Diversification… Here we have one of those sharemarket ‘buzzwords’ that is probably thrown around a bit more than it should be. Every fund manager on the market will tell you about the importance of diversification, and perhaps how every one of their investment portfolios is ‘diversified’.

But then you have legendary investors like Warren Buffett, who has said that “diversification is a protection against ignorance. It makes very little sense for those who know what they’re doing”.

So what’s the deal on the D?

Diversification and its benefits

So the whole idea of diversification comes from risk management. The concept revolves around the simple proposition that if one of your investments gets hit by the proverbial bus, it won’t have a ruinous impact on your wealth. It’s the old ‘don’t have all of your eggs in one basket’ strategy.

This does make sense. And it is important to try and plan for any scenario that might come to pass, no matter how inconceivable it might seem at the time. I’m sure no one thought there was too much external risk owning seemingly-good quality businesses like now-delisted Virgin Australia, Qantas Airways Ltd (ASX: QAN), Webjet Limited (ASX: WEB) or Corporate Travel Management Ltd (ASX: CTD) at the start of the year.

Yet, if you had a substantial portion of your wealth in one or more of these companies back then, your portfolio would have looked very dire in March and April. Virgin has since gone bankrupt, wiping its shareholders out. It was no fault of these businesses’ or their management of course. But that doesn’t really matter when it comes to the value of one’s portfolio.

Thus, you can see how it is important to not have ‘all of your eggs’ in one sector or industry.

Geography matters too

But does ‘good diversification’ stretch beyond just one sector of one share market? Well, let’s take a look at that famous disparager of diversification: Mr Buffett. Warren Buffett has always been a patriot who routinely tells investors to “never bet against America”.

Yet, Buffett has spent 2020 ‘diversifying’ Berkshire Hathaway Inc‘s (NYSE: BRK.A)(NYSE: BRK.B) from American companies, selling US shares like his bank positions, Costco Wholesale Corporation (NASDAQ: COST) and Apple Inc (NASDAQ: AAPL), and buying massive stakes in large Japanese industrial conglomerates like Mitsubishi.

Every country has its own set of intrinsic risks, such as currency stability. Thus, spreading out your investments (diversifying) across multiple countries can mitigate risk as well. Especially if you might be worried about your own country’s unprecedented quantitative easing (QE) programs, as Buffett might be. If you don’t fancy buying Japanese industrials like Buffett, an internationally-focused exchange-traded fund (ETF) might be a good alternative to consider.

Foolish takeaway

You might not be able to afford the same apathy towards diversification that Buffett boasts of (you’re not alone there). Thus, it pays to remember that none of us can know what is just around the corner. Diversification is one easy way you can acknowledge this in your portfolio of investments, so use it wisely!

More reading

• These were the worst performing ASX 200 shares last week
• Are ASX stocks about to get an earnings upgrade boost in the new year?
• Why BetMakers, Medical Development International, Qantas, & Zip are dropping lower
• REX Airlines (ASX:REX) share price rockets up 13%, smashing 52-week high
• Qantas (ASX:QAN) share price in focus after market update

Sebastian Bowen 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 Apple, Berkshire Hathaway (B shares), and Costco Wholesale and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short December 2020 $210 calls on Berkshire Hathaway (B shares). The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Webjet Ltd. The Motley Fool Australia has recommended Apple and Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post The meaning of ‘diversification’ when it comes to ASX shares appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/2L8YBsi

A stock market recovery has always taken place following previous bear markets. As such, the long-term prospects for indexes such as the FTSE 100 Index (FTSE: UKX) are relatively attractive.

Certainly, some stocks may experience further challenges due to risks such as the ongoing coronavirus pandemic. However, buying them at a discount to their intrinsic values could mean capital appreciation potential that makes it easier to generate a portfolio valued in excess of a million.

Improving investor sentiment in a stock market recovery

A stock market recovery can encourage investors to become more optimistic about the future. They may see the value of their own holdings increase, and determine that further gains are possible. A rise in share prices may also remind them that the stock market operates in cycles. No downturn or upturn has ever lasted in perpetuity. However, it is easy to forget this during periods of extreme market performance. As share prices rise, investors may become less risk averse. This can help to sustain a bull market over the long term.

As such, holders of today’s cheap stocks could benefit the most from improving sentiment. Such companies may currently be relatively unpopular due to their weak near-term outlooks. However, as investors become less risk averse, they may begin to focus on undervalued companies to a greater extent. This may mean that investors who have purchased cheap stocks during the 2020 stock market crash see the value of their portfolios increase in a stock market recovery.

Stronger economic conditions after the stock market crash

A stock market recovery is often linked to the world’s economic outlook. If investors believe that economic conditions are improving, they generally become more bullish about equities.

Improving economic conditions suggest that the operating environment for businesses is likely to strengthen. This may mean that those companies which have struggled to post rising sales and profit this year are able to deliver stronger financial performances. This may help to justify even higher share prices, since a higher earnings per share figure equates to a higher share price when its multiple of earnings remains constant.

Clearly, company operating conditions can change quickly in a stock market recovery. However, the economy’s past performance suggests that they are likely to rebound after the challenges experienced in 2020. Therefore, investors who have purchased struggling companies this year may benefit from an upturn in their operating outlook in 2021 and beyond.

Making a million in a stock market rally

Even if a stock market recovery only allows an investor to generate the market rate of return, they can still build a large portfolio over the long run. For example, the stock market has produced an annual total return of around 8% over the long run. Such a rate of return would turn $100,000 into $1 million within 30 years. Similarly, a $750 monthly investment would be worth a seven-figure sum over the same time period at the same return.

However, through buying today’s cheap stocks and holding them ahead of a long-term stock market recovery, it may be possible to earn a higher return. Investors who have purchased undervalued stocks this year could stand to benefit the most from a likely improvement in investor sentiment and company operating conditions in the coming years.

More reading

• How to turn $20,000 into $950,000 in 10 years with ASX shares
• Got cash to invest? Here’s 3 ASX shares to buy
• 2 highly rated ASX dividend shares to buy
• 3 ASX growth shares to buy for 2021
• These were the worst performing ASX 200 shares last week

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. 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.

The post How a stock market recovery could boost my chances of making a million appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/33JK4K1

I’m a big fan of buy and hold investing and believe it is the best way for investors to grow their wealth.

To demonstrate how successful it can be, I like to pick out a number of popular ASX shares to see how much a single $20,000 investment 10 years ago would be worth today.

This time around I have picked out the three ASX shares that are listed below:

ARB Corporation Limited (ASX: ARB)

This 4×4 accessories manufacturer has been a bit of a quiet achiever over the last decade. Without much fanfare, ARB has grown its sales, earnings, and dividend at a consistently solid rate over this time. This has been supported by the growing popularity of 4×4 vehicles and increasing demand for its products internationally. This positive form has led to the ARB share price providing investors with an average total return of 16% per annum since 2010. Which would have turned a $20,000 investment into just over $88,000 today.

Carsales.Com Ltd (ASX: CAR)

The Carsales share price has been a market beater over the last decade. This has been driven by its consistently solid sales and earnings growth over the 2010s, which has been underpinned by the seismic shift to online auto listings. Also supporting its growth has been its global expansion. Carsales now has a presence in both South America and Asia. Overall, this has led to its shares generating an average total return of 17.15% per annum. This means that a $20,000 investment in its shares would now be worth just under $100,000.

Magellan Financial Group Ltd (ASX: MFG)

Thanks to its expert stock picking and popular global investment funds, this fund manager has experienced a tidal wave of fund inflows over the last decade. For example, in August 2010 the company had funds under management of approximately $1.3 billion across its global equities and infrastructure equities. At the end of October, this had grown to $103.5 billion. Unsurprisingly these stunning fund inflows have been reflected in the performance of the Magellan share price. As a result, its shares have generated an average total return of 47.2% per annum over the last decade. This would have turned a $20,000 investment into a massive $955,000.

More reading

• These were the worst performing ASX 200 shares last week
• Why the Magellan (ASX:MFG) share price dipped lower today
• Top brokers name 3 ASX shares to sell today
• ASX stock of the day: Platinum (ASX:PTM) shares up 6%
• 3 ASX shares with large dividend yields

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

The post How to turn $20,000 into $950,000 in 10 years with ASX shares appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/37uvMhe

Do you have some cash to invest? There could be some ASX shares that may be worth a spot on your watchlist.

Pushpay Holdings Ltd (ASX: PPH)

Pushpay is an ASX technology business that facilitates electronic donations. Its main client base is large and medium churches in the United States.

The ASX share is tapping into the global shift of payments from cash to digital. This is particularly noticeable during this COVID-19 period of restrictions and social distancing. Indeed, the US is currently seeing record numbers of COVID-19 cases, hospitalisations and deaths.

Pushpay is aiming for US$1 billion of annual revenue from the church sector whilst it progresses towards market leadership.

The growth of revenue is coming with increasing profit margins. In the FY21 half-year result it reported that its gross profit margin went up from 65% to 68%. This means that more of the revenue will fall to the next line of profit like a waterfall.

In a recent presentation, Pushpay pointed out that it can expand to smaller Catholic churches as well as different denomination groups and other donation sectors and geographies.

Pushpay recently upgraded its guidance to say that earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) is now expected to be in a range of between US$54 million to US$58 million.

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

Kogan.com Ltd (ASX: KGN)

Kogan.com is another ASX share that’s in the technology space and is experiencing stronger demand partly because of physical retail impacts.

In FY20 it grew gross sales by 39.3% to $768.9 million. In the annual general meeting (AGM) update it said that gross sales increased by 99.8% in the first four months of FY21.

Kogan.com is another business that can demonstrate growing operating leverage as it gets bigger. In FY17 it had an EBITDA margin of 4.3%, in FY18 it had an EBITDA margin of 6.3%, in FY19 the margin was 6.9% and in FY20 the margin was 9.3%.

The ASX share continues to invest in areas that it thinks will increase the efficiency and margins of the business, whilst continuing to serve the customer and grow profit.

It announced this week that it’s going to acquire the Mighty Ape online retail business which is based in New Zealand. Kogan.com is paying AU$122.4 million for the business which is expected to generate AU$14.3 million of EBITDA in FY21 (which would be growth of 254.1% compared to FY20).

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

Brickworks Limited (ASX: BKW)

Brickworks is the biggest brickmaker in Australia. It’s currently experiencing a recovery in the Australian construction market after the impacts of COVID-19 earlier in 2020.

However, the part of the business that has been grabbing the most attention in recent times has been the industrial property trust that it owns 50% of, along with Goodman Group (ASX: GMG).

This property trust is currently constructing two very large distribution warehouses for Amazon and Coles Group Ltd (ASX: COL). Once these are completed, it’s expected to increase the gross assets of the trust to more than $3 billion. These new warehouses are also expected to increase the rental profit distributions by at least 25%. This in turn will provide more cashflow for Brickworks to pay dividends to shareholders.

It hasn’t cut the dividend in over 40 years and its dividend is entirely funded by the distributions from the property trust and the dividends from its large shareholding of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares.

At the current Brickworks share price it’s valued at 19x FY21’s estimated earnings. It also has a trailing grossed-up dividend yield of 4.3%.

More reading

• 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
• 3 reasons why Pushpay (ASX:PPH) shares could be a buy
• 3 reasons why Brickworks (ASX:BKW) shares are a buy for dividends

Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd and PUSHPAY FPO NZX. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET. The Motley Fool Australia has recommended 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.

The post Got cash to invest? Here’s 3 ASX shares to buy appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/37zqgtP

Thankfully in this ultra-low interest rate environment, there are a large number dividend shares for investors to choose from on the Australian share market.

Two ASX dividend shares that could be top options for income investors are listed below. Here’s why they come highly rated:

Accent Group Ltd (ASX: AX1)

The first dividend share to look at its Accent Group. It is a leading footwear retailer with a (growing) number of popular store brands. This area of the retail sector has been a particularly positive performer in 2020 despite the pandemic. This led to Accent Group delivering a solid result in FY 2020, which allowed it to reward shareholders with a generous dividend.

The good news is that this strong form has carried over into FY 2021. The company recently revealed that its like for like sales (excluding its Auckland and Victorian stores) were up 15.7% during the first 20 weeks of the financial year. It also revealed a stunning 129% increase in Digital sales compared to the prior corresponding period.

Morgan Stanley was pleased with this update and has a buy rating on its shares. It is also forecasting a fully franked dividend of 9.4 cents per share this year. Based on the current Accent share price, this represents a 4.4% dividend yield.

Telstra Corporation Ltd (ASX: TLS)

Another dividend share to look at is Telstra. This telco giant has been a disappointing performer over the last few years due to the impact of the NBN rollout. The good news is that the end of the rollout is in sight and the headwind is finally easing.

Combined with the arrival of 5G internet, cost cutting, and its T22 strategy, Telstra has been tipped to return to growth again in the not so distant future. In addition to this, the company is aiming to create value for shareholders by splitting its business into three separate entities. Management believes the restructure would enable the company to take advantage of potential monetisation opportunities.

Goldman Sachs likes what it sees here and recently reiterated its buy rating and $3.60 price target on Telstra’s shares. It has also reaffirmed its estimate for a 16 cents per share fully franked dividend in FY 2021 and beyond. Which, based on the current Telstra share price, would provide investors with a 5.25% dividend yield.

More reading

• The Telstra (ASX:TLS) dividend yield is creeping higher
• 2 high yield ASX dividend shares to buy
• Which ASX 200 sectors performed the best in November? 
• Why the Telstra (ASX:TLS) share price stormed 14.5% higher in November
• 2 growing ASX dividend shares to buy this month

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

The post 2 highly rated ASX dividend shares to buy appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/2JRB1PT

Are you looking to add some ASX growth shares to your portfolio next month? Well, you’re in luck! The Australian share market has a large number of quality growth shares to consider buying.

Three that could be great long term options are listed below. Here’s why they are rated as buys:

Altium Limited (ASX: ALU)

Altium is an electronic design software provider which has been growing at an exceptionally strong rate over the last few years. Management remains confident that it still has a long runway for growth. This is thanks to its exposure to the growing Internet of Things and Artificial Intelligence markets, which are underpinning solid demand for subscriptions. It is aiming to almost double its subscriber numbers to 100,000 and its revenue by ~150% to US$500 million by 2025/26. Analysts at Credit Suisse are positive on its outlook. They have an outperform rating and $42.00 price target on its shares.

ELMO Software Ltd (ASX: ELO)

ELMO is a cloud-based human resources and payroll software company. It provides businesses in the ANZ and UK markets with a unified platform that streamlines a wide range of everyday processes. ELMO has been a strong performer over the last few years, and even during the pandemic. In FY 2020 it reported ARR of $55.1 million. This was a 19.7% increase over the prior corresponding period. Pleasingly, management is expecting more strong organic growth in FY 2021, which will be supported by the recent acquisition of Breathe. This acquisition went down well with analysts at Morgan Stanley. They recently reaffirmed their overweight rating and lifted the price target on its shares to $9.30.

ResMed Inc. (ASX: RMD)

ResMed is a medical device company which has a focus on sleep treatment solutions. It also creates ventilators, which have been experiencing incredible demand this year because of the pandemic. Over the last decade the company’s revenue and earnings have grown at a very strong rate thanks to the quality of its products and its large and growing market opportunity. In respect to the later, management estimates that there are 936 million people with sleep apnoea globally and 380 million people who suffer from chronic obstructive pulmonary disease (COPD). Last month Credit Suisse upgraded its shares to an outperform rating with a $31.00 price target.

More reading

• 2 ASX growth shares to buy in December
• 3 ASX shares growing the dividend rapidly
• These ASX tech shares have been tipped for big things
• 10 fantastic ASX shares to buy in December
• Brokers name 3 ASX shares to buy right now

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 and recommends Altium and Elmo Software. The Motley Fool Australia has recommended Elmo Software and ResMed Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post 3 ASX growth shares to buy for 2021 appeared first on The Motley Fool Australia.

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

Last week the S&P/ASX 200 Index (ASX: XJO) was on form again and continued its push higher. The benchmark index climbed 33 points or 0.5% higher to finish at 6,634.1 points.

Unfortunately, not all shares on the index climbed higher with the market. Here’s why these were the worst performers on the ASX 200 last week:

IDP Education Ltd (ASX: IEL)

The IDP Education share price was the worst performer on the ASX 200 last week with a 9.7% decline. This appears to have been driven by profit taking after some stellar gains in November. Last month the language testing and student placement company’s shares jumped 29% higher due to optimism over the potential launch of three effective COVID-19 vaccines in the near future. This could lead to a quicker than expected recovery in the international student market.

Zip Co Ltd (ASX: Z1P)

The Zip share price wasn’t too far behind with a disappointing 7.8% decline. Investors were selling the buy now pay later provider’s shares despite the release of a trading update which revealed a record performance during November. Zip reported record transaction value of $577.1 million for the month. This was up 44% month on month and more than double year on year. Key drivers of this growth were a 157% increase in monthly transaction numbers and a 104% year on year increase in customer numbers to 5.3 million. No details were provided in relation to bad debts or arrears.

Magellan Financial Group Ltd (ASX: MFG)

The Magellan share price was a poor performer and drop 5.6% last week. This may have been driven by a broker note out of Morgan Stanley a week earlier. It retained its underweight rating and $48.00 price target on the fund manager’s shares. The broker has concerns that its performance could be negatively impacted due to its focus on growth. Growth shares have underperformed value shares recently following a significant rotation by investors.

Corporate Travel Management Ltd (ASX: CTD)

The Corporate Travel Management share price was out of form and tumbled 5.6% over the five days. As with IDP Education, this appears to be down to some investors taking a bit of profit off the table. The reopening of domestic borders and COVID-19 vaccine news gave Corporate Travel Management shares a huge boost last month. So much so, the Corporate Travel Management share price is still up 19.1% since this time in November even after this decline.

More reading

• These were the best performing ASX 200 shares last week
• ASX 200 goes up on Friday
• Elixinol (ASX:EXL) share price tumbles on capital raising update
• Are ASX stocks about to get an earnings upgrade boost in the new year?
• Why BetMakers, Medical Development International, Qantas, & Zip are dropping lower

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 Idp Education Pty Ltd and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post These were the worst performing ASX 200 shares last week appeared first on The Motley Fool Australia.

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

The S&P/ASX 200 Index (ASX: XJO) was on form again last week and continued its winning streak. The benchmark index rose 33 points or 0.5% higher to finish at 6,634.1 points.

While a good number of shares climbed higher with the market, some recorded stronger than average gains. Here’s why these were the best performing ASX 200 shares last week:

Sandfire Resources Ltd (ASX: SFR)

The Sandfire share price was the best performer on the ASX 200 last week with a 28.6% gain. Investors were buying the copper producer’s shares after the release of its strategy update. This update went down well with analysts at Morgan Stanley. They retained their overweight rating and $6.60 price target on its shares following its release. The broker was pleased with its T3 progress. In addition to this, a solid rise in the spot copper price gave its shares a boost.

PolyNovo Ltd (ASX: PNV)

The PolyNovo share price was on form last week and stormed 15.2% higher. The medical device company’s shares have been very strong performers since an announcement last month. That announcement revealed that the United States Food and Drug Administration (FDA) has approved the pivotal trial IDE for NovoSorb BTM. This relates to its treatment of full thickness burns. In addition to this, last week PolyNovo announced that it would bring its Breast device development program in-house effective immediately.

OZ Minerals Limited (ASX: OZL)

The OZ Minerals share price wasn’t far behind with an impressive 15% gain last week. Investors were buying the copper producer’s shares after the price of the base metal continued its rise. The spot copper price rose over 4.5% during the week, extending its monthly gain to 13%. According to CNBC, Goldman Sachs expects the copper price to keep on climbing. “This current price strength is not an irrational aberration, rather we view it as the first leg of a structural bull market in copper,” Goldman said.

Monadelphous Group Limited (ASX: MND)

The Monadelphous share price was a solid performer and charged 13.8% higher over the five days. A rise in commodity prices last week appears to have given this mining services provider’s shares a big boost. This could mean demand for its services remains strong in 2021 and underpins solid earnings and dividend growth.

More reading

• ASX 200 goes up on Friday
• Elixinol (ASX:EXL) share price tumbles on capital raising update
• Are ASX stocks about to get an earnings upgrade boost in the new year?
• Why the Woodside (ASX:WPL) share price is edging higher today
• ASX 200 up 0.3%: Premier Investments update, big four banks rise, gold miners tumble

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

The post These were the best performing ASX 200 shares last week appeared first on The Motley Fool Australia.

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

There are a few reasons why Kogan.com Ltd (ASX: KGN) shares may resonate with some investors.

What does Kogan.com do?

Kogan.com is an online marketplace company that sells a wide variety of products including TVs, phones, computers, appliances, clothes, furniture and office supplies.

It’s run by the founder, Ruslan Kogan, and it has grown significantly during 2020. In FY20 it grew gross sales by 39.3% to $768.9 million. In the annual general meeting (AGM) update it said that gross sales increased by 99.8% in the financial year to date for the four months of July 2020 to October 2020, compared to the prior corresponding period.

Kogan.com also sells a number of different household services including mobile plans, internet, energy, credit cards, insurance, pet insurance, life insurance, health insurance and so on.

Here are some reasons why investors may like Kogan.com shares: 

Reason one: New Zealand acquisition

Kogan.com just announced a large acquisition for the expansion into New Zealand. It’s buying Mighty Ape, which is one of New Zealand’s leading online retailers which has a focus on gaming, toys and other entertainment categories.

Before the impact of synergies, Mighty Ape has FY21 forecast 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. This would represent year on year growth in revenue, gross profit and EBITDA of 43.7%, 58.1% and 254.1% respectively.

Kogan.com is paying AU$122.4 million with the purchase payable over four tranches through to the delivery of the FY23 result. Mighty Ape is founder-led, and the founder and executive team will be retained with incentives until at least FY23.

Kogan.com is expecting “significant revenue and cost synergies” across numerous areas of the business.

Reason two: Rising profit margins

When a business can increase its profit margins, it means that more of the revenue will help the net profit after tax (NPAT) line of the financials. Seeing growing profit is one of the main reasons that share prices grow over time and may influence Kogan shares.

Kogan.com can point to a steadily-rising EBITDA margin over the last few years. In FY17 it had an EBITDA margin of 4.3%, in FY18 it had an EBITDA margin of 6.3%, in FY19 the margin was 6.9% and in FY20 the margin was 9.3%.

The e-commerce business said that this demonstrates improving operating leverage and it continues to deliver significant projects to grow its products and services offering, while heavily investing in the platform.

Reason three: Kogan First members and extra services

Kogan First is a membership program that provides a range of consumer benefits, which includes access to free shipping. The idea is also for the business to create stronger loyalty from customers.

The ASX share explained that 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.

Kogan.com also wants more of its customers to sign up to the other extra services it offers like mobile plans, superannuation or home loans. If a customer signs up to additional services then they become more profitable to Kogan.com on a per-customer basis and it’s cheaper to ‘acquire’ them to use extra services than winning new external customers.

Valuation

At the current Kogan.com share price of $17.30 it’s valued at 27x FY23’s estimated earnings, according to Commsec. It also offers a trailing grossed-up dividend yield of 1.7%.

More reading

• Brokers name 3 ASX shares to buy right now
• Why Cashrewards, Doctor Care Anywhere, Kogan, & Treasury Wine are pushing higher
• Why Flight Centre, Fortescue, Kogan, & Telix shares are racing higher
• Kogan (ASX:KGN) share price storms higher on $122m Mighty Ape acquisition
• After a record November, what’s next for ASX 200 shares?

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

The post 3 reasons why Kogan.com (ASX:KGN) shares could be a buy appeared first on The Motley Fool Australia.

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

The Janus Henderson Group CDI (ASX: JHG) share price is having a fantastic day today. Janus Henderson shares are up 7.17% at the time of writing to $41.99 a share.

That came after a very strong open for the company, which saw the Janus Henderson share price spike all the way up to $43.08 – almost 9% higher than the $39.37 price the company closed at yesterday.

At $43.08, it’s also the new 52-week high and the highest level this company has traded at since mid-2018. It also means the Janus Henderson share price is up almost 98% from the lows the company reached in March. However, we’re still a long way away from the ~$64 a share levels we saw back in late 2015.

So who is Janus Henderson? And why are the shares spiking so enthusiastically today?

Janus Hender-who?

Janus Henderson is in the business of asset management. It’s a funds management company that is actually dual-listed, hence the ‘CDI’. It (of course) appears on the ASX under the ticker JHG. But it is also listed on the New York Stock Exchange as Janus Henderson Group PLC (NYSE: JGH).

Despite these two listings, it is actually headquartered in the United Kingdom (explaining the PLC on the end there). So we have a real globetrotter here! This is explained by the fact that Janus Henderson used to be 2 separate companies – you guessed it, Janus Capital Group and Henderson Group. Janus was an American company, and Henderson, British before the two merged in 2017.

So, as we just touched on, Janus Henderson is a fund manager. The company states that: “Our individual, intermediary and institutional clients span the globe and entrust us with… their assets”.

It offers both mutual funds (managed funds) and exchange-traded fund (ETF), although its Australian offerings are more or less restricted to ‘wholesale’ (read ultra-wealthy) clients. Even so, its funds’ are available in many, if not most countries in the world in varying degrees. This includes the United Kingdom, Europe and the United States and Canada, as well as most of South America and the Middle East.

It’s North American funds under management (FUM) is the company’s crown jewel, housing US$208.8 billion (or 56%) of the total FUM of US$374.8 billion (as of the 2019 annual report). Europe, the Middle East, Africa and Latin America account for another US$111.6 billion, with the Asia Pacific making up another US$54.4 billion in turn.

Why is Janus Henderson rocketing today?

Strangely, there is no immediately-obvious reason why Janus Henderson shares are rocketing today. There are no newsworthy announcements that the company has made recently, and certainly none with any earth-shattering, share price-moving potential that one would deem obvious.

However, if we dig a little deeper, something interesting does bubble up to the surface. Janus Henderson has been buying back its own shares. With gusto.

The company has posted a daily share buyback notice almost every trading day for months now. In fact, just today, the company did the same thing, telling the markets that the company has bought back and cancelled almost 4,000 shares. Same as yesterday, and the same as the day before that.

Perhaps investors (or one giant investor) have noticed.

Share buybacks are accretive to shareholder value. If a company buys-back its own shares, it reduces the pool of shares that its profits (and dividends) have to be split between. Thus, a share buyback increases the earnings per share that an investor can expect to receive from their investments. Even if the company isn’t actually growing its profits in the conventional manner. A buyback is often compared to a dividend in how it returns value to the shareholders.

It’s possible that these buybacks have led to the spike in Janus Henderson today. Or it’s possible that someone knows something good about the company that hasn’t been released to the markets just yet.  Either way, it’s been a good day for Janus shareholders!

More reading

• ASX 200 up 0.3%: Premier Investments update, big four banks rise, gold miners tumble

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

The post ASX stock of the day: Janus Henderson (ASX:JHG) opens at new 52-week high appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3lHh5g1