Category: Stock Market

I have tried a lot of different approaches to picking good shares to invest in over the last ten years. From buying shares in small-cap growth companies to ‘bargain’ commodity producers.

The most successful approach I’ve found when picking shares has actually been one of the simplest: looking for companies with strong economic moats.

What is an ‘economic moat’?

An ‘economic moat’ is another name for a competitive advantage. It is a feature that is hard to replicate which protects a company’s earnings from the onslaught of competition. Just like a moat protects a castle.

Companies with economic moats can be an investors’ best friend. By being insulated from competition companies, they are able to generate above-average returns on capital. By reinvesting that cash, these companies can compound and grow dramatically over time. 

Many of the best-performing ASX-listed companies have strong economic moats. If we pick these companies as a core part of our portfolio, we stand a good chance of earning better returns.

The 4 types of economic moat

In his book ‘The Little Book That Builds Wealth’ author Pat Dorsey outlines four categories of economic moat to look for when picking a company to invest in:

• Intangible assets
• Customer switching costs
• The network effect
• Cost advantages

Intangible assets can include brands and patents. Blood product company CSL Limited (ASX: CSL) is an example of a company which, through years of research and acquisitions, has created a valuable portfolio of patents and product licences.

Accounting platform Xero Limited (ASX: XRO) is an example of a company with high customer switching costs. Because there is a lot of time and hassle involved with changing to a new accounting system, the cost to switch can be prohibitive.

Despite the rise of Linkedin, jobs platform Seek Limited (ASX: SEK) has proved to be a robust example of the network effect where growing additional users creates more value for other users.

While JB Hi-Fi Limited (ASX: JBH) is an example of a company that has thrived using cost advantages to reduce prices for consumers and win market share.

Growing your money with great companies

I think economic moats are useful criteria for picking decent companies that will earn high share returns. However, to really get the best result we need to have patience; the patience to buy shares at bargain prices and the patience to let returns compound for long periods. That is the hard part.

More reading

• Where to invest $10,000 into ASX shares immediately
• CSL shares have underperformed the ASX 200 over the past month. What’s going on?
• 3 stellar ASX tech shares to buy and hold for decades
• Which is the best ASX entertainment media share?
• 2 ASX shares in the fight against coronavirus

Regan Pearson owns shares of Xero. You can follow Regan on Twitter @Regan_Invests.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. and Xero. The Motley Fool Australia has recommended SEEK 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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This morning the Afterpay Ltd (ASX: APT) share price continued its sensational run and broke through the $50 mark for the first time.

What a turnaround this has been for the payments company over the last couple of months.

It was around this time in March that Afterpay’s shares hit a 52-week low of $8.01. Now they are trading 525% higher than this level!

Why has the Afterpay share price rebounded and broken through $50?

Below are four key reasons why its shares have just reached this milestone:

Strong third quarter update.

At the height of the pandemic there were some in the market that feared Afterpay would struggle with lower sales and higher bad debts. How wrong they were. Afterpay’s third quarter update not only revealed incredibly strong sales and customer growth, but bad debt levels that were in line with pre-pandemic levels. The company’s flexible business model has helped play a key role in this. Users of its service may have noticed that you have to pay the first instalment of an online purchase upfront now, with three fortnightly payments to follow. This has reduced the overall risk of each transaction and doesn’t appear to have stifled its growth.

Tencent Holdings becomes a substantial shareholder.

Another driver of its strong share price performance has been the arrival of Tencent Holdings on its share registry as a substantial shareholder. Tencent is a US$500 billion Chinese conglomerate and the owner of the massively popular WeChat app. It is being seen by investors as the company that could help Afterpay expand into the Asian market in the future.

Impressive U.S. update.

Investors were also buying Afterpay’s shares after the recent release of an update on its operations in the United States. That update revealed that there are now more than 5 million active customers in the United States using its buy now pay later service. The company also revealed that more than one million new customers started using its platform in the country during a 10-week period at the height of the pandemic. Afterpay also noted a significant jump in brands and retailers using its platform. Not bad after just two years operating in the country.

Index inclusion.

A final catalyst to its strong share price gain has been its upcoming inclusion in the MSCI Australia index. The MSCI Australia Index is designed to measure the performance of the large and mid cap segments of the Australia market and has 69 constituents. Its strong performance over the last 12 months gives it a market capitalisation that is more than sufficient to be included at the rebalance on Friday. Inclusion in this index tends to bring a company onto the radar of fund managers globally and also leads to increased buying from index-tracking funds.

More reading

• Leading brokers name 3 ASX 200 shares to sell today
• The ASX 200 just hit an 11-week high. Here are 3 reasons we might be in overvalued territory
• 5 ASX 200 10-bagger shares of the decade
• Why Afterpay and these ASX shares just zoomed to 52-week highs
• ASX 200 jumped higher, rises more than 2%

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T 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 Senex Energy Ltd (ASX: SXY) share price is charging higher today on the back of a trading and earnings update. After sitting as much as 17.5% higher before midday, Senex shares have slightly pulled back to be up by 15% at the time of writing at 23 cents per share.

Senex Energy is an independent Australian oil and gas exploration and production company. It has a portfolio of onshore oil and gas assets in Queensland and South Australia, with access to the nation’s east coast energy market.

What did Senex announce?

The highlight of this morning’s announcement was upgraded FY20 guidance.

Following strong production performance across the company’s Surat Basin assets, Senex has increased its full-year FY20 production guidance to between 2.0 and 2.1 million barrels of oil equivalent (mmboe). This is up from the previously guided range of 1.8 to 2.0 mmboe. 

In addition, Senex also increased its full-year FY20 guidance for earnings before interest, tax, depreciation and amortisation (EBITDA). The company now expects EBITDA in the range of $45 million to $55 million, up from previous guidance of between $40 million and $50 million.

These upgraded figures assume continued normal operations in the current COVID-19 environment.

Atlas drilling campaign update

Senex also revealed that natural gas production continues to outperform at both Roma North and Atlas in the Surat Basin. As a result, production now exceeds 34 terajoules (TJ) per day.

Given the continued production and reservoir outperformance, the company announced it will further reduce the number of wells to be drilled at Atlas from 50 wells to 45 wells.

The company expects to complete the current drilling campaign in the coming weeks, with final wells to be brought into production during June 2020. Additionally, Atlas water infrastructure is on schedule to commence commissioning and water intake in June. The completion of all works is expected in early FY21.

Roma North gas production update

Also detailed in today’s announcement was the agreement between Senex and GLNG to re-direct around 1 petajoule of natural gas from Roma North to the domestic market.

Following currently lower LNG offtake requirements at GLNG, the two parties have agreed to re-direct these volumes to the Wallumbilla natural gas supply hub over the period of June to August 2020.

Senex will market this natural gas, along with higher than expected production from Atlas, to east coast gas customers as part of the company’s supply portfolio.

Management commentary

Commenting on today’s update, CEO Ian Davies said:

“In October 2018, Senex reached the Final Investment Decision for our $400 million capital program in the Surat Basin. Less than two years later, the transformational Roma North and Atlas natural gas development projects have established Senex as an important producer of gas for the east coast market.”

“Our announcement today of an increase in full year FY20 production and EBITDA guidance further reinforces the underlying strength of our transformed east coast natural gas business and our ability to adapt and grow in the current lower oil price environment,” he added.

More reading

• How to pick better shares and earn better returns
• 4 reasons the Afterpay share price just hit $50
• 2 ASX shares to buy with $5000 today
• Leading brokers name 3 ASX 200 shares to sell today
• The ASX 200 just hit an 11-week high. Here are 3 reasons we might be in overvalued territory

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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Are you wanting to buy ASX shares today but are unsure where to look? Below are two ASX shares I would consider placing $5000 in for the next 3–5 years.

Medical Developments International Ltd (ASX: MVP)

Familiarity is a great place to start when looking at what shares to buy. On the other hand, investing in an esoteric business can make you feel disconnected from the company. This can easily lead to a panic sale from a bump in the road. While Medical Developments may not be a household name, there’s a chance you’ve either used or heard of its products.

Medical Developments’ flagship product is the ‘green whistle’. Less commonly known as the drug Penthrox. Penthrox has been reining superior over other pain relief drugs as it’s fast-acting, non-addictive and self-administered. Its growth has, therefore, exploded in Australia and overseas, being used by paramedics, medical practitioner the defence force and more.

Medical Developments announced that it expects any negative impact caused by COVID-19 to be limited. In the last month alone it announced the approval for the sale of Penthrox in Thailand, Netherlands, Bosnia-Herzegovina and Hungary.

The list of countries where Penthrox is sold is growing fast, while sales are continuing to grow strongly in its first market, Australia. However, Penthorx only accounts for a little over half its revenue with the remaining coming from its medical devices segment. This segment accounts for medical devices including Space Chambers, masks and Breath-Alert Peak-Flow meters. These are also growing strongly in Australia with 1H20 up by approximately 45% compared to the prior corresponding period.

Its share price has rebounded strongly over the past two months following the market low at the end of March. However, it still has some 39% to go to reach its share price high prior to the market crash.

Aristocrat Leisure Limited (ASX: ALL)

Aristocrat Leisure is a gaming technology company which operates in over 90 countries. Its land-based business serving a range of products including electronic gaming machines and casino management systems saw revenue fall 6% in its recent half-year results. However, its digital portfolio which offers a range of apps is still growing strongly and was up 19% for the 6 months to 31 March 2020.

Aristocrat’s shares are trading at just over half of what they were in February. This is after another fall following the release of results which were short of consensus expectations. However, North America and New Zealand venues plan to open again through a phased approach in May and June while the larger Australian states look to re-open in July.

The steady re-opening will see its land-based businesses begin to return to somewhat normal. Although, there’s no knowing how long this may take. While this plays out, I believe Aristocrat’s digital business can continue to grow strongly, making this, in my eyes, a great time to buy shares and open a position in the company.

More reading

• Why didn’t Warren Buffett buy more shares in the recent bear market?
• Top brokers name 3 ASX shares to buy next week
• Here’s how I would put $10,000 to work on the ASX
• Top brokers are urging you to buy this slumping ASX 200 stock next week
• Brokers name 3 ASX 200 shares to buy right now

Michael Tonon owns shares of Medical Developments International Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Medical Developments International Limited. The Motley Fool Australia has recommended Medical Developments International 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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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 these ASX 200 shares:

Afterpay Ltd (ASX: APT)

According to a note out of UBS, its analysts have retained their sell rating but lifted their price target on this payments company’s shares slightly to a lowly $14.00. The broker made the revision to its price target after factoring in Afterpay’s recent U.S. update this month. While it acknowledges that the pandemic could accelerate positive structural changes for Afterpay, it has warned investors not to extrapolate the magnitude of recent growth in online sales. The Afterpay share price broke through the $50.00 mark earlier today.

Vicinity Centres (ASX: VCX)

Analysts at Morgan Stanley have retained their underweight rating and $1.25 price target on this shopping centre operator’s shares. According to the note, the broker believes that Vicinity will experience a material drop in rent rates once the crisis is over. And while it believes Vicinity has some high quality assets, there are other assets in its portfolio which it is less enamoured with and fears could struggle. The Vicinity share price is trading at $1.67 this afternoon.

Wesfarmers Ltd (ASX: WES)

A note out of Citi reveals that its analysts have retained their sell rating but lifted the price target on this conglomerate’s shares to $36.60. The broker was pleased to see the company take action on its underperforming Target business. And while it has lifted its earnings estimates for FY 2020 and the coming years to reflect stronger than expected sales growth, it still has issues with its current valuation. As a result, it appears to see better value elsewhere and has retained its sell rating. The Wesfarmers share price is fetching $40.27 on Tuesday.

More reading

• 4 reasons the Afterpay share price just hit $50
• The ASX 200 just hit an 11-week high. Here are 3 reasons we might be in overvalued territory
• What ASX investors can do before 30 June to save tax
• The ASX 200 stocks in the tax-loss selling firing line
• 2 unbelievable ASX 200 value shares to buy today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO and Wesfarmers 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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Yesterday, the S&P/ASX 200 Index (ASX: XJO) hit its highest closing level since 11 March at 5,615.6 points after a healthy 2.16% gain for the day. Today, the ASX 200 is pushing even higher – up another 1.41% at the time of writing to 5,694.7 points.

The ASX blue chips that have the heaviest weighting in the ASX 200 are behind this surge. The big 4 ASX banks (with the exception of Commonwealth Bank of Australia (ASX: CBA)) were all up over 2% yesterday and another 1% this morning. Telstra Corporation Ltd (ASX: TLS), Woolworths Group Ltd (ASX: WOW) and Wesfarmers Ltd (ASX: WES) are powering ahead today as well.

Afterpay Ltd (ASX: APT) is also contributing, making a new all-time high this morning of over $50 per share.

So what’s next for the ASX 200? Onwards and upwards?

On the contrary, here are 3 reasons I think the ASX 200 is getting into overvalued territory at these levels

1) US markets are wagging the ASX 200 dog

‘If America sneezes, the world catches a cold’ is how the old saying goes. As much as we would like to think otherwise, what happens in the United States pretty much dictates what happens on the ASX 200. And over in the US, the Federal Reserve is pumping a mind-boggling amount of cash into the financial system.

Here’s something to ponder: The US S&P 500 Index is only down 9.28% year to date. Really? Is the coronavirus pandemic and accompanying economic destruction only worth 9.28% in 2020?

Something strange is happening to the US markets (in my very humble opinion) and it has a lot to do with the massive Fed interventions.

This artificial inflation of the share market over there is spilling into the ASX in my view.

2) The markets are dislocating from reality

As a consequence of interest rates being a cut above zero, I think the markets have become distorted. There are no other options left for investors these days. Bonds, term deposits and other debt instruments have lost their potency as investments, which means a large section of the investing community is being pushed into ASX 200 shares.

This strong buying pressure is drawing attention away from the fact that corporate earnings are going to be hit hard in 2020 and possibly further into the future. We have entire businesses like Qantas Airways Limited (ASX: QAN) and Webjet Limited (ASX: WEB) in the deep freezer, commercially speaking.

Is this reflected in the current market? Not in my opinion. On the contrary, ASX travel shares like Qantas and Webjet are among today’s biggest gainers. Go figure.

3) FOMO has taken over the ASX 200

Investing greats like Warren Buffett and Benjamin Graham have said that the market is driven by 2 emotions: fear and greed. We saw a lot of fear in the ASX 200 back in March, and I think the current rally is being emotionally driven by greed. Once a market starts putting runs on the board, it attracts investors who might have ’gone to cash’ and are waiting to jump back in on fear of missing out (FOMO). This effect then snowballs as markets are pushed even higher.

It doesn’t matter what fundamentals actually underpin the markets in this type of situation, it slowly becomes a game of musical chairs. It can go on for a while, but eventually, the music stops. It’s hard to know whether this is happening, but it sure is starting to feel like it for this writer.

Foolish takeaway

I’m not trying to elicit panic here and I enjoy watching the value of my ASX 200 shares rise as much as the next investor. However, I like to ‘hope for the best, but prepare for the worst’ with my investing, and I see a lot of reasons why this market might be becoming overvalued.

The solution? Well, I’m not one to try and time the markets, but I am getting as much cash together as possible. That way, I always have one foot in both camps.

More reading

• What ASX investors can do before 30 June to save tax
• The ASX 200 stocks in the tax-loss selling firing line
• 2 unbelievable ASX 200 value shares to buy today
• Why didn’t Warren Buffett buy more shares in the recent bear market?
• ASX 200 up 1.8%: Big four banks jump higher, Flight Centre and Webjet rocket again

Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited and Webjet Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO, Wesfarmers Limited, and Woolworths 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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It’s nearly June, so S&P/ASX 200 Index (ASX: XJO) investors should start considering their tax affairs for FY20. Given death and taxes are the only certainties in life, it’s worth considering them. A tax outcome should rarely, if ever, dictate your investment decisions, but paying the right amount of tax can add thousands to your wealth over time.

Here are a few things that you can do to prepare for tax time and ensure that you are paying the right amount.

Sell some investments

There are a million reasons to sell an investment, but the main ones should be because your thesis is broken or your portfolio allocations need adjusting. I’ve only ever sold a few investments, but Telstra Corporation Ltd (ASX: TLS) was one of them, because my thesis was broken.

Many investors will have heard of capital gains tax (CGT) loss selling. This is where you sell an investment at a capital loss, because you want to use the capital loss now or in the future. If you know that you are going to have a capital gain on other investments in FY20, it may be possible to reduce these gains from carried forward capital losses or capital losses you make in the same year. Be careful when you do this, however, as there are tax avoidance rules about selling and buying back the same shares. As always, you shouldn’t do this just for tax reasons.

Less investors will have thought about CGT gains selling. If you have been thinking about selling some of your investments that are in a gain position, before 30 June may be the time to do it. With COVID-19 impacting many people’s livelihood, taking profits may be a good idea if you are going to be in a lower margin tax rate than normal.

Speak to your trusted business advisor

Like investing, tax planning is based on your personal circumstances. If you don’t want to read through pages of the ATO website and legislation, your registered tax agent and accountant will be best positioned to understand your financial position and what is available to you. You should speak to them about the above and any other options available to you.

Foolish takeaway

Tax shouldn’t be what drives your investment decisions, but it should be a consideration. ASX investors should target outperforming the ASX 200 index return, after fees and taxes. Legally lowering your average lifetime tax rate can significantly increase your annualised growth rate and wealth over time.

More reading

• The ASX 200 just hit an 11-week high. Here are 3 reasons we might be in overvalued territory
• The ASX 200 stocks in the tax-loss selling firing line
• 2 unbelievable ASX 200 value shares to buy today
• Why didn’t Warren Buffett buy more shares in the recent bear market?
• ASX 200 up 1.8%: Big four banks jump higher, Flight Centre and Webjet rocket again

Motley Fool contributor Lloyd Prout has no position in any of the stocks mentioned and expresses his own opinions. The Motley Fool Australia owns shares of and has recommended Telstra 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 LiveHire Ltd (ASX: LVH) share price is rocketing higher today on the back of a new contract win. After being up by as much as 22.73% in early trade, LiveHire shares have pulled back somewhat to sit at an 11.36% gain for the day at the time of writing.

About LiveHire

LiveHire is a recruitment platform that enables employers to keep digital track of candidates within one ecosystem. According to LiveHire, its platform can help save its enterprise clients time and money by streamlining the recruitment process and potentially even cutting out recruiters’ sky-high fees. 

LiveHire was founded in 2011 in Melbourne and went on to publicly list on the ASX in 2016 at an initial public offering price of 20 cents per share. The company’s client base includes leading brands like Vodafone, Asics, Nissan, and Xero Limited (ASX: XRO).

What did LiveHire announce?

Shortly before market open this morning, LiveHire revealed it has won a contract with the Victorian State Government to provide technology to help deploy staff into critical areas of need.

More specifically, the state government will use LiveHire’s platform to profile, match, and engage current employees in order to transition them into critical roles across the state government.

According to the announcement, the Victorian government contract is approximately 8 times the average annualised recurring revenue per client across LiveHire clients. 

The initial term of the contract is 12 months, and the state government has the option to extend the term for a further 12 months.

Commenting on the contract win, CEO Christy Forest said:

“LiveHire has unique capabilities in search, match, skills profiling and personal communications, making our solution highly suitable for organisations which are now increasingly required to bring a more agile approach to workforce mobility.”

“Similar to our work for other Australian State Governments, we will leverage our platform to assign well-fitted, available employees to in-demand roles from a newly created Talent Community for Victoria’s Jobs and Skills Exchange,” she added.

While today’s announcement was welcome news for investors, it’s important to note that LiveHire is on the smaller end of the ASX in terms of market capitalisation. Factoring in the 11.36% share price rise at the time of writing, LiveHire shares have a market capitalisation of just $74 million.

More reading

• The ASX 200 just hit an 11-week high. Here are 3 reasons we might be in overvalued territory
• What ASX investors can do before 30 June to save tax
• The ASX 200 stocks in the tax-loss selling firing line
• 2 unbelievable ASX 200 value shares to buy today
• Why didn’t Warren Buffett buy more shares in the recent bear market?

Cathryn Goh owns shares of Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. 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 Small-cap ASX tech share rockets 23% higher on government contract win appeared first on Motley Fool Australia.

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The end of the financial year could complicate the recovery of some beaten down ASX shares.

These underperforming stocks on the S&P/ASX 200 Index (Index:^AXJO) may see the rebound in the share prices capped by shareholders looking to unload these losers for tax-loss purposes before the June 30 deadline.

If you aren’t already thinking about the tax implications for the financial year, you should be!

Waiting longer for a recovery

This is particularly so because the V-shaped economic recovery that many were hoping to see once the COVID-19 emergency passed is unlikely to materialise.

The debate is now focused on whether we will get a “U” or “L” shaped recovery instead. This means the short- to medium-term outlook for some coronavirus-impacted shares is likely to stay dim.

No point holding on to some of these losers if you can utilise the loss to offset your capital gains liabilities, especially if you think you can buy these laggards back later at a discount or around the same price.

What’s tax-loss selling?

For those who need a refresher on what tax-loss is, if you sell a stock below what you paid, the loss can be used to offset any profit you make on other investments.

For instance, if you made a loss of $100 on a stock and made a $100 profit on another, your capital gains liability is likely to be zero. You should check with your accountant to ensure you stay within the rules.

You should also note that the tax office takes a dim view of those who sell a stock for tax loss and then buy it back almost immediately. Again, be sure to speak to your tax professional for advice.

Poor foundations

But coming back to stocks that I believe make ideal tax-loss selling candidates, there are several that come to mind.

One stock that fits the bill is building materials group Boral Limited (ASX: BLD). The Boral share price was already under pressure before the COVID-19 disaster due to poor management that drove multiple profit downgrades.

The market’s patience ran out and this forced its chief executive Mike King to announce his departure in August.

The transition to a new leader usually marks a volatile period for shareholders. Newly installed chief executives of embattled companies almost always make dramatic cuts and changes that includes big write-down of assets.

A better option to Boral

If you are hanging on because you believe construction activity in the US and Australia will experience a speedy recovery, you probably would do better buying its better run rival James Hardie Industries plc (ASX: JHX).

Sure, you will be paying a premium for the switch, but you are getting a higher quality investment – and it’s particularly worth paying for quality during highly uncertain periods.

Weak properties

Another group of stocks that I think make good tax-loss selling targets are those own shopping malls and apartment projects.

I can’t see a V-shape recovery for this group and I am not swayed by arguments that their shares are trading below book value.

The problem is that there is lots of room to lower the value of their assets if structural changes to mega malls are afoot.

The outlook for apartment sales are also bleak as this segment of the property market is overly dependent on property investors and international students.

Examples of companies exposed to these thematic are Vicinity Centres (ASX: VCX), Stockland Corporation Ltd (ASX: SGP) and Mirvac Group (ASX: MGR).

Clipped wings

A third example of a stock that I see little reason to hang on to for the near term is Flight Centre Travel Group Ltd (ASX: FLT). The Flight Centre share price made a very decent 60% bounce since its March bottom and is ripe for tax loss selling for those who have been in the stock for a while.

Shares in the travel agent is still down close to 70% this financial year and international travel is one of the last few industries to return to “normalcy” (whatever that looks like in the post-coronavirus world).

Its cost base is also higher than online rivals as it operates brick and mortar shops. I reckon there’s time to buy back the stock later when more of the COVID-19 dust has settled.

The wild card is government support. There’s speculation that the federal government may extend a financial helping hand to industries most stricken by the pandemic.

However, I would rather back other travel related stocks if I wanted to take a punt on the government stimulus.

More reading

• The ASX 200 just hit an 11-week high. Here are 3 reasons we might be in overvalued territory
• What ASX investors can do before 30 June to save tax
• 2 unbelievable ASX 200 value shares to buy today
• Why didn’t Warren Buffett buy more shares in the recent bear market?
• ASX 200 up 1.8%: Big four banks jump higher, Flight Centre and Webjet rocket again

Motley Fool contributor Brendon Lau owns shares of James Hardie Industries plc. Connect with me on Twitter @brenlau.

The Motley Fool Australia has recommended Flight Centre Travel Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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During routine analysis on the weekend, 2 absolute fantastic S&P/ASX 200 Index (ASX: XJO) shares jumped out at me. I had previously written these off as far too expensive and turned my attention elsewhere. Both of these ASX 200 value shares have been among the best performing shares of the decade, increasing their share price by at least 10 times in the past 10 years. 

This is a unique window in time where shares of this calibre are available at what I believe are discount prices. 

Altium Limited (ASX: ALU)

Between 2010 and now, Altium has been one of the outperforming ASX 200 value shares, with its share price returning over 146 times the initial investment. That means a $10,000 investment 10 years ago would have become over $1.4 million today. This is not a company that is built on smoke or vapour – Altium develops software for the printed circuit board (PCB) design industries.

Over a 10-year period, it has achieved compound annual growth rates (CAGR) that are the envy of most organisations. It is clear Altium is a company built on solid technological foundations, managed with steel-like discipline. This includes a 10-year sales CAGR of 16.4%, an 8 year earnings per share (EPS) CAGR of 30.3%, and a cashflow CAGR of 39.3%. Over the past 5 years, using a USD to AUD conversion rate of $0.72, the company has an average return on capital employed (ROCE) of 20%.

This is an organisation that knows how to turn capital into profits. 

The company is sitting on a current price-to-earnings (P/E) ratio of 60, which immediately sounds high. It is way over the company’s 10-year average P/E of 23. However, when you factor in the compound growth rates I have mentioned with a horizon of 10 years, then the share price appears to be at a discount.

Personally, even if it was selling at a small premium I would be interested in owning this ASX 200 value share. Even with the recent hit from the coronavirus, it clearly has a long runway ahead of it. 

Domino’s Pizza Enterprises Ltd. (ASX: DMP)

Everyone knows Domino’s. Most readers have probably bought from Domino’s. We know the taste, the buying experience, the usefulness of the app. And for many of us, we know that we automatically choose Domino’s Pizza. It isn’t a thought-through process. This is what makes it one of the great ASX 200 value shares.

Like Altium, Domino’s was an outperforming share during the past decade, returning 12 times the initial purchase price. It has a sales CAGR of 21.9% and shows no signs of slowing, with last years sales growth exceeding that of the previous 2 years. Its 10-year cashflow CAGR is 22.3% and it has a 10-year EPS CAGR of 21.4%. Also like Altium, the company has demonstrated an ability to turn capital into profits, averaging a ROCE of 19% over the past 4 years.

On paper, its P/E is 39.16. That’s 9 points higher than its 10-year average. However, over a 10-year investing horizon and based on the above CAGRs, I believe it is selling at a discount.

Foolish takeaway

When searching for ASX 200 value shares it is important to dig a bit deeper than the initial summary statistics. If you were to look at headlines and P/E ratios alone, you will never have a full measure of an organisations true worth. 

More reading

• The ASX 200 just hit an 11-week high. Here are 3 reasons we might be in overvalued territory
• What ASX investors can do before 30 June to save tax
• The ASX 200 stocks in the tax-loss selling firing line
• Why didn’t Warren Buffett buy more shares in the recent bear market?
• ASX 200 up 1.8%: Big four banks jump higher, Flight Centre and Webjet rocket again

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Altium. The Motley Fool Australia has recommended Domino’s Pizza Enterprises 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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