The ASX energy sector may represent one of the last value buys on the S&P/ASX 200 Index (Index:^AXJO) if oil demand stages a record bounce in 2021.

The bullish prediction was contained in the International Energy Agency’s monthly report released yesterday, according to Market Watch.

While the IEA is forecasting global demand for crude to plunge by 8.1 million barrels a day in 2020, demand next year will rebound by a record 5.7 million barrels a day.

One of the few value sectors left standing?

The economic shutdown forced upon us by the COVID-19 pandemic pushed demand for crude off a cliff – along with ASX oil-exposed stocks.

These stocks, such as the Woodside Petroleum Limited (ASX: WPL) share price and Oil Search Limited (ASX: OSH) share price, may have recovered some of their big losses since the March bear market low, but they are still underperforming the ASX 200.

In fact, they are also lagging behind ASX big bank stocks like Westpac Banking Corp (ASX: WBC) since the start of this fateful year.

The banking sector enjoyed a re-rating as bargain hunters rushed to buy the big banks. Oil stocks may represent a value play too if oil demand comes roaring back, like the IEA expects.

Oil demand recovering – somewhat

Early recovery in oil demand in parts of the world is giving hope to the bulls. China’s demand for the commodity in April is nearly back to what it was for the same month last year.

India also recorded an increase in May despite its big lock-down of its economy to stem the spread of the virus.

Meanwhile, OPEC and Russia’s agreement to extend production cuts through to July is also helping the recovery. The Brent oil price jumped to over US$40 a barrel from under US$20 a barrel in April.

Consolidating befor a recovery

If the tailwinds persist, the IEA believes the market will stabilise in the second half of 2020 before rebounding next year.

But it also warned that the recovery will be patchy with the pace and success of different countries in restarting their economies still looking highly uncertain.

I held a more downbeat outlook on the recovery prospects for the sector given the large stockpiles of crude and the fact that international air travel looks to be off the cards till 2021, at the earliest.

Foolish takeaway

The effective grounding of planes means a 3 million-barrel drop for the sector in 2020 before the IEA estimates a modest 1 million-barrel recovery in 2021.

I won’t be changing my underweight position in the sector despite the better than expected forecast from the IEA. But I think having a small exposure to the potential oil recovery (assuming the IEA is spot on – and that’s quite a big assumption) isn’t a bad idea.

But the stock I would be more drawn towards for the exposure to this thematic is oil and gas engineering group Worley Ltd (ASX: WOR).

It follows the saying that you are better off investing in the guys supplying the shovels during a mining boom than the miners themselves.

More reading

• Top brokers name 3 ASX 200 shares to buy today
• ASX 200 down 0.1%: Carsales update impresses, a2 Milk surges higher
• Is $1,000 invested in AGL Energy shares a smart investment?
• 3 reasons to buy ASX 200 shares right now
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor Brendon Lau owns shares of Westpac Banking and WorleyParsons 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.

The post What a record rebound in oil demand in 2021 means for ASX energy stocks appeared first on Motley Fool Australia.

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Many of Australia’s top brokers have been busy adjusting their financial models again, leading to the release of a large number of broker notes this week.

Three broker buy ratings that have caught my eye are summarised below. Here’s why brokers think these ASX 200 shares are in the buy zone:

A2 Milk Company Ltd (ASX: A2M)

According to a note out of UBS, its analysts have retained their buy rating and NZ$22.00 (A$20.64) price target on this infant formula company’s shares. UBS believes there is some upside risk to its earnings guidance for FY 2020. In addition to this, it suspects there could be a new product launch in the medium term. It feels this could be the catalyst to taking its shares higher again. I agree with UBS on a2 Milk Company and think it would be a great buy and hold investment.

Cochlear Limited (ASX: COH)

A note out of the Macquarie equities desk reveals that its analysts have retained their outperform rating and lifted the price target on this hearing solutions company’s shares to $208.50. According to the note, the broker has been busy surveying audiologists. Its survey found that Cochlear has the strongest portfolio of implantable products. And while it notes that the pandemic has reduced patient volumes materially, it believes volumes will rebound when the crisis passes. And with Advanced Bionics recalling competing devices, it expects Cochlear to grow its sales quicker than the industry average. I think Macquarie is spot on and Cochlear would be a top option.

Crown Resorts Ltd (ASX: CWN)

Analysts at Morgan Stanley have upgraded this casino and resorts operator’s shares to an overweight rating with an improved price target of $12.00. According to the note, due to international travel uncertainty, it believes the gaming market will be reliant heavily on domestic tourism. Morgan Stanley thinks that the opening of Crown Sydney later this year will give it the edge over the competition and allow it to win market share from rivals. I think Morgan Stanley makes some very good points, but I’d rather wait and see how the company fares in the coming months before jumping in.  

More reading

• ASX 200 down 0.1%: Carsales update impresses, a2 Milk surges higher
• Why a2 Milk, Carsales, Fisher & Paykel Healthcare, & Starpharma are surging higher
• Is $1,000 invested in AGL Energy shares a smart investment?
• How to become wealthy by investing $1,000 into ASX shares
• 3 reasons to buy ASX 200 shares right now

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 A2 Milk. The Motley Fool Australia has recommended Cochlear Ltd. and Crown Resorts 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 Top brokers name 3 ASX 200 shares to buy today appeared first on Motley Fool Australia.

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The  CSL Limited (ASX: CSL) share price has risen strongly over the past 12 months. It rose from $211.42 last June to $341.00 in mid-February this year. It then declined sharply in the first month of the coronavirus crisis to mid-March. However, after a strong rally to mid-April, where it regained most of its losses, its share price has been on a downward trajectory again.

CSL is also playing an important role during the pandemic.  It has recently entered into a new agreement to accelerate the development of a COVID-19 vaccine candidate.

With all this in mind, is the CSL share price a buy right now?

An amazing Australian success story

Although the CSL share price has lost some recent ground, its long-term returns to shareholders have been amazing.

It has risen from a split-adjusted price of 76.6 cents back in 1994 to now be trading at $284.10. So if you had invested $10,000 back in 1994, that investment would now be worth a staggering $3.71 million!

CSL has evolved from a modest federal government department back in 1994, to become the largest company on the S&P/ASX 200 Index (ASX: XJO). It now has a market capitalisation of $129 billion.

The company has become a global market leader in blood plasma research and disease treatment, now reaching more than 60 countries.

High investment in research and development to create new products is a key factor underpinning its success.

CSL’s P/E ratio is high. Is this a reason not to invest?

CSL’s P/E ratio is 44.09. That significantly higher than the ASX market average which is around 18. However, due to CSL’s strong market differentiation and strong growth potential, I don’t think this is an issue. In addition, over the past 10 years, CSL’s P/E ratio has always been above the market average, yet its share price has continued to climb!

A similar trend has been evident over the past decade with other top Australian growth shares. These include: REA Group Limited (ASX: REA), Carsales.Com Ltd (ASX: CAR) and Seek Limited (ASX: SEK).

So, is the CSL share price a buy?

The CSL share price has been trending downwards since April. However, there doesn’t appear to be any obvious reason for this trend. In fact, despite no recent announcements, CSL’s latest business performance continues to appear quite strong. And, with its share price well below its 12-month peak in February, I think now offers a reasonable buying opportunity for long-term investors.

I believe that CSL remains well-positioned to continue delivering strong earnings growth over the next 5–10 years. It continues to have a strong new product development pipeline. There is also likely to be a steadily increasing global demand for immunoglobulin products over the years to come.

More reading

• ASX 200 down 0.1%: Carsales update impresses, a2 Milk surges higher
• Why a2 Milk, Carsales, Fisher & Paykel Healthcare, & Starpharma are surging higher
• Carsales share price up 5% following solid trade update
• Why I would buy CSL and these ASX blue chip shares
• Here are 2 top ASX tech shares for your portfolio

Phil Harpur owns shares of carsales.com Limited, CSL Ltd., REA Group Limited, and SEEK Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has recommended carsales.com Limited, REA Group Limited, and SEEK 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 Is the CSL share price a buy right now? appeared first on Motley Fool Australia.

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The Infigen Energy Ltd (ASX: IFN) share price is climbing today after the company disclosed a takeover offer from a global energy leader. At the time of writing, Infigen shares have jumped 9.15% to 89.5 cents.

Today’s announcement follows a takeover bid from UAC Energy at the beginning of June, which sent Infigen shares flying. UAC made an offer of 80 cents per Infigen stapled security, which represented a 35.59% premium to the previous day’s closing price at the time of the announcement.

When news first broke of UAC’s offer in early June, the Infigen board advised investors to take no action. The board reiterated this recommendation in a further ASX release last week.

Why is the Infigen share price spiking?

This morning, Infigen announced it has entered into a bid implementation agreement with Iberdrola Renewables Australia. Under the agreement, Iberdrola will make an off-market takeover bid for Infigen at a cash offer price of 86 cents per stapled security. This represents a 7.5% premium to UAC’s offer of 80 cents.

In conjunction with the bid, Iberdrola has entered into a pre-bid agreement with Infigen’s largest security holder, TCI Funds, to purchase 20% of Infigen stapled securities.

Iberdrola is a major player in the global energy space. It is the number one producer of wind power and one of the world’s biggest electricity utilities in terms of market capitalisation.

Unlike the takeover play from UAC, Infigen’s board unanimously recommends that security holders accept the offer from Iberdrola. 

According to today’s release, Iberdrola’s offer is less conditional than UAC’s offer. This includes not being subject to the due diligence and disclosure conditions contained in the UAC offer.

As for the next steps, Infigen expects Iberdrola to lodge its bidder’s statement with the ASX and ASIC shortly. Following this, Infigen will dispatch its target’s statement for the Iberdrola offer to security holders “as soon as practical”.

2H20 distribution scrapped

In addition to the takeover announcement, Infigen revealed this morning it will not pay a second-half FY20 distribution. The company noted that both takeover offers are on the basis of no distribution being paid with respect to this period.

In this way, Infigen stated the decision to not pay a distribution lowers the conditionality of the bids and provides more certainty for security holders.

More reading

• ASX 200 jumps 1.8%, Australian headed for recession
• Why Afterpay, Infigen, Qantas, & Zip Co shares are charging higher
• Infigen Energy share price rockets 36% higher following takeover bid

Motley Fool contributor Cathryn Goh 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 Infigen Energy share price jumps 9% on rival takeover bid appeared first on Motley Fool Australia.

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At lunch on Wednesday the S&P/ASX 200 Index (ASX: XJO) has given back its morning gains and dropped into the red. The benchmark index is currently down 0.1% to 5,935.3 points.

Here’s what has been happening on the market today:

Carsales update.

The Carsales.Com Ltd (ASX: CAR) share price has been a strong performer on Wednesday. Investors have responded positively to the release of a business update by the auto listings company which included guidance for the full year. Carsales expects to report adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA) in the range of $228 million to $232 million in FY 2020. This will be a 5% to 6% increase on FY 2019’s adjusted EBITDA.

Bank shares acting as a drag.

The big four banks have been acting as a major drag on the ASX 200 on Wednesday. At lunch, all four banks are trading lower despite there being no news out of the group. I suspect that investors may be taking a bit of profit off the table after strong gains on Tuesday. The worst performer in the big four has been the Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price with a 1.5% decline.

CSL exec to join BHP

The CSL Limited (ASX: CSL) share price is pushing higher today despite announcing the exit of its chief financial officer. David Lamont, who has been in the role since January 2016, will leave the biotherapeutics company in October and join mining giant BHP Group Ltd (ASX: BHP). Mr Lamont will replace Peter Beaven as the Big Australian’s chief financial officer on 1 December 2020.

Best and worst ASX 200 shares.

The best performer on the ASX 200 on Wednesday has been the A2 Milk Company Ltd (ASX: A2M) share price with a gain of almost 7%. On Tuesday UBS retained its buy rating and ~$20.64 price target on the company’s shares. The worst performer has been the Mayne Pharma Group Ltd (ASX: MYX) share price with a 4.5% decline. Next week the pharmaceutical company will be kicked out of the ASX 200.

More reading

• Why a2 Milk, Carsales, Fisher & Paykel Healthcare, & Starpharma are surging higher
• Carsales share price up 5% following solid trade update
• Is $1,000 invested in AGL Energy shares a smart investment?
• How to become wealthy by investing $1,000 into ASX shares
• 3 reasons to buy ASX 200 shares right now

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 A2 Milk. The Motley Fool Australia has recommended carsales.com 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 ASX 200 down 0.1%: Carsales update impresses, a2 Milk surges higher appeared first on Motley Fool Australia.

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After a strong start to the day, the S&P/ASX 200 Index (ASX: XJO) is currently fighting hard to stay in positive territory. In late morning trade the benchmark index is up slightly to 5,944.4 points.

Four shares that are climbing more than most today are listed below. Here’s why they are surging higher:

The A2 Milk Company Ltd (ASX: A2M) share price has jumped 6.5% to $18.90. This may be in response to a broker note out of UBS on Tuesday. According to the note, the broker has retained its buy rating and NZ$22.00 (A$20.64) price target on the infant formula company’s shares. It believes there is some upside risk to its earnings guidance for FY 2020.

The Carsales.Com Ltd (ASX: CAR) share price has stormed almost 5% higher to $17.77. This follows the release of a business update by the auto listings company this morning. That update revealed that Carsales expects to report adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA) in the range of $228 million to $232 million in FY 2020. This represents a 5% to 6% year on year increase in adjusted EBITDA.

The Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) share price is up 5% to $27.59. This gain appears to have been driven by a broker note out of Macquarie this morning. According to the note, the broker has upgraded the medical device company’s shares to an outperform rating. It believes current trading conditions bodes well for the company’s earnings growth in the near term.

The Starpharma Holdings Limited (ASX: SPL) share price has surged 7.5% higher to $1.14. Investors have been buying the company’s shares after it revealed the results of its first radiotherapeutic candidate. DEP lutetium showed highly statistically significant anticancer activity, tumour regressions, and 100% survival in a human prostate cancer model.

More reading

• Carsales share price up 5% following solid trade update
• How to become wealthy by investing $1,000 into ASX shares
• Here are 2 top ASX tech shares for your portfolio
• Why these ASX shares could help you beat the market
• Is the SEEK share price a buy right now?

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 Starpharma Holdings Limited. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended carsales.com Limited and Starpharma 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 Why a2 Milk, Carsales, Fisher & Paykel Healthcare, & Starpharma are surging higher appeared first on Motley Fool Australia.

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There are some ASX shares where it takes years for the investment thesis to play out. There are other ASX shares that could be worth buying for what may happen in 12 months or less.

No-one can truly tell you what’s going to happen tomorrow or next week with the share market. But I think 12 months is a long enough time period where your investment idea can prove you right through two reporting seasons, perhaps it only needs one result to prove you right.

With that in mind, here are three ASX shares that I think could produce good growth over the next 12 months:

Share 1: Costa Group Holdings Ltd (ASX: CGC)

Costa is Australia’s largest agricultural businesses. It grows tomatoes, avocadoes, mushrooms, berries and citrus fruit.

The last couple of years have been very tough for Costa. There’s the COVID-19 global pandemic happening right now. Bushfires were a worry during last summer, a fire caused some damage at one of Costa’s farms. The agricultural ASX share has had to deal with the terrible drought. Fruit flies were an issue for its citrus division.

Can it get any worse after all of those issues in such a short time? Hopefully not.

Food prices are rising and this should help Costa a lot. It largely costs Costa the same to grow produce whether food prices are cheaper or a bit more expensive – so higher revenue is mostly just extra profit.

I think the higher food prices could have a very helpful effect on Costa over the next 12 months. The drought ending would also be very good if it keeps raining in those dry hard-hit areas.

Share 2: Sydney Airport Holdings Pty Ltd (ASX: SYD)

Sydney Airport is one of those ASX travel shares that has suffered enormously because of the limitations of travellers coming to Australia. Domestic travel has also suffered a big hit. In April 2020 the airport operator saw total passengers decline by 97.5% to 92,000. International passengers were down 96.9% to 43,000 and domestic travellers were down 97.9% to 49,000.

However, the Sydney Airport share price is recovering as Australia’s domestic travel restrictions lift. Since 3 April 2020 the Sydney Airport share price has risen around 21%. But there’s still a long way to go before international travel restrictions improve. But there is some promising news regarding the treatment of COVID-19 with an existing drug seemingly helping some suffering COVID-19 patients recover. 

Share 3: Macquarie Group Ltd (ASX: MQG)

Macquarie is by far my favourite large ASX bank share. There are two key reasons why.

Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB) are all heavily focused on Australia and New Zealand. Macquarie generates about two thirds of its earnings outside of the local region. I think that’s good international diversification.

The second reason is that the big four ASX banks generate most of their earnings from loans. Macquarie has a loan book too, but its earnings are more evenly spread across other divisions. For example, it’s one of the world’s biggest infrastructure asset managers. It also offers numerous investment banking services such as its involvement with initial public offerings, capital raisings, acquisitions and so on.

I like that Macquarie can pivot towards whatever sector or region it thinks is a growth area. A focus for the ASX share right now is renewable energy.  

I think that Macquarie’s share price can continue to rise into 2021 as the world economy heads towards normality again, or at least a new normal.

Foolish takeaway

I think these three ASX shares could produce solid returns over the next 12 months. If I had to pick one of three, I’d go for Macquarie. I think it’s a high-quality business that has very good management and is also focused on shareholder returns with a good dividend yield.

More reading

• Why Afterpay and these ASX shares just stormed to new highs
• Why I would buy CSL and these ASX blue chip shares
• 2 quality ASX 200 shares to buy for long-term growth
• Why I would buy Wesfarmers and these ASX dividend shares
• ASX 200 falls 2%, ASX travel shares drop heavily

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO and Macquarie Group 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 to buy for 2021 appeared first on Motley Fool Australia.

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