• Why this expert says the ‘do nothing’ approach to retirement planning is not good advice amid market uncertainty

    Why this expert says the ‘do nothing’ approach to retirement planning is not good advice amid market uncertainty  Farnoosh Torabi, Financial Expert and Contributing Editor at NextAdvisor.com, joined Yahoo Finance’s ‘The Final Round’ to discuss the biggest mistakes young people make when planning for retirement and gives her advice for retirement planning amid market uncertainty.

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  • 3 ASX 200 shares to buy for the long-term

    asx 200, share price increase

    The S&P/ASX 200 Index (ASX: XJO) is full of good quality shares. I think some ASX 200 shares are definitely worth investing in for the long-term.

    Let’s get straight into it, here are my three long-term ASX 200 ideas:

    Altium Limited (ASX: ALU)

    Altium is an electronic PCB software business that provides the tools for engineers to design the products, devices and vehicles of the future.

    The ASX 200 share has an impressive list of existing clients including John Deere, Tesla, Space X, Broadcom, Qualcomm, Google, Amazon, Disney, Cochlear Limited (ASX: COH), CSIRO and NASA.

    Altium has largely been hitting its long-term goals for a number of years. It’s now aiming for 100,000 Altium Designer seats as well as US$500 million revenue by 2025. Considering the company didn’t even reach US$200 million in FY20, there is a lot of potential growth between now and then.

    The company is in a strong financial position with no debt and a cash balance of over US$90 million.

    I think the ASX 200 share is a great long-term option because it’s one of the few ASX businesses with a global client base, it has growing profit margins (aside from FY20 perhaps) and a growing dividend.

    The world is only going to become more technological, I think Altium is in the right industry to benefit from that.

    At the current Altium share price it’s trading at 49x FY22’s estimated earnings.

    Brickworks Limited (ASX: BKW)

    Brickworks has already been around for decades and I think it’s got a compelling long-term future ahead with its various divisions.

    It owns a large amount Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares. The diversified investment conglomerate provides Brickworks with rising dividends and long-term capital growth. I think this a great long-term investment for Brickworks.

    The ASX 200 share also owns half of an industrial property trust along with Goodman Group (ASX: GMG). This industrial property trust offers resilient rental income for Brickworks. But over the next few years there could be a sizeable increase in the rental income and valuation of the property trust when two large distribution warehouses are completed for Amazon and Coles Group Limited (ASX: COL). I really like this division for its defensive attributes.

    The other main section of Brickworks is building products. It manufactures building products in both the US and Australia. In the US it recently made some acquisitions and now it’s the leading brick manufacturer in the north east of the US.

    In Australia it sells a variety of different products including bricks, precast, roofing, masonry, paving and so on. It’s the biggest brick manufacturer in the country.

    Building products is going through a tough period due to COVID-19, but I think it’s a good idea to invest in cyclical businesses when they’re at the worst point of their cycle.

    At the current Brickworks share price it offers a grossed-up dividend yield of 5%.

    A2 Milk Company Ltd (ASX: A2M)

    I think that A2 Milk is one of the highest quality shares in the ASX 200.

    The infant formula business has impressively built a good market position in New Zealand, Australia and Asia.

    The company has seen stronger earnings, despite COVID-19, as customers stocked up on products.

    I really like the long-term growth potential of A2 Milk. It’s being sold in thousands of more stores in the US each year, which increases its potential customer base. It takes a while before customers are willing to switch over to a new product.

    Soon the ASX 200 share will be generating earnings from Canada with an agreement with Agrifoods.

    A2 Milk has a huge cash pile that could be used for acquisitions or shareholder returns. I think the company has the right strategy by aiming for an earnings before interest, tax, depreciation and amortisation (EBITDA) margin of around 30% – it balances growth and short-term profitability nicely.

    At the current A2 Milk share price it’s trading at 30x FY22’s estimated earnings.

    Where to invest $1,000 right now

    When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

    Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

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    Tristan Harrison owns shares of Altium and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of A2 Milk and COLESGROUP DEF SET. 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.

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  • These ASX shares could be great additions to a retirement portfolio

    Retirement shares

    If you’re currently in the process of constructing a retirement portfolio, then you might want to take a look at the ASX shares listed below.

    I believe they are great options for investors looking for a combination of growth and income over the next decade. They are as follows:

    Collins Foods Ltd (ASX: CKF)

    The first option to consider buying for your retirement portfolio is Collins Foods. It is one of the largest quick service restaurant operators in the ANZ region with a massive 240 KFC stores in Australia and 40 KFC stores in Europe. It also operates 12 Taco Bells across Queensland and Victoria, as well as 75 franchised Sizzler restaurants around Asia.

    Although it has a very large KFC footprint in the ANZ market, management still sees plenty of room for growth. This is also the case in Europe, where the brand has yet to fully penetrate the market. Combined with expansion opportunities for the Taco Bell brand, I believe Collins Foods is capable of delivering solid earnings and dividend growth for a long time to come. 

    This was certainly the case in FY 2020, despite the pandemic. Last month the company released its full year results and revealed an 8.9% increase in revenue to $981.7 million and a 5.1% lift in underlying net profit after tax to $47.3 million.

    Ramsay Health Care Limited (ASX: RHC)

    I think Ramsay Health Care would be a good option for a retirement portfolio. Although its growth over the short term is likely to be challenging because of lower elective surgeries and other headwinds caused by the pandemic, I expect it to bounce back once the crisis passes. Looking further ahead, I believe Ramsay has a very positive outlook.

    This is due to its world class network of private hospitals and their exposure to the growing demand for healthcare services globally. Combined with potential earnings accretive acquisitions in the future, I believe Ramsay shares can deliver strong total returns for investors over the long term.

    Where to invest $1,000 right now

    When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

    Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

    *Returns as of June 30th

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    Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Collins Foods 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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  • Top brokers name 3 ASX shares to sell next week

    business man holding sign stating time to sell

    Once again, a large number of broker notes hit the wires last week. Some of these notes were positive and some were bearish.

    Three sell ratings that caught my eye are summarised below. Here’s why top brokers think investors ought to sell these shares next week:

    Magellan Financial Group Ltd (ASX: MFG)

    A note out of the Macquarie desk reveals that its analysts have downgraded this fund manager’s shares to an underperform rating with an improved price target of $57.50. Although Magellan has been growing its funds under management and delivered strong performance fees, it appears concerned with its lofty valuation. In light of this, it has downgraded its shares on valuation grounds. The Magellan share price ended the week at $58.56.

    Scentre Group (ASX: SCG)

    Analysts at Citi have retained their sell rating and cut the price target on this shopping centre operator’s shares to $2.06. According to the note, the broker expects earnings season to be very messy for Scentre and its real estate peers. It is particularly concerned about the prospects of retail property companies because of the pandemic and suspects that they could disappoint the market next month. The Scentre share price last traded at $2.11.

    TPG Telecom Ltd (ASX: TPG)

    According to a note out of Credit Suisse, its analysts have reinitiated coverage on this newly merged telco with an underperform rating and $7.35 price target. The broker has been looking over its business and appears concerned that the pandemic could weigh on its performance. This is particularly the case with mobile service sales and revenues from roaming. In light of this, it is predicting a step down in its earnings. The TPG Telecom share price ended the week at $8.02.

    Legendary stock picker names 5 cheap stocks to buy right now

    Motley Fool resident tech stock expert Dr. Anirban Mahanti has stumbled upon five stocks he believes could be some of the greatest discoveries of his investing career.

    These little-known ASX stocks are growing like gangbusters, yet you can buy them today for less than $5 a share. Click here to learn more.

    See these 5 cheap stocks

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

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  • 3 lessons I’ve learned about investing from 2020

    Piggy bank wearing glasses sitting on pile of books

    The year is a long way from being over, but many lessons are likely to have already been learned from investing in 2020.

    Notably, the stock market crash has shown that unforeseen events can have a major and sudden impact on stock prices. Alongside this, volatility can persist over a period of many months and this can allow investors to take advantage of the stock market’s cyclicality.

    As such, through buying high-quality businesses at fair prices for the long term, you could improve your financial prospects even in the most difficult of investing conditions.

    An unforeseen stock market crash

    The stock market crash has dominated the views of most individuals when investing in 2020. As with many previous market downturns, it was unforeseen by most investors at the start of the year. However, it caused one of the sharpest and fastest falls in the stock market’s price level in history.

    A key lesson that all investors can take away from the market crash is that unforeseen bear markets can occur at any time. There is often little or no warning that they will take place, since any number of potential risks can grow in size to negatively impact on stock prices.

    Therefore, buying high-quality businesses when investing in 2020 and in the coming years could be of great importance. They may be better able to survive a period of weak economic performance that causes their sales figures to fall. Through identifying the best businesses in a sector and holding them in your portfolio, it may be possible to reduce risks and improve your overall returns.

    High volatility

    High volatility has seemingly been a constant when investing in 2020. As per previous stock market downturns, uncertainty and risks can remain elevated for many months, and even years, following the initial decline. As such, with the prospect of a second wave of coronavirus and geopolitical risks in Europe and North America, investing conditions could continue to be unpredictable for the remainder of the year.

    Therefore, investors may wish to take a long-term view of their holdings. This may enable them to look beyond the short-term volatility that could cause paper losses in the near term, with the stock market’s long-term track record highlighting its potential to deliver relatively high returns over a sustained time period.

    Value investing in 2020

    Seeking undervalued stocks when investing in 2020 could lead to high returns in the coming years. Although growth stocks have become increasingly popular over recent years, valuations may now be more relevant in a world economy that is struggling to grow.

    Through buying high-quality companies when they are trading at low prices, it is possible to obtain a wide margin of safety that could boost your returns. This may improve your financial prospects and allow you to benefit from the lessons learned from the stock market crash in 2020.

    5 stocks under $5

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

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

    *Extreme Opportunities returns as of June 5th 2020

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    Motley Fool contributor Peter Stephens 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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  • 4 ASX tech shares to buy that aren’t BNPL shares

    ASX tech shares

    Buy now, pay later (BNPL) shares have stolen the limelight from the ASX tech sector. BNPL shares have become increasingly challenging to buy as valuations continue to be stretched. With reporting season around the corner, here are 4 ASX tech shares with reasonable valuations and strong growth portfolios. 

    1. Data#3 Ltd (ASX: DTL) 

    Data3 delivers an integrated array of solutions spanning cloud, modern workplace, security, data and analytics, and connectivity. These technology solutions are delivered by combining its services across consulting, project services and support services.

    On 16 July, the company advised that, subject to finalisation of its group year-end audit, its consolidated net profit before tax for FY20 is estimated to be approximately $34 million. This represents an increase of 28% compared to its previous record FY19 result. 

    2. Bigtincan Holdings Ltd (ASX: BTH) 

    Bigtincan is a global leader in sales enablement software, which allows organisations to increase sales win rates, reduce expenditure and improve customer satisfaction. In its equity capital raising presentation back in May, the company cited that its customer cash receipts increased 178% to $14.9 million from the March 2019 quarter of $5.4 million. This growth was driven by significant new wins with a number of Fortune 500 companies.

    I believe Bigtincan represents a more volatile opportunity that could deliver some explosive growth in the medium-long term. For investors looking for a slightly speculative opportunity, this could be the ASX tech share to add to your watchlist. 

    3. Rhipe Ltd (ASX: RHP) 

    Rhipe provides licensing, business development and knowledge services that support its customers’ adoption of cloud technologies. Its vendors – such as Microsoft, VMWare and Citrix – all rely on Rhipe’s platform to build, grow and support the consumption of their cloud license programs.

    On 17 April, the company provided a trading update highlighting its unaudited trading results for the nine months to 31 March 2020. During this period, the company delivered a 32% increase in sales and 19% increase in revenue. Following this announcement, Rhipe initiated a $34 million capital raising to allow it to pursue acquisitions that are complementary to its existing cloud software subscription business. I believe Rhipe has demonstrated fair growth and is now in a strong cash position to explore opportunities to accelerate its growth moving forward. 

    4. Dicker Data Ltd (ASX: DDR) 

    Dicker Data is a value added distributor of hardware, software, cloud and emerging technologies in Australia. In the company’s market update announced on 23 July, it outlined the recent surge in remote work has seen a strong demand for remote and virtual working solutions across its hardware and software portfolios.

    The company provided unaudited half year results that saw its total revenue increase 18.1% and net profit after tax up 23.5%. Dicker is one of the few ASX tech shares that do not trade at an outrageous valuation. At today’s prices, its price-to-earnings ratio is just 21. I believe the company represents good value and further sales tailwinds can be expected.

    5 stocks under $5

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

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

    *Extreme Opportunities returns as of June 5th 2020

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    Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends BIGTINCAN FPO. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited. The Motley Fool Australia has recommended BIGTINCAN 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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  • The Growth Story Remains for Alibaba Stock Despite Troubles in India

    The Growth Story Remains for Alibaba Stock Despite Troubles in IndiaAlibaba (NYSE:BABA) stock had a rare bad run last week, falling almost 6%.Source: testing / Shutterstock.com Considering its attractive business model and historical growth multiples, many analysts would find this development surprising. However, escalating tensions in Southeast Asia and a resurgent novel coronavirus are pushing the stock down.Still, these developments have little to do with the operational metrics of the business. Hence, I believe there are plenty of reasons to remain bullish on Alibaba stock stock. Chinese demand is rebounding, and the U.S. economy is also showing signs of life. Meanwhile, the business-to-business platform operated by Alibaba continues to give it a significant leg-up on its competition, especially with respect to its more famous American counterpart, Amazon (NASDAQ:AMZN).InvestorPlace – Stock Market News, Stock Advice & Trading TipsDespite the occasional hiccup, Alibaba stock has a lot going for it. You won't go wrong investing in this one. What Sets Alibaba Stock Apart?The reason why Alibaba is different from a lot of its peers is the unique business model. Although it did not pioneer the business-to-business e-commerce system, it is now its foremost expert, giving it a massive edge over the likes of Amazon, which operates a business-to-customer model. * 10 Cybersecurity Stocks We Need Now More Than Ever The critical difference between the two systems is that Alibaba does not need logistics facilities and warehouses to store goods that need to be shipped. Not having to do so makes for higher operating margins. Even from a liquidity standpoint, Alibaba is cash-rich, and its debt-equity ratio stands at 0.20 times, which is prudent, considering the industry average is 0.67 times. China-India Tensions Are Pressuring Alibaba StockThe Indian government's decision to ban 59 Chinese apps has jolted several Chinese tech companies, including Tencent Holdings (OTCMKTS:TCEHY), Baidu (NASDAQ:BIDU) and Alibaba.This is not great news for Alibaba. The tech giant has long sought to diversify its revenue sources away from China to other geographies. But those ambitions have hit a snag due to tensions between the two nuclear-armed states.Since we are still in the early days of this conflict, we don't know where this is going. At the moment, the administration of Prime Minister Narendra Modi is targeting apps developed in China. However, the government may want to punish every company that has even the remotest link to Beijing.For example, Alibaba has a significant stake in several platforms in India. Through two subsidiaries, the company holds a 40% share in payment app Paytm. Meanwhile, Alibaba affiliate, Ant Group, formerly known as Alipay, is the largest stakeholder in Zomato, India's most prominent food delivery provider.A recent news report revealed that due to rising tensions, the company could find it challenging to tap into the $100 million equity capital it attracted in its last funding round from Ant. U.S.-China Trade IssuesThe recent troubles in India come at a particularly bad time for Alibaba. Just a month ago, the U.S. Senate passed a bill that imposed greater regulation on Chinese companies. According to the law, any company found in violation of U.S. Securities and Exchange Commission rules could face delisting.There are several reasons why the bill was tabled in the first place. Although trade tensions between the U.S. and China are on the decline, there is still a lot of bad blood. There is also a feeling in Washington that companies that are either indirectly or directly controlled by the Chinese government must face greater scrutiny.Finally, fraud cases like Luckin Coffee (OTCMKTS:LKNCY) reinforce the notion that the regulatory environment in China is not as robust as the U.S., so there is a need for greater regulation when dealing with Chinese companies. Ant Group IPOOne of the driving forces of Alibaba stock stock recently has been the impending IPO of Ant Group, formerly known as Ant Financial. The fintech firm has revealed that the IPO will take place simultaneously on the Hong Kong Stock Exchange and Shanghai Stock Exchange's Star Market.Reuters said that bankers are valuing the IPO at over $200 billion. It's a no-brainer that every Chinese investor would love to get their hands on this company, considering that it's a crucial linchpin in digitizing China's service industry. My Final WordAlthough I have highlighted a significant number of risks Alibaba is facing, I remain bullish on the stock. It has an attractive business model and wide moat, relative to peer Amazon, Alibaba stock trades at a 33.78x trailing price-earnings ratio. That may seem steep, but Amazon trades at 152.74x, just to put things in perspective.The company's ambitions to spread its wings beyond China may not have borne fruit. But there is plenty to cheer for if you are an investor that values fundamentals. The business model remains enticing, holdings are diversified, and its business divisions are flourishing. Covid-19 has also done little to dent the company's business prospects. In fact, it has led to increased traffic on Alibaba's various platforms.Bottom line: You can't go wrong parking your capital in the Asian tech juggernaut.Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. He has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio. He does not directly own the securities mentioned above. More From InvestorPlace * Why Everyone Is Investing in 5G All WRONG * America's 1 Stock Picker Reveals His Next 1,000% Winner * Revolutionary Tech Behind 5G Rollout Is Being Pioneered By This 1 Company * Radical New Battery Could Dismantle Oil Markets The post The Growth Story Remains for Alibaba Stock Despite Troubles in India appeared first on InvestorPlace.

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  • 3 stellar ASX tech shares I would buy in August

    asx tech shares

    If you’re looking to add some tech shares to your portfolio in August, then I think the three listed below could be ones to consider buying.

    Here’s why I think these ASX tech shares could be destined for big things:

    Nearmap Ltd (ASX: NEA)

    Nearmap is a leading aerial imagery technology and location data company. Its software allows its users to move location analysis out of the field and into the office. It gives businesses instant access to high resolution aerial imagery, city-scale 3D datasets, and integrated geospatial tools. I think Nearmap could have a bright future ahead of it thanks to its high quality solutions and its lucrative opportunity in a highly fragmented market. All in all, I believe the Nearmap share price could be a market beater over the 2020s.

    Xero Limited (ASX: XRO)

    Another ASX tech share to consider buying is Xero. It is one of the world’s leading cloud-based business and accounting software providers. Thanks to the ongoing shift to cloud accounting, Xero has been growing at a rapid rate in recent years. This continued in FY 2020 with Xero reporting a 29% lift in annualised monthly recurring revenue (AMRR) to NZ$820.6 million. This was driven by strong customer growth and its sky high retention rate. I believe the latter demonstrates the quality and stickiness of its accounting platform. Looking ahead, I believe the company has a long runway for growth. Particularly in the North America market where it currently has just 241,000 subscribers. This compares to 914,000 subscribers in a materially smaller ANZ market.

    Zip Co Ltd (ASX: Z1P)

    A final tech share to consider buying is Zip Co. It is one of the ANZ region’s leading buy now pay later providers. While its shares have been on fire this year, I believe they could still be a great long term option for investors. Especially given its recent expansion into the massive United States market via the acquisition of QuadPay. If the company can make a success of this expansion, it could be destined for further explosive growth over the coming years.

    5 stocks under $5

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

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

    *Extreme Opportunities returns as of June 5th 2020

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

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  • Why I’d start planning for stock market crash part 2 today

    man with head in hands after looking at stock market crash on computer, asx 200 share market crash

    A second stock market crash could realistically occur over the coming months. Numerous risks face the world economy that could derail its growth prospects and cause investor sentiment to weaken.

    Furthermore, the stock market has a long track record of high volatility. This means that always being ready for a sudden fall in share prices could be a sound move.

    Of course, many stocks currently offer wide margins of safety, and may therefore be worth buying today despite the risk of a further drop in the price levels of indexes such as the S&P 500 and FTSE 100.

    A second stock market crash

    The second half of 2020 could include a second market crash after the initial decline and subsequent rebound recorded in the first half of the year. Risks such as an increase in coronavirus cases, as well as geopolitical uncertainty in the US and Europe, may contribute to more challenging operating conditions across many sectors. This may cause investor sentiment to weaken, which could disrupt the share price growth prospects for many businesses.

    Of course, the stock market has a long history of high volatility. Even if a further decline in share prices does not occur over the near term, the next bear market is almost certain to take place in the coming years. No stock market index has ever risen without experiencing downturns and bear markets, which means that investors should always be ready to react to attractive stock prices that may only be available for a short time period.

    Having some cash available to invest whenever a market crash occurs could be a potential solution to the prospect of a decline in share prices. It may act as a drag on your portfolio’s performance in the short run due to the low returns on savings accounts, but could allow you to capitalise on undervalued opportunities.

    Buying shares today

    Of course, another market crash may not occur for many years. Investor sentiment has improved in recent months, and the risks facing the world economy may already be priced in to market valuations.

    As such, now could be the right time to buy high-quality businesses at low prices. Certainly, some sectors have risen significantly in value over recent months, and may now offer unfavourable risk/reward opportunities. However, other sectors still appear to be undervalued based on their long-term recovery prospects and the financial positions of their incumbents.

    Therefore, investors who can adopt a long-term time horizon and look beyond short-term risks of a second market crash may wish to add stocks to their portfolios. This may not lead to high returns in the coming months, but may significantly improve your portfolio’s value as the world economy and stock prices gradually recover from an extremely challenging period.

    5 stocks under $5

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

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

    *Extreme Opportunities returns as of June 5th 2020

    More reading

    Motley Fool contributor Peter Stephens 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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  • My 5-minute bull case for the Bubs share price

    baby, milk, formula, bellamy's, bubs

    I think that the Bubs Australia Ltd (ASX: BUB) share price is a buy. I’m going to outline my bull case for it in this article.

    A quick overview of what Bubs does

    Bubs was founded in 2006 by Kristy Carr. The company sells a variety of products with a focus on infant formula products and baby food, particularly goat milk products. It also sells other goat milk products and Jersey milk products.

    Here are the main reasons why I think, at this share price, Bubs is a great business to buy:

    Strong growth with international earnings

    The biggest point about the company is that it’s delivering strong results.

    Each result that Bubs releases shows strong revenue growth by the company. In the FY20 half year result it showed revenue growth of 37% to $28.75 million. In the quarter ending 31 March 2020, its revenue jumped by 67% to $19.7 million – up 36% on the previous quarter.

    Whilst the current revenue numbers it’s reporting aren’t big in absolute terms, compound growth could mean the company quickly becomes much larger if it keeps growing strongly at a high double digit rate.

    It’s the international growth that particularly excites me about the revenue growth. In the FY20 third quarter, Chinese revenue went up 104% and represented about a quarter of total sales. ‘Other markets’ revenue went up almost 20 times, with large growth into Vietnam – this segment now represents 12% of gross sales.

    Ultimately, a business with ‘potential’ needs to deliver the growth to grow its value and lead to a sustainable increase in the Bubs share price over time.

    I’m going to try to explain some of the points of why the Bubs revenue and the Bubs share price are growing so strongly.

    Expanding distribution network

    A key part of success for a consumer product business is to get its products in front of more potential consumers. That means into more stores, more websites and more countries.

    In terms of exports, its products are going to China, South East Asia and the Middle East. The ‘other market’ regions are a big addressable market for Bubs.

    Bubs has made a number of deals to expand its distribution network. For example, it has distribution agreements with Alibaba’s Tmall and Beingmate.

    In Australia, Bubs products are sold across hundreds of stores with major distribution agreements with Chemist Warehouse, Woolworths Group Ltd (ASX: WOW), Coles Group Limited (ASX: COL) and Baby Bunting Group Ltd (ASX: BBN).

    Bubs recently signed a new deal to expand its distribution of organic grass fed infant formula with Coles and Woolworths. That announcement sent the Bubs share price higher by 10%.

    High level of control of its supply chain

    Bubs boasts of being Australia’s only vertically integrated producer of goat milk formula, with exclusive milk supply from Australia’s largest milking goat herd after the acquisition of NuLac Foods.

    Last year the company announced the acquisition of the Deloraine manufacturing facility for $35 million. It was a key acquisition because, at the time, it was only one of 15 licenced canning facilities in Australia authorised by the certification and accreditation administration of China (CNCA) for physical importation into China under regulatory requirements administered by state administration for market regulation (SAMR). These approved manufacturers are key for getting product into China. 

    At the time of the acquisition, the company also raised $31.4 million at a share price for Bubs of $0.65. It’s up 57% since then.

    Rising gross profit margin

    One of the main factors for a market-beating ASX share is rising profit margins. Economies of scale are important.

    Bubs has reported a steadily growing gross profit margin over the past four results. In June 2018 the gross margin was 14%, in December 2018 it had a 19% gross margin, in June 2019 it had a gross margin of 21% and in December 2019 it had a gross margin of 24%.

    Bubs said it is doing effective cost management on a fixed milk price and more of the products sold are the higher margin infant formula products. In the December 2019 result the infant formula gross margin was 41%.

    As the business gets bigger, Bubs will become more profitable for each extra dollar of revenue generated.

    Cashflow positive

    An important stage for every fast-growth company is reaching cashflow status. The company has had to do a number of capital raisings at a lower Bubs share price to reach its current size and strength. When a business becomes cashflow positive it can start funding its own growth.

    In the three months to 31 March 2020, Bubs saw positive operating cashflow of $2.3 million. That’s not a lot, but the fact it’s now positive is a big plus. Bubs also had $36.4 million of cash on the balance sheet at 31 March 2020. It’s in a strong financial position. 

    Good strategy and focused management

    I’ve been very impressed by the partnerships, acquisitions and expansion that Bubs has done since it listed on the ASX.

    Kristy Carr and the team around her have done a great job of building the business into what it is today.

    It’s a good sign when the founder of the business has stayed with the business since it was founded. Mrs Carr’s holding is now 2.43% of the issued share capital. That’s not a large position, but it’s still worth over $13 million at the current Bubs share price.

    Foolish takeaway

    I think Bubs is one of the most promising ASX shares around. In five years I think Bubs could be a much larger business, making good profit with a strong international presence. At the current Bubs share price I’d be happy to start with a sizeable position for the long-term.

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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 BUBS AUST FPO. 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 My 5-minute bull case for the Bubs share price appeared first on Motley Fool Australia.

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