Category: Stock Market

The process of Virgin Holdings Australia Ltd (ASX: VAH) re-emerging from voluntary administration continues to unfold, with the company announcing it has shortlisted a small number of “well-funded parties with strong aviation credentials”.

While Virgin refrained from naming the parties due to confidentiality reasons, ABC News reports that the shortlist comprises 4 bidders: private equity firms Bain Capital and BGH Capital, US aviation firm Indigo Partners, and New York-based investor Cyrus Capital Partners.

BGH Capital is an Australian and New Zealand-focused private equity firm that is headquartered in Melbourne. Just this morning, details emerged of its revised takeover proposal for entertainment company Village Roadshow Ltd (ASX: VRL).

“Significant step forward”

Virgin described the shortlisting as a significant step forward in the process to find a new owner and bring the airline out of administration as soon as possible.

The deadline for indicative bids was last Friday 15 May, with 8 non-binding offers received and negotiations ongoing with a further 12 parties as of Thursday.

According to Reuters, other parties that put in non-binding indicative offers include Canadian asset manager Brookfield, India’s InterGlobe Enterprises and Australian mining tycoon Andrew “Twiggy” Forrest. The Queensland government also made a surprise bid.

Commenting on the shortlist, lead partner for the administrators, Deloitte’s Vaughan Strawbridge, said:

These parties enable us to seek the best available commercial solution which we are all looking for, while meeting our responsibility to maximise the outcome for creditors and see the airline continue as one of the country’s two carriers serving Australians across cities and regions.

What next?

The embattled airline entered voluntary administration on 21 April, owing around $7 billion to thousands of creditors.

Virgin and its administrators will now work with these shortlisted parties over the next 4 weeks to enable binding offers by mid-June. This will involve the sharing of more detailed financial information, management workshops, and meetings with various stakeholders including financiers, landlords, suppliers and unions.

According to the ABC News report, final bids are due on 12 June 2020.

More reading

• 5 ASX 200 winners and 5 losers of the week
• Why Beach, CBA, Qantas, & Xero shares are dropping lower
• Losers of Virgin Australia’s potential nationalisation
• The Queensland government is aiming to buy a stake in Virgin Australia
• 5 things to watch on the ASX 200 on Thursday

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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The S&P/ASX 200 Index (ASX: XJO) has had a rollercoaster start to the year. Despite initially being hammered by the coronavirus pandemic shutdown and oil price war, the ASX 200 has had a comeback in recent weeks. In fact, the benchmark index has surged 20.78% since bottoming out at 4,546 points on 23 March.

But despite the recovery, there is still plenty of uncertainty in the markets. Just last week we saw that Australia’s unemployment rate jumped to 6.2% in April with 600,000 jobs lost during the pandemic.

So, how is the ASX 200 still climbing higher despite the bleak economic data?

Why is the ASX 200 soaring higher?

One thing that is helping the Aussie share market in 2020 is better-than-expected data. While COVID-19 has hit the economy hard, economists had forecast much higher unemployment. In fact, Treasury estimates have forecast unemployment to reach 10% in the June quarter. That means that last week’s unemployment figures (while devastating for Aussie businesses and individuals) paint a picture that’s less bleak than expected.

The other bit of good news is the easing of coronavirus restrictions. Australia is slowly coming back to life with many states easing restrictions on gatherings. That’s good news for operators in some of the hardest-hit sectors like domestic travel, hospitality and leisure. 

There’s a long way to go, but the ASX 200 has been climbing higher due to some broader positivity. Share markets are inherently forward-looking, which means investors are pricing in the future rather than the present.

However, there’s another big factor driving the ASX 200 higher right now: money supply. The Reserve Bank of Australia has injected a lot of cash into the economy while the official interest rate is sitting at 0.25%. That means high-interest savings accounts are starting from as little as 0.01% right now.

So, if you’re looking to invest your money, a savings account doesn’t seem like a great return on investment. It’s a similar story with term deposit rates, while bonds are yielding very little. Property in most Aussie towns and cities is very expensive right now, which makes it inaccessible to many investors.

That leaves us with ASX 200 shares. Those Aussies who are still working throughout the pandemic are putting their spare cash into shares to get some sort of return on investment. That’s helping boost the share market higher despite concerns over economic growth, migration and other factors hampering the economy.

More reading

• Is it time to buy ASX 200 gold shares?
• The 5 ASX shares that were last week’s biggest fallers
• Is the Mirvac share price about to soar?
• ASX 200 up 1.35%: Gold miners and Fortescue rocket higher, big four banks tumble
• Meet the ASX 200 company that just posted a 90% surge in profit

Motley Fool contributor Ken Hall 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 200 gold shares made some strong gains on Friday. While the S&P/ASX 200 Index (ASX: XJO) edged 0.25% lower last week, some of the biggest gold companies jumped higher.

For instance, the Saracen Minerals Holdings Limited (ASX: SAR) share price surged 6.99% higher on Friday and closed 13.23% higher for the week. It was a similar story for fellow ASX 200 gold share Northern Star Resources Ltd (ASX: NST) which climbed 7.75% last week.

Clearly, investors are still unsure of how to price in the coronavirus impacts. There’s a lot of uncertainty about the global and domestic economy including how and when restrictions will be eased.

But despite the current confusion, are Aussie gold shares the best way to invest in 2020?

Are ASX 200 gold shares in the buy zone?

Let’s start with why shares in the Aussie gold miners are climbing higher right now. Gold is seen as a safe haven asset, given it’s been a store of value for thousands of years.

Most investors aren’t too keen to buy and hold physical gold. Let’s be honest, gold bullion isn’t the most convenient investment to have.

So the alternative is to get indirect exposure to gold through another vehicle. That vehicle happens to be ASX 200 gold shares for the average investor. Of course, there is still company risk from buying Northern Star or Saracen shares. But if the price of gold surges due to demand, these companies can get a higher realised price and make more profit.

I’m personally not a big gold investor, but I think Aussie gold shares could outperform in the next few months until the global outlook is a little clearer. However, I’m a long-term, buy-and-hold investor.

That means I’d rather buy high-quality companies with long-term prospects. That’s not to say that ASX 200 gold shares like Saracen don’t have long-term prospects, but that I’d rather not put all my eggs in the one basket.

Foolish takeaway

If you’re particularly bearish on the economy, ASX 200 gold shares could be a great buy. I also think a small exposure to commodities can be good for portfolio diversification. However, I’d rather not speculate on the short-term and focus on buying ASX shares for the next 20 or 30 years.

More reading

• How is the ASX 200 soaring despite rising unemployment?
• The 5 ASX shares that were last week’s biggest fallers
• Is the Mirvac share price about to soar?
• ASX 200 up 1.35%: Gold miners and Fortescue rocket higher, big four banks tumble
• Meet the ASX 200 company that just posted a 90% surge in profit

Motley Fool contributor Ken Hall 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 Is it time to buy ASX 200 gold shares? appeared first on Motley Fool Australia.

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At the mid cap side of the market I believe there are a good number of shares which have the potential to grow into large caps over the next decade.

This could make it well worth investing in them with a long term view.

Three top mid cap ASX shares that I would buy right now are listed below. Here’s why I like them:

Clover Corporation Limited (ASX: CLV)

Clover is a producer of ingredients such as omega-3 oils that go into infant formula, supplements, and baby food. It has been growing at a very strong rate over the last few years thanks largely to increasing demand from infant formula manufacturers. Given potentially favourable changes to ingredient requirements in a number of key markets, I expect demand to grow over the coming years and drive strong earnings growth.

Electro Optic Systems (ASX: EOS)

I think Electro Optic Systems is a mid cap share to watch. It is Australia’s largest aerospace company and the largest defence exporter in the Southern Hemisphere. The key product in its portfolio in my eyes is its Remote Weapon System. This system allows the military to remotely operate weapons and machinery. Electro Optic Systems has partnerships with major global aerospace giants and a massive backlog of work that alone looks set to underpin solid earnings growth over the next few years.

Nearmap Ltd (ASX: NEA)

Nearmap is a leading aerial imagery technology and location data company. Its growth has taken a bit of hit this year due to the loss and downgrade of a number of large contracts. While this is disappointing, it is important to note that these customers have not been lost to the competition. I still believe Nearmap is head and shoulders above its rivals and well-placed to capture a greater slice of this growing global market over the next decade.

More reading

• 2 ASX tech shares to buy with stellar growth prospects
• 30% off: 3 ASX 200 shares to buy on the cheap
• Where I’d invest $1,000 into ASX shares right now
• 2 ASX shares that every investor should own
• How to build your first ASX share portfolio

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 Clover Limited. The Motley Fool Australia owns shares of and has recommended Electro Optic Systems Holdings Limited and Nearmap 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.

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Xero Limited (ASX: XRO) shares have opened the week strong today, banking a 2.5% rise to $77.19 at the time of writing. Even so, the Xero share price is still down 7.6% over the past week.

Xero is one of those shares that doesn’t seem to ever dip too much, so is this a rare buying opportunity?

Why has the Xero share price dipped?

Xero shares fell last week after the company released its FY20 results to the market. Xero reported some strong numbers, including a 26% increase in subscribers, a 30% increase in revenues and an inaugural profit of NZ$3.3 million. Free cash flow also increased by 320% to NZ$27.1 million.

But despite these numbers, investors were clearly expecting a little more out of this WAAAX market darling. Xero shares dipped in response, falling from nearly $84 on Wednesday to around $75 by the end of the week.

Does this mean Xero is a buy today?

Although the Xero share price has come off the boil, I’m still not convinced it’s at a compelling level today.

Xero is a company investors are pricing for a high growth future and it does have a long growth runway, for sure. Governments around the world are pushing for their taxpayers to switch to digital providers like Xero, which is a great long-term tailwind for the company to enjoy. Further, Xero has shown its product is extremely sticky, with most customers remaining on its platform after onboarding.

But with a current price-to-earnings ratio over 3,500, I think investors are seeing a little too much future potential based on current levels. Remember, this is a company that has just turned its first profit of NZ$3.3 million, yet has a market capitalisation of nearly $11 billion.

Furthermore, I still have concerns that Xero might run into increased competition which, in turn, may slow the astronomical rate of its subscriber growth. Intuit Inc. (NASDAQ: INTU) is one of Xero’s major competitors and has also been growing its market share in North America.

Perhaps on current prices, the market is treating Xero like a future monopoly in its cloud accounting space, rather than one of several strong players.

Foolish Takeaway

Xero is a high-quality company to be sure, and one I wouldn’t mind owning shares in at some point. But I think the current market environment is not one we should be making high-growth bets in. Therefore, today’s Xero share price is still a little out of my comfort zone. Call me if the Xero share price falls back to under $60 where it was a year ago and we might have a different conversation!

More reading

• 5 ASX 200 winners and 5 losers of the week
• ASX 200 up 0.25% this week, CBA reveals Q3
• Top brokers name 3 ASX 200 shares to sell next week
• Top brokers name 3 ASX shares to buy next week
• ASX 200 finishes up 1.4%, gold miner share prices surge

Sebastian Bowen 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 Intuit. 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.

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One of the best performers on the S&P/ASX 200 Index (ASX: XJO) on Monday has been the Fortescue Metals Group Limited (ASX: FMG) share price.

At one stage today the iron ore producer’s shares were up as much as 8% to a record high of $13.53.

When its shares reached that level, it meant they had gained a sizeable 25% since the start of the year.

Not bad when you consider that the ASX 200 is down over 18% during the same period.

Why is the Fortescue share price at a record high?

Investors have been buying the iron ore producer’s shares on Monday after the price of the steel making ingredient climbed higher on Friday night.

According to CommSec, the benchmark iron ore price rose by US$2.50 or 2.8% to US$93.25 a tonne. This brought its weekly gain to a solid US$4.80 or 5.4%.

Iron ore prices have been increasing thanks to solid demand in China and production disruptions from key Brazilian miners.

Pleasingly, analysts at Goldman Sachs appear confident that iron ore prices will remain solid for some time to come. They recently ruled out a crash in the base metal’s price.

What else is supporting Fortescue’s shares?

In addition to this, with the interest rates on offer with savings accounts and term deposits at ultra low levels, income investors have been attracted to Fortescue for its generous yield.

Especially given how countless dividend favourites such as Australia and New Zealand Banking GrpLtd (ASX: ANZ) have been deferring or even outright cancelling dividend payments during the pandemic.

According to a note out of Macquarie Group Ltd (ASX: MQG) on May 1, it expects Fortescue to pay a 73.3 cents per share dividend in FY 2021. This implies a 5.5% fully franked forward dividend yield.

While that is very generous already, I suspect that if iron ore prices remain at these levels for longer, Fortescue’s free cash flows will be strong enough to pay an even bigger dividend next year.

Overall, I think this yield and its positive outlook makes it worth considering Fortescue along with fellow mining giant BHP Group Ltd (ASX: BHP).

More reading

• ASX 200 up 1.35%: Gold miners and Fortescue rocket higher, big four banks tumble
• Beat falling rates with these strong ASX dividend shares
• Are these China-exposed ASX shares in danger in 2020?
• Get paid huge amounts of cash to own these ASX dividend shares
• Goldman Sachs names 5 reasons iron ore prices won’t crash

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie 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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I think the smartest shares to buy if you have $2,000 are ones that are seeing an acceleration of growth.

In light of the ongoing coronavirus pandemic and the share market decline, I think there are three groups of shares.

There’s one group that have seen their earnings and share prices smashed. Think of industries like retail and travel. There may be a few shares to buy in that group, but I don’t think the Flight Centre Travel Group Ltd (ASX: FLT) share price will be back above $30 any time soon.

There’s another group of shares that generally don’t seem to be significantly affected either way for the medium-term. I’m thinking of eesource shares like Rio Tinto Limited (ASX: RIO), supermarkets like Coles Group Limited (ASX: COL) and energy infrastructure like APA Group (ASX: APA). I think you need to decide if you’re happy to invest in these names, when other shares have fallen hard in price.

Finally, I think there’s another group where growth has been, or will be, accelerated by the current conditions. This largely describes business that have an important digital element to their service. I think it’s within this group that could be the smartest shares to buy if you have $2,000.

Two of the smartest shares to buy with $2,000

Pushpay Holdings Ltd (ASX: PPH) is a compelling smaller business that provides electronic donation services to not-for-profits, predominately US churches.

In this period of social distancing, having the ability to donate digitally to the church is extremely useful. Pushpay also enables churches to livestream the church service to the congregation.

The company generated excellent growth in FY20 and in FY21 it’s expecting earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) to approximately double.

I think Pushpay is one of the smartest shares to buy because people are shifting to electronic giving much faster than what would have happened otherwise.

Magellan High Conviction Trust (ASX: MHH) is a listed investment trust (LIT) that invests in high quality globally listed shares which have very strong economic moats. This trust has a small portfolio of names that it has high conviction in. Those businesses generally provide most of their services digitally.

Some of the shares within the trust’s holdings are Alibaba, Alphabet, Microsoft, Facebook and Visa. I think these are some of the smartest shares to buy in the world. We can get exposure to all of them with a single investment in Magellan High Conviction Trust.

Even the advertising businesses like Alphabet and Facebook could be good picks because whilst total marketing spend is obviously down, digital advertising is the best way to reach customers at the moment.

As a bonus, the trust targets a 3% distribution yield each year.

Foolish takeaway

I really think both of these shares will see stronger underlying user growth and this will help generate stronger long-term growth. At the current prices I think Pushpay could be one of the smartest shares to buy on the ASX. Magellan High Conviction Trust could be another great idea, particularly if the Australian dollar keeps strengthening.

More reading

• Why I would buy these exciting ASX growth shares right now
• ASX shares can help millennials retire before their parents
• These 4 ASX shares are at 52-week highs. Time to invest?
• Take advantage of ASX share market volatility
• Double your money with these high quality ASX shares

Motley Fool contributor Tristan Harrison 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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