The Cogstate Limited (ASX: CGS) share price is rocketing higher on Tuesday morning.

At the time of writing, the neuroscience technology company’s shares are up 73% to $1.60.

Why is the Cogstate share price rocketing higher?

Investors have been bidding the CogState share price higher on Tuesday following a very positive development.

According to the release, Eisai and its development partner, Biogen, have announced that the U.S. Food and Drug Administration (FDA) has granted Accelerated Approval for aducanumab for the treatment of Alzheimer’s disease.

The accelerated approval has been granted based on data from clinical trials demonstrating the effect of aducanumab on reducing amyloid beta plaques. This is a biomarker that is believed to predict clinical benefit, in this case a reduction in clinical decline.

The release advises that under the accelerated approval conditions, which provide patients suffering from the disease earlier access to treatment, Biogen will conduct a controlled trial to verify the clinical benefit of the drug in patients with Alzheimer’s disease.

This is the first new treatment approved for Alzheimer’s disease since 2003 and is the first approved therapy that targets the fundamental pathophysiology of the disease.

However, if the Biogen trial fails to verify clinical benefit, the FDA may initiate proceedings to withdraw approval of the drug.

How does this benefit Cogstate?

Cogstate stands to benefit from this development due to its agreement with Eisai, which gives the Japan-based pharmaceutical company the rights to exclusively develop and distribute Cogstate digital cognitive assessment technologies in healthcare and other markets worldwide.

The release explains that following the approval of aducanumab by the FDA, Eisai no longer has the right to accelerated termination of the Cogstate-Eisai agreement.

Therefore, in addition to the minimum contractual royalty payments over commercial years 1-5 of US$10 million, Eisai is now also contractually obliged to make the minimum royalty payments to Cogstate over commercial years 6-10. This will mean an additional aggregate payment of US$20 million over that period.

The Cogstate share price is now up 385% over the last 12 months.

The post Why the Cogstate (ASX:CGS) share price is rocketing 73% higher appeared first on The Motley Fool Australia.

More reading

• Ansell (ASX:ANN) share price lower despite CEO appointment
• Breakdown in gold and inflation link leaves more questions than answers
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James Mickleboro does not own any shares 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 Ansell Limited (ASX: ANN) share price is trading lower on Tuesday morning despite announcing its new CEO.

At the time of writing, the health and safety products company’s shares are down 0.5% to $40.03.

What did Ansell announce?

According to the announcement, the company has promoted Neil Salmon to the role of Managing Director and CEO effective 1 September 2021. This follows a comprehensive internal and external search for a successor. He will be replacing the retiring Magnus Nicolin.

The release explains that Mr Salmon joined Ansell in 2013 as its CFO and was appointed President of Ansell’s Industrial GBU in 2019. A new head of the Industrial GBU will be appointed in due course.

Ansell’s Chairman, John Bevan, believes that Neil Salmon will be the ideal leader for Ansell in its next phase of development.

He commented: “Neil has the right combination of financial and operational experience and capability for the CEO role at Ansell. He has worked alongside Magnus for many years and was a key contributor to the strategies which transformed Ansell during that time. More recently, Neil also led our Industrial GBU with its over 7,500 strong manufacturing, marketing and product development workforce located in multiple jurisdictions.”

“His leadership was critical in the management of the initial challenges of the pandemic, positioning the business where it could maximise benefits from the recovery as it emerged. Ansell’s strategies are delivering well. Neil understands the drivers of Ansell’s success in recent years and I’m confident Neil will build on that momentum,” Mr Bevan added.

The new CEO appears up for the challenge of leading the company.

Mr Salmon said: “It is a considerable responsibility to lead Ansell at this time of enormous need for our personal protection products worldwide. I thank the Board for the opportunity to build on Ansell’s success and I acknowledge the outstanding leadership of Magnus Nicolin in taking the company so far.”

The post Ansell (ASX:ANN) share price lower despite CEO appointment appeared first on The Motley Fool Australia.

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James Mickleboro does not own any shares 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 Ansell Ltd. 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 questions about gold’s long track record of being an inflation hedge that will leave ASX gold investors wanting.

The precious metal has offered good protection against rising prices in the past. But some experts believe the game has changed, reported the Australian Financial Review.

If so, this will have implications for ASX gold shares as we head into a higher inflationary environment.

These include the Newcrest Mining Ltd (ASX: NCM) share price, Evolution Mining Ltd (ASX: EVN) share price and Northern Star Resources Ltd (ASX: NST) share price – just to name a few.

Gold’s inflation credentials being questioned

Worries that central banks will lose control of inflation have rocked the S&P/ASX 200 Index (Index:^AXJO) and global equities.

Historically, that gives gold a big reason to shine. But modern-day monetary policy may have broken gold’s link to inflation.

“Over the past 40 years, gold has been the textbook inflation hedge, but times have changed,” The AFR quoted Chris Weston, head of research at broker Pepperstone.

“With central banks so willing to change financial conditions using their balance sheets, what we’ve seen over the last decade is that in periods when bond yields fall due to deflationary pressures, gold has worked incredibly well.”

Best time to invest in gold

He isn’t the only expert that has voiced a counter-consensus similar view for gold. And if this theory is proved right, gold is a better investment during periods of disinflation and panic.

The COVID-19 market meltdown last year certainly supports the thesis. The yellow metal surged to a record high above US$2,000 as central banks pumped cash into the financial system as disinflation risks grew.

But gold started retreating as economic conditions rebounded and inflation worries started appearing.

Weston pointed out that some of gold’s biggest bull runs in the last 15 years have occurred during periods of disinflation and not inflation.

Don’t throw ASX gold shares out with the bathwater

However, correlation is not causation. I can think of instances where gold could rally in an inflationary environment.

If central bankers want to deflate asset bubbles as gently as possible, they will likely want to cap the rise in bond yields. This is regardless of inflation as we know these monetary gurus are not worried about that.

In other words, if inflation is allowed to run on a long leash and government bond yields are kept on a short one, gold could get a new reason to shine.

ASX gold miners can still prove to be rich pickings

Another interesting point is that even the experts who believe the link between gold and inflation has been cut don’t necessarily see much downside risk for the commodity.

And with gold trading around US$1,900 an ounce, ASX gold shares are still making a very pleasing margin.

The post Breakdown in gold and inflation link leaves more questions than answers appeared first on The Motley Fool Australia.

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Brendon Lau owns shares of  Newcrest Mining Ltd and Evolution Mining Ltd. Connect with me on Twitter @brenlau.

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

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

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

Employees of Apple (NASDAQ: AAPL) are grousing about having to return to the office. 

In a letter to CEO Tim Cook, the employees say the new hybrid work policy that lets them work from home two days a week and up to two weeks a year with a manager’s approval is overbearing because it doesn’t take into consideration their feelings about working from an office again. They’re demanding they be allowed to continue working from home if they want to.

Many companies are calling their employees back to the office as the economy reopens and more people become vaccinated against COVID-19. The Apple employees, however, aren’t expressing concern about potential health and safety risks of returning; rather, they bemoan a lack of understanding about “the lived experiences of many of Apple’s employees.”

They say Cook’s decision to end the remote work policy without first consulting them shows a disconnect between management and their workers’ feelings. It also undermines the company’s commitment to inclusivity and diversity, they say, because not every employee works well in the same conditions.

As a result, they have five “formal requests” for Apple:

• Allow teams to decide for themselves whether they will work from home.
• Regularly survey employees about certain listed issues.
• Ask during exit interviews about employee churn due to remote work.
• Implement an action plan to accommodate disabled employees whether they work from home, the office, or a combination.
• Study the environmental impact of employees returning to the office versus working from home.

The employees acknowledge the pandemic forced Apple to quickly adapt to new realities, but the record quarterly earnings report it just posted shows remote working is a success.

Working from home should be the “new normal” and the tech stock’s employees ought to be allowed to continue doing so, their letter to Cook said.

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

The post Apple employees don’t ever want to go back to the office appeared first on The Motley Fool Australia.

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Rich Duprey 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 Apple. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Apple. 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 Altium Limited (ASX: ALU) share price was an extraordinarily strong performer on Monday.

The electronic design software company’s shares started the week with a 39% gain to $37.83.

However, despite this impressive gain, the Altium share price is still only trading in line with the market in 2021 with a gain of 9.6%.

Why did the Altium share price rocket higher?

Investors were bidding the Altium share price higher on Monday after it revealed that it had received a formal, non-binding, indicative and unsolicited proposal from Autodesk, Inc. (NASDAQ: ADSK).

Autodesk is a US$62 billion US-based multinational software company. It makes software products and services for the architecture, engineering, construction, manufacturing, media, education, and entertainment industries.

According to the release, Autodesk has tabled a $38.50 per share takeover proposal. This represents a 41.5% premium to its last close price at the time, but also a 4.2% discount to its 52-week high.

How did Altium respond?

The latter discount is something that didn’t go unnoticed by the Altium board, which promptly rejected the proposal on the belief that it undervalues the company.

It commented: “The Altium Board appreciates the interest expressed by Autodesk, which has evolved from a dialogue about a strategic partnership. However, it considers that the Proposal significantly undervalues Altium’s prospects and therefore rejects the Proposal at the current price.”

Though, the board has explained that it would be willing to engage with interested parties if the offer were compelling.

“Altium has a unique position in the electronics ecosystem and in the past unsolicited acquisition interest has developed from partnership dialogues with others in the ecosystem. As consistent with past unsolicited acquisition interest, the Altium Board will engage with interested parties in the context of an appropriate valuation of Altium and it will continue to review all potential strategic alternatives for the Company,” it added.

Will Autodesk return with a better offer?

According to a note out of RBC Capital Markets, its analysts aren’t expecting Autodesk to make a materially improved offer. The broker suspects a small increase could occur in the near future in order to secure further board engagement.

But time will tell if that’s what happens.

The post Why the Altium (ASX:ALU) share price rocketed 39% higher appeared first on The Motley Fool Australia.

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James Mickleboro does not own any shares 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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On Monday the National Australia Bank Ltd (ASX: NAB) share price was among the worst performers on the S&P/ASX 200 Index (ASX: XJO).

The banking giant’s shares ended the day 3% lower at $26.64.

Why did the NAB share price tumble lower?

The NAB share price came under pressure on Monday after it revealed that AUSTRAC has identified serious concerns with its compliance with the Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) Act.

According to the announcement, the regulator believes there is “potential serious and ongoing non-compliance” regarding NAB business group’s customer identification procedures and ongoing customer due diligence.

Given the penalties that AUSTRAC has previously dished out to big four rivals Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC), this sparked concerns that NAB will be given a hefty fine in the future.

Is this a buying opportunity?

One leading broker that sees the weakness in the NAB share price as a buying opportunity is Goldman Sachs.

This morning the broker retained its conviction buy rating and $29.97 price target on the bank’s shares.

Based on the latest NAB share price, this price target implies potential upside of 12.5% excluding dividends. Including dividends, this stretches to over 17%.

What did Goldman say?

The broker appears optimistic that things will be different compared to AUSTRAC’s dealings with CBA and Westpac.

Goldman commented: “While the risk of civil proceedings against NAB for contraventions of its AML/CTF requirements remains, and today’s announcement needs to be read in the context of CBA’s A$0.7 bn civil penalty and WBC’s A$1.3 bn civil penalty for their own specific AML/CTF breaches, we would highlight a number points.”

“The issues highlighted today by AUSTRAC in relation to customer identification procedures and ongoing customer due diligence are relatively consistent with the details disclosed by NAB in its 1H21 result contingent liabilities disclosure.”

“In relation to NAB, AUSTRAC has stated that, at this stage, it is not considering civil penalty proceedings and this is reflective of work undertaken by NAB to date. This language is quite different from the language used by AUSTRAC in its original notice of filing of civil proceedings against Westpac Banking Corporation, which cited, for example, systemic failures in its control environment and inadequate Board oversight,” it added.

The post Is the NAB (ASX:NAB) share price still a buy after its AUTRAC update? appeared first on The Motley Fool Australia.

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James Mickleboro owns Westpac shares. 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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Share investors love talking about their successes: ‘Here’s one where we multiplied our money 7 times over!’

You will always hear that wise uncle talk to you about the hot stock he made lots of money on, without mentioning the other one that crashed and burned.

But the reality is no one, even professionals, has a portfolio of 100% winners.

Either there will be some businesses that have lost them money, or there are those stocks they hesitated to buy that annoyingly shot up later.

This is why it’s interesting to see fund managers open up to talk about their regrets. 

Here are 5 ASX shares that humbled the best of the pros:

CSL Limited (ASX: CSL)

Perennial portfolio management director Stephen Bruce wonders what might have been if he bought CSL during a small window in 2002.

“It was just after they’d merged with ZLB or acquired ZLB,” he told Ask A Fund Manager. 

“It was quite a difficult period in the industry, you had [the] currency going the wrong way and a few other factors, but it was the one time that you could have bought CSL really cheaply.”

CSL shares were trading for around $10 in the middle of 2002. They closed Monday at $292.57.

“Obviously, CSL has gone on to be probably one of the best, if not the best, amongst the absolute best companies that Australia has produced,” said Bruce.

Altium Limited (ASX: ALU)

Monash Investors co-founder and director Simon Shields actually gave software maker Altium some advice back in the day… but he didn’t invest in it at the time.

He told Ask A Fund Manager that he first encountered Altium during the 1990s dot-com boom, and saw it drift sideways during the 2000s.

“I did a company visit with them and they were asking me what I thought of their business strategy. And I said, ‘Well, I think you should go to a subscription rather than just sell upfront‘,” said Shields.

“And unbeknownst to me, they did that, and then the next thing I know, the stock’s taken off and I felt like I’d missed it.”

But of course, history now shows that even investing in the 2000s still would have rewarded Shields handsomely.

“I hadn’t missed it and it kept going. So that was my big regret… I regret not making a lot of money from Altium.”

Afterpay Ltd (ASX: APT)

Medallion Financial managing director Michael Wayne actually got some clients to buy into the buy now, pay later giant on its first day on the ASX. For $1.30 per share.

So why would this be a regret?

“We got a little bit too trigger-happy and sold out too early,” he told Ask A Fund Manager.

“Ended up selling [some] at $4.50 and then at $8 the rest – so that’s obviously got on to a lot bigger and better things, but we did okay out of it.”

The Afterpay share price sat at $96.38 after Monday’s close. It has been as high as $160.05 this year.

“I think that’s par for the course [in] investing, unfortunately,” he said.

“I’m sure there are numerous names for the people that missed out on over the years, but that’s probably our biggest one that we’ve sold early.”

Spotless Group Holdings Ltd (ASX: SPO)

The facilities services provider “caught out” the Pengana Capital team, led by Rhett Kessler.

“We paid the price and ended up losing a bit of money,” he told Ask A Fund Manager.

“When I went back and did a forensic on how we did, it was all in the provisions that we should have picked up.”

Fortunately, Kessler’s team clawed back some of the losses when another ASX company showed interest in a buyout.

“They were actually bought out by Downer EDI Limited (ASX: DOW), I think… That actually gave us a great opportunity to at least lick our wounds a little bit where there was a lot of talk from M&A, and the share price ran up quite strongly on the back of that.”

Speedcast International Limited (ASX: SDA)

Speedcast was a business that had everything going for it, according to Wayne.

“This is a telecommunications company that was providing telecommunications services to those companies and those interested parties that operate in remote locations,” he said.

“So if you think about the military or you think about the cruising industry, they’re two sectors that use those services heavily. That’s a business that looked very good for a long period of time.”

But its fortunes turned when it took on debt to go on an acquisition spree.

“Those acquisitions weren’t successfully integrated. And when that occurs and you’ve run up your debt, you get yourself into a lot of trouble,” said Wayne.

“Fortunately, we managed to get the vast majority of clients out before it delisted or went belly up – but it wasn’t our proudest moment, that’s for sure.”

The post 5 ASX shares that haunt fund managers appeared first on The Motley Fool Australia.

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Tony Yoo owns shares of  AFTERPAY T FPO, Altium, and CSL Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO, Altium, and CSL Ltd. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO and 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 Carsales.Com Ltd (ASX: CAR) share price will be one to watch on Tuesday morning. This comes after the online auto listings company announced it has completed its retail entitlement offer.

At Monday’s market close, Carsales shares finished the day at $18.90.

Equity raising efforts

The Carsales share price will be in focus today after the company advised it has raised approximately $115 million (before costs) through a retail entitlement offer. The retail component, following the company’s Institutional offer, will see 1 share issued for every 6.99 existing shares owned.

Over 8,300 eligible retail shareholders participated either partially or fully in the retail entitlement offer. This represents an aggerate take-up of roughly 67% by value of applicants. As a result, about 6.8 million Carsales shares will be created and allotted to shareholder accounts this Friday 11 June.

For the remaining 3.4 million retail entitlements not taken up, the company will offer the shares in a retail shortfall bookbuild. This allows investors who missed out on the opportunity, along with ineligible retail shareholders, to participate in the offer to buy Carsales shares. The company noted that the retail shortfall bookbuild will be a variable price beginning with a floor price of $17.00 per new share.

Together with the institutional offer (raising $428 million), Carsales is expected to successfully raise a total of $600 million. The retail shortfall bookbuild will fill the remaining $57 million, bringing the entire retail entitlement offer to $172 million.

The proceeds of the equity raising will be put towards acquiring a 49% interest in Trader Interactive for $800 million.

Carsales share price summary

Established in 1997, Carsales is Australia’s largest online automotive, motorcycle and marine classifieds business. The group also operates in South Korea, and has interests in Mexico, Argentina, Chile, and Brazil.

Since this time last year, Carsales shares have lifted by more than 16%, but have fallen by about 4% in 2021. The company’s shares reached a 52-week high of $22.62 in October, before moving in peaks and troughs along the way to their current value.

On valuation grounds, Carsales ranks 99th on the ASX with a market capitalisation of roughly $5.1 billion. The company has over 271 million shares currently on its registry.

The post Why the Carsales (ASX:CAR) share price will be in the spotlight today appeared first on The Motley Fool Australia.

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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 recommended carsales.com 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 S&P/ASX 200 Index (ASX: XJO) could be a good option to consider for dividend income over the coming years.

Businesses in the ASX 200 have the potential to be consistent dividend payers whilst also generating operating earnings growth over time.

These two ideas might be considerations:

Rural Funds Group (ASX: RFF)

This real estate investment trust (REIT) owns a portfolio of farming properties. However, it doesn’t operate the properties, it leases them to high-quality tenants like Treasury Wine Estates Ltd (ASX: TWE), Select Harvests Limited (ASX: SHV), Olam, JBS and Australian Agricultural Company Ltd (ASX: AAC).

As the tenants may suggest, its portfolio is spread across cattle, vineyards, almonds, macadamias and cropping (sugar and cotton).

One of the main aims of the REIT is to grow the distribution for shareholders by 4% each year. It achieves this with contracted rental growth as well as productivity improvements at those farms. Examples of those improvements include better water access for cattle and improved irrigation.

The ASX 200 REIT has been steadily growing its distribution for investors for a number of years.

It has provided guidance for the FY22 distribution of 11.73 cents per unit. That translates to a forward distribution yield of 4.6%.

Centuria Industrial Reit (ASX: CIP)

This REIT is the largest one that purely focuses on industrial properties on the ASX. It’s currently rated as a buy by the broker Morgan Stanley with a price target of $3.90.

The ASX 200 share says it has a portfolio of high-quality industrial assets that are situated in key metropolitan locations throughout Australia and is underpinned by a quality and diverse tenant base.

Centuria Industrial REIT is benefiting from a steady increase in the valuation of its portfolio. In the latest external valuations for its portfolio for June 2021, it said that its portfolio had increased in value to $2.9 billion. On a like for like basis, that was an increase of $285 million, up 11% from prior book values.

The two biggest changes in dollar terms were the Telstra Corporation Ltd (ASX: TLS) data centre in Clayton and the large Woolworths Group Ltd (ASX: WOW) facility in Warnervale, which went up $60 million and $38 million respectively.

This led to a pro forma net tangible asset (NTA) increase from $3.33 to $3.85 per unit.

The portfolio has an occupancy rate of 98.8% and a weighted average lease expiry (WALE) of 9.7 years and portfolio capitalisation rate of 4.53%.

Jesse Curtis, the fund manager, said:

Strong sector tailwinds continue to provide long-term benefits to industrial real estate with e-commerce and onshoring increasing demand for quality industrial accommodation. CIP is a beneficiary of the buoyant tenant market with a number of assets delivering valuation gains on the back of strategic leasing.

Morgan Stanley has projected a distribution of 17 cents per unit in FY21, equating to a yield of 4.5%.

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

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED, Telstra Corporation Limited, Treasury Wine Estates Limited, and Woolworths 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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With last year’s COVID-friendly technology shares taking an absolute beating in the last couple of months, some experts have marked this as an opportunity to buy in.

But with the dark shadow of inflation looming, which tech businesses are “safe” to return to and which ones should we avoid?

According to Montgomery Investments chief investment officer Roger Montgomery, now is the time to be very selective about where investors park their money.

“Investing in global stocks has been particularly rewarding during 2020 and the early part of 2021. The future, however, could be more challenging and more discernment will be required. This discernment will be no more necessary than required in the tech sector,” he said on the company blog.

“The next big rotation could see these over-valued – often profitless – firms dumped in favour of long-duration quality tech businesses.”

Short-term volatility is the forecast

Rising inflation changes the whole game, according to Montgomery.

While he believes the world will eventually return to the pre-COVID low inflation environment, the immediate future is not so rosy for tech.

“For the next few months there is every risk that both the leading tech companies and the profitless prosperity companies are put under some pressure,” he said.

“Any forthcoming volatility may be greater for the super long-duration tech set where price and sales multiples are off the Richter scale.”

Taking advantage of this volatility involves putting money into the right tech shares to reduce downside risk.

Tech giants’ numbers are far superior to the speculators

Montgomery thought the COVID winners still have nonsensically high valuations.

“EV [enterprise value]-to-EBITDA sits at about 2500 times for Roku Inc (NASDAQ: ROKU) and 147 times [for] Zoom Video Communications Inc (NASDAQ: ZM),” he said.

“Meanwhile Roku, Docusign Inc (NASDAQ: DOCU) and Slack Technologies Inc (NYSE: WORK) generate negative returns-on-equity.”

This is why the safe bet in a rising inflation world are the well-established giants.

“Contrast these multiples to the tech giants whose combination of growth and profitability could not have been imagined by capitalism even a decade ago,” said Montgomery.

“Facebook‘s ROE sits at 25 per cent, Apple‘s is 82 per cent and Microsoft 43 per cent.”

He added that the profitable mega-caps like that trio and Amazon.com Inc (NASDAQ: AMZN) and Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG) have “incredible economics” and “scarcity” on their side.

The rotation away from momentum stocks has already well begun, even though these companies are merely seeing a slowdown in revenue growth.

“Witness, for example, the up-to-50% slides in Peloton Interactive Inc (NASDAQ: PTON) and Afterpay Ltd (ASX: APT), a decline of a third for Docusign and Zoom, along with slides in Appen Ltd (ASX: APX) (down 70%), WiseTech Global Ltd (ASC: WTC) and Xero Limited (ASX: XRO),” Montgomery said.

“We currently believe it is wise to tilt towards quality and away from momentum in the tech names.”

Montgomery’s worst fear is that inflation pokes up, and then the central banks allow it to go out of control.

“Recently, a well-connected friend told me Australia’s [Reserve] Bank believes there’s a 25% chance inflation could get away from them,” he said.

“The idea that central banks could be ‘behind-the-curve’ is one markets are most nervous about.”

The post The tech shares to buy now (and the ones to avoid): analyst appeared first on The Motley Fool Australia.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO, Alphabet (A shares), Alphabet (C shares), Amazon, Appen Ltd, Apple, DocuSign, Facebook, Microsoft, Peloton Interactive, Roku, Slack Technologies, WiseTech Global, Xero, and Zoom Video Communications. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2022 $1,920 calls on Amazon, long March 2023 $120 calls on Apple, short January 2022 $1,940 calls on Amazon, and short March 2023 $130 calls on Apple. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO, Appen Ltd, WiseTech Global, and Xero. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Facebook, Slack Technologies, and Zoom Video Communications. 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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