Category: Stock Market

The National Australia Bank Ltd (ASX: NAB) share price continued its positive run on Wednesday and pushed higher again.

The banking giant’s shares are now up 18% from the 52-week low they dropped to in March.

Is it too late to invest?

While NAB is not my number one pick, I still believe its shares would be great options at the current level.

Times may be hard for the bank right now, but the cycle will eventually change and a return to better days will come. I feel this could make it worth being patient and buying its shares with a long term view.

I’m not alone in labelling NAB a buy.

Who else likes NAB?

Earlier this week analysts at Goldman Sachs reiterated their conviction buy rating and $17.50 price target on the bank’s shares.

With its shares currently changing hands at $15.60, this price target implies potential upside of greater than 12% over the next 12 months excluding dividends.

But if you include the fully franked dividends of $1.05 per share Goldman Sachs expects NAB to pay in FY 2021, this potential return stretches to almost 19%.

Why does Goldman Sachs like NAB?

The broker likes NAB due to the dramatic improvement in its operational performance in recent years. This has particularly been the case with how it manages the volume versus margin trade-off.

In addition to this, it expects NAB’s revenue momentum over the medium term to remain superior to its peers. This is expected to be driven by its overweight exposure to SME lending, which Goldman Sachs views as both a relative volume and margin tailwind versus housing.

Another reason it is positive on NAB is its costs focus. This has seen NAB deliver flat expense growth in FY 2019 and FY 2020 excluding notable items.

All these positives are expected to combine and drive the strongest pre-provision operating profit (PPOP) growth among its peers. Which, considering its 15% PPOP multiple discount to peers, Goldman Sachs feels NAB is the standout pick in the sector.

More reading

• Why the Commonwealth Bank share price is the best buy among the Big 4 banks
• Are ASX bank shares worth buying despite dividend cuts?
• Is it time to buy ASX banks?
• The ASX big bank stock most likely to outperform in the COVID-19 recovery
• 5 ASX 200 dividend shares for an economic recovery

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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ASX gold stocks have been on a tear and the sector is likely to remain well supported as the price of the precious metal is forecasts to hit a record high of US$2,000 an ounce in the next 12-months.

The bullish prediction comes from Joe Foster who is the portfolio manager at VanEck – the world’s largest gold exchange-traded fund, reported the Australian Financial Review.

The gold price couldn’t muster enough momentum to reach that price barrier after the GFC when it peaked at a little over US$1,900 an ounce.

But Foster highlights four reasons why it can this time round.

Gold’s 4 tailwinds

The first is the US$9 trillion ($14 trillion) in stimulus that central banks and governments around the world have pumped into the economy to soften the COVID-19 blow.

If the record amount of stimulus triggers an inflationary cycle or if the impact from the coronavirus is worse than expected, gold could even head north of US$2,000 an ounce, Foster told the AFR.

The second tailwind for gold is its ability to protect investors from any short-term deflationary shock that’s triggered by the COVID-19 pandemic.

Works as an inflation and deflation hedge

Interestingly, gold is about the only asset that can also protect against inflation. If inflation does rear its ugly head due to the massive liquidity injection, the gold price will outperform.

Finally, ballooning sovereign debt from the stimulus is likely to devalue fiat currencies. This loss of faith in paper money is anther boon for the gold price.

The ASX gold stocks shining bright

For these reasons, Foster allocated around 20% of his portfolio to Australian gold miners. He commented that the drop in the Australian dollar rejuvenated the industry and prompted greater exploration activity.

The mid-tier ASX gold miners that he believes are great companies include Evolution Mining Ltd (ASX: EVN), Northern Star Resources Ltd (ASX: NST) and Saracen Mineral Holdings Limited (ASX: SAR).

However, he also likes earlier stage Australian miners. These include Gold Road Resources Ltd (ASX: GOR), West African Resources Ltd (ASX: WAF) and Bellevue Gold Ltd (ASX: BGL).   

Foolish takeaway

Foster’s views follow my article on April 16 when I outlined reasons why the gold price will break new highs.   

The tailwinds supporting the commodity are unlikely to reverse or ease anytime soon. If anything, they can persist for the next few years.

This is why I have been recommending investors go overweight on the sector even as we recover from the coronavirus disaster.

While the yellow metal tends to outperform during a crisis, history shows that it keeps running well into the recovery phase.

More reading

• These are the latest ASX shares to be downgraded by top brokers
• 5 things to watch on the ASX 200 on Wednesday
• Macquarie picks the best stocks to buy for the post COVID-19 rebound
• Why Fisher & Paykel Healthcare, Mesoblast, Northern Star, & TechnologyOne are tumbling lower
• ASX 200 climbs 1% in positive start to the week

Motley Fool contributor Brendon Lau owns shares of Evolution Mining Limited. 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 this expert is predicting gold to hit record high of US$2000 appeared first on Motley Fool Australia.

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You can save your future self from financial misery by making sure you take advantage of this volatile share market period.

At the moment the S&P/ASX 200 Index (ASX: XJO) is down around 22% from the pre-coronavirus heights. Ignoring that the share market has been even lower, I think today’s lower price is broadly attractive. (However, I wouldn’t call every share a buy just because it’s priced lower.)

The thing is, our 65-year-old selves don’t suddenly wake up with a $1 million share portfolio out of thin air. It takes a lifetime of good financial habits, saving your dollars and investing diligently, to build that kind of wealth.

No-one can know how generous (or not) the Australian pension will be in two or three decades from now in ‘real’ terms. I’d bet it won’t be as generous as today as the demographics change.

If you want to have a good portfolio when you retiree you need to starting building it today. Or at least as soon as you can.

Would you rather buy shares when they’re priced 20% lower or 20% higher? I think it’s obvious what the answer should be! Warren Buffett has a good analogy for this with buying burgers from a supermarket. He’s going to keep buying burgers, so rejoice when prices are a lot lower.

What shares will help your future self financially?

I don’t think you can go too wrong with low-cost, quality exchange-traded funds (ETFs) like BetaShares Australia 200 ETF (ASX: A200), iShares S&P Global 100 (ASX: IOO) and iShares S&P 500 ETF (ASX: IVV).

I also believe there are some great fund managers to chose from. Shares like Magellan High Conviction Trust (ASX: MHH), MFF Capital Investments Ltd (ASX: MFF) and PM Capital Global Opportunities Fund Ltd (ASX: PGF) could be solid picks at these prices. Managers can be worth the fees if they outperform or you buy at a good discount to the assets. 

More reading

• ASX 200 ends the day higher, EML share price rises another 12%
• These are the latest ASX shares to be downgraded by top brokers
• $3,000 invested in these 3 ASX industries could make you a fortune in the future
• Down 10% in 2 months. Are Coles shares a buy today?
• Why this ASX 200 stock could surge higher tomorrow

The post Save your future self from financial misery appeared first on Motley Fool Australia.

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Investment company Stockspot has just released its 2020 ETF research report, revealing the best and worst-performing ASX exchange-traded funds (ETFs) and providing insight into this increasingly popular investment option. 

The report found that the Australian ETF market grew by 24% over the 12 months to March 2020, with ETF funds under management (FUM) increasing from $45.8 billion to $56.9 billion.

Over the last year, 23 new ETFs were introduced to the market, taking the total number of ETFs in Australia to 212.

Investors turn to ETFs amid heightened uncertainty

The report revealed that ETF trading volumes in March 2020 set an all-time record that was almost triple the previous monthly record. As the ASX entered a bear market, there were nearly 800,000 ETF trades in March. That’s 8 times the historical average of 110,000 monthly trades.

According to the report, the market sell-off welcomed consistent inflows to Australian-focused ETFs and those focused on other parts of the world, while active ETFs experienced significant outflows. This reflects the greater importance investors place on transparency and liquidity in times of volatility.

Best-performing ASX ETFs

Commodities were front and centre in the report’s best performers for the 12 months to March 2020, with the ASX gold sector performing strongly. ETF Securities’ ETFS Physical Gold ETF (ASX: GOLD) posted a 43.1% return. Hot on its heels was Perth Mint Gold (ASX: PMGOLD), which saw a 1-year return of 42.9%.

This reflects the safe-haven status of gold, with investors flocking to the precious metal on the back of increasing COVID-19 uncertainty and record-low interest rates. Notably, the report also found that there is now $2.3 billion in physical gold ETFs listed on the ASX, more than double last year’s figure of $906 million.

According to the report, physical gold outperformed ASX gold mining companies, which delivered a return of 23%.

Worst-performing ASX ETFs

The dreaded pole position belonged to the BetaShares Crude Oil Index ETF (ASX: OOO), racking up a negative return of 64.6%. This is a synthetic ETF that aims to provide investors with exposure to WTI crude oil futures, which have been on a downward spiral and crashed into negative territory at the back-end of last month.

In second place was the BetaShares Global Energy Companies ETF (ASX: FUEL) which experienced a 46.7% fall. Since most major energy companies are largely exposed to crude oil prices, this ETF suffered a similar fate to OOO.

Most popular ASX ETFs

The Vanguard Australian Shares Index ETF (ASX: VAS) retained its crown as the largest ASX ETF and was the most popular choice for investors in terms of net flows. In the 12 months to March 2020, the VAS ETF experienced $1.6 billion of inflows. According to Vanguard, VAS now manages $4.8 billion of ETF funds as of 30 April 2020.

The second most popular choice for investors was another broad-based Australian share market ETF, iShares Core S&P/ASX 200 ETF (ASX: IOZ). IOZ enjoyed $871 million in new money coming in.

Perhaps unsurprisingly, gold also featured, with the ETF Securities GOLD ETF experiencing the third-highest inflows of $629 million.

If you’re interested in investing in ETFs, be sure to check out the Fool’s top ETFs for 2020. And if shares are also up your alley, don’t miss the report below.

More reading

• Buffett? Lynch? Here are the investing experts you should take advice from when buying ASX shares
• Should ASX investors just buy ETF index funds for better returns?
• Don’t delay: Start investing today in shares to become rich
• Here’s how to create a $1 million ASX portfolio by investing $1,000 a month
• Why a buy and hold strategy for ASX shares is best

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.

The post Australian ETF market sets an all-time record amid COVID-19 appeared first on Motley Fool Australia.

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The Commonwealth Bank of Australia (ASX: CBA) may emerge from the coronavirus pandemic as the best bank to invest in among its Big 4 cohorts: Australia and New Zealand Banking Group Limited (ASX: ANZ), Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd. (ASX: NAB).

Could it be the big four bank to buy? 

No deferred dividend or capital raising 

CBA’s strong capital position enabled the bank to deliver 1H20 interim dividend of $2.00 per share or $3.5 billion to its ~830,000 shareholders. A much-needed cash benefit to the economy. 

Comparing this to the likes of Westpac and ANZ, which both deferred their interim dividend, and NAB, which offered its existing shareholders more capital in its $3.5 billion capital raising yet still opted to pay them a small interim dividend. 

Despite paying $3.5 million in dividends, Commonwealth Bank was still able to maintain a March CET1 (Common Equity Tier 1) ratio of 10.7% above APRA’s ‘unquestionably strong’ benchmark of 10.5%, notwithstanding the timing of the 1H20 dividend payment and additional COVID-19 and remediation provisions. 

I believe Commonwealth Bank’s commitment to paying a dividend in today’s uncertain climate – without having to raise additional capital, while also meeting APRA’s stringent capital requirements – is a reflection of its position as the leading big four bank. 

Sturdy relative earnings

Commonwealth Bank demonstrated relatively sturdy earnings compared to its peers. Cash net profit after tax for the big four banks in comparison to 1H19 was:

• CBA down 44% 
• Westpac down 70%
• NAB down 51.4%
• ANZ down 60%

Commonwealth Bank is well placed to manage the challenging market conditions, with strong balance sheet settings and a favourable business mix. The group is 70% deposit funded, underpinned by the bank’s peer lending franchise strength in stable household deposits. Deposit balances grew strongly in Q3, influenced by growth in retail/SME deposits and corporate clients drawing down on funding lines and placing these funds into CBA deposits for liquidity purposes. 

Is it a buy?

There are a number of risks and scenarios that could play out following COVID-19. Commonwealth Bank’s report outlines key drivers in the housing market including unemployment, underemployment, changes to income and house prices.

Government assistance programs such as the JobKeeper scheme have been able to prop up the economy and employment levels. However, the implicit end of JobKeeper combined with structural changes in Australian sectors and ongoing China trade tensions could see economic conditions worsen. Despite a potentially weaker economic outlook, I would still consider Commonwealth Bank the better of the big four banks, given its earnings and commitment to dividends. 

More reading

• Are NAB shares a bargain buy?
• ASX 200 down 0.2%: Big four banks lower and TPG announces demerger plans
• Are ASX bank shares worth buying despite dividend cuts?
• Is it time to buy ASX banks?
• Are CBA shares in the buy zone?

Motley Fool contributor Lina Lim 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 the Commonwealth Bank share price is the best buy among the Big 4 banks appeared first on Motley Fool Australia.

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