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.

Ethereum (CRYPTO: ETH), the second-largest cryptocurrency, sports a $445 billion market cap after a five-bagger performance in 2021 that made even Bitcoin (CRYPTO: BTC) look sleepy.

^SPX data by YCharts

However, this blockchain network also faces a couple of technical challenges. Ethereum is known as a powerful decentralized computing platform, but its transactions are also seen as slow and costly. Therefore, several rival cryptocurrencies are challenging Ethereum’s market position by offering some combination of faster processing and lower transaction fees.

Solana (CRYPTO: SOL), Cardano (CRYPTO: ADA), and Avalanche (CRYPTO: AVAX) are three of Ethereum’s strongest challengers. Their massive gains in 2021 left Ethereum eating buckets and buckets of dust.

Ethereum Price data by YCharts

Don’t sell your ether tokens just yet, though. As impressive as these Ethereum rivals may be, they don’t stand a chance to kill the old king in 2022 — or in the foreseeable future.

The king of smart contracts

The Ethereum blockchain can process approximately 20 transactions per second (TPS). The average transaction currently costs roughly 170 gwei, where 1 gwei equals one-billionth of an ether token. At today’s prices, that gas fee works out to $0.16 per Ethereum transaction. It takes about 5 minutes to receive the 20 confirmations required to complete that transaction, on average.

To compare and contrast Ethereum’s figures with the market’s largest digital currency, the median Bitcoin transaction currently costs 23,000 satoshis (billionths of a bitcoin), or $10.66. This trade only requires four network confirmations, but Bitcoin’s slower system results in delays as long as 40 minutes — unless you pay a higher fee to earn a faster processing schedule. The system can only settle roughly five transactions per second these days.

However, Bitcoin was never designed to churn through large numbers of transactions per second — this currency is meant to act like digital gold or cash. Security and stability are more important here than lightning-quick trade settlement.

Ethereum, on the other hand, was intended to provide immutable blockchain ledgers to a variety of decentralized applications (dApps). In this case, low fees and fast transactions make a big difference.

You should also know that both Ethereum and Bitcoin still use the energy-munching proof-of-work blockchain architecture. Millions of computers and specialized mining systems around the world are solving complex cryptography problems in order to settle transactions and earn tokens for the miners.

Meet the Ethereum alternatives

Each of the alternative smart contract blockchains has a unique set of attributes, though they all use a different blockchain system known as proof-of-stake. In this case, transactions are settled by consensus between proven holders of the cryptocurrency in question, resulting in lower energy consumption and a more scalable system. Here’s how this looks for various platforms:

• Cardano separates its transaction settlement functions from its computational layer, allowing the network to process hundreds of TPS. Transaction fees are comparable to Ethereum’s at $0.22 per average transaction. Finalizing each transfer requires 15 third-party confirmations, which currently takes about 10 minutes. The Cardano project is managed as a highly decentralized open-source system.
• Avalanche is optimized for low transaction fees and fast processing, hoping to attract many dApp developers. With three distinct blockchain networks at its service, Avalanche can churn through 6,500 transactions per second and the 20 transaction confirmations are typically collected in less than 1 minute. Transactions fees vary depending on what type of transaction you are executing on one of the Avalanche blockchain networks. The final cost tends to be roughly one-tenth of Ethereum’s fees for a similar transaction.
• Solana relies on proof-of-stake processing, paired with a unique layer called proof-of-history. This network records and settles transactions based on ultra-precise timestamps rather than constantly communicating with other validators. Together, Solana’s solution can process a mind-boggling 50,000 transactions per second and each transaction is completed in real time. Fees will rise as developers, traders, investors, and end users scale up their transaction volumes but currently run at a forgettably small $0.00025 per transaction.

But wait — things are changing!

Ethereum’s developer team isn’t sitting still while upstarts and alternative solutions rush in to steal their lunch. Through a series of upgrades to the underlying blockchain systems, the digital currency is transforming into Ethereum 2.0 before our eyes.

The Ethereum Foundation has already set up a proof-of-stake chain known as the Beacon Chain, which will merge with the current blockchain network later this year. The resulting hybrid should be able to process thousands of transactions per second while bringing costly Ethereum mining operations to a permanent halt. In 2023, the merged networks will add shard chains, spreading the processing load across 64 new blockchains.

The flawed Ethereum system you see today will hardly bear any resemblance to the upgraded and retooled Ethereum 2.0, apart from the fact that smart contracts designed to run on the old network will continue to work just fine on the new platform.

At that point, Ethereum will have erased most of the issues that Solana, Avalanche, and Cardano wanted to solve in the first place. Then, a cosmic game of ping-pong will ensue as the market leader and the usurpers take turns to develop game-changing system improvements.

Everyone’s a winner

None of the alternative smart contract networks stand any realistic chance of actually killing Ethereum — at least not in the next few years. Instead, we’re going to see healthy competition among projects with similar goals but different approaches, giving users and developers the opportunity to work with the best blockchain network for each end-market situation.

I’m not saying that Ethereum (or any of its rivals) will be around forever, but this particular cryptocurrency has a huge leg up on the competition in the form of early adoption and a massive market share right out of the starting gate. A smart cryptocurrency investor should build a diverse portfolio of promising coins and tokens, expecting a couple of misses alongside a few big wins in the long run. I own three of the four smart contract cryptocurrencies discussed above, and I’ll probably add the missing link, Avalanche, soon enough.

That’s no different from building a healthy stock portfolio for the long term. Investing is investing. The more you know, the better you’ll perform — and it’s OK to take a few risks along the way, as long as the potential upside is big enough. 

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

The post Can these 3 ‘Ethereum Killers’ actually kill Ethereum in 2022? appeared first on The Motley Fool Australia.

More reading

• Here’s what happened with the Ethereum price in 2021
• 3 big reasons crypto sceptics are WRONG
• Is Coinbase moving the goalposts on your taked Ethereum?
• Is Cardano a smart cryptocurrency to buy now?
• Australia’s first physical crypto gift cards are now on sale for Christmas

Anders Bylund owns Bitcoin, Cardano, Ethereum, and Solana. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and recommends Bitcoin and Ethereum. 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 Aristocrat Leisure Limited (ASX: ALL) share price is under pressure on Thursday.

In morning trade, the gaming technology company’s shares are down 3.5% to $43.66.

Why is the Aristocrat Leisure share price falling?

The weakness in the Aristocrat Leisure share price today has been driven by a couple of reasons.

One of course is a selloff on the tech-focused Nasdaq index overnight which is weighing heavily on the local tech sector today. So much so, the S&P ASX All Technology index is down 3.2% in early trade.

Also putting pressure on the Aristocrat Leisure share price was the release of an update on its proposed acquisition of Playtech after the market close on Wednesday.

Late last year, Aristocrat Leisure announced a deal to acquire London-listed leading global online gambling software and content supplier, Playtech, for an enterprise value of $5 billion.

Playtech has two key business segments: Business-to-Business gambling (B2B) and Business-to-Consumer gambling (B2C). The company’s B2B gambling operations include the design, development, and distribution of software and services to the online and land-based gambling industry.

Whereas the B2C gambling operations predominantly consists of Snaitech (Italy). It is a vertically integrated retail and online business leveraging Playtech’s proprietary technology and capabilities. Other B2C brands include HPYBET and SunBingo. HPYBET is Playtech’s retail sports betting B2C business, operating sports betting shops in Austria and Germany.

What’s the latest?

Playtech shareholders were due to vote on the takeover proposal at a meeting next week. However, this has now been pushed back until 2 February to allow time for rival JKO Play to make a firm competing offer.

Management notes that Aristocrat’s proposal remains the only firm offer that has been made for Playtech. It also highlights that it provides attractive value in cash and enhanced regulatory and financial certainty for Playtech shareholders.

Furthermore, Aristocrat notes that any other potential bidders have already had a substantial amount of time to make an alternative proposal for Playtech. Therefore, the decision to further delay the shareholder meeting only extends the period of uncertainty for all Playtech stakeholders.

One positive, though, is that proxy advisers continue to recommend shareholders vote in favour of Aristocrat’s proposal. It also advised that regulatory approvals process remains well on track, and that it is committed to completing the acquisition as quickly as possible.

The post Why the Aristocrat Leisure (ASX:ALL) share price is tumbling lower today appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Thursday
• Analysts name 3 ASX growth shares to buy right now
• What could the Playtech deal mean for Aristocrat (ASX:ALL) shares?
• 3 ASX 200 shares with major upside potential in 2022
• What’s impacting the Aristocrat (ASX:ALL) share price today?

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. 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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There are a few S&P/ASX 200 Index (ASX: XJO) shares that are making a lot of revenue and profit from the high level of COVID-19 testing.

A few key providers are providing millions of tests, such as Sonic Healthcare Ltd (ASX: SHL) and Healius Ltd (ASX: HLS). The smaller, non-ASX 200 business Australian Clinical Labs Ltd (ASX: ACL) is also involved in testing.

How is testing benefiting the ASX 200 healthcare shares?

According to reporting by The Australian there has been a total of more than 55 million PCR tests done. The testing providers are now receiving a $85 million Medicare rebate for every test, which has gone up from $28.65 per test at the start of pandemic.

On 18 November 2021, Sonic disclosed that it had conducted 36 million COVID-19 PCR tests in total to date, though Sonic operates in several northern hemisphere countries like the USA, Germany, the UK and Switzerland.

Sonic also performs vaccinations. It had provided more than 1 million vaccinations when it announced a trading update in mid-November.  

Whilst rapid antigen tests are quickly becoming a key part of the testing system, it’s still thought that PCR testing will continue for the next couple of years at least.

Healius noted at its recent annual general meeting (AGM) (in October, before the Omicron surge) that it was doing more than 40,000 COVID tests per working day with commercial COVID testing performing “well” in industries like sports and film production. The ASX 200 share’s underlying net profit after tax almost tripled from $53.1 million to $148.4 million.

Healius said that it expected COVID PCR testing to be part of the health landscape for years.

How are investors seeing the situation?

The Australian reported that Citi is expecting more COVID testing in FY22 and FY23, as well as a continuation of testing going into FY24.

Investors have sent the share prices of the three companies mentioned much higher in recent times.

The Sonic Healthcare share price has risen 24% over the last six months and 39% over the last year at the time of writing.

Over the last six months the Healius share price has risen by 13% and it has increased by 36% in the past year.

The Australian Clinical Labs share price has surged 37% in just the last month and over the past six months it has soared 75%.

Are those ASX 200 shares still opportunities?

The broker Morgans has rated both Healius and Sonic Healthcare as buys with price targets that are approximately 10% higher than where they are now. It noted that both businesses are also making bolt-on acquisitions to boost earnings over the longer-term.

The post 2 ASX 200 shares benefitting from the surge in COVID tests appeared first on The Motley Fool Australia.

More reading

• 2 ASX dividend shares tipped as buys this month
• Are these 2 impressive ASX shares buys in January 2022?
• In the green: Here are the 5 best ASX healthcare shares of 2021
• 3 fantastic ASX shares to buy this month
• Why 4DS, Healius, Helloworld, and Humm shares are dropping today

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. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Australian Clinical Labs Limited and Sonic Healthcare 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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The Latitude Group Holdings Ltd (ASX: LFS) share price is trading slightly higher on Thursday morning despite the tech selloff.

At the time of writing, the lending company’s shares are up a touch to $1.97.

Why is the Latitude share price not being sold off?

The Latitude share price has managed to avoid the tech selloff today after announcing an agreement to acquire the consumer business of Humm Group Ltd (ASX: HUM).

According to the release, Latitude will pay a total consideration of $335 million for the consumer business, which comprises Humm’s buy now pay later (BNPL), instalments and cards operations.

The release explains that the  $335 million consideration will be a mixture of cash and shares. Humm will receive $35 million in cash and 150 million Latitude shares valued at $2.00 each for the business.

Why acquire this business?

Latitude notes that at the end of June, Humm’s consumer business had approximately $1.8 billion of net receivables and $152 million of net tangible assets. The combination of the businesses would lead to more than $8 billion of receivables, over five million customers, and 70,000-plus merchants.

In addition, management highlights that it expects annualised combined synergies and cash earnings from the acquisition of Humm’s consumer business to exceed $100 million pre-tax in full year 2023, with $70 million of synergies including $50 million from duplicate costs and technology rationalisation.

In light of this, the transaction is expected to be double digit earnings per share accretive for Latitude assuming full run rate synergies.

Latitude’s Managing Director and Group CEO, Ahmed Fahour, commented: “Humm’s consumer business is highly accretive to Latitude’s shareholders. The proposed Transaction would enable us to accelerate the deployment of BNPL and instalment solutions for our customers and merchant partners in Australia/New Zealand and accelerate our growth in our international markets. It would also realise highly deliverable synergies which will enhance our financial performance and create significant shareholder value.”

The parties expect to sign definitive transaction documents by the end of January. Completion of the transaction will then be subject to regulatory, shareholder and board approvals, with both parties aiming to close the transaction before the end of June.

The post Latitude (ASX:LFS) share price higher on $335m Humm BNPL acquisition appeared first on The Motley Fool Australia.

More reading

• Humm (ASX:HUM) share price shoots 8% higher after BNPL takeover approach
• These were the 5 top performing ASX BNPL shares of 2021
• Why 4DS, Healius, Helloworld, and Humm shares are dropping today
• Bank of Queensland (ASX:BOQ) hoses down Humm (ASX:HUM) takeover rumours
• Why Anteotech, Bega Cheese, Humm, and Syrah shares are racing higher

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. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Humm Group 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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The Humm Group Ltd (ASX: HUM) share price is shooting higher on Thursday morning.

At the time of writing, the consumer finance products provider’s shares are up 8% to 97 cents.

Why is the Humm share price shooting higher?

Investors have been bidding the Humm share price higher today after it announced the receipt of a takeover approach from Latitude Group Holdings Ltd (ASX: LFS) for its Humm Consumer Finance (HCF) business.

According to the release, the two parties have entered into a non-binding heads of agreement that will see Latitude acquire the HCF business for approximately $335 million. This comprises a consideration of 150 million Latitude shares (worth $300 million based on a $2.00 Latitude share price) and $35 million cash for HCF.

Should the deal go ahead, Latitude intends to combine HCF with its existing BNPL and instalments businesses.

Humm’s Chair, Christine Christian, said: “HUM’s Board and Management are committed to maximising shareholder value. In this context, we believe that the Latitude proposal is potentially attractive to HUM shareholders and warrants due diligence and detailed negotiation.”

Humm notes also that by receiving Latitude shares as consideration, shareholders could further benefit from any potential enhanced scale and efficiencies of Latitude’s enlarged consumer finance platform. Latitude has indicated it expects significant synergies to arise from the combination.

What will be left of Humm?

If the deal proceeds, Humm will be left as a pure play Commercial business, with HUM shareholders retaining full exposure to this high growth segment.

It notes that it has purposefully reoriented FlexiCommercial, focusing on broker-originated SME lending. This has resulted in both positive operating performance, with the Commercial business delivering cash NPAT of $22.3 million in FY 2021.

It also highlights its strong forward momentum, noting a 100% increase in volumes in the first quarter of FY 2022.

Management believes that as a standalone ASX-listed Commercial business, its market position across Australia and New Zealand would be underpinned by robust standalone operational and technology platforms and an appropriate capital base.

The post Humm (ASX:HUM) share price shoots 8% higher after BNPL takeover approach appeared first on The Motley Fool Australia.

More reading

• These were the 5 top performing ASX BNPL shares of 2021
• Why 4DS, Healius, Helloworld, and Humm shares are dropping today
• Bank of Queensland (ASX:BOQ) hoses down Humm (ASX:HUM) takeover rumours
• Why Anteotech, Bega Cheese, Humm, and Syrah shares are racing higher
• Why Afterpay, Humm, Namoi Cotton, and Pilbara Minerals shares are falling

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. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Humm Group 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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The Boral Limited (ASX: BLD) share price powered through 2021 amid asset sales and a dragged-out takeover.

After ending 2020 trading at $4.95, the Boral share price grew to close 2021 at $6.10. That represents a 23.23% gain.

Let’s take a closer look at what the building products company got up to last year.

What drove the Boral share price higher in 2021?

Boral ended last year with a new owner after Seven Group Holdings Ltd (ASX: SVW) scrapped together 69.6% of its outstanding stock.

Seven Group bid $6.50 for all Boral shares it didn’t already own in May. Boral’s board quickly recommended its shareholders reject the bid, but that wasn’t enough to stop Seven.

It upped its bid to $7.30, or $7.40 if its stake in Boral increases by at least 34.5%, the following month.

Boral’s board once more rejected the offer, stating an independent expert found that its shares were worth between $8.25 and $9.13 apiece.

Nonetheless, enough of the company’s shareholders voted ‘yes’ to Seven’s takeover, seeing the investment group walking away with control over Boral.

At the time of the takeover, the Boral share price was $7.34.

Meanwhile, the building supplies company was selling off chunks of its North American businesses.

In 2021, it sold its fly ash business for US$755 million, its 50% stake in the USG Boral joint venture for US$1.015 billion, and its North American building products business for US$2.15 billion.

Including the divestment of its share of the Meridian Brick business in 2020, which saw the company with another US$125 million, its milked more than $4 billion through North American divestments.

It also sold its Australian timber business for $64.5 million.

Over the course of 2021, the Boral share price hit a high of $7.44 in July and a low of $4.77 in January.

It has gained another 2.95% since the start of 2021 to finish yesterday’s session trading at $6.29.

The post How did the Boral (ASX:BLD) share price manage to climb 23% in 2021? appeared first on The Motley Fool Australia.

More reading

• What are these top brokers betting for Beach Energy (ASX:BPT) shares in 2022?
• Is the Boral (ASX:BLD) share price already fully valued?
• Leading brokers name 3 ASX shares to sell today

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 Newcrest Mining Ltd (ASX: NCM) share price had a disappointing year caused by weakened market conditions.

The company holds the title of owning and operating some of Australia’s largest gold and copper mines. While the company appears solid on paper, its shares have suffered as a result of macroenvironmental headwinds.

For the past 12 months, Newcrest shares lost around 5% in value. While this may not seem much, the broader S&P/ASX 200 Index (ASX: XJO) gained 13.5% over the same period.

At yesterday’s market close, Newcrest shares closed 1.27% higher at $24.80 apiece. It’s worth noting that its shares have been on a rebound in the last month, leaping by almost 10%.

Why did the Newcrest share price sink?

A common theme with gold mining companies, the Newcrest share price has been dumped amid the deterioration of gold prices.

Traditionally, investors flock to the yellow metal as a safe-haven asset when there is uncertainty in the market. However, with the world moving past COVID-19, among renewed investor confidence across the US dollar and inflation numbers, gold has lost its value.

In the past year, the price of gold soared close to the US$2,000 barrier but has since fallen wayside. At current, one ounce of gold is fetching for US$1,817.64.

Compared to the start of the year, the precious metal had been fetching for US$1,951.34, down 7% from today’s levels.

The United States Federal Reserve has indicated its intent to raise interest rates at least 3 times in 2022. This is because inflation had accelerated to 6.9% last year, the highest rate in nearly four decades, and unemployment levels being down.

Supply and demand imbalances due to COVID-19 along with the reopening of the economy have led inflation to spike.

As such, the Reserves Bank of Australia is expected to follow suit, with two rate hikes for the current 2022 year.

Rising interest rates drag down the price of precious metals, and it appears investors are bracing for the worst.

Is this a buying opportunity?

The good news for investors is that a number of brokers believe that the Newcrest share price is attractively valued.

Multinational investment bank, Macquarie lifted its 12-month price target by 13% to $34 for Newcrest shares. This implies an upside of around 37% based on the current share price.

In addition, Swiss investment firm, UBS lowered its assessment on Newcrest shares by 19% to $27. Its analysts clearly believe that there is still significant value in the gold mining company and that a recovery is inevitable. This represents a potential upside of 9% from where it trades today.

The post Own Newcrest (ASX:NCM) shares? Here’s how the share price performed in 2021 appeared first on The Motley Fool Australia.

More reading

• Leading brokers name 3 ASX shares to buy
• 5 things to watch on the ASX 200 on Friday
• Is it a buy? Newcrest Mining (ASX:NCM) share price outlook in 2022
• 5 things to watch on the ASX 200 on Friday
• What’s going on with the strange Newcrest (ASX:NCM) share price today?

Motley Fool contributor Aaron Teboneras 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 ASX 200 tech sector looks set to be a bloodbath on Thursday after a selloff on the Nasdaq index overnight.

The illustrious tech-focused Nasdaq index had its worst session in almost a year after falling 3.3% overnight.

Why did the Nasdaq sink?

Investors were selling down tech shares following the release of minutes from the US Federal Reserve which suggested that tighter U.S. monetary policy was coming.

The Fed commented: “Almost all participants agreed that it would likely be appropriate to initiate balance sheet runoff at some point after the first increase in the target range for the federal funds rate.”

This runoff has been classed as “the key risk for the year” by Jay Hatfield from Infrastructure Capital Management.

Hatfield told CNBC: “If the Fed starts shrinking the balance sheet that’s going to be disastrous. I assume that they’re going to keep the balance sheet flat, but it is possible if inflation stays really hot that they start letting the balance sheet run off. It’s not just that they’re not injecting liquidity, they’re taking liquidity out.”

“You don’t want to be in the stock market when the Fed is taking liquidity out of it — it’s like being in Coke when Warren Buffett is selling his position,” Hatfield added.

ASX 200 tech shares to fall

Given how the Australian tech sector tends to follow the lead of the Nasdaq index, this doesn’t bode well for ASX 200 tech shares this morning.

This is particularly the case for the Afterpay Ltd (ASX: APT) share price. It looks likely to fall to a new 52-week low on Thursday after the Block share price sank over 8% during overnight trade.

And with fellow BNPL provider Affirm falling 7%, this could mean an equally bad day for the Zip Co Ltd (ASX: Z1P) share price.

Elsewhere, Intuit shares fell 4%, which could be a bad sign for the Xero Limited (ASX: XRO) share price, and Autodesk, which attempted to acquire Altium Limited (ASX: ALU) last year, saw its shares fall 5%.

The post ASX 200 tech shares on watch after Nasdaq selloff appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Thursday
• Here are the top 10 ASX shares today
• What are some key lessons for ASX share investors at the end of 2021?
• These 3 ASX 200 shares are topping the volume charts on Wednesday
• Why Afterpay, Kogan, Premier Investments, and Pro Medicus shares are dropping

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 Afterpay Limited, Altium, Xero, and ZIPCOLTD FPO. The Motley Fool Australia owns and has recommended Afterpay Limited and Xero. 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 Magellan Financial Group Ltd (ASX: MFG) share price has fallen approximately 60% over the past year. Is the fund manager now a bargain buy after all of its troubles?

Magellan shares have been drifting lower for quite a long time. Worries about its investment fund performance caused concerns regarding funds under management (FUM) retention and the ability to maintain its management fees.

It was a week before Christmas that Magellan received the news that its biggest client was pulling its funds out.

Loss of St James’ Place mandate

Magellan was notified on 17 December 2021 that St James’ Place had terminated its mandate.

That mandate, which was a separate account and not an investment in any of Magellan’s retail global funds, represented approximately 12% of its current annual revenue and is anticipated to have an impact of around 6% on the FY22 revenue.

Due to the timing to the mandate loss, the impact will be immaterial to the company’s half-year result to 31 December 2021.

Magellan co-founder Hamish Douglass noted in a video that no other client amounts to more than 3% of its revenue. The Magellan business, Mr Douglass noted, was diversified and in a strong financial position with strong assets and cash. It continues to have high profit margins and good cashflow.

The Magellan share price has dropped 28% since this news dropped.

Resignation of CEO

About a month ago, Magellan announced that its CEO, Dr Brett Cairns, was resigning for personal reasons and will be leaving the company.

The chief financial officer (CFO) of Magellan, Ms Kirsten Morton, has been appointed as the interim CEO. She has been CFO for eight years and has a “detailed understanding of Magellan and its operations” after joining the senior management team in 2013.

Mr Hamish Douglass will remain as Magellan’s executive Chair.

Is the Magellan share price an opportunity?

There are a mixture of views on the business.

Despite the heavy decline of the share price, UBS thinks there could be further declines on the potential loss of other clients. The broker has a price target of $17, which would suggest a potential drop of around 20%. UBS is expecting more than $20 billion of net outflows of funds under management over the next few years and increased pressure of management fees.

Morgan Stanley also reckons that Magellan is a sell/underweight with a price target of $17.50. It is concerned that the underperformance could lead to a decline in the management fees that it charges the retail clients.

However, not every analyst is pessimistic about where the Magellan share price is headed. Morgans currently rates Magellan as a hold, but it has a price target of $24.15 – that’s 15% higher than where it is right now. But, fee pressure and net outflows are also a concern for Morgans.

Whilst the core equity strategy may be under pressure, Magellan has pointed to various other parts of the business which have growth potential in the coming years including its Australian equity strategies, its retirement product called Futurepay, its sustainable investing strategies and its investments in other businesses like Barrenjoey and Guzman y Gomez.

The post Down 60%: Is the Magellan (ASX:MFG) share price now a bargain? appeared first on The Motley Fool Australia.

More reading

• These were the 5 worst performing ASX 200 shares in 2021
• These were the worst performing ASX 200 shares in December
• ASX 200 falls on Friday but records 13% gain in 2021
• Is the Magellan (ASX:MFG) share price a beaten-up buy?
• Leading brokers name 3 ASX shares to sell

Motley Fool contributor Tristan Harrison owns Magellan Financial Group. 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 Brickworks Limited (ASX: BKW) share price has risen by around 30% over the past year, outperforming the S&P/ASX 200 Index (ASX: XJO) by around 16% over that same time period.

There are three (or four) different sections to the Brickworks business. It has an Australian building products division, a US building products division, a property trust investment and a shareholding of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).

Each section has its own influence on the Brickworks share price and results. These are some of the recent comments from the company and analysts on the business:

The property division is expecting a big result

Brickworks is expecting to report record property earnings in the first half of FY22. Property earnings before interest and tax (EBIT), assuming no further transactions, is expected to be in the range of $290 million to $310 million. This compares to property EBIT of $253 million in FY21.

The COVID-19 pandemic has accelerated industry trends towards online shopping and increased the importance of well-located distribution hubs and sophisticated supply chain solutions.

Brickworks’ managing director Mr Lindsay Partridge said:

In order to meet the strong customer demand, development activity within the property trust has also continued at pace. At Oakdale West, construction of the start of the art Amazon facility is due to reach practical completion at the end of December. The completion of this facility, together with others at Oakdale South, will result in significant development profits, also included in the record first half earnings.

In the second half of the financial year, Brickworks is expecting to complete additional developments at the Oakdale Estates in western Sydney and the Rochedale estate in Brisbane.

Brickworks is also selling 75 hectares of excess land at Oakdale East, resulting in a “significant” one-off land sale profit and extending the development pipeline in order to meet the unprecedented demand for industrial development.

This is increasing the underlying backing for the Brickworks share price.

Building products

Several weeks ago, the business held its annual general meeting (AGM) and outlined how both of its building products businesses were performing.

In Australia, it said that it was experiencing strong demand, though the first quarter of FY22 was disrupted by COVID-19 restrictions. First quarter revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) was “slightly ahead” of the prior corresponding period. It said there is strong underlying demand across the country, with a large backlog of detached housing construction work in the pipeline.

In North America, sales have been buoyed by the recent brick distributor acquisition, though margin pressures remain. Thanks to the acquisition of the Illinois Brick Company (IBC), the sales uplift was “significant”.

Soul Pattinson

After the merger with Milton, Brickworks now owns 26.1% of Soul Pattinson.

Mr Partridge said:

The merger provides WHSP with increased scale, diversification and liquidity to pursue additional investment opportunities, and we expect WHSP to continue to deliver superior long-term returns and consistent dividend growth well into the future.

Is the Brickworks share price a buy?

Ord Minnett currently calls Brickworks a buy, with a price target of $26.20. Whilst the broker notes the ongoing performance of the property division, which is benefiting from higher valuations, the Soul Pattinson share price has been declining and hurting the underlying value of Brickworks shares over the last few months.

The post What’s the outlook for the Brickworks (ASX:BKW) share price in 2022? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison owns Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns and has recommended Brickworks and Washington H. Soul Pattinson and Company 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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