The Appen Ltd (ASX: APX) share price may be trading lower on Friday, but it remains one of the best performers on the S&P/ASX 200 Index (ASX: XJO) in 2020.

Since the start of the year the artificial intelligence company’s shares have gained almost 60%.

This compares to a 10% decline by the benchmark ASX 200.

Why is the Appen share price up 60% in 2020?

Investors have been fighting to get hold of Appen’s shares this year after it continued its meteoric growth despite the pandemic.

In February Appen released its full year results and not only revealed stellar earnings growth for FY 2019 but forecast more of the same for FY 2020.

For the 12 months ended December 31, Appen posted revenue of $536 million and underlying EBITDA of $101 million. This was a 47% and 42% increase, respectively, on FY 2018’s result. Positively, the latter was also ahead of management’s upgraded guidance for EBITDA in the range of $96 million to $99 million.

The key driver of this was its Relevance segment. Once again it was the star of the show for Appen with a 37% increase in revenue to $430 million. This means it now accounts for 80% of its total revenue. And thanks to margin expansion, Relevance EBITDA increased 66% year on year.

Looking ahead, management revealed that it is forecasting underlying EBITDA in the range of $125 million to $130 million in FY 2020. This represents year on year growth of 24% to 29%. Pleasingly, this has since been reiterated twice over the last few months despite the pandemic.

What about the future?

The good news is that Appen still has a very long runway for growth, which is why I think it would be a fantastic buy and hold option despite its strong gains in 2020.

A company presentation from last year advised that the AI market is expected to grow to be worth between US$169 billion and US$191 billion per annum by 2025.

This is great news for Appen because an estimated 10% of spending in this market goes towards the data labelling it specialises in. That means Appen’s addressable market could be worth US$17 billion to US$19 billion in five years. Which, as you can see above, is many times greater than the revenue it is currently generating.

Given the quality of its services and its strong relationships with major tech companies, I believe it is in a great position to capture a growing slice of this market. In light of this, I feel confident Appen shares will be market beaters over the 2020s. 

More reading

• Are these the best ASX tech shares to buy right now?
• 3 must-buy ASX growth shares for July
• 2 ASX tech shares to buy and hold beyond 2025
• Is Altium still a leading ASX 200 tech share to buy?
• 5 things to watch on the ASX 200 on Tuesday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Appen 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 Viva Leisure Ltd (ASX: VVA) share price stormed more than 6% higher in early trade after the company released a market update. It has since dropped back slightly, sitting at $2.06 at the time of writing.

What did Viva Leisure announce?

Viva released a positive market update earlier today informing shareholders on the company’s recent performance. According to the announcement, Viva’s facilities have been trading above management’s expectations following their re-opening.

The listed gym operator announced that 94% of its locations are either operating or undergoing scheduled refurbishment and will re-open shortly. Viva also informed the market that operations in the Melbourne metro area account for only 4% of the company’s membership portfolio and are not operating due to government COVID-19 lockdown restrictions. However, 3 of the company’s operations in regional Victoria are still open and operating as they aren’t affected by the restrictions.

Viva also reported that membership levels have recovered to 98% of pre-COVID-19 levels. According to the company’s management, the significant recovery in membership is above its expectations. Viva currently has 95,400 operating members and around 10,000 memberships suspended due to restrictions. The company also provided an update on landlord arrangements, with Viva successfully negotiating waiver and deferral arrangements with over 75% of its landlords.

How has Viva performed in 2020?

Viva Leisure is an ASX-listed gym operator with 100 health clubs in Australia. Pre-COVID, the company reported a 52.7% increase in revenue for the first half of FY20 and a 79.8% increase in earnings before interest, tax, depreciation and amortisation.

The government restrictions and lockdown period saw all of the company’s operations in Australia close for around 10 weeks. As a result, Viva reported a 100% reduction in revenue over the period from April to May 2020. The company was forced to cancel all casual shifts and reduce its permanent staffing in late March.

In early June, Viva completed a $25 million equity raising in order to provide the company with financial strength and flexibility to function. The company also reported that funds will be used for strategic acquisition opportunities and to accelerate refurbishments at existing locations.

Foolish takeaway

The Viva share price stormed more than 6.1% higher in early trade after hitting an intra-day high of $2.09. Since then the company’s share price has been sold-down and is currently trading more than 4% higher for the day at around $2.06.

More reading

• Fund managers have been buying these ASX shares

Motley Fool contributor Nikhil Gangaram 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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Is the REA Group Limited (ASX: REA) share price a buy?

The real estate property portal business saw its share price fall 43% from 21 February 2020 to its low of $65 on 23 March 2020. Since then it has risen 64% to today’s $106.60.

Where to now for REA Group? It’s being priced as though conditions have almost returned to normal.

The worst of the COVID-19 period across Australia saw a severe drop in the number of property listings, as you’d expect.

FY20 third quarter

When REA Group announced its profit for the quarter ending 31 March 2020, the company also revealed that residential listings were down 33% across the country with Sydney showing an 18% fall and Melbourne with a 27% fall.

Obviously REA Group is quite dependent on volume for generating its earnings. And the earnings should be important for the direction of the REA Group share price.

In that third quarter of FY20, REA Group said that national listings were down 2% over the three months due to COVID-19. This led to revenue after broker commissions dropping 4% to $640.2 million, operating earnings before interest, tax, depreciation and amortisation (EBITDA) falling 3% to $390.8 million and free cash flow declining 14% to $195.2 million.

REA Group did what it could to offset the problems such as ‘digital inspections’ with digital video tours and 3D tours.

However, some measures that the company announced will cause lower earnings in the short-term. It gave customers subscription discounts and also increased the advertising duration which will extend the revenue recognition period. However, cost reductions will help with offsetting the revenue reduction. FY20 fourth quarter operating expenses are expected to be 20% lower than the fourth quarter in FY19.

Balance sheet

Many businesses have had to do a capital raising to ensure that their balance sheets remain strong during this tough period. But these capital raises have been done at a low share price, which dilutes existing shareholders. Raisings from the likes of Webjet Limited (ASX: WEB) and Qantas Airways Limited (ASX: QAN) were necessary but existing shareholders will now only get a smaller share of the earnings when they recover.

Thankfully, REA Group hasn’t had to raise capital because of its strong balance sheet. At 30 April 2020 it had low levels of debt and a cash balance of $135 million. It also entered into an additional $149 million debt facility as well as a $20 million overdraft facility with National Australia Bank Ltd (ASX: NAB).

In short, REA Group is in a great financial position and shouldn’t need to raise capital.

So is the REA Group share price a buy?

A balance sheet is important for a business, but it isn’t the main thing in my opinion. Apple has a fantastic balance sheet, but there’s more to Apple than its huge cash pile.

The renewed Melbourne lockdown will make it harder for REA Group to bounce back quickly if listings remain lower in Victoria for the next few months. The Sydney property market could also come under pressure if COVID-19 gets out of control there.

REA Group is now trading at 44x FY21’s estimated earnings. I don’t think that represents good value in the current share market because it relies on there being a return to normal listing activity. If there are numerous forced property sellers over the next six months due to jobkeeper and payment holidays coming to a close thenperhaps  REA Group may see that required activity bounce.

But the combination of lower listings volume and more attractive listing options for vendors makes me believe that, at today’s share price, I don’t think REA Group is going to be a market-beating buy in the medium-term. If I had to go for something property related it would be Brickworks Limited (ASX: BKW).

More reading

• 3 high quality blue chip ASX shares Warren Buffett might buy
• Is the REA Group share price in the buy zone?
• Here are the top 5 ASX tech shares on the All Tech Index
• Cochlear and these ASX 200 shares could be fantastic buy and hold investments
• Where to invest $10,000 into ASX shares in July

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Brickworks and Webjet Ltd. 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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The Azure Minerals Limited (ASX: AZS) share price has rocketed higher today after the mineral exploration company announced acquisition plans. Azure announced that it is set to acquire a number of high quality gold and nickel projects in Western Australia. Since the announcement, the Azure Minerals share price has soared 24% to 16 cents.

What does Azure Minerals do?

Azure Minerals is a mineral exploration company focused on the development of nine mineral projects in Mexico and now in Australia. The company maintains a primary focus on developing the high grade, zinc, lead, silver Oposura project in Mexico, with full scale production expected by early to mid 2021.

The company often looks to leverage partnerships with major resource companies to develop advanced stage projects with potential for large scale, long life mining operations. 

What has caused the Azure Mineral share price to move today?

Azure has entered into tenement sale and joint venture agreements with entities controlled by the Creasy Group on several Western Australian gold and nickel projects. These projects include;

• The Turner River gold project (70% Azure/30% Creasy Group). It is located adjacent to De Grey Mining Limited (ASX: DEG)‘s Mallina project. The project hosts 12 kilometres of very fertile strike zone for gold discovery.
• The Andover nickel and copper project (60% Azure/40% Creasy Group). The mine hosts nickel-copper mineralisation discovered by the Creasy Group in 2018, however there has been no drilling since the initial discovery in 2018.
• The Meentheena and Coongan gold projects (70% Azure/30% Creasy Group). The Meentheena site has been drilled for epithermal gold mineralisation and has been explored by Creasy Group since 1994.

Commenting on the background to the acquisition, Azure’s managing director Mr. Tony Rovira said: “Due to the severity of the COVID-19 pandemic in Mexico and the uncertainty of future field operations, Azure sought gold and nickel projects in Western Australia to enable the Company to continue exploration activities.”

Azure Minerals capital raise

Another factor pushing the Azure Minerals share price up today is the news it has received binding commitments from institutions and investors to raise $4 million. The raise will occur at 10 cents per share via a share placement. The money will be put to use supporting the initial exploration activities on the new Western Australian projects.

About the Azure Minerals share price

With the Azure Minerals share price up to 16 cents today, the company continues its resurgence this year. The share price is up by 60% from this time last year, which is impressive considering the almost 10% drop in the All Ordinaries (INDEXASX: XAO) across the same period.

More reading

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• De Grey Mining share price plunges another 13% lower today
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Motley Fool contributor Daniel Ewing 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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I like to keep an eye on the substantial shareholder notices that are released to the ASX. This is because these notices give you an idea of which shares large investors, asset managers, and investment funds are buying or selling.

Two notices that have caught my eye this week are summarised below. Here’s what these fund managers have been buying:

Adairs Ltd (ASX: ADH)

A notice of initial substantial holder reveals that Commonwealth Bank of Australia (ASX: CBA) has been buying this homewares retailer’s shares. According to the notice, the banking giant and its subsidiaries have been building a position in the company since the middle of March. This was at a time when the Adairs share price had crashed lower at the height of the market volatility. In fact, the bank was able to pick up a large parcel of shares for as low as 63 cents each.

It has continued to buy through the recovery and was buying shares as recently as 15 July. That purchase brought its holding to just over 8.6 million shares, which represents a 5.09% stake in the company. At the time of writing the Adairs share price is trading at $2.37, which isn’t overly far from its 52-week high of $2.77. This certainly appears to have been a successful investment by Commonwealth Bank.

Uniti Group Ltd (ASX: UWL)

Another notice of initial substantial holder shows that Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) has become a major shareholder of this telecommunications company. According to the notice, the investment house has made a series of share purchases between 1 June and 13 July. The most recent purchase at the start of the week was for $4 million worth of shares and took its holding to a total of 24,906,745 shares. This equates to a 5.05% stake in Uniti Wireless.

I estimate that the average price it paid for the shares in this notice was approximately $1.65. So with the Uniti Wireless share price currently trading at $1.46, Washington H. Soul Pattinson clearly sees a lot of value in them at this level. And given its long track record of successful investments, it could pay to follow this trade.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Investors may feel like they have missed a significant buying opportunity with both the S&P/ASX 200 Index (ASX: XJO) and All Ordinaries (ASX: XAO) bouncing back more than 30% since their March lows. While the market may continue to crawl higher, here are two ASX shares that I feel have remained dirt cheap.

2 ASX shares that are still dirt cheap

1. Money3 Corporation Limited (ASX: MNY) 

Money3 provides automotive finance for the purchase and maintenance of vehicles in Australia and New Zealand. The company estimates that 1 in every 500 vehicles in Australia and 1 in every 800 vehicles in New Zealand have current Money3 loans. Despite the economic uncertainty amidst COVID-19, the company highlighted in late April that its cash collections over Easter were superior to the prior corresponding period (PCP) and had not been materially impacted by the pandemic to date. 

Money3 believes that it is well positioned to be patient and opportunistic in M&A activity or originating new organic growth when demand returns to pre-pandemic levels. In Australia, government stimulus will have a positive impact on its customers’ ability to continue paying their loans, while new loan originations are continuing to customers with income. The company’s New Zealand business believes that demand for automotive finance will return as restrictions are lifted. 

In its YTD March 2020 unaudited financial results, Money3 saw revenues increase 44.4% on the PCP while normalised NPAT increased 49.2%. A 5 cent dividend was paid out following strong earnings, representing a dividend yield of approximately 5.90%. The Money3 share price trades at a relatively low price-to-earnings (P/E) ratio of just 10.4. Given its growth potential and market leading dividend, I believe Money3 is one of the cheapest ASX shares out there. 

2. Bell Financial Group Ltd (ASX: BFG) 

Bell Financial Group is an Australian-based provider of stockbroking, investments and financial advisory services to private, institutional and corporate clients. On 10 July, the company advised that it expects to report a first half 2020 profit before tax of approximately $23.5m, an increase of around 5% on the PCP. The key drivers of growth were its subsidiaries, Bell Potter Capital and Third Party Platform, delivering 120% and 140% respective increases in unaudited profit before tax ($2.4 million and $3.3 million respectively). 

I believe Bell Financial’s services will continue to be highly sought after despite challenging economic conditions. Demand may be driven by factors such as increased trading volumes from all types of investors, companies requiring additional capital/capital raisings and access to financial advisory services for things such as potential M&A activity. Much like Money3, the Bell Financial Group share price trades at a P/E of just 12.08 while paying a dividend yield of approximately 6.5%.

More reading

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• Safe ASX 200 dividend shares to buy today

Motley Fool contributor Lina Lim 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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