The stock market crash has provided numerous opportunities for investors to purchase cheap stocks. Despite this, some investors may feel that other assets such as gold and Bitcoin offer superior growth prospects. After all, they have risen sharply in price of late, and may have outperformed some stocks over recent months.

However, the track record of the stock market suggests that it offers long-term recovery potential. As such, and with gold and Bitcoin having their own risks, equities could prove to be a better means of making a million than other assets.

Cheap stocks: a buying opportunity

The stock market’s track record suggests that buying cheap stocks can be an effective means of making a million. It has always experienced periods of boom and bust, with neither of them lasting forever. Therefore, investors who can buy undervalued businesses during downturns can be among the biggest beneficiaries during the likely recovery.

At the present time, the continued risk of a second market crash means that many shares are trading on low valuations. In some cases, they are not wholly merited due to the financial strength and competitive advantage of businesses in sectors that have long-term growth potential. As such, there appear to be opportunities for investors to purchase bargain shares even after the stock market’s recent rebound from its decline in February/March.

Clearly, some cheap stocks are unlikely to survive the challenging outlook faced by the world economy. As such, it is imperative for investors to try and purchase the best quality companies they can find, and to diversify across numerous industries and regions. This may reduce your overall risks, and help to provide sustained growth for your portfolio.

Bitcoin and gold: an attractive risk/reward opportunity?

Of course, some investors may seek to avoid cheap stocks in favour of other assets such as Bitcoin and gold. While their prices may have risen sharply, they appear to offer less attractive risk/reward investing opportunities than a portfolio of equities.

For example, gold’s appeal could deteriorate in the coming years as investor sentiment gradually improves. Furthermore, it currently trades close to a record high, which may indicate that there is limited scope for a price rise over the coming years.

Similarly, Bitcoin may not be an attractive investment opportunity. Its limited size and ongoing regulatory risks could mean that its price level is overly generous. And, with the virtual currency lacking fundamentals, challenges in valuing it may mean that buying cheap stocks is a far more logical step for long-term investors.

Therefore, while further difficulties may be ahead for stock market investors, low price levels and the recovery potential of equities mean that now could be the right time to buy a diverse range of companies to make a million.

More reading

• Stock market crash: why I’d grab this rare chance to buy cheap shares
• 3 ASX dividend shares for dependable income
• ASX 200 drops 2%, ASX banks fall, Super Retail jumps
• Is the REA Group share price a buy?
• Why Amazon’s share price is set to leap on the opening bell

Motley Fool contributor Peter Stephens 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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Despite the recent market rebound, there are still a relatively large number of cheap shares that could deliver high returns in the long run.

Certainly, their prices could fall further in the short run due to risks such as a continued rise in global coronavirus cases. However, the recovery potential of the stock market suggests that buying undervalued companies today can lead to high returns compared to other assets.

Moreover, some share prices are rarely as cheap as they are at the moment. Grabbing wide margins of safety that may be temporary in nature could, therefore, be a logical move.

A rare opportunity to buy cheap shares

The last time there were so many cheap shares available to buy was probably during the global financial crisis in 2008/09. Although the recent market rebound means that some sectors now appear to be fully valued, other industries continue to have extremely undervalued shares on offer. In some cases, they trade well below their historic average valuations. This could indicate that they offer good value for money, and that investors have priced in many of the risks they face.

Such opportunities are generally rare. Over a decade has elapsed since the last global bear market and recession, and many investors are likely to be able to count on one hand how many times they have experienced such periods in their own lives. Therefore, taking advantage of the opportunities available today could be a sound move that allows you to buy stocks when they are unusually low, and sell them at a later date when they are relatively likely to trade at higher prices.

Recovery potential

Buying cheap shares today could allow investors to capitalise on a sustained recovery over the long term. As per the global financial crisis, and other past bear markets, a recovery in the stock market’s price level seems likely. Even though there are risks facing the world economy, the impact of stimulus packages such as quantitative easing and tax changes in many major economies could lead to a strong recovery over the coming years.

As such, focusing your capital on undervalued shares could be a more profitable strategy than buying other assets such as cash and bonds. Although less risky assets may offer a higher chance of a return of capital, their profit potential may be very limited in an era when interest rates look set to persist at low levels. In fact, fixed-income securities and cash savings accounts may erode your spending power if monetary policy measures such as quantitative easing prompt a period of higher inflation.

While buying cheap shares today may not necessarily feel like a natural move for any investor to make, history suggests that it is a logical step for those individuals with long-term horizons. Some stocks are rarely this cheap, and could offer high total returns in the coming years.

More reading

• 3 ASX dividend shares for dependable income
• ASX 200 drops 2%, ASX banks fall, Super Retail jumps
• Is the REA Group share price a buy?
• Why Amazon’s share price is set to leap on the opening bell
• Thorn Group share price surges 30% on quarterly report

Motley Fool contributor Peter Stephens 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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Some dividend yields are looking sky high right now – hello, Flight Centre Travel Group Ltd (ASX: FLT). But uncertainty is also at highly elevated levels. Dividends are inherently uncertain. They can be cut or not paid at all if funds are not available. Investors tend to prefer some degree of certainty around whether they will receive investment income. Companies that operate in industries with reliable demand are more likely to be able to pay consistent dividends. Here we take a look at three ASX shares for dependable dividends. 

3 dependable ASX dividend shares

AGL Energy Limited (ASX: AGL)

Electricity is a non-negotiable necessity, so the revenues of power generator AGL are fairly certain. AGL targets a payout ratio of 75% of underlying profit after tax and is currently offering a dividend yield of 6.68%. In the first half of FY20, AGL declared an interim dividend of 47 cents per share. This was down 8 cents per share, consistent with AGL’s payout ratio as underlying profit was down 20% for the half year. This was due to a power station outage, lower wholesale gas prices, and reduced gas volumes. AGL has predicted full year profits in the upper half of its guidance range of between $780 million and $860 million. 

Fortescue Metals Group Limited (ASX: FMG) 

Fortescue produces iron ore which is the main ingredient in steel. Iron ore is the world’s most used metal accounting for about 95% of metal tonnage produced worldwide. This ASX dividend share targets a payout ratio of 50% to 80% of net profits and is currently offering a dividend yield of 5.74%. In the June quarter, Fortescue reported record iron ore shipments of 47.3 million tonnes. Full year shipments were 178.2 million tonnes, exceeding the top end of guidance. FY21 guidance is for iron ore shipments of 175 – 180 million tonnes. Fortescue paid a fully franked FY20 interim dividend of 76 cents per share, up from 30 cents per share in 1H19. 

Orora Ltd (ASX: ORA) 

Packaging provider Orora supplies customers with glass bottles, aluminium cans, caps and closures, boxes, cartons, and more. Packaging is ubiquitous – a necessity in making products available for consumption. This ASX dividend share is currently offering a yield of 7.07% but some have questioned how sustainable this is given Orora’s high payout ratio. Orora returned $600 million to shareholders earlier this year via a special dividend of $450 million and a capital return of $150 million. While COVID-19 will have a negative financial impact, however, Orora’s estimate limits this to $25 million in the second half. 

More reading

• Want to start investing? Here’s how
• Reliable ASX dividend shares still exist
• Is the Fortescue share price too expensive?
• Why Fortescue and these ASX 200 shares are at record highs
• ASX 200 rises 0.75%, Fortescue impresses and Macquarie remains robust

Motley Fool contributor Kate O’Brien has no position in any of the stocks mentioned. 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 S&P/ASX 200 Index (ASX: XJO) fell by just over 2% today to 5,928 points.

The number of COVID-19 case numbers continue to mount in Victoria and the NSW cases continue to edge higher.

Super Retail Group Ltd (ASX: SUL) was a bright spot

The Super Retail share price rose by 9.5% today, it was a shining light on a pretty negative day for the ASX 200.

The retailer announced updated expectations for the FY20 year with the full year result expected on 24 August 2020.

In the 52 weeks to 27 June 2020, three of the company’s four core businesses achieved solid sales growth. Supercheap Auto sales increased 7.6%. Rebel sales grew 3.3% and BCF sales increased by 4%. However, Macpac sales declined by 5%. Overall, total sales grew by 4.2% with like for like sales growth of 3.6%.

Super Retail revealed that sales rebounded strongly during the fourth quarter as the easing of COVID-19 restrictions led to a significant uplift in domestic tourism and travel, personal fitness and outdoor leisure activities. In April there was a 26.2% decline in like for like monthly sales during the peak of the COVID-19 lockdown. But then sales increased by 26.5% in May. In June the momentum continued with like for like sales growth of 27.7%.

The company also announced some preliminary unaudited financial results for FY20.

Total revenue was approximately $2.82 billion, up from $2.71 billion.

Pro forma segment earnings before interest, tax, depreciation and amortisation (EBITDA) is expected to come between $327 million to $328 million – up from $315 million in FY19. Pro forma segment earnings before interest and tax (EBIT) is expected to be between $235 million to $236 million – up from $228 million.

Pro forma normalised net profit expected to come between $153 million and $154 million. The FY19 profit was $153 million. These pro forma numbers exclude $54 million of ‘abnormal items’.

ASX banks take a tumble

The big four ASX banks were among the largest hits on the ASX 200 today.

Australia and New Zealand Banking Group (ASX: ANZ) suffered a share price fall of around 2.2%.

The Commonwealth Bank of Australia (ASX: CBA) share price dropped by around 2.75%.

The National Australia Bank Ltd (ASX: NAB) share price fell by approximately 2.5%.

Finally, the Westpac Banking Corp (ASX: WBC) share price dropped 3.3%.

Most of the ASX 200 was actually in the red today. Whilst Super Retail was one of the best performers, it was another painful day for a business which has suffered a lot recently:

AMP Limited (ASX: AMP)

The AMP share price dropped close to 13% today after giving an update that showed its underlying profit is expected to halve in the upcoming FY20 half year result.

AMP said that the Australian wealth management division is expecting operating earnings of approximately $60 million.

AMP Capital is expecting operating earnings of approximately $70 million.

The AMP Bank division is expecting operating earnings of around $50 million. AMP Bank is expecting a credit loss provision of $25 million due to COVID-19 related economic conditions.

The CEO of the ASX 200 share, Francesco De Ferrari, said: “AMP has taken decisive action to support clients and employees and maintain a strong and resilient business, as COVID-19 continues to impact investment markets and the broader economy.

“Our strong capital position and liquidity have positioned us well to respond, though our first half results have been impacted by the market volatility.

“The pandemic has presented many challenges but has not distracted us from our mission to transform AMP into a simpler, client-led, growth orientated business.

“In the first half, we have made significance progress in delivering our strategy including completing the highly complex sale of AMP Life which simplifies our portfolio and sets us up well for the future.”

More reading

• Why I’m worried about the US markets right now
• Latest ASX stocks upgraded by top brokers to “buy” today
• US tech shares deliver massive results – what does it mean for ASX tech shares?
• Brokers name 3 ASX 200 shares to buy right now
• Why Afterpay, Bapcor, NRW, & Super Retail shares are climbing higher today

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Super Retail 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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Is the REA Group Limited (ASX: REA) share price a buy?

It’s an interesting one. The REA Group share price is still a little below where it was in February 2020. Indeed, since 23 March 2020 the REA Group share price has risen by 67%.

Lower interest rates certainly should increase the valuation of businesses. Australia’s interest rate is now just 0.25%. I think that justifies some of the rise. But COVID-19’s resurgence could knock over some of the recovery in my opinion. 

FY20 third quarter

I think the third quarter update gave us an insight into why a second wave could be so damaging to the property market and REA Group.

In the three months ended 31 March 2020 the property business reported that free cash flow was down 20%.

It was the number of residential listings in April that makes the REA Group share price a hard one to judge. REA Group said that the number of residential listings in April 2020 was down 33%, with Sydney down 18% and Melbourne down 27%. It’s hard to grow earnings with that type of decline. 

REA Group needs a certain amount of volume to maintain, let alone grow, its earnings. REA Group’s stats will probably show that listing numbers rebounded in May and June nationally as COVID-19 was eradicated from states and territories one by one.

The Victorian property market’s size is not enough to knock REA Group’s entire growth off track, but it’s obviously a sizeable part of the overall picture with Melbourne being the second largest city. It could be argued that REA Group is trading too highly with a potential slowdown of listing numbers looking more likely. 

So does this mean that REA Group should be avoided?

Investing is meant to be for the long-term. What happens over the next six months or twelve months shouldn’t necessarily make or break the overall thesis for a business.

I think it’s highly unlikely that COVID-19 will be around forever. The Spanish Flu eventually went away by itself. There are a number of healthcare teams around the world that are trying to find a solution for COVID-19 – either a vaccine or a treatment (hopefully both). The Oxford University vaccine is particularly promising at this stage.  

When you look further into the future, the REA Group share price doesn’t seem to be that bad if it can get back to good growth over the rest of the decade – it’s trading at 35x FY22’s estimated earnings.  

What excites me about the longer-term with REA Group is the international investments in property sites in the US and Asia – two regions with much larger populations and economies than Australia. If you’re quite optimistic about those stakes then perhaps today’s valuation easily be justifiable.

For me, I think REA Group is priced too highly with the potential for damage to property sentiment (and listings) over the next six months. Particularly in Victoria and NSW. However, I think REA Group will easily ride through this difficult period. At 30 April 2020 it had “low debt levels” and a cash balance of $135 million. It also has debt facilities it can tap into.

But I’m still positive about some property ASX shares

I don’t think every property share is too expensive. I’m particularly attracted to Brickworks Limited (ASX: BKW) with its defensive assets of the industrial property trust and the shares of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL). I like Soul Patts as a separate investment as well.

In terms of real estate investment trusts (REITs), I also like the farmland landlords Rural Funds Group (ASX: RFF) and Vitalharvest Freehold Trust (ASX: VTH). They both have distribution yields of more than 5%. They bpth offer defensive rental income which should operate fairly differently from most other REITs and indeed most of the ASX. We all need food, after all.

More reading

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• 2 top ASX growth shares to buy for long-term growth
• All Technology Index celebrates 6 months with stunning outperformance
• Why Lynas, Northern Star, REA Group, & Sezzle shares are storming higher
• Is the REA Group share price a buy?

Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks, RURALFUNDS STAPLED, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended REA 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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Amazon.com, Inc. (NASDAQ: AMZN) has come a long way since 1995 when the company started out as an online bookstore.

Today Amazon has a market cap of US$1.5 trillion (AU$2.1 trillion). And founder and CEO Jeff Bezos counts among the richest people on Earth.

But judging by the company’s second quarter results — released yesterday (overnight Aussie time) — both Bezos and the Amazon share price could have much more growth ahead.

The company reported a 42% increase in operating cash flow, to US$51.2 billion. That’s compared to the previous 12 months ending 30 June.

Net sales grew to US$88.9 billion, up 40% from its second quarter in 2019. And according to the company’s third quarter guidance, net sales are forecast to grow from 24% to 33% compared to the third quarter in 2019.

Net income also rose to US$5.2 billion. That works out to earnings per share (EPS) of US$10.30, compared to US$5.22 EPS in the same quarter of 2019.

Additionally, the COVID-19 lockdowns saw online grocery sales triple, while Amazon increased its grocery delivery capacity by 160%.

A word from Amazon’s founder and CEO, Jeff Bezos

This was another highly unusual quarter… As expected, we spent over $4 billion on incremental COVID-19-related costs in the quarter to help keep employees safe and deliver products to customers in this time of high demand — purchasing personal protective equipment, increasing cleaning of our facilities, following new safety process paths, adding new backup family care benefits, and paying a special thank you bonus of over $500 million to front-line employees and delivery partners. We’ve created over 175,000 new jobs since March and are in the process of bringing 125,000 of these employees into regular, full-time positions. And third-party sales again grew faster this quarter than Amazon’s first-party sales. Lastly, even in this unpredictable time, we injected significant money into the economy this quarter, investing over $9 billion in capital projects, including fulfillment, transportation, and AWS.

How did investors in Amazon stock react?

Amazon trades on the Nasdaq Composite (INDEXNASDAQ: .IXIC) at US$3,051.88 per share. The Amazon share price closed up 0.60% on Thursday. The share price is up 65.0% in after-hours trading.

While the company trades at a nosebleed price to earnings (P/E) ratio of 145 times, Amazon’s share price has been trending higher since 1997, when you could have picked up the stock for US$1.73 per share! And with the company forecasting net sales to grow from 24% to 33% in the next quarter, compared to the same quarter in 2019, I believe Amazon is well-placed to see its shares run higher from here.

More reading

• US tech shares deliver massive results – what does it mean for ASX tech shares?
• Are the big US tech companies about to be broken up?
• Goodman share price hits record high. Is it too late to invest?
• ASX investors have been buying Tesla and these international shares
• ASX investors were buying these 5 international shares last week

John Mackey, CEO of Whole Foods Market, an Amazon 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 Amazon and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool Australia has recommended Amazon. 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 Thorn Group Ltd (ASX: TGA) share price surged 30% on Friday to close the day at 13 cents. The rise in the Thorn Group share price came following the release of the company’s quarterly report.

What was in the announcement?

The company announced that the closure of its Radio Rentals stores was completed. According to Thorn group, the company had initially closed its stores temporarily due to the coronavirus pandemic, later deciding to close them permanently. The store closures were completed at the end of May 2020 with significant redundancies occurring as a result. The company’s Radio Rentals business now utilises a purely online model which onboards customers digitally. Progress was made towards the development of this new structure during the second quarter of 2020.

Thorn reported that its business finance division faced difficulties during the second quarter of 2020 due to reduced cash repayments from customers. The company is in discussion with the lenders of its warehouse funding trust about relief options.  

In the June quarter of 2020, Thorn Group had positive cash flow of $45.5 million. This came as receipts from previously written lease contracts exceeded operating expenses and outgoings for new leases.

Thorn Group paid off $21.3 million of debt funding in the June quarter along with $2 million of its corporate debt facility. 

The company is currently undergoing cost reductions and collecting receivables from its Radio Rentals business after remodelling this division into an online business. It expects both these initiatives to be cash positive for the group. 

At the end of the June quarter, Thorn Group had $71.8 million in cash. This compared to $49.6 million cash at the end of the March quarter.

About the Thorn Group share price

Thorn is a financial services company that provides leasing and financing to consumers and businesses.

In December 2019, Thorn Group settled a class action brought against the company for $25 million. The class action was related to the previous lending practices of its Radio Rentals business.

The Thorn Group share price is up 333% from its 52 week low of 3 cents, however, it is down 40.9% since the beginning of the year. The company’s share price is also down 53.6% since this time last year.

More reading

• ASX 200 drops 2%, ASX banks fall, Super Retail jumps
• Is the REA Group share price a buy?
• Why Amazon’s share price is set to leap on the opening bell
• Apple smashes revenue forecasts
• Is the Woolworths share price in the buy zone?

Motley Fool contributor Chris Chitty 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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