Category: Stock Market

The S&P/ASX 200 Index (ASX: XJO) fell by more than 2% today to 5,720 points.

Here are some of the highlights from the share market today:

ASX 200 travel shares decline

The travel sector suffered a heavy selloff today, three of the worst performing shares in the ASX 200 were from the travel industry.

The Corporate Travel Management Ltd (ASX: CTD) share price dropped 9.9%. The Flight Centre Travel Group Ltd (ASX: FLT) share price fell 8.5%. Webjet Limited (ASX: WEB) saw a share price drop of 7.9%.

Several other ASX travel shares declined too. Airline Qantas Airways Limited (ASX: QAN) suffered a 3.6% share price drop. The Sydney Airport Holdings Pty Ltd (ASX: SYD) share price fell 4.6%. The Helloworld Travel Ltd (ASX: HLO) share price dropped 5.6%.

Looking at New Zealand travel shares, the Auckland International Airport Limited (ASX: AIA) share price fell 2.3% and the Air New Zealand Limited (ASX: AIZ) share price declined by almost 5%. Travel software company Serko Ltd (ASX: SKO) saw its share price fell 3.8%.

Healius Ltd (ASX: HLS) share price soars

The ASX 200 healthcare company experienced a 19% rise of its share price.

Healius announced today it has entered into a binding agreement to sell its medical centres business for $500 million to BGH Capital on a cash and debt free basis. It will retain the day hospitals and IVF segments.

Dr Malcolm Parmenter, the managing director and CEO, explained why Healius sold the division and what it will do with the money:

“This sale is consistent with our strategy of simplifying our portfolio and focusing on our leading and scalable diagnostics and day hospital business, in order to deliver on our mission of seeking and sustaining life-enhancing healthcare through people who care.

“The proceeds will strengthen the company, reducing our net debt and freeing up capital for investment, while enabling shareholders to realise the value of the medical centres business, which has not been reflected in our share price.”

Healius is seeing more normal trading levels as the economy opens up from the COVID-19 restrictions. Revenues are recovering strongly in line with the opening of the broader economy, according to Healius.

The ASX 200 business also said that it had signed the refinance of its syndicated bank debt facility of $500 million which was due to mature in January 2021. The facility has been increased by $70 million to $570 million and its maturity has been extended to January 2024 with unchanged covenants.

Super Retail Group Ltd (ASX: SUL) capital raising and trading update

Super Retail went into a trading halt this morning to announce a capital raising and trading update.

The ASX 200 retail business is going to do an underwritten accelerated pro-rata non-renounceable entitlement offer to raise approximately $203 million at a fixed price of $7.19 per share.

The equity raising will enable the company to keep executing its strategy and pursue its strategic growth initiatives.

In terms of trading, the company has seen a strong bounce back for its overall sales. Super Retail’s like for like sales fell by 26.2% in April 2020 compared to April 2019. However, Super Retail’s group like for like sales increased by 26.5% in May 2020 compared to May 2019.

We’re only halfway through June but sales growth has continued to benefit from the strong consumer environment.

Looking at the revenue for the financial year to date to 31 May 2020, total revenue was $2.52 billion, which was up 1.9%. However, like for like sales were only up 1.2%. The company stated that the gross margin percentage was down over April and May, impacted by a shift in product mix and a higher proportion of online sales.

More reading

• Why MOAT is my favourite ASX ETF
• Can ASX big banks generate an attractive sustainable dividend yield from FY21?
• Clinuvel share price jumps as investors favour healthcare
• Why the ASX 200 tumbled lower on Monday and 2 shares to buy
• Should you buy ASX shares during this market selloff?

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Helloworld Limited and Serko Ltd. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited, Super Retail Group Limited, and Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited, Helloworld Limited, and Serko 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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Shares of Clinuvel Pharmaceuticals Limited (ASX: CUV) are trading nearly 3% up today with investors looking to the healthcare sector for value. Prior to the March market correction, Clinuvel’s share price was trading above $29 and are yet to regain these levels. 

What does Clinuvel do?

Clinuvel has spent the last 15 years developing its product, Scenesse; the world’s first systematic photoprotective drug. Scenesse is used to treat Erythropoietic Protoporphyria (EPP) which is a metabolic genetic disorder causing intolerance to light. 

EPP patients suffer painful reactions and burns from exposure to direct light, which means they must avoid it at all times. Reactions can occur after just a few minutes of exposure and last days or weeks. The disorder is rare, affecting around 10,000 people worldwide and causes social isolation and anxiety. 

The Scenesse drug provides EPP patients with photoprotection and the ability to lead a “normal” life. Prior to the creation and regulatory approval of Scenesse in Europe in 2014 and the US in 2019, EPP had no approved treatment.  

What does the Clinuvel share price represent?

Clinuvel has progressed from the R&D phase into the commercialisation phase with FY17 being the first year of commercial operations and the first profitable year. Its profits rose in FY18 and FY19, with the December 2019 period seeing Clinuvel eighth consecutive half-year profit. Its earnings per share increased from 18 cents in 2017 to above 30 cents in 2019. 

Clinuvel paid its first dividends to shareholders in FY18 and FY19. The company is debt-free and has cash and equivalents of over $60 million. The share price has increased by around 700% over the last 5 years, taking Clinuvel into the S&P/ASX 200 (ASX: XJO) in June last year. 

What’s next for Clinuvel? 

Clinuvel hopes to specialise in creating treatments for rare genetic conditions. And beyond 2020 it is seeking to evolve into a diversified pharmaceutical company.

Clinuvel plans to take Scenesse to new regions to develop a paediatric formulation. A clinical trial is also underway to evaluate Scenesse for the treatment of vitiligo as a repigmentation agent. 

Clinuvel has strong cash flow and an ambition to deliver new products which provide treatment to multiple patient groups. Investors with an eye on the Clinuvel share price will be interested to see if it can sustain long-term growth and evolve into an integrated biopharmaceutical company. 

More reading

• Why MOAT is my favourite ASX ETF
• Can ASX big banks generate an attractive sustainable dividend yield from FY21?
• ASX 200 falls 2%, ASX travel shares drop heavily
• Why the ASX 200 tumbled lower on Monday and 2 shares to buy
• Should you buy ASX shares during this market selloff?

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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After a reasonably subdued morning of trade, the S&P/ASX 200 Index (ASX: XJO) fell heavily in the afternoon to end the day notably lower.

The benchmark index tumbled a disappointing 2.2% to 5,719.8 points.

Why did the ASX 200 tumble lower?

Australian investors were selling off shares this afternoon after U.S. futures took a sharp turn.

At present, futures contracts are pointing to the Dow Jones opening the day 3.3% lower, the S&P 500 starting the week with a 2.8% decline, and the Nasdaq index opening 2.3% lower.

According to CNBC, stock futures fell heavily amid signs of a second wave of coronavirus cases in the United States as the economy reopens. This follows a spike in cases late last week in a number of states.

President and chief investment strategist, Ed Yardeni, from Yardeni Research, believes that investors got ahead of themselves in respect to the reopening.

Mr Yardeni said, courtesy of CNBC, that: “The meltup may need to take a break, as sentiment has turned too bullish too rapidly. Now that reopening is happening, there’s fear of suboptimal results: less social distancing triggering a second wave of the virus, followed by another round of lockdowns.”

Though, another lockdown seems unlikely based on what Treasury Secretary Steven Mnuchin told CNBC late last week. Mnuchin suggested that shutting down the economy again wasn’t viable and would only “create more damage.”

Is this a buying opportunity for Australian investors?

Unfortunately for Australian investors, we have a tendency to follow the lead of U.S. markets regardless of what is happening over here. This means that if the U.S. does struggle with a second wave, it could weigh on our market in the near term.

However, I wouldn’t let this put you off investing. In fact, I would suggest you look to see if you like the look of any of the shares that have pulled back notably over the last few days.

Companies like Aristocrat Leisure Limited (ASX: ALL) and EML Payments Ltd (ASX: EML), for example, have fallen heavily since last week. I think this could be a buying opportunity for long term-focused investors. I feel both shares trade on attractive multiples relative to their long term earnings growth potential.

More reading

• Why MOAT is my favourite ASX ETF
• Can ASX big banks generate an attractive sustainable dividend yield from FY21?
• ASX 200 falls 2%, ASX travel shares drop heavily
• Clinuvel share price jumps as investors favour healthcare
• Should you buy ASX shares during this market selloff?

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 Emerchants Limited. The Motley Fool Australia has recommended Emerchants 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 Why the ASX 200 tumbled lower on Monday and 2 shares to buy appeared first on Motley Fool Australia.

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The S&P/ASX 200 Index (ASX: XJO) and All Ordinaries (ASX: XAO) have both tumbled more than 7% over the past 4 trading sessions. This follows an increase in coronavirus cases and a grim economic outlook announced by the United States Federal Reserve last Thursday.

With all things considered, should investors be buying ASX shares during this recent market selloff? 

The bad news 

Coronavirus infections continue surging 

From a global perspective, the coronavirus pandemic is still running rampant. The US experienced a record number of new cases across multiple states last week. State health officials are pointing to an increase in gatherings over the Memorial Day holiday as a catalyst for this increase.

South America has also seen a surge in cases with daily infections surpassing those in Europe and the US. The World Health Organization declared the region the pandemic’s ‘new epicentre’ on 22 May. 

China reported its highest daily increase of coronavirus cases in 2 months, with 57 new confirmed cases over the weekend. The cases identified in Beijing have been linked to its biggest wholesale food market, which has since been shut down. 

I believe the recent selloff combined with fresh news that the pandemic is not showing signs of slowing down will add to the uncertainty and panic in the markets. 

Unemployment crisis 

The US Fed updated its economic projections for the year, predicting a 6.5% drop in its GDP. It also estimates an unemployment level by the end of the year of approximately 9.3%. Whilst this is still dire, it is less than the 13.3% seen in May. 

Australia is in much better shape, with a seasonally adjusted unemployment rate of 6.2% in April. However, much of this can be attributed to the JobKeeper stimulus package that is assisting many businesses to retain their employees in what are extremely tough times.

On Monday morning, prime minister Scott Morrison warned that some businesses will fail when JobKeeper is withdrawn. This creates a lot of uncertainty, and businesses will no doubt be more cautious with spending moving forward. 

Patience is needed 

This is a unique recession, in that it came about because an economic shutdown was required to prevent the spread of the virus. Should the pandemic subside, there is no reason why the economy can’t return to a pre-COVID-19 state. The amount of money going into the economy via quantitative easing is both greater and faster than the responses to crises such as the GFC. Interest rates are still at a record low and will be low for many years to come.

Australia is also one of the leading countries to come out of COVID-19 largely unscathed. However, it is the rest of the world that we are waiting on to resume activity in key sectors such as education and travel.

Foolish takeaway 

I believe that it is a good idea for investors to be patient and wait for the current market volatility and uncertainty to subside before jumping in and buying ASX shares. 

More reading

• The ASX winners and losers from the latest S&P index shake-up
• 3 Warren Buffett quotes to start your week off right
• Shares up? Haven’t you seen the economy?
• These 5 ASX shares were last week’s worst performers
• Why the Reliance Worldwide share price is outperforming today

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 Should you buy ASX shares during this market selloff? appeared first on Motley Fool Australia.

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If you’re looking for strong returns in the 2020s, then I think having a little exposure to the small cap side of the market could be a good thing.

At this side of the market there are a number of companies that have the potential to grow materially over the next decade.

While it is worth remembering that not all small cap shares will live up to their potential, I feel the two listed below have a good chance of doing so. Here’s why I think they could have bright futures:

ELMO Software Ltd (ASX: ELO)

ELMO Software is a fast-growing provider of cloud-based human resources and payroll software. Its increasingly popular unified platform allows users to streamline processes for everything from employee administration, recruitment, and payroll. Demand for its offering has continued to grow in FY 2020, with management recently providing full year guidance for annualised recurring revenue (ARR) of $55 million to $57 million. This represents an increase of 20% to 24% on the prior corresponding period. The good news is that its current ARR is only scratching at the surface of its total addressable market in the ANZ region. This means it still has a significant runway for growth in the local market and also the opportunity to expand into other key markets in the future.

Mach7 Technologies Ltd (ASX: M7T).

Mach7 is a medical imaging data management solutions provider for healthcare organisations. Its solutions create a clear and complete view of the patient to inform diagnosis, reduce care delivery delays and costs, and improve patient outcomes. Demand for Mach7’s offering has been growing strongly in recent times, leading to the company delivering a 158% increase in revenue to $9.1 million during the first half. I’m confident there will be more strong growth in the years to come, especially after its recent acquisition of Client Outlook. The addition of this leading provider of an enterprise image viewing technology increases Mach7’s total addressable market from US$0.75 billion to US$2.75 billion.

More reading

• Mach7 share price charges 7% higher on acquisition news
• Why Mach7, Meridian, Spark, & TPG Telecom are pushing higher
• ELMO Software share price on watch after upgrading FY20 guidance
• ELMO Software and 2 other ASX growth companies see businesses adapt to a “new normal”
• 3 small cap ASX tech shares that could be stars of the future

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 MACH7 FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Elmo Software. The Motley Fool Australia owns shares of and has recommended Elmo Software. 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 Afterpay Ltd (ASX: APT) share price was on form earlier today before fading in late trade.

At one stage the payments company’s shares were up as much as 5% to $54.63.

When its shares hit that level, it meant they were up a whopping 580% from the 52-week low they hit in March.

Why has the Afterpay share price been on fire over the last three months?

There have been a number of catalysts for the incredible rebound in the Afterpay share price since March.

The first was the resilience of its business model, which caught the market by surprise. Many investors were sure that Afterpay would struggle in a recession, but the company has proven them very wrong.

Not only has Afterpay continued to deliver explosive underlying sales growth, its bad debts have remained consistent.

I believe the low average transaction values and the flexibility of its business model are to thank for its strong bad debt performance. In respect to the latter, over the last few months Afterpay has required the first instalment upfront for purchases, with three payments to follow. I believe this has reduced the overall risk of each transaction without stifling its growth.

What else is supporting its share price?

Another key catalyst to its strong share price performance has been the emergence of Tencent Holdings on its share registry as a substantial shareholder.

Given how powerful Tencent is in Asia thanks to its massively popular WeChat app, it could potentially open up this key market to Afterpay in the future.

Combined with potential expansions onto mainland Europe and its rapidly growing U.S. business, Afterpay could continue its meteoric growth for a long time to come.

Speaking of its U.S. business, that was another driver of its strong share price rebound. A recent update revealed that it now has over 5 million active customers in the United States using its buy now pay later service.

Impressively, more than one million new customers started using its platform in the country during a 10-week period at the height of the pandemic.

And while 5 million active customers may sound like a large number, there is still a long runway for growth in the lucrative market. Rival Zip Co Ltd (ASX: Z1P) has just entered the United States via an acquisition and revealed that it estimates the retail market to be worth $5 trillion a year.

Should you buy Afterpay shares?

While its shares do trade at a significant premium to the market average and carry a lot of risk, I believe they could still be a great long term option for investors.

In light of this, I would still be a buyer of its shares if you’re prepared to make a buy and hold investment. Though, restricting your holding to a small part of your portfolio might be prudent given the risks.

More reading

• Got $5,000 spare? Consider Wesfarmers shares and these 2 other ASX companies
• Keep a watch on the Zip Co share price and 1 other ASX tech this June
• Sezzle shares and 2 other ASX techs soared up to 50% in the past 4 weeks
• The most explosive ASX tech shares you can buy today
• How I would build a balanced portfolio worth $100,000 with 10 ASX shares

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

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Standard and Poor’s announced a big reshuffle to the key ASX indices that could see a number of ASX stocks outperform and underperform in the near-term.

The June quarterly rebalance includes a bigger than normal shake-up of the S&P benchmarks as the March rebalance was held over due to the COVID-19 crisis.

History shows us that index inclusions and exclusions tend to have an impact on the share prices of ASX stocks swept up in the changes.

The quarterly ASX anomaly

This seems to be unique to Australian shares and is called the “index effect”. This market anomaly could form a basis for some short-term trades for nimble investors.

The analysts at Macquarie Group Ltd (ASX: MQG) found that the stocks to be included in the S&P/ASX 100 (Index:^ATOI) (ASX:XTO) tend to underperform in the weeks before they are added to the index.

However, these stocks after two-weeks from their inclusion and the broker speculates this is due to selling from small cap fund managers.

Many of these funds have mandates that prevent them from owning stocks in the top 100 benchmark and are forced to sell.

Large caps that could outperform

This means the Nextdc Ltd (ASX: NXT) share price and Saracen Mineral Holdings Limited (ASX: SAR) share price could be heading higher soon as they are the latest to be added to the index.

They replace international shopping centre owner UNIBALWEST/IDR UNRESTR (ASX: URW) and miner Whitehaven Coal Ltd (ASX: WHC).

Interestingly, large caps that are dropped from the ASX 100 don’t generally come under much selling pressure, added the broker.

Different impact on ASX 200

However, the same can’t be said for the S&P/ASX 200 Index (Index:^AXJO).

“S&P/ASX 200 index additions have typically outperformed strongly in the weeks prior to the announcement of the changes,” said Macquarie.

“Stock performance has often peaked prior to implementation date. ASX 200 deletions have traditionally underperformed as they are removed.”

What this means is that it might be too late to buy ASX shares that are about to become part of the ASX 200 club as the index change comes into effect this Friday.

The ASX 200 stocks that could lag

On the other hand, those getting the boot could underperform from next week.

On that note, the six ASX 200 rejects are the ones to watch. These include aged care company Estia Health Ltd (ASX: EHE), investment platform Hub24 Ltd (ASX: HUB), online lottery group Jumbo Interactive Ltd (ASX: JIN), drug maker Mayne Pharma Group Ltd (ASX: MYX), miner Pilbara Minerals Ltd (ASX: PLS) and wealth manager Pinnacle Investment Management Group Ltd (ASX: PNI).

More reading

• Should you buy ASX shares during this market selloff?
• 3 Warren Buffett quotes to start your week off right
• Shares up? Haven’t you seen the economy?
• Got $5,000 spare? Consider Wesfarmers shares and these 2 other ASX companies
• These 5 ASX shares were last week’s worst performers

Brendon Lau owns shares of Macquarie Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Hub24 Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Jumbo Interactive Limited. The Motley Fool Australia owns shares of and has recommended Jumbo Interactive Limited and Macquarie Group Limited. The Motley Fool Australia has recommended Hub24 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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