Australia’s leading brokers are always on the lookout for the best ASX shares to buy.

Brokers don’t always get it right, but they are often on the money. They regularly update their view on different businesses as share prices change or when that ASX share releases an important announcement, such as a result.

These three ASX shares have been rated as buys recently:

Volpara Health Technologies Ltd (ASX: VHT)

Volpara has been rated as a buy by Morgans as it highlighted the benefits of the CRA Health purchase and the benefit of growth of its average revenue per user (ARPU). The share price target is $1.94.

A few weeks ago, Volpara announced that it was acquiring Boston-based CRA Health for US$18 million with another potential US$4 million payable based on meeting certain targets.

Volpara explained that CRA is profitable, with annual recurring revenue (ARR) of over US$4 million, average revenue per user (ARPU) of around US$1.70 and coverage of around 6% of US breast screenings. CRA software is integrated with major electronic health record and genetics companies.

This acquisition increases Volpara’s market share to over 30%. It also increased the group ARPU to over US$1.40.

A couple of weeks ago, Volpara revealed that CRA Health had won a contract that covered the provision of breast cancer risk scores to a large Indiana-based organisation that has sites across more than 20 states and runs a major electronic health record system. It was the biggest in Volpara’s history.

BWX Ltd (ASX: BWX)

Natural beauty business BWX has been rated as a buy by the broker Citi. It has a price target of $5.35.

Citi noted that the company is seeing less engagement on social media recently, but if it can increase that with users then it could help growth in the future. But, the natural beauty business is focusing its efforts on the domestic retail sector – this may lead to a better payoff for the company.

In the FY21 half-year result the ASX share reported net revenue grew by 0.6% to $84.5 million, or 3.4% in constant currency terms. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) went up by 1.4% to $11.7 million.

BWX said that the Chemist Warehouse equity partnership will continue to fuel growth of Sukin, Andalou Naturals and Mineral Fusion in Australia and international markets. The Woolworths Group Ltd (ASX: WOW) partnership will see Sukin launched in 930 Woolworths stores. It has also achieved distribution gains in North American retailers including in Walmart (Canada) and Mineral Fusion in Wholefood Markets.  

Clover Corporation Limited (ASX: CLV)

Clover is a business that aims to deliver science-based bioactives into products such as infant formula.

The ASX share is rated as a buy by the broker Ord Minnett, which has a price target of $2.37 for the ASX share.

Clover is suffering from reduced demand for infant formula, however it is also staying on top of its costs. Whilst demand is low, the broker pointed out that it has a good customer base that will lead to potential upside when daigou and other demand returns.

In the recently-released FY21 half-year result it showed a 21.7% decrease in net sales revenue to $29.4 million and a 45.8% reduction in net profit after tax (NPAT) to $2.5 million.

Clover is still confident about the future, saying that the fundamentals of the business remain strong with opportunities for growth across markets and segments currently curtailed by COVID-19.

It’s expecting FY21 revenue to be in the range of $60 million to $70 million.

More reading

• Why AGL, Clover, QBE, & Volpara shares are pushing higher today
• 2 small cap ASX shares with huge potential
• Why Corporate Travel Management, Silver Lake, Volpara, & Vulcan are pushing higher
• Here’s why the Volpara (ASX:VHT) share price is storming higher
• Leading brokers just upgraded these ASX shares to “buy” today

Tristan Harrison 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 VOLPARA FPO NZ. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Clover Limited. The Motley Fool Australia owns shares of and has recommended BWX Limited. The Motley Fool Australia owns shares of Woolworths Limited. The Motley Fool Australia has recommended VOLPARA FPO NZ. 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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More reading

• Top brokers name 3 ASX shares to buy today
• 3 exciting small cap ASX shares to watch
• Time to be bullish or bearish on the Afterpay (ASX:APT) share price?
• 5 things to watch on the ASX 200 on Tuesday
• 2 rapidly growing mid cap ASX shares to buy

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Kate O’Brien owns shares of Apple and Rio Tinto Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Apple. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Apple. 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 a big fan of investing in small cap shares, then you might want to look at the ones listed below.

Here’s why these three ASX small cap shares could be ones to watch:

Audinate Group Limited (ASX: AD8)

Audinate is digital audio-visual networking technologies provider. It is the company behind the industry-leading Dante audio over IP networking solution. Audinate’s solutions replace point-to-point audio and video connections with easy-to-use, scalable, flexible networking. They have been adopted by hundreds of manufacturers in thousands of professional products, making its products the de facto standard for modern AV connectivity. While demand was very soft during the pandemic, sales are expected to increase materially once the crisis passes. 

UBS currently has a buy rating and $10.10 price target on the company’s shares.

Booktopia Group Ltd (ASX: BKG)

Another small cap to watch is Booktopia. It is an online book retailer which, unlike Audinate, has been in fine form during the pandemic. For example, during the first half of FY 2021, the company reported a 51.1% increase in revenue to $112.6 million and a 502.3% jump in underlying EBITDA to $8 million. This was driven by the shift to online shopping and its investment in a new distribution centre. The latter allowed the company to take advantage of the increased demand by shipping more books than ever before.

Last month Morgans put an add rating and $3.53 price target on Booktopia’s shares.

Universal Store Holdings Limited (ASX: UNI)

Universal Store is a fashion retailer for the 16-35 year old fashion-focused consumer. It aims to deliver an ever-changing and carefully curated selection of on-trend products to customers. This tactic is working wonders and helped Universal Store deliver a stellar half year result in February. For the six months ended 31 December, Universal Store reported a 23.3% increase in sales to $118 million and a 63.6% increase in underlying net profit after tax to $21.1 million.

This went down well with analysts at Morgans, who believe more strong growth is coming. The broker currently has an add rating and $8.37 price target on its shares.

More reading

• 3 small cap ASX shares rated as buys
• Wilson Asset Management thinks these 2 small cap ASX shares are a buy
• 3 small cap ASX shares to watch in 2021
• 2 ASX tech shares rated as buys by brokers
• 4 exciting small cap ASX shares to watch

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Booktopia Group Limited. The Motley Fool Australia owns shares of and has recommended AUDINATEGL 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 Afterpay Ltd (ASX: APT) share price has been falling in recent weeks, it’s actually down by around 27% over the last month. That’s a pretty steep decline in a fairly short amount of time. 

What do brokers think of the Afterpay share price?

Different brokers have different views of Afterpay shares. UBS doesn’t have much expectation for the Afterpay share over the next year – it has a price target of $36.

UBS thinks that a problem for Afterpay is the growing amount of competition in the space from large players such as Commonwealth Bank of Australia (ASX: CBA) which could lead to problems relating to the no surcharge rules.

Merchants currently can’t pass on those costs to customers, but CBA’s merchant fee (and PayPal’s) is actually lower than what Afterpay charges.

Ord Minnett has a price target of $150 on Afterpay, with the broker being pleased by the continuing northern hemisphere growth.

Macquarie Group Ltd (ASX: MQG) brokers have set a price target of $140 for the buy now, pay later leader. However, it noted that the rate of growth in Afterpay’s recent half-year result for FY21 is slower than other recent reports.

How did reporting season go?

Well, the Afterpay share price has been falling since the report’s release, but there was plenty of growth reported.

Customer numbers and merchants continue to grow significantly – merchants went up 73% to 74,700 and active customers grew by 80% to 13.1 million.

The buy now, pay later company continues to see its underlying sales roughly double each report. In the first six months of FY21, underlying sales grew 106% to $9.8 billion. On a constant currency basis, underlying sales would have gone up 112% to $10.1 billion.

Afterpay’s income from merchants grew by 108% to $374.2 million, or 114% in constant currency terms.

The company’s gross loss as a percentage of underlying sales improved by 0.3 percentage points to 0.7%, whilst the net transaction margin as a percentage of underlying sales improved by 0.1 percentage point to 2.2%. This led to the net transaction margin growing by 110% to $213.9 million.

Earnings before interest, tax, depreciation and amortisation (EBITDA) before significant items jumped 521% to $47.9 million.  

What is management doing to grow profit and the Afterpay share price?

Afterpay is focused on growth in a number of different areas, particularly when it comes to global growth.

One area that Afterpay is looking to grow in is Europe with the completion of its Pagantis acquisition which will now occur after regulatory approval being granted by the Bank of Spain.

Afterpay has revealed that preparation into the launch of Spain, France and Italy is currently underway with over $1 billion global merchants in the process of contracting.

It’s also looking at Asia as the next stage of growth after establishing a base in Singapore after the acquisition of EmpatKali in August 2020 to drive the potential expansion into South East Asia.

Afterpay continues to see that its longer-term customers use the buy now, pay later service more and more, which can lead to higher margins with repeat usage.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• Will mounting competition break the Afterpay (ASX:APT) share price?
• ASX 200 Weekly Wrap: Inflation fears hold ASX down
• 5 things to watch on the ASX 200 on Monday
• 3 five-star ASX shares to buy in March

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T 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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On Monday the S&P/ASX 200 Index (ASX: XJO) fought back from a poor start to record a solid gain. The benchmark index rose 0.65% to 6,752.5 points.

Will the market be able to build on this on Tuesday? Here are five things to watch:

ASX 200 futures pointing lower

The Australian share market looks set to edge lower today despite strong gains being recorded in the United States. According to the latest SPI futures, the ASX 200 is poised to open the day 12 points or 0.2% lower this morning. In late trade on Wall Street, the Dow Jones is up 0.55%, the S&P 500 is up 1%, and the Nasdaq is trading 1.6% higher. A pullback in bond yields gave equities a boost.

Tech shares could jump

It could be a good day for ASX tech shares such as Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P) on Tuesday after US tech stocks stormed higher overnight following a pullback in bond yields. US giants Apple, Facebook, and Tesla are all recording solid gains and helping to drive the tech-focused Nasdaq index 1.6% higher. As the local tech sector has a tendency of following the Nasdaq’s lead, this bodes well for Tuesday’s trade.

Oil prices edge higher

Energy producers such as Beach Energy Ltd (ASX: BPT) and Woodside Petroleum Limited (ASX: WPL) will be on watch after oil prices edged higher. According to Bloomberg, the WTI crude oil price is up 0.1% to US$61.47 a barrel and the Brent crude oil price has risen 0.1% to US$64.58 a barrel. Oil prices edged higher despite concerns about European lockdowns and their impact on demand.

Gold price lower

Gold miners Evolution Mining Ltd (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) could have a subdued day after the gold price edged lower despite bond yields falling. According to CNBC, the spot gold price is down 0.1% to US$1,739.70 an ounce. A switch to risk on assets weighed on the safe haven asset.

Carsales goes ex-dividend

The Carsales.Com Ltd (ASX: CAR) share price is going ex-dividend this morning and could trade lower. The auto listings giant will then be paying its fully franked 25 cents per share interim dividend to eligible shareholders next month on 21 April. Elsewhere, BHP Group Ltd (ASX: BHP) shareholders can look forward to being paid its $1.31 per share dividend later today.

More reading

• Two ASX 200 banking and mining shares to own as inflation lurks
• ASX 200 climbs, Crown soars, Mineral Resources drops
• Top broker issues buy alert on Santos (ASX:STO) and these ASX energy shares
• Why the Beach Energy (ASX:BPT) share price is climbing today
• ASX 200 up 0.35%: Crowns surges, ANZ & CBA settle class actions

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 AFTERPAY T FPO. The Motley Fool Australia has recommended carsales.com 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 looking for some new additions to your portfolio, you might want to take a look at the mid cap space.

At this side of the market, there are a number of companies with the potential to grow materially over the next decade or two.

But which mid cap ASX shares should you buy? Two to consider are listed below:

Adore Beauty Group Limited (ASX: ABY)

Adore Beauty could be a mid cap ASX share to buy. It is Australia’s leading online beauty retailer, providing an empowering and engaging beauty shopping experience.

One of the important differences between Adore Beauty and other retailers is that it is so much more than just a place to shop. Adore Beauty’s website is also a destination for education and entertainment. This means that many beauty consumers frequent its website even when they are not seeking to purchase items.

At the last count, the company had almost 800,000 active customers. This was up 82% since the end of December 2019, underpinning an 85% increase in first-half revenue to $96.2 million. 

Positively, when you annualise this figure, it is still only a small portion of an Australian beauty and personal market currently worth ~$11 billion a year.

One broker that is confident in its outlook is Morgan Stanley. It currently has an overweight rating and $8.35 price target on the company’s shares.

Megaport Ltd (ASX: MP1)

Another mid cap ASX share to consider is Megaport. It is a leading global provider of elastic interconnection services across data centres globally.

With Megaport’s networking equipment now installed in hundreds of data centres across the world, it has created a software layer that provides an easy way for users to create and manage network connections. This allows users to create and run a global network with or without the need for physical infrastructure. Which, given the shift to the cloud, is becoming increasingly attractive for businesses.

Last month Megaport released its half year results and revealed that its Monthly Recurring Revenue (MRR) has increased 37% to $6.3 million. This annualises to revenue of $75.6 million.

Goldman Sachs has been pleased with its performance. In response to its result, the broker put a buy rating and $15.55 price target on Megaport’s shares. Goldman believes the company is going to benefit greatly from the migration to public cloud infrastructure.

More reading

• 2 ASX shares that could be fantastic buy and hold options
• 10 of the best ASX shares to buy in March
• ASX fashion and beauty shares shine on half-year results
• 2 buy-rated small cap ASX shares growing rapidly
• ASX 200 rises, Afterpay sinks, Vocus jumps

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 MEGAPORT FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Adore Beauty Group Limited. The Motley Fool Australia has recommended MEGAPORT 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 WAM Active Limited (ASX: WAA) share price closed up 3.9% today, trading at a 52-week high of $1.195.

What happened

The WAM Active share price was flying today after the company announced strong demand for its share purchase plan (SPP), which, together with its oversubscribed placement, has raised more than $25.2 million.

The SPP announced in late February allowed shareholders to apply for up to $30,000 in shares at a discounted rate. As a bonus, those who participated will receive the company’s fully franked 3 cents per share dividend on all newly issued shares.

Participants in the SPP and placement will be entitled to bonus options from this Thursday. Each option provides the holder with the ‘option’ to purchase one WAM Active share for $1.10 without any brokerage fees.

Management comments

WAM Active chair Geoff Wilson welcomed the news, saying:

We greatly appreciate the trust, loyalty and support we have received from WAM Active shareholders.

More than 840 existing WAM Active shareholders participated in the SPP, which, together with the oversubscribed placement, raised more than $25.2 million.

Performance update

WAM Active also recently announced an investment portfolio update for shareholders, stating its investment portfolio increased by 2% in the period.

At the time of release on 16 March, the company’s net tangible assets equated to $1.02 a share. WAM Active revealed its largest holding was Keybridge Capital Limited (ASX: KBC), with a 9.2% weighting. 

About the WAM Active share price

WAM Active is a listed investment management company operating under the Wilson Asset Management umbrella. The portfolio provides investors with “exposure to an active trading style with the aim of achieving a sound return with a low correlation to traditional markets”.

Over the past 12 months, the WAM Active share price has returned around 32.8% compared to the All Ordinaries Index (ASX: XAO) return of 44% in the same period.

More reading

• 2 top ASX shares to buy according to WAM

Motley Fool contributor Daniel Ewing 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 now infamous ARK Invest updated its Tesla Inc (NASDAQ: TSLA) share price target on Friday – it’s now more bullish than ever.

Cathie Wood and her team of analysts last year estimated the US electric vehicle (EV) maker’s shares would eclipse US$1,400 by 2024. But, with updated research, the disruptive-focused asset manager now estimates it could hit US$3,000 in 2025.

Although a year later, the upgraded price target represents a 114% increase on the firm’s prior base case and an implied 358% upside from Tesla’s current price.

There are four main reasons for the revised price target.

Less money, more production, higher Tesla share price

In ARK’s 2025 Tesla share price target, the first reason listed for the target increase is refined capital efficiency. Originally ARK estimated that Tesla would spend US$11,000 to US$16,000 per unit of increased production capacity in 2024.

However, Tesla announced an anticipated 75% reduction in investment costs over time due to improved cell chemistry and manufacturing processes. Consequently, ARK has lowered its gross capital expenditure estimate per car.

For this reason, the asset manager now foresees sales somewhere between 5 to 10 million electric vehicles in 2025.

Take out a policy with Tesla

In August 2019, Tesla introduced its own vehicle insurance coverage for customers in California. These policies are provided through partnering with underwriters, but ARK believes Tesla could begin underwriting them itself in the next few years.

In addition to this, the margins on the policies are estimated to be better than average due to the detailed driving data available from the EVs.

ARK thinks the company could roll out the insurance offering to more states and acquire customers at a low cost, given Tesla’s high safety profile and dynamic pricing ability. In this case, if Tesla sold 40% of its vehicles with its own insurance in 2025, insurance revenue alone could hit US$23 billion annually – and this is in ARK’s bear case.

Did you request a Tesla for John?

Human-driven ride-hail is now incorporated into ARK’s Tesla bear case share price. In the bear case, Tesla would deliver a ride-hailing service similar to that of Uber Technologies Inc (NSYE: UBER). However, Cathy Wood’s team believes Tesla could do it with a lower cost structure.

If implemented, ride-hail could add US$20 billion to Tesla’s operating profit by 2025, by ARK’s estimates. This would also lay the groundwork for an autonomous service while providing a highly profitable recurring revenue stream.

Highest Tesla share price target = no human driver

Lastly, ARK’s previous valuation model considered Tesla’s chances of achieving fully autonomous driving before the end of 2024 to be 30%. The revised model has seen the team ambitiously raise the probability to 50% by 2025.

ARK estimates that if 60% of Elon’s Autopilot-equipped EVs were to serve as robo-taxis’, the company would generate an additional US$160 billion in earnings before interest, tax, depreciation, and amortisation (EBITDA) in 2025.

Furthermore, in ARK’s targets, electric vehicle sales and robo-taxi business operations account for 40% and 50% of Tesla’s estimated market capitalisation. Additionally, ARK estimates Tesla’s combined operations to generate US$507 billion in revenue by 2025.

More reading

• ASX tech shares: A once-in-a-lifetime buying opportunity?
• Why Tesla stock fell sharply on Thursday
• Why are the Nasdaq’s highest-growth stocks panicking about a strong economy?
• Airtasker IPO: staff demand 10 times the shares offered
• We’re betting on ASX growth shares: global fund

Mitchell Lawler owns shares of Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Uber Technologies. 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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With inflation on the horizon, S&P/ASX 200 Index (ASX: XJO) mining and banking shares should be in your sights. Not to mention your share portfolio.

That’s because ASX 200 financial shares and ASX 200 resource shares tend to outperform technology and other growth shares during inflationary periods, when central banks may be forced to raise interest rates sooner and higher than many expect.

Now inflation may not be a concern today. And according to placating words from the world’s leading central bankers (we’re looking at you Jerome Powell, Philip Lowe and Christine Lagarde) they’re in no hurry to lift their official cash rates even if inflation does return to within target levels.

Stay calm, investors have been told. Rates will, almost certainly, remain at rock bottom levels until at least 2024.

But long-term government bond yields have told a potentially different story. With US 10-year Treasury notes recently spiking to 1.62%, the highest level since before the global pandemic, the bond market is clearly getting a tad jittery about what was for so long lamented as “stubbornly absent” inflation.

And share market investors would do well to take note.

The case for ASX 200 mining and banking shares in an inflationary environment

According to Perennial Value Management portfolio manager Dan Bosscher, inflation looks to be coming, though it’s yet to show up in the economic data.

Bosscher says (as quoted by the Australian Financial Review):

Inflation is the topic of the day – whether the inflationary outlook is going to be real or not. The five year/five year breakeven has been going up for six months and there’s been no inflation prints yet. The market is saying they can see it but it’s not in the economic data yet. If I didn’t follow that, I wouldn’t know that maybe I should be long commodities because they work well in an inflationary environment.

Two of the ASX 200 shares that Bosscher holds in a portfolio of only 20 companies are mining giant BHP Group Ltd (ASX: BHP) and banking behemoth Australia and New Zealand Banking Group Ltd (ASX: ANZ).

“They fit with my view that the reflation story is real. I don’t think that we are going to have rampant inflation but I think it’s pretty clear that the market is pointing in that direction,” Bosscher said.

BHP share price and ANZ share price snapshots

Up 0.5% in late afternoon trading today, ANZ shares have gained an impressive 101.2% over the past 12 months. That compares to a 48.7% gain on the ASX 200. Year-to-date the ANZ share price is up 23.1%. ANZ pays an annual dividend yield of 2.1%, fully franked.

BHP shares are slipping today, down 0.89% at the time of writing. Over the past 12 months, the BHP share price is up 64% with a gain of 3.3% so far in 2021. BHP pays an annual dividend yield of 4.6%, fully franked.

More reading

• ASX 200 climbs, Crown soars, Mineral Resources drops
• ASX 200 up 0.35%: Crowns surges, ANZ & CBA settle class actions
• ANZ (ASX:ANZ) share price in focus after settling US class action
• Why the Commonwealth Bank (ASX: CBA) share price is on watch today
• ASX 200 Weekly Wrap: Inflation fears hold ASX down

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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Fortescue Metals Group Limited (ASX: FMG) shares did not have a pleasant day today. At the close of trading, the Fortescue share price has fallen 4.25% to $19.16 a share.

It was worse earlier in the day though. At around midday, Fortescue shares were down more than 5.5% when a low of $18.87 a share was hit.

Today’s move represents the latest chapter in what has been a rapid wind change for Fortescue. It was less than a month ago that this company was commanding a share price of $25.24 a share, meaning Fortescue has dropped 24% since 25 February.

As my Fool colleague reported this morning, it is concern over a falling iron ore price that seems to be weighing Fortescue down.

But let’s look at the bigger picture for a moment. The miner’s performance over the past few years has in some ways masked the dangers that are inherent with investing in a company like Fortescue.

Yes, the company is up an extraordinary 347% since the start of 2019. But investors would probably do well to remember that Fortescue shares also lost roughly 30% of their value over the preceding 9 or so years.

Iron is a fickle master, even for Fortescue

Headed by one of Australia’s most successful business operators in Andrew Forrest, Fortescue is evidently an extremely well-run company. However, it is also bound to the fact that is a resource extractor at the end of the day.

Fortescue’s fortunes are forever entwined with the price of iron ore. It’s this fact that can make it a potentially dangerous company to invest in if you are unaware of these pitfalls.

Companies outside the resource sector are in far more control of their own destiny. Most companies can decide what prices to charge for their products or can differentiate what they sell in other ways. This is not the case with a miner like Fortescue.

Fortescue share price ups and downs

It can only sell its product, which is essentially the same as what every other iron or miner on the planet produces, for the prevailing market price. This is great in times when iron ore is rising. But it can be terrible (and capital destructive) if iron falls into a bear market.

For anyone who bought Fortescue shares at their mid-2008 peak had to wait until January last year for their investment to return to the share price they bought at. That’s not a desirable scenario to find oneself in. But that’s often the risk that is there when investing in a miner.

So make sure you keep all of that in mind if you’re thinking about investing in iron ore mining shares. Not knowing the ins and outs of a miner, in particular, can be very dangerous indeed.

More reading

• ASX 200 climbs, Crown soars, Mineral Resources drops
• Leading brokers name 3 ASX shares to buy today
• Why Fortescue, Freedom Foods, QBE, & Singular Health are sinking
• Why the Fortescue (ASX:FMG) share price is sinking 5% today
• ASX 200 up 0.35%: Crowns surges, ANZ & CBA settle class actions

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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