The Australian share market is home to a good number of high quality companies with strong business models.

Among the best of them are arguably the shares listed below. Here’s why these ASX shares could be quality options for investors right now:

CSL Limited (ASX: CSL)

The first ASX share to consider is CSL. While this leading biotechnology company would be a top option at most times, now appears to be a particularly good time to make an investment. This is due to a recent and sharp pullback in the CSL share price.

This weakness has been driven by plasma collection headwinds caused by the pandemic. The good news is that increased demand for flu vaccines from the Seqirus business looks set to offset much or even all of this. And with plasma collections expected to improve once the pandemic passes, CSL appears well-placed for growth once conditions ease.

This should be supported by its lucrative R&D pipeline, which is filled with a number of potentially lucrative therapies that could be launched in the not so distant future. One of those is Clazakizumab. It is a humanised recombinant monoclonal antibody targeting interleukin-6 for the potential treatment of chronic active antibody-mediated rejection. This is the leading cause of long-term rejection in kidney transplant recipients. If successful, peak sales are estimated to be US$5.4 billion per annum.

Citi currently has a buy rating and $310 price target on its shares.

Xero Limited (ASX: XRO)

Another option to consider is Xero. This cloud-based business and accounting platform provider has been growing strongly over the last few years.

This has been driven by the shift to the cloud, its international expansion, acquisitions, increasing revenue per user, and its evolution into a full service solution.

The good news is that these same trends look set to underpin further strong growth over the next decade. This should be supported by its burgeoning app ecosystem, which Goldman Sachs is incredibly positive on.

According to a note, the broker estimates that Xero has a core total addressable market (TAM) of NZ$14 billion across its key markets. However, if it can successfully broaden and monetise its app ecosystem and expand into new geographies, Goldman believe it would open a further NZ$62 billion in TAM. As a result, it believes Xero has “a multi-decade runway for strong revenue growth.”

Goldman Sachs has a buy rating and $153.00 price target on its shares.

More reading

• Why the CSL (ASX:CSL) share price has rebounded 13% since March
• AUSSIE-FIRST: How to buy a fraction of an ASX share
• 2 five-star ASX 200 shares that are rated very highly
• Aussie dollar shoots higher! Here are some ASX winners
• CSL (ASX:CSL) share price wobbles on plasma and vaccine update

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 CSL Ltd. and 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.

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The Telstra Corporation Ltd (ASX: TLS) share price has had an interesting week. Telstra shares started Monday off at a price of $3.42 a share. But by Wednesday, those same shares dipped to as low as $3.32, a fall of more than 3% from Monday’s level. By the end of the week, we saw Telstra return to a share price of $3.40.

That was despite some interesting developments along the way. On Thursday, we discussed how Pengana Capital holds Telstra shares as its biggest holding. As my Fool colleague Tony reported, Pengana Capital chief investment officer Rhett Kessler has Telstra “as just under 8% of our portfolio”. Why? Mr Kessler stated that Pengana likes the telco because “when you buy Telstra shares, you’re buying the best mobile phone network in the country. And you’re buying a really nice inflation-protection bond from the government”.

Telstra gets 5G boost

On Friday, it was revealed that Telstra has secured 1,000 MHz in the 26 GHz spectrum auction, spending $277 million to do so.

Here’s some of what Telstra CEO Andy Penn said of the acquisition:

Telstra is already leading the way in 5G, and this investment of $277 million in highly sought after spectrum will help us broaden and deepen our 5G connectivity for more Australians across the country…. mmWave spectrum is especially good at providing high-speed mobile broadband in high-density areas, such as built up cities and towns, train stations, sport stadiums and other locations with a high concentration of people using their mobile devices.

So what’s next for the Telstra share price? Well, Telstra has been hovering around its current pricing level since late March. Before then, the telco had been on a bit of a bullish run, appreciating more than 12% between 11 March and 30 March. This share price run was sparked by Telstra’s announced plans to structurally separate itself into 4 divisions by December this year. Investors are evidently expecting that this separation will unlock value from some of Telstra’s more defensive assets. Such as its mobile towers and fixed-line networks.

Considering all of this, it will be interesting to see how the market continues to price Telstra. The separation plans are likely to continue to set the tone for the company. Especially in conjunction with the 5G spectrum announcement on Friday.

More reading

• ASX 200 finishes flat, Kogan drops, Accent jumps
• What’s with the Telstra (ASX:TLS) share price and other telcos today?
• History is on the side of the battered AMP (ASX:AMP) share price as it plans its demerger
• ASX 200 down 0.1%: Kogan crashes, AMP’s demerger plans, Telstra strengthens 5G network
• Telstra (ASX:TLS) share price on watch after 5G update

Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra 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 IGO Ltd (ASX: IGO) share price spent all day firmly in the green today. At the close of trade, shares in the mineral exploration company were swapping hands for $7.13, up 2.5%.

Today’s positive price movement comes amid news the company has successfully divested its minority stake in a gold mining project.

Let’s take a closer look at today’s news and what it means for the IGO share price.

IGO offloads Tropicana investment

In a statement to the ASX, IGO advised it has sold its 30% stake in the Tropicana Gold Mine to Regis Resources Limited (ASX: RRL). The sale was pending confirmation from Tropicana majority owner, AngloGold Ashanti (ASX: AGG). This approval was received yesterday.

The divestment of Tropicana marks “an important strategic milestone” for IGO.

The company said the transaction maximised the value of Tropicana for IGO’s shareholders and allowed it to focus on commodities critical to enabling clean energy. Investors seemingly agree, judging by today’s IGO share price rise.

Proceeds from the sale will be used to fund the purchase of the Tianqi Lithium Corporation’s Australian lithium assets.

Lithium demand continues 

It’s no secret that Lithium shares have been soaring in recent months. Strong demand for the element is linked to rising demand for electric vehicles – which use lithium in their batteries.

The website Trading Economics puts the price of lithium on the open market at approximately US $14,000 a tonne. It’s up an astonishing 93.6% since the beginning of the year. Other metals surging on the green energy boom include cobalt, copper, nickel, palladium, platinum, and rhodium.

In other news affecting the IGO share price recently, Antipa Minerals Ltd (ASX: AZY) announced the Burracoppin Project (which it has a 30% interest in) has “encouraging” essay results.

The best results, according to Antipa, include a 1-metre-wide ore with 7.48g of gold per tonne and an 8-metre-wide ore with 0.47g of gold per tonne.

IGO share price snapshot

Over the past year, the IGO share price has increased 55.57% and posted a 65.17% rise in 2021.

IGO Ltd has a market capitalisation of $5.4 billion.

More reading

• The ASX 200 shares brokers think you should watch out for
• Why Megaport, Pointerra, Regis Resources, & Zip are charging higher
• ASX 200 shares thrown in the bargain bin: Here’s 3 ideas
• Why the Regis Resources (ASX:RRL) share price is climbing
• ASX 200 Weekly Wrap: ASX 200 hits new post-COVID high

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.

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If you’re looking for outsized returns, then the small cap side of the market could be worth a look.

This is because there are a number of small caps that could generate very strong returns for investors over the 2020s if they live up to their potential.

Two small cap ASX shares that are highly rated are listed below. Here’s what you need to know about them:

Bigtincan Holdings Ltd (ASX: BTH)

The first small cap to look at is this provider of an artificial intelligence-powered sales enablement automation platform.

Sales enablement may not be a term that many readers are overly familiar with. However, it is simply a platform that enables sales teams to function more efficiently and deliver better results.

Clearly the platform works, as Bigtincan continues to experience strong demand from some of the biggest companies in the world.

The company has also been making bolt-on acquisitions which have improved its offering and strengthened its position in particular industries.

A combination of the benefits of acquisitions and organic growth led to the company reporting annualised recurring revenue (ARR) of $48.4 million at the end of December. This was a 50% increase over the prior corresponding period.

Morgan Stanley is a fan of the company. It currently has an overweight rating and $1.40 price target on its shares.

Booktopia Group Ltd (ASX: BKG)

Another small cap to watch is this online book retailer.

Like Bigtincan, it has been growing very strongly in FY 2021. This has been driven by the shift online and improvements in its distribution capabilities.

For example, during the first half of FY 2021, the company reported a 40% jump in shipments to a total of 4.2 million units. This ultimately led to Booktopia reporting a 51.1% increase in revenue to $112.6 million and a whopping 502.3% jump in underlying EBITDA to $8 million.

Analysts at Morgans are fans of the company and believe it is well-placed for further growth. They currently have an add rating and $3.53 price target on its shares.

More reading

• 2 rapidly growing small cap ASX shares to watch
• 3 excellent small cap ASX shares to watch closely
• 3 exciting small cap ASX shares to watch
• Why the Booktopia (ASX:BKG) share price is climbing today
• 2 quality small cap ASX shares rated as buys

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends BIGTINCAN FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Booktopia Group Limited. The Motley Fool Australia has recommended BIGTINCAN FPO. 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) rose 0.08% to 7,061 points.

Here are some of the highlights from the ASX:

Kogan.com Ltd (ASX: KGN)

The Kogan share price fell around 14% today after giving a business update.

For the three months to 31 March 2021, gross sales went up 47% and revenue rose by more than 65%. Gross profit grew by more than 54% and adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) fell by 24%. Kogan active customers went up by 77% to 3.22 million.

The ASX 200 share said that it has continued its long-term strategy of investing in technology, brand awareness, logistics capability, platform improvements and Kogan First membership benefits to lay the foundation for future growth and provide ongoing improvements in the customer experience.

However, in the period to March 2021, customer demand fluctuated below the levels seen in the prior nine months to December 2020. As a result, the company was required to store larger amount of inventory, after ordering a high level of product in reaction to the demand seen in the first half of the financial year. This resulted in high storage expenses and demurrage fees.

The company has been increasing its promotional activity in response to the above inventory problem.

At the same time, the company is observing price inflation of many products currently being planned for reorder in advance of the peak Christmas trading period, together with inflation in international shipping costs.

Accent Group Ltd (ASX: AX1)

The Accent share price rose by around 11% after the shoe retailer announced an acquisition.

Accent announced that Brett Blundy is going to re-join the board. The business also announced the acquisition of the Glue Store retail business and the whole sale and distribution brands business of Next Athleisure.

The acquisition is going to cost a total of $13 million. Glue Store is an Australian youth apparel, shoe and accessory retailer offering an aspirational range spanning global street, fashion and sport cultures.

Glue Store’s product range includes leading domestic and global brands and a portfolio of strong and growing owned vertical brands.

The retail business has a network of 21 stores and an integrated online site. It’s generating $90 million of annual sales as well as $16.6 million of online sales.

Telstra Corporation Ltd (ASX: TLS)

The Telstra share price went up 0.3% today after the ASX 200 shared its success after investing $277 million to secure 1000 MHz nationally in a 26 GHz spectrum auction.

Telstra CEO Andrew Penn said that the new mmWave spectrum would dramatically increase capacity and speeds for Telstra’s customers.

Mr Penn said:

High speed connectivity is critical to Australia’s future prosperity and our aspirations to be a world leading digital economy. It has become central to all our lives – the way we live, work, keep ourselves entertained and stay connected, and more and more 5G will be at the heart of that.

mmWave spectrum is especially good at providing high-speed mobile broadband in high-density areas, such as built up cities and towns, train stations, sport stadiums and other locations with a high concentration of people using their mobile devices.

Telstra’s 5G technology now covers almost two-thirds of the Australian population and is on track to reach 75% by the end of June 2021.

More reading

• What’s with the Telstra (ASX:TLS) share price and other telcos today?
• History is on the side of the battered AMP (ASX:AMP) share price as it plans its demerger
• Why a2 Milk, Centaurus Metals, Kogan, & Youfoodz are sinking today
• The Youfoodz (ASX:YFZ) share price is down 15% today. Here’s why
• AMP (ASX:AMP) is the most traded ASX 200 share today

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd and Telstra Limited. The Motley Fool Australia has recommended Accent Group. 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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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:

BHP Group Ltd (ASX: BHP)

According to a note out of Macquarie, its analysts have retained their outperform rating and $57.00 price target on this mining giant’s shares. This follows the release of a third quarter update that the broker thought was solid. Overall, it believes BHP is well-positioned to deliver on its guidance and benefit from sky high iron ore prices. This is expected to result in strong earnings and bumper dividends. Macquarie is forecasting fully franked dividends of $3.51 per share in FY 2021 and $2.97 per share in FY 2022. Based on the latest BHP share price of $47.56, this represents yields of 7.4% and 6.2%, respectively.

Wesfarmers Ltd (ASX: WES)

Another note out of Macquarie reveals that its analysts have retained their outperform rating and $56.60 price target on this conglomerate’s shares. The broker appears to have been pleased with the company’s Kmart update. It believes that the focus on private label expansion and online sales will drive growth in the coming years. Particularly given its modest share of an enormous addressable market. Macquarie expects fully franked dividends of $1.63 per share and $1.51 per share for the next two years. Based on the current Wesfarmers share price of $55.70, this will mean yields of 2.9% and 2.7%.

Westpac Banking Corp (ASX: WBC)

Analysts at Morgans have retained their add rating and lifted the price target on this banking giant’s shares to $28.50. According to the note, the broker believes Westpac and the rest of the big banks could surprise to the upside when they release their next updates in the coming weeks. In addition, Morgans has upgraded its earnings forecasts for the coming years to reflect lower credit impairment assumptions. As for dividends, the broker is forecasting $1.37 per share in FY 2021 and $1.49 per share in FY 2022. Based on the latest Westpac share price of $25.12, this equates to fully franked yields of 5.5% and 5.9%, respectively.

More reading

• 3 ASX dividend shares with fully franked yields over 5% today
• History is on the side of the battered AMP (ASX:AMP) share price as it plans its demerger
• 2 strong ASX 200 shares offering good income
• 5 things to watch on the ASX 200 on Friday
• 2 high quality ASX shares for your retirement portfolio

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of Wesfarmers 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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Finding an investment that offers a yield on your cash of 5% or more today is a hard task. If you don’t look at the ASX share market that is. In this era of near-zero interest rates, ASX dividend shares are one of the last bastions of yield today. Luckily for all of the yield-hungry investors out there, there are still plenty of ASX shares that have a trailing yield of 5% or more on offer today. Here are 3 of them:

3 ASX dividend shares with fully franked yields of 5% or greater today

BHP Group Ltd (ASX: BHP)

The ‘Big Australian’ BHP is one ASX dividend share that offers a yield of 5% or greater today. BHP has had a stellar year, climbing almost 60% over the past 12 months, and reaching a new all-time high of $50.93 last month. Investors can thank the surging commodities markets, especially a stubbornly high iron ore price, for these highs. At the time of writing, BHP shares are going for $47.48 a share. At this level, BHP shares offer a trailing dividend yield of 4.36%. That grosses up to a 6.23% yield if you include BHP’s full franking credits.

Coles Group Ltd (ASX: COL)

The Coles share price has been out of favour for a few months now. The country’s second-largest supermarket chain remains more than 15% down year to date, and down almost 20% from the all-time highs we were seeing back in August last year. Intriguingly for ASX dividend investors, this share price slump has pushed Coles’ trailing dividend yield to a pretty hefty level.

On the recent pricing of $15.68 a share, Coles offers a trailing dividend yield of 3.96%. Like BHP, Coles’ dividends tend to come with full franking credits. That means that this yield grosses up to 5.51% with the inclusion of those credits.

Medibank Private Ltd (ASX: MPL)

Medibank is the largest private health insurer on the ASX. Medibank has been on a bit of a rollercoaster share price wise over the past year. Its 52-week low of $2.45 a share was seen back in September, which was incidentally lower than the lowest price Medibank hit during the March 2020 coronavirus-induced market crash.

Medibank shares have obviously rebounded since then, but are still down more than 3% year to date. Luckily for ASX dividend investors, Medibank’s dividend payments have been far steadier. The interim dividend of 5.8 cents per share that investors received last month was actually higher than 2020’s interim payment of 5.7 cents. On current pricing, Medibank has a trailing dividend yield of 4.12%, which grosses up to 5.89% with the company’s full franking.

More reading

• Top brokers name 3 ASX dividend shares to buy today
• History is on the side of the battered AMP (ASX:AMP) share price as it plans its demerger
• 2 growing ASX dividend shares for income investors
• 5 things to watch on the ASX 200 on Friday
• Wesfarmers’ (ASX:WES) Bunnings open to hosting COVID vaccine hubs

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET. 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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After flying 5% higher this morning, it was downhill all the way for the Proteomics International Laboratories Ltd (ASX: PIQ) share price today.

At the market close today, shares in the medical technology company were right back where they started, trading at $1.18. By comparison, the S&P/ASX All Ordinaries Index (ASX: XAO) is 0.02% higher.

Today’s price movement comes as the company announced one of its products received ISO certification.

ISO Certification

In today’s release, Proteomics International advised it has received ISO 13485 certification. ISO certification is an independent process that gives assurance a product or service “meets specific requirements”.

The company said achieving certification would aid it in commercial discussions going forward with global diagnostic companies. It also believes the certification will “widen” the market for its PromarkerD test and make it easier to achieve regulatory approval around the world.

The PromarkerD test is used for the early detection of chronic kidney disease (CKD) in patients with type-2 diabetes. According to Proteomics, clinical studies showed 86% of patients with type-2 diabetes went on to develop CKD within 4 years.

PromarkerD tests are manufactured in Australia under licence. The company is anticipating demand for the product to boom worldwide. Recognising this, Proteomics says it is in discussions with several manufacturers in the northern hemisphere “with the objective of streamlining the future production”. 

Proteomics managing director Dr Richard Lipscombe welcomed the progress, saying:

The ISO 13485 manufacturing standard provides the foundation to regulatory requirements for medical diagnostics and has been adopted by markets including the European Union, Australia, Japan, Canada and, most recently, the United States.

Proteomics share price snapshot

The Proteomics share price has increased 280% over the past 12 months and is up 51% year-to-date. At the same time, it has fallen 13% since achieving its all-time high on Monday.

Proteomics International has a market capitalisation of $129.7 million.

More reading

• Top brokers name 3 ASX dividend shares to buy today
• 3 ASX dividend shares with fully franked yields over 5% today
• What’s with the Telstra (ASX:TLS) share price and other telcos today?
• History is on the side of the battered AMP (ASX:AMP) share price as it plans its demerger
• Broker weighs in on the Redbubble (ASX:RBL) share price after its 20% dive

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.

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Shares in ASX-listed telco companies barely moved today following the outcome of the 26 GHz band spectrum auction.

The share prices of Telstra Corporation Ltd (ASX: TLS), TPG Telecom Ltd (ASX: TPG), and Pentanet Ltd (ASX:5GG) have all remained fairly flat as the end of trading closes in.  

Telstra pays a hefty price for its share

The Australian Communications and Media Authority announced the results of its 26 GHz auction on Friday. Australian telcos placed their bids over the last month in an attempt to secure licenses of the 5G optimised spectrum.

With the spectrum split into 360 available lots, 358 were sold for a combined total of $647.6 million. These 358 lots were snagged by just 5 competing bidders, listed below:

• Pentanet Ltd won 4 lots – paying $7.986 million
• Dense Air Australia won 2 lots – paying $28.690 million
• Mobile JV (TPG’s bidding vehicle) won 86 lots – paying $108.187 million
• Optus Mobile won 116 lots – paying $226.203 million
• Telstra won 150 lots – paying $276.576 million

The millimetre wave, or mmWave, spectrum band sold is a short-range, high-frequency, and high-capacity band that unlocks the massive potential of 5G. Clearly, Telstra wants to be the frontrunner of 5G’s future in Australia, with the company making up nearly 43% of the total money spent by winning bids.

Telstra commentary

Commenting on the auction results, Telstra CEO Andy Penn said:

High-speed connectivity is critical to Australia’s future prosperity and our aspirations to be a world-leading digital economy.

It has become central to all of our lives – the way we live, work, keep ourselves entertained and stay connected, and more and more 5G will be at the heart of that.

In its update, Telstra also revealed it’s on track to reach 75% of Australia’s population with its 5G network by the end of June. At the time of writing, the Telstra share price is 0.2% higher trading at $3.40 per share.

What about competitors?

Singtel-owned Optus purchased 800MHz in mainland capital cities, along with 600MHz in Hobart and the Margaret River region of Western Australia.

Furthermore, TPG snatched up the 600MHz spectrum licenses across Brisbane, Adelaide, Canberra, and regional areas. In addition to licenses for the 400MHz spectrum across Sydney, Melbourne, and Perth.

There have been competition concerns among players due to the 5G allocations. Optus has nudged the Australian Competition and Consumer Commission for a 70MHz cap on all low-band allocations.

More reading

• History is on the side of the battered AMP (ASX:AMP) share price as it plans its demerger
• ASX 200 down 0.1%: Kogan crashes, AMP’s demerger plans, Telstra strengthens 5G network
• Pentanet (ASX:5GG) share price jumps after news of 5G deal
• Telstra (ASX:TLS) share price on watch after 5G update
• Why this ASX share bull market could run for longer

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra 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 AMP Ltd (ASX: AMP) share price reacted positively to its demerger plans, but investors are left confused as to whether this is a buying or selling opportunity.

It looks like the pessimists are winning out with the AMP share price initially surging over 7% before losing momentum to trade 0.9% higher at $1.14 in the last hour of trade.

But history is on the side of AMP supporters as several research reports have noted that most demergers create value for shareholders.

Demerger history gives embattled AMP share price hope

One of these reports was released by Wilsons earlier this month. The broker believes that returns generated from such transactions can be meaningful.

“The empirical evidence on demerger event studies, both in Australia and overseas, validates that break-ups generally create shareholder value, for both the parent and the spin-off,” said Wilsons.

“We have looked at 16 demergers since 2010, and in the majority of examples demergers create value during both the demerger period as well as post-demerger over the following 12 and 24 months.”

Ugly duckings can turn into swans

What’s surprising is that the entity that is being spun out usually performs better than the parent. Wilson found that these abandoned children have outperformed their parents by almost two times on average over a 12- to 24-month period.

Some of the divested entities that have outshone their parents two years post demerger include Dulux Group, which split from the Orica Ltd (ASX: ORI) share price; South32 Ltd (ASX: S32) share price after leaving BHP Group Ltd (ASX: BHP) and Virgin Money UK CDI (ASX: VUK) share price after being cut from National Australia Bank Ltd. (ASX: NAB).

Short-term pain for longer-term gain

Another research paper from Macquarie Group Ltd (ASX: MQG) also found that demergers can create buying opportunities for longer-term investors.

The broker found that ASX shares normally fall on the demerger announcement until the transaction is implemented.

It also noted that the performance of the child entity usually underperforms the broader market for the first six months. But this trend reverses and the child entity outruns the market.

“For the parent entity there is typically a short-term run-up into the demerger implementation followed by market performance post,” said Macquarie.

“The parent entity has tended to outperform over the longer term (1yr plus).”

Other ASX shares with demerger ambitions

Given the number of other potential demergers on the ASX, these findings are reassuring. The Suncorp Group Ltd (ASX: SUN) share price, AGL Energy Limited (ASX: AGL) share price and Telstra Corporation Ltd (ASX: TLS) share price are a few examples.

There is one other implication from demergers that are relevant to ASX investors. The outperformance of demerger candidates is uncorrelated to the S&P/ASX 200 Index (Index:^AXJO).

Hidden benefit from demergers and spin-offs

“In many cases, the value creation, or shareholder return, is almost entirely controllable by the company, and is distinct from a strategy that relies on improving sales or operating margins,” explained Wilsons.

“Corporate break-ups can provide investors with attractive returns, while also diversifying their sources of portfolio returns.”

Given the volatility on the market, this point shouldn’t be lost in the details.

More reading

• Why the NAB (ASX:NAB) share price is up 70% in 12 months
• AMP (ASX:AMP) is the most traded ASX 200 share today
• Why Accent, AMP, De Grey, & Nuix shares are charging higher
• What’s happening with the ANZ Bank (ASX:ANZ) share price?
• ASX 200 down 0.1%: Kogan crashes, AMP’s demerger plans, Telstra strengthens 5G network

Motley Fool contributor Brendon Lau owns shares of AMP Limited, BHP Billiton Limited, Macquarie Group Limited, National Australia Bank Limited, South32 Ltd, and Telstra Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited and Telstra 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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