The Metcash Limited (ASX: MTS) share price is jumping higher following the release of its half year results.

At the time of writing, the wholesale distributor’s shares are up 8% to $3.49.

How did Metcash perform in the first half?

Much like rivals Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW), Metcash has been performing very positively over the last six months.

For the six months ended 31 October, the company reported a 12.2% increase in group revenue to $7.1 billion. Including charge-through sales, the company’s revenue increased 12.3% to $8.1 billion.

This led to Metcash reporting a 30.4% increase in underlying group earnings before interest and tax (EBIT) to $203 million and a 43% lift in underlying profit after tax to $129.6 million.

On a statutory basis, profit after tax came in at $125.1 million, compared to a loss of $151.6 million a year earlier.

This allowed the Metcash board to declare a fully franked interim dividend of 8 cents per share.

What were the drivers of its growth?

This solid growth was driven by the strong performance of all its segments.

Total Food sales increased 9.5% to $4.8 billion or 16.3% when excluding the impact of Drakes and 7-Eleven contract losses. Management advised that this was driven by a change in consumer behaviour to more home cooking, an increase in the preference for local neighbourhood shopping, and the success of its MFuture initiatives.

Total Liquor sales were even stronger and increased 14.3% to $2 billion. This reflects strong demand in the retail network, which more than offset COVID-19 trading restrictions on on-premise customers.

Finally, Hardware sales increased 20.6% to $1.3 billion for the half. This was boosted by higher margin DIY sales and acquisitions. Excluding acquisitions, sales increased 16.2% over the prior corresponding period.

Management notes that the strong DIY demand was underpinned by a change in consumer behaviour to more home improvement projects, gardening, and maintenance activity. The success of MFuture initiatives also helped to further improve the competitiveness of the IHG retail network.

Outlook.

Metcash has started the second half strongly and revealed that its sales momentum has continued in all segments during the first five weeks of the half.

Metcash’s CEO, Jeff Adams, commented: “I am pleased to report that the Group has had a good start to the second half, with strong sales momentum continuing in all pillars in the first five weeks of trading. We are also expecting strong trading over the Christmas and New Year period.”

For the first five weeks, Food sales are up 2.4% over the prior corresponding period or 12.1% excluding the 7-Eleven impact, Liquor sales are up 16.9%, and Hardware sales are up 25.3%.

However, due to the high level of uncertainty caused by COVID-19, management hasn’t provided any guidance for the remainder of the half.

More reading

• 5 things to watch on the ASX 200 on Monday
• Top brokers name 3 ASX shares to buy next week
• 5 things to watch on the ASX 200 next week
• Goldman says buy the Metcash (ASX:MTS) share price ahead of next week’s results
• These are the 10 most shorted shares on the ASX

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths 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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ASX bulls rejoice! The market is set to open higher and it’s the ASX iron ore miners that are likely to lead the charge this morning.

The futures market is pointing to a 0.6% jump in the  S&P/ASX 200 Index (Index:^AXJO) at the open as risk taking fuelled another big jump in the iron ore price.

The price of the steel making ingredient surged 5.8% to US$145.01 a tonne on Friday evening, reported the Australian Financial Review.

Why iron ore prices are surging

It isn’t only promising COVID‐19 vaccine news that’s bringing out the animal spirits for the commodity. The US federal government appears closer to unleashing a new round of economic stimulus that could be worth around US$1 trillion before year end.

Then there is the economic rebound in China, which is the largest buyer of Australian iron ore. The Asian giant is about the only major economy that can boast about a V-shaped recovery.

Rally favours smaller ASX iron ore stocks near-term

That only means more good news for the BHP Group Ltd (ASX: BHP) share price, the Rio Tinto Limited (ASX: RIO) share price and the Fortescue Metals Group Limited (ASX: FMG) share price.

But I won’t be surprised to see the smaller marginal ASX miners benefit more. Rising commodity prices tend to favour these stocks more. These stocks include the Mount Gibson Iron Limited (ASX: MGX) share price and Deterra Royalties Ltd (ASX: DRR) share price.

On the flipside, the big run up in the iron ore price over a short timeframe is causing some to question if the rally is sustainable.

After all, what goes up quickly has a tendency to tumble suddenly.

Why the iron ore price can go higher

But the iron ore run may be more enduring than sceptics believe. Firstly, Vale SA’s production guidance downgrade for 2020 and 2021 clears the way higher for Australian producers. The Brazilian rival is struggling to restore output to pre-COVID levels because of the pandemic.

Even if a vaccine is available today, it will take considerable time for it to be available to the masses.

Meanwhile, demand for iron ore, particularly from China, is likely to increase as its economic recovery gathers pace. Also, the Chinese government needs the ore to build its military capabilities. Thank goodness it doesn’t have alternative suppliers for iron ore as Australia supplies around 60% of its market.

Other tailwinds supporting ASX iron ore stocks

Thirdly, currency forecasters are tipping further weakness in the US dollar in 2021. The massive stimulus that the US will have to undertake under new President Biden to restore growth will weaken the greenback.

A weaker US dollar usually means higher commodity prices as commodities are priced in the US currency.

Finally, history bodes well for the iron ore price. Analysts have repeatedly underestimated the strength in the commodity. There’s no reason to think the pessimists have got it right this time – at least not in the shorter-term.

More reading

• 5 things to watch on the ASX 200 on Monday
• How to get a passive income of $50,000 per year from ASX dividend shares
• 2 ASX dividend shares with generous yields
• 5 things to watch on the ASX 200 next week
• These were the worst performing ASX 200 shares last week

Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited, Deterra Royalties Limited, and Rio Tinto Ltd. Connect with me on Twitter @brenlau.

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

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This article is about three ASX tech shares that may be worth keeping an eye on.

Here are those names:

Betashares Nasdaq 100 ETF (ASX: NDQ)

This exchange-traded fund (ETF) is a collection of many of the biggest technology businesses in the world that are listed in the US.

Its top holdings include businesses like Apple, Microsoft, Amazon, Tesla, Facebook, Alphabet, Nvidia, PayPal, Adobe, Intel, Netflix, Qualcomm and Broadcom.

However, because it’s an index-based ETF rather than a sector-based ETF, it does have some other non-tech holdings like PepsiCo, Costco, Starbucks and Intuitive Surgical.

Since inception it has been one of the best-performing ETFs on the ASX, thanks to outperformance of the overall share market from many of its leading holdings. After the fees per annum of 0.48%, it has produced net returns of 21.7% per annum since inception in May 2015.

BetaShares says that this ETF’s strong focus on technology provides diversified exposure to a high-growth potential sector that is under-represented in the Australian share market.

Pushpay Holdings Ltd (ASX: PPH)

Pushpay is an electronic donation ASX tech share that serves many of the largest churches in the US. Its software offering helps in many different ways including the donations, livestreaming services, volunteer scheduling and a custom church app.

The company continues to grow its customer base and it’s benefiting from the shift to cashless transactions. Its growth has accelerated during COVID-19 due to social distancing and restrictions.

Its operating revenue surged by 53% in the FY21 interim result to US$85.5 million. This led to earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) going up 177% to US$26.7 million and operating cash flow jumping 203% to US$27 million.

Over the long-term, Pushpay is aiming for US$1 billion of annual revenue. In FY21 it’s now aiming for EBITDAF of between US$54 million to US$58 million (up from previous guidance of US$50 million to US$54 million).

The ASX tech share’s management are confident that customers are going to be drawn to its combined offering called ChurchStaq which combines the offering of both Pushpay and Church Community Builder, which is a business it acquired not too long ago. Having all of the features and tools in one place is proving to be a popular offering.

At the current Pushpay share price it’s valued at 24x FY23’s estimated earnings.

Kogan.com Ltd (ASX: KGN)

Kogan.com is one of the largest e-commerce businesses in Australia.

It sells a wide variety of different items including TVs, devices, furniture and clothes. The company also offers other services, like Kogan Mobile, and it has a membership program called Kogan First.

Kogan First members purchase on average much more often than non-members, which also demonstrates the significant savings available through the loyalty program. The number of paying Kogan First members increased significantly during FY20.

The ASX tech share has recently decided to acquire Mighty Ape, which is one of the biggest online retailers in New Zealand where it has a major focus on gaming, toys and other entertainment categories.

Before the impact of synergies, Mighty Ape has forecast FY21 revenue of AU$137.7 million, forecast gross profit of AU$45.7 million and forecast earnings before interest, tax, depreciation and amortisation (EBITDA) of AU$14.3 million.

Kogan expects significant revenue and cost synergies across plenty of areas of the business after the Mighty Ape acquisition.

There are not too many ASX tech shares that display consistently rising profit margins. In FY17 it had an EBITDA margin of 4.3%, in FY19 the EBITDA margin was 6.9% and in FY20 the EBITDA margin had grown to 9.3%.

At the current Kogan.com share price, it’s valued at 27x FY23’s estimated earnings.

More reading

• 3 of the best ASX shares to buy in December
• Got cash to invest? Here’s 3 ASX shares to buy
• 3 reasons why Kogan.com (ASX:KGN) shares could be a buy
• Brokers name 3 ASX shares to buy right now
• Why Cashrewards, Doctor Care Anywhere, Kogan, & Treasury Wine are pushing higher

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BETANASDAQ ETF UNITS, Kogan.com ltd, and PUSHPAY FPO NZX. The Motley Fool Australia has recommended BETANASDAQ ETF UNITS, Kogan.com ltd, and PUSHPAY FPO NZX. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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

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

I’ll cut right to the chase: Yes, AstraZeneca plc (NASDAQ: AZN) could be a millionaire-maker stock. But no, it’s not very likely for most investors. Really, those are the correct answers for nearly any stock when asked if it could make someone a millionaire.

What’s more instructive, though, is to understand what it would take for a given stock to deliver the returns to build such a fortune. It’s also helpful to know what kind of gains a stock could realistically generate, even if it probably won’t be a millionaire-maker. You might be surprised how AstraZeneca fares on both of these fronts.

What it would take

Let’s first delve into what it would take for AstraZeneca to be a millionaire-maker. Of course, it depends largely on two critical factors: (1) the initial investment, and (2) what the investing time horizon is.

Investing writers like myself usually look at an initial investment of $10,000. For that amount to grow to $1 million, AstraZeneca’s share price would need to multiply by a factor of 100. With the big drugmaker’s market capitalisation currently hovering around $140 billion, that would require AstraZeneca’s market cap to explode to $14 trillion.

Given a long enough period of time, that kind of growth could happen. However, we’re talking about a really long timeframe. For example, if AstraZeneca’s stock price appreciated 15% annually, it would take around 33 years to become a 100-bagger. Over the last 20 years, by the way, the big pharmaceutical stock has increased at an annual rate close to 2.5%.

Starting with a much larger initial investment could easily make AstraZeneca a millionaire-maker. If you invested $800,000 in the stock, for instance, you’d only need a 25% return to reach $1 million. Of course, most investors don’t have that much money to invest in a single stock. 

What’s more likely

Now that’s out of the way, let’s turn to something more practical: What kind of return could AstraZeneca realistically generate? You’ll probably like the answer to this one.

While AstraZeneca hasn’t performed all that great over the last two decades, it’s a different story over the last two years. That’s because AstraZeneca is a much different company than it was 20 years ago and even 10 years ago.

Today, AstraZeneca has a lineup loaded with products with strong sales growth. Cancer drugs Tagrisso, Imfinzi, Lynparza, and Calquence are rocking. Diabetes drug Farxiga and asthma drug Fasenra continue to enjoy solid momentum.

The pharma company’s pipeline is also strong. AstraZeneca has over 170 clinical programs in development. These include 24 late-stage programs. One of those is the company’s COVID-19 vaccine AZD1222. Even though AstraZeneca caused confusion with its interim efficacy results announced last month, it could still be a major player in the coronavirus vaccine market. 

Wall Street analysts project that AstraZeneca will generate average annual earnings growth of more than 19% over the next five years. If the stock appreciates at a similar rate, an initial investment of $10,000 would grow to nearly $24,000 in five years.

What if AstraZeneca managed to keep up that growth rate for another 10 years? The initial investment would swell to over $135,000. To be candid, it would be difficult for AstraZeneca to deliver that kind of growth over a 15-year period. However, with the company’s strong pipeline it’s not out of the question.

The bottom line is that AstraZeneca probably won’t make you a millionaire. However, it could make you plenty of money. 

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

More reading

• 3 key advantages Moderna holds over Pfizer and AstraZeneca
• Why AstraZeneca’s potential vaccine is more exciting than you think
• Why Moderna Is Less Risky Than You Think
• ASX energy shares surge ahead as oil rises to 9-month high
• Why fund manager optimism is at almost 3-year highs

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

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

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The Xero Limited (ASX: XRO) share price has been a strong performer in 2020.

Since the start of the year, the cloud-based business and accounting software provider’s shares have jumped almost 67% higher.

Is it too late to buy Xero shares?

According to a note out of Goldman Sachs, its analysts believe the Xero share price could still go higher from here.

This morning the broker commenced coverage on the company with a buy rating and $157.00 price target.

This implies potential upside of just over 18% for its shares over the next 12 months.

Why is Goldman Sachs bullish on Xero?

Goldman Sachs likes Xero due to the quality of its offering, its large and growing total addressable market (TAM), and its attractive unit economics.

The broker commented: “We estimate Xero has a core TAM of NZ$14bn p.a. across its key markets (4.6% penetrated in FY20). However as it broadens and monetizes its app ecosystem, and expands into new geographies, we estimate this will open a further NZ$62bn in addressable TAM, providing a multi-decade runway for strong revenue growth. Combined with attractive unit economics at maturity (GSe 40% EBIT margins), we believe the long-term earnings opportunity for Xero is material.”

What is it expecting in the coming years?

At the end of the first half of FY 2021, Xero had a total of 2.45 million subscribers and was generating annualised monthly recurring revenue (AMRR) of NZ$877.6 million.

Goldman believes this can grow materially over the 2020s.

It explained: “Based on our penetration assumptions of new market opportunities, which are below current market launch performances, we think Xero can achieve a 2030 subscriber footprint of 7.4mn, generating NZ$3.4bn in annual revenues.”

This, combined with the monetisation of its ecosystem, is expected to underpin strong earnings growth over the decade.

Goldman commented: “A key driver of earnings will be its ability to increasingly monetize the application ecosystem that it has built. This could be done through revenue share agreements (app-by-app, introducing a broader platform fees) or through M&A (example: its purchase of Waddle), which we see as increasingly likely.”

“We estimate that by more aggressively monetizing its ecosystem, Xero can increase its addressable TAM by NZ$44bn in potentially extremely high margin revenues (i.e. app-store fee likely 100% margin). Hence we see material upside to XRO ARPU,” it added.

Overall, while it sees the second half of FY 2021 as challenging due to COVID headwinds, the broker believes Xero’s long term opportunity is considerable.

More reading

• 5 things to watch on the ASX 200 on Monday
• How to benefit from the cloud computing boom with ASX shares
• These ASX shares are growing rapidly in FY 2021
• Why the Xero (ASX:XRO) share price zoomed 20% higher in November
• Why healthcare, tech and consumer staples shares underperformed the ASX 200 in November

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 Xero. 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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In this article are two quality exchange-traded funds (ETFs) that have been providing long-term returns for many years.

What does an ETF do?

In the above link is a breakdown of an ETF, but in summary in provides investors exposure to a group of assets or businesses through a single investment. You don’t have to go out and buy the 100, 500 or thousands of individual businesses yourselves.

This would save a lot on brokerage and it also provides instant diversification. This diversification can supposedly lower risks because if there’s a problem with one business (or sector) then the exposure to the other businesses and sectors can mitigate that.

Here are two examples:

Vanguard Msci Index International Shares ETF (ASX: VGS)

This ETF is about investing in the global share market in numerous companies based in many countries around the world.

It was actually invested in around 1,550 holdings as at the end of October 2020. It gives exposure to many of the world’s largest businesses. Its top 10 holdings include: Apple, Microsoft, Alphabet, Facebook, Johnson & Johnson, Proctor & Gamble, Nestle, Nvidia and Visa.

Looking at the sector weightings, this ETF has a 22% holding of IT shares, a 13.5% position in healthcare shares, a 12% weighting to consumer discretionary businesses, an 11.7% position in financials businesses and a 10.5% weighting to industrials. The other sectors have a weighting of less than 10%.

The United States gets the biggest allocation of the ETF as it’s the biggest economy and it’s where many global companies are listed. Around 68% of the ETF is invested in US businesses. However, it also has a 8.1% allocation to Japan, a 4% weighting to the UK, a 3.2% holding of French shares, a 3.2% weighting to Switzerland, a 3.1% allocation to Canada and a 2.8% holding of German shares. There are many other countries with representation such as the Netherlands, Sweden, Denmark, Spain and Italy.

Fees can have a major impact on the overall net returns of an investment. Vanguard Msci Index International Shares ETF has an annual management fee of just 0.18%.

In terms of net performance, this ETF has returned an average of 11.1% per annum since November 2014 and 8.6% per annum over the past five years.

According to Vanguard, this ETF has a dividend yield of just over 2% with a return on equity (ROE) ratio of 16.4%.

VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT)

VanEck, an ETF provider, says that this ETF gives investors exposure to a diversified portfolio of attractively priced US companies with sustainable competitive advantages according to Morningstar’s equity research team.

This one has many less holdings compared to the global Vanguard one. It has 48 positions. and its biggest positions are different to the biggest companies in the world. The largest holdings are: Applied Materials, Corteva, Charles Schwab, Microchip Technology, Boeing, Compass Materials International, Aspen Technology, Yum! Brands, Cheniere Energy and American Express.

In terms of sector allocation with a double digit weighting, there is a 22.2% allocation to IT, an 18.2% weighting to healthcare, a 17.1% holding of financial businesses, an 11.3% weighting of industrial companies and a 10.1% position in consumer staples.

Despite VanEck Vectors Morningstar Wide Moat ETF’s annual fee of 0.49% per annum, it has produced bigger long-term returns than the Vanguard ETF. Over the past five years it has produced net returns of 16% per annum. This has actually been stronger than iShares S&P 500 ETF (ASX: IVV) as well.

More reading

• Want to invest like Warren Buffett? This ASX ETF is all about ‘the moat’
• 10 hottest (and coldest) Aussie ETFs right now
• 2 leading ETFs to buy for global returns

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended VanEck Vectors Morningstar Wide Moat ETF and Vanguard MSCI Index International Shares ETF. 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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There is at least one fund manager that thinks the share prices of big banks like National Australia Bank Ltd (ASX: NAB) are a buy.

Fund manager Rhett Kessler recently revealed that his Australian share fund from Pengana Capital Group Ltd (ASX: PCG) was increasing exposure to the major ASX banks.

What has NAB recently announced?

A month ago the big four ASX bank announced its FY20 result. There were various different profit measures to look at, but they all showed a double digit profit decline.

NAB’s cash earnings fell by 36.6% to $3.71 billion. Excluding large notable items, cash earnings fell by 25.9%. Statutory net profit after tax dropped 46.7% to $2.56 billion.

During the year, the big bank suffered a 201% increase of credit impairment charges to $2.76 billion. As a percentage of gross loans and acceptances, the ratio worsened from 31 basis points to 46 basis points. This included an allocation for targeted sectors experiencing elevated levels of risk including aviation, tourism, hospitality and entertainment, retail trade and commercial property.

NAB also said that the ratio of loans that are more than 90 days past due increased by another 10 basis points to 1.03% largely due to rising delinquencies in the Australian home loan portfolio where customers are not part of the COVID-19 deferral program. Eligible customers receiving COVID-19 payment deferrals are treated as performing in accordance with APRA guidance.

The net interest margin (NIM) declined by 1 basis point to 1.77%. However, excluding a 1 basis point reduction from ‘markets and treasury’ which includes the impact of holding higher liquid assets, NIM was flat with the benefits of home loan repricing and lower wholesale funding costs offset by impacts of the low interest rate environment combined with competitive pressures.

However, excluding all the ‘one-offs’, revenue was only down 1.5% and expenses only grew by 2%. Expenses went up because of its refresh strategy, higher technology costs (including strengthening its compliance and control framework), salary increases and COVID-19 costs. However, these were offset by productivity benefits, lower performance-based compensation and reduced travel and entertainment costs.

What has the NAB share price done?

Like most other ASX shares, the NAB share price has been recovering since March 2020. However, it has recovered at a different pace. It didn’t really do much between June and September. But since the start of October 2020 the NAB share price has gone up by 30%.

In that time the result of the US election and the results of COVID-19 vaccine trials have made headlines.

Why Pengana likes big banks

There are a few different areas about why Pengana thinks that the big four ASX banks look interesting.

Whilst valuation has been broadly supportive for some time now, the outlook for the banks benefited in particular through the month by evidence of accelerating home loan growth (supported by low-interest rates and first homeowner support), a supportive federal budget; improving housing finance approvals; house prices holding up better than expected, a meaningful reduction in loan deferrals and lower than anticipated loss provisioning.

What is NAB’s valuation?

At the current NAB share price it’s valued at under 14x FY23’s estimated earnings according to Commsec projections. In FY23 it’s also predicted to pay a dividend of $1.16 per share, which equates to a grossed-up dividend yield of 7.2%.

More reading

• 5 things to watch on the ASX 200 next week
• Here are the ASX bank shares rated as a buy today
• Macquarie (ASX:MQG) share price lags on $2.3bn takeover
• Banks rejoice: House prices to return to 2019 levels
• CBA (ASX:CBA) and the ASX banks just had an amazing month

Motley Fool contributor Tristan Harrison 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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Every Monday I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Webjet Limited (ASX: WEB) is still the most shorted share on the ASX and experienced a jump in short interest to 15%. Short sellers appear to believe the market is getting ahead of itself and that its shares are overvalued at the current level.
• Western Areas Ltd (ASX: WSA) has seen its short interest rebound to 11.6%. Short sellers have been going after the nickel producer after management downgraded its production guidance.
• Speedcast International Ltd (ASX: SDA) still has short interest of 9.3%. The communications satellite technology provider’s shares have been suspended for almost the entire year as it undertakes a recapitalisation.
• InvoCare Limited (ASX: IVC) has short interest of 8.6%, which is flat week on week. Tough trading conditions and potential market share losses have been weighing on its shares recently.
• Tassal Group Limited (ASX: TGR) has seen its short interest rise to 8.5%. Concerns over its uncertain near term outlook could be why short sellers are targeting the salmon producer.
• Inghams Group Ltd (ASX: ING) has 8.2% of its shares held short, which is down slightly week on week. An improvement in the poultry company’s performance in FY 2021 hasn’t scared of short sellers just yet. They appear concerned with potentially high input costs.
• A2 Milk Company Ltd (ASX: A2M) has jumped into the top ten with 8.2% of its shares held short. Short sellers appear to be betting that the infant formula company will fall short of its guidance this year due to weakness in the daigou channel.
• Myer Holdings Ltd (ASX: MYR) has seen its short interest fall to 7.4%. The department store operator has been struggling in the current operating environment and reported a massive loss in FY 2020.
• Galaxy Resources Limited (ASX: GXY) is back in the top ten with short interest of 7.3%. Short sellers may believe the lithium miner’s shares have climbed too far over the last few months and are now overvalued.
• AVITA Therapeutics Inc (ASX: AVH) has entered the top ten with 7.3% of its shares held short. The regenerative medicine company’s shares have come under pressure this year after COVID-19 had a negative impact on its sales in FY 2020.

More reading

• The meaning of ‘diversification’ when it comes to ASX shares
• Are ASX stocks about to get an earnings upgrade boost in the new year?
• 2 stellar ASX growth shares to buy in December
• 4 small cap ASX dividend shares with large yields
• Flight Centre and Mesoblast were among the most traded shares on the ASX last week

James Mickleboro owns shares of Galaxy Resources Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Avita Medical Limited. The Motley Fool Australia owns shares of and has recommended A2 Milk and Webjet Ltd. The Motley Fool Australia has recommended Avita Medical Limited and InvoCare 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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This article is about three small cap ASX shares that could be worth watching at the moment.

Smaller businesses have the possibility of producing good performance over time because they are much earlier on in their growth journey.

Here are three examples:

Sezzle Inc (ASX: SZL)

Sezzle is a buy now, pay later (BNPL) company that is based in the United States.

The whole BNPL sector is growing at a quick rate, but Sezzle is one that’s growing at an even faster pace.

It recently gave an update for its performance over November 2020. It said that its underlying merchant sales (UMS) jumped 188.5% to US$113 million and annualised UMS also went up 188.5% to US$1.36 billion.

Sezzle’s UMS is being driven by rapidly rising active consumers and active merchants. In November, active consumers rose by 151.5% to 2.07 million and active merchants grew by 164.5% to 24,846.

The recent Black Friday and Cyber Monday saw UMS of US$28.5 million, which was a 146.4% increase for the small cap ASX share.

Sezzle executive Chair Charlie Youakim said: “We are extremely excited about the direction of our business, as we recently partnered with GameStop and eCommerce platform Wix. Sezzle is now offered at Gamestop’s network of more than 3,300 US retail stores, its online store and in the GameStop mobile app. Our integration on Wix is available to all Wix merchants in the US, Canada, India and in the future will be able in other regions as Sezzle expands internationally.”

Over The Wire Holdings Ltd (ASX: OTW)

Over The Wire is a favourite of fund manager NAOS Small Cap Opportunities Company Ltd (ASX: NSC) at the moment.

This business has a number of offerings including a national voice network, public cloud, cyber security services and on-demand cloud connectivity. The company also recently acquired Digital Sense, which mostly provides services to large and government clients. Over 90% of Digital Sense’s revenue is recurring in nature.

Naos believes the small cap ASX share can generate much higher earnings before interest, tax, depreciation and amortisation (EBITDA) over the next 24 months and, along with higher free cash flow generation, could see the company command a higher EBITDA multiple.

Volpara Health Technologies Ltd (ASX: VHT)

Volpara is a healthcare technology business. It provides breast imaging analytics and analysis products that improve clinical decision-making and the early detection of breast cancer.

The small cap ASX share aims to reduce the mortality and cost of breast cancer by providing clinically validated software that underpins personalized, high-quality breast cancer screening.

A couple of weeks ago, Volpara released its FY21 half-year result where it reported growth of its total revenue by 38% to NZ$9.5 million, with annual recurring revenue up to NZ$19.9 million (up from NZ$15.7 million last year). Subscription revenue rose 71% to NZ$8.8 million.

The company reported that approximately 27% of women in the US had a group product applied on their images and data compared to approximately 25.8% at the end of the prior corresponding period.

Volpara also reported that its gross profit increased by 43% to NZ$8.7 million which represented an increase in the gross profit margin to 92% (up from 89%).

In terms of the outlook, Volpara is continuing to see a high retention rate and growing average revenue. Most new sales now are for two or three products, which represents much higher average revenue per user (ARPU). Volpara says it has a pipeline of new deals. It’s being successful with upselling as it upgrades its MRS 6 users (from the MRS System acquisition) and start moving MRS 7 users to Aspen Breast and Volpara products – this is creating an increase of 200% to 300% of recurring revenue.

The small cap ASX share is also looking for acquisition opportunities which would increase its customer base or improve its skills and products to help increase ARPU and technology.

More reading

• Sezzle (ASX:SZL) share price higher after delivering more explosive growth
• Why the Afterpay (ASX:APT) share price continues to dominate
• 3 exciting small cap ASX shares rated as buys
• Volpara (ASX:VHT) share price falls on half-year results
• Afterpay (ASX:APT) share price under pressure by US BNPL giant

Tristan Harrison owns shares of NAO SMLCAP FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends VOLPARA FPO NZ. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Over The Wire Holdings Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia has recommended Over The Wire Holdings Ltd, Sezzle Inc, and 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 3 exciting small cap ASX shares to buy appeared first on The Motley Fool Australia.

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If you’re wanting to add a few blue chip dividend shares to your portfolio, then you may want to check out the ones listed below.

Here’s why these ASX shares come highly rated:

Coles Group Ltd (ASX: COL)

Coles is of course one of Australia’s leading supermarket operators and most recognisable brands. Thanks to a combination of its defensive qualities, store expansion, and long track record of same store sales growth, Coles has been growing its top and bottom lines at a solid rate in recent years.

This certainly was the case in FY 2020 when Coles’ sales surged during the height of the pandemic. Pleasingly, this positive form has continued in FY 2021, with sales across the business growing strongly in the first quarter.

Analysts at Citi appear confident that this can continue. The broker recently retained its buy rating and lifted the price target on the Coles share price to $21.20. It expects groceries demand to remain strong over the medium term. It also notes that margins are firming up thanks to rational competition in the industry. The broker is forecasting a 63.5 cents per share fully franked dividend in FY 2021. Based on the current Coles share price, this represents a 3.5% dividend yield.

Telstra Corporation Ltd (ASX: TLS)

It has been a tough few years for this telco giant, but with its T22 strategy delivering on its objectives, the NBN headwind easing, and 5G internet taking off, its outlook has improved greatly in recent months. In addition to this, the company has announced plans to split into three separate entities. This has been well-received by the market and is expected to unlock value for shareholders.

Credit Suisse appears to be a fan of this plan. Its analysts suggested that it reinforces its view around the underlying value of Telstra’s assets. The broker also believes the company is well-placed to maintain its 16 cents per share dividend for the foreseeable future. Based on the current Telstra share price, this means a fully franked 5.25% dividend yield. Credit Suisse has an outperform rating and $3.85 price target on its shares.

More reading

• 2 highly rated ASX dividend shares to buy
• Goldman says buy the Metcash (ASX:MTS) share price ahead of next week’s results
• The Telstra (ASX:TLS) dividend yield is creeping higher
• Which ASX 200 sectors performed the best in November? 
• Why the Telstra (ASX:TLS) share price stormed 14.5% higher in November

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. 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.

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