The CSL Limited (ASX: CSL) share price has gone off the radar somewhat in recent months. If we cast our minds back to 2019, CSL shares were the hot stock to own. Everyone was talking about how high CSL could go. And boy did it get high, so to speak. Over the course of the 2019 calendar year, CSL shares rose from around $188 in early January to around $276 by the end of December (nearly 47%).

But over the course of 2020, sentiment on CSL shares has cooled somewhat. The CSL share price started the year at $275.04 and climbed another 24.5% all the way to its all-time high of $342.75 in mid-February. But then the March coronavirus-induced crash came and CSL plummeted back down to roughly $270. Today, CSL shares are asking $288.88 (at the time of writing).

Now, CSL shares are beating the S&P/ASX 200 (INDEXASX: JXO) on a year-to-date returns benchmark. CSL shares are still up roughly 5.12% year to date, whereas the ASX 200 is still nursing a 10% loss for the year so far.

But since 23 March (when the ASX 200 bottomed), the index has risen more than 32%, whilst CSL shares are up 2.5%.

So I think it’s fairly safe to draw the conclusion that CSL is no longer considered the ‘growth wunderkind’ that it was last year in many ASX investors eyes.

Is the CSL share price fairly valued?

So with the current CSL share price inertia, can we consider the shares to be ‘fairly valued’ today? Well, let’s look at how the market is currently pricing CSL shares.

The current CSL share price (at the time of writing) is $288.88. this gives CSL a market capitalisation of $131.18 billion and a price-to-earnings (P/E) ratio of 44.8. It also offers a trailing dividend yield of 1.01% on these current prices.

In the 2018/19 financial year, CSL brought in US$8.21 billion in revenues and US$1.92 billion in net profits after tax (NPAT). This was an increase of 8.13% and 11% respectively over the 2017/18 financial year.

This is healthy growth to be sure, but does it really justify a P/E ratio of 44.8? I’m not so sure.

The current ASX 200 average P/E ratio is around 16.6, going off the iShares Core S&P/ASX 200 ETF (ASX: IOZ). So you are paying a ~2.5x premium for this company over the market average. Does revenue growth of ~8% and profit growth of 11% justify this premium? Not in my eyes.

Foolish takeaway

Therefore, I don’t think CSL shares are trading at ‘fair value’ today, just going off these humble calculations. I like CSL as a company. It has grown spectacularly over the past 2 decades. But I’m not willing to pay nearly 45x earnings for this company today and I think there are better offers elsewhere.

More reading

• Should you buy these 2 new ASX 200 index additions?
• This ASX fund manager is still ultra-bearish on shares
• Should you buy ASX gold shares like Saracen Minerals in July?
• Why I would buy and hold a2 Milk and this ASX 200 share until 2030
• Top brokers name 3 ASX 200 shares to sell right now

Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. 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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Each quarter the S&P/ASX 200 (INDEXASX: XJO) is rebalanced to reflect companies with the largest-weighted market capitalisations. This rebalance ensures that the broader market remains liquid and tradeable. Companies added to the benchmark ASX 200 index can experience an increase in demand as fund managers and institutions balance and hedge their portfolios.

The Q3 FY20 rebalance of the ASX indices was abandoned due to the extreme volatility caused by the coronavirus pandemic. As a result, the June rebalance of the index has attracted more interest and activity.

Here are 2 new additions to the ASX 200 index that you should keep your eye on.

Megaport Limited (ASX: MP1)

With businesses relying on the internet to work remotely, shares in the IT sector showed incredible resilience during the coronavirus pandemic. Megaport has been one of the company’s that has thrived during the lockdown period.

The company is a global leader in interconnection services. It uses software-defined networking (SDN) centres to provide bandwidth, allowing customers to connect their network to other services. This allows users to quickly build and access connections to various services.  It also offers users scalable solutions with flexible terms, allowing businesses to scale up or down as required.

Megaport’s services are essential which was reflected in the company’s share price recovery. Megaport’s share price soared 120% from its March low to its June high. This gave the company a market capitalisation of more than $2 billion and a place in the ASX 200 index.

With many companies considering the potential of having remote workers post-pandemic, Megaport’s services could receive increased attention.

Mesoblast Limited (ASX: MSB)

Mesoblast’s share price nearly tripled in the 3 months to 30 June with news of the company’s potential coronavirus treatment. This propelled the biotechnology company into the ASX 200 index.

Mesoblast is a world leader in developing regenerative medicines for inflammatory diseases. It prides itself on innovation surrounding stem cell research. The company made headlines in April after it announced promising results for its Remestemcel-L treatment for COVID-19.

In a US trial, the company recorded an 83% survival rate in ventilator-dependent COVID-19 patients. Furthermore, 75% of patients had successfully come off ventilator support within 10 days. Due to the urgent nature of COVID-19 therapies, Mesoblast’s treatments undertook a $46 million phase 2/3 trial in order to gain approval from the US Food and Drug Administration.

Mesoblast also completed a $138 million capital raising in order to scale-up manufacturing of its products and is also in the process of conducting clinical trials in Australia. Mesoblast’s treatments, if approved, will likely generate significant interest from fund managers.

Should you buy these additions?

The addition of a company to the ASX 200 can lead to increased demand in their share registry as many funds have a mandate that requires them to have exposure to companies on a certain index.

In my opinion, the most prudent strategy would be to keep these new additions to the index on a watchlist and let price action dictate before making an investment decision.

More reading

• Is the CSL share price fairly valued?
• This ASX fund manager is still ultra-bearish on shares
• Should you buy ASX gold shares like Saracen Minerals in July?
• Why I would buy and hold a2 Milk and this ASX 200 share until 2030
• Top brokers name 3 ASX 200 shares to sell right now

Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT FPO. 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 Aurelia Metals Ltd (ASX: AMI) share price has surged 14.95% higher today on the back of its Q4 FY20 update.

The group is an Australian gold and base metals mining exploration company. Aurelia has a landholding in New South Wales’s polymetallic Cobar Basin and operates the Peak and Hera Mine projects.

The 2 major processing plants possess a combined capacity of approximately 1.3 million tonnes per annum (Mtpa).

Q4 FY20 production update

The company has reported preliminary production increases in gold, copper, lead and zinc. However, the standout performer was in its gold production figures with gold increasing from 14.3 thousand ounces (koz) in Q3 FY20 to 32.8 koz in Q4 FY20. For FY20, preliminary gold production totalled 91.7 koz.

In addition, Aurelia’s cash balance at 30 June 2020 is $78.6 million which is an increase from $51.4 million at 31 March 2020. The group had no debt other than usual creditors. 

Maiden Federation Resource Estimate announcement

On 9 June, Aurelia Metals released a Maiden Resource Estimate (MRE). The Federation deposit contains 197,000 tonnes of lead, 348,000 tonnes of zinc, 67,000 ounces of gold and 755,000 ounces of silver.

Drilling is ongoing to test the prospects of the mine with mineralisation ranges from 80–550 metres in depth and remains open in multiple directions.

A scoping study has commenced to evaluate project development options and the company is anticipating processing at the existing Hera Mine plant.

About Aurelia Metals

As stated in the introduction, the group operates the Hera Mine and Peak Mine. 

Aurelia purchased Hera Mine as an undeveloped gold, lead, zinc and silver deposit in September 2009. The NSW government approved the development in July 2012 after extensive exploration and a feasibility study in September 2011. In FY19, the mine produced 58,025 ounces of gold at an all-in sustaining cost (AISC) of $809 per ounce. 

In April 2019, the company purchased the Peak Mine for $59 million. The group was able to achieve investment payback on this purchase price within 4 months. In FY19, the mine produced 59,496 ounces at an all-in sustaining cost (AISC) of $1,143 per ounce. 

After Aurelia Metals share price gain today, the company’s market capitalisation is worth $515 million. 

More reading

• 3 high quality ASX dividend shares for patient investors
• This ASX fund manager is still ultra-bearish on shares
• 2 exciting small cap ASX shares that could be destined for big futures
• Should you buy ASX gold shares like Saracen Minerals in July?
• Why I would buy and hold a2 Milk and this ASX 200 share until 2030

Motley Fool contributor Matthew Donald 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.

The post Why the Aurelia Metals share price is up 15% today appeared first on Motley Fool Australia.

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If you’re looking to invest in dividend shares and you’re not in immediate need for income, then I think the three ASX dividend shares listed below could be worth considering.

All three dividend shares have been negatively impacted by the pandemic this year. However, I’m confident their performances will improve in FY 2021 and allow them to pay generous dividends again.

Here’s why I would buy them:

Lendlease Group (ASX: LLC)

Earlier this week this international property and infrastructure company released its unaudited results for FY 2020 and revealed a sharp decline in profit. While this was disappointing, I believe all the bad news is now built into the Lendlease share price and the company can start afresh in FY 2021. I’m confident that its burgeoning global development pipeline have positioned the company perfectly for solid earnings growth in FY 2021 and beyond. As a result, I estimate that Lendlease will pay a 57 cents per share dividend next year. This equates to a 4.4% dividend yield.

Sydney Airport Holdings Pty Ltd (ASX: SYD)

Another company which I expect to bounce back strongly in FY 2021 is Sydney Airport. Unfortunately, its terminals are a bit of a ghost town right now because of the pandemic. But with restrictions easing and state borders reopening, I expect domestic travel markets to recover in 2021 to the point that it is able to pay a decent distribution in the region of 29 cents per unit. Based on the current Sydney Airport share price, this represents a 5% FY 2021 dividend yield.

Transurban Group (ASX: TCL)

A final dividend share to look at buying is Transurban. As with Sydney Airport, its toll roads were virtually empty at the height of the pandemic. However, with restrictions easing, traffic volumes have been recovering and toll revenues are improving. I’m not convinced the company will pay a final distribution, but I expect them to return to relatively normal levels in FY 2021. I estimate that it will pay shareholders a 49 cents per unit distribution next year. Based on today’s Transurban share price, this equates to a 3.4% distribution yield.

More reading

• Lendlease share price jumps 6% after being given conviction buy rating
• Fund managers have been snapping up Sonic and these ASX 200 stocks
• ASX 200 finishes 0.6% higher, Aussie house prices fall
• Don’t let low interest rates hold you back! Buy these ASX dividend shares
• Top ASX Stock Picks for July 2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of 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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The S&P/ASX 200 (INDEXASX: XJO) has been faring relatively well over the past 3 months. Since the lows we saw on 23 March, the ASX 200 has recovered more than 32%. Even though the ASX 200 is still down around 9.8% since the start of the year, considering all that has gone on with the coronavirus pandemic, ASX investors may be feeling a slight sense of relief.

But after the run of the past few months, many investors are now asking “where to from here?”. After all, the outlook for the broader Australian economy and the ASX shares that dwell within it is still very uncertain. 

One ASX fund manager is taking a big bet on this question and the direction of this bet should at least cause some angst for investors today.

Enter the ultra-bear

Chris Mackay is the fund manager of MFF Capital Investments Ltd (ASX: MFF). MFF Capital is a Listed Investment Company (LIC) that used to be part of the Magellan Financial Group (ASX: MFG), which Mr Mackay was a co-founder of. There are still some links between the 2 companies, but they are more-or-less independent of each other these days.

Mackay has proved himself as one of Australia’s best fund managers in my view. Over the past 10 years, Mackay has grown MFF’s value by a cumulative 350% (an average of 16.21% per annum). This figure excludes dividend payments.

MFF Capital primarily invests in US-listed shares like Visa, Mastercard, Microsoft and Home Depot, forming the lion’s share of the company’s portfolio.

But MFF’s largest position these days is in cold, hard cash. In an update yesterday, Mr Mackay informed the market that the company’s portfolio is sitting at 44% in cash as of 30 June 2020.

Having 44% of your fund’s assets in cash is another way of saying you’re bearish over shares in the short-term.

So, what has Mr Mackay spooked?

Well, here is some of what he had to say to his investors in the ASX update:

“Cash is MFF’s largest holding. We prefer not to hold significant amounts of cash for long periods. Cash is a wasting, non earning asset… We far prefer significant holdings in sustainably advantaged businesses on sensible terms. Cash and savers fare badly under inflation and financial repression. However, cash is usually valuable in crises for managing advantaged purchases when asset prices fall significantly in relative and absolute terms. Our investment approach has benefited from past market cycles, when purchases were possible at low prices but near term economic and business outlooks were terrible.

Assessment of successful longer term investments looks beyond short term marks to meet market and comparisons with indices and other investors. So far this time we have retained cash rather than risk permanently destroying capital with overpriced purchases or seeking to trade for prices in the market recovery in recent months.”

Should ASX investors follow MFF into bearish territory?

As an investor of MFF myself, I have a lot of respect for Mr Mackay. Therefore, I find his bearish insights troubling.

In my view, having a 44% cash position isn’t just having a foot in both camps; it’s an all-out bearish bet on lower share prices in the near future. It’s not too hard to read between the lines of what Mr Mackay had to say; he clearly is expecting some kind of correction or crash on the horizon.

I myself have been trying to increase my portfolio’s cash position recently (though not to the extent of Mr Mackay). None of us knows what will happen in the markets next year, next month or even tomorrow. But I do think the current circumstances warrant a lot of caution.

So, if you agree with Mr Mackay, looking at your own cash position might be a good idea. Remember, the worst time to sell a share and increase your cash is when the market is already crashing.

More reading

• Should you buy ASX gold shares like Saracen Minerals in July?
• Why I would buy and hold a2 Milk and this ASX 200 share until 2030
• Top brokers name 3 ASX 200 shares to sell right now
• ASX 200 up 0.9%: Citi lifts Afterpay price target, Webjet boosts liquidity
• Fund managers have been snapping up Sonic and these ASX 200 stocks

Sebastian Bowen owns shares of Magellan Flagship Fund Ltd, Mastercard, and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Mastercard and Visa. The Motley Fool Australia has recommended Mastercard. 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 like to keep a close eye on the small cap side of the market. This is because many of the most popular shares on the market at the moment such as Afterpay Ltd (ASX: APT) and Appen Ltd (ASX: APX) were small caps once.

And anyone that was lucky enough to have picked up their shares at that point, will have generated mouth-watering returns over the last few years.

With that in mind, I thought I would look to see if there are any small cap shares which could follow in their footsteps in the 2020s.

Two small cap shares that I think have a lot of potential are listed below:

Bigtincan Holdings Ltd (ASX: BTH)

I think this growing provider of enterprise mobility software could have a very bright future. Its software allows sales and service organisations to increase their sales win rates, reduce expenditures, and improve customer satisfaction. This is achieved through mobile worker productivity improvements provided by the Bigtincan Hub platform. It has a sizeable market opportunity, which management currently estimates will be worth US$5 billion by 2021. Incidentally, the Bigtincan share price jumped higher today after signing a contract with Red Bull.

ELMO Software Ltd (ASX: ELO)

Another small cap which I think has a lot of potential is ELMO. It provides businesses with a cloud-based human resources and payroll software platform. Demand for the platform has been very strong, leading to ELMO delivering stellar sales and earnings growth in recent years. Pleasingly, ELMO still only has a very small share of an addressable ANZ market estimated to be worth $2.4 billion per year. It also has the option to expand its addressable market further by expanding internationally in the future. If this is a success, then I suspect the ELMO share price could be heading a lot higher from here.

More reading

• Why Afterpay, Bigtincan, Dicker Data, & NIB shares are racing higher
• Bigtincan share price jumps 18% on Red Bull deal
• These 2 ASX tech shares show stellar growth prospects
• These exciting ASX shares could help you smash the market in the 2020s
• Are these small cap ASX tech shares future stars?

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Elmo Software. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BIGTINCAN FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO and Appen Ltd. The Motley Fool Australia has recommended BIGTINCAN FPO and 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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The February/March bear market and general investor pessimism has been pushing ASX gold shares higher in 2020.

As such, leading Aussie producers like Saracen Minerals Holdings Limited (ASX: SAR) and St Barbara Ltd (ASX: SBM) have seen their values rocket this year.

In fact, the Saracen share price has climbed 72.7% while St Barbara shares are up 20.6%. So, as we enter a new financial year, could July be a good time to buy ASX gold shares?

Is July the time to buy?

ASX gold shares tend to do well when the S&P/ASX 200 Index (ASX: XJO) is doing poorly. This seems to fit the narrative at the moment with the benchmark index being down nearly 10% in 2020 and all.

I also think this makes Saracen’s recent decision to expand its operations a wise one in hindsight. The company is now a joint venture partner with fellow gold miner Northern Star Resources Ltd (ASX: NST) in the Kalgoorlie Super Pit gold mine.

That acquisition has helped to ramp up operations and maybe even put both ASX gold shares back in the buy zone. 

In fact, Saracen recently moved into the S&P/ASX 100 Index in the most recent rebalancing along with NextDC Ltd (ASX: NXT).

Of course, no one knows exactly where the economy or the share market are headed in the next 12 months. However, this uncertainty is perhaps what makes shares like Saracen attractive to some investors looking for a potential downside hedge.

Will ASX gold shares deliver strong gains?

Personally, I’m not a big believer in using ASX gold shares to hedge against a potential downturn.

I do think gold generally has good inflation hedging properties as a real asset. However, investing in companies doesn’t get you pure gold exposure given you’re still exposed to idiosyncratic company risk.

Instead, I believe a diversified strategy of investing in a basket of ASX shares is still the best, long-term option for portfolio gains. Diversification means you weather the ups and downs with your investments in the long run without stressing in the short-term.

I’m reasonably optimistic that Saracen and St Barbara could hold their gains and even push higher in 2020 given current sentiment. However, if I’m investing for 30 years into the future, I don’t have a strong enough conviction to buy in at their current prices.

More reading

• Why I would buy and hold a2 Milk and this ASX 200 share until 2030
• Top brokers name 3 ASX 200 shares to sell right now
• ASX 200 up 0.9%: Citi lifts Afterpay price target, Webjet boosts liquidity
• Fund managers have been snapping up Sonic and these ASX 200 stocks
• This leading broker thinks the NEXTDC share price can go higher

Motley Fool contributor Ken Hall 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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