Stock Pick

Category: Stock Market

  • Is the Woolworths share price a buy?

    finger pressing red button on keyboard labelled Buy

    The Woolworths Group Ltd (ASX: WOW) share price has fallen 4.40% lower in 2020, but could it be back in the buy zone today?

    Why the Woolworths share price could be a buy

    The Aussie retailer’s shares had a reasonably strong start to the year and hit a new 52-week high of $43.96 in late February. That was the peak for most ASX 200 shares before entering a bear market in February and March. 

    The Woolworths share price has since fallen 20.95% from that 52-week high to $34.75 per share at the time of writing. Given the S&P/ASX 200 Index (ASX: XJO) is down 18.87% in 2020, the retailer’s shares are still outperforming the market.

    While I think that Coles Group Ltd (ASX: COL) shares can outperform Woolworths in 2020, both retailers’ shares could be back in the buy zone. Australia is starting to ease coronavirus restrictions, but I think the supermarkets will still see strong sales in 2020.

    That’s good news for shareholders and those looking for strong dividend shares this year. If sales remain steady in Woolworths’ core business, that means the retailer may be able to maintain its 2.97% dividend yield.

    What about the downsides?

    While the Woolworths share price may be in the buy zone, it’s not all sunshine and roses. There is still the ailing pubs business, Endeavour Group, that is under the retailer’s ownership.

    The hospitality sector has been smashed by recent government restrictions. These measures have forced many to temporarily shut their doors and lay off staff to stay afloat.

    Woolworths had flagged a sale of the recently merged pubs business but COVID-19 has thrown those plans into doubt. While this may not materially impact earnings for Woolworths going forward, it could place a question mark over the Woolworths share price valuation.

    Foolish takeaway

    I think Woolworths will continue to be a strong defensive buy in 2020. With a 2.97% dividend yield and a solid technical environment, the Woolworths share price could be good value, although I still think Coles shares could be a better buy.

    If you’re still hunting for income shares in 2020, check out this top ASX dividend pick for the right price today!

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    *Returns as of 7/4/20

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    Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET 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.

    The post Is the Woolworths share price a buy? appeared first on Motley Fool Australia.

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  • Cloudflare Sees Uptick in Cyber Attacks as Internet Usage Increases

    Cloudflare Sees Uptick in Cyber Attacks as Internet Usage IncreasesMay.10 — Matthew Prince, co-founder and chief executive officer of San Francisco-based software maker Cloudflare Inc., which provides services such as firewalls, network routing and traffic management that allow cloud-based sites to operate more effectively, discusses how the coronavirus outbreak is affecting demand for its products and services. He also talks about the deal with a unit of China’s JD.com with Selina Wang and Rishaad Salamat on “Bloomberg Markets: China Open.”

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  • SpringWorks (SWTX): A Rare Cancer Biotech with Potentially >50% Upside. Recommending BUY.

    Last week, we initiated a position in Springworks Therapeutics (NASDAQ: SWTX), and as promised, we’re providing our view on the company.

    Summary: Founded in 2017, Springworks is a $1.4B market cap biotech company developing targeted oncology therapies for rare tumor types with high unmet need. We like Springworks for several key reasons:

    • The company has two late-stage (Phase 2/3) programs, nirogacestat and mirdametinib, targeting rare tumor types with high unmet need (either insufficient therapies or no available therapies). Past trial data gives us confidence in their chances of approval, and we expect these candidates to be approved in 2022 and 2023 respectively, upon which they will become first-in-class drugs in their respective indications through their differentiated clinical profiles.
    • Springworks has signed collaborations with major biotech companies to develop several interesting early stage assets in additional oncology indications, providing a degree of validation of Springworks’ assets and creating a future growth runway.
    • We anticipate several value-creating milestones over the next year, namely topline data from nirogacestat’s registrational Phase 3 trial in mid-2021 and an interim update from mirdametinib’s registrational Phase 2b in 1Q21.
    • Our DCF analysis assigns Springworks a price target of $55, assuming an 85% probability of success for nirogacestat and mirdametinib in their main indications, and using an 11% discount rate and 2% terminal growth rate.

    Company Background: Springworks was established in 2017 as a spinoff from Pfizer, which provided the company with initial funding and the development rights to its 4 clinical assets. Springworks raised ~$230M from investors including Bain Capital and OrbiMed Advisors before going public in September 2019.

    1. Late-stage Clinical Programs in Areas of High Unmet Need: Springworks has two late stage programs currently in registrational or potentially registrational trials:

    Nirogacestat. Nirogacestat is an oral, selective gamma secretase inhibitor developed to treat desmoid tumors.

    • Desmoid tumors. Desmoid tumors are highly morbid, soft tissue tumors with an estimated 6,000 patients being treated in the US every year.
    • Unmet need. Though survival rates for desmoid tumors are relatively high compared to other cancer types, desmoid tumors place a heavy burden on patients’ quality of life; they can interfere with the function of nearby structures (e.g. intestines), are painful to live with, and highly disfiguring. Treatment has traditionally been via surgical resection, but this method has been associated with recurrence rates of up to 70%. Chemotherapy and other targeted cancer therapies have been used off-label as well, but these have shown inconsistent efficacy and unfavorable safety profiles.
    • Nirogacestat has received FDA breakthrough and orphan drug designation.

    Mirdametinib. Mirdametinib is an oral, selective MEK inhibitor developed to treat NF1-associate plexiform neurofibromas (NF1-PN).

    • NF1-PN. The NF1 gene produces neurofibromin, a protein that represses a key signaling pathway (RAS/MAPK) responsible for the growth of many cancers. When the NF1 gene is mutated, the loss of neurofibromin production allows this pathway to run unchecked, resulting in tumor growth across the body. There are ~100k NF1 patients in the US, and 30-50% of these patients can develop plexiform neurofibromas, which are tumors that grow along nerves.
    • Unmet need. NF1-PN are associated with extreme pain and disfigurement as well as interference with neurocognitive function. First-line therapy is usually surgical resection, but NF1-PN extensive growth patterns along nerves make them hard to completely remove (while risking nerve damage).
    • There is one approved MEK inhibitor for NF1-PN, AstaZeneca’s selumetinib, which was approved in April 2020. While the drug works, mirdametinib has demonstrated a potentially superior safety profile vs. selumetinib, which should allow patients to remain on therapy longer and experience more clinical benefit.
    • Mirdametinib has received FDA orphan drug designation.

    2. Promising Clinical Data.

    Nirogacestat. To date, nirogacestat has shown a promising clinical profile in its Phase 1 and 2 trials. The drug is currently enrolling patients in its Phase 3 trial, with progression free survival (PFS, a measure of how long patients live without their tumors growing >20% in size) as the primary endpoint.

    • Phase 1. Nirogacestat achieved an objective response rate (ORR) of 71.4% in its 7-patient Phase 1 trial (5/7), and a 100% disease control rate (DCR). Patients were able to stay on the drug for a median of 49.5 months (at the time of publication, so possibly longer), and none went off treatment due to safety issues.
    • Phase 2. In a heavily pre-treated population (median 4 lines of prior therapy vs. 3 in Phase 1 i.e. sicker patients), nirogacestat again achieved a 100% DCR and a 29.4% ORR. More importantly, 59% of patients remained on drug for more than 2 years. The drug was well tolerated with only 1 patient discontinuing treatment due to side effects.
    • Phase 3. A 115-patient Phase 3 trial is currently enrolling patients. The trial is powered to show a 12-month difference in PFS vs. placebo, and past trials from a similar drug showed that 50% of placebo patients experience disease progression by 8 months, which compares favorably to what nirogacestat has demonstrated in its Phase 1/2 trials.
    • The Phase 3 trial is expected to readout in 2Q/3Q21 and we expect approval of nirogacestat in 2022.

    Mirdametinib.

    • Phase 2. In its Phase 2 trial, Mirdametinib demonstrated a 42% ORR in 8/19 patients. In contrast, selumetinib demonstrated a 74% ORR in its Phase 2 trial. Though selumetinib’s Phase 2 data was numerically superior to mirdametinib’s, we believe several factors artificially limited mirdametinib’s efficacy:
      • Selumetinib’s trial enrolled only children while mirdametinib’s trial included only patients 16 years or older. Tumors in younger children are considered to be more responsive to therapy than those in adults.
      • Patients in the mirdametinib trial were removed from the trial if they did not show signs of benefit within 12 months, which may have limited the number responses; 30% of selumetinib’s patients did not respond until after 12 months on drug.
    • Safety benefits. In its Phase 2, only 5 out of 19 patients (26%) required dose reductions of mirdametinib. In contrast, in selumetinib’s Phase 1, 10 out of 24 patients (42%) required dose reductions due to toxicity issues. We believe that this is evidence that mirdametinib is a safer drug than selumetinib, which will be an important differentiating factor for doctors deciding between the two drugs.
    • Phase 2b. Springworks is currently enrolling patients for a 100-patient Phase 2b trial of mirdametinib (primary endpoint ORR) that could support approval in 2023. The trial will enroll an even split of pediatric and adult patients and will not remove patients before 12 months. We expect that mirdametinib will show a similar ORR to selumetinib and differentiate itself via a superior safety profile.

    3. Intriguing Early Stage Programs.

    • Nirogacestat for Multiple Myeloma Therapy. Nirogacestat is also being evaluated as an add-on therapy to BCMA therapies for multiple myeloma, a cancer of the plasma cells with ~27k patients in the US every year. These drugs target a protein called BCMA on the surface of cancer cells, and preclinical data has shown that nirogacestat significantly upregulates the expression of BCMA on cancer cells and enhanced the potency of BCMA-targeting drugs. Springworks has already signed collaborations with Glaxo Smith Kline and Allogene Therapeutics to use nirogacestat in combination trials with their BCMA drugs.
    • BGB-3245. Springworks has also signed a collaboration agreement with Beigene, a leading China biotech company, to develop a novel cancer drug targeting BRAF-mutant solid tumors. BRAF is a validated oncology target that is clinically relevant in melanoma, lung cancer, and colorectal cancer. BGB-3245 has been shown in preclinical models to be effective in inhibiting certain mutant forms of BRAF that currently approved BRAF inhibitors cannot target. A Phase 1 trial for BGB-3245 has been initiated in Australia.

    4. Strong Balance Sheet: As of the end of 2019, Springworks had ~$330M in cash and no debt. This is expected to be sufficient to fund operations and support its 6 clinical trials through the end of 2022. The company has not indicated that its clinical development timelines have been impacted by Covid, but we will be on the lookout for any future guidance.

    5. Experienced Leadership: Springworks is led by a world-class management team with deep pharma industry experience. Selected leadership includes:

    • Chief Executive Officer Saqib Islam is a founding member of the company and was formerly the Chief Business Officer at Moderna. Prior to Moderna, he held senior leadership roles at Alexion Pharmaceuticals (a $20B rare disease biotech).
    • Chief Medical Officer Jens Renstrup was formerly Head of Medical Affairs at Alexion, where he was instrumental in building out its pipeline. Prior to Alexion, he led medical affairs at Glaxo Smith Kline’s vaccine division.
    • Head of R&D Stephen Squinto is a venture partner at OrbiMed, a highly respected life science investment firm. He is also a co-founder of Alexion, where he led global operations and R&D for over 20 years.

    6. Risks. Potential investors should be aware that Springworks is exposed to the following key risks as a biotech company:

    • Clinical development risk. Springworks’ assets could fail their clinical trials due to unfavorable or uncompetitive clinical data and/or unexpected safety issues.
    • Competitive risk. Springworks’ drugs could be leapfrogged by more effective drugs, severely limiting their commercial potential.
    • Financial risk. Unexpected costs/circumstances could lead to the company running out of cash and having to raise dilutive capital and/or shut down.

    Disclosure: We currently own shares of Springworks Therapeutics. This article expresses our own opinions, not Springworks’ or any other party’s opinion. We are not receiving compensation for this report. We do not have a business relationship with the company mentioned in this report.

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    source https://www.reddit.com/r/StockMarket/comments/ghfsnf/springworks_swtx_a_rare_cancer_biotech_with/

  • Which markets or industries do you see perform best in the next decades (geographic vs. industry focus vs. cap size)? How do you build this into a strategy and portfolio to maximize expected risk-adjusted future returns?

    I often get confused when people here argue whether one could beat "the market". Which "market" are they referring to? Assuming Equities, which equities and index? MSCI World? S&P500? FTSE100? ASX200? Emerging markets?Many portfolios suggested here seem to suggest a strong U.S. bias for equities, and even an MSCI world would have almost 40% U.S. equity exposure. While it's true that the S&P500 has had strong past returns over many time periods, there's plenty of research suggesting that over the same periods other markets have outperformed.Let's assume for a minute that "the market" is the S&P500 (or MSCI world index, irrelevant for my point). In times of low-cost ETFs widely available and being able to shift the weightings of one's portfolio relatively easily to replicate a strategy, I think it makes sense to compare this reference index and their risk adjusted returns to other indices along different dimensions. For equities, the obvious ones are

    Now obviously past performance does not predict future returns, but it's one data point and can be considered alongside other factors. These include current valuations of such markets or sectors (particularly when it comes to investing lump sums at a certain point of time) and more importantly larger themes such as changes in political landscapes and the geopolitical environment, climate change and shift towards renewables, urbanization (or de-urbanization due to COVID?), digitization, etc.With a lot of data on past performance of different indices available and reflecting on major socioeconomic and political trends that will shape our lives in the next decades, I'd be interested in creating a diversified portfolio using low-cost ETFs, which over the next 20-30 years is likely to outperform the classic bogleheads 3-fund portfolio or an MSCI world and potentially offer higher risk-adjusted returns compared to those indices. Suggestions should be evidence-based on a combination of past returns and outlook into the future, rather than saying "just put your money into FANG or an AI or ROBO-ETF".With that in mind, which mix of markets, or sectors, do you see outperforming over the next decades compared to a S&P500 or MSCI world reference index, how would you build a low-cost portfolio based on that strategy, and with which weightings? Let's discuss!

    submitted by /u/niknikniknikniknik1
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    source https://www.reddit.com/r/StockMarket/comments/ghfpme/which_markets_or_industries_do_you_see_perform/

  • Leading brokers name 3 ASX shares to buy today

    Buy ASX shares

    With so many shares to choose from on the Australian share market, it can be hard to decide which ones to buy.

    The good news is that brokers across the country are doing a lot of the hard work for you.

    Three top shares that leading brokers have named as buys this week are listed below. Here’s why they are bullish on them:

    Audinate Group Ltd (ASX: AD8)

    According to a note out of UBS, its analysts have retained their buy rating but cut the price target on this media networking technology company’s shares to $7.30. The broker is a big fan of Audinate’s Dante product and believes it has a massive long term market opportunity. And while it does expect sales to soften over the coming quarters due to the pandemic, the broker believes it is well worth looking beyond this and focusing on its long term potential. I agree with UBS and feel Audinate would be a great buy and hold option for investors.

    REA Group Limited (ASX: REA)

    A note out of Morgan Stanley reveals that its analysts have retained their overweight rating and $105.00 price target on this property listings company’s shares. It was pleased with its latest quarterly update given the tough trading conditions it was facing. And while conditions in the industry continue to be tough, the broker remains positive on its long term prospects. Especially given the structural tailwinds it is benefiting from. I agree with Morgan Stanley and feel REA Group is a top blue chip to own.

    Reject Shop Ltd (ASX: TRS)

    Analysts at Goldman Sachs have upgraded this discount retailer’s shares to a buy rating from sell and put a price target of $4.75 on them. Goldman likes Reject Shop due to its turnaround story with a new executive team, a more robust balance sheet, and the potential for material improvements in efficiencies in labour, rent and stock turn. It also notes that its valuation is supported by a cash balance that was 28% of its market capitalisation based on its last closing price. While I’m not a big fan of Reject Shop, I think Goldman Sachs makes some very good points.

    And here are five dirt cheap shares which analysts have just given buy ratings to as well.

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    Returns as of 7/4/2020

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    Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended AUDINATEGL FPO. The Motley Fool Australia has recommended REA 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.

    The post Leading brokers name 3 ASX shares to buy today appeared first on Motley Fool Australia.

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  • ASX stock of the day: This ASX materials share jumped 11% today on a 250% surge in profits

    The Advance Nanotek Ltd (ASX: ANO) share price has surged 11.51% today after the company announced profits are expected to more than double. Net profit before tax for FY20 is expected to be approximately $8.4 million, 2.5 times greater than FY19 profit before tax. 

    What does Advance Nanotek do?

    Advance Nanotek manufactures zinc oxide, which is used in sunscreen. First formed in 1997, Advance Nanotek has been listed on the ASX since 2003. Its product range suits a wide variety of sunscreens and cosmetics, with its Zinxation recipe providing SPF50+ for broad UVA/UVB protection. Advance Nanotek has a current annual capacity of 3,000 tonnes, and is investing to increase capacity beyond 5,000 tonnes. 

    Advance Nanotek’s business

    Around 70% of Advance Nanotek’s sales are in the US. The company’s production facilities were temporarily closed in the US but have now reopened with sunscreen manufacturing recommenced, albeit at smaller volumes. Advance Nanotek expects US sales volumes to return to normal and has established stockpiles in a logistics facility to take advantage of the expected upturn in conditions. 

    The board is looking to expand Advance Nanotek’s aluminium oxide business into new markets and improve supply to existing customers by raising capacity. Stock will be made available at an EU logistics facility, with sales from the aluminium oxide product in FY20 expected to be ~$2 million. 

    Financial results

    Advance Nanotek recorded sales revenue of $11.3 million in 1HFY20, up from $4.7 million in 1HFY19. Net profit before tax for the half was $4.81 million, nearly 3 times greater than the prior corresponding period. Earnings per share increased to 5.71 cents up from 3.03 cents in 1HFY19. 

    The company ended the half with cash and cash equivalents of $304,964 and borrowings of $1.1 million. Strong sales continued into the second half with profit before tax of $1.3 million in January. FY20 anticipated turnover is up 46% on FY19 to $18 million. 

    Outlook

    US sales increased 280% for the 7 months to 31 January over the prior corresponding period. Some negative impact from coronavirus has been experienced with US citizens cancelling or delaying travel plans for the summer. This may have a modest negative impact on Advance Nanotek’s $30 million FY20 sales target. 

    Nonetheless, Advance Nanotek has seen impressive increases in profit over the last few years. Profit before tax increased from $0.56 million in the 5 months to November 2017 to $3.831 million in the 5 months to November 2019. Full year FY20 net profit is estimated to be $8.4 million. 

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    Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Advance NanoTek 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 ASX stock of the day: This ASX materials share jumped 11% today on a 250% surge in profits appeared first on Motley Fool Australia.

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  • Elon Musk Talks About The Tesla Cybertruck Smash-Up: ‘I Was Not Expecting That’

    Elon Musk Talks About The Tesla Cybertruck Smash-Up: 'I Was Not Expecting That'Tesla (NASDAQ: TSLA) CEO Elon Musk opened up to Joe Rogan in a podcast last week, about the Cybertruck smash-up last year.When Musk presented the Cybertruck, a much-anticipated all-electric pickup, it didn't quite go as planned.Musk showed off the strength of the new Cybertruck by having its door beaten with a sledgehammer and the window glass struck with heavy metal balls — and the glass cracked. 'I Was Not Expecting That,' Musk Says "What was it like when the dude threw the steel balls at the window and it broke?" Rogan asked Musk. "You know our demos are authentic!" the CEO replied."I was not expecting that and I mumbled under my breath 'holy sh–' — I swore and didn't think the mic would pick it. We practiced this behind the scenes … at Tesla we don't do tons of practice with our car demos because we are working on the cars and building new technologies. We are not doing hundreds of practice things … we don't have time for that."Just hours before the demo, Musk and his chief designer Franz von Holzhausen were throwing steel balls at the windows and they were bouncing right off, Musk told Rogan."We think what happened was when Franz hit the door with the sledgehammer — we think that he cracked the corner of the glass at the bottom, and once you crack the coroner of the glass, then it's game over," Musk said. Tesla's stock closed Friday at $819.42 per share. The stock has a 52-week high of $968.99 and a 52-week low of $176.99.Related Links:Elon Musk Talks Neuralink, Brain Stimulation And AI With Joe RoganElon Musk Says Tesla's Stock Price Is Too High, Tweets About Freedom, Gene Wilder And MoreScreenshot via The Guardian on YouTube. See more from Benzinga * Elon Musk Talks Baby X Æ A-12, Selling Possessions * Elon Musk Says Coronavirus A 'Trial Run' For Future Pandemic, Questions Mortality Rate * Elon Musk Talks Neuralink, Brain Stimulation And AI With Joe Rogan(C) 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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  • Reality bites: Broker warns CBA shares to underperform this week

    panic, uncertainty, worry

    The relative outperformance of the Commonwealth Bank of Australia (ASX: CBA) share price is under threat as one leading broker believes the stock will slump this Wednesday.

    This is when Australian’s largest ASX-listed bank will release its quarterly earnings and update.

    The news will be ugly, according to Morgan Stanley, which is predicting a 70% to 80% chance that the stock will fall relative to the S&P/ASX 200 Index (Index:^AXJO) and keep underperforming for next two months.

    Cut above the rest

    CBA shares have fallen 24% since the start of 2020 as the COVID-19 pandemic rocked the economy, but that’s better than the other ASX big banks.

    The National Australia Bank Ltd. (ASX: NAB), Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking GrpLtd (ASX: ANZ) share prices have tumbled by over 30% each.

    The three laggards have reported dismal first half profits in the last two weeks, so the bad earnings news from CBA isn’t unexpected although that may not be the bank’s biggest problem.

    Reality check

    “We expect a ~30% fall in cash profit, an A$1bn COVID-19 provision and a CET1 ratio of ~11.2%,” said Morgan Stanley.

    “While the profit decline and higher provisioning are unlikely to surprise investors in the current environment, we think the trading update will lead to less confidence in the capital and dividend outlook.”

    This will make CBA’s market premium harder to justify.

    CBA losing its crown

    The bank has long held the crown of being the best quality bank on our market and investors are happy to pay a higher multiple for the stock.

    For instance, CBA trades on a FY21 forecast price-earnings (P/E) multiple of 15 times and a price-to-book value (P/BV) of 1.5 times, based on Morgan Stanley’s estimates.

    This compares to the average P/E of 11 times and P/BV of around 0.8 times for its peer group.

    Foolish takeaway

    This is why the broker thinks CBA is more vulnerable to a de-rating if the cycle deteriorates further, and offers less upside in a rebound scenario.

    Morgan Stanley rates the stock as “underweight” (meaning a “sell”) with a price target of $57.50 a share.

    If you want to find out more about bank valuations and the importance of P/BV, click here to read my weekend article on the cheapest bank on the ASX.

    But of course, price and quality usually move in opposite directions. Those willing to pay for a relatively safer stock in the sector may want to consider Macquarie Group Ltd (ASX: MQG) instead – at least until more coronavirus water passes under the banking bridge.

    One “All In” ASX Buy Alert, that could be one of our greatest discoveries

    Investing expert Scott Phillips has just named what he believes is the #1 Top “Buy Alert” after stumbling upon a little-owned opportunity he believes could be one of the greatest discoveries of his 25 years as a professional investor.

    This under-the-radar ASX recommendation is virtually unknown among individual investors, and no wonder.

    What it offers is an utterly unique strategy to position yourself to potentially profit alongside some of the world’s biggest and most powerful tech companies.

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    Find out the name of Scott’s ‘All in’ Buy Alert

    Returns as of 6/5/2020

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    Motley Fool contributor Brendon Lau owns shares of Australia & New Zealand Banking Group Limited, Commonwealth Bank of Australia, Macquarie Group Limited, and National Australia Bank Limited. 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.

    The post Reality bites: Broker warns CBA shares to underperform this week appeared first on Motley Fool Australia.

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  • 3 ASX 200 pandemic winners and 3 losers

    The changes in our behaviour during the COVID-19 lockdown has created pandemic winners and losers up and down the S&P/ASX 200 Index (ASX: XJO).

    Some of these are obvious. Companies like Qantas Airways Limited (ASX: QAN) and Sydney Airport Holdings Pty Ltd (ASX: SYD) are undoubtedly going to see a fall in full-year earnings. 

    However, some are less obvious. Some companies have profited greatly during the pandemic while others may be in for a structural change to their earnings.

    3 pandemic winners

    ASX gold mining companies have benefited greatly from the rise in the gold price. The Evolution Mining Ltd (ASX: EVN) share price has been one of the great winners. Its share price is up 43.7% year to date (YTD). In fact, it has risen by over 60% since its low point on 16 March. Evolution has benefitted from both the rising gold price and the low Australian dollar. It is regularly one of the top 3 traded gold shares by volume on the ASX. 

    JB Hi-Fi Limited (ASX: JBH) is another pandemic winner. The company has seen a rise in earnings due to the short-term rush for work-from-home accessories. Laptops, printers, monitors, keyboards. All items that are bringing trade to JB Hi-Fi’s network of stores. The company reported a 6.9% growth in YTD Q3 sales for JB Hi-Fi Australia. This is up from 4.1% during the comparable period last year.

    Ansell Limited (ASX: ANN) is the Australian manufacturer of personal protective equipment (PPE) such as gloves and surgical masks. The Ansell share price has risen by 3.5% YTD. It hit a low point on March 23 and has risen by 41% since then. Ansell is one of the great pandemic winners as it is a company built for crises such as this.

    3 pandemic losers

    The Bapcor Ltd (ASX: BAP) share price is down by 20% YTD. Given the restrictions in place during the national lockdowns, this is to be expected. However, Bapcor may also suffer a structural reduction in earnings if work-from-home becomes widespread after the resumption of normal work.

    The Oil Search Limited (ASX: OSH) share price has been devastated by the pandemic. It is currently down by 59% YTD. The company has been hit not only by the collapse in demand but also by the glut in supply from the Saudi-Russian oil price feud. The company is currently performing well in a fight for survival. Nevertheless, it will be interesting to see if it emerges as the same company it was in January.

    Transurban Group (ASX: TCL) has seen its average daily traffic (ADT) percentage drop by 44% across all Transurban assets in the final week of April compared to the same period last year. If work from home becomes permanent, the company is likely to see a structural reduction in ADT% which may call into question other expansion plans. 

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    Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bapcor. The Motley Fool Australia owns shares of Transurban Group. The Motley Fool Australia has recommended Ansell 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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  • Shareholders strike against executive pay at this ASX financial share

    No deal

    Shareholders have overwhelmingly voted against executive pay packets at AMP Limited (ASX: AMP). Last week’s annual general meeting saw 67% of shareholders vote against the board’s remuneration report for 2019.

    Chief Executive Francesco De Ferrari was paid approximately $4 million in base salary and short-term rewards. Non-executive directors were paid $3.79 million as a group. 

    The wealth manager delivered a $2.5 billion loss last financial year and did not pay a final dividend. The AMP share price is down around 35% in the past 12 months and is currently trading for $1.42.

    What does the vote mean?

    The shareholder vote does not prevent these payments being made, but puts pressure on the board. The ‘two strikes’ rule means a vote on a board spill will be triggered if more than 25% of shareholders vote against two remuneration reports. 

    AMP struggles with legacy issues

    AMP is still making amends for practices uncovered in the Royal Commission.The wealth manager continues to repay customers for inappropriate advice and for charging customers for advice never received. In its most recent financial year, AMP paid $190 million to clients in misconduct fees. Impairments of $2.35 billion were recorded to address legacy issues.

    AMP failed to pay either interim or final dividends last year as its wealth management business sagged. Chairman David Murray told shareholders the decision was disappointing, but in the long-term interests of the company. He  responded to shareholder criticism of executive pay packets by saying the pay reflected the size of the challenge ahead for AMP. 

    Business reset 

    The wealth manager is undertaking a fundamental reset of its business. Foundational steps in a three-year transformation are underway, but there is much work to be done. CEO De Ferrari said, “2019 was a year of fundamental reset for AMP. We rebased our business, set out a new group strategy, and strengthened our capital base to accelerate the execution of our strategy.”

    AMP has shelved the divestment of its New Zealand wealth management operations due to the economic disruption of COVID-19. Offers did not meet expectations, so AMP has decided to retain and grow the business. 

    AMP is proceeding with the sale of AMP Life. A deal was struck to sell the business to Resolution Life last year for $3 billion. Payment of the next dividend is dependent on the completion of this sale. Multiple complications have been encountered during the sale process. 

    Foolish takeaway

    The shareholder strike is an embarrassing blow for AMP. Previous voluntary cuts to fees were not enough to stave off shareholder anger. In April, AMP revealed at least $19.4 billion in outflows in the first 3 months of the year. The wealth manager better hope its transformation strategy brings results. 

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    Motley Fool contributor Kate O’Brien 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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