Shares in ASX healthcare company Polynovo Ltd (ASX: PNV) have had a shocking start to 2021, shedding over 30% of their value in January. The decline in the Polynovo share price comes despite the company announcing a sharp rise in first half sales, as well as its continued expansion into a new European markets.

What does Polynovo do?

Polynovo is a healthcare company specialising in the development of biodegradable medical devices that aid in skin tissue repair. Its flagship medical technology is called NovoSorb, a medical-grade polymer designed for use in surgery, tissue repair, and other medical procedures.

Novosorb BTM (“Biodegradable Temporising Matrix”) is the first fully commercialised Novosorb product developed by Polynovo. It is a synthetic polymer matrix that clinicians can use to treat burns and other serious skin wounds. The polymer can be applied to trauma sites on the skin and encourages the body to build new tissue. The polymer is eventually safely absorbed and excreted, leaving only biological material behind.

What’s been happening to the Polynovo share price?

After a strong rally in the second half of 2020, which saw the Polynovo share price surge to a new record high of $4.08 by late December, Polynovo shares have collapsed this year. They are now trading at just $2.63 (at the time of writing), 35% less than their 52-week high and their lowest price since early November.

Recent news out of the company

Polynovo has released a flurry of announcements in recent months. On 19 November 2020, the company announced it was extending its partnership with its European distributor, PolyMedics Innovations, and entering the healthcare markets in Belgium, the Netherlands, Luxembourg and Sweden.

Then, on 20 January 2021, Polynovo also announced it had appointed distributors in Poland and Turkey. The company claims these markets are both key to its growth strategy. Turkey provides a gateway into the Europe-Middle East-Africa (EMEA) market, while Poland is the sixth largest country in Europe and has a medical device market valued at over $2.2 billion.

However, while the announcement back in November caused the Polynovo share price to soar to new highs, the ones in January barely shifted the dial at all.

This could be down to uncertainty reflected in the company’s interim trading update for the first half of FY21, released to the market on 12 January 2021. While sales for the half were up 31% versus the first half of FY20, most of this uplift came in the first quarter, while sales in October and November were slower than expected.

The lumpiness in the sales numbers was partly down to disruptions caused by COVID-19, particularly in the United States. Other markets that have dealt better with the challenges posed by the pandemic, such as Taiwan and New Zealand, exceeded their budgets.

Polynovo Managing Director Paul Brennan hinted that there might be some continued short-term volatility in the company’s results when commenting on the announcement. He noted that “in the short-term, forecasting sales will be challenging particularly in the US, however the medium-term outlook is strong.”

Based on the current Polynovo share price, the company has a market capitalisation of around $1.7 billion.

More reading

• These were the worst performing ASX 200 shares in January
• These ASX 200 shares have been smashed in 2021
• ASX 200 rises 0.4%
• ASX 200 up 0.5%: BHP’s update, PolyNovo jumps, Ansell impresses
• Why Afterpay, Ansell, MyDeal, & PolyNovo shares are storming higher today

Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of POLYNOVO FPO. 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 Polynovo (ASX:PNV) share price is already down 30% in 2021 appeared first on The Motley Fool Australia.

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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.

eBay (NASDAQ: EBAY) investors had a fantastic 2020, with the stock price comfortably outpacing the broader market during the pandemic-fuelled e-commerce boom. Sure, companies like Amazon and Shopify posted wider gains. But eBay’s nearly 40% share-price spike reflected some major operating wins and kept it ahead of other huge online businesses, including Walmart.

Investors are about to learn exactly how well eBay did in 2020 when the company announces its holiday season results. The strength of that performance, along with management’s official outlook for 2021, will determine whether the stock continues its winning streak into the new year.

Let’s take a closer look at the company in advance of the fourth-quarter earnings report’s release on Wednesday, Feb. 3, and what investors should watch for.

Merchandise volumes and conversion rates

eBay’s core growth metric is the volume of merchandise moving through its platform. Soaring results here formed the basis for last year’s stock surge. Volume had been flat or declining in the quarters before the pandemic struck but shot up to over 20% year over year as commerce stampeded to online channels beginning in late February.

This quarter’s report will answer big questions around the sustainability of that spike. Volume gains year over year slowed to 21% in Q3 from 29% in the quarter that captured the most intense period of retailing shutdowns. For its part, management in late October forecast gains in the low double-digit percentages. However, eBay easily surpassed its last quarterly outlook, and investors are hoping for another beat this week.

Other indications of healthy market share would show in an expanding buyer pool and robust conversion rates for its product pages. CEO Jamie Iannone should comment on both these metrics on Wednesday.

Cash and profits

eBay’s asset-light operating model restricts its growth potential a bit as compared to Amazon, but the trade-off is higher profitability and impressive cash flow. Earnings more than doubled last quarter as operating margin surged thanks to the combination of higher sales, lower expenses, and an uptick in seller transaction fees.

Wall Street is expecting more gains ahead in this area, with reported earnings set to rise to $0.83 per share compared to $0.66 per share a year ago. But the more useful figure to follow is cash flow. eBay generated $584 million of free cash flow in Q3, and the company needs more success here to meet management’s goals of investing in the business while paying down debt and sending more cash to shareholders through dividends and stock repurchases.

The 2021 outlook

Iannone and his team will be looking at an unusually wide range of potential results as they craft their official 2021 forecast. Organic sales likely increased by at least 20% in 2020 compared to their initial prediction targeting a flat result. That boost sets a high bar for growth this year, but it also gives the marketplace giant momentum in a quickly growing industry.

The good news is eBay already showed off a few impressive competitive advantages at a time when sellers were looking for new platforms they could use to connect with their customers during COVID-19.

The company’s main challenge for 2021 is convincing these small businesses to stick around, mainly by making the platform more popular with buyers and easier for sellers to use. These successes are the key to eBay protecting its positive momentum in what’s likely to be a competitive selling period ahead for the e-commerce industry.

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

More reading

• These were the worst performing ASX 200 shares in January
• Top ASX shares to buy in February 2021
• These were the best performing ASX 200 shares in January
• The worst mistake GameStop investors can make right now
• 3 ASX dividend shares with yields above 5%

Demitri Kalogeropoulos owns shares of Amazon. 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 Shopify. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends eBay 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.

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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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The S&P/ASX 200 Index (ASX: XJO) was on course to record a strong gain in January until a final week market selloff. The benchmark index ultimately ended the month with a gain of 0.3% to 6,607.4 points.

A number of shares were unable to follow the market higher and recorded disappointing monthly declines. Here’s why these were the worst performers in January:

PolyNovo Ltd (ASX: PNV)

The PolyNovo share price was the worst performer on the ASX 200 in January by some distance with a 32.2% decline. Investors were selling the medical device company’s shares following the release of a disappointing first half trading update. During the six months ending 31 December, PolyNovo delivered a 31% increase in sales over the prior corresponding period. Although this is strong growth, it fell short of both the market’s expectations and management’s guidance. Bell Potter was disappointed with its performance. It commented: “Polynovo announced a relatively disappointing trading update, with 1H FY21 sales growth of 31% vs the pcp well below our forecasts, consensus and management expectations.”

Nanosonics Ltd (ASX: NAN)

The Nanosonics share price was out of form and dropped 14.8% lower during the month. This was despite there being no news out of the infection prevention company. Though, the company was the subject of a reasonably bearish broker note during the period. Analysts at Ord Minnett have retained their lighten rating and put a $5.65 price target on its shares. This compares to the latest Nanosonics share price of $6.84. It believes rising COVID-19 cases in Europe and the US could be putting pressure on demand for its products.

Adbri Ltd (ASX: ABC)

The Adbri share price wasn’t far behind with a 14.3% decline in January. This also appears to have been driven by a broker note. According to one out of Morgan Stanley, its analysts downgraded the building products company’s shares to an underweight rating and cut the price target on them to $3.30. It believes the company’s shares are fully valued given its reasonably subdued growth outlook.

Link Administration Holdings Ltd (ASX: LNK)

The Link share price was out of form and dropped 13.9% lower in January. Investors were selling the administration services company’s shares after the release of an update on a takeover approach by SS&C Technology Holdings. In December, the NASDAQ listed global provider of investment and financial software tabled a conditional offer of $5.65 per share to acquire 100% of Link. Although management felt the offer undervalued the company, it still allowed SS&C Technology to undertake due diligence. However, following the completion of its due diligence, the US company has walked away from the table and withdrawn its proposal.

More reading

• These were the best performing ASX 200 shares in January
• ASX 200 Weekly Wrap: Reality (and GameStop) finally hits ASX
• 2 quality ASX growth shares that could be long term market beaters
• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 next week

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 Link Administration Holdings Ltd and POLYNOVO FPO. The Motley Fool Australia owns shares of and has recommended Nanosonics Limited. The Motley Fool Australia has recommended Link Administration Holdings Ltd. 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 the new trading year underway and earnings season just around the corner, we asked our Foolish contributors to compile a list of some of the ASX shares experts are saying to Buy in February.

Here is what the team have come up with…

Tristan Harrison: Pushpay Holdings Ltd (ASX: PPH)

Pushpay is an electronic donation business which predominantly serves medium and large United States churches. The company is rapidly growing its margins. In Pushpay’s FY21 half-year result it increased its earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) margin from 17% to 31%.

The company also recently increased its FY21 EBITDAF guidance range of US$56 million to US$60 million. Management is expecting operating leverage to continue to accrue this year and beyond.

Pushpay is aiming for 50% market share and US$1 billion of annual revenue over the long term.

Motley Fool contributor Tristan Harrison does not own shares of Pushpay Holdings Ltd.

Bernd Struben: Nearmap Ltd (ASX: NEA)

Nearmap uses patented cameras and processing software systems to provide digital mapping and aerial imagery services. The company’s primary markets are the US, Australia, Canada, and New Zealand, and, according to Nearmap, there is plenty of growth potential left in these markets. The company is also hoping its commitment to product innovation, such as its new Nearmap AI, will help create effective barriers to entry for would-be competitors.

Following Nearmap’s $90 million capital raising in September, the company believes its cash position is strong. Management is striving to achieve annualised contract value (ACV) growth of 20% to 40% over the coming years. At the time of writing, the Nearmap share price is trading 33.5% lower than its 52-week high seen in August.  

Motley Fool contributor Bernd Struben does not own shares of Nearmap Ltd.

Sebastian Bowen: Challenger Ltd (ASX: CGF)

Challenger is a fund management firm focused on annuities. Annuities are financial products that have been growing in popularity in recent years due to the certainty of income they can provide to the purchaser in retirement. This trend could arguably broaden further in the future with Australia’s ageing population.

Unfortunately for this ASX share, the record low interest rates we have been seeing over the past year have dented the company’s fortunes. However, this also means Challenger could be a  beneficiary if rates start rising again. And that is bound to happen sooner or later. 

Motley Fool contributor Sebastian Bowen does not own shares of Challenger Ltd.

Brendon Lau: Macquarie Group Ltd (ASX: MQG)

The Macquarie share price will be one to watch in February after Morgan Stanley recently highlighted the potential for the investment bank to meet or beat its FY21 consensus forecasts. The broker cited improved trading conditions and ongoing structural tailwinds for its “overweight” recommendation on this ASX share with a 12-month price target of $155.

At the time of writing, the Macquarie share price is trading at around $131, more than 14% lower than its 52-week high of $152.35 achieved in February last year.

Motley Fool contributor Brendon Lau owns shares of Macquarie Group Ltd.

Rhys Brock: Temple & Webster Group Ltd (ASX: TPW)

Online furniture retailer Temple & Webster has been a surprising success story to emerge out of the COVID-19 pandemic. With government-imposed lockdowns hurting many brick-and-mortar businesses across Australia and New Zealand in 2020, Temple & Webster was able to cash in on the consumer shift towards online shopping. It reported a 74% jump in revenues to $176.3 million in FY20, and active customers increased 77% to almost 500,000.

Although there has been a recent pullback in the Temple & Webster share price, the performance of the underlying business has remained robust. First quarter FY21 earnings before interest, tax, depreciation and amortisation (EBITDA) came in at $8.6 million – which is already greater than the company’s EBITDA for all of FY20.

Motley Fool contributor Rhys Brock owns shares of Temple & Webster Group Ltd.

James Mickleboro: Appen Ltd (ASX: APX)

The Appen share price has come under significant pressure recently. This has been partly due to a trading update from the company revealing COVID-19 was having an impact on demand from some its largest customers. The good news is that management believes this is a temporary headwind and expects demand for its machine learning and artificial intelligence data services to rebound once the pandemic eases.

And, with the Appen share price down ~50% from its 52-week high, analysts at Macquarie have recently put an outperform rating and $27.00 price target on Appen shares. They believe the company is well-placed to benefit from increasing artificial intelligence spending in the coming years.

Motley Fool contributor James Mickleboro does not own shares of Appen Ltd.

Tristan Harrison: Pacific Current Group Ltd (ASX: PAC)

According to Pacific Current, it is a company that invests in “exceptional” investment managers.

In its update for the three months ending 31 December 2020, Pacific said its funds under management (FUM) rose 8.3% to $112.8 billion with GQG, one of its investments, posting “significant increases”. GQG grew FUM by over US$35 billion during 2020.

Dean Fremder of Perpetual Limited (ASX: PPT) went as far as saying: “The stock’s really cheap. It’s on nine times earnings. It’s growing earnings at double digits, so more than 10% a year… we think they can pay out a much larger portion of their earnings as dividends.”

Motley Fool contributor Tristan Harrison does not own shares of Pacific Current Group Ltd.

Sebastian Bowen: Coles Group Ltd (ASX: COL)

Coles is a certainly a company that flourished during the worst throes of the pandemic-induced lockdowns last year. Thanks to panic buying of goods, Coles managed to substantially increase its revenue during 2020. That’s the appeal of consumer staples companies in a nutshell. They provide products we all use on a daily basis.

Whilst many ASX shares delivered reduced dividends last year, Coles actually increased its dividend payouts. Based on the current Coles share price, you can expect a fully franked dividend yield of more than 3%, which looks pretty good in this low-interest-rate environment.

Motley Fool contributor Sebastian Bowen does not own shares of Coles Group Ltd.

More reading

• 3 ASX dividend shares with yields above 5%
• ASX 200 Weekly Wrap: Reality (and GameStop) finally hits ASX
• Leading broker names Nearmap (ASX:NEA) as a buy
• 2 on form ASX dividend shares to buy
• Leading brokers name 3 ASX shares to buy today

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd. The Motley Fool Australia owns shares of and has recommended Challenger Limited, Macquarie Group Limited, Nearmap Ltd., and PUSHPAY FPO NZX. The Motley Fool Australia owns shares of Appen Ltd and COLESGROUP DEF SET. The Motley Fool Australia has recommended Temple & Webster Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Top ASX shares to buy in February 2021 appeared first on The Motley Fool Australia.

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A disappointing final week of the month led to the S&P/ASX 200 Index (ASX: XJO) climbing just 0.3% to 6,607.4 points in January.

Fortunately, a good number of ASX 200 shares outperformed the benchmark index by some distance. Here’s why these were the best performers in January:

Zip Co Ltd (ASX: Z1P)

The Zip share price was the best performer on the ASX 200 in January with a massive 37.4% gain. Investors were buying the buy now pay later provider’s shares following the release of a strong second quarter update. During the three months ended 31 December, the buy now pay later provider delivered a 103% increase in transaction volume to a record $1.6 billion. A key driver of this strong form was Zip’s US-based QuadPay business, which recorded explosive growth despite the increasing competition from PayPal and Shopify. QuadPay reported a 217% increase in transaction volume to $673.1 million, which was driven by a 180% lift in customer numbers to 3.2 million and a 655% jump in merchants to 8,400 in the key market.

Bingo Industries Ltd (ASX: BIN)

The Bingo share price was a strong performer over the month and jumped a sizeable 32.4%. The catalyst for this was news that the waste management company has received a takeover approach from a private equity firm. BINGO received an unsolicited, highly conditional, non-binding, indicative proposal from funds advised by CPE Capital. The indicative cash price currently offered to BINGO shareholders under the proposal is $3.50 per share.

Pro Medicus Limited (ASX: PME)

The Pro Medicus share price was on form last month and recorded an impressive 25.4% gain. Investors were buying the health imaging software company’s shares after it announced another major new contract win. According to the release, Pro Medicus has signed a $40 million seven-year contract with Salt Lake City based Intermountain Healthcare. Management advised that the agreement will see its Visage 7 Viewer and Visage 7 Open Archive products implemented across all of Intermountain’s radiology and subspecialty imaging departments. Impressively, this is the fifth major contract win Pro Medicus has announced in the space of six months.

Lynas Rare Earths Ltd (ASX: LYC)

The Lynas share price wasn’t far behind with a sizeable gain of 20.1% over the month. Investors were buying the rare earths producer’s shares after it provided the market with an update on its US activities. According to the release, the company has entered into an agreement with the United States Government to build a commercial Light Rare Earths separation plant in Texas. The U.S. government will provide funding of approximately US$30 million for its construction. In addition to this, last month Lynas released its second quarter update and revealed record quarterly sales revenue of $119.4 million. This was up from $87.3 million in the first quarter.

More reading

• ASX 200 Weekly Wrap: Reality (and GameStop) finally hits ASX
• 5 things to watch on the ASX 200 on Monday
• The Zip (ASX:Z1P) share price rocketed 37% higher in January
• 5 things to watch on the ASX 200 next week
• 3 reasons to consider Sezzle (ASX:SZL) at this share price

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’s parent company Motley Fool Holdings Inc. recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of and has recommended Pro Medicus Ltd. 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.

Shares of GameStop (NYSE: GME) have been on an astronomical rise recently as a short squeeze and a gamma squeeze combined to force a lot of buying of its shares. While those who bought in early in anticipation of such an outcome may be sitting pretty right now, current investors should beware. Squeezes like this rarely end well, and the same forces that caused its shares to skyrocket can cause its shares to fall just as far, just as fast if not faster.

Indeed, the worst mistake GameStop investors can make right now is to assume the party will continue. It very likely won’t, and those who invest believing it will are the ones in line to get hurt the worst when it all comes crashing down. There are at least two huge risks facing GameStop’s shares that can cause the whole thing to come tumbling down. Failure to recognize them will cause trouble for those left holding the bag when the whole house of cards collapses.

The options at the centre of that gamma squeeze

The very stock options that helped drive the gamma squeeze on the way up may end up fuelling the collapse on the way down. Here’s why. On Friday, Jan. 29, GameStop stock closed at $325 per share. According to data from Nasdaq.com, the following expiring near-the-money yet still in-the-money call options look like they were still open at the market close:

• 7,835 contracts at $320 per share.
• 855 contracts at $310 per share.
• 1,170 contracts at $300 per share.

When options expire in the money, brokers typically automatically exercise those options on behalf of their clients. And that’s where the risk starts. Once exercised every one of those options contracts require the holder to buy 100 shares of stock at the options exercise price. Those three options contracts alone are forcing people to buy 986,000 shares of GameStop stock  over this weekend, for a total out of pocket investment of $312,325,000.

For a sense of scale, one single contract at $320 requires an investor to pony up $32,000 to buy the shares at expiration. At some point between market close on Friday Jan. 29 and market open on Monday Feb. 1, affected former GameStop options investors will wake up to find they are now GameStop shareholders. Not only are they now shareholders, but they are out tens of thousands or hundreds of thousands of dollars or more.

If those investors don’t have the cash or margin buying power to complete the purchase, their brokers will issue a margin call and forcibly close out those positions by selling GameStop stock. Just as buying the stock and options forced the short squeeze and gamma squeeze on the way up, mandatory, broker-initiated selling resulting from margin calls could force the process to reverse.

When a broker forces a sale because of a margin call, that broker does not care what the price of the underlying asset is. All that broker cares about is getting the account within regulatory or contractual limits. This is a strong and structural mechanic of why short and gamma squeezes are such dangerous, double-edged swords that can reverse just as easily and quickly as they form.

Even if these newly minted GameStop investors aren’t forced out of their positions because of a margin call, many of them may decide to sell anyway. After all, it is one thing to gamble a few hundred dollars on an option, but it’s something else entirely to find yourself committed to tens of thousands of dollars (or more) in a very speculative stock position.

Beware the cult of personality

Beyond the structural mechanics of short and gamma squeezes, GameStop investors face another, more personality-driven risk. At the center of the mania is a single Reddit poster (whose online username can’t be reprinted in a family friendly publication), who has regularly posted his investment progress on the stock.

The risk doesn’t come so much from his postings, which have largely consisted of just screen captures of his brokerage account positions and value, but rather the mass of those who have followed him. The community comments in response to his posts are littered with sayings like “if he’s still in, I’m still in” and all sorts of references to “sticking it to the man.” Those are not the sayings of rational, valuation-focused investors, but rather people swept up in an emotional movement or commitment to a person.

Emotional investing may work for a little while, but it rarely ends well. First, those that have followed along by buying up all those call options that caused the gamma squeeze may not have fully recognized the financial commitments they made by buying those options. Their fanatical commitment may quickly wane once they realize just how deep into it their own pockets they have really reached to take part in this movement.

Even if that doesn’t cause the stock to come tumbling down, at some point, the Reddit poster is going to decide he has gained enough wealth from that particular speculation and reduce or close his position. His position — 50,000 shares and options to buy another 50,000 more — is only a small fraction of the daily volume on the stock and may not be enough to move the market on its own. When he sells, however, all the “if he’s still in, I’m still in” investors will probably rush to sell as well.

With the leader out and the mass of followers not far behind, what’s left to hold up the stock or keep those short and gamma squeezes from rapidly reversing? Even worse for those following along, many of those holding only because the original poster is still holding will find out the hard way just how quickly the market can turn the other way. Paper profits can quickly turn to very real losses, especially when the drivers of the initial move in one direction become the drivers of the move in the opposite direction.

It’s not a question of whether, but rather when

Short squeezes and gamma squeezes eventually run out of steam. Whether it’s because of the mechanics of expiring options, the person at the eye of the storm deciding he has profited enough, or some other reason, the GameStop momentum will also run out.

Investors who are holding because they think they will really make money from the trend continuing risk being the poster children of falling victim to the greater-fool theory. They run the very risk of losing everything they’ve invested — or even more, if margin is involved.

If you are an investor in GameStop stock or options, consider the very real and incredible risks you are facing and plan and act accordingly. This party is very likely to not end well, and those who are the most euphoric now may very well end up hurt the worst when it does end.

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

More reading

• ASX 200 Weekly Wrap: Reality (and GameStop) finally hits ASX
• How to buy US shares from Australia right now
• GameStop chaos: Real reason Robinhood cut off retail investors
• GameStop frenzy: 3 shorted ASX shares that could shoot up
• GameStop (NYSE:GME) stock insanity: Here are 4 things you need to know

Chuck Saletta 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 worst mistake GameStop investors can make right now appeared first on The Motley Fool Australia.

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

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There are some ASX dividend shares that have yields of more than 5%.

Higher yields may be attractive to some income-seeking investors that are struggling to find yield.

Here are some examples of businesses with yields of more than 5%:

Charter Hall Long WALE REIT (ASX: CLW)

This is a commercial property trust, it’s a real estate investment trust (REIT). It owns a variety of properties in different sectors such as Bunnings properties, service stations, telco exchanges, offices, grocery and distribution, agri-logistics and retail properties with long weighted average lease expiry dates such as the David Jones flagship store in Sydney.

Its major tenants by income are Telstra Corporation Ltd (ASX: TLS) accounting for 19% of the rental income, Australian government entities accounting for 16%, BP accounting for 14% and Woolworths Group Ltd (ASX: WOW) accounting for 13%.

As the name may suggest, it has a long dated lease expiry profile of around 14 years.

The ASX dividend share is expecting to generate no less than 29.1 cents of operating earnings per share (EPS) in FY21. Assuming a 100% distribution payout ratio, that equates to a forward distribution yield of 6.3%.

In FY20 its operating EPS was 28.3 cents per unit, which was an increase of 5.2% on the prior corresponding period. The distribution per unit was also 28.3 cents.

Pacific Current Group Ltd (ASX: PAC)

Pacific is a small cap ASX dividend share which invests in fund managers around the world. The company tries to find managers that have growth potential where it can help them with its expertise or capital to grow.

As the fund manager’s funds under management (FUM) grows, then Pacific Current benefits.

In FY20 the ASX dividend share saw its FUM increase by 62% to $93 billion, which helped underlying EPS rise by 18% to $0.51. The annual dividend per share was increased by the Pacific board by 40% to $0.35.

In the quarter to 30 September 2020, Pacific Current said that FUM had risen by 14% to $106.4 billion. In the subsequent three months to 31 December 2020 FUM rose by another 8.3% to $112.8 billion.

The fund manager GQG is the biggest driver of growth for Pacific. In the 12 months to 31 December 2020, GQG saw its FUM increase by more than US$35 billion.

In native currencies, US dollar orientated fund managers saw FUM increase by 16.9%. When converting to Australian dollars, the increase was partly offset by the significant increase of the Australian dollar against the US dollar.

Pacific currently has a trailing grossed-up dividend yield of 8.1%.

Nick Scali Limited (ASX: NCK)

Nick Scali is a furniture retailer that continues to see elevated levels of demand since COVID-19 hit the world.

In the FY21 first half result, the company is expecting unaudited net profit after tax (NPAT) to be $40.5 million, which would be growth of approximately 100%. There was better than expected container availability during the months of November and December leading to increased delivery volumes.

Total written sales orders for the first quarter of FY21 grew 45% and there was growth of 58% in the second quarter for the ASX dividend share.

In FY20, Nick Scali’s net profit after tax was flat at $42.1 million, but it increased the final dividend by 12.5% to 22.5 cents. That brought the full year dividend to 47.5 cents per share.

At the current Nick Scali share price, it has a trailing grossed-up dividend yield of 6.6%.

More reading

• 2 ASX shares to buy in February 2021
• 3 small ASX dividend shares with big yields
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra 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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The S&P/ASX 200 Index (ASX: XJO) has just endured its worst week since October last year, in a drama-filled week for the ages. Despite this, the index ended up giving investors its fourth month of positive momentum in a row. 

As per usual, it was ASX banks and resources shares that were behind the week’s poor performance. Lower iron ore prices and a ‘risk-off’ turn in investor sentiment contributed to last week’s falls.

But all of this was overshadowed by one of the strangest and most-FOMO inducing events the markets have seen in living memory. It all revolved around a formerly-little known United States company called GameStop Corp (NYSE: GME). We covered some of the complicated machinations that took place around this company here, but following is what happened in a nutshell (and why everyone was talking GameStop last week).

GameStop stops the market in its tracks

Basically, GameStop was perceived as a sunset, dying company due to its ‘old-world’ business model of selling gaming consoles and games through physical stores (a market that is fast moving online). GameStop owns a large network of retail gaming stores around the world (including the EB Games chain in Australia).

As a result of this perception, GameStop has long been at the top of the list of ‘most-shorted stocks’ over in the US, as a large number of institutional fund managers and hedge funds held GameStop stock in short positions. That essentially means these investors were all betting that GameStop stock would trend lower over time as its business model dries up.

That’s where this whole palaver started. The thing was, a large number of investors on the Reddit community known as ‘WallStreetBets’ noticed this situation in which a relatively small company had many large, well-funded short bets against it. These investors decided if they banded together to try and push up the GameStop share price, it would result in something called a ‘short-squeeze’.

This occurs when the shorter has to exit their short position due to the rising stock price of the company in question. When a number of large short positions have to cover their losses at the same time, it can result in a massive market distortion where there are more buyers than sellers in the market.

And that’s exactly what happened. This ‘short-squeeze’ resulted in GameStop shares exploding over just a few days. At the start of last week, GameStop shares were trading as low as US$68. On Thursday morning (US time), the GameStop share price was as high as US$483. A ~640% return? Enough said. That’s why the markets were abuzz with this news. It’s not often a bunch of retail, ‘amateur’ investors can exploit large fund managers like this.

How did the markets end the week?

As we discussed earlier, the ASX 200 did not have a top week. Monday was the only day the index had a day in the green, with a rise of 0.36%. Tuesday was a public holiday, so the markets were closed. Then Wednesday, Thursday and Friday all brought sell-offs, with losses of 0.65%, 1.93% and 0.64% respectively. Since the ASX 200 started the week at 6,800.4 points and finished up 6,607.4 points, it recorded a nasty 2.8% loss for the week.

Meanwhile, the All Ordinaries Index (ASX: XAO) didn’t fare any better, starting at 7,078.9 points and finishing up at 6,870.9 points, also down 2.8% for the week.

Which ASX 200 shares were the biggest winners and losers?

It’s now time to have a gossip over last week’s biggest winners and losers. So put the tea on and we’ll start with the losers:

Leading the losers last week was wooden spooner and wealth manager IOOF. IOOF was in the firing line after a not-too-well-received quarterly update from the company. IOOF told the market it managed to record a net outflow of $400 million in the quarter, despite a rapidly rising market.

Fuel retailer Ampol was also on the nose. There was no major news out of Ampol apart from a notice that the company was wrapping up its share buy-back program. Investors apparently would have rather kept it rolling.

Rare earths processor Lynas wasn’t far behind. This company was on our winners’ list last Monday after announcing a new deal with the US government. There was no major news out last week, so we can probably put this move down to some profit taking during a down week for the market.

Finally, we have investor favourite (at least until last week) Kogan.com. Kogan was also the victim of a quarterly update. This one outlined how Kogan increased its sales by 196% and its earnings by 140%. Since this wasn’t quite as impressive as Kogan’s previous quarter, investors decided to hit the sell button. The company’s declaration it was struggling to meet demand perhaps didn’t help (although that’s not usually a bad thing).

Now with the losers out of the way, let’s check out the week’s winners:

Best ASX 200 gainers	% gain for the week
Unibail-Rodamco-Westfield (ASX: URW)	22.4%
IDP Education Ltd (ASX: IEL)	12.6%
Domain Holdings Australia Ltd (ASX: DHG)	8%
Treasury Wine Estates Ltd (ASX: TWE)	7.8%

Leading the winners last week was real estate investment trust (REIT) Unibail-Rodamco-Westfield, despite no major news out of the company. Interestingly, URW was a heavily-shorted share on the ASX, so it’s possible that some short-sellers got spooked by the whole GameStop saga and cashed out early to avoid the kind of burn GameStop shorters experienced last week. The same could arguably be said of Treasury, which investors have been bearish on ever since China effectively halted Aussie wine imports.

IDP Education, in contrast, appeared to be benefitting from improving sentiment, fuelled in part by some positive broker notes. Domain was in a similar boat, spurred on by rising house prices across the country (particularly in Sydney and New South Wales).

A wrap of the ASX 200 blue chip shares

Before we go, here is a look at the major ASX 200 blue chip shares as we start yet another week on the ASX boards:

More reading

• 2 on form ASX dividend shares to buy
• Leading brokers name 3 ASX shares to buy today
• 5 things to watch on the ASX 200 on Monday
• 2 unstoppable ASX shares that keep growing and growing
• Top brokers name 3 ASX shares to buy next week

Sebastian Bowen owns shares of National Australia Bank Limited, Newcrest Mining Limited, and Telstra Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. and Idp Education Pty Ltd. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd, Macquarie Group Limited, Telstra Limited, and Treasury Wine Estates Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO, COLESGROUP DEF SET, Transurban Group, Wesfarmers Limited, and Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post ASX 200 Weekly Wrap: Reality (and GameStop) finally hits ASX appeared first on The Motley Fool Australia.

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Are you looking for growth shares with the potential to beat the market? Then you might want to take a look at the ones listed below.

They have been tipped as buys and could be destined for big things in the future. Here’s what you need to know:

Domino’s Pizza Enterprises Ltd (ASX: DMP)

The first ASX growth share to look at is Domino’s. This pizza chain operator had a network of 2,668 stores across Australia, New Zealand, Belgium, France, the Netherlands, Japan, Germany, Luxembourg, and Denmark at the end of FY 2020.

While this might sound like it is running out of space to grow its network, management certainly doesn’t believe this is the case at all. In fact, the company is planning to more than double its network to 5,500 stores by 2033. And that’s just from the aforementioned markets that it currently operates in. There is speculation Domino’s could expand into new markets over the next decade to boost its growth inorganically.

In addition to this store growth, the company has set itself bold same store sales growth targets. If it delivers on both and is able to maintain or improve its margins, this should underpin solid earnings growth over the next decade.

One broker that is a big fan of Domino’s is Bell Potter. It has a buy rating and $99.30 price target on its shares.

Nanosonics Ltd (ASX: NAN)

Another ASX growth share to look at is Nanosonics. One thing the COVID-19 crisis is highlighting is just how important infection control is. This is a big positive for Nanosonics, given that it is an infection prevention company.

At present, the company is a one-trick pony with its hugely popular and industry-leading trophon EPR disinfection system for ultrasound probes. However, it is aiming to launch several new products in the near future which have similar addressable markets. Given the favourable tailwinds supporting infection prevention, these products could take its growth up a level when they are finally released.

UBS is a fan of Nanosonics and believes it is a high-quality and structural growth story. It expects the company to benefit from post-COVID infection prevention tailwinds. UBS has a buy rating and $7.20 price target on the company’s shares.

More reading

• 3 explosive ASX growth shares that could be strong buys
• These ASX shares are targeting enormous growth over the 2020s
• ASX 200 up 1.2%: Bingo rockets, Rio Tinto update, Domino’s jumps
• Why Bingo, Creso Pharma, Domino’s, & Tyro shares are zooming higher today
• 3 ASX 200 shares that keep growing their dividends

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Nanosonics Limited. The Motley Fool Australia has recommended Dominos Pizza Enterprises 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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The Nearmap Ltd (ASX: NEA) share price will be one to watch this morning after it was the subject of a bullish broker note out of Goldman Sachs.

What did Goldman Sachs say?

According to the note, Goldman Sachs has upgraded the aerial imagery technology and location data company’s shares to a buy rating with a $2.75 price target.

Based on the latest Nearmap share price, this price target implies potential upside of almost 29% over the next 12 months.

Why is the Nearmap share price in the buy zone?

There are a number of reasons why Goldman believes that Nearmap share price is in the buy zone right now.

These include its attractive valuation relative to peers, its strong balance sheet, and the broker’s expectation for a strong macro recovery.

It commented: “We upgrade our recommendation to BUY (was Neutral) given the strong macro recovery expected by our US Economics team, NEA’s strong balance sheet (A$110mn in net cash forecast by end of FY21E), its market leading technology capabilities and relatively attractive valuation metrics (our revised target price of A$2.75 implies a potential return of +29% relative to the +15% expected of our coverage universe).”

And although the broker believes Nearmap is currently facing a challenging demand environment in the US as COVID-19 impacts its sales cycle for new customer contracts, it is anticipating these headwinds to ease through 2021.

After which, it believes a sharp economic recovery will support the reacceleration of Annualised Contract Value (ACV) growth from the June quarter. Especially given how ~37% of its FY 2020 ACV came from segments that are likely to have some economic cyclicality or be impacted by social distancing measures.

Technological advantage

Also driving growth will be the quality of its technology, which Goldman believes is market-leading.

It commented: “Our review of the competitive landscape in the US market concluded that NEA is a leader in both quality and frequency of update and has made a substantial investment to provide oblique and 3D imagery and AI/ML driven analytical capability at scale for its customer base which few competitors currently replicate.”

“Our broad conclusion is that based on frequency of capture and image quality (measured by GSD), NEA remains the leader among its competitor set. Eagleview offers a higher resolution image than NEA but its frequency of capture is significantly lower (once every 2-3 years vs. 6x per year).”

“In our view, the value derived from the imagery for customers is dependent on both aspects as they combine to provide a quality of data advantage (i.e. higher quality data captured more frequently allows for better interrogation/analytics capability from the data set),” it concluded.

More reading

• 5 things to watch on the ASX 200 on Monday
• 2 explosive ASX tech shares to buy in February
• ASX 200 up 0.35%: Afterpay & Appen push higher, big four banks rising
• 2 outstanding ASX tech shares to buy today
• 2 ASX growth shares to buy for big returns

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

The post Leading broker names Nearmap (ASX:NEA) as a buy appeared first on The Motley Fool Australia.

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