If ever there was a good reminder to look beyond the noise of daily ASX share price swings, the past few days have delivered it.

Volatility returned with a vengeance to global share markets. And the S&P/ASX 200 Index (ASX: XJO) was no exception.

From last Wednesday, 27 January, through to yesterday’s late morning low the ASX 200 fell 4.4%. Since then it’s gained 3.4%, including today’s 1.3% intraday rise.

Just as in US markets, where the tech heavy Nasdaq Composite (NASDAQ: .IXIC) index led the charge higher (gaining 2.6% Monday), ASX tech shares are again outperforming.

At time of writing, the S&P/ASX All Technology Index (ASX: XTX) – which tracks 50 of Australia’s leading and emerging technology shares – is up 4.0%.

The usual share market culprits… and some new ones

What do long-term investors, patiently watching the share prices of their holdings yo-yo up and down, have to thank for the renewed volatility?

Some of the drivers are the same forces that have roiled markets on and off for the past 11 months. Those include the news flow around coronavirus variants and vaccines, expectations of future rounds of government stimulus, and concerns inflation could see central banks raise rates sooner than promised.

In recent weeks we can add the so-called Reddit army to those destabilising forces.

That’s the collective of retail investors linked through Reddit’s WallStreetBets app who’ve been targeting institutional short sellers. You know, the amateur investing crowd who helped drive the GameStop Corp (NYSE: GME) share price up 1,914% in 2021 through to last Wednesday’s all time highs.

Speaking of volatility, GameStop shares gained 135% on Wednesday, fell 44% on Thursday, gained 68% on Friday, and lost 31% yesterday (overnight Aussie time).

Dizzy yet?

Which gets us back to why buy and hold investors would do well to ignore these daily swings. If you measure your investment horizon in years, what happens this week or next is likely to be a forgotten memory by the time you need or choose to cash in your shares.

If you’ve got the stomach and capital to risk on day trading, on the other hand, take another look at the GameStop share price moves over the past 4 trading days. If you managed to guess right, and bought low and sold high, you could have made some quick, tidy profits. But if you guessed wrong you could have lost almost half your investment in a single day.

With that said, what can investors expect for the year ahead?

Macquarie’s ASX earnings outlook

If you strip away the shorter-term forces moving share prices, the core issue investors should focus on is company earnings. That includes past, present, and future earnings projections.

With earning’s reporting season upon us here in Australia, Macquarie offers an upbeat outlook (quoted by the Australian Financial Review):

We remain positive on the earnings outlook, supported by fiscal stimulus, strong commodity prices and the view that vaccines drive stronger growth over calendar year 2021.

Net EPS [earnings per share] revisions have now been positive for the last 5 months. Revisions have not been this positive since the commodity boom (2004 or 2005).

Two ASX 200 shares for 2021

Macquarie listed a number of shares its analysts favour for 2021, some of which have been heavily sold off during the pandemic.

One of the shares its analysts tip is Telstra Corporation Ltd (ASX: TLS). The Telstra share price is up 4.7% so far in 2021. Over the past 12 months, however, shares remain down 18%.

Telstra pays an annualised dividend yield of 5.1%, fully franked.

If it’s dividends you’re after though, Macquarie’s analysts point to some of the leading ASX miners, including Fortescue Metals Group Limited (ASX: FMG). The Fortescue share price is down 9% in 2021. Over the past 12 months, though, Fortescue has been a star performer, seeing its share price soar 105%.

Fortescue pays an annualised dividend yield of 8.1%, fully franked.

More reading

• BHP Energy and Zip were among the most traded ASX shares last week
• Why ASX silver shares like Silver Mines (ASX:SVL) are falling today
• Can the Reddit army save the plunging Unibail (ASX:URW) share price today?
• How Monday’s stock market silver squeeze fared
• Robinhood forced to raise another $2.4 billion despite limiting GameStop trades

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. 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.

The post Why investors should look beyond the Reddit army to these ASX fundamentals appeared first on The Motley Fool Australia.

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There are some blue chip ASX shares that could be worth owning for potentially reliable and long-term returns.

What’s a blue chip?

Well, it depends on your definition. For some people it might mean the biggest shares on the ASX share market. Others might say that it’s shares within the ASX 50 or the ASX 100. It may mean that it’s the leader in its industry.

Whatever the size of a blue chip, it may mean that investors can hope for a somewhat more reliable return than the overall market, or it’s able withstand any economic downturns better than other businesses across the economy.

Here are two examples of blue chip ASX shares:

Ansell Limited (ASX: ANN)

Ansell is one of the businesses involved in the fight against COVID-19. It provides health and safety protection products such as gloves.

The world has been seeing an increase in the number of COVID-19 cases worldwide, and there has been a greater focus on protection against transmission according to Ansell.

The ASX blue chip share continues to see elevated demand for its examination gloves, life sciences and chemical protective clothing. Ansell is also seeing strong market share gains in its mechanical and surgical segments.

Ansell recently said in a trading update it has been implementing efficiencies to increase output and investing in production capacity at its own plants. Management boasted that the company has been able to successfully and safely meet higher demand where others in the industry have struggled.

In addition to sizeable volume increases, the company has been able to effectively pass through price increases to offset higher costs from raw material, particularly in exam and labour costs.

In the first half of FY21, the company is expecting to deliver organic revenue growth of more than 20% and unaudited earnings per share (EPS) growth of 62% to 68% in a range of 81 cents to 84 cents. That means it’s now expecting FY21 EPS to be in a range of 135 cents to 145 cents.

Amcor Plc (ASX: AMC)

Amcor is one of the world’s largest packaging businesses for food, beverages, pharmaceutical, medical, home, personal care and other products.

The company is focused on making packaging that uses less materials, is increasingly cyclable and reusable, and is made with more recycled content.

The ASX blue chip share has around 47,000 employees with operations that span 230 locations in more than 40 countries.

Despite all the impacts of COVID-19 on the global economy, Amcor continues to generate profit growth and it keeps increasing the dividend.

In the first quarter of FY21 it saw 9% growth of adjusted earnings before interest and tax (EBIT) to $358 million in constant currency terms and adjusted EPS went up 20% in constant currency terms.

Amcor said that demand for its products remained resilient. Both segments delivered growth with ‘flexibles’ adjusted EBIT going up by 11% and ‘rigid packaging’ adjusted EBIT rising by 7%.

The company said that its flexible packaging businesses are capitalising on the strategic and financial benefits from the Bemis acquisition and cumulative cost synergies have now reached $100 million. Rigid packaging is also building momentum with “strong” volume growth and mix in North America as the business continues its transformation.

Amcor CEO Ron Delia said at the time of the FY21 first quarter update: “The Amcor investment case has never been stronger. In addition to further acquisition synergies and an attractive dividend currently yielding more than 4%, organic growth from our consumer and healthcare exposure should remain resilient and will be enhanced over time from innovations delivering more sustainable packaging. With a strong balance sheet and annual free cash flow of over $1 billion, we also have substantial capacity to reinvest in the business and pursue acquisitions.”

More reading

• Why the Amcor (ASX:AMC) share price is having a rough start to 2021
• ASX 200 up 0.5%: BHP’s update, PolyNovo jumps, Ansell impresses
• Why Afterpay, Ansell, MyDeal, & PolyNovo shares are storming higher today
• Why the Ansell (ASX:ANN) share price stormed 5% higher today
• Is the “Blue Wave” of US Democrats good or bad for ASX investors?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Amcor Limited. The Motley Fool Australia has recommended Ansell Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The De.mem Limited (ASX: DEM) share price is climbing higher today. This comes after the water and waste water treatment company announced that it had been awarded a milestone contract.

During early afternoon trade, the De.mem share price has climbed 1.56% higher to 32 cents.

What did De.mem announce and what does this mean for their share price?

The De.mem share price is on the rise after reporting another contract award in the power generation market.

According to its release, the company advised it has received a purchase order from energy giant, AGL Energy Ltd (ASX: AGL). AGL is one of Australia’s largest energy providers and is an integrated company that focuses producing renewable energy.

In addition, AGL retails electricity and gas to both residential and commercial sectors. Its energy is sourced from its diversified power generation portfolio that includes thermal power, natural gas, wind power, hydroelectricity, solar energy and others.

Terms of the deal

Under the agreement, De.mem will deliver water treatment equipment to an Australian power station. This will be used for boilers, turbines, and cooling towers. This allows a power station to run effectively and smoothly. Furthermore, the treated water can be used for AGL’s hydroelectricity plants.

The contract is worth around $550,000. However, no details were given in terms of the contract start date and timings.

Continued momentum for De.mem

The latest contract award represents the company’s continued momentum in Australian power generation industry.

In September last year, De.mem received a $400,000 purchase order for an ultrapure water treatment system. The contract was considered significant as it represented the company’s first revenues, and created a product offering within the sector.

What did the CEO say?

De.mem CEO, Mr Andreas Kroell welcomed the deal, saying:

We are delighted to be growing our presence in the highly attractive Australian power generation segment with high quality institutional clients. The power generation industry is an important target market for De.mem as it requires large volumes of the highest quality treated water for use in boilers, turbines and cooling towers. We look forward to continuing to grow our presence within this segment.

De.mem share price performance overview

The De.mem share price has risen over 35% when looking at its chart over the last 12 months.

Hitting a 52-week low of 10 cents in March, the company’s shares began its upwards trajectory. Today, its shares reached within a whisker of its 52-week high of 34 cents achieved just last week.

Based on the current share price, De.mem commands a market capitalisation of roughly $57 million.

More reading

• Clean Teq (ASX:CLQ) share price unmoved by quarterly update
• Top brokers name 3 ASX shares to sell next week
• Why ASX energy shares are under pressure right now
• Which ASX 200 shares have been slapped with price downgrades this week?
• The AGL (ASX:AGL) share price just hit a 12-year low

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Ava Risk Group Ltd (ASX: AVA) share price is 61 cents at the time of writing, up 11.93% so far today. This gain follows the release of Ava’s preliminary first-half FY21 results.

What does Ava Risk Group do?

Ava Risk Group (formerly Future Fibre Technologies) is a risk management services and technologies provider. The group features a range of complementary solutions including intrusion detection and location for perimeters, pipelines and data networks, biometrics, card access control and locking as well as secure international logistics, storage of high value assets and risk consultancy services

Ava’s clients extend across commercial, industrial, military and government sectors.

Ava Risk Group currently consists of three divisions: Future Fibre Technologies (FFT), BQT Solutions, and AVA Global Logistics.

Ava share price shoots up on strong financial results

Ava reported a FY2020 revenue of $46.1 million, a 46% increase over the previous corresponding period (PCP).

The first-half FY2021 unaudited revenue rocketed up a whopping 70% on PCP coming in at $35 million.

Ava also reported a first-half FY2021 net operating cash flow of $8.2 million. The company has already exceeded its FY2020 total generated cashflow, which was $6 million.

The financial statements further reflect an earnings before interest, tax, depreciation and amortisation (EBITDA) of $12 million. This is a dramatic improvement from the FY2019 EBITDA of negative $4.7 million.

The FFT division’s $16.7 million contract with the Indian Ministry of Defence helped boost performance for the period. The contract is for the large scale supply of FFT’s SecureLink technology to protect more than 40,000 kms of data communications cables.

Additionally, the Australian Department of Defence ordered $3.4 million worth of encrypted BQT readers during the period. The security devices will be deployed nationally across defence facilities and bases. 

FY21 growth strategy and outlook

Ava’s growth strategy is to address increasing global security concerns by driving increasing demand and rapid adoption of the company’s high security technologies. 

The company stated that it plans to invest and continue to grow profitable sales and service channels globally.

Ava’s preliminary cash at bank total to help support funding growth activities was $13.4 million dollars as at 31 December 2020.

Ava claims to have a strong pipeline of projects coming up. The company believes that attractive industry fundamentals presently underpin future growth.

The Ava Risk share price has gone up more than 274% over the past 12-month period.

More reading

• ASX stock of the day: AVA Risk Group (ASX:AVA) share price rockets 30%

Motley Fool contributor Gretchen Kennedy 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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Australia’s leading investment platform provider CommSec has released data on the most traded ASX shares on its platform from last week.

Here’s the data:

BPH Energy Ltd (ASX: BPH)

This small cap biotechnology and mineral exploration company was the most traded share on the CommSec platform last week. BPH Energy’s shares were responsible for 2.4% of total trades on the platform, with 63% coming from buyers. Those buyers will be pleased to have seen the BPH Energy share price rocket 200% over the five days. Excitement around its Baleen Well drilling appears to have been the catalyst for this.

Zip Co Ltd (ASX: Z1P)

Zip shares were popular with investors again last week. The buy now pay later provider’s shares were attributable to 2.2% of trades on the platform. On this occasion, the buying and selling was evenly split. It may be partly for this reason that the Zip share price was largely flat for the week. Which isn’t a bad outcome considering the ASX 200’s 2.8% weekly decline. A week earlier, the Zip share price jumped 30% following its second quarter update.

Novonix Ltd (ASX: NVX)

This battery materials company’s shares were responsible for 2.2% of total trades on CommSec over the five days. And although almost two-thirds of these trades came from buyers, it wasn’t enough to stop the Novonix share price from dropping 6.8% last week. Nevertheless, the company’s shares are still up over 100% since the start of 2021.

Fortescue Metals Group Limited (ASX: FMG)

CommSec users were buying Fortescue shares in large numbers last week following its second quarter update. The iron ore giant’s shares were attributable for 1.8% of total trades, with a massive 80% coming from the buy side. Unfortunately for these buyers, the Fortescue share price shed 10% of its value over the week.

Lake Resources N.L. (ASX: LKE)

Another battery materials company which was popular with investors was lithium-focused Lake Resources. Its shares were responsible for 1.8% of trades on the platform, with 70% coming from buyers. Last week Lake raised $20.6 million via a placement. Investors appear pleased that its flagship Kachi Lithium Brine Project is now fully funded through to the construction phase in 2022. The Lake share price jumped almost 43% over the week.

More reading

• Here’s why the Fortescue Metals (ASX:FMG) share price fell 12% in January
• Fundie names 3 great ASX shares to own
• ASX 200 rises, Worley dumped, Mesoblast rises
• Why BPH Energy (ASX:BPH) shares are in a trading halt
• Forget growth or value: Here’s a neutral way to pick shares

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 ZIPCOLTD 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.

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For an unlisted company, Ellume certainly knows how to keep ASX investors talking. The Brisbane-based health company also made news last year. This was due to its announcement that the United States Food and Drug Administration (FDA) had endorsed one of its products.

As we discussed at the time, Ellume specialises in rapid diagnostic technology. The company had developed a rapid test for the COVID-19 infection. The test only costs around US$30. It can reportedly detect traces of coronavirus in as little as 15 minutes with a 94% sensitivity in detecting infection.

Following that endorsement from the FDA, Ellume ramped up plans to send more than 100,000 of its tests to the US. At the time, Ellume planned on delivering more than 5 million tests every month by March 2021. Ellume was (and remains) the first and only company that the FDA has licensed to produce ‘at-home’ COVID tests.

Ellume gets another green light from the USA

Today, Ellume has received more good news.

According to reporting in the Australian Financial Review (AFR) today, the Biden administration has inked a US$230 million deal with Ellume for increased testing. The report states that the White House is aiming for “mass production” and “slashed costs” with the deal.

It also sees it as a “critical way to reopen large parts of America’s battered economy”. Apparently, the Ellume test involves a nasal swab that is inserted into a cartridge and linked to a smartphone app. The White House is quoted in the AFR stating that this is a “chicken and egg problem that we have actually taken a step to solve today”.

Now Ellume has signed this deal, it will reportedly enable the company to build a US-based factory. The company is expecting to deliver 8.5 million COVID-19 testing kits. Until the factory is built, the company will deliver 100,000  tests a month from Australia.

This comes after the company told the AFR that it is on track to deliver roughly 200,000 tests per day “this quarter”. When the factory is completed and reaches full capacity, it will be able to produce as many as 19 million tests per month.

Ellume founder and CEO  Dr. Sean Parsons had this to say on the deal:

We are prioritising our partnership with the U.S. government to mobilise tests quickly and in the most impactful way… We will fulfill the order for these tests at the same time as we ramp up the output across our production facilities, creating more possibilities for retail and private institution use in the future.

Possible ASX flow-on effects

Even though Ellume is an unlisted company, its good fortune appears to be having some flow-on effects.

Shares of a blood-testing company Atomo Diagnostics Ltd (ASX: AT1) are up almost 2% today. Shares of another diagnostic testing manufacturer, Anteotech Ltd (ASX: ADO), are in a trading halt today “pending a further announcement”.

So stay tuned to this sector!

More reading

• Atomo Diagnostics (ASX:AT1) posts 709% boost in quarterly cash receipts

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.

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The Healthia Ltd (ASX: HLA) share price has been a strong performer on Tuesday.

In afternoon trade, the shares of the integrated group of health-based companies are up 5% to $1.81.

Why is the Healthia share price surging higher?

Investors have been buying Healthia’s shares this afternoon following the release of a market update.

According to the release, based on unaudited accounts, the company is expecting to report strong revenue and profit growth for the first half of FY 2021.

In respect to the top line, Healthia is expecting to report revenue of $62 million to $64 million for the period. This will be an increase of 40% to 45% on the prior corresponding period. This was driven by organic revenue growth of 14.5% and the benefits of acquisitions.

Things are expected to be even better for its earnings for the first half due to a significant improvement in its earnings before interest, tax, depreciation and amortisation (EBITDA) margin.

The company’s EBITDA margin is anticipated to improve by 425 basis points to 527 basis points, driving its underlying margin to 17.26% to 18.26%.

This is expected to underpin an 86% to 103% increase in EBITDA to the range of $10.7 million to $11.7 million for the half.

On the bottom line, the company is forecasting underlying net profit after tax before amortisation (NPATA) of $4.5 million to $5 million. This will be an 85% to 106% increase over the same period last year.

Underlying earnings per share is expected to increase at a slightly slower (but impressive) rate of 69% to 88% for the half. This is due to its increased share count following capital raisings.

Management commentary

Healthia’s Managing Director, Wesley Coote, commented: “With strong organic growth during the period, and the completion of a number of strategic acquisitions over the last 12 months, including settlement of The Optical Company on 30 November 2020, we expect to see underlying EBITDA for the period ending 31 December 2020 in the range of $10.7 million to $11.7 million. This represents an expected increase in underlying EBITDA in the range of 86% to 103% over the prior period.”

More reading

• These 2 ASX small cap shares just hit 52-week highs

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended HEALTHIA 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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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.

Ford Motor Company (NYSE: F) announced Monday that it has entered a six-year deal with Google, which will make the search giant responsible for much of Ford’s upcoming in-vehicle connectivity.  

Under the deal, future Ford and Lincoln vehicles — beginning in 2023 — will be “powered” by Google’s Android operating system, providing customers with built-in access to Google services such as Maps, Play, and Assistant. 

In addition, the in-car systems will be able to run apps from both Ford and third-party developers, the companies said. 

Ford and Google are establishing a new collaborative group, called “Team Upshift,” to “push the boundaries of Ford’s transformation” by exploring and developing new products and services that make use of the data that will be gathered, the company said in a statement.

Ford said that the partnership is intended to streamline its operations and accelerate its ongoing $11 billion restructuring plan. CEO Jim Farley said that Ford will be able to redirect spending from developing its own navigation and in-car entertainment systems in-house, which he said gave Ford’s customers a “generic” experience. 

For Google and its parent Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL), the deal gives Google Cloud a prominent new customer that could help it win additional business. Google Cloud’s market share has lagged similar offerings from rival tech giants Amazon Inc (NASDAQ: AMZN) and Microsoft Corporation (NASDAQ: MSFT). 

Financial terms of the deal were not disclosed. 

Microsoft signed a similar deal with General Motors Company (NYSE: GM) and its Cruise self-driving subsidiary in January. 

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

More reading

• Experts want Big Tech to stop the spread of COVID-19 misinformation
• Better buy: Amazon.com vs. Google
• Amazon’s ad business will dominate the 2020s
• 3 biggest risks to ASX share investors right now

John Rosevear owns shares of Amazon, Ford, and General Motors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and Microsoft and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Amazon. 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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With earnings season now here, I thought I would take a look at what is expected from some of Australia’s most popular companies.

On this occasion, I’m going to take a look at Domino’s Pizza Enterprises Ltd (ASX: DMP).

What is expected from Domino’s in the first half of FY 2021?

According to a note out of Goldman Sachs, it is expecting the pizza chain operator to deliver a strong first half result on 17 February.

Its analysts expect solid same store sales growth to be complemented by operating leverage, driving above-average earnings growth for the period.

Goldman is forecasting same store sales growth of 8% across the group, leading to total network sales of $1,833.3 million and revenue of $1,077.9 million.

Thanks to margin expansion across all territories, the broker has pencilled in earnings before interest, tax, depreciation and amortisation (EBITDA) of $180.5 million for the half. This will be up 19.6% on the prior corresponding period.

Finally, on the bottom line, the broker expects Domino’s to report a 19.8% increase in net profit after tax to $89.3 million. This is expected to lead to an interim dividend of 73 cents per share, with 75% franking.

What will the drivers of the result be?

Goldman is expecting all sides of the business to contribute positively to Domino’s first half result.

In the ANZ market, it is forecasting same store sales growth of 6%, a 13-basis points increase in its EBITDA margin, and total stores of 846. This is expected to underpin an 8.7% increase in ANZ EBITDA to $77.6 million.

Over in Europe, the broker is also forecasting a 6% increase in same store sales. In addition, it has pencilled in total stores of 1,209 and a 55-basis points increase in its EBITDA margin, leading to a 22.9% lift in European EBITDA to $58.6 million.

Finally, the Japan segment is expected to be the star performer for the half. Goldman is forecasting same store sales growth of 15%, total stores of 745, and a 24-basis points improvement in margins. This results in a 35.9% increase in Japan EBITDA to $52.2 million.

Goldman Sachs currently has a conviction buy rating and $88.00 price target on its shares. Though, it is worth noting that the Domino’s share price is now trading above this at $92.95.

More reading

• 2 quality ASX growth shares that could be long term market beaters
• These ASX shares are targeting enormous growth over the 2020s
• ASX 200 up 1.2%: Bingo rockets, Rio Tinto update, Domino’s jumps
• Why Bingo, Creso Pharma, Domino’s, & Tyro shares are zooming higher today
• 3 ASX 200 shares that keep growing their dividends

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Dominos Pizza Enterprises 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) is having a top day today. At the time of writing, the index is up a respectable 1.05% to 6,733 points. But one sector is not joining in on the party today. That sector is ASX silver shares.

Yesterday, we looked at why ASX silver shares were rocketing for a seemingly strange reason. That turned out to be an alleged attempted short squeeze on the silver market that was initiated by the now-famous Reddit group WallStreetBets.

The idea behind this ‘short squeeze’ attempt was that the silver market is a relatively shallow and illiquid one, meaning that a sudden surge of buying pressure would force a supply-demand imbalance, and cause the price of silver to skyrocket accordingly.

As we also discussed yesterday, there was an underlying assumption in this WallStreetBets ‘short thesis’ that silver could shoot as high as US$1,000 an ounce if the market was squeezed hard enough. For investors brimming with FOMO after seeing what happened with GameStop Corp (NYSE: GME) stock last week, it must have been a red flag to the bull.

That’s perhaps why we saw a feeding frenzy of activity yesterday surrounding silver, silver miners and silver exchange-traded funds (ETFs). We saw ASX silver miners like Thomson Resources Ltd (ASX: TMZ) and Silver Mines Limited (ASX: SVL) rally between 50% and 80% during yesterday’s trading day at various points.

Not such an ASX silver bullet

Well, yesterday’s feeding frenzy is today’s rotting carcass. ASX silver shares are plunging this morning, giving up some (or most) of yesterday’s gains. That’s coming off the price of silver falling 2.6% overnight to US$28.66 an ounce, according to Bloomberg. However, that was after silver reached an 8-year high of $29.42 an ounce yesterday. To put things in perspective, silver was asking just US$25.40 an ounce on 27 January, just less than a week ago.

At the time of writing, Thomson Resources shares are down more than 22% today, while Silver Mines is down 19%. Another big performer yesterday in Adriatic Metals plc (ASX: ADT) is down 7.6%. A notable exception is Soth32 Ltd (ASX: S32), whose shares are up almost 4% today. However, South32 did not see the same kind of rally yesterday (‘only’ 4.7%) as these other miners. This is probably due to silver making up a relatively small part of South32’s earnings base.

So why are these silver miners falling today, even though the price of silver remains substantially higher than it was last week? Well, it’s probably due to the fact that investors have realised that silver isn’t going to US$1,000 an ounce like some evidently were thinking yesterday.

After last week’s saga, perhaps investors have realised that silver isn’t going to be the next GameStop after all.

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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.

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