Is the Australia and New Zealand Banking Group (ASX: ANZ) share price a buy?

ANZ’s share price has been on a bit of a rollercoaster in recent months. During the first COVID-19 share market crash it fell by 48% to $14.10 in March. It then rose 49% to peak at $21 last week. Interestingly, the ANZ share price has fallen 12% from that post-crash high last week.

ASX investors may have pushed the ANZ share price a little too far. There is certainly a lot of positive news around. Australia’s coronavirus, infection numbers are very low. The cost of jobkeeper was overestimated by $60 billion, which means the economy didn’t need as much support as first feared.

ASX banks like ANZ are an important part of the Australian economy. A good economy is important for the performance of the banks. The other large ASX banks of Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd (ASX: NAB) are also key parts of keeping Australia’s economic cogs turning.

ANZ recently announced its initial estimation of the expected effects on COVID-19 on its profit. The ANZ share price has fallen so hard because of the fears about the coronavirus impacts.

In the recent ANZ half-year result the major ASX bank announced that statutory profit was down 51% compared to the prior corresponding period. The decline was driven by credit impairment charges of $1.674 billion, which included increased credit reserves for COVID-19 impacts of $1.031 billion. In that same result ANZ reported that its (continuing) cash profit dropped by 60% to $1.4 billion.

The large decline in profit and uncertainty caused by COVID-19 caused the ANZ board to defer the decision about the dividend to a later date. This may mean there is going to be a large dividend cut later, particularly as APRA wants banks to manage their capital this year.

Is the ANZ share price a buy?

The ANZ share price is currently trading at a level we saw during some parts of the GFC, though ANZ went as low as $12 in early 2009.

Warren Buffett once said some wise words for times like this: “Be fearful when others are greedy and greedy when others are fearful.” The market seems to be fearful with the ANZ share price, so perhaps it is a medium-term opportunity?

However, I’m not totally convinced that it is a good opportunity. It seemed like a more obvious bet at under $15.

The RBA interest rate is now 0.25%. The lower the official interest rate, the harder it is for banks to maintain their net interest margin (NIM). Transaction accounts are a good example of this effect. Banks aren’t likely to charge customers for keeping cash in the bank, so a reduction of the official rate by 0.25% means less margin for the bank if it reduces the loan interest rate for borrowers.

The dividend was an alluring reason for income-focused investors to buy ANZ shares. But it’s hard to say what the bank’s dividend policy will be going forward. More cash profit retained should translate into more earnings growth and a higher ANZ share price. However, large fully franked dividends are a good way to reward shareholders. It’ll be interest to see what the ANZ board does. 

If I were part of the bank’s leadership I’d consider a 50% dividend payout ratio. That could be a fair balance between dividends and future growth.

Foolish takeaway

I don’t think the ANZ share price is a bargain right now. But I don’t think it’s expensive either. Pleasingly, Australia’s economy seems to have moved into the recovery phase now, so hopefully the worst of the COVID-19 effects has passed. However, I believe the best way to growth your wealth could be to pick shares with better growth prospects. ANZ is already a large, mature business with a big market share of the mortgage market. 

More reading

• Can ASX big banks generate an attractive sustainable dividend yield from FY21?
• ASX 200 Weekly Wrap: ASX bears take control as market volatility returns
• ASX 200 falls 1.9%, big 4 ASX banks retreat
• 5 things to watch on the ASX 200 on Friday
• ASX 200 drops 3%, Webjet share price sinks

Motley Fool contributor Tristan Harrison 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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Here’s why the VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT) is my favourite ASX exchange-traded fund (ETF).

ETFs come in all shapes and sizes. The cheapest and most popular tend to be plain Jane index funds like the Vanguard Australian Shares Index ETF (ASX: VAS). Most investors would be fine just sticking to these kinds of funds for simple and cheap passive investing.

But I like to think outside this box when it comes to ETF investing. And VanEck’s MOAT delivers a unique combination of active and passive investing that I think will continue to deliver for investors.

Why MOAT is my favourite ASX ETF

MOAT is slightly different from your average ETF in that it tracks an ‘actively managed’ index rather than a market-weighted passive index like the S&P/ASX 200 Index (ASX: XJO). This index is managed by Morningstar, which chooses a basket of US-listed shares that display characteristics of a ‘wide moat’.

A moat is a term first coined by Warren Buffett and refers to the concept of an intrinsic competitive advantage that a company can have that protects it from the competition (much like a moat protects a castle).

Think about how Apple’s brand enables the company to charge more than its competitors for its iPhones. Or how Coca-Cola is the most popular cola drink, as well as the most expensive. Or how some people will only fly on Qantas Airways Limited (ASX: QAN) planes.

MOAT aims to only hold companies with this kind of pricing power. On its most recent update, this ASX ETF names Amazon.com, Nike, Facebook, Pfizer and American Express as among its top holdings. When we look at these companies, they all have some unique advantage over any potential competition – whether it be branding, monopolistic market share or exclusive drug patents.

Having these unique advantages increases the chances of a company outperforming other shares in the market over time in my view.

How does MOAT measure up?

Talking the talk is all well and good, but does MOAT walk the walk?

Well, over the past 5 years, MOAT has delivered an average annual return of 15.69% per annum. By comparison, the ASX 200 has delivered just 4.2% per annum over the past 5 years.  Even the US S&P 500 Index has returned 12.91% per year.

I like those numbers, and it gives me confidence that MOAT will continue to bring home the bacon. This fund has a winning, market-beating strategy and will continue to sit in its well-deserved place in my portfolio as long as it keeps it up. That’s why MOAT is my favourite ASX ETF and one that I think merits consideration for any ASX investor.

More reading

• Can ASX big banks generate an attractive sustainable dividend yield from FY21?
• ASX 200 falls 2%, ASX travel shares drop heavily
• Clinuvel share price jumps as investors favour healthcare
• Why the ASX 200 tumbled lower on Monday and 2 shares to buy
• Should you buy ASX shares during this market selloff?

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of American Express, Coca-Cola, Facebook, Nike, Pfizer and VanEck Vectors Morningstar Wide Moat ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Facebook and Nike. The Motley Fool Australia has recommended Facebook, Nike, and VanEck Vectors Morningstar Wide Moat ETF. 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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Australian growth investors certainly are lucky. Right now, I believe there are a great number of growth shares that could provide investors with strong returns over the next decade.

Three which I think are well worth considering are listed below. Here’s why I think they could be future market beaters:

Bravura Solutions Ltd (ASX: BVS)

Bravura Solutions is the financial technology company behind the Sonata wealth management platform. This popular platform is used in the wealth management and funds administration industries to connect and engage with clients via computers, tablets, or smartphones. Demand for the platform has been growing very strongly in the past few years and shows no signs of slowing. Combined with recent acquisitions that open the company up to new and lucrative markets, I believe Bravura is well-positioned to deliver solid long term earnings growth.

Nearmap Ltd (ASX: NEA)

Another ASX growth share to consider buying is Nearmap. It is an aerial imagery technology and location data company with operations in the ANZ and North American markets. These two regions currently provide Nearmap with a total addressable market (TAM) of $2.9 billion per year. This is materially more than the annualised contract value (ACV) of $103 million to $107 million it expects to achieve in FY 2020. Given the fragmented nature of the market and its high quality offering, I believe Nearmap can capture a growing slice of this market over the next decade. It also has the option to increase its TAM by expanding into other territories in the future.

Zip Co Ltd (ASX: Z1P)

A final growth share to consider buying is Zip Co. I’ve been very impressed with the performance of the buy now pay later provider over the last couple of years and particularly during the pandemic. In respect to the latter, Zip Co has continued to deliver rapid sales and customer growth over the last few months. I’m confident there will be more of the same in the future due to the growing popularity of the payment method and its expansion internationally. 

More reading

• Got $5,000 spare? Consider Wesfarmers shares and these 2 other ASX companies
• Keep a watch on the Zip Co share price and 1 other ASX tech this June
• Sezzle shares and 2 other ASX techs soared up to 50% in the past 4 weeks
• ASX winners and losers from last week
• These are the 10 most shorted ASX shares

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 Bravura Solutions Ltd, Nearmap Ltd., and ZIPCOLTD FPO. The Motley Fool Australia has recommended Bravura Solutions Ltd and 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.

The post The top ASX growth shares I would buy for the 2020s appeared first on Motley Fool Australia.

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The Tyro Payments Ltd (ASX: TYR) share price closed down 12.6% on Monday following a trading update released on Monday morning. The trading update outlined the recent effects of the coronavirus on the company’s business and was one in a series of weekly updates released to the market about the company’s transaction volumes.

Why is the Tyro Payments share price down?

The announcement revealed that payments for June so far were up 6% on the same month in 2019. While this may seem positive, it was probably a lot less than the market was hoping for, given that the worst of the coronavirus lockdowns have eased. It showed that Tyro payments is no longer experiencing the type of growth it saw prior to the coronavirus pandemic.

Growth in January was up 27% on January 2019 and growth in February was up 30% on the same month in 2019. March saw an increase of only 3% with April and May showing steep declines. Transactions in April were down 38% on the same period in 2019 and in May were down 18% on March of the prior year.

Tyro mainly relies on brick and mortar retailers for revenue and it is possible that those merchants have seen a permanent decline in their sales. This could affect the value of Tyro’s transactions in the long term.

Who has been selling Tyro Payments shares?

Also announced on Monday was the reduction in holdings of Tyro Payments shares by fund manager, Fidelity. Recently, Fidelity sold 9,934,175 shares. This took their holding in the company to 6.25%, down from 8.27% previously. Fidelity sold the shares for between $2.66 and $4.26. Fidelity reported that they sold shares between 27 April and 10 June.

How have Tryo Payments shares performed this year?

Tyro listed on the ASX late in 2019 at an IPO price of $2.75. Tyro shares are down 26.3% from its 52-week high of $4.53 reached in February. It is down 4.5% from its share price of $3.50 at the beginning of the year. The company’s share price has had a bumpy ride as a result of the coronavirus and its effect on retailers. In March, the company’s share price hit a low of 97 cents. The Tyro Payments share price closed at $3.32 on Monday.

More reading

• Keep a watch on the Zip Co share price and 1 other ASX tech this June
• Why ASX, Domain, Tyro, & Wesfarmers shares are dropping lower
• Are Aussies still withdrawing cash like crazy?
• The smartest ASX shares to invest $10,000 in right now
• 2 leading ASX tech shares to buy in June

Chris Chitty has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Tyro Payments. 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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ASX bank investors have to endure a roller coaster ride as the market falls in and out of love with the sector.

The share prices of the big four crashed as the COVID-19 crisis unfolded and quickly rebounded on a FOMO buying frenzy.

That bounce quickly petered with bank stocks copping the brunt of the selling today. The Westpac Banking Corp (ASX: WBC) share price was the worst in the group with a 2.9% decline to $17.38.

But the National Australia Bank Ltd. (ASX: NAB) share price and Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price weren’t far behind with around a 2.7% fall each.

The Commonwealth Bank of Australia (ASX: CBA) share price is the outlier (as usual). Shares in our biggest domestic bank shed 1.5% to $66.30 and is the only one in the group that outperformed the 2.2% drop on the S&P/ASX 200 Index (Index:^AXJO).

The bank valuation debate

Investors are blowing hot and cold towards the sector as experts can’t seem to quite agree on whether these stocks are cheap or expensive.

The debate centres around bank’s return on equity (ROE) and price to book value (P/B). The Australian Financial Review reported that a consensus view seems to be forming around the sector’s post-coronavirus ROE of around 10%.

The P/B multiple is also fairly black and white with the big banks trading at around 0.9 times, with the exception of the higher quality CBA at 1.5 times.

The problem is working out if these measurements represent value in the face of growing loan defaults after government support ends in September.

Multiple earnings headwinds

The Australian Banking Association data shows that the total number of deferred loans stand at nearly 800,000. If most of these distressed borrowers can’t return to paying off their monthly mortgage payments soon, things could get ugly for the banking sector.

There’re other headwinds impacting on bank profits too. Their net interest margin (which is essentially their operating profit margin) have been under pressure even before the pandemic.

Record low interest rates and a flattening bond curve have made more challenging for these lenders to turn a buck. Banks make the most hay when short-term bond yields are materially lower than longer-term yields.

Stay focus on dividend yield

I won’t blame you if you don’t quite get what ROE and P/B really measure or why retail investors should care.

The fact is, the only measure that I think is important at this juncture is the dividend yield. If the banks can achieve a ROE of around 10% as most analysts expect, this should enable them to pay out around 70% of profits as dividend.

Foolish takeaway

That should provide investors with a forecast dividend yield of around 6% before franking at the current share prices.

Add in franking, and that will push the yield north of 8% (except for CBA as investors will need to pay a premium for quality).

Even if that proves too optimistic and the gross-up yield drops to around 6%, that still represents good value to me as interest rates are expected to stay close to zero for a few years yet.

More reading

• Why MOAT is my favourite ASX ETF
• ASX 200 falls 2%, ASX travel shares drop heavily
• Clinuvel share price jumps as investors favour healthcare
• Why the ASX 200 tumbled lower on Monday and 2 shares to buy
• Should you buy ASX shares during this market selloff?

Motley Fool contributor Brendon Lau owns shares of Australia & New Zealand Banking Group Limited, Commonwealth Bank of Australia, National Australia Bank Limited, and Westpac Banking. 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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Buying ASX shares for both growth and income isn’t something that too many investors actively strive for in my experience. You’ll hear “I’m a growth investor” or “I’m a dividend income investor’ far more than “I go for growth and income”, I’d wager.

But by not seeking the best of both worlds, you might be overlooking some potentially lucrative returns. There are many ASX shares that have made investors very wealthy with a combination of both growth and income.

So, with this in mind, here are 2 ASX shares that I think investors can reasonably expect to deliver both capital growth and dividend income going forward.

Ramsay Health Care Limited (ASX: RHC)

Ramsay Health Care isn’t a favourite share of the income investor right now. This company used to have one of the best ASX dividend records around – 20 years of uninterrupted increases. Unfortunately, the COVID-19 crisis put an end to that this year and Ramsay has suspended its dividend payments until further notice.

Ramsay runs a network of private hospitals across Australia and a few other countries, including the United Kingdom and France. I think private healthcare is going to be playing an increasingly large role in the hospital network over the coming decade or two, given the demographic of our ageing population. Ramsay is well placed to capitalise on this trend, which should give this company a very long growth runway

I think Ramsay is still a top choice for both growth and income today. Yes, the company has suspended dividend payments. But I think this suspension won’t last long, and indeed I think it was prudent at the time, given the uncertain path ahead for the economy. I don’t think it will be too long until dividends resume and investors enjoy another strong streak of payout increases.

WAM Global Ltd (ASX: WGB)

WAM Global is a listed investment company (LIC) that aims to find undervalued growth opportunities from various share markets around the world. This company has been growing its dividends rapidly (including by 50% last year), even though it only started life in 2018. WAM Global’s last interim dividend came in at 6 cents a share, which gives the LIC a trailing grossed-up dividend yield of 4.42% on current prices.

WAM Global is also well-poised for some nice capital gains down the road. Some of WAM Global’s current top holdings include Amazon.com, Tencent, Costco and Activision Blizzard – all top-notch growth companies outside the realm of most ASX investors. 

I think WAM Global’s management team has shown, alongside WAM’s other LICs like WAM Capital Ltd (ASX: WAM), that it knows how to grow wealth with a long-term mindset. Thus, I’m very confident in WAM Global today and in its future ability to provide both growth and income.

More reading

• Insiders have been buying these ASX 200 shares
• Why the Healius share price will be in the spotlight tomorrow morning
• 2 top ASX dividend shares for income in 2020
• Where to invest $20,000 into ASX shares immediately
• These ASX healthcare shares could be long term market beaters

Motley Fool contributor Sebastian Bowen owns shares of Ramsay Health Care Limited and WAMGLOBAL FPO. The Motley Fool Australia has recommended 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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The S&P/ASX 200 Index (ASX: XJO) fell by more than 2% today to 5,720 points.

Here are some of the highlights from the share market today:

ASX 200 travel shares decline

The travel sector suffered a heavy selloff today, three of the worst performing shares in the ASX 200 were from the travel industry.

The Corporate Travel Management Ltd (ASX: CTD) share price dropped 9.9%. The Flight Centre Travel Group Ltd (ASX: FLT) share price fell 8.5%. Webjet Limited (ASX: WEB) saw a share price drop of 7.9%.

Several other ASX travel shares declined too. Airline Qantas Airways Limited (ASX: QAN) suffered a 3.6% share price drop. The Sydney Airport Holdings Pty Ltd (ASX: SYD) share price fell 4.6%. The Helloworld Travel Ltd (ASX: HLO) share price dropped 5.6%.

Looking at New Zealand travel shares, the Auckland International Airport Limited (ASX: AIA) share price fell 2.3% and the Air New Zealand Limited (ASX: AIZ) share price declined by almost 5%. Travel software company Serko Ltd (ASX: SKO) saw its share price fell 3.8%.

Healius Ltd (ASX: HLS) share price soars

The ASX 200 healthcare company experienced a 19% rise of its share price.

Healius announced today it has entered into a binding agreement to sell its medical centres business for $500 million to BGH Capital on a cash and debt free basis. It will retain the day hospitals and IVF segments.

Dr Malcolm Parmenter, the managing director and CEO, explained why Healius sold the division and what it will do with the money:

“This sale is consistent with our strategy of simplifying our portfolio and focusing on our leading and scalable diagnostics and day hospital business, in order to deliver on our mission of seeking and sustaining life-enhancing healthcare through people who care.

“The proceeds will strengthen the company, reducing our net debt and freeing up capital for investment, while enabling shareholders to realise the value of the medical centres business, which has not been reflected in our share price.”

Healius is seeing more normal trading levels as the economy opens up from the COVID-19 restrictions. Revenues are recovering strongly in line with the opening of the broader economy, according to Healius.

The ASX 200 business also said that it had signed the refinance of its syndicated bank debt facility of $500 million which was due to mature in January 2021. The facility has been increased by $70 million to $570 million and its maturity has been extended to January 2024 with unchanged covenants.

Super Retail Group Ltd (ASX: SUL) capital raising and trading update

Super Retail went into a trading halt this morning to announce a capital raising and trading update.

The ASX 200 retail business is going to do an underwritten accelerated pro-rata non-renounceable entitlement offer to raise approximately $203 million at a fixed price of $7.19 per share.

The equity raising will enable the company to keep executing its strategy and pursue its strategic growth initiatives.

In terms of trading, the company has seen a strong bounce back for its overall sales. Super Retail’s like for like sales fell by 26.2% in April 2020 compared to April 2019. However, Super Retail’s group like for like sales increased by 26.5% in May 2020 compared to May 2019.

We’re only halfway through June but sales growth has continued to benefit from the strong consumer environment.

Looking at the revenue for the financial year to date to 31 May 2020, total revenue was $2.52 billion, which was up 1.9%. However, like for like sales were only up 1.2%. The company stated that the gross margin percentage was down over April and May, impacted by a shift in product mix and a higher proportion of online sales.

More reading

• Why MOAT is my favourite ASX ETF
• Can ASX big banks generate an attractive sustainable dividend yield from FY21?
• Clinuvel share price jumps as investors favour healthcare
• Why the ASX 200 tumbled lower on Monday and 2 shares to buy
• Should you buy ASX shares during this market selloff?

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Helloworld Limited and Serko Ltd. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited, Super Retail Group Limited, and Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited, Helloworld Limited, and Serko 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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