The Westpac Banking Corp (ASX: WBC) share price was on form on Friday.

The banking giant’s shares ended the week with a 1% gain to $25.41.

This means the Westpac share price is now up 30% since the start of the year.

Why is the Westpac share price on fire in 2021?

Investors have been buying Westpac and other banks this year due to the improving outlook for the sector.

This is thanks to the strong economic recovery from the pandemic, the easing of responsible lending rules, and the booming housing market.

These improvements have been on show for all to see this month with the release of half year and quarterly results.

In respect to Westpac, at the start of the month, the bank released its half year results and reported a statutory net profit after tax of $3,443 million. This was an increase of 189% over the prior corresponding period and 213% over the second half of FY 2020.

Its cash earnings were also strong. They came in at $3,537 million for the half, which was a 256% increase over the prior corresponding period and a 119% lift over the second half of FY 2020.

And even if you adjust for notable items from all periods, Westpac’s earnings were strong. Excluding notable items, Westpac reported cash earnings of $3,819 million, up 60% year on year and 35% on the second half of FY 2020. This ultimately allowed the Westpac board to declare a fully franked interim dividend of 58 cents per share.

Also giving the Westpac share price a lift was news that it is planning to cut costs materially.

Westpac is targeting an $8 billion cost base by financial year 2024 to materially improve its efficiency. This compares to a ~$10.2 billion cost base in FY 2020.

Where next?

One leading broker that still sees a lot of value in the Westpac share price is Citi.

According to a recent note out of Citi, its analysts have a buy rating and $29.50 price target on its shares.

Based on the latest Westpac share price, this represents potential upside of 16% over the next 12 months. And if you include the dividend yield of 4.5% that it is forecasting, this potential return stretches beyond 20%.

Citi commented: “The market received WBC’s 1H21 result positively, with core earnings upgrades near-term from a better than expected NIM; and over the medium term, from lower costs. WBC’s target for FY24 costs of $8bn was lower than we anticipated, and management are confident and ambitious. We see many of the building blocks in place for the strategy, even if obvious sensitivities prevent their more fulsome disclosure. The premise of multi-year core earnings upgrades, layered on sector-wide asset quality improvements, leave WBC with a differentiated investment thesis. It remains our sole Buy in a sector that has rallied strongly in the COVID recovery.”

More reading

• 2 buy-rated ASX bank shares with huge dividend yields
• What do the CEOs of the Big Four banks think of the Federal Budget?
• Which ASX bank share is the cheapest after earnings?
• The ALS (ASX:ALQ) share price is flying on news of debt refinancing
• ASX 200 Weekly Wrap: Bank shares push ASX 200 towards all-time high

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. 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.

The post Why this broker thinks the Westpac (ASX:WBC) share price is great value appeared first on The Motley Fool Australia.

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The Centuria Capital Group (ASX: CNI) share price was rising today. The company came into focus after its takeover of Primewest Group Ltd (ASX: PWG) came one step closer to fruition.

By the market’s close, shares in the real estate funds manager were trading at $2.71 each – up 1.5%. Similarly, Primewest shares were up 2.07% to $1.48. For comparison, the S&P/ASX 200 Index (ASX: XJO) closed the day 0.57% higher.

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

Background

Back in April, Centuria first submitted an offer to buy its fellow real estate fund manager for an implied price of $1.51. The offer consisted of 20 cents in cash and 0.473 in Centuria securities for every share in Primewest. At the time, the proposed offer of Centuria shares was worth $1.31. At today’s valuation, it is now worth approximately $1.29 – for a total price of $1.49 now. This is still one cent above the current Primewest share price.

The deal was practically done from the moment it was announced. Primewest directors said they planned to vote unanimously in favour of the deal and, since they own 53% of all shares in the company, had a majority vote.

Latest takeover news

 In its statement to the ASX, Primewest says it is recommending shareholders accept the deal for 100% of its shares. The company gave the following reasons as to why:

• An “attractive premium” of 3.1% based on the closing price of Primewest and Centuria on 16 April, and an 11.8% premium based on an average 30-day price of the two companies.
• A 60.9% shareholder return for Primewest owners.
• A 19% appreciation in earnings per share in the merged company compared to Primewest alone.
• Greater diversification of assets and greater relevance in its assets under management.
• A stronger likelihood of being placed in the S&P/ASX 200 Index (ASX: XJO). The new company will have an estimated market capitalisation of $2.2 billion.

In its own statement, Centuria gave similar reasons to Primewest shareholders as to why they should accept the offer.

Today’s statement takes Centuria one step closer to acquiring Primewest. 

Centuria Capital share price snapshot

Over the past 12 months, the Centuria share price has increased by 85.9%. Its value crashed to around $1.40 at the height of the COVID market crash before recovering to levels seen just before the pandemic.

More reading

• Why the Centuria (ASX:CNI) share price is edging lower today
• Here’s why the Centuria (ASX:CNI) share price is up today

Motley Fool contributor Marc Sidarous 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.

The post Centuria Capital (ASX:CNI) share price rises as merger edges closer appeared first on The Motley Fool Australia.

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The De Grey Mining Limited (ASX: DEG) share price has plunged to become today’s worst performer on the S&P/ASX200 Index (ASX: XJO).

The De Grey share price hit an intra-day low of $1.24 just before noon, down more than 14% despite no price-sensitive news released today. At the time of writing, shares in the gold explorer have recovered slightly and are currently trading down 10.5% at $1.30.

Let’s take a closer look at what may have affected the company today.

De Grey share price sinks

Since De Grey has not released any price-sensitive news, it’s possible today’s price fall could be a reflection of the volatile spot gold price.

Overnight, the spot gold price touched its lowest intraday price in a week after posting declines over the past two sessions. Gold mining giants Newcrest Mining Ltd (ASX: NCM) and Evolution Mining Ltd (ASX: EVN) are both down marginally today. 

But fellow gold explorer Chalice Mining Ltd (ASX: CHN) has seen its share price fly 6.5% higher today. Could the De Grey share price fall be the result of investors switching from one gold explorer to another?

About the company

De Grey is a mining company based in Western Australia that focuses on gold exploration and development activities. The company has 100% ownership of the Mallina Gold Project in the Pilbara region which is also the site of its flagship Hemi Gold Project.

The Hemi Project is made up of zones including Aquila, Brolga, Brolga South and Crow. De Grey has noted thick and high-grade mineralisation across the project and expects the project to deliver great growth in the future.

Earlier this week, the De Grey share price bolted following positive drill results from the Aquila zone of its Hemi project. According to the update, samples from the top 200vm of the Aquila zone showed consistent and positive mineralisation. The company’s management described the results as “encouraging” with metallurgical test work revealing high gold recoveries.

Earlier in May, De Grey also released positive drill results from its Diucon-Eagle mining sites in the Hemi prospect.

De Grey share price snapshot

Despite today’s fall, the De Grey share price has performed strongly in 2021. Since the start of the year, shares in the gold explorer are up nearly 24% for the year, having hit an all-time high of $1.67 in April. Its shares have lifted 259% over the past 12 months.

More reading

• Why De Grey, GrainCorp, Pilbara Minerals, & Xero shares are dropping
• ASX 200 up 0.8%: Xero continues to slide, big four banks rise
• Brokers name 3 ASX shares to buy now
• 5 things to watch on the ASX 200 on Friday
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor Nikhil Gangaram 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.

The post Why is the De Grey (ASX:DEG) share price plummeting today? appeared first on The Motley Fool Australia.

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Crown Resorts Ltd (ASX: CWN) shares are on the rise today. The positive price movement comes after it became known a major shareholder is pushing the company to make the sale of the gaming and resort business happen as soon as possible.

At the time of writing, the Crown share price is trading at $13.05 – up 2.35%. For context, the S&P/ASX 200 Index is currently trading 0.67% higher.

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

Crown sell-off too slow?

The Australian Financial Review (AFR) is reporting substantial Crown shareholder Perpetual Investments is actively pushing Crown’s board and management to begin selling the business as soon as possible. Crown is currently the target of three separate takeover bids from Blackstone Group, Oaktree Investments, and Star Entertainment Group Ltd (ASX: SGR).

“Given this interest, it makes sense for the board to immediately commence and fast-track a formal sale process, concurrent with its consideration of the proposals presented by Star Entertainment, Blackstone and Oaktree,” Perpetual Head of Equities, Paul Skamvougeras, is quoted as saying.

The AFR is reporting frustration is growing among bidders and shareholders that the Crown sales process is not happening quickly enough. However, reports suggest Crown is prioritising ensuring it can obtain/retain its gaming licenses in New South Wales, Victoria, and Western Australia. 

The latest Blackstone bid is for $12.35 per share, Star Entertainment’s offer is a mix of cash and shares it says values Crown shares at approximately $14.00 each, and Oaktree wants to loan Crown $3 billion to buy back James Packer’s plurality in the company. Mr Packer was singled out by the NSW Independent Liquor and Gaming Authority (ILGA) as a key reason for withholding its NSW gaming license.

Crown share price snapshot

Over the past 12 months, the Crown share price has increased by around 44.5%. Shares in the company bottomed out at $6.00 during the height of the COVID market crash and then struggled to return to their pre-pandemic value, largely hovering around $9.00 to $10.00 until mid-March this year.

Crown shares then rocketed 21.4% after Blackstone was the first to submit an offer for the beleaguered company. Since then, successive bids from other potential buyers have seen the Crown share price go higher and higher.

Crown Resorts has a market capitalisation of $8.8 billion.

More reading

• The Crown (ASX:CWN) share price is in focus today. Here’s why
• What to expect from the Budget, and a record close for the ASX 200: Motley Fool CIO Scott Phillips on Sky News
• Boral (ASX:BLD) share price in focus as it rejects Seven Group (ASX:SVW) takeover bid
• ASX 200 jumps, A2 Milk sinks, Crown rises
• Why Crown, Fortescue, Nearmap, & Tyro shares are charging higher

Motley Fool contributor Marc Sidarous 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.

The post Crown Resorts (ASX:CWN) share price lifts amid sell-off push appeared first on The Motley Fool Australia.

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Fortunately, in this low interest rate environment, there are countless dividend shares for investors to choose from on the Australian share market.

But with so many to choose from, it can be hard to decide which ones to buy. To narrow things down, I have picked out three ASX dividend shares that brokers think investors should buy:

Humm Group Ltd (ASX: HUM)

According to a note out Macquarie, its analysts have retained their outperform rating and $1.30 price target on this financial services company. This follows the release of its third quarter update this week. The broker notes that Humm is a profitable buy now pay later provider and is expecting it to share its profits with shareholders in the form of dividends. It is forecasting a dividend per share of 3.4 cents per share in FY 2021. And thanks to provision releases in FY 2022, it expects Humm’s dividend to increase to 6.6 cents per share next year. Based on the current Humm share price of 95.2 cents, this will mean fully franked dividend yields of 3.6% and 6.9%, respectively.

Rio Tinto Limited (ASX: RIO)

A note out of Ord Minnett reveals that its analysts have a buy rating and $161.00 price target on this mining giant’s shares. Thanks to strong iron ore and copper prices, the broker believes Rio Tinto is well-placed to deliver bumper earnings and dividends in the coming years. Ord Minnett is forecasting fully franked dividends of ~$13.48 per share in FY 2021 and ~$11.22 per share in FY 2022. Based on the latest Rio Tinto share price of $126.01, this will mean 10.7% and 8.9% yields, respectively, over the next couple of years.

Telstra Corporation Ltd (ASX: TLS)

Another note out of Ord Minnett reveals that its analysts have retained their buy rating and lifted their price target on this telco giant’s shares to $4.10. The broker lifted its price target to reflect both Optus and Telstra increasing their mobile plan prices. Ord Minnett expects this to result in an increase in its average revenue per user (ARPU) metric in FY 2022. This should be supportive of its earnings and dividends in the near future. As a result, Ord Minnett continues to forecast fully franked dividends per share of 16 cents in FY 2021 and FY 2022. With the Telstra share price trading at $3.45, this will mean yields of 4.6%.

More reading

• Broker says this BNPL share could be better than Afterpay (ASX:APT)
• Why Humm, Moelis, Orica, & Treasury Wine shares are storming higher
• These ASX dividend shares offer generous fully franked yields
• What’s driving the Afterpay (ASX:APT) share price to 8-month lows?
• Why it might be time to give the TPG (ASX:TPG) and Telstra (ASX:TLS) share price a second look

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended Humm Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Top brokers name 3 ASX dividend shares to buy today appeared first on The Motley Fool Australia.

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The Magellan Financial Group Ltd (ASX: MFG) share price is having a very nice day today. At the time of writing, Magellan shares are up 4.27% to $47.35 a share. That’s a significant outperformance of the broader S&P/ASX 200 Index (ASX: XJO) which is only managing a 0.68% rise today.

Magellan is now more than 10% above the 52-week low of $42 that we saw back in March. However, it is still way down from the company’s 52-week high of $66 that we saw in the middle of last year.

So why are Magellan shares performing so well today?

Well, there are a couple of recent developments that may be responsible.

Why the Magellan share price is rising today

Firstly, Magellan’s funds under management (FUM). On 7 May, the company reported its FUM for the month of April. It disclosed a total FUM of $110.43 billion, which was up significantly (4.1%) from the $106.05 billion from the previous month. Since Magellan more or less makes its crust from a percentage cut of its total FUM, more FUM means more profits for Magellan.

Secondly, Magellan co-founder and chief investment officer Hamish Douglass has been loading the boat with shares of some of Magellan’s largest funds. As my Fool colleague Mitchell Lawler discussed last week, Mr Douglass has purchased significant tranches of both the Magellan Global Trust (ASX: MGF) and the Magellan High Conviction Trust (ASX: MHH) in recent weeks. This amounted to a total of $3.19 million as of 7 May.

Mr Douglass is well-known as a skilled investor, and as such, these moves are likely to add to the perception that Magellan’s funds are a good deal right now (or at least they were a few weeks ago). Not a bad factor to have working in a share price’s favour.

Finally, yesterday Magellan released its latest performance reports for the aforementioned funds. After a couple of months of benchmark underperformance, the Magellan Global Fund managed to return 4.5% for the month of April, significantly above the 3.2% that its benchmark (MSCI World Net Total Return Index (AUD)) delivered. The Magellan high Conviction Trust isn’t benchmarked. But it still managed to do even better over April, banking a return of 4.9%.

These figures are objectively impressive and may be restoring some confidence in investors that were previously put off by the relative underperformance of these funds over the past year or so.

Foolish takeaway

It’s likely to be a combination of these factors that are leading to the Magellan share price’s performance today. On current pricing, Magellan has a market capitalisation of $8.71 billion, a price-to-earnings (P/E) ratio of 21.49 and a trailing dividend yield of 4.62%.

More reading

• The Commonwealth Bank (ASX:CBA) share price hits new record high
• What resurgent inflation really means for your ASX shares
• ASX 200 up 0.8%: Xero continues to slide, big four banks rise
• 5 things to watch on the ASX 200 on Friday
• ASX 200 sinks alongside largest US inflation rise in 12 years

Motley Fool contributor Sebastian Bowen owns shares of Magellan High Conviction Trust. 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.

The post Why is the Magellan (ASX:MFG) share price up 4% today? appeared first on The Motley Fool Australia.

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Since this time last year, shares in Bendigo and Adelaide Bank Ltd (ASX: BEN) have performed better than those in Australia’s big four banks. The Bendigo Bank share price has gained 82.62% over the last 12 months.

That’s an ever-so-slightly superior result than the best performing of the big four banks, Australian and New Zealand Banking Group Ltd (ASX: ANZ), and notably better than the other three banks. The ANZ share price has gained 82.05% since 14 May 2020 and the other three majors have each gained between 65% and 71%.

At the time of writing, the Bendigo Bank share price is trading at $10.30, up 1.2% for the day so far.

Let’s take a look at what’s been happening for Bendigo Bank over the last 12 months.

The year that’s been for the Bendigo Bank share price

This time last year, Bendigo Bank shareholders would not have been as happy as they are today. The bank’s share price, along with those of most other ASX 200 companies, had plunged as a result of the coronavirus-induced recession. In fact, one year ago, Bendigo shares were only a matter of days off hitting their lowest closing price since 2001.

On 22 May 2020, the Bendigo Bank share price closed at $5.57, yet now it is arguably within striking distance of double this.

Following its lowest point, the Bendigo Bank share price was helped along by improving investor sentiment and a positive broker note on 9 June, which saw the company’s value surge 9.4% higher.

In July last year, most Australian bank shares were once again hammered by coronavirus concerns, as Victoria and New South Wales both saw an increase in case numbers. Shares in Bendigo Bank also took a plunge. Between 17 July and 20 July, the bank’s share price fell 5%.

End of 2020 financial year results

On 17 August 2020, Bendigo Bank published dire end-of-year results. Its net profit after tax fell 48.8% lower than the previous year’s.

Its bad and doubtful debts grew to reach $168.5 million. That figure included a coronavirus collective provision worth $127.7 million.

The results caused the bank’s share price to close 6.5% lower than it had the previous session.

First-quarter results

Bendigo Bank then went a little quiet for two months before releasing its first-quarter update in late October.

The update stated the bank had had a good start to the 2021 financial year.

Over the quarter, it achieved total lending growth of 11% and residential lending growth of 16.1%.

In the middle of October, it had 6,797 customer accounts still on deferral– 69% less than the peak on 31 May.

The value of deferred repayments was also down, comprising just $2.5 billion worth compared to $6.9 billion worth in June.

On 28 October, Bendigo also announced it was undertaking a capital raise, the news of which had little impact on its share price.

Half-year results

On 15 February 2021, the Bendigo Bank share price closed 7.9% higher than the previous session after the bank released its half-year results.

The results included a positive outlook and a number of improvements on the company’s full-year results.

For the half-year ended 31 December, the bank had a total income growth of 3.3% – raking in $849 million. It also had statutory net profit growth of 67.3% to $243.9 million.

The bank reported cash earnings of $219.7 million – 1.9% higher than the previous period as well as a fully franked dividend of 28 cents per share.

Finally, it reported its bad and doubtful debts had fallen another 15.9%, totalling just $19.5 million.

More reading

• ASX 200 up 0.8%: Xero continues to slide, big four banks rise
• 2 buy-rated ASX bank shares with huge dividend yields
• What do the CEOs of the Big Four banks think of the Federal Budget?
• Which ASX bank share is the cheapest after earnings?
• Flight Centre and Zip were among the most traded ASX shares last week

Motley Fool contributor Brooke Cooper 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.

The post The Bendigo Bank (ASX:BEN) share price has outperformed the big four appeared first on The Motley Fool Australia.

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Respected fund manager Wilson Asset Management (WAM) has recently identified two ASX shares that it owns in its portfolio.

WAM operates several listed investment companies (LICs). Some focus on larger companies like WAM Leaders Ltd (ASX: WLE) and WAM Research Limited (ASX: WAX).

There’s also one called WAM Capital Limited (ASX: WAM) which targets “the most compelling undervalued growth opportunities in the Australian market.”

The WAM Capital portfolio has delivered an investment return of 16.5% per annum since inception in August 1999, before fees, expenses and taxes. This gross return outperformed the S&P/ASX All Ordinaries Accumulation Index return of 8.6% per annum over the same timeframe.

These are the two ASX shares that WAM Capital outlined in its most recent monthly update:

Viva Energy Group Ltd (ASX: VEA)

Viva Energy is a business that refines, imports and delivers energy across Australia and is the exclusive licensee of almost 1,300 Shell and Liberty service stations. The Geelong Refinery employs more than 700 people and supplies more than 50% of Victoria’s fuel requirements.

Viva Energy recently revealed its first quarter operational update to investors. In that, it revealed a strong performance in its retail service stations division, with volumes of petrol consumed in the quarter ending 31 March 2021 now only 17% below the prior corresponding quarter.

The CEO and managing director of Viva Energy, Scott Wyatt, said:

Viva Energy is making strong progress on our business recovery program with encouraging results in all parts of our business during the first quarter.

WAM Capital pointed out that the Australian Government announced a support package providing a production payment to support domestic refiners which should help with the profitability of the ASX share’s struggling refining business which has been impacted by lower demand for refined fuel through this COVID-19 pandemic period.

Downer EDI Limited (ASX: DOW)

The LIC outlined what the Downer business is about – it designs, builds and sustains assets, infrastructure and facilities. It has a large workforce, with approximately 50,000 staff across more than 300 sites, largely in Australia and New Zealand.

During April, Downer announced that it was going to divest its tyre management business to Bridgestone Corporation for $79 million.

WAM Capital said this sale by the ASX share represented a strategic step in Downer’s divestment of its portfolio of mining businesses. Downer’s sale of mining and laundries assets so far will deliver total proceeds of $605 million to the business.

After the announcement of the sale of Otraco, the company revealed its intention to do an on-market share-buyback of up to 70.1 million shares, which is around 10% of its issued share capital. This will return the divestment program proceeds to investors.

More reading

• Its WAR! More details of WAM’s new listed investment company emerge
• ASX 200 Weekly Wrap: Shares have average week but a great month
• These were the best performing ASX 200 shares last week
• Downer (ASX:DOW) share price may only be at start of a capital return cycle
• Why the Sandfire (ASX:SFR) share price jumped to a 2-year high today

Motley Fool contributor Tristan Harrison 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.

The post Wilson Asset Management (WAM) thinks these 2 ASX shares are a buy appeared first on The Motley Fool Australia.

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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) remains on course to finish a difficult week on a positive note. At the time of writing, the benchmark index is up 0.7% to 7,033.8 points.

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

De Grey Mining Limited (ASX: DEG)

The De Grey Mining share price is down 12% to $1.27 despite there being no news out of the gold explorer. However, with its shares up over 250% since the time year amid excitement over its Hemi prospect, today’s decline could have been driven by profit taking from some investors.

GrainCorp Ltd (ASX: GNC)

The GrainCorp share price is down almost 2.5% to $5.30. This morning analysts at Credit Suisse downgraded the grain exporter’s shares to a neutral rating with a $5.54 price target. This follows the release of its half year results on Thursday. With its shares up 24% since the start of the year, the broker doesn’t appear to have seen enough in the result to maintain its outperform rating.

Pilbara Minerals Ltd (ASX: PLS)

The Pilbara Minerals share price is down 5% to $1.09. Investors have been selling Pilbara Minerals and other lithium miners today despite there being no obvious reason. Once again, this could be due to profit taking after some stellar gains in 2021. In fact, even after factoring in today’s decline, the Pilbara Minerals share price is up almost 25% this year.

Xero Limited (ASX: XRO)

The Xero share price has continued its slide and is down a further 4% to $112.50. Investors have been selling the cloud accounting platform provider’s shares since the release of its full year results on Thursday. The market was disappointed that Xero fell well short of earnings expectations. In addition to this, the company’s operating expense guidance for FY 2022 was higher than consensus estimates.

More reading

• Has COVID-19 killed the ASX WAAAX shares?
• Could this be a once-in-a-lifetime buying opportunity for ASX tech shares?
• ASX 200 up 0.8%: Xero continues to slide, big four banks rise
• Brokers name 3 ASX shares to buy now
• Top broker gives its verdict on the Xero (ASX:XRO) share price

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 Xero. 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.

The post Why De Grey, GrainCorp, Pilbara Minerals, & Xero shares are dropping appeared first on The Motley Fool Australia.

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Rewind to the blissful time before the COVID-19 pandemic, and WAAAX was an acronym that ASX investors were tossing around with fevered excitement. The ‘ASX’s answer’ to the US FAANG stocks, the WAAAXers were growing quickly and amassing incredible amounts of cash for shareholders. If you’re not familiar with the FAANG acronym, don’t worry. It stands for Facebook, Inc. Common Stock (NASDAQ: FB), Amazon.com, Inc. (NASDAQ: AMAN) Apple Inc (NASDAQ: AAPL) and Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL), which of course used to be called Google.

The ASX’s answer was WAAAX: WiseTech Global Ltd (ASX: WTC), Appen Ltd (ASX: APX), Altium Limited (ASX: ALU), Afterpay Ltd (ASX: APT) and Xero Limited (ASX: XRO).

WiseTech Global managed to put on almost 750% between May 2016 and September 2019. Altium managed roughly 470% over the same period. Appen was a top performer, adding more than 1,000% over that period, as did Afterpay. And Xero put up a still-respectable 300% or so of gains.

Well, the FAANG stocks have continued to show their dominance. All 4 of these US tech giants are right now, at, or near, all-time highs. Facebook is up more than 47% over the past 12 months. Apple, up 61%. Amazon is up 32.3% and Alphabet (C Class), 65%. Long story short, the FAANGs still have claws.

But the same can’t be said of the WAAAXers.

WAAAX off

After reaching an all-time high of just over $38 in 2019, WiseTech has, as of today’s pricing, gone backwards to the tune of 32% from that all-time high from close to 2 years ago. Altium has lost 42% from its high watermark that it hit just before the pandemic struck. Appen is a real clanger, down more than 72% since August last year on today’s level. Afterpay was doing ok for a while there, topping out at $160 a share back in February. But again, on today’s prices, it has given up more than 45% from those levels. And Xero has been dealt a similar fate, falling around 30% from its all-time high of $158 in December last year to today.

So what’s changed? Well, some of the WAAAXers have run into problems scaling their business models in a post-COVID world. This is especially true of WiseTech, Altium and Appen. In Appen’s case, the shares were especially hard hit earlier this month when the company’s CEO warned that the pandemic had led to changes in its customers’ behaviour, and not in a way that benefits the company.

Foolish takeaway

But ultimately, perhaps the story of the WAAAX shares so far just highlight how a narrative can get ahead of fundamental business performance. Just because a company grows at a breakneck speed for a few years doesn’t mean it will do so until Judgement Day.

But many of the WAAAX shares attracted prices over the past few years that arguably seemed to assume they would. When the market corrects this over-optimism, it can be devastating for existing shareholders. Remember, the great investor Benjamin Graham once said that in the short term, the market is a voting machine, and in the long term, a weighing machine. This might be exactly what we’ve seen play out with the WAAAX shares.

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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. Sebastian Bowen owns shares of Alphabet (A shares) and Facebook. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, and Facebook. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Appen Ltd and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Altium and recommends the following options: long January 2022 $1920 calls on Amazon, short March 2023 $130 calls on Apple, short January 2022 $1940 calls on Amazon, and long March 2023 $120 calls on Apple. The Motley Fool Australia owns shares of AFTERPAY T FPO, Altium, and WiseTech Global. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, and Facebook. 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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