Stock Pick

  • Fortescue Metals and 2 other ASX 200 shares to buy in a recession

    graph bars with miniature business men on them tumbling over

    Many investors are are feeling the inevitable recession may present some buying opportunities among ASX 200 shares but are uncertain which ones to target.

    Whilst I still believe in buying and holding for the long term, there are definitely some ASX 200 shares I’d have my eye on in the event there is another downturn this year.

    3 ASX 200 shares to buy in a recession

    The first Aussie company on my buylist should we experience another bear market would be Fortescue Metals Group Limited (ASX: FMG). 

    Fortescue is one of the world’s leading iron ore miners and could benefit from a mining and infrastructure boom. When the GFC hit in 2008-09, it was Chinese demand for iron ore that helped pull the Aussie economy through.

    While that is unlikely to be the case in 2020, surging demand for iron ore could still help boost economic activity. 

    That’s good news for the ASX 200 mining share if demand continues to climb higher.

    Other than Fortescue, I also like the look of Coles Group Ltd (ASX: COL) in a downturn.

    The Coles share price has rocketed 13.3% higher this year and was one of the gainers in the recent bear market.

    ASX 200 supermarket shares did well in March and I could see them experiencing strong demand again if there is another downturn. Those defensive qualities and non-cyclical earnings could definitely make Coles shares worth buying in 2020.

    I think National Storage REIT (ASX: NSR) could also perform well if the S&P/ASX 200 Index (ASX: XJO) falls lower.

    National Storage derives its income from rent paid by its self-storage unit users. A big economic downturn could hit residential real estate hard and mean more downsizing and ‘rightsizing’ from Aussie households.

    This could be good news for the ASX 200 REIT share and its dividends on the back of strong earnings.

    Foolish takeaway

    No one knows if, or when, the next share market downturn will hit. These are just a few of the ASX 200 shares that I’ve got my eye on if the market turns south.

    Of course, I believe it’s essential to consider investing for the long term rather than just trying to capitalise on a downturn. But if you can pick up some defensive shares to diversify your portfolio at decent prices, then I see that as an added bonus.

    5 stocks under $5

    We hear it over and over from investors, “I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!” And it’s true.

    And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!

    Learn More

    *Extreme Opportunities returns as of June 5th 2020

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

    The post Fortescue Metals and 2 other ASX 200 shares to buy in a recession appeared first on Motley Fool Australia.

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  • Why you probably won’t buy stocks in the next market crash either

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

    Investor looking at share market chart

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

    Time after time, investors have seen the same scenario play out. A crisis arises, and stocks sell off hard. Things look bad. There doesn’t seem to be any bottom in sight.

    Then, all of a sudden, the market starts to rebound. It seems too good to be true, as the situation outside the financial markets still looks sketchy at best. Yet stocks keep rising and rising. Before you know it, a new bull market has started.

    That’s what’s happened so far in 2020, and it’s a playbook that experienced investors have seen countless times before. Yet even with all that experience, many of those seasoned investors didn’t pull the trigger to buy more stocks when the market was plunging. A lot of them are kicking themselves right now, because once again, they’ve missed out on a golden opportunity to make what could be some of the most lucrative investments of their careers.

    But if you’re angry at yourself for missing out on the March lows, cut yourself some slack. There are very good reasons why it’s so hard to buy stocks during market crashes. Here are two of the biggest.

    1. It always feels different this time

    It’s easy to say that the next time the stock market crashes for no apparent reason, you’ll be the first to take your cash and buy stocks on the cheap. But when the crash actually comes, the reason behind it always seems to be new. The bearish arguments for what the future will bring seem extremely compelling.

    During the financial crisis in 2008 and 2009, there was a very real chance that the global financial system would collapse. It took extraordinary effort to keep it afloat. Those who took the chance and invested optimistically got rewarded, but to say that it was a sure thing is to let hindsight cloud what it was actually like during the crisis.

    This year, the pandemic has led to similarly unprecedented actions, including the suspension of nearly all business activity for months. Tens of millions are unemployed. A market crash seemed warranted, and the magnitude of the decline reflected how much concern there was. Now, risk-tolerant investors have once again identified that it’s likely that things will work out and that the drop was exaggerated. However, there’s still no certainty that the pandemic won’t get worse, and that’s kept many people on the sidelines during the ensuing rally.

    If you’re going to buy during a market crash, you have to be willing to invest when it feels like the absolutely worst idea in the world. Don’t expect to build a mindset where you’re comfortable or even eager to buy into crashes. That’s a rarity — and it’s why there are so many truly great investors out there.

    2. You’ll settle for nothing short of perfect timing

    Even if you have the discipline to buy stocks when the market drops, the odds of your picking the absolute bottom are nearly zero. What’s more likely is one of the following outcomes:

    • You’ll identify bargains when the market is down 5% or 10%, and use up all your available cash just in time to see stocks drop another 10% or 20%.
    • You’ll wait until the market stops falling, and then when share prices start to jump, you’ll nitpick over whether you should really pay 5% or 10% more than you would’ve paid if you’d just picked the day of the market lows to buy. Then, the stock will rise another 10% or 20% while you sit shaking your head.

    One strategy to avoid this problem is to buy partial positions rather than investing all at once. You might invest a portion when the market’s down 5%, another when it’s down 10%, and a bigger part when it’s down 20% or 25%. Even then, you’ll sometimes invest all your money before the market hits bottom. But when the market recovers, you’ll see some of those positions turn profitable early on in the rally. You also run the risk of not investing all your cash at bargain prices if the market turns out not to fall that far, but that at least leaves you with opportunities to capitalize on future downturns.

    The best way to keep investing during a market crash

    Knowing that these influences are out there is helpful. But even knowing them won’t make it any easier to pull the trigger in the next market crash.

    Perhaps the easiest way to avoid having to worry too much about investing during crashes is simply to have an automatic investment program. If you take the same amount of money month after month and put it to work in the stock market, then you’ll end up buying more shares of stocks or ETFs  in the months when the market has dropped. That’ll give you an edge — and if it’s automatic, you won’t even have to think about it.

    Taking advantage of market crashes is harder than it looks. Rather than responding emotionally, you have to find a way to overcome anxiety and make the choices that seem so obvious when markets aren’t under stress. Do whatever it takes to put yourself in that rational state, and you’ll see your long-term results improve.

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

    5 stocks under $5

    We hear it over and over from investors, “I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!” And it’s true.

    And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!

    Learn More

    *Extreme Opportunities returns as of June 5th 2020

    More reading

    Dan Caplinger 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 you probably won’t buy stocks in the next market crash either appeared first on Motley Fool Australia.

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

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  • The U.S.-China Feud Quietly Gets Nasty

    The U.S.-China Feud Quietly Gets Nasty(Bloomberg) — The U.S. and China are moving beyond bellicose trade threats to exchanging regulatory punches that threaten a wide range of industries including technology, energy and air travel.The two countries have blacklisted each other’s companies, barred flights and expelled journalists. The unfolding skirmish is starting to make companies nervous the trading landscape could shift out from under them.“There are many industries where U.S. companies have made long-term bets on China’s future because the market is so promising and so big,” said Myron Brilliant, the U.S. Chamber of Commerce’s head of international affairs. Now, they’re “recognizing the risk.”China will look to avoid measures that could backfire, said Shi Yinhong, an adviser to the nation’s cabinet and a professor of international relations at Renmin University in Beijing. Any sanctions on U.S. companies would be a “last resort” because China “is in desperate need of foreign investment from rich countries for both economic and political reasons.”Pressure is only expected to intensify ahead of the U.S. elections in November, as President Donald Trump and presumptive Democratic nominee Joe Biden joust over who will take a tougher line on China.Trump has blamed China for covering up the coronavirus pandemic he has mocked as “Kung Flu,” accused Beijing of “illicit espionage to steal our industrial secrets” and threatened the U.S. could pursue a “complete decoupling” from the country.Biden, likewise, has described President Xi Jinping as a thug, labeled mass detention of Uighur Muslims as unconscionable and accused China of predatory trade practices.And on Capitol Hill, Republicans and Democrats have found rare unity in their opposition to China, with lawmakers eager to take action against Beijing for its handling of Covid-19, forced technology transfers, human rights abuses and its tightening grip on Hong Kong.“China is going to be a punching bag in the campaign,” said Capital Alpha Partners’ Byron Callan. “But China is a punching bag that can punch back.”China has repeatedly rejected U.S. accusations over its handling of the pandemic, Uighurs, Hong Kong and trade, and it has fired back at the Trump administration for undermining global cooperation and seeking to start a “new cold war.” Foreign Minister Wang Yi last month said China has no interest in replacing the U.S. as a hegemonic power, while adding that the U.S. should give up its “wishful thinking” of changing China.Both countries have already taken a series of regulatory moves aimed at protecting market share.The U.S. is citing security concerns in blocking China Mobile Ltd., the world’s largest mobile operator, from entering the U.S. market. It’s culling Chinese-made drones from government fleets and discouraging the deployment of Chinese transformers on the power grid. The Trump administration has also tried to constrain the global reach of China’s Huawei Technologies Co., the world’s largest telecommunications equipment manufacturer.Meanwhile, China prevented U.S. airline flights into the country for more than two months and, after the U.S. imposed visa restrictions on Chinese journalists, it expelled American journalists. It has stepped up its scrutiny of U.S. companies, with China’s state news agency casting one probe as a warning to the White House. China also has long made it difficult for U.S. telecommunications companies to enter its market, requiring overseas operators to co-invest with local firms and requiring authorization by the central government.One of the most combustible flashpoints has been the Trump administration’s campaign to contain Huawei by seeking to limit the company’s business in the U.S. and push allies to shun its gear in their networks.The U.S. Federal Communications Commission moved to block devices made by Huawei and ZTE Corp. from being used in U.S. networks. And the Commerce Department has placed Huawei on blacklists aimed at preventing the Chinese company from using U.S. technology for the chips that power its network gear, including tech from suppliers Qualcomm Inc. and Broadcom Inc.After suppliers found work-arounds, Commerce in May tightened rules to bar any chipmaker using American equipment from selling to Huawei without U.S. approval. The step could constrain virtually the entire contract chipmaking industry, which uses equipment from U.S. vendors such as Applied Materials Inc., Lam Research Corp. and KLA Corp. in wafer fabrication plants. The curbs also threaten to cripple Huawei. Although the company can buy off-the-shelf or commodity mobile chips from a third party such as Samsung Electronics Co. or MediaTek Inc., going that route would force it to make costly compromises on performance in basic products.Huawei was on a list the Pentagon unveiled last week of companies it says are owned or controlled by China’s military, opening them to increased scrutiny.China has raised the specter of reprisal.After the new restrictions were announced, the editor of the Communist Party’s Global Times newspaper tweeted that China would retaliate using an “unreliable entities list” that it first threatened at the height of the trade war last year. Although China didn’t identify companies on the list, the Global Times has cited a source close to the Chinese government as saying U.S. bellwethers such as Apple Inc. and Qualcomm could be targeted.The fallout could extend to companies heavily reliant on Chinese supply chains, as well consumer-facing brands eager to expand sales in Asia. Boeing Co., which recorded $5.7 billion of revenue from China in 2019, and Tesla Inc., the biggest U.S. carmaker operating independently in China, are among companies most exposed if relations sour further.“We’re playing in a much wider field now,” said Jim Lucier, managing director of research firm Capital Alpha Partners. “We’re not simply talking about ‘you tariff me’ and ‘I tariff you.’ The playing field is virtually unlimited.”Planes and AutomobilesU.S. automakers have also been singed. In June, China fined Ford Motor Co.’s main joint venture in the country for antitrust violations, saying Changan Ford Automobile Co. had restricted retailers’ sale prices since 2013.Aviation has been another source of tension, as both countries squabble over access to their skies. China’s decision to limit U.S. airlines operations to those services scheduled as of March 12 hurt carriers such as United Airlines Holdings Inc., Delta Air Lines Inc, and American Airlines Group Inc. that had suspended passenger flights to and from China because of the coronavirus pandemic.The U.S. responded earlier this month by initially threatening to ban all flights from China, then relenting to allow two flights weekly once Chinese officials eased their restrictions. Now, in what appears to be a staged de-escalation, China gave U.S. passenger carriers permission to operate four weekly flights to the country and earlier this month, the Trump administration matched the move by also authorizing four flights from Chinese airlines.It’s happening outside of aviation too. Consider the U.S. government’s decision to seize a half-ton, Chinese-made electrical transformer when it arrived at an American port last year and divert the gear to a national lab instead of the Colorado substation where it was supposed to be deployed. That move — and a May executive order from Trump authorizing the blockade of electric grid gear supplied by “foreign adversaries” of the U.S. in the name of national security — have already sent shock waves through the power sector.The effect has been to dissuade American utilities from buying Chinese equipment to replace aging components in the nation’s electrical grid, said Jim Cai, the U.S. representative for Jiangsu Huapeng Transformer Co., the company whose delivery was seized. Although Cai said the firm has supplied parts to private utilities and government-run grid operators in the U.S. for nearly 15 years without security complaints, at least one American utility has since canceled a transformer award to the company, Cai said.Trump’s directive is tied to a broader effort to bring more manufacturing to the U.S. from China. “This is a part of the administration’s efforts to impair China’s supply chains into the United States,” said former White House adviser Mike McKenna.Escalating tensions could jeopardize the U.S. economic recovery as well as China’s trade commitment to purchase $200 billion in American goods and services. Trump declared on Twitter last week that the pact “is fully intact,” adding: “Hopefully they will continue to live up to the terms of the Agreement!”Last week, Trump tweeted “The China Trade Deal is fully intact. Hopefully they will continue to live up to the terms of the Agreement!”It may also affect the November presidential election. Former U.S. national security adviser John Bolton alleges in a new book that Trump asked his Chinese counterpart Xi Jingping to help him win re-election by buying more farm products — a claim the White House has dismissed as untrue.“I don’t expect one single blow to send this relationship in a tailspin,” the chamber’s Brilliant said. “Each side will calibrate their reactions in a way that will not tip the scales too far.”Take the recent spat over media access. After the U.S. designated five Chinese media companies as “foreign missions,” China revoked press credentials for three Wall Street Journal staff members over an article with a headline describing China as the “real sick man of Asia.”Then the Trump administration ordered Chinese state-owned news outlets to slash staff working in the U.S. Beijing responded in March by effectively expelling more than a dozen U.S. journalists working in China.Both the U.S. and China have ample opportunities to ratchet up regulatory pressure. A bill passed by the Senate last month could prompt the delisting of Chinese companies from U.S. stock exchanges if American officials aren’t allowed to review their financial audits.And last week, as the U.S. State Department imposed visa bans on Chinese Communist Party officials accused of infringing the freedom of Hong Kong citizens, a senior official made clear the move was just an opening salvo in a campaign to force Beijing to back off new restrictions on the city.China, similarly, can slow licensing decisions and regulatory approvals, launch investigations under its anti-monopoly law and squeeze financial firms that want to do business in the country. For instance, the country could rescind pledges to let U.S. financial firms take controlling stakes in Chinese investment banking joint ventures, according to a Cowen analyst.“China will not make any significant compromise and will retaliate whenever and wherever possible,” Shi, the Renmin University professor, said.Companies are still lured to China and its massive local market — and tensions with the U.S. don’t overcome the Asian superpower’s appeal. Just one-fifth of companies surveyed by the American Chamber of Commerce in China late last year said they had moved or were considering moving some operations outside of the country, part of a three-year downward trend.But the coronavirus pandemic has subsequently pushed more companies to reckon with the risks of relying too heavily on any single country for their supply chains, amid existing concerns about forced technology transfers, cost and rising tensions that could damp investment in China.China is no longer the lowest-cost manufacturer, and companies are more reluctant to invest there, said James Lewis, director of the Technology Policy Program at the Center for Strategic and International Studies in Washington.“Everyone would like to be in the China market — everyone wants it to be like 2010 — but things are changing.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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  • 2 quality ASX shares I would buy with $10,000 in July

    Child holding cash and scratching head

    If you’re looking to invest $10,000 into the share market in July, then I think the two ASX shares listed below could be the ones to buy.

    Here’s why I would snap up these ASX shares next month:

    Nearmap Ltd (ASX: NEA)

    Nearmap is an aerial imagery technology and location data company providing high-resolution aerial maps and 3D maps for governments and businesses. While its performance in FY 2020 has been a touch disappointing because of several churn events, I remain very positive on its long term outlook.

    For example, this year the company is aiming to deliver annualised contract value of $102 million to $110 million. This is only a fraction of the global aerial imagery market which is estimated to be worth US$10.1 billion in 2020. And thanks to its high quality software (including its new artificial intelligence product) and geographic expansion opportunities, I believe Nearmap will continue to win a greater share of this fragmented market over the coming years and drive strong recurring revenue growth.

    NEXTDC Ltd (ASX: NXT)

    Another top option for a $10,000 investment could be NEXTDC. It is a leading and innovative data centre operator which operates a portfolio of world class operations in key locations across Australia. Demand for its services has been growing very strongly in recent years and particularly in 2020 during the pandemic.

    This is because the pandemic has accelerated the shift to the cloud and driven very strong demand for data centre capacity. So much so, NEXTDC recently announced the construction of its third data centre in Sydney and brought forward planned capacity additions in other markets. I’m confident there will be more of the same in the coming years, which should drive strong earnings growth as it scales. This could make it a great buy and hold option for investors.

    5 stocks under $5

    We hear it over and over from investors, “I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!” And it’s true.

    And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!

    Learn More

    *Extreme Opportunities returns as of June 5th 2020

    More reading

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

    The post 2 quality ASX shares I would buy with $10,000 in July appeared first on Motley Fool Australia.

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  • Is the Pushpay share price too high to buy?

    man holding mobile phone that says make donation

    The Pushpay Holdings Ltd (ASX: PPH) share price has rocketed up by 224.2% since its year to date low point on 16 March. The question for growth investors is, of course, can this company that provides donor management systems continue surging in value? If so, by how much?

    The target market

    Based in New Zealand and operating predominantly in the United States, Pushpay sells donor management tools to faith-based organisations, nonprofits, and education providers. So the entire company is set up to help facilitate donations and therefore assist organisations to fund charitable works. This is what initially sparked my interest in the Pushpay share price. 

    The company operates through two primary verticals: a donor management system, including applications, and the Church Community Builder platform, the latter being a leader in church management systems. The Church Community Builder provides insights into congregations and helps drive engagement. It also provides scheduling functions for voluntary work.

    Pushpay currently has over 10,000 customers and, during the height of COVID-19 lockdowns, its revenues actually increased. 

    Pushpay’s financial position

    At its annual meeting on 18 June, Pushpay announced it had achieved an amazing US$5 billion in total processing volumes for the year ended 31 March 2020. In addition, the company increased operating revenue by 33% to US$127.5 million while increasing its gross margin from 60% to 65%. That is an impressive margin. Moreover, the company has increased its sales by an average 45% per year over 4 years.

    Over the past two years, Pushpay has delivered a positive return on equity (ROE). That is, the net income divided by the shareholders equity, or the total assets minus debt. The average ROE for the past two years has been 38.2%.

    Of the company’s total revenues ~$91.9 million came from processing, while ~$35 million came from subscriptions. Both of these revenue streams contain large recurring revenue content. 

    The Pushpay share price

    As a growth company, the Pushpay share price is currently trading at a price to earnings ratio of >90. The share price has risen ~42% per year, on average, for 4 years. Furthermore, the company only generated its first profit in FY19. 

    Foolish takeaway

    Personally, I think the Pushpay share price still has a long runway ahead of it. The company has managed to eke out a profit over a relatively short period of time and has built a company based largely on recurring revenue streams. 

    On its current growth rate, I expect Pushpay to process more than $5 billion in total transactions in FY21. While it is presently focused on the church sector in the US, which is a very large sector, I feel there is still significant growth opportunities for the company to realise through other donation-driven organisations. 

    I believe it’s very possible the Pushpay share price could double two or three more times from its current value over the next 3 – 5 years. 

    3 “Double Down” Stocks To Ride The Bull Market

    Motley Fool resident tech stock expert Dr. Anirban Mahanti has stumbled upon three under-the-radar stock picks he believes could be some of the greatest discoveries of his investing career.

    He’s so confident in their future prospects that he has issued “double down” buy alerts on each of these three stocks to members of his Motley Fool Extreme Opportunities stock picking service.

    See the Double Down Stocks

    *Extreme Opportunities returns as of June 5th 2020

    More reading

    Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX. The Motley Fool Australia has recommended PUSHPAY FPO NZX. 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 Is the Pushpay share price too high to buy? appeared first on Motley Fool Australia.

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  • Comments from CUA brings hope to COVID-19 stricken ASX banking stocks

    waiting, anticipation, hoping, hopeful, fingers crossed

    Good news will be in short supply on our market today. But feedback from Brisbane-based credit union CUA could shine a ray of hope for coronavirus-afflicted ASX banking stocks.

    The S&P/ASX 200 Index (Index:^AXJO) 1.8% in early trade. Rising fears of a second wave of COVID-19 cases as the world records 500,000 deaths and 10 million infections will give market bears the upper hand today.

    Those desperately searching for some sliver of good news may be encouraged by what Australia’s largest customer-owned lender told the Australian Financial Review.

    V-share bank recovery?

    CUA undertook a survey of its borrowers. Its chief executive Paul Lewis said more than three-in-five of its customers on COVID-19 assistance are ready to restart payments now.

    That’s encouraging as it supports hope of a V-shape economic bounce back given that we are only at the half-way mark for the pandemic assistance packages offered by banks and the government.

    Banks offered its customers affected by the pandemic lockdown to defer loan repayments for six months until October.

    Bad debt a big thorn in the side

    But the move also heightened worries about bad debts when the government’s wage assistance ends at the same time as the loan relief program.

    This is one key reason why the Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking GrpLtd (ASX: ANZ) and National Australia Bank Ltd. (ASX: NAB) share prices have tumbled.

    The findings by CUA stand in contrast to the feedback that NAB received a few weeks ago. As reported back then, NAB’s boss Ross McEwan said as many as 90% of its customers on loan deferral can’t restart paying their mortgages.

    Emerging from the COVID-19 freeze

    But as the Australian economy is continuing to emerge from the COVID-19 deep freeze (apart from Victoria), perhaps things are looking brighter now.

    However, before you get too excited, there are some caveats to CUA’s upbeat findings. Firstly, credit unions tend to have more conservative lending practices. This means their borrowers tend to be in better financial shape heading into the crisis.

    Further, its borrowers are usually older. This is important as the massive job losses have hit younger Australians harder as they are concentrated in industries most affected by the lockdowns, such as hospitality.

    CUA also has limited exposure to small business lending, unlike the big four – particularly NAB. Some economists are predicting a wave of small business closures when the government’s JobKeeper and JobSeeker programs end on September 24.

    Foolish takeaway

    Bad debt is a bigger issue for ASX banks than for credit unions, although it’s the Big Four that wields the market power.

    The big banks can outprice smaller lenders as they have a funding advantage and the balance sheet strength (assuming bad debts don’t lift significantly from forecasts).

    I believe coming out of the crisis, the big four will have the upper hand. That’s why I own shares in all the big banks.

    Now all they have to do is to get through this shorter-term volatility.

    5 stocks under $5

    We hear it over and over from investors, “I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!” And it’s true.

    And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!

    Learn More

    *Extreme Opportunities returns as of June 5th 2020

    More reading

    Motley Fool contributor Brendon Lau owns shares of Australia & New Zealand Banking Group Limited, Commonwealth Bank of Australia, National Australia Bank Limited, and Westpac Banking. 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 Comments from CUA brings hope to COVID-19 stricken ASX banking stocks appeared first on Motley Fool Australia.

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  • Jumbo Interactive share price sinks lower on new Tabcorp agreement

    Lottery Balls

    The Jumbo Interactive Ltd (ASX: JIN) share price has returned from its lengthy suspension and is sinking notably lower this morning.

    At the time of writing the lottery ticket seller’s shares are down 9% to $10.39.

    Why is the Jumbo share price sinking lower?

    Investors have been selling Jumbo’s shares this morning after it announced a new 10-year reseller agreement with Tabcorp Holdings Limited (ASX: TAH).

    According to the release, Jumbo and Tabcorp have extended their reseller agreements for New South Wales, Victoria, South Australia, Northern Territory, ACT, and Tasmania (as well as international jurisdictions) until July 2030.

    However, given the enlarged scale of Jumbo and the fundamental value of Tabcorp’s lottery licences to it, these agreements will come at a cost.

    Jumbo has agreed to pay an upfront extension fee of $15 million for the 10-year term and a service fee of 4.65% of the ticket subscription price.

    The latter will be introduced in phases, initially with a service fee of 1.5% in FY 2021. After which, its service fees will increase to 2.5% in FY 2022, 3.5% in FY 2023, and then 4.65% thereafter. Though, should the value of its ticket sales be in excess of $400 million for each applicable financial year, it will pay a pay a service fee of 4.65% on ticket sales beyond that amount.

    Western Australia update.

    Jumbo also revealed that it is in discussions with Lotterywest in relation to arrangements for its Western Australian customers. These represented approximately $33 million or 10.5% of ticket sales in FY 2019.

    Though it warned that there is no guarantee that these discussions will result in any agreement being reached with Lotterywest. Furthermore, if an agreement with Lotterywest cannot be reached, Jumbo will seek alternative options for maximising the value of its Western Australia customer base.

    FY 2020 guidance.

    Jumbo has reaffirmed its guidance for FY 2020 despite a lower than expected number of large jackpots.

    It expects to report ticket sales of $335 million to $341 million and revenue of $68.5 million to $69.9 million. In respect to earnings, it is forecasting earnings before interest, tax, depreciation, and amortisation (EBITDA) of $38.7 million to $40 million and net profit after tax in the range of $24.4 million to $25.3 million.

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    James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Jumbo Interactive Limited. The Motley Fool Australia owns shares of and has recommended Jumbo Interactive 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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  • Up 2,700% in 5 years: can the a2 Milk share price continue to climb?

    A2 Milk share price higher

    The A2 Milk Company Ltd (ASX: A2M) share price has had an impressive run in the last 5 years.

    Shares in the Kiwi dairy group have rocketed 2,710.8% over that time to $18.27 per share. That means $10,000 invested 5 years ago would be worth more than $271,000 today.

    Many investors would look at the a2 Milk share price and think that its growth potential is already gone. But could the dairy group’s value continue to soar this year?

    Why the a2 Milk share price may continue to climb

    I think conditions in the Australian and New Zealand dairy market remain quite tough. Farmgate milk prices are low and competition is as fierce as ever.

    However, a2 Milk shares have continued to climb in 2020 and are up 27.8% for the year. Despite some strong sales to start the year, I think the real growth potential is in international expansion.

    a2 Milk is looking to expand its iconic brand into Canada, which could open up a whole new market. While the Kiwi dairy group has had a lot of success in Asia, North America could provide a real sales boost if it can capture market share.

    That could mean the a2 Milk share price heads higher if this is converted into higher earnings.

    That being said, I’m not bullish enough to be buying in at $18.27 per share, particularly given the uncertainty around international trade right now.

    Have any other ASX shares seen the same growth?

    A2 Milk isn’t the only ASX growth share to rocket higher over this period. The Polynovo Ltd (ASX: PNV) share price has rocketed 2,700.0% to $2.52 per share.

    The Aussie biotech company has gone from strength to strength in recent years, much like a2 Milk.

    I think Polynovo has some strong growth prospects as it looks to expand its NovoSorb product into other healthcare and cosmetic markets.

    While no one knows where Polynovo and A2 Milk shares are headed in 2020, I think both companies are well-positioned for more growth in the short to medium-term.

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

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  • Are Coles and Woolworths shares back in the buy zone?

    Supermarket Sales Growth

    Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW) shares have been outperforming in 2020.

    While the S&P/ASX 200 Index (ASX: XJO) is down 11.7% this year, Coles and Woolworths shares have climbed 13.1% and 0.6%, respectively.

    There are fears over a second coronavirus wave right now, particularly in Victoria. We saw ASX supermarket shares rocket higher earlier in the year, so will this time be any different?

    Will ASX supermarket shares soar again?

    I’m of the opinion that we won’t see the same share price surges that we saw in February.

    For one, I just don’t think there will be the same level of panic buying this time around. While both Coles and Woolworths have introduced new buying restrictions, there are more options available to Aussies right now.

    Restaurants and cafes are starting to re-open, which means more people can eat out now compared to March. That could mean that supermarket sales don’t reach the same heights but Coles and Woolworths shares could still climb higher.

    What’s good about Coles and Woolworths shares?

    While I don’t think we’ll see more surges, we could still see the Aussie supermarket shares finish the year strongly.

    A recent SCA Property Group (ASX: SCP) trading update suggested strong turnover from its supermarket tenants up to 31 May 2020. That could be good news for Coles and Woolworths shares in the short to medium-term.

    On top of that, Woolworths is working on some impressive automation projects with Qube Holdings Ltd (ASX: QUB). The new automated logistics centre could be a game-changer for operational efficiency for the supermarket giant.

    Foolish takeaway

    While panic buying may not return in 2020, that doesn’t mean supermarket shares won’t be worth buying.

    If we see more share market volatility, the relatively steady earnings for the Aussie supermarkets could make Coles and Woolworths shares welcome portfolio additions.

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    Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET, Shopping Centres Australasia Property Group, and 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.

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  • 3 top ASX growth shares to buy for FY21

    asx growth shares

    Investing in the best ASX growth shares at the right price can create some great returns if you choose well.

    Not many businesses are destined to be top performers over the long-term. I think it’s quite tough to identify those businesses which will go on to become Australia’s next mid-caps. Or even large caps eventually.

    I think these are some of the best ASX growth shares to invest in for the next 12 months and beyond:

    Share 1: Bubs Australia Ltd (ASX: BUB)

    Bubs is one of the most exciting consumer ASX growth shares in my opinion. It sells a range of goat milk products. The infant formula business is growing impressive. In the quarter to 31 March 2020, infant formula revenue rose 137% compared to the prior corresponding period and represented 58% of that quarter’s gross sales. I think that was a very impressive result.

    Chinese revenue is similarly growing at a fast pace, rising 104% in the last quarter. But ‘other market’ revenue rose almost 20 times compared to the prior corresponding period and represented 12% of gross sales in the quarter. There was significant growth in Vietnam. There is more to Asia than just China. 

    Bubs is distributed across a variety of retailers in Australia like Coles Group Limited (ASX: COL), Woolworths Group Ltd (ASX: WOW), Amazon, Chemist Warehouse and Baby Bunting Group Ltd (ASX: BBN). I think Bubs is doing a good job of raising its brand profile.

    I think the international expansion aspect makes this a very exciting ASX growth share.

    Share 2: City Chic Collective Ltd (ASX: CCX)

    City Chic describes itself as a global omni-channel retailer specialising in plus-size women’s apparel, footwear and accessories. After making acquisitions, it now runs several brands including City Chic, Avenue and Hips & Curves.

    Not only does the retailer operate over 90 stores across Australia and New Zealand, but it also has a website in the US, marketplace and wholesale partnerships with major US retailers and a wholesale business with European and UK partners.

    Store closures and lower margins because of COVID-19 were not ideal for the ASX share, but it managed to achieve 57% online sales growth during the store closure period, despite already having a high level of online sales.

    The company has agreed reduced rent with a large majority of its landlords and it is also eligible for jobkeeper in Australia and the wage subsidy in New Zealand. This will help with costs. 

    On 19 March 2020 the company announced it had achieved strong comparable sales growth of 8.6% for the financial year to date. As COVID-19 impacts lessen, I think City Chic’s growth will rebound.

    Share 3: BWX Ltd (ASX: BWX)

    BWX is a leading natural beauty business with a number of different brands including Sukin, Andalou Naturals, Nourished Life and Mineral Fusion.

    It was a really tough year in 2018 for the ASX share, but the company seems to be turning things around. In the FY20 result it grew total revenue by 23% to $84.1 million. That included 43% revenue growth of Sukin, 15% growth for Andalou Naturals, 28% growth for Mineral Fusion and 5% growth for Nourished Life.

    FY20 half-year earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 40%, excluding the effects of AASB 16 Leases. Reported EBITDA rose 63% and statutory net profit after tax (NPAT) rose by 63%.

    It has exited 16 markets to concentrate on certain areas for growth. For example, Sukin is now selling across around 1,000 US distribution points including 330 USA Target stores. Mineral Fusion was recently launched in 770 USA Target stores. Andalou Naturals is being rolled out in Australia with new retail partners. A bigger distribution network should lead to more sales.

    At 31 December 2019, the ASX share had a net cash position of $14 million, up from $12 million a year ago. It even declared an interim dividend of 1.3 cents per share.

    BWX looks like it’s now on the right path and continues to grow internationally with rising profit margins.

    Foolish takeaway

    I think each of these ASX growth shares could beat the market in FY21 and deliver impressive growth. It’s hard to pick a favourite, though I’d go for Bubs if I had to choose one. I think it could grow its revenue and profit the most (in percentage terms) over the next year and five years. I also believe it could be the least affected if COVID-19 affects Australia and China again. 

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    Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BUBS AUST FPO. The Motley Fool Australia owns shares of and has recommended BWX Limited. The Motley Fool Australia has recommended BUBS AUST 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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