The Afterpay Ltd (ASX: APT) share price has gone up more than 10% over the last month. What’s going to happen next to the buy now, pay later business?

The 2021 calendar year has been a volatile period so far for the business. In February 2021 it rose to around $160. By the middle of May 2021 it had fallen 47% to $84.50. But it has actually risen around 40% from that low.

The latest business insight investors have received was the FY21 third quarter update.

Third quarter of FY21

Afterpay likes to regularly tell the market how much it is growing.

In the third quarter it said that it was delivering a strong operating performance across all regions with underlying sales, up 104% compared to the prior corresponding period. On a constant currency basis, underlying sales were 123% higher than the third quarter of FY20. The Australian dollar has strengthened compared to 2020.

Growth was particularly strong in the countries of the US and the UK, where underlying sales were up 211% and 277% respectively on a local currency basis.

Based on the FY21 third quarter performance, North America is now the largest contributor to underlying sales and outperformed the seasonally strong FY21 second quarter on a local currency basis (which includes Christmas).

The Afterpay share price is down 6% since releasing its FY21 third quarter numbers.

The month of March 2021 exceeded December 2020 and delivered the second highest monthly underlying sales ever recorded, with the US becoming the first region to record more than $1 billion of underlying sales in a single month.

Global active customers went up by 75% year on year to 14.6 million, with North America and the UK reaching 9.3 million and 1.8 million active customers respectively. Active merchants increased by 77% to 85,800.

The older cohorts of customers continue to shop more. The top 10% of global customers, on average, now transact 33 times per year. In the US it’s 23 times per year, in the UK it’s 29 times per year and in ANZ it is 62 times per year.

Underlying sales from the global ‘Afterpay Day’ sale increased 117% on the same period last year and was 36% higher than the August 2020 ‘Afterpay Day’ sale.

Merchants with over $1.5 billion of total addressable online sales were live, integrating or signed in the EU, at the time of the announcement, after the completion of the Pagantis acquisition and launch of Clearpay across Spain, France and Italy in March 2021.

The business also said that merchant revenue margins remained firm and gross losses continued to remain below historical rates. Net transaction losses also remained low.

Is the Afterpay share price a buy?

There are very different opinions on the buy now, pay later businesses.

Citi has a neutral rating on the buy now, pay later business with a price target of $125.

Morgan Stanley thinks that Afterpay shares are a buy, with a price target of $145.

However, UBS has a sell rating on the Afterpay share price, with a price target of just $42. That suggest a possible decline of over 60% over the next 12 months if UBS is right.

The post Up 12% in a month, is there more to come from the Afterpay (ASX:APT) share price? appeared first on The Motley Fool Australia.

More reading

• What this leading broker thinks about Afterpay (ASX:APT) and Zip (ASX:Z1P) shares in July
• These 3 ASX 20 shares are up more than 60% in a year
• ‘That hurts’: Fund manager reveals his 35-bagger ‘failure’
• ASX 200 Weekly Wrap: COVID wobbles ASX as shares retreat
• 5 things to watch on the ASX 200 on Monday

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 shares of and has recommended AFTERPAY T FPO. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3hxijLU

Is your money safe with Telstra Corporation Ltd (ASX: TLS) shares right now? The Telstra share price has certainly been a good performer of late. At yesterday’s closing share price of $3.73, Telstra is now up 23.9% year to date in 2021 so far, and almost 40% above its 52-week low of $2.66 which we saw back in October last year. Those returns don’t include Telstra’s generous 16 cents per share annual dividend either.

But after such a robust performance over the past few months, is your money still safe with Telstra, given the company is trading fairly close to its current 52-week high of $3.79?

Well, let’s look at what has been driving the Telstra share price to these new heights lately first. Fears that Telstra would have to cut its cherished dividend were partly behind the company’s slump last year. The ongoing commitment the telco’s management has shown to preserving this dividend at the current level seems to have not gone unnoticed by investors.

When Telstra all but committed to holding its dividend at 16 cents per share over 2021 in October last year, it seemed to put investors’ fears to rest, seeing as Telstra rose more than 8% over the subsequent month.

But more recently, it has been the talk of asset sales that have given Telstra another boost. Late last month, the telco announced that it had sold 49% of its InfraCo Towers business to a group of institutional investors, headed by none other than the Future Fund.

This has further boosted sentiment around Telstra, evidenced by the fact that the telco is up almost 4% since this announcement.

But what about Telstra shares at their current level. Is there further to climb?

Is your money safe in Telstra shares today?

One broker who thinks money is safe in Telstra right now is investment bank Goldman Sachs. Goldman currently has a ‘buy’ rating on Telstra shares, and a 12-month share price target of $4.20.

For this rating, Goldman notes that pricing competition in the Telstra-dominated mobile market is loosening. Further, Goldman expects Telstra to “meaningfully” grow its average revenue per user (ARPU) across FY21-23, helped by expected price increases in FY22. It’s also pleased about Telstra’s ongoing 5G rollout.

If Goldman’s target does come to pass, investors would enjoy a potential gain of 12.6% on Telstra’s last share price (not including dividend returns either).

The post Is your money safe in Telstra (ASX:TLS) shares right now? appeared first on The Motley Fool Australia.

More reading

• Why Telstra (ASX:TLS) and this dividend share could be buys
• ASX 200 Weekly Wrap: COVID wobbles ASX as shares retreat
• 2 high yield ASX dividend shares that could be buys
• These 3 ASX 200 shares were the most heavily traded today
• The Telstra (ASX:TLS) share price is now up 24% so far in 2021

Motley Fool contributor Sebastian Bowen owns shares of Telstra Corporation Limited. 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 has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3AXD4YQ

There are quite a few different reasons why the Pushpay Holdings Ltd (ASX: PPH) share price might be attractive to investors.

What is Pushpay?

Pushpay is a technology business that enables US churches to manage their church, connect with their community and process electronic donations.

It also has a business that it acquired called Church Community Builder which offers increased functionality for churches.

Here are three key reasons why Pushpay could be a business to consider:

In-demand service

The world is going increasingly digital. Pushpay is a key business that is helping US churches to go electronic.

At 31 March 2021, Pushpay had over 11,000 customers. Some of them are using the donor management system, some are using the church management system and some use both.

ChurchStaq is the combined offering of both the Pushpay services and Church Community Builder where everything can be accessed through the single service.

With its giving and donor management service it can engage new donors, increase recurring giving, remove barriers to generosity and it offers various forms of donation including web, mobile, text and cash/check.

The ‘My Church App’ allows increased participation, access to church media, targeted communication, groups and calendar and “pre-check”.

ChurchStaq’s church management system is “comprehensive”, it also allows for groups, events, check-in, service planning and prices. There are also giving dashboards and analytics.

Having a strong offering allows Pushpay to attract and retain clients. It has plans to search for other acquisitions that may broaden its current proposition and add significant value to the current business at a quicker pace than what could be achieved organically.

Operating leverage

There are a number of financial measures that show that Pushpay is achieving operating leverage.

In FY21, Pushpay’s operating revenue went up by 40% to US$179.1 million. It reported that its gross profit margin increased by three percentage points for FY21 from 65% to 68%.

Total operating expenses only increased by 9%. As a percentage of operating revenue, total operating expenses improved by 11 percentage points from 47% to 36%.

Pushpay explains that it adopted “best-in-class” software tools and scalable process early in its development. Combined with “strong financial discipline”, these investments will allow significant operating leverage to be achieved as revenue grows.

Net profit in FY21 increased by 95% to US$31.2 million and operating cashflow went up 145% to US$57.6 million.

Pushpay says it expects significant operating leverage to accrue as operating revenue continues to increase, while growth in total operating expenses remains low.

Growth plans

Pushpay has embarked on serving the Catholic segment. It’s focused on establishing relationships and increasing engagement with key stakeholders. In FY22, Pushpay is expecting to invest between US$6 million to US$8 million.

The company expects the benefits from the Catholic segment to be realised over the course of the next financial years.

It has set of goal of market share of more than 25% of the Catholic church management system and donor management system over the next five years.

Pushpay pointed out that the Catholic church is closely associated with many education providers and non-profit organisations, which presents further opportunities within the US and other international jurisdictions.

The company has previously stated that international growth to regions like South America and South East Asia.

What is the Pushpay share price valuation?

According to Commsec, Pushpay shares are valued at 30x FY22’s estimated earnings.

The post 3 reasons why the Pushpay (ASX:PPH) share price might be a buy appeared first on The Motley Fool Australia.

More reading

• Here’s how some of the top ASX SaaS shares performed in FY21
• 2 high-quality ASX tech shares that could be buys
• Here are the 5 worst performing ASX 200 tech shares from FY21
• Why the Pushpay (ASX:PPH) share price is under pressure
• 2 impressive ASX shares that could be buys in July 2021

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 shares of and has recommended PUSHPAY FPO NZX. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3ATTqSr

The Zip Co Ltd (ASX: Z1P) share price was out of form on Monday.

The buy now pay later (BNPL) provider’s shares dropped 1% to $8.23.

Why did the Zip share price drop?

The weakness in the Zip share price on Monday appears to have been driven by the release of a mixed broker note out of Citi.

Although the broker has retained its buy rating on the company’s shares, it has cut its price target down by 6% to $10.25. It made the move to reflect a weaker than expected performance in June.

Nevertheless, based on the current Zip share price, this downgraded price target still implies potential upside of almost 25% over the next 12 months.

What did Citi say?

According to the note, the broker’s industry research shows that most BNPL players achieved improvements in website visits and app downloads in June.

However, it estimates that Zip’s key QuadPay business had a relatively subdued month, with website visits falling 4% month on month and app downloads increasing by a modest 3%. Citi expects this to lead to new customer additions of 600,000 during the fourth quarter.

In addition to this, the broker is expecting Zip’s costs to increase and has lowered its cash earnings estimates notably to reflect this.

What about Afterpay?

Citi still prefers Zip over Afterpay Ltd (ASX: APT).

The note reveals that the broker has retained its neutral rating and trimmed its price target on Afterpay’s shares to $125.00.

While Afterpay had a comparatively stronger month in June, with app downloads increasing 12%, Citi has warned that this may not be from new users.

The broker suspects that a good number of these downloads could be from existing customers that have been encouraged to download the app via in-app promotions. As a result, the broker has lowered its US active customer forecast to 10.5 million at the end of FY 2021.

So with the Afterpay share price trading at $118.64, it hasn’t seen enough to warrant a change to its neutral rating at this point.

The post What this leading broker thinks about Afterpay (ASX:APT) and Zip (ASX:Z1P) shares in July appeared first on The Motley Fool Australia.

More reading

• These 3 ASX 20 shares are up more than 60% in a year
• These are the 10 most shorted shares on the ASX
• ‘That hurts’: Fund manager reveals his 35-bagger ‘failure’
• ASX 200 Weekly Wrap: COVID wobbles ASX as shares retreat
• 5 things to watch on the ASX 200 on Monday

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 AFTERPAY T FPO and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3i07KQJ

An old investment adage says people find losing money much more painful than the joy they get from earning the same amount.

This explains why almost everyone — retail and professional — ends up making a massive basic mistake on their way to investment wisdom.

Say you bought Nuix Ltd (ASX: NXL) shares in January when they were flying at $11. What a great company with a great product — the future’s looking good!

Then you see the stock plunge to $6 in February after a downgrade to their financial forecasts.

What do you do? You’ve lost almost half your money.

Many novices, and even some veterans, will buy more shares. The stock is cheap now — buy low, they think.

For God’s sake, don’t double down on a loser

But as Cyan Investment Management portfolio manager Dean Fergie reminds us, doubling down on your mistakes is never a good idea.

“One thing that is completely non-negotiable is we do not throw good money after bad,” he told this week’s Ask A Fund Manager.

“We don’t prop up businesses that aren’t going well because we think the price has got too cheap… We will let other people do that. We never follow any business that’s going down. We never keep topping up.”

Fergie admitted psychologically people can’t help putting more money into their losers. The loss pains them and they get sucked into thinking that’s the way to recover.

“It’s an emotionally difficult thing to do, because it’s like, ‘Oh, I’m going to prove the market’s got this wrong’ — but it’s just silly.”

Copping a loss is not the end of the world

Exiting when a company is clearly failing and the original investment thesis doesn’t hold is a wise move, not an admission of failure.

If you double down, you’ll expose even more of your money to losses.

Fergie told The Motley Fool that losses are part of the experience.

“The thing with long-only investing is that it’s an asymmetrical outcome. You can’t lose more than 100%, but you can make much more than 100%,” he said.

“So you don’t even have to get 50% of your calls right. You just got to make sure that the ones you get wrong, you don’t double down on and keep throwing good money after bad. And the ones that go well, you let those profits run.”

For the record, if you doubled down on Nuix in February at $6, you would have lost even more. The stock was trading at $2.67 at the close of trade on Monday.

The post Whatever you do, NEVER make this mistake appeared first on The Motley Fool Australia.

More reading

• What’s with the Nuix (ASX:NXL) share price today?
• The Nuix (ASX:NXL) share price grew 9% today. So what happened?
• 3 companies that broke their way into the ASX 200 in FY21
• The one thing ASX IPO losers have in common
• ASX 200 Weekly Wrap: ASX finishes FY21 on a high

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Nuix Pty 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.

from The Motley Fool Australia https://ift.tt/3kahj24

The Westpac Banking Corp (ASX: WBC) share price has been steadily climbing in 2021. Shares in the big four bank are up almost 32% year to date, and one leading fundie is bullish on their future prospects.

Why this leading fundie likes the Westpac share price

The leading fundie in question is Yarra Capital Management. The group’s May 2021 update for its Yarra Australian Equities Fund contained some upbeat commentary on Westpac.

Gains for the Westpac share price were sighted as a key contributor to the fund’s 2.40% 1-month return to 31 May 2021. According to the release, Westpac outperformed after a strong first half result and announcing an “ambitious cost-out program”. The bank unveiled a plan to target an $8 billion cost base by FY2024 in a bid to boost efficiency compared to a $10.2 billion cost base right now.

Westpac management is looking to slash its costs by exiting non-core businesses, increasing digitisation for customers and simplifying its organisational and operating structure. Yarra Capital remains overweight in its position and is hoping for more Westpac share price gains in 2021.

Yarra Capital described the cost-cutting plan as “challenging” and said that “achieving even half of it will be a reasonable outcome”.

The overweight position is based on the fund’s belief that earnings and post-COVID dividends will be better than expected. Yarra Capital is also expecting bad debt expenses to be close to zero over the next 18 months.

The Westpac share price has certainly been a strong performer in the year so far. After a tough 2020 marred with scandals and managing the COVID-19 pandemic, shares in the Aussie bank have rebounded strongly.

Westpac shares closed 0.6% higher on Monday with a $93.6 billion market capitalisation and a 3.5% dividend yield.

The post Why this leading fundie is bullish on the Westpac (ASX:WBC) share price appeared first on The Motley Fool Australia.

More reading

• Why the Commonwealth Bank (ASX:CBA) share price is beating the ASX 200
• ASX 200 Weekly Wrap: COVID wobbles ASX as shares retreat
• Is the Westpac (ASX:WBC) share price in the buy zone?
• Brokers name 3 ASX shares to buy today
• The Westpac (ASX:WBC) share price is up 30% in 2021

Motley Fool contributor Ken Hall 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.

from The Motley Fool Australia https://ift.tt/3yO3RVI

iShares S&P 500 ETF (ASX: IVV) might be a really good investment to think about for the long-term.

It’s an exchange-traded fund (ETF) which is focused on the American share market, with businesses from both the New York Stock Exchange and the NASDAQ.

There a few different reasons why it could be an interesting idea to consider:

iShares S&P 500 ETF has very low fees

Out of all of the options that ASX investors can choose from, the iShares S&P 500 ETF is one of the lowest costing ETFs out there.

Management fees can detract a substantial amount away from an investor’s long-term returns cumulatively after a few years. The higher the fees, the more investors are handing over to the investment manager and losing from their portfolio value each year.

It has an annual management fee of 0.04% per annum. Compared to a fund manager that charges 1% per annum (or more), iShares S&P 500 ETF charges next to nothing for this investment.

That means that almost all of the fund’s returns stay in the investor’s hands as net returns.

Diversification

Diversification can be an important part of lowering risk over time from shares, or any investment.

iShares S&P 500 ETF ticks the diversification box in several ways.

It has an underlying total of 500 holdings, if you hadn’t guessed already.

Those businesses are spread across a number of different economic sectors. The following industries had a weighting of more than 5% at 30 June 2021: information technology (27.45%), healthcare (12.99%), consumer discretionary (12.28%), financials (11.22%), communication (11.16%), industrials (8.47%) and consumer staples (5.81%).

iShares S&P 500 ETF has more than 27% invested in nine businesses in its portfolio: Apple Inc (5.90%), Microsoft Corp (5.60%), Amazon.com Inc (4.05%), Alphabet (3.98%), Facebook Inc (2.29%), Berkshire Hathaway Inc (1.45%), Tesla Inc (1.44%), Nvidia Corp (1.37%), JPMorgan Chase & Co (1.29%).

Whilst all of these businesses are listed in the US, many of the businesses in the S&P 500 generate earnings from across the world. For example, Apple smartphones are sold in a lot of countries around the world. Microsoft’s office products are used all over the world. And so on.

Historical returns

Past performance is not a reliable indicator of future performance, as the disclosure goes.

The iShares S&P 500 ETF has been producing double digit returns over the longer-term. Over the last three years, it has made returns of 17.6% per annum. In the last five years it has made an average of 17.2% per annum.

Even in the COVID-19-affected calendar year of 2020, the fund saw a net return of 7.5% over the 12 months.

The post 3 reasons why the iShares S&P 500 ETF (ASX:IVV) could be a great investment appeared first on The Motley Fool Australia.

More reading

• 3 excellent ETFs for ASX investors
• 2 high quality ETFs for ASX investors
• 3 ASX ETFs that could give investors easy exposure to the US markets

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 iShares Trust – iShares Core S&P 500 ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3AUpQfA

Ever noticed stock market commentators referring to ‘ASX 200 futures’ prior to market open? It sounds as though these mystical things act as a crystal ball, indicating whether the market will open higher or lower. However, there’s more to this financial instrument than being a mistaken fortune teller.

Let’s demystify ‘futures’ and establish what they really are.

Defining this derivative

Futures contracts, such as ASX 200 futures, are a type of derivative that is often used for speculation or hedging. When we are talking derivatives, we are talking about financial instruments that ‘derive’ their value from another underlying asset.

Essentially that means the derivative has no value on its own, other than being an agreement. Instead, the value is perceived from the corresponding asset that it is tied to. Whether that is an index, commodity, or share.

In a futures contract, a buyer agrees to buy a certain asset or instrument at some point in the future from a seller (and vice versa) for a predetermined price agreed upon from the outset. In essence, this allows participants to take a stance on the direction of an investment without holding the underlying asset.

Futures are quite popular with fund managers for ‘hedging’ their portfolios in times of volatility. For example, a fund heavily exposed to ASX shares might sell futures in the S&P/ASX 200 Index (ASX: XJO) if concerned about a near-term market crash. By selling the futures (short shorting), the fund would offset losses in its shares with gains from its ASX 200 futures.

On the other hand, speculators take advantage of futures to make leveraged returns on their bullish or bearish sentiment towards an asset.

It is important to know that futures have inherent risks and function quite differently from shares. For that reason, it is important to fully understand the risks when investing in any type of financial instrument.

ASX 200 futures before the open

When ASX 200 futures are used to forecast the direction of the market ahead of open, it is the ASX SPI 200 Index being referenced. This futures contract operates nearly 24 hours a day, 5 days a week.

Hence, traders will be buying and selling contracts for hours ahead of the open. This often gives a reasonable indication as to where the market will open. However, ASX 200 futures are not always on the money.

In summary, futures can be used for short-term trading strategies to ‘predict’ market trends. However, futures contracts can be much riskier than investing in quality companies due to leverage and the short-term time horizons.

The post What are ASX 200 futures and how do they work? appeared first on The Motley Fool Australia.

More reading

• 2 excellent ASX 200 dividend shares that could be buys
• 2 ASX 200 blue chip shares that might be the best to buy
• 5 things to watch on the ASX 200 on Tuesday
• These 3 ASX 200 shares were big movers this Monday
• Why Telstra (ASX:TLS) and this dividend share could be buys

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.

from The Motley Fool Australia https://ift.tt/2UJmmvS

Luckily for income investors in this low interest rate environment, the ASX 200 is home to a number of quality shares that are forecast to pay generous dividends in the near term.

Two ASX 200 dividend shares that could be in the buy zone are listed below:

BHP Group Ltd (ASX: BHP)

The first ASX 200 dividend share to look at is this mining giant. The Big Australian could be a top option due to its world class operations, favourable commodity prices, and strong balance sheet. The latter means the company is likely to return the vast majority of its free cash flow to shareholders through dividends. And with iron ore currently trading close to US$120 a tonne, there certainly will be a lot of free cash flow being generated.

Macquarie is very bullish on BHP and currently has an outperform rating and $63.00 price target on its shares. The broker is also forecasting fully franked dividends of ~$4.07 and $3.82 per share in FY 2021 and FY 2022, respectively. Based on the latest BHP share price of $51.05, this will mean generous yields of 8% and 7.5% over the next two years.

Coles Group Ltd (ASX: COL)

Coles could be an ASX 200 dividend share to buy. This is thanks to its strong market position, defensive qualities, positive growth outlook, and favourable dividend policy. The latter sees the supermarket giant aim to pay out upwards of 90% of its earnings to shareholders each year as dividends.

Goldman Sachs remains very positive on Coles. It currently has a buy rating and $19.40 price target on its shares. The broker is also forecasting fully franked dividends of 62 cents per share in FY 2021 and then 67 cents per share in FY 2022. Based on the current Coles share price of $16.65, this represents yields of 3.7% and 3.9%, respectively, over the next two years.

The post 2 excellent ASX 200 dividend shares that could be buys appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• Why is the Mineral Resources (ASX:MIN) share price up 4% today?
• Why this sector is lifting the ASX 200 higher today
• ASX 200 midday update: Wesfarmers makes API takeover bid, BHP & Rio Tinto rising
• Why the BHP share price is charging higher on Monday

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 owns shares of and has recommended COLESGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/36ysYQ9

There are some S&P/ASX 200 Index (ASX: XJO) blue chip shares that might make good long-term investments.

Businesses that have a strong market share and good competitive position have the potential to keep doing well.

The below two businesses are among the leaders at what they do:

Wesfarmers Ltd (ASX: WES)

Wesfarmers is a diversified company with a number of businesses including Bunnings, Kmart Group and Officeworks. Those three businesses may be the leaders of their respective categories in Australia.

The company recently announced a potential diversification move with an offer for Australian Pharmaceutical Industries Ltd (ASX: API) at $1.38 cash per share.

Wesfarmers said that if the takeover is successful, API would form the basis of a new healthcare division of Wesfarmers and a base from which to invest and develop capabilities in the health and wellbeing sector.

Management said the combination is a compelling opportunity to capitalises on API’s strength in the growing health, wellbeing and beauty sectors, whilst drawing on Wesfarmers’ capabilities in retail and distribution.

This is the latest move by Wesfarmers to grow and diversify its business. It wasn’t long ago that the ASX 200 blue chip share announced it would be expanding into lithium mining.

Bunnings is one of the leading retail businesses in Australia with a very high return on capital. Wesfarmers has been looking to grow its hardware segment with both Adelaide Tools and the acquisition of Beaumont Tiles. It’s also looking to improve its commercial offer to better service builders, tradespeople and organisations.

At the current Wesfarmers share price it’s valued at 28x FY22’s estimated earnings according to Commsec.

Magellan Financial Group Ltd (ASX: MFG)

Magellan is one of the largest asset managers in Australia.

It’s currently rated as a buy by the broker Morgans with a price target of around $58 over the next 12 months.

The broker pointed to the growth of its funds under management (FUM) as a reason to be positive about the business.

The ASX 200 blue chip share recently announced that it finished June 2021 and FY21 with total FUM of $113.9 billion. Average FUM for the year ending 30 June 2021 was $103.7 billion, up from $95.5 billion from FY20.

However, for the quarter ending 30 June 2021, Magellan experienced net outflows of $351 million which comprised of net retail outflows of $260 million and net institutional outflows of $91 million.

The broker also noted that the fund manager’s starting FUM for FY22 is around 10% higher than the average FY21 figure.

Magellan has been investing in external businesses to achieve growth away from its funds management business. Two of the investments include Barrenjoey and Guzman y Gomez.

According to Morgans, Magellan is priced at 21x FY22’s estimated earnings with a forward projected partially franked dividend yield of 4.5%.

The post 2 ASX 200 blue chip shares that might be the best to buy appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 rises, API soars, Wesfarmers up
• Why is the Soul Patts (ASX:SOL) share price down this Monday?
• ASX 200 midday update: Wesfarmers makes API takeover bid, BHP & Rio Tinto rising
• Australian Pharmaceutical (ASX:API) share price soars 18% on Wesfarmers bid

Motley Fool contributor Tristan Harrison owns shares of 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 owns shares of and has recommended Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3edpqHv