I think it makes a lot of sense to invest in ASX tech shares.

I’m not saying that just because technology is ‘cool’. I think the businesses that predominately offer technology have inherent advantages that many other sectors simply don’t have.

Commodity businesses have to hope that their customers will continue to need more product at a similar or higher price. Banks are heavily reliant on a good economy and they are (rightly) under heavy regulation. Insurers seem to get smashed every few years by a natural hazard event. And so on.

Cheap replication of software

ASX tech shares don’t have a lot of major costs once the software is developed. Some businesses have very high gross profit margins. For example, Xero Limited (ASX: XRO) reported a gross profit margin of 85.2% in its FY20 result. When the gross profit margin is that high, it turns a lot of the revenue from new customers into profit at the earnings before interest, tax, deprecation (EBITDA) level.

Once an ASX tech share like Xero, Pushpay Holdings Ltd (ASX: PPH) or others have developed the software, it can be replicated very cheaply and rapidly. If Tesla wants to sell another car, it needs to manufacture it and ship it. A software business can just instantly distribute it over the internet. It makes it very easy to grow the business at a rapid rate.

A business like Pushpay – which offers tools for electronic donations for US churches – is very attractive. It can sell its product to any church in the US whilst utilising its existing software. A wonderful business like A2 Milk Company Ltd (ASX: A2M) has had to spend a lot of effort to build up its logistics network in the US. A2 Milk has to ship physical products to customers unlike many software businesses.

Pushpay was very successful at improving its profitability in FY20 with its gross profit margin rising by five percentage points from 60% to 65%. Pushpay is aiming to double its earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) in FY21.

Software as a service (SaaS)

Not only do the best ASX tech shares offer rapid growth and high profit margins, but they also have quite sticky revenue with their existing customer bases. Perhaps they could be called defensive ideas. 

A client can’t quickly switch from Xero. It would take a lot of time (and therefore money) to be trained up on a new system. Plus, if the ASX tech share’s software is really good, then the client wouldn’t even want to leave.

A business like Altium Limited (ASX: ALU) is another good example of this. Every year it materially builds its subscriber numbers and this helps grow Altium’s revenue.

I like ASX tech shares that are able to offer a product that is regularly improved. Altium regularly updates its software. The SaaS model means that software companies can expect regular annual (or even monthly) cashflow from their clients which will continue for the foreseeable future.

ASX tech shares I’d buy today

There are plenty of ASX software businesses that look a bit bubbly to me. However, there are also others that look good value such as Pushpay and Citadel Group Ltd (ASX: CGL).

I also have my eye on names like Kogan.com Ltd (ASX: KGN), Redbubble Ltd (ASX: RBL) and even BetaShares NASDAQ 100 ETF (ASX: NDQ). However, whilst these names have done very well since the COVID-19 crash, it’s hard to say if they’re good value because it’s difficult to know if the shift to online is somewhat temporary (in the shorter-term) or permanent.

More reading

• What do you do after record share price gains?
• Why Lendlease, Redbubble, SeaLink, & Starpharma shares are pushing higher
• 4 ASX growth shares I’d buy in September
• Top ASX Stock Picks for September 2020
• If you invested $10,000 in Kogan shares 5 months ago, here’s how much you’d have today

Tristan Harrison owns shares of Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BETANASDAQ ETF UNITS, Kogan.com ltd, and Xero. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended BETANASDAQ ETF UNITS, Citadel Group Ltd, and Kogan.com 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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The Reserve Bank of Australia (RBA) signaled that the good times will continue to roll on for borrowers at the expense of savers.

Our central bank held the official cash rate and three-year government bond yield target steady at 0.25%, but expanded its term funding facility.

The S&P/ASX 200 Index (Index:^AXJO) and the Australian dollar was largely unmoved by the news, which all but guarantees record low rates for loans and savings accounts.

Low interest rates for everyone

The term funding facility (TFF) gives authorised deposit-taking institutions (ADIs), which includes banks like Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC), access to cheap funds.

The TFF was meant to expire in September but the RBA extended this to the end of June 2021 and increased the size of the facility to $200 billion.

ADIs can tap the TFF for three-year loans at up to 2% of their outstanding credit and only pay 0.25% interest to fund their loan book. To date, ADIs have drawn down $52 billion with the RBA expecting banks to make further drawings over the coming weeks.

Debt to keep economy afloat

“This will help keep interest rates low for borrowers and support the provision of credit by providing ADIs greater confidence about continued access to low-cost funding,” said RBA Governor Philip Lowe.

“The Term Funding Facility and the other elements of the Bank’s mid-March package are helping to support the Australian economy.

“There is a very high level of liquidity in the Australian financial system and borrowing rates are at historical lows.”

It’s a demand, not supply issue

But access to cheap debt isn’t really the issue. The main problem is poor demand for debt due to rising unemployment amid the COVID-19 recession. Those with no jobs or job security won’t be in the mood to borrow.

Throw in the stricter lending criteria imposed by the banks because of the weakening economy, and the limits to the RBA’s monetary prowess becomes painfully apparent.

The most desperate borrower in Australia

The only ones that’re desperately in need to borrow are the state and federal governments as they are forced to spend big to support our struggling economy.

Thankfully, governments aren’t having any issue on this front. The market showing no indigestion issues even as government debt issuances surge and the RBA stands ready to be the lender of last resort.

“Over the past month, the Bank bought a further $10 billion of Australian Government Securities (AGS) in support of its 3-year yield target of 25 basis points,” added Dr Lowe. “Since March, the Bank has bought a total of $61 billion of government securities.”

Lower for longer

But with all the twists and turns in the path to COVID recovery, particularly for Victoria, the RBA reassured the market that it will provide support for as long as necessary.

In other words, interest rates here won’t be going up for a long while. Good news for those who are willing and able to borrow.

More reading

• 3 ASX blue-chip shares I would buy at today’s prices
• How the rising Aussie dollar could drive the Carsales share price to new all-time highs
• Revealed: Risk-reward myth shattered
• What do you do after record share price gains?
• Here’s why the Telstra share price fell 15% in August

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

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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If you’re wishing to bolster your portfolio with the addition of some ASX blue chip shares, then you might want to consider the ones listed below.

Here’s why I think these blue chip ASX shares could be great long term options for investors:

Cochlear Limited (ASX: COH)

The first blue chip ASX share to consider buying is Cochlear. I think the hearing solutions specialist could be a great long-term investment due to the ageing populations tailwind. As our hearing has a tendency to fade when we get older, I’m confident that ageing populations will lead to growing demand for its high quality products over the next couple of decades. In addition to this, I’m a big fan of the company due to its heavy investment in research and development and the industry’s high barriers to entry. Combined, I expect these to allow Cochlear to maintain its leadership position and limit competition in the future.

CSL Limited (ASX: CSL)

The CSL share price has uncharacteristically been an underperformer in recent months and is trading around 18% lower than its 52-week high. I think this pullback is a buying opportunity for investors with a long-term focus. This is because I’m confident the biotherapeutics company is well-positioned to deliver solid sales and earnings growth over the long term. This is thanks to increasing demand for immunoglobulins, its growing plasma collection network, and its lucrative research and development pipeline.

SEEK Limited (ASX: SEK)

A final blue chip ASX share to consider buying is SEEK. I think the job listings company is one of the best long-term options on the Australian share market. This is due to its growing China-based operations, its market domination in the ANZ market, and investment in future growth opportunities. In FY 2020 SEEK delivered a small increase in revenue to $1,577.4 million. And while FY 2021 will be tough because of the pandemic, I’m confident the company’s growth will accelerate once the crisis passes. This should put it back on a path to achieving its aspirational revenue target of $5 billion later this decade.

More reading

• 3 ASX blue-chip shares I would buy at today’s prices
• 3 market-beating ASX blue-chip shares
• Up 38% in August, is the Mesoblast share price a buy?
• 2 ASX shares I would buy right now for both growth and income
• Where to invest $20,000 into ASX shares immediately

James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. and CSL Ltd. The Motley Fool Australia has recommended Cochlear Ltd. 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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The Carsales.Com Ltd (ASX: CAR) share price hit a new record high of $21.23 last Monday, 24 August. The price has since retraced a bit, down 3% from the high. But that still leaves Carsales shareholders up a tidy 23% year-to-date.

Like most every share on the S&P/ASX 200 Index (ASX: XJO), Carsales shares were savaged during the COVID-19 panic selling, falling 45% from 12 February through 23 March.

Since the March low, the Carsales share price has gained 97%. In comparison, the ASX 200 has gained 31% over that same time.

What does Carsales do?

Carsales.Com is Australia’s largest online automotive, motorcycle and marine classifieds business. The company also has operations and interests in a range of different automotive classifieds websites in countries across Asia and South America, making it one of the largest digital automotive advertising businesses in the world.

Together with its subsidiaries, Carsales employs more than 600 people in Australia to develop leading technology and advertising solutions that drive its business around the world.

Carsales shares first began trading on the ASX in 2009.

Why the Carsales share price could head for new record highs

The company’s full 2020 financial year results, released on 19 August, helped drive the Carsales share price to new record highs. Despite headwinds thrown up by the coronavirus, the company managed to increase its underlying revenue by 1% from the previous year. Net profit after tax (NPAT) also increased 6% to reach $138 million.

So, with its share price recently hitting new records, why could Carsales be heading even higher?

Aside from its proven business model and a likely consumer spending spree once the economy begins to recover from COVID shutdowns, I believe the rapidly strengthening Aussie dollar will see a marked increase in future revenue.

As recently as 19 March, the Australian dollar was worth 57 US cents. Today it’s worth just shy of 74 US cents. And leading economists are tipping this to head towards 80 US cents over the next year.

Now predicting currency movements is notoriously difficult. But with the US Federal Reserve indicating it’s happy to see inflation run over its previous 2% target figure, I believe these economists have it right.

With a strong Aussie dollar, the price of imported cars – and most all our cars are imported – falls. That should encourage more people to buy new cars, which will in turn see more used cars sold on Carsales.

And that should translate to higher Carsales share prices ahead.

More reading

• 3 ASX blue-chip shares I would buy at today’s prices
• What you need to know about the RBA’s rate decision today
• Revealed: Risk-reward myth shattered
• What do you do after record share price gains?
• Here’s why the Telstra share price fell 15% in August

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has recommended carsales.com 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 Telstra Corporation Ltd (ASX: TLS) share price has continued its poor run and is tumbling lower again on Tuesday.

At the time of writing the telco giant’s shares are down over 1.5% to a 52-week low of $2.84.

Why is the Telstra share price trading at a 52-week low?

The Telstra share price has come under considerable pressure since the release of its full year results last month.

Although the company delivered a result in line with its guidance and maintained its full year dividend at 16 cents per share, its guidance for FY 2021 spooked investors.

Telstra’s guidance shows that its earnings will be impacted more than expected by the COVID-19 pandemic this year. It expects its underlying EBITDA to be in the range of $6.5 billion to $7 billion.

This suggests that its current dividend could be at risk based on its current policy.

Management explained: “We remain clear that, adjusted for recent accounting changes, our EBITDA, post the nbn, needs to be in the order of $7.5 – 8.5 billion to pay a dividend around 16 cents under the 70 to 90 percent payout ratio in our capital management framework.”

As a result of this, the market appears to be predicting a dividend cut down to ~12 cents per share in FY 2021. This has led to its shares dropping down accordingly since its results release.

Is the Telstra dividend going to be cut?

I’m optimistic that a dividend cut can be avoided if the company elects to change its dividend policy.

Right now, its policy is based on its accounting earnings, which are actually lower than its free cash flows. So, if the company were to shift to a free cash flow-based policy, it should be sustainable at the current level.

Analysts at Goldman Sachs also appear optimistic that this could be the case.

It explained: “Although 16cps is now unsustainable across FY21-22 on the existing payout policy, we note TLS further shifted its dividend focus to FCF ( i.e. TLS justified the 99%, out-of-policy EPS payout as this was well supported by cashflow). Hence we have not revised our 16c dps, believing Telstra will maintain this through FCF, if it believes that is on track for $7.5bn by FY23E.”

Should you invest?

The pullback in the Telstra share price has been very disappointing for shareholders, but I believe it has created a compelling buying opportunity for non-shareholders.

With the market appearing to have now priced in a dividend cut, I believe the downside is limited from here.

There’s also the added bonus of a probable re-rating higher if Telstra decides to shift its policy and is able to maintain its dividend.

As a result, I think the Telstra share price is a strong buy at the current level.

More reading

• Here’s why the Telstra share price fell 15% in August
• Zip and Brainchip were among the most traded shares on the ASX last week
• Why I’d buy Wesfarmers and 1 other quality ASX dividend right now
• Telstra and 1 more hot ASX dividend share to buy
• ASX 200 Weekly Wrap: Earnings drag ASX back to reality

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra 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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Low interest rates are making it difficult to live off money in the bank. I think ASX dividend shares are the answer.

The official RBA interest rate is now just 0.25%. That’s not going to generate much money even if you have $1 million in the bank. Cash may provide short-term downside protection, but over the long-term inflation can eat away at the ‘real’ value of your money.

I think that ASX dividend shares could be the answer. They can provide a bigger yield and deliver growth.

Here are three income ideas with solid yields:

Brickworks Limited (ASX: BKW)

Brickworks is a diversified property business. It produces and sells building products like bricks, masonry, precast and roofing. It has a strong market position across Australia, it’s the market leader of bricks in Australia.

The ASX dividend share also is the market leader in bricks in the north east of the US after acquiring three brick businesses. The United States is a large long-term opportunity with how big the population is. Brickworks will bring its efficiency to that division over time.

Brickworks hasn’t cut its dividend in over four decades. It has been able to do this because the dividend is entirely funded by the dividends from investment house Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) as well as the net rental from its 50% stake of an industrial property trust.

At the current share price, Brickworks offers a grossed-up dividend yield of 4.75%.  

NAOS Small Cap Opportunities Company Ltd (ASX: NSC)

This is a listed investment company (LIC) which is operated by Naos Asset Management.

The benefit of a LIC is that it can invest in ASX growth shares, make investment returns and pay that profit out as a dividend. Good returns can mean it can afford to be an ASX dividend share.

It runs a high-conviction portfolio with around 10 names. An example of what it owns is MNF Group Ltd (ASX: MNF).

At the current share price, NAOS Small Cap Opportunities Company offers a grossed-up dividend yield of 10%. It’s currently paying a 1 cent per share dividend every quarter and it’s aiming to grow its dividend sustainably over the long-term.

It’s also trading at a 16.7% discount to the pre-tax net tangible assets (NTA) at the end of July 2020.

Vitalharvest Freehold Trust (ASX: VTH)

Vitalharvest is an agricultural real estate investment trust (REIT). The ASX dividend share leases large berry and citrus farms to Costa Group Holdings Ltd (ASX: CGC).

Not only does Vitalharvest receive a fixed rental return from its farms, but it also receives 25% of the profit generated from its farms with a profit share agreement with Costa.

Variable rent in FY20 was impacted by a number of “coinciding, unprecedented events” which led to a 30.9% decrease compared to FY19, the lowest variable rental return since FY19. Costa and Vitalharvest’s manager think the worst effects of these events are over.

I think that Vitalharvest’s variable rent can rebound in FY21 and beyond with demand from export markets for quality Aussie agricultural products and an improving situation with the drought.

The ASX dividend share is looking to buy new assets related to food such as food processing and food storage. These new properties will hopefully reduce the downside risk associated with the variable rental component.

At the current share price, Vitalharvest offers a distribution yield of 6.25%. It’s also trading at a 17.6% discount to the net asset value (NAV) per unit at 30 June 2020.

Foolish takeaway

I think each of these ASX dividend shares could deliver solid income over the coming years. Brickworks likely has the most reliable dividend. However, the Naos LIC and Vitalharvest are both trading at large discounts to their underlying value and offer attractively big dividend yields.

More reading

• Are ASX banks or miners buys for dividends?
• 5 top ASX dividend shares you should never sell
• This is where I’d invest $1,000 right now into ASX shares
• 3 ASX 200 growth shares to buy right now
• Where to hunt for ASX dividend share income in 2020

Motley Fool contributor Tristan Harrison owns shares of NAO SMLCAP FPO and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks, COSTA GRP FPO, MNF Group Limited, and Washington H. Soul Pattinson and Company 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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ASX dividend growth shares are an endangered species in 2020. This year has really separated the wheat from the chaff and the cream from the milk when it comes to dividend-paying shares. Many former ASX dividend stars have turned up to shareholders empty-handed this year as a result of the coronavirus pandemic. These include Westpac Banking Corp (ASX: WBC), Sydney Airport Holdings Pty Ltd (ASX: SYD) and Ramsay Health Care Limited (ASX: RHC).

But there are some shares that are growing their dividend instead. They are rare and may require you to look under rocks that you might not have before. The 2 ASX dividend shares that I’ve found below are both Listed Investment Companies (LICs), which operate a little differently to normal ASX shares. That’s because a LIC is itself an investor of a sort. LICs holds a portfolio of other shares on behalf of their owners. In this way, they can be a useful addition to a dividend portfolio.

1) MFF Capital Investments Ltd (ASX: MFF)

MFF Capital is a LIC that used to be part of the Magellan Financial Group Ltd (ASX: MFG). Even though MFF and Magellan have gone their separate ways to some extent, Magellan co-founder Chris Mackay remains MFF’s chief portfolio manager. Mr Mackay is regarded as one of the best fund managers in the country. MFF holds a portfolio of mostly US-based shares. Its top holdings are payment giants Visa and Mastercard, as well as Microsoft and Warren Buffett’s Berkshire Hathaway. It also has a sizeable cash position as of 28 August of 37.6%.

MFF is also a solid dividend payer. It has just announced a 3 cents per share fully franked final dividend, which was up from February’s 2.5 cents per share interim payout and gives the company an annualised yield of 2.25%. Further, the company has just announced that it intends to increase its biannual dividends to 5 cents per share over the next 3 years. That would equate to a 3.76% annualised yield on today’s prices.

2) WAM Global Ltd (ASX: WGB)

WAM Global is another internationally-focused LIC with a strong track record of dividend growth. This LIC also invests is US shares, as well as holdings from Europe, China and the United Kingdom. Some of its top holdings include Tencent Holdings, EA Games, Microsoft and Nomad Foods, as well as a 5.9% cash position. It’s run by the reputable Wilson Asset Management, which has developed a strong track record with its 20-year history of running LICs.

WAM Global has recently declared a fully franked final dividend of 4 cents per share, which doubled FY19’s final payout of 2 cents per share. That gives WAM Global an annualised trailing yield of 3.74% on current prices. The company has a profit reserve of 30.1 cents a share as well, so I think this dividend is well covered and sustainable. If this dividend growth continues at this rate (likely in my view due to the fat profit reserve), I expect WAM Global to be a top yielding ASX dividend growth share in just a few years.

More reading

• 2 ASX shares I would buy right now for both growth and income
• This ASX-listed company makes $5.7 million per employee
• 2 ASX shares perfect for a starter portfolio
• 2 great ASX shares I’d buy for income and growth
• 2 ASX shares I’d invest $1,000 into EVERY month

Sebastian Bowen owns shares of Magellan Flagship Fund Ltd, Mastercard, Ramsay Health Care Limited, Visa, and WAMGLOBAL FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Mastercard and Visa. The Motley Fool Australia has recommended Mastercard and Ramsay Health Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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On Monday I looked at three ASX shares that brokers have given buy ratings to this week.

Unfortunately, not all shares are in favour with them right now. Three that have just been given sell ratings are listed below.

Here’s why these brokers are bearish on these ASX shares:

Fisher & Paykel Healthcare Corp Ltd (ASX: FPH)

According to a note out of UBS, its analysts have retained their sell rating and NZ$20.20 (A$18.45) price target on this medical device company’s shares. While the broker acknowledges that the company has a major opportunity in the home respiratory device market, it isn’t enough for a change of rating. UBS continues to believe that its shares are overvalued at the current level. The Fisher & Paykel Healthcare share price is trading at $33.54 on Tuesday.

National Storage REIT (ASX: NSR)

A note out of Goldman Sachs reveals that its analysts have retained their sell rating and lowered the price target on this self storage company’s shares to $1.54. Although National Storage delivered a full year result in line with the broker’s expectations, it isn’t overly confident on FY 2021. Goldman expects the company’s earnings to slide 3.5% this year, before rebounding 6.6% in FY 2022. In light of the tough year ahead, the broker retains its sell rating and believes there are more attractive opportunities for investors to focus on. The National Storage share price is changing hands for $1.86 this afternoon.

PointsBet Holdings Ltd (ASX: PBH)

Analysts at Credit Suisse have downgraded this sports betting company’s shares to an underperform rating with a $6.50 price target. According to the note, the broker notes that PointsBet has signed a major deal with NBC Universal in the United States. However, as the agreement has a marketing spend commitment of US$393 million over five years for PointsBet, the broker suspects it could take until FY 2025 before the company delivers operating earnings in the market. In light of this, it feels its shares are overvalued currently. The PointsBet share price is trading $13.15 on Tuesday.

More reading

• The Pointsbet share price rocketed 118% in August and our in-house pro says it’s still a long-term buy
• Buy these ASX dividend shares if the RBA cuts rates
• Why Fortescue, Openpay, Pointsbet, & Sezzle shares are dropping lower
• Is the Mirvac share price the best real estate buy right now?
• Is it too late to buy the Pointsbet share price?

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 Pointsbet Holdings Ltd. The Motley Fool Australia has recommended Pointsbet Holdings 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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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.

Apple‘s (NASDAQ: AAPL) stock split is on track to be a resounding success. The tech giant’s share price has climbed roughly 30% since the company published second-quarter results and announced the 4-for-1 split at the end of July, and the recent fervor over the move has prompted speculation about which other large companies might carry out their own splits.

Perhaps no other company in the tech sector is a better candidate than Amazon (NASDAQ: AMZN). The e-commerce and cloud computing giant’s shares currently trade at roughly $3,400 a pop, and it’s been more than two decades since the company orchestrated a stock split. Here’s why Jeff Bezos and Co. could soon join the stock-splitting fray. 

What would a stock split mean for Amazon?

A stock split wouldn’t have any direct impact on the e-commerce pioneer’s market capitalisation – it would simply increase the company’s share count and reduce its stock price by a proportional amount. For example, if a 10-for-1 stock split happened tomorrow, a person holding one share of Amazon stock at $3,400 per share would find they now held 10 shares valued at $340 each.

Amazon’s market cap would hold steady at approximately $1.7 trillion if this hypothetical split took place, and Jeff Bezos (the company’s CEO and largest individual shareholder) would still be sitting pretty with a net worth of roughly $200 billion. However, the act of making shares easier to buy for smaller investors could have the effect of increasing the appeal of owning Amazon stock and ultimately boost the company’s valuation – just as it seems to have done for Apple and Tesla (NASDAQ: TSLA).

Tesla’s post-split momentum has been even more impressive than Apple’s, with the electric vehicle maker’s stock soaring roughly 60% since the company announced plans on 11 August  for a 5-for-1 split. While gains for the broader market and each company’s respective business momentum have played big roles in the stock gains, it appears the stock splits have also been catalysts.

Splits could be coming back in style

The market is going gaga for stock splits, with the recent moves from Apple and Tesla prompting soaring interest among investors and speculation about which other companies will be next to get in on the action. Just take a look at this chart tracking search interest for the term “stock split” over the last year courtesy of Alphabet-owned Google Trends.

The explosion of interest over the last month would look even starker if you adjusted the search parameters on Google Trends to track searches for the term over the last five years. While business results will still be the most important factor in a stock’s long-term performance, there are actually some good reasons for the recent hype around splits.

Lower share prices tend to make stocks more accessible. With surging activity among retail investors this year due to market volatility and the popularity of apps like Robinhood, that kind of accessibility has added appeal. It’s reasonable to think that more management teams will look at the Apple and Tesla splits and see compelling reasons to carry out their own splits. 

A stock split makes sense for The Everything Company

Amazon went public in 1997 and has conducted three stock splits in its roughly 23 years as a publicly traded company. However, these moves all occurred very early in the e-commerce pioneer’s history, with the last one orchestrated in September 1999.

The company’s split-adjusted share price has climbed roughly 173,500% since its market debut – a staggering figure made possible by dominant performance in online retail and cloud computing. While the ability to purchase fractional shares has recently become more widely available and removed obstacles to purchasing stocks with high prices, not all stockbrokers offer this option. Large share prices can also be a psychological barrier to some investors.

There’s another potential perk worth mentioning. A stock split could give Amazon the opportunity to be included in the Dow Jones Industrial Average. The DJIA is price-weighted, and Amazon’s current stock price is a barrier to inclusion because it’s so much higher than any other company included in the index. Being added could create positive catalysts for the company’s share price because the stock would be included in funds that track the index, and investors who bought those funds would also be buying Amazon stock. 

Amazon has the second-highest share price of any U.S.-based company, trailing only Berkshire Hathaway‘s Class A shares, and the timing for a split seems to be right on the heels of success for Apple and Tesla’s recent moves. How Bezos and the rest of the management team at Amazon feel about a split move remains to be seen, but there are certainly shareholders who are hoping Amazon follows Apple’s lead. 

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

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• Apple shares will surge 20% after its stock split, according to this analyst. Is he right?

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. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Berkshire Hathaway (B shares), and Tesla and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), short January 2022 $1940 calls on Amazon, long January 2022 $1920 calls on Amazon, and short September 2020 $200 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Amazon and 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 Apple just split its stock: Here’s why this tech stock might be next 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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Oil is considered as the lifeblood of industrialised nations. The precious resource is what keeps the world running. However, in recent times, the price of oil has tanked due to the severe impact of COVID-19 on world economies.

Global traffic has come to a standstill with international travel restricted, logistical supply chains disrupted and passenger movement slowed. With no near end in sight, this has affected ASX energy shares such as BHP Group Ltd (ASX: BHP), Woodside Petroleum Limited (ASX: WPL), Origin Energy Ltd (ASX: ORG), Oil Search Limited (ASX: OSH), and Senex Energy Ltd (ASX: SXY) among others.

So, let’s take a look at oil and its price movements impacting on ASX energy shares.

What are the main types of crude oil?

The type of crude oil generally depends on the geographical location of the oil field and the characteristics of the oil itself. While there are more than 160 different types of oil traded on the global market, two primary types of crude oil serve as a global benchmark for oil prices. West Texas Intermediate and Brent crude. They can be distinguished as follows:

West Texas Intermediate (WTI)

• Sourced from oil fields in the US
• Cheaper to produce than Brent Crude
• Lighter due to low density and low sulphur content

Brent crude

• Sourced from the North Sea between the Shetland Islands and Norway
• Popular to refine into diesel fuel and gasoline
• More expensive than WTI

Oil price fluctuations

Oil prices are predominately driven by three factors: current supply, future supply and demand.

Over the past few decades, oil prices have soared and plummeted amid various economic crises, natural disasters and political adventures around the globe.

From the onset of the coronavirus pandemic, the spot price for oil significantly dropped. As demand for the black gold waned, this caused a large fall on the broader ASX market. Tensions rose between OPEC nations amidst the fallout, which led to a pricing war.

The price of a barrel of WTI went in negative territory for 2 days in April. This was a first in history. These past few months however, the prices of Brent crude and WTI have somewhat recovered and can be today fetch US$46.07 and US$43.12, respectively (at the time of writing).

What does this mean for ASX energy shares?

ASX energy shares have not been spared in the oil market bloodbath. The ASX’s largest oil producer, Woodside has seen its share price fall almost 50% since its 52-week high. Oil Search has fared much worse, down 60% from its year-high in January.

Other companies such as BHP, Origin and Senex have also seen their share price tumble. However, because of their portfolio diversification in the resources sector, the energy giants have managed to largely escape the brutal sell-off.

Foolish takeaway

No one could have predicted the spot price of oil crashing below zero. Indeed COVID-19 has severely reduced oil demand around the world. However, oil is still vital in almost every industry and is used as a by-product in everyday lives.

I believe that oil demand will outstrip supply within the next 12 months, and thus ASX energy share prices will rebound to pre-pandemic levels. Now could be a good time for a patient investor to pick up these beaten down ASX energy shares.

More reading

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• Are ASX banks or miners buys for dividends?
• ASX 200 Weekly Wrap: Earnings drag ASX back to reality
• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 next week

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 Where to now for the ASX energy shares? appeared first on Motley Fool Australia.

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