings having been filed. Furthermore, the company believes that it has complied with all applicable disclosure obligations and denies any claim to the contrary.

It will respond further if and when any legal proceedings are commenced.

What is happening?

According to the report in the AFR, Slater and Gordon is investigating a possible class action claim on behalf of investors who bought shares over a nine-month period between 19 August 2020 and 7 May 7 2021.

During this time, the infant formula company posted four downgrades, leading to a bitterly disappointing 62% decline in its share price. Also occurring during these dates and before the downgrades began were a series of insider sales by executives comprising millions of dollars’ worth of a2 Milk shares.

The report reveals that Slater and Gordon alleges a2 Milk may have engaged in misleading or deceptive conduct in breach of the Corporations Act. It may also have possibly breached continuous disclosure rules.

The law firm stated: “There may be basis to allege that by no later than August 19, 2020, a2 Milk was or ought to have been aware the full-year 2021 guidance did not adequately take into account a number of factors which would impact the company’s financial performance.”

“Earlier last year, the company seemed to be talking about COVID-related impacts that have affected its business. But when there was this fourth downgrade, that started revealing information about more systemic and structural problems that seem to exist in the business, which triggered us to go back and look through not only the most recent downgrade but what’s happened over the last nine months.”“

“Our investigation is considering whether or not all of the information that’s been dripped out by the company over the last nine months was actually not in the company in August when they gave that initial full-year guidance,” it added.

More reading

• A2 Milk (ASX:A2M) shares are up 4% today. Has a bottom been found?
• Where to for the A2 Milk and Afterpay share price, and US economic growth? Motley Fool CIO Scott Phillips on Nine’s Late News
• A2 Milk and EML were among the most traded ASX shares last week
• Move over A2 Milk (ASX:A2M), there’s a new company on the block
• Where next for the a2 Milk (ASX:A2M) share price?

The post a2 Milk (ASX:A2M) share price hit by class action news appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3c5826w

The Link Administration Holdings Ltd (ASX: LNK) share price could be one to watch on Monday.

This follows the company’s update on its investment in property settlement business PEXA.

At Friday’s market wrap, Link shares closed the day at $5.45 after gaining 5% for the day.

What did Link announce?

In a statement to the ASX, Link advised it has signed an underwriting agreement to launch an initial public offering (IPO) for PEXA.

The enterprise value of the IPO is $3.3 billion, with Link’s carrying value at around $1.6 billion.

Link owns a 44.18% interest in Torrens Group Holdings Pty Ltd (TGH) which is the holding company for PEXA. However, prior to any scale back from this process, Link’s shareholding in PEXA will lift to around 47%.

As a result of the IPO, Link will receive a minimum amount of $50 million in cash, as well as any proceeds through the scale back.

PEXA is expected to list on the ASX sometime in late June, subject to a number of satisfying admission requirements.

The latest news comes after Link closed the door on the $3.1 billion takeover offer from Kohlberg Kravis Roberts (KKR) announced Friday.

In today’s announcement, Link Group CEO and managing director Vivek Bhatia said:

This is an outstanding outcome for the shareholders of Link Group. In October 2020, the Link Group Board considered that the private equity consortium’s bid for Link Group, including its interest in PEXA, significantly undervalued Link Group’s business including the PEXA asset. This has been now demonstrated through the book build undertaken on Friday valuing PEXA at $3.3 billion, representing an increase of approximately 70% on the consortium’s implied valuation of PEXA at $1.95 billion.

About the Link share price

Over the last 12 months, Link shares have gone on a rollercoaster ride, but have gained almost 35%. It’s worth noting that the company’s share price is now within reach of breaking its 52-week high of $5.68.

On valuation metrics, Link presides a market capitalisation of roughly $2.9 billion, with approximately 536 million shares on issue.

More reading

• ASX 200 Weekly Wrap: ASX record highs tumble like… Costa shares
• 5 things to watch on the ASX 200 on Monday
• These were the best performing ASX 200 shares last week
• ASX 200 surges to new record, Fortescue drops, Inghams flies higher
• ASX 200 up 1.1%: Tabcorp receives $4bn offer, KKR wants Link’s PEXA business

The post Link (ASX:LNK) share price on watch following PEXA IPO update appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3wH4W0s

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Even after getting clobbered in the last month, cryptocurrency prices are still flying high. Investor interest in the nascent digital currency market remains strong, and Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) prices are up a respective 370% and 1,600% since the start of 2020. 

This is having a real-world impact on some businesses. NVIDIA (NASDAQ: NVDA) is a prime example. It launched new hardware designed specifically for crypto mining (the process in which digital assets are created and managed) just a few months ago, and sales are skyrocketing.

The crypto industry is notoriously volatile, though, and this has created headaches for NVIDIA in the past. But this isn’t the semiconductor giant’s first rodeo. This time around, it has quite a bit more visibility into how the young crypto market is impacting it financially.

A $400 million windfall

NVIDIA announced the launch of a new chip lineup called the CMP (cryptocurrency mining processor) in Feb. 2021. CMPs are off to a hot start.

NVIDIA CFO Colette Kress said on the first-quarter fiscal 2022 earnings call (NVIDIA’s current fiscal year ends in Jan. 2022) that CMP sales totaled $155 million. Pretty impressive for a fresh product launch that’s only been available for a couple of months, even from a semiconductor industry leader like NVIDIA.

In spite of wildly volatile crypto prices (Bitcoin and Ethereum are each down about 45% from their all-time highs as of this writing), Kress said CMP sales are staying strong. The company is forecasting CMP revenue of $400 million during the fiscal second quarter, the three-month period ending in July 2021. 

Could crypto prices tank NVIDIA?

While a new chip contributing $400 million in quarterly sales is impressive, this is still a relatively small number for NVIDIA. The company is forecasting total revenue of $6.3 billion in the current quarter, up a whopping 63% year over year. CMP would thus be only about 6% of sales.

It’s nevertheless a notable new contributor to growth, but it’s still video game and data center GPUs that are the driving force here, not cryptocurrencies. Gaming and data center sales were 85% of the total in the fiscal first quarter.

The extra detail from NVIDIA’s top brass is a nice luxury, though. Back in 2018, plummeting prices for Bitcoin and other cryptocurrencies dragged NVIDIA along with them. Though designed for high-end video game graphics, many NVIDIA GPUs are available for purchase through retailers and are programmable for other uses.

One such prominent use-case is crypto mining. Given the lack of visibility on who was making retail purchases, it only became apparent after Bitcoin tanked that many gaming GPUs were actually getting scooped up by crypto miners. And when Bitcoin fell in price, those miners stopped buying. 

CMP thus represents an important chip product. It helps ensure the company’s new RTX 30 GPUs end up in the hands of actual gamers (the RTX 30s can detect Ethereum mining and cut computing power to make them less desirable to miners, encouraging the purchase of a CMP unit instead). It also helps NVIDIA get more insight on where its products are being used, which should help with forecasting future financial results. 

That doesn’t mean RTX 30 GPUs aren’t getting bought up by crypto miners at all. However, the CMP lineup should help disaggregate video game sales from other end markets.

Long story short, if crypto price volatility continues and CMP demand suddenly dries up, investors have a clearer picture on how this will impact NVIDIA going forward. Though the company is deriving benefit from the digital-currency industry, this is still first and foremost a video game and data center chip business.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• 3 unstoppable growth trends to invest in today
• This ASX tech ETF might be in the buy zone today. Here’s why

The post NVIDIA expects its new cryptocurrency GPU to make $400 million in fiscal Q2 appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

from The Motley Fool Australia https://ift.tt/3vAJ7zB

In the days before COVID-19, much of the Australian financial news headlines centred around the WAAAX group of companies. This collection of tech market darlings, consisting of WiseTech Global Ltd (ASX: WTC), Afterpay Ltd (ASX: APT), Appen Ltd (ASX: APX), Altium Limited (ASX: ALU) and Xero Limited (ASX: XRO), was the antipodean version of the NASDAQ’s FAANG stocks.

FAANG shares comprise global tech giants Facebook, Inc. (NASDAQ: FB), Amazon.com, Inc. (NASDAQ: AMZN), Apple Inc (NASDAQ: AAPL), Netflix Inc (NASDAQ: NFLX) and Google’s parent company, Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL).

But the social and economic impacts of COVID-19 fundamentally changed the market. Last year, it was a new generation of tech shares that took up most of the headlines. High growth companies like Whispir Ltd (ASX: WSP), Megaport Ltd (ASX: MP1) and Bigtincan Holdings Ltd (ASX: BTH) arguably knocked the WAAAX stocks off the top of many retail investors’ most-wanted lists.

So, does the old guard still have the staying power to outlast the new kids on the block, or are the WAAAX stocks now just another legacy of the pre-COVID market? Now seems like a good time to revisit these five ASX tech shares to see how they are faring more than a year into this global pandemic.

WiseTech

The share price of logistics software company WiseTech struggled early on last year as international trade levels slumped during COVID. However, a surprisingly strong FY20 result – in which the company reported year-on-year revenue growth of 23% – lit a fire under the WiseTech share price. The late surge meant that WiseTech shares ended the year up by over 30%.

The WiseTech share price hasn’t performed as well this year, however, losing almost 10% of its value. This came after the company’s revenue growth slowed slightly over the first half of FY21, only increasing by 16% versus the first half of FY20.

Afterpay

The share price of buy now, pay later (BNPL) giant Afterpay skyrocketed in 2020. After falling below $9 during the market crash in March, Afterpay shares ended the year valued at a scarcely believable $118 – a gain of well over 1,200%!

That trend continued into 2021, with this ASX tech share climbing to a record high of $160.05 by mid-February. Since then, Afterpay shares have suffered a significant correction, dropping over 40% to $93.93 as at the time of writing. This share price decline has come despite the fact that Afterpay reported a 108% jump in income for the first half of FY21 (versus the first half of FY20).     

Altium

Altium develops software that helps engineers design printed circuit boards for use in electronics equipment. Despite a brief rally in the wake of the March market crash, Altium shares underperformed last year and ended up declining by around 2%.  

The share price has continued this decline in 2021, dropping by around 17% since the start of the year. This has come on the back of Altium’s disappointing first half FY21 results, in which the company reported its first drop in revenues in eight years.

Appen

Artificial intelligence company Appen has been in the wars recently. After surging to a new all-time high price of $43.66 in August, Appen shares have sunk all the way back to just $13.43 as the time of writing.

The share price decline came as Appen reported underwhelming results for the year ended 31 December 2020. The company’s initial guidance suggested earnings before interest, tax, depreciation and amortisation expenses (EBITDA) would be in the range of $125 million to $130 million, but this was subsequently downgraded to between $106 million and $109 million. Reported EBITDA eventually came in at $108.6 million for the year.

Xero

The Xero share price got a significant boost last year as the company’s accounting software helped many small to medium-sized businesses meet their tax obligations under the Federal Government’s JobKeeper program. Its share price ended the year up by over 80%.

The Xero share price has been much more volatile so far this year. Overall, Xero shares are currently down by around 11% year to date. Xero’s underlying business momentum has remained strong, however, with revenues for the full year ended 31 March 2021 up 18% to NZ$848.8 million. Xero also delivered record growth in customer numbers over the second half of FY21, picking up a net total of 288,000 subscribers.

More reading

• 2 excellent ASX growth shares named as buys
• ASX 200 Weekly Wrap: ASX record highs tumble like… Costa shares
• 2 quality ASX growth shares with heaps of potential
• Here are 2 excellent buy-rated ASX tech shares
• RBA delivers win for BNPL providers like Sezzle (ASX:SZL)

The post How are the ASX WAAAX shares performing in 2021? appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3fA8rA3

In this era of low interest rates, ASX dividend shares could be the way to generate a higher level of income.

The Reserve Bank of Australia (RBA) has pushed the official Australian interest rate to almost 0%, which makes it hard to make much money from a bank account.

These two businesses are building reputations as ASX dividend shares:

Accent Group Ltd (ASX: AX1)

Accent has been steadily growing its dividend over the last few years as profit grows as well.

The company’s CEO himself, Daniel Agostinelli, has said:

With long-term objectives and incentives linked to driving at least 10% compound earnings per share (EPS) growth, Accent continues to be defined by strong cash conversion and the consistently strong returns it delivers on shareholders’ funds.

Accent said it has strong future growth initiatives through its online sales growth, new store rollouts across its different brands and new brands. Not only is it looking to increase its gross profit margins but it’s trying to be more cost efficient too.

The shoe business saw pre-AASB-16 earnings before interest, tax, depreciation and amortisation (EBITDA) growth of 44% to $97.5 million, earnings before interest and tax (EBIT) growth of 47.3% to $81.8 million and net profit after tax (NPAT) growth of 57.3% to $52.8 million.

It was that profit growth that allowed the ASX dividend share’s board to increase the interim dividend by 52.4% to 8 cents per share.

For the first eight weeks of the second half of FY21, the like for like (LFL) retail sales across the whole network was up 10.7%.

According to Commsec, Accent Group is expected to pay a grossed-up dividend yield of 6.4% for FY21.  

Rural Funds Group (ASX: RFF)

Rural Funds is a fairly different real estate investment trust (REIT) compared to most others in the industry. It owns a portfolio of farming assets rather than retail, office or industrial properties.

It owns agricultural real estate in various sectors – cattle, almonds, macadamia, vineyards and cropping (sugar and cotton).

Rural Funds has a target of growing its distribution by 4% per annum for unitholders. It achieves this through a combination of ways.

Rental increases built into the contracts with its high-quality tenants produce organic rental profit growth each year. Those rental increases are either a fixed 2.5% per annum, or linked to CPI inflation, with some having occasional market reviews.

Some of those strong tenants include Treasury Wine Estates Ltd (ASX: TWE), Select Harvests Limited (ASX: SHV), Olam, JBS and Australian Agricultural Company Ltd (ASX: AAC).  

Another of the ways that Rural Funds can grow its rental profit is by re-investing some of its retained cash profit into improving its farms for the tenants. This can then make the ASX dividend share’s farms worth more in capital value and lead to higher rent over time.

Rural Funds has a large water entitlements portfolio to ensure that tenants have access to the water they need. The water value is a sizeable part of the overall underlying Rural Funds value. 

Rural Funds has forecast a distribution of 11.73 cents per unit in FY22, which translates to a forward distribution of 4.75%.

More reading

• 2 ASX dividend shares with attractive yields
• 2 top ASX dividend shares with 4%+ yields
• 2 ASX 200 shares that could be great for dividends
• 2 ASX dividend shares that could be a buy for income today
• 2 attractive ASX dividend shares that could be a buy

The post 2 ASX dividend shares that could be buys in June 2021 appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3g0cYLh

Ask a Fund Manager

The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In Part 1 of this edition, Kardinia Capital’s portfolio manager Kristiaan Rehder explains when his fund goes long and when it decides to short ASX shares, along with 1 sector investors should steer clear of.

Fund snapshot

The Bennelong Kardinia Absolute Return Fund was launched in May 2006. That makes it one of the longest running absolute return funds in the Australian market. Bennelong assumed responsibility as a replacement trustee in August 2011.

The fund employs a long/short strategy. It invests in ASX shares with the goal of making positive returns, whether the broader market is rising, falling, or flat.

Over the past 12 months, the fund has returned 14.04% as at 30 April. The 6 months to 30 April saw the fund return 15.01%.

Now, on to Part 1 of the Motley Fool’s interview with Bennelong Kardinia Absolute Return Fund’s portfolio manager, Kristiaan Rehder.

Starting with the long side of your investment strategy, what triggers a buy signal for an ASX share? 

We’re very much fundamental stock pickers. We do our analysis from a bottom-up basis. What we’re trying to do is identify companies with as many winning attributes as possible. Only companies which have our targeted attributes become contenders for our long portfolio.

What are some of those winning attributes?

First of all, we look for companies with a strong balance sheet, good earnings quality, cash conversion, and higher returning businesses.

We like to see businesses in large potential markets. If you can find a company that’s operating in a large potential market that has an industry that’s growing, and they’re growing that market share within that industry, then you’ve got multiple powerful tailwinds for that business.

Governance is also important. And if anything, it’s becoming even more important, with ESG [Environmental, Social, and Corporate Governance] considerations a real focus for investors.

Ultimately, we’re after good quality companies at a fair price. We’re not looking at dirt-cheap valuations. Because the reality is when you’re trying to identify quality companies you often need to pay for those. But we are looking for companies with fair valuations.

On the other side of your strategy, what do you look for in ASX shares before you might short sell them?

I don’t want to get bogged down in too much industry jargon, but we’re what’s referred to as a variable beta strategy. That means we can adjust our net exposure, depending on how bearish or bullish we are.

It’s probably not much different from how you or I might invest in the market. If you are bearish, you have the ability to sell your shares and go to cash. And we have the same flexibility in our strategy. A lot of long-only managers are forced to be fully invested, but that’s not the case with us.

How does that impact your short strategy?

What that actually means is that we need to make money off our shorts. That might sound obvious, but there are other absolute return funds who are happy to lose money on their shorts, because they approach their shorts as a hedge. As long as they make more money on the long side of their book than they lose on the short side of their book, they are satisfied with that.

We’re different. They [shorts] need to make money in their own right.

So we approach our shorts the same way we approach our longs. We go through the same investment process with them. We’re looking for companies that have weak balance sheets, poor earnings quality and cash conversion, low returns, and operating in a small potential market. Hopefully a shrinking market. At best the business is also suffering from market share erosion.

If you can find those sorts of ‘loser attributes’, if you will, then they can be contenders for our short portfolio.

Any areas you think our readers should look into shorting?

Broadly, a sector that’s caught us a little by surprise is the mining services sector. It’s a sector that should be doing incredibly well in theory [with high commodity prices].

Unfortunately, the issue of inflation is starting to creep into the mining sector. We’ve had a number of miners come out recently complaining about inflation. And often mining services contractors will win their contract on a fixed price basis. When inflation starts to occur, that causes issues to their margins.

We’re seeing real signs of inflation right across the industry, particularly in Western Australia where labour is becoming increasingly hard to find. So mining services is one area at this time we’re staying well away from.

Do you take the macro picture into account as well?

By virtue of our strategy, we need to take into account our outlook for equity markets. That helps us set the net exposure for the strategy. Splitting it up, about 30% of our time is focused on top down macro considerations and 70% of our time is focused on bottom up, fundamental stock picking.

What factors determine when you decide to exit your long and your short ASX share positions?

If there are changes to our investment thesis, including valuation, we’ll close our positions. We generally live by the old adage that we let our profits run and cut our losses early.

We have a very disciplined stop-loss limit in place.

Once a stock falls by 15% [from the entry price] we close that position out, no questions asked. We actually have 2 stop losses that run parallel with one another. One is reset each month, so if the market moves against us by 15% that month, even though it might be profitable, we close it out.

This helps limit any losses to 15% and also forces us to lock in those profits when prices turn.

You normally hold 20–50 shares in your portfolio. What’s the breakdown there between long and short positions?

Our short book is typically smaller than our long book. It’s harder to find good quality shorts. On average our short book will contain between 5 and 12 individual names while our long book would be on average between 30 and 40 names.

And what’s your average holding period for those shares?

Our typical holding period for our longs and our shorts is about 12 months. But our portfolio is made up of core positions and trading positions. The core positions make up a much larger component of our portfolio than our trading positions, which can move quite quickly.

We typically hold our core positions for 2–3 years.

Tomorrow, in Part 2 of our interview, Kristiaan Rehder reveals 2 small-cap ASX shares with huge potential and explains why his fund remains bullish on CBA.

More reading

• How are the ASX WAAAX shares performing in 2021?
• 2 ASX dividend shares that could be buys in June 2021
• 2 excellent ASX growth shares named as buys
• Leading brokers reveal 2 ASX shares to buy right now
• ASX 200 Weekly Wrap: ASX record highs tumble like… Costa shares

The post When to go long and when to short ASX shares… and 1 sector to avoid: fund manager appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3uByhYA