The S&P/ASX 200 Index (ASX: XJO) is continuing its fine form of recent weeks today and is up 1.24% at the time of writing to 5,457.7 points. Since the lows we saw in March, the ASX 200 has now rallied well over 20%, meaning we are in a new bull market for ASX shares once more.

But one investor not popping the champagne right now is David Pace – co-founder of Greencape Capital.

According to reporting in the Australian Financial Review (AFR), Pace is calling time on the current bullish sentiment defining ASX shares, saying “the days of market gains are numbered, and investors should prepare for another sell-off”.

Calling the performance of the ASX 200 over the past 6 weeks as an “inevitable rally” over the reopening of sections of the Australian economy, Pace is worried about this euphoria wearing off as the “economic reality sets in”.

“I’m not expecting the upswing to continue,” the AFR quotes Pace as stating. “If we are in some form of social distancing for the rest of the year – and it might be as profound as we are currently experiencing – there are parts of the economy that will struggle.”

Should ASX investors be worried today?

Mr Pace’s comments should certainly be appreciated in my view. Greencape Capital has long been a successful fund manager on the ASX and Pace is certainly an experienced hand at markets.

However, Pace is not selling everything and walking away. More recently, Greencape is looking to load up on shares that Pace sees as having a high chance of coming out the other side of coronavirus stronger than before: “Our bias is backing better-than-average people in better-than-average businesses”.

Pace names Aristocrat Leisure Limited (ASX: ALL), James Hardie Industries (ASX: JHX) and Sydney Airport Holdings Pty Ltd (ASX: SYD) as top stocks Greencape considers under this label.

However, Pace does dispense a word of caution: “We are cautious not to overdo it. We are wanting to see some proof statements about what the other side looks like”.

“It’s a sea of uncertainty right now and that’s not a wonderful backdrop for putting down money unless you’re getting bargain-basement prices,” he added.

Foolish takeaway

Whether the markets go higher from here or we do see another market crash, I think investors should stick to their strategy regardless. In my view, investing in quality businesses but also keeping some cash on the side is a great playbook you can use to hedge your bets either way.

More reading

• Webjet share price jumps 25%: Is it good value?
• Is the Woolworths share price a buy?
• 3 ASX 200 pandemic winners and 3 losers
• ASX 200 storms 1.2% higher: Cochlear reports 60% sales decline, Webjet jumps 22%
• 3 ASX 200 shares to watch this week

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Is this ASX 200 share market recovery “fool’s gold”? This ASX fundie thinks so appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3dxioKF

The S&P/ASX 200 Index (ASX: XJO) has started the week off in sensational form. In afternoon trade the benchmark index is up 1.2%.

While the majority of shares on the index are pushing higher, none have pushed as hard as the Webjet Limited (ASX: WEB) share price on Monday.

The online travel agent’s shares were up as much as 25.5% to $3.68 this morning. When its shares hit that level, they had gained an impressive 36% over the last two trading days.

Why is the Webjet share price rocketing higher?

Investors have been buying Webjet and fellow travel agent Flight Centre Travel Group Ltd (ASX: FLT) (up 9% today) following the announcement of the Federal Government’s 3-step plan to reopening Australia.

While step one will have a small benefit to travel agents, as intra-state travel is being encouraged in some states, the third step is the one which could give them the biggest short term boost.

If Australia avoids a spike in infection rates as restrictions ease, state governments look set to push ahead with the second step in June and then the third step in July.

That third step is likely to include the opening of borders to allow interstate travel once again, which would be a major boost to the local tourism industry.

In addition to this, there’s the potential for a trans-Tasman travel bubble being opened up later this year allowing travel between Australia and New Zealand. This would be another much needed boost for Webjet and its industry peers.

But whether this level of travel will be enough to make Webjet’s operations profitable in the near term is difficult to say. Though, with the company recently raising $346 million via an equity raising and reducing its costs down materially, it looks well-positioned to come out of the crisis in a strong position.

Should you invest?

While I think things are looking a lot more positive for Webjet, I feel its shares are deceptively expensive at this point and wouldn’t be in a rush to invest.

Based on FY 2019’s net profit of $60.3 million, Webjet’s shares are changing hands at 20x earnings.

I’m not overly confident Webjet will deliver a profit of that level again until FY 2023. Which begs the question, do you want to pay 20x FY 2023 earnings for Webjet’s shares? I think better value options are available elsewhere on the market.

More reading

• Is this ASX 200 share market recovery “fool’s gold”? This ASX fundie thinks so
• Is the Woolworths share price a buy?
• 3 ASX 200 pandemic winners and 3 losers
• ASX 200 storms 1.2% higher: Cochlear reports 60% sales decline, Webjet jumps 22%
• 3 ASX 200 shares to watch this week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Webjet share price jumps 25%: Is it good value? appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3fEtRu3