The final third of my 15 ASX share starter portfolio is allocated to dividend shares. Historically, ASX dividend shares have been strong performers as a group. Furthermore, a significant portion of the S&P/ASX 200 Index (ASX: XJO) return is made up of dividends and franking credits.

Here are 5 great ASX dividend shares that pay solid yields:

Jumbo Interactive Ltd (ASX: JIN)

Jumbo recently signed an extension to its resale agreement with gambling giant Tabcorp until 2030. This provides the online lottery ticket seller with strong visibility in the medium term. A growing lottery-as-a-service business also provides the stock with great optionality. Jumbo currently pays a 2.6% dividend yield, or 3.7% grossed up for franking credits. 

Macquarie Group Ltd (ASX: MQG)

Macquarie is the only bank that I would buy on the ASX. Why? Because the “millionaire maker” doesn’t just apply to the bank’s rich clients, but also to investors. Macquarie has more international exposure, as well as an investment banking arm which provides greater optionality than the other major banks. It currently pays a partially franked 3.4% dividend yield.

Rural Funds Group (ASX: RFF)

Rural Funds must be one of the most stable businesses on the ASX. The business owns and leases agricultural properties to strong tenants such as Treasury Wine Estates Ltd (ASX: TWE). A benefit of dealing in a required field like agriculture, is that Rural Funds can implement long-term contracts, with inbuilt growth. Rural Funds currently yields a generous 4.76%.

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

Soul Patts is a Fool favourite. The diversified investment house has been a great ASX dividend share for long-term investment. Soul Patts has never failed to pay a dividend to shareholders since listing on the ASX. What’s more, this dividend has increased every year since 2000. Soul Patts currently pays a 2.77% dividend yield, or 3.95% grossed up for franking credits. 

Wesfarmers Ltd (ASX: WES)

Wesfarmers is another mature and diversified business with a long track record of success. Wesfarmers has done so well by effectively allocating capital over long periods of time. A great example of this is its investment and sale of the Coles Group. With a significant amount of cash from that sale, I expect some exciting announcements in the future. In the meantime, Wesfarmers has a number of strong brands like Bunnings and Kmart that allow it to pay a 3.13% dividend yield, or 4.47% grossed up for franking credits. 

More reading

• More radical action from RBA likely after Victoria’s extends harsh lockdown
• ASX 200 Weekly Wrap: Friday crash pulls ASX back below 6,000 points
• 3 ASX shares every retiree should own
• Here’s how to make a $1 million portfolio by investing $1,000 a month
• How to earn a passive income of $50,000 with ASX dividend shares

Lloyd Prout owns shares of Jumbo Interactive Limited and Macquarie Group Limited and expresses his own opinions. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Jumbo Interactive Limited. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited, RURALFUNDS STAPLED, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool Australia has recommended Jumbo Interactive 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 New to investing? Here are 5 ASX dividend shares to buy now appeared first on Motley Fool Australia.

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Capitalism is effectively on hold in the year of the COVID-19 pandemic.

Most developed nations, including Australia, have had to hand out massive public assistance to their citizens and businesses to save them from going broke.

The effectiveness of those schemes have varied from country to country.

Nucleus Wealth head of investments Damien Klassen said the government was forced into such intervention to fight a specific macroeconomic effect.

“We don’t want bankruptcies to snowball into more job losses, into a housing market crash, into more defaults and so on,” he wrote on the Nucleus blog.

“So, by delaying the start, it creates a calm spot, the eye of the storm.”

However, it has had to be careful to not damage the economy with a second subsequent effect.

“We don’t want the lack of bankruptcies to mean that the over-indebted who aren’t paying their bills start bringing down people who weren’t over-indebted. This is the second half of the storm.”

Governments were hoping for a short and sharp shutdown of the economy before a V-shaped recovery followed.

But an effective treatment, cure or vaccine hasn’t come along quickly. And most countries are now dealing with a prolonged recession and even a second wave of the virus.

Everyone agrees we have to get back to capitalism

Klassen said governments would now be tempted to push out more assistance, but questioned whether that would be wise.

“The issue is that the second [effect] grows bigger every day. By pulling the first lever again, if we don’t get a cure or vaccine, then there is now a much larger problem.”

It’s a dilemma with no easy answers.

S&P Global Ratings predicts prolonged negative pressure on corporate results as government support eventually runs out.

“We believe more pain is likely in companies’ earnings amid the weakest macroeconomic environments in decades,” said S&P Global Rating credit analyst Richard Timbs.

“The fallout from the pandemic has yet to fully play out across the Australian and New Zealand corporate landscape.”

The ratings agency stated government stimulus would “remain a key swing factor” in any recovery.

The Business Council of Australia (BCA) is a group that represents, among others, Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB), Australia and New Zealand Banking Group Limited (ASX: ANZ), Macquarie Group Ltd (ASX: MQG), AGL Energy Limited (ASX: AGL), BHP Group Ltd (ASX: BHP), Coca-Cola Amatil Ltd (ASX: CCL), Coles Group Ltd (ASX: COL), Wesfarmers Ltd (ASX: WES), Telstra Corporation Ltd (ASX: TLS), Scentre Group (ASX: SCG), Qantas Airways Limited (ASX: QAN), and ASX Ltd (ASX: ASX) itself.

BCA chief Jennifer Westacott admitted on television last week that the current situation of heavy subsidies is artificially inflating corporate results.

“We always knew that JobKeeper was sort of like a blunt but necessary instrument. But it has had this weird effect,” she told Sunrise.

“[Companies] are on a bit of a sugar hit. We’ve got to stay on the timetable to move off JobKeeper and get things back to normal because it is having that distortionary effect.”

According to Westacott, “real-world data” suggests Australian businesses have lost $30 billion from their bottom line.

But how do we return to capitalism?

Westacott said next month’s federal budget would have a bearing.

“Part of the job, I think, of the October budget is to get the confidence back in the community and in business so that people start spending money again,” she said.

“You’ve got to carefully reopen things so you can get activity going again.”

According to Klassen, given the choice between “short term pain for a large amount of economic gain” and “short term gain for a large amount of economic pain”, governments inevitably choose the latter.

“The rules are rolling off around the globe — my expectation is that this will create at least some sense of normalcy,” he said.

“But there are already countries extending provisions until the end of the year or beyond. [This] makes it difficult to assess when the eye of the storm will pass, and the second half will begin.”

And what if we don’t return to capitalism?

There is an alternative: Things never return to the way they were.

That COVID-19 has changed the economic and market fundamentals forever.

“We have a checklist of a dozen decisions that governments and central banks can make that will eventually suspend capitalism,” Klassen said.

“A few of the items have already been checked off the list. The more that get implemented, the closer we get to a genuinely new paradigm.”

But a complete reworking is unlikely. Klassen said capitalism will be permanently suspended only if government actions “become increasingly radical”. 

“Effectively central banks and governments bailing out and propping up most failing businesses, turning the world’s capital markets into a herd of state-owned entities that will ‘kill the village in order to save it’.”

More reading

• 4 of the best ASX shares to buy before 2021
• 5 ASX shares I will never sell
• 3 reasons why I’d sell gold to buy dirt-cheap stocks today
• CSL share price higher on COVID-19 vaccine news
• New to investing? Here are 5 ASX dividend shares to buy now

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited and Telstra Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Wesfarmers 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 How long can capitalism be paused before it kills us all? appeared first on Motley Fool Australia.

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Following reporting season, you should have a much clearer picture of how your ASX shares are tracking along and whether it’s time to re-adjust your portfolio. Reading and understanding a company’s reports will reveal its financial health and future growth profile.

As some ASX shares have performed better than others, it’s important to understand which companies present value and which could be riskier to put your hard-earned cash towards. On that note, below I have picked which ASX shares I would avoid buying during this economic crisis.

4 ASX shares I would avoid buying this year

Myer Holdings Ltd (ASX: MYR)

The Myer share price has been gaining back some ground since its fall to 8.3 cents in March. Today, the Myer share price can be picked up for 26.5 cents per share, up over 200% from its March low. However, looking at the last 12 months, this ASX share has fallen from 61.5 cents, a drop of almost 57%.

Last month, Myer released its latest update advising it had secured an amended debt facility of $340 million to see it through the pandemic. No covenants will be tested before FY20, given the significant impact on Myer’s operations during 2H20. Covenants for future periods will be tested quarterly, with the $340 million bank facility to be repaid by August 2022

Furthermore, Myer said that COVID-19 had severely impacted trading during the second half of FY20. The company has initiated cost control measures as well as rent relief and deferrals.

Myer is expected to report its FY20 results this Thursday 10 September.

QBE Insurance Group Ltd (ASX: QBE)

QBE has had a turbulent year, to say the least. The company reported its FY20 results in August which saw a monstrous net loss of US$712 million. This was followed in September by the shock exit of QBE’s CEO from an external investigation concerning workplace communications.

Investors have been quick to hit sell on this ASX share which has seen the QBE share price tumble from $15.19 in February to $9.82 today. That’s a decline of 35%, and over 8% in the last week from the board’s announcement of the new leadership change.

The insurance group warned its outlook remains uncertain as government actions continue to significantly impact revenue drivers. COVID-19 is expected to have a total cost of around US$600 million to QBE, including US$265 million of potential further net claims in the next 12-18 months.

The company’s decision to support customers through offering premium refunds, premium deferrals, extending credit and counselling services will likely further effect future earnings.

Southern Cross Media Group Ltd (ASX: SXL)

One of Australia’s largest media companies, Southern Cross reported a staggering decline of underlying net profit of $35.8 million in its FY20 results, down 51.6% on the prior year.

The company has experienced fierce headwinds from COVID-19 with revenue down 18.2% in both audio and television segments. Southern Cross suspended all dividend payments for FY21, and forecasts to resume paying dividends in FY22.

Shareholders have largely sold off their positions in this ASX share over the past 12 months. This time last year, the Southern Cross share price was fetching for $1.24 compared to just 15.5 cents now. This represents a freefall of 88%.

The media company is looking to recover its underlying earnings and reduce expenses to see it through the challenging climate. Southern Cross completed a recent capital raising of $169 million.

Scentre Group (ASX: SCG)

Scentre has been another poor performer on the ASX this year. The shopping centre operator’s HY20 results disappointed investors with a deep first-half statutory loss of $3.61 billion, down from a profit of $740 million in the prior corresponding period. COVID-19 restrictions prevented many shoppers from visiting its malls and weighed on valuations of retail property assets of the ASX share.

The leading retail property group indicated that the pandemic risks stretched into its balance sheet, despite $4.4 billion of liquidity available.

The company has accelerated customer engagement platforms and other programs to support revenue growth.

The Scentre share price is trading at $2.18, a drop of 47% from its 52-week high of $4.08.

More reading

• These are the 10 most shorted ASX shares
• ASX 200 plunges 3.1%, Afterpay suffers
• Quarterly rebalance: Coles and Fortescue added to ASX 20, Zip joins the ASX 200
• How to build a recession-beating ASX share portfolio
• Myer’s share price is rocketing up. Here’s why.

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

The post 4 ASX shares I would avoid for 2020 appeared first on Motley Fool Australia.

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As a new share investor, the chances are you have a reasonable time horizon to invest. In my opinion, ASX growth shares are one of the best asset classes to invest in to compound and grow your wealth. That’s why two thirds of the starter portfolio is built on growth shares. Here is the second group of growth shares to buy now.

A2 Milk Company Ltd (ASX: A2M)

A2 Milk is my biggest ever investing mistake. After eying off the ASX growth share in mid-2015, I chose to invest in Telstra Corporation Ltd (ASX: TLS) instead. A2 Milk is now a 30-bagger in 5 years, whereas Telstra has more than halved!

Buy this long-term winner and don’t make the same mistake I did. The returns from this point forward will be nowhere close to the past, but as Motley Fool co-founder David Gardner likes to say, “winners, win”.

Altium Limited (ASX: ALU)

Altium is another long-term winner that can continue to smash the market in the future. The printed circuit board software provider is operating in a growth industry. As the Internet of Things grows, Altium stands to benefit. The company has a long track record of setting and meeting lofty goals. The COVID-19 pandemic will have an impact in the short-term, but the future is bright for this ASX growth share.

Bigtincan Holdings Ltd (ASX: BTH)

Arguably the best named share on the ASX, Bigtincan is a software-as-a-service (SAAS)  business that provides sales enablement and automation software to enterprise clients. 

Bigtincan is in the early innings of what can be a massive growth story, and is the smallest company in this starter portfolio. With a market capitalisation of $433 million, the share will be volatile and comes with some risk. But if the company can continue to grow revenue at 30-40% in the medium term the stock will also have a lot of reward for shareholders.

CSL Limited (ASX: CSL)

CSL is the largest company on the ASX at more than $125 billion in market capitalisation. This provides a nice counterbalance to tiny Bigtincan. However, it doesn’t mean that you need to forgo amazing growth. The biotech company has a strong track record of double digit revenue and earnings growth. Given the quality of the business, I see this continuing in the future.

Xero Limited (ASX: XRO)

If you run a small or medium sized business, you’ve probably heard of Xero. Xero provides its customers with a best in class cloud accounting solution. These customers have primarily been in Australia and New Zealand, however the business is expanding into the UK and US. 

The digitisation of tax and accounting reporting across the globe is a nice tailwind that Xero can ride to significant profitability. Another reason I love this ASX growth share is that it has a third-party marketplace for products that work with Xero. Apple Inc. (NASDAQ: AAPL) and Atlassian Corporation (NASDAQ: TEAM) are great examples of this high margin revenue.

More reading

• 4 of the best ASX shares to buy before 2021
• 5 ASX shares I will never sell
• CSL share price higher on COVID-19 vaccine news
• ASX 200 Weekly Wrap: Friday crash pulls ASX back below 6,000 points
• 4 exciting small cap ASX tech shares to watch

Lloyd Prout owns shares of Altium and BIGTINCAN FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium, Apple, and Atlassian. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends BIGTINCAN FPO. The Motley Fool Australia owns shares of and has recommended BIGTINCAN FPO. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post New to investing? More ASX growth shares to buy now appeared first on Motley Fool Australia.

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The Reserve Bank of Australia (RBA) may be forced to pump more stimulus into the financial system after Victoria extended its lockdown.

Victorian Premier Dan Andrews outlined an aggressive plan to eliminate COVID-19 before residents can return to “COVID normal”.

The plan to “eradicate” rather than “suppress” is condemned by many business leaders. It will come at a big cost to the state and national economies.

Negative reaction to Victoria’s road to reopening

The chief executive of Wesfarmers Ltd (ASX: WES) is a vocal critic. His retail conglomerate employs 30,000 Victorians and he told the Australian Financial Review that the Andrews government didn’t properly consult with retailers.

The federal government also couldn’t hide their disappointment with the overly ambitious plan. Australia’s September quarter GDP is almost guaranteed to cop another big blow after it crashed by a record 7% in the previous quarter.

More monetary stimulus for markets?

This is bad news for ASX share investors too, although the market will be looking to the RBA to provide a backstop.

After all, global equities are racing higher due to the liquidity dump by central banks around the world, and not by growth.

The probability of our central bank pulling harder on the quantitative easing (QE) and interest rate lever just went up!

Economists predicting bigger QE program

A Bloomberg survey of economists found that nearly two-thirds of respondents are predicting the RBA will increase QE by expanding bond purchasing.

UBS believes this will happen as soon as next month, while most others think it will happen towards the end of 2020 or early 2021.

Will the RBA cut rates to 0.1%?

The Reserve Bank could also cut record low interest rates further. This view isn’t as popular among economists with three out of 11 believing the cash rate will fall to 0.1% from 0.25%.

These economists also think the RBA will align its three-year yield target to the cash rate to further lower borrowing costs.

While these voices are in the minority, the survey was probably completed before Premier Andrew’s press conference yesterday.

Foolish takeaway

I won’t be surprised if economists are now crunching the numbers to quantify the cost of the Victorian lockdown with the state contributing to around a quarter of the national economic output.

This may mean the RBA will be forced to become more dovish. Its governor Philip Lowe indicated his reluctance to lower the cash rate in the past and ruled out the use of negative interest rates.

Negative interest rates are probably still off the table, but the cut to interest rates is looking increasingly plausible in my view – even though it could be more symbolic than anything.

More reading

• Share price opportunities to buy this week
• ASX 200 Weekly Wrap: Friday crash pulls ASX back below 6,000 points
• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 next week
• ASX 200 plunges 3.1%, Afterpay suffers

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of Wesfarmers 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 More radical action from RBA likely after Victoria’s extends harsh lockdown appeared first on Motley Fool Australia.

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If you are new to investing, it is important to quickly build a diversified portfolio of ASX stocks.

Holding at least 15 ASX stocks should reduce the volatility in your portfolio, as well as improve your chances of making money. Here is the growth third of a ready-built ASX stock portfolio to buy now:

BetaShares Asia Technology Tigers ETF (ASX: ASIA)

ASIA is on my list because it provides market capitalisation weighted exposure to a geographic location that will be an economic powerhouse long into the future. This diversification helps to balance my portfolio, whilst giving me access to fast growing innovative stocks such as Alibaba and Tencent.

Betashares Nasdaq 100 ETF (ASX: NDQ)

The Nasdaq 100 ETF is another foundational pillar of the portfolio along with ASIA. Along with additional geographic diversification, investors get access to some of the fastest growing and most innovative stocks that are changing the world. Personally, my best investments have come from the Nasdaq!

Kogan.com Ltd (ASX: KGN)

Kogan has been an amazing stock to own in 2020. The stock is up 158% year-to-date on the back of amazing results. Although a lot of this growth can be attributed to the COVID-19 pandemic, the long term trend towards and the growth of e-commerce is undeniable. Kogan’s data-led approach puts it in a great position to be a market beater over the long term.

Nanosonics Ltd (ASX: NAN)

Nanosonics is a leader in the disinfection of ultrasound probes. The stock has been a long-term market beater and I think this will continue. Operating with the razor and blade business model, Nanosonics is successfully growing its installed base of Trophon and Trophon 2 machines. Nanosonics can then sell more high margin consumables products and boost profitability.

Resmed Inc. (ASX: RMD)

Resmed is a leader in the treatment of sleep apnea. Sleep apnea is a hugely underdiagnosed condition that can have significant impacts on your quality of life and your health. As the company and physicians educate more of us, I can see a greater adoption of Resmed’s products.

Further, the move into data and internet connected devices should provide optionality in the future.

What about the other 10 shares?

Five ASX shares are not enough to constitute a long-term buy and hold portfolio. Keep an eye out for 5 more ASX growth shares and 5 dividend shares to complete your starter portfolio coming soon.

More reading

• 3 unstoppable ASX shares to hold for the next decade
• I love volatile ASX share market days like today
• 2 high quality ETFs for ASX investors to buy today
• Every bull run has pullbacks. Why today’s share price falls are ‘healthy’
• Why Appen, Kogan, OZ Minerals, & ResMed shares are dropping lower

Lloyd Prout owns shares of BetaShares Asia Technology Tigers ETF, Nanosonics Limited, and ResMed Inc and expresses his own opinions. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BETANASDAQ ETF UNITS and Kogan.com ltd. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF and Nanosonics Limited. The Motley Fool Australia has recommended BETANASDAQ ETF UNITS, Kogan.com ltd, and ResMed 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.

The post New to investing? ASX growth shares to buy now appeared first on Motley Fool Australia.

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

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

This has been quite the history-making year on Wall Street. In no particular order, we’ve witnessed:

• The fastest bear market decline from all-time highs in history (a 34% move lower in the S&P 500 in 33 calendar days).
• The greatest snapback rally in stock market history, with the S&P 500 regaining all of its losses from its bear market low in under five months.
• A brief period of negative West Texas Intermediate crude oil prices.
• Apple Inc (NASDAQ: AAPL) becoming the first U.S. company to top the $2 trillion valuation mark. 

And at the end of August, we added yet another first to the list: electric vehicle (EV) manufacturer Tesla Inc‘s (NASDAQ: TSLA) first stock split.

In fact, over the past month, there hasn’t been a story that’s garnered more attention in the investment community than Apple’s and Tesla’s respective 4-for-1 and 5-for-1 stock splits, which were both enacted before the market opened on Monday, Aug. 31. That could be because Apple and Tesla have respectively added $653 billion and $187 billion in market value since announcing their stock splits.

Although a stock split has absolutely no bearing on a company’s market cap or fundamentals — i.e., it’s entirely cosmetic and designed to raise or lower a company’s share price and shares outstanding — you certainly wouldn’t know it by looking at Apple’s and Tesla’s recent performance.

With these splits now in the rearview mirror, here are four important takeaways that could dictate whether other high-flying stocks follow suit.

1. Stock splits create a strong perception of value

The first lesson we learned from these two stock splits is just how important investor perception can be.

For example, whether you have one share of Tesla at $2,000 or five shares at $400, your total value owned is exactly the same. But psychologically speaking, it’s a lot easier for an investor to come to terms with buying additional shares of Tesla stock at $400 than it is to buy a single share of stock at $2,000. It’s also easier for an investor to gather $400 in spare cash than it is to build up $2,000 in order to buy a share.

Fractional-share investing has helped combat high-share-price bias. However, not all brokerages allow their users to buy fractional shares, including TD Ameritrade, E*Trade, and Vanguard. Thus, for millions of retail investors, adding to Apple or Tesla to their portfolios just became considerably easier.

2. Having a brand name matters

This might go without saying, but being a brand-name company really helps when it comes to stock split appeal. Apple and Tesla are two of the most recognized brands in the States. Many consumers across the country have forged an emotional attachment with one or both of these brands.

Other public companies enacting forward stock splits during August gained little or no traction. For instance, integrated circuits (IC) manufacturer Power Integrations announced a 2-for-1 stock split on July 30, the same day Apple unveiled its 4-for-1 split. Yet, Power Integrations’ stock has declined nearly 10% since its announced split. That’s because it’s a relatively unknown company with no direct consumer presence. It provides its ICs and electrical components to original equipment manufacturers. 

Without a brand name, a stock split is usually a nonevent.

3. Retail investors are almost certainly driving Apple and Tesla higher

We’ve also learned that retail investors have probably been the driving force behind the hoopla and subsequent moves higher in both companies.

How do we know this? A little more than three weeks ago, money managers with over $100 million in assets under management were required to file Form 13F with the Securities and Exchange Commission. These forms provide an under-the-hood look at what the smartest money managers were up to in the most recent quarter. With regard to Apple, money managers were heading for the exit. The total number of shares held by 13F filers declined by close to 140 million (5.2%) from the sequential first quarter. As for Tesla, the number of shares held by 13F filers did increase, but only by approximately 2 million shares (2%).

Understandably, 13F filings have faults. Namely, we’re looking at information that, as of today, is now over two months old. Big money could’ve played a role in the surges of Apple’s and Tesla’s share prices that isn’t yet known or reflected in these SEC filings. But this 13F data suggests that retail investors are behind Apple’s and Tesla’s surging valuations.

4. The market can stay irrational longer than you can stay solvent

Last but not least, we’ve been reminded that irrational stock market or individual equity behavior can have staying power. 

Tesla, for instance, was decried as too pricey by its own CEO, Elon Musk, on May 1. Tesla’s now split-adjusted price on that day was $140. In four months, Tesla’s stock has more than tripled from Musk’s personal call on his company’s valuation, and it’s defied my own repeated arguments that the company is priced for perfection. Tesla was briefly worth more than auto stocks Toyota, Honda, Daimler, Ford, General Motors, Volkswagen, and Ferrari combined, even though Tesla’s only producing around 500,000 EVs a year. Emotional investing is driving this short-term rally.

The same can be said for Apple, which is now valued at close to 35 times forward earnings. Apple has hovered between 10 and 20 times forward earnings over the past decade. It’s suddenly being valued as a services company despite the fact that its fast-growing services segment was responsible for just 19% of its sales through the first nine months of fiscal 2020. 

Neither valuation makes any sense, but both could still head higher.

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

More reading

• ASX 200 Weekly Wrap: Friday crash pulls ASX back below 6,000 points
• Every bull run has pullbacks. Why today’s share price falls are ‘healthy’
• After the crash, is it time to buy this Nasdaq ETF?
• NASDAQ plunges 5%. What next?
• Microsoft, Apple, and Alphabet led the stock market lower on Thursday

Sean Williams 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 Apple and Tesla and recommends the following options: long December 2021 $130 calls on Ferrari. The Motley Fool Australia has recommended Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post 4 things learned from Apple and Tesla stock splits appeared first on Motley Fool Australia.

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

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Every Monday I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Webjet Limited (ASX: WEB) continues to be the most shorted share on the ASX after its short interest rose to 15%. It appears as though short sellers believe Webjet’s shares are overvalued relative to its earnings potential in the medium term.
• Myer Holdings Ltd (ASX: MYR) has seen its short interest reduce slightly once again to 11%. Some short sellers appear to be closing positions after a recent rebound in the department store operator’s shares. Though, others are sticking around, potentially on the belief that the pandemic will ruin its turnaround plans.
• Speedcast International Ltd (ASX: SDA) has seen its short interest slide to 10.6%. This communications satellite technology provider recently announced a US$395 million equity commitment to complete its chapter 11 recapitalisation.
• Orocobre Limited (ASX: ORE) has seen its short interest rise week on week to 9.3%. Short sellers have been going after Orocobre due to a collapse in lithium prices. This led to it posting a US$67.1 million loss after tax in FY 2020.
• InvoCare Limited (ASX: IVC) has short interest of 9.1%, which is up week on week once again. Short sellers have been increasing their positions since the release of the funerals company’s half year results. InvoCare revealed a sharp decline in profits due partly to COVID-related social distancing restrictions.
• Inghams Group Ltd (ASX: ING) has 8% of its shares held short, which is down sharply week on week. It appears as though short sellers may believe the worst is over for Inghams now following its full year result. This certainly seems to be the case with its directors, who were buying shares en masse recently.
• CLINUVEL Pharmaceuticals Limited (ASX: CUV) has seen its short interest increase slightly to 7.9%. Last month the biopharmaceutical company’s shares tumbled lower following a disappointing full year result. Short sellers may believe lockdowns are stifling demand for its SCENESSE product.
• FlexiGroup Limited (ASX: FXL) has entered the top ten with 7.7% of its shares held short. Although the company’s buy now pay later offering is performing well, there are concerns over the rest of the business.
• Corporate Travel Management Ltd (ASX: CTD) has short interest of 7.2%, which is down week on week. Short sellers appear to be closing positions amid a strong rebound in the travel company’s shares.
• Bank of Queensland Limited (ASX: BOQ) has seen its short interest fall to 7.1%. This regional bank has come under significant pressure this year after delivering a soft half year result and warning that trading conditions were expected to remain tough.

More reading

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• Insiders have been buying Fortescue and this ASX share
• Is the Galaxy Resources share price a buy?
• Quarterly rebalance: Coles and Fortescue added to ASX 20, Zip joins the ASX 200
• How to build a recession-beating ASX share portfolio

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

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The S&P/ASX 200 Index (ASX: XJO) fell by 3.06% on Friday, bringing many share prices down with it. During the week there was a cavalcade of bad news. From the start of an official recession after a 7% fall in GDP for the June quarter, to fears of a global slowdown, through to China banning all barley imports from Australia. The last of the major negative economic domestic news was a fall of 0.4% in Core Logic’s home value index.

In the buy now, pay later (BNPL) sector, Paypal Holdings Inc (NASDAQ: PYPL) announced it would be entering the market with an existing global platform. Consequently, companies like Sezzle Inc (ASX: SZL), Zip Co Ltd (ASZ: Z1P) and even the market leader, Afterpay Ltd (ASX: APT), saw their share prices fall by greater than 5%. In addition, the expectation of harder times ahead saw the Commonwealth Bank of Australia (ASX: CBA) share price fall by 2.13%, while the other big 4 banks saw falls of over 3%.

Nevertheless, there were definitely bright spots in the market. In my view, the positive performance of these companies serves to highlight investor sentiment, and where there is the possibility of share price growth over the next 6 – 18 months. 

Business credit

Three of the share prices I saw rise on Friday were related to personal and business credit. For example, CML Group Ltd (ASX: CGR) saw its share price go against the tide and rise by 1.37%. CML offers financing services for small businesses secured by assets other than real estate. It also has an online platform called Earlypay to increase customer loyalty and smooth the credit process. I have been watching this company for a while now and I think it is likely to perform well in the current market. 

CML Group is selling at a price-to-earnings (P/E) ratio of 22.29 and has a trailing 12 month dividend yield of 4.73%.

Consumer Credit

The Moneyme Ltd (ASX: MME) share price rose by 2.56% Friday. This company is an online loan provider. In FY20 it was able to increase origination by 52.8% and its gross loan book by 52.7%.  It has BNPL style services in real estate renting and sales, as well as a short-term, interest-free virtual credit card. However, the neo-lender is a very innovative and versatile company. Its principal business line is personal loans for up to 5 years. Well beyond that of the BNPL sector.

Moneyme is selling at a P/E of 190, which is very high. Clearly the market expects a lot from this company and I think they may be right. 

Money3 Corporation Limited (ASX: MNY) is another consumer lender primarily targeting the car loans sector, but also long-term personal loans. Recently, the Money3 share price rose after the company reported an increase in revenue of 35.3% and a 16.4% growth in its loan book. The company has been able to expand significantly in the near prime sector. Near prime is a sector for those with a problematic credit history. Consequently, they are able to charge higher margins. 

If even half of the forecasts are correct, we are headed for a pretty rough ride over the next 1 – 2 years. Therefore, companies like this will probably see higher revenues. Money3 is selling at a P/E ratio of 17.29 and has a trailing 12 month dividend yield of 3.86%.

Foolish takeaway

To me, the trends reflected last week signify that investors are repositioning their portfolios for a change in the economy. As such, acting sooner rather than later could be wise. Once shares like these take off, then some potential share price gains could be curtailed. I like all three of these companies, with CML Group being my stand out option. 

More reading

• More radical action from RBA likely after Victoria’s extends harsh lockdown
• ASX 200 Weekly Wrap: Friday crash pulls ASX back below 6,000 points
• Where to invest $500 into ASX shares right now
• 5 things to watch on the ASX 200 on Monday
• Top brokers name 3 ASX shares to sell next week

Daryl Mather owns shares of Sezzle Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends PayPal Holdings. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended PayPal Holdings 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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The S&P/ASX 200 Index (ASX: XJO) capped off one of its worst weeks in 3 months last week, dropping a substantial 2.4% over the week. It was a fairly ordinary week on the ASX 200 until Friday. From Monday to Thursday, the ASX 200 was up for the week (around 0.6%) and things seemed to be fairly ordinary. No major news, no significant market-moving events. But then Friday came and brought mayhem with it. Friday started with the ASX 200 plunging by 2.4% half an hour after market open. By 2pm, the index had fallen by another 0.8% and Friday ended up wiping 3.06% from the value of the ASX 200.

It was the ASX 200 blue chips that led these losses. The ASX’s biggest share, CSL Limited (ASX: CSL), was down 4.09% on Friday, whilst the major ASX banks and Telstra Corporation Ltd (ASX: TLS) were all down more than 2%. Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW) were both down by 3.39% and 3.94% respectively. BHP Group Ltd (ASX: BHP) was down 3.78% and Wesfarmers Ltd (ASX: WES) by 3.73%.

ASX tech shares, whilst not as important to the ASX 200 Index, were nonetheless the worst hit shares. Afterpay Ltd (ASX: APT) shares were down 6.7% and WiseTech Global Ltd (ASX: WTC) down 7.1% on Friday. Appen Ltd (ASX: APX), Xero Limited (ASX: XRO) and Altium Limited (ASX: ALU) were all down by more than 5%.

US markets bring ASX 200 carnage

The catalyst for these moves? Well, it didn’t appear to have anything to do with the Australian economy or the Australian commercial landscape. Rather, it followed an extremely heavy night of selling over in the United States markets on Thursday night (our time), which logically reduces the value of almost every company on the ASX (I hope you’re sensing the sarcasm here!). In all seriousness, the US markets have been on a tear in recent weeks, with big tech companies like Apple Inc (NASDAQ: AAPL) and Tesla Inc (NASDAQ: TSLA) in particular going bananas after recent stock splits.

Thursday night saw a dramatic correction of this run-up.

The tech-heavy Nasdaq Composite index dropped by 5% on Thursday night, with the broader S&P 500 Index dropping by 3.5%. It was the worst day for the Nasdaq since March. US tech shares took the brunt of these falls, with Apple down by 8% and Tesla by 9%. Other tech names like Amazon.com Inc (NASDAQ: AMZN) and Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL) weren’t spared either, dropping by 4.6% and 5.1% respectively.

There’s little doubt that US tech shares’ valuations had been becoming stretched in recent months in my view, so there was always going to be a pullback at some point. This week has delivered it and the spillover has hit the ASX in dramatic fashion.

How did the markets end the week?

As we’ve discussed, it was a dramatic week on the ASX 200. The index started out the week at 6,073.8 points and finished up on Friday at 5,925.5 points for a week-on-week loss of 2.44%. Monday started out strong with a 2.2% rise for ASX 200 shares. Tuesday then brought a 1.8% slump, which was promptly reversed on Wednesday with a 1.8% gain (despite official confirmation of Australia’s first recession in 3 decades). Then Thursday brought a small 0.8% gain before Friday saw the week’s gain destroyed with the 3.06% plunge.

Meanwhile, the All Ordinaries Index (ASX: XAO) also had a nasty week, starting out on Monday at 6,262.5 points and finishing up on Friday at 6,108.8 points for a week-on-week loss of 2.5%.

Which ASX 200 shares were the biggest winners and losers?

Now let’s turn to the Foolish gossip pages with last week’s winners and losers. As always, we’ll start with the losers:

Worst ASX 200 losers	% loss for the week
IOOF Holdings Limited (ASX: IFL)	(22.5%)
Afterpay Ltd (ASX: APT)	(11.9%)
Platinum Asset Management Ltd (ASX: PTM)	(10.1%)
Medibank Private Ltd (ASX: MPL)	(9.6%)

The week’s recipient of the ASX 200 wooden spoon goes to wealth manager IOOF. Investors couldn’t wait to get out of this company’s shares after the completion of a mammoth $1.04 billion capital raising. IOOF intends to use this money to purchase wealth business MLC from National Australia Bank Ltd. (ASX: NAB). Clearly investors aren’t too hot on the whole idea.

Next up we have Afterpay, a rare appearance for the buy now, pay later (BNPL) pioneer in the losers column. As one of the ASX’s highest flying tech shares in 2020 so far, Afterpay was particularly vulnerable to the tech sell-off the ASX saw on Friday. The 6.7% fall on Friday was enough to pull Afterpay shares down nearly 12% last week. An announcement from US payments giant PayPal Holdings Inc. (NASDAQ: PYPL) that the company intends to rollout a BNPL product of its own didn’t help either.

Platinum was a victim of the sell-off on Friday with no major news coming out of the asset manager, whilst Medibank also had a tough week, made tougher by the company going ex-dividend on Wednesday.

Now the losers are out of the way, let’s take a look at last week’s winners:

Best ASX 200 gainers	% gain for the week
SkyCity Entertainment Group Limited  (ASX: SKC)	11.7%
Lendlease Group (ASX: LLC)	9.1%
AMP Limited (ASX: AMP)	8.5%
Costa Group Holdings Ltd (ASX: CGC)	8.5%

Taking out top spot on the ASX 200 last week was casino operator SkyCity. Investors were excited by this company’s late-out-the-gate earnings report that the company released on Thursday, in which SkyCity said it expects to return to profit growth in FY2021.

Next up we have property tycoon Lendlease. Investors were evidently impressed by a ‘strategy update’ that the company released last week. Despite this bump in share price, Lendlease shares remain nearly 32% below where they started the year.

Investors also reacted positively to AMP’s plans to potentially break up and sell the pieces of the iconic business, seeing some potential value for shareholders in the process.

Finally, we have agricultural company Costa. Costa shares have been in investors’ sights for the last week after the company posted a positive earnings update the previous week.

What does this week look like for the ASX 200?

Last week’s late market moves probably took most of us by surprise , and in my opinion, all eyes will be turning to the US markets this week for some directional guidance for the ASX 200. The US markets are closed on Monday (US time) for their Labour Day weekend, so we will have to wait until Tuesday night (our time) to get a gauge on how the Americans are feeling. 

I would anticipate some more volatility on the ASX if the US markets plunge again, but equally, I wouldn’t be surprised to see the ASX 200 rally if US investors shake off the wobbles that last week saw when trading resumes.

So to prepare yourself for this week and whatever it may bring, here is a look at how the major ASX 200 blue chip shares are shaping up:

More reading

• Where to invest $500 into ASX shares right now
• 5 things to watch on the ASX 200 on Monday
• Why I would buy these quality ASX shares for a retirement portfolio
• Forget Westpac’s term deposits and buy these ASX dividend shares
• Top brokers name 3 ASX shares to buy next week

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Alphabet (A shares), National Australia Bank Limited, Newcrest Mining Limited, Telstra Limited, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Altium, Amazon, Apple, PayPal Holdings, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd., WiseTech Global, and Xero and recommends the following options: short January 2022 $1940 calls on Amazon, long January 2022 $1920 calls on Amazon, and long January 2022 $75 calls on PayPal Holdings. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO, Macquarie Group Limited, and Telstra Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO, COLESGROUP DEF SET, Transurban Group, Wesfarmers Limited, and Woolworths Limited. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, PayPal Holdings, and Sky City Entertainment 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.

The post ASX 200 Weekly Wrap: Friday crash pulls ASX back below 6,000 points appeared first on Motley Fool Australia.

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