Stock Pick

  • Intel Considers What Was Once Heresy: Not Manufacturing Chips

    Intel Considers What Was Once Heresy: Not Manufacturing Chips(Bloomberg) — Intel Corp. Chief Executive Officer Bob Swan spent almost an hour on Thursday discussing an idea that would once have been unthinkable for the world’s largest semiconductor company: Not manufacturing its own chips.Outsourcing is the norm in the $400 billion industry nowadays, but for 50 years Intel has combined chip design with in-house production. And until recently, Intel was even planning to churn out processors for others.“To the extent that we need to use somebody else’s process technology and we call those contingency plans, we will be prepared to do that,” Swan told analysts on a conference call, after the company warned of another delayed production process. “That gives us much more optionality and flexibility. So in the event there is a process slip, we can try something rather than make it all ourselves.”Pursuing this option would represent a huge shift in the industry and the end of Intel’s biggest differentiator, Cowen & Co. analyst Matt Ramsay said.Design can only do so much for semiconductor performance. The manufacturing step is crucial to ensuring these components can store more data, process information faster and use less energy. Combining the two helped Intel improve both sides of its operation for decades.However, Taiwan Semiconductor Manufacturing Co. has succeeded by just focusing on production and leaving the design to other companies. Its factories have passed Intel in capabilities. And that’s helped Intel rivals such as Advanced Micro Devices Inc. catch up on performance.Read more: Intel’s Chipmaking Throne Is Challenged by Taiwanese UpstartIntel’s current best technology, known as 10 nanometer in the industry, was scheduled to appear in 2017 and is only now making it into high-volume production. And when the company reported results on Thursday, it said the next iteration — 7 nanometer — would be delayed by a year.“You didn’t need to read any more,” Sanford C. Bernstein analyst Stacy Rasgon said. “Whatever little credibility they had is out of the window.”That sent Intel shares down 10% in extended trading and left Swan fending off a barrage of questions from frustrated analysts on the conference call. They all asked about the manufacturing delay, its financial consequences and what Intel plans to do.Swan’s answers were sometimes disjointed and vague. “What’s different is we’re going to be pretty pragmatic about — yes if, and if and when we should be making a step inside or making it outside and making sure that we have optionality to — yeah build internally mix and match inside and outside or go outside in its entirety,” he said at one point.Intel’s back-up plan means it may tap TSMC to make its chips. But that won’t be easy, according to Cowen’s Ramsay. TSMC’s other customers, who compete with Intel, would likely oppose the Taiwanese company prioritizing Intel’s designs, he said.And TSMC would probably be reluctant to build lots of new production capacity for Intel when there’s a chance the U.S. company may switch back to its own factories later.“They can’t go to TSMC because it doesn’t have the capacity,” Bernstein’s Rasgon said.Swan, a former CFO who took the CEO role only after reversing a decision to exclude himself from consideration, will have to make some tough decisions soon. His predecessors lauded Intel’s factories and spent billions of dollars a year keeping up with the latest manufacturing technology. Outsourcing that to another company may mean Intel never catches up again.Swan tried to put a positive spin on the challenge when he wrapped up the conference call.The flexibility is “not a sign of weakness,” he said.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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  • Curaleaf Completes the Acquisition of Grassroots Creating the World’s Largest Cannabis Company

    Curaleaf Completes the Acquisition of Grassroots Creating the World's Largest Cannabis CompanyMarket Leading U. Presence Across 23 States with Over 135 Dispensary Locations and LicensesMitchell Kahn, Grassroots Co-Founder and CEO, Appointed to the Curaleaf Board of DirectorsWAKEFIELD, Mass.

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  • Gold Nears $1,900 as Veteran Mobius Says Keep Buying

    Gold Nears $1,900 as Veteran Mobius Says Keep Buying(Bloomberg) — Gold traded near $1,900 an ounce, edging closer to its all-time high set almost nine years ago, as concerns about global growth buoyed haven demand.Increasing signs that the prolonged coronavirus pandemic is stalling an economic recovery and the recent surge in tensions between the U.S. and China are underpinning demand for the metal. Bullion is heading for a seventh weekly gain, the longest stretch since 2011, while silver is poised for its biggest weekly advance in about four decades.Negative real rates, a weaker dollar, concerns over the economic cost of the health crisis and geopolitical uncertainties have put both precious metals on track for their biggest annual gain in a decade. UBS Group AG raised its near-term forecast for gold to reach $2,000 an ounce by the end of September, citing its qualities as a diversifier in a low-rate world.“When interest rates are zero or near zero, then gold is an attractive medium to have because you don’t have to worry about not getting interest on your gold and you see the gold price will rise as uncertainty in the markets are rising,” Mark Mobius, co-founder at Mobius Capital Partners, said in a Bloomberg TV interview. “I would be buying now and continue to buy, because gold is really on a run, it’s doing well.”Spot gold declined 0.1% to $1,885.52 an ounce at 9:16 a.m. in Singapore. Prices touched $1,898.34 on Thursday, nearing the record $1,921.17 hit in September 2011. Spot silver rose 0.3% to $22.6566 an ounce, and is poised for the biggest weekly advance since 1980.While spot gold prices are about $40 away from the all-time high, some futures contracts on the Comex are already trading even higher, potentially leading to a situation that may see the incoming most-active contract already at a record. December, which is likely to become the contract with the most open interest in coming days, touched $1,927.10 an ounce Thursday, above the record for the most-active contract of $1,923.70 reached in September 2011.On the geopolitical front, Secretary of State Michael Pompeo cast China’s leaders as tyrants bent on global hegemony. His comments came after the U.S. unexpectedly ordered China to close its consulate in Houston within 72 hours, following what it said were years of espionage directed from the diplomatic compound against U.S. commercial and national security assets. China rejected the accusations and vowed to retaliate.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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  • Why Afterpay, Evolution, IAG, & Vicinity Centres shares are dropping lower

    Downward trend

    The S&P/ASX 200 Index (ASX: XJO) is on course to follow the lead of U.S. markets and record a sizeable decline on Friday. At the time of writing the benchmark index is down 0.9% to 6,038.3 points.

    Four shares that are falling more than most today are listed below. Here’s why they are dropping lower:

    The Afterpay Ltd (ASX: APT) share price is down 3.5% to $69.41. This appears to be down to general weakness in the tech sector after a pullback on the Nasdaq index overnight. In addition to this, news that ecommerce giant Shopify has signed an agreement with Affirm for its own buy now pay later offering could be weighing on its shares.

    The Evolution Mining Ltd (ASX: EVN) share price has tumbled over 6% lower to $5.91. Investors have been selling the gold miner’s shares after they were downgraded by analysts at Credit Suisse. According to the note, the broker has downgraded Evolution’s shares to a neutral rating with a $6.00 price target on valuation grounds.

    The Insurance Australia Group Ltd (ASX: IAG) share price is down 4.5% to $5.51. Investors have been selling the insurance giant’s shares after the release of a trading update this morning. Insurance Australia Group expects to post a pre-tax loss on shareholders’ funds income of $181 million. This is down sharply from a profit of $227 million in FY 2019 and has resulted in the company cancelling its final dividend.

    The Vicinity Centres (ASX: VCX) share price has fallen 2.5% to $1.37. This follows the release of an update on its portfolio valuations. According to the release, the company’s portfolio has experienced a net valuation decline of 11.3%. This reflects the impact of COVID-19 and the evolving retail landscape. Among its valuation declines is its flagship portfolio, which includes Chadstone, Premium CBD locations, and DFO outlet centres. This portfolio has seen a net valuation loss of 8.8%.

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    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.

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

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  • Why Opthea shares could offer big growth potential

    $100 notes multiplying into the future

    Long-term shareholders of emerging ASX healthcare company Opthea Ltd (ASX: OPT) have endured a volatile 12 months. A little under a year ago, the Opthea share price was trading at a 52-week low of just $0.735. Then, in the space of a month, shares skyrocketed 465% to an all-time high price of $4.15.

    In March, amid a wave of selloffs prompted by the global spread of COVID-19, the Opthea share price plunged all the way back down to just $1.25. Opthea shares have rallied significantly since then – at one point in early June they even looked set to push back up beyond $3.50. But then came yet another pullback, and as at the time of writing they are trading at $2.67.

    What’s been driving the Opthea share price?

    Opthea specialises in developing novel treatments for chronic eye diseases such as age-related macular degeneration (AMD). The initial steep rise in the share price back in August 2019 was driven by positive clinical trial results from a phase 2b study involving 366 patients suffering from “wet” AMD. Wet AMD is a condition caused by blood vessels leaking fluid into the macular resulting in blurred vision or persistent blind spots. According to Opthea, wet AMD is the leading cause of blindness for those aged over 50 across the developed world.

    In the trial, Opthea’s OPT-302 treatment was shown to deliver statistically significant benefits versus the control group when used in combination with an existing wet AMD treatment called Lucentis. Opthea has stated that currently approximately 50% of wet AMD patients who use Lucentis will not experience significant gains in vision. And yet, in 2018 alone, sales of Lucentis totalled US $3.7 billion.

    That trial was followed by positive results from a further phase 2a trial released just last month. This time, OPT-302 was used in combination with another therapy called Eylea in patients suffering from diabetic macular edema (DME). DME is a similar condition to wet AMD and occurs in people suffering the long-term effects of diabetes.

    On Thursday, the company announced that the results of the trial will be presented at the upcoming American Society of Retina Specialists 2020 Annual Meeting. This gives Opthea significant international exposure, as over 3,000 retinal specialists from 63 countries are expected to attend the virtual meeting.  

    Should you invest?

    Economic uncertainty caused by the COVID-19 global pandemic has made valuing growth stocks like Opthea incredibly difficult. Other emerging ASX healthcare companies like Medical Developments International Limited (ASX: MVP) and Polynovo Ltd (ASX: PNV) have also seen big swings in their share prices over the last 12 months as investors try to price in the longer-term impacts of the pandemic.

    However, Opthea has continued to demonstrate that its treatments are not only effective but also address a debilitating condition affecting a significant portion of the population. Sales of Lucentis and Eylea show that this is a potentially lucrative market if Opthea can successfully commercialise its treatment.

    The COVID-19 economy poses significant challenges to young companies. Supply-side logistical challenges may persist for months and funding will be harder to come by. However, for those willing to take on the risk, in my opinion an investment in Opthea has the potential to deliver significant long-term gains.

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    Rhys Brock owns shares of Medical Developments International Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Medical Developments International Limited and POLYNOVO FPO. The Motley Fool Australia has recommended Medical Developments International 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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  • Why Alcidion, Bubs, IGO, & Next Science shares are pushing higher

    shares higher, growth shares

    In late morning trade the S&P/ASX 200 Index (ASX: XJO) is on course to finish the week in a disappointing fashion. At the time of writing the benchmark index is down 1% to 6,034.4 points.

    Four shares that have not let that hold them back today are listed below. Here’s why they are pushing higher:

    The Alcidion Group Ltd (ASX: ALC) share price has jumped almost 7% to 16 cents. This morning the healthcare technology company announced an enterprise agreement with NHS Lanarkshire for a five-year term. The agreement will see the health board deploy Alcidion’s Patientrack electronic bedside monitoring system across its entire regional health network. The total value of the new contract is ~$1.5 million over five years.

    The Bubs Australia Ltd (ASX: BUB) share price is up 3.5% to $1.01 despite there being no news out of the infant formula and baby food company. However, Bubs is likely to release its fourth quarter update next week. Investors may be snapping up shares on Friday in anticipation of a stellar update. Infant formula demand has been very strong during the pandemic and could have underpinned solid sales growth in the fourth quarter.

    The IGO Ltd (ASX: IGO) share price has stormed 4.5% higher to $5.41. This follows a jump in the spot nickel price overnight. According to CommSec, the nickel price climbed 4.2% to US$13,650.75 a tonne. It was the best-performing base metal during overnight commodities trading.

    The Next Science Ltd (ASX: NXS) share price has risen 2.5% to $1.37. This follows the release of the medical technology company’s second quarter update on Thursday. Next Science’s performance was negatively impacted during the quarter due to the shutdown of elective surgeries. As a result, it reported cash receipts of $1.9 million. However, management expects a rebound in revenues as surgeries recommence and wound care clinics reopen.

    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!

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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 Alcidion Group Ltd. The Motley Fool Australia owns shares of and has recommended BUBS AUST FPO. The Motley Fool Australia has recommended Alcidion Group 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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  • ASX cannabis shares adjust to coronavirus environment

    Cannabis shares

    Cannabis shares were considered a fad for a while. Now, they’ve proved they’re here to stay. As the Australian medicinal cannabis industry grows, ASX cannabis companies are refining their strategies. While some are focused on cultivation and production, others are involved in the manufacturing and distribution components of the value chain. 

    ASX cannabis share prices have seen mixed comebacks from the March downturn. Some have struggled in the current environment, while others have adapted in the face of coronavirus challenges. We take a look at how ASX cannabis shares are facing the coronavirus challenge. 

    Althea Group Holdings Ltd (ASX: AGH)

    The Althea share price has regained 125% from its March low. The medicinal cannabis distributor responded to the coronavirus pandemic by launching online sales of medicinal cannabis. Patients can have products delivered direct to their door via Althea’s app, which has been registered as a medical device. 

    Althea finished FY20 with a record month and quarter. Unaudited revenue for the quarter was $1.59 million, a new record and 5% up on the March quarter, notwithstanding COVID-19 disruptions. June sales rebounded strongly for a record revenue month following a COVID-19 affected April and May. Unaudited revenue for FY20 totalled $4.97 million, a 547% increase on FY19. 

    At the end of June, Althea had 7,295 Australian patients and was achieving strong month-on-month growth in the UK. The number of healthcare professionals prescribing Althea products grew to 590 at the end of June, an increase of 16% on the prior quarter. Althea reported a healthy balance sheet with $10.4 million cash on hand at 30 June 2020.

    Cann Group Ltd (ASX: CAN)

    The Cann Group share price fell 18.4% yesterday. Cann Group announced a capital raising last week to fund working capital. Shares were issued under a $14.3 million institutional placement at 40 cents a share, which represented a 51.2% discount to the previous closing price. 

    The company needed funds for working capital while it pursues near-term growth opportunities, including the expansion of its Mildura facility, which remains a key component of its growth strategy. COVID-19 has slowed progress of potential funding options and practical timing of construction involving offshore specialists. Cann Group’s existing facilities provide 1,200 kilos in capacity. 

    The company has a manufacturing agreement with IDT Australia Ltd (ASX: IDT) to manufacture resins, oils, and finished products. Products are distributed to hospitals and pharmacies in Australia under a distribution agreement with Symbion. Cann Group also has existing supply agreements in place with Iuvo Therapeutics, Astral Health, Entoura, Zalm Therapeutics, and Aurora. These agreements cover Australia, New Zealand, South Africa, North and South America, Europe, and parts of Asia. The company says it has secured or is negotiating multiple supply agreements which are expected to generate ~$15 million revenue in FY21. 

    Cann Group reports that Australian industry momentum continues to be positive. The company is well positioned to address growing demand due to its manufacturing of bio-pharmaceutical grade products. New international markets are also opening up, with initiatives including patient reimbursement in Germany and pilot programs on France and Poland. 

    Auscann Group Holdings Ltd (ASX: AC8)

    The Auscann share price is currently on par with its March low of 14 cents. Auscann is involved in the manufacture of medicinal cannabis products. With a focus on providing reliable and standardised cannabinoid-based pharmaceutical products, Auscann has developed a capsule formulation designed to enable accurate dosing. 

    Auscann’s capsules are currently undergoing a phase 1 study to examine the pharmacokinetics of doses in volunteers. Dosing of the first subjects was completed in April. The study is designed to provide information that will inform dose selection and assist medical professionals in prescribing the hard shell capsules. The study is expected to be completed this calendar year. 

    Auscann’s hard shell capsules were made commercially available for prescription in the March quarter. Patients can access the products through the TGA special access scheme and authorised prescriber scheme. The capsules are also available in a low-dose formulation, confirming Auscann’s ability to customise dosing in a standardised and scalable way. This is critical for personalised treatment. 

    The company finished the March quarter with $24.7 million in cash and no debt. This was down from $26.1 million at 31 December 2019, however the strong capital position supports the continued progress of Auscann’s growth strategy. This strategy is centred on product development, clinical evaluation and market access. In its quarterly results announcement, Auscann CEO Ido Kanyon said, “product standardisation backed by clinical evidence and medical education will drive growth, medical acceptance, and consequent demand for our capsules.”

    Ecofibre Ltd (ASX: EOF)

    The Ecofibre share price has recovered strongly from its March low of $1.25 and is currently trading at $2.49. Nonetheless, it remains significantly down from its highs for the year of over $3.

    Ecofibre manufactures hemp and CBD products which are sold in the US and Australia. The Ananda Hemp and Ananda Professional brands produce nutraceutical products for human and pet consumption as well as topical creams and salves. Ananda Food produces Australian grown hemp food products including hemp oil and protein powders. The Hemp Black business develops hemp-based textiles and composites.

    Ecofibre recently announced that FY20 net profits are expected to be around $12.5 million, double that of FY19. Full year revenue is expected to be in  excess of $50 million. Ecofibre adjusted focus as a result of coronavirus, with the Hemp Black business tapping into demand for PPE. The brand launched a face mask and sold around 135,000 of these in May and June. This added $2.4 million to revenue in FY20. Manufacturing capacity will double this quarter from its current rate of 65,000 per month to 130,000 masks, and distribution to Australia has begun. 

    The Ananda Food business also continues to experience steady growth. Its newly formulated protein powder will be used by The Alternative Meat Co in a new range of products. The range will be available in Coles from August. Woolworths will also begin stocking Ananda’s hemp seed oil under its Macro brand. The oil will be available from August alongside existing hemp seed and protein powder products.  

    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!

    See the 5 stocks

    *Extreme Opportunities returns as of June 5th 2020

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    Motley Fool contributor Kate O’Brien 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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  • City Chic Collective announces capital raising and acquisition

    Giant magnet attracting banknotes to symbolise a capital raising

    City Chic Collective Ltd (ASX: CCX) shares are in a trading halt with the apparel retailer announcing a capital raising and potential acquisition. City Chic is seeking to raise $90 million via a placement and share purchase plan. Funds will be used to fund the potential acquisition, strengthen the balance sheet, and provide financial flexibility to accelerate growth.

    What does City Chic Collective do? 

    City Chic is a multi-channel womenswear retailer focused on the plus size market. With over 200 locations globally, City Chic generated revenue of $104.8 million in 1H FY20, with digital sales accounting for 53% of total sales.

    With the onset of COVID-19, City Chic temporarily closed stores, but saw online sales continue to climb, building on already high online penetration. Online sales grew 57% versus the same period the prior year, which meant City Chic was able to trade profitably through the store closure period.

    Trade has continued to improve as stores have reopened, with City Chic recording FY20 sales revenue of $194.5 million (unaudited). 

    Why is City Chic raising capital?

    At the end of 1H FY20, City Chic had $17.5 million of debt and $14.9 million cash, giving a net debt position of $2.6 million. The company is now seeking to acquire the ecommerce assets of Catherines, a US plus-sized brand which has filed for bankruptcy. City Chic has bid US$16 million for the brand, subject to inventory adjustments. If successful, the transaction is expected to complete in the third or fourth quarter of 2020. 

    To fund the acquisition, as well as strengthen the balance sheet and provide financial flexibility, City Chic is seeking to raise an additional $90 million in equity capital. A placement to sophisticated and institutional investors will raise $80 million with up to a further $10 million raised via a share purchase plan.   

    What is the outlook for City Chic? 

    The City Chic share price has recovered strongly from the March downturn, gaining 300% to trade at $3.20. The proposed acquisition is consistent with the company’s strategy of scaling its business across geographies and plus-size segments. It would be City Chic’s third strategic acquisition of digital assets in the $50 billion global plus-size apparel market.

    In 2019, City Chic acquired Avenue and Hips & Curves, which are now fully integrated and trading profitably. City Chic has advised it intends to continue to assess opportunities to expand its customer base in key product streams and drive digital presence across geographies. 

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    Motley Fool contributor Kate O’Brien 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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  • Should Afterpay shareholders be concerned about Shopify’s BNPL launch?

    man hitting digital screen saying buy now pay later

    The Afterpay Ltd (ASX: APT) share price is on course to end the week with a day in the red.

    At the time of writing the payments company’s shares are down almost 3% to $70.00.

    Why is the Afterpay share price dropping lower?

    Investors have been selling Afterpay’s shares on Friday after a disappointing night of trade on Wall Street’s technology-focused Nasdaq index.

    US-China tensions and worse than expected jobless claims data hit sentiment and weighed on U.S. tech shares overnight. This led to the famous index dropping 2.3% lower.

    It isn’t just Afterpay that is dropping lower today. The likes of Altium Limited (ASX: ALU) and Nearmap Ltd (ASX: NEA) are also in the red. This has dragged the S&P/ASX 200 Information Technology index 1.6% lower.

    What else is weighing on Afterpay’s shares?

    There is also a spot of industry news that could be weighing on the Afterpay share price today.

    Fellow buy now pay later company Affirm, which is run by PayPal co-founder Max Levchin, has just announced a partnership with Canadian e-commerce giant Shopify on a new interest-free, zero-fee payments program for online customers.

    According to CNBC, the new “Shop Pay Installments” offering will give approved Shop Pay customers the option to split the total purchase cost into four equal, bi-weekly payments, which will be processed and handled by Affirm. This is identical to the Afterpay model.

    While this is certainly going to increase competition in the industry, one broker that isn’t concerned is Goldman Sachs.

    What did Goldman say?

    Goldman commented: “Clearly alternatives are emerging to APT. SHOP has a merchant and consumer reach which could allow them to acquire a user base more rapidly than most of APT’s other US competitors (especially the likes of Quadpay, Sezzle and Klarna).”

    “However, if APT has a large enough consumer base which is transacting frequently (which is what is occurring), merchants may be prepared to adopt both services. In addition, SHOP’s BNPL product will be limited to merchants who use SHOP.”

    In light of this, the broker advised that it is leaving its “forecasts unchanged as we believe this announcement is unlikely to impede the company’s achievement of our forecasts.”

    I agree with this view and continue to believe Afterpay would be a fantastic long term investment option.

    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!

    See the 5 stocks

    *Extreme Opportunities returns as of June 5th 2020

    More reading

    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 and recommends Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Nearmap Ltd. and Sezzle Inc. 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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  • Insurance Australia Group share price sinks 4% lower after cancelling final dividend

    Dividend payment cancelled

    The Insurance Australia Group Ltd (ASX: IAG) share price is dropping lower on Friday after the release of an announcement.

    At the time of writing the insurance giant’s shares are down 4% to $5.54.

    What did IAG announce?

    This morning IAG provided the market with an update on its expectations for FY 2020.

    According to the release, the insurer expects to report gross written premium (GWP) growth of ~1.1%. This is consistent with its ‘low single digit’ guidance.

    IAG also expects to report an insurance margin of approximately 10%, which has fallen short of its prior guidance of 12.5% to 14.5%. This is due largely to adverse natural perils, prior period reserving, and credit spread factors.

    On an underlying basis, its insurance margin is expected to be 16%, compared to 16.6% in FY 2019. This was driven by a tough second half, which saw its margin fall to 15.1% because of higher reinsurance costs, lower investment returns, and a deterioration in the performance of some Australian commercial long tail portfolios.

    This is ultimately expected to lead to a pre-tax loss on shareholders’ funds income of $181 million. While this is down sharply from a profit of $227 million in FY 2019, it is better than its previously indicated year-to-date loss of approximately $280 million at the end of April.

    Dividend cancelled.

    In light of its poor performance, there will be no final dividend in FY 2020.

    The company explained: “While IAG recognises many shareholders will be disappointed with no final dividend, it believes it is important to adhere to its long-established dividend payout policy and to maintain a strong capital position in the current uncertain environment.”

    IAG’s Managing Director and CEO Peter Harmer, commented: “We have experienced an immensely challenging second half to the 2020 financial year, characterised by severe natural peril activity, the disruption caused by the COVID-19 pandemic to our people, customers and suppliers, and the marked volatility in investment markets which has adversely impacted our results.”

    “We have seen some softening in our underlying margin in the second half. This stems from the combination of lower investment returns from diminishing interest rates, an increased reinsurance expense as we bolstered our protection following heavy perils incidence early in the calendar year, and some deterioration in Australian commercial long tail loss ratio,” he added.

    However, the chief executive appears cautiously optimistic on the year ahead.

    He concluded: “We enter FY21 with a strong balance sheet and enhanced reinsurance protection, and are well equipped to negotiate the challenges and opportunities that a post-COVID environment will present.”

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    Motley Fool contributor James Mickleboro 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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