The IGO Ltd (ASX: IGO) share price could find favour with investors when it resumes trading after a broker upgraded the stock.

The IGO share price last traded at $5.10 when it went into a trading halt on Monday to announce a $766 million capital raise to fund an acquisition.

ASX shares that go cap in hand to investors tend to come under pressure from the discounted new share sale.

IGO share price upgraded

But IGO get just get a warmer reception as Jarden upgraded the nickel miner to “outperform” from “neutral”.

The broker turned bullish on the IGO share price despite the large dilution from the raise as it believes IGO’s expansion into lithium is a “game changer” for the miner.

IGO said it would buy a 49% stake in Tianqi Lithium Energy Australia Pty Ltd from China-listed Tianqi Lithium Corporation.

IGO acquisition details

The acquisition comes with a US$1.4 billion ($1.9 billion) price tag and will give IGO a 24.99% indirect interest in the Greenbushes Lithium Mining and Processing Operation (Greenbushes) and a 49% indirect interest in the Kwinana Lithium Hydroxide Plant (Kwinana). Both assets are located in Western Australia.

Jaden listed seven reasons why it likes the deal as it upgraded the IGO share price.

“Transacting at the bottom of the cycle from a forced seller [and] buying into a sector with a strong structural growth thematic,” said the broker.

Reasons to like the IGO transaction

It also removes the uncertainty around what IGO will acquire to drive growth. The sector doesn’t have a good track record in making value accretive mergers and acquisitions.

The deal will also address the short mine life of its flagship asset, the Nova nickel mine, which can only produce for another six-odd years. Miners with limited life assets tend to trade at a discount to the market.

IGO is also buying into a world class asset that has scale, grade, low cost and growth potential.

Buying knowhow at a bargain price

Jarden also pointed out that the ASX miner will be partnering with lithium industry heavyweights that can teach IGO a thing or two in operating lithium assets.

Further, the assets offer fully integrated lithium hydroxide production that maximises margin potential across the supply chain.

Finally, Jarden believes IGO paid a very attractive price for a stake the assets.

IGO target price upgraded

“Under a scenario of ramped‐up ~2025 production, ‘normalised’ lithium pricing, and IGO’s value attribution among the assets based on Kwinana at sunk capital (US$700mn, 100%), the acquisition prices Greenbushes at ~8.0x EV/EBITDA and Kwinana at ~3.3x,” explained Jarden.

“These multiples are below global peers(FY22E ~7‐78x), while also inherently conservative in that they are based on committed near term expansions, not long term expansion aspirations supported by Resource, offering further earnings and value accretion.”

The broker lifted its IGO share price target to $6 from $4.90 a share even after it accounted for the dilution from the cap raise.

More reading

• ASX 200 up 0.7%: CBA update, IGO enters lithium market, Healius jumps
• IGO (ASX:IGO) enters lithium market, shares on trading halt
• What do big brokers think about soaring commodity prices and ASX mining shares?

Motley Fool contributor Brendon Lau 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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Mineral Resources Limited (ASX: MIN) shares have soared 111% higher so far in 2020. And this is no mining minnow we’re talking about. Based on the current Mineral Resources share price, the company has a market capitalisation of $6.6 billion.

Though slipping today, down 1% in afternoon trading, Mineral Resources shares hit a new all-time high yesterday, closing at $35.07. That’s a remarkable 176% higher than the $12.71 per share the stock was trading at on 23 March following the COVID-19 market panic.

Yet despite that meteoric rise, Montgomery Lucent Investment Management’s Dominic Rose sees strong growth potential ahead.

We’ll look at why below. But first…

What does Mineral Resources do?

Mineral Resources is a mining services company with a portfolio of mining operations across lithium and iron ore. The business consists of three core pillars: mining services, commodities, and innovation and infrastructure.

Mineral Resources’ subsidiary businesses offer a range of general mine services, contract crushing, infrastructure provision and recovery of base metals concentrate for export. Mineral Resources is part of the S&P/ASX 200 Index (ASX: XJO).

Why this fundie sees upside to the Mineral Resources share price

Dominic Rose is portfolio manager of the Montgomery Small Companies Fund.

Writing in Livewire, Dominic notes Mineral Resources is a “highly entrepreneurial company with strong growth potential from its iron ore and lithium operations and a proven track record of value creation”.

One of the company’s two pillars is iron ore. And it’s no secret that iron ore prices have gone through the roof. With Brazilian supply issues hitting just as Chinese demand for the metal rockets, iron ore is trading at multi-year highs, above US$140 per tonne. And, as Dominic writes, Mineral Resources is planning major expansions of its iron ore production.

MIN [Mineral Resources] plans to grow its iron ore business significantly over the next three to five years, targeting production expansion from c.20 million tonnes per annum to 90 million tonnes per annum via a multi-stage hub strategy.

Lithium, Mineral Resources’ second pillar, also looks to have a strong growth demand ahead. According to Dominic:

After a tough few years, the outlook for lithium also appears to be improving on the back of favourable ‘green’ stimulus support in Europe and a potentially more climate friendly regime in the US. We view battery materials as an attractive long-term theme (green energy, decarbonisation) and MIN is particularly well positioned to benefit from a market recovery.

With both iron ore and lithium in the spotlight, it will be interesting to see how the Mineral Resources share price performs moving forward.

More reading

• Top ASX shares making record all-time highs
• The sector that’ll explode in February: fundie
• Why the Afterpay (ASX:APT) share price and these ASX stocks could get a boost next week

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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On Wednesday I looked at three ASX shares that brokers have given buy ratings to this week.

Unfortunately, not all shares are in favour with them right now. Three ASX shares that have just been given sell ratings by brokers are listed below.

Here’s why these brokers are bearish on them:

Champion Iron Ltd (ASX: CIA)

According to a note out of Citi, its analysts have downgraded this iron ore producer’s shares to a sell rating but lifted the price target on them to $4.40. While the broker expects Champion Iron to benefit greatly from strong iron ore prices and has upgraded its earnings forecasts materially to reflect this, it isn’t a fan of its current valuation. Citi believes the strong gain in the Champion Iron share price has left its shares overvalued, hence the downgrade. The Champion Iron share price is fetching $5.12 this afternoon.

Commonwealth Bank of Australia (ASX: CBA)

Analysts at Morgan Stanley have retained their underweight rating and $68.50 price target on this banking giant’s shares. This follows news that Commonwealth Bank has been given Chinese regulatory approval to sell its stake in BoCommLife to MS&AD Insurance Group. While this sale will give its CET1 ratio a nice boost, it doesn’t expect it to lead to a share buyback anytime soon. In light of this and its lofty valuation, the broker isn’t in a rush to change its rating. The CBA share price is trading at $83.00 on Thursday.

Scentre Group (ASX: SCG)

A note out of Macquarie reveals that its analysts have downgraded this shopping centre operator’s shares to an underperform rating but lifted the price target on them to $2.68. Macquarie believes that the percentage of retail sales made online will double from pre-pandemic levels by 2025. And while Scentre has some high quality assets, it believes this could weigh on its performance over the medium term and stifle its growth. The Scentre share price is changing hands for $2.83 this afternoon.

More reading

• The CBA share price ticks green for year-to-date returns
• ASX 200 up again on Wednesday
• Citigroup downgrades these ASX mining stocks after a big rally
• ASX 200 up 0.7%: CBA update, IGO enters lithium market, Healius jumps
• Commonwealth Bank (ASX:CBA) share price higher on divestment update

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.

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The Creso Pharma Ltd (ASX: CPH) share price is on course to end its remarkable run on Thursday with a sizeable decline.

The cannabis company’s shares were down as much as 33% at one stage to 20 cents this afternoon.

The Creso Pharma share price has since recovered slightly but remains down 27% to 22 cents at the time of writing.

What is happening with the Creso Pharma share price?

It appears as though some investors have decided to take a bit of profit off the table after a stunning gain in December.

Prior to today, the Creso Pharma share price was up an incredible 500% month to date.

Investors have been scrambling to buy its shares on the belief that a couple of recent developments will have a material impact on its future performance.

These developments were the UN announcing a landmark decision to reclassify cannabis as a less dangerous drug and the US House of Representatives voting to decriminalise cannabis.

Management commented that it believes these decisions have the potential to create significant growth opportunities in the industry.

Market expansion.

In addition to this, investors responded positively to an announcement on Wednesday which revealed that Creso Pharma has entered the largest recreational cannabis market in Canada. This was achieved following the receipt of orders worth ~C$230,000 from the Province of Ontario.

It also noted a maiden purchase order from the Yukon Liquor Corporation, which is another key market for recreational cannabis. According to the release, the Ontario and Yukon markets have recorded combined sales for recreational cannabis of over C$300 million year to date.

Management commented: “We are proud to announce that Mernova has been chosen to become part of a very select group of licensed producers with cannabis products for sale in the Yukon. This is a major achievement for us, and we expect growth to continue across Canada and, with our pending entry into Ontario, Canada’s largest recreational market, we expect rapid growth to continue.”

Though, with a market capitalisation heading beyond $300 million on Wednesday, time will tell if it delivers on the enormous growth being factored into its share price.

More reading

• Why the Creso Pharma (ASX:CPH) share price is rocketing 96% higher today
• Why Afterpay, Creso Pharma, Healius, & Resonance Health shares are storming higher
• Why Creso Pharma and these ASX shares just hit 52-week highs or better
• Zip and Creso Pharma were among the most traded shares on the ASX last week
• Why the Creso (ASX:CPH) share price is rocketing 30% today

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.

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The Asaleo Care Ltd (ASX: AHY) share price was on fire this morning, rising 21.78% to $1.23 before being placed in a trading halt. Asaleo shares opened at $1.01 this morning and stayed pretty much at that level until just past 11:00 am.

Then, they shot the moon and rapidly climbed as high as $1.24. At 11:31 am, Asaleo released an announcement to the markets which informed investors that trading would be “temporarily paused pending a further announcement”.

At 12:32 pm, the ASX issued another announcement advising the markets the shares would be “placed in a trading halt at the request of AHY [Asaleo Care], pending it releasing an announcement.” We have not yet received this announcement directly from Asaleo.

So what’s going on here with Asaleo Care? This company is a large manufacturer of personal paper products. It owns well-known household brands like Libra, Sorbent, Handee and Purex.

What’s driving the Asaleo Care share price?

Well, the recent run of ASX takeovers looks set to add another chapter to its story today. Asaleo is reportedly the latest ASX company to be subject to a takeover offer. This follows in the footsteps of other recent targets such as Coca-Cola Amatil Ltd (ASX: CCL).

According to reporting in the Australian Financial Review (AFR) today, Asaleo’s board has “called in defence adviser Luminis Partners to assess and handle potential interest in the company”. The AFR asserts that “it is understood there’s an indicative proposal on the table at $1.26 a share, which would be a 24 per cent premium to Asaleo’s last traded price”.

The suitor? According to the report, it is “believed to be” an existing major shareholder in Asaleo – Essity Group. Essity is a large Swedish company, and already reportedly has a 36.2% stake in Asaleo.

However, the report also states that “market sources reckon that’s unlikely to be enough to win over Asaleo’s board and shareholders”.

Even so, the two companies are apparently already rather intertwined, especially if we consider the large stake that Essity already has in Asaleo. The AFR tells us that Essity already licenses several brands to Asaleo, including ‘Tork’ and ‘Tena’ until 2027. These two brands alone reportedly made up “the majority” of Asaleo’s earnings last financial year. 

More reading

• Why Asaleo Care, Fortescue, Perpetual, & Starpharma shares are storming higher
• Leading ASX fund manager names 3 US value stocks to buy in December
• Meet the latest ASX stock to come under the takeover spotlight
• Can these fund managers drive the Coca-Cola Amatil (ASX:CCL) share price 10% higher?
• BlueScope (ASX:BSL) share price on watch as takeover rumours swirl

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 Renergen Ltd (ASX: RLT) share price is climbing higher today. This comes after the company announced a helium powered transport solution for vaccines. At the time of writing, the Renergen share price is up 4.5% to $1.40. In comparison, the All Ordinaries Index (ASX: XAO) is down 0.7% to 6,923 points.

Renergen is a renewable energy business that invests in early-stage alternative energy projects across Africa and other emerging markets. Its focus is on the commercialisation of its Virginia Gas Project which has reserves of both helium and natural gas.

What’s moving the Renergen share price higher?

While the broader market falls, the Renergen share price is on the rise as investors welcome the company’s positive update.

According to the release, Renergen has created a new vaccine storage solution which effectively simplifies the process of transferring immunisations.

Named ‘Renergen Cryo-Vacc’, the device enables a minimum of 100 doses to be transported at temperatures between -70 and -150 Celsius. Encased in aluminium, the Renergen Cryo-Vacc utilises liquid helium which is boiled and released over a period of 30 days, without any power supply. This permits vaccines to be transported over long distances, ensuring the doses aren’t comprised by heat.

In addition, Renergen noted that the density of liquid helium is significantly lighter than liquid nitrogen. This makes the device easy to carry with an overall weight of just 20 kilos.

The company has filed for patent rights to the design, and is calling on its partners to adopt the ground-breaking solution.

Renergen has reported that not only does its device offer a cost-effective solution, but also allows vaccines to be delivered to remote areas.

What did management say?

Renergen CEO and managing director Mr Stefano Marani commented on the milestone achievement, saying:

As an emerging helium producer, we are proud to have developed this innovative concept, at a time when the world is seeking solutions on how to overcome the COVID-19 pandemic.

…we are inviting partners with the resources to roll-out large-scale manufacture of the Renergen Cryo-Vacc… Importantly, with the devices in circulation, transportation can be completed in a cost-effective manner, given the relatively small size and weight of the devices. Depending on where the helium is sourced, the operating cost of the device should be under US$0.07 per dose per day for the smallest device.

Renergen share price summary

The Renergen share price has had a bumpy ride over the last year. The company’s shares reached as high as $1.72 in February, before falling to 52-week low of 84 cents in March.

Renergen shares have, however, been performing better of late and have increased more than 28% over the last 30 days.

More reading

• Better buy: Amazon vs. Peloton
• No savings at 40? I’d follow Warren Buffett’s advice to retire early
• Why the ASX tech share rally can run well into 2021
• WAM Global (ASX:WGB) share price jumps on dividend guidance
• Why the Appen (ASX:APX) share price is sliding 11% today

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.

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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.

Amazon.com Inc (NASDAQ: AMZN) and Peloton Interactive Inc (NASDAQ: PTON) are two of the hottest stocks on Wall Street. Both of them were hot even before the pandemic, but while COVID-19 has harmed many businesses, it’s been a boon to both of these companies. 

Amazon is the standard favorite, and Peloton is the new stock on the block. Let’s take a look at what they have going for them and which one is better for your stock portfolio.

High-speed growth

Many investors look for high-growth companies to fuel their portfolios. High growth comes with risk, but it also provides the opportunity for high gains. Shareholders who believed in Amazon from the time it was a humble online bookseller have seen their stock skyrocket. Those who are sticking with Peloton are looking for the same kind of returns. 

Amazon became the go-to retail experience during the pandemic as Americans stayed home and accelerated their adoption of online shopping. The e-commerce giant hired hundreds of thousands of new employees to fill soaring demand, and even had to temporarily pause deliveries of nonessentials to focus on getting customers the goods they really needed. 

Sales surged commensurately, increasing 40% in the second quarter ended 30 June and 37% in the third quarter ended 30 September. 

Peloton has seen even more extreme growth during the pandemic. In the fourth quarter ended 30 June, revenue increased 172%, connected fitness subscribers grew 113%, and paid digital subscriptions were up 210%. Clearly, these are the beginning stages of a very popular brand. Some gyms were closed during this time and others continue to stay shuttered, and fitness enthusiasts had to find other means to achieve their fitness goals. This definitely helped increase adoption of Peloton’s products, since growth was beginning to slow down before COVID-19.

Keeping it up

Amazon still has tremendous prospects. It’s expecting sales to increase between 28% and 38% in the fourth quarter, which includes the high-volume holiday season. It’s expanded its business with Amazon Web Services, which provides cloud computing solutions and has picked up many large clients such as Global Payments and Moderna.

It has also made headway in its efforts to get into storefronts, an important piece of omnichannel shopping that’s become the new wave in digital. It pioneered the Amazon Go cashierless technology and has opened 26 Go stores in four states. It also launched four Fresh stores in California, with another on the way in Illinois. These combine in-store grocery shopping with almost every iteration of digital options, including the Amazon Dash cart, where customers can place their goods and skip the checkout lane. 

Peloton also has a lot of future potential. It recently lowered the price of its standard bike and introduced a newer, premium model. It’s also launching a line of connected fitness treadmills with a range of prices. Its exercise class subscription model ensures there’s an inexpensive way to connect with the company and keeps the brand in the public eye. 

One could argue that once the pandemic ends, the kind of growth Peloton is seeing will subside. While that’s probably true to some degree, Peloton customers are happy customers, and getting them to take the first step is the beginning of keeping them on board. The company has high retention rates, at least in part because customers who buy the expensive equipment want to make the most of their purchase.

Amazon stock is up 71% year to date and is trading at about 90 times trailing 12-month earnings. That seems high, but historically Amazon has traded for a much higher valuation.

Peloton stock is up 300% year to date and is trading at a staggering 408 times trailing 12-month earnings. 

I think that they’re both great companies, and investors won’t lose out buying shares in either one. But if I had to choose one, I’d go with Amazon. It’s more established and therefore less risky. It’s also trading pretty cheaply, and has many years of growth ahead, making this an excellent time to buy shares.

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

More reading

• ASX stock of the day: Linius (ASX:LNU) share price blasts up 30% on product debut
• Here’s how world’s 10 richest made $1.5 trillion from COVID-19
• Amazon grew even more dominant in 2020
• Amazon’s holiday sales jump 60%
• Cyber Monday sales hit a record $10.8 billion

Jennifer Saibil 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 Peloton Interactive and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 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.

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

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Warren Buffett’s long-term approach to investing money in shares has allowed him to benefit from the stock market’s growth over many decades.

Furthermore, his focus on buying high-quality shares at low prices has allowed him to unearth some of the best opportunities in the stock market.

As such, following his methods may lead to relatively high long-term returns that allow an investor to retire earlier than they had planned.

Warren Buffett’s long-term approach

Warren Buffett has always taken a long-term approach to investing money in the stock market. He is relatively unconcerned with the potential for a market crash, other than to use it to buy stocks for lower prices.

A long-term investment approach can be beneficial because it allows an investor to take advantage of compounding. For example, the stock market has historically offered an 8% annual total return. Over a short time period, such a return is unlikely to make a significant impact on a portfolio’s value. However, repeated over a period of 25 years, for example, it can turn modest amounts of capital into a surprisingly large portfolio.

For example, using Warren Buffett’s long-term approach could mean a $10,000 investment today is worth $68,000 in 25 years’ time. This assumes an 8% annual return, which is in line with the return previously delivered by indices such as the FTSE 100 Index (FTSE: UKX).

A focus on high-quality companies at low prices

Of course, Warren Buffett has generated an annual return that is significantly higher than 8% per annum over the long run. A key reason for this is his focus on buying high-quality companies when they trade at low prices. High-quality companies are generally those businesses with competitive advantages over their peers. This can allow them to generate higher profits in a range of market conditions.

Buying such companies at low prices provides greater scope for capital appreciation over the long run. Certainly, the best buying opportunities often coincide with the periods of greatest economic weakness. However, by focusing on long-term recovery prospects for high-quality businesses, it may be possible to purchase them at attractive prices.

Retiring early with a portfolio of stocks

Clearly, it has taken Warren Buffett many years to build his wealth to its current level. However, an investor aged 40 is likely to have a long time horizon until they plan to retire.

Furthermore, Buffett has stuck with his holdings for the long run. Many of his holdings have been part of his portfolio for many years. By holding companies over an extended timeframe, they are provided with the opportunity to deliver on their growth potential. It also means they have time to implement new strategies and to see the results of their own investments. Over time, this can catalyse a portfolio’s performance and lead to an early retirement.

More reading

• Why the ASX tech share rally can run well into 2021
• WAM Global (ASX:WGB) share price jumps on dividend guidance
• Why the Appen (ASX:APX) share price is sliding 11% today
• Why Asaleo Care, Fortescue, Perpetual, & Starpharma shares are storming higher
• Whisky maker Top Shelf’s (ASX:TSI) share price slips on IPO debut

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

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“Reports of my death have been greatly exaggerated,” Mark Twain famously quipped.

After falling ill in England, Twain’s obituary was published in the United States. Rather prematurely, it turned out. Forcing him to write a letter proclaiming he was very much alive.

Some analysts have been sounding a similar premature death knell for the outlook of technology shares in 2021.

The reasoning goes that, following a stellar run in 2020’s coronavirus-plagued ‘work, shop and socialise from home’ world, tech shares are likely to underperform in 2021 as the world reopens.

Top 3 ASX 200 tech shares

Now it’s true that tech shares have had a stellar run since the rebound from the March lows.

In the US, the tech heavy Nasdaq Composite (NASDAQ: .IXIC) is up 80% from 23 March.

It’s a similar story with ASX technology shares.

The S&P/ASX All Technology Index (ASX: XTX) – which tracks 50 of Australia’s leading and emerging technology shares – is up a whopping 132% since 23 March.

But there are few signs yet to proclaim that strong performance is over. On Tuesday, the Nasdaq closed at yet another new record high, posting 10 straight days of gains.

And yesterday, the All Tech also closed for a new all-time high.

In fact, 3 of the 10 best performing shares on the S&P/ASX 200 Index (ASX: XJO) in 2020 are technology shares.

BNPL darling Afterpay Ltd (ASX: APT) leads the charge. Afterpay’s share price is up 228% year-to-date.

Data centre operator Nextdc Ltd (ASX: NXT) also makes the top 10 performers list, with the share price up 78%.

The third ASX tech share to make it into the top 10 gainers on the ASX 200 this year is cloud-based accounting software provider Xero Limited (ASX: XRO). Xero’s share price is up 74% year-to-date.

What’s happening with tech share prices today?

Markets never go up in a straight line. And tech shares are certainly no exception.

Yesterday (overnight Aussie time) all 3 major US indexes lost ground. The Nasdaq suffered the biggest fall, losing 1.9%.

As tends to be the case, ASX shares are following the US lead lower.

At time of writing, the ASX 200 is down 0.4%. And tech shares are falling harder here as well, with the All Tech index down 1.8%.

But as long-term investors, you shouldn’t get overly hung-up on daily price swings.

The losses we’re witnessing on our screens right now mostly come down to any lack of progress on the next multi-trillion-dollar US stimulus package.

But that doesn’t mean the stimulus package won’t be passed… eventually.

As Mark Heppenstall, chief investment officer for Penn Mutual Asset Management, says (quoted by Bloomberg):

To the extent they can’t come to an agreement on stimulus given the heightened urgency, given the recent outbreak, that’s a bad message. I do think stimulus is coming and I think the market was more prepared for it to be this year than next year.

Diana Mousina is a senior economist at AMP Capital, a subsidiary of AMP Ltd (ASX: AMP). Speaking at AMP’s webinar yesterday, she said she also believes a US stimulus package is forthcoming. And this hasn’t been fully priced into share markets yet:

When it is passed, I do expect that share markets will have another leg up. Because there’s always some concern that it may not get there… Of course, if you don’t see it getting passed, that will be a negative for share returns.

It’s not just technology shares with a bright outlook

While the reports of the death of technology shares may be greatly exaggerated, that doesn’t have to come at the expense of cyclical shares.

As the Australian Financial Review reports, LPL Financial is forecasting moderate gains for share markets in 2021. Its analysts wrote:

We see an S&P 500 Index fair value target range of 3,850–3,900 in 2021 with potential for further upside if the production of a vaccine exceeds expectations. Growth-style stocks may continue to perform well next year, but we expect participation to broaden, which could boost cyclical value stocks. Early-cycle positioning and prospects of a strong earnings rebound may provide a tailwind to small caps.

And then there’s this conclusion from global market strategists at JPMorgan Chase & Co, reported by Bloomberg.

The strategists, led by Nikolaos Panigirtzoglou, expect to see a US$600 billion (AU$810 billion) increase in demand for shares in the year ahead, largely driven by retail investors. Topping that off, they expect the supply of shares to fall by US$500 billion, mostly driven by an increase in share buybacks alongside less capital raising activity.

“This is similar to the equivalent equity demand/supply improvement in 2019 relative to 2018 which at the time had seen global equities rising by around 25%,” JPMorgan said.

Happy investing.

More reading

• 5 things to watch on the ASX 200 on Thursday
• Top brokers name 3 ASX shares to buy today
• Morgans picks the best ASX stocks to buy for 2021
• Why Afterpay, Creso Pharma, Healius, & Resonance Health shares are storming higher
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Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. 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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The market may be tumbling lower today but the same cannot be said for the WAM Global Ltd (ASX: WGB) share price.

In afternoon trade the fund manager’s shares are up 5.5% to a record high of $2.41.

Why is the WAM Global share price at a record high?

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

That announcement revealed that its global investment fund has been outperforming the MSCI World Index in 2020.

According to the release, at the end of November, the WGB Investment Portfolio had delivered a return of 14.6% in the current financial year.

This compares to a 10.3% return by the MSCI World Index, which represents an outperformance of 4.3% for WAM Global.

What does this mean for dividends?

A lot of investors look to WAM Global and its other funds for a source of income. This is due to their traditionally very generous payouts.

The good news for investors is that FY 2021 will be no different.

The release advises that the WAM Global board intends to pay shareholders a fully franked interim dividend of 5 cents per share. This represents a 66.7% increase on FY 2020’s interim dividend.

If you were to annualise this interim dividend, it would mean a fully franked full year dividend of 10 cents per share. Which based on the current WAM Global share price, implies a fully franked 4.15% dividend yield.

The release also revealed that the company currently has 41.9 cents per share in profits reserve. This represents 4.2 year of dividend coverage for shareholders.

Management commented: “The dividend guidance has been made possible by the WAM Global investment portfolio’s solid risk-adjusted performance in the financial year to date and the increased profits reserves available.”

“The Board notes the share price is currently trading below the net tangible assets (NTA) and believes the clear dividend guidance and the continued strong performance of the investment portfolio will lift the share price to a premium to NTA over time,” it concluded.

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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 WAM Global (ASX:WGB) share price jumps on dividend guidance appeared first on The Motley Fool Australia.

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