The S&P/ASX 200 Index (ASX: XJO) was on form again last week thanks partly to strong gains in the consumer discretionary and industrials sectors. The ASX 200 rose 0.8% over the five days to end it at 6,766.8 points.

While a good number of shares climbed higher with the market, some stood out with particularly strong gains. Here’s why these were the best performers on the ASX 200 last week:

Corporate Travel Management Ltd (ASX: CTD)

The Corporate Travel Management share price was the best performer on the ASX 200 last week with a 14% gain. This was despite there being no news out of the corporate travel booker last week. However, with more leisure travelling expected to occur domestically because of government stimulus, some investors may believe this will trickle over into the corporate sector.

Appen Ltd (ASX: APX)

The Appen share price wasn’t far behind with a gain of 13% last week. This strong gain was driven by a rebound in the tech sector and bargain hunters snapping up the artificial intelligence data services company’s shares following a sharp pullback in recent weeks. Despite Appen’s rise last week, its shares are still down by almost 28% since the start of the year.

Silver Lake Resources Limited (ASX: SLR)

The Silver Lake Resources share price was on form last week and recorded an 11.3% gain. Investors were buying this gold miner’s shares after the price of the precious metal rebounded following a pullback in bond yields. And given how Silver Lake share price was down heavily year to date, investors appear to have decided that it was a particularly good way to gain exposure to the sector. One broker that would agree is Macquarie. Late last month it put an outperform rating and $2.40 price target on its shares. The Silver Lake share price ended the week at $1.58.

Clinuvel Pharmaceuticals Limited (ASX: CUV)

The Clinuvel share price was a strong performer and charged 11.1% higher over the five days. This was despite there being no news out of the biopharmaceutical company last week. However, given that the company’s key drug, Scenesse, treats erythropoietic protoporphyria (EPP), investors may be hopeful that the rollout of COVID vaccines in the Northern Hemisphere will lead to increased mobility and ultimately stronger demand for the drug. EPP is a condition where sufferers have a hypersensitivity of the skin to sunlight. Demand for Scenesse softened during lockdowns.

More reading

• What exactly is a ‘balanced’ ASX share portfolio?
• These were the worst performing ASX 200 shares last week
• ASX 200 climbs, Westpac in the clear, Nine reveals a WIN-ning deal
• Here’s why the Challenger (ASX:CGF) share price is up 80% in 6 months
• Why the Corporate Travel Management (ASX:CTD) share price just hit a 52-week high

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 Appen Ltd. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management 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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One of the most overused words in the world of ASX share market investing is surely ‘balanced’. Every financial advisor under the sun will tell you the benefits of having a ‘balanced’ or ‘diversified’ portfolio.

It’s even what most superannuation funds usually call their most popular portfolio options. And yet it’s one of the topics that many investors struggle with the most. Perhaps even inadvertently.

So what does this fabled concept really mean?

When people talk about a ‘balanced’ portfolio or a ‘diversified’ portfolio, they are essentially talking about the same thing. ‘Balanced’ usually refers to a share portfolio’s ability to weather adverse events, either in a specific company, a specific sector, or even an entire economy.

Let’s take an ASX dividend investor. If this investor had a portfolio of eight dividend-paying companies, and five of them were ASX bank shares, the investor might think they are diversified because they hold five different banks.

Yet any bank that operates in Australia is exposed to the same risks. If there is a problem with the Australian banking system, all banks will be affected. If there is a change to company tax rates, all banks will be affected. And the investor’s portfolio will be too. Dramatically. As such, this would not normally be considered a ‘balanced portfolio’.

Instead, consider this. The ASX dividend investor owns just their favourite ASX bank, among a portfolio of 15 other top ASX dividend shares. In this scenario, the investor is far more protected against bank-specific woes. Hence, the portfolio is far more ‘balanced’.

Perfectly balanced, as all things should be?

But balance doesn’t always just mean diversity amongst ASX shares. We are still one small-ish country in a very big world. Our currency is also rather fickle due to our economy’s exposure to the volatile mining industry. That’s why you’ll find that Australian shares as a whole usually make up less than half of the typical ‘balanced’ superannuation fund.

Most of these balanced funds will have some international shares thrown in, partly to balance out currency risk. They’ll also usually hold assets that aren’t shares at all, such as cash, property or government bonds. These assets can balance out the volatility of shares, which is a big concern for some investors.

So how much balance should we all aim for? Well, that’s a question with no right or wrong answer – nothing can be ‘perfectly balanced’ anyway.

If you know a sector inside and out, warts and all, such as tech, you might not feel the need to diversify away from it at all. If you don’t know too much about investing in general, or find it utterly boring, you might want to go for as much diversification as possible.

Perhaps if you’re comfortable with the volatility that shares can bring, you might not feel it necessary to invest in other safer asset like cash or bonds. There’s nothing wrong with a diversified portfolio of ASX shares, perhaps with some international ones thrown in as well.

The only right answer when it comes to how ‘balanced’ your portfolio should be is how comfortable you are with its balance in the first place. As long as you understand the risks and potential benefits of your choice, that is.

More reading

• These were the best performing ASX 200 shares last week
• These were the worst performing ASX 200 shares last week
• ASX 200 climbs, Westpac in the clear, Nine reveals a WIN-ning deal
• Here’s why the Challenger (ASX:CGF) share price is up 80% in 6 months
• Goldman reaffirms its conviction buy on this ASX share on Yallourn shutdown

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. 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) was on form again last week thanks partly to strong gains in the consumer discretionary and industrials sectors. The ASX 200 rose 0.8% over the five days to end it at 6,766.8 points.

While a good number of shares climbed higher with the market, some stood out with particularly strong gains. Here’s why these were the best performers on the ASX 200 last week:

Zip Co Ltd (ASX: Z1P)

The Zip share price was the worst performer on the ASX 200 last week with a disappointing 10.2% decline. Weakness in the tech sector due to concerns over rising bond yields and a broker note out of UBS weighed on the buy now pay later provider’s shares. In respect to the latter, UBS downgraded Zip’s shares to a sell rating with a $6.40 price target. This compares to the Zip share price of $8.59 at the end of the week.

Smartgroup Corporation Ltd (ASX: SIQ)

The Smartgroup share price was out of form and dropped 7.3% over the five days. A good portion of the salary packaging and fleet management company’s share price decline last week was driven by its shares trading ex-dividend. Eligible Smartgroup shareholders can now look forward to being paid its final fully franked dividend of 32 cents per share on 23 March.

Santos Ltd (ASX: STO)

The Santos share price wasn’t far behind with a 7% decline last week. This was driven by news that major shareholder ENN Group sold approximately 107.1 million shares, representing a 5.14% interest in Santos, at $7.33 per share. The energy producer advised that ENN has told it that it remains fully supportive of Santos’ strategy and future direction. It is also excited to remain its largest individual shareholder with a 9.97% stake.

A2 Milk Company Ltd (ASX: A2M)

The a2 Milk share price was out of form again last week and sank 5.8%. This latest decline means the infant formula company’s shares are now down 25% since the start of the year. A disappointing half year result, which included a second downgrade to its FY 2021 guidance, is the reason for its share price decline. Judging by the selling, investors don’t appear convinced that the company’s performance will turnaround quickly.

More reading

• ASX 200 climbs, Westpac in the clear, Nine reveals a WIN-ning deal
• Here’s why the Challenger (ASX:CGF) share price is up 80% in 6 months
• Goldman reaffirms its conviction buy on this ASX share on Yallourn shutdown
• Morgans just added this ASX 200 share to its model portfolio
• Why ASX income investors should consider this dividend ETF

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 ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool Australia has recommended SMARTGROUP 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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The S&P/ASX 200 Index (ASX: XJO) joined the global share market rally on Friday, with the index finishing 0.8% higher.

That comes after US share markets posted strong gains on Thursday (overnight Aussie time).

The tech heavy Nasdaq Composite (INDEXNASDAQ: .IXIC) gained 2.5%, bringing it within 5% of its record highs after having entered correction territory (down 10%) just last week.

Meanwhile, the Dow Jones Industrial Average (INDEXDJX: .DJI) closed up 0.6% for a new all-time high.

Investors’ animal spirits have been stoked by the latest US$1.9 trillion stimulus injection waved through by United States President Joe Biden.

As Chris Gaffney, president of world markets at TIAA Bank puts it, “The administration has slipped a little bit of extra fuel to the equity markets with their bill. It’s going to be rocket fuel. We’re headed to new highs because of all that stimulus money that’s being put out there and it’s more broad-based than the first couple stimulus programs.”

Is the stimulus-fuelled ASX 200 rally sustainable?

Much of the future performance of the ASX 200 remains dependent on how well Australia and the world emerge from the pandemic. And much, of course, depends on how well the 200 companies that make up the ASX 200 perform themselves.

But there’s no arguing that ASX 200 shares have enjoyed major tailwinds from government stimulus packages. And as we’ve witnessed with the passage of new US stimulus measures, it’s more than just the Aussie government pulling the levers.

This concerted effort by leading global governments and central banks makes the stimulus outlook more sustainable. At least over the medium term.

In Europe, for example, the European Central Bank (ECB) reported that it plans to increase the pace of its asset purchases.

Noting the risk of rising interest rates for market financing, Lagarde said (quoted by the Australian Financial Review):

We will continue to conduct net asset purchases under the pandemic emergency purchase programme (PEPP) with a total envelope of €1,850 billion until at least the end of March 2022.

She added that the ECB “expects purchases under the PEPP over the next quarter to be conducted at a significantly higher pace than during the first months of this year”.

Then there’s this, from Bloomberg:

Japan needs to double the nearly [US]$700 billion it’s already budgeted in extra spending to ensure a recovery from the pandemic, says an influential ruling party lawmaker… Kozo Yamamoto.

Saying the Bank of Japan (BoJ) can’t do all of the heavy lifting itself, Yamamoto adds, “We need to make a bold move along the lines of what the US is doing. Some people are in dire circumstances.”

Foolish takeaway

While the future will always remain uncertain, investors worried that the ASX 200 could crash because global stimulus efforts are reined in too soon and too quickly can most likely rest easy.

At least on that front.

More reading

• Wilson Asset Management (WAM) thinks these 2 ASX shares are a buy
• Nasdaq wants its boards to be more diverse
• Macquarie Group (ASX:MQG) is hungry for assets as its share price grows
• Qantas (ASX:QAN) successfully trials COVID vaccine app in preparation of return to international travel
• 2 quality ETFs to buy in March

Motley Fool contributor Bernd Struben 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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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 16.4% 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 8.3% per annum over the same timeframe.

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

Codan Limited (ASX: CDA)

Codan is a manufacturer and supplier of communications, metal detection and mining technology for use in difficult environments by humanitarian organisations, security and military groups, mining companies and governments.

WAM said that in February, the company announced it was going to wholly acquire the US-based business called Domo Tactical Communications for $114 million, a wireless communications technology provider that supplies more than 20 US government agencies, as well as the ‘Five Eyes’ intelligence communities. Five Eyes is an alliance of intelligence groups from the US, the UK, New Zealand, Australia and Canada.

Codan says that the acquisition will be earnings accretive. In the first year under the ASX share’s ownership it is expected to make $90 million of revenue, $14 million of earnings before interest, tax, depreciation and amortisation (EBITDA) and $9 million in profit before tax.

Codan’s share price rose in February after news of the acquisition as well as the FY21 half-year report, where Codan revealed a record profit result. Sales grew by 14% to $194 million. Codan also grew its dividend by 40% to 10.5 cents per share.

Virgin Money UK CDI (ASX: VUK)

Virgin Money is one of the larger banks in the UK. It has 6.4 million customers through typical retail and business banking services.

The fund manager said that Virgin Money reported a solid start to the year during reporting season, with a continued roll-out of its rebranding programme, a return to making a profit in statutory terms and high levels of customer deposits (up 0.9% in the quarter ending 31 December 2020).

The number of deferred loans in the ASX share’s portfolio have been declining – those borrowers were given loan support due to the pandemic.

WAM Capital is positive about Virgin Money UK’s outlook because the investment team believe the UK’s accelerative vaccination program and accommodative fiscal and monetary policies will support the company’s rebound from the COVID-19 pandemic.

More reading

• The simple yet incredibly effective way to generate term-deposit busting income from just one quoted ASX fund
• These were the best performing ASX 200 shares in February
• Amaysim (ASX:AYS) share price higher as company moves to delist
• Why is the WAM Capital (ASX:WAM) share price on the rise?
• Here’s why the Codan (ASX:CDA) share price just hit a record high

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.

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Nasdaq Inc (NASDAQ: NDAQ) is waiting to hear from the Securities and Exchange Commission (SEC) regarding its board diversity proposal.

A request was submitted in December 2020 regarding the board diversity policy that Nasdaq can set for the businesses trading on its exchange.

The Wall Street Journal reports that Nasdaq will have to wait until August (at the latest) for the SEC’s ruling regarding its request.

Why does Nasdaq want more board diversity?

According to the WSJ, Nasdaq wants more women, racial minorities and LGBT individuals on its boards. If a company’s board cannot meet the requirements, Nasdaq wants public disclosure of why it cannot.

The exchange has set board targets that include at least one woman and a director that identifies as a racial minority or lesbian, gay, transgender, bisexual or queer.

Following a recent audit of its boards, Nasdaq discovered that more than three-quarters of its listed companies do not meet its envisioned diversity metrics. This resulted in pursuing the SEC to update the exchange’s rules.

Why is the SEC dragging its feet?

Last month, 12 Republican members of the US Senate Banking Committee wrote a letter to the SEC expressing concerns over the Nasdaq proposal.

The SEC claims that it has delayed the process due to the complexity of the request. By deciding to “institute proceedings”, the SEC automatically receives a 90-day extension for the outcome. This can be further extended by another 60 days, which is what takes us to August 2021.

If the SEC accepts the proposal, all Nasdaq listed companies will have to disclose board diversity statistics within twelve months.

Foolish Takeaway

Variety is the spice of life. Many businesses are already considering how diverse the group is and why it’s important to have an assortment of professionals steering the ship. This comes as part of the general corporate and social responsibly (CSR) movement.

Nasdaq has taken a significant position with its SEC request. We’ll be waiting to hear about the outcome and what it will mean for the market.

More reading

• Macquarie Group (ASX:MQG) is hungry for assets as its share price grows
• Qantas (ASX:QAN) successfully trials COVID vaccine app in preparation of return to international travel
• 2 quality ETFs to buy in March
• Tabcorp (ASX:TAH) share price falls as demerger speculation continues
• ASX 200 climbs, Westpac in the clear, Nine reveals a WIN-ning deal

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The Macquarie Group Ltd (ASX: MQG) share price has been performing strongly over the last 6 months, gaining 24.5% over the period. Similar to the big four banks, Macquarie appears to be enjoying the rotation from tech into financials. But there’s a lot more going on for Australia’s fifth-largest bank.

The Macquarie share price finished the day 0.95% higher, at $149.60 a share.

Macquarie has been busy buying (and trying to buy) more assets. Given the bank’s recent performance, it’s worth looking at what the bank has been cooking up.

Whatcha gonna do with all that cash?

Being predominantly an investment bank, Macquarie focuses heavily on getting the highest return on its assets. Through both Macquarie infrastructure and real assets (MIRA) and Macquarie investment management (MIM), the investment bank acquires and operates a diversified pool of assets.

From Macquarie’s operational briefing in February, MIRA had a total of $25.7 billion of equity ready to deploy. This was after the division had raised $6.6 billion of new equity. With all that capital sitting and waiting for returns, Macquarie is busily searching for opportunities.

Earlier this week Vocus Group Ltd (ASX: VOC) accepted MIRA’s $3.5 billion takeover bid for the network solution provider’s assets. The Vocus Board has agreed to unanimously recommend that Vocus shareholders vote in favour of the takeover. Both the Macquarie and Vocus share prices lifted on the deal. 

On top of that, MIRA is still working on a takeover of Vitalhavest Freehold Trust (ASX: VTH). The investment subsidiary increased its offer today, but no word yet on how it has been received. MIRA is duking it out with Roc Private Equity, another investment firm that finds the berry farm portfolio appealing.

In the event MIRA manages to acquire Vitalharvest, the subsidiary will still have over $18 billion in equity to deploy.

Lifted guidance lifts Macquarie’s share price

The Macquarie (MQG) share price got a recent bump after upgrading its full-year guidance in late February. Positively, the bank now forecasts profits to grow, rather than its original expectation of a slight decline.

The release stated Macquarie expects its profits to increase by roughly 5% to 10% for FY2021.

Furthermore, Macquarie advised that it is still maintaining a conservative approach in the current environment. Whether that means Vitalharvest is the last potential acquisition on the radar for FY2021 is uncertain.

More reading

• Vitalharvest (ASX:VTH) share price flat despite takeover stoush
• ASX 200 unmoved, Flight Centre soars, Afterpay keeps falling
• AMP (ASX:AMP) selling assets too cheaply warns Macquarie
• Why the Macquarie (ASX:MQG) share price just hit a record high
• Why the Rio Tinto (ASX:RIO) share price is among the worst performers today

Motley Fool contributor Mitchell Lawler owns shares of Macquarie Group Limited. The Motley Fool Australia owns shares of and has recommended Macquarie Group 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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Qantas Airways Limited (ASX: QAN) announced today it has successfully trialled an app with customers designed to track vaccinations and COVID test results. Qantas tested the app, called CommonPass, on passengers on its Frankfurt to Darwin repatriation flight.

Qantas’ CommonPass app

In a media statement, Qantas declared the CommonPass App’s trial was the first time it had used it for passengers. Last month, the airline trialled the smartphone app with some of its crew.

The app allows the airline to verify negative COVID test results before anyone can board a plane. It works by connecting customers to certified testing labs, which will then upload the results straight to the app. Customers will then be able to show staff proof of a negative test. This is a requirement for travel into many countries – including Australia.

Qantas is hoping to integrate vaccination information into the app in future. The airline says it will work with the federal government to look at ways to show COVID vaccine certificates on the software.

Group Chief Customer Officer, Stephanie Tully, said a digital health pass would assist airlines and governments globally post-coronavirus.

“We want to get our international flights back in the air and our people back to work and a digital health pass will be a key part of that,” said Ms Tully.

“COVID test results and proof of vaccine will be required in many countries for quarantine-free travel, just as it has been for polio and yellow fever vaccinations in the past.  Even if it wasn’t a government requirement, Qantas has always been a leader in safety, and we have a responsibility to our customers and crew.”

The app’s developer’s (The Commons Project Foundation) CEO, Paul Meyer, assured customers the process would be “secure, private, and a trusted experience…”

The national carrier is hoping to integrate CommonPass functions into its already existing Qantas app.

Other news affecting Qantas

The federal government revealed its $1.2 billion domestic tourism package to replace JobKeeper yesterday. The program, which will see airline tickets subsidised by 50% for travel to 13 domestic tourist locations, saw the Qantas share price lift, along with Flight Centre Travel Group Ltd (ASX: FLT), Webjet Limited (ASX: WEB), and Helloworld Travel Ltd (ASX: HLO). All of these shares have retreated today as initial enthusiasm for the program has waned.

Qantas CEO, Alan Joyce, defended the program amid accusations from Regional Express Holdings Ltd (ASX: REX) deputy chair, John Sharp, that it would primarily benefit the larger airline.

“You can’t feel sorry for Rex because Rex has gotten all this money from the government previously,” Mr Joyce said on the Today show.

“They got as a percentage of revenue seven times the aid that Qantas got last year, which is the equivalent of Qantas getting $7bn.”

Qantas share price snapshot

Qantas shares closed the day flat at $5.30. Almost one year ago today, the Qantas share price hit a low of $2.03. Since then, the company’s value has increased by 159.1%. Shares, however, have still not reached their pre-pandemic price of $6.67.

Qantas has a market capitalisation of $10 billion.

More reading

• Brokers name 3 ASX shares to buy right now
• What this broker thinks about ASX travel shares after government’s stimulus package
• ASX 200 up 0.95%: Afterpay rises, Westpac’s APRA update, Qantas upgraded
• Why the Qantas (ASX:QAN) share price could shoot higher in 2021
• 5 things to watch on the ASX 200 on Friday

Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Helloworld Limited. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited and Helloworld 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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If you’re wanting to add some diversification to your portfolio in March, then you might want to look at exchange traded funds (ETFs).

ETFs help investors achieve this because they provide easy access to a large and diverse number of different shares through a single investment.

With that in mind, listed below are two ETFs which could be worth considering. Here’s what you need to know about them:

BetaShares Global Cybersecurity ETF (ASX: HACK)

The first ETF to look at is the BetaShares Global Cybersecurity ETF. It aims to track the performance of an index that gives investors with exposure to the growing global cybersecurity sector.

Given how cybercrime is on the rise, demand for cybersecurity services is expected to rise strongly over the coming decade and beyond. And as this industry is heavily under-represented on the ASX, this ETF give investors an easy way to invest in the best companies in the space.

Among those companies are industry giants such as Accenture, Cisco, Cloudflare, Crowdstrike, and Okta.

Over the last three years, the fund has generated a return of 20.26% per annum.

iShares Global Consumer Staples ETF (ASX: IXI)

Another ETF to look at is the iShares Global Consumer Staples ETF. This fund has been designed to measure the performance of global consumer staples companies. This includes companies that produce essential products such as food, tobacco, and household items.

Given how demand for these types of products is relatively consistent whatever the economy throws at them, this ETF is likely to be suitable for investors that are looking for low risk options. 

Among its holdings are the likes of Coca-Cola, Nestle, PepsiCo, Procter & Gamble, Unilever, and Walmart.

Over the last 10 years, the iShares Global Consumer Staples ETF has generated an average total return of 9% per annum.

More reading

• Could the Tesla (NASDAQ:TSLA) camera hack lift ASX cybersecurity shares?
• Chinese and Russian hack attacks put ASX cybersecurity shares in spotlight
• 2 high quality ETFs for ASX investors to buy in March
• 2 compelling ASX shares to buy in March 2021
• 2 high quality ETFs for ASX investors to buy in February

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of BETA CYBER ETF UNITS and iShares Global Consumer Staples ETF. 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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Tabcorp Holdings Limited (ASX: TAH) shares edged lower today as rumours continue circulating about a potential demerger. By the market’s close, the Tabcorp share price finished the day trading 0.22% lower at $4.60. In contrast, the S&P/ASX 200 Index finished Friday’s session 0.79% higher.

Tabcorp might take a punt on a successful demerger

The Australian reported yesterday that Tabcorp will be moving forward with a strategic review to assess a demerger of its wagering and media unit from its lotteries arm. Speculation of the move has been rife for at least a month. The newspaper claims as many as three bidders are keen to make a deal.

Tabcorp was expected to make an announcement regarding the demerger during its half-yearly update but gave very little away, citing that “details of any proposal remained confidential, and were indicative and non-binding in nature.”.

Many believe the three bidders are Entain – owners of Ladbrokes, Apollo Global Management, and Blackstone. Rumours are Apollo’s offer is somewhere between $3 billion to $3.5 billion. Entain has apparently offered $3 billion and left open the possibility for scrips.

According to The Australian’s report, Entain CFO Rob Wood is confident of making a deal. He believes the biggest hurdle to acquisition would be from the board and not regulators, like the Australian Competition and Consumer Commission (ACCC).

Tabcorp’s financial performance

For the six months ending 31 December 2020, Tabcorp reported a net profit after tax of $185 million. The result was 7% lower than the prior corresponding period (pcp).

Revenue declined by 1.5% on the pcp, while earnings before interest, tax, depreciation and amortisation (EBITDA) was down 6.2%.

The company attributed the poor performance to the COVID-19 pandemic. The group’s CEO said at the time that while the results may have been disappointing, the company was “well-positioned for the second half…”.

A closer examination of the results reveals why some Tabcorp shareholders are keen to sell off the wagering division of the betting behemoth. For the half year, Tabcorp Lotteries and Keno saw revenue increase 1.6% on the pcp. Its wagering division, however, saw revenues collapse by 51% on the pcp – totalling $73 million.

Tabcorp share price snapshot

Nearly one year ago, the Tabcorp share price reached a 52-week low of $2.07. Today’s price represents a 122% gain since that time. Tabcorp shares are now almost at parity with their pre-coronavirus showing of $4.61.

Tabcorp has a market capitalisation of $10.2 billion.

More reading

• The Tabcorp (ASX:TAH) share price wobbles on results

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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