Shares in Challenger Ltd (ASX: CGF) are charging north today and are now trading 8.2% higher at $7.39 apiece.

The Challenger share price is on the move after the financial services company released its quarterly results for the third quarter of FY22.

Challenger grows sales by 10%, confirms guidance

Key takeouts from Challenger’s quarter include:

• Life sales of $2.7 billion, up 10% for the quarter
• Life book growth of $500 million, or 2.8%, for the quarter
• Funds under management (FUM) at $100 billion, down 3% for the quarter excluding the derecognition of Whitehelm Capital following its sale
• Group assets under management (AUM) of $106 billion
• Normalised net profit before tax expected to be towards the upper end of $430 million to $480 million FY22 guidance range

What else happened this quarter for Challenger?

Challenger said that Total Life net flows were $491 million for the quarter. This included annuity net inflows of $286 million and inflows of $205 million to its Other Life segment.

Further, sales to institutional clients grew by 10% to $2.1 billion during the period. Growth was underscored by “strong Challenger Index Plus sales of $1.1 billion (up 30%) and institutional term annuity sales of $1.0 billion”.

Excluding its sale of Whitehelm Capital, FUM reduced by 3% for the quarter, and included “negative investment market movements of $1.9 billion and net outflows of $1.7 billion,” Challenger says.

The group also left the quarter well capitalised with 1.65 times the minimum amount of ‘prescribed’ capital set by the Australian Prudential Regulation Authority (APRA).

Management commentary

Speaking on the announcement fuelling the Challenger share price today, managing director and chief executive officer Nick Hamilton said:

Challenger is a unique business with an exciting opportunity to meet the needs of more customers. This quarter, our business continued to perform well, highlighting the benefits of our diversification strategy.

The Life business maintained its impressive performance, with book growth of 2.8% for the quarter. Sales growth exceeded 10% across both institutional and retail, reinforcing the success of our strategy to extend our customer reach and broaden our distribution channels.

Product innovation remains a key priority and our market-linked annuity reflects our commitment to meeting the needs of more customers. The market-linked annuity has now been added to approved product lists of key financial advice businesses and initial feedback and engagement from financial advisers has been positive.

What’s next for Challenger?

Challenger reiterated its FY22 normalised net profit after tax (NPAT) guidance. It now expects NPAT to fall at the upper end of the $430 million to $480 million guidance range.

“Challenger remains on track to achieve full-year profit guidance and now expects to be towards
the upper end of the range,” Hamilton added.

“As we look to the future, we are well placed to continue our growth trajectory, meet the needs of
more customers, and deliver on our purpose to provide financial security for a better retirement.”

Challenger share price snapshot

In the last 12 months, the Challenger share price has climbed 31%. It is also up 12% this year to date, and 5% over the past month.

The post ‘Exciting opportunity’: Why the Challenger share price just leapt 8% appeared first on The Motley Fool Australia.

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Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Challenger Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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

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

What happened

While Tesla (NASDAQ: TSLA) CEO Elon Musk has been making headlines for other reasons in recent days, the focus for investors turns back to his electric car company this afternoon. Tesla is set to report first-quarter earnings after the bell today, and investors seem pessimistic about what they’ll hear. Shares of the electric vehicle (EV) leader were trading down 4.2% as of 2:23 p.m. ET today. 

So what 

There have certainly been some positive highlights for the company so far this year. But Tesla investors seem to be concerned about what the impacts to production will be from COVID-19-related lockdowns in Shanghai. Tesla opened the Shanghai plant — its second production facility — in 2018, and it has been a large contributor to the company’s explosive growth. 

Now what

The Shanghai plant has been supplying the large market in China as well as its European customers. The suspension of production there won’t have nearly as much impact on the first quarter as it will on second-quarter production, since it only began near the end of the first quarter on March 28. But investors are likely thinking guidance for second quarter will be hit, and that might be what is concerning them ahead of the report. 

Tesla is expected to report a huge increase in earnings compared to the year-ago period, but the $2.2 billion in expected first-quarter profit would be slightly lower than the record $2.3 billion reported in the fourth quarter of 2021.

Tesla also has been battling increases in raw material costs. It raised prices on the vehicles produced in the Shanghai plant during the first quarter. Investors will want to hear more about how inflation may be impacting profit margins, and will be focused on what the overall impacts will be from the Shanghai plant production delays. Leading up to the report, investors seem to be expecting the worst. 

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

The post Why investors are selling Tesla stock ahead of today’s earnings appeared first on The Motley Fool Australia.

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Howard Smith has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 

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

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The CSL Limited (ASX: CSL) share price is edging higher in early trading after the ASX healthcare share revealed details of its debt funding for its acquisition of Vifor Pharma Ltd.

At the time of writing, CSL shares are swapping hands for $265.66 apiece, a gain of 0.44%.

The biotechnology giant intends to use the cash proceeds from the offering to partially finance the proposed acquisition of Vifor, which the company announced in December 2021. Some of the money will also be used for general corporate purposes.

What did CSL announce?

The CSL share price is gaining after the company revealed it has priced US$4 billion of bonds in the US market. The notes were issued by CSL Finance and are guaranteed by the parent company.

There were six different tranches of notes:

• US$500 million of 5-year notes with an interest rate of 3.85%
• US$500 million of 7-year notes with an interest rate of 4.05%
• US$1 billion of 10-year notes with an interest rate of 4.25%
• US$500 million of 20-year notes with an interest rate of 4.625%
• US$1 billion of 30-year notes with an interest rate of 4.75%
• US$500 million of 40-year notes with an interest rate of 4.95%

Management commentary

CSL chief financial officer Joy Linton said:

We are pleased with the outcome of the bond issue from both a demand and pricing perspective. It also provides depth and flexibility for our long-term capital management program.

The strong support shown by investors towards our inaugural US dollar bond issue reflects positively on our track record of disciplined financial management, as well as confidence in our strategy to invest in our leading therapeutic capabilities and generate sustainable growth.

Vifor acquisition

CSL said the regulatory process for the Vifor Pharma acquisition is on track to be completed by June 2022.

The company has also completed a A$6.3 billion institutional placement to fund the deal.

CSL describes Vifor Pharma as a global specialty pharmaceutical company with leadership in renal disease and iron deficiency.

CSL also said it would enhance CSL’s patient focus and ability to protect the health of those facing a range of rare and serious medical conditions. It also expands CSL’s presence in the rapidly growing nephrology market.

In terms of the financial side, CSL said it would add to revenue and cash flow. It was expecting to be able to achieve US$75 million of pre-tax cost synergies over three years after the deal is completed.

Management expects the deal to add to underlying net profit after tax (NPAT) in the low-to-mid-teens in the first full year of CSL ownership, including the cost synergies. This could be helpful for the CSL share price.

One of the latest ratings comes from Citi. It rates CSL as a buy with a price target of $335. That implies a potential upside of around 26%.

The post CSL share price lifts amid US$4b debt raise appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Origin Energy Ltd (ASX: ORG) is one of the more notable dividend shares in the S&P/ASX 200 Index (ASX: XJO).

Origin has been handing its investors payouts since it was listed on the ASX following its demerger from Boral Limited (ASX: BLD) in 2000.

But what kind of dividend yield is the share boasting right now?

The Origin Energy share price is in the green today. It’s currently up 2.1%, trading at $6.82.

For context, the ASX 200 is also up on Thursday. It has gained 0.25% at the time of writing.

What is Origin Energy’s current dividend yield?

Have you owned Origin Energy shares for the last year? You’ve likely received 20 cents of dividends in that time.

The energy producer and retailer handed out a 7.5 cent final dividend for the financial year 2021 and a 12.5 cent interim dividend in March.

The former represented a free cash flow payout of 31% – just within the company’s target payout range of 30% to 50%. The latter, however, represented a free cash payout of 66%.

Both dividends were unfranked. Origin Energy hasn’t paid a franked dividend since early 2020.

No doubt, all eyes will be on the company’s next dividend when it drops its earnings for financial year 2022 on 18 August.

So, what is Origin Energy’s current dividend yield?

Based on its previous closing price of $6.68, the company has a 12-month trailing dividend yield of 2.99%.

That’s a relatively healthy dividend yield by many accounts. Though, it doesn’t compare to some of the company’s ASX 200 peers. As The Motley Fool Australia’s Sebastian Bowen reports, numerous ASX 200 shares were trading with dividend yields of more than 9% last month. But they were all ASX miners and financials.

Origin Energy share price snapshot

The Origin Energy share price has been on a roll in 2022 so far.

Right now, it’s 27% higher than it was at the start of the year. It has also gained 68% since this time last year.

The post Are Origin Energy shares really trading on a 3% dividend yield? appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Commodity markets are booming in 2022 amid a wave of catalysts. Turns out, that’s been equally as harsh for ESG and ethically focused share baskets.

As a sector – which is still poorly defined on Australian public markets, mind you – renewables have lagged other segments such as financials, utilities and materials this year.

How can we tell? Whilst there’s no specific ASX renewables index, EFTs tracking the segment have crept downwards this year, as is shown further below.

Evidently, as markets have endured volatility in 2022, that’s translated to a fairly strong headwind for ASX renewables shares, and at the end of the day, the sector is in the red in 2022.

Nonetheless, scaling back to the start of the year, some names have absorbed losses better than others. Let’s take a look at those.

‘Green’ shares aren’t in the green

Unfortunately, on an individual stock level, what we define as a ‘renewables’ share is quite narrow. Actually, there are no real winners per se, but some shares absorbed selling pressures better than others.

Let’s talk in terms of energy first and, with that, results aren’t good.

Renewables investor Infratil Ltd (ASX: IFT) is down 2.45% year to date but has whipsawed higher over the past three months. Although, its price chart looks like a 9.0 scale reading on the Richter scale.

Meanwhile, Genesis Energy Ltd (ASX: GNE), owner of a diverse portfolio of thermal and renewable generation assets located in different parts of New Zealand, has slipped 3.3%.

Trends are similar across the board and it appears any capital that’s left the sector has been shipped straight across to the adjacent resources, traditional energy, and wider commodities segments.

Alas, it’s no better for the exchange-traded funds (ETFs), with the Vanguard Ethically Conscious International Shares INDEX ETF (ASX: VESG) creeping down by 13%.

Meantime, the VanEck MSCI Australian Sustainable Equity ETF (ASX: GRNV) has fallen by more than 5% and is in a similar vein to the product above.

Finally, the Russell Investments Australian Responsible Investment ETF (ASX: RARI) has crept up hard in 2022 and is 4 basis points higher in that time.

It’s important to zoom out

Longer term – since last January to be specific – the picture’s a bit different. Three of the four securities have remained buoyant over that time, albeit Genesis Energy, which slipped more than 21% into the red.

The VESG ETF seems to have outperformed this bunch and was the star player until volatility crept in this year and it has since consolidated returns.

It has now levelled off and is rangebound alongside the fellow MSCI Australian Sustainability ETF from VanEck.

That’s something to think about.

The post Here are the best ASX renewables shares of the year so far appeared first on The Motley Fool Australia.

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• Zip share price edges higher amid third quarter update

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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

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

What happened

Shares of Netflix (NASDAQ: NFLX) were going down in flames on Wednesday, plunging by as much as 39% in morning trading. As of 11:50 a.m. ET, the stock was still down by 36.9%.

The catalyst that sent the streaming pioneer lower was news that its subscriber count actually declined last quarter, the first time that’s happened in more than a decade. 

So what

In the first quarter, Netflix generated revenue of $7.9 billion, up 9.8% year over year, while its earnings per share (EPS) declined by roughly 5.9% to $3.53. 

To put those numbers in context, analysts’ consensus estimates had called for revenue of $7.9 billion and EPS of $2.90. 

The big story, however, was that Netflix shed roughly 200,000 subscribers during the quarter and expects to lose another 2 million in Q2. Netflix cited a number of factors as contributing to the subscriber loss, including inflation, the war in Ukraine (which has slowed adoption of the service in Eastern Europe), growing competition, and password sharing.

Now what

The news certainly isn’t good, but it also isn’t as bad as it might appear at first glance. In the fine print of its investor letter, management provided details of the suspension of its operations in Russia, which played a pivotal role in the quarter’s subscriber decline (italics mine):

The suspension of our service in Russia and winding-down of all Russian paid memberships resulted in a -0.7 million impact on paid net adds; excluding this impact, paid net additions totaled +0.5 million. 

Netflix’s management acknowledged the ongoing challenges and is exploring various measures to reignite its subscriber growth. The primary focus will be on increasing the quality of its programming and recommendations, but the company is also investigating ways to combat password sharing and working to continue its expansion in international markets.

Given its dramatic slowdown in subscriber growth, investors are certainly justified in wondering whether Netflix’s growth story is winding down. Management said it expects to return to — and sustain — double-digit percentage revenue growth and remain free-cash-flow positive in 2022 and beyond.

I, for one, don’t think the sky is falling. The sell-off might represent a compelling opportunity for investors, because this isn’t fade to black for Netflix. 

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

The post Why Netflix stock crashed and burned Wednesday appeared first on The Motley Fool Australia.

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Daniel Vena owns Netflix. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Netflix. The Motley Fool Australia has recommended Netflix. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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

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Shares in Megaport Ltd (ASX: MP1) are crashing this morning after the company released its quarterly key performance indicators for March.

At the time of writing, the Megaport share price is $10.75, down 15.75%. In the first 30 minutes of trading today, it hit a new 52-week low of $10.42 — an 18.3% drop.

Megaport grows revenue 6% this quarter

The company covered its monthly revenue statistics for 3Q FY22, including:

• Monthly recurring revenue (MRR) for the month of March was $9.5 million, an increase of $300,000 or 3% quarter-on-quarter (QoQ)
• Revenue for the quarter was $27.9 million, an increase of $1.4 million or 5% QoQ
• Customer numbers at the end of the quarter were 2,541, an increase of 86, or 4% QoQ
• Total ports at the end of the quarter were 9,012, an increase of 489, or 6% QoQ
• Total virtual cross connections (VXCs) at the end of the quarter were 14,706, an increase of 993, or 7% QoQ
• Total Megaport Cloud Router (MCRs) at the end of the quarter were 670, an increase of 67, or 11% QoQ
• Total Megaport Virtual Edge (MVEs) at the end of the quarter were 59, an increase of 19, or 48% QoQ.

What else happened this quarter for Megaport?

The company launched its full suite of products and services in Mexico. It says this is the “2nd largest IT spending market in Latin America and the 25th country enabled on Megaport’s global platform”.

It also launched the Megaport ONE platform in January 2022 and named Jim Brinksma as Chief Technology Officer last month.

Cash outflows were up for network operations, with a 21% increase from last quarter, whilst the company also realised an increase in gross profit of $1 million.

Cash receipts came in at $29 million versus revenue of $28 million. Megaport had a cash position of $88.8 million at the end of March.

Management commentary

Speaking on the results, Megaport’s CEO, Vincent English, said:

The momentum of our channel program, Megaport PartnerVantage, continues to accelerate since the launch of our partner portal in November, 2021. The team has been highly-focused on partner recruitment and enablement in the past two quarters. As our channel investments are yielding greater
results, we are strengthening our pipeline and increasingly converting more deals from partners across the board. Additionally, our larger strategic partnerships with Arrow Electronics and Cisco contributed to deals in the third quarter. Operationalising these larger partnerships requires commercial, marketing, and development investments to bring our combined capabilities to market and we are very excited to see the impact with these initial deals.

What’s next for Megaport?

Regarding the company’s outlook, English added some additional colour:

Coming into the close of Fiscal Year 2022, we will remain focused on our channel and innovation strategies. Our commercial team will continue to recruit and onboard partners within our PartnerVantage program to sell our Network as a Service offering as part of holistic IT solutions including bundles with cloud service offers. With our recent agreement with Arrow Electronics beginning to produce deals, we are also focusing on operationalising our most recent partnership with TD Synnex, announced in January.

The Megaport team is energized and focused on delivering a solid fourth quarter performance and setting our business up for great momentum heading into Fiscal year 2023.

Megaport share price snapshot

Over the past 12 months, the Megaport share price is down 7%. The new year has been rough with the shares collapsing in value by 43% year to date.

The post Megaport’s quarterly update sends its share price crashing 18% appeared first on The Motley Fool Australia.

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Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Endeavour Group Ltd (ASX: EDV) share price is in the red after the company released a trading update for the quarter just been.

The drinks and hotels business saw its sales slip 2.1% over the 13 weeks between 3 January and 3 April, on those of the same period of last year, led by its retail division.

Though, the S&P/ASX 200 Index (ASX: XJO) company notes the dip was partly due to the timing of the Easter holidays, which fell in the third quarter of financial year 2021. Its performance was also impacted by COVID-19 and extreme weather events.

In fact, major flood events in NSW and Queensland cost the company approximately $9 million during the period.

At the time of writing, the Endeavour share price is $7.77, 1.27% lower than its previous close.

Let’s take a closer look at today’s update from the Woolworths Group Ltd (ASX: WOW) spin off.

Endeavour share price down as sales slip

The Endeavour share price is down after the company announced its group sales for the March quarter slumped to $2,728 million.

Most of that fall is attributed to the company’s retail business ­– the home of Dan Murphy’s and BWS. Its sales fell 3% to $2,323 million last quarter.

Though, adjusting for the Easter holidays, which fell in the fourth quarter of financial year 2022, the segment’s sales slipped 0.7%.

Also adjusting for Easter, the segment’s online sales rose 16.8% to $222 million last quarter. That saw it surpassing $1 billion of annual online sales.

The ASX 200 company believes the drop in retail sales was partly born from relaxing COVID-19 restrictions, as Australians returned to pubs and hotels.

Meanwhile, Endeavour’s hotels segment brought in $405 million of sales – a 3.8% improvement. Or, a 2.5% improvement if adjusting for Easter.

The improvement was also driven by easing COVID-19 restrictions in Victoria and NSW, where improving sales offset a decline in Western Australia. Restrictions tightened in the western state during the period.

Though, the spread of COVID-19 caused customer hesitancy and impacted staff availability early in the quarter.

Endeavour managing director and CEO, Steve Donohue said the company’s “sustained strength” was “encouraging”, particularly during a challenging quarter.

These results are once again delivered within the context of an uncertain operating environment with extreme weather events, ongoing supply chain disruptions, and growing inflationary pressures creating new challenges.

Flood events take their toll

Damages to the company’s stores and bottom line caused by major flooding in parts of NSW and Queensland might also be hampering the Endeavour share price this morning.

Dan Murphy’s Lismore store was submerged in floodwater in early March. 10 BWS stores were also impacted by the flood event.

Additionally, Endeavour’s Breakfast Creek Hotel – located in Brisbane – and its Westower Tavern – in Ballina – were affected.

Endeavour expects the event dinted its earnings before interest and tax (EBIT) by $9 million last quarter.

That figure includes the direct costs of the floods, such as clean-up costs and asset write offs. It also includes the estimated profits lost due to some stores and hotels being unable to open.

Endeavour is processing an insurance claim for the event. It hasn’t recognised an insurance recovery yet.

As of the end of the quarter, 5 stores and a hotel remained fully or partially closed.

Endeavour share price snapshot

This year so far has been good for the Endeavour share price.

Right now, it’s 14% higher year to date.

It has also gained 29% since it split from Woolworths in June 2021.

The post ‘Another period of volatility’: What’s going on with the Endeavour share price today? appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Zip Co Ltd (ASX: ZIP) share price is having a subdued but positive start to the day.

This follows the release of the buy now pay later (BNPL) provider’s third quarter update under the new ticker code ZIP.

At the time of writing, the Zip share price is up slightly at $1.22.

Zip share price edges higher following quarterly update

• Quarterly transaction volume up 27% year on year to $2.1 billion
• Group quarterly revenue up 39% year on year to $159.2 million
• Active customers up 78% to 11.4 million
• Merchants up 90% to 86,200
• Cash transaction margin improved to 2.3%
• Credit losses worsen

What happened during the third quarter?

For the three months ended 31 March, Zip reported a 27% increase in quarterly transaction volume to $2.1 billion. This reflects transaction growth of 28% in the US, 7% in the ANZ region, and the inclusion of Rest of the World transaction volume of $154.8 million.

Zip’s revenue came in 39% higher year on year at $159.2 million thanks to an improvement in its cash transaction margin to 2.3%.

While this top line growth was solid on paper, it is a slowdown on what the company recorded during the first half. During the six months, Zip reported transaction volume growth of 93% and revenue growth of 89%.

Also potentially holding back the Zip share price today could be its credit losses. Management advised that due to a combination of both internal and external factors, credit losses increased outside the company’s target range during the quarter.

Zip is addressing this by executing on adjustments to its risk settings to drive down credit losses towards target levels, while still maintaining top line growth. This includes through the rollout of new machine learning models and comprehensive diagnostic analysis.

Positively, these adjustments have seen an immediate improvement in February and March cohorts in the United States. Though, it is worth noting that even these cohorts are still outside Zip’s target range at this stage.

As for costs, the company is taking steps to reduce its operating costs by trimming its workforce. This is expected to reduce staff costs by $30 million+ in FY 2023. Additional initiatives across procurement and automation are also underway, and these will be realised in the coming quarters

Management commentary

Zip’s Co-Founder and Global CEO, Larry Diamond, appears to be pleased with the progress the company made during the quarter. He said:

“In the half year results we acknowledged a change in external factors and announced several adjustments to our strategy – with a refined focus on sustainable growth, strong unit economics and fast tracking profitability.

The quarter saw us continue to deliver top line growth and strong revenue margins, while beginning to implement this refreshed strategy. The Sezzle acquisition remains on track and will deliver significant scale and synergies, directly supporting our objective of accelerating and winning in our core US market, and building a profitable business at scale. Our merchant pipeline is exceptionally healthy and we look forward to welcoming game changing merchants to the platform in Q4.

The underlying business remains strong, we are well funded and positioned to execute on the significant market opportunity as we aim to take control of our future. We are well on our way to disrupting the unfair and broken credit card, with a better and fairer digital alternative for the customer of tomorrow.”

The post Zip share price edges higher amid third quarter update appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Capital flows in and out of ASX exchange-traded funds (ETFs) have remained buoyant this year. The iShares MSCI Australia ETF (LON: IAUS) has realised $230 million in net inflows so far in April, in line with last month’s result.

One such ETF is the Betashares Geared Australian Equity Fund (ASX: GEAR) which gives investors a cost-effective way to access geared exposure to the returns of the ASX. What that means is it uses leverage — or borrowed funds — to magnify the returns.

Leverage is a strategy that uses borrowed funds from a broker in order to magnify investment returns. The ETF currently has a 2.06 times leverage, meaning it seeks a return of 2.06 times its benchmark index on a daily basis. According to Bloomberg data, this is the S&P/ASX 200 Index (ASX: XJO).

Before we go any further, we need to recognise that the equation works both ways. Whilst leverage magnifies returns, it also magnifies losses in the same multitude. Often the saying with leverage is that it can provide ‘an elevator to the ceiling — and the basement’.

So, is this ASX ETF worth buying?

Depending on who you ask — as well as your personal financial situation — it certainly could be. For Ben Nash of Pivot Wealth, it’s a no-brainer for every investor to include this ETF in their ASX portfolio.

“I love index investing generally and I think that this one is certainly not for the faint of heart, but by introducing borrowing to amplify returns you pick up all of the companies as they increase in size,” he recently said to Livewire.

“Like with any index investment, the costs are reasonable and the performance is quite strong, with the focus on dividend yield. I think it’s a good one for growth investors.”

Nash would be right, too, in his comment on amplifying returns, as shown on the chart below. The GEAR ETF has outpaced the benchmark over the past 12 months to date.

However, it’s a question of risk tolerance and just how much volatility you’re willing to accept in your portfolio.

Can you handle the volatility?

There’s actually a quick way in which we can examine how ‘worth it’ the GEAR ETF has been compared to the ASX 200.

To do that, we need to check in on each product’s ‘risk-adjusted’ return, in other words – just how much return did we get for the amount of volatility we had to endure?

Let’s pretend we invested in both ‘indices’ on 1 April 2021. On face value, we’ve recognised a 23.8% gain in GEAR, and a circa 8% gain in the ASX 200. Thanks, leverage.

However, as we can see on the chart above, GEAR was far more volatile over that time. Checking its risk-adjusted return via a measure called the Sharpe Ratio we see it scores 1.11, whereas the ASX 200 has a score of 1.17.

GEAR also has historical downside risk – the amount of ‘down’ moves in its share price – of 16.25% versus just 7.10% for the ASX 200 benchmark.

However, payoffs matter – we don’t want to lose money, right? So, the benchmark has had 55.77% of the time in the green, and 44.23% in the red.

The GEAR ETF, on the other hand, has had more up periods at 57.69%, with just 42.3% of time spent in the red — more than two percentage points less than the ASX 200 benchmark.

Recent research from Man Group PLC (LON: EMG), the world’s oldest hedge fund, noted the following:

There is a clear positive correlation between return and payoff: in other words, it matters less that a portfolio manager is right or wrong, rather that they know when they are right and wrong, and in both cases act with conviction by running winners and cutting losers.

With GEAR in the green almost 58% of the time this past year, that’s something worth thinking about.

The post What is the Betashares Geared Australian Equity Fund and is it worth buying? appeared first on The Motley Fool Australia.

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Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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