This week is one of the last chances to decide which shares to buy before earnings season starts. There are a few unique dynamics going on this year. As investors we have been speculating since the start of the coronavirus pandemic about how companies are going, yet we haven’t seen any earnings reports yet. In August, we finally get to look behind the curtain to see what is really going on.

Having said that, there are a few companies that have been diligently working away in the background that I believe are likely to deliver an earnings surprise. These companies all use an online, or software-as-a-service (SaaS) business model. Companies like this, that provide corporate functionality, have a few characteristics in common that gives them a distinct competitive advantage. 

First, as an online product there are no update cycles – it just happens. Second, as a subscription-based business model, most revenues are recurring. Third, and most importantly, retention rates are high. This means that the first movers are often the companies that dominate the sector. It is almost a winner-take-all business.    

Payroll system shares to buy

ELMO Software Ltd (ASX: ELO) provides SaaS human resources management systems. This includes HR systems, payroll, as well as rostering and timesheet functions within Australia and New Zealand. 

On 9 June, Elmo reinstated its previous guidance. The company expects to generate annual recurring revenues (ARR) of $55–$57 million. In its H1FY20 report, Elmo announced a 30.9% growth in the customer base. In addition, the company’s customer retention rate sits at approximately 92.9%. 

However, one of the most important figures is the customer concentration. For example, less than 1% of the company’s ARR comes from its largest customer and less than 6% from the top 10 customers. This is a measure of the resilience of the company’s revenue streams – Elmo could lose a big client without a large material impact.

At present, Elmo has a market valuation of approximately $599.61 million and is showing strong signs of forward momentum. It is not profitable at present and spends more than it earns to fund growth. However, the company has a cash balance of $140.3 million, and operations continued uninterrupted through the lockdown.

Although the company may surprise on the upside during earnings reports, I think it is a good share to buy for growth over the next 3–5 years, regardless.

Insurance claims management

FINEOS Corporation Holdings PLC (ASX: FCL) sells core enterprise software solutions for insurance management. It calls itself a life, accident and health (LA&H) company. The software is an SaaS module based platform. Its strength is in claims and payments management, as well as a string of additional modules to provide increased customer engagement and business intelligence. 

Based in the IT hub that is Dublin, the company is active across 8 countries. Fineos is used by 6 of the top 10 Australian life and health insurance providers, 7 out of the top 10 life and health providers in the US, and is used to process 100% of accident claims in New Zealand. Fineos is also working on expanding the footprint within each client, and adding additional functionality through artificial intelligence. 

The company has recently listed in Australia and has yet to post a profit. However, it has signalled that it is on track to beat prospectus forecasts. In my opinion, this is a good share to buy for relatively high growth in the medium term. I also believe that this company is going to surprise investors on the upside and is likely to spark a lot of interest.

Enterprise resource planning

TechnologyOne Ltd (ASX: TNE) is a company I have been following for a while now. Enterprise resource planning systems are enterprise level systems designed to manage all aspects of large organisations. In the case of TechnologyOne, this includes sectors like local, state and federal governments, utilities and infrastructure, health and community service providers, and financial companies.

TechnologyOne has been in this space for a while, although the move to a 100% SaaS model is fairly recent.  It follows a different financial year, so H1 FY20 finished in March, and FY20 finishes in September. In its half yearly report, the company revealed a 6% increase in net profit after tax and an increase in ARR of 33%. In addition, the SaaS model also meant the recent lockdowns had a relatively low impact.

I think this is a good share to buy for solid growth over the next 2–5 years at least. It should also surprise during its earnings report, in my view, although that will be later in the year.

Foolish takeaway

This collection of SaaS companies cover a range of areas. I think all of them will do well during earnings season, particularly Fineos and TechnologyOne as their figures are still relatively unknown. Each company has the benefit of high retention rates and increasing ARRs. In addition, they have all established a first mover advantage over their competitors. 

Last, and most importantly, the business models of companies like this are totally different from the IT companies of the late 20th century. Here installation and implementation is low cost, just as the ongoing subscription costs are manageable. As such, the cost of a client switching out, given the integration with enterprise business processes, is often not worth it. 

All of these reasons make these companies good shares to buy in today’s market, in my view.

More reading

• Why Audinate, Nearmap, Resolute, & TechnologyOne shares are tumbling lower
• Add these ASX small cap shares to your watchlist immediately
• How to get rich by investing in small cap ASX shares
• ASX 200 jumps almost 2% today, Afterpay rises
• Insiders have been buying TechnologyOne and this ASX 200 share

Daryl Mather 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 Elmo Software. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends FINEOS Holdings plc. The Motley Fool Australia has recommended Elmo Software and FINEOS Holdings plc. 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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On Monday the S&P/ASX 200 Index (ASX: XJO) was back on form and pushed higher.

While a good number of shares climbed higher with the market, a few stood out with particularly strong gains that took them to new highs.

Here’s why these three ASX shares just hit record high:

5G Networks Ltd (ASX: 5GN)

The 5G Networks share price rocketed 23% higher on Monday and hit a record high of $1.95. This was despite there being no news out of the telecommunications carrier. However, given its focus on managed cloud and data centre solutions and the rapidly accelerating shift to the cloud, investors appear to be buying 5G Networks’ shares on the belief that demand for its offering is growing strongly.

Redbubble Ltd (ASX: RBL)

The Redbubble share price jumped to an all-time high of $2.50 yesterday. The ecommerce company’s shares have been on fire over the last few months after the shift to online shopping caused its sales to go through the roof. For example, last month Redbubble released an update which revealed that fourth quarter to date, marketplace revenue was up 107% over the prior corresponding period. As a result of this quicker than expected growth, its operating earnings before interest, tax, depreciation and amortisation (EBITDA) for the period 1 July 2019 to 31 May 2020 was $11.9 million. This compares to the operating EBITDA of just $3.8 million it recorded in FY 2019.

Saracen Mineral Holdings Limited (ASX: SAR)

The Saracen Mineral share price stormed to a record high of $6.60 on Monday. Investors were buying Saracen and rest of the gold miners on Monday after the price of the precious metal broke through the US$1,900 an ounce mark and hit a record high. This has been driven by a combination of the pandemic, escalating US-China tensions, interest rate cuts, and a weakening U.S. dollar. With an all-in sustaining cost of A$1,101 an ounce, Saracen’s operations are generating material free cash flows thanks to the current gold price.

More reading

• Why the gold price just stormed to a record high
• How to take advantage of the surging gold price
• Evolution share price lower despite increased scale of opportunity
• 5 things to watch on the ASX 200 on Wednesday
• These ASX eCommerce shares are riding the online shopping wave

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends 5G NETWORK FPO. 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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Blue chip shares are among the most popular type of shares for Australian investors to buy. But with so many to choose from, it can be hard to decide which ones to buy ahead of others.

Three top blue chip ASX shares that I think would be good options in August are listed below:

Domino’s Pizza Enterprises Ltd (ASX: DMP)

Domino’s Pizza is a blue chip which I think could be a great long term option. Over the last decade Domino’s has grown its earnings at an above-average rate, leading to strong returns for its shareholders. The good news is that I believe it could do the same over the next ten years. This is thanks to its strong brand and management’s bold sales and expansion targets. In respect to the latter, Domino’s is aiming to increase its store network by upwards of 9% per annum over the next five years.

ResMed Inc. (ASX: RMD)

Another blue chip to buy is ResMed. I think the sleep treatment-focused medical device company is a great option thanks to its positive outlook due to the proliferation of obstructive sleep apnoea (OSA). Management estimates that just 20% of OSA sufferers have been diagnosed with the condition at this point. But given the growing education of the sleep disorder, I expect more and more sufferers to be diagnosed in the coming years. And given the quality of its masks and software, I believe ResMed is well-placed to benefit from this.

SEEK Limited (ASX: SEK)

A final blue chip share to consider buying is SEEK. I think the job listings company has a very positive long term outlook and could be a market beater over the 2020s. This is due to its domination of the ANZ market and the growth potential of its China-based Zhaopin business. Given Zhaopin’s strong position in a very lucrative market, I believe it has the potential to support strong overall earnings growth over the next decade.

More reading

• Does the second wave of COVID-19 make these ASX 200 healthcare shares a buy?
• All Technology Index celebrates 6 months with stunning outperformance
• 3 fantastic ASX growth shares to buy in August
• Where to invest $100,000 into ASX shares
• Buy and hold Cochlear and these ASX shares for strong long term returns

Motley Fool contributor James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia has recommended Domino’s Pizza Enterprises Limited, ResMed Inc., and SEEK 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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On Monday the S&P/ASX 200 Index (ASX: XJO) started the week on a positive note and recorded a solid gain. The benchmark index rose 0.35% to 6,044.2 points.

Will the market be able to build on this on Tuesday? Here are five things to watch:

ASX 200 expected to rise again.

The ASX 200 looks set to push higher again on Tuesday. According to the latest SPI futures, the benchmark index is expected to open the day 29 points or 0.5% higher this morning. This follows a positive night of trade on Wall Street, which saw the Dow Jones climb 0.4%, the S&P 500 rise 0.75%, and the Nasdaq storm 1.7% higher.

Tech shares on watch.

Tech shares including Altium Limited (ASX: ALU) and Appen Ltd (ASX: APX) could be pushing notably higher today following a very positive night for their U.S. counterparts. The tech-heavy Nasdaq index jumped 1.7% overnight thanks to solid gains by the likes of Amazon and Apple. The two tech giants hit record highs on Monday. According to CNBC, market sentiment was given a boost by the coronavirus stimulus hopes and news that the U.S. government is allocating an additional US$472 million towards Moderna’s coronavirus vaccine research.

Oil prices push higher.

Energy producers including Oil Search Limited (ASX: OSH) and Woodside Petroleum Limited (ASX: WPL) could be rise today after oil prices pushed higher. According to Bloomberg, the WTI crude oil price climbed 0.85% to US$41.64 a barrel and the Brent crude oil price rose 0.4% to US$43.52 a barrel.

Gold price hits record high.

Gold miners including Evolution Mining Ltd (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) will be on watch on Tuesday after the gold price hit a record high. According to CNBC, the spot gold price rose 2% to US$1,937.40 an ounce amid coronavirus worries and rising US- China tensions.

Credit Corp results.

The Credit Corp Group Limited (ASX: CCP) share price will be another one to watch this morning when it releases its full year results. Earlier this month the debt collector advised that it expects its net profit after tax (before one-offs) to be in the range of $75 million to $80 million in FY 2020.

More reading

• ASX 200 rises 0.3%, Perpetual reveals large US acquisition
• Is it too late to buy the outperforming Woolworths share price and Coles share price?
• How investors can make the most of all this uncertainty
• 3 Warren Buffett quotes to start the week off right
• Why these brokers are telling you to buy the crashing IAG share price today

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia owns shares of Appen 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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Fortunately, in this low interest rate environment, there are a good number of ASX shares paying investors handsome dividends.

Here are three ASX dividend shares that I think income investors should buy right now to beat low rates:

Coles Group Ltd (ASX: COL)

The first ASX dividend share to consider buying is this supermarket operator. I think Coles is well-positioned to grow its dividend at a consistently solid rate over the next decade. This is because of its positive growth outlook thanks to food inflation, its refreshed strategy, defensive earnings, and expansion opportunities. Based on the current Coles share price, I estimate that it offers a fully franked ~3.5% FY 2021 dividend.

Rural Funds Group (ASX: RFF)

A second dividend share to buy today is Rural Funds. It is a leading agriculture-focused property company with a collection of quality assets throughout Australia. I’m a big fan of Rural Funds due to its long term tenancies which have been structured to allow the company to consistently increase its distribution at a solid rate each year. For example, the earnings visibility this provides means the company has already provided its distribution guidance for FY 2021. It plans to pay shareholders a 11.28 cents per share distribution. Based on the current Rural Funds share price, this equates to a 5.6% yield.

Vanguard Australian Shares High Yield ETF (ASX: VHY)

A final option to consider is a dividend-focused exchange traded fund. As its name implies, the Vanguard Australian Shares High Yield ETF has a focus on high yield dividend shares. It provides investors with exposure to 62 of the highest yielding shares on the ASX through just a single investment. This includes the likes of Coles, the big four banks, and high-yielding miners and telcos. At present I estimate that its units offer a FY 2021 dividend yield of at least 4.4%.

More reading

• Is it too late to buy the outperforming Woolworths share price and Coles share price?
• Coles launches new collectables! Is the Coles share price a buy?
• These shares were the ASX 200’s biggest losers last week
• ASX 200 Weekly Wrap: ASX has week of high volatility
• Beat low interest rates on savings accounts with these ASX dividend shares

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

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