The McPherson’s Ltd (ASX: MCP) share price is surging notably higher on Thursday morning.

At the time of writing, the personal care and beauty products company’s shares are up 14% to $1.39.

Why is the McPherson’s share price surging higher?

Investors have been fighting to get hold of shares this morning after McPherson’s announced the receipt of a takeover approach.

According to the release, Gallin Pty Ltd has made an unconditional on-market takeover offer of $1.34 cash per share.

While this represents a 9.8% premium to its last close price, it is a very opportunistic 60% discount to its 52-week high.

What is Gallin Pty Ltd?

A separate release explains that Gallin has been incorporated specifically for the purpose of acquiring an interest in McPherson’s.

All of the shares in Gallin are owned by Bennamon Pty Ltd, which is wholly owned by Kin Group, which is ultimately controlled by the Geminder family. Kin Group also owns a significant stake in Pact Group Holdings Ltd (ASX: PGH), among many other investments.

Gallin has been quietly building up a position in McPherson’s over the last few months and, prior to today, owned a 4.95% stake.

“McPherson’s has lost its way”

Gallin’s Director, Nick Perkins, believes McPherson’s has lost its way and needs new leadership.

He said, “McPherson’s is a business that has lost its way and is in urgent need of reinvigoration across its strategy, governance, and leadership. The company’s performance has disappointed shareholders for some time despite owning a number of quality, attractive brands across key consumer markets.”

“Now investors face a further extended period of uncertainty, including a lack of visibility on the current performance of sales of the Dr. LeWinn’s product range into China. Although highly uncertain and with no guarantee of success, McPherson’s urgently needs to undertake a full operational and strategic review with a view of turning around the business. We have the capital, capability, wherewithal and patience to do this, while shareholders have an opportunity to receive cash now at an attractive premium.”

Gallin also took aim at management’s poor M&A track record, its history of one-off adjustments, and wasted capital.

It concluded: “McPherson’s also has a relatively poor M&A track record and a history of recognising “one-off” adjustments. Notably, between FY16 and 1H FY21 there has been c. $56.7 million4 in one-off impairments, inventory write-downs and restructuring costs. Moreover, the latest downgrade to the outlook on 1 December 2020 has further eroded market trust having come approximately 1 month after McPherson’s raised fresh capital from shareholders.”

More reading

• Brickworks (ASX:BKW) share price higher following half year results
• Starpharma (ASX:SPL) share price pushes higher on COVID-19 nasal spray update
• The ASX sector set to outperform this morning thanks to Suez
• Amazon reportedly demands that delivery drivers submit to invasive biometric surveillance or be fired
• Here’s an ASX tech share flying under the radar: fundie

Motley Fool contributor James Mickleboro 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 the McPherson’s (ASX:MCP) share price is zooming 14% higher today appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/2NPB3KB

In morning trade the Brickworks Limited (ASX: BKW) share price is rising following the release of its half year results.

At the time of writing, the building products company’s shares are up 2.5% to $19.41.

How did Brickworks perform in the first half?

For the six months ended 31 January, Brickworks reported a 4% decline in revenue to $432 million. This comprises Australian revenue of $330 million and North American revenue of $102 million.

It was a similar story for the company’s earnings before interest and tax (EBIT). Half year EBIT was down 6% over the prior corresponding period to $127 million.

This was driven partly by a 33% decrease in North American EBIT to $4 million following significant disruption by the COVID-19 pandemic. It partially offset a 60% lift in Australian EBIT to $16 million, which was underpinned by cost reductions.

Once again, the company’s Property Trust joint venture with Goodman Group (ASX: GMG) was its saving grace. It helped its Property business generate EBIT of $92 million for the half. Management notes that the business benefited from very favourable revaluations and profit on the sale of land.

On the bottom line, Brickworks posted an underlying net profit after tax of $90 million, which was down 10% compared to last year. However, on a statutory basis, which includes significant items, Brickworks’ net profit increased 22% to $71 million.

Positively, despite the decline in underlying profit, the Brickworks board has increased its interim dividend by 5% to 21 cents per share. This maintains its 45-year record of increasing dividends.

Outlook

Brickworks Managing Director, Mr. Lindsay Partridge, appears cautiously optimistic on the future. This is thanks to its conservative gearing, its diversified portfolio of attractive assets, and improving demand.

He said: “Development activity within the Property Trust is continuing at an unprecedented scale. This includes the construction of new facilities to meet lease pre-commitments across four of our Estates in Sydney and Brisbane. The completion of these facilities within the next two years will result in gross rent within the Trust increasing by over 40%, with significant further land remaining for development.”

Mr Partridge expects its Australian operations to perform strongly in the short term.

“Within Building Products Australia, the short-term outlook is positive, with demand gathering momentum in recent months. As demand grows, we anticipate sales volume will be limited by the availability of tradespeople such as brick layers and roof tilers, and this is likely to extend the existing pipeline of work, resulting in an elevated period of activity for at least a year. However, looking beyond the current stimulus induced surge in activity, significant uncertainty remains,” he explained.

Positively, the Managing Director notes that demand is recovering in the North American market.

“In North America, we have seen a strong recovery in demand during March, with improved weather and increased optimism of a stimulus led recovery. Daily order intake is now back to pre-pandemic levels, and as conditions continue to normalise, we are confident that our North American operations will deliver improved earnings and growth for many years to come.” “WHSP is expected to deliver a stable and growing stream of earnings and dividends over the long term,” Mr Partridge concluded.

More reading

• 5 things to watch on the ASX 200 on Thursday
• 2 leading ASX 200 dividend shares to buy for income
• 3 under-appreciated income stocks yielding 4-9%: Motley Fool CIO Scott Phillips, on ausbiz
• This ASX company has increased or maintained dividends for 44 years
• 3 reasons why Brickworks is a great ASX dividend share

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

The post Brickworks (ASX:BKW) share price higher following half year results appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3lZBr69

The Starpharma Holdings Limited (ASX: SPL) share price is pushing higher on Thursday morning.

At the time of writing, the dendrimer products developer’s shares are up 3.5% to $2.10.

Why is the Starpharma share price pushing higher?

Investors have been buying Starpharma’s shares this morning following the release of a positive announcement.

According to the release, the company has signed a sales and distribution agreement for its Viraleze antiviral nasal spray with Lloyds Pharmacy and the McKesson Group in the United Kingdom.

Lloyds Pharmacy and the McKesson Group is one of the largest pharmacy groups in the UK and is also a major wholesaler. It currently operates approximately 1,400 pharmacies across the country and supplies to over 14,000 independent UK pharmacies.

The release explains that Viraleze will be available online next week and is expected to be instore in April.

Starpharma’s sales and distribution agreement with the pharmacy group incorporates a reciprocal exclusivity arrangement for Viraleze. This includes significant investment in marketing by Lloyds, both online and instore.

What is Viraleze?

Viraleze is an antiviral nasal spray that was developed by Starpharma based on an already marketed active.

It contains astodrimer sodium (SPL7013), which is virucidal and irreversibly inactivates >99.9% of coronavirus/SARS-CoV-2 within one minute. Importantly, it has also demonstrated potent antiviral activity against multiple strains of SARS-CoV-2.

Starpharma’s CEO, Dr Jackie Fairley, was very pleased with the agreement.

She said: “We are excited that VIRALEZE will be available from next week in the second largest pharmacy chain in the UK.”

“The LloydsPharmacy/McKesson team shares Starpharma’s enthusiasm and commitment to bring VIRALEZE antiviral nasal spray to UK consumers as they emerge from their latest lockdown. LloydsPharmacy represents an ideal partner for this product.”

Lloyds Pharmacy’s Head of e-Commerce and Category Management, Mr John Acland, added: “We are excited to have secured exclusive rights to VIRALEZE for the UK. It is a highly innovative product with compelling customer benefits and is well supported by an impressive body of quality science and research.”

“We hope VIRALEZE will bring LloydsPharmacy customers added peace of mind and protection as we enter the next chapter of the pandemic and re-emerge back into work, school and social settings.”

More reading

• Why the Starpharma (ASX:SPL) share price is charging higher today
• Which ASX healthcare shares saw the biggest gains in February?

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 Starpharma Holdings Limited. The Motley Fool Australia has recommended Starpharma Holdings Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Starpharma (ASX:SPL) share price pushes higher on COVID-19 nasal spray update appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/31fZxjk

The market is expected to dip on weak leads from Wall Street, but not these ASX shares that will benefit from the accident along the Suez Canal.

The Brent oil price surged 5.7% to US$64.23 a barrel while the WTI benchmark rallied 5.9% to US$61.18 a barrel.

This will likely boost ASX energy shares like the Woodside Petroleum Limited (ASX: WPL) share price, Oil Search Ltd (ASX: OSH) share price and Santos Ltd (ASX: STO) share price – just to name a few.

In contrast, the S&P/ASX 200 Index (Index:^AXJO) is expected to dip 0.2% this morning.

ASX energy shares get boost from Suez blockage

While ASX shares exposed to the oil price are likely to outperform, there will be questions about how long the rally can last.

Up to 10 crude tankers carrying around 13 million barrels of oil could be stuck in the bottleneck long the Suez Canal, reported Oilprice.com.

The key shipping channel linking Europe and Asia has been blocked after a tanker ran aground along the narrow man-made canal that opened in 1869.

Stubbornly stuck

Authorities are trying to free the vessel but with little success. It could take another day or two to free the trapped container ship.

In the meantime, around 50 vessels per day are waiting to cross the canal. Sailing around the Suez will add an extra 15 days.

Around 9 % of total seaborne traded petroleum and 12% of global trade flows through this channel, according to the U.S. Energy Information Administration.

Oil market interrupted in a good way for once

The top three exporters of crude oil and oil products via the Suez Canal so far in 2021 were Russia with 546,000 barrels per day (bpd), Saudi Arabia with 410,000 bpd, and Iraq with 400,000 bpd, reported Oilprice.com which sourced data from oil analytics firm Vortexa.

China is among the top three importers of crude and oil products that are shipped through the Suez Canal.

The cargo ship at the centre of the accident, Ever Given, is a 400-meter giant and is one of the largest vessels that sails through the Suez Canal. Ever Given is wedged sideways along the embankment on Egypt’s side, blocking the narrowest part of the canal.

Foolish takeaway

It’s not a question of “if” but “when” Ever Given will be re-floated. When that happens, the oil price could surrender recent gains.

At least for the moment, the turnaround in oil will provide some relief to the ASX energy sector. These ASX shares have been hit hard by a large drop in crude due to worries of waning demand and excess supply.

Those fears could soon remanifest as they linger for longer than Ever Given.

More reading

• 5 things to watch on the ASX 200 on Thursday
• ASX 200 rises, Airtasker soars again, Westpac considers NZ
• How is Australia’s jobs rebound affecting ASX shares?
• How are ASX 200 shares faring in the carbon revolution?
• Why Lynas, Oil Search, Pushpay, & Webjet shares are tumbling lower

Motley Fool contributor Brendon Lau owns shares of Santos Limited. Connect with me on Twitter @brenlau.

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 ASX sector set to outperform this morning thanks to Suez appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/2NNuwjw

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

A month after Amazon.com Inc (NASDAQ: AMZN) began outfitting its vans with new surveillance cameras equipped with artificial intelligence (AI) to keep a watchful eye on its drivers, the company is reportedly demanding that its drivers either agree to be monitored biometrically while in the vans or get fired.

Motherboard, a tech news website, reports that 75,000 US delivery drivers, as a condition of employment, are being given a consent form to sign acknowledging they agree to facial recognition and the collection of biometric data while driving company-branded vans. Amazon says the cameras are to improve driver safety.

The consent form says that to deliver packages, drivers must agree to have the vehicle tracked for location, movement, speed, acceleration, braking, turns, following distance, and more.

Earlier this year, Amazon posted a video to Vimeo to alert its delivery contractors it was installing Netradyne Driver-i cameras in its branded delivery vans, giving it a 270-degree view to monitor drivers and detect potentially risky behaviour. Incidents that trigger the cameras, such as running a stop sign or taking a corner too hard, are uploaded to Amazon’s cloud for review.

Motherboard reports the onboard AI can detect if a driver yawns, appears distracted, or isn’t wearing a seatbelt. Because of the intrusive nature of the surveillance, drivers are reportedly quitting rather than be constantly monitored. Congress has also recently questioned Amazon about its concerns over driver privacy.

Amazon Logistics delivered around 5.1 billion packages in 2020, which was just slightly fewer than the 5.3 billion that United Parcel Service Inc (NYSE: UPS) delivered, and half the total volume of all packages delivered for Amazon last year.

Most Amazon drivers don’t actually work for the company. Instead, they are employed by third-party contractors that Amazon encouraged to start their own delivery business through its delivery service partner (DSP) program.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• How to counter the ASX 200’s Achilles heel
• Why it’s a great time for ASX investors to buy US shares
• When dividends can be a bad thing for an ASX share
• Amazon expands road testing of Rivian electric delivery vans
• 2 ETFs to buy today for future-proof ASX diversification

Rich Duprey has no position in any of the stocks mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Amazon reportedly demands that delivery drivers submit to invasive biometric surveillance or be fired appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

from The Motley Fool Australia https://ift.tt/31hcTMk

Ask A Fund Manager

The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In part 1 of our interview, Spaceship portfolio manager Jason Sedawie explained how he aims to double his clients’ money every 5 years. Now in part 2, he tells us which stock purchase he’s most proud of and how he’s constantly reminded of the one that got away.

Overrated and underrated shares

MF: What’s your most underrated stock at the moment?

JS: I think an underrated stock here in Australia is Life360 Inc (ASX: 360). I feel like it’s going to get more well known here. 

It’s a leading family and safety service. It’s listed in Australia but headquartered in San Francisco, and it has 25 million members worldwide in over 140 countries. They’ve got Randy Zuckerberg on board as a director. 

They’re just entering the S&P/ASX 300 (ASX: XKO) next week. I think they’ve done really well, considering the economies have been closed. I think that one’s sort of been underrated here in Australia. 

MF: It will also benefit from people being able to physically move around a bit more?

JS: Yes, well, I thought there might have been a bit more churn in this company. Everyone’s been home, so you don’t need to know if your family members are safe or not. I think when the economy does open, I think this will be a really good way to get exposure to it.

MF: When did you buy in?

JS: Towards the end of 2019, maybe – so we’ve had it for a little while.

MF: What do you think is the most overrated stock at the moment?

JS: One stock we did sell recently was Sonic Healthcare Limited (ASX: SHL). Yeah, so they’re a leader in diagnostic tools and lab services, which benefited from COVID testing. [But] I don’t think that’s really a sustainable trend going forward. 

So we sold the stock. I wouldn’t say it’s overrated, but they’ve just had a really good benefit with the price of those tests as well.

Looking back

MF: Which stock are you most proud of from a past purchase?

JS: Yeah, probably the proudest one is Tesla Inc (NASDAQ: TSLA), just because climate change has been such a large problem. Just being able to support Elon’s mission through its ups and downs early on to accelerate the world’s transition into sustainable energy – and the first step is electric vehicles. 

And notice they don’t say electric vehicles and no emissions – but that’s the first step, electric vehicles. We’ve held that since inception, and I think it’s done such a great job, just moving the whole industry forward to electric vehicles. Not just Tesla, but getting everyone going. I just think it’s been such a big service for everybody, so I’m glad we’ve been able to hold onto it.

MF: You’ve held it since the fund’s inception! You would have done pretty well out of it.

JS: [The share price] went nowhere for the first 18 months, and now last year, it’s gone up.

MF: Is there a move that you regret from the past? For example, a missed opportunity or buying a stock at the wrong timing or price.

JS: I have to say [missing out on] Zoom Video Communications Inc (NASDAQ: ZM).

Yeah, it’s always what you don’t buy that hurts you because they can be the potential multi-baggers. Whenever I’m on a Zoom call or Google Meet, I just get reminded of that company.

MF: To be fair, was it on your radar before COVID came?

JS: Not really. We did know about it, but it wasn’t something we were really excited about because everyone used Microsoft Teams, Google Hangouts. We say Zoom, but they run along with these other services. So I still have concerns about the moat and the competition, but I just think management, how [well] they executed. 

They were a business service that schools and consumers just all of a sudden knew. So they went from 10 million daily meeting participants to 300 million a couple of months later. Just how they scaled and executed and pivoted – I just have a lot of respect. 

But I’m still worried about the moat of that company.

More reading

• 5 things to watch on the ASX 200 on Wednesday
• How to counter the ASX 200’s Achilles heel
• ASX 200 up 0.4%: Bank shares lower, Xero shares upgraded
• 4 reasons ARK recently increased its Tesla share price target to US$3,000
• 2 high quality ASX dividend shares to buy today

Tony Yoo 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 Tesla and Zoom Video Communications. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Life360, Inc. The Motley Fool Australia has recommended Sonic Healthcare Limited and Zoom Video Communications. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Here’s an ASX tech share flying under the radar: fundie appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/2P3xKjE

The Premier Investments Limited (ASX: PMV) share price was on form on Wednesday following the release of its half year results.

The retail conglomerate’s shares rose over 2.5% to end the day at $23.84.

How did Premier Investments perform in the first half?

Premier Investments was a very positive performer during the first half of FY 2021.

It reported a 7.2% increase in global sales to $784.6 million and an 88.9% jump in net profit to $188.2 million.

Key drivers of this growth were its Peter Alexander business, wage and rent subsidies, and a significant lift in online sales across the business. This helped offset weakness in the Smiggle business caused by COVID-19.

Can the Premier Investments share price climb higher?

According to one leading broker, the Premier Investments share price may have peaked and could come under pressure in the near future.

A note out of Goldman Sachs this morning reveals that its analysts have retained their sell rating and cut their price target to $20.20.

Based on the current Premier Investments share price, this implies potential downside of 15.3% over the next 12 months.

What did Goldman say?

Goldman commented: “PMV’s 1H21 earnings continue to benefit from wage and rent subsidies of c. A$15.6mn and c. A$26mn. We adjust for these subsidies in our forecasts, and our revised EBIT forecasts imply a 4 year CAGR of 3.8% over FY19-23e.”

It appears to believe that this growth rate isn’t enough to justify its shares trading at 23x estimated FY 2022 earnings.

In addition to this, Goldman has concerns over the outlook of the key Smiggle business.

Its analysts explained: “The outlook for Smiggle will be volatile as European stores remain closed for much of the remainder of FY21, although back to school in the UK could provide a late swing to sales. We revise our sales forecasts for Smiggle by -14.5% in FY21 but less materially at -4.5% in FY22, as we update for the ongoing store closures in Europe before a forecast recovery into FY22.”

The broker also believes that the Peter Alexander business will struggle to maintain its level of sales post-COVID.

Goldman said: “We revise Peter Alexander sales by +9.2% in FY21 reflecting the stronger momentum in sales to date. However, expectations are unchanged from FY23 as we expect the significant increase in FY20 and FY21 to be difficult to sustain beyond the short term.”

Overall, the broker sees more value in other retailers than it does in the current Premier Investments share price.

More reading

• ASX 200 rises, Airtasker soars again, Westpac considers NZ
• ASX 200 up 0.45%: Premier Investments results, Xero acquisition, Computershare halted
• Why Alcidion, GrainCorp, Premier Investments, & Xero are storming higher
• Why is the Premier Investments (ASX:PMV) share price on the rise?
• 2 ASX 200 shares to buy for income

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments 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 broker puts sell rating on Premier Investments (ASX:PMV) share price appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3lMLKtU

An expert has warned share markets could crash in the coming quarter if one metric fails to stay in its favour.

Watermark Funds Management chief investment officer Justin Braitling told clients that the post-COVID “reflation trade may be maturing sooner than we previously thought”.

“Is a bubble forming in shares?” he said in a memo.

“Price signals in bond and currency markets are key to reflation. The US dollar, along with bond prices, peaked in March of last year when the share market bottomed.”

Braitling warned of dire consequences for share markets if the US dollar’s descent turns around to a rebound.

“In recent weeks, the US dollar is looking like it may have bottomed for now,” he said.

“If the low is in for the USD, we are likely to see a reversal in the reflation trade and a setback for equities and commodities in the near term. This is the first major red flag we have seen for the reflation settings in a year and should be monitored carefully.”

A second quarter US dollar rally could be disaster

Braitling told clients that the coming quarter could see chaos for investors.

“Watch the USD – it holds the key,” he said.

“Positioning is extreme, everyone is short the dollar, which means a Q2 rally and associated sell-offs in equities could be one of the big surprises for this year.”

Oddly enough, the Australian dollar will remain strong through any movements in the greenback, as the local currency is heavily associated with commodity prices.

And that’s also a headwind for ASX shares, as it makes Australian companies less competitive in a global market.

“If we are correct, the high for the AUD at 80 [US cents] is probably in for the medium term and equities could be in for a rough ride in Q2 2021.”

What shares do Watermark hold in its portfolio?

Braitling said that while his team’s game is to assess each stock on its merits, the macroeconomic shift in the post-pandemic world could not be ignored.

Therefore the Watermark Absolute Return Fund is currently holding:

• Value stocks with post-COVID tailwinds emerging
• Commodities shares: “We are bullish on commodities. There is both structural constraints in supply and heightened demand expected. This comes with a more favourable inflation/yield environment.”

And the fund is currently avoiding:

• Expensive technology shares: “We still think tech is a brilliant and exciting sector. We are holding companies that will generate huge shareholder value regardless of what the yield environment holds, but tech that has simply seen valuation benefit from low rates should be avoided.”
• Defensive income shares like infrastructure and utilities: “However, we look favourably on those that will benefit from reopening, such as airports.”

More reading

• Will tech shares ever rise again?
• Why the Resolute (ASX:RSG) share price will be in focus this morning
• 2 of the best small cap ASX shares to buy
• Why the NRW (ASX:NWH) share price is on watch
• 2 quality ASX dividend shares with generous yields

Motley Fool contributor Tony Yoo 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 one thing now that could kill the share market appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3rfdl89

The share market rally of 2020, and perhaps the entire decade prior to COVID-19, was led by technology stocks.

For example, the S&P/ASX All Technology Index (ASX: XTX) put on 125% last year after the pandemic crash in March 2020.

And the Nasdaq Composite (NASDAQ: .IXIC) has gained a stunning 382% in the last 10 years.

But the last couple of months has seen a violent rotation from growth to value stocks, as investors fear increasing inflation and bond yields.

So is this the end of an era? Have technology shares had their day?

The golden years are done

Watermark Funds Management chief investment officer Justin Braitling reckons two big forces that buoyed tech are fading fast.

“The golden years of leadership from technology and growth seem, for the time being, behind us,” he said in a memo to clients.

“Of the two major tailwinds pushing technology shares higher — the health crisis and low interest rates — one is abating (COVID) and the other is reversing (real interest rates).”

And interest rates are “likely to keep moving higher in the medium term”, according to Braitling.

“The prospects of a second tech boom to complete this bull market looks less likely,” he said.

“As the fundamental drivers of technology adoption are very much intact, the sector can still perform but is unlikely to lead the way it has in recent years.”

It’s not the end for tech shares though 

While they may no longer be market leaders, there is still plenty of upside for the technology sector, said Braitling.

“There is still tremendous momentum in each of the enablers of technology adoption: e-commerce, cloud and SaaS computing, the internet of things, and big data, to name the main ones,” he said.

“This has become obvious to businesses and households awash with liquidity. They will keep investing given penetration is still early for many of these services.”

The pandemic absolutely accelerated adoption of many technologies out of necessity. And while this revolution would slow down, the coronavirus has forever changed the mindset of many.

“COVID was a great awakening to the benefits of a digital economy — that message has not been lost on a single business we speak to,” said Braitling.

“Those that lead in technology will invest to stay in front and the slow adopters caught wanting through the crisis will spend to catch up.”

The fund manager noted, in the past 10 years, earnings per share (EPS) for tech stocks have outpaced non-tech businesses. This is despite the share prices for the tech sector climbing up.

T Rowe Price Group Inc (NASDAQ: TROW) portfolio manager Scott Berg said much the same in a webinar on Wednesday.

“Over time, if you invest with reasonable valuations, stock prices follow earnings and cash flows,” he said.

“A lot of the most dynamic growth companies [today] actually have incredible economics — meaningfully different than companies back in the last tech bubble. They have very high margins, very low capital requirements, they have typically net cash balance sheets with tremendous operating leverage.”

More reading

• Value vs growth shares: which will win?
• We’re betting on ASX growth shares: global fund

Motley Fool contributor Tony Yoo 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 Will tech shares ever rise again? appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3riEjfj

Investors will be watching Resolute Mining Limited (ASX: RSG) shares today after the company provided an update on its Bibiani Gold Mine last night. The gold miner’s shares have been in a trading halt since yesterday morning pending a company announcement. Following last night’s update, it’s most likely shares will resume normal trading today.

The Resolute share price last traded at 63 cents at Tuesday’s market close.

What did Resolute announce?

The Resolute share price could be under pressure today as investors weigh up the company’s shock announcement.

According to its release, Resolute has received notification from the Ghanaian Minerals Commission that its mining lease for the Bibiani Gold Mine has been terminated. All activities and operations at the site have been instructed to cease immediately following the decision.

It will be interesting to see how the Resolute share price responds this morning after the company said the action is unexpected and it will seek clarification from the Minister’s office for the reason behind the termination. Furthermore, legal advice is being taken on the validity of the notice, the company’s rights of appeal, and a potential recourse.

Late last year, Resolute entered a binding agreement to sell the Bibiani Gold Mine to Chifeng Jilong Gold Mining Co. Ltd (Chifeng). The $105 million deal was expected to be finalised during the first quarter of 2021. However, with the latest roadblock, it seems Resolute may have to review its options.

More on the Bibiani Gold Mine

Located in Ghana, the Bibiani Gold Mine was acquired by Resolute in 2014. Since then, the company has run two surface and underground resource drilling programs to re-assess the mine’s potential.

Its most updated feasibility study found that the Bibiani Gold Mine contains 2.5 million ounces of mineral resources. In addition, the project could produce approximately 100,000 ounces over a 10-year mine life at an all-in sustaining cost of US$764 per ounce.

About the Resolute share price

The Resolute share price has lost around 28% of its value in the past 12 months. Year to date, the company’s shares have not fared much better, down roughly 25% on the back of the falling gold spot price.

Based on the current share price, Resolute commands a market capitalisation of about $695 million, with 1.1 billion shares outstanding.

More reading

• 5 things to watch on the ASX 200 on Thursday
• These are the 10 most shorted shares on the ASX
• ASX 200 down 0.15%: Westpac asset sale, Webjet update, gold miners jump
• 5 things to watch on the ASX 200 on Thursday
• These are the 10 most shorted shares on the ASX

Motley Fool contributor Aaron Teboneras 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 the Resolute (ASX:RSG) share price will be in focus this morning appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3cjk1xP