There are a few reasons why the Commonwealth Bank of Australia (ASX: CBA) share price could be a buy.

Recent financial results

CBA said that its FY20 result reflected the impact of COVID-19 on customers and the economy, however the bank said its performance remained strong due to disciplined execution of the strategy and it continued to improve its balance sheet.

FY20 statutory net profit after tax (NPAT) dropped 12.4% to $9.63 billion and cash NPAT declined 11.3% to $7.3 billion. The loan impairment expense increased by $1.3 billion to $2.5 billion as the loan loss rate increased to 33 basis points. The net interest margin (NIM) declined by another 2 basis points to 2.07% because of the impact of lower interest rates.

The common equity tier 1 (CET1) capital ratio was 11.6%, which was above APRA’s unquestionably strong benchmark of 10.5%.

In terms of the amount of COVID-19 related loan deferrals, at 31 July 2020 there were 135,000 home loans being deferred representing 8% of total accounts (down from 154,000 at the peak) and there were 59,000 business loans still being deferred which represented 15% of total balances, down from 86,000 at the peak. At the end of October, the number of home loan deferrals had reduced to 45,600.

The latest financial result was the FY21 first quarter trading update which showed that CBA generated $1.9 billion of statutory NPAT and $1.8 billion of cash profit, down 16% on the prior corresponding period. CBA said that income was stable, but expenses (excluding customer remediation) were up 2%.

In that latest quarter, the CET1 ratio continued to strengthen as it grew 20 basis points to 11.8%.

What are the reasons that the CBA share price could be a buy?

Rhett Kessler from the Pengana Australian Equities Fund, of Pengana Capital Group Ltd (ASX: PCG), thinks that the banks have a positive outlook.

The first reason is that there’s accelerating home loan growth supported by low interest rates and first homeowner support. Indeed, at the moment the official Australian interest rate set by the Reserve Bank of Australia is just 0.25% right now.

The second reason, or group of reasons, is that there’s a supportive federal budget, improving housing finance approvals and house prices are holding up better than expected.

The third reason was that there has been a meaningful reduction in loan deferrals.

The final reason is that there is lower than anticipated loss provisioning.

Those factors were key for causing Pengana to increase the exposure to the major banks.

Valuation

According to the ASX, CBA currently has a market capitalisation of $150 billion with the CBA share price just over $85.

Looking at the (externally provided) earnings estimates for CBA shares, it’s valued at 21x FY21’s estimated earnings. Looking further ahead, it’s valued at 18x FY23’s estimated earnings.

There are also estimates for the dividends that CBA may pay shareholders. In FY21 it could pay an annual dividend of $2.75 per share, equating to a grossed-up dividend yield of 4.6% at the current share price. In FY23 it’s projected to pay a dividend of $3.23 per share, equating to a grossed-up dividend yield of 5.4%.

More reading

• Why ANZ, Westpac, and the rest of the big four are storming higher today
• ASX 200 drops 1.1%
• What strong jobs data means for ASX 200 shares
• Here’s which ASX bank share this leading broker thinks you should buy
• ASX 200 up 0.8%: CBA storms higher, Link sinks, tech shares rise

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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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.

Costco Wholesale Corporation (NASDAQ: COST) and McDonald’s Corp (NYSE: MCD) are venerable companies that have proven popular with consumers over many years. They have become dominant through their focus on providing value to customers.

Last year’s results took divergent paths, which each stock reflected. Costco’s stock price increased by 28%, besting the S&P 500 Index (INDEXSP: .INX) 16%. Meanwhile, McDonald’s shares underperformed the overall index with a more than 8% gain.

But the market typically looks at short-term results. To figure out which is the better long-term stock investment, it is time to dig deeper into each company’s prospects.

A popular destination

With more than 39,000 establishments in more than 100 countries, McDonald’s golden arches are perhaps the restaurant industry’s most recognisable symbol. However, it doesn’t own the majority of restaurants. Rather, it franchises 93% of them, in which the franchisees pay McDonald’s an upfront fee plus an ongoing percentage of its sales. It is also a landlord in many instances, so it also receives rent.

Heading into 2020, McDonald’s, with its inexpensive food and quick service, was doing well. Its 2019 comps rose by 5.9%, with higher guest counts contributing one percentage point. This was due to changes management implemented, such as all-day breakfast, new menu items, and a focus on the “3 Ds”– digital, delivery, and drive-thru. The company’s operating income grew to $9.1 billion, 27% higher than 2015’s $7.1 billion.

Last year, with governments imposing social distancing guidelines, was a different story. Still, results showed an improvement in the third quarter as governments relaxed restrictions, and its previous push of the 3 Ds proved fortuitous. Comps were down 2.2%, but they did better each month.

While cases are surging, creating some near-term uncertainty as governments and people react to contain the virus, McDonald’s long-term prospects look promising with its affordable menu that it is constantly tinkering with to adapt to consumer preferences (including reintroducing the popular McRib for a limited time), and the company continues to push the 3 Ds.

The company’s dividend track record, raising it for 44 consecutive years since its first payout in 1976, is impressive. This includes boosting December’s payment by 3% to $1.29. The stock’s dividend yield is 2.4%.

Offering members a good value

Costco is not your typical retailer. It operates warehouses that offer a variety of goods sold in bulk and services at lower prices than members can typically find elsewhere. It charges members to shop there, and they happily sign up and stay on. The number of paid memberships has grown from 47.6 million to 58.1 million over the last five years. It consistently has a nearly a 90% renewal rate worldwide.

With positive same-store sales (comps) for many years and increased profitability, Costco is executing its plan to serve members by offering them high-quality merchandise at low prices. Over the last five years, its operating income grew by nearly 50% to $5.4 billion.

The company got off to a good start in 2021, too. For its first fiscal quarter, which ended on Nov. 22, comps were up by 17.1% after excluding gasoline price changes and foreign currency exchange translations. Costco’s operating income increased by 35% to $1.4 billion.

Costco’s success is leading management to continue opening new warehouses. Historically, it added 20 to 25 clubs annually. It ended last year with 795 and opened eight in the first quarter, with plans to add 20 to 22 for the year.

The company has also built an impressive track record of raising dividends annually since its initial payment in 2004. Its 0.7% dividend yield pales in comparison to some companies, but it has bright growth prospects. Costco has also paid large, special dividends to shareholders every few years, including a $10 payment last month.

The decision

Choosing between Costco and McDonald’s is a tough call. Both are well recognised, popular destinations. For me, Costco comes out ahead due to its ability to draw in members based on its offerings, which have produced consistently improving results.

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

More reading

• Better buy: Amazon vs Costco
• Is McDonald’s stock a buy?
• Costco’s big earnings beat points to further upside

Lawrence Rothman, CFA 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 Costco Wholesale. 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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If you’re looking to make some new investments in January, then you might want to take a look at the ASX shares listed below.

Here’s why these three ASX shares have been named as buys:

Appen Ltd (ASX: APX)

The first share to look at is Appen. It is a leading developer of high-quality, human annotated datasets for machine learning and artificial intelligence (AI). Appen’s team of over one million contractors prepare or create the data for the machine learning models of some of the largest tech companies. This has previously included Apple, with its virtual assistant, Siri.

While trading conditions are tough because of the pandemic, analysts at Macquarie remain positive on Appen and have an outperform rating and $43.00 price target on its shares. The broker appears confident the company will bounce back once the pandemic passes. They also believe the company is well-placed to benefit over the long term from the AI tailwind.

IDP Education Ltd (ASX: IEL)

Another share to look at is IDP Education. It is a provider of international student placement and English language testing services.

While the pandemic has hit the company very hard, it has a very strong balance sheet and looks well-placed to ride out the storm. This is something that many of its competitors have struggled to do. As a result, the company has been tipped to come out of the crisis in an even stronger position. This could lead to an acceleration in its growth once the pandemic passes.

Analysts at Morgans like the company and have an add rating and $25.09 price target on its shares. The broker believes the company is well-placed for growth once trading conditions return to normal.

Pushpay Holdings Group Ltd (ASX: PPH)

Pushpay is a leading donor management and community engagement platform provider for the faith sector.

While this may be a niche market, it certainly is a very lucrative one. The company is aiming to win a 50% share of the medium to large US church market in the future, which represents a US$1 billion opportunity. Given that FY 2020’s revenue came in at US$129.8 million (up 32% year on year) , this shows just how long a runway for growth it has over the 2020s.

Due to the quality of its platform and last year’s US$87.5 million acquisition of church management system provider Church Community Builder, management appears optimistic it will get there.

One broker that also appears confident is Goldman Sachs. It has a conviction buy rating and ~$2.59 price target on its shares.

More reading

• 2 compelling ASX shares to buy in January
• 2 fantastic ASX growth shares that could beat the market in 2021
• 3 mid cap shares hitting 1-month lows on the ASX today
• Brokers name 3 ASX shares to buy right now
• The Pushpay (ASX:PPH) share price jumped 80% in 2020: Can it go higher?

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 Appen Ltd, Idp Education Pty Ltd, and PUSHPAY FPO NZX. The Motley Fool Australia has recommended 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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There are some compelling ASX shares to look at in January 2021.

These are two businesses liked by experts:

Pacific Current Group Ltd (ASX: PAC)

Pacific Current describes itself as a business that is a global multi-boutique asset management business committed to partnering with exceptional investment managers. It combines capital — offered through bespoke economic structures — with strategic business development to help businesses grow.

Dean Fremder of Perpetual Limited (ASX: PPT) said when Pacific Current shares were a bit lower: “The stock’s really cheap. It is on nine times earnings. It’s growing earnings at double digits, so more than 10% a year. It’s paying a 6.5% fully franked yield. And most excitingly, we think they can pay out a much larger portion of their earnings as dividends. We see no reason, given the surplus franking credits they have on the balance sheet, they can’t be paying a 10 or 11% fully franked yield in the next 12 months. So, really excited about that one.”

In FY20 the ASX share grew underlying earnings per share (EPS) by 18% and it increased the dividend by 40%. In the three months to 30 September 2020, Pacific Current said that its funds under management (FUM) grew by a further 14% to $106.4 billion, largely driven by the investment in fund manager GQG.

Pacific Current is hoping to launch a new fund to invest external funds into other investment managers – it would earn a management fee of this fund. Pacific Current is also hoping that its managers will be able to win more investment mandates as life (hopefully) starts returning to normal in 2021.

According to Commsec, the Pacific Current share price is valued at 10x FY22’s estimated earnings.  

Pushpay Holdings Ltd (ASX: PPH)

Fund manager Ben Griffiths from Eley Griffiths said: “Over the last 12 months it has become clear Pushpay is at an inflection point for both cashflow and earnings. Under the stewardship of CEO Bruce Gordon, Pushpay has transitioned from a founder-led investment phase into an optimize/monetization phase. What is more surprising is the very conservative nature of the accounts (a rarity in small cap tech, outside Iress Ltd (ASX: IRE)). We believe the next few years for Pushpay will be rewarding and that COVID-19 will accelerate the already entrenched trend to digital giving/engagement from cash.”

The electronic donation ASX share has a lower price/earnings (p/e) ratio than some other technology shares. According to Commsec, the Pushpay share price is valued at 23x FY23’s estimated earnings.

In the FY21 interim result Pushpay reported that its operating revenue for the six months to 30 September 2020 increased by 53% to US$85.6 million. Pushpay is hoping to achieve US$1 billion of annual revenue down the track. Pushpay is expecting to achieve continued revenue growth as it continues to execute on its strategy and gain further market share in the US faith sector.

That HY21 result also showed expanding operating leverage. The gross profit margin went up from 65% to 68%. Whilst operating revenue grew 53%, operating expenses only grew by 16%. This helped the earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) margin increase from 17% to 31%. Management expect “significant operating leverage to accrue as operating revenue continues to increase, while growth in total operating expenses remains low.”

Pushpay now expects EBTIDAF to be in the range of US$54 million to US$58 million for FY21, which would be growth of more than 100%.

Over the long term, Pushpay is targeting a market share of over 50% in the medium and large church segments in the US.

The ASX share also continues to evaluate additional potential strategic acquisitions that broaden the current proposition and would add significant value to the current business.

More reading

• 2 fantastic ASX growth shares that could beat the market in 2021
• The Pushpay (ASX:PPH) share price jumped 80% in 2020: Can it go higher?
• 3 great ASX tech shares to buy
• Got money to invest for income? Here are 3 ASX dividend shares
• 2 outstanding ASX shares to buy and hold

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 PUSHPAY FPO NZX. The Motley Fool Australia has recommended IRESS Limited 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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It has been a tough few years for income investors who have had to contend with ultra low rates.

Unfortunately, according to the economics team from Westpac Banking Corp (ASX: WBC), it could still be some time before rates start to improve.

What did Westpac say?

According to the latest Westpac Weekly economic report, the bank is forecasting the cash rate to stay on hold at 0.1% until at least the end of 2022.

And given how rate increases are likely to be gradual when they finally happen, it could be several more years before rates get back to previous levels.

In light of this, it looks as though dividend shares will remain the best way to generate a passive income for some time to come.

But which dividend shares should you buy? One highly rated ASX dividend shares is named below:

Telstra Corporation Ltd (ASX: TLS)

Telstra is a dividend share that a large number of brokers are rating as buys right now. They appear to believe the worst is behind the telco giant after a number of years of struggles because of the NBN rollout.

This is especially the case given the success it is having at cutting costs and simplifying its business with the T22 strategy. Furthermore, the arrival of 5G internet, the easing of the NBN headwind, and the company’s proposal to split into three separate entities are being seen as big positives for Telstra’s prospects.

Goldman Sachs is a big fan of the company and recently reiterated its buy rating and $3.60 price target on its shares.

It has also reaffirmed its forecast for a 16 cents per share fully franked dividend in FY 2021 and beyond. Based on the current Telstra share price of $3.02, this would provide investors with a generous fully franked 5.3% dividend yield.

More reading

• ASX 200 up 0.4%: Afterpay & Zip charge higher, NAB rises, Harvey Norman hits new high
• Do Australian consumers care about chaos?
• Why ANZ, Westpac, and the rest of the big four are storming higher today
• ASX 200 up 1.55%: ANZ & Westpac surge higher, Afterpay & Xero tumble
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of and has recommended Telstra 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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There are some ASX dividend shares that have kept growing the dividend to shareholders even during 2020.

That may be attractive to income investors in a world where interest rates are so low.

Here are three options within the ASX 200:

Bapcor Ltd (ASX: BAP)

Bapcor currently has a grossed-up dividend yield of 3.25%.

This business is the largest auto parts business in Australia and New Zealand. It operates a number of different brands including Burson, Autobarn, Precision Automotive equipment, Truck and Trailer Parts, Truckline, Midas and ABS.

Bapcor’s FY20 final dividend was maintained at 9.5 cents per share, but thanks to a half-year increase the full year dividend was increased by 2.9% to 17.5 cents. That was despite underlying pro forma net profit being down 5.5%.

The ASX dividend share recently gave a FY21 trading update. For the five months to the end of November 2020, revenue was up 26%. Net profit after tax (NPAT) achieved operating leverage from lower expenses in areas like travel and other areas of discretionary spending, as well as lower interest rates and the contribution from Truckline which wasn’t in the prior corresponding period.

In the first half of FY21 Bapcor thinks revenue will grow by 25% and net profit will rise by at least 50%.

Wilson Asset Management is one of the fund managers that likes Bapcor for its rebounding performance, its strong market position and its ability to potentially make more acquisitions with a strong balance sheet.

APA Group (ASX: APA)

APA currently has a distribution yield of 5.2%.

This ASX dividend share owns a large network of 15,000km of natural gas pipelines around Australia with a presence in every mainland state and the Northern Territory. It also owns or has interests in gas storage facilities, gas-fired power stations and renewable energy generation (wind and solar farms). APA owns, or manages and operates, a portfolio of assets and delivers half the nation’s natural gas usage.

APA has increased its distribution every year since just before the GFC, which is a long record for the ASX.

The business funds its distribution from its annual operating cashflow, which is steadily rising as it finishes more energy infrastructure projects. One recently-announced plan is to build a new pipeline in WA and then link that with existing pipelines.

The Australian government has commented that gas could be part of the recovery from COVID-19 impacts.

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

Soul Patts currently has a grossed-up dividend yield of 2.9%.

This ASX dividend share has the longest dividend growth streak on the ASX. It has grown its dividend every year since 2000.

Soul Patts funds its dividend from the investment income (dividends, distributions and interest) from its portfolio of assets.

It has substantial holdings in listed businesses like TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW), Bki Investment Co Ltd (ASX: BKI), Milton Corporation Limited (ASX: MLT), Palla Pharma Ltd (ASX: PAL), Clover Corporation Limited (ASX: CLV) and Australian Pharmaceutical Industries Ltd (ASX: API).

Soul Patts also has an unlisted portfolio of businesses. It has investments in sectors like agriculture, financial services, resources and swimming schools.

The ASX dividend share has a long-term investment style, whilst also usually looking at defensive assets and investing with a contrarian nature. Not only is the investing long-term, but the employees are also long-term.

More than 40 employees have worked for the company for over 50 years. Five generations of the Pattinson family have served the company, as have three generations of the Dixson, Spence, Rowe and Letters families.

More reading

• Top brokers name 3 ASX shares to buy today
• How ASX shares in the automotive sector outperformed the market in 2020
• Got money to invest for income? Here are 3 ASX dividend shares
• These were the worst performing ASX 200 shares last week
• 2 ASX dividend shares to buy for 2021

Motley Fool contributor Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Bapcor and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of APA Group. 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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Cheap dividend shares do not only offer a generous passive income today. In many cases, they have the potential to produce strong capital growth and dividend growth over the long run so that an investor can enjoy a rising income in the coming years.

Through buying a diverse range of high-quality dividend stocks at cheap prices, it is possible to ultimately replace a wage. They could deliver a sustainable and resilient income for a wide range of investors.

Buying cheap dividend shares for a long-term passive income

The high yields on offer from many dividend shares suggest that they offer good value for money, as well as a worthwhile passive income. Despite the stock market rally in the second half of 2020, a number of companies trade at prices that are below their long-term averages. This may mean that they provide scope for capital growth over the long run that enables an investor to build a surprisingly large nest egg.

Clearly, some high-yielding dividend shares face difficult operating outlooks in the short run. The impact of coronavirus on some industries has been significant. However, those companies that have solid financial positions, sound growth strategies and affordable shareholder payouts may become increasingly popular in a likely stock market rally in the coming years. An improving economic outlook and stronger investor sentiment may lift their prices – especially as other popular assets offer disappointing passive income opportunities in many cases.

Building a portfolio for a long-term income

Of course, the stock market’s uncertain outlook means that there may be challenging periods ahead for passive income investors. For example, in the short run a portfolio of dividend shares could experience declines that lead to paper losses as a result of political change or a wide variety of other risks.

However, over the long run a diverse portfolio of high-quality income stocks could produce a surprisingly large portfolio. For example, indexes such as the FTSE 100 Index (FTSE: UKX) and S&P 500 Index (SP: .INX) have produced annualised returns of around 8% over recent decades. Therefore, a $500 monthly investment could be worth around $300,000 within 20 years, assuming the same rate of return as the stock market has produced in the past. From this, a 4% annual withdrawal would equate to a $12,000 annual income that may provide greater financial freedom for many individuals.

Capitalising on today’s buying opportunities

It may be difficult for many passive income investors to buy cheap dividend shares today. As mentioned, the world economy faces numerous risks that may derail its prospects.

However, today’s low share prices for many dividend stocks may provide the opportunity to buy high-quality companies while they trade on attractive valuations. Over time, this may lead to higher returns that produce an even greater portfolio valuation and income in the coming years.

More reading

• How to turn $20,000 into $225,000 in 10 years with ASX shares
• These were the best performing ASX 200 shares last week
• These were the worst performing ASX 200 shares last week
• 2 great ASX growth shares to buy for January
• ASX 200 rises 0.7% on Friday

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

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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:

Aristocrat Leisure Limited (ASX: ALL)

This gaming technology company’s shares have been strong performers since 2011. During this time the company has carved out a leadership position in the poker machine market and has completed a couple of major earnings accretive acquisitions. The acquisitions of Plarium for US$500 million and Big Fish for $1.3 billion opened up the company to the rapidly growing mobile and social gaming markets and diversified its business. This proved to be especially important during the height of the pandemic when casinos close. The company’s success has led to its shares generating an average total return of 27.5% per annum over the last 10 years. This would have turned a $20,000 investment into $227,000.

Nanosonics Ltd (ASX: NAN)

The Nanosonics share price has been a market beater over the last decade. This has been thanks to the increasing demand for the infection control company’s trophon EPR disinfection system for ultrasound probes. Over the last 10 years the company has consistently grown its market share, which is good for two reasons. One is the unit sales it generates, the other is the growing recurring revenues it generates from the consumable products the trophon EPR system needs to function. This has underpinned strong revenue growth and an impressive average total return of 23.8% per annum since 2011. This means a $20,000 investment would now be worth $169,000.

NEXTDC Ltd (ASX: NXT)

Thanks to the shift to the cloud, a significant increase in demand for data centre services, and its growing network of centres across Australia, NEXTDC’s sales and earnings have been growing at a strong rate for a decade. This has led to its shares smashing the market over the last 10 years. During this time, the NEXTDC share price has provided investors with an average total return of 21.6% per annum. This would have turned a $20,000 investment into $141,000 in 2021.

More reading

• ASX 200 drops 1.1%
• Why a2 Milk, AVZ Minerals, Nanosonics, & Premier Investments are dropping lower
• Are heads in the clouds with these sky high P/E ratios?
• ASX 200 down 0.5%: Energy shares jump, big four banks fall, Zip climbs higher
• 2 ASX growth shares to buy in January

James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nanosonics Limited. The Motley Fool Australia has recommended Nanosonics 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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The S&P/ASX 200 Index (ASX: XJO) had a sensational start to 2021 and recorded a sizeable gain last week. Over the five days the benchmark index rose 2.6% to 6,757.9 points.

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

Lynas Rare Earths Ltd (ASX: LYC)

The Lynas share price was the best performer on the ASX 200 last week with a gain of 15.6%. Investors were piling into the resources sector after the Democrat’s won control of the U.S. senate. This means it is now quite likely that the incoming Biden administration will be able to push through significant stimulus in the near future. This is expected to underpin solid economic growth and demand for commodities.

Oil Search Ltd (ASX: OSH)

The Oil Search share price wasn’t far behind with a weekly gain of 15.1%. Investors were fighting to get hold of the energy producer’s shares last week after oil prices surged higher. This was driven by the announcement of a surprise production cut by Saudi Arabia. The world’s second largest energy producer plans to cut its production by a massive 1 million barrels per day to help combat lower demand because of the pandemic.

IGO Ltd (ASX: IGO)

The IGO share price was a strong performer and jumped 14% higher over the five days. This appears to have been driven by news that its acquisition of an interest in a global lithium joint venture with Tianqi Lithium is progressing well. On January 5, Tianqi Lithium shareholders voted overwhelmingly in favour of the transaction between Tianqi and IGO. Management believes this is a strong validation of the “win-win” the transaction has created for the shareholders of both companies.

Bingo Industries Ltd (ASX: BIN)

The BINGO share price was on form last week and climbed 12.3% higher. This was despite there being no news out of the waste management company. However, there has been speculation that BINGO could be a takeover target for a private equity firm. This could have given its shares a boost last week.

More reading

• ASX 200 rises 0.7% on Friday
• The Bingo (ASX:BIN) share price is up 8% today, 38% in 6 months
• Why the IGO (ASX:IGO) share price is dropping lower
• ASX 200 up 0.4%: Afterpay & Zip charge higher, NAB rises, Harvey Norman hits new high
• 5 things to watch on the ASX 200 on Friday

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

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The S&P/ASX 200 Index (ASX: XJO) has started 2021 in style and stormed notably higher last week. The benchmark index rose a sizeable 2.6% to end the five days at 6,757.9 points.

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

Link Administration Holdings Ltd (ASX: LNK)

The Link share price was the worst performer on the ASX 200 last week by some distance with a 16.2% decline. Investors sold off the administration services company’s shares after its released an update on a takeover approach by SS&C Technology Holdings. Last month the NASDAQ listed global provider of investment and financial software made a conditional offer of $5.65 per share to acquire 100% of Link. While management felt the offer undervalued the company, it granted SS&C Technology due diligence. However, last week it revealed that the takeover proposal has now been withdrawn. 

PolyNovo Ltd (ASX: PNV)

The PolyNovo share price was out of form and dropped 9% lower over the five days. This was despite there being no news out of the medical device company. However, it is worth noting that the PolyNovo share price was an exceptionally strong performer in 2020, so this decline could be due to profit taking. PolyNovo’s shares recorded a gain of 97% last year.

EML Payments Ltd (ASX: EML)

The EML Payments share price wasn’t far behind with an 8.9% decline last week. This decline may have been driven by concerns that its gift card segment will struggle for longer than expected due to lockdowns in the UK, growing COVID cases in the US, and recent outbreaks in New South Wales and Victoria. Brokers remains positive on the company, though. Last month Wilsons put an overweight rating and $4.55 price target on its shares.

Megaport Ltd (ASX: MP1)

The Megaport share price was out of form last week and dropped 8.5% over the five days. This was despite there being no news out of the global provider of elastic interconnection services. Though, with its quarterly report potentially going to be released in the coming days, some investors may be nervous. Megaport’s first quarter update was a touch weaker than many were expecting.

More reading

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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 EML Payments and MEGAPORT FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Link Administration Holdings Ltd and POLYNOVO FPO. The Motley Fool Australia has recommended EML Payments, Link Administration Holdings Ltd, and MEGAPORT FPO. 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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