Right now investors have a range of areas to choose great ASX shares for growth. On one hand we see radical changes in short term credit with the buy now, pay later companies led by Afterpay Ltd (ASX: APT). On the other hand, changes in the world’s security outlook has boosted defence shares. Furthermore, growth shares are springing up in technological and medical areas with companies such as Recce Pharmaceuticals Ltd (ASX: RCE).

When investing in ASX growth shares, it’s important to remember 3 pieces of advice. First, with great upside potential comes the ability to rapidly go to zero (this is what high risk looks like). Second, always consider investments over a minimum 3–5 year time frame. Third, do not commit to invest anything more than you can live with losing.

So, if you have the nerve for investing in growth stocks, then here are 3 that I think are well worth your attention.

3 ASX shares with big potential

Fintech sector

The finance technology, or fintech, sector in Australia is fascinating. This is an area where companies are delivering financial services using modern technologies.

In this space, the ASX share that I believe is under appreciated is the blandly named CML Group Ltd (ASX: CGR). I believe this is a company made for our times. It provides debtor finance; that is, securing short-term finance with assets other than property. The largest example of this is invoice financing. CML Group will take your invoice as security and fund you up to 80–90% of it, with the loan paid back when the invoice is paid.

Short term credit like this is vital to small businesses for cashflow management. The “tech” part of this fintech is its recent acquisition of a a software-as-a-service (SaaS) website called Skippr. The platform integrates with common fintech platforms like Xero Limited (ASX: XRO) and MYOB, as well as a number of others.

It provides small business with a subscription-based approach to quickly access short-term finance. It also automates a lot of the process making it feasible for CML Group to finance much smaller companies. Previously, it had to target companies with receivables of $200,000 or more to make it profitable.

Aside from the business dynamics, there are a number of other reasons why I favour this company. First, it has a solid financial track record. In fact, over an 8-year period it has grown its earnings per share by about 12% per year. Second, it has a small market capitalisation. At $78.33 million, the idea of multiplying one or two times the initial  investment is believable. Last, at its current price it has a trailing 12-month dividend yield of 6.67%, which I find respectable.

Biotech sector

There are many innovative biotech ASX shares that are shaping the future not only in Australia, but throughout the world. Dimerix Ltd (ASX: DXB) is currently developing a drug, DMX-200, to treat diabetic kidney disease and focal segmental glomerulosclerosis (commonly referred to as FSGS). FSGS is a scarring of the kidneys and some cases may end in kidney failure, requiring dialysis or a kidney transplant.

Proteinuria, or protein in the urine, is a sign of kidney disease. DMX-200 demonstrated a 29% reduction in protein for all test subjects versus the placebo. Moreover, 29% demonstrated a greater than 40% reduction. In the first half of CY21 the company plans to commence the investigational new drug process with the FDA in the USA.

Dimerix is valued at $92.94 million. Year to date, the company’s share price has risen 261%. This company is a pure research organisation and it may take a year or so to start seeing real on the ground results. However, I think the ASX share price is likely to continue rising over the near term as it moves closer and closer to production. Most importantly, the potential addressable market for this company is massive and global.

Defence sector

In the defence sector there are a number of ASX shares worth looking into. These include aluminium ship building giant Austal Limited (ASX: ASB), sensor technology experts Electro Optic Systems Hldg Ltd (ASX: EOS), and body armour manufacturer Xtek Ltd (ASX: XTE). However, personally I think near-term growth is likely to come from Orbital Corporation Ltd. (ASX: OEC).

Orbital is the world leader in propulsion systems for unmanned aerial vehicles (UAV) or drones. The company recently announced it had achieved revenue of $33.8 million. This is an improvement of 121% on the FY19 revenue. Moreover, it now has 2 engine models in continuous production for Insitu, a subsidiary of Boeing. The 3rd of the 5 contracted engine models is scheduled for production in 2021.

In addition, Orbital signed a new MoU with one of Singapore’s largest defence companies for the design, development and initial production of a multi-fuel UAV engine. Furthermore, it has a new contract with leading aerospace company Northrop Grumman for a hybrid propulsion system for a vertical take-off and landing UAV.

Foolish takeaway

There are many ASX shares that are poised for growth over the next 3–5 years. I have chosen 3 that I believe have strong momentum and are likely to see at least a doubling of their share price. Each of the 3 ASX shares above is advanced in their technologies, with CML and Orbital already generating revenues. Lastly, each of them has a very sizeable addressable market.

More reading

• 4 ASX shares leading the way in drone technology
• Should you invest in Commonwealth Bank shares?
• CML share price surged 13% last week
• Orbital share price defies a falling market
• 3 surging ASX defence shares to buy next week

Daryl Mather owns shares of Electro Optic Systems Holdings Limited and Recce Pharmaceuticals Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Austal Limited, Electro Optic Systems Holdings Limited, Orbital Limited, and Xero. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Electro Optic Systems Holdings Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post 3 ASX shares that could make you rich appeared first on Motley Fool Australia.

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With so many shares to choose from on the ASX, it can be hard to decide which ones to buy.

The good news is that brokers across the country are doing a lot of the hard work for you.

Three top shares that leading brokers have named as buys this week are listed below. Here’s why they are bullish on them:

Ansell Limited (ASX: ANN)

According to a note out of Credit Suisse, its analysts have retained their outperform rating and lifted their price target on this safety products company’s shares to $42.50. Credit Suisse is expected Ansell to deliver a solid result in FY 2020 thanks to strong demand for personal protective equipment. It has forecast full year earnings before interest and tax of US$212 million. This compares to US$202.8 million a year earlier. Pleasingly, the broker believes the increase in demand is structural and will last beyond the pandemic. While I think Ansell could be a decent option for investors, I would like to see signs that this is a structural change before investing.

IDP Education Ltd (ASX: IEL)

A note out of Goldman Sachs reveals that its analysts have retained their buy rating but cut the price target on this student placement and language testing company’s shares to $17.00. According to the note, the broker has revised its earnings forecasts lower for the next couple of years to reflect a more prolonged impact from COVID-19. Nevertheless, it believes IDP Education’s future is very bright and sees the longer-term structural growth profile of international education remaining robust. It also feels the company is better positioned to navigate the crisis than its unlisted peers. I agree with Goldman Sachs and feel IDP Education could be a great long term investment option.

Nearmap Ltd (ASX: NEA)

Analysts at Citi have retained their buy rating and lifted their price target on this aerial imagery technology and location data company’s shares to $2.75. According to the note, the broker is a fan of its artificial intelligence product and believes it is going to be a key driver of growth over the medium term. I agree with Citi and would be a buyer of Nearmap’s shares right now.

More reading

• Here’s the best mid-cap growth share to buy on the ASX
• These are the 10 most shorted shares on the ASX
• 5 things to watch on the ASX 200 on Monday
• Which 3 ASX tech shares are investing in long-term growth?
• Are you a growth investor? Then take a look at these exciting ASX shares

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 Idp Education Pty Ltd and Nearmap Ltd. The Motley Fool Australia has recommended Ansell Ltd. and Nearmap Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Can you remember the last time your bank delivered an unexpected windfall on your cash savings?

Me neither.

Unfortunately, the paltry returns Australians receive from their savings deposits have only been heading one way — lower.

According to data from RateCity, 64% of Aussie banks have slashed one or more of their savings rates over the past two months. This comes as the Reserve Bank of Australia (RBA) has kept its official cash rate unchanged at 0.25% since March.

National Australia Bank Ltd. (ASX: NAB) was the latest of the big four banks to cut rates. NAB lopped 0.10% off its introductory rate on 30 July, bringing it down to 0.95%. With its ongoing rate already at a rock bottom 0.05%, the bank left that one unchanged.

Whatever benefits NAB hopes to achieve for its shareholders with the move have yet to be reflected in the NAB share price. NAB’s share price is down 6.4% since its 30 July savings rate cut. Year to date, the NAB share price is down 31%.

Commonwealth Bank of Australia (ASX: CBA) also cut savings rates late last month. It knocked 0.05% off its GoalSaver for anyone with a balance of more than $50,000. Pity for those customers whose goal is to save more than that. The Commonwealth Bank share price is down 9.7% year to date.

Good news and bad for your cash holdings

The good news for Aussies with large cash holdings is that the cost of living is actually getting cheaper. Driven by falling fuel prices and free child care in the wake of the COVID-19 pandemic, the consumer price index (CPI) is down 0.3% over the last year.

The bad news is that the returns you’re getting from your bank deposits are likely to get even smaller.

As RateCity’s research director, Sally Tindall, says:

“Banks are feeling the heat at the other end of the equation where there is immense pressure to put competitive home loan rates on the table. There’s little competition between the banks for deposits right now. As a result, banks can chip away at these rates, often without too much blowback”.

Now a 0.10% cut in the savings rate won’t make or break most Australians’ retirement plans. If you have $50,000 in cash savings, it will mean $50 less in your pocket at the end of the year, minus what the ATO may claim.

But if you had, say $205 billion, even a 0.10% cut would knock $205 million off your annual savings. Ouch!

But then who has $205 billion in cash holdings?

Two new records from Warren Buffett’s Berkshire Hathaway

Legendary investor Warren Buffett has $205 billion, of course.

At the end of the June quarter, Buffett’s Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) held a record US$146.6 billion (AU$205 billion) on hand.

But that doesn’t mean Buffett has been sitting idly on the sidelines.

From Bloomberg:

Berkshire spent a record $5.1 billion buying back its own stock in the second quarter, and may have kept that higher pace going in July…

Edward Jones analyst Jim Shanahan estimated that Berkshire repurchased about $2.4 billion more of its stock in July…

Buffett said in early May that he was keeping cash high to be prepared for any direction the pandemic might turn and wasn’t overly attracted to buybacks. But as he searched for undervalued assets to spend billions on, he gravitated to his own firm’s shares.

Despite the record buybacks, Berkshire’s cash pile increased to the new record high as the company sold US$13 billion more shares than it bought. That’s its biggest net share sales in more than ten years.

Buffett has been particularly pessimistic about the share price outlook for airlines. Since May, Berkshire sold all of its shares in the four biggest United States airline companies.

Not to second guess the Oracle of Omaha, but…

I’d hate to pit my investing acumen against Warren Buffett when it comes to investing in Qantas Airways Limited (ASX: QAN) shares. So, I’ll let the analysts from UBS and JPMorgan do it for me.

As noted by the Australian Financial Review (AFR), Qantas will likely report an 80% drop in earnings and profits in its upcoming 20 August report on the full financial year (according to Bloomberg estimates).

Despite that massive profit plunge, only one of the eight analysts surveyed by Bloomberg had a sell rating on Qantas shares. Two analysts remained neutral with five reporting a buy rating on Qantas shares. The consensus target price was $4.36. That’s 31% higher than Qantas’ current share price of $3.34.

According to the AFR, JPMorgan analyst, Richard Jones, stated Qantas is in a relatively good position despite the current challenges:

“We see [Qantas] as well-positioned given: 1) [about] 70 per cent of earnings over the past 10 years and we estimate 80 per cent over the next five comes from domestic and loyalty. And, 2), its strong relative balance sheet positioning…”

“Loyalty is a high-quality business, having delivered stable growing earnings. It is comfortably the least disrupted division from the crisis, despite an expected pullback in FY20 earnings of [about] 5-10 per cent … Loyalty is worth [more than] $4bn”.

UBS analyst, Matt Ryan, is also bullish on the Qantas share price, telling his clients in a note last week they shouldn’t be concerned with the revival of Virgin 2.0.

From the AFR:

“Virgin is intending to offer customers a broad offering (including regional routes, lounges and loyalty, corporate and leisure etc) albeit on a reduced scale. Without more significant changes, we believe this is positive for Qantas. As this represents a similar service offering that we saw from Virgin over the past five years where Qantas was able to take [about] 90 per cent of the domestic profit pool”.

Ryan rates the Qantas share price as a buy, with a target price of $4.60. That’s 37% above the Qantas share price in early morning trading today.

More reading

• ASX 200 jumps 1.2%: Big four banks rise, Qantas update, Mesoblast surges
• Qantas share price higher despite share purchase plan flop
• It’s ASX reporting season! Here’s what to watch out for this week
• BHP and 2 more ASX dividend shares for beginners
• CBA and 2 more ASX 200 shares to watch this week

Bernd Struben 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 Berkshire Hathaway (B shares) and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short September 2020 $200 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Berkshire Hathaway (B shares). 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 Bank savings rates fall as Buffett racks up record cash pile and analysts tip Qantas share price rebound appeared first on Motley Fool Australia.

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The Australian ASX tech sector is smaller and less mature than the much larger US tech market. However, the number of  ASX tech shares listed continues to grow each year.

Two ASX tech shares have caught my eye lately: Carsales.Com Ltd (ASX: CAR) and Bigtincan Holdings Ltd (ASX: BTH). Here’s why I think both could be good buy and hold options for your ASX share portfolio right now.

Carsales.Com

Carsales has held a dominant market position in the Australian online automotive classifieds market for well over a decade now. Local revenue growth has slowed down due to maturity of the online channel. However, local growth has still been solid and consistent in recent years. Growth is now being particularly driven from Carsales’ overseas operations, which includes South Korea and Brazil.

Although coronavirus impacted Carsales in the early phase of the pandemic, the company share price has rebounded strongly in recent months.

Carsales reported in June that Australia’s lead and traffic volumes had continued to improve despite the challenges of the pandemic. However, at the time total revenue for FY 2020 was predicted to be flat.

Carsales may continue to face short-term challenges due to the pandemic. But I believe its expanding overseas operations will drive strong growth in the longer term.

Bigtincan

Another good ASX tech share to buy and hold for the long-term is Bigtincan. This small cap technology company operates in a fast-growing IT software niche called ‘sales enablement’.

Like Carsales, the Bigtincan share price took a hit early on in the pandemic. However, it has witnessed strong share price gains in recent months.

Bigtincan reported a strong fourth quarter in which customer cash receipts surged by 89% to $10.4 million. Annualised Recurring Revenue (ARR) year-on-year growth for Bigtincan lifted by 53% to $35.8 million. Bigtincan’s ARR has now grown at a very impressive compound annual growth rate of 50% over the past 5 financial years.

I should point out that Bigtincan has yet to reach the breakeven point in terms of profitability, so it could be perceived as a risky investment right now. However, I believe the company will be profitable in coming years as it achieves further market scale.

Foolish Takeaway

Carsales and Bigtincan are 2 ASX tech shares that I believe are well-placed to outperform the ASX over the next five years.

More reading

• Are these small cap ASX shares future stars?
• 3 exciting small cap ASX shares to put on your watchlist immediately
• 3 five-star ASX dividend shares to buy in August
• Could these small cap ASX shares be the next Afterpay?
• Why you should buy into this booming ASX retail sector today

Phil Harpur owns shares of Carsales.Com Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends BIGTINCAN FPO. The Motley Fool Australia has recommended BIGTINCAN FPO and Carsales.Com 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 exciting ASX tech shares to buy and hold till 2025 appeared first on Motley Fool Australia.

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The Afterpay Ltd (ASX: APT) share price is proving itself to be a Teflon stock. Bad news just doesn’t seem to stick.

The BNPL superstar recovered from an early sell-off to surge 1.7% to $71.91 in late morning trade  when the S&P/ASX 200 Index (Index:^AXJO) increased 1%.

The trouble facing Afterpay’s substantial shareholder Tencent Holdings Ltd isn’t worrying shareholders. The sell-down of the stock by another substantial, Lone Pine Capital, is also quickly overlooked by the market.

Tencent tailwind turning into headwind

But it’s Tencent’s US problems that is a little more concerning. The China-based conglomerate’s entry to Afterpay’s register three months ago was touted as a big win as it sent the stock jumping from $29.16 to $47.41 in May, according to the Australian Financial Review.

Tencent owns the popular WeChat app and is regarded as one of the most successful digital platforms businesses in the world.

The investment by Tencent will help the fledging fintech expand more rapidly into the global digital payments space, which includes the lucrative US market.

Chinese tech companies in Trump’s cross-hair

But US President Donald Trump is moving to ban WeChat and stop US companies from doing business with Tencent and ByteDance (TikTok’s owner). Trumps accuses both of spying on users on behalf of the Chinese government.

The ban could conceivably turn Tencent into a liability for Afterpay if the US government expands the restrictions to all of Tencent’s commercial interests.

Should Afterpay shareholders be worried?

The reason why the market isn’t too worried is because the White House said it won’t be going after video game companies, reported PC Gamer.

Tencent owns Riot Games, which makes games like League of Legends and Valorant. It also holds a 40% interest in Fortnite creator Epic Games and 5% of Activision Blizzard, among many others.

If these game developers aren’t impacted, then it’s probable that Afterpay will also escape unscathed.

Also, investors can take comfort in the fact that Tencent doesn’t have majority control of Afterpay and that other US companies have made investments in the ASX stock.

Why investors should remain on alert

But Trump is anything if not unpredictable and the rocketing Afterpay share price leaves little room for bad news.

Afterpay jumped by close to 150% since the start of the 2020 calendar year, making it the best performer among the WAAAX tech darlings.

The Appen Ltd (ASX: APX) share price is the second-best gainer with a 66% increase, followed by the Xero Limited (ASX XRO) share price on 14%.

More reading

• ASX 200 jumps 1.2%: Big four banks rise, Qantas update, Mesoblast surges
• Here’s the best mid-cap growth share to buy on the ASX
• Know when to buy ASX 200 shares – watch the VIX
• A2 Milk and 1 other top ASX growth share to buy this month
• Will the Domain share price follow auction clearance rates higher?

The post Why the Afterpay share price is yet to be impacted by Tencent’s US troubles appeared first on Motley Fool Australia.

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At lunch on Monday the S&P/ASX 200 Index (ASX: XJO) is on course to start the week on a very positive note. The benchmark index is currently up 1.2% to 6,077.4 points.

Here’s what is happening on the market today:

Big four bank shares higher.

The big four banks have started the week in a positive fashion and are helping to drive the ASX 200 higher. All four banks are pushing higher at lunch, but the Westpac Banking Corp (ASX: WBC) share price is the best performer with a solid 2.6% gain.

GPT half year result goes down well with investors.

The GPT Group (ASX: GPT) share price is pushing higher on Monday after the release of its half year result. The property company, which owns assets such as Westfield Penrith and Melbourne Central, reported a $519.1 million loss. This was due to negative property valuation movements of $711.3 million. Despite this, GPT declared an interim distribution of 9.3 cents per stapled security. This is expected to be paid on 28 August.

Qantas share purchase plan flops.

The Qantas Airways Limited (ASX: QAN) share price is ascending today despite falling well short of its $500 million target with its share purchase plan. Qantas received valid applications from 8,660 shareholders, which represents just 5% of 173,343 eligible shareholders. As a result, it was only able to raise $71.7 million. Management blamed the timing of the share purchase plan, noting that it coincided with the outbreak in Melbourne.

Best and worst performing ASX 200 shares.

The best performer on the ASX 200 on Monday has been the Mesoblast limited (ASX: MSB) share price with a 9% gain. The biotech company’s shares have been strong performers this month ahead of some potentially major announcements. The worst performer has been the oOh!Media Ltd (ASX: OML) share price with a 5% decline. This appears to be due to concerns that it is having to heavily discount its billboards.

More reading

• Why the Afterpay share price is yet to be impacted by Tencent’s US troubles
• Know when to buy ASX 200 shares – watch the VIX
• A2 Milk and 1 other top ASX growth share to buy this month
• Why CIMIC, oOh!Media, ResMed, & Resolute shares are dropping lower
• Will the Domain share price follow auction clearance rates higher?

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia has recommended oOh!Media 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 ASX 200 jumps 1.2%: Big four banks rise, Qantas update, Mesoblast surges appeared first on Motley Fool Australia.

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When I invest in companies, I always look for long-term quality growth shares that have competitive advantages and are run by a solid management team. Whilst there are few I could list such as Appen Ltd (ASX: APX) and Nearmap Ltd (ASX: NEA), I believe that Electro Optic Systems Hldg Ltd (ASX: EOS) has the brightest future ahead and will hammer the All Ordinaries Index (ASX: XAO) over the next few years.

What does Electro Optic Systems do?

Electro Optic Systems is Australia’s largest aerospace entity and largest defence exporter in the Southern Hemisphere, specialising in defence, space, and communications technology.

The company designs, manufactures and delivers battle-proven technology that can leverage a country’s position and influence on the world stage. Key applications include telescopes and dome enclosures, laser satellite tracking systems, and fire control systems.

Global reach

Strategic alliances with military enterprises such as NASDAQ-listed behemoth Northrop Grumman is one sure way to make a statement. The company’s participation in the B-21 strategic bomber program (whereby the US plan to acquire 100 of these long range tactical aircraft) will come at a cost of roughly US$550 million per unit. No doubt this will be a massive cash injection for Electro Optic Systems in the near future. To put it in perspective, that slice of the pie could be worth a potential US$55 billion ($76.8 billion).

Also noteworthy is Electro Optic Systems partnership with Elon Musk’s company SpaceX. With the recent launches of its Falcon 9 rocket, docking with the International Space Station could not have been possible without the use of Electro Optic’s sensory equipment. This technology tracks space junk that allows the rocket to simulate a flight path that won’t be hazardous during its voyage.

Last year, Electro Optic Systems delivered $160 million of exports to our partners and allies such as the United States, Singapore and the Netherlands. This represented 95% of its products and services.

In late June, the Morrison government stood at the company’s Hume manufacturing facility and announced Australia’s 2020 Force Structure Plan – a bold statement recognising Electro Optic Systems as a pivotal part of the country’s strategic defence plans. The $270 billion in defence spending over the next 10 years will benefit Electro Optic Systems, with the government committing to purchase 251 remote weapon stations, a deal worth to be close to $100 million.

Is the Electro Optic Systems share price a buy?

In its latest quarterly earnings statement, Electro Optic Systems declared that the company expects to report a net loss of $18.2 million in its H1 financial results. Whist this may seem like concerning news, the company has forecast a strong and positive second half with FY2020 profit to fall in between the range of $20-$30 million earnings before interest and taxes (EBIT) – consistent with its prior guidance of $27 million EBIT.

Although revenue has been deferred, orders remain firm with $620 million worth of backlog products and $3.1 billion in the pipeline. Electro Optic Systems also has an unrestricted cash balance of $128 million to see it through the COVID-19 pandemic.

Foolish takeaway

As the theatre of war always looms in global events and dominates media news, countries will always invest in defence capabilities. And with the launch of US President Trump’s Space Force, I see great potential in its development and collaboration with other global entities.

Fostering these strategic alliances, combined with a strong management team with expertise within the defence and telecommunications sector, is a fool-proof way to run a solid company, in my opinion.

I think that the Electro Optic Systems share price is undervalued at its current level of $5.71 (at the time of writing) – a fall of 47% from its all-time high of $10.80. This represents a great opportunity for a buy and long-term hold investor.

More reading

• Why the Afterpay share price is yet to be impacted by Tencent’s US troubles
• 2 ASX retail shares on my radar in 2020
• These are the 10 most shorted shares on the ASX
• ASX 200 Weekly Wrap: Surging commodity prices snap ASX 200’s losing streak
• Why the Senex Energy share price climbed 17% in July

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

The post Here’s the best mid-cap growth share to buy on the ASX appeared first on Motley Fool Australia.

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The volatility of the Australian share market, as tracked by the S&P/ASX 200 VIX (INDEXASX: XVI), can provide some valuable insights into the best points in time to buy ASX 200 shares. The coronavirus pandemic is a perfect example of this. 

Since the S&P/ASX 200 Index (ASX: XJO) reached its peak of 7,162 on 20 February, it has been on a wild ride. The ASX 200 index bottomed out at 4,546 on 23 March and has made relatively steady progress back to 6,047 at the time of writing. That represents a 36% decline, followed by a 33% rise. Despite the strong rally, the index is still down nearly 16% from its February high. 

Warren Buffett’s approach to investing

Famous investor Warren Buffett has 2 key rules for investing:

1. Never lose money.
2. Never forget rule 1.

So, how do you avoid losing your hard earned money? And, how do you know when the best time is to buy ASX 200 shares for the long term? 

One way to inform your broad investment decisions is by following the S&P/ASX 200 VIX.

What is the VIX? 

In simple terms, the VIX is a measure of implied volatility in the ASX 200 (being the benchmark index). A low figure for the VIX represents a period of expected low volatility, whereas a high reading indicates an increasing amount of implied volatility, and presumably plenty of uncertainty for investors.

VIX is a helpful tool that can assist long-term investors to follow another of Warren Buffet’s favourite strategies, “Be fearful when others are greedy and greedy when others are fearful.”

When to buy ASX 200 shares during the pandemic

The VIX began 2020 around $12 and moved within the range of $11–$16 up until 24 February. It subsequently sky-rocketed over 230% to roughly $53 on 18 March. An extremely high VIX is a positive indicator for long-term bullish investors to buy ASX 200 shares.

Every bear market is ultimately followed by a bull market. The ASX 200 VIX wasn’t around during the Great Recession. If we study the S&P 500 VIX, however, we can see that it was also extremely high just months prior to the bottom of that bear market. This was one of the best times in history to buy shares!

The VIX is currently trading at $18.78 at the time of writing. This indicates that although some of the best opportunities may no longer be available, the market should provide more buying opportunities than in January and February.

Foolish bottom line

Over the long term, high quality ASX 200 shares should continue to be life-changing assets to own. Stock market crash or not, short-term volatility or not, continuing to invest in the right businesses is likely to stand you in good stead. However, watching the VIX can help you to identify timely buying opportunities and assist with capital allocation decisions.

More reading

• Why the Afterpay share price is yet to be impacted by Tencent’s US troubles
• ASX 200 jumps 1.2%: Big four banks rise, Qantas update, Mesoblast surges
• A2 Milk and 1 other top ASX growth share to buy this month
• Will the Domain share price follow auction clearance rates higher?
• Should you invest in ASX 200 childcare shares during stage 4 lockdown?

Motley Fool contributor Lloyd Prout has no position in any of the stocks mentioned and expresses his own opinions. 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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