Category: Stock Market

The Afterpay Ltd (ASX: APT) share price has been out of form on Friday and is on course to end the week with a sizeable decline.

In early trade the payments company’s shares fell as much as 9% to $76.13.

They have since recovered a touch but are still down a disappointing 5% to $79.68.

Why is the Afterpay share price dropping lower?

Investors have been selling Afterpay and other ASX tech shares on Friday after Wall Street’s tech-focused Nasdaq index crashed lower overnight.

The Nasdaq index fell a sizeable 5% on Thursday night in what appears to have been a move driven by profit taking after some very strong gains in 2020.

One of the worst performers was the Apple share price. It lost a massive 8% of its value overnight.

However, it is worth noting that even after the Nasdaq’s sizeable decline, the famous index is up an incredible 26% since the start of the year despite the global pandemic.

What about other tech shares?

It isn’t just the Afterpay share price that is under pressure on Friday. Australian investors are selling a wide range of popular tech shares this morning.

Among the declines are the Appen Ltd (ASX: APX) share price and the Xero Limited (ASX: XRO) share price. At the time of writing, Appen shares are down 6% to $32.65 and Xero shares are over 4% lower at $96.26.

The WiseTech Global Ltd (ASX: WTC) share price is another poor performer. The logistics solutions company’s shares have fallen 7% to $27.70.

The Kogan.com Ltd (ASX: KGN) share price has also fallen by the same margin, along with fellow high-flying ecommerce company Redbubble Ltd (ASX: RBL).

Is this a buying opportunity?

When the dust settles on this selling I think there will certainly be a few buying opportunities.

The one that jumps out most to me is Appen. With its shares now down 25% from their 52-week high, I think it could be an opportune time to make a long term investment.

More reading

• 4 ASX shares I’m looking to buy today
• Another buy now, pay later company is listing on Monday
• Quarterly rebalance: Coles and Fortescue added to ASX 20, Zip joins the ASX 200
• 5 things to watch on the ASX 200 on Friday
• Why Redbubble and this ASX share just stormed to record highs

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd, WiseTech Global, and Xero. The Motley Fool Australia owns shares of AFTERPAY T FPO and Appen Ltd. The Motley Fool Australia has recommended Kogan.com ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why the Afterpay share price crashed 9% lower today appeared first on Motley Fool Australia.

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If you’re interested in building your wealth, then I believe the best way to do this is by investing with a long term view.

This is because by investing with a long time horizon, you get to benefit from the power of compounding.

Compounding is what happens when you earn interest on top of interest. Or in the case of investments, returns on top of returns.

It explains why generating a 10% per annum return on a $25,000 investment becomes $27,500 after one year and then approximately $65,000 in 10 years.

But which shares can you grow your wealth with? Listed below are two top ASX shares that I believe could provide strong returns for investors over the next decade and beyond:

Aristocrat Leisure Limited (ASX: ALL)

The first ASX share to consider buying for the long term is Aristocrat Leisure. This gaming technology company’s shares have fallen heavily in 2020 because of the pandemic. However, with casinos now reopening, I expect demand for its industry-leading poker machines will soon rebound. In the meantime, its fledgling Digital business has been booming during lockdowns and is generating material recurring revenues. When these two businesses are finally pulling together, I expect its earnings growth to accelerate.

Pushpay Holdings Group Ltd (ASX: PPH)

Another option to consider buying and holding is Pushpay. It is a fast-growing donor management platform provider for the faith and not-for-profit sectors. Unlike Aristocrat Leisure, it has been a big winner from the pandemic. The temporary closure of churches and the shift to a cashless society have accelerated demand for its platform this year. So much so, management is expecting its earnings to double in FY 2021. Looking further ahead, it is targeting a 50% share of the medium to large church market. This is a US$1 billion opportunity, which provides it with a significant runway for growth.

More reading

• 2 ASX shares I’d buy in a heartbeat
• 3 fantastic ASX growth shares to buy and hold
• Why it makes sense to invest in ASX tech shares
• These ASX stocks at earnings risks as the Aussie is forecast to hit US80 cents
• 4 ASX growth shares I’d buy in September

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Well that was quick.

And brutal.

But it wasn’t unexpected.

‘It’ is the 5.23% fall in the NASDAQ composite index overnight.

Tesla Inc (NASDAQ: TSLA) shares fell 9%. Apple Inc (NASDAQ: AAPL) was down 8%.

Google’s parent company, Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG), dropped 5%, while Amazon.com, Inc (NASDAQ: AMZN) gave up 4.6%. (I own shares in those two).

ASX futures are down 2% at the time of writing.

As I said, brutal.

But no, not unexpected.

Which is different from ‘I predicted it’.

I didn’t.

But yesterday, I did send a Slack message to the Investment team. I wrote:

“Google up 4% overnight. I’m officially reinstating #TheReckoning”.

#TheReckoning, in case you’re wondering, is part-joke, part-serious comment. Tech stocks have been super-hot over the past few months.

In part, completely justified by growing sales and profits, much of it boosted by the economic side-effects of COVID-19.

But some of it is pure P/E expansion. (At least for those companies that actually have earnings!).

Now, we can look at P/E expansions two ways:

1. The market was undervaluing these companies, and the P/E expansion is ‘catching up’ to reality; or

2. The market was correctly valuing these businesses, and the P/E expansion is the market getting carried away.

Now, as I said, #TheReckoning is partly in jest, too.

Investors have routinely undervalued technology businesses over the past decade.

An inability or unwillingness to see the sort of long-term compounding potential of some of these companies means that share prices have routinely been too low.

After all, I still own my Amazon and Alphabet shares. That’s not the action of a sensible investor who thinks they can predict share price falls, is it?

But then, that’s an oxymoron in itself.

The sensible investor doesn’t try to predict.

Not because the future isn’t worth knowing, but because it’s just not knowable.

And the degree of difficulty is magnified over shorter time periods.

Believing Amazon will be more valuable in 10 years is one thing.

Imagining I can guess what each zig and zag will look like, between now and then, is something else entirely.

And, of course, to try would be folly.

But it was also folly to expect these companies’ shares to go up in an accelerated straight line forever.

Apple shares were up by more than 30% in the last 6 weeks.

Amazon was up 22%.

Tesla had risen 50%.

And, as I said to the team, Google had risen 4% in a single trading session on absolutely no news.

Yes, shares are volatile.

They do often move on no news.

But as they say, once is happenstance, twice is a coincidence, three times is enemy action.

Or, in this case, something that should have investors paying attention.

Hence that comment.

Be careful, though, of people who say ‘we needed a pullback’. That’s rubbish.

Same with ‘we were due for a correction’.

Even worse ‘corrections are healthy’.

Either the commentator in question is lazy, or reaching for boilerplate explanations that make no sense.

(Those same people rarely say ‘we needed a run-up’ or ‘we were due for a fast increase’. They’re just peddling seemingly comforting cliches.)

Unless those very same people made those comments before the fall, you can assume they’re just retro-fitting a convenient narrative.

With all of that said, though, as I said, I’m not surprised.

Remember, too, that your emotions lead you astray.

Does today’s 5% fall in Google shares feel painful? You bet.

But after yesterday’s 4% rise, I’m barely down 1%, in total, in the last two days.

If Google had dropped 0.5% yesterday and another 0.5% today, I wouldn’t be writing these words.

Similarly, after the huge drops overnight, the other tech companies I mentioned are simply up ‘hugely’ rather than ‘phenomenally’ over the past 30 trading days.

Kinda puts it in perspective, right?

Today’s headlines will shout ‘NASDAQ plunges 5%’ or similar.

They could (and probably should) equally say: ‘NASDAQ up 33% this year’.

Kinda changes the perspective a little, no?

I do think investors, at large, have got ahead of themselves.

Yes, maybe big (and small) tech was undervalued in March and April.

Maybe those share prices deserved to go higher, as investors realised how resilient they were, as a group, in the face of COVID-19.

And, for the record, I do expect the NASDAQ to outperform the broader US market (and probably the ASX) over the next decade.

But not every company.

Not at every price.

When share prices rise, quickly, it’s tempting to believe the narrative.

That, somehow, they ‘deserve’ these higher prices.

So remember Warren Buffett’s warning: “You pay a high price for a cheery consensus”.

Our market will likely fall, today.

Perhaps by a lot.

If I was a betting man, I’d suggest that our tech sector will bear the brunt — and the higher they’ve flown, the harder they’ll likely drop.

In some cases, today’s falls might be a buying opportunity. In others, it’ll be the overdue removal of some hot air.

Which makes it a good time to reconsider your portfolio.

Do you really own those shares because you think it’s an attractive price for a quality company that is likely to justify its market cap with future performance?

Or do you own it because the shares have been going up, and so you’ve created a convenient, if flaky, investment thesis to justify it? 

“In the short run, the market is a voting machine…” Lots of votes over the past few months, but probably not many today.

“…But in the long run, it’s a weighing machine.” Today is a good time to grab the scales, and make sure you’re getting what you’ve paid for.

But remember: on average, even if the market falls hard, today, Australian shares will still be up by more than 35% since the March lows.

Kinda puts it in perspective, doesn’t it?

Fool on!

More reading

• Microsoft, Apple, and Alphabet led the stock market lower on Thursday
• Is the Nasdaq’s 600-Point Plunge the End of the Bull Market?
• Why the Zip share price is plummeting 15% today
• This is the one investment Warren Buffett says almost everyone should make
• A strange thing is happening with index funds…

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Scott Phillips owns shares of Alphabet (C shares). The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, and Tesla. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Apple. 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 uncertain economic outlook means that a second stock market crash in 2020 is a very real threat facing investors. As such, starting to prepare for it now could be a sound move.

Through analysing your existing holdings, identifying potential buying opportunities and holding some cash in your portfolio, you may be able to use a stock market decline to your advantage.

Identifying buying opportunities ahead of a market crash

As the recent market crash showed, sharp declines in stock prices can be extremely swift and without any prior warning. The stock market declined at an exceptionally fast pace earlier this year, and then went on to rebound at a relatively brisk pace.

As such, many investors did not have sufficient time to identify attractive stocks before they had rebounded to higher price levels. This means that they may have missed out on good value opportunities that were only available for a very limited time.

Ahead of a potential second market crash, it may be a good idea to make a list of companies that you feel offer long-term investment appeal. For example, they may be dominant players in their industry, and have solid financial positions that will allow them to survive a tough period for the economy. Through knowing which companies you are positive about prior to a stock market decline, you can be in a strong position to act upon lower prices that may only be available temporarily.

Assessing your current holdings

As well as searching for potential stocks to purchase ahead of a market crash, it may be worth reassessing your existing holdings. The economic landscape has changed dramatically over the past few months, and the operating environments for many businesses may be very different than when you purchased them. They may need to adapt their business models, and could be unable to do so.

Through identifying which stocks in your portfolio are worth holding for the long run, you may be able to reduce your number of holdings now ahead of a market decline. This may increase your cash balance so that you have greater liquidity in a bear market that provides you with greater scope to act upon low valuations.

Holding cash

Clearly, holding cash for the long term is likely to lead to disappointing returns relative to stocks. However, with the potential for a second stock market crash, having some cash in your portfolio could be a sound move. It may enable you to take advantage of lower stock prices to a far greater degree than otherwise would be the case.

It may also provide peace of mind so that you view a stock market fall as an opportunity to invest, rather than a reason to be fearful. This attitude can help you to capitalise on a temporary decline in stock prices ahead of a likely recovery.

More reading

• 2 quality ASX shares to buy now to get rich later
• NASDAQ plunges 5%. What next?
• 5G Networks launches capital raising for Webcentral acquisition
• Another buy now, pay later company is listing on Monday
• Fortescue share price drops lower despite positive update

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.

The post How I’d start planning for stock market crash part 2 today appeared first on Motley Fool Australia.

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The 5G Networks Ltd (ASX: 5GN) share price is missing out on the market selloff on Friday.

This morning the data networks company requested a trading halt while it undertakes a capital raising.

What did 5G Networks announce?

5G Networks is attempting to raise $30 million via a non-underwritten institutional placement at $1.85 per share. This represents a 13.1% discount to its last close price of $2.13.

The proceeds will be used to provide the company with the balance sheet flexibility to potentially fund an acquisition of Webcentral Group Ltd (ASX: WCG) and the refinancing of its outstanding debt.

However, if the potential acquisition of Webcentral doesn’t eventuate, management advised that it has a range of other potential acquisitions in its pipeline which would constitute highly accretive M&A opportunities.

What is Webcentral?

Webcentral is an Australian full-service digital services partner for small and medium businesses. 5G Networks already owns a 10.2% stake in the company.

It was previously known as Melbourne IT and more recently as ARQ Group. It offers a range of digital growth solutions, helping businesses get online, improve their online performance, and protect their online presence.

Webcentral recently announced that it has entered into a scheme implementation deed with Web.com, under which Web.com proposes to acquire 100% of Webcentral.

However, 5G Networks does not intend to vote its 10.2% interest in favour of the scheme with Web.com.

Instead, it wants to acquire the company and believes there are significant synergies and efficiencies that can be delivered across both businesses.

Management notes that in a scenario where the businesses are combined, it expects that it can generate synergies across both businesses of over $7 million on an annualised basis.

For now, 5G Networks has reconfirmed its FY 2021 revenue and EBITDA guidance of $60 million to $65 million and $8 million to $8.5 million (before material acquisitions).

Management sell-down.

In addition to the above, the company revealed that its managing director, Joe Demase, intends to sell-down his holding.

Mr Demase has agreed to sell 3 million shares, representing 16% of his shareholding, at the same price as the placement.

This will leave the managing director with a relevant interest of approximately 16.2 million shares, representing approximately 15% of the expanded capital of 5G Networks.

The company advised that Mr Demase remains committed and has confirmed that he has no immediate plans to sell more shares.

More reading

• 3 small cap ASX shares I’d buy with $1,000
• Top ASX Stock Picks for September 2020
• Analysts think 5G Networks shares could be a post-COVID-19 winner
• My top 5G ASX share to buy right now
• 5G Networks share price falls 6% on FY20 results

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends 5G NETWORK FPO. 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 buy now, pay later (BNPL) scene is pretty crowded on the ASX, but another new player is listing on Monday.

New Zealand’s Laybuy Group Holdings Limited (ASX: LBY), established in 2017, is floating with an initial price of $1.41. That will value the business at $246 million.

Founder and managing director Gary Rohloff told The Motley Fool the payment cycle is the differentiator for his company.

“We’re the only buy now, pay later provider in the market that offers a weekly payment option,” he said.

“We’re very simply weekly pay in 6 [payments]. We own that weekly space in New Zealand, I’d argue we own it in Australia, and we definitely own it in the UK.”

Rohloff added that psychologically a weekly rhythm makes sense, as that’s how consumers think – for example, doing a weekly grocery shop.

He told The Motley Fool that frequency has advantages for shareholders too.

“The weekly payment cycle is the most capital-efficient in the buy now, pay later model anywhere.”

What will Laybuy do with the IPO money?

Laybuy first operated in New Zealand and Australia but the capital raised from the IPO will drive the UK expansion.

“The United Kingdom has a retail market that is more than two times larger than the Australian market,” said Rohloff.

“It is also a market where there is a comparatively high proportion of retail shopping done online and where BNPL is still in its infancy.”

The money will add to the NZ$20 million debt facility with Kiwibank and a £80 million debt facility with US finance firm Victory Park.

Consumer protection for Laybuy customers

Similar to Afterpay Ltd (ASX: APT), Laybuy earns more revenue from merchants than it does from customer fees.

“We credit check every new Laybuy customer. We also set strict transaction limits to make sure our customers can afford the goods they purchase,” Rohloff said.

Credit limits don’t exceed $1,200 and a 24-hour grace period is provided before a late fee is charged. That fee itself is capped at $40 (or NZ$40 or £24).

According to Laybuy, a hold is put on accounts when there are signs the customer is under financial stress.

Laybuy’s current numbers and future vision

As of June this year, Laybuy had 472,961 active customers shopping through 5,672 active merchants. Each customer put through an average of NZ$460 (A$424) per year.

Laybuy, with the help of all the debt facilities and money coming in from the IPO, aims to grow to gross merchandise value to $4 billion. This is 8 times its current size.

The company is also working on digital payment cards, to allow consumers to tap-and-go at physical stores. It has a partnership with Mastercard for the New Zealand market for this reason, and EML Payments Ltd (ASX: EML) for Australia and the UK.

Rohloff told The Motley Fool that he can hardly believe what’s happening after starting the business at the family kitchen table in Auckland.

“This is a very big milestone for our family and our company. Three-and-a-half years ago we launched in New Zealand and now we’re listing on the Australian stock exchange. I just think that’s a pretty cool thing for us.”

More reading

• How to build a recession-beating ASX share portfolio
• ASX 200 rises 1.8%, Afterpay had a volatile day
• The Future Fund is stockpiling cash. Should ASX investors take the hint?
• 3 fantastic ASX growth shares to buy and hold
• Some ASX winners and losers from a high Aussie dollar

Tony Yoo owns shares of AFTERPAY T FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Mastercard. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Emerchants Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Emerchants Limited and Mastercard. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Fortescue Metals Group Limited (ASX: FMG) share price has dropped lower on Friday with the rest of the market. This is despite the release of a positive announcement this morning.

At the time of writing the iron ore producer’s shares are down 2% to $17.75.

What did Fortescue announce?

This morning Fortescue announced that it has received approval to increase the material handling capacity of its Herb Elliott Port facility from 175 million tonnes per annum (mtpa) to 210mtpa on a staged basis.

This includes provisions for 188mtpa of hematite ore and 22mtpa of magnetite concentrate. The high-grade magnetite product will be produced from its Iron Bridge Magnetite operations, with the first ore shipments scheduled for mid-2022.

According to the release, the revised licence utilises the capacity of Fortescue’s existing port infrastructure. This comprises five berths and three ship loaders and supports the company’s FY 2021 iron ore shipments guidance of 175mt to 180mt.

World leading port operations.

Fortescue’s Chief Executive Officer, Elizabeth Gaines, notes that its port operations are world leading and continue to demonstrate its capacity to optimise the efficiency and productivity of its infrastructure to deliver iron ore to customers.

She added: “The increase in the licensed capacity of Fortescue’s Herb Elliott Port from 175mtpa to 210mtpa is in line with our strategy to deliver growth through investment, including the US$2.6 billion investment in the Iron Bridge project.”

“This significant project will deliver 22mtpa of high-grade magnetite product, enhancing the range of products available to our customers through our flexible integrated operations and marketing strategy,” the chief executive said.

The company also commented on concerns over the dust levels in the area. It will maintain a high level of vigilance over its management of dust in Port Hedland. This includes the installation and implementation of additional controls ensuring no net increase in dust emissions as a result of the progressive increase in throughput capacity at Herb Elliott Port.

ASX 20 addition.

In other news, this morning Fortescue was added to the ASX 20 index along with supermarket giant Coles Group Ltd (ASX: COL). This index contains the 20 largest listed companies on the Australian share market.

They have joined the large cap index at the expense of Scentre Group (ASX: SCG) and Suncorp Group Ltd (ASX: SUN).

More reading

• Why you should buy ASX copper miners in this market meltdown
• Quarterly rebalance: Coles and Fortescue added to ASX 20, Zip joins the ASX 200
• The one type of ASX company that outperforms all others
• Strike Resources share price wanes despite moving closer to an off-take agreement
• Top brokers name 3 ASX 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 COLESGROUP DEF SET. 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 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.

What happened

Shares of Zoom Video Communications (NASDAQ: ZM) were up 28% in August, according to data provided by S&P Global Market Intelligence. The stock’s outsized gains didn’t get started until later in the month when analysts began predicting blow-out results for the company’s upcoming second-quarter earnings report. Investors began bidding up the stock in anticipation.

Zoom reported earnings on Aug. 31, and calling it a blow-out quarter would be an understatement. A Bank of America analyst had one word to sum it up: “unprecedented.”

ZM data by YCharts.

So what

Multiple analysts issued bullish statements on Zoom stock in August. For example, RBC raised its Zoom price target by 20% to $300 per share. And Rosenblatt Securities raised its price target by 24% to $260 per share. All analysts expected incredible revenue growth from the company – consensus estimates placed Zoom’s Q2 revenue at around $500 million. In the days leading up to report, investors started piling in, hoping to see some sort of pop after earnings.

I think, by now, you know the rest. Zoom stock rocketed around 40% higher to new all-time highs after its Q2 report. Its results obliterated even the most bullish expectations. The company reported revenue of $664 million, an increase of 355% year over year. Its net cash from operations was $401 million – up almost 13 times from the year-ago quarter.

Now what

Zoom issued guidance for its fiscal 2021 (its current year). The company expects full-year revenue of $2.37 billion to $2.39 billion, and non-GAAP (adjusted) diluted earnings per share of $2.40 to $2.47. Given its current market capitalisation of around $110 billion, that means Zoom stock currently trades around 46 times fiscal 2021 sales and around 164 times non-GAAP earnings. That’s a hefty price to pay, even for a growth stock of Zoom’s calibre. 

The debate isn’t whether Zoom can grow in the near term – investors are divided about whether Zoom can grow at a rate to justify its valuation over the long term. Furthermore, some believe Zoom’s video conferencing tool is merely being used now out of necessity, but customers will bail once COVID-19 is far in the rearview mirror.

This is a good time for Zoom bulls to review their investing theses, given the stock’s current valuation, to see if they are prepared to continue holding for the long term. Likewise, Zoom bears should consider that top companies often find ways to keep growing and winning – sometimes going down new, unforeseen avenues. In Zoom’s case, it sees plenty of growth to come in areas like telehealth and Zoom phone, a multifaceted business communication tool.

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

More reading

• Is the Nasdaq’s 600-Point Plunge the End of the Bull Market?
• Zoom earnings on Monday: Will they keep the stock’s COVID-fueled surge going?
• Zoom Video to soon appear on Amazon, Facebook, and Google smart display devices

Jon Quast has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Zoom Video Communications. 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Things are ugly this morning fellow Fools. The S&P/ASX 200 Index (Index:^AXJO) is tipped to crash although there’s a glimmer of good news for ASX copper miners.

The futures market is pricing in a 2% crash in top 200 stock benchmark this morning after US stocks suffered their worst beating in three months.

While it’s the US tech darlings like the Tesla Inc (NASDAQ: TSLA) share price that ended up with the bloodiest noses, today’s sell-off on the ASX is likely to be widespread.

ASX copper miners on verge of surge?

The only real piece of good news for Aussie investors to sink their teeth into is a report of a looming copper shortage.

The global copper market could be on the verge of a historic supply squeeze, reported Bloomberg.

The squeeze is being triggered by strong Chinese demand for the red metal and depleting inventories, which plunged to their lowest levels in more than 10 years.

ASX copper underperformer to benefit more

Some experts are forecasting a surge in copper prices and some are even comparing what’s happening now to the early 2000s. Back then, Chinese buyers emptied warehouses of metal exchanges and sent copper rallying to record highs.

Those golden days for copper could be back, if these predictions come through. Panic buying will benefit the Sandfire Resources Ltd (ASX: SFR) share price the most, in my view.

While its peer, the OZ Minerals Limited (ASX: OZL) share price hits new record highs, Sandfire is lagging behind due to its lower quality projects. It’s the more marginal players that tend to benefit more when commodity prices surge.

Mining giants like the BHP Group Ltd (ASX: BHP) share price will also benefit from the copper bull market. But it’s the pure copper miners like Sandfire that are most leveraged to the industrial metal.

Squeezed by high demand and low supply

Chinese demand for copper is growing as its factories ramp up as the world reopens from the COVID-19 shutdown.

China’s Caixin manufacturing purchasing managers’ index for August hit its highest reading since January 2011.

Citigroup believes that copper could hit US$8,000 a ton, which is more than US$1,000 higher than the current price, reported Bloomberg. Copper’s record price is $10,190 a ton.

On the other hand, supply at warehouses is likely to stay lower for longer due to the ongoing disruption to supply chains. There is also a hint of panic hoarding by copper users around the world.

ASX copper miners on new upgrade cycle?

I don’t believe stronger for longer copper prices are yet reflected in consensus forecasts, so this means ASX copper-exposed stocks could be on a cum-upgrade cycle.

This could not be dissimilar to what we saw for iron ore, which benefitted Fortescue Metals Group Limited (ASX: FMG) more than its bigger rivals. FMG’s ore is of a lower quality.

When commodity prices run, it’s the uglier ducklings that turn into swans.

More reading

• Fortescue share price drops lower despite positive update
• Here’s why the Vocus share price leapt 19% in August
• Quarterly rebalance: Coles and Fortescue added to ASX 20, Zip joins the ASX 200
• Down in August, is the CBA share price a buy?
• Why the Qantas share price has lifted 22% in the past month

Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited and OZ Minerals Limited. Connect with me on Twitter @brenlau.

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 you should buy ASX copper miners in this market meltdown appeared first on Motley Fool Australia.

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The Australian share market is great place to find quality ASX blue chip shares with $3,000.

The idea of a blue chip is that it’s a dependable, well-known business that you can invest in for the long-term.

However, I also think that any investment we make should have a fairly high chance of producing good returns. At the moment I can’t see businesses like BHP Group Ltd (ASX: BHP), Westpac Banking Corp (ASX: WBC) or Telstra Corporation Ltd (ASX: TLS) producing solid compounding returns in their existing forms.

However, I do believe that there are a few ASX 100 shares that would be good ASX blue chip share investments with $3,000:

CSL Limited (ASX: CSL)

CSL may not be one of the most talked about businesses in Aussie households, but it actually has the largest market capitalisation on the ASX. I think that makes it an ASX blue chip share. It has been an incredibly good investment over the long-term. In just the past five years the CSL share price has risen by 223%.

The biotech business develops biotherapies and influenza vaccines that save lives, and helps people with life-threatening medical conditions.

Healthcare is an important aspect of our modern life. Just think how important finding a healthcare solution for COVID-19 is. CSL is involved in trying to find healthcare answers to COVID-19. 

What I really like about CSL is its commitment to research and development. It’s this constant investment into the company’s future that will create new earnings streams and grow profit further.

CSL is often called expensive. It does seem expensive with the CSL share price trading at 39x FY22’s estimated earnings. However, remember that it invests a large amount into research and development each year – in FY20 in spent (and expensed) US$922 million. If you take that out then the valuation looks more reasonable.

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

Soul Patts is another name that may not be as widely-known as Woolworths Group Ltd (ASX: WOW), but I think it could be a really good long-term investment. The investment house has been listed in Australia since 1903. It has great longevity. I think that makes it an ASX blue chip share as it’s in the ASX 100. 

Whilst the ASX share may not be very recognisable to most people, it has several well-known investments like TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW) and Australian Pharmaceutical Industries Ltd (ASX: API).

It’s also invested in unlisted businesses like resources, swimming schools and agriculture.

Soul Patts is the type of business that can steadily grow for many years. Its existing portfolio should be able to create decent returns and the ASX blue chip share puts new money to work every year as it receives annual investment income. It only pays out a certain amount of its net operating cashflow as a dividend after paying for its operating expenses.

As a bonus, at the pre-open Soul Patts share price it offers a grossed-up dividend yield of 4%.

A2 Milk Company Ltd (ASX: A2M)

In terms of having a nationally-recognised brand, I think A2 Milk definitely fits the description. That makes it an ASX blue chip share to me, as it’s in the ASX 100. Its infant formula is found across the country in supermarkets, pharmacies and so on. Liquid milk is also sold in all major grocery stores in Australia.

The infant formula business is generating excellent growth internationally. In FY20 the ‘China and other Asia’ segment saw revenue growth of 65.1% to NZ$699.4 million, with earnings before interest, tax, depreciation and amortisation (EBITDA) growth of 66.7% to NZ$224.9 million. In FY20, US revenue increased by 91.2% to NZ$66.1 million.

I think that the A2 Milk share price is a strong buy today for its long-term international growth potential.

It’s currently trading at 27x FY22’s estimated earnings.

Foolish takeaway

CSL is a dependable ASX blue chip share, I think A2 Milk can generate the biggest growth. Soul Patts is the type of business you could own for decades. I like all three of these ASX shares. Soul Patts is a good dividend pick, whilst A2 Milk is a good growth pick right now in my opinion.

More reading

• Why I think the A2 Milk share price is a strong buy today
• New to investing? 3 top ASX shares to kickstart your portfolio
• 2 of the best ASX healthcare shares to buy today
• Why a recession shouldn’t matter for the ASX share market
• 3 ASX 200 shares to buy for strong returns

Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Brickworks, Telstra Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of A2 Milk. 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 3 ASX blue chip shares I’d buy with $3,000 right now appeared first on Motley Fool Australia.

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