The Coles Group Ltd (ASX: COL) share price is outperforming its largest rival after it was upgraded to “buy” by a leading broker.

The COL share price jumped 0.2% to $17.44 during lunch time trade with the Woolworths Group Ltd (ASX: WOW) share price fell 0.7% to $36.88.

In contrast, the S&P/ASX 200 Index (Index:^AXJO) slipped 0.2% at the time of writing.

Broker upgrades Coles share price to “buy”

The stronger performance by the Coles share price coincides with Credit Suisse’s decision to lift its rating on the stock to “outperform” from “neutral”.

The broker’s move comes as it forecasts Australia will have one million more residents to feed come Christmas. This represents around a 4% increase in the population.

These “extra” people are made up of Aussies who can’t travel abroad this year for holidays due to COVID-19 restrictions.

It also includes long-term visitors, such as international students, who find themselves stuck here as international borders remain shut.

1 million COVID population boost

“The addition to the resident population in Australia is likely to be a significant benefit to domestic retail,” said the broker.

“We highlight food and recreational goods retail as areas likely to benefit disproportionately from a greater level of domestic expenditure.”

Credit Suisse found that the rate of retail spending growth was negatively impacted by an increasing number of resident departures in the past.

ASX stocks best placed to benefit

It added that the increase in spending is likely to be larger than the increase in population for 2020 and that food retailers will be among the biggest beneficiaries.

That’s understandable given the amount of food we feast on during the festive season.

This bullish outlook prompted Credit Suisse to upgrade its price target on Coles to $20.16 a share. It increased the Woolworths target by 12 cents to $40.43 and the Metcash share price by 7 cents to $3.62.

Coles better than Woolworths?

“We prefer COL to WOW,” explained Credit Suisse.

“In our view, a stronger cost out programme, lower level of capital expenditure, and higher payout ratio should result in absolute appreciation in COL and out-performance relative to WOW.”

The broker rates Woolworths as “neutral” and reiterated its “outperform” recommendation on Metcash.

Another retailer that the broker is urging investors to buy based on the same thematic is the Super Retail Group Ltd (ASX: SUL) share price.

The group is well placed to benefit from the multi-year increase in road trips and outdoor recreational activity. It also has a superior online offering compared to its rivals.

More reading

• Why I would buy CSL (ASX:CSL) and this blue chip ASX share
• What investors learnt from the RBA’s rate decision today
• Here’s where you could invest your Woolworths (ASX:WOW) dividends today
• Does time in the market really beat timing the market?
• ASX 200 down 0.2%: Northern Star & Saracen announce mega merger, IAG settles class action

Motley Fool contributor Brendon Lau owns shares of Woolworths Limited. The Motley Fool Australia owns shares of and has recommended Super Retail Group Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET 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.

The post Why the Coles Group (ASX:COL) share price just got upgraded to “buy” appeared first on Motley Fool Australia.

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If you’re looking to add a few blue chip ASX shares to your portfolio this month, then you’re in luck.

The ASX is home to a number of blue chips which I believe could generate market-beating returns for investors over the 2020s.

Two blue chip ASX shares that I would buy are listed below. Here’s why I like them:

Coles Group Ltd (ASX: COL)

The first ASX blue chip share to consider buying today is this supermarket operator. Although its shares have been on fire this year, I still think they are good value for a long-term investment. Especially given its solid growth prospects and attractive dividend policy.

In respect to the former, I expect Coles’ long track record of same store sales growth and its focus on cost cutting, automation, and efficiencies to underpin solid earnings growth over the next decade. And with the company aiming to pay out 80% to 90% of its earnings to shareholders, this bodes well for its dividend growth in the future. At present, based on the current Coles share price, I estimate that it offers a fully franked forward 3% dividend yield.

CSL Limited (ASX: CSL)

A second blue chip ASX share to buy is this global biotherapeutics company. Due to the quality of its portfolio of therapies and vaccines, its growing plasma collection network, strong demand for immunoglobulins, and its high level of research and development investment, I am confident that CSL can continue to deliver strong earnings growth for the foreseeable future.

Overall, I expect this to lead to market-beating returns again for shareholders over the next decade. It is also worth noting that the CSL share price has come under pressure this year due to the pandemic. As a result, if you were to invest today, you would be buying at 16% discount to its 52-week high.

More reading

• Why the Coles Group (ASX:COL) share price just got upgraded to “buy”
• Leading brokers name 3 ASX shares to buy today
• 2 strong ASX dividend shares to buy today
• 2 of the best ASX 200 shares to buy in October
• 5 things to watch on the ASX 200 next week

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 CSL Ltd. 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 Why I would buy CSL (ASX:CSL) and this blue chip ASX share appeared first on Motley Fool Australia.

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The Australian dollar jumped after the Reserve Bank of Australia (RBA) unveiled its latest interest rate decision.

The decision by our central bankers to keep the official cash rate steady at a record low of 0.25% didn’t surprise anyone. ASX investors hardly battered an eyelid with the S&P/ASX 200 Index (Index:^AXJO) largely unmoved by the news.

The same can’t be said for the Aussie. It shot up from US71.9 cents before the RBA’s 2.30pm announcement to a two-week high of US72.1 cents.

Optimism from the RBA rate decision

I suspect currency traders were expecting more dovish commentary from the RBA to support expectations of further monetary easing.

But the board wants the federal government to do some of the heavy lifting. Its officials have said before that monetary easing alone won’t be enough to reflate the economy punctured by COVID-19.

The Morrison government will get a chance to prove it’s a team player tonight when Treasurer Josh Frydenberg hands in the budget.

Federal budget is the main event today

Economists are expecting the budget to be the most stimulatory since the Second World War as the government spends big to create jobs.

We could be left with a $200 billion budget hole in the aftermath, but it will be worth it if Frydenberg can get Australia humming at pre-coronavirus levels again in 2021.

I don’t think the RBA meant to be party-poopers, but it’s written off any V-shape recovery.

If anything, its governor Philip Lowe said the recovery will be bumpy and will take “some time” before we get back to end 2019 levels.

Glass half full

While Dr Lowe did point out other risks to growth, his statement was leaning on the cautiously optimistic side, in my view.

It started off pointing out the gradual global recovery from the pandemic and highlighted success stories like China to balance out the resurgence of the virus in other countries.

“Financial conditions remain accommodative around the world and supportive of the economic recovery,” said Dr Lowe.

“Financial market volatility is low and the prices of many assets have risen substantially despite the high level of uncertainty about the economic outlook.”

Ample liquidity

Australian dollar bulls may have also felt emboldened by the fact that he didn’t seem fussed about the rise in the Aussie.

The RBA also revealed that Authorised Deposit-Taking Institutions (ADIs) have so far drawn down $81 billion of its $200 billion Term Funding Facility and that there was ample amount of cheap credit in the system.

Don’t rule out another rate cut in November

But despite these positives, I think it’s premature to rule out another interest rate cut next month to 0.1%, which is what leading economists are increasingly forecasting.

Dr Lowe indicated as much at the end of his statement when he said “the Board continues to consider how additional monetary easing could support jobs as the economy opens up further”.

The RBA and government have to do a lot more supporting for a longer period to get us back on the path of growth.

More reading

• Why the Coles Group (ASX:COL) share price just got upgraded to “buy”
• Does time in the market really beat timing the market?
• ASX 200 down 0.2%: Northern Star & Saracen announce mega merger, IAG settles class action
• Meet the latest ASX small cap stock that’s racing ahead during COVID
• Why now is a great time to buy ASX shares

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. Connect with me on Twitter @brenlau.

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 Dacian Gold Ltd (ASX: DCN) share price is rocketing higher today, up 15.15% in afternoon trading (at the time of writing). The rise in the Dacian share price follows on the company’s preliminary September quarter update, released to the ASX earlier in the day.

Today’s gains will come as welcome news to shareholders, who saw the Dacian share price plummet 71% from 6 January through to 21 July.

Since that low, the share price has regained nearly 27%, but still remains down nearly 61% in 2020. By comparison, the All Ordinaries Index (ASX: XAO) is down almost 10% year to date.

At the current price of 38 cents per share, Dacian Gold has a market capitalisation of $211 million.

What does Dacian Gold do?

As the name implies, Dacian Gold is a gold producer, based in Western Australia. The company’s 100% owned Mount Morgans Gold Operation is located in a region containing numerous multi-million-ounce gold mines. Gold production at the mine commenced in March 2018. Mount Morgans is supported by Westralia, consisting of the Beresford and Allanson underground mines, and the company’s Jupiter open pit operation.

What’s causing the Dacian share price to rocket?

Dacian’s preliminary September quarter update stated the company had produced 32,799 ounces of gold for the September quarter. It noted this tracks well against its 2021 financial year guidance of 110,000-120,000 ounces. Most of the gold was sourced from Dacian’s Jupiter open pit mine.

Dacian also paid down $25 million of debt in the September quarter. Its total cash and gold on hand as at 30 September stood at $38.5 million. With the company still having a total outstanding debt of $39.1 million, this brings its net debt to $600,000.

Additionally, Dacian’s hedge commitment fell by 23,101 ounces, bringing its hedged position to a total of 61,488 ounces at an average price of $2,114 per ounce. That’s still considerably below the current market price for gold of $2,657 per ounce, but it’s higher than the average price of the company’s previous outstanding hedge position.

Addressing the results, Managing Director, Leigh Junk stated:

This is a great start to the financial year and positions Dacian favourably to meet its annual targets during FY2021. The strong operating performance has translated into a much-improved financial position with total debt and hedge commitments further reduced. I’d like to thank the team for their excellent effort and look forward to continuing the momentum at Mt Morgans.

With the company well on track to meet its production targets, and gold forecast to remain strong, the Dacian share price will be one to watch.

More reading

• 2 ASX shares that every investor should own
• Why the Coles Group (ASX:COL) share price just got upgraded to “buy”
• Why I would buy CSL (ASX:CSL) and this blue chip ASX share
• What investors learnt from the RBA’s rate decision today
• Here’s where you could invest your Woolworths (ASX:WOW) dividends today

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.

The post Why the Dacian Gold (ASX:DCN) share price is soaring 15% higher today appeared first on Motley Fool Australia.

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On Tuesday eligible shareholders of Woolworths Group Ltd (ASX: WOW) will be paid the conglomerate’s fully franked 48 cents per share final dividend.

If you’re planning to reinvest these funds back into the share market, then I would suggest you consider the ASX shares listed below.

Here’s why I think they would be top options for your Woolworths dividends:

Cochlear Limited (ASX: COH)

If you’re looking to invest these funds into a growth share, then you might want to take a closer look at Cochlear. It is one of the world’s leading hearing solutions companies with a growing portfolio of high quality implantable devices.

I believe Cochlear is well-positioned for growth over the next decade and beyond thanks to the extremely favourable shift in demographics globally. According to the World Health Organization, by 2050 there are forecast to be 1.5 billion people over the aged of 65. This will be almost triple the number of over 65s in 2010. I expect this to lead to growing demand for its hearing products and underpin solid earnings growth in the future.

Commonwealth Bank of Australia (ASX: CBA)

If you’re wanting even more dividends, then I would suggest you consider buying this banking giant’s shares. Although the pandemic is certainly hitting the bank hard, I’m confident the provisions it has made will be sufficient. This could mean that the worst is now over for Commonwealth Bank and it is onwards and upwards from here.

Another big positive is the recent news that responsible lending rules will be relaxed. I expect this and a jobs-focused Federal Budget to be a big boost to the banks and could put them on a path to return to growth in the not so distant future. Estimating what dividend the bank will pay is difficult, but I would expect something in the region of 4% fully franked in FY 2021.

More reading

• Why the Coles Group (ASX:COL) share price just got upgraded to “buy”
• Which ASX banking share is the cheapest today?
• ASX 200 jumps 2.6%, big 4 banks surge
• Top broker tipping turnaround in ASX big bank profit margins
• 5 things to watch on the ASX 200 next week

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 Cochlear Ltd. The Motley Fool Australia owns shares of Woolworths Limited. The Motley Fool Australia has recommended Cochlear 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 where you could invest your Woolworths (ASX:WOW) dividends today appeared first on Motley Fool Australia.

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In afternoon trade the Afterpay Ltd (ASX: APT) share price is among the best performers on the S&P/ASX 200 Index (ASX: XJO).

At the time of writing the payments company’s shares are up 5% to $83.73.

Why is the Afterpay share price charging higher?

Today’s gain appears to be attributable to a broker note out of Goldman Sachs this morning.

Although the broker has only retained its neutral rating, it has reaffirmed its $93.45 price target.

This price target implies potential upside of approximately 11.5% for its shares over the next 12 months even after today’s sizeable gain.

What did Goldman Sachs say about Afterpay?

Although in September Goldman Sachs believes Afterpay had its weakest month of app downloads in the ANZ market since February 2018, this was in line with its expectations due to the maturing market.

Its data shows that Afterpay and Zip Co Ltd (ASX: Z1P) remain the clear market leaders, with FlexiGroup Limited (ASX: FXL) gaining traction with its humm platform.

Conversely, across in the United States, the broker notes that Afterpay had its strongest month of app downloads in history with approximately ~330,000 downloads.

Based on this, Goldman Sachs estimates that the company now has a user base of ~6.7 million in the United States, which is up from 5.6 million at 30 Jun 2020.

Pleasingly, with November and December typically peak app download months, Goldman believes Afterpay is on track to achieve its U.S. forecast of 7.8 million users in the first half and 10.3 million users for the full year.

Though, it does note that competition is increasing in the key market.

Goldman commented: “We expect competition could become more aggressive and note recent retailer switches include HAUS Laboratories (Lady Gaga’s cosmetic label) moving to Klarna from APT and the Decker Group brands (e.g. UGG, Teva, Hoka) moving to APT from Quadpay. This elevated competition could manifest itself in the form of merchant fee compression and/or co-marketing costs.”

Nevertheless, for now, the broker remains positive on Afterpay’s margins in North America thanks to smaller merchants (which are charged more) becoming a larger portion of Afterpay’s merchant sales mix.

Should you invest?

I think Afterpay is a great option due to its massive global market opportunity.

And due to its recent share price weakness, I feel now could be a good buying opportunity for investors that are willing to make a long term and patient investment.

More reading

• Why this ASX tech share could be better than BNPL stocks 
• Why now is a great time to buy ASX shares
• Afterpay vs Zip, which is the better investment?
• You could become very wealthy by investing $1,000 into these ASX shares
• 5 things to watch on the ASX 200 on Monday

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 ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T 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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On Monday I looked at three ASX shares that brokers have given buy ratings to this week.

Unfortunately, not all shares are in favour with them right now. Three that have just been given sell ratings are listed below.

Here’s why these brokers are bearish on these ASX shares:

Domino’s Pizza Enterprises Ltd (ASX: DMP)

According to a note out of Credit Suisse, its analysts have retained their underperform rating but lifted the price target on this pizza chain operator’s shares to $61.32. Although the broker has upgraded its estimates to account for strong like for like sales growth in FY 2021, it isn’t enough for a change in its rating. Credit Suisse believes the company’s shares are overvalued at the current level. The Domino’s share price is trading at $81.31.

HUB24 Ltd (ASX: HUB)

Another note out of Credit Suisse reveals that its analysts have downgraded this investment platform provider’s shares to an underperform rating with a $16.30 price target. While HUB24 is performing well and benefiting from industry tailwinds, the broker believes this is more than priced into its current share price. Furthermore, the broker appears concerned that its margins could be squeezed if the RBA cuts rates again. The HUB24 share price is changing hands for $18.01 this afternoon.

Reliance Worldwide Corporation Ltd (ASX: RWC)

Analysts at Morgan Stanley have downgraded this plumbing parts company’s shares to an underweight rating with an improved price target of $4.00. Morgan Stanley notes that Reliance has started FY 2021 very strongly. However, it doesn’t believe investors should get carried away and warned that this strong growth is unlikely to persist. In light of this, it feels its shares are overvalued at the current level. The Reliance Worldwide share price is trading at $4.26 on Tuesday afternoon.

More reading

• Where to invest $10,000 into ASX shares next week
• How to generate a passive income of $50,000 with ASX shares
• ASX 200 rises 1%, Reliance Worldwide (ASX:RWC) climbs 11%
• ASX 200 up 1.6%: CBA higher on COVID-19 loan deferrals update, Reliance rockets
• Why BHP, Paradigm, Reliance, & SeaLink shares are charging higher today

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 Hub24 Ltd and Reliance Worldwide Limited. The Motley Fool Australia has recommended Domino’s Pizza Enterprises Limited, Hub24 Ltd, and Reliance Worldwide 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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A common phrase one might hear in the course of their investing journey is the old maxim ‘time in the market beats timing the market’. Whilst this proverb appears simple in nature, it is actually quite a multi-layered concept. Still waters run deep and all that.

So what does this quote actually mean? Well, on the surface, it tells us that investing capital consistently and steadily into the share market is a better strategy than trying to jump in and out of the market when you see a ‘low’ or a ‘high’. In this way, this quote sort of goes against that other famous investing dictum ‘buy low, sell high’.

But why is this the case? Surely, it’s better to ‘buy the dips’ than just focusing on maximising the ‘time in the market’…

Well, theoretically yes it is. Waiting until a quality share hits a low pricing point is a great way to make money. But theory and practice are extremely divergent when it comes to investing. See, we investors just aren’t very good at the whole ‘timing’ thing. It’s psychologically abhorrent to us as humans to sink large amounts of capital into shares when the market is selling off. Doubts start to creep in, like ‘what if it drops again tomorrow?’ or ‘I’ll just wait a little longer’. No one truly knows when the market tops out or bottoms out until after it has happened. As such, any decision to try and ‘find the bottom’ is actually a gamble, a bet on when you think the markets will give you the best deal. If you get this deal wrong, the consequence is usually a permanent loss of capital.

Time vs Timing

So why is time in the market so much better? Well, firstly, it’s because it takes this ‘guess the bottom’ element out of the equation. By focusing on the long term, it’s far easier to ignore the cut and thrust of the markets from day to day. Sure, it’s still scary watching the value of your share portfolio fall from time to time (as we saw back in March). But today, the S&P/ASX 200 Index (ASX: XJO) and ASX shares have recovered substantially from where they were on 23 March. All you had to do to benefit from this was… give it time.

But time in the market is really about harnessing the power of compound interest. Compounding is the best thing about investing in ASX shares, and it’s usually what makes investors like Warren Buffett rich. Why do you think Buffett, at age 90, is as rich as he has ever been? Time in the market of course. If you are able to achieve a consistently high annual rate of return over decades and decades, building wealth is almost inevitable. And Buffett has never tried to time a market in his life. But pushing and pulling your money in and out of the market kneecaps the compounding process. And all it takes is one massive mistime to end up back at square one.

Foolish takeaway

Long story short, I believe time in the market beats timing the market, every time. And it’s easier too. What’s not to like?

More reading

• ASX 200 down 0.2%: Northern Star & Saracen announce mega merger, IAG settles class action
• Meet the latest ASX small cap stock that’s racing ahead during COVID
• Why now is a great time to buy ASX shares
• 5 things to watch on the ASX 200 on Tuesday
• Altium (ASX:ALU) updates market on restructure

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

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The wild ride continues for ASX banking shares in 2020. Bank shares like Commonwealth Bank of Australia (ASX: CBA) have had a topsy turvy year, to say the least. Despite yesterday’s massive 3.3% surge, CBA shares are still down more than 17% in 2020 so far. And that’s the best of the bunch.

CBA’s banking brethren have fared far worse. Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking GrpLtd (ASX: ANZ) are all down roughly 50% in 2020 so far. And that comes on top of a conspicuous lack of dividend payments from ASX bank shares this year, something ASX banking investors are not used to seeing from the big four.

Yes, CBA has managed to pay out a respectable $2.98 in dividends in 2020 (down from $4.31 in 2019). But NAB and ANZ have both paid out paltry dividends that pale in comparison to 2019’s levels. And Westpac has yet to even announce a dividend in 2020 after cancelling its interim payment earlier in the year. That nasty $1.3 billion fine won’t help either.

So which ASX bank is looking hot today? Let’s take a look at what the market is telling us about bank shares.

ASX banks – hot or not?

At the time of writing, CBA shares are asking $65.96 each. NAB is trading at $18.16, whereas Westpac is going for $17.25. ANZ brings up the rear at $17.78.

At this share price, CommBank is trading on a price-to-earnings (P/E) ratio of 16.13.

NAB? It’s current P/E ratio stands at 16.31. Westpac is on 12.95x earnings, while ANZ is asking a 12.1 ratio.

So on these simple metrics, it appears CommBank and NAB are the most expensive ASX bank shares today, while the market is heavily discounting ANZ and Westpac by comparison.

On one level, this seems fair. CBA is unquestionably the healthiest ASX bank today. It has been able to keep its dividends flowing while the other 3 majors have struggled. And sheer size is certainly an advantage in this uncertain world. But a P/E ratio of more than 16 is certainly a lot for a bank share. Other major banks around the world don’t normally trade anywhere near this valuation. For example, Bank of America Corp (NYSE: BAC) is one of the largest banks in the US and the world. Yet it is currently trading on a P/E ratio of 11.83

Whilst one might be able to justify CBA at these levels, in my view we can’t say the same of NAB. NAB has already diluted shareholders once this year with a massive $3.5 billion capital raise. As such, I’m not seeing much value in the NAB share price today.

Westpac I am not interested in, not least because Westpac has been one of the worst performing ASX shares this century so far. You could have picked up Westpac shares in the midst of the 2008/09 global financial crisis for around the same price as today. Think about that for a minute!

That leaves ANZ, which I actually think is looking like a good deal at today’s prices. ANZ hasn’t diluted shareholders in 2020 so far, and has paid a small dividend of 25 cents per share. Whilst I’m not personally interested in investing in the ASX banks this year, if I had to, ANZ would probably by my pick of the bunch.

More reading

• ASX 200 jumps 2.6%, big 4 banks surge
• Top broker tipping turnaround in ASX big bank profit margins
• Why today’s NAB (ASX:NAB) share price gains could be just the beginning
• ASX 200 up 2.3%: Big four banks charge higher, Qantas soars, energy shares jump
• Why Costa, Qantas, Santos, & Westpac shares are storming higher today

Motley Fool contributor Sebastian Bowen owns shares of National Australia Bank Limited. 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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Change is afoot.

In fact, change is sprinting at a pace Australians have rarely seen before.

While rapid change can be disconcerting, it also opens the doors to a myriad of new ASX investment opportunities.

That’s not to say you should junk your existing investments. Far from it. Though it’s worth reviewing your share holdings every few months to make sure they’re still aligned with your original investment goals.

With a rapidly changing share market, it can also be tempting to try to time your entries and exits.

Hold onto the shares you’re happy with

But as Perpetual’s Thomas Rice explains, for most people — including himself — attempting to time the market is a mistake.

Rice manages the Perpetual Global Innovation Share Fund, which has returned 27.7% net of fees for the three years to 30 September, including dividends.

When it comes to trying to time the share market’s rapid decline and rebound, Rice says (as quoted by the Australian Financial Review (AFR)):

The recovery was a lot faster than I expected, but that kind of shows why I don’t try to time the market because I think I’d do a worse job. There are very few people that time the decline – and the recovery. So for me it’s all about keeping fully invested, but making sure I’m happy to own everything I own at current prices.

So if he doesn’t jump in and out of shares trying to time the highs and lows, how has his fund managed such market thrashing returns? Rice says:

Everything that actually matters in investing is in the future. Any stock is going to be based on its future cash flows. It’s not observable. It’s entirely theoretical. So it’s all about coming up with theories about how businesses develop, what creates a competitive advantage and why it’s not competed away.

Getting a grip on what the future is likely to look like, and which shares are likely to see their cash flows ramp up, isn’t always straightforward. And, of course, there are no guarantees things will play out as forecast.

But when you get it right, the returns can be highly rewarding.

A $50 billion niche market

One area that’s rapidly evolving in Australia is the banking space.

As the big banks tighten their lending to higher risk assets, this is opening up new opportunities for some smaller players in the commercial real estate debt markets.

According to consultancy Plan1 co-founder Richard Jenkins (quoted by the AFR):

I expect that the four major Australian banks will continue to reweight their commercial real estate debt portfolios in the wake of the pandemic and lower their exposure to the tourism and retail sectors in coming years… They will focus on funding prime assets at low-leverage levels given the impending increased capital requirements to be implemented by APRA.

Jenkins expects non-bank lenders’ share of commercial real estate lending will balloon to more than $50 billion by 2024.

In case you’re not familiar, non-banks function similarly to traditional banks, providing real estate and car loans at competitive rates. However, they do not take deposits and they’re not held to the same capital requirements as traditional banks like Westpac Banking Corp (ASX: WBC) or Commonwealth Bank of Australia (ASX: CBA).

If you’re looking for a loan outside of the traditional banks, there are a number of non-banks to choose from. However, many of these are private companies.

If you’re looking to own shares in one of the non-banks which could capture a growing slice of Australia’s commercial real estate loan market, I suggest you investigate Resimac Group Ltd (ASX: RMC).

Resimac has a market capitalisation of $599 million and has an annual dividend yield of 2.0%, fully franked. It operates in Australia and New Zealand, claiming a distribution network of more than 12,000 mortgage brokers.

The company had a stellar year in 2019, with the Resimac share price gaining 236% over 12 months.

Then COVID-19 angst rippled across the economy and share markets. The Resimac share price was hit particularly hard, falling a stomach churning 76% from 26 February through to 23 March.

The rebound, though, was even more spectacular. Investors lucky enough to have bought shares on 23 March would be sitting on a gain of 245% today (at the time of writing). That rebound sees the Resimac share price up 1.33% year to date.

The CBA share price, by comparison, is still down nearly 18% for the year. And the Westpac share price is down nearly 29%.

While the big banks are likely to see their share prices recover as new government stimulus measures roll through the economy, it’s some of the smaller players, like Resimac, which could offer investors the biggest gains.

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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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