Fund managers have been snapping up ASX shares with their average cash balance dropping again in May to a more than two-year low.

This is usually a bullish sign for the S&P/ASX 200 Index (Index:^AXJO), although most of the latest buying is focused on defensive ASX stocks, according to JP Morgan.

The broker undertakes a monthly survey of fund managers and it found that the average cash holdings have dropped by a “remarkable” 120 basis points since the peak of the COVID-19 mayhem in March.

Putting cash to work

Fundies are now holding around 4.8% of their assets in cash as they bought shares in healthcare, telecoms and utilities.

“For the first time since January, Financials benefited from inflows (+15bp), which aligns with our analysis in last month’s [survey], in which we pointed to the need to “risk manage” the deep UW [underweight] that the majority of Australian institutions run on the sector,” said the broker.

A hot favourite in May

One stock that these professional investors have been buying in May was Sonic Healthcare Limited (ASX: SHL).

The medical diagnostic group is the latest member of JP Morgan’s “love index”, which ranks the top 30 stocks on the ASX 200 to the number of shares held by fund managers.

Other well-loved stocks include Telstra Corporation Ltd (ASX: TLS), BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO), AMCOR PLC/IDR UNRESTR (ASX: AMC), Suncorp Group Ltd (ASX: SUN) and QBE Insurance Group Ltd (ASX: QBE).

Gaming machine maker Aristocrat Leisure Limited (ASX: ALL) is also in the group, although fundies have been taking some profit on the stock two months ago.

Falling out of love

Meanwhile, stocks that dropped into the “neutral” zone in May are National Australia Bank Ltd. (ASX: NAB), Coles Group Ltd (ASX: COL) and A2 Milk Company Ltd (ASX: A2M).

There are also some notable large caps that have fallen into the “unloved” or underheld category. Blood products maker CSL Limited (ASX: CSL) is one, which may not come as a surprise as its share price has been underperforming in recent times after it surged well over $300.

Another is stock market operator ASX Ltd (ASX: ASX) and the two stocks join the likes of Transurban Group (ASX: TCL), Insurance Australia Group Ltd (ASX: IAG) and Woolworths Group Ltd (ASX: WOW).

Foolish takeaway

Getting a sense of what the professionals are doing and thinking can provide clues to where the market is heading, but remember the data is around two months old – and that’s a long time in markets.

Some of these positions could have changed since, although I suspect defensive stocks will remain in vogue as the Australia and the world grapples with the risk of a second wave coronavirus outbreak.

More reading

• The Marley Spoon share price is up 588% in 2020. Will it keep delivering?
• Down 32% in FY20, is the NAB share price a buy this year?
• 5 things to watch on the ASX 200 on Thursday
• Should you buy Coles or Woolworths shares?
• ASX 200 finishes 0.6% higher, Aussie house prices fall

Brendon Lau owns shares of Aristocrat Leisure Ltd., BHP Billiton Limited, National Australia Bank Limited, Rio Tinto Ltd., Telstra Limited, and Woolworths Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Amcor Limited and Telstra Limited. The Motley Fool Australia owns shares of A2 Milk, COLESGROUP DEF SET, Transurban Group, and Woolworths 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 NIB Holdings Limited (ASX: NHF) share price is pushing higher on Thursday after the release of an announcement.

At the time of writing the private health insurer’s shares are up 3% to $4.77.

What did NIB announce?

This morning NIB responded to an announcement by the Australian Prudential Regulation Authority’s (APRA) which urged private health insurers to provision in FY 2020 for a presumed catch up in treatment and claims post-pandemic.

In a letter to private health insurers, APRA directed capital requirements allow (as a general liability) an expectation of hospital and allied treatment deferred during the course of COVID-19 to now occur during FY 2021.

In response to this, NIB has confirmed that its forecast capital position remains well ahead of regulatory requirements, internal targets, and allows for APRA’s announcement.

The company’s Managing Director, Mark Fitzgibbon, commented: “The impact of COVID-19 on healthcare treatment and claims remains unclear and we’ll only be in a position to finalise an estimate of a liability once FY20 actual claims experience is clearer. Nevertheless, we’ve modelled APRA’s direction and expect to have a level of retained capital well ahead of APRA’s minimum capital requirement as well as nib’s own internal target.”

The managing director was supportive of APRA’s conservative position on the pandemic and noted that “COVID-19 was having an ongoing impact upon a range of factors beyond that encountered in April and May when medical and other clinical activity was at its nadir.”

Mr Fitzgibbon explained: “Yes we saw a significant drop off in hospital and allied treatment, most of which will return or is already returning this current financial year. Yet we suspect an underlying impact on what we would normally expect in treatment volumes.”

“First, there are possible limitations on the healthcare system’s capacity in FY21 to accommodate the additional deferred treatment. Second, we suspect there may be an aversion to treatment and especially hospitalisation while ever the threat of COVID-19 survives. Only time will tell,” he concluded.

What about NIB’s dividend?

NIB may have paid an interim dividend in April, but its final dividend remains uncertain.

The company advised that its final dividend will only be considered by the board once its accounts for FY 2020 were finalised.

More reading

• The better ASX buy: NIB vs Medibank shares
• Can these 5 FY20 dogs of ASX 200 bounce back in the new financial year?
• NIB Holdings and 1 other ASX share which I would consider buying for growth and income

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended NIB Holdings 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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Real estate shares are in a very strange place right now. After months of speculation, the real estate market seems to have finally taken a dive in the past month. A recent building approval report from The Australian Bureau of Statistics shows that for new house approvals for May were softer at 4.4% from April’s figures. Private sector dwellings excluding houses were down a massive 34.9%. The number of total dwellings was down by 16.4% compared to April. 

The value of total building approved fell 13.5% in May, in seasonally adjusted terms. The value of residential building fell 17.3% while non-residential building declined 7.1%.

The ABS goes on to point out that due to the lag in the process, the May data likely reflects applications and levels of demand prior to the introduction of major restrictions. 

Real estate shares impacted

While this lag means the worst is yet to come in terms of figures, the market expects the government HomeBuilder stimulus to cushion the blow significantly.

Mirvac Group (ASX: MGR) has worked with an estimated value of $18.8 billion in progress, with a further $2 billion planned. According to the company’s H1 Analyst toolkit, they have only settled 37% of these houses. The company has entered into $810 million of new debt facilities over 3–4.5 years. This has provided the group with cash and undrawn debt facilities in excess of $1.3 billion with only $200 million of debt due for repayment between now and early 2022.

Stockland Corporation Ltd (ASX: SGP) has 76,000 lots remaining with an estimated market value of $21.7 billion according to its 30 June 2019 portfolio. However, the company has reported a level of pent up demand. Notably, since mid-May residential real estate has recovered to above pre-COVID levels. Moreover, this has translated into an accelerated pace of net sales achieved. 

On Wednesday the 2 real estate shares saw increases. The Mirvac share price rose by 1.8% and the Stockland share price rose by 4.2%.

Foolish takeaway

At the same time that the ABS data has shown a very steep decline in approvals of new dwellings; houses and apartments, house prices have also started to fall. I think there are several ways that this can play out.

The HomeBuilder stimulus is going to have a positive impact on new houses and it is likely the lag time in the market that has obscured this. However, the banks are unlikely to allow for a stay of housing loan repayments beyond September. In fact, the Commonwealth Bank of Australia (ASX: CBA) has already stated it wouldn’t extend COVID-19 support beyond 30 June. 

There is simply no doubt that we live in interesting times. Even if the Prime Minister was to extend JobKeeper and/or Homebuilder, which is now a rapidly growing expense to future generations, it is only part of the picture. Residential real estate-exposed shares are far too uncertain for me, and not somewhere I would currently invest in.

More reading

• 5 things to watch on the ASX 200 on Monday
• Why top brokers are urging you to buy SEEK and these other ASX stocks today
• Leading brokers name 3 ASX 200 shares to sell today
• The next ASX sector at risk of cutting dividends
• Cheap ASX 200 shares I’d buy for less than $10

Motley Fool contributor Daryl Mather 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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The Bigtincan Holdings Ltd (ASX: BTH) share price is charging higher on Thursday after the release of an announcement.

At the time of writing the artificial intelligence-powered sales enablement automation platform provider’s shares are up 18% to 93 cents.

This latest gain means Bigtincan’s shares are now up 79% from 52 cents over the last 12 months.

What did Bigtincan announce?

This morning Bigtincan announced that it has signed a major new customer contract with a global beverage giant.

According to the release, Bigtincan has signed a contract with Red Bull GmbH for a deployment of its software with a total contract value of $1.8 million over 30 months. It also includes an option to extend the agreement for a further 60 months.

Management advised that the software will be used by Red Bull employees and distributors globally to help empower these users for remote onboarding and training. It will also be used to help promote and sell Red Bull products in customer facing scenarios on iOS devices and phones/tablets.

Pleasingly, Bigtincan’s software was chosen in a competitive bid process, which I feel is a testament to its quality.

What does Bigtincan’s software do?

Bigtincan’s software unlocks new and more effective ways for sales and service teams to perform at higher levels and deliver better business results. It does this by creating more positive and efficient buying experiences.

Its artificial intelligence-powered sales enablement automation platform, Bigtincan Hub, features the industry’s premier user experience and empowers sales and service reps to maximise their use of content to engage with customers and prospects more effectively.

Red Bull joins the likes of AT&T, Thermo Fisher, Merck, and Australia and New Zealand Banking GrpLtd (ASX: ANZ) that rely on Bigtincan to enhance sales productivity and fuel customer engagement.

More reading

• These 2 ASX tech shares show stellar growth prospects
• Are these small cap ASX tech shares future stars?
• ASX tech shares: 2 exciting small caps to watch closely
• 3 excellent small cap ASX shares to add to your watchlist
• 3 exciting small cap ASX shares to watch closely in the 2020s

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 BIGTINCAN FPO. The Motley Fool Australia has recommended BIGTINCAN FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The NEXTDC Ltd (ASX: NXT) share price was a strong performer on the ASX 200 on Thursday.

The data centre operator’s shares stormed to a record high of $10.75 after announcing new contract wins in New South Wales.

Is it too late to buy NEXTDC shares?

Although NEXTDC’s shares are certainly not cheap, I would still be a buyer of them if you’re prepared to make a long term investment.

This is because I believe the company is well-positioned to grow its earnings at an above-average over the 2020s thanks to the shift to the cloud. This seismic shift is driving incredible demand for capacity in data centres and shows no signs of slowing.

One leading broker that believes NEXTDC’s shares can still go higher from here is Goldman Sachs.

According to a note out of the investment bank this morning, its analysts have retained their buy rating and lifted their price target by 14% to $11.10.

What did Goldman Sachs say?

Goldman Sachs was very pleased with NEXTDC’s update on Wednesday and particularly its commitment options.

Its analysts commented: “NXT has announced a +4MW increase in S2 contracted commitments, which follows the previous +6MW (March) and +6MW (May) Melbourne announcements earlier this calendar year. NXT also disclosed ~24MW of ‘options‘ in the NSW market (vs. 33MW options in VIC).”

“This announcement is another clear positive for NXT, and continues the momentum from the record 2H20. Combined, the contracted commitments and options in NSW now account for 60MW, which exceeds the total capacity of S1 and S2 facilities, implying that NXT now has 14MW of options for its S3 facility, which it recently commenced construction on,” it added.

Furthermore, the broker notes that the company now has 26MW of contracted, but not yet billing MW. It estimates this to be worth $86 million of revenue at $3.3 million/MW.

Goldman expects this to ramp up over the next 2 to 3 years, underpinning its forecast FY 2019-FY 2023 EBITDA compound annual growth rate of +25%.

After which, the broker expects the conversion of the existing 57MW of expansion options (worth an estimated $190 million of revenue) to be the next driver of growth. It expects this to be supported by ongoing Enterprise growth and the potential for further new contract wins in Sydney, Melbourne, and the soon to be completed P2 facility in Perth.

Foolish Takeaway.

I think Goldman is spot on with its assessment and believe NEXTDC can continue to beat the market over the next decade. This could make it a great buy and hold option.

More reading

• ASX 200 finishes 0.6% higher, Aussie house prices fall
• ASX 200 up 0.9%: Big four banks rising, NEXTDC rockets higher
• Why Alterity Therapeutics, Flight Centre, NEXTDC, & Telix are surging higher
• NEXTDC share price jumps 8% on new contract wins
• Top ASX Stock Picks for July 2020

Motley Fool contributor James Mickleboro owns shares of NEXTDC Limited. 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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The Afterpay Ltd (ASX: APT) share price rocketed 149.96% higher in the last financial year but will the buy now, pay later company’s value continue to climb?

Will the Afterpay share price continue climbing in FY21?

It’s been a huge 12 months for Afterpay and its investors. We’ve seen successful international growth into the United States and United Kingdom markets. The group’s revenues have continued to climb while bad debts have been kept low.

There are a lot of things to like about the Afterpay share price right now. The company’s shares hit a new, all-time high of $63.90 yesterday and Afterpay is now worth a whopping $16.7 billion.

Obviously, any share that has rocketed nearly 150% in 12 months is going to have some question marks about value hanging over it. Incredibly, the company’s shares have gone from a 52-week low of $8.01 to their current $62.24 level in the space of a few months.

Clearly, investors are banking on a lot of Afterpay’s growth to translate into earnings over the coming years. But on top of its strong merchant revenues, there’s also the potential value of Afterpay’s extensive dataset.

The company has a real insight into how consumers spend their money. If this can be monetised in the years to come, it could represent a lucrative future proposition for Afterpay.

While I think the Afterpay share price could continue to climb in FY21, there are some headwinds.

For one, the buy now, pay later space is starting to look a little crowded. Competitors like Openpay Group Ltd (ASX: OPY) and Zip Co Ltd (ASX: Z1P) are also rocketing in value right now.

Now, there is certainly a huge addressable market out there. However, I think a hot market like this one could see more consolidation and an eventual winner in the years to come.

Afterpay is in a strong position if we do see further industry changes given its scale and strong networks. However, the entry of a major international player like Amazon or Visa could spell trouble for Afterpay’s growth plans.

Foolish takeaway

I think the Afterpay share price is incredibly difficult to value right now. There’s a lot riding on the company’s future growth projections, but I think the short-term outlook (and momentum) bode well for a strong finish to the year.

More reading

• 10 FY21 ASX share picks revealed by Bell Potter
• These 2 ASX tech shares show stellar growth prospects
• Millionaire maker increases share price 28 times in FY20
• Are Newcrest shares set to take off in FY21?
• ASX 200 stocks to watch for FY2021

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

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Despite the coronavirus pandemic wreaking havoc on financial markets, the Marley Spoon AG (ASX: MMM) share price is up a staggering 588% for the year. The company has been a key beneficiary of changing consumer behaviours during the lockdown period.

Here’s a closer look at why the Marley Spoon share price is surging, and whether it can be sustained.  

Why is the Marley Spoon share price surging?

Marley Spoon is a subscription-based meal-kit provider that has capitalised on changing consumer behaviour as a result of COVID-19. With many shoppers looking to bypass the chaos and panic buying at local supermarkets, convenience services like Marley Spoon have thrived during the coronavirus lockdown period. From the comfort and safety at home, Marley Spoon allows consumers to order fresh ingredients and meal kits that are delivered with step-by-step recipes.

The company currently operates in 3 primary regions: Australia, the United States and Europe. During the coronavirus pandemic, Marley Spoon experienced unprecedented demand for its services, reporting a 46% increase in revenue for the first quarter. The company reported that 7.5 million meals were delivered in the first quarter of 2020, resulting in Marley Spoon’s first ever positive cash flow.

What is the outlook for Marley Spoon?

The coronavirus pandemic has actually given Marley Spoon a favourable tailwind for future growth. In an investor presentation in May, the company reported lower customer acquisition costs due to inbound customer interest and lower advertising rates. Marley Spoon also reported that year-on-year order growth across all regions increased, indicating strong retention and customer loyalty.

As a result, the company predicts that its path to profitability will be accelerated and expects to achieve positive operating earnings before interest, tax, depreciation and amortisation by the second quarter of 2020. Marley Spoon has already completed a $16.6 million capital raising in order to strengthen its balance sheet and fund continued global expansion.

Is it too late to buy shares in Marley Spoon?

The Marley Spoon share price has had an almost vertical ascendance. Personally, I can’t advocate buying shares in the company at the moment after such a fast rally. Although I do believe that the company will benefit from consumer behaviour following the pandemic, there are other alternatives to capitalise on this trend if Marley Spoon doesn’t fit your risk profile.

Woolworths Group Ltd (ASX: WOW) actually has a 9% stake in Marley Spoon after the supermarket giant invested $30 million into the company via a debt and equity transaction in 2019. Therefore, investors looking for a more established company, whilst also having exposure to changing consumer behaviours could see Woolworths as a great alternative.

More reading

• Should you buy Coles or Woolworths shares?
• Can the Coles share price climb 12% again in July?
• Are Coles and Woolworths shares back in the buy zone?
• ASX 200 Weekly Wrap: ASX retreats as confidence wanes
• Why Fortescue and these ASX dividend shares could be top income options

Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Woolworths 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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