The Redbubble Ltd (ASX: RBL) share price has soared an astounding 759% from its low in late March. But, like much of the wider share market, the Redbubble share price is today falling sharply lower.

Redbubble is an online marketplace that allows independent artists to connect with customers and fulfil orders through print on demand technology. 

The online retailer has been a clear winner during the COVID-19 pandemic. With consumer spending patterns changing, Redbubble has seen enormous growth in its online marketplace.

This growth has been reflected in the Redbubble share price. However, given its meteoric rise, many investors may now be questioning the sustainability of such a run.

How has Redbubble performed?

In late August, the company reported an impressive performance for FY20 which resulted in the Redbubble share price edging higher.

The company’s annual report was highlighted by a 36% lift in sales revenue for the full-year of $416 million. Redbubble also reported operating earnings before interest, tax, depreciation and amortisation (EBITDA) of $5.1 million. This represented a $7 million turnaround from the company’s $2 million deficit in FY19.

According to Redbubble, the surge in sales revenue was attributed to consumer demand for face masks. Mask sales accounted for $12.1 million in revenue.

Redbubble was also a haven for artists and small-businesses impacted by the pandemic. As a result, the company doubled its number of selling artists to 511,000 for FY20.

Is Redbubble’s growth sustainable?

As a result of securing more independent artists, Redbubble believes that more customers will be attracted to the platform. The company has a global supply chain, with over 60 product offerings including stickers, t-shirts, art and home décor.

In FY20, Redbubble also managed to improve its marketing efficiency and reduce operating expenditure. If the company is able to retain artists and drive repeat customers, it should be able to retain its rate of growth.

In addition, Redbubble has a few structural tailwinds in its favour. These include the emergence of the ‘stay at home’ economy and irreversible shift to online shopping. A recent note from broker Morgan Stanley has reiterated this outlook for Redbubble.

Is today’s Redbubble share price a buy?

The Redbubble share price has, historically, been correlated with an accelerating and decelerating growth profile.

Despite reporting substantial growth, the company still reported a net loss for FY20. As a result, I can’t justify Redbubble’s current share price based on its recent performance. This is despite the Redbubble share price falling 9.6% lower to currently trade at $3.95, at the time of writing.

The fact that mask sales were a key driver in sales revenue also makes me question how sustainable the company’s future growth is. No doubt, Redbubble does have the opportunity to take advantage of structural tailwinds post-pandemic. However, I believe the company needs to see repeat business consistently in order to justify its current valuation.

More reading

• Why the Afterpay share price crashed 9% lower today
• Why Redbubble and this ASX share just stormed to record highs
• Why Afterpay, IOOF, Redbubble, & Zip shares are dropping lower
• Why it makes sense to invest in ASX tech shares
• Why Lendlease, Redbubble, SeaLink, & Starpharma shares are pushing higher

Motley Fool contributor Nikhil Gangaram 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 $50 billion market wipe-out is the buying opportunity many late-to-the-party investors have been hoping for. And top brokers have a few recommendations on the ASX stocks you should be putting on your shopping list.

The S&P/ASX 200 Index (Index:^AXJO) crashed close to 3% in the last hour of trade and every sector is wallowing in red ink.

This is how I know the market plunge is a buying opportunity as the selling is indiscriminate. Take the Graincorp Ltd (ASX: GNC) share price as an example.

ASX stock to buy on expected upgrade

Shares in the grain handler capitulated 2.9% to $4.38 at the time of writing even though Macquarie Group Ltd (ASX: MQG) believes its cum-earnings upgrade.

The defensive stock isn’t driven as much by economic cycles or COVID-19 as it is by weather. On that front, investors have reason to be excited. The Australian Bureau of Agricultural and Resource Economics (ABARES) estimated the winter 2020/21 crop was 21.5 million tonnes (mmt).

“We have been expecting a much stronger 2020/21 winter crop vs pcp of 11.4mmt given the turnaround in seasonal conditions over the past eight months,” said the broker.

“Industry feedback suggests that ABARES first crop production estimate of 21.5mmt is conservative.”

Raining cash

Macquarie thinks the crop could be as much as 27.3mmt and that would translate to around $50 million extra for Graincorp.

The stock is the broker’s top pick for the sector and Macquarie reiterated its “outperform” rating and 12-month price target of $4.79 a share.

Competitive edge

Another stock to buy in the sell-off is the James Hardie Industries plc (ASX: JHX) share price. Shares in the building materials supplier was demolished by 3.8% to $30.12 in late trade.

But Credit Suisse reiterated its “outperform” recommendation on the stock as it’s well placed to not only outpace the market but its rivals.

“JHX’s internal initiatives (manufacturing, supply chain) have given the co a clear advantage, outperforming peers in the [June quarter],” said the broker.

“JHX issued FY21 guidance, unlike many building product peers, a good sign of operating performance.”

Faster pace of growth

This advantage will allow James Hardie to capture market share at a time when US housing is booming, despite the pandemic.

“We believe JHX’s market share growth can continue, with industry discussions suggesting JHX has been able to meet the unprecedented demand, whilst competitors have been struggling to keep up, particularly as industry inventories remain low,” explained Credit Suisse.

The broker’s 12-month price target on James Hardie is $34.90 a share.

More reading

• I love volatile ASX share market days like today
• Why the Transurban share price is outperforming today
• Why ASX investors shouldn’t fear a market crash
• ASX 200 down 2.75%: Afterpay & Appen sink lower, SKYCITY pushes higher
• Why you should buy ASX copper miners in this market meltdown

Motley Fool contributor Brendon Lau owns shares of James Hardie Industries plc and Macquarie Group Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended Macquarie Group 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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If you’re looking for market beating returns over the 2020s, then I think the three ASX growth shares listed below would be worth considering.

Especially after today’s market selloff dragged them down to much lower levels.

I believe that all three are well-placed to grow their earnings at a rapid rate over the coming years. Here’s why I would buy them after the selloff:

ELMO Software Ltd (ASX: ELO)

ELMO provides a unified software platform which allows businesses to streamline a range of processes. It has been growing at a strong rate over the last few years, leading to stellar recurring revenue growth. Pleasingly, this growth continued during the pandemic and is expected to be sustained in FY 2021. Management recently provided annual recurring revenue (ARR) guidance of $65 million to $70 million this year. This represents year on year growth of 18% to 27%. Importantly, this guidance is all organic and doesn’t include the benefits of potential acquisitions. ELMO has upwards of $140 million in cash that can be used for value accretive acquisitions in the future.

NEXTDC Ltd (ASX: NXT)

Another growth share to consider buying is NEXTDC. I think the data centre operator is perfectly positioned to capitalise on the cloud computing boom. While the pandemic has certainly accelerated the shift to the cloud, it still has a long way to go. Last year research firm Gartner predicted that 80% of all organisations will shift their workloads to third-party data centres by 2025. That compares to an estimated 10% that had already done so in 2019. I believe this bodes well for NEXTDC and expect it to lead to increasing demand for its innovative data centre outsourcing solutions. This should underpin solid earnings growth as the company scales.

Xero Limited (ASX: XRO)

A final growth share to consider buying is this cloud-based business and accounting software provider. Xero may have been growing at an explosive rate over the last few years, but I believe it still has a long runway for growth over the next decade. At its recent annual general meeting, the company advised that it estimates that less than 20% of its global English-speaking target market is using cloud-based accounting software currently. This compares to 50% in the ANZ market. Clearly, Xero still has a massive market opportunity to grow into over the coming years. And given the quality of its platform, I expect it to capture a growing slice of this market over the 2020s. This could make the Xero share price a market beater over the long term.

More reading

• After the crash, is it time to buy this Nasdaq ETF?
• Why the Afterpay share price crashed 9% lower today
• 5 things to watch on the ASX 200 on Friday
• ASX 200 up 1%: Big four banks charge higher, SKYCITY impresses, Xero tumbles
• Why Bubs, Perseus, WiseTech, & Xero shares are dropping lower

James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Elmo Software. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia has recommended Elmo Software. 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 love volatile ASX share market days like today.

It’s been quite a while since there was a drop as heavy as this, though there was a bit of volatility earlier this week too.

Cheaper opportunities

Volatile days for the share market are attractive because it provides opportunities to buy ASX shares at cheaper prices than before. On single days like today it means some shares will drop by a few percent.

Volatility can also lead to extended periods of declines. This can give us once-a-year or once-in-a-generation opportunities to buy shares at much cheaper prices like we saw in March 2020 when COVID-19 caused a major share market crash.

It’s unlikely that today’s fall – as heavy as it is – will be the start of the S&P/ASX 200 Index (ASX: XJO) falling 30% again. The Australian economy has already seen through the worst of COVID-19 spread and the country is aiming to open up by Christmas, except perhaps Western Australia.

‘Buying the dip’ seems like simple advice. It might be detrimental to your returns to wait entirely for dips before buying anything, but adding extra cash to your ASX share portfolio to buy on days like today can be a smart move.

I decided to invest in something today. I can’t tell you what it is due to trading rules, but I thought my choice was worth buying with today’s volatility. During the crash in March 2020 I bought shares like WAM Microcap Limited (ASX: WMI) because I liked the diversification, the long-term outperformance and the widening discount between the share price and the net tangible assets (NTA).

There are plenty of high growth ASX shares that have sank today like Appen Ltd (ASX: APX), Nearmap Ltd (ASX: NEA) and A2 Milk Company Ltd (ASX: A2M). These growth names may fall further next week, but they’re probably not going to be lower forever. It could be a good time to consider BetaShares NASDAQ 100 ETF (ASX: NDQ) too.

It’s meant to be volatile

I’m also glad for volatile ASX share market days because shares are meant to be volatile. A 3% drop in one day is a probably bit steep. But shares are meant to go up and down over the shorter-term. Each day the market is made up of different buyers and sellers. Participants should have differing views about what price they’re happy to transact at. The market isn’t just going to go higher and higher. 

The recovery over the past six months has been surprisingly strong. Some people may think it has been too strong.

If you believe the ASX share market was too expensive last week, then I think it’s worth thinking about investing today (or next week). Investors seem to be able to quickly let go of their fear. The opportunity to buy at a lower price probably isn’t going to hang around.

I’m not saying go ‘all in’ if you have been saving up cash for a while. But the best time to buy and be greedy is when there’s fear, like today.

At some point COVID-19 will fade into the history books, as bad as it has been, like the Spanish Flu did. Hopefully an effective healthcare solution can be found sooner rather than later. But it’s important not to let shorter-term concerns stop you from investing in anything for the long-term.

Foolish takeaway

Who knows why people are suddenly happy to accept ASX share prices substantially less than yesterday? Perhaps some investors didn’t have much conviction in their ideas. That’s why I think you should only invest in something robust enough that you’d be comfortable to hold through a hefty market crash. If you sell during a market crash then you’re just crystallising a decline and permanently hurting your wealth.

If the market keeps falling next week then I’ll be putting more of my reserve cash to work.

More reading

• Top brokers are urging you to buy these ASX stocks in this market meltdown
• Why the Transurban share price is outperforming today
• Why ASX investors shouldn’t fear a market crash
• Why Appen, Kogan, OZ Minerals, & ResMed shares are dropping lower
• After the crash, is it time to buy this Nasdaq ETF?

Tristan Harrison owns shares of WAM MICRO FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BETANASDAQ ETF UNITS and Nearmap Ltd. The Motley Fool Australia owns shares of A2 Milk and Appen Ltd. The Motley Fool Australia has recommended BETANASDAQ ETF UNITS 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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I’m a big fan of exchange traded funds (ETFs) and believe they are a great way for investors to both diversify their portfolios and gain exposure to areas that are not represented on the ASX.

But which ones should you buy? Two high quality ETFs that I like are listed below:

BetaShares Asia Technology Tigers ETF (ASX: ASIA)

I think the BetaShares Asia Technology Tigers ETF could be a great option for investors. This is because it gives investors a way to invest in the biggest and brightest technology and ecommerce companies that have their main area of business in Asia. BetaShares notes that through a single trade, this ETF provides diversified exposure to a high-growth sector that is under-represented in the Australian share market.

Which shares are included in the fund? There are 50 companies included within the ETF. These include industry giants such as Alibaba, Baidu, JD.com, and Tencent Holdings. Given the very positive outlooks of these companies, I believe this ETF has the potential to generate market-beating returns for investors over the next decade and beyond.

iShares Global Healthcare ETF (ASX: IXJ)

Another ETF to consider buying is the iShares Global Healthcare ETF. This fund gives investors a slice of some of the largest players in the global healthcare industry such as Johnson & Johnson, Novartis, Pfizer, Roche, and Sanofi. It also includes locally listed healthcare stars CSL Ltd (ASX: CSL), Ramsay Health Care Limited (ASX: RHC), and Sonic Healthcare Limited (ASX: SHL).

Due to the positive outlook for the healthcare sector globally over the next couple of decades because of ageing populations and increased chronic disease, I believe it could provide strong returns for investors over the long term. Overall, I feel this could make it a top pick for investors right now.

More reading

• 3 of the best ASX tech shares to buy in September
• 2 ASX ETFs to buy for instant portfolio diversification
• These ASX ETFs will give you exposure to China’s growing middle class
• ETF provider VanEck to launch 4 new ASX ETFs
• 3 ASX growth shares to buy in September

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF. 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 Praemium Ltd (ASX: PPS) share price is falling today despite news out of Powerwrap Ltd (ASX: PWL) that it will accept Praemium’s latest takeover offer. The Praemium share price is currently trading 4.67% lower to 51 cents.

The decrease in share price is likely to be as a result of the heavily falling All Ordinaries Index (ASX: XAO) more broadly.

A closer look at Praemium and Powerwrap

Praemium is global provider of technology platforms for managed accounts, investment administration and financial planning. Its fully integrated account management platform is suitable for both small and large account holders, enabling clients to see all their portfolios in one place.

Powerwrap, simply put, is a smaller version of Praemium and in the past has acted as a smaller rival. Powerwrap is also involved in development and execution of investment portfolio administration services.

What happened

The takeover bid of Powerwrap first came to light in early July as Praemium placed an offer for their longstanding partner and competitor. The companies initially entered into a bid implementation agreement, under which Praemium would make an off-market conditional takeover bid for all of the Powerwrap shares it does not presently hold.

However despite the Powerwrap board of directors unanimously deciding that its shareholders should accept the offer, powerful players stood against the offer. A pair of ‘Rich Listers’ and other Melbourne players teamed up to try to get Praemium to increase its bid for their smaller wealth platform play, Powerwrap. They were ultimately unsuccessful, which meant that the offer stood at 7.5 cents per Powerwrap share in cash and 1 Praemium share for every 2 Powerwrap shares. 

Two days ago, the offer went unconditional.

What now?

With the offer to be concluded on 21 September, Powerwrap’s directors are urging shareholders to accept the offer as quickly as possible.

Praemium already controls 56.01% of the company and thus has the majority of votes at any general meeting of Powerwrap shareholders. However, it must be noted that it needs 75% if it is to continue with its plans to delist Powerwrap.

The Powerwrap share price is currently trading 4.67% lower, with it having made no gain or loss overall this year.

More reading

• Praemium share price edges higher after Powerwrap offer goes unconditional

Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Praemium Limited. The Motley Fool Australia has recommended Praemium 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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There’s blood on the street but one ASX stock that’s holding up better than most today is the Transurban Group (ASX: TCL) share price.

Shares in the toll road operator is holding steady at $14.31 during lunch time trade when the S&P/ASX 200 Index (Index:^AXJO) crashed by around 3%.

The big sell-off on Wall Street that was led by high-flying tech stocks are to blame for the carnage on the ASX. This is why our tech darlings like the Afterpay Ltd (ASX: APT) share price and Appen Ltd (ASX: APX) share price are among the worst performers.

Transurban share price upgraded to “buy”

It looks like investors are rotating out of these expensive growth stocks and into relatively more stable businesses that have suffered a big de-rating during COVID-19.

This partially explains the outperformance of Transurban, although a broker upgrade is also helping.

UBS lifted its recommendation on the stock to “buy” from “neutral” as it thinks too much bad news is factored into the stock.

Boring stocks suddenly looking exciting

It also believes that Transurban will rebound strongly as Melbourne emerges from its stage four lockdown.

Most of Transurban’s toll roads are in that state, which explains why the stock was hit particularly hard by the second wave of COVID-19 infections in that state.

“We see the stock as highly leveraged to recovery in that network given Melbourne accounts for one-third of group EBITDA [earnings before interest, tax, depreciation and amortisation],” said UBS.

“Further the market continues to seek out quality growth names in a structurally lower growth environment.”

Big dividend growth ahead

But this these aren’t the only reasons to be excited. The broker reckons Transurban’s annual dividend yield could double to around 13% from FY22 to FY25.

The big dividend increase will be funded by the completion of a number of big development projects in its pipeline.

“Our strong 13% pa growth from FY22-25E relies on completion of WestConnex Stage 3 in Sydney, WestGate Tunnel in Melbourne, and a number of Washington projects,” explained UBS.

“These are all expected to complete in 2023 and 2024. The largest risk remains the contractual dispute over the WestGate Tunnel project.”

What Transurban shares are worth

Other risks to the lofty dividend assumption are a slower than expected easing of the lockdown in Melbourne and the underperformance of its Washington asset.

The broker lifted its 12-month price target on the stock to $15.50 from $14.70 a share.

More reading

• Top brokers are urging you to buy these ASX stocks in this market meltdown
• I love volatile ASX share market days like today
• Every bull run has pullbacks. Why today’s share price falls are ‘healthy’
• Why ASX investors shouldn’t fear a market crash
• Why Appen, Kogan, OZ Minerals, & ResMed shares are dropping lower

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO, Appen Ltd, and Transurban Group. 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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Finding a savings account or term deposit offering a yield of more than 5% is impossible these days. The best you could do would be around 1.8% per annum, by my reckoning. Thank record low interest rates. But the same cannot be said for ASX dividend shares.

Whilst a dividend-paying share does not offer the same kind of certainty as a term deposit, savings account or bond (far from it), you can be compensated by yields of 3, 4 or 5%. Never a settler, I’ve found 2 ASX dividend shares that indeed offer yields of more than 5% today, and will (in my view) well into the future.

2 ASX dividend shares offering yields over 5%

Telstra Corporation Ltd (ASX: TLS)

Telstra is our first dividend share offering a yield of more than 5%. The Telstra share price has not had a good month. Investors were spooked by the company’s pessimistic FY2020 earnings report released last month. Although Telstra did report an earnings slump of 9.7% and a 14.4% hit to profits, it also reaffirmed it’s 16 cents per share dividend. On current share prices, that would give Telstra a trailing dividend yield of 5.63% (or 8.04% grossed up with Telstra’s full franking).

Some commentators are assuming that Telstra will have to trim this dividend next financial year due to falling earnings. But looking at Telstra’s free cash flow, which should be more than enough to cover a 16 cents per share payout in FY21, I don’t agree with this thesis. Thus, I think Telstra remains a top dividend share to buy for income today. Especially at current 52-week low prices.

2) SPDR S&P Global Dividend Fund (ASX: WDIV)

Turning to an exchange-traded fund (ETF) now, here we have this globally focused income fund from SPDR. WDIV holds a basket of 75 dividend-paying shares from around the world, with only companies delivering steady or increasing dividends over the past decade selected. Canada and the United States are heavily weighted in this ETF, as well as Hong Kong and the United Kingdom. Some of WDIV’s holdings include Enagas, Nokian Tyres and Japan Tobacco, as well as our own AGL Energy Limited (ASX: AGL) and Commonwealth Bank of Australia (ASX: CBA).

I think getting exposure to dividend-paying shares outside the ASX bubble is a great way to bulk up and diversify an ASX income-focused portfolio. Remember, you’re not too diversified if all you hold is four ASX bank shares and a couple of miners. WDIV currently offers a healthy trailing dividend yield of 5.62% and charges a management fee of 0.5% per annum.

More reading

• 2 fantastic ASX 50 shares I would buy today
• 3 top ASX shares I would love to buy this September
• UBS picks the best and worst ASX stocks from the reporting season
• Should you buy Telstra and these beaten down ASX shares?
• The Telstra share price just hit a 52-week low: Is it time to buy?

Motley Fool contributor Sebastian Bowen owns shares of SPDR S&P Global Dividend Fund and Telstra Limited. The Motley Fool Australia owns shares of and has recommended 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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The Galaxy Resources Limited (ASX: GXY) share price has been creating tailwinds over the past 3 months. Although down 5.42% today due to the market sell-off, the Galaxy share price has jumped from 84 cents in May to $1.36 per share at the time of writing.

However, the recent Galaxy share price rise does not paint the full picture. Shareholders have been taken on a wild rollercoaster ride since the fall in lithium prices, which started in 2017 after supply outstripped demand for the key battery component.

Today, it is forecasted that the lithium market will move towards a balance in 2021–22. Will this restore Galaxy Resources to its former glory?

Lithium oversupply

Almost all everyday technology such as mobile phones, laptops, cameras, toys and clocks include lithium.

However, one of the biggest markets for the battery-making ingredient is electric vehicles. The reason for this is the huge difference in battery sizes. As an example, a Tesla car is fuelled by up to 90 kWh of lithium-ion, compared to 5–6 kWh for an iPhone 11 that would last an entire year.

As the world continues to be slow to adopt the electric vehicle revolution, lithium miners have finally started to decrease their supply to the market, namely ASX companies like Galaxy and Orocobre Limited (ASX: ORE).

Lithium is mainly sourced from either spodumene or brine. Australia is home to the majority of the hard rock (spodumene) mines, while brine production is concentrated mainly in South America, particularly Chile and Argentina.

It takes about 3–5 years for spodumene mines to go into production, whereas brine can take up to 7 years. The shorter project lead times and previous reluctance to slow down expansion plans by Australian miners led to a deepening oversupply in the market. This in turn has led to extended pressure on the lithium price.

Financial snapshot of Galaxy

Galaxy released its full-year results to the market last week for the period ending 30 June 2020. Revenue had fallen 17% to $23.3 million, and statutory net profit after tax came in at a loss of US$22.2 million. This was a significant improvement from the shortfall of US$171.9 million in FY19.

The company recorded a cash balance of $106 million and nil debt.

Galaxy burned over $60 million in cash over a trailing 12 months. At the current rate, without capital raising through debt or equity, this means that Galaxy will only have enough cash for 21 months from June. That does not leave a lot of breathing room for a company to continue maintaining current operations, despite its reduced cash burn of 38% from the prior year.

While I don’t think Galaxy will have any trouble raising cash, the fall in revenue is the most concerning. The impact from subdued realised selling price and lower sales volumes from weak market conditions is expected to remain in the short-term, thus affecting future earnings.

Should you invest?

In the long run, the Galaxy share price could surge a lot high from where it is today. However, this is dependent on the price fetched by lithium, which is controlled by market forces.

Personally, I think that the lithium price will remain volatile for the next few years, and thus would not be a buyer of Galaxy shares today.

More reading

• Quarterly rebalance: Coles and Fortescue added to ASX 20, Zip joins the ASX 200
• Why the Orocobre share price is the worst performer on the ASX 200 today
• ASX 200 edges higher: Fortescue sinks, NAB sells MLC Wealth, Costa jumps
• These are the 10 most shorted ASX shares
• Top brokers name 3 ASX shares to sell next week

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. 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 WAM Capital Limited (ASX: WAM) share price is today rising after announcing it has placed a bid for Concentrated Leaders Fund Ltd (ASX: CLF). The WAM Capital share price has risen 0.48% on the news despite it being a tough day for the All Ordinaries Index (ASX: XAO).

About WAM Capital

WAM Capital is a listed investment company (LIC) managed by Wilson Asset Management. It listed on the ASX in 1999 and provides investors with exposure to an actively managed, diversified portfolio of undervalued companies listed on the ASX. WAM Capital aims to deliver a stream of fully franked dividends and provide capital growth with its focus on small to medium sized businesses.

What’s moving the WAM Capital share price?

WAM Capital announced a conditional off-market takeover bid for Concentrated Leaders Fund (CLF). The offer consideration is two WAM Capital shares for every 3.7 CLF shares, representing a 15.2% premium to the CLF share price.

WAM Capital has sited the takeover as an “exit opportunity” for Concentrated Leaders shareholders. WAM Capital’s board have cited the appointment of the new CLF manager occurring without shareholder approval as reason to accept the offer. Furthermore, the LIC believes that CLF shareholders have been unfairly treated as the size of the company was reduced through a 12.8% special dividend payment.

Concentrated Leaders’ response

Concentrated Leaders’ management team is currently reviewing the offer and has stated that it is not in a position to make a recommendation to shareholders yet.

Accordingly, CLF shareholders have been advised to take no action in relation to the offer until the board has had a chance to further consider the offer and bidder’s statement.

Concentrated Leaders is also a listed investment company. It invests primarily in Australian companies within the S&P/ASX 200 Index (ASX: XJO) with the objective of delivering regular income and long-term capital growth to its shareholders.

Foolish takeaway

It remains to be seen what the response will be from Concentrated Leaders’ management. Nonetheless, the market has responded positively with the Concentrated Leaders share price moving 4.9% higher to $1.07. According to reporting in The Australian Financial Review, the move represents the potential beginning of a round of consolidation in the sector.

Including today’s modest rise, the WAM Capital share price is currently trading 7.93% lower in 2020. 

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Motley Fool contributor Daniel Ewing 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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