Category: Stock Market

The Air New Zealand Limited (ASX: AIZ) share price is at its opening trade level of $1.23 at the time of writing, after the company released a market update.

This compares to the S&P/ASX 200 Index (ASX: XJO) which is 1.1% ahead to 6007.5 points.

What did Air New Zealand say?

Air New Zealand provided a monthly investor update this morning. The airline advised that passenger numbers had fallen for July to 714,000 from 1.4 million in the prior corresponding period. Furthermore, revenue passenger kilometres also fell to $499 million from $3,215 million. Both metrics represent a decline of 56.9% and 86.8%, respectively.

Passenger load factor has plunged by 26.7%. Air New Zealand’s aircraft are running at 57.2% capacity compared with 83.9% last July.

While short-haul flights have been affected by the COVID-19 pandemic, the company’s long-haul flights have been almost non-existent with passenger numbers slumping 95.5% to just 9,000 for the month.

What did management say?

Air New Zealand CEO Greg Foran is wary about the pressure COVID-19 has impacted on the business. He said:

Physical distancing means we can only sell just under 50 per cent of seats on a turboprop aircraft and just 65 per cent on an A320 which also means we won’t be able to offer our lowest lead in fares until physical distancing measures are removed. This has put huge pressure on our business as it means we need to move some of our customers to other flights.

Outlook for 2021

Management did not provide any specific guidance earnings for 2021. However Air New Zealand is expected to make a loss as a result of travel restrictions.

The airline company remains focused on servicing domestic routes and chasing opportunities in the cargo space. Air New Zealand noted that its domestic business is highly encouraging and will look towards driving domestic tourism.

Air New Zealand will provide more context at its annual shareholders’ meeting on 29 September, which will include a discussion of the airline’s network focus, loyalty program enhancements, sustainability focus and digital priorities.

Should you invest?

In light of the trading update, I would stay away from Air New Zealand until we see a global recovery in international travel. I think there are safer opportunities in the ASX market that may have seen their share price beaten down, but don’t necessarily reflect its long-term growth prospects.

More reading

• ASX 200 up 0.95%: Big four banks rise, Scentre collections improve, Nufarm jumps
• Here’s why I avoid these terrible ASX shares at all costs
• ASX investors given a $1.7bn injection of COVID-19 hope
• A practical guide on how to invest in ASX shares
• Polynovo and one more ASX growth share to buy in 2021

Motley Fool contributor Aaron Teboneras 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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Avoiding underperforming ASX shares can help to provide market-beating returns. The reason is purely mathematical. If you lose 30% of your initial investment in an ASX share, just to break even you’ll need to earn a return of 50%. And it can cost you even more. If you lose 50% of your capital, you need to earn a return of 100% to break even!

Warren Buffett has some great rules for investing in stocks. The following 2 are some of my favourites and simply explain why you should avoid bad ASX shares at all costs:

1. Never lose money;
2. Don’t forget rule No. 1.

So with that in mind, here is one type of ASX share that I believe investors should avoid at all costs.

Junior explorers – boom or bust

The S&P/ASX 200 Index (ASX: XJO) is made up of a lot of what I call ‘terrible shares’. And a lot of these terrible shares are junior explorers. Now, I don’t have an issue with savvy business folk trying to make it big, but as an investment, junior explorers are a bad idea in my opinion. For every Twiggy Forrest and Fortescue Metals Group Limited (ASX: FMG), there are thousands of stocks you’ve never heard of… And never will again.

Show me the money

My main issue with investing in junior explorers is that, in my view, they have terrible business fundamentals. The companies need to raise (your) capital to acquire tenements and to perform test drilling. All in the hope that the results are favourable. There is no product, no pricing power, no brand, no moat and certainly no operating cash flow.

Market mechanics

Given the size of most junior explorers, they can often be more thinly traded than their large cap counterparts. This can cause problems for investors that don’t utilise limit orders to buy these ASX shares. It also lends itself to people with a vested interest in the share price over-hyping the stock.

You work hard for your money

Most people’s money comes from their business or their job. Now I work really hard to earn an income and I bet you do too. Having a punt on junior explorers can be thrilling, and great for the office banter. But at the expense of your hard earned cash, it’s an expensive undertaking.

You should only be investing with cash that you don’t need in the next few years. Drill down even further (hilarious mining pun), and if you do want to try and become the next Gina or Clive, allocate an appropriately small portion of your stock portfolio to it. If it goes to zero, you only want a little! If it goes to the moon, you only need a little!

More reading

• ASX 200 up 0.95%: Big four banks rise, Scentre collections improve, Nufarm jumps
• Air New Zealand share price flat on market update
• ASX investors given a $1.7bn injection of COVID-19 hope
• A practical guide on how to invest in ASX shares
• Polynovo and one more ASX growth share to buy in 2021

Motley Fool contributor Lloyd Prout has no position in any of the stocks mentioned and expresses his own opinions. 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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In late morning trade the S&P/ASX 200 Index (ASX: XJO) has broken through the 6,000 points mark again and is on course to record a strong gain. At the time of writing the benchmark index is up 0.8% to 5,991.8 points.

Four shares that are climbing more than most today are listed below. Here’s why they are storming higher:

The Magellan Financial Group Ltd (ASX: MFG) share price is up 2.5% to $59.92. The catalyst for this appears to be a broker note out of Credit Suisse this morning. Its analysts have upgraded the fund manager’s shares to an outperform rating with an improved price target of $65.00. This follows the release of its latest funds under management update on Monday.

The Nufarm Limited (ASX: NUF) share price has jumped 5% to $4.05. This appears to have been driven by a broker note out of Morgans this morning. Its analysts have upgraded Nufarm’s shares to an add rating with an improved price target of $4.85. While it expects a soft FY 2020 result later this month, it appears optimistic that this could be the bottom of the cycle.

The Opticomm Ltd (ASX: OPC) share price has stormed 10% higher to $5.62. Investors have been buying the telco’s shares after it received another takeover approach. Superannuation fund First State Super is looking to snare Opticomm from the hands of Uniti Group Ltd (ASX: UWL), which was reasonably close to finalising a takeover. Uniti has postponed its scheme meeting until further notice.

The Scentre Group (ASX: SCG) share price is up 4% to $2.27 after releasing an update on its rental collections. The Westfield shopping centre operator revealed that it was able to collect a total of $183 million of gross rent in August. This represents 86% of monthly gross rental billings. This is another month on month improvement for Scentre. This compares to pre-pandemic collections of 94% or $200 million of gross rental billings.

More reading

• ASX 200 up 0.95%: Big four banks rise, Scentre collections improve, Nufarm jumps
• Magellan share price up after reporting increased FUM for August
• Why the Scentre share price is pushing higher today
• ASX 200 rises 0.3%, CSL reveals COVID-19 vaccine manufacturing deals
• Last chance to buy ASX REIT shares cheaply

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.

The post Why Magellan, Nufarm, Opticomm, & Scentre shares are storming higher appeared first on Motley Fool Australia.

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The Magellan Financial Group Ltd (ASX: MFG) share price is up 2.94% after the company released its funds under management report for August 2020 yesterday. At the time of writing, the Magellan share price is trading at $60.14 after closing yesterday’s session lower for the day at $58.42.

What was in the announcement?

According to Magellan, its total funds under management were up by $2.35 billion from the previous month to $100.87 billion at 31 August 2020.

Retail funds under management were up from $26.59 billion at 31 July to $27.49 billion at 31 August.

Institutional funds under management rose from $71.94 billion at 31 July to $73.38 billion at the end of August.

Funds invested by Magellan in global equities rose from $74.82 billion at the end of July 2020 to $77.12 billion at the end of August 2020. Funds invested in infrastructure equities declined from $16.6 billion at 31 July to $16.36 billion at 31 August. Magellan had $7.39 billion invested in Australian equities at the end of August, up from $7.11 billion at the end of July.

In August, Magellan’s funds under management were supported by net inflows of $566 million, this included net retail inflows of $208 million and net institutional inflows of $358 million.

About the Magellan share price

Magellan Financial Group is a funds management company that operates listed and unlisted managed funds. It has grown significantly since it was founded in 2006 and the rising Magellan share price has seen it become a top 100 ASX company.

In the financial year to 30 June 2020, Magellan had average funds under management of $95.5 billion, an increase of 26% compared to the prior year. Adjusted net profit after tax increased by 20% to $438.3 million in the 2020 financial year. Total dividends for the 2020 financial year increased by 16% to 214.9 cents per share, these were franked at 75%.

In August, Magellan announced that it would restructure its retail global equity fund offerings. The company stated that it would consolidate its unlisted Magellan Global Fund, its listed Magellan Global Equities Fund and its listed closed-end Magellan Global Trust into a single fund with an open-end class and a closed-end class, both of these will be listed on the ASX.

The Magellan share price is up 99.8% since its 52 week low of $30.10, it is up 4.17% since the beginning of the year. The Magellan share price is up 12.52% since this time last year.

More reading

• Why Magellan, Nufarm, Opticomm, & Scentre shares are storming higher
• ASX 200 rises 0.3%, CSL reveals COVID-19 vaccine manufacturing deals
• Are IOOF shares in the buy zone today after the MLC acquisition?
• 2 ASX dividend growth shares I would buy right now
• This ASX-listed company makes $5.7 million per employee

Motley Fool contributor Chris Chitty 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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I like to keep an eye on substantial shareholder notices. This is because these notices give you an idea of which shares large investors, asset managers, and investment funds are buying or selling.

Two notices that have caught my eye today are summarised below. Here’s what these fund managers have been buying:

Star Entertainment Group Ltd (ASX: SGR)

A notice of initial substantial holder shows that Yarra Capital has taken advantage of the pullback in the Star share price in 2020 to increase its stake. According to the notice, between May and September Yarra Capital picked up a total of 2,014,834 Star share for a total consideration of $6,015,210.12. This equates to average price of $2.99 per share, which is roughly in line with where the Star share price is trading today.

This brought the fund manager’s stake to a total of 50,850,614 shares, which represents a 5.3637% interest in the casino and resorts operator. The good news is that it may not be too late to follow Yarra Capital’s lead. Last month analysts at UBS put a buy rating and $3.90 price target on the company’s shares.

Super Retail Group Ltd (ASX: SUL)

Another notice of initial substantial holder reveals that Challenger Ltd (ASX: CGF) has been buying this retailer’s shares over the last few months. According to the notice, Challenger bought a total of 1,873,578 Super Retail shares between May and September. This means the fund manager now owns 11,719,193 Super Retail shares, which represents a 5.19% stake in the company.

Challenger was buying as recently as 3 September when the Super Retail share price was fetching ~$11.00. This is around 3% higher than where its shares are trading at present. But its shares may not be trading lower than this buy price for long. Late last month Citi put a buy rating and $11.90 price target on Super Retail’s shares following its full year results release.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• This ASX-listed company makes $5.7 million per employee
• 5 things to watch on the ASX 200 next week
• Super Retail share price edges higher on FY20 result
• Is the Star Entertainment share price a gamble right now?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Challenger Limited and Super Retail 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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The S&P/ASX 200 Index (ASX: XJO) dividend environment has seen a significant shakeup with household dividend shares such as the big four banks, Transurban Group (ASX: TCL) and Sydney Airport Holdings Pty Ltd (ASX: SYD) unable to maintain market leading yields. In this new era of dividend investing, here are 3 ASX 200 dividend shares that pay a reliable 5% yield. 

1. WAM Capital Limited (ASX: WAM) 

WAM is a Listed Investment Company (LIC) that provides investors exposure to an actively managed diversified portfolio of undervalued growth companies on the ASX.

In FY20, its portfolio delivered an outperformance of 4.4% against the ASX 200 and declared a fully franked dividend of 7.75 cents per share. This brings its total dividends paid for the year to 15.5 cents or a dividend yield of 8.50% at today’s prices. 

WAM has an incredibly consistent history of dividend payments with more than a decade of steadily increasing dividends. Given the significant changes to its investment portfolio to adjust to today’s new environment and its flexible mandate to increase and decrease cash weightings where required, I believe WAM is the ASX 200 dividend share fit for all seasons. 

2. Rio Tinto Limited (ASX: RIO) 

The iron ore spot price has hit a 15-month high following record imports from China. In the first eight months of the year, China imported 759.91mt of iron ore, rising 11 per cent from the January-August period in 2019, according to customs data.

From a supply perspective, Brazil has struggled to maintain output while the rest of the world has been modestly impacted by temporary COVID-19 restrictions. With raging demand and challenging supply side conditions, Australian iron ore miners are positioned to reap the rewards.

I believe Rio Tinto will provide investors exposure to a diversified materials portfolio while ensuring that the upside to iron ore is captured. The recent strength in commodities has enabled Rio Tinto to pay a market-leading dividend yield of 5.90% at today’s prices. I expect iron ore miners to continue to act as leading ASX 200 dividend shares in the short-medium term.  

3. Tassal Group Limited (ASX: TGR) 

Tassal is engaged in the farming and distribution of Atlantic salmon and prawns. In the company’s FY20 results, the company delivered a 13.3% increase in operating EBITA and a 13.4% increase in operating earnings before interest, taxes, depreciation and amortisation (EBITDA).

The business has a strong growth record with year-on-year NPAT growth typically in the low-mid teens. Positive consumer trends in areas such as demand for sustainable brands, home eating and cooking, increasing health awareness and easy to prepare meal solutions further support Tassal’s salmon and prawn sales volumes.

Given its price-to-earnings ratio of just 10, I believe Tassal shares represent good value at today’s prices. Much like WAM, the company’s consistent and strong cash flows has seen more than a decade of steady dividends. It currently pays a dividend  yield of 5.20%.

More reading

• ASX 200 Weekly Wrap: Friday crash pulls ASX back below 6,000 points
• Why the Transurban share price is outperforming today
• WAM Capital share price edges higher on takeover bid
• 2 ASX dividend shares with yields over 10%
• ASX 200 Weekly Wrap: Earnings drag ASX back to reality

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Transurban Group. 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 Scentre Group (ASX: SCG) share price has been a strong performer on Tuesday.

In morning trade the Westfield shopping centre operator’s shares are up almost 2.5% to $2.24.

Why is the Scentre share price pushing higher?

Investors have been buying Scentre shares this morning after the release of an update on its rental collections for the month of August.

According to the release, the company was able to collect a total of $183 million of gross rent in August. This represents 86% of monthly gross rental billings, which is another month on month improvement for Scentre.

For example, in June the company collected 80% of gross rental billings and then 82% in July.

This is a major improvement and putting it within sight of its pre-pandemic levels. In both January and February, Scentre was collecting 94% or $200 million of gross rental billings.

Is it safe to buy Scentre shares?

While the trends are certainly improving for Scentre, I’m not in a rush to invest just yet. Especially given speculation that the company could be considering a major equity raising in the near future to reduce its debt load.

However, one broker that remains positive on the company is Morgan Stanley. Even after factoring in the possibility of a $1.8 billion equity raising, the broker has held firm with its overweight rating and $2.70 price target.

This price target represents potential upside of 20% for its shares over the next 12 months. The broker has also pencilled in a 16.4 cents per share distribution in FY 2021, which equates to a very generous 7.3% dividend yield.

Though, not everyone is as positive. Last month Citi retained its sell rating and cut its price target to $1.98. This price target implies potential downside of almost 12% for its shares.

Finally, sitting in the middle is Ord Minnett. Its analysts currently have a hold rating and a $2.20 price target on Scentre’s shares.

Time will tell which broker has made the right call, but I would side with Ord Minnett right now.

More reading

• Last chance to buy ASX REIT shares cheaply
• 4 ASX shares I would avoid for 2020
• ASX 200 plunges 3.1%, Afterpay suffers
• Quarterly rebalance: Coles and Fortescue added to ASX 20, Zip joins the ASX 200
• How household savings could boost these ASX share prices

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 Sydney Airport Holdings Pty Ltd (ASX: SYD) share price has come under pressure on Tuesday following the release of an update on its equity raising.

At the time of writing the airport operator’s shares are down 2.5% to $5.60.

What did Sydney Airport announce?

On Monday Sydney Airport announced the completion of the retail component of its fully underwritten, pro rata accelerated renounceable 1 for 5.15 entitlement offer.

According to the release, approximately 53,000 of the company’s retail shareholders elected to partially or fully take up their entitlements.

This amounted to eligible retail shareholders subscribing for approximately 94.2 million new shares worth a total of $430 million, which reflects a participation rate of 62% by value.

Retail shortfall bookbuild.

Given that less than two-thirds of the retail entitlements were taken up by shareholders, the company offered approximately 58.1 million new shares for sale via a retail shortfall bookbuild.

This morning Sydney Airport announced that these shares were successfully offloaded at a price of $5.50 per new share. This represents a premium of $0.94 per new share over the offer price of $4.56 per share.

This brought the gross proceeds from the retail entitlement offer to approximately $695 million. Which, combined with its institutional offer, brings the total raised to $2 billion.

This equity raising leaves Sydney Airport with liquidity of $4.6 billion to ride out the storm.

“Strongly positioned when the recovery emerges.”

Sydney Airport’s Chairman, Trevor Gerber, was pleased with the support shown for the equity raising.

He commented: “We would like to thank our securityholders for their continued support. The funds raised will enhance our financial resilience in these challenging times and ensure that we are strongly positioned when the recovery emerges.”

This echoes comments made by the company’s Chief Executive Officer, Geoff Culbert, last month.

He said: “The equity raising will position Sydney Airport for the future. Sydney Airport took pre-emptive action at the start of the COVID-19 pandemic, putting in place significant liquidity which gave us the flexibility to monitor how the situation evolved. Six months into the pandemic, there remains uncertainty as to how long it will take for aviation markets to return to pre-COVID-19 levels.”

“Accordingly, Sydney Airport is taking further decisive action to strengthen its balance sheet and to help ensure it remains well capitalised to meet the challenges presented by an uncertain COVID-19 operating environment, and to ensure it is positioned for growth in the future,” he added.

More reading

• Why Afterpay, ASX, Mesoblast, & Sydney Airport shares are dropping lower
• ASX 200 Weekly Wrap: Friday crash pulls ASX back below 6,000 points
• Why the beaten down share price of this ASX blue chip will fly again
• Top ASX Stock Picks for September 2020
• These market veterans believe a share market pullback is coming. Here’s their surprising advice…

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 recent stock market crash may have caused paper losses for many investors. After all, it was the largest fall in stock prices since the global financial crisis occurred over a decade ago.

However, it may also present an opportunity to buy high-quality businesses while they trade on low valuations. Over time, they have the capacity to deliver sound share price recoveries in many cases.

This could make them significantly more appealing relative to other mainstream assets. As such, now could be the right time to build a diverse portfolio of stocks to benefit from their improving total returns in the coming years.

Low valuations after a stock market crash

Although some share prices have recovered after the stock market crash, a large number of high-quality businesses continue to trade on low valuations. This suggests that they offer wide margins of safety, which could translate into impressive capital returns over the coming years.

A strategy of buying companies when they trade at a discount to their intrinsic value has generally been a sound means of generating market-beating returns in the past. It enables investors to use the stock market’s fluctuations to their advantage, in terms of buying at low prices and potentially selling at higher prices in future.

With the stock market crash causing extremely challenging trading conditions for many industries, some businesses with solid balance sheets and strong track records of profit growth currently trade at low prices. This could make today the ideal time to buy them, as they commence the process of rebuilding after the present economic difficulties they face.

Recovery potential

Of course, low share prices after the stock market crash are unlikely to remain present in perpetuity. The stock market has an excellent track record of recovering from even its very worst declines to post new record highs.

While a recovery may seem unlikely for some businesses that face difficult operating conditions, over time fiscal and monetary policy stimulus is likely to lead to world economy back to stronger levels of growth.

For example, the last stock market crash in 2008/09 caused many investors to become bearish about the prospects for the economy and stock market. However, within a few years, stock prices had generally recovered and investors who bought equities ahead of their turnaround generated high returns in many cases.

Relative appeal

The stock market crash may have dissuaded some investors from buying equities. It may even have convinced them to seek less risky assets such as bonds and cash. However, with low interest rates likely to persist over the medium term, the returns on cash and bonds may prove to be very disappointing.

Similarly, property investments may fail to keep pace with stocks when it comes to total returns. High house prices in many parts of the world could mean that now is the right time to buy undervalued stocks ahead of a likely recovery. They could make a bigger impact on your financial prospects over the long run.

More reading

• Sydney Airport share price lower after completing $2 billion equity raising
• ASX investors given a $1.7bn injection of COVID-19 hope
• 2 ASX shares I’d buy with $750 right now
• Why I would buy Appen and these ASX tech shares after the selloff
• A practical guide on how to invest in ASX shares

Motley Fool contributor Peter Stephens 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 S&P/ASX 200 Index (Index:^AXJO) is building on yesterday’s gain as positive leads from overnight markets and optimism for a free COVID-19 vaccine lifts animal spirits.

The top 200 benchmark jumped 0.8% in early trade after notching up a 0.3% gain on Monday.

The upbeat mood is helped by the federal government’s $1.7 billion commitment to provide two potential vaccines for all Australians.

Ready to use COVID-19 vaccine by January?

One of these vaccines could be ready for use in as little as five months, according to a report on Business Insider.

The Morrison government signed contracts with pharmaceutical companies to secure 85 million doses of two vaccines.

One of the deals is with AstraZeneca for their production of the University of Oxford vaccine. The other is for another vaccine being developed by the University of Queensland.

CSL in the frontline of COVID fight

If these treatments are proven to be safe and effective in clinical trials, they will be made in Melbourne at CSL Limited’s (ASX: CSL) facilities.

This puts our largest ASX stock on the frontline of the pandemic. But don’t get too excited. While CSL’s topline will benefit from the contract to produce the vaccines, it won’t be making much profit in this situation.

However, what it will gain in terms of reputation could be a worth more over the longer-term. CSL is already a household name, but it will become a national icon if it’s linked to a successful COVID-19 treatment.

Australian could be first to be vaccinated

Our Prime Minister believes we could be among the first in the world to get vaccinated against the dreaded coronavirus, which infected close to 30 million people worldwide and claimed nearly 900,000 lives.

“Australians will gain free access to a COVID-19 vaccine in 2021 if trials prove successful,” said Prime Minister Scott Morrison said in a statement released yesterday.

“There are no guarantees that these vaccines will prove successful, however the agreement puts Australia at the top of the queue, if our medical experts give the vaccines the green light.”

$1.7 billion is a “cheap” gamble

There is a big “if” in the statement. Most drugs don’t make it past Phase 3 trials, although there are promising signs for both these candidates.

The bottom line is that $1.7 billion is a cheap price to pay given that the cost of COVID-19 to the Australian economy is 100 times that and counting.

When will a COVID-19 vaccine be ready?

The University of Oxford vaccine is already in Phase 3 trials (final human trials) and is the most advanced candidate in the world – if you ignored Russia’s claims.

This vaccine will be the first to be available if all the stars align, and so far, it’s producing a strong immune response without any major safety concerns.

The University of Queensland’s drug isn’t far behind, and it too is showing good promise. This candidate is currently in Phase 1 trials and should be available from mid-2021 onwards if everything goes to plan.

Sadly, things seldom do in the world of drug development, or investing for that matter.

Fingers crossed fellow Fools!

More reading

• A practical guide on how to invest in ASX shares
• Polynovo and one more ASX growth share to buy in 2021
• Is the Mesoblast share price a bargain yet?
• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 rises 0.3%, CSL reveals COVID-19 vaccine manufacturing deals

Brendon Lau owns shares of CSL Ltd. Connect with me on Twitter @brenlau.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. 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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