There is no doubt that this question on our minds right now. After a few great months of recovery following the March stock market crash, things seem to be slowing down.

The S&P/ASX 200 Index (ASX: XJO) has tried and failed multiple times to make it higher than 6,200 points. Before the March correction, the index rose as high as 7,200 points. Even with the recent strong rally following those lows of around 4,400 points in March, we are still sitting low. In fact, we are still a full 1,000 points or more below this previous high. 

One thing to note here is the unique complexity that coronavirus has brought with it. We have never seen a crash exactly like this one. Although stock market crash events tend to have some similarities, each one is absolutely unique.

We are seeing a huge amount of stimulus from our governments and even the most experienced investors are struggling to come to a consensus on market direction. Keep this in mind when trying to ‘predict’ the market.

Everyone has an opinion, however I believe the best thing for investors to do is simply be prepared for all possibilities. 

Things to consider

The S&P/ASX 200 Index

The Index is not a single company. The ASX 200 is made up of the top 200 companies listed on the Australian Securities Exchange, by float-adjusted market capitalisation. So when you are looking at the ‘ASX 200’ falling or climbing, just remember that this doesn’t mean individual shares will rise or fall.

Small cap shares for instance, may not move with the ASX 200. The media often refers to the market falling or rising by a number of points. This is generally related to the ASX 200 Index.

Understanding what the index means will allow you to make more informed decisions.

The 6,200 point barrier

Now we have discussed the ASX 200 makeup, we can look at the points again. While the top 200 companies represent less than 10% of companies listed, they are certainly very important. With this in mind, we come back to the 6,200 point barrier.

The index has made five attempts to break through this barrier between 9 June and 25 August. It’s interesting because if we apply the same logic to an index that we do to a share price, multiple rejection is never good. Its shows a lack of strength and an inability to gain ground.

To me, breaking above this 6,200 point level is critical for positive change. 

Compounding this doubt is the fact that for the last 2 weeks, the index has been steadily trending down and away from that barrier, in retreat.

Business and life is evolving

The world is changing and evolving. What we know today, may not apply tomorrow. We are seeing changes in the way people work, the way companies operate and the way we live our lives. We are in the midst of a digital evolution and it’s affecting the whole planet.

It’s hard to imagine but, whilst we are seeing certain industries struck down by the pandemic, such as airlines, others, like technology providers are thriving. It’s a shift and a flow of both money and energy. Although we see increasing unemployment among traditional jobs, at the same time, there are also many technology companies advertising for multiple roles to handle the new workload. It’s a changing game.

On another note, this changing landscape is adjusting what we think we know about the financial health of companies. For example, recently Premier Investments Limited (ASX: PMV) announced that sales were down 18% globally.

Normally, this would be a shocking piece of news for investors, however the Premier share price rose 12%. The reason for this was that although sales were down, net profit was actually up. As most of the brands in Premier’s portfolio are retailers, the physical shops have had to close for lock downs. However, online sales have surged, accounting for more than quarter of total sales. 

It’s a different game.

The reality of share prices

We regularly see the financial media comment on the over or under valued nature of share prices all the time. Every analyst has an opinion and a methodology for valuing a company – myself included. However, there is one very important thing to remember: A company is not its share price.

We might see prices crash, but remember that the company could very well still be trading normally. You could see prices surging and when you look at the company, you find it’s not even making a profit.

If a company is surging with no profit, is it ‘overvalued’? Perhaps, however I would also argue that if two people, a buyer and a seller, agree on a price, then that company may not be over or undervalued. It may just be ‘valued’ correctly at the time of trade.

It’s an interesting question and I’m not taking anything away from true valuations or fundamental analysis. In fact, I trust and rely on fundamentals myself, however it’s worthwhile being aware of the reality of a real-time market, like the ASX. The share price is what a buyer is willing to pay, at the time.

How to handle a potential stock market crash

Have a plan

The first thing to think about is who you are as an investor. A financial advisor may be the best person to help you personally understand your goals and objectives. Having clarity around your goals will allow you operate with a clear mind in a crisis.

Some investors will lose sleep at night if they see shares in their portfolio falling in value. If this is you, have a plan. Know what you are going to do ahead of time. Know what you are happy holding and what you would prefer to sell. It’s important to think about your portfolio and positions ahead of time. It’s also important to know how to log into your trading account!

Long-term investors tend to view short-term corrections as nothing more than a blip on the radar. If this is you, a potential crash may not faze you too much. However, you can always improve your position. One strategy you might consider is dollar cost averaging. This involves keeping a supply of cash available to purchase more shares at lower prices later, should you need to.

Another reason for a long-term investor to keep some spare cash around is to be able to take advantage of buying opportunities quickly. In the March crash, investors had a matter of days at the bottom of the market. It’s worth being prepared to act.

Risk management is key

Having a risk management mindset is a great way to operate in a stock market crash. Be aware of the risks involved in your positions and understand the potential losses. Even if you’re not an analyst, you can refer to past events to understand the risks of your holdings.

One thing you can do right away is check out how low the prices went in March this year for all your holdings. In the event of another crash, it’s likely the market could revisit previous levels and even lower. Having a look at previous prices can help you to understand the potential impact.

For example, Afterpay Ltd (ASX: APT) fell from over $40 to $8.90 in the March market crash, losing approximately 80% of its value. If that were to happen again at today’s value of around $73 per share, an 80% drop would mean prices could dip below $15 per share. This is not a prediction, it’s just basic risk management. If a major crash occurs, we can expect companies which were heavily impacted previously to be significantly impacted again.

If you consider risk management ahead of time, you will be able to consider the possibilities and make less emotional decisions. It’s certainly helpful to think about.

Look at ways to hedge your portfolio

Selling shares at the first sign of a correction isn’t always the best default move. Apart from the disruption to the portfolio you have worked so hard to build, there is also the tax implications to consider. This is something to discuss with your tax agent to really understand the repercussions of transactions. 

One possibility you have to help prepare for a market crash, aside from keeping spare cash for further investment, is to add hedging to you portfolio.

Companies showing resilience

One example of hedging is to purchase more companies that stand up well during a stock market crash. For example, large grocery companies such as Coles Group Ltd (ASX: COL) fell less than 20% in the March crash (compared to 80% with Afterpay). Another example is technology provider and artificial intelligence leader Appen Ltd (ASX: APX). Appen fell around 40% in March, however bounced back quickly and has gone on  exceed all previous highs. Lastly, healthcare giant CSL Limited (ASX: CSL) fell a mere 25% in March while most of the ASX was bleeding. It has held ground well since then. 

Negative correlation exchange traded funds

In a previous article, I wrote about three exchange-trade funds (ETFs) you can use to hedge your portfolio in a downturn. The purpose of a negative correlation ETF is to inversely track the direction of a regular index, such as the ASX 200.

For example, BetaShares Australian Equities Bear Hedge Fund (ASX: BEAR), which aims to produce returns that are negatively correlated to the returns of the ASX 200. If the ASX 200 moves -1%, BEAR can be expected to be positive +1%. As you can imagine, putting some extra cash into this ETF can help to offset the paper losses on the main portfolio, should you choose to hold your shares in a crash.

For investors with a little less cash, or even those looking to make a little profit on the way down, you could potentially look to a negative correlation ETF that is ‘magnified’. BetaShares Australian Strong Bear Hedge Fund (ASX: BBOZ) is one such fund. BBOZ aims to produce magnified returns that are negatively correlated to the returns of the ASX 200. If the ASX 200 moves -1%, BBOZ can be expected to be positive +2.4%.

Foolish takeway

Facing the prospect of another stock market crash can be a little unnerving to say the least. However, being prepared, managing risk and looking for options to hedge your portfolio can really help. 

My suggestion is this, don’t try to predict the market. Instead be prepared for all scenarios. Investing is what we love, so it doesn’t make sense to stop doing it. What does make sense is preparation to ensure we can continue doing what we love well into the future.

A market crash is often required to keep the market healthy. Throughout history, the market has bounced back stronger and stronger each time. You can draw confidence that we will always recover, it’s just a matter of time. Having a sense of awareness and being prepared can be the difference between panic and success. 

I hope this article has helped to guide you through the prospect of a potential crash. It’s not that scary if we are ready for it! 

More reading

• How to position your ASX share portfolio for a downturn
• The Boral (ASX:BLD) share price back in the M&A spotlight as Stokes buys another 45m shares
• 3 simple ways to save more cash to buy ASX shares today!
• ASX 200 Weekly Wrap: ASX 200 hits 4 straight weeks of losses
• 5 things to watch on the ASX 200 on Monday

glennleese owns shares of BetaShares Australian Equities Strong Bear Hedge Fund. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO, Appen Ltd, and COLESGROUP DEF SET. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Is the Altium Limited (ASX: ALU) share price a strong buy today?

I think Altium is an interesting business that could be worth a closer look because Altium shares have fallen by 11% since 25 August 2020.

A quick overview of Altium

Altium is an electronic PCB software design business. It has several segments. Its core segment is Altium Designer. Other divisions include Nexus, Tasking and Octopart. It’s an integral part of the electronics world. 

The ASX tech share offers software to individual engineers all the way up to large multinational design teams.

It has an impressive list of high profile clients including: Space X, NASA, Tesla, Boeing, Lockheed Martin, Bosch, Google, Apple, Amazon, Microsoft, Broadcom, Qualcomm, CSIRO, Siemens, Proctor & Gamble, Honeywell, Cochlear Limited (ASX: COH), ResMed Inc (ASX: RMD), John Deere and so on. Many of these are leaders in their industries.

FY20 result

FY20 was certainly a mixed bag for the ASX growth share. Revenue grew by 10% to US$189.1 million, it would have been materially higher if it weren’t for COVID-19 impacts.

Altium said that in the fourth quarter it extended payment terms for customers and launched “attractive pricing”.

Earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 13% to US$75.6 million with the EBITDA margin improving from 38.9% to 40%.

Profit before income tax went up by 12% to US$64.6 million. Profit after tax fell 42% due to a one-time accounting charge for a deferred tax asset revaluation based on US tax optimisation to decrease the effective tax rate in FY21 to between 22% to 25%, down from the previously stated 27% to 29%. Operating cashflow dropped 18% to US$56.5 million.

Normalised earnings per share (EPS), which excludes that tax change, rose by 5%. The Altium share price isn’t likely to grow if the profit growth doesn’t impress. 

However, there was good news on the balance sheet side of things. The cash balance rose by 16% to US$93 million and the Altium FY20 dividend was increased by 15% to $0.39 per share.

Is the Altium share price a buy?

FY20 didn’t go according to plan. It saw the ASX growth share not hitting its long-term goal of US$200 million by 2020. It also caused Altium to suggest that it may take a little longer to hit its US$500 million revenue goal (it was originally targeted for 2025).

However, I think the Altium share price reduction reflects that reality. Interest rates are lower than they were before COVID-19, which supports a higher share price.

Looking at the Altium share price, it’s down 22% since 17 February 2020 and it has fallen 11% since 25 August 2020.

Altium gave a roadmap for its expectations about revenue, EBITDA and the EBITDA margin over the next five years. It’s expecting strong progress in FY24 and FY25.

I think it’s important to remember that Altium has long-term growth aspirations leading up to 2025. But I don’t think growth is suddenly going to stop once it gets to US$500 million revenue.

If you use a discounted cashflow model style of investing, I think it’s quite easy to argue Altium has a good chance of producing strong shareholder returns over the next decade if it keeps building market share.

When you look at the short-term valuation it does look fairly expensive at 58x FY21’s estimated earnings. It’s possible that the EBITDA margin could go backwards in FY21.

In the short-term I think there could be more volatility for ASX shares, particularly when it comes to businesses linked with the US due to the upcoming election. The last quarter of 2020 could be a buying opportunity for Altium shares. 

If you take a long-term view I think this Altium share price could be a good long-term buy for 2030. However, I don’t think I’d want to buy shares in 2020 unless it drops under $30 because of the short-term uncertainties.

More reading

• Could these exciting small cap tech shares be the next Afterpay (ASX:APT) and Altium (ASX:ALU)?
• Should you buy these beaten down ASX 200 shares?
• 3 outstanding ASX shares to buy and hold for decades
• Why you shouldn’t be concerned by the high PE multiples of ASX tech shares
• 2 ASX shares I’d buy if this crash gets worse

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

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The Monadelphous Group Limited (ASX: MND) share price will be on watch this morning after the release of a very positive announcement.

What did Monadelphous announce?

This morning the engineering company announced that it has secured construction and maintenance contracts in the resources sector worth a combined value of approximately $120 million.

According to the release, two of the contracts Monadelphous has been awarded relate to the WAIO Asset Panel Framework Agreement it has previously signed with mining giant BHP Group Ltd (ASX: BHP).

The first contract is to provide structural, mechanical, and electrical upgrades at the Newman Hub site in the Pilbara, Western Australia. Work will commence immediately and is expected to be completed before the end of 2021.

Whereas the second contract is associated with the dewatering of surplus water at the Jimblebar mine site in Newman, Western Australia.

Olympic Dam.

Pleasingly, there could be more contracts coming Monadelphous’ way in the future from BHP.

The company also revealed that it has entered into an Olympic Dam Asset Projects Framework Agreement with BHP to provide it with multi-disciplinary construction services at the Olympic Dam copper mine in South Australia.

Monadelphous has secured its first contract under the agreement. This is for the supply and construction of acid storage tanks and connection to the existing operating acid plant.

Saraji Mine.

Finally, the company advised that its Maintenance and Industrial Services division has also been awarded a contract.

This contract will see the company undertake a major dragline shutdown for the BHP Mitsubishi Alliance at its Saraji Mine, located near Dysart, Queensland. Management advised that the work will be completed by the end of December 2020.

With the Monadelphous share price down over 37% since the start of the year, shareholders will no doubt be hoping that these contracts get it heading in the right direction again.

More reading

• Brokers name 3 ASX shares to buy right now
• BHP’s climate plan is rubbish: shareholder group
• IGO share price surges on potential sale of Tropicana
• Why the Rio Tinto share price is outperforming its peers
• An all-weather ASX resources shares strategy

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

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The S&P/ASX 200 Index (ASX: XJO) has just notched up its fourth week in a row in the red, giving investors another hefty 1.1% loss for the week. It caps off a wild and furious month, which has seen the ASX 200 index fluctuate between 6,167 points and the 5,859 points the index finished up at on Friday.

We now start this week at the lowest point the ASX has seen since early June – not exactly a comfortable position for investors to be in. The last time the ASX 200 had four weeks in the red, it was back in February and March and we all know how that felt. Thankfully, the past four weeks haven’t been anything close to how the markets were in March, but we still aren’t going in the direction that most of us would like.

So the ASX was again dominated last week by the (frankly) crazy levels of volatility we saw over in the United States, particularly from tech shares. We saw moves of more than 8% over just a day or two in Apple Inc. (NASDAQ: AAPL) shares last week, just to give some context (no mean feat for a US$2 trillion+ company). And Tesla Inc (NASDAQ: TSLA) – perhaps the poster-child for tech volatility these days – saw its shares fall by more than 16% on Tuesday (US time), backed up by an 11% rise the following day.

It was ASX tech shares as well as some blue chips that were the big draggers on the index last week. The S&P/ASX All Technology Index (ASX: XTX) was down more than 3% last week, as buy now, pay later (BNPL) shares blew off steam. Combining the general tech shares sell-off with news that both Commonwealth Bank of Australia (ASX: CBA) and National Australia Bank Ltd. (ASX: NAB) are launching no-interest credit card products with a BNPL spin cooled the payments space significantly. Afterpay Ltd (ASX: APT) shares were down 5.54% for the week, while Zip Co Ltd (ASX: Z1P) shed 11.4%, including 6.7% on Friday alone.

It’s also worth mentioning that shares of mining giant Rio Tinto Limited (ASX: RIO) were up 4.48% for the week. It followed an announcement on Friday that its CEO JS Jacques will be stepping down in the fallout over the company’s much-criticised destruction of the Juukan Gorge rock shelters in Western Australia’s Pilbara region.

How did the markets end the week?

It was another topsy-turvy week for ASX 200 shares. As we flagged earlier, the ASX 200 index fell 1.12% for the week, after opening at 5,925.5 points on Monday and closing at 5,859.4 points on Friday. Monday saw a good start to the week with a 0.3% gain, which was doubled down on Tuesday with a substantial 1.1% rise. But it was all downhill from there (and not in a good way). Wednesday brought with it a nasty 2.2% slide, which was countered on Thursday with a 0.5% rebound. But Friday saw another day of selling, with ASX 200 shares losing another 0.83%.

Meanwhile, the All Ordinaries Index (ASX: XAO) also slumped 1.14% after falling from 6,108.8 points on Monday to 6,038.9 points by Friday.

Which ASX 200 shares were the biggest winners and losers?

Time to get the kettle on for our Foolish gossip pages. So let’s see which ASX shares were making investors the happiest and the saddest last week. As always, we’ll start with the losers:

Worst ASX 200 losers	% loss for the week
Nearmap Ltd (ASX: NEA)	(15.5%)
Origin Energy Ltd (ASX: ORG)	(12%)
Resolute Mining Limited (ASX: RSG)	(11%)
Graincorp Ltd (ASX: GNC)	(10.5%)

Taking out last week’s wooden spoon was aerial mapping company Nearmap. Nearmap has been issuing shares as part of a capital raising which concluded last week and appears to be the primary catalyst for this company’s drop. Remember, a capital raising decreases the value of a company’s shares by increasing the supply.

Next up we had utility provider Origin. There was no major news out of Origin last week, but the company is now down around 20% over the past month. Clearly, investors haven’t found a bottom for this falling knife just yet.

ASX 200 gold miner Resolute was next up on investors’ hit list. A lacklustre gold price in recent weeks, as well as problems in one of the company’s mines in Mali, appear to be behind this share’s 11% fall.

Lastly, Graincorp was also under pressure after some negative broker notes out last week, despite no major news out of this company either.

Now with the losers out of the way, let’s have a look at the week’s winning shares:

Best ASX 200 gainers	% gain for the week
Nufarm Limited (ASX: NUF)	12.9%
Clinuvel Pharmaceuticals Limited  (ASX: CUV)	7.9%
Vocus Group Ltd (ASX: VOC)	7.9%
Sims Ltd (ASX: SGM)	7.8%

Leading last week’s gainers was chemical manufacturer Nufarm, despite (again) no major news out of the company. Nufarm was the beneficiary of some positive broker notes, however, which is probably the reason behind its near 13% gain.

Next up we had biopharma company Clinuvel, which got investors excited when it announced it plans on expanding the range of potential applications for its flagship Scenesse product.

Telecom Vocus was next up, and there’s no obvious reason why Vocus shares rose 7.9% last week. The shares have been on a bit of a run lately (up more than 25% in the past month), so perhaps some investors are just jumping on the bandwagon with this one.

Finally, we had steel recycler Sims, which benefitted from some positive broker attention.

What does this week look like for the ASX 200?

After the volatility of the past few weeks, predicting what this week might have in store is even more of a fool’s game than usual. I’ll be (once again) watching the US markets this week, as they seem to be setting the ASX’s agenda these days. Tech shares have been front and centre of the action recently, so I would wager that watching what Apple, Tesla and other big US tech names are doing this week will give us a fair sense of how the ASX 200 is going to travel. Especially with tech and BNPL shares like Afterpay.

Other than that, it’s still a sea of relative calm on the ASX boards after the wild earnings month we’ve just endured in terms of news and company developments. So nothing more to do now than grab the popcorn, fellow investors!

But before you do, here’s a snapshot into how the major ASX 200 blue chip shares are looking as we start a new week:

More reading

• 5 things to watch on the ASX 200 on Monday
• 3 ASX 200 shares I’d buy right now
• 5 things to watch on the ASX 200 next week
• These were the best performing ASX 200 shares last week
• These were the worst performing ASX 200 shares last week

Sebastian Bowen owns shares of National Australia Bank Limited, Newcrest Mining Limited, Telstra Limited, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Apple and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd., Nearmap Ltd., and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited and Telstra Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO, COLESGROUP DEF SET, Transurban Group, Wesfarmers Limited, and Woolworths Limited. The Motley Fool Australia has recommended Apple and Nearmap Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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At the current share price I’d buy A2 Milk Company Ltd (ASX: A2M) shares this week.

I really like the infant formula company. It has been a wonderful investment since it listed on the ASX and I think there is plenty more growth potential for the coming years.

Let’s just quickly recap the main highlights of the FY20 result:

A2 Milk FY20 result

For shareholders, the key figure was that earnings per share (EPS) rose 33.5% to NZ 52.39 cents. Net profit after tax (NPAT) rose by 34.1% to NZ$385.8 million. The EPS and profit growth are key for A2 Milk shares going higher

This growth was driven by revenue increasing by 32.8% to NZ$1.73 billion. Earnings before interest, tax, depreciation and amortisation (EBITDA) jumped by 32.9% to NZ$549.7 million. The EBITDA margin was 31.7% against a longer-term target of 30%.

Group infant nutrition revenue rose by 33.8% to NZ$1.42 billion. China label infant nutrition grew strongly, more than doubling to NZ$337.7 million. Overall China and other Asia segment revenue rose 65.1% to NZ$699.1 million.

USA milk revenue also rocketed higher, up 91.2% to NZ$66.1 million.

One of the great things about the result was there was growth across the board. Even the ANZ segment, which has been around the longest, managed to grew revenue by 14.6% to NZ$965.7 million and EBITDA increased by 19.9% to NZ$465.6 million.

Operating cash flow generated was NZ$427.4 million and it finished with a closing cash balance of NZ$854.2 million.

It has a great future

A2 Milk has a very compelling range of products. But it takes a while to win over new customers when they first come across the product. That means that the new store distribution it added in FY20, particularly in the second half, could continue to add new customers and revenue for a while. So I think A2 Milk has growth built-in for a couple of years even if it doesn’t increase its store distribution number.

In the second half of FY20 it grew its store footprint from 18,300 stores to 19,100 stores in China. In the US in FY20 it increased its store count to 20,300 stores, up from 17,500 stores from December 2019 and 13,100 stores at June 2019.

A2 Milk shares have plenty of growth potential from the US and China alone in my opinion.

It’s also just starting to generate earnings in Canada. In March 2020 it entered into an exclusive licensing agreement with Agrifoods International for the production, distribution, sales and marketing of A2 Milk branded liquid milk for the Canadian market. A2 Milk has provided access to intellectual property and marketing assets as well as proprietary systems and know-how relating to the local sourcing and processing. Agrifoods will distribute the products and fund the venture. The product has recently been launched to a number of customers in Western Canada.

In FY21 A2 Milk is expecting continued strong revenue growth whilst investing in marketing and the organisational capability. It’s expecting an FY21 EBITDA margin of 30% to 31%. It’s aiming for a longer-term EBITDA margin target of 30%.

Why I think the A2 Milk share price is a buy

A2 Milk shares have plenty of earnings growth potential, much more than the market is giving it credit for in my opinion.

The A2 Milk share price has fallen 16% since 18 August 2020 despite still having a very attractive growth runway.

FY21 will face some difficulties. Management said there will be higher raw and packaging material costs partially offset by price increases, an increase of marketing costs, foreign currency benefits not likely to be replicated and COVID-19 pantry stocking unlikely to reoccur again.

A2 Milk is now just trading at 24x FY23’s estimated earnings. I think this is a really good price to buy A2 Milk shares considering its global growth aspirations. A2 Milk may soon decide to pay out some excess capital to shareholders, which would improve shareholder returns.

More reading

• 3 ASX 200 shares I’d buy right now
• 3 ASX shares for beginners to buy
• Top brokers name 3 ASX shares to sell today
• Why you shouldn’t be concerned by the high PE multiples of ASX tech shares
• Are these the ASX growth shares to buy right now?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Investors that are looking to add some quality dividend shares to their portfolio this week might want to consider the ones listed below.

I believe these two ASX dividend shares are among the best on offer on the Australian share market right now. Here’s why I would buy them:

Rural Funds Group (ASX: RFF)

I think this agriculture-focused property group would be a great option for income investors. I believe Rural Funds is well-positioned to grow its distribution at a solid rate over the 2020s. This is because of its high quality portfolio of assets spread across several different industries and their very long leases. In respect to the latter, Rural Funds currently has a weighted average lease expiry of almost 11 years. It also has rental increases built into these contracts.

I expect this to allow the company to deliver on its target of increasing its distribution by 4% per annum over the long term. This certainly looks to be the case in FY 2021, with management intending to increase its distribution to 11.28 cents per share. Based on the latest Rural Funds share price, this equates to a 4.9% yield.

Telstra Corporation Ltd (ASX: TLS)

Another ASX dividend share I would buy is Telstra. After a decade of disappointment, I’m confident that the 2020s will be a lot more positive. This is thanks to some major changes that are happening at the company right now with its T22 strategy. This is stripping out costs, making it more efficient, and simplifying its business.

But perhaps best of all, is that the end of the NBN rollout is now in sight. When this headwind finally ends, I expect Telstra to return to growth again. Until then, I’m optimistic that the company will be able to sustain its dividend if it changes its policy to a free cash flow based one. Based on this and the current Telstra share price, this would mean a very generous fully franked 5.6% dividend yield.

More reading

• Why ASX dividend shares are still king in 2020
• ASX dividend shares raising their dividends like clockwork
• Where to invest your JB Hi-Fi (ASX:JBH) dividends today
• Is the Telstra (ASX:TLS) dividend sustainable? This analysts thinks it is
• Why I would buy Telstra (ASX:TLS) and this outstanding ASX 50 share

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

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On Friday the S&P/ASX 200 Index (ASX: XJO) was out of form and sank notably lower. The benchmark index fell 0.8% to 5,859.4 points.

Will the market be able to bounce back from this on Monday? Here are five things to watch:

ASX 200 expected to rise.

It looks set to be a better day of trade for the ASX 200 index. According to the latest SPI futures, the ASX 200 is poised to start the week higher. Current futures contracts are pointing to a 4-point or 0.1% gain at the open. This follows a reasonably positive night of trade on Wall Street on Friday which saw the Dow Jones rise 0.5%, the S&P 500 edge slightly higher, and the Nasdaq fall 0.6%.

Oil prices mixed.

Energy shares such as Beach Energy Ltd (ASX: BPT) and Woodside Petroleum Limited (ASX: WPL) will be on watch today after a mixed night of trade for oil prices on Friday. According to Bloomberg, the WTI crude oil price rose 0.1% to US$37.33 a barrel and the Brent crude oil price dropped 0.6% to US$39.83 a barrel. Oil prices recorded their second straight week of declines.

Tech shares on watch.

Tech shares including Afterpay Ltd (ASX: APT) and Appen Ltd (ASX: APX) could start the week in the red after their U.S. counterparts continued their slide. The tech-heavy Nasdaq index tumbled 0.6% lower on Friday night and current Nasdaq futures are pointing to further declines tonight. The S&P/ASX All Technology Index (ASX: XTX) has lost 9.3% of its value since the start of the month.

Gold price drops lower.

The shares of Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) could come under pressure today after the gold price softened. According to CNBC, the spot gold price fell 0.8% to US$1,947.90 an ounce on Friday night. Despite this decline, the precious metal recorded a small weekly gain due to economic recovery concerns.

Vocus given conviction buy rating.

The Vocus Group Ltd (ASX: VOC) share price could be on the rise today after analysts at Goldman Sachs put the telco on its conviction buy list. Goldman believes Vocus delivered a solid FY 2020 result and constructive FY 2021 guidance. It notes that it is the only telco guiding to growth this year. The broker has a price target of $4.70 on its shares.

More reading

• How to tell if this is the end of the ASX bull market
• 3 ASX 200 shares I’d buy right now
• Forget day trading and get rich with these top ASX shares
• Are higher P/E ratios really here to stay?
• 5 things to watch on the ASX 200 next week

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

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I think the healthcare sector is a great place to look for buy and hold options.

This is because in this sector you’ll find a number of companies that have the potential to grow significantly in the future thanks to favourable tailwinds and new technologies.

Three small cap ASX healthcare shares I am watching closely are listed below. Here’s why I like them:

Alcidion Group Ltd (ASX: ALC)

Alcidion is a growing informatics solutions company. It provides software that aims to improve the efficacy and cost of delivering services to patients and reduce hospital-acquired complications. It has been winning a number of contracts over the last couple of years in the UK with the NHS and privately in Australia.

Telix Pharmaceuticals Ltd (ASX: TLX)

Another small cap ASX healthcare share to watch is Telix Pharmaceuticals. It is a clinical-stage biopharmaceutical company developing an advanced pipeline of molecularly-targeted radiation (MTR) products. I think MTR is an exciting treatment approach. It chemically links radioactive isotopes to target molecules specific to cancer cells. One key therapy in its portfolio is TLX591, which is also known as Illumet. It is a metastatic prostate cancer radionuclide therapy. Management estimates that it has a $2 billion market opportunity in late-stage disease alone.

Volpara Health Technologies Ltd (ASX: VHT)

A final small cap ASX healthcare share to look at is Volpara. It is a healthcare technology company that provides software which leverages artificial intelligence imaging algorithms to help with the early detection of breast cancer. It has been a very strong performer in recent years and has consistently grown its market share in the United States at a strong rate. I expect more of the same in the coming years and for recent acquisitions to start supporting the growth of its average revenue per user metric. Combined, this should underpin strong revenue growth over the next decade.

More reading

• 3 very exciting small cap ASX shares to watch
• Why IOOF, SKYCITY, Starpharma, & Telix shares are storming higher
• Alcidion share price drops despite FY20 revenue growth
• 3 exciting small cap ASX shares to watch in FY 2021
• Why you should add these small cap ASX shares to your watchlists

James Mickleboro owns shares of TELIXPHARM DEF SET. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Alcidion Group Ltd and VOLPARA FPO NZ. The Motley Fool Australia has recommended Alcidion Group Ltd and VOLPARA FPO NZ. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The roller coaster ride on equity markets is enough to send your head spinning with many investors questioning if this is the end of the bull market.

The sharp fall in the share prices of tech darlings both in the US and Australia is sapping confidence.

It’s not only the crash in the Tesla Inc (NASDAQ: TSLA) share price along with other FAANG favourites that I am talking about.

Tech standing on the neck of the bull market

The pullback in the Afterpay Ltd (ASX: APT) share price, Appen Ltd (ASX: APX) share price and Xero Limited (ASX: XRO) share price are also rattling the bull market cage.

The rest of the S&P/ASX 200 Index (Index:^AXJO) hasn’t faired too well either. It retreated around 1% for the week and shed 5% since hitting its COVID-19 high less than a month ago, thanks to a pleasing August reporting season.

Is the bull party over and should you be taking profits now? I don’t think we are at a sinister turning point, but I will admit this call is a bit of crystal ball gazing on my part.

Bears still yielding to bulls

But there are three things my crystal ball is showing me to support the belief that ASX investors should stay hold the line.

The first is the yield curve. This is the difference between the two-year bond yield and the 10-year yield on US government bonds.

While equity markets were whiplashed and volatility spiked, the gap between the two yields remains more than 50 basis points apart.

The fact that the 10-year is providing a fatter return than the 2-year is promising. The curve tends to be steep when credit markets are anticipating growth and curve flattens, or even inverts, when the outlook sours.

Earnings still positive in uncertain world

The second point is that company profits are still growing on the most part. This is true for the ASX as it is for the US share market in general.

The “good performance” for ASX stocks is no doubt artificially bolstered by government handouts, but analysts are still tipping earnings growth for FY21 when these measures mostly expire.

I doubt we will slip into a bear market when earnings are expanding, even though the growth isn’t particularly exciting. But hey, growth is growth.

Least dirty shirt

The third reason I think the bull market will survive is the lack of alternatives. Love them of hate them, equities are still the best major asset class for Australian investors.

If you did cash in your chips now, where would you put the cash for the medium to longer-term? Credit investments aren’t dead (and may even outperform in the short-term if the RBA cuts rates to 0.1% as some speculate), but shares still offer the best risk-reward, in my view.

ASX 200 correction still a strong possibility

However, there are two caveats to my optimistic outlook. The first is that the ASX 200 may drop into correction territory in the near-term.

This means there may be another 5% plus drop for our market if this happens – and that’s a good reason to keep some powder dry.

Rotation from growth to value not over

The second is that the dramatic price-earnings (P/E) expansion that boosted many market darlings is probably over as we move into a “late-stage” bull market.

I know this prediction was made before and proved to be wrong. But there have been recent signs of this transition.

As the bull market pushes on each week or month, it increases the probability that value stocks will dominate.

More reading

• Forget day trading and get rich with these top ASX shares
• Are higher P/E ratios really here to stay?
• 5 things to watch on the ASX 200 next week
• Buy these ASX growth shares after the market selloff
• 3 five-star ASX stocks to buy right now

Brendon Lau has no position in any of the stocks mentioned. Connect with me on Twitter @brenlau.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of AFTERPAY T FPO and Appen Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post How to tell if this is the end of the ASX bull market appeared first on Motley Fool Australia.

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Once again, a large number of broker notes hit the wires last week. Some of these notes were positive and some were bearish.

Three sell ratings that caught my eye are summarised below. Here’s why top brokers think investors ought to sell these shares next week:

ASX Ltd (ASX: ASX)

According to a note out of Morgans, its analysts have retained their reduce rating and lowered the price target on this stock exchange operator’s shares to $74.82. Morgans made the move following the release of the company’s activity statement for the month of August. The broker felt that ASX’s update was a touch weak, particularly in respect to futures. In light of this, it has reduced its earnings estimates and its valuation accordingly. The ASX share price was changing hands for $82.76 on Friday.

Fortescue Metals Group Limited (ASX: FMG)

A note out of Morgan Stanley reveals that its analysts have downgraded this iron ore producer’s shares to an underweight rating with an improved price target of $14.50. Although the broker has upgraded its iron ore price forecasts to reflect strong steel production in China, it isn’t enough to stop it downgrading its shares. Its analysts believe Fortescue’s valuation is looking stretched at the current level and the risk/reward on offer isn’t sufficient. The Fortescue share price ended the week at $17.34.

Mineral Resources Limited (ASX: MIN)

Analysts at Morgan Stanley have also downgraded this mining and mining services company’s shares to an underweight rating with an improved price target of $23.50. As with Fortescue above, the broker made the move on valuation grounds after some exceptionally strong gains in 2020 for the Mineral Resources share price. The company’s shares are up over 64% year to date thanks to its exposure to the rising iron ore price. This left them trading at $27.15 at Friday’s close.

More reading

• Are higher P/E ratios really here to stay?
• 3 top ASX dividend shares I would buy next week
• A definitive guide to September ASX share trends
• 2 ASX shares I would buy again and one I regret
• Why the Rio Tinto share price is outperforming its peers

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

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