The Strategic Elements Ltd (ASX: SOR) share price is off to the races again in morning trading today. Shares are currently up 13% after leaping 16% higher on open.

This is a great start, particularly on a morning where the All Ordinaries Index (ASX: XAO) is falling hard, down 2%.

Strategic Elements’ gains come following the company’s latest progress report on its novel battery ink technology.

What did Strategic Elements report on its battery ink project?

In an announcement to the ASX this morning, Strategic Elements revealed another big step forward with its self-charging battery project.

The battery pack is a prototype with several connected battery ink cells. It uses moisture from the air to generate an output of over 4 volts for around 5 hours. The batteries can also generate electricity from the humidity from your skin surface.

Strategic Elements said that additional work would be done to test its battery ink cells. Testing with different loads and different humidity levels will be performed.

The project is being developed in collaboration with the University of New south Wales and CSIRO. The Federal Government has also given partial funding for the project.

The company reported that a patent application covering aspects of its work was filed yesterday, 27 January.

In a forward looking statement, Strategic Elements revealed the battery ink cells could potentially be made up to 4 times smaller while still generating 0.8V of electricity. The development of these smaller cells is expected to be conducted over the next 4 to 6 weeks.

In the next 6 to 8 weeks, the company also plans to develop a prototype of Battery Ink cells it can fabricate onto flexible textile material.

Words from the Managing Director

Commenting on the latest progress, Strategic Elements Managing Director Charles Murphy said:

We are obviously very encouraged with the milestones being achieved by UNSW and the team. In response that that we are adding in PhD material science expertise and developing a panel of industry specialists. The technology sits across two of the strongest 2021 investment sectors in batteries and environmental technologies and is a very good fit for our high-risk, high reward Pooled Development Fund Structure.

UNSW Professor Dewei Chu added, “Although still under development the battery ink is developing promisingly as an electrical generator battery technology.”

Strategic Elements share price snapshot

Strategic Elements operates as a venture builder, generating projects by combining teams of leading scientists and innovators. The company operates as a registered Pooled Development Fund (PDF). Notably, investors in Strategic Elements do not pay capital gains taxes. This is compensation for the added risk of investing in small and medium sized companies under the Federal Government PDF program.

It’s been a great New Year for investors in Strategic Elements to date.

With the 13% intraday gains taken on board, the Strategic Elements share price is up 233% since the opening bell on 4 January. Shares are up a whopping 906% over the past 12 months.

More reading

• Zip and Vulcan were among the most traded ASX shares last week
• Why the Strategic Elements (ASX:SOR) share price is rocketing 36% higher today
• Why AVZ Minerals, Immutep, Kogan, & Strategic Elements shares are pushing higher
• Why the Strategic Elements (ASX:SOR) share price rocketed 39% higher today

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.

The post Why the Strategic Elements (ASX:SOR) share price is soaring 13% higher appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3oq1Rxt

The ELMO Software Ltd (ASX: ELO) share price has been caught up in the market selloff on Thursday and is tumbling lower despite the release of a solid second quarter update.

At the time of writing, the cloud-based HR and payroll platform provider’s shares are down 5.5% to $6.61.

How did ELMO perform in the second quarter?

ELMO continued its strong form in the second quarter of FY 2021 thanks to a combination of organic growth and the benefits of the Breathe and Webexpenses acquisitions. The latter have contributed their own recurring revenues and provided the company with cross-selling opportunities.

For the three months ended 31 December, ELMO reported a 22.1% increase in cash receipts to a record $18.8 million. This brought its cash receipts for the first half to $34.4 million.

Statutory revenue for the half came in at $30.6 million, which was up 29.3% on the first half of FY 2020. This led to the company’s annualised recurring revenue (ARR) increasing 42.8% over the prior corresponding period to $74.2 million.

At the end of the half, ELMO was well capitalised with a cash balance of $71.4 million.

Laying the foundations of growth

ELMO’s Chief Executive Officer, Danny Lessem, was pleased with the half and believes the company has laid the foundations of growth.

He commented: “We have had a strong first half in FY21 with the highest half year cash collection in ELMO’s history. The first half of FY21 was an important investment period for the business as we laid the foundation for high levels of organic growth with entry into the small business market segment and expansion into expense management.”

“The acquisition of Breathe, a UK-based scalable self-service HR platform, has provided entry to the small business market in Australia, New Zealand and the UK and typically services customers with less than 50 employees. This segment represents an addressable market of c$2.2bn and pleasingly we have already seen the UK customer base grow in the past few months.”

“The acquisition of WebExpenses, a UK based expense management platform, in late December has not only expended ELMO’s wide convergent solution, it also accelerates ELMO’s UK midmarket expansion by facilitating the cross sell of ELMO modules to existing Webexpenses customers. The expense management segment represents a new addressable market of c$1.4bn,” he concluded.

Outlook

ELMO has reaffirmed its guidance for FY 2021.

It continues to expect ARR in the range of $81.5 million to $88.5 million, revenue of $65 million to $71 million, and an operating loss of $2.4 million to $7.4 million.

More reading

• 2 exciting mid cap ASX shares to buy and hold
• These ASX growth shares could give your portfolio a big boost
• What’s in store for the ASX tech sector in 2021?
• 2 explosive ASX tech shares to buy in January
• 2 quality ASX growth shares to buy for 2021

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Elmo Software. The Motley Fool Australia owns shares of and has recommended Elmo Software. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Here’s why the ELMO (ASX:ELO) share price is sinking lower today appeared first on The Motley Fool Australia.

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

It’s best to avoid diving into entire stock sectors, regions or styles this year, according to one international fund manager.

Investors have just endured a 2020 dominated by crazy unpredictable events, according to Fidelity International director Tom Stevenson.

“The year was dominated by the mother of all ‘unknown unknowns’,” he wrote on Livewire.

“The pandemic was a black swan, left field, out of the blue surprise to us all.”

Fortunately, a sharp recovery since March provided some relief.

“A terrible year in so many ways turned out to be a lot kinder to investors than perhaps we deserved,” said Stevenson.

“If someone had told us in March that many stock markets would end the year well ahead of where they had started, we would have taken it.”

But despite the lucky escape, investors have again thrown money into the market like 2021 will be a predictable year only consisting of “known knowns”.

Stevenson suspects this will burn many people.

“There remain more unknowns than knowns to my mind. And this will make it difficult to manage our investments this year,” he said.

“Relying on the big market narratives that have driven returns in recent years looks risky. It feels like a year in which the micro will matter more than the macro. Stock-picking will determine success or failure more than making the big calls.”

Now you actually have to be smart

Stevenson’s advice to pick individual stocks in 2021 is a call for a more selective attitude than the past decade.

“For many years – and the pandemic did nothing to change this – investment success has reflected three binary decisions,” he said.

“Being in the right sector: technology, not banks or energy. Picking the right style: growth not value. And being in the right place: if you had a big enough exposure to the US, the rest of your regional allocation didn’t matter much.”

The UK investment executive advised the rise of technology shares would continue and it’s fair enough to pay a premium. But in 2021 you actually have to pick “tomorrow’s winners”, rather than gambling indiscriminately.

“As the digital revolution continues, governments look to build back better after the pandemic and the decarbonisation of the world gathers pace, there will be winners to spot and losers to avoid,” he said.

“So, looking into 2021, I see less benefit to be gained from placing big bets and more from the harder graft of picking the best stocks across sectors, styles and regions.”

Structural winners protect against unknown unknowns

Stevenson’s stance matches Australian fund manager Jun Bei Liu’s advice last week to seek out growth shares that will be “structural winners”.

The portfolio manager at Tribeca Investment Partners told a GSFM briefing that company earnings had been on a downward spiral for 10 years before COVID-19.

“It’s been declining for many, many decades. So the structural winners will always command a premium,” she said.

“My view is that a portfolio will always have to have structural winners – because they will future-proof your portfolio.”

She said a small increase in interest rates will not damage those companies that are benefitting from a fundamental shift in society or consumption.

“It is still at a 3-decade low… And we don’t see that interest rate escalating to anything more meaningful in the next few years.”

Stevenson warned investors to be ready for anything in 2021.

“We can only brace ourselves for the unknown unknowns that inevitably lie ahead.”

More reading

• Why the Openpay (ASX:OPY) share price is crashing 13% lower
• Here’s why the Volpara (ASX:VHT) share price is edging higher
• Here’s why the Bubs (ASX:BUB) share price is surging 10% higher
• Why the Bigtincan (ASX:BTH) share price is jumping higher today
• What will Netflix do with piles of cash?

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Don’t make massive ASX bets in 2021 appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3cgXy4R

The Openpay Group Ltd (ASX: OPY) share price has come under pressure on Thursday.

In morning trade, the buy now pay later (BNPL) provider’s shares are down a sizeable 13% to $2.53.

Why is the Openpay share price crashing lower?

The catalyst for the Openpay share price weakness was the release of its second quarter update this morning.

According to the release, the Afterpay Ltd (ASX: APT) rival experienced a further strong uplift in all leading indicators during the three months ended 31 December.

The company reported a 213% increase in active plans to 1,447,000 and a 123% jump in active customers to 461,000. Management notes that 77% of new plans were generated from repeat customers and 49% of active customers now have more than one plan.

Also supporting its growth was a 46% lift in active merchants on its platform compared to the prior corresponding period. There are now 2,766 merchants using Openpay, which is up 21% from the first quarter.

Management notes that this is the strongest quarter on quarter increase and has been driven by the successful launch of Openpay’s automated self-service program. This significantly shortens and simplifies onboarding, particularly of small and mid-sized merchants.

What about its financials?

The above ultimately led to the company achieving a 96% increase in total transaction value (TTV) to a record $97.1 million. From this, the company generated revenue of $7.2 million, which is up 58% on the same period last year.

However, this means its gross revenue yield as a percentage of TTV was 7.5% for the second quarter, down from 9.1% in the first quarter and 9.3% a year earlier.

It has been a similar story for its net transaction margin, which came in at 1.1% for the second quarter and 1.6% for the first half.

The softening of these metrics could be what is weighing on the Openpay share price this morning.

One positive, though, was that the company’s rolling three-month net bad debt ratio as a percentage of TTV remains stable and within expected healthy levels. It currently stands at 2.3% compared to the prior comparative period’s 2.2%.

US expansion

Openpay established an office in the United States ahead of its upcoming expansion into the massive market.

It advised that it is in advanced discussions with strategic partners regarding the initial inaugural launch of its BNPL product (OpyPay).

Prioritised negotiations are in progress with potential funding partners, payments processors, and foundational merchants in core verticals. It notes that a lack of penetration in the company’s key verticals of Automotive (service and repair), Healthcare, Home Improvement, and Education enables OpyPay to step in to fill an unmet market need.

Management commentary

Openpay’s CEO, Michael Eidel, was pleased with the quarter and the company’s growth plans.

He commented: “Openpay finished the December quarter ready to drive the next phase of international expansion in the US and UK – both sizeable addressable markets. The US especially, represents an incredibly exciting opportunity for our Opy business, as the BNPL and B2B payments market is substantially less developed than in other geographies. We are negotiating several near-term opportunities which would deliver growth well over and above our current volumes.”

“In our existing markets, we continue to be the only, or one of two providers in niche verticals. We are seeing continued repeat use of our longer-term and higher-value plans – also filling a gap in the retail market through this flexible approach. Supported by our solid pipeline and growth plans, we are well positioned to become profitable over time as we create operating leverage through scale,” he added.

More reading

• 3 ASX shares that have outperformed over the past year
• Could this be why Afterpay (ASX:APT) and other BNPL shares are soaring today?
• 2 exciting small cap ASX shares to watch this month
• 2 more small cap ASX shares to watch in 2021
• ASX sector of the year: BNPL goes from strength to strength

Motley Fool contributor James Mickleboro 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.

The post Why the Openpay (ASX:OPY) share price is crashing 13% lower appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3cg9u79

The Volpara Health Technologies Ltd (ASX: VHT) share price is edging higher today. This comes after the company reported its trading update for the third-quarter of the 2021 financial year.

In early morning trade, the Volpara share price is up 1.3% to $1.50. It’s worth noting that most of the ASX market is down from Wall Street losses overnight. The All Ordinaries Index (ASX: XAO) has fallen 1.6% to 6,994 points.

How did Volpara perform for Q3?

The Volpara share price is on the move today following the announcement of a positive trading update.

For the period ending December 31, the health technology software company delivered its largest ever Q3 sales performance. Annual Recurring Revenue (ARR) stood at NZ$20.7 million, reflecting a 20% increase over the prior corresponding period (pcp). Volpara noted that robust sales came from a mix of significant upsells, new major contracts, and the transition to its Aspen Breast software platform.

The Average Revenue Per User (ARPU) lifted to US$1.22, a 5% jump over the same time last year. In particular, Q3 deals ranged from US$1.43 for a single product to upwards of US$5.12 for Volpara’s multi-product packages. This represents a huge opportunity if the company can upsell the integrated Volpara Breast Health Platform to its existing customers.

Cash receipts from customers also grew, with the business recording NZ$4.6 million for Q3, up 2% on the pcp. This is despite COVID-19 affecting normal trading conditions, and the weakening United States dollar against other currencies. The company highlighted that this was the sixth straight quarter of cash receipts above NZ$4.5 million.

Net operating cash outflow for the quarter came to NZ$3.1 million, which is less than what the company originally forecasted. Capital spend has continued on a downward trajectory since Volpara’s MRS Systems acquisition, and management’s focus on controlling costs.

Volpara revealed a healthy cash balance of $60.3 million, and $2.8 million in bank debt facilities.

Management commentary

Volpara group CEO, Dr. Ralph Highnam, hailed the outstanding quarter, saying:

It has been a truly remarkable sales quarter, with a set of outstanding new deals coming over the line and growing our recurring revenue significantly, despite COVID-19. Very encouragingly, our ability to identify women at high cancer risk who should have genetics testing has potential to be a game-changer and significantly increase our ARPU. Over the next few quarters, our focus will be on ramping up those genetics relationships and connections as quickly as we can.

About the Volpara share price

The Volpara share price is down around 20% over the past 12 months, after reaching a 52 week high of $1.89. In the months following, its shares fell to a 52 week low of 79 cents in March, and stagnated ever since.

Based on the current share price, Volpara commands a market capitalisation of roughly $371 million.

More reading

• Why the 4DMedical (ASX:4DS) share price is soaring higher
• 2 ASX healthcare shares to buy this week
• Here’s why the Coventry Group (ASX:CYG) share price is soaring 9% today
• Here’s why the Rhythm (ASX:RHY) share price hit an all-time high today
• Why the Bod (ASX:BDA) share price is tracking 5% higher today

Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends VOLPARA FPO NZ. The Motley Fool Australia owns shares of and 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.

The post Here’s why the Volpara (ASX:VHT) share price is edging higher appeared first on The Motley Fool Australia.

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

The Bubs Australia Ltd (ASX: BUB) share price is surging notably higher on Thursday.

At the time of writing, the infant formula company’s shares are up 10% to 67 cents.

Why is the Bubs share price surging higher?

The Bubs share price is on the move today following the release of its second quarter update.

For the three months ended 31 December, Bubs reported a 12% decline in gross revenue to $12.8 million. This was despite the company reporting a 34% increase in China cross border ecommerce (CBEC) sales and strong sales growth in Australian supermarkets compared to the same period last year.

In respect to supermarket sales, management notes that Bubs is the fastest growing infant formula manufacturer across Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW). Though, it is worth remembering that Bubs is working from a much smaller base compared to the market leaders such as a2 Milk Company (ASX: A2M), Aptamil, and Bellamy’s. So, its stronger growth isn’t overly surprising, especially given the recent expansion of its ranging.

The corporate daigou channel remains challenged but has improved since the first quarter. Bubs more than doubled its sales in the channel quarter on quarter.

What about costs?

Bubs was burning through its cash again during the second quarter. It spent $13.6 million on product manufacturing and operating costs over the three months, which was more than it generated in revenue.

This led to a net operating cash outflow of ~$5.7 million. This was offset slightly by a $3.8 million share purchase plan, leaving the company with a cash balance of $40.2 million.

It notes that this is sufficient to fund its operating activities for eight quarters based on its second quarter.

Bubs Founder and Chief Executive Officer, Kristy Carr, appears optimistic that the worst is behind the company now. This may explain why the Bubs share price is charging higher today.

She commented: “Whilst the impact of COVID-19 continues to cause channel disruption and market conditions remain challenging, we are pleased to report sales growth is returning across all product groups, channels and regions, with quarter-on-quarter growth revenue increasing 36 percent.”

“While this is still some 12 percent below the prior comparable period due to the contraction of the Daigou channel, we are particularly pleased by the strong rebound in domestic sales which are up 31 percent quarter-on-quarter. Total export sales revenue was also up 45 percent on previous quarter, and up 55% on prior year, validating our global expansion strategy is taking hold.”

More reading

• Here’s why the Bubs (ASX:BUB) share price crashed 40% lower in 2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended A2 Milk and BUBS AUST FPO. The Motley Fool Australia owns shares of COLESGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Here’s why the Bubs (ASX:BUB) share price is surging 10% higher appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/36leDqN

The Bigtincan Holdings Ltd (ASX: BTH) share price is jumping higher today.

In morning trade, the artificial intelligence-powered sales enablement automation platform provider’s shares are up 4.5% to $1.12.

Why is the Bigtincan share price jumping higher?

Investors have been buying Bigtincan shares this morning following the release of its second quarter update.

According to the release, Bigtincan continued its strong form in the second quarter and delivered annualised recurring revenue (ARR) of $48.4 million. This represents growth of 50% over the prior corresponding period.

Management advised that this comprised organic ARR of $40 million (up 42.9%) and ARR of $8.4 million from recently completed acquisitions. However, the latter reduces to $6.8 million on a sustainable basis, comprising $6.8 million (US$5.2 million) from ClearSlide and $1.6 million from Agnitio.

A key driver of its organic growth was the success of the company’s “Land and Expand” strategy. It notes that 21% of Bigtincan’s total active customer base expanded their use of its platform during the first half of FY 2021. This compares to 16% during the same period last year.

Quarterly customer cash receipts came in at $10.5 million, which was an increase of 32% over the prior corresponding period (excluding multi year payments). And quarterly cash operating payments were up 17% on the prior corresponding period but steady quarter on quarter at $11.6 million.

This left the company with total cash and cash equivalents of $33.4 million at the end of December. Though, since then the company has received the proceeds from its capital raising, giving it a pro forma cash balance of $65 million.

Bigtincan CEO and Co-Founder, David Keane, commented: “Strong organic growth and overall 50% ARR growth over the previous corresponding period demonstrates the ongoing demand for Bigtincan’s technology during the pandemic.”

“Our customers continue to see Sales Enablement technology as critical to connect their customer facing teams together in the absence of face to face meetings, and as a way to empower their teams to be ready to deal with a smarter and more informed buyer. The recent strategic acquisitions, new technology partnerships and a growing global team provide a strong foundation for the company to continue to meet this growth in customer demand,” he added.

Outlook

Potentially boosting the Bigtincan share price today will be management’s outlook update.

It advised that it expects its ARR to be at the top end of FY 2021 ARR guidance range of $49 million to $53 million. This guidance assumes a stable exchange rate and stable customer retention.

More reading

• 4 growing small cap ASX shares to watch
• The Bigtincan (ASX:BTH) share price has dropped 35% in 3 months
• Why the Bigtincan (ASX:BTH) share price is edging higher today
• These ASX shares are growing at a rapid rate in FY 2021
• 2 small cap ASX shares growing at a rapid rate

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends BIGTINCAN FPO. The Motley Fool Australia owns shares of and has recommended BIGTINCAN FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why the Bigtincan (ASX:BTH) share price is jumping higher today appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3a7ugDf

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.

Netflix Inc (NASDAQ: NFLX) made a very important announcement in its fourth quarter letter to shareholders. “We believe we no longer have a need to raise external financing for our day-to-day operations,” management wrote in bolded and italicized type.

CFO Spence Neumann expects the company to produce breakeven free cash flow for the year, and that number ought to climb well into positive territory in 2022 and beyond. The company will pay down existing debt to a manageable level and then plans to return excess cash to shareholders through a share buyback.

But Netflix could reasonably generate over $10 billion in free cash flow every year by the middle of the decade. What will it do with its piles of cash at that point?

Expand the service with new verticals

Netflix has subtly expanded its service over the last few years to appeal to a broader audience. Investments in film, unscripted, adult animation, and more have already produced strong engagement, expanding its audience and enabling continued price increases.

The media company’s also pouring more money into children’s programming and animated films. The move could be a response to Walt Disney Co (NYSE: DIS)‘s rapid ascension in streaming. If anything, Disney+ is proving the breadth of demand for franchise animated films like its Pixar and Disney studio productions. 

Netflix may use its excess cash to invest in additional verticals that are showing strong engagement on other platforms. Several analysts have speculated Netflix could acquire sports rights at some point in the future. Content chief Ted Sarandos has previously said sports isn’t core to Netflix’s value proposition; there’s nothing Netflix can add to the sports viewing experience.

But in an interview with Variety in September, CEO Reed Hastings said sports and other content verticals could make their way onto Netflix in the distant future. “I doubt news, but sports, video gaming, user-generated content — if you think of the other big categories, someday it could make sense,” he said.

There’s certainly potential for Netflix to add new verticals, but live programming like sports is well outside its wheelhouse. As with every new area Netflix invests in, it has the potential to start small and grow quickly if it sees traction. And with a growing cash buffer, experimenting in other areas comes with a favorable risk-reward ratio.

Acquiring content and intellectual property

Netflix may become more interested in acquisitions in the future if it has excess cash to spend. It’s made only one acquisition in the past; it bought comic publisher Millarworld in 2017. The first slate of original series and films based on Millarworld characters will debut this year.

If Netflix can create popular content based on acquired intellectual property, it may look to repeat the process in the future. It’s a strategy right out of Bob Iger’s Disney playbook. Disney made several major acquisitions during Iger’s tenure, and he reinvigorated franchises and built out a slate of potential blockbusters well into the next decade based on acquired intellectual property.

Netflix may focus more on regional acquisitions that could further its progress in attracting international audiences. Netflix has the benefit of being able to produce content for local markets with the potential of creating a global hit. Disney, by comparison, is trying to make a billion-dollar box-office hit with every film release. Ultimately, more local acquisitions could present more opportunities and be a better investment for Netflix.

A long-term play

There’s still a long way to go before Netflix is sitting on piles of cash. After all, it’s only expecting to break even this year. But with consistent revenue growth and operating margin expansion set to continue for years to come, it may be only a few years before the media company has more cash than it can spend with its current strategic plans. While returning cash to shareholders through a buyback is nice, many investors may be just as happy to see Netflix continue investing to further its long-term growth.

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

More reading

• Does Netflix have a competitive advantage?
• Why Tesla (NASDAQ:TSLA) shares were last year’s worst short bet
• Why Netflix stock jumped to an all-time high today
• Netflix is considering a stock-buyback program
• Netflix has a lot to prove to investors this week

Adam Levy owns shares of Netflix and Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Netflix and Walt Disney. The Motley Fool Australia has recommended Netflix and Walt Disney. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post What will Netflix do with piles of cash? appeared first on The Motley Fool Australia.

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

from The Motley Fool Australia https://ift.tt/2NHLG1L

There are some exchange-traded funds (ETFs) that have been generating strong returns over the last few years.

You may have heard of some of the largest ETFs like Vanguard Australian Shares Index ETF (ASX: VAS) and BetaShares Australia 200 ETF (ASX: A200). Those two just focus on the 300 and 200 largest shares on the ASX, respectively.

But there are other ETFs that give international diversification and have produced stronger returns:

VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT)

This ETF is provided by VanEck, one of the biggest providers in Australia. It says that VanEck Vectors Morningstar Wide Moat ETF gives investors exposure to a diversified portfolio of attractively priced US companies with sustainable competitive advantages according to Morningstar’s equity research team.

The ETF utilises Morningstar’s research process to find businesses that possess wide economic moats and are trading at attractive prices relative to Morningstar’s estimate of fair value.

All of the businesses that it’s invested in are listed in the US, but the underlying earnings from the companies that make up the portfolio can (and many do) generate earnings from across the world.

Looking at the latest monthly portfolio disclosure, it had 50 holdings with the largest 10 positions being John Wiley & Sons, Charles Schwab, Corteva, US Bancorp, Wells Fargo, Constellation Brands, Bank of America, Boeing, Yum! Brands and Cheniere Energy.

The sector allocation of the ETF is fairly diversified, these are the biggest five weightings with the percentage allocated: healthcare (18.8%), financials (17.6%), information technology (17.5%), industrials (12.2%) and consumer staples (10.8%).

VanEck Vectors Morningstar Wide Moat ETF has annual management costs of 0.49% per annum.

Its returns over the past five years has been 16.6% per annum, which was 2% per annum better than the S&P 500.

Betashares Global Cybersecurity ETF (ASX: HACK)

This ETF is a way for investors to get exposure to the world’s leading cybersecurity companies in a single ASX trade. The portfolio includes global cybersecurity giants, as well as emerging players, from a range of global locations.

BetaShares says that with cybercrime on the rise, the demand for cybersecurity services is expected to grow strongly for the foreseeable future.

A vast majority of the portfolio is made up of businesses listed in the US, but there are representations from other countries like the UK, Israel, Japan and France.

Its biggest 10 positions on 27 January 2021 were: Crowdstrike, Zscaler, Cisco Systems, Accenture, Splunk, Fireeye, Proofpoint, Juniper Networks, F5 Networks and Fortinet.

This ETF has annual management fees of 0.67%. In terms of returns, Betashares Global Cybersecurity ETF has made net returns of 25.6% per annum over the last three years and 21.4% since inception in August 2016.

More reading

• 2 high quality ETFs for ASX investors to buy today
• 3 exciting ASX tech shares to buy
• Got cash to invest? Here are 3 ASX shares to buy
• 2 top ETFs delivering solid returns
• 2 outstanding ASX ETFs to buy

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of BETA CYBER ETF UNITS. The Motley Fool Australia has recommended VanEck Vectors Morningstar Wide Moat ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post 2 quality ETFs to buy that are making big returns appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3qY0AiJ

Inflation in Australia is on the way up, which could have dire consequences for growth shares.

The Australian Bureau of Statistics on Wednesday revealed the consumer price index (CPI) rose 0.9% in the December quarter.

This meant the annual inflation rate has now been dragged up from 0.7% to 0.9%.

“The December quarter CPI was primarily impacted by an increase in tobacco excise and the introduction, continuation and conclusion of a number of government schemes, including child care fee subsidies and home building grants,” said ABS head of prices statistics Michelle Marquardt.

Tobacco prices went up 10.9% and child care a whopping 37.7%. Domestic holiday travel costs also headed up 6.3% as state borders opened up for a while.

The danger here is that rising inflation will prompt the Reserve Bank of Australia to consider raising the cash rate.

Why rising inflation could eat us alive

Forager Funds chief investment officer Steve Johnson earlier this month predicted 2021 would “be a difficult year” for exactly that reason.

“If we’re ever going to see pressure on interest rates going up and inflation, it’s going to be over the course of the next two years,” he said.

“I think that’s the big risk for financial markets of all sorts out there, that interest rates start to pick up over the next few years and that people start looking at 5% and 6% returns on equities and saying ‘Well, I can get 3% on a bond portfolio now. I want more.”

As well as the rate rise, the current danger is that so many investors have put money into the market with an assumption that low rates would last forever.

This is especially the case for growth stocks, where investors have relied on future earnings to justify high valuations. 

“There are theories, from ageing populations to technological improvements and low cost labour substitution, that explain low inflation or even deflation as a permanent feature of the developed world,” said Johnson.

“I don’t have a strong view that those theories are wrong. But I know that when the whole market thinks something can’t possibly happen, the consequences of that assumption being wrong are significant.”

But maybe it’s nothing to worry about this year

Precisely because of these risks, other experts think the Reserve Bank would be reluctant to put rates up any time soon.

“The central banks are unlikely to allow a repeat of the ‘taper tantrum’ that caused the market to fall over in October 2018, so we can probably relax for this year at least,” said Marcus Today director Marcus Padley last week.

AMP Capital economist Shane Oliver predicted RBA governor Philip Lowe to “stay the course” in his “the year ahead” speech next month.

“A shift to hawkishness now would be inconsistent with the RBA’s commitment to focus on the achievement of actual inflation sustainably at target.”

He thought the RBA would eventually raise rates but there are too many reasons not to pull that trigger in 2021.

“While the jobs market has improved faster than expected, we are still a long way from full employment. Jobs growth is likely to slow a bit in the months ahead with some jobs (eg travel related) taking longer to return and some (eg in parts of retail) likely to never return again,” said Oliver.

“The end of JobKeeper in late March will create a bit of apprehension (not that I expect much impact), coronavirus still has the potential to create upsets in the short term with uncertainty remaining how effective vaccines will be, [and] the strong Australian dollar is maintaining pressure on the RBA to extend quantitative easing.”

More reading

• 3 reasons why I’d buy cheap stocks right now and hold them to 2030
• IOOF (ASX:IFL) share price on watch after second quarter update
• Here’s why the Tyro (ASX:TYR) share price is in focus today
• Why the a2 Milk (ASX:A2M) share price could tumble lower today
• Why the Eagers Automotive (ASX:APE) share price is on watch today

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Shock data: ASX growth shares could get hammered soon appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/39oAkIr