I hate certainty.

I mean, I’m glad there are some immutable laws of physics and chemistry, but that’s about as far as I want to go.

I’m glad gravity is undeniable and consistent. I’m pretty pleased that hydrogen and oxygen combine in a two-to-one ratio to give us water.

But in other things? I’m allergic to the idea that we can be sure about anything.

First, though, let’s go back a few decades…

When I was in high school, I studied Commerce and Economics.

I can’t remember in which one of those I was introduced to the share market, but I can still vividly remember turning to somewhere near the middle of the newspaper to read through the share market tables.

ASX code, company name, market capitalisation, P/E, dividend yield, franking.

And when I say I remember it, I can still vividly recall the process of going line by line, trying to recognise company names, to find the cheap stocks (by P/E) and the ones paying the most in dividends.

Going a little further back, I can remember having a physical passbook (remember those?) at the State Building Society, and earning something like 6% or 7% interest on my (very meagre) savings.

In both cases, thanks to my teacher and parents, respectively (and, in all likelihood, an innate mental wiring for these things), I quickly understood and was in awe of the ability of being paid for doing nothing other than waiting.

When that interest just turned up in my account — $6 on top of the $100 I had saved — I was hooked.

“Six dollars!… for nothing!”

Dividends were the same. I’m pretty sure I had no idea how good franking was, at that point, but just the idea that you could make 3% or 5% from owning shares in a real business was mind-blowing.

Fast forward a few years, and I was nuts about investing.

Now these were the truly-ruly olden days, and the internet was in its infancy.

So I used to call up the Investor Relations department of ASX-listed companies, and ask for their last 5 annual reports.

I’d wait a week, and a fat envelope would arrive in the mail. Sometimes, the companies didn’t actually have any copies of their older reports, but most of the time I got what I was after.

I’d flick past the glossy pages, and go straight to the ‘cheap paper’ section, in which the financial reports were printed.

Balance Sheet. Profit & Loss.

I can’t remember learning about the Cash Flow Statement at university, and I can’t remember if it even existed when I started investing.

Yes, I did say it was the olden days!

There certainly was no Statement of Changes in Equity.

Still, it was enough.

I’d fire up my computer (it took a while) and open Microsoft Excel.

Then I’d meticulously type in all of the numbers from the P&L and Balance Sheet… for 5 years’ worth of statements…

I wish I could pretend I was cool, and that this was a boring, thankless task that I hated.

In truth, while I didn’t love having to type it all up, I knew it was the first step in unlocking the secrets of investing.

Because behind the data entry, I’d created a template that would turn the numbers into gold.

No, not literally.

But by making sure I put the numbers in the right cells, the spreadsheet would create all of the ratios and percentages I could want.

And by all, I mean all.

Gross profit. Net profit.

Sales and marketing as a percentage of sales.

Days sales outstanding.

Cash conversion ratio.

Quick ratio.

Interest cover.

Sales growth.

Profit growth.

And they’re just the ones I can quickly recall.

If I’m not mistaken, I had something like 40 different calculations, for each of 5 years (and the change in each, from year to year).

Seeing those numbers automatically calculate was (geekily) intoxicating. I had everything right at my fingertips.

I knew what was good and what was bad.

What showed things getting better. And worse.

The only problem was that I’d fallen into the same trap that plagues many a new investor — and some experienced ones — I knew “the price of everything, but the value of nothing”.

As Warren Buffett remarked, “If past history was all there was to the game, the richest people would be librarians.”

But I hadn’t yet learned that lesson. I had the numbers (and the ratios, multiples and growth rates!), and I knew the (inflexible) theory.

I knew which ratios were good and which were bad. Which multiples should be going up, and which should be coming down, if a business was any good.

I was, in short, an investing librarian-cum-theorist.

Which isn’t very useful.

In retreating to the certainty of black-and-white numbers and a suffocating number of calculations, I’d let myself believe I had all the answers.

Which I did… if the questions were all historical.

Unfortunately, in investing, they’re not.

Again: the price of everything, but the value of nothing.

See, it turns out that history isn’t very useful, for a couple of important reasons.

First, you can’t just extrapolate.

Kodak was a world-beater… until it died.

Woolworths Group Ltd (ASX: WOW) had world-beating margins… until they were shown to be unsustainable.

Newspapers had a lock on super-profitable classifieds ‘rivers of gold’… until the internet diverted them.

Second, calculating those numbers tells you exactly what everyone else already knows.

Sure, I had spreadsheets full of calculations for the most ‘important’ investing numbers, but so did anyone else who cared to do the same (let alone large fund managers and brokerage houses who had them well before I did!).

Woolies’ gross margins weren’t exactly secret.

It’s not like I was the only person who knew CSL Limited (ASX: CSL) was growing.

To be fair, people obviously still owned poor businesses — and avoiding them was an advantage that others seemed not to care about — but I wasn’t exactly uncovering nuggets of hidden value.

Third, I’d embraced some cast iron rules that, simply, weren’t very useful.

Instead of using them as indicators of superior value (or reasons to take points away from an investment thesis), I used them as hard-yes or hard-no decision criteria.

Management was selling? No way was I going to buy.

Inventory increasing? Trouble ahead.

Unprofitable? Way too risky.

By now, I hope the example is obvious: I was valuing absolutes over making informed judgements.

Socrates said the only true wisdom is in knowing you know nothing.

While I’m not one to get lost in fluffy philosophical thought, I’ve learned that there’s more truth in Socrates’ statement than many investors like to admit.

Discomforted by uncertainty, many investors try to find solid ground. But if (when) there isn’t any, they construct it in their minds.

They convince themselves that things are more certain than they truly are.

Perhaps they put total faith in a set of arbitrary rules.

Maybe they convince themselves that their favourite companies are stronger than they truly are.

Or they might create their own conception of a likely future, and come to believe that’s the only way things can play out.

Alternatively, buoyed by early success, they develop an unshakeable belief in their own ability.

And hey, maybe they’ve discovered El Dorado. Maybe they’re the next Nostradamus or Warren Buffett.

Maybe.

But if they’re not, such certainty is at best unhelpful and at worst can be disastrous.

As Mark Twain once said, “It’s not what you don’t know that kills you, it’s what you know for sure that ain’t true.”

I’m no Socrates. Or Buffett. Or Twain.

But their sentiments ring true.

The longer I invest (and the older I get), the more I realise I don’t know.

The more room I leave for doubt. And for error.

The more nuance I bring to my investing.

The more I realise that being wrong is part of the game.

And that the more certain I am, the more worried I should be — because nothing in life is certain.

I can’t claim credit for it — it’s long been a Motley Fool approach — but it’s also why we include a ‘Risks And When We’d Sell’ section in all of our recommendations: because something can always go wrong.

In my experience, it’s the approach that is most useful.

Humility beats arrogance, because you give yourself more room to change course, and you’ll likely learn something.

The more certain you are, the less likely you’ll leave room to seek out — or just hear — a disconfirming thesis.

You’ll know you’re right, long after your thesis has busted… or until bankruptcy, whatever comes first.

Instead, my approach is to utilise a group of ‘rules of thumb’, trying to tick as many boxes as possible, to put the odds in my favour.

I know I’ll be wrong, too.

That’s life. And that’s investing.

Success will likely come from being right more often than you’re wrong, and having your winners gain more, on average, than your losers cost you.

That’s not going to sell too many books. And it’s really going to annoy those who want certainty, and who will suspend disbelief (and reality) in order to get it.

I don’t listen to those who peddle certainty, or its close cousin, snarkiness.

Both suggest the peddler has an intellectual smugness that is both pretty distasteful as well as likely being unhelpful.

In investing, you either check your ego at the door, or it’ll cost you.

Fool on!

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Scott Phillips 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 owns shares of Woolworths 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 Investing 101: Humility > Arrogance appeared first on Motley Fool Australia.

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

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

If you don’t know the name Irving Kahn, you’d do well to spend a few minutes learning about him, as his life and words offer some great investment guidance for us all. Here’s a fun fact: He foresaw the 1929 stock market crash, and was one of the few who managed to profit from it.

Kahn died in 2014 – at the age of 109. Like super investor Warren Buffett, he was a follower of the value-investing tenets of Benjamin Graham.

Here are five investing tips from Kahn that can make us all better investors.

1. Be contrarian

Irving Kahn was a contrarian, purposely aiming to go against the grain when investing. (Contrarianism is also espoused by Buffett, who has famously advised investors to be fearful when others are greedy and greedy when others are fearful.) Kahn’s son Alan, who worked with his father, quipped in a 1995 interview, “If we buy something which is generally well-thought of by the Street and popular, then we’re probably doing something wrong.”

It’s a perspective that makes a lot of sense: If everyone is bullish on a company – or the overall stock market – they will be snapping up shares and sending values up. That leads to overvaluation.

Ideally, especially in the minds of value investors, overvalued securities are to be avoided, as they stand a good chance of falling closer to their intrinsic value. Meanwhile, if investors have abandoned a stock, or are bearish on the entire market, they will have sold shares, sending prices lower – possibly to the point of significant undervaluation – and making some such shares attractive for contrarian believers.

2. Control yourself

Thus, as the thoughts above suggest, successful investing requires you to control your emotions, not selling in a panic and not hastily buying because you read a promising article about an investment. As Kahn noted in an interview with financial author Jason Zweig: “Millions of people die every year of something they could cure themselves: lack of wisdom and lack of ability to control their impulses.”

Take the time to figure out what investment strategies make sense to you, and then stick with them. Stick with companies you’ve invested in, too, through ups and downs, as long as you believe in them and see rosy futures.

3. Study companies

It can be easier to stick with your convictions if you have studied the companies in which you’re invested and know them very well. That way, if the market suddenly drops, you may be able to comfortably hang on, knowing that your holdings’ futures remain promising – or you might sell, understanding that a new development has rendered your previous investment thesis obsolete. For example, you might decide that post-pandemic, your real estate investment trust that’s focused on office buildings will have a hard time, as you expect more people to work from home. You might determine, at the same time, to hang on to shares of railroad companies, because while their business may be suffering now, better days are ahead.

Kahn reportedly read a lot of annual reports of various companies, and often did so by starting at the back, with the financial statements – balance sheets, income statements, and statements of cash flow. Then, armed with recent performance numbers and a snapshot of the company’s financial health, he would proceed to read the letter to shareholders and to review the glossy photos and other information. He explained in an interview that he aimed “to know much more about the stock I’m buying than the man who’s selling does.”

Zweig noted that Kahn “reads voraciously, including at least two newspapers every day and numerous magazines and books, especially about science.”

4. Cast a wide net

Irving Kahn also advised investors to “look beyond the one or two largest companies in a given industry.” That would serve us well because, of course, most investors already know about the top players in various industries, and so if they’re in good shape, they may be trading at full or premium values because many people have already snapped up shares.

If you can look beyond those big players, though, you may find smaller gems. For example, if you expect sales of smartphones to grow robustly in the coming years, look into the companies that supply components for the phones. If you’re bullish on oil companies, look beyond the big names to smaller companies, such as ones offering technology to help find and drill for oil. If you’re excited about e-commerce, look beyond Amazon.com, Inc (NASDAQ: AMZN) to companies such as Etsy Inc (NASDAQ: ETSY) or China-based Baozun, which offers services to e-commerce companies.

5. Seek a margin of safety

Finally, Kahn was a believer in margins of safety. He said, “Capital is always at risk unless you buy better than average values,” meaning that if you’re buying overvalued securities, they may fall in value, causing you to lose money. “Better than average values” are undervalued securities that are more likely in the long run to grow in value, approaching (and perhaps surpassing) their intrinsic value.

It’s smart to focus on preserving your capital – your hard-earned money – while you try to grow it. Chasing after high-flyers puts your money at too much risk.

There’s a lot to be learned from smart and experienced investors such as Irving Kahn. The more you learn from them, the less you’re likely to lose by making mistakes.

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

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Selena Maranjian owns shares of Amazon and Baozun. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool Australia has recommended Amazon. 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 article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Last week saw the gold price jump to over US$2,000 per troy ounce. It is currently trading at US$2,030, just off its all-time-high. Gold’s previous all-time high was US$1,921, last seen in September 2011.

Historically, gold has generally risen during risk-off periods when investors rebalance their portfolios away from assets like equities, perceiving turbulent times ahead. However, over the last few months both gold and equities have risen together.

So, what’s driving the gold price higher?

As I see it, here are the key factors currently driving up the gold price:

Hedging inflation risk

Historically, gold has been an important hedge against inflation risk. It has held its value very well during periods of high inflation. But you might wonder where the inflation risk is today, considering central banks globally are struggling to raise inflation to their target levels.

However, I believe, there are enough investors in the market who think that there is a good chance that inflation might resemble the genie in the bottle – currently, central banks are working hard to wake the genie (inflation). But once it emerges, it might be extremely difficult to put it back in the bottle.

This same view is likely driving up the price of the cryptocurrencies like Bitcoin, which rose more than 20% during the last 2 weeks. The key investment driver for both gold and Bitcoin is that their supply is limited and grows at a much slower pace than fiat currency issued by central banks.

Chinese demand picking up

China is the largest consumer of gold in the world, having overtaken India over the last few years. And as the Chinese economy rebounds from the impact of COVID-19, its economic growth is driving up the demand for gold. With India also loosening its COVID-19 lockdown measures, the global demand for gold might increase further. For instance, as Chinese economy opened up during the second quarter of 2020, the investment demand for gold during that period almost doubled to 583 tonnes compared to the corresponding period in 2019.

While there is a strong likelihood that global demand will rise further, the supply side is not likely to keep pace with the growth in demand because of COVID-19 restrictions on mining businesses, especially in countries which are among the largest producers of gold. This is likely to drive the price of gold higher still from current levels.

Global liquidity

As a rising tide lifts all boats, the liquidity that central banks are infusing in global economy is raising the prices of all kinds of assets including gold. And with central banks expected to keep the liquidity tap open till at least the end of 2021, we are looking at a continuing supply of liquidity supporting the gold price.

Gold as an institutional investment alternative

For a long time, investment wisdom argued that gold is not an investment alternative because it does not generate income like equities do through dividends (present and future), or bonds through their interest payments, or even property through rental income.

However, currently about US$16 trillion of debt is priced at negative yield. A negative yield means that instead of a bond investor receiving interest income on his investment, he or she is in fact, paying money over and above the principal value of the bond. Imagine investing $100 to receive $98 a few years down the line!

With that as a backdrop, gold not generating any income suddenly does not sound so bad. In fact, global central banks had been net buyers of gold since the global financial crisis till COVID-19 struck this year. Taking the cue from the central banks regarding the need for diversification away from US dollar-denominated assets, even if there is a minor shift in the institutional asset allocation towards gold, we might see a further rise in gold price.

How can you benefit from the rising gold price?

One way that retail investors can benefit from the gold price rise is by investing in gold exchange-traded funds (ETFs) like ETFS Physical Gold ETF (ASX: GOLD).

However, for investors with a slightly higher risk appetite, investing in ASX gold mining companies could be an excellent option. As the gold price rises, mining companies generally see their profits grow even faster, because while they can now command a higher price for the yellow metal, their costs to mine the gold itself remain the same.

There are a number of gold mining shares listed on the S&P/ASX 200 Index (ASX: XJO) that could provide the opportunity for investors to benefit from the rising gold price. These include Newcrest Mining Limited (ASX: NCM), Gold Road Resources Ltd (ASX: GOR), Saracen Mineral Holdings Limited (ASX: SAR), Northern Star Resources Ltd (ASX: NST), Evolution Mining Limited (ASX: EVN).

More reading

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Motley Fool contributor Arpan Ranka 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 have $3,000 to invest in ASX shares, congratulations! Buying into the share market can be a great investment for your future wealth, depending on where you deploy it of course.

But, like some famous farm animals once proclaimed, some ASX shares are “more equal than others”. Choosing a winner can make a huge difference to your personal wealth, while others can take you backwards. So with this in mind, here are 2 ASX shares that I think are dirt cheap today and have the potential to make a great investment as a result.

1) Washington H. Soul Pattinson & Co Ltd (ASX: SOL)

Soul Patts is one of my favourite ASX shares. It’s a diversified conglomerate that has been around longer than most, having started ASX life back in 1903 as a chain of pharmacies. Today, this company boasts massive stakes in a diversified portfolio of ASX businesses. These include TPG Telecom Ltd (ASX: TPG), New Hope Corporation Limited (ASX: NHC) and Brickworks Limited (ASX: BKW).

Using the income from these investments, Soul Patts has built a reputation as one of the best ASX dividend shares on the market. It has paid a consistent dividend for more than 40 years and has increased this dividend every year for the past 20. I also think Soul Patts is undervalued at the current share price. Its current market capitalisation is around $4.89 billion, yet its stake in Brickworks is worth around $1.09 billion alone. Its TPG stake adds a further $1.9 billion and the New Hope share, another $500 million. My conclusion? You are buying these assets for a discount at the current Soul Patts share price, making it a great option for a $3,000 investment today.

2) Ramsay Health Care Limited (ASX: RHC)

Another good-value ASX share to invest in is Ramsay Health Care. It’s one of the largest health companies on the ASX with a massive portfolio of private hospitals. This network is vast in Australia alone, but Ramsay has expanded across the seas in recent years. It now has a significant presence in France, Singapore and the United Kingdom as well. The coronavirus crisis has not left Ramsay unscathed, with suspensions of elective surgeries and other re-prioritising causing some short-term hits to the company. As a result, it was sadly forced to suspend its 20-year streak of dividend pay rises this year.

Still, I think there is still some value in the Ramsay share price today. And that’s despite the company’s share price putting on around 20% since March. Ramsay shares are (at the time of writing) trading at $62.57, which is still more than 22% off the company’s February highs. Healthcare is an industry that isn’t going anywhere anytime soon. It might take a year or two, but I think this company is poised to flourish in a post-COVID world. As such, I think the Ramsay ASX share price is showing some value today and is another worthy choice for your $3,000.

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Motley Fool contributor Sebastian Bowen owns shares of Ramsay Health Care Limited and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Ramsay Health Care 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 Bendigo and Adelaide Bank Ltd (ASX: BEN) share price will be one to watch this month when it releases its full year results.

Ahead of the release, I thought I would take a look to see what was expected from the regional bank when it hands in its report card on 17 August.

What to look out for with Bendigo and Adelaide Bank FY 2020 results.

According to a note out of Goldman Sachs, its analysts are expecting the bank to report an unsurprisingly sharp decline in profits in FY 2020.

The broker has forecast cash earnings of $315.3 million for the full year, which will be down 24.2% on the prior corresponding period.

This is expected to be driven by a large increase in bad and doubtful debts. Goldman has pencilled in a provision for bad and doubtful debts of $177 million, up from $50 million a year earlier.

If you exclude this from the equation, Bendigo and Adelaide Bank’s result would have been reasonably solid. On a pre-provisioning basis, it expects operating profit to be down 3.6% year on year to $635 million. This is due largely to a 3.4% increase in operating costs to $987 million.

What about its dividend?

Unfortunately, a severe cut to the bank’s dividend is expected in FY 2020.

Goldman has forecast a final dividend of 9 cents per share, which will take its full year dividend to 40 cents per share. This will be down 43% on the prior corresponding period. Though, the broker acknowledges that there are a wide range of possible outcomes.

It commented: “Following APRA’s announcement on 29-July allowing banks greater flexibility to pay dividends through the remainder of CY20, we forecast BEN to pay a A9¢ final FY20 dividend (46% 2H20 payout).”

“On the capital front, we forecast a 9.4% CET1 for BEN in FY20, noting it reported a pro-forma Mar-20 9.3% CET1. We expect BEN’s dividend and any capital management commentary to be a key focus area at the upcoming result and concede there remains a wide range of potential outcomes on the dividend front despite APRA’s recent guidance,” it added.

Should you invest?

Goldman Sachs has a neutral rating and $8.14 price target on Bendigo and Adelaide Bank shares at present. This compares favourably to the current share price of $6.83.

Its preference in the sector remains National Australia Bank Ltd (ASX: NAB). The broker has a conviction buy rating and $21.70 price target on its shares.

More reading

• The latest ASX stocks to be hit by broker downgrades today
• Down 5% in 1 day: Are Bendigo and Adelaide Bank shares a buy?

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

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The Breville Group Ltd (ASX: BRG) share price gained 13.9% in July, ending the month at $25.93 per share. That return smashed the gains delivered by the S&P/ASX 200 Index (ASX: XJO), which gained 0.5% in July.

The Australian electrical appliance manufacturer wasn’t spared from the COVID-19 panic selling in February and March. The Breville share price fell an agonising 58% from 13 February through its 23 March low, when it hit $10.80 per share.

Since then the Breville share price has been on a tear, up 163% since 23 March.

Year-to-date, Breville shares are also well into the green, up an impressive 70%. At its current share price of $28.40, Breville has a market cap of $3.9 billion.

What does Breville Group do?

Breville Group is a well-known Australian designer and manufacturer of a wide range of small electrical appliances, like blenders, coffee machines, juicers and mixers. The company launched in 1932 when Bill O’Brien and Harry Norville mixed their last names together and started a company making radios. After providing mine detectors for World War II, the pair turned their attention to small appliances.

Today, Breville-designed products are sold in more than 30 countries across the globe. Along with Breville, the group owns and operates other brands including Sage, Kambrook, PolyScience, and Aquaport. Since listing on the ASX in 1999, Breville shares have been included as a growth investment in many investors’ portfolios, along with providing some income to shareholders along the way in the form of dividends.

Why did the Breville share price leap higher in July?

July got off to a good start for Breville with 2 major brokers providing the tailwinds.

First, Morgans retained its add rating and $27.00 price target in a note to its clients. Morgans stated Breville appeared well-placed for growth, with an increased demand for coffee machines, its international expansion success and more people making their own meals at home as the coronavirus is keeping many restaurants around the globe shuttered.

On 14 July, this was followed by a bullish report from Morgan Stanley. Morgan Stanley placed and overweight recommendation on Breville shares, estimating its global market at $10 billion. It set a 12-month target price of $28 per share.

In intraday trading today, the Breville share price stands at $28.43.

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Motley Fool contributor Bernd Struben 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 Nextdc Ltd (ASX: NXT) share price hit an all-time high of $12.17 in early trade this morning. At the time of writing, Nextdc shares have fallen back to $12.

The data centre and cybersecurity provider’s share price has outperformed since it fell to lows of $6.58 in March this year, surging close to 60% from its bottom.

What’s driving the Nextdc share price to new heights today

Rather than this morning’s movement coming off the back of a key announcement, the Nextdc share price appears to have broadly benefitted from the unprecedented growth of the digital economy.

In particular, rising demand for data storage and security services this year has benefitted the company. The impact of COVID-19 on corporate Australia has been vast, including mandated stay at home orders and the majority of the workforce transitioning to working from home. These tailwinds have seen Nextdc flourish.

Part of the unique offering provided by Nextdc is the storage of company data infrastructure and IT services, coupled with its holistic protection by security operations centres. This ensures peace of mind for its clients to mitigate the risk of data breaches or cybersecurity breaches. Its client list includes international powerhouses Amazon Web Services (AWS), Alibaba, Google Cloud, and Microsoft Azure.

Cybersecurity continues to be an increasing area of positive market sentiment, highlighted by the approximate 25% increase in the BetaShares Global Cybersecurity ETF (ASX: HACK) share price since its lows in March this year. This macro trend for companies to invest in data protection will benefit Nextdc over the long-term in my view, as the incidence of corporations choosing to outsource their data and cybersecurity operations is likely to increase.

Should you invest?

Although Nextdc hasn’t provided a date for the release of its FY20 full-year results, many were impressed by the company’s first-half performance in February.

Despite being prior to COVID-19, the company nonetheless grew revenue by 8%, underlying earnings before interest, tax, depreciation and amortisation rose 21%, and its liquidity of $497 million will have helped cushion the pandemic’s blow.

I’m looking forward to seeing how Nextdc fared over the last 6 months, but over the long-term I expect the company to perform strongly. The shift to the digital economy and use of services in the ‘cloud’ is only going to be furthered over time, and the niche services offered by Nextdc are of critical importance to its clients.

The company is a watchlist item for me in the short-term, simply due to the Nextdc share price being at an all-time high, but if the price were to take a brief dive I’d be much more inclined to invest.

More reading

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• The next ASX stocks to beat expectations during this reporting season
• Overvalued or a strong buy? Nextdc and 1 more ASX growth share to watch
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Motley Fool contributor Toby Thomas has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of BETA CYBER ETF UNITS. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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At the time of writing, the Adairs Ltd (ASX: ADH) share price was up 13.5% to $3.11 after the company released its preliminary final result for the 2020 financial year. At one point during this morning’s trade, the Adairs share price soared by more than 18% before seeing a pull back. Here we take a look at the details that prompted the Adairs share price to rally.

What was in the announcement?

According to the company, group online sales were up 110.5% to $124.2 million with online sales representing 34.8% of total sales. Total group sales were up 12.9%, however, in store sales were down 7.3%.

Adairs’ underlying earnings before interest and tax were up 39.7% to $60.7 million. Statutory net profit after tax was up 19.0% to $35.3 million with earnings per share up 17.3% to 21 cents per share.

The company stated that its recently acquired Mocka brand had performed well since the acquisition and during COVID-19. Financial year 2020 sales and earnings before interest and tax for the brand were above expectations despite low inventory levels during the fourth quarter.

Adairs had net debt of $1.0 million at 30 June, this was down $7.2 million versus FY 2019.

The company announced a final dividend of 11 cents per share, fully franked. This was an improvement on the final dividend of 8 cents per share announced in FY 2019 and represented 72% of underlying net profit after tax.

Adairs Managing Director and CEO, Mark Ronan commented on the result, stating;

“We have seen strong trading since re-opening our stores and websites throughout May, which has continued up to today. Our results confirm the strength of our brands and the competitive advantage our omni-channel model provides in these volatile times. The acceleration in online penetration and growth rate brought about by COVID-19 restrictions has long term benefits for us as more of our customers shop across our brands.”

About the Adairs share price

Adairs is a retailer that provides manchester, homewares, furniture and children’s products. It operates in Australia and New Zealand. Adairs has over 160 physical stores along with online stores.

In March 2020, Adairs temporarily closed its Australian stores for five weeks due to the lockdowns put in place as a result of the pandemic.

Last year in December, the company announced that it had acquired online retail brand Mocka for an enterprise value of $75.5 million. As consideration for the acquisition, $43.4 million was paid in cash with the rest paid in Adairs shares and from the future earnings of the acquired company.

The Adairs share price is up 607% from its 52 week low of 44 cents, it has returned 37% since the beginning of the year. The Adairs share price is up 114.5% since this time last year.

More reading

• Why Adairs, Coles, Kogan, & Tyro shares are storming higher
• Here’s where Australians are spending – despite the recession
• How will Victoria’s stage 4 lockdowns impact ASX shares?
• Which ASX furniture share has the edge?
• Extended jobkeeper: Which ASX shares to buy?

Motley Fool contributor Chris Chitty 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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