The recent surge in ASX retailers like the JB Hi-Fi Limited (ASX: JBH) share price may be running out of puff. A leading broker is recommending investors rotate to better value stocks.

This advice comes at a time of renewed worries about a second wave of COVID-19 infections as large parts of Victoria re-enters a lockdown.

While several ASX retail stocks benefitted from the first nationwide shutdown to contain the pandemic, they may not get a repeat boost this time round.

ASX retailers at risk of a de-rating

In fact, the analysts at Macquarie Group Ltd (ASX: MQG) thinks the re-rating that lifted the sector is at risk of deflating.

This is because government support programs like JobKeeper have provided a temporary shot in the arm to consumers, limited the spike in unemployment and given many low wage earners a pay rise even.

“We believe these short-term catalysts are likely to be unwound in next couple of months, the early wins from holding these names are likely to have already occurred,” said Macquarie.

COVID-19 ASX winners losing their crown in second lockdown

Consumers that were forced to stay and work from home have rushed to buy home office supplies. Many have also started on DIY projects around the home to occupy and distract themselves.

This provided the Wesfarmers Ltd (ASX: WES) share price a big boost as group benefitted through its Bunnings and Officeworks stores.

The JBH share price was also another big winner as sales of computers and IT accessories took off, while the demand for home delivered food made the Domino’s Pizza Enterprises Ltd. (ASX: DMP) share price a tasty treat for investors.

While these retailers will continue to benefit from the ongoing COVID-19 disruption, they probably won’t get the same uplift the second time round.

Earnings forecasts at risk

“As the world and consumer settings return to a more normal setting over the next couple of years, so too will spending patterns,” said Macquarie.

“This suggests that using FY20 or FY21 as a base year for calculating sustainable earnings and valuation is likely to lead to disappointment.”

For this reason, Macquarie downgraded its recommendation on Wesfarmers, JB Hi-Fi and Domino’s to “neutral” from “outperform” even though it didn’t change its earnings forecasts for the trio.

ASX stocks to buy on second wave fears

The broker now favours consumer staple stocks, namely the major supermarkets. These include the Woolworths Group Ltd (ASX: WOW) share price and Coles Group Ltd (ASX: COL) share price.

Both these stocks outperformed the S&P/ASX 200 Index (Index:^AXJO) today as panic buying of groceries due to the new Victorian lockdown will provide a lift to sales that analysts weren’t counting.

Macquarie is recommending both supermarket stocks as “outperform”.

More reading

• 2 reasons early super withdrawal might be a bad idea
• Top brokers are urging investors to buy these ASX stocks today
• Goldman Sachs names the ASX retail shares to buy and the ones to avoid
• My bull and bear case for the ASX share market
• ASX 200 down 0.5%: Afterpay completes placement, big four banks tumble

Motley Fool contributor Brendon Lau owns shares of Macquarie Group Limited and Woolworths Limited. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET, Wesfarmers Limited, and Woolworths Limited. The Motley Fool Australia has recommended Domino’s Pizza Enterprises 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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Today, the Vault Intelligence Ltd (ASX: VLT) share price rose by 19.12% to $0.40 cents following a takeover offer from Damstra Holdings Ltd (ASX: DTC). 

What were the terms of the offer?

If the takeover goes ahead, Vault shareholders will receive 1 share in Damstra for every 2.9 Vault shares they hold. This values Vault at an implied $0.464 cents per share. The offer represents a premium of 36.5% over the Vault closing price on 6 July of $0.34. If the deal goes ahead, Vault shareholders will own 25% of fully diluted Damstra-issued capital.

According to an announcement released by Damstra, each company has highly complementary product sets and respective client bases. Damstra is a global provider of integrated workplace management solutions, and expects that the takeover will provide increased revenue diversity, greater scale and a platform for accelerating growth. It also expects synergies of $4 million within 12 months of the acquisition.

Damstra also announced that its financial year 2020 unaudited earnings before interest, tax, depreciation and amortisation were $5.5 million. 

According to Damstra, the merged group will have pro-forma revenue and other income of $33 million to $35 million.

The directors of Vault, including the company’s CEO and founder, recommended that Vault shareholders vote in favour of the offer.

About the Vault Intelligence share price

Vault Intelligence is a software provider that provides solutions for workforce performance. The software provided by Vault involves wearable solutions with applications including smart watch-based software. Vault aims to deliver productivity gains to to organisations while helping them to manage the risk, safety, security, protection and connection of workers. 

Vault currently has a number of partnership for distribution of its software. The company recently signed an agreement with Vodafone New Zealand for that company to become a reseller of its software. It also recently signed an agreement with a Singapore blue-chip customer for an upscale from 1,000 solo licenses to 7,500 solo licenses with over 2,500 wearable devices provisioned in June. Vault also has an agreement with Peninsula Health for the support of 40,000 seniors. 

During the June quarter, Vault also signed agreements with NZ Post, Visy Recycling, Hirepool, Sorbent, Asaleocare, DB Breweries and multiple councils across Australia and New Zealand.

The Vault Intelligence share price is up 344% from its 52 week low of $0.09. It has dropped 2.44% since the beginning of the year, but has increased 81.8% since this time last year.

More reading

• Why PolyNovo and this ASX mid cap share could be future large caps
• Why it’s time to rotate out of JB Hi-Fi share price and these popular ASX stocks: Macquarie
• 5G Networks share price surges 9% higher on acquisition announcement
• 2 reasons early super withdrawal might be a bad idea
• Forget term deposits and buy these strong ASX dividend shares

Chris Chitty has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Damstra Holdings Ltd. The Motley Fool Australia has recommended Damstra Holdings 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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Today the 5G Networks Ltd (ASX: 5GN) share price surged on higher on news that it had successfully completed the acquisition of ColoAU, a wholesale provider of data centre services and hyper-speed global networks. The 5G Networks share price is up by more than 9% and is sitting at $1.32 per share at the time of writing.

What does 5G Networks do?

5G Networks is a licensed telecommunications carrier that operates across Australia. The company supplies cloud-based solutions, data networks and offers management services.

In June the company successfully raised $18.2 million in funds to pursue growth projects through expansion of its fibre network in Sydney and Melbourne, and new builds in Brisbane and Adelaide focused on CBD demand.

What did 5GN announce today? 

This morning, the news that the teclo would be acquiring ColoAU sent the 5G Networks share price spiralling higher. 5G Networks agreed to purchase the company for $2.9 million, which represents a value that is four times that of ColoAU’s earnings before interest, tax, depreciation and amortisation.

ColoAU currently operates 6 datacentres in Australia, with its annual revenue sitting at $4.2 million. This acquisition will allow 5G Networks to fast track its wholesale section of business by utilising established ColoAU platforms. The company advised that it expects to realise synergies in the first 12 months, post-acquisition, in the range of $500–$700,000.

Through integration of the ColoAU network platform, 5G Networks’ wholesale customers will enjoy automated self-service capabilities. 5G Networks highlights this will allow it to meet the growing demand for high-speed connectivity across cloud platforms and data centre hosting in Australia and international markets.

The deal also allows 5G Networks to implement a number of benefits including cost avoidance and strategy acceleration, as it was planning to invest and build the networking technology recently deployed by ColoAU.

Commenting on the growth potential of the acquisition, Joe Demase, 5G Networks Managing Director, stated:

ColoAU allows us to fast track a number of growth strategies we have identified including the ability to employ system automation to augment the customer fulfilment process and accelerate the speed of service delivery. We believe our channel partner program will be further enhanced by offering alternative on-demand connectivity solutions which will seamlessly connect to over 67 leading data centres once our fibre network rollout is complete. Importantly, the international architecture of ColoAU’s network is also exciting as it opens the possibility of new markets and geographic expansion.

About the 5G Networks share price

The 5G Networks share price has been on solid run this year, gaining around 66% and surpassing a market cap of $100 million. Its current price of $1.32 per share is still down by 8% on this time last year, but is up more than 140% since its March 2020 lows.

More reading

• Why the 5G Networks share price is charging higher today
• The smartest ASX shares to invest $10,000 in right now

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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One of the Federal Government’s policy responses to the coronavirus pandemic has been to allow the withdrawal of up to $20,000 from superannuation funds. Eligible persons are allowed to make one, tax-free withdrawal of $10,000 in the 2020 financial year, and a further $10,000 withdrawal in FY21 (which began last week on 1 July).

According to reporting in today’s Australian Financial Review (AFR), this program has proven remarkably popular. The AFR reports that the initial $27 billion in early withdrawals that Treasury forecasted is likely to be well exceeded.

Apparently, more than 2.4 million Australians have had early super release applications approved as of 5 July.

But there are many questions surrounding this policy decision. So let’s look at two of the main reasons I think withdrawing $10,000 or $20,000 from your super account might not be such a great idea. I’d like to preface this by saying that I’m not passing any judgement on those who have chosen to access their super early out of genuine financial hardship.

1) Early super withdrawal damages your retirement fund

The whole point of our superannuation structure is that it capitalises on compound interest over many decades. Making regular contributions to a pool of cash that is invested into growth assets like ASX shares is a great way to harness the power of compounding. It’s why investing $1,000 per month with a 7% return over 30 years will net you a nest egg of $1.23 million (excluding taxes and transaction fees). This is despite only $360,000 actually being invested over the period.

Unfortunately, a great way to kneecap these kinds of returns is withdrawing capital early. Withdrawing $10,000 today could cost you $50,000 down the road. It’s a high-cost transaction, have no doubt about it.

2) Most withdrawals were done at the market bottom

The first day Australians were eligible to access their super withdrawals was 20 April 2020. On that date, the S&P/ASX 200 Index (ASX: XJO) was down around 25% from its 2020 high watermark. In other words, most Aussies who cashed out their super did so after a massive share market crash. The ASX 200 has gone on to add nearly 11% since that date (plus some dividends). Unfortunately, these are gains anyone who cashed out some of their super missed out on.

It’s hard to quantify how damaging this action would have been for a retirement fund. Selling low is a great way to lose money, and it would have definitely stunted a super fund’s return potential if this was done in April.

For anyone who has made a second withdrawal over the past week, it’s not as deleterious due to the market’s more recent gains. But despite these gains, the ASX 200 still remains around 17% below its 2020 peak.

Foolish takeaway

As I said above, I’m certainly not trashing anyone who has withdrawn capital from their super fund out of genuine financial need. That was the intent of the scheme, afterall. But there have been disturbing reports that many Aussies are withdrawing this money to ‘play the markets’. Remember, our super funds are there to support our retirement. That’s not something I would want to undermine lightly.

More reading

• Why it’s time to rotate out of JB Hi-Fi share price and these popular ASX stocks: Macquarie
• Top brokers are urging investors to buy these ASX stocks today
• My bull and bear case for the ASX share market
• ASX 200 down 0.5%: Afterpay completes placement, big four banks tumble
• The Afterpay share price among ASX stocks hit by a broker downgrade today

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. 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 want to earn an income from traditional interest-bearing assets like term deposits, it is becoming increasingly difficult.

For example, at present Westpac Banking Corp (ASX: WBC) is offering 0.85% per annum yields on its 12-month term deposits. This is roughly in line with what other banks are offering.

Based on this rate, if you invested $1 million into these term deposits, you’d only get $8,500 of income each year. Which is certainly not enough to live on.

Fortunately, the Australian share market is home to a number of ASX dividend shares which offer vastly superior yields.

Two ASX dividend shares that I think would be great as part of a balanced income portfolio are listed below. Here’s why I would buy them:

BWP Trust (ASX: BWP)

The first dividend share to buy instead of a term deposit is BWP Trust. It is the largest owner of Bunnings Warehouse sites in Australia with a portfolio of 68 stores leased to the hardware giant. Pleasingly, thanks to the strength of the Bunnings business, the trust appears to have been unaffected by the pandemic and continues to collect rent as normal. As a result, it is able to pay its distribution as normal this year. Looking ahead, I feel the trust is well-placed to grow its distribution modestly each year for the foreseeable future. Based on the current BWP share price, I estimate that it offers a generous 3.8% FY 2021 distribution yield.

Rural Funds Group (ASX: RFF)

Another dividend share that I think would be better than term deposits is Rural Funds. It owns a diversified portfolio of high quality Australian agricultural assets which include cattle properties, vineyards, and orchards. The main attraction to the company for me is its long tenancy agreements. With a weighted average lease expiry of over a decade and rental increases built into contracts, Rural Funds appears well-positioned to increase its distribution each year for a long time to come. This will be the case in FY 2021, with management intending to lift its distribution by 4% to 11.28 cents per share. Based on the current Rural Funds share price, this represents a forward 5.6% yield.

More reading

• ASX 200 down 0.5%: Afterpay completes placement, big four banks tumble
• AFG share price flat despite revealing 30% increase in lodgements
• These ASX shares are swept up by the new Victorian COVID-19 lockdown
• Here’s what ASX investors need to know about the RBA’s rate decision today
• I think the Rural Funds share price is a buy after insider buying

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. 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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When it comes to investing in ASX shares, everyone is different. Some investors like to invest in the shares they think have the most potential to climb further in value. Others will buy the shares most likely to pay large, fully franked dividends.

But some ASX investors (although not as many as I think should) also trade in international shares. That is, those companies listed on exchanges beyond our shores.

On that note, let’s look at the 5 most popular international shares that were traded on Commonwealth Bank of Australia (ASX: CBA)’s CommSec platform. CommSec is the largest and most popular brokering platform in Australia. This makes it pretty representative of the entire ASX investing community. This data comes from CommSec’s website and covers the period between 29 June and 3 July.

Which international shares are ASX investors buying?

1) Tesla Inc. (NASDAQ: TSLA)

If you haven’t heard of Tesla and its eccentric CEO, Elon Musk, then you may have been living under a rock. This electric car maker has been grabbing worldwide headlines in recent weeks as its share price has exploded to unprecedented highs. Just one month ago, Tesla shares were trading around US$949. Today, those same shares are touching US$1,390, up more than 46% in just 4 weeks. And anyone who bought Tesla exactly a year ago is looking at a 5-bagger stock today.

2) Facebook Inc. (NASDAQ: FB)

Just like Tesla, everyone knows Facebook and its (slightly infamous) CEO, Mark Zuckerberg. Facebook is easily the largest social media company in the world. Not only does it own the ubiquitous Facebook platform, but it also owns Instagram, Messenger, and Whatsapp – all among the most frequently used apps on the planet. Facebook has certainly had its fair share of controversies over the years, but that hasn’t stopped Facebook shares climbing ~65% since mid-March.

3) Apple Inc. (NASDAQ: AAPL)

Apple is the largest company in the world right now for a reason. It has probably the world’s most valuable brand and makes one of the most popular consumer products of all time in the iPhone. But Apple has also been expanding into services over the past few years with offerings like Apple Pay, Apple Music, and Apple TV. It’s been a great performer for over 2 decades now, so it’s no surprise Apple shares remain popular with Aussie investors today.

4) Microsoft Corporation (NASDAQ: MSFT)

Apple may currently be the largest company in the world, but Microsoft is a close second. Owning the world’s most popular productivity programs in Microsoft Office, as well as the most popular computer operating system in Windows, is just part of Microsoft’s success story. It’s also a heavyweight in the lucrative world of gaming with its Xbox consoles as well as a formidable player in the rapidly-growing cloud space with its Azure platform. Not a bad stable of operations for this tech titan.

5) Amazon.com Inc. (NASDAQ: AMZN)

Last but certainly not least is Amazon. Amazon is one of the most striking American success stories in history. It was started as an online bookstore back in the late 1990s by Jeff Bezos. Today, Bezos is the world’s richest person (worth around US$166 billion) and Amazon is a US$1.5 trillion behemoth. How else would you describe a company that turns over hundreds of billions of dollars in revenue each year? Furthermore, Amazon continues to expand, push boundaries and disrupt industries to this day. With Amazon shares rocketing past US$3,000 per share in just the last week, no wonder Aussie investors are getting interested in sharing some of the pie.

Foolish takeaway

So there you have it, Aussies’ top 5 favorite international shares. No real surprises in this list, but all of these shares have done exceptionally well for their investors over the past few months. It just goes to show how a household name can also make a phenomenal investment.

More reading

• ASX 200 down 0.5%: Afterpay completes placement, big four banks tumble
• AFG share price flat despite revealing 30% increase in lodgements
• Why the CBA share price is worth watching this quarter
• These ASX shares are swept up by the new Victorian COVID-19 lockdown
• Here’s what ASX investors need to know about the RBA’s rate decision today

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, 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. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Facebook and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon, Apple, Facebook, Microsoft, and Tesla and recommends the following options: long January 2022 $1920 calls on Amazon, short January 2021 $115 calls on Microsoft, long January 2021 $85 calls on Microsoft, and short January 2022 $1940 calls on Amazon. The Motley Fool Australia has recommended Amazon, Apple, and Facebook. 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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This sell-off could prove to be the second buying opportunity for cashed-up investors and top brokers are recommending a handful of ASX stocks to buy today.

The S&P/ASX 200 Index (Index:^AXJO) tumbled 1% in the last hour of trade when it was trading just below breakeven earlier in the day.

Investors are increasingly fretting about a resurgence in the COVID-19 pandemic and escalating tension between US allies and China aren’t helping.

I am expecting further market weakness as we head into the August reporting season, but as I mentioned before, any big pullback should be treated as a buying opportunity.

ASX gold stock beating expectations

Those hunting for well-priced ASX stocks to buy might want to watch the St Barbara Ltd (ASX: SBM) share price.

Morgan Stanley reiterated its “overweight” recommendation on the gold miner after it delivered a better than expected production report.

Gold output in the June quarter of 109,000 ounces was around 8% higher than the broker’s estimate and performance from its Gwalia mine was particularly pleasing.

Morgan Stanley pointed out that Gwalia is key to lifting St Barbara’s gold production in FY21 and the broker has a 12-month price target of $3.85 on the stock.

Given that gold is in vogue during times of heightened uncertainty, St Barbara looks like a worthwhile addition to a share portfolio.

Robust loan applications

Meanwhile, the Australian Finance Group Ltd (ASX: AFG) share price is another worth watching. The mortgage broker recently released a pleasing update, which prompted Macquarie Group Ltd (ASX: MQG) to restate its “outperform” rating on the stock.

Despite the impact of the coronavirus on our property market, mortgage applications have jumped and is reflected in the group’s lodgement activity.

“Our previous forecasts assumed a 30% decline in the level settlement activity in 1H21 (set in mid Mar20 as COVID-19 uncertainty peaked),” said the broker.

“The level of lodgement activity in 2H20 has caused us to revise our settlement activity forecast.”

But the broker lowered its assumed conversion rate between lodgement and settlement of the loan to around 55% from the historical average of circa 65%. This is to account for the tougher job market, weaker consumer confidence and operational delays.

However, the negatives can’t outweigh the positives and Macquarie thinks the stock is cheap. It’s 12-month price target on AFG is $2.34 a share, which implies a near 50% upside if dividends are included.

Looking cheap for the long haul

Finally, the Aurizon Holdings Ltd (ASX: AZJ) share price is looking good value to Credit Suisse, which repeated its “outperform” recommendation on the rail operator today.

While falling demand for coal due to the impact of the coronavirus on economic activity is a headwind for Aurizon’s haulage business, this isn’t as bad as it seems.

Firstly, the drop in demand for Australian coal is less severe than elsewhere. Secondly, this earnings impact is relatively small to Aurizon.

Around 41% of Aurizon’s earnings before interest and tax (EBIT) is exposed to coal haulage, and of this, around two-thirds of earnings is from take-or-pay contracts. This means the rail operator gets paid by the customer even if its wagons are empty.

Credit Suisse’s 12-month price target on Aurizon is $5.55 a share.

More reading

• Why it’s time to rotate out of JB Hi-Fi share price and these popular ASX stocks: Macquarie
• 2 reasons early super withdrawal might be a bad idea
• My bull and bear case for the ASX share market
• ASX 200 down 0.5%: Afterpay completes placement, big four banks tumble
• The Afterpay share price among ASX stocks hit by a broker downgrade today

Motley Fool contributor Brendon Lau owns shares of Macquarie Group Limited. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia has recommended Aurizon Holdings 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 retail sector certainly is a tricky place to invest right now. The recently announced six-week lockdown in Melbourne and the decline in forecast immigration are expected to weigh heavily on some retailers.

Analysts at Goldman Sachs have been busy running the rule over the sector and have picked out a few companies which they feel will be winners and losers in FY 2020 and FY 2021.  

What did Goldman Sachs find?

First and foremost, Goldman Sachs favours consumer staples over discretionary retailers. It has buy ratings on the likes of Coles Group Ltd (ASX: COL) and Metcash Limited (ASX: MTS). This is because in the current environment, it feels predictability of earnings is very valuable.

Outside this, here is a summary of how it feels a number of key retailers will perform in the near term:

Domino’s Pizza Enterprises Ltd (ASX: DMP)

Goldman Sachs is positive on Domino’s and has a buy rating and $67.70 price target on its shares. It commented: “While we expect the growth rate for Cafés, restaurants and takeaways foods to be negative in FY21 and stronger at +15.8% in FY22, we believe DMP is unlikely to see these variations due to the higher share of digital sales in the business (72.4% of sales in 1H20). We forecast DMP to see 4% comp growth in FY21 and +4.5% in FY22, after +1.7% in FY20 (due to hard lock downs in NZ in 2H20).”

Harvey Norman Holdings Limited (ASX: HVN) and JB Hi-Fi Limited (ASX: JBH)

JB Hi-Fi and Harvey Norman have been very impressive performers during the pandemic, but the broker doesn’t expect this form to carry over into FY 2021. Next year it expects JB Hi-Fi to report a 3.8% decline in sales and Harvey Norman to post a 1.3% decline in sales. Goldman has a neutral rating and $39.90 price target on the JB Hi-Fi share price, but a buy rating and $4.25 price target on the Harvey Norman share price.

Premier Investments Limited (ASX: PMV)

The broker has a neutral rating and $13.70 price target on this retail conglomerate’s shares. It has “forecast all apparel brands to see double digit declines in FY20 before largely returning to FY19 sales levels by FY21.” However, it does have concerns that the key Smiggle brand might have a slower recovery in its sales. Goldman is predicting 10% growth in FY 2021 after a 20% decline in FY 2020.

Super Retail Group Ltd (ASX: SUL)

Goldman Sachs is bullish on Super Retail and has retained its buy rating and lifted its price target slightly to $10.20. Thanks to the diversity of its businesses, it doesn’t believe the company will have been impacted too greatly during the pandemic. It explained: “We forecast the leisure brands BCF and Macpac to see negative growth at -1.6% and -10% respectively in FY20 while SupercheapAuto and Rebel are forecast to grow at +3.4% and +2.3% respectively. We forecast all four brands to grow at low single digit in FY21.”

Wesfarmers Ltd (ASX: WES)

Goldman has a neutral rating and $42.50 price target on Wesfarmers shares. Its analysts said: “We forecast Bunnings and Officeworks to have seen strong growth at +11.7% and +17.5% respectively in FY20 but forecast FY21 sales to decline by -1.7% and -1.8%. We forecast the department stores (Kmart and Target) to see stronger declines of -3% and -9.5% respectively over FY21.”

More reading

• My bull and bear case for the ASX share market
• Plummeting retail spend puts ASX fashion shares under the microscope
• Why Coles, Kogan, Northern Star, & Splitit are charging higher
• Why I would buy Nanosonics and these ASX growth shares
• These ASX shares are swept up by the new Victorian COVID-19 lockdown

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited and Super Retail Group Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Wesfarmers Limited. The Motley Fool Australia has recommended Domino’s Pizza Enterprises 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 share market recovery has stalled as Victoria reintroduces lockdowns to combat a new resurgence of the coronavirus outbreak. Businesses are now facing shutting up shop not long after reopening, casting doubt on economic recovery. The impacts of the coronavirus crisis on our lives and spending are becoming entrenched as we work, eat, and spend more leisure time at home. 

Consumption patterns are likely to be impacted over the long term as new habits are formed. This will have a mixed impact on ASX shares, with some set to benefit while others will continue to experience challenges. According to the most recent Deloitte Access Economics Business Outlook, the mining sector has continued largely unabated through the crisis, with resurgent demand from China driving iron ore and coal sales. 

This has benefitted companies such as BHP Group Ltd (ASX: BHP), whose production guidance for 2020 remains unchanged for petroleum, iron ore, and metallurgical coal. Rio Tinto Limited (ASX: RIO) actually reported an increase in iron ore shipments in the March quarter, with shipments up 5% compared to the prior corresponding period. 

But the news is less positive in other parts of the economy, such as the tourism industry. With international travel off the cards and domestic travel severely curtailed, companies like Qantas Airways Limited (ASX: QAN), Flight Centre Travel Group Ltd (ASX: FLT), and Webjet Limited (ASX: WEB) are in limbo. 

In retail, fortunes have been mixed. Consumers are increasingly turning to e-commerce to fulfil their needs. Those with a strong online presence have reported surging digital sales. Those that rely on a physical presence have been more adversely impacted due to store closures. Accent Group Ltd (ASX: AX1) reported a quadrupling of online sales when stores closed. Adairs Ltd (ASX: ADH) saw online sales increase 92.6% over the half year to 14 June and 64% over the year to date.

Pre-COVID-19, strong overseas population growth, international travellers, and students provided stimulus to many industries. This source of growth has now been cut off, and it’s not clear when it will resume. As Deloitte notes, this hurts education and tourism immediately, but also has downstream impacts. It may weigh on economic recovery, impacting on everything from construction to utilities.  

Foolish takeaway

The medium- to long-term impacts of the pandemic will be mixed, favouring some ASX shares over others. Changes to consumer behaviour resulting from the pandemic may alter spending patterns over the long term.  

More reading

• My bull and bear case for the ASX share market
• Top brokers name 3 ASX shares to buy right now
• Plummeting retail spend puts ASX fashion shares under the microscope
• Why Afterpay, Alumina, Magellan, & Webjet shares are dropping lower
• Rio Tinto share price on watch following broker downgrade

Motley Fool contributor Kate O’Brien owns shares of BHP Billiton Limited and Rio Tinto Ltd. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended Accent Group and Flight Centre Travel 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.

The post These ASX shares are the winners and losers in the “new normal” appeared first on Motley Fool Australia.

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I think the ASX share market seems to be at a crossroad right now. Should investors be bulls or bears in this environment?

There are arguments for both sides. The S&P/ASX 200 Index (ASX: XJO) is struggling to stay above the 6,000 point level – which is a symbolic market measure. The ASX 200 spent most of the 2010s below 6,000.

Here are my thoughts about the bull and bear case for the ASX share market:

Bull case

I was surprised at how strongly the ASX share market recovered after the initial COVID-19 selloff.

Since 23 March 2020 the ASX 200 has gone up more than 31%. The share prices of the big four ASX banks of Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ) are still down materially from their pre-coronavirus prices. If you exclude the banks then the ASX share market recovery looks even stronger.

I think the lower interest rates do go some way to justify the higher prices. All assets are meant to be valued compared to the ‘risk free rate of return’, namely government bonds. With the RBA interest rate now down to just 0.25%, I think it’s clear that share prices would rise in reaction to that.

Obviously another key factor for share prices is the earnings and expectations of future earnings.

Listed businesses are bigger and more resilient

You’d expect the ASX share market to fall during a recession. The share market did fall and it’s still down. But remember that the ASX share market isn’t just a collection of random businesses in the economy. ASX shares tend to be among the biggest and best in their respective industries.

ASX shares generally have better balance sheets than smaller unlisted businesses. Listed businesses can get access to capital a lot easier as well.

I think what’s been most interesting during this period is that many ASX shares have actually reported an increase in revenue during the last couple of months because of all of the stimulus provided to the economy. We’ve seen a lot of spending in certain categories like groceries, DIY home projects and home office products.

Some of the shares that have reported strong revenue growth include: Wesfarmers Ltd (ASX: WES), Woolworths Group Ltd (ASX: WOW), JB Hi-Fi Limited (ASX: JBH), Harvey Norman Holdings Limited (ASX: HVN), Adairs Ltd (ASX: ADH), Nick Scali Limited (ASX: NCK) and Accent Group Ltd (ASX: AX1).

If we accept that earnings ultimately decide share price movements, then I think it’s fair to say the ASX share market has behaved quite rationally with the shares that have seen stable or even growing revenue.

Bear case

But arguably this surge of retail spending is going to be short lived. Jobkeeper, jobseeker and the coronavirus supplement have supported households during this difficult period. But the broad government support is scheduled to come to an end in September. What happens after that?

Has most of the country recovered enough for the economy to go back to normal? I’m not sure it has yet, particularly for Melbourne which has gone back into a lockdown.

The OECD warned that if there is a return to lockdowns in Australia then GDP could fall by 6.3% in 2020. Thankfully it’s not the entire country that’s facing a lockdown. But Melbourne is important as it’s Australia’s second biggest city. Hopefully COVID-19 hasn’t escaped from Victoria into another state during the last couple of weeks – that would be bad news for the ASX share market.

US issues

What particularly concerns me at the moment is the prospect of a large second wave in the US – there are now 3 million confirmed cases. Some economically important US states like Texas are now slowing and reversing the lifting of restrictions. More restrictions means less economic activity. Obviously officials must make the right decisions to protect lives, but it does mean earnings hits for people and businesses. The ASX generally follows the US share market in the short-term.

The key for stopping a COVID-19-caused share market fall is some sort of healthcare breakthrough in my opinion. Without a healthcare solution it will mean either extended restrictions or increased infections (and deaths), neither of which is good for the economy or share market. 

I’m also cautious for the global share market with the upcoming US election later this year. I think it could cause a lot of uncertainty over the next six to nine months depending on who wins and what actions they take. Biden may choose to reverse the tax cuts given to US businesses and President Trump is very unpredictable.

Foolish takeaway

I’m bullish about the long-term future of the ASX share market. However, I feel cautious about what may happen over the rest of 2020. I think the recent bull run has mostly been justified because many companies have delivered strong updates and the economy hasn’t been hit as hard as expected. But the last three months of 2020 could cause a lot of share market volatility both in Australia and internationally.

More reading

• Goldman Sachs names the ASX retail shares to buy and the ones to avoid
• These ASX shares are the winners and losers in the “new normal”
• Plummeting retail spend puts ASX fashion shares under the microscope
• ASX 200 down 0.5%: Afterpay completes placement, big four banks tumble
• The Afterpay share price among ASX stocks hit by a broker downgrade today

The post My bull and bear case for the ASX share market appeared first on Motley Fool Australia.

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