• Leading broker tips REA Group shares as a buy

    Financial data graph

    The REA Group Limited (ASX: REA) share price has been a strong performer over the last seven weeks.

    Since dropping to a 52-week low of $62.05 around seven weeks ago, the property listings company’s shares have zoomed approximately 45% higher.

    Is it too late to invest?

    While REA Group is far from the bargain buy that it was in March, I still see a lot of value in its shares at the current level for long term-focused investors.

    I continue to be very impressed with the resilience of its business and the way it can generate earnings growth during very tough trading conditions.

    For example, last week REA Group released its third quarter update and revealed a 1% increase in revenue to $199.8 million and an 8% lift in quarterly EBITDA to $119.6 million. This was despite it dealing with a 7% decline in national residential listings during the three months.

    And while things are going to be tougher in the current quarter, the company is attempting to offset this with a 20% reduction in operating costs.

    Overall, when trading conditions improve, and they will, I believe REA Group will be well-positioned to accelerate its growth again.

    Goldman Sachs rates REA Group as a buy.

    One broker which agrees that REA Group is a buy is Goldman Sachs. This morning it retained its buy rating and lifted its price target to $107.00. This implies potential upside of approximately 18% over the next 12 months.

    It lifted its price target after upgrading its earnings forecasts for the company.

    The broker explained: “Given our increased confidence on the outlook for property listings in Australia, given April numbers that were well ahead of our expectations, and a relaxation of auction/open home restrictions in parts of Australia, we see less risk around our listings forecasts.”

    Goldman is forecasting listings growth of 12% in FY 2021 and then 8% in FY 2022.

    “As a result, we revise higher the multiple we ascribe to REA Australia and Domain Digital assets by 1X, with REA increasing to 25X and DHG to 19X.”

    REA Group remains it preferred option in the space. It has held firm with its neutral rating for Domain Holdings Australia Ltd (ASX: DHG) and has a $2.70 price target on its shares.

    Domain may have a neutral rating, but these five top stocks have buy ratings along with REA Group. They look dirt cheap after the market crash.

    5 cheap stocks that could be the biggest winners of the stock market crash

    Investing expert Scott Phillips has just named what he believes are the 5 cheapest and best stocks to buy right now.

    Courtesy of the crashing stock market, these 5 companies are suddenly trading at significant discounts to their recent highs… creating what could be incredible opportunities for bargain-hungry investors.

    Simply click here to scoop up your FREE copy and discover the names of all 5 cheap shares to buy now… before the next stock market rally.

    See the 5 stocks

    Returns as of 7/4/2020

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    Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA 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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  • 3 top ASX 200 shares you can buy on sale today

    It’s been a rollercoaster start to the year for most ASX shares. Concerns over the coronavirus shutdown smashed the S&P/ASX 200 Index (ASX: XJO), which slumped as low as 4,456 points on 23 March.

    However, the recent bear market has created a lot of buying opportunities. Here are just a few ASX 200 shares I think could be on sale at bargain prices today.

    3 ASX 200 shares on sale today

    Webjet Limited (ASX: WEB) is one of the obvious candidates on sale today. Webjet shares have been smashed in 2020 and are down 65.71% this year at the time of writing. 

    The reality is that things have changed dramatically since the start of the year. And the outlook for the travel sector has also changed for at least the next 12 to 18 months. This means Webjet shares should rightly be valued lower in the wake of the COVID-19 shutdown.

    However, I think the ASX travel share has been oversold and could be in the buy zone. Even if it’s just domestic travel or across the ditch, we could see more bookings as restrictions ease and Australia’s economy starts to open back up.

    Stockland Corporation Ltd (ASX: SGP) is another ASX share that has been smashed in 2020. Stockland owns and operates shopping centres around Australia and therefore has a large exposure to the Aussie retail sector.

    Aussie retailers were struggling even before COVID-19 took hold. However, things looked even bleaker in the wake of the pandemic. Stockland shares have fallen 41.13% lower this year (at the time of writing) but things are starting to look up, in my opinion. Restrictions are starting to be wound back and we could see sales bounce back quicker than expected.

    Westpac Banking Corp (ASX: WBC) could also be an undervalued ASX bank share. I think there could be some short-term pain for the Aussie banks in 2020 but the longer-term outlook could be OK. At the time of writing, the Westpac share price is down 37.14% in 2020 and now could be a good time to buy for a sale price and hold for decades to come.

    If you’re looking for undervalued shares to buy, don’t miss this top ASX share pick today!

    One “All In” ASX Buy Alert, that could be one of our greatest discoveries

    Investing expert Scott Phillips has just named what he believes is the #1 Top “Buy Alert” after stumbling upon a little-owned opportunity he believes could be one of the greatest discoveries of his 25 years as a professional investor.

    This under-the-radar ASX recommendation is virtually unknown among individual investors, and no wonder.

    What it offers is an utterly unique strategy to position yourself to potentially profit alongside some of the world’s biggest and most powerful tech companies.

    Potential returns of 1X, 2X and even 3X are all in play. Best of all, you could hold onto this little-known equity for DECADES to come

    Simply click here to see how you can find out the name of this ‘all in’ buy alert… before the next stock market rally.

    Find out the name of Scott’s ‘All in’ Buy Alert

    Returns as of 6/5/2020

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    Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet 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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  • Datadog (DDOG) Is a Winner, but the Stock Is Fairly Valued Here, Says 5-Star Analyst

    Datadog (DDOG) Is a Winner, but the Stock Is Fairly Valued Here, Says 5-Star AnalystFate is a cruel mistress, the saying goes. But how about turning the phrase on its head? Might fate be a welcoming friend, too? That’s certainly the case during COVID-19. As some companies’ unfortunate line of business has dictated a struggle to make it through the pandemic, some are inherently well set up to benefit.Cloud based services and data focused companies, for example. Or specifically, Datadog (DDOG). The SaaS data analytics specilaist’s performance has been impressive. Since the turn of year, DDOG shares have appreciated by 82%, whilst successfully navigating through the pandemic storm. And unlike many companies struggling with recent Q1 reports, DDOG just delivered the goods. So, where has it all gone right for DDOG?As befits a data crunching platform, it’s all in the numbers. In the first quarter, the company reported revenue of $131.25 million, up by 87.4% year-over-year and easily beating the Street's call for $117.7 million. Q1 Non-GAAP EPS of $0.06 came ahead of the estimates by $0.07, turning a profit against expectations.Bucking the trend to shy away from guidance, in Q2, DDOG expects revenue to come in between $134 to $136 million (consensus calls for $126.31 million) and for FY20 , the company projects revenue in the range of $555 to $565 million, again ahead of consensus, which calls for $534.50 million.Even though they've yet to encounter any pressure, anticipating COVID-19 headwinds, management is preparing for some 2Q/3Q retention rate pressure and deal slippage.Oppenheimer analyst Ittai Kidron expressed great satisfaction with the results and steady execution, and said, “Even with management budgeting for some 2Q/3Q COVID-19 pressure on retention rate/churn, they were still comfortable raising CY20 guidance given the robustness of the existing deal pipeline. Management's also doubling down on aggressive investment, positioning for long-term gains.”Despite the strong report, though, Kidron argues the upside is “fairly reflected in Datadog's premium valuation.” However, the 5-star analyst believes “investors with longer investment horizons (+18 months) can buy into the story.” Accordingly, Kidron keeps his Perform (i.e. Hold) rating as is, though has not set a price target. Kidron is one of the top analysts on Wall Street covering technology. His picks average a 32% one-year return, and he's ranked in the top 10 out of over 6,500 analysts, according to TipRanks database.When evaluating DDOG’s prospects, the Street is almost split down the middle. 7 Buys and 6 Holds add up to a Moderate Buy consensus rating. However, the company’s on-going share appreciation means the current average price target of $61.50, implies downside of 11%.Read more: * 3 “Strong Buy” Dividend Stocks That Look Great After Earnings Beat * 2 Cruise Line Stocks to Bet on After the Coronavirus Crisis (And 1 to Avoid) * 3 Stocks Needham’s Top Analysts Are Raving About

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  • Why diversification is important and how to diversify your portfolio with ASX shares

    While it might be tempting to load up a portfolio full of the hottest stocks like Afterpay Ltd (ASX: APT) and Xero Limited (ASX: XRO), having too much exposure to one particular sector can be a bad thing for a portfolio.

    You only need to look at the travel sector to see this. Through no fault of their own, the shares of Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB) have been crushed in 2020 because of the pandemic.

    If you had a portfolio with significant weighting to the travel sector, you would be severely underwater right now compared to those with more balanced portfolios.

    With that in mind, here are two top ASX shares you could diverse your portfolio with:

    Betashares Nasdaq 100 ETF (ASX: NDQ)

    The first option for investors to consider is the Betashares Nasdaq 100 ETF. As its name implies, this exchange traded fund gives investors exposure to the famous Nasdaq 100 index. These are 100 of the largest, non-financial businesses on the NASDAQ exchange. There are countless household names included in the fund such as Amazon, Apple, Costco, Netflix, Starbucks, and video conferencing provider Zoom. Given the positive outlooks for the companies on the index, I feel the exchange traded fund offers strong potential returns as well as diversity.

    BHP Group Ltd (ASX: BHP)

    If you’re one of the many investors that doesn’t have any exposure to the resources sector, then doing so could be an easy way to bring some diversification to your portfolio. My favourite option in the sector is BHP, just ahead of fellow mining giant Rio Tinto Limited (ASX: RIO). I like BHP due to its diverse and world class operations, their low costs, its strong balance sheet, and the bumper free cash flow it generates. The latter is likely to lead to generous dividend payments over the coming years.

    And here are five dirt cheap shares which could be great additions to a balanced portfolio right now. They have just been given buy ratings.

    5 cheap stocks that could be the biggest winners of the stock market crash

    Investing expert Scott Phillips has just named what he believes are the 5 cheapest and best stocks to buy right now.

    Courtesy of the crashing stock market, these 5 companies are suddenly trading at significant discounts to their recent highs… creating what could be incredible opportunities for bargain-hungry investors.

    Simply click here to scoop up your FREE copy and discover the names of all 5 cheap shares to buy now… before the next stock market rally.

    See the 5 stocks

    Returns as of 7/4/2020

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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 and has recommended BETANASDAQ ETF UNITS and Webjet Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO and Xero. The Motley Fool Australia has recommended Flight Centre Travel 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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  • Up 140% since March: the ASX airline share flying under the radar

    share price higher

    The Regional Express Holdings Ltd (ASX: REX) share price has more than doubled in the past 7 weeks, surging more than 140% from its low in late March. The positive price action dwarfs the recovery seen in the share price of its larger competitors Qantas Airways Limited (ASX: QAN) and Virgin Australia Holdings Ltd (ASX: VAH) over the same period.

    Here’s why the Regional Express share price is flying and a closer look at whether Rex could be a long-term buy.

    A potential three-airline market

    Securities in Regional Express (Rex) entered a trading halt yesterday, following an article in the Australian Financial Review (AFR) that suggested the airliner was looking to expand its services. According to the article, Rex is looking to capitalise on the fragmented domestic market by investing $200 million into capital city services.

    According to the report, the company plans to lease a fleet of 10 aircraft and hire new pilots, crew and ground staff. The new services offered by Rex will compete directly with Qantas, its subsidiary Jetstar and Virgin Australia as a budget and full-service airline.

    How has Rex performed during the pandemic?

    Regional Express operates exclusive services to 60 regional destinations in Australia and currently has a fleet of 60 Saab aircraft. The company has been able to maintain minimum services to regional Australia thanks to funding arrangements with both federal and state governments.  

    The company was founded in 2002 and has made an operational profit every year since 2004. An interesting note from the article in the AFR is that Rex’s cumulative net profits over the past 6 years have exceeded the combined earnings of both Qantas and Virgin over the same period.

    Despite the company’s resilience and consistent profitability, Rex has not been spared the impact of the COVID-19 pandemic. The airline withdrew its profit guidance in mid-March citing the uncertain trading environment. The company also released an open letter to the Deputy Prime Minister, which stated that regional operators like Rex could only last for a few weeks based on reserves without government assistance.  

    Should you buy?

    Given the distressed state of the domestic airline sector, Regional Express has found an opportune moment to enter the market. Rex currently dominates regional services, covering 85% of the routes offered. However, the move from being a purely regional airline to servicing capital cities could be interesting. If the company manages to build on its existing infrastructure and maintain a lower cost base, it should be competitive.

    I think the prospect of Rex expanding its services would be great for consumers and potentially shareholders as well. I think a prudent strategy for investors would be to keep any eye on the sector and Rex in particular before making an investment decision.

    The Rex share price could have great long-term potential. Here are 5 more stocks that could boom in 2020 and beyond.

    NEW! 5 Cheap Stocks With Massive Upside Potential

    Our experts at The Motley Fool have just released a FREE report detailing 5 shares you can buy now to take advantage of the much cheaper share prices on offer.

    One is a diversified conglomerate trading 40% off it’s all time high, all while offering a fully franked dividend yield of over 3%…

    Another is a former stock market darling that is one of Australia’s most popular and iconic businesses. Trading at a significant discount to its 52-week high, not only does this stock offer massive upside potential, but it also trades on an attractive fully franked dividend yield of almost 4%.

    Plus, this free report highlights 3 more cheap bets that could position you to profit in 2020 and beyond.

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    Motley Fool contributor Nikhil Gangaram 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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  • Is the Altium share price a buy?

    Altium share price

    Is the Altium Limited (ASX: ALU) share price a buy after the electronic PCB software business gave investors a business update yesterday?

    Here’s what Altium revealed

    Altium said that since the last market update in early April, it’s anticipating some headwinds due to coronavirus impacts in the US and Western Europe.

    May and June are typically the strongest months of the year for closing sales. So it’s going to cause problems for Altium’s FY20 result with the cash preservation priorities of small and medium size businesses affecting Altium’s sales. But Altium did say that engineers are still working on prototype designs. The electronics industry is still holding up relatively well.

    In response to the problem, Altium has launched ‘attractive pricing’ and extended payment terms to drive volume. That’s not beneficial for revenue, margins or cashflow in the short-term. But I think it makes sense for the longer-term. Altium’s plan is to become the clear market leader by 2025, what happens in FY20 and even FY21 is less important than continuing to grow long-term market share.

    The Altium share price fell almost 4% yesterday.

    Altium is working even harder on rolling out its new cloud platform Altium 365 so that more clients will adopt to working on the platform. Altium 365 Standard was made available to all subscribers on 1 May 2020. According to management, it’s “off to a great start”. It won’t drive short-term revenue, but it’s important for transforming the industry and improving the recurring revenue.

    The company said it’s still profitable and has a cash balance of more than US$77 million.

    Due to the disruptions, the goal of US$200 million revenue this year is unlikely to be met.

    Is the Altium share price a buy?

    At around $35 the Altium share price is looking a little expensive for the short-term considering yesterday’s news. There could be heavier economic impacts to come this year. Though the very low interest rate does supposedly boost asset values.

    Over the long-term I think investors will still do quite well at $35, but I’d rather buy at around $30. It’d be even better to buy for price much cheaper than $30, but we don’t know what the Altium share price is going to do.

    If you’re waiting for a better price, then you could decide one of these top ASX shares instead.

    5 cheap stocks that could be the biggest winners of the stock market crash

    Investing expert Scott Phillips has just named what he believes are the 5 cheapest and best stocks to buy right now.

    Courtesy of the crashing stock market, these 5 companies are suddenly trading at significant discounts to their recent highs… creating what could be incredible opportunities for bargain-hungry investors.

    Simply click here to scoop up your FREE copy and discover the names of all 5 cheap shares to buy now… before the next stock market rally.

    See the 5 stocks

    Returns as of 7/4/2020

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    Motley Fool contributor Tristan Harrison owns shares of Altium. The Motley Fool Australia owns shares of Altium. 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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  • 2 of the best ASX 200 healthcare shares to buy for the long term

    Health technology shares

    Over the last 10 years the healthcare sector has been a great place to invest your money.

    During this time the S&P/ASX 200 Health Care index has climbed a remarkable 413%.

    While I don’t necessarily expect the same level of gains over the next 10 years, I believe the tailwinds the sector is experiencing are likely to underpin further outperformance in the future.

    In light of this, I think it is well worth having exposure to the sector in your investment portfolio.

    But which shares should you buy? Two healthcare shares I think could generate strong returns for investors in the future are listed below:

    Nanosonics Ltd (ASX: NAN)

    Nanosonics is an infection control specialist which I believe could be a great long-term investment. This is thanks to the impending launch of several new products targeting unmet needs and its core trophon EPR product. The latter product is used by healthcare organisations to prevent ultrasound probe cross-infection.

    At the end of the first half, the trophon EPR product’s global installed base had grown 17% over the last 12 months to 22,500 units. While this is a large number, it is still only a fraction of its total addressable market which is estimated to be 120,000 units. Due to its best in class status, I expect more market share gains over the coming years. This should support strong sales growth from units and also recurring revenue growth from the consumables the device requires. And if its new product launches are a success, the sky could be the limit for Nanosonics.

    Ramsay Health Care Limited (ASX: RHC)

    Ramsay Health Care is a leading private hospital operator. It provides healthcare services from 480 facilities across 11 countries. This makes it one of the largest and most diverse private healthcare companies in the world.

    While times have been hard for its network over the last couple of years and this is unlikely to ease in the immediate term, I believe its long term outlook is very positive given the increasing demand for healthcare services globally. In light of this, I think it is worth focusing on the long term and considering a patient buy and hold investment in its shares.

    And here are five more top shares that could be great options for investors right now. Each looks dirt cheap after the market crash.

    5 cheap stocks that could be the biggest winners of the stock market crash

    Investing expert Scott Phillips has just named what he believes are the 5 cheapest and best stocks to buy right now.

    Courtesy of the crashing stock market, these 5 companies are suddenly trading at significant discounts to their recent highs… creating what could be incredible opportunities for bargain-hungry investors.

    Simply click here to scoop up your FREE copy and discover the names of all 5 cheap shares to buy now… before the next stock market rally.

    See the 5 stocks

    Returns as of 7/4/2020

    More reading

    Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Nanosonics Limited. The Motley Fool Australia has recommended 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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  • Commonwealth Bank reveals $1.5 billion COVID-19 provision with Q3 result

    Commonwealth bank

    The Commonwealth Bank of Australia (ASX: CBA) share price will be one to watch today after the release of its third quarter update.

    How did Commonwealth Bank perform in the third quarter?

    For the three months ended March 31, Australia’s largest bank delivered an unaudited statutory net profit of approximately $1.3 billion.

    The bank’s cash net profit from continuing operations also came in at approximately $1.3 billion during the quarter. This was a 41% reduction on the average quarterly cash net profit it achieved in the first half and driven by remediation charges and COVID-19 provisions. In respect to the latter, Commonwealth Bank has made an additional credit provision of $1.5 billion for the potential longer term impacts of COVID-19.

    Positively, the bank’s operating income was flat for the period. Management notes that its strong operational execution is driving core volume growth, offset by the impacts of a lower cash rate. Operating expenses (excluding notable items) was down 1%, reflecting seasonal factors and ongoing simplification savings.

    This ultimately led to Commonwealth Bank finishing the period with a strong CET1 capital ratio of 10.7%. This includes the payment of its interim dividend on March 31 and the COVID-19 provision.

    Strength and resilience on display.

    The bank’s chief executive officer, Matt Comyn, believes this result demonstrated the strength and resilience of the bank.

    He said: “The strength and resilience of the Bank remained evident through the March quarter. Our people have continued to serve our customers diligently and professionally under challenging circumstances.”

    The chief executive also believes the bank is well-placed to navigate the current crisis and support consumers and businesses.

    He commented: “The strength of the Bank means we are well placed to support our customers and the broader Australian economy. Since the onset of the COVID-19 pandemic, our package of support measures has included over $9 billion in support to ~100,000 businesses, repayment deferrals on approximately 240,000 loans, reduced interest rates for borrowers, increased interest rates for depositors and waived fees and charges.”

    “Our strong capital position enabled us to deliver 1H20 dividend payments totalling $3.5bn to our ~830,000 shareholders during March, providing a further direct cash benefit into the economy,” he added.

    Asset sale.

    In addition to its update, Commonwealth Bank revealed that it has entered into an agreement to sell a 55% interest in Colonial First State to private equity firm KKR.

    The transaction implies a total valuation of $3.3 billion, which will result in CBA receiving cash proceeds of approximately $1.7 billion from KKR. The sale price represents a multiple of 15.5x pro forma net profit after tax of approximately $200 million.

    The two parties intend to undertake a significant investment program, strengthening the position of Colonial First State as one of Australia’s leading retail superannuation and investments businesses.

    Management notes that the transaction represents the final stage of its previously announced planned exits from various wealth management activities over recent years.

    Not sure about the banks? Then check out this highly rated dividend share which continues to grow at a very strong rate.

    NEW: Expert names top dividend stock for 2020 (free report)

    When our resident dividend expert Edward Vesely has a stock tip, it can pay to listen. After all, he’s the investing genius that runs Motley Fool Dividend Investor, the newsletter service that has picked huge winners like Dicker Data (+92%), SDI Limited (+53%) and National Storage (+35%).*

    Edward has just named what he believes is the number one ASX dividend stock to buy for 2020.

    This fully franked “under the radar” company is currently trading more than 24% below its all time high and paying a 6.7% grossed up dividend

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    *Returns as of 7/4/20

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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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  • 3 ASX 200 value plays for an economy hell-bent on recovery

    a hand drawing a balancing scale in which price outweighs value

    Given the level of volatility in the market in recent weeks, it would be unrealistic to assume we’re now in a totally ‘risk-off’ environment. But with forced selling having left the S&P/ASX 200 Index (ASX: XJO) down 20% since the start of 2020, it’s starting to look like bottom is now behind us.

    Did you miss the bottom? Don’t panic, so did the most of the chief investment officers, who are paid a lot more than you to get it right.

    That’s not to say heightened volatility isn’t here to stay for a while. However, while we’ll still see spreads of 2–3% on a given day’s trading, the expectation of the market moving another major leg down – which most institutional buyers are still praying for – now looks less bankable.

    But if you’ve been brave enough to take positions in stocks over last few weeks, congratulations. Three years from now your entry point will (with the wisdom of hindsight) look compelling.

    Did fund managers drink too much of their own Kool-Aid?

    Ironically, it is fund managers, many of whom still refuse to admit how much they were zigging when the markets were zagging, who’ve been the last to heed their own advice. Namely, start accumulating oversold stocks. Assuming they reluctantly admit that the bottom has now passed, institutional buying over the coming weeks should provide a much needed kicker to the stocks you recently bought.

    With COVID-19 affecting fundamental assumptions on blue-chip stocks we previously thought were bankable, like Flight Centre Travel Group Ltd (ASX: FLT), only the truly brave want to shout about the market bleeding value. After all, COVID-19 has delivered an existential shift to the earnings of many stocks.

    However, the COVID-19 impact appears to have been overstated. Many stocks have been forced to re-emerge from the ashes with better, leaner and more profitable business models.

    Swing back to value

    With market dynamics being more impacted by central bank policy than fundamentals, it’s been hard for investors to draw a meaningful bead on value. However, with stocks in the value bucket now looking (at face value anyway) decidedly cheap, it could be time for active value-based fund managers to finally shine.

    The resurfacing of value plays should offer strong clues as to where institutional money will find a home over the next few weeks. Riding the coat-tails of this buying strategy may not be such a silly idea, especially with the phased easing of COVID-19 lockdowns acting as an inflection point for a full economic recovery.

    Assuming the likelihood of a second wave of COVID-19 is alleviated, Australia should – courtesy of the government’s $214 billion fiscal response – emerge strongly from our low-point of economy activity in April.

    Here are 3 ASX 200 shares that make good value plays in the current environment, in my opinion.

    Crown Resorts Ltd (ASX: CWN)

    The late April decision by private equity firm Blackstone Group Inc to take a 9.99% stake in Crown Entertainment at $8.15 a share, provides some insight into what sectors are attracting the attention of institutional investors. While the stock has bounced up to $9.11, it’s still trading at a 32% discount to its 52 week high of $13.40.

    Despite the coronavirus, Crown is still on track for the progressive completion of its new jewel, Crown Sydney, from late 2020.

    The company recently secured $1 billion in fresh debt to weather the coronavirus shutdown. After paying its half-year 30 cents a share dividend, and $203 million to 95% of employees who were stood down, the company still has around $500 million in cash on hand.

    Star Entertainment Group Ltd (ASX: SGR)

    Crown’s rival Star Entertainment also benefitted from a vote of confidence in both the wagering sector at large, and its mid-April COVID-19 response. While the share price is now up around 62% after dipping as low as $1.62 in late March, it’s still trading at a 46% discount to its 52-week high of $4.93.

    It’s too early to put definitive numbers around Star’s future earnings, but the market is clearly excited over its $3.6 billion Queens Wharf joint venture, which it plans to open late in 2022. While the Brisbane River development is being marketed as an ‘integrated resort’, it is expected to hold up to 2,500 poker machines.

    Within its COVID-19 response, Star revealed that it stood down over 90% of its workforce in response to the shutdown of its activities in Sydney, the Gold Coast and Brisbane. In the meantime, after recently raising $200 million in fresh debt, the company has available cash and undrawn debt facilities of around $700 million.

    The company is also advancing a business interruption claim through its insurer. The outcome of this claim hasn’t been factored into its cost and cash flow expectations. Based on a commitment not to pay a cash dividend until gearing is below 2.5 times, its lender has agreed to waiver debt covenants for the next testing date of 30 June.

    Aristocrat Leisure Limited (ASX: ALL)

    Unsurprisingly, slot machine group Aristocrat has witnessed similar share price falls to gaming stocks since early March. But after tumbling as low as $15.44, Aristocrat shares have now bounced back up to $25.58.

    Aristocrat stood down 1,000 staff until the end of June, following the decision by virtually all its land-based customers globally to suspend operations. It also cut 200 roles permanently from the business, and moved another 200 full-time roles to part-time.

    Aristocrat has a conservatively geared balance sheet with $1 billion in liquidity and no near-time refinancing requirements. This should allow it to rebound quickly once customers start to ramp up their patronage.

    Foolish takeaway

    Given the speed with which Australia (and the world) want to return to normalcy, Star, Crown and Aristocrat should be early beneficiaries once COVID-19 restrictions begin to lift. This also bodes well for the resumption of regular dividends.

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

    The post 3 ASX 200 value plays for an economy hell-bent on recovery appeared first on Motley Fool Australia.

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  • Why the coronavirus is still affecting share markets

    Stylised portrayal of virus outbreak on blue background

    The coronavirus is still affecting share markets. Overnight the S&P 500 (INX) fell by 2% on infection worries.

    It isn’t as though the infection numbers are still growing exponentially in the US in terms of the total number. New York is certainly over the worst of it, it was perhaps the main entry port of the virus into the US. But now it’s spreading across the country, so whilst the daily number is staying between 20,000 to 30,000 it’s decreasing in the original states and growing elsewhere.

    Some in the US are keen to lift restrictions and get the economy going again. Overnight there was a particular warning that spooked US investors.

    Dr Fauci, the boss of the National Institute of Allergy and Infectious Diseases, warned if restrictions are lifted too soon it could mean “suffering and death”. According to media reports, he said:

    “It would almost turn the clock back rather than going forward. There is a real risk that you will trigger an outbreak that you may not be able to control, which in fact, paradoxically, will set you back, not only leading to some suffering and death that could be avoided but could even set you back on the road to get economic recovery.”

    That’s the real danger. A second (and a third and so on) wave. The US hasn’t even gotten over the first wave yet. Will the US go into lockdown again? Will it just spread through the country relatively uncontrolled and cause the public’s confidence to spend to stay low?

    It’s a tough situation in the US with different groups having different views.

    How does the coronavirus affect the ASX share market?

    Thankfully Australia’s infection numbers are incredibly low compared to many other countries. But our share market generally follows the US share market on a day to day basis. Some of the ASX’s biggest companies like CSL Limited (ASX: CSL) earn a large portion of earnings in the US.

    If the US economy goes into lockdown again then it could cause much more economic damage. Not many households or businesses have many months of cash on hand. 

    But it won’t be like this forever, the world will get through the coronavirus whether it disappears naturally or a treatment can be developed.

    I’m going to keep investing during this period of volatility. Over the longer-term, things are more likely to work out than not.

    Here are some of the top ASX shares I’ve got my eyes on.

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    Another is a former stock market darling that is one of Australia’s most popular and iconic businesses. Trading at a significant discount to its 52-week high, not only does this stock offer massive upside potential, but it also trades on an attractive fully franked dividend yield of almost 4%.

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    Returns as of 7/4/2020

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

    The post Why the coronavirus is still affecting share markets appeared first on Motley Fool Australia.

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