Things are ugly this morning fellow Fools. The S&P/ASX 200 Index (Index:^AXJO) is tipped to crash although there’s a glimmer of good news for ASX copper miners.

The futures market is pricing in a 2% crash in top 200 stock benchmark this morning after US stocks suffered their worst beating in three months.

While it’s the US tech darlings like the Tesla Inc (NASDAQ: TSLA) share price that ended up with the bloodiest noses, today’s sell-off on the ASX is likely to be widespread.

ASX copper miners on verge of surge?

The only real piece of good news for Aussie investors to sink their teeth into is a report of a looming copper shortage.

The global copper market could be on the verge of a historic supply squeeze, reported Bloomberg.

The squeeze is being triggered by strong Chinese demand for the red metal and depleting inventories, which plunged to their lowest levels in more than 10 years.

ASX copper underperformer to benefit more

Some experts are forecasting a surge in copper prices and some are even comparing what’s happening now to the early 2000s. Back then, Chinese buyers emptied warehouses of metal exchanges and sent copper rallying to record highs.

Those golden days for copper could be back, if these predictions come through. Panic buying will benefit the Sandfire Resources Ltd (ASX: SFR) share price the most, in my view.

While its peer, the OZ Minerals Limited (ASX: OZL) share price hits new record highs, Sandfire is lagging behind due to its lower quality projects. It’s the more marginal players that tend to benefit more when commodity prices surge.

Mining giants like the BHP Group Ltd (ASX: BHP) share price will also benefit from the copper bull market. But it’s the pure copper miners like Sandfire that are most leveraged to the industrial metal.

Squeezed by high demand and low supply

Chinese demand for copper is growing as its factories ramp up as the world reopens from the COVID-19 shutdown.

China’s Caixin manufacturing purchasing managers’ index for August hit its highest reading since January 2011.

Citigroup believes that copper could hit US$8,000 a ton, which is more than US$1,000 higher than the current price, reported Bloomberg. Copper’s record price is $10,190 a ton.

On the other hand, supply at warehouses is likely to stay lower for longer due to the ongoing disruption to supply chains. There is also a hint of panic hoarding by copper users around the world.

ASX copper miners on new upgrade cycle?

I don’t believe stronger for longer copper prices are yet reflected in consensus forecasts, so this means ASX copper-exposed stocks could be on a cum-upgrade cycle.

This could not be dissimilar to what we saw for iron ore, which benefitted Fortescue Metals Group Limited (ASX: FMG) more than its bigger rivals. FMG’s ore is of a lower quality.

When commodity prices run, it’s the uglier ducklings that turn into swans.

More reading

• Fortescue share price drops lower despite positive update
• Here’s why the Vocus share price leapt 19% in August
• Quarterly rebalance: Coles and Fortescue added to ASX 20, Zip joins the ASX 200
• Down in August, is the CBA share price a buy?
• Why the Qantas share price has lifted 22% in the past month

Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited and OZ Minerals Limited. 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 Australian share market is great place to find quality ASX blue chip shares with $3,000.

The idea of a blue chip is that it’s a dependable, well-known business that you can invest in for the long-term.

However, I also think that any investment we make should have a fairly high chance of producing good returns. At the moment I can’t see businesses like BHP Group Ltd (ASX: BHP), Westpac Banking Corp (ASX: WBC) or Telstra Corporation Ltd (ASX: TLS) producing solid compounding returns in their existing forms.

However, I do believe that there are a few ASX 100 shares that would be good ASX blue chip share investments with $3,000:

CSL Limited (ASX: CSL)

CSL may not be one of the most talked about businesses in Aussie households, but it actually has the largest market capitalisation on the ASX. I think that makes it an ASX blue chip share. It has been an incredibly good investment over the long-term. In just the past five years the CSL share price has risen by 223%.

The biotech business develops biotherapies and influenza vaccines that save lives, and helps people with life-threatening medical conditions.

Healthcare is an important aspect of our modern life. Just think how important finding a healthcare solution for COVID-19 is. CSL is involved in trying to find healthcare answers to COVID-19. 

What I really like about CSL is its commitment to research and development. It’s this constant investment into the company’s future that will create new earnings streams and grow profit further.

CSL is often called expensive. It does seem expensive with the CSL share price trading at 39x FY22’s estimated earnings. However, remember that it invests a large amount into research and development each year – in FY20 in spent (and expensed) US$922 million. If you take that out then the valuation looks more reasonable.

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

Soul Patts is another name that may not be as widely-known as Woolworths Group Ltd (ASX: WOW), but I think it could be a really good long-term investment. The investment house has been listed in Australia since 1903. It has great longevity. I think that makes it an ASX blue chip share as it’s in the ASX 100. 

Whilst the ASX share may not be very recognisable to most people, it has several well-known investments like TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW) and Australian Pharmaceutical Industries Ltd (ASX: API).

It’s also invested in unlisted businesses like resources, swimming schools and agriculture.

Soul Patts is the type of business that can steadily grow for many years. Its existing portfolio should be able to create decent returns and the ASX blue chip share puts new money to work every year as it receives annual investment income. It only pays out a certain amount of its net operating cashflow as a dividend after paying for its operating expenses.

As a bonus, at the pre-open Soul Patts share price it offers a grossed-up dividend yield of 4%.

A2 Milk Company Ltd (ASX: A2M)

In terms of having a nationally-recognised brand, I think A2 Milk definitely fits the description. That makes it an ASX blue chip share to me, as it’s in the ASX 100. Its infant formula is found across the country in supermarkets, pharmacies and so on. Liquid milk is also sold in all major grocery stores in Australia.

The infant formula business is generating excellent growth internationally. In FY20 the ‘China and other Asia’ segment saw revenue growth of 65.1% to NZ$699.4 million, with earnings before interest, tax, depreciation and amortisation (EBITDA) growth of 66.7% to NZ$224.9 million. In FY20, US revenue increased by 91.2% to NZ$66.1 million.

I think that the A2 Milk share price is a strong buy today for its long-term international growth potential.

It’s currently trading at 27x FY22’s estimated earnings.

Foolish takeaway

CSL is a dependable ASX blue chip share, I think A2 Milk can generate the biggest growth. Soul Patts is the type of business you could own for decades. I like all three of these ASX shares. Soul Patts is a good dividend pick, whilst A2 Milk is a good growth pick right now in my opinion.

More reading

• Why I think the A2 Milk share price is a strong buy today
• New to investing? 3 top ASX shares to kickstart your portfolio
• 2 of the best ASX healthcare shares to buy today
• Why a recession shouldn’t matter for the ASX share market
• 3 ASX 200 shares to buy for strong returns

Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Brickworks, Telstra Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Australia is fortunate to have a defence sector on the bleeding edge of innovation in many fields. Since the announcement of the nation’s $270 billion in defence spending, many of these ASX shares have come to the attention of investors.

With Australia officially falling into recession, the jobs created by these companies are going to be more important than ever. Moreover, most of the revenue is presently coming from increased spending by many of our friends and neighbours. These include great powers like Europe and the United States, as well as regional powers. 

I earnestly believe we are watching the emergence of an industry sector which is likely to become a great GDP generator for the country, as well as contributing to our national security.

DroneShield Ltd (ASX: DRO)

DroneShield saw its share price rocket up by 29.63% on Thursday, valuing this ASX share at $54 million. On Monday, the company announced it had received orders from 2 separate European countries. DroneShield creates drone detection and non-ballistic counter-drone technology. In particular the company creates products with zero Rf emissions, reducing the likelihood of counter detection. 

The order announced Monday was worth approximately $750,000 in sales proceeds. In addition, these are orders for evaluation and are likely to lead to further opportunities. It included the first sale in a new country and underlines the growing demand for the company‘s products across Europe and globally.

Electro Optic Systems Hldg Ltd (ASX: EOS)

Electro Optic develops sensor technology, which plays a very large role in situational awareness in space operations. Its share price has been steady over the past month, lowering by approximately 1%. Nonetheless, the company continues to push forward with its technological development, and is driving into new areas.

For example, Electro Optic is currently negotiating the sale of 115 remote-operated mobile mounted weapons, including battle tested anti-drone weapons, to the federal government. Furthermore, this ASX share recently announced that, after a multi year program of research, it was moving its “drone kill” technology into production. This is a directed energy weapon, designed to defend against sophisticated drone attacks.

Brainchip Holdings Ltd (ASX: BRN)

The BrainChip share price has rocketed up by 177% in the past month, an outstanding result and a breakthrough price movement for this ASX share. BrainChip is the world’s largest listed pure play artificial intelligence (AI) company. It already has a raft of products in the security sectors. Moreover, it is working on a first of its kind technology that will significantly advance the AI field. 

After finalising chip construction, the company is starting to announce some of its early prototyping agreements for its new technology. On 17 August it announced an agreement with Magik Eye Inc to combine AI with the Magik Eye’s 3D sensing. This partnership will be targeting gesture recognition in a wide array of gaming and consumer products. On 1 September  the Brainchip share price jumped 54% after the company announced a partnership with VORAGO Technologies to support a Phase 1 project for NASA.

Foolish takeaway

Under any analysis, I believe all 3 of these ASX shares should continue to see strong growth. All of them are at the vanguard of emerging defence technologies, with BrainChip and Electro Optic developing new technological areas that could have huge, world-changing significance. 

More reading

• Why Brainchip and these ASX shares just surged to new highs
• Why Brainchip, De Grey Mining, Nufarm, & Pointsbet shares are storming higher
• Brainchip share price rockets 30% higher on NASA program collaboration
• Zip and Brainchip were among the most traded shares on the ASX last week
• DroneShield shares surge then flatten on new government orders

Daryl Mather owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Electro Optic Systems Holdings Limited. 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.

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The Vocus Group Ltd (ASX: VOC) share price rocketed upwards by over 19% during August. Most of these gains were in the latter part of the month, after the release of its FY20 annual report.

Vocus is part of the S&P/ASX 200 Index (ASX: XJO) and is a company in the telecommunications sector. It has a very rich history and was originally founded by serial entrepreneur and venture capitalist James Spenceley.

FY20 saw Vocus Network Services (VNS) become firmly established as the company’s core growth engine. This is a fibre network interlinking between third party and black spot networks to create a network that encompasses all of Australia, the pacific rim to Hong Kong and the east cost of the USA, as well as throughout New Zealand. This includes the North-West Cable System (NWCS), the only combined sub-sea telecommunications network and resources industry cable in Australia

What made the Vocus share price move?

FY20 was the first year in the company’s 3-year turnaround plan, which is a strategy to trim the organisation back to 3 core areas of business. These are VNS, Vocus Retail, and Vocus NZ. Within Australia, the Vocus retail arm includes brands like Dodo and iPrimus. 

One of the main focus points of FY20 was the completion of the Coral Sea Cable infrastructure. Overall, this project contributed to lower revenue and lower direct costs. Moreover, gross margin declined by 4% due to a %50 million reduction in the retail business. Nonetheless, earnings before interest, taxes, depreciation and amortisation (EBITDA) across the group remained stable due to disciplined overhead reductions.

However, it was the performance of the VNS that really drove up the Vocus share price in my view. In this business vertical the gross margin increased by 5%,  and underlying EBITDA increased by 10%. New Zealand also delivered a 4% increase in EBITDA. 

The year ahead

In my view, FY21 will be a positive year for the Vocus share price. The company plans to deliver an increase in underlying EBITDA of 6–10%, with the VNS to deliver between 8% and 12% growth. What’s more, COVID-19 is accelerating market trends for New Zealand and VNS. Digitisation, automation, artificial intelligence, machine learning and 5G are all increasing demand for data connectivity and high bandwidth consumption.

Furthermore, large enterprises are increasingly adopting private and public cloud. As these trends continue, there is increasing demand for diversity of supply. Lastly, the Australia Singapore Cable became operational in FY20, so this asset can now be harnessed for international and domestic growth. 

Foolish takeaway

With the ailing retail sector looking to return to growth by the end of Fy21, Vocus is clearly on target with its 3-year turnaround. This includes extracting greater value from its fibre cable network across Australia and internationally. Moreover, the company continues to spend CAPEX to build assets it can use to earn high-margin revenues.

Given the company has hit its FY20 targets, I expect FY21 to be a year of consolidation, leading to a year of strong growth for the Vocus share price in FY22. 

More reading

• Down in August, is the CBA share price a buy?
• Why the Qantas share price has lifted 22% in the past month
• Why I think the AMP share price is finally looking good enough to buy
• ASX 200 rises 0.8%, investors bet on SkyCity
• New to investing? 3 top ASX shares to kickstart your portfolio

Motley Fool contributor Daryl Mather 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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A number of shares could be on the move on Friday after S&P Dow Jones Indices announced its September 2020 quarterly rebalance of the S&P/ASX Indices.

Below is a summary of the changes that have been made, effective at the open of trading on 21 September.

S&P/ASX 20 index changes.

There have been two changes to the S&P/ASX 20 index this quarter. Supermarket giant Coles Group Ltd (ASX: COL) and iron ore producer Fortescue Metals Group Limited (ASX: FMG) have joined this exclusive index. They have joined at the expense of shopping centre operator Scentre Group (ASX: SCG) and insurance giant Suncorp Group Ltd (ASX: SUN), which have both struggled during the pandemic.

S&P/ASX 100 index changes.

There has also been two changes to the S&P/ASX 100 index for this quarter. Out goes contractor Cimic Group Ltd (ASX: CIM) and UK bank Virgin Money UK (ASX: VUK). They will be replaced by artificial intelligence services company Appen Ltd (ASX: APX) and medical device company Fisher & Paykel Healthcare Corp Ltd (ASX: FPH).

S&P/ASX 200 index changes.

The benchmark S&P/ASX 200 will see five changes later this month. The most notable being the inclusion of buy now pay later provider Zip Co Ltd (ASX: Z1P) at long last. It will be joined by Auckland International Airport Limited (ASX: AIA), AUB Group Ltd (ASX: AUB), Ramelius Resources Limited (ASX: RMS), and Westgold Resources Ltd (ASX: WGX).

Leaving the ASX 200 are salary packing company McMillan Shakespeare Limited (ASX: MMS), coal miner New Hope Corporation Limited (ASX: NHC), outdoor advertiser oOh!Media Ltd (ASX: OML), lithium miner Orocobre Limited (ASX: ORE), and media company Southern Cross Media Group Ltd (ASX: SXL).

What now?

When a company is added to an index it can lead to an increase in demand for its shares from exchange traded funds that are designed to track an index and from fund managers that may have investment mandates which permit them to only buy shares on certain indices.

Conversely, when a share is removed it can lead to increased selling pressure as exchange traded funds dump them and fund managers are forced to sell them.

Though, given the (bleak) outlook for today’s trade, it seems unlikely that this will have much impact on their relative performances.

More reading

• 5 things to watch on the ASX 200 on Friday
• 2 solid ASX dividend shares for income in 2020
• New to investing? 3 top ASX shares to kickstart your portfolio
• The Appen share price is down 20% in a week: Is it time to buy?
• Top brokers name 3 ASX shares to sell 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 ZIPCOLTD FPO. The Motley Fool Australia owns shares of Appen Ltd and COLESGROUP DEF SET. 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.

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

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

What happened

The stock market crashed hard on Thursday, Sept. 3. At 1:15 p.m. EDT, the Dow Jones Industrial Average stood 2.6% lower and the broader S&P 500 index had fallen 3.4%. The tech-heavy Nasdaq Composite led the pack with a decline of 4.6%, giving us a big clue to the drivers of this sharp market drop.

A familiar trio of trillion-dollar market caps led the way here. Shares of iPhone maker Apple (NASDAQ: AAPL) posted a 6.8% loss and software giant Microsoft (NASDAQ: MSFT) slumped 5.9%. Google parent Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) fared slightly better, limiting its decline to approximately 5.3%.

Together, these sudden dives added up to $382 billion in lost market value at press time.

So what

None of these tech titans had any terrible news of their own yesterday. If anything, their business updates should have moved the stock prices higher. Apple introduced a new feature for mobile app developers designed to boost the number of paying subscribers for iOS apps through easy-to-use subscription offer codes. Google scored a big win with cloud computing services helping the U.S. military predict cancer diagnoses. But investors shrugged off these mildly positive tidbits.

The sell-off starts to make sense when you look at Microsoft’s, Alphabet’s, and Apple’s recent stock charts. Here’s how the tech giants’ stocks have performed in 2020 leading up to Thursday’s dramatic correction:

AAPL data by YCharts.

There’s no reason to cry for tech investors today, though. Alphabet’s stock is still up 22% year to date, trailing Microsoft’s 38% gain and Apple’s enormous 67% price increase.

Now what

It’s true that the COVID-19 health crisis has boosted the profile of many technology companies. Work-from-home policies are undeniably good news for businesses that sell products and services in the office productivity market, and all three of these companies are leaders in that space. At the same time, the stock market as a whole has been overheated lately. The major benchmarks are mostly back where they were before the coronavirus crisis, excepting the Nasdaq. A correction seems to be in order at this point, and things could get much worse if there’s a second wave of COVID-19 cases in store.

To be clear, none of the stocks mentioned above did anything wrong. They’re just being ensnared in the broader market slump. Their charts could very well turn upward again in a hurry, but there might also be further corrections on tap in the coming days. All of this depends on factors outside of Apple’s, Alphabet’s, and Microsoft’s control, including coronavirus trends, election results, and the rate of political progress on a second stimulus bill.

This overdue correction is certainly no reason to panic. Everything you knew about these companies and their business prospects yesterday is just as true today. The only thing that changed was the market’s attitude toward high-flying tech stocks in the face of rising uncertainty. You could even pick up some shares at lower prices today. Perfect market timing is an impossible game, but serious investors can take advantage of temporary price drops when they come along.

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

More reading

• Is the Nasdaq’s 600-Point Plunge the End of the Bull Market?
• This is the one investment Warren Buffett says almost everyone should make
• A strange thing is happening with index funds…
• Apple and Tesla are in the top 5 US shares bought by ASX investors this week
• Apple just split its stock: Here’s why this tech stock might be next

Anders Bylund owns shares of Alphabet (A shares). Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, and Microsoft and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

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The IOOF Holdings Ltd (ASX: IFL) share price has not had a good week. Last Wednesday, the IOOF share price was asking more than $5 a share. Yesterday, IOOF shares closed at $3.62. IOOFed indeed, it’s not often you see a company’s market capitalisation declined by nearly a third over the space of 9 days. We’re still not at the levels we saw in the March crash (when IOOF got down to around $2.72 a share), but it’s still a significant move, and one that begs the question: are IOOF shares a buy today?

Why the IOOF share price has tanked

IOOF shareholders have not responded well to the mammoth capital raising that the company has completed over the past 2 weeks. IOOF has now completed the institutional placement, which has raised $734 million. Its retail investor placement is still underway and is expected to raise an additional $306 million.

For a company with a market capitalisation of just $1.27 billion, that represents a lot of share dilution. This explains why the company’s shares have tanked over the past week or so, in my view.

Are IOOF shares in the buy zone today?

So with such a massive fall in the IOOF share price, the question must be asked: are IOOF shares in the buy zone today?

Well, first thing’s first. The IOOF share price has declined because the share count has been massively increased. It’s not like this is your standard ‘value play, buy the dip’ opportunity here.

But let’s take a look at what IOOF is actually using all of this cash for. It was revealed on Monday that the company plans to acquire the wealth manager MLC from National Australia Bank Ltd (ASX: NAB) for $1.44 billion. MLC is one of the largest wealth managers in Australia. According to reporting from the Australian Financial Review (AFR), once the merger is complete, IOOF will be the largest wealth manager in the country, eclipsing long-time (and embattled) rival AMP Limited (ASX: AMP). The AFR is describing this outcome as a new ‘duopoly’ of wealth management in Australia.

Whilst this deal does help IOOF grow its market footprint, I still have doubts about its long-term future. Wealth management has not been shown in a good light over the past few years, largely due to the revelations of the 2018 banking royal commission. Retail superannuation funds (like those offered by IOOF and MLC) already have something of a reputation as ‘high fees, low returns’. With competition from industry funds and perhaps the low-fee champion Vanguard Group over the next few years, I think IOOF is facing challenges on multiple fronts. Investors seem a lot more excited about passive exchange-traded index funds (ETFs) than higher-fee active managed funds for outside-super investing these days as well.

Foolish takeaway

As such, I’m not wild on IOOF shares today, even after this share price crash, and I think there are better options elsewhere. If I was after a fund manager, I would choose Magellan Financial Group Ltd (ASX: MFG) shares instead.

More reading

• Why I think the AMP share price is finally looking good enough to buy
• Why IOOF, SKYCITY, Starpharma, & Telix shares are storming higher
• Why a recession shouldn’t matter for the ASX share market
• QBE’s silence triggers shareholder outrage
• ASX 200 rises 1.8%, Afterpay had a volatile day

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

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

The Nasdaq Composite (NASDAQINDEX: ^IXIC) has been a huge performer for much of 2020, bouncing back quickly from the COVID-19 bear market in late February and March and soaring to new record highs. Yet all of that turned around on Thursday morning, as the index quickly plunged more than 600 points, or 5%, shortly before noon EDT. The move was so abrupt that it took many investors aback with its ferocity.

For a while now, many market participants have believed that the Nasdaq’s gains were unsustainable. It’s tempting to declare that the bull market in stocks must now be over, especially with plenty of uncertainty about the pandemic, the geopolitical situation, and the economic strains faced by those in the U.S. and around the world. Yet before you decide that the end is near, it’s important to keep some perspective.

Where the Nasdaq is, and where it’s been

As I’m writing this, the Nasdaq is down almost exactly 600 points. That puts the index at a level of 11,455, down 4.9% on the day.

That sounds like a disaster, and if you look at your brokerage account on a one-day basis right now, you’ll probably see plenty of red ink.

But here’s something to think about: It was exactly seven trading sessions ago that the Nasdaq set a new record high. It turned out to be one of eight days out of nine in which the index reached new heights for the first time. The reason it’s remarkable here, though, is that its closing level that day — Aug. 25 — was 11,466.

Yes, some investors are in a panic because the Nasdaq has fallen to levels that it first saw a week and a half ago. On the day that new record was set, the Nasdaq was up more than 700 points just since the beginning of August. That monthly gain had only added to immense boosts in April, May, June, and July.

If that seems to you as though investors have totally lost their perspective, then you’re on the right track. Just because the market has corrected after huge gains doesn’t mean that the bull market is over.

The same holds true for individual stocks

There are plenty of people looking at their individual holdings and feeling even more uncertain. In some cases, percentage losses for individual companies are much greater than the market’s decline. Big drops include some of the leaders of the bull market.

Again, though, the declines aren’t all that big when put into context:

• Apple‘s (NASDAQ: AAPL) 6% drop leaves it above its closing value on Aug. 20, which was a record at the time.
• Tesla (NASDAQ: TSLA) is down nearly 8% Thursday morning, but it wasn’t until Aug. 26 that the electric vehicle pioneer’s stock closed above its current level for the first time.
• Zoom Video Communications (NASDAQ: ZM) is off almost 12% from its closing price on Wednesday. But it’s still $50 per share higher than its record close from Aug. 31.

That last point is worth visiting in more detail. Zoom announced blockbuster earnings for the second quarter. That sent its stock up as much as $150 per share. But if the stock had simply risen $50, investors would’ve been happy with the gains. Somehow, the fact that it jumped higher and settled out at current levels is worse than if it had simply risen without the big volatility.

Don’t get head-faked

The lesson here is that if you look at the stock market’s moves on a daily basis, they’ll distract you from the long-term value creation that the Nasdaq has done such a good job of providing to investors for decades. If you have a long-term strategy, stick to it — and don’t worry about whether this is a one-day aberration or the beginning of a more extensive correction.

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

More reading

• Microsoft, Apple, and Alphabet led the stock market lower on Thursday
• Why the Zip share price is plummeting 15% today
• This is the one investment Warren Buffett says almost everyone should make
• A strange thing is happening with index funds…
• Apple and Tesla are in the top 5 US shares bought by ASX investors this week

Dan Caplinger owns shares of Apple. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Apple, Tesla, and Zoom Video Communications. The Motley Fool Australia has recommended Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

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Given that many savings accounts offer base rates of just 0.05% per annum currently, I would sooner invest any spare funds into the share market than keep it in one of these accounts.

With that in mind, if you’re lucky enough to have $10,000 spare to invest, then the ASX shares listed below could be top options.

Here’s why I would invest this money into these shares:

Domino’s Pizza Enterprises Ltd (ASX: DMP)

I think this pizza chain operator could be a top option for a $10,000 investment. It is the master franchise holder for Domino’s in Australia, New Zealand, Belgium, France, the Netherlands, Japan, Germany, Luxembourg, and Denmark. Although its shares have been very strong performers this year, I would still invest due to its positive long term outlook.

Domino’s is aiming to grow its global store network by 7% to 9% per annum for the next 3 to 5 years. At the same time, it is targeting same store sales growth of 3% to 6% per annum over the same period. After which, by 2033 the company is aiming to grow its network to 5,500 stores. This compares to the network of 2,668 stores it had at the end of FY 2020. If it delivers on these targets, then I believe it will lead to strong earnings growth over the next decade. This could make the Domino’s share price a long term market beater.

Ramsay Health Care Limited (ASX: RHC)

Another ASX share to consider investing $10,000 into is Ramsay Health Care. While trading conditions are not easy for the private hospital operator right now due to the pandemic, I remain very positive on its long term prospects. This is because as the global population ages, demand for its services is likely to increase substantially. I feel this puts Ramsay and its sprawling global network of private hospitals in a strong position to deliver solid earnings growth for decades to come.

The company also recently hinted that it might be on the lookout for earnings accretive acquisitions. Management commented: “Ramsay is also committed to expanding our business both in Australia and overseas, in and out of hospital where there is a strategic fit and it meets our strict investment criteria. We have a strong balance sheet to support this growth strategy.”

More reading

• Is the Domino’s share price too expensive?
• ASX 200 Weekly Wrap: Earnings drag ASX back to reality
• 3 stellar ASX growth shares to buy right now
• How to turn $20,000 into $350,000 in 10 years with ASX shares
• Domino’s share price gain of 17% in August a good slice of news for shareholders

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

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The Commonwealth Bank of Australia (ASX: CBA) share price dropped 4% in August. Does that mean the CBA share price is a buy?

It’s always nice to buy a business at a cheaper price than it was before. I think the CBA share price movement is particularly interesting considering the S&P/ASX 200 Index (ASX: XJO) actually went up by 2.2% last month.

August was a bit of a strange month for Australia. A lot of the country remained COVID-19 free. But Melbourne went into stage 4 lockdown whilst NSW saw a little bit of community transmission. 

Obviously the biggest piece of news during August 2020 was the release of the CBA FY20 result.

FY20 result

I thought that Australia’s biggest bank’s held up remarkably well. Cash net profit only dropped by 11.3% to $7.3 billion. CBA said net profit was supported by strong business performance but it was impacted by a higher loan impairment expense because of COVID-19.

The loan impairment expense was $2.52 billion (up from $1.32 billion) including the $1.5 billion COVID-19 provision.

CBA’s net interest margin (NIM), a key measure of profitability, declined by 2 basis points to 2.07%. This was expected because of the impact of lower interest rates. The official RBA interest rate declined to just 0.25% during CBA’s 2020 financial year.

What about CBA’s balance sheet?

A key aspect that usually sets CBA apart from the other major ASX banks is that it’s strongly capitalised. Its common equity tier 1 (CET1) ratio was 11.6% at the end of FY20. That’s comfortably above the ‘unquestionably strong’ benchmark of 10.5% set by regulator APRA. I think this is one of the main reasons the CBA share price hasn’t fallen further. 

I think that CBA has proven to be a high-quality bank through this difficult COVID-19 period.

At 31 July 2020 it was providing COVID-19 related loan deferrals for 135,000 home loans (8% of total accounts) and 59,000 business loans (15% of total balances). This was down from 154,000 home loans and 86,000 business loans at the peak.

I’m sure that CBA will hoping that the vast majority of these deferred loans can go back to a normal payment schedule soon, even if it’s just interest only payments.

CBA is one of those ASX shares that does need the overall economy to do well for its profit to grow. Though its faster-than-system home lending growth of $18.4 billion was attractive.

Is the CBA share price a buy?

I think it speaks volumes of the strength of CBA that it was still able to declare a final dividend of $0.98 per share, which was on top of a pre-COVID-19 interim dividend of $2 per share paid at the start of 2020. A strong dividend is good for the CBA share price.

If I had to pick one of the big ASX bank shares for dividends it would be CBA because I think its profit is likely to be the one least affected. That should mean its dividend is able to hold up the best through the current period.

It’s difficult to say when profit growth will return. It’s even harder to say when CBA’s profit will return to 2019 levels (excluding royal commission remediation).

The CBA NIM could be under pressure for a few years with the RBA suggesting that the Australian interest rate isn’t going to be increased for a while. Bad debt levels may be elevated for a while considering all of the long-term impacts of COVID-19 will take a while to flow through the economic system.

A normal economy takes a while to recover from a typical a recession. The economy isn’t like a share price which can go up 10% in a day. A global pandemic that has halted several important sectors like international education, travel and tourism could mean the Australian economy takes longer to get back to normal.

Perhaps the CBA share price was a buy during May for bank investors. But ever since we learned of the jobkeeper overestimation, it seemed the short-term buying opportunity for CBA shares had passed. I don’t think you should focus on past CBA dividends, another dividend cut may be on the cards in six months.

A different opportunity

I’d rather buy investment bank Macquarie Group Ltd (ASX: MQG) over CBA for dividends and growth.

More reading

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended 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.

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