• Why is the AMP (ASX:AMP) share price falling again today?

    white arrow pointing down

    The AMP Ltd (ASX: AMP) share price continues to go from bad to worse. AMP shares are down a nasty 4% today to $1.08 a share. This puts the embattled wealth manager just a hair above the all-time low of $1.05 a share it reached last week. It also gives up the gains that AMP saw last Friday when the company rose by close to 4%.

    This move actually makes AMP one of the worst-performing S&P/ASX 200 Index (INDEXASX: XJO) shares on the market today. Even the ASX 200 is having a day in the green, currently up 0.2% to 7,047 points today.

    So what’s going on with AMP?

    A disastrous three years

    Things have been going downhill for AMP for just over three years now. Ever since the Banking Royal Commission held in 2018, AMP shares have been under pressure. As you might remember, the Royal Commission uncovered systemic misconduct by AMP, including the infamous fees-for-no-service scandal. The company’s plans to right the ship have undergone setback after setback. This resulted in AMP’s post-Royal Commission CEO Francesco de Ferrari resigning from AMP earlier this year.

    AMP did manage to orchestrate the sale of its AMP Life division last year. It also successfully offloaded its AMP Capital arm last month. But it wasn’t enough to stop a shareholder revolt at its annual general meeting a few days later, narrowly avoiding a second strike on its remuneration report.

    Which brings us to today. Right now, AMP shares are at their lowest levels ever. And that’s saying something for a company that has been listed for more than two decades. The shares are now around 80% below where they were in February 2018, and 92% below where they were at AMP’s ASX listing back in 1999.

    So why is the AMP share price falling again today?

    It’s not exactly clear why the AMP share price is once again coming under pressure. There are no major news or announcements out of the company that might result in investors hitting the sell button.

    AMP has even commenced a share buyback program as of 10 May. This should, in theory, be supporting higher AMP share prices, since share buybacks take shares off the market. And this has been happening with gusto. Just today AMP released a market announcement detailing how it purchased $4.5 million worth of shares last week.

    So perhaps today’s share price moves are the result of a large institutional investor exiting an AMP position. Or perhaps a broker issuing a sell recommendation. Though it’s not clear yet, what we do know is that today’s move was probably not what investors were hoping for after Friday’s share price bump. At the current share price, AMP Limited has a market capitalisation of $3.7 billion.

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  • Why smaller ASX shares could outperform this year

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    Investors may wish to review their exposure to small and mid-cap ASX shares.

    It’s important to ensure a well-diversified portfolio. I’m sure you know the old ‘don’t put all your eggs in 1 basket’ cliché. In line with that investors would be wise not to invest solely in the smaller end of the share market.

    But, as Bell Asset Management points out, small and mid-cap shares across the world significantly beat their larger peers during the recovery from the COVID driven selloff last year.

    Small and mid-cap shares outperform

    Small and mid-cap stocks, as measured by the MSCI World SMID Cap Index, have gained 111% since the market lows in March 2020. That handily beats the performance of the all-cap MSCI World Index, which is up 88% in that same time.

    According to Bell Asset Management, “This outperformance was also apparent after prior sharp market drawdowns such as the GFC in 2009 and the dot-com bust of 2000 and persisted over a number of years.”

    No one can say with any certainty that this same outperformance will be mirrored among ASX shares during the current market recovery. But it’s worth noting and taking some time to review your own allocation to the somewhat smaller end of the ASX.

    Not that the blue chips haven’t largely been charging ahead as well.

    Earnings smash expectations

    As Bell Asset Management noted, more than 66% of the companies contained in the MSCI World Index beat earnings expectations. It said sales came in 3% higher than expectations and earnings were more than 20% above expectations.

    The report pointed to the strength of the ongoing global economic recovery along with “tangible results of ongoing stimulus packages and rising consumer spending” as helping drive the exceptional earnings growth.

    Looking ahead for ASX shares

    With a look to the future, Bell Asset Management’s outlook for equities:

    [R]emains favourable given rapidly recovering global economic growth and corporate earnings. With many countries still in the early days of re-opening, we see the potential for continued growth and further earnings upgrades. Inflation concerns have abated somewhat, but we are wary that it remains a potential headwind to profitability.

    Happy investing! 

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  • Is the Zip (ASX:Z1P) share price in the buy zone?

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    The Zip Co Ltd (ASX: Z1P) share price has had a reasonably positive start to the week.

    After being up as much as 5% at one stage, the buy now pay later (BNPL) provider’s shares are up 1% to $7.09 late in the session.

    Why is the Zip share price rising today?

    The Zip share price was given a boost today by news that the company is expanding into the European and Middle East markets. The company will be doing this in the same way it entered the United States market, by acquiring an established player in both markets.

    In Europe, Zip is acquiring the shares it doesn’t already own in Twisto Payments for 89 million euros (~A$140 million). Whereas in the Middle East, the company is acquiring the shares it doesn’t already own in UAE-based Spotii for US$16 million (~A$21 million).

    Management commented: “Zip has adopted a similar approach to Quadpay, which proved to be highly successful. By initially making low-risk minority investments, Zip is well placed to validate cultural fit and management alignment, stress test the business plan and identify synergies, and plan for integration.”

    It also notes that Europe is a $1.1 trillion annual ecommerce market and Twisto’s license can be passported to all 27 member states of the European Union. And while the Middle East market is much smaller, it is growing fast.

    The acquisition of Spotii is expected to complete in the third quarter of calendar year 2021, whereas the Twisto acquisition is expected to complete in the fourth quarter.

    Judging by the performance of the Zip share price, investors appear happy with the news.

    Should you invest?

    While brokers have yet to run the ruler over this news, one broker that was already bullish on the Zip share price is Citi.

    Its analysts recently upgraded Zip’s shares to a buy rating with an $11.30 price target.

    In addition to this, fellow broker Morgans currently has an add rating and $10.39 price target on the company’s shares.

    Based on the middle of these price target ($10.85), this implies potential upside of over 50% from where the Zip share price trades today.

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  • How to tell if an ASX 200 share is risky

    person with a magnifying glass with four blocks of letters spelling out risk on top of each other

    Risk is one of those words that ASX investors probably use a little too much. Especially considering it can mean different things to different investors.

    Classical modern portfolio theory teaches that share market risk has a linear relationship with returns. That is, the higher returns you want, the more risk you have to take. Whilst the merits of this theory are still being debated, it does posit an interesting question: How can you evaluate the risks of investing in a particular ASX share?

    Well, an easy way to assess risk is to look at how much money a business makes. It sounds simple, but there are two kinds of companies that you can buy on the ASX. Those that are valued on the money they make today. And those that are priced for the money they might make in the future.

    Risk on, risk off

    Take ASX 200 growth share Afterpay Ltd (ASX: APT). Afterpay is currently being priced with a market capitalisation of $26.62 billion.

    Looking at Afterpay’s full-year results from last year (FY2020), and we can see that the company brought in $44.4 million in earnings before interest, tax, depreciation and amortisation (EBITDA). A $26.6 billion company bringing in $44.4 million in earnings? That valuation sounds a little silly. But those earnings grew at an annual rate of 73%. As such, we can reasonably assume Afterpay is being priced for the money it could make in the future, rather than its current earnings. If Afterpay (hypothetically) grows its earnings at 73% every year for a decade, its valuation starts to look a lot cheaper.

    But something like the ASX 200 blue chip Coles Group Ltd (ASX: COL) is a different kettle of fish. Last year, this company reported earnings before interest and tax (EBIT) of $1.39 billion for FY2020. On today’s pricing, Coles has a market capitalisation of $22.24 billion (lower than Afterpay’s, incidentally). This tells us that Coles is probably being priced for the cash it generates today, rather than the growth it might deliver in the future. This makes sense. Coles is an established, mature, dividend-paying business.

    Birds in the bush

    And that’s where risk comes in. Coles has runs on the board right now. It has shown it has what it takes to generate large volumes of cash flow today. As such, it is fundamentally less risky than Afterpay, which might deliver the same levels of cash one day, if its growth rates continue and everything goes as planned.

    Warren Buffett once said of investing that ‘a bird in the hand is worth two in the bush’. This can be applied to what Coles and Afterpay have on offer today. Of course, some investors like chasing companies that might have bushes full of birds. But Buffet implies it’s a whole lot less risky if they’re in the hand.

    So if you’re wondering which of your ASX 200 shares are the ‘riskiest’ today, have a look at how much cash they generate, and what they are being priced at. That will give you a great feel for how risk-tolerant your ASX share portfolio is.

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  • I might be getting old, but it has its benefits

    surge in asx growth share price represented by tiny bean stalk being watered by miniature watering can

    I spent a decent amount of time out in the garden over the weekend.

    Some mowing, but mostly carrying two cubic metres of pine bark from a pile at the end of the driveway and down into the vege patch.

    I was replacing the pine bark that got washed down the hill in the recent storms.

    The access meant that I couldn’t use a wheelbarrow, so it was two plastic buckets at a time.

    Up.

    Back.

    Up.

    Back.

    The good news is that it’s done. And that it was finished before the rain.

    The bad news is that it turns out I’m not as young as I used to be, and I’m nursing a pulled shoulder muscle.

    Speaking of which, I refuse to accept that my advancing years are the cause of my interest in growing veges.

    When my son was born, we wanted him to experience having a vege garden.

    To appreciate where some of his food came from. 

    To be part of the process.

    And, hopefully, to make picking a berry off a bush, a tomato off a vine or an apple off a tree something natural.

    So, when we moved to the NSW Southern Highlands 5 years ago, we wanted to be able to have a larger vege patch and some more fruit trees.

    See… it’s not my advancing age at all!

    At least, that’s what I tell myself.

    Speaking of veges, winter tends not to be a particularly bountiful time for most of them. Some, yes, but not most.

    I planted some peas and beans a few weeks back.

    (And some lettuce and other greens, but the snails got them. Little buggers. Snail traps going in next weekend, now I have the new pine bark laid!)

    They’re an exercise in patience (the veges, not the snails!).

    For a week or two, nothing happens.

    And I mean literally nothing. At least nothing that can be seen by the human eye.

    Then, a small tendril pokes its way out of the ground.

    Then, almost nothing, for another couple of weeks.

    Maybe it’s growing, but the pace is so slow, it’s hard to tell.

    And a couple of the would-be pea plants die.

    But then, you start to notice some growth. 

    Or at least it seems like growth.

    Then a little more.

    Now, the pea plants are a good 20cm high, and the beanstalks are thickening and sprouting more leaves.

    Give it a couple of weeks, and the peas will double in height.

    Then another couple of weeks, and they’ll double again — growing more in a couple of days than they did in a couple of weeks, just a month or so ago.

    Oh come on… surely I’m not going to make that literal a comparison, am I?

    The whole ‘pea plant as an analogy for compound interest’ thing?

    Surely not.

    Yep. I am. (And don’t call me Shirley).

    But for what it’s worth, I’m not reaching for a banal analogy specifically because I had a point to make.

    In this instance, it was literally the reverse.

    Yesterday morning, while I was bucketing pine back, I noticed how suddenly the peas had grown, when they were seemingly much smaller only a few days ago.

    But it makes sense.

    Root systems spread and go deeper, giving the plants a better and more plentiful source of nutrition.

    The leaves multiply, giving the plant ever more surface area to utilise for photosynthesis.

    Growth begets growth.

    Is it a hackneyed example? Probably.

    I can’t recall using it before, or even someone else using the analogy, but I’m sure they have.

    Sometimes, though, cliches are cliches for a reason, and analogies are analogies because the similarities are just too clear to ignore.

    So here goes:

    When you start investing, the dollar value of your compound gains can be reasonably small… but give it time. Remember the maths.

    Not every investment will live and thrive. Some of your portfolio will disappoint. You don’t stop growing peas because one plant dies.

    As I said, growth begets growth. One leaf becomes two. Two become four. Four become eight. Soon enough, you have 16 times as many leaves as you started with.

    Investing requires discipline and a little education, but surprisingly little ongoing effort. Some pruning, some fertilising.. But the returns don’t scale with effort, past a certain point. They scale with time.

    You have to let them do their thing. You’re not going to do well as a gardener if you rip out the peas because they haven’t sprouted in the first month, or the apple tree if it hasn’t fruited in the first year. 

    Gardening — like investing — rewards steady effort, and a lot of patience. Mostly, they both work best if you get the structure right, then largely leave them alone.

    And, like investing, one day, you’ll remember how little you had, when you started, compared to how much you have, after time has done its work. You won’t necessarily notice, day by day, but it’s happening.

    And the harvest is more than worth the time, effort and — remember — patience.

    Fool on.

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  • Why AnteoTech, Fortescue, Synlait, & TPG shares are tumbling lower

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    The S&P/ASX 200 Index (ASX: XJO) is on course to record a small gain. At the time of writing, the benchmark index is up almost 0.2% to 7,042.4 points.

    Four ASX shares that have failed to follow the market higher today are listed below. Here’s why they are tumbling lower:

    AnteoTech Ltd (ASX: ADO)

    The AnteoTech share price is down 6% to 32.5 cents. Investors have been selling the surface chemistry company’s shares despite an update on its manufacturing plans. According to the release, AnteoTech plans to commence in-house manufacturing in Brisbane to enable the production capability of an additional 12 million test strips per annum. This will bring it total test strip production capability now to 32 million per annum. These strips are to be used in a COVID-19 rapid testing device. Investors may feel the investment is too late in the COVID cycle.

    Fortescue Metals Group Limited (ASX: FMG)

    The Fortescue share price has fallen 4% to $21.40. This iron ore giant’s shares have come under pressure on Monday following another pullback in the price of the steel making ingredient. According to Metal Bulletin, the spot iron ore price fell a sizeable 5.3% to US$200.72 a tonne on Friday.

    Synlait Milk Ltd (ASX: SM1)

    The Synlait Milk share price has tumbled 4.5% to $2.85. This follows the release of a second guidance downgrade this morning. According to the release, the dairy processor now expects to make a loss after tax of between NZ$20 million and NZ$30 million in FY 2021. This compares to its previous guidance for a breakeven result, which itself was reduced from a 50% year on year profit decline.

    TPG Telecom Ltd (ASX: TPG)

    The TPG Telecom share price is down almost 2.5% to $4.92. Investors have been selling the telco’s shares after it revealed that its cloud-based hosting service, TrustedCloud, was compromised in a recent cyber incident. However, it is worth noting that only two customers are believed to have been impacted. Furthermore, the business is being decommissioned and is scheduled to close at the end of August.

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  • The MyState (ASX:MYS) share price is frozen today. Here’s why

    A dollar sign embedded in ice, indicating a share price freeze or trading halt

    The MyState Limited (ASX: MYS) share price is in a trading halt today after the company announced a capital raising.

    As such, the MyState share price will remain frozen at Friday’s closing price of $4.85 to enable the placement to be completed. Trading is expected to resume on Wednesday.

    The financial and fund management company also detailed its strategy and outlook in today’s release. Let’s take a look.

    MyState capital raising

    MyState today announced it aims to “rapidly accelerate” its growth strategy through a placement to raise up to $80 million. The placement will comprise a $20 million institutional underwritten offer and a $60 million entitlement offering to all eligible shareholders. All shares under the capital raise will be issued at $4.30.

    The company also outlined its new growth strategy for the coming years. MyState wants to bring in new customers by creating better experiences for them on its current platform. The company said it was turning to a more digital and intuitive platform to meet this goal.

    It is also aiming to simplify operations while expanding its distribution network to enhance both productivity and distribution.

    With these priorities, the company has outlined four objectives to be achieved by 2025:

    • Accelerated home loan and retail deposit growth over the medium term, while maintaining asset quality.
    • Improved operating leverage.
    • Return on Equity accretion as capital is deployed.
    • And sustainable growth in the company’s EPS over the medium term.

    Management comments

    MyState chair Miles Hampton explained:

    The capital raising will support the business to pursue a significant acceleration of its growth strategy. Since 2016, MyState has increased its home loan book by 43%. We now see an opportunity to build on that success and substantially increase our growth trajectory.

    This is important as it helps us to remain competitive and provide the services that our customers expect whilst improving shareholder value.

    Trading update and guidance

    In MyState’s trading update and FY21 guidance also released today, the company advised it was well ahead of the prior corresponding period for the 10 months ending 30 April.

    Highlights include a net profit after tax increase of 17.1%, and earnings per share (EPS) up 16.2%.

    In terms of guidance, the company said it was on track to deliver growth in operating profit of 11%-14%.

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  • The Commonwealth Bank (ASX:CBA) share price hits new record highs

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    Commonwealth Bank of Australia (ASX: CBA) shares are powering ahead today. The CBA share price is up 1.1% in afternoon trading.

    At the current price of $99.09 per share, Commonwealth Bank shareholders are only 91 cents away from seeing the stock crack the psychological $100 mark.

    If CBA’s share price can hold onto the intraday gains, or add to them, today will mark yet another new record closing high for the big 4 bank.

    CBA share price record

    It took more than 7 years, but last week the CBA share price hit $98.84 per share. That finally saw shares surpass their previous record high, set in March 2015.

    At the time (March 2015) analysts were eagerly predicting that CommBank would become the first ASX share to crack the $100 mark. While that honour fell to CSL Limited (ASX: CSL), CBA could join the 3-figure share price club any day now.

    Today’s gain, outpacing the 0.3% increase posted by S&P/ASX 200 Index (ASX: XJO), sees the CommBank share price up 68% over the past 12 months. And the Commonwealth Bank has continued to outperform in 2021, with shares up more than 18% year-to-date.

    On Friday the bank announced it will raise interest rates on its 3 and 4-year fixed-term owner-occupier loans by 0.05% and investor only loans by 0.10%, potentially adding to its bottom line.

    Now investors will be looking to see if management gives any sign of upping the dividend payments alongside its appreciating capital value.

    At the current price of $99.09 per share, CommBank pays an annual dividend yield of 5.0%, fully franked. The market cap stands at $174 billion.

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  • Codan (ASX:CDA) share price tops performance on ASX Tech Index in 2021

    rising asx share price represented by woman flying through the air

    Shares in Codan Ltd (ASX: CDA) are leading the S&P/ASX All Technology Index (ASX: XTX) this year. The Codan share price has gained almost 60% in 2021 so far.

    At the time of writing, shares in Codan are trading at $17.73, gaining 3.02% today. At the start of 2021, shares in the company were swapping hands for $11.28.

    By contrast, the All Tech Index has fallen almost 10% since the beginning of the year.

    Codan designs and manufactures communications and technologies designed for use in tough conditions. It produces radios, metal detectors, and mining automation systems. The company provides these to a number of users, including ‘Five Eyes’ military and intelligence agencies.

    Codan has announced a number of acquisitions this year, as well as posting strong financial results. The company’s share price also managed to dodge the US-driven tech sell-off in March.

    Let’s take a closer look at what Codan has been up this year.

    Terrific 2021 to date

    The first we heard from Codan this year was in mid-February.

    Then, the company announced it had acquired US-based Domo Tactical Communications (DTC). DTC produces high bandwidth wireless communications and specialises in multiple-input multiple-output (MIMO) mesh networks.

    The news saw the Codan share price hit what was then an all-time high of $13.64.

    Two days later, Codan released strong results for the first half of the 2021 financial year.

    On 1 April, Codan announced another acquisition, this time of critical communication technologies manufacturer Zetron Inc.

    The news led its share price to close 9.5% higher than the previous day’s trade.

    Codan share price snapshot

    Codan shares have been having more than just a great few months on the ASX.

    Since this time last year, the Codan share price has gained around 160%.

    The company has a price-to-earning (P/E) ratio of 41.67 and it pays a dividend.

    Codan has a market capitalisation of around $3 billion, with approximately 180 million shares outstanding.

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  • Morgans picks small cap ASX shares with near-term share price catalysts

    ASX small cap buy man standing with arms crossed in front of giant shadow of body builder representing asx small cap stocks

    The market looks caught in a fairly tight trading band since April as bulls and bears look to see who blinks first.

    In this climate, a good way to pick ASX shares to buy is to target those with positive near-term catalysts, according to Morgans.

    The broker’s advise comes as the S&P/ASX 200 Index (Index:^AXJO) bounces between both sides of breakeven today. The index has traded in a less than 200-point band in the past seven weeks.

    Target ASX shares with near-term catalysts

    Investors are torn between the strong earnings outlook for ASX shares and fears that share prices are primed for a big pullback.

    As I reported last week, Morgans believes you should ignore the jitters and use any market weakness as a buying opportunity.

    The broker highlighted some ASX 200 shares to buy as it expects them to release positive news in the near-term.

    It expects that these good updates will propel their share prices even in the face of a broader market sell-off.

    ASX small cap shares that could outperform in the near-term

    But there are a number of little known ASX shares that many have overlooked that are also in this basket.

    The first is the Kina Securities Ltd (ASX: KSL) share price. The small cap Papua New Guinea broker has around a 60% upside to Morgans’ share price target and you may not have to wait long for the Kina Securities share price to surge towards fair value.

    “We expect closure of the WBC Asia Pacific acquisition in September to be a material catalyst, forcing the market to reconsider strong earnings growth into FY22,” said Morgans.

    Dividend restart to light this ASX small cap

    Another lesser followed ASX share is the Dalrymple Bay Infrastructure Ltd (ASX: DBI) share price.

    Morgans reckons there is a close to 20% upside for the coal export port operator, although ESG conscious investors may shun shares with the “C” word.

    But the broker believes that any news of the company restarting its quarterly dividends could light a fire under the Dalrymple Bay share price. This could come as June.

    Looking for the X-factor

    Those looking for more bang for their buck may want to consider the Micro-X Ltd (ASX: MX1) share price.

    The X-ray technology developer that’s used for security and medical screening could see its share price surge in the coming weeks or months.

    Morgans expects Micro-X to announce that it has secured European regulatory approval for its technology in the current quarter. There is a close to 80% upside for the Micro-X share price to the broker’s price target.

    Where to invest $1,000 right now

    When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

    Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

    *Returns as of February 15th 2021

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