The market may have taken a tumble today, but that hasn’t stopped the A2 Milk Company Ltd (ASX: A2M) share price from charging higher.

This morning the infant formula and fresh milk company’s shares jumped 5% to a record high of $20.05.

When its shares hit that level, it meant they were up an impressive 43% since the start of the year. This compares favourably to an 11% decline by the S&P/ASX 200 Index (ASX: XJO) over the same period.

Why is the a2 Milk share price at a record high?

Investors have been buying the company’s shares this year due to its strong performance during the third quarter.

Strong demand for its infant formula during the pandemic led to a2 Milk upgrading its FY 2020 guidance in April.

It now expects revenue to be in the range of NZ$1,700 million to NZ$1,750 million this year. It is also forecasting a stronger than expected earnings before interest, tax, depreciation, and amortisation (EBITDA) margin of 31% to 32%. This compares to its previous EBITDA margin guidance of 29% to 30%.

Based on the top end of its ranges, this guidance implies EBITDA of NZ$560 million in FY 2020. This will be a 35.4% increase on the prior corresponding period.

What else is driving its shares higher?

In addition to the above, investors may have been buying a2 Milk’s shares this week following the release of a positive broker note out of UBS.

According to the note, the broker has retained its buy rating and NZ$22.00 (A$20.64) price target on the company’s shares.

UBS appears to believe there is a chance that a2 Milk will actually outperform its guidance in FY 2020.

Outside this, it has suggested that there could be a new product launch in the medium term. Depending on the market opportunity for this potential product, it seems to think it could be a catalyst to taking its shares up a level again.

Should you invest?

While I think a2 Milk Company’s shares are coming close to being fully valued, I would still buy them if you plan to invest for the long term.

I believe the company has a long runway for growth over the next decade thanks to its expanding footprint and lucrative opportunity in the China market.

More reading

• ASX 200 down 1.3%: Big four banks tumble, Afterpay tipped to go higher
• Why A2 Milk, Afterpay, Mesoblast, and Temple & Webster are pushing higher
• ASX 200 finishes higher by 0.8%, Carsales share price driven up by FY20 guidance
• Top brokers name 3 ASX 200 shares to buy today
• ASX 200 down 0.1%: Carsales update impresses, a2 Milk surges higher

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. 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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Investing some extra money in super can have real advantages if you’re looking to build long-term wealth.

Superannuation could mean being a member of an industry fund, a for-profit fund or even running a self-managed super fund (SMSF).

But the basics of super remain the same across all vehicles. Investing in super over and above the 9.5% Superannuation Guarantee from your employer may not be the right decision for everyone. It’s a big decision which will ultimately depend on investment goals, age and income level.

So, how do you know what’s the best way to invest for you?

The benefits of investing in ASX shares

Many pre-set options in super funds won’t allow you to choose your investments as you could outside of super.

For instance, unless you’ve got an SMSF, you probably can’t buy individual ASX shares. That means you may have to leave buying growth shares like Xero Limited (ASX: XRO) for your investment accounts outside of your super fund.

The flexibility that can provide could be a real benefit for an active investor. While investing in super can provide some powerful long-term benefits, many Aussies may not want to lock-up that money until retirement.

For instance, a lot of younger investors may have one eye on buying property. The First Home Super Saver (FHSS) allows you to access up to $30,000 from your super for a deposit. But then many investors may prefer to just avoid the hassle in the first place.

So while it’s true that compounding returns are boosted inside your super fund, investing more than just the 9.5% from your employer won’t suit everyone’s goals and needs.

Why should you be investing in super?

The big factor here is tax. It’s a good time to look at investing in super considering we’re fast headed towards 30 June and the end of the financial year.

Provided the eligibility criteria is met, concessional superannuation contributions are taxed at just 15% inside of super.

For most Australians, that means you can use super to reduce your tax bill at the end of the year, while still boosting your retirement income. Every dollar earned above $18,200 per year is subject to at least 19 cents of tax.

That means that even in the lowest tax bracket there are potential tax savings. However, if your income is above the $180,000 mark, the tax-advantaged status of super really starts to add up. 

Other than just investing for tax reasons, superannuation investments can offer a liquidity premium. Given the long-term horizon of super funds, they can invest in long-term investments like infrastructure and private equity.

These investments aren’t easy to access for the average Aussie investor. That means that you could invest in more than just ASX shares if you’re investing in super. 

This could mean higher returns (due to the liquidity premium on investments) as well as strong diversification options for your portfolio.

Foolish takeaway

Super is a complicated but powerful tool for retirement. As always, it’s best to talk to a financial advisor to determine what’s best for your individual circumstances.

While the potential tax benefits are clear, investing extra money in super can tie your cash up for a long time which won’t suit everyone’s needs.

More reading

• Will Xero shares and these 2 other ASX companies be portfolio staples by 2030?
• 3 ASX growth shares to buy with $3,000
• 5 ASX shares that would’ve made you a fortune in 5 years
• Why I think Xero shares are a great long-term buy
• 3 ASX shares to buy and hold for the next decade

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 Xero. 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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It’s a tale as old as time. Good times breed great times that bring exuberance, followed by pain. It’s your classic asset bubble that we’ve witnessed through the centuries. No asset, be it shares in 1999, bitcoin in 2017, or tulips in 1636, are exempt.

Now, just to be clear, I don’t think the S&P/ASX 200 Index (ASX: XJO) or, indeed, the US markets like the Dow Jones are anything close to true ‘bubble’ territory.

But I do think we are starting to see signs of what former Federal Reserve chair, Alan Greenspan would call “irrational exuberance”.

According to reporting in the Australian Financial Review (AFR), ASX share trading surged on investment platforms like Commonwealth Bank of Australia (ASX: CBA)’s CommSec over the past few months. Millennials also displayed the highest activity on the platform. And it’s not just Aussies getting amongst it. The AFR reports that American users of the popular-with-millennials US brokerage company, Robinhood surged by 70% in March.

It’s an interesting phenomenon to see. Conventional wisdom dictates that market crashes translate into a rise in despondency towards stocks as an asset class – with investors burnt by falling prices reluctant to jump back in.

ASX shares in a bubble

Why is this? Well, in my opinion, it’s the nature of the market swings we have seen this year. The bear market we saw between 20 February and 23 March was almost perfect in the way it was consistent and steep. The bull market that has been in play ever since 23 March has been equally perfect in that share prices have gone up in almost a straight line.

This, in turn, has made it relatively easy to jump back into shares at any time over the past 2 months and make money.

The AFR reports that the top shares traded on CommSec over 9-10 June were Flight Centre Travel Group Ltd (ASX: FLT) and Zip Co Ltd (ASX: Z1P). Forget about the ASX blue chips. Apparently these businesses are the companies investors want in their long-term portfolios. Any coincidence that Flight Centre shares were up more than 100% between April and 10 June? Or that Zip Co shares were up more than 470% between March and 10 June? Probably not.

In the US we have seen far worse signs of exuberant, ‘bubbly’ behaviour. For example, shares of US car rental company, Hertz Global Holdings Inc (NYSE: HTZ) have ballooned more than 800% between 26 May and 8 June – despite Hertz filing for bankruptcy in between. There’s a similar story going on with Nikola Corporation (NASDAQ: NKLA), a potential rival to the electric car maker, Tesla Inc (NASDAQ: TSLA). Nikola shares shot up more than 400% between 1 May and 10 June for no solid reason.

This data tells us that these ‘new traders’ entering the market are looking for easy money, which has been delivered to them in spades so far. Making 470% in 2 months is enough to give anyone a healthy dose of irrational exuberance, in my view. 

Foolish takeaway

Yes, market crashes do give investors a phenomenal opportunity to pick up shares at great prices. But the wise words of Warren Buffett come to mind in this situation: “don’t even think about owning a stock for 10 minutes if you don’t plan on holding it for 10 years”.

So, I would caution any investor out there to avoid these ‘hype-train’ stocks and keep a long-term investing mindset present at all times.

History shows us that bubbles and irrational exuberance always ends in tears – and I’m seeing signs of some very irrational behaviour right now. 

More reading

• Are Zip Co shares too expensive?
• Top brokers name 3 ASX 200 shares to sell today
• Australian unemployment jumps to 7.1%
• ASX 200 down 1.3%: Big four banks tumble, Afterpay tipped to go higher
• Has the Afterpay share price become too expensive to buy?

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

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The Zip Co Ltd (ASX: Z1P) share price has soared 64.5% in June. The company is undergoing a $200 million capital raising to acquire United States-based buy now, pay later (BNPL) provider, QuadPay. But is the Zip Co share price getting too expensive? 

Q3 highlights 

Zip Co provided the market with an update for the month ending 31 May 2020. The company highlighted a 78% year on year increase in monthly revenue and a 63% increase in active customers to 2.1 million. Furthermore Zip Co reported a 46% increase in active merchants to 23,600. I think these numbers are pretty impressive. I also think the company’s strong performance should continue due to the change in consumer behaviour resulting from COVID-19. 

Zip Co’s business update commented on the shift away from cash to digital payments that has occurred throughout the pandemic. The company also anticipates eCommerce penetration to remain at elevated levels post COVID-19 as more consumers gain familiarity with shopping online and retailers invest significantly in this space. These trends represent considerable tailwinds for BNPL and digital payment operators like Zip Co.

QuadPay highlights 

I believe the QuadPay acquisition is a game changer for the Zip Co share price. This is a compelling investment proposition that transforms Zip Co from a domestic BNPL player to a global BNPL leader. Post completion, the combined group will have operations across Australia, New Zealand, the US, the United Kingdom and South Africa. Zip Co will have a combined annualised total transaction value of $3.0 billion and annualised revenue of $250 million. It will also boast 3.5 million customers and 26,200 merchants. 

The QuadPay acquisition will immediately elevate all of Zip Co’s key reporting metrics and its existing scale. It will also ramp up the company’s growth potential in the world’s largest retail market. QuadPay currently has an existing customer base of 1.5 million, over 3,500 merchants and annualised revenue of $70 million for the quarter ending March 2020. QuadPay allows customers to split their purchase into 4 instalments spread over 6 weeks, interest free. The merchant gets paid upfront with risk and fraud liability absorbed. What makes QuadPay unique is its ‘Anywhere App’ that enables customers to pay in instalments in store or online at any merchant.

Zip Co’s acquisition will be funded with $100 million in convertible notes and up to $100 million in warrants. This will mean Zip Co shares will be progressively diluted by $10 million every six months as the notes convert into shares. The capital will be provided by an affiliate of Susquehanna International Group, one of the largest privately-held financial services firms in the world. The company has an established track record of investing in high-growth companies including the parent company of Tik Tok, Bytedance. 

Foolish takeaway 

I believe QuadPay is a transformational acquisition that takes the growth potential of the Zip Co share price to the next level. Zip Co has entered the largest retail market in the world with a genuinely innovative product. While investors could wait for its share to possibly become cheaper, I would certainly be watching it closely. 

More reading

• Millennials be warned! Signs of dangerous ASX share trading grow
• Has the Afterpay share price become too expensive to buy?
• Why Zip Co and these All Ords shares have doubled in 12 months
• ASX 200 jumps almost 4%, Webjet share price soars
• The Zip Co share price is up 500%. Too late to invest?

Lina Lim 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 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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Earlier today the Afterpay Ltd (ASX: APT) share price continued its meteoric rise and stormed higher again.

The payments company’s shares rose 3% to hit a record high of $59.64.

Why is the Afterpay share price rising again?

There have been a couple of potential catalysts for Afterpay’s share price rise on Thursday.

The first is a broker note out of Ord Minnett this morning which reveals that its analysts believe the buy now pay later provider’s shares can go higher from here.

According to the note, the broker has retained its buy rating and almost doubled its price target to $64.70.

It believes that Afterpay could end the financial year with almost 10 million active customers.

Apple Pay integration.

Another possible catalyst is the company’s integration with Apple Pay.

Although it has been a couple of weeks since the company actually partnered with Apple, it was only today that it emailed customers to advise them of the integration.

This appears to be good timing by the company ahead of its push into the U.S. bricks and mortar retail market.

While the Afterpay app is easy enough to use for transactions, it is still no comparison to using Apple Pay, which is effortlessly simple. I feel making the process as easy as possible when entering the offline U.S. market could be key to increasing its adoption and usage.

Is the Afterpay share price in the buy zone?

I still believe Afterpay is a buy for investors that are intending on holding its shares for the long time.

Given the increasing popularity of the payment method, its massive opportunity in a $5 trillion U.S. retail market, and possible expansions into mainland Europe and Asia in the future, I feel Afterpay has the potential to grow enormously over the next decade and become a real force in the payments industry.

Though, given its high valuation, I think it would be prudent to limit an investment to just a small part of a balanced portfolio.

More reading

• ASX 200 down 1.3%: Big four banks tumble, Afterpay tipped to go higher
• Splitit share price rockets 33% on new Mastercard deal
• Has the Afterpay share price become too expensive to buy?
• Why A2 Milk, Afterpay, Mesoblast, and Temple & Webster are pushing higher
• 2 ASX shares to buy for beginners

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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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If you’re just starting out with investing, you may not have tens of thousands of dollars to invest into the share market.

But I wouldn’t let that put you off starting your investment journey. This is because even small investments can grow into something meaningful over a long enough timeframe thanks to compounding.

For example, $2,500 invested in the share market each year for 20 years and earning a 10% return would grow into almost $160,000.

And if you’re able to increase your level of investments as the years go by and your earnings increase, you could grow your wealth materially more.

But which shares should you start with? I think you would be best looking long term and at companies which have the potential to grow their earnings strongly.

Two that tick a lot of boxes for me are listed below. Here’s why I would invest $2,500 into them:

Nearmap Ltd (ASX: NEA)

I think this growing aerial imagery technology and location data company could be a great place to invest $2,500. Nearmap provides high resolution aerial imagery, city-scale 3D datasets, and integrated geospatial tools to businesses. It has a massive opportunity in a highly fragmented market and looks well-placed to grow it market share significantly over the next decade thanks to its high quality product offering.

Pushpay Holdings Group Ltd (ASX: PPH)

Another ASX share to consider investing these funds into is Pushpay. It is a donor management platform provider which is well-positioned to benefit from the digitisation of giving and the shift to a cashless society. It is aiming to capture a 50% share of the medium to large church market in the future, which represents a US$1 billion opportunity. If it delivers on this target, which I suspect it will, then it should drive strong earnings growth over the next decade.

More reading

• 2 fast-growing ASX tech shares to buy right now
• 3 ASX shares to buy and hold for the next decade
• Why Nearmap and this ASX mid cap share could be strong buys
• $3,000 invested in these 2 shares could make you a fortune over the next 10 years
• The top ASX growth shares I would buy for 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 Nearmap Ltd. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX. The Motley Fool Australia has recommended Nearmap 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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On Wednesday 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 ASX 200 shares that have just been given sell ratings by brokers are listed below.

Here’s why these brokers are bearish on them:

Fisher & Paykel Healthcare Corp Ltd (ASX: FPH)

According to a note out of UBS, its analysts have retained their sell rating but lifted their price target on this medical device company’s shares to NZ$18.20 (A$17.09). While the broker acknowledges that Fisher & Paykel Healthcare will have been benefiting during the pandemic, it doesn’t appear convinced it will be as much as its share price implies. In light of this, it has retained its sell rating, largely on valuation grounds. The Fisher & Paykel Healthcare share price is trading notably higher than this price target at $26.84 this afternoon.

InvoCare Limited (ASX: IVC)

A note out of the Macquarie equities desk reveals that its analysts have downgraded this funerals company’s shares to an underperform rating and cut the price target on them to $10.20. Macquarie believes there is a risk of InvoCare falling short of expectations in FY 2020. It notes that its research is indicating that the company is losing market share. In addition to this, it suspects there will be lower deaths during the current flu season because of social distancing initiatives. The InvoCare share price is trading at $11.12 at the time of writing.

Regis Resources Limited (ASX: RRL)

Analysts at Ord Minnett have downgraded this gold miner’s shares to a sell rating with a $4.10 price target. According to the note, the broker made the move on valuation grounds after a strong share price gain over the last three months. Prior to today, the Regis share price was up over 130% in the space of just three months thanks to a strong gold price. Regis’ shares are currently changing hands for $5.08.

More reading

• Australian unemployment jumps to 7.1%
• ASX 200 down 1.3%: Big four banks tumble, Afterpay tipped to go higher
• Where to invest $5,000 in an irrational market
• Next phase of bull market could see ANZ Bank outperform Afterpay
• Is the Macquarie share price a solid buy today?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended 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 Australian Finance Group Ltd (ASX: AFG) share price has leapt 16% this morning following the announcement the ACCC will grant clearance for its merger with rival Connective. Both businesses will become better positioned to invest in digital technologies and innovation in the face of digital disruption faced by the sector. 

What does AFG do?

AFG is one of Australia’s largest mortgage broking groups and was established in 1994. It began as a mortgage aggregator which provides mortgage brokers access to products and support. It now offers business finance, insurance products, and AFG-branded and securitised products throughout Australia. 

What is the Connective merger?

AFG proposed to merge with competitor, Connective. The combination would create Australia’s largest mortgage aggregator by a significant margin, accounting for almost 40% of Australia-operating mortgage brokers. More than half of all home loans written each year are initiated through the broker channel. 

After the merger, the AFG and Connective brands intend to operate separately. The transaction is also subject to court approval with a final decision likely in the second half of FY20. 

How is the AFG share price performing?

The AFG share price has more than doubled from its March low of 92 cents with shares currently trading at $1.96. AFG entered the S&P/ASX 300 (ASX: XKO) in the most recent quarterly rebalance due to this increase.   

AFG announced in its most recent update that April operating results had been strong. However, COVID-19 is expected to create some economic uncertainty. Lodgements and settlements could experience adverse effects on 1H FY21. Lodgements in the March quarter were up 33% on the previous corresponding period, driven by record-low interest rates. 

Nonetheless, residential settlements are expected to fall in coming months driven by a slowdown in broader economic activity. This will result in upfront commissions payments softening. Operating cash flow from existing trail commission arrangements on AFG’s $151.7 billion trail book will, however, continue. 

Foolish takeaway 

AFG’s merger will provide a strong base to benefit from an eventual recovery, despite the Australian mortgage market being expected to feel a downturn as a result of COVID-19. 

More reading

• Keep a watch on these 3 ASX trends next week

Motley Fool contributor Kate O’Brien 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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