Stock Pick

  • The Kogan share price rocketed 11% higher today: Is it too late to invest?

    Kogan share price

    The Kogan.com Ltd (ASX: KGN) share price was an exceptionally strong performer once again on Monday.

    The ecommerce company’s shares were up as much as 11% at one stage, before ending the day 9.5% higher at $18.25.

    This latest gain means the Kogan share price is now up 430% from its March low of $3.45.

    Why did the Kogan share price rocket higher today?

    Investors have been fighting to get hold of Kogan’s shares again after the Victorian state government declared a state of disaster and announced a six-week lockdown.

    While supermarkets such as Coles Group Ltd (ASX: COL) and Wesfarmers Ltd (ASX: WES) operated Bunnings home improvement stores are likely to remain open as normal, non-essential retailers are expected to close.

    As we have seen over the last few months, this has accelerated the shift to online shopping and led to a material increase in sales and customer numbers for ecommerce companies such as Kogan and Temple & Webster Group Ltd (ASX: TPW).

    Investors appear confident that this will be the case again with the Victorian lockdown, which could position Kogan for another outstanding quarter of sales and profit growth.

    Pleasingly, they may not have to wait long for Kogan to reveal how it is performing. It is scheduled to release its full year results in two weeks on Monday 17 August 2020. I suspect the company will provide investors with an update on trading during the first quarter with its results.  

    Is it too late to invest?

    I think Kogan’s shares are looking fully valued now, so I wouldn’t buy them if you’re just looking for a quick gain.

    However, I would be a buyer of them if you plan to hold on for the long term. Given its positive long term outlook from the shift to online shopping, potential acquisitions, and its expansion into other verticals, I believe Kogan can grow significantly over the next decade.

    This could make the Kogan share price a market beater over the 2020s.

    5 stocks under $5

    We hear it over and over from investors, “I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!” And it’s true.

    And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!

    See the 5 stocks

    *Extreme Opportunities returns as of June 5th 2020

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    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 Kogan.com ltd and Temple & Webster Group Ltd. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Wesfarmers Limited. The Motley Fool Australia has recommended Kogan.com ltd and Temple & Webster Group 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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  • TikTok Could Become Microsoft’s Deal of the Decade

    TikTok Could Become Microsoft's Deal of the Decade(Bloomberg Opinion) — Let’s get something clear upfront: Microsoft Corp.’s purchase of TikTok isn’t worth $50 billion. That’s my opinion. But then again, it’s not my money.(2) Some investors in its parent company, ByteDance Ltd., think it’s worth that much, according to a Reuters report last week. Good for them. We’ll soon find out its true value, and more importantly, that of Microsoft’s chief executive officer.After a weekend of speculation, the American software giant came out Monday morning, Beijing time, to confirm talks to buy the short-video sensation that boasts more than 100 million users in the U.S. alone.The opening line of the blog statement notably said: “Following a conversation between Microsoft CEO Satya Nadella and President Donald J. Trump.” This came after after  Trump had suggested that he may ban TikTok from the U.S. altogether.ByteDance, TikTok’s Beijing-based owner, wasn’t mentioned until the third paragraph. I don’t want to downplay the importance of founder Zhang Yiming or his executive team, who have done a fabulous job of building a powerhouse of an internet company, but this deal already transcends them.Nadella is the kingmaker now.The architect of Microsoft’s transformation from PC operating systems to cloud computing, he’s already overseen some big deals. Within a year of taking over as CEO in 2014, he bought the Swedish games company behind Minecraft; later, he closed the $24 billion purchase of professional-network site LinkedIn Corp.An earlier idea to have TikTok, or at least the U.S. operations, spun off and bought by existing ByteDance investors looked good on paper. But it likely wouldn’t have allayed U.S. concerns about data privacy and Chinese control given how opaque the ownership structure would be afterward.As my colleague Tae Kim wrote, a TikTok-Microsoft deal makes sense because it could allay antitrust concerns just days after four other tech CEOs were grilled by members of Congress. I also think it might solve the issue of data transparency by putting the U.S. operations of TikTok in the hands of a trusted, publicly listed American company. Microsoft thinks so, too, outlining how it would transfer and protect user data. The company "would ensure that all private data of TikTok’s American users is transferred to and remains in the United States,” it said. Any such data currently stored outside the U.S. would be deleted from servers overseas, it continued.But first, Microsoft will need to convince the U.S. administration. The company indicated which buttons it’s pushing, mentioning in its statement — before it even named ByteDance — both the U.S. Treasury Department and the Committee on Foreign Investment in the United States.Some U.S. lawmakers are already on board. “Win-win,” Senator Lindsey Graham wrote on Twitter. His fellow Republican John Cornyn and others looked ready to sign off, too.It’s not really up to Congress, but their support adds important political momentum to the deal. Democrat Senator Richard Blumenthal is among those more cautious, noting that such a transaction “should not distract us from the need to crack down on insidious spying & surveillance” by Chinese companies.It’s quite likely other names will pop up as potential suitors, leaked by bankers or ByteDance insiders in the hope of building the illusion of a bidding war. But Microsoft has the credibility and strategy to get a deal past the real gatekeepers in Washington, leaving ByteDance with few other options.The onus is on Nadella to get it done, and quickly. Microsoft said it will complete discussions by Sept. 15.Now let’s look at what’s for sale.ByteDance itself had revenue of $17 billion last year with profits of $3 billion. But that’s the entire company, with a stable of at least 20 apps — including Douyin (the local version of TikTok) and news feed Toutiao. According to The Information, TikTok’s revenue last year was around $300 million globally — that’s less than 2% of an entire company which CB Insights lists as the world’s top unicorn at $140 billion in value. This year, TikTok is aiming for $500 million in sales in the U.S., The Information reports.According to Microsoft, it’s looking to buy operations in the U.S., Canada, Australia and New Zealand. Throw in a little extra for the three smaller markets and some upside, and we’re looking at maybe $700 million in annual revenue this year, $1 billion if we’re lucky. India and the U.K. were not mentioned. These are crucial omissions, given that Britain is also a key Five Eyes security partner and far larger than both New Zealand and Australia, while India is TikTok's largest potential market but was banned after a recent border clash.Facebook Inc. shares trade at 9.6 times sales and Twitter Inc. at 8.5 times sales. Sure, TikTok is growing more quickly, but so was Snap Inc., that once-hip social media app which had an initial public offering in 2017 and posted 590% revenue growth the year before it listed. Snap now trades at 16.5 times sales, and has yet to post an annual profit. The idea that TikTok — without the U.K., India or dozens of other emerging markets — is worth $50 billion today is fanciful. ByteDance’s leadership can be sure that Nadella knows it, too. He has a fiduciary duty to his own shareholders to squeeze TikTok’s owners as hard as possible.After finessing regulators and stroking egos to get this deal done, Microsoft will rightfully expect a big discount. The size of which will prove Nadella’s worth and make this the deal of the decade.(1) For the record: I think the business Microsoft is bidding for is worth closer to $20 billion. That's not to say this will be the transaction price, though.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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  • The ASX stocks hit by Victoria’s stage 4 forced shutdowns

    A wide range of ASX stocks are about to be hit by forced shutdowns in Victoria as the state grapples to control the second wave of COVID-19 cases.

    The state’s premier Danial Andrews is ordering most retailers to shutter along with construction sites, car dealerships and manufacturing plants, reported the Australian Financial Review.

    ASX stocks slumping on the news

    The news sent the JB Hi-Fi Limited (ASX: JBH) share price and the Harvey Norman Holdings Limited (ASX: HVN) share price tumbling to intra-day lows. Both stocks tumbled over 2% each at the time of writing.

    Listed auto dealerships also hit the lows of the Monday trading session. The AP Eagers Ltd (ASX: APE) share price crashed 5.6% to $7.66 while the Autosports Group Ltd (ASX: ASG) share price lost 2.3% to $1.27.

    Another to lose steam in late trade is the Lendlease Group (ASX: LLC) share price. It lost 2.4% to $11.08, probably on worries that some of its construction sites will need to be closed.

    New restrictions on construction

    There will only be three types of construction that will be allowed to continue in metropolitan Melbourne but with stricter restrictions coming into force by midnight Friday.

    Government infrastructure projects can continue. While the number of people working on these projects have been halved, the state government will be looking to reduce this even further.

    Large non-residential construction projects with buildings above three storeys will be allowed to remain open.

    However, operators will need to cut the number of workers to “a practical minimum” but with no more than 25% of their workforce.

    For residential sites, operators cannot have more than five people working onsite at any one time.

    Smaller companies to get more help

    While the government is offering some financial support for businesses, its mainly aimed at smaller business and won’t make much difference to larger listed companies.

    Premier Andrews isn’t ruling out providing more support packages targeting specific industries, but I don’t think these will make much difference to larger listed companies.

    ASX winners benefiting from State of Disaster

    On the flipside, this latest development sent shares in a handful of ASX stocks higher. The Kogan.com Ltd (ASX: KGN) surged nearly 10% to a record high of $18.31 ahead of the close.

    The Coles Group Ltd (ASX: COL) share price and Woolworths Group Ltd (ASX: WOW) share price also outperformed the S&P/ASX 200 Index (Index:^AXJO). Supermarkets are allowed to operate during stage four restrictions and so are petrol stations.

    This is why the Viva Energy Group Ltd (ASX: VEA) share price and Ampol Ltd (ASX: ALD) share price surged by over 5% each.

    Legendary stock picker names 5 cheap stocks to buy right now

    Motley Fool resident tech stock expert Dr. Anirban Mahanti has stumbled upon five stocks he believes could be some of the greatest discoveries of his investing career.

    These little-known ASX stocks are growing like gangbusters, yet you can buy them today for less than $5 a share. Click here to learn more.

    See these 5 cheap stocks

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    Brendon Lau owns shares of Woolworths Limited. Connect with me on Twitter @brenlau.

    The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool Australia has recommended 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.

    The post The ASX stocks hit by Victoria’s stage 4 forced shutdowns appeared first on Motley Fool Australia.

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  • The Biggest Bull on a Gasoline-Powered Future Is… 7-Eleven?

    The Biggest Bull on a Gasoline-Powered Future Is… 7-Eleven?(Bloomberg Opinion) — You might think that 2020 was the year everyone gave up on petroleum-powered transport. Royal Dutch Shell Plc Chief Executive Officer Ben van Beurden has expressed doubts about whether oil demand will ever return to pre-Covid levels. The world’s largest carmaker Volkswagen AG pledged that more than a fifth of its vehicles will be battery-driven by 2025.The International Energy Agency is pushing for 30% of vehicle sales to be electric by 2030 and expects gasoline demand to peak late this decade even under current policies. Major oil refineries are switching to manufacture raw materials for plastics and jet fuel on the expectation that consumption in their core market of powering road transportation is in decline.Seven & i Holdings Co. has a different view. It’s impossible to see the 7-Eleven owner’s $21 billion offer to buy Marathon Petroleum Corp.’s Speedway convenience stores as anything but a wager on the future of their main sales item: gasoline. Seven & i’s motivation is straightforward. Speedway has 3,900 sites concentrated in the Midwest and South of the U.S. That’s equivalent to about 40% of 7-Eleven’s existing North American network, and turns over about $1.5 billion of annual earnings before interest, taxes, depreciation and amortization. By using its convenience-store expertise, Seven & i(1) can upgrade Speedway’s shelves to a more attractive and profitable mix of own-brand products. Fuel, which accounts for about three-quarters of revenue and half of gross profit, will largely look after itself.As we've written, that prediction looks like a mistake. Even under a Trump administration that’s worked hard to tear up fuel-economy rules, gas demand has stood still for four years. Despite evidence that urban traffic has rebounded close to pre-pandemic densities and long holiday road trips are exceeding former levels, on a trailing 12-month basis, gasoline consumption is currently at its slowest since the early 2000s.The increasing efficiency of conventional vehicles is already enough to reduce the amount that car owners spend filling the tank and the number of trips they make to gas stations, a dynamic that will hurt both the fuel and non-fuel sides of the business.Add in the impact of electric vehicles and the effect will be compounded. At present, there are just 1.5 million on U.S. roads; by the end of the decade, General Motors Co. expects to see at least twice that number sold there every year, equivalent to nearly 20% of annual sales. While gas stations can install chargers to accommodate this market, battery vehicles charged at home or in workplaces won’t have to make the regular visits to the pump and convenience store that even hybrid cars require.The risk for Seven & i is that it’s willfully blind to these looming changes. Battery cars as a share of U.S. vehicle sales will rise to just 5% in 2030 and 11% in 2050, according to its presentation. That’s drastically lower than most carmakers and oil companies are predicting (BloombergNEF pegs the share at around 25% in 2030 and above 60% by 2040). Remarkably, Seven & i posits as one of the “reasons for the acquisition” the way that taking control of Marathon’s store network will help it achieve environmental, social and governance goals such as installing energy-efficient lighting, switching stores to renewable power, and reducing use of plastic packaging. This misses the forest for the trees. The overwhelming majority of emissions from a gas station aren’t the Scope 1 and Scope 2 type generated on-site and from buying electricity, but the Scope 3 carbon generated when the fuel it sells is burned in car engines.Unlike the ESG initiatives that Seven & i boasts about, this isn’t just a nice-to-have factor to stick in the corporate responsibility report. The shift that the automotive and petroleum industries expect to see in the power-trains of road vehicles over the coming decade is a challenge to the core of the fuel retail model. With this deal, 7-Eleven will go from depending on gas for 20% of its gross profit to 30%. It’s heading the wrong direction down a one-way street.(1) Although the 7-Eleven brand is used around the world, we're using "7-Eleven" in this article to refer to the North American unit owned by the Japanese parent company, Seven & i.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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  • Why you should own a piece of the world’s biggest company

    apple with a slice out of it

    The king is dead. Long live the king!

    This is the chorus I imagine ringing through the halls at Apple Inc.‘s (NASDAQ: AAPL) corporate headquarters in Cupertino, California in the United States.

    Listed on the tech-heavy Nasdaq Inc (NASDAQ: NDAQ), the Apple share price surged 10.5% on Friday. Investors piled in after the company’s third quarter results revealed revenue grew by an impressive 11% from the same quarter in 2019, among other numbers that beat analysts’ expectations.

    That brings Apple’s year-to-date gains to 41.5%. And it lifts the company’s market capitalisation to an eye-popping US$1.84 trillion (AU$2.57 trillion).

    The share price leap was enough to see Apple surpass Saudi Arabia’s national oil company, Saudi Aramco, which Bloomberg reports is worth US$1.76 trillion. The sharp gain was also enough to comfortably put Apple ahead of its customary sparring partner, Microsoft Corporation (NASDAQ: MSFT), with a current market cap of ‘merely’ US$1.55 trillion.

    A lesson in long-term investing

    Few blue chip companies offer a better lesson in the benefits of buying and holding quality shares for the long term than Apple.

    Let’s go back 20 years, a decent timeline for long-term investors to hold onto quality stocks. On 4 August 2000, you could have bought Apple shares for US$3.38. Today, they are worth US$425.04. That’s a gain of 12,475%. And not from a highly speculative and high-risk micro cap, either.

    Twenty years too long for you? How about 10 years? In August 2010, you could have picked up shares in Apple for US$34.50. Still, a very handy 1,132% gain at the current Apple share price.

    And in after hours trading, the stock continues to edge higher, up 0.5% at time of writing.

    Why you should look beyond the ASX

    There are plenty of great Australian companies listed on the ASX. And you should certainly own a number of them in your diversified portfolio.

    But ASX shares only make up some 2% of the total global market. If you limit yourself to shares on the ASX, you’re shutting out 98% of the investment opportunities available to you.

    Most brokers, online and physical, now enable you to buy international shares more easily and at a lower cost than ever before. And if you want to own a piece of the world’s most valuable company before it potentially runs even higher, you’ll need to look offshore.

    Legendary stock picker names 5 cheap stocks to buy right now

    Motley Fool resident tech stock expert Dr. Anirban Mahanti has stumbled upon five stocks he believes could be some of the greatest discoveries of his investing career.

    These little-known ASX stocks are growing like gangbusters, yet you can buy them today for less than $5 a share. Click here to learn more.

    See these 5 cheap stocks

    More reading

    Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Apple and Microsoft and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. The Motley Fool Australia has recommended 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.

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  • The Fortescue Metals share price just hit a new record high

    success, high flyer, win, challenge

    The Fortescue Metals Group Limited (ASX: FMG) share price has been a positive performer on Monday.

    At one stage today the iron ore producer’s shares were up 3% to a new record high of $17.92.

    When the Fortescue share price reached that level, it meant it was up a remarkable 126% since this time last year.

    Why is the Fortescue share price at a record high?

    Investors have been buying Fortescue shares on Monday after the iron ore price recorded a solid gain last week.

    According to CommSec, the spot price of the steelmaking ingredient rose by 1.7% last week to end it at US$111.45 a tonne.

    This is great news for Fortescue, given its ultra-low cash costs per tonne. In its recent fourth quarter update, Fortescue revealed that it expects its C1 cost to be US$12.94 per wet metric tonne in FY 2021.

    And while Fortescue’s iron ore doesn’t sell for the benchmark spot price because of its lower grade, it still stands to make bumper profits on each tonne sold.

    In FY 2020 it was able to command an average realised selling price of US$81 per dry metric tonne. This bodes well for earnings and dividends in the year ahead.

    What else is driving the Fortescue share price higher?

    Also supporting the Fortescue share price has been a broker note out of Macquarie.

    Last Friday, analysts at the investment bank retained their outperform rating and lifted their price target on the company’s shares to $18.00.

    Macquarie was impressed with its better than expected fourth quarter and also its guidance for the year ahead.

    The broker also notes that its medium-term outlook looks positive and should be supported by the Eliwana operation. It was happy to see that the development is on track and expects it to improve its product mix in the future.

    The Eliwana project underpins the introduction of a 60.1% iron grade product, West Pilbara Fines, and will maintain Fortescue’s low cost status. Management notes that it provides greater flexibility to capitalise on market dynamics while maintaining its overall production rate of a minimum 170mtpa over 20 years.

    5 stocks under $5

    We hear it over and over from investors, “I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!” And it’s true.

    And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!

    See the 5 stocks

    *Extreme Opportunities returns as of June 5th 2020

    More reading

    Motley Fool contributor James Mickleboro 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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  • ASX stock of the day: Catapult share price leaps 15% on US college football contract

    man scoring touchdown in football game

    The Catapult Group International Ltd (ASX: CAT) share price is up 14.6% today (at the time of writing) after the technology company revealed it has been awarded a contract to provide video exchange services to the top 130 United States college football teams. Catapult says its new video exchange solution will change the way content is traded among college football teams and open up new strategic opportunities for the company. 

    What does Catapult Group do? 

    Catapult Group creates technology to improve the performance of athletes and teams. This includes wearable technology, video analysis, and athlete management programs. Its products are used by some 2,970 teams and organisations worldwide, including AFL Queensland, Hartford Athletic, and Newcastle United. 

    How has the Catapult share price been performing? 

    The Catapult share price took a dive in March but has recovered strongly and is now trading down 12.1% from its February high. By comparison, the S&P/ASX 200 (ASX: XJO) is trading down more than 17% from its February high. Global demand for professional sports has improved in recent months with thousands of athletes and sports teams returning to work.

    The company has reported that FY20 revenue is expected to be between $100 million and $101 million. Free cash flow of $9 million was generated during the year, meaning cash flow positivity was achieved a year earlier than forecast. Revenues and earnings before interest, taxes, depreciation and amortisation (EBITDA) continued to grow despite the postponement of many professional sporting leagues globally, This was thanks to the subscription nature of the company’s business model, with around 75% of revenues subscription based. 

    Catapult adopted a conservative approach early in the pandemic, instituting cost control measures and managing working capital. This ensured it maintained a strong cash position while minimising business disruption. Catapult finished the financial year in a position of strength with $27.5 million cash at bank. 

    What’s next for Catapult Group? 

    Catapult continued to win new customers and retain existing customers during recent lockdowns, including landing significant deals in core sports geographies. Delays and temporary closures have, however, shifted the sales cycle for the company. This means a significant portion of sales expected to be made in FY20 are now expected to be made in 1H FY21. Although the sales impact of COVID-19 is expected to linger, the pipeline for FY21 remains strong. The US college football win signifies an accelerated step towards offering a broader platform of cloud services to Catapult customers.

    Legendary stock picker names 5 cheap stocks to buy right now

    Motley Fool resident tech stock expert Dr. Anirban Mahanti has stumbled upon five stocks he believes could be some of the greatest discoveries of his investing career.

    These little-known ASX stocks are growing like gangbusters, yet you can buy them today for less than $5 a share. Click here to learn more.

    See these 5 cheap stocks

    More reading

    Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Catapult Group International Ltd. The Motley Fool Australia has recommended Catapult Group International 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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  • WAM Microcap share price rises on big special dividend

    blocks trending up

    The WAM Microcap Limited (ASX: WMI) share price is up 6% right now after announcing a special dividend for FY20.

    A quick overview of WAM Microcap

    WAM Microcap is a listed investment company (LIC) which invests in ASX shares with market capitalisations under $300 million at the time of purchase.

    The LIC is operated by Wilson Asset Management (WAM), one of the best small cap managers in Australia in my opinion. Fund management firm WAM was founded by veteran investors Geoff Wilson. WAM operate a number of other LICs including WAM Capital Limited (ASX: WAM) and WAM Leaders (ASX: WLE). 

    FY20 result

    WAM Microcap reminded investors that over the 12 month period to 30 June 2020 its investment portfolio outperformed the S&P/ASX Small Ordinaries Accumulation Index by 17.5% after rising by 11.8% (before fees, expenses and tax). WAM enable shareholders to benefit from this growth through the WAM Microcap share price growth as well as from the dividends it pays.

    Since inception in June 2017, the WAM Microcap investment portfolio has increased by 15.9% per annum, outperforming the index by 10% per annum – again this is before fees, expenses and tax.

    WAM Microcap said that it had a profit reserve of 28.7 cents per share at 30 June 2020 before the payment of dividends.

    WAM Microcap dividend

    The WAM Microcap share price seems to be rising after the board announced two dividends.

    As expected, the LIC announced a final fully franked dividend of 3 cents per share, which is a 33.3% increased compared to a year ago. WAM Microcap also announced a special fully franked dividend of 3 cents per share.

    WAM Microcap said that it is committed to paying an increasing stream of fully franked dividends as long as it has sufficient profit reserves and franking credits and it is within prudent business practices.

    That means at the current WAM Microcap share price, the two end-of-year dividends amounts to a grossed-up dividend of 6%.

    WAM Microcap share purchase plan (SPP)

    WAM Microcap also announced a SPP for shareholders who want to increase their holding of the LIC. Investors will be able to purchase up to $30,000 of new shares without being charged brokerage.

    Shareholders who participate will be entitled to receive the final ordinary dividend and the special dividend.

    The WAM Microcap board intend to offer shares to professional and sophisticated investors at the same price and terms as the SPP.

    The SPP will be priced at the WAM Microcap net tangible assets (NTA) at 31 July 2020. That may end up being a material discount to the current WAM Microcap share price. At the end of June 2020 the WAM Microcap NTA was $1.31 per share.

    WAM Microcap said that the primary purpose of the capital raising is to increase the company’s assets, increase its relevance to the market, improve the prospect of broker and research coverage, increase interest from financial planners and gain more access to market opportunities such as pre-IPO capital raisings.

    Positions

    At the end of each financial year, LICs reveal their investment positions. At 30 June 2020, WAM Microcap’s biggest positions were: Infomedia Limited (ASX: IFM), City Chic Collective Ltd (ASX: CCX), Temple & Webster Group Ltd (ASX: TPW), People Infrastructure Ltd (ASX: PPE), Viva Leisure Ltd (ASX: VVA) and AMA Group Ltd (ASX: AMA).

    Foolish takeaway

    WAM Microcap has been a strong performer since inception. It had a great run between 31 March 2020 and 30 June 2020. Its portfolio’s gross return was 32.9% over that three month period.

    The LIC offers quite a large dividend, which is attractive in this COVID-19 era. Excluding the special dividend, it has an annual ordinary grossed-up dividend yield of 6% for new investors.

    Depending on what the NTA was at 31 July 2020, it’s quite likely I will participate in the SPP, even if it’s just a relatively small purchase.

    Legendary stock picker names 5 cheap stocks to buy right now

    Motley Fool resident tech stock expert Dr. Anirban Mahanti has stumbled upon five stocks he believes could be some of the greatest discoveries of his investing career.

    These little-known ASX stocks are growing like gangbusters, yet you can buy them today for less than $5 a share. Click here to learn more.

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    Tristan Harrison owns shares of WAM MICRO FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Infomedia and Temple & Webster Group Ltd. The Motley Fool Australia has recommended People Infrastructure Ltd and Temple & Webster Group 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 ASX small cap benefitting from COVID that you’ve probably never heard of

    waving the chequered flag

    The Vmoto Ltd (ASX: VMT) jumped to a more than five-year high today after it released a market update.

    The electric scooter manufacturer rallied 13.3% to $0.51 in after lunch trade when the All Ordinaries (Index:^AORD) (ASX:XAO) and the S&P/ASX 200 Index (Index:^AXJO) slipped 0.2% each.

    The ASX small cap may be benefiting from the COVID-19 pandemic with increased demand on food delivery services – which uses e-scooters.

    Record deliveries

    Management said it’s receiving strong interest from other business customers too, including parcel delivery and ride-sharing companies.

    Vmoto reported selling a record breaking 6,389 units in the June quarter, which is 55% above what it achieved in the previous quarter. International orders accounted for 94% of these units.

    It also reported that it delivered 2,000 units of its ride sharing products to Netherlands-based Go Sharing, and it received an additional order for another 1,500 units.

    Further, Vmoto shipped its first order of 60 units to a new ride-sharing company in the Czech Republic called re.volt.

    Riding the COVID and electric vehicle trends

    Management is currently supplying products to seven sharing operators globally and is actively in discussions with 12 other sharing operators.

    “With the European governments’ initiatives encourage consumers to adopt electric vehicles and the impacts from Covid-19 on personal and public transportation and social distancing, the Company and its business are well positioned to benefit from these for longer term,” said Vmoto in its ASX statement released today.

    Financial position

    The company completed a $4 million capital raise in May via a share purchase plan (SPP). This takes its total cash holding to $7.3 million at the end of June after it paid a RMB30 million ($6 million) capital contribution to Nanjing Vmoto Soco Intelligent Technology.

    Vmoto reported having firm international orders for 6,353 units and it continued to receive further orders from its existing and new customers after the end of the latest quarter.

    International interest

    “In  2Q20, the Company signed a number of exclusive distribution agreements with international  distributors across Armenia, Japan, Costa  Rica, Panama and Thailand for the warehousing, distribution and marketing of its B2C range of electric two-wheel vehicle products,” added the company.

    “Vmoto has also supplied samples to and/or is in discussions with a number of potential B2C and  B2B  distributors and customers in Brazil, Bulgaria, Cuba, Dubai, Egypt, Kazakhstan, Maldives,  Malaysia, Mongolia, Nepal, Indonesia,  Israel, Mexico, Morocco, Nepal, Portugal, Philippines,   Romania, Russia, Saudi Arabia, Singapore, Slovenia, South Africa, Spain, Switzerland, Turkey and Ukraine.”

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    Motley Fool contributor Brendon Lau 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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  • These ASX medical shares fell double figures in July – are they a buy?

    coronavirus mask with a falling line graph on it

    It seems investors in these two ASX medical shares have taken the opportunity to lock in recent gains, sending prices down significantly in July. The Avita Therapeutics Inc (ASX: AVH) share price fell more than 30% in July as sales faltered in the face of COVID-19. The PolyNovo Ltd (ASX: PNV) share price fell nearly 14% despite reporting record sales in June. Both companies operate in the medical device space and will potentially see strong demand for their products over the coming decade. Coronavirus may have dented short-term demand, but are these ASX medical shares worthy long-term buys?  

    Avita Therapeutics 

    Avita Therapeutics produces a spray-on skin system used to treat burn wounds. The ‘Recell System’ allows a suspension of spray-on skin cells to be produced using a small sample of the patient’s own skin. This can be sprayed onto a wound, improving healing and scar appearance. Avita is primarily focused on the United States market and redomiciled to the US earlier this year. Growth in sales of the Recell System were strong in FY20, growing 213% over the prior year. But the rate of sales growth took a tumble in the fourth quarter with sales revenue of US$3.79 million compared to US$3.78 million the previous quarter. 

    Lockdown measures meant there was a reduction in accidents leading to burn injuries. Access to facilities and patients was also limited due to infection control procedures aimed at preventing the spread of coronavirus. A re-prioritisation of hospital resources meant April sales fell to their lowest level in 2020. Encouragingly, procedural volumes resumed growth in May and June with the benefits of the Recell System, which include fewer surgeries and reduced hospital stays, embraced by surgeons. The system is also being investigated for use in treating vitiligo, scar reconstruction, and for aesthetic applications. This could substantially increase the addressable market for this ASX medical share. 

    The Avita share price is currently trading at $6.12 which is a 1% gain for the day so far. 

    PolyNovo

    PolyNovo produces ‘Novosorb BTM’, an implantable dressing that can be integrated into the body as it heals. The product is produced using a biodegradable polymer, which helps the body to use its own mechanisms to repair damaged tissue. Novosorb BTM is used in the treatment of severe wounds or burns where the dermal layer of the skin has been lost and requires a graft to close. PolyNovo reported record US sales of Novosorb BTM in June, with a 67% increase in hospital accounts over FY20. The company also made its first sale in the United Kingdom and expects additional near-term sales from this market. 

    Sales of Novosorb BTM tend to be lumpy, but there is a strong upward trajectory with product sales in FY20 expected to double those of FY19. In a July update, PolyNovo Chairman, David Williams, said “While FY20 sales will show impressive growth over FY19, the sales run-rate is more impressive and should be a better indicator of the near-term future”. PolyNovo’s polymer has potentially even wider applications. The company is currently working on hernia repair and breast reconstruction products. Both areas have large addressable markets and would diversify the revenue base for PolyNovo.  

    At the time of writing, the PolyNovo share price is trading 0.91% up for the day at $2.22.

    Foolish takeaway

    I believe these two ASX medical shares have serious long-term potential. While coronavirus may have put a dampener on short-term demand, longer-term indicators are positive. This means recent pull backs in each company’s share price may provide an opportunity for long-term investors to take a stake at a discount. 

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    We hear it over and over from investors, “I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!” And it’s true.

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    Kate O’Brien owns shares of Avita Medical Limited and POLYNOVO FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Avita Medical Limited and POLYNOVO FPO. The Motley Fool Australia has recommended Avita Medical 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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