Buying ASX shares for both growth and dividend income can be a tricky game. Only the strongest companies can afford to invest in their business at the same time as paying out dividends. So if you find a company that can manage both of these difficult feats, you know you might be onto a winner. So here are 2 such shares that I think offer this duality to investors today:

2 ASX shares to buy for growth and dividends today

Telstra Corporation Ltd (ASX: TLS)

Telstra is our first growth and dividends share to buy today. This might be something of a controversial pick. Telstra is not a company known for its strong growth prospects in recent years. In fact, it’s earnings have been going backwards for a while now due to the rollout of the national broadband network (nbn). However, I think there are a few strong growth avenues opening up for the telco, the best of which is 5G.

5G promises to offer superior speed and latency over the current 3G and 4G technology in use. It also offers the prospect of making the internet of things (IoT) into a reality. I fully expect Telstra to have the country’s best 5G network for the foreseeable future due to the heavy investment the company has been making over the past few years. If all goes well, this should convert 5G into a lucrative earnings stream for Telstra over the next decade.

But Telstra is also known for its dividends. The company recently all but confirmed that its current 16 cents per share dividend payouts would be continuing into FY2021. That would give Telstra shares a forward dividend yield of 5.81% on current prices. That’s a big fat tick in the income box as well.

MFF Capital Investments Ltd (ASX: MFF)

This is another share I would buy for both growth and income today. MFF is a Listed Investment Company (LIC) that invests mostly in a mid-sized portfolio of US shares. It’s largest current holdings are US payments giants Visa Inc (NYSE: V) and Mastercard Inc (NYSE: MA). It’s run by one of the best fund managers in the country in my view – Magellan Financial Group Ltd (ASX: MFG) co-founder Chris Mackay. I like MFF right now as it’s more of a contrarian play.

AS of 16 October, the company still has around 23% of its assets in cash, which it could deploy effectively if global markets were to take a dive in the short to medium-term future. The company has a stellar track record of growth behind it, but is also working on building its dividend income chops. The company has paid out 6 cents per share in dividends over the past 12 months, giving it a trailing yield of 2.12% today. However, the company has told investors that it wants to increase this payout to 10 cents a share over the next few years. As such, I think MFF is another top ASX share to hold for both growth and dividends.

More reading

• ASX 200 Weekly Wrap: ASX snaps winning streak… just
• Buy these blue chip ASX shares for generous dividends in 2021
• 3 important rules to help you build wealth
• The best time to invest may feel uncomfortable
• Got $1,000? You should buy one of these 8 ASX shares

Sebastian Bowen owns shares of Magellan Flagship Fund Ltd, Mastercard, Telstra Limited, and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Mastercard and Visa. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended Mastercard. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The COVID-19 pandemic first struck in Wuhan, China, sending the city of 11 million people, the wider Hubei region and much of the nation into strict lockdown.

The extreme mitigation measures China immediately took placed the nation in the enviable position as one of the few to have contained the deadly virus.

But with today’s reports of renewed outbreaks, China again faces the prospects of an unchecked coronavirus spreading amongst its massive population.

What did China report?

China has reported 181 new cases of COVID-19 in its northwest Xinjiang region. Of those, 161 are people who do not display any symptoms of the disease. The government reported 20 new confirmed cases of people showing symptoms, as Chinese policy doesn’t count those with asymptomatic infections as confirmed cases.

Massive testing of some 4.8 million people is under way following what are the first new local infections since 14 October.

Why did the Aussie dollar slip on the news and what to expect from ASX shares?

The relative strength of the Australian dollar is based on more factors than we can list in this article.

But one prime driver that’s been keeping the Aussie at a relatively strong level is the high price or iron ore, Australia’s number one export earner. China, Australia’s number one purchaser of iron ore, uses it to make steel to fuel its massive infrastructure and building projects.

China’s voracious appetite for iron ore has been a key driver in keeping the price of the metal far higher than most analysts had forecast, currently at US$121 per tonne.

If the coronavirus manages to get ahead of Chinese authorities, it could see much of the Middle Kingdom’s factories shuttered again. If that happens it could quickly see the price of iron ore, and the Australian dollar, fall hard.

Remember, iron ore was trading for $81 per tonne in February. Not long after the Aussie dollar was trading for as little as 52 US cents in mid-March.

On today’s news the Australian dollar slid 0.3% to 71.18 US cents.

Meanwhile, the S&P/ASX 200 Index (ASX: XJO) looks to have reacted negatively to the news as well. The ASX 200 was down 0.3% around midday but has since rallied slightly.

Iron ore giant BHP Group Ltd‘s (ASX: BHP) share price is down 0.6% in that same time.

More reading

• ASX 200 Weekly Wrap: ASX snaps winning streak… just
• Buy these blue chip ASX shares for generous dividends in 2021
• Top brokers name 3 ASX shares to buy next week
• Why the Iluka (ASX:ILU) share price nearly halved today
• ASX 200 down 0.2%: Afterpay rockets on Westpac deal, Zip climbs, BHP’s Q1 update

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. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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I think it’s a great time to start considering ASX dividend shares with big dividend yields.

It’s getting really hard to find income because of how low the official interest rate has gone. Plenty of good ASX dividend shares have seen their yields compressed as their share prices go higher.

Here are three ideas to really boost your income:

WAM Leaders Ltd (ASX: WLE)

WAM Leaders is a listed investment company (LIC) which is operated by the team at Wilson Asset Management (WAM). The lead portfolio manager is Matthew Haupt.

The idea of WAM Leaders is to provide an active approach to investing in the large caps on the ASX.

It owns some of the biggest businesses on the ASX in its portfolio like Macquarie Group Ltd (ASX: MQG), BHP Group Ltd (ASX: BHP), Goodman Group (ASX: GMG) and CSL Limited (ASX: CSL).

WAM Leaders also has a few ‘active’ picks outside of the ASX 20 in its top 20 holdings including Ramsay Health Care Limited (ASX: RHC), Challenger Ltd (ASX: CGF) and OZ Minerals Limited (ASX: OZL).

The performance of the WAM Leaders portfolio allows it to pay a steadily-growing dividend. It has a solid track record as an ASX dividend share. That’s very welcome in this era of COVID-19-caused dividend cuts.

Including dividend guidance for the upcoming FY21 half-year result, it offers a grossed-up dividend yield of 8.1%.

Pacific Current Group Ltd (ASX: PAC)

This is a boutique investment business that takes strategic stakes in global asset managers to help them grow. Pacific also brings its expertise to help managers grow, if they want help, so that the manager can focus on the investments.

I think that Pacific is one of the most promising, high-yield ASX dividend shares because of how fast its earnings may grow over the next few years. In FY20 it grew its underlying earnings per share (EPS) by 18% to $0.44. That allowed the board to increase the annual FY20 dividend to $0.35 per share. A dividend payout ratio of 80% is pretty high, but completely sustainable – particularly if the earnings keep going higher.

Excluding stakes sold and acquired during the year, funds under management (FUM) grew by 52% to $93.3 billion. Pacific thinks that asset gathering efforts could improve in FY21 with new commitments.

I think that the EPS and dividend can steadily grow over the next few years. At the current Pacific share price that makes the trailing grossed-up dividend yield of 8.1%.

Naos Emerging Opportunities Company Ltd (ASX: NCC)

This is another LIC, but it looks at the opposite end of the market to WAM Leaders. This Naos ASX dividend share targets small caps with market capitalisations under $250 million, which is the smallest end of the market.

Some examples of the shares it owns includes BTC Health Ltd (ASX: BTC), Experience Co Ltd (ASX: EXP) and Saunders International Ltd (ASX: SND).

Naos like to be long-term investors in businesses that the investment team has high-conviction in. That’s why Naos generally only has around 10 names in the portfolio.

This ASX dividend share has maintained or grown its dividend every year since the second half of FY13. That means it has a pretty reliable record compared to many other dividend stocks on the ASX.

At the current Naos Emerging Opportunities Company share price it currently offers a grossed-up dividend yield of 10.1%.

Foolish takeaway

Each of these ASX dividend shares offer really good starting yields. At the current prices I think I’d definitely go for Pacific because of its global growth potential and its expected continuing growth in FY21.

More reading

• Beat the low interest rate with these ASX dividend shares
• New WAM Alternative Assets LIC appoints portfolio manager
• 3 top global ASX dividend share ideas
• 2 little-known ASX dividend shares to buy for income
• Get paid huge amounts of cash to own these ASX dividend shares

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Challenger Limited and Macquarie Group Limited. The Motley Fool Australia owns shares of EXPERNCECO FPO. The Motley Fool Australia has recommended Ramsay Health Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Funtastic Limited (ASX: FUN) share price was up 207.69% this morning, reaching 20 cents before dropping back to 14 cents at the time of writing. This came after the company’s shares were lifted from a suspension that commenced on 5 October 2020.

What has Funtastic announced recently?

On 23 October, Funtastic announced that it would undertake the acquisition of Australian e-commerce websites Toys “R” Us, Babies “R” Us, Hobby Warehouse and Mittoni. The company also announced that it would recapitalise through a fully underwritten placement and a debt for equity swap.

This morning, the company announced that it had successfully completed a placement worth $29 million. Funtastic will issue 258.9 million shares at an issue price of 11.2 cents. According to the company, the placement was well supported by both existing shareholders and new investors. The company’s major shareholder, Jaszac Investments Pty Ltd, also committed to a conversion of $6 million of debt to equity, also at an issue price of 11.2 cents. 

The planned acquisition, placement and debt for equity swap are subject to shareholder approval, which will be sought at the company’s annual general meeting on 23 November 2020.

The issue price of 11.2 cents was a 72% premium to the company’s last trading price of 6.5 cents on 30 September.

According to Funtastic, capital raised from the company’s placement will fund the growth of the group, develop logistics, warehousing and automation capabilities, marketing and brand development, debt repayment and the development of e-commerce technology and associated intellectual property.  

Funtastic chair Bernie Brooks commented on the company’s placement:

With a strengthened balance sheet, Funtastic is well positioned to take advantage of the structural shift towards e-commerce for toys and hobby products while continuing to support and grow our ongoing wholesale agreements with our distribution and retail partners.

About the Funtastic share price

Funtastic is a wholesaler and distributor of consumer lifestyle products, which includes its own products and the products of its partners. Funtastic has been listed on the ASX since 2000.

The Funtastic share price is up 3,400% since its 52-week low of 0.4 cents, and is up 600% since the beginning of the year. The Funtastic share price is up 366.67% since this time last year.

More reading

• Pointsbet (ASX:PBH) share price continues to excite investors
• What to expect from the Coles Q1 update this week
• Shriro (ASX:SHM) share price pops by 5.7% on update
• Here’s why superannuation changes could see an ETF boom
• 3 FAANG stocks to buy right now

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

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The Pointsbet Holdings Ltd (ASX: PBH) share price has continued a rally that started in August, rising by 2.6% in today’s trading thus far. On 28 August, the company announced a transformational 5 year partnership with NBCUniversal, a subsidiary of Comcast Corporation (NASDAQ: CMCSA). Since that date, the Pointsbet share price has rocketed up by more than 55%, placing it up by 138% in year-to-date trading. 

What’s driving the Pointsbet share price?

The Pointsbet share price grew after the company became the official sports betting partner of NBC Sports in the United States. This provided it with access to over 184 million viewers which is the largest sports audience of any US media company. 

As part of the deal, Pointsbet has committed to a total marketing spend of US$393 million in progressively increasing amounts, as well as incentives payable to NBCUniversal for customer referrals. Commitment to the alignment is also underscored by NBCUniversal receiving a 4.9% shareholding in Pointsbet as well as 66.88 million options maturing in five years, conditional on shareholder approval. Pointsbet only floated on the ASX in 2019.

Comments on the deal

JPMorgan analysts believe the deal may have a negative impact on the Pointsbet share price. In a client note, the analysts said:

Media partnerships require balance sheet, time and expertise. Rarely do these start frictionless, and often they benefit the guaranteed media partner more than the paying operator.

Nonetheless, investors streamed in for Pointsbet’s $353 million raising on 8 September, with funds intended to be used for marketing and business development. 

PointsBet Managing Director and Group CEO, Sam Swanell, said at the time;

NBC Sports, an iconic brand and holder of the largest sports audience in the US, brings significant credibility and trust to PointsBet’s operations. Through the NBC Sports partnership, PointsBet gains access to market-leading broadcast assets which span 184 million viewers and digital assets which span 60 million monthly active users.

These assets will act as the cornerstone of our marketing strategy and combined with our in-house technology and products, as well as our talented and experienced team, will deliver outstanding client acquisition and retention efficiency as we scale rapidly over the next five years. NBCUniversal’s decision to take an equity stake in PointsBet illustrates the alignment of our strategies, the trust across teams, and our shared belief that the US gaming market is a once in a lifetime opportunity.

Pointsbet remains a favorite of retail investors, in fact Morgan Stanley has found it is only behind Myer Holdings Ltd (ASX: MYR) and Ardent Leisure Group Ltd (ASX: ALG) with regards to its proportion of retail online trading. Only time will tell whether, as the company starts to report revenues from the US under this arrangement, it continues to have a positive impact on the Pointsbet share price.

More reading

• 3 ASX shares I’d buy for summer 2021
• 3 ASX growth shares that I would buy in 2020
• Why ASX gambling shares like PointsBet (ASX:PBH) have surged in 2020
• 2 ASX 200 tech shares I don’t want to miss if the market rallies 
• “Incredible surge” in Pointsbet (ASX:PBH) share price appears justified according to one of the country’s best performing funds

Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Pointsbet Holdings Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Comcast. The Motley Fool Australia has recommended Pointsbet Holdings Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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On Wednesday all eyes will be on the Coles Group Ltd (ASX: COL) share price when the supermarket giant hands in its highly anticipated first quarter update.

Ahead of the update, I thought I would take a look to see what was expected from Coles.

What is expected from Coles in the first quarter?

According to a note out of Goldman Sachs, its analysts are expecting Coles to deliver a 7% increase in comparable supermarket sales during the first quarter.

This is expected to result in supermarket sales of $8,263 million. It expects this to be driven partly by the Little Treehouse promotion but largely by the stronger demand environment.

The company’s Liquor business is expected to have performed very strongly during the quarter. Goldman is forecasting comparable store sales growth of 10% for the quarter, leading to total Liquor sales of $804 million.

Finally, the broker has pencilled in first quarter Convenience sales of $298 million, up 12.9% on the prior corresponding period.

Overall, will mean a 7.7% increase in total first quarter sales to $9,365 million.

What else should you look out for?

Goldman Sachs believes Coles has been busy opening new stores during the three months.

It is expecting the company to report 9 net new supermarkets and 15 liquor stores to have been opened during the quarter.

And while it is unlikely that management will provide guidance for the remainder of the year, Goldman revealed that it has lifted its full year forecasts for FY 2021.

It now expects revenue of $38,663.9 million and earnings before interest, tax, depreciation and amortisation (EBITDA) of $3,398.3 million. This represents year on year growth of 3.4% and 4.4%, respectively.

Should you invest?

Based on Goldman Sachs’ estimates, Coles shares are currently changing hands for just under 29x FY 2021 earnings.

While this isn’t cheap, I still think it is decent value for a company with such positive long term growth potential, defensive qualities, and a generous dividend yield.

Incidentally, Goldman has a buy rating and $20.40 price target on the company’s shares.

More reading

• ASX 200 Weekly Wrap: ASX snaps winning streak… just
• 5 things to watch on the ASX 200 next week
• Why you shouldn’t sweat the small stuff when it comes to investing
• 2 must-buy ASX dividend shares for income investors to snap up
• Here’s where I would spend $10,000 on ASX shares today

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

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The Shriro Holdings Ltd (ASX: SHM) share price is up today after the company reported a 14% sales growth compared to the previous corresponding period. This was driven by the strong demand for household related goods including appliances, BBQs and musical instruments.

The Shriro share price is up by 13.7% in year to date trading despite falling about 44% during COVID-19 lockdowns.

At the time of writing, the Shriro share price was trading up 3.85% at 8.1 cents after an early high of 8.3 cents. Let’s take a look at today’s update.

What’s behind the Shriro share price momentum?

The company distributes and manufactures home appliances, and distributes consumer electronics, in Australia and New Zealand. Today’s announcement builds on the good news in the company’s half year report to June.

During this period, sales revenue dropped by 1.8% but the company was able to increase net profit after tax by 74%. This was due to Shriro’s cost control measures during the lockdown. These included rationalising office premises which started last year, postponing planned marketing expenditure and reducing staff working hours by 40%. In addition, there were full and partial stand‐downs of certain roles, and an agreement to reduce director and management pay by 20% and 40% respectively for April to May.

Casio calculators, keyboards and appliances for the residential renovation market performed well while watches underperformed through the period of retail closures and reduced consumer confidence. Watches have since recovered from May 2020.

The seasonal products division which includes heating, cooling and BBQs performed in line with the prior year. Although heater sales did not reach their full potential due to COVID‐19 related supply disruption. The Omega Appliances brand and product refresh occurred in the half and were successful in gaining increased in‐store brand presence. Greater investment in digital and ecommerce assets supports the brand refresh. 

What did management say?

Shriro’s key trading period is in the months leading up to Christmas. Sales will undoubtedly be impacted by unannounced government directives.  However, despite the economic uncertainty, the company expects sales to remain resilient. Thus allowing continued focus on building brands that succeed into the future.

CEO Tim Hargreaves said:

We remain cautiously optimistic that Shriro is positioned for continued growth in Q4. However given the unpredictability of the economic climate and ongoing consumer-related effects stemming from COVID‐19, nothing can be certain.

More reading

• Here’s why superannuation changes could see an ETF boom
• 3 FAANG stocks to buy right now
• The Quickstep (ASX:QHL) share price is shooting higher today. Here’s why
• Leading brokers name 3 ASX shares to buy today
• How did ASX retail shares perform in the latest quarter?

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

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It’s been a big year for the superannuation industry – Australia’s multi-trillion dollar retirement scheme. In response to the coronavirus pandemic and associated economic recession, the government has already created an unprecedented ‘early access’ scheme. Eligible participants were allowed to withdraw up to $10,000 in FY2020, and a further $10,000 in FY2021 to supplement their income.

But the disruptions haven’t ended there for super. One of the less-reported changes in last month’s belated federal budget was a raft of changes to the superannuation sector.

According to reporting in the Australian Financial Review (AFR), chief amongst those changes is a new annual performance test by the regulator. The AFR reports that super funds will now have their investment performance ‘ranked’ on a new website. Additionally, super funds that fail the test twice will be prohibited from accepting new members until they pass.

However, the methods to test super funds are being called into question, by both some large super funds and some market commentators. The test will involve the super funds being “benchmarked against a basket of 12 indices”.

Indices and benchmarks for super?

This benchmarking is expected to lead to many super funds utilising a process called ‘index hugging’. Index hugging involves investing a large percentage of a fund into exchange-traded funds (ETFs) tracking the very indices the funds are benchmarked against and trying to beat. It both decreases the chances of the fund underperforming, and overperforming the benchmark.

According to the AFR, the Financial Services Council (a superannuation lobby group) has already expressed these concerns to the government.

But the government is pushing ahead, arguing that lower fees are worth the tradeoff. Index funds typically offer far lower fees than an actively managed portfolio.

The AFR also quotes Stockspot’s Chris Brycki, who says:

Simply investing in the right mix of low-fee index funds would reduce high fees while delivering stronger returns than almost all actively-managed super funds over the long run.

However, Matt Gaden, of investment firm, Janus Henderson Group CDI (ASX: JHG), disagrees:

If the new regime resulted in funds going 100 per cent passive, it would not be a desirable outcome… you need to understand that an index investment will deliver market returns, good or bad… with no chance for a different outcome if that market heads south.

Gaden says that a “prudent strategy” might instead involve a dominant “passive core” in a super fund, with actively-managed “satellites” to hedge against downturns.

Foolish takeaway

I think both parties here have valid concerns. However, I do think that the prospects of lower fees for Aussie super funds do outweigh any other possible negative consequences of the government’s reforms in this area. History shows that most actively-managed funds struggle to outperform their indices in any given year anyway, yet still charge far higher fees for trying. I think this probably extends to the super sector as well. As such, I believe the government’s reforms are worth giving a chance.

More reading

• Shriro (ASX:SHM) share price pops by 5.7% on update
• 3 FAANG stocks to buy right now
• The Quickstep (ASX:QHL) share price is shooting higher today. Here’s why
• Leading brokers name 3 ASX shares to buy today
• How did ASX retail shares perform in the latest quarter?

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

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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.

Investing in 2020 hasn’t been easy. The uncertainty created by the coronavirus pandemic ushered in a steep bear market decline during the first quarter, which was followed by a ferocious snap-back rally that took the S&P 500 Index (INDEXSP: .INX) to new highs.

Yet, while most investors and equities were suffering from volatility-induced whiplash, the FAANG stocks have been kicking butt and taking names.

These industry leaders have been unstoppable for some time

By FAANG, I’m referring to:

• Facebook Inc (NASDAQ: FB)
• Amazon.com Inc (NASDAQ: AMZN)
• Apple Inc (NASDAQ:AAPL)
• Netflix Inc (NASDAQ:NFLX)
• Google, which is a subsidiary of Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL)

On a year-to-date basis, the benchmark S&P 500 is up 6%, through to 21 October. By comparison, Facebook, Amazon, Apple, Netflix, and Alphabet are up a respective 36%, 72%, 59%, 51%, and 19% (rounded to include both Alphabet’s Class A and Class C shares). These industry leaders are running circles around the broader market while, at the same time, propelling it higher. Remember, the FAANGs make up a sizable percentage of the market cap-weighted S&P 500.

But even with their collective 2020 outperformance, not all FAANG stocks are created equally. In my view, three of the five FAANGs still stand out as particularly attractive right now.

Facebook

The first of the no-brainer buys is Facebook. Yes, it’s faced its fair share of bad press in 2020, and it’s seen its ad revenue hurt by the COVID-19 pandemic. But there are three key reasons Facebook’s needle continues to point up.

First, advertising is a cyclical business – and last I checked, periods of economic expansion last substantially longer than periods of contraction or recession. Even though Facebook’s ad growth has slowed to its lowest level since it became a public company, the long-term expansion of the US and global economy favors its ad revenue continuing to grow.

Second, advertisers can’t go anywhere else to reach more than 3 billion pairs of eyeballs. In the June-ended quarter, Facebook boasted 2.7 billion monthly active users, along with 3.14 billion family monthly active users, which includes owned sites like Instagram and WhatsApp. Being the go-to social media site affords Facebook top-tier ad-pricing power.

Third, it’s only monetising half of its assets. Currently, ads on Facebook and Instagram generate the bulk of the company’s sales, with Facebook Messenger and WhatsApp not yet meaningfully monetised. That’s four of the six most-visited social platforms in the world. The fact is, Facebook is still in the early to-middle innings of its growth phase, and that makes it worth buying.

As an added bonus, what if I told you Facebook was fundamentally cheap? Having averaged a price-to-cash-flow multiple of close to 24 over the past five years, Wall Street’s consensus pegs the company at just over 11 time cash flow by 2023.

Alphabet

Some folks might be a bit concerned with Alphabet considering that revenue actually fell on a year-over-year basis in the second quarter. That’s the first time that’s happened since it became a public company. But just like Facebook, all concerns about Alphabet appear to be overblown.

For starters, Google is the most dominant internet search platform in the world, and it’s not even close. According to GlobalStats, Google’s share of global search has ranged between 91.9% and 93% over the trailing 12 months.  Just as advertisers are tripping over their feet to get their message in front of Facebook’s huge audience, advertisers are also clamoring for placement on relevant Google search space. With periods of economic expansion lasting a long time, Alphabet’s core business offers plenty of upside.

Alphabet is also home to two fast-growing operating segments: YouTube and Google Cloud. YouTube is one of the three most-visited social platforms on the web, and has thusly seen a big increase in ad revenue. In the June-ended quarter, YouTube ad revenue accounted for roughly 10% of the company’s total sales. 

But it’s Google Cloud that could be the most exciting aspect of Alphabet. Cloud revenue surpassed $3 billion for the first time during the second quarter and actually grew 43% from the prior-year period. Remember, this growth comes in spite of the worst economic downturn for the US economy in decades. Since cloud margins are substantially higher than ad-based revenue, Alphabet’s operating margins and cash flow are expected to expand rapidly as Cloud grows into a larger percentage of total sales.

After averaging a multiple of 18 times cash flow over the past five years, Alphabet is valued at less than 12 times Wall Street’s consensus full-year cash flow for 2023. That’s a bargain you shouldn’t pass up.

Amazon.com

A third FAANG stock to buy hand over fist is e-commerce giant Amazon.com.

Unlike Facebook and Alphabet, Amazon has seen its business pick up in a big way since the pandemic hit. With consumers and people with pre-existing medical conditions less willing to leave their homes and shop in brick-and-mortar retail stores during a pandemic, Amazon’s marketplace has become a logical destination. The June-ended quarter saw the company’s net sales (i.e., not just e-commerce) catapult 40% from the prior-year period, with operating cash flow rising 42% to $51.2 billion. 

Amazon remains, first and foremost, a retail entity. According to estimates from eMarketer in March 2020, Amazon is expected to increase its share of U.S. online sales from 37.3% in 2019 to 38.7% this year. For some context, that’s over 33 percentage points higher than the next-closest competitor. Even with retail margins being razor thin, having this much clout in the online retail space has played a big role in the company signing up more than 150 million Prime members worldwide. 

Like Alphabet, Amazon is also expected to see significant growth and cash flow expansion from its ancillary cloud infrastructure services business. Amazon Web Services (AWS) generated $10.8 billion in sales during Q2 2020, representing 29% sales growth from the prior-year period. We were already seeing small and medium-sized businesses pushing online prior to the pandemic. COVID-19 has accelerated this shift.

As AWS grows into a larger percentage of Amazon’s total sales, its operating cash flow should soar. We’re talking a possible tripling in operating cash flow per share between 2019 and 2024. If Amazon is simply valued at the midpoint of its cash flow multiple over the past decade, it should be a $3 trillion company within the next three or four years.

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

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Sean Williams owns shares of Amazon and Facebook. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Facebook, and Netflix 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 Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Facebook, and Netflix. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

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The Quickstep Holdings Limited (ASX: QHL) share price is shooting higher today following the release of its first quarter results.

In late-morning trade, shares in the aerospace manufacturer are up 4% to 7.8 cents after earlier reaching as high as 8.1 cents.

Let’s see how the Quickstep share price performed for the first quarter of FY21.

Trading update

For the period ending 30 September, Quickstep reported a robust performance while crediting its risk management process for COVID-19.

Total sales came to $22.6 million, an increase of 16% over the prior corresponding period. This is in line with production efforts at its facilities, which are continuing to meet all contract delivery schedules.

Operating cash flow was $1.4 million after funding headcount reductions to deliver annual savings of $1.5 million. The cost to implement these changes was $500,000. Quickstep said that inventory management was crucial in mitigating COVID-19 supply chain risks.

Net bank debt decreased by $800,000 over Q1 FY20 to $5.6 million. Total debt including capitalised interest stood at $8.8 million.

The company recorded a cash balance of $2.5 million at the end of the quarter, up from $1.7 million on June 30. Furthermore, $700,000 is available in restricted term deposits.

Operational highlights

F-35 fighter jet

Quickstep noted that its F-35 production contract is continuing at full-rate, and is being delivered to plan. The first batch of its components are on track, with the 10 new parts awarded by defence giant, Northrop Grumman. All remaining shipments are due to be delivered by the end of the current calendar year.

Volume production on the F-35 vertical tails contract with Marand has amplified over the past 12 months.

MJU-68 decoy flares

Quickstep has completed testing on the final batch of MJU-68 flare housing. The company is awaiting formal approval from the United States Department of Defence before the end of 2020 and is in discussions to address production requirements.

The countermeasure program’s objective is to establish a reliable secondary source of income for Quickstep.

C-130J transport plane

Demand for the C-130J military aircraft has been consistent, and negotiations are taking place with Lockheed Martin on new product initiatives.

Micro-X Nano lightweight xray machine

Production is ongoing, and the machine is being used by medical staff in the fight against COVID-19. Contracted deliveries are running through FY21, including the latest Lockelec train ramp.

Outlook

Quickstep said its outlook for the remainder of FY21 was strong. Customer revenues are expected to increase between 5% to 10%, excluding any major contract wins. In addition, commercial aerospace production volumes look to stabilise in the next 12 months, with full recovery anticipated in FY23.

The company will focus research & development spend on implementing its AeroQure process in the commercial aerospace market. While current volumes are down, the company believes AeroQure’s cost reduction offer over rival firms can win new customers.

No material guidance was given for the end FY21, but Quickstep foresees further opportunities emerging post COVID-19.

More reading

• Quickstep (ASX:QHL) share price edges up on positive FY20 results

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

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