The Rio Tinto Limited (ASX: RIO) share price is struggling to entice buyers as it hovers around 10-month lows of $106.73.

What’s next for the Rio Tinto share price?

Brokers think it’s time to sell

In the Motley Fool’s latest brokerage notes for Rio Tinto, UBS analysts are sell-rated with a $102.00 target price.

The broker flagged that Rio Tinto might miss its iron ore production guidance for the calendar year.

This view is consistent with the company’s mixed half-year results commentary.

Rio said that iron ore shipments decreased 3%, driven by “lower production following sustained wet weather, particularly at West Pilbara and Robe Valley operations, shutdowns to enable new replacement mines to be tied in, processing plant availability and cultural heritage management”.

UBS also noted rising supply and falling demand for iron ore as another drag on the Rio Tinto share price.

Iron ore weakness to persist

Iron ore prices have plunged in recent weeks, in the wake of China’s plans to curtail its steel production.

An article featured on Mining.com said the Chinese government had asked major producers in Tangshan city to “suspend operations for a week in August in order to reduce emissions as the Chinese steel sector makes up 15% of the country’s total carbon emissions”.

The article also quoted analysts from UBS who warned about weaker iron ore prices in the near term.

In a broker note, the UBS analysts said: “We expect China’s steel curtailments to be targeted in 4Q when demand slows seasonally and air pollution is in focus (especially ahead of the Winter Olympics in Feb-22) and as a result we expect prices to stabilize in Sept/Oct before continuing to fall back below $100/tonne in 2022.”

Rio Tinto share price snapshot

In late July, the Rio Tinto share price hit a new all-time record of $137.33.

The post Rio Tinto (ASX:RIO) share price at 10-month lows. What’s next? appeared first on The Motley Fool Australia.

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• Leading brokers name 3 ASX shares to sell today
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Motley Fool contributor Kerry Sun 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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Ever since the cryptocurrency Bitcoin (CRYPTO: BTC) exploded onto the mainstream investing consciousness, it has been compared to gold. Some investors even call Bitcoin ‘digital gold’, an alternative to the yellow metal for a modern world. After all, gold has been mined, collected and stored as an investment or store of value of thousands of years of human history. Bitcoin has been around since 2010.

So gold and Bitcoin do have some similarities. Both are finite and scarce commodities. Everyone knows gold is a rare metal. And there are only 21 million Bitcoins that can ever be mined. Because of this scarcity, many investors often claim that Bitcoin has the same inbuilt protections against monetary debasements like inflation or deflation.

Bitcoin is also often touted as an alternative to gold because of its decentralised nature and fungibility. Governments have little control over Bitcoin. And it can be used in a similar way with a consistent value anywhere on the planet. The same is more or less true for gold.

So is Bitcoin really the 21st century’s answer to gold? A decidedly medieval investment by comparison?

Well, one expert doesn’t think so.

Bouris: Bitcoin doesn’t shine up to gold

Mark Bouris is chair of the financial services group Yellow Brick Road. According to a report in The Australian today, he has a rather strong opinion on the idea of Bitcoin as digital gold.

Mr Bouris told the Australian that gold “has shown a consistent trajectory over the past few decades, and as a physical asset it tends to hold its value”. But in contrast, he sees cryptocurrencies like Bitcoin as nothing of the sort, noting their “extreme deviations and “lack of pedigree”.

Bouris also pointed to the recent legalisation of Bitcoin as legal tender in the Central American country of El Salvador. He pointed out that Bitcoin crashed by 10% just as it was legalised. “Blockchain technology is pretty cool and could have interesting and widespread applications in the future, but quite simply, it’s volatile,” he said.

The report also quoted the manager of listed products and investment research at the Perth Mint, Jordan Eliseo. Mr Eliseo agrees with this sentiment. Here’s some of what he added:

Gold is seen as the ultimate safe haven, with a multi-millennia track record of preserving wealth… Despite the hype, cryptocurrencies remain a market characterised by enormous volatility, and have so far failed to act as safe haven asset in the traditional sense over the last 10 years.

So it appears that opinions on just what Bitcoin can (or should) be used for do differ wildly around the world. It seems only time will tell which clothes Bitcoin will end up wearing. It could well be digital gold, a currency or a speculative asset. Or it could end up being… er, rat poison, as Warren Buffett’s right-hand man Charlie Munger once put it.

The post Why this expert thinks gold is a better investment than Bitcoin appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen owns shares of Bitcoin. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Bitcoin. 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 Australian telecommunication landscape is dominated by Telstra Corporation Ltd (ASX: TLS), but there are a host of smaller players listed on the ASX that are making their mark on the industry.

The August earnings season gave investors the opportunity to examine the performance of not just Telstra, but ASX telecommunication shares including TPG Telecom Ltd (ASX: TPG), Spark New Zealand Ltd (ASX: SPK), and Chorus Limited (ASX: CNU). 

How have ASX telecommunications shares performed against the market?

Telstra shares have performed strongly this year. The Telstra share price is up 28% year to date, compared to 12.5% for the All Ordinaries Index (ASX: XAO) over the same period.

Shares in Spark are up just 0.73% for the year, trading slightly below levels last seen pre-COVID. The TPG share price, on the other hand, is currently down 6% since January. Similarly, the Chorus share price has fallen 9.2% in 2021. 

Who are the telco winners this earnings season? 

Telstra announced it had reached a turning point in its financial performance and outlook in FY21.

The telecommunications giant delivered results in line with guidance and is projecting earnings growth in FY22. Telstra says it is building financial momentum. It reported strong performance in its mobile business, green shoots in certain growth businesses, and a diminishing impact from the NBN.

Total income decreased 11.6% to $23.1 billion and reported EBITDA decreased 14.2% to $7.6 billion in FY21. Profits, however, increased 3.4% to $1.9 billion.

Shareholders will receive a fully franked final dividend of 8 cents per share, consisting of an ordinary dividend of 5 cents and a special dividend of 3 cents, This brings total dividends for the year to 16 cents per share. 

Telstra is three years into a four-year transformation strategy. The company says it is on track or has delivered around 80% of its targets.

“We have transformed Telstra to become a simpler, more digitally enabled and leaner business,” CEO Andrew Penn said.

The company is undergoing a restructure which involves the separation and sale of InfraCo Towers. Up to $1.35 billion of the proceeds will be returned to shareholders in FY22 via an on-market share buyback.

According to Penn, this is a clear demonstration of how the company is creating additional long-term value for shareholders. The remainder of the proceeds from the transaction will be used for debt reduction to ensure Telstra maintains balance sheet strength and flexibility. 

Spark New Zealand reported its half-year results last month which revealed a decline in revenue driven by a loss of roaming revenues. Nonetheless, the phone and internet provider managed to deliver earnings growth at the top end of the guidance range thanks to disciplined costs management.

Revenue declined 0.8% to $3,953 million but Spark New Zealand’s earnings grew 1% to $1,124 million. Higher depreciation and amortisation costs and an increase in tax expenses drove a decline in profits, with NPAT falling 8.6% to $384 million. Mobile service revenue grew 0.5%, but the broadband market saw a revenue decline of 1.3% due to continued competitive pressure and slower overall market growth.

Although the New Zealand economic recovery has been stronger than expected, closed international borders are impacting Spark New Zealand through the loss of roaming revenues and lower overall growth in some markets. 

And the losers?

Chorus was another telecommunications provider that experienced a drop in revenue due to softer market conditions. Together with competition from other fibre and wireless networks, this resulted in a $12 million drop in revenue compared to FY20.

Chorus’ earnings, however, increased marginally at $649 million compared to $648 million in FY20. This was thanks to tight management of costs and the absence of once-off COVID-19 costs incurred in FY20. Chorus boasted 871,000 active fibre connections at the end of the financial year, up from 751,000 the year before. This is well on the way to Chorus’ target of 1 million connections next year. 

The TPG share price dipped on the release of the company’s half-year results last month, which revealed an 8% drop in profits. This was impacted by the fact that HY20 profits benefitted from a one-off accounting credit.

The HY21 results reveal the full impact of the Vodafone TPG merger, as the HY20 results only had four days’ contribution from TPG Corporation. Reported revenue increased 71% from HY20 to $2.63 billion while TPG’s earnings increased 67% to $886 million. The merger synergy program is on track and delivered $38 million in cost synergies during HY21 as part of its $70 million synergy target for 2021. 

What is the outlook for ASX telecommunication shares?

Telstra is predicting a return to growth for its underlying business in FY22. The company has provided full-year guidance for income of $21.6 — $23.6 billion and earnings of $7.0 — $7.3 billion.

The company is continuing to progress the proposed corporate restructure of its organisation, which involves the creation of separate subsidiaries. The restructure is expected to be undertaken by way of a scheme of arrangement, for which shareholder approval should be sought before the end of the year. 

Spark New Zealand has significant infrastructure investments planned for FY22. An additional $25 million is being invested to accelerate the 5G rollout. This will support the company in delivering 90% population coverage by the end of calendar 2023. Spark New Zealand is also exploring shared ownership models for ‘passive’ components of its mobile network and fibre. Discussions are ongoing in this regard and there is no certainty any transaction will proceed. 

TPG’s key strategic focuses for the second half of the year are bringing more fixed customers onto its own infrastructure, improving mobile performance, and achieving its merger cost synergy target. It is on track to reach 85% 5G population coverage in 10 of Australia’s largest cities and regions by the end of 2021, supporting future growth in mobile and home wireless. 

Chorus has provided guidance for FY22 earnings of $640 million — $660 million, with total dividends of 26 cents per share. The company is transitioning to a new dividend policy based on a majority pay-out range of free cash flow.

The dividend is temporarily constrained by high capital expenditure related to ultra-fast broadband, however Chorus expects to provide further detail on the dividend outlook in February 2022. 

The post How have ASX telecommunication shares performed during the August 2021 earnings season? appeared first on The Motley Fool Australia.

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Motley Fool contributor Katherine O’Brien 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 owns shares of and has recommended Telstra Corporation Limited. The Motley Fool Australia has recommended TPG Telecom 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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It has been a disappointing year so far for the Altium Limited (ASX: ALU) share price.

Since the start of the year, the electronic design software provider’s shares have fallen 10% to $31.08.

Is the Altium share price weakness a buying opportunity?

One leading broker isn’t sure this is a buying opportunity and feels the Altium share price could be trading around fair value present.

According to a note out of Bell Potter, its analysts have a hold rating and $32.50 price target on the company’s shares.

Based on the current Altium share price, this implies modest upside of 4.5% over the next 12 months.

What is Bell Potter saying?

Bell Potter was a touch underwhelmed with the company’s performance in FY 2021. While its revenues from continuing operations came in a touch above its estimates, its earnings fell well short due to weaker margins.

Unfortunately, those weaker margins are expected to persist, which has led to Bell Potter downgrading its earnings estimates.

The broker explained: “We have modestly downgraded our EBITDA and NPAT forecasts by around 3% in both FY22 and FY23. The downgrades have been driven by reductions in our margin estimates which have more than offset increases in our revenue forecasts. We now forecast FY22 revenue and EBITDA of US$214.1m and US$76.5m respectively.”

In light of this, the broker doesn’t see enough value in the Altium share price to warrant a buy rating.

It commented: “We have updated each valuation used in the determination of our price target for the earnings changes and also reduced the premium we apply in the relative valuations from 25% to 10% given the strong rally in some of the comps (e.g. WiseTech). The net result is a 7% decrease in our PT to $32.50 and we maintain the HOLD rec.”

The post Here’s what this top broker thinks of the Altium (ASX:ALU) share price 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 shares of and has recommended Altium. The Motley Fool Australia owns shares of and has recommended Altium. 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 Qantas Airways Limited (ASX: QAN) share price is in the green today amid news the airline will be adding a new domestic route to its offerings.

Qantas will begin flying between Brisbane and Launceston 3 times a week in November.

The airline’s budget operation, Jetstar, already flies the route. It will be adding another 2 flights each week between the Queensland capital and the northern Tasmanian city.

Right now, the Qantas share price is $5.32, 1.82% higher than its previous close.

Comparatively, the S&P/ASX 200 Index (ASX: XJO) is gaining 0.64% today.

Let’s take a closer look at today’s news from Qantas.

Qantas share price takes off amid new flight path

The Qantas share price is taking off today. It comes after the company announced it will soon begin operating Qantas flights between Brisbane and Launceston for the first time.

The new flights will see an extra 15,000 seats available to fly between the cities each week.

Qantas said it will fly the route 3 times a week from November 2021 until March 2022. At the end of March, it may alter the offering in line with demand.

It’s the eighth new route Qantas has introduced to Tasmania since Australia’s international borders shut.

The airline said demand for flights to and from Tasmania has increased alongside the number of Australians’ seeking out domestic holidays.   

The Qantas share price was bolstered last month when it announced its domestic operations were 95% cash-flow positive over financial year 2021.  

Qantas’ domestic and international CEO Andrew David commented on the new route:

Tasmania has been very popular with travellers in the past year and we’re pleased to be making it easier for Queenslanders to visit the island’s north coast with its historic estates, premium wineries, and famous wilderness.

More visitors will be great for the Tasmanian economy this summer and these flights will also open up more travel options for Launceston residents to Brisbane and onward Queensland destinations.

Right now, travellers looking to fly between Brisbane and Launceston can get their hands on a one-way ticket for a special price of $169.

The post Qantas (ASX:QAN) share price gains amid new domestic flight offering 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 Mesoblast limited (ASX: MSB) share price is having another year to forget in 2021.

Since the turn of the year, the biotechnology company’s shares have fallen 27% to $1.69.

Is the Mesoblast share price good value now?

The good news for investors and the company’s long-suffering shareholders is that one leading broker believes the Mesoblast share price could be very good value.

According to a note out of Bell Potter, its analysts have retained their speculative buy rating but trimmed their price target slightly to $3.45.

Based on the current Mesoblast share price, this price target implies potential upside of greater than 100% over the next 12 months.

Why is the broker bullish?

Bell Potter remains positive on Mesoblast due to the belief that its remestemcel-L product is approaching a key inflection point in the fourth quarter of calendar year 2021.

It notes that the company was hit with an unexpected request for more information from the US Food and Drug Agency (FDA) last year for remestemcel-L’s use in paediatric GvHD. While this has delayed the time to first revenues from the product, Bell Potter is encouraged with recent developments.

The broker explained: “Based on recent discussions with FDA’s CBER, there is no further talk about a confirmatory adult trial, which is a key positive and reflects that the efficacy of this life saving therapy is undeniable. The OTAT meeting to be held in 4QCY21 to discuss critical aspects of the manufacturing and quality control process including potency assays is now the gating event to a potential BLA resubmission with a 6 month review clock.”

What else?

Bell Potter notes that those potency assays are also key for label expansion into treating COVID-19 ARDS.

Pleasingly, the broker highlights that “initial FDA feedback is that the assays currently in development appear to be reasonable based on in vitro data.”

Furthermore, with the next trial likely to be focused on patients <65 years of age, where there was strong survival benefit observed, Bell Potter believes this increases the chances of a positive outcome.

Another reason the broker is bullish on the Mesoblast share price is that, based on the above, it believes the company’s game-changing deal with Novartis will go ahead.

It commented: “We continue to believe there is strong likelihood of closure in 2HCY21 (however timing could be pushed from 3QCY21 to 4QCY21 in our view) based on the survival benefit observed in the recent trial. As a reminder closing of this deal will provide US$50m to MSB (US$25m in cash and balance in equity) and will be a key catalyst for the stock.”

The post Top broker tips Mesoblast (ASX:MSB) share price to double in value 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. 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 Zoom2u Technologies Ltd (ASX: Z2U) share price has rocketed 100% after the company completed its initial public offering (IPO) on Friday.

Zoom2u shares are now changing hands at 40 cents apiece, after entering the secondary markets at 20 cents.

What is Zoom2u Technologies?

Zoom2u is a delivery service that offers its customers a Software as a Service (SaaS) business model. It has a product that manages bookings, optimises routes, and shares live locations of couriers with customers. It actually operates two businesses, Zoom2u itself and Locate2u.

The company also develops intellectual property in a number of other technology products, through its subsidiaries.

It was founded in 2014 by now CEO Steve Orenstein, who started Zoom2u after selling a previous company “to a NYSE company”.

Zoom said its IPO was oversubscribed from new shareholders including institutional, professional, and retail investors.

It successfully raised $8 million at 20 cents per share, with a market capitalisation of $34.7 million at the offer price.

According to the ASX release, the company has “started FY22 strongly, with significant increases in number of customers, drivers, total deliveries, and gross marketplace value (GMV)”.

Additionally, it stated the company is “well-positioned to capitalise on favourable tailwinds” in the Australian and global delivery services market.

In terms of operations, the company achieved a compound annual growth rate (CAGR) in revenue of 71% between FY2015 and FY2021.

This positive outlook from the company appears to be driving up the Zoom2u share price.

What did management say?

Speaking on the IPO, Orenstein said:

We’ve been delighted by the response the IPO has received from institutional, professional and retail investors which led to a significant level of demand, which was validation of the company’s performance to date and growth strategy.

Regarding its next moves, Orenstein added:

Zoom2u’s vision is to be the future leader in last-mile delivery both in Australia and across the globe. The first two months of FY22 have started strongly with lockdowns in New South Wales and Victoria supporting growth in revenue, deliveries and GMV. We remain confident that the company will continue to drive growth, delivering sustained operational performance for shareholders in FY22 and beyond.

Investors can expect to see more action for the Zoom2u share price in its first full week of trading from next Monday.

The post Zoom2u (ASX:Z2U) share price doubles on initial public offering appeared first on The Motley Fool Australia.

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• If only Gelion was an ASX share! Here’s why its batteries are making news
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The author Zach Bristow has no positions 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 ResMed Inc (ASX: RMD) share price has been a strong performer in 2021.

Since the start of the year, the sleep treatment focused medical device company’s shares have risen a sizeable 45% to $39.76.

This is more than four times greater than the return of the S&P/ASX 200 Index (ASX: XJO) over the same period.

Where next for the ResMed share price?

Unfortunately, one leading broker believes the ResMed share price may now have peaked for the time being.

According to a note out of Goldman Sachs, it has retained its neutral rating and $36.20 price target.

Based on the current ResMed share price, this implies potential downside of 9% over the next 12 months.

What did the broker say?

The broker notes that ResMed has just held its annual investor day event.

And while the company spoke positively and reiterated its expectation of a US$300 million to US$350 million revenue tailwind from a competitor product recall, it isn’t enough for a more positive rating. This is largely due to the current valuation of the ResMed share price.

Goldman explained: “Our primary challenge with the stock at these levels is valuation. Clearly, RMD has a substantial opportunity to capture sustainable share from a material product recall, but we believe the earnings upside may not justify US$15bn (A$20bn) of additional market capitalisation since mid-May (43x-50x the guided FY22 revenue tailwind).”

The broker is forecasting solid sales and earnings growth through to FY 2026. However, the level of growth it is forecasting is simply not enough to justify the higher than normal multiples its shares trade on.

It said: “We forecast normalised sales/earnings CAGRs of +7%/+8% respectively (FY23-26E), modestly below recent historical run-rates, and yet valuation of 33.1x NTM EV/EBITDA is now a substantial sector premium and +57% vs. history. We remain Neutral-rated.”

The post Is the ResMed (ASX:RMD) share price in the buy zone? 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. has recommended ResMed. The Motley Fool Australia has recommended ResMed Inc. 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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ASX investors are a curious bunch. If we hear of a company that may be doing well, a natural instinct is to look for it on the ASX boards, our public share market. That seems to be the situation that is going on with the renewable energy company Gelion.

Gelion has been making headlines this week. A news release from the University of Sydney this morning tells us that Gelion is partnering with another compnay – Battery Energy Power Solutions – to “make and distribute the Gelion Endure zinc-bromide battery”.

WIth this in mind, many ASX investors might be keen to buy some Gelion shares and join this party. After all, renewable energy is an exciting growth area for many investors right now.

Alas, that won’t be possible, at least for now. That’s because Gelion remains a private company, unavailable for public investment through the share market.

Who is Gelion, and why isn’t it on the ASX?

Gelion was actually a creation of the University of Sydney, hence the news release this morning. The University still remains an investor in the company.

Even so, there’s no doubt Gelion is an exciting start up. Its flagship zinc-bromide battery was developed by Professor Thomas Maschmeyer, and will now be manufactured at Battery Energy’s Sydney factory in Fairfield.

These new battries can reportedly deliver power more efficiently and safely than a standard lthium ion one. In the release, Professor Maschmeyer said the following in the technology:

For stationary energy storage, zinc-bromide batteries do away with the need for expensive cooling and maintenance systems. And they can’t catch fire…

We recently tested the battery by heating it on a barbeque plate at about 700 degrees for half an hour… Not only did the battery not catch fire, it continued to operate, keeping a light on through the whole test.

Gelion CEO Andrew Grimes also had a few things to say on this development for the company:

Gelion’s vision is to play a leading role in the transition to clean energy across the globe…

In the coming months, we will be focused on demonstrating our next-generation battery systems in-field in Australia, commencing later this year.

New battery technology is not all that Gelion has cooking in its kitchen though. Last year, Gelion announced that it had developed a solar-powered bench using its battery technology. These benches were installed across the University of Sydney campus, and seem to have proved an initial success.

But, as we discussed earlier, Gelion won’t be available to retail ASX investors just yet. But watch this space, you never know what the future might hold for this exciting company.

The post If only Gelion was an ASX share! Here’s why its batteries are making news appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen 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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Much like the seasons, stock market crashes come and go. However, unlike the predictable nature of changes in season, the market’s next move is near impossible to foresee.

As long-term investors, we accept this unstructured cyclic pattern that ebbs and flows as it pleases. One thing we know for sure is that time and time again crashes eventually give way to new highs.

Conveniently, we don’t need to look too far back to reflect on such an occurrence. It was 17 months ago that the S&P/ASX 200 Index (ASX: XJO) capped off its ~32% COVID-19 induced crash. An event that unfolded in the space of a mere 28 days from top to bottom. Yet, here we are 17 months later and 53.5% higher.

Looking back, we now have the benefit of hindsight — and while that may not be helpful to the decisions made back in 2020, it can be put to good use in the event of any future stock market crashes.

Lessons worth remembering for another stock market crash

Timing the market is a fool’s errand

It seems obvious, but it must be said — no one can accurately predict the future, and certainly not consistently. Occasionally, we might ‘luck out’ and sell out of a company at the top, or buy-in towards the bottom. However, this strategy comes with its flaws.

See, we humans are emotional beings. As much as we’d like to believe we can make completely rational decisions, our instinctual nature tends to override our logical decision-making. The problem with this is that when the market is falling, it instils fear. We can’t help but be overwhelmed with the numbing distress of losing our hard-earned money. As a result, we often avoid the stock market completely when it is crashing.

However, the fact is, the days of the greatest historic stock market returns are wedged in between some of the worst.

In other words, you either need a DeLorean from Back to the Future to pick which days to buy and sell. Or you employ the strategy of dollar-cost averaging and settle in for the long haul. One of those two options is feasible at the time of writing this article.

Allocate appropriately based on your own circumstances

The next lesson is more of a personal consideration. When investing and the market is going up, it is easy to get carried away. It is important to consider how a stock market crash would impact your own situation and to invest accordingly.

In terms of cash, a good rule of thumb is to conserve roughly 6 months’ worth of expenses. This could be higher or lower depending on your circumstances. The importance of this emergency fund is to ensure that we as investors are not forced to sell our investments while they are in the doldrums. Because, as we discussed above, it could be soon after selling that they bounce back.

At the same time, having some extra cash on the sidelines affords us the ability to take advantage of depressed share prices, if we so please.

Additionally, taking an audit of our investment allocations in terms of sectors can also be important. For example, if a portfolio was heavily weighted towards retail shares, would we still be able to sleep at night if it was particularly hit hard during a stock market crash?

This self-assessment ensures that we can stomach the risk we have assigned ourselves. If we can’t, then it jeopardises the ability to stay the course through market volatility.

Look at the business, not the share price

Lastly, our final lesson is helpful in aiding in our rational decision-making during irrational market moments.

While the share price matters to investors in the long term, it can be a distraction in the short term. At the end of the day, we are investing in businesses and people, not just ticker codes on a screen.

Amazon.com, Inc. (NASDAQ: AMZN) is a good example of this. During the dot-com crash, the company’s share price plummeted 80%. Yet, all the internal metrics relating to sales, customer numbers, etc. were in an upwards trend.

It is during market crashes that a disconnect between the share price and the business fundamentals can occur. In the words of Jeff Bezos, “The company is not the stock, and the stock is not the company.” So, in saying that, it can be helpful to look at the progress of the company during such times.

Avoiding a stock market crash

This is a trick question, there is no avoiding stock market crashes as a long-term investor. Instead, we should only hope to navigate them better. Like a fisherman going out to sea — we are likely to encounter the occasional storm and rough waters — but as long as we have come prepared, then we can be confident in our actions.

Ironically, rough waters can be even better for fishing, as choppy conditions provide good conditions for fish to be more active in the water. So, with our lessons in mind, we should be equipped to cast a line in the next stock market crash.

The post If there is another stock market crash, will we learn from our mistakes? appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler 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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