The Beach Energy Ltd (ASX: BPT) share price is wobbling in morning trade, falling almost 1% on open, then shooting higher before dropping again. At the time of writing, the Beach Energy share price is trading at $1.75, down 0.28%.

This comes after the company released its results for the first half of the 2021 financial year (H1 FY21).

What did Beach Energy report?

In this morning’s release, Beach Energy reported a net profit after tax (NPAT) of $128.7 million. That’s down 53% from the first half of the 2020 financial year. The company pointed to a 40% decline in its realised oil price for the fall, saying production had remained steady at 13.0 million barrels of oil equivalent (MMboe).

Earnings before interest, tax, depreciation and amortisation (EBITDA) came in at $407 million. Beach Energy noted that this was impacted by $39 million of exploration expenses, mostly around its Wherry, Ironbark and Bonaparte sites.

On 31 December, the company had $114 million of cash on hand and $290 million of undrawn loan facilities.

While its Western Flank oil production increased approximately 8% over H1 FY20, the company reported the decline rates in a number of those wells is higher than expected. It’s still studying the cause for this.

Commenting on the results, Beach Energy managing director Matt Kay said:

When you take stock of what has happened in the past six months, it’s extremely pleasing to see we have well and truly set the foundations for growth. It’s not every day you can look back at a half and say you reached FID at an LNG project the scale of Waitsia, delivered a material liquids rich gas discovery in the Otway Basin and executed two value-accretive acquisitions.

Kay added that the half-year was the company’s safest ever, with 1 million injury-free hours worked.

Looking ahead, Kay said:

Working with our joint venture participants, we continue to progress the project [Waitsia] towards first gas in the second half of calendar year 2023. Waitsia is set to supply high quality, long-life reserves to both the global LNG and west coast domestic gas markets…

Beach Energy announced will pay an interim dividend of 1 cent per share (cps), fully franked.

Beach Energy share price snapshot

The Beach Energy share price has yet to fully recover from the big hit energy shares took in the fallout of COVID-19 early last year. Over the past 12 months, Beach Energy shares are down 17%. However, they’re up 86% from the 23 March 2020 lows.

Year-to-date, the Beach Energy share price is down 4%. That compares to a 3% gain on the S&P/ASX 200 Index (ASX: XJO).

More reading

• 5 things to watch on the ASX 200 on Wednesday
• 5 things to watch on the ASX 200 on Tuesday
• 5 things to watch on the ASX 200 on Thursday
• 5 things to watch on the ASX 200 on Tuesday
• Why Beach, Fortescue, Iluka, & Temple & Webster shares are dropping lower

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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The Nearmap Ltd (ASX: NEA) share price is soaring today. This comes as Nearmap released its response to a short-seller attack that resulted in it requesting a trading halt Friday afternoon. At the time of writing, the Nearmap share price is exploding by 14.35% to $2.47.

The imaging provider also released its half-year results this morning which included valuable rhetoric on the short-seller saga. Contrary to the short sellers’ article, Nearmap posted record performance in North America.

Short-seller attacks

Last Friday, news of the short seller attack hit the Nearmap share price, causing it to fall by more than 7%. Hong Kong-based J Capital Research targeted the aerial imaging company’s shares before it was hurried into a trading halt.

J Capital claimed that Nearmap was struggling in the United States market and using accounting errors to pull the wool over investors’ eyes. The shorting firm also made the point that Nearmap’s churn is currently sitting at 28% in the US. This suggested that almost one in five clients who have trialled the service opt not to continue using it.

Nearmap share price rebounds

The Nearmap share price is rising strongly this morning as the company posted its response to what it calls an “erroneous” report. Nearmap claimed that “the report contains many inaccurate statements and makes unsubstantiated allegations of a very serious nature.”

In reply to the report, Nearmap responded with details regarding its US market strategy, technology and accounting practices.

Importantly, management addressed the claim that “Nearmap has failed to succeed in any key sector in the U.S.” Nearmap highlighted that in the results released today, North American annual contract value (ACV) increased by 41% to US$35.1 million, representing record half-year growth. Moreover, Nearmap’s growth in each of its three key verticals (insurance, government and roofing) was strong. Roofing was the pick of the bunch, up 198% on the prior half.

Regarding the company’s churn, management denied J Capital’s claims, highlighting its FY21 first-half result of 6.5% churn up until 31 December 2020.

Furthermore, to every claim laid out in the short report, Nearmap provided the firm refutation, together with supporting evidence, that:

“THE REPORT’S CLAIM IS FALSE”

Management comments

Commenting on the short report, Nearmap CEO and Managing Director Dr Rob Newman said:

This Report demonstrates a deep misunderstanding of our business and the industry in which we operate. The Report contains many inaccurate statements, makes unsubstantiated allegations and presents a misleading representation of our business. Our Company has delivered a very strong result which clearly demonstrates the strength of our business and the high levels of engagement of the Nearmap team. All members of the Board are resolutely committed to the Company’s long-term growth.

Foolish takeaway

The publication of the short report that hit the Nearmap share price hard is once again prompting discussion over whether shorting should be regulated. My colleague Tony Yoo also addressed this question earlier in the month after short sellers targeted Tyro Payments Ltd (ASX: TYR) on the ASX and began the renowned GameStop Corp (NYSE: GME) saga on the US markets. 

More reading

• Why Atomos, Bendigo and Adelaide Bank, Coca-Cola Amatil, & Nearmap are racing higher
• Why the Nearmap (ASX:NEA) share price is surging 12% higher
• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 next week
• Why brokers rate these 4 ASX shares a buy this month

Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. and Tyro Payments. The Motley Fool Australia 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.

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In late morning trade the S&P/ASX 200 Index (ASX: XJO) is on course to start the week on a positive note. At the time of writing, the benchmark index is up 0.9% to 6,868.2 points.

Four ASX shares that are climbing more than most today are listed below. Here’s why they are racing higher:

Atomos Ltd (ASX: AMS)

The Atomos share price is up 11% to $1.04 following the release of its half year results. The video technology company reported a small increase in revenue to a record $32.8 million for the half. Pleasingly, this was achieved despite a substantial reduction in marketing expenses, which supported a 19.3% decline in operating expenses. This led to the tripling of its operating earnings to $3 million.

Bendigo and Adelaide Bank Ltd (ASX: BEN)

The Bendigo and Adelaide Bank share price is up 8% to $10.23. This follows the release of the regional bank’s half year results. For the six months ended 31 December, the bank reported total income growth of 3.3% to $849 million and cash earnings after tax growth of 1.9% to $219.7 million. This was driven by growth in its lending portfolios and an increase in hedging revenue, which offset a 7 basis points decline in its net interest margin to 2.30%.

Coca-Cola Amatil Ltd (ASX: CCL)

The Coca-Cola Amatil share price is up 2% to $13.40. Investors have been buying the beverage company’s shares after it revealed that Coca-Cola European Partners PLC (NYSE: CCEP) has increased its takeover offer. According to the release, CCEP has revised its offer from $12.75 per share to $13.50 per share.

Nearmap Ltd (ASX: NEA)

The Nearmap share price has zoomed 12% higher to $2.42. This follows the release of the company’s response to a short seller attack and the release of its half year results. In respect to the former, management refuted every single one of the short seller’s allegations. As for its half year results, Nearmap reported annual contract value (ACV) of $112.2 million on a reported basis and $116.7 million on a constant currency basis. This represents a 16.1% and 21% increase, respectively, over the prior corresponding period. A record performance by the North American business helped drive this growth.

More reading

• Why is the Coca-Cola Amatil (ASX:CCL) share price gaining today?
• Why the Bendigo and Adelaide Bank (ASX:BEN) share price is storming 8% higher today
• Why the Nearmap (ASX:NEA) share price is surging 12% higher
• 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 Atomos Ltd and Nearmap Ltd. The Motley Fool Australia has recommended Atomos Ltd and Nearmap 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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ASX biotech shares have had an up and down start to the year. While the S&P/ASX 200 Index (ASX: XJO) is up 1.8%, shares in Pro Medicus Limited (ASX: PME) and Polynovo Ltd (ASX: PNV) have been far more volatile.

Why ASX biotech shares are up and down in 2021

On the one hand, the Pro Medicus share price has climbed 28.5% and raced to a new all-time high. The company’s fifth major contract win in sixth months was a key factor.

Pro Medicus has signed a 7-year, $40 million contract with Salt Lake City-based Intermountain Healthcare. That will see its Visage 7 Viewer and Visage 7 Open Archive products implemented across all of Intermountain’s radiology and subspecialty imaging departments.

However, it hasn’t been all good news for investors in ASX biotech shares this year. While Pro Medicus shares soar, the Polynovo share price has fallen 35.9% this year.

Polynovo develops biodegradable medical devices that aid in skin tissue repair, led by its flagship Novosorb polymer. An important trading update on January 12 has been the catalyst for the ASX biotech share price slump this year.

Interestingly, Polynovo shares have fallen sharply despite a number of sales updates in recent months.

Polynovo reported a 31% increase in sales over the prior corresponding period (pcp) for the first half of FY21. The Aussie biotech’s near term performance could be “volatile”, according to managing director, Paul Brennan. Sales also slowed in October and November despite an uptick to finish the year.

The ASX biotech share soared in 2020 meaning some profit-taking may also be pushing the share price down.

Combined with the short-term uncertainty and ongoing impact of the coronavirus pandemic, the Polynovo share price has been under pressure to start the year.

Foolish takeaway

2021 has been the tale of two ASX biotech shares. While Pro Medicus shares soar, the Polynovo share price has been smashed this year.

Both companies are yet to report their half-year results to the market which are expected later this month.

More reading

• Why ASX travel shares were smashed on Friday
• ASX 200 Weekly Wrap: ASX cools on earnings reality check
• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 next week
• These were the best performing ASX 200 shares last week

Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Pro Medicus Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of POLYNOVO FPO. The Motley Fool Australia 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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The Aurizon Holdings Ltd (ASX: AZJ) share price has taken off this morning following the release of the company’s half-year results. 

Aurizon Holdings is Australia’s largest rail freight operator. It provides integrated freight and logistics solutions across an extensive rail and road network. The company’s infrastructure connects miners, primary producers, and industry with international and domestic markets.

At the time of writing, the Aurizon share price is trading up 4% at $4.00.

How did Aurizon perform?

The company reported that total revenue for the first half of FY21 dipped 2% to approximately $1.49 billion, compared to the $1.53 billion reported for the same period in FY20.

Lower volumes in coal and ‘network’ and the sale of Aurizon’s Rail Grinding business in October 2019 impacted this decline. Network refers to the company’s Aurizon Network Pty Ltd business, the largest coal rail network in Australia. 

Aurizon’s earnings before interest and taxes (EBIT) came in at $454.2 million compared to $455.6 million in the prior corresponding period (pcp).

Aurizon attributed the flat EBIT results to higher earnings in bulk and network being offset by a 4% reduction in coal volumes. This reduction has been partially impacted by the current challenging trade environment with China.

Earnings before interest, tax, depreciation and amortisation (EBITDA) for 1H FY21 were $738.3 million, up 1% on the pcp.

Net cash inflow from operating activities from continuing operations increased by $73.9 million (12%) to $700.4 million.

About the Aurizon share price

The company reported a first-half increase to shareholder distributions for FY2021, with the dividend per share up 5%. 

Aurizon’s interim dividend is 14.4 cents per share compared to the 1H FY20 dividend of 13.7 cents. 

On 10 August 2020, Aurizon announced a share buy-back program of up to $300 million during FY21. During the first half, the company bought back and subsequently cancelled 60,022,650 shares at a total consideration of $247.1 million.

The Aurizon share price has fallen nearly 30% over the previous 12-month period. Aurizon has a market capitalisation of $7.1 billion and 1.9 billion shares outstanding.

More reading

• ASX coal stocks increasingly isolated with rise of start-ups like MGA Thermal
• 3 ASX dividend shares rated as strong buys by brokers

Motley Fool contributor Gretchen Kennedy has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Aurizon Holdings 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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Coca-Cola Amatil Ltd (ASX: CCL) shares are on the rise this morning following an update from the soft drink giant. At the time of writing, the Coca-Cola share price has jumped 1.98% to $13.39.

What’s driving the Coca-Cola Amatil share price?

The Coca-Cola share price is on the move this morning after the company announced Coca-Cola European Partners PLC (NYSE: CCEP) has increased its offer price to independent shareholders to acquire all Coca-Cola Amatil independent shares.

In an announcement released this morning, it was reported that CCEP has revised the original offer made in its scheme implementation deed on 4 November, upping the cash per Amatil share from $12.75 to $13.50.

CCEP has stated that this 5.9% increase to its original total cash consideration will be its best and final offer to Coca-Cola Amatil’s independent shareholders. CCEP noted that the new proposal also represents a 35% premium to the undisturbed average broker 12-month price target for Amatil shares.

Amatil’s Related Party Committee (RPC) and Group Managing Director Alison Watkins unanimously recommended that shareholders vote to support the new offer, providing no superior offers emerge and subject to the usual conditions being met.

Commenting on the offer, Coca-Cola Amatil Chair Ilana Atlas said:

The economic outlook for Australia and New Zealand has improved since the announcement of the original CCEP proposal and recent trading validates our strategy and demonstrates our strong recovery. The value of Amatil has increased and we are pleased that CCEP has acknowledged this in increasing its proposed cash consideration to Independent Shareholders.

The RPC and the Group Managing Director unanimously consider that the Revised Scheme, including the revised price, is in the best interests of Independent Shareholders.

Company snapshot

Coca-Cola Amatil is the authorised bottler and distributor of The Coca-Cola Company’s beverages in Australia and five other Asia Pacific regions. The company has a market capitalisation of around $9.5 billion and pays an annualised dividend yield of 2.7%, unfranked.

The Coca-Cola share price moved sharply higher following the original takeover offer from CCEP in October and shares have continued to slowly trend higher since then.  Over the past six months, Coca-Cola Amatil shares are up 51%. That compares to a 13% gain on the S&P/ASX 200 Index (ASX: XJO).

Since this time last year, the Coca-Cola Amatil share price is up 13% compared to a 4% fall on the ASX 200.

More reading

• Why the Coca-Cola Amatil (ASX:CCL) share price is pushing higher
• These blue chip ASX shares just hit multi-year highs
• Why the Coca-Cola Amatil (ASX: CCL) share price is in focus 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.

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The Creso Pharma Ltd (ASX: CPH) share price has been a strong performer on Monday morning.

At one stage today, the cannabis company’s shares were up as much as 11% to 25 cents.

The Creso Pharma share price has since pulled back a touch but remains 4.5% higher at 23.5 cents.

Why is the Creso Pharma share price racing higher?

Investors have been buying Creso Pharma shares after it announced its expansion into the Pakistan market.

According to the release, the company has signed a comprehensive distribution agreement with leading nutritional supplements company, Route2 Pharm.

The agreement will see Route2 Pharm import, market, distribute, and sell the company’s hemp derived therapeutic products exclusively into Pakistan and The Philippines. Route2 Pharm will also have non-exclusive rights to other potential target markets including Cambodia, Afghanistan, Azerbaijan, Bangladesh, Georgia, the Maldives, Myanmar, Tajikistan, Turkmenistan, Uzbekistan, and Vietnam.

The release explains that Route2 Pharma is a subsidiary of Route2Health. It has over thirty years of pharmaceutical sciences experience and produces and distributes world-class herbal remedies and dietary supplements. Route2Health is based in Pakistan and has United States Pharmacopeia (USP) GMP compliant manufacturing facilities and global partnerships.

As part of the agreement, to retain its exclusivity rights in Pakistan and The Philippines, Route2 Pharm must make minimum order quantities worth approximately $2.5 million a year.

Creso Pharma’s Non-Executive Chairman, Adam Blumenthal, commented: “This Agreement has the potential to take Creso into markets with a combined population of over 750 million people. Our mission is to deliver access to affordable, high quality, broad spectrum, GMP products for the betterment of people’s lives everywhere. We’re delighted to conclude this important partnership, through which we hope to provide the opportunity for millions of people to have access to our innovative products.”

This latest gain means the Creso Pharma share price is now up 31% since the start of the year.

More reading

• Why the Creso Pharma (ASX:CPH) share price is tumbling 5% lower
• Why Cann, Creso, LiveTiles, & New Corp shares are tumbling lower today
• What’s happening with the Creso Pharma (ASX:CPH) share price today?
• Why Blackmores, Creso Pharma, Pilbara Minerals, & Zip shares are pushing higher
• Here’s why the Creso Pharma (ASX:CPH) share price is rocketing 18% higher

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 Altium Limited (ASX: ALU) share price is inching lower today after the release of its half-year results for 2021.

At the time of writing, shares in the electronic design software company are down 0.18% to $30.60.

How did Altium perform in H1 FY21?

The Altium share price is losing ground this morning after announcing losses across its key metrics.

In today’s release, Altium delivered a subdued performance for the first half of FY21 as COVID-19 heavily affected trading conditions.

For the period ending 31 December, the company reported group revenue of US$80 million (not including its divested Tasking business). This reflected a fall of 4% when compared to the prior corresponding period (pcp).

Altium revealed that after 8 consecutive years of double-digit growth, its United States and European operations were impacted by COVID-19. In addition, the global economic slowdown has caused a challenging environment for licence compliance activities, as witnessed post-COVID in China.

Earnings before interest, tax, depreciation and amortisation (EBITDA) sank to US$27 million, a decline of 15% over the H1 FY20 period. The company advised that a drop in revenue coupled with continued investment in its cloud business led its EBITDA to retreat.

Net profit after tax (NPAT) also plummeted to US$16.6 million, slipping 12% from the prior comparable period.

Group operating cash flow reduced to US$18.7 million, shedding 10% as a result of an increase in corporate tax payments of US$6.2 million.

Altium stated it had a healthy balance of US$88.3 million in cash, up 9% on the pcp. The company also noted that it continues to remain debt-free.

The board declared an unfranked interim dividend of 19 cents per share to be paid to shareholders on 23 March. This is a 5% decrease on H1 FY20 interim dividend, which was 20 cents per share.

Management commentary

Commenting on the company’s H1 FY21 performance, Altium CEO Aram Mirkazemi said:

Altium experienced a challenging first-half with extreme COVID conditions in the US and Europe and our pivot to the cloud involving a number of significant organisational changes that we have referred to as our Netflix Moment.

These changes included the separation of our CAD software from our Cloud business and the bifurcation of our sales into high volume (digital sales channel) and high touch (professional sales channel). We also opportunistically divested our TASKING business to concentrate our focus on accelerating the adoption of our cloud platform Altium 365 for dominance and industry transformation.

Altium 365 is key to our future success through indirect monetisation from our CAD software tools and, in time, direct monetisation from the broader ecosystem. I am most heartened by the strong adoption of Altium 365 and, with our Netflix organisational changes behind us, I am confident of a much stronger second half. Early signs are positive for this.

Outlook

Looking ahead, Altium believes that fiscal 2021 will be viewed as a pre-vaccine year. It said that while the macro environment remains challenging, a second more robust half result is expected.

The company reaffirmed its long-standing target to reach US$500 million in revenue and 100,000 subscribers by 2025. At the end of 2020, its subscriber base stood at 52,157, a 12% lift over the first-half=FY20.

Furthermore, Altium reinforced its updated guidance range for the full-year of US$190 million to US$195 million in revenue.

Altium share price snapshot

Over the last 12 months, the company’s shares are down more than 30%, reflecting weak investor sentiment. Its shares hit a multi-year low of $23.11 in March before gradually moving higher. 

Based on the current Altium share price, the company commands a market capitalisation of just over $4 billion.

More reading

• 5 things to watch on the ASX 200 on Monday
• Here’s why the Altium (ASX:ALU) share price could be a buy
• 2 of the best ASX growth shares to buy now
• 5 fantastic ASX shares to buy right now
• 2 outstanding ASX tech shares to buy and hold until 2030

Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Altium. The Motley Fool Australia owns shares of Altium. 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 Incitec Pivot Ltd (ASX: IPL) share price is sliding lower in early trade following the company’s release of a business and performance update.

Why is the Incitec share price on the slide?

The Incitec share price is heading lower today despite the company advising it expects to deliver cost savings of at least $30 million in FY2021 as previously announced. The manufacturer is also reportedly anticipating higher earnings in FY2021.

In its Fertilisers Asia Pacific segment, Incitec expects favourable weather conditions and firming fertiliser prices.

A combination of those two things looks set to provide a welcome earnings boost. Higher expected pricing also looks set to accentuate Incitec’s usual second-half earnings skew.

However, it wasn’t all good news for the company, which likely explains the Incitec share price’s lacklustre performance this morning. In the Dyno Nobel Americas Explosives segment, Incitec reported unplanned downtime due to equipment failure.

The total earnings impact of the outages is expected to be US$11 million to be included in the first-half results. Excluding these impacts, Incitec is forecasting segment earnings in line with guidance.

In its Dyno Nobel Asia Pacific Explosives segment, performance is tracking as expected. Incitec reported lower metallurgical coal exports have not materially impacted earnings to date.

More about Incitec Pivot

Incitec is a leading Australian manufacturer of fertiliser, explosives chemicals and mining services. Based on the current Incitec share price, the company has a market capitalisation of around $5.1 billion with a 1.8% dividend yield.

In this morning’s updates, Incitec advised it has now completed its Waggaman plant turnaround discovery phase. The company noted an incremental US$15 million earnings impact from the turnaround extension and plant outage, making a total US$40 million impact.

Planning and preparation for a major turnaround of its Moranbah plant in May 2021 remain on track. Incitec reported successful completion of a 6-week turnaround in November 2020 at its St Helens plant.

Incitec also completed planned maintenance at its Mt Isa/Phosphate Hill plant in October 2020.

Foolish takeaway

The Incitec share price is heading lower this morning after dual updates from the Aussie manufacturer. Incitec is set to report its interim results on Monday 17 May 2021.

More reading

• Wilson Asset Management thinks these 2 ASX shares are a buy
• The latest ASX broker “buy” ideas that got a valuation upgrade

Motley Fool contributor Ken Hall 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 2020 market crash caused a wide range of shares to experience major price declines. For example, the S&P 500 Index (INDEXSP: .INX) declined by a third in a matter of weeks as investors began to price in a weaker economic outlook.

Even though there has been a stock market rally since then, the crash acts as a reminder that the stock market can be hugely unpredictable and very volatile.

Therefore, buying financially-sound businesses and diversifying in 2021 could be a sound move that lowers risks during what remains a very uncertain economic situation.

The ongoing potential for a market crash

Even though the 2020 market crash occurred in a shorter amount of time than previous bear markets, it was not an unprecedented event in terms of share prices falling heavily in a matter of weeks. For example, there have been previous rapid declines in the stock market, notably in the dot com bubble and the global financial crisis.

Predicting such events is almost impossible. Therefore, they could occur at any time without any prior warning. With the economic outlook being very uncertain at the present time, there may even be a higher chance of a market decline in the coming months. While this may or may not take place, being ready for it at all times could be a means of reducing risk and capitalising on a possible recovery in its wake.

Buying financially-sound businesses

Even though most shares fell heavily in the 2020 market crash, buying financially-sound businesses could be a shrewd move. The stock market declined partly because of a weaker economic outlook caused by coronavirus. As such, it could have a larger negative impact on companies with weak balance sheets that contain large amounts of debt. They may be less able to service their debt should sales fall than a company that has lower leverage.

Of course, buying even the most financially-stable business will not make any investor immune from a stock market fall. However, it can mean their holdings have a higher chance of still being in existence to benefit from a potential market recovery as the economic outlook improves and investor sentiment strengthens.

Building a portfolio for 2021

The 2020 market crash also showed that some sectors can be worse affected than others by a downturn. For example, at the present time industries such as financial services and resources are underperforming many of their index peers due to relatively weak operating conditions.

As such, owning a variety of companies that operate in a broad range of industries could be a shrewd move. This strategy will not eliminate risk entirely. However, it could reduce overall risks during the course of 2021 and in the coming years, with the economic and stock market outlook continuing to be very unpredictable because of the ongoing pandemic.

More reading

• Why the Altium (ASX:ALU) share price is inching lower
• Incitec (ASX:IPL) share price falls on performance update
• Why ASX travel shares were smashed on Friday
• Why the Cann (ASX:CAN) share price is pushing higher
• Why the Bendigo and Adelaide Bank (ASX:BEN) share price is storming 8% higher today

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

The post Why I won’t forget the 2020 market crash when buying stocks in 2021 appeared first on The Motley Fool Australia.

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