The Wesfarmers Ltd (ASX: WES) share price was out of form and dropped lower on Thursday following the release of its strategy update.

The conglomerate’s shares ended the day with a 2% decline to $55.11.

Why did the Wesfarmers share price drop?

Investors were selling Wesfarmers shares after it provided an update on current trading conditions at its strategy briefing.

That update revealed that Wesfarmers’ retail businesses have been cycling the impacts of COVID-19 in the prior year from mid-March. This has led to significant volatility in monthly sales growth results.

Wesfarmers also revealed that online sales growth has moderated and that its Catch business has experienced a decline in sales since March.

Is this a buying opportunity?

One leading broker that believes the weakness in the Wesfarmers share price is a buying opportunity is Goldman Sachs.

This morning its analysts retained their buy rating and $59.70 price target on the company’s shares.

Based on the latest Wesfarmers share price, this implies potential upside of 8.5% over the next 12 months excluding dividends. If you include dividends, the potential total return stretches to almost 12%.

Goldman commented: “Wesfarmers hosted its strategy day today outlining the priorities for each division. From the group’s perspective, key priorities have been aligned towards developing a market leading data and digital ecosystem, investing in platforms and accelerating the pace of continuous improvement.”

“Most retail divisions have been trialing supply chain expansions with more details expected to be announced over the upcoming months. This is the clear theme coming out of the WES strategy day: digital investment and supply chain automation increasingly likely to soak up increased amount of management time and capital over the medium term.”

Goldman also notes that Wesfarmers has the balance sheet strength to make acquisitions.

It explained: “Management is looking to rightsize the balance sheet and hopes to do that in a tax effective way. However, a decision has not been made regarding the level or method to do so. The group continues to evaluate acquisition opportunities, although availability of capital has not increased the priority on this front.”

Overall, the broker remains positive on the future and continues to forecast robust profit growth in the years to come.

Goldman estimates earnings per share of $2.18, $2.25, and $2.44, respectively, between FY 2021 and FY 2023.

The post Is the Wesfarmers (ASX:WES) share price in the buy zone after its update? appeared first on The Motley Fool Australia.

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The Orocobre Limited (ASX: ORE) share price is on fire in 2021. After years of slipping lower, shares in the Australian lithium miner are rebounding, and in a big way.

Orocobre’s market capitalisation has swelled to $2.4 billion after climbing 1.6% higher on Thursday. That means the Orocobre share price is now up more than 50% in 2021 alone and sitting 5% below its May 2021 record high.

What is driving the price hike?

Orocobre is a major lithium miner. In fact, it is one of the world’s largest lithium chemicals producers. As is usually the case with commodity-based shares, the underlying commodity price has a lot to do with the company’s valuation.

While there have been several lean years since 2018, things are looking up again. Lithium prices have skyrocketed in 2021 thanks to supply-side restrictions and surging demand. A big part of that demand has been driven by lithium-ion batteries and the electric vehicle space.

According to Trading Economics data, lithium prices are sitting at US$13,900 per tonne, up from US$6,800/t in November 2020. That’s been reflected in the Orocobre share price gains we’ve seen in 2021. Shares in the lithium miner have surged 182% since the start of November 2020 as prices have rallied.

A broader commodities boom has also helped lift ASX energy shares higher and fuelled the S&P/ASX 200 Index (ASX: XJO) to a new record high. Concerns around global inflation and strong demand for basic materials has boosted the prices of key commodities including iron ore and oil in recent months.

The Orocobre share price has been a beneficiary of the surging lithium price with supply constraints and growing electric vehicle interest helping pull the ASX lithium share higher.

Foolish takeaway

The Orocobre share price has been on fire in 2021. Shares in the Aussie lithium miner continue to outperform its ASX 200 peers amid climbing commodities prices. That’s good news for investors who are riding the wave right now.

The post Why the Orocobre (ASX:ORE) share price continues to soar in 2021 appeared first on The Motley Fool Australia.

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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.

A common critique of Bitcoin (CRYPTO: BTC) is that it is outdated technology in the fast-moving world of cryptocurrency and it will eventually be replaced by something better. There are different versions of this theory, with some saying another decentralized cryptocurrency will overtake bitcoin as the best crypto money and others saying bitcoin will eventually be made obsolete by central bank digital currencies (CBDCs).

Let’s focus on the former theory. The Ethereum (CRYPTO: ETH) network’s underlying ETH cryptocurrency has the most support. During the initial coin offering (ICO) bubble of 2017, various crypto market commentators claimed that ETH overtaking BTC as the largest and most popular cryptocurrency is inevitable. Although this didn’t happen back then, the idea of a “flippening” taking place has gained traction once again, as the BTC-denominated price of ETH has nearly tripled so far this year.

The argument for ETH over BTC

The main argument for Ethereum over Bitcoin is that the latter of the two cryptocurrency networks is limited by a lack of technical functionality in the form of smart contracts. Smart contracts enable advanced crypto use cases such as non-fungible tokens (NFTs) and decentralized finance (DeFi). Mark Cuban has pointed to these sorts of use cases as his reasoning for preferring ETH over BTC.

DeFi in particular has been the main source of attention for Ethereum over the past year or so, as various apps have enabled new ways of doing traditional financial activities like issuing assets, trading, borrowing, lending, and more. The argument is that ETH will overtake BTC as the most widely used cryptocurrency due to these additional applications.

The argument for BTC over ETH

A key argument against the idea that DeFi and other types of decentralized applications is that much of the activity on Ethereum today is likely unsustainable. Many of the Ethereum use cases that are popular today, such as stablecoins and the trading of those stablecoins against ETH, involve the reintroduction of third-party risk, which puts into question whether it makes sense to build these applications on a decentralized blockchain.

Bitcoin itself also has various solutions for implementing many of the use cases that have gained popularity on Ethereum. Sovryn is a relatively new DeFi application built on Bitcoin that combines many of Ethereum’s touted use cases into a single interface. It has long been argued that Bitcoin can adopt any new tech that is developed by its competitors, and Sovryn is an illustration of that point happening right in front of our eyes.

If Bitcoin is able to adopt the features of its competitors, then the real competition between cryptocurrencies has more to do with their monetary properties than anything else. And in that department, bitcoin is still by far the most liquid, stable form of crypto money with the most credible, unwavering monetary policy.

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

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 FYI Resources (ASX: FYI) share price is performing swimmingly. In 12 months, the company’s shares are up 1,300%. In the last 6 months, they’re more than 200% higher. And at the market close yesterday, the FYI Resources price was up 9.52% for the day, closing at 69 cents.

Decarbonising the global economy, it’s a thing.

According to its own company literature, FYI is positioning itself for high quality, high purity alumina (HPA) through low carbon and environmental footprint production.

FYI Resources says that there are two ways to apply HPA. There is the application in LED screens and other sapphire glass products, substrates, electronics and specialty abrasives. 

The second market — and longer-term driver for HPA — is the application in lithium-ion batteries for the burgeoning electric vehicle and static energy storage markets. HPA in these markets allows better functionality and safety of the battery cells, according to the company.

Decarbonising the global economy is a priority for governments in the United States and Europe, so it is little wonder that FYI Resources has caught the attention of Australian investors.  

Agreement with Alcoa 

Alcoa is a leading global aluminium producer. On 8 September 2020, FYI Resources entered into a Memorandum of Understanding (MoU) with Alcoa to explore the possible joint development of FYI’s HPA project. 

In a company release last month, FYI Resources managing director Rolland Hill said:

We believe there is a highly complementary fit between the corporate objectives, cultures and operational expertise of FYI and Alcoa.

Any commercial agreement would also seek to leverage the corporate capabilities of Alcoa, who are globally recognised as a leading producer of alumina, and FYI who have developed and demonstrated an innovative, fully integrated and environmentally conscious HPA refining process.

The future looks bright

With governments pushing to decarbonise the economy, a possible joint venture with Alcoa, and HPA becoming increasingly sought-after for its unique properties, FYI Resources seems well-positioned in the market.

And judging by the upward trend of the past 12 months, the FYI Resources share price appears to be gaining momentum.

The post Why FYI Resources (ASX:FYI) share price is roaring higher appeared first on The Motley Fool Australia.

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Rising inflation is nothing to worry about for stock investors, according to multiple experts.

The current economic recovery after the COVID-19 downturn has ironically been a bogey for growth shares. 

A fear of subsequent rising inflation and interest rates has seen the valuations of growth businesses hammered over the last 6 months.

The S&P ASX All Technology Index (ASX: XTX), for example, has sunk 8% since the start of the year. It’s dropped almost 15% off its 52-week high.

“It’s been a violent selloff out there,” Forager Funds chief executive Steve Johnson said in a video to investors this week.

“Good quality tech companies are down with Xero Limited (ASX: XRO) 23% off its peak and even the poster child for the growth sector, Afterpay Ltd (ASX: APT), is now down 45% from its peak just a couple of months ago.”

So should we be worried? How long will growth stocks be out of favour?

Remember how we worried machines would take our jobs?

Montgomery Investments chief investment officer Roger Montgomery is shocked at how short people’s memories are.

“Prior to COVID, one narrative occupying our imaginations was the rise of automation,” he said in a blog post recently.

“The ‘jobs for machines, life for people’ narrative had become so concerning to some it inspired talk of a universal basic wage.”

And since that talk interest rates had sunk even lower, triggering “a near-vertical acceleration in IT spending” everywhere.

So for Montgomery the current inflation worries are temporary. The pre-COVID disinflationary forces still persist and will return after the virus has been dealt with.

“It is important for investors to remember the long-term narrative,” he said.

“Inflation will bounce around in the short and even medium term but structurally it appears to be heading interminably down. Lower inflation appears to be a structural reality.”

A ripe buying opportunity

The longer-term low inflation outlook means investors need to put their fears aside and grab the current buying opportunities.

“We’ve got a good list of probably 8 to 10 businesses that we’d love to own at the right price that are a lot closer to it today,” said Johnson.

“So if this goes on for a few more months, you can expect to see a few more new names in the Australian Fund portfolio.”

Montgomery agreed, saying there are now many decent stocks going for a tempting discount. 

“Historically, economic growth combined with disinflation is an ideal time to be in equities,” he said.

“Current and intermittent weakness in the share prices of high quality companies with bright long-term growth prospects should be seen as a classic contrarian opportunity.”

After vaccinations are rolled out and the pandemic is long forgotten, automation and digitisation of work will once again re-enter public discourse.

“We will return to debating a response to job losses from the rise of machines, AI and robots,” said Montgomery.

“And while the impact on wages and jobs will be negative, in the absence of any legislative or regulatory response, the marginal cost for business will decline and profits will rise.”

The post Why investors don’t need to worry about rising inflation appeared first on The Motley Fool Australia.

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The Pro Medicus Limited (ASX: PME) share price was on form on Thursday.

The health imaging company’s shares rose over 3% to $47.61.

This means the Pro Medicus share price is now up almost 36% since the start of the year.

Why did the Pro Medicus share price storm higher?

Investors were bidding the Pro Medicus share price higher on Thursday after the company announced a deal with healthcare giant Mayo Clinic.

According to the release, the company’s Visage Imaging business has signed a multi-year research collaboration agreement with Mayo Clinic that will facilitate development and commercialisation activities in the field of artificial intelligence (AI), leveraging the Visage AI Accelerator platform.

Can its shares go higher?

According to a note out of Goldman Sachs, its analysts still see value in Pro Medicus’ shares.

This morning the broker has retained its buy rating and $53.80 price target on the company’s shares. Based on the latest Pro Medicus share price, this implies potential upside of 13% over the next 12 months.

Goldman commented: “PME today announced that it has signed a multi-year research collaboration with Mayo Clinic, one of the leading academic healthcare networks in the US. This agreement will facilitate the two parties’ research efforts around Artificial Intelligence in the field of radiology, with the primary aim of developing/commercialising new products.”

“Following today’s announcement, we highlight that PME has now established R&D collaborations with three different, world-renowned healthcare networks. These efforts have already yielded an interesting commercial opportunity, which could provide a material revenue contribution from FY22. We believe the strategy of partnering with the leading academics helps to maximise the value and competitive advantage of PME’s technology proposition,” the broker commented.

In light of the above, this could make it worth considering Pro Medicus at the current level.

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The Volpara Health Technologies Ltd (ASX: VHT) share price could be an interesting one to look at with the current price being $1.26.

What is Volpara?

Volpara is a New Zealand technology business that is listed on the ASX.

It operates a software-as-a-service (SaaS) model that utilises AI to improve the early detection of breast cancer by analysing breast images, called mammograms, and associated patient data.

Volpara provides personalised breast care through clinical decision support and proactive management tools. It wants to provide a cost effective reduction of breast cancer deaths, there are around 600,000 deaths globally each year.

Here’s why Volpara could be a good option:

Growing average revenue per user (ARPU)

Volpara has an increasing average revenue per user. ARPU is the average revenue achieved per women screened per year at a site

ARPU has risen to US$1.40. The CRA Health business that Volpara recently acquired is growing strongly and has ARPU of US$1.70. The company said that its ARPU rose by over 30% between the second quarter of FY20 and the second quarter of FY21 despite COVID-19 impacts. 

The business continues to track acquisition opportunities that could increase ARPU further.

A lot of the existing installed base is using a product that was sold as a capital sale with a small service and maintenance contract, not SaaS. Since 1 November 2019, all quotes and proposals are SaaS contracts. These new deals comprise multiple products. In the second quarter of FY21, ARPU on new deals was between US$1.75 to US$4.30.

Volpara has explained that identifying women who should get genetics testing can lead to a significantly increased ARPU.

Increasing market share

The business has significantly increased its market share over the last few years thanks to acquisitions like MRS Systems and CRA Health.

Volpara’s market share increased in FY21 to 32% of US women having a group product applied on their images and data. That compares to approximately 27% at the end of FY20.

The CRA Health acquisition came with a market share of approximately 6%, as well as the integration with electronic health records (EHR).

Strong gross profit margin

The Volpara gross profit margin continues to grow. It is one of the highest on the ASX. In FY20 the gross profit margin was 86% and in FY21 the margin increased another five percentage points to 91%. This could be an important driver for the Volpara share price over time. 

That means a lot of the new revenue can fall to the next profit line in the accounts. Over the longer-term, the gross margin could rise even more and help the net profit improve at a relatively fast rate.

The post 3 reasons why the Volpara (ASX:VHT) share price could be a buy appeared first on The Motley Fool Australia.

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Exchange traded funds (ETFs) can be a fantastic way to balance out your portfolio. This is because ETFs provide investors with easy access to a large and diverse group of shares that you wouldn’t normally have access to.

With that in mind, I have picked out two ETFs that are popular with investors right now. Here’s what you need to know about them:

VanEck Vectors Video Gaming and eSports ETF (ASX: ESPO)

The first ETF to consider is the VanEck Vectors Video Gaming and eSports ETF. This ETF gives investors exposure to a portfolio of the largest companies involved in video game development, eSports, and gaming related hardware and software globally.

The fund manager points out that these companies are well-placed to benefit from the increasing popularity of video games and eSports.

In addition to this, VanEck believes this ETF would be a good option for investors that already have exposure to FAANG stocks or want alternative options in the tech sector.

Among the fund’s largest holdings are graphics processing units giant Nvidia and games developers Take-Two Interactive (GTA, Red Dead), Electronic Arts (FIFA, Sims, Apex Legends), and Activision Blizzard (Call of Duty).

Vanguard MSCI Index International Shares ETF (ASX: VGS)

If diversification is your aim, then you’ll find it hard to beat the Vanguard MSCI Index International Shares ETF.

This ETF gives investors a slice of over 1,500 of the world’s largest listed companies from major developed countries.

This means you’ll be buying global giants such as Amazon, Apple, Facebook, Home Depot, Johnson & Johnson, Nestle, Procter & Gamble, Tesla, and Visa.

Vanguard believes that this ETF would be suitable for buy and hold investors that are seeking long-term capital growth, international diversification, and some income. In respect to the latter, the fund currently offers a 1.6% dividend yield.

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Legendary investor Jeremy Grantham is warning anyone who’ll listen that share markets have formed a big bubble about to burst.

The co-founder of GMO said it in January, then reiterated it again this week at an Australian investor conference.

“The Nasdaq Composite (INDEXNASDAQ: .IXIC) peaked quite a long time ago,” he said this week.

“Maybe in a few months the termites might get to the rest of the market.”

According to Grantham at the start of the year, the market was characterised by “extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative investor behavior”.

“I believe this event will be recorded as one of the great bubbles of financial history – right along with the South Sea bubble, 1929, and 2000,” he said.

“Make no mistake – for the majority of investors today, this could very well be the most important event of your investing lives.”

Grantham is famous for predicting the dot-com bust and global financial crisis crash, so people listen when he speaks.

But one investment executive reckons the perma-bear deserves to be completely ignored.

If you’re always a bear, you’ll be right some of the time

The trouble with bears, according to Bell Potter director Richard Coppleson, is that they will be smug from inevitably being right some of the time.

If you keep saying every 6 months the market will crash, you are not actually predicting anything. You’ll merely be correct some of the time because the market naturally goes through ups and downs.

“In an article I read about 8 months ago, several well-known fund managers were warning that dark times were coming and that this rally had gone too far,” he posted on Livewire.

“But then I stopped and thought, ‘Hey wait a minute — I actually read the exact same stuff from most of these fund managers 11 months ago, 8 months ago, 5 months ago and again now.’”

And this behaviour is exactly what Coppleson accuses Grantham of doing.

“It’s worth realising he has been a bear for a very long time,” said Coppleson.

“Given we see these falls every decade or so (1987, 2000, 2008/2009, 2020), it’s only a matter of time until he is ‘proven right’ (and then the media will proclaim that ‘he picked it’).”

To demonstrate, he noted Grantham famously predicted doom for equities in 2010, 2011, 2012, 2013, 2014 and 2015.

“So if one day we see another market crash of say -25% or more, then he would be proven 100% correct and be able to claim he called it.”

Coppleson said that if an investor listened to Grantham and held back for the last 10 years, they would have missed a 265% return on the US market, not even including dividends.

“Right now many are ‘nervous’ after his big call – but it’s the same call we have heard now for at least 10 years.”

Pre-COVID forces will be back

Two Australian experts thought that the current ‘inflation fear’ conditions would not last.

Technology and automation is taking over human labour, and that will drive prices for consumers down in the long run.

“It is important for investors to remember the long-term narrative,” said Montgomery Investments chief investment officer Roger Montgomery.

“Inflation will bounce around in the short and even medium term but structurally it appears to be heading interminably down. Lower inflation appears to be a structural reality.”

Forager Funds chief investment officer Steve Johnson agreed that, while the market’s already seen “a violent sell-off” of growth stocks, they will not be in permanent decline.

In fact, it’s a nice time to buy.

“We’ve got a good list of probably 8 to 10 businesses that we’d love to own at the right price that are a lot closer to it today,” he told a Forager video.

“So if this goes on for a few more months, you can expect to see a few more new names in the Australian Fund portfolio.”

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