Stock Pick

  • Are ASX 200 shares overvalued right now?

    Hand holding a pin next to a bubble with a dollar sign in it

    The S&P/ASX 200 Index (ASX: XJO) rocketed 2.6% higher to close at a four-month high on Tuesday.

    That’s good news for investors who have ridden ASX 200 shares higher since the March bear market.

    The benchmark Aussie index has now rebounded 35.4% higher since 23 March. That’s been led by some of the biggest companies like Commonwealth Bank of Australia (ASX: CBA) and BHP Group Ltd (ASX: BHP).

    But have ASX 200 shares been overbought at their current valuations or is there something else at play?

    The argument for why they’re overbought

    I think the easiest argument is just to compare where we are now versus the start of the year. 

    The benchmark index is back to where it was in early March. A lot has changed since then in terms of economic growth and corporate earnings.

    Arguably, the current climate means that most ASX 200 shares are not worth what they were back in March. However, share price valuations tend to say otherwise.

    In fact, the JB Hi-Fi Limited (ASX: JBH) share price has climbed 14.6% in 2020. That’s despite difficult conditions for the Aussie retail sector as a result of the pandemic restrictions and significant unemployment.

    All of this could indicate that ASX 200 shares have been overbought and are trading above their intrinsic value right now.

    But ASX 200 shares could continue to climb

    There are a couple of key factors that support ASX 200 shares continuing to climb higher in 2020.

    One is the significant government stimulus being deployed right now. The Federal Government has pumped billions of dollars into the economy in the form of JobKeeper, JobSeeker and other initiatives.

    According to an article in yesterday’s Australian Financial Review, that trend may continue in 2020. AMP Capital portfolio manager, Dermot Ryan, suggested ‘markets continue to want to trend higher’ despite some challenges facing the Aussie economy.

    There’s also been a strong response from central banks around the world. That has helped boost market liquidity and allow companies to fuel growth with cheap borrowing rates.

    Also adding to the bullish scenario is the record low-interest rate environment. Even if investors want a lower risk investment, savings account and bond rates are at all-time lows.

    That means any spare capital is likely to be directed towards the share market. As a result, ASX 200 shares may continue to push higher due to limited investment options to deploy this additional cash right now.

    Foolish takeaway

    I’m not sure if ASX 200 shares have been overbought in 2020. However, I’m certainly not willing to bet against the world’s governments and central banks.

    Add in the possibility of a quicker than expected economic recovery and I think I’ll keep buying ASX 200 shares in 2020.

    Where to invest $1,000 right now

    When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

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    Motley Fool contributor Ken Hall 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 Brambles share price a hidden buy?

    woman whispering secret to a man who looks surprised

    The Brambles Limited (ASX: BXB) share price has climbed 19.4% higher since March but is the S&P/ASX 20 company a buy?

    What does Brambles do?

    Brambles is a global supply chain logistics business operating in over 50 countries. The group specialises in the pooling of unit-load equipment, pallets, crates and containers.

    The company’s most prominent brands are Commonwealth Handling Equipment Pool (CHEP) and IFCO.

    Brambles listed on the ASX in November 2006 and is now an ASX 20 company with a $16.7 billion market capitalisation.

    How good are the company’s financials?

    Clearly the coronavirus pandemic has made earnings outlooks uncertain. However, Brambles’ half-year result in February was broadly positive.

    One factor that could make the Brambles share price a buy is the company’s strong earnings growth.

    Sales revenue climbed 7% and landed in the upper end of Brambles’ guidance range. 4% of that was attributed to volume driven by strong demand from the CHEP pallet business.

    Underlying profit climbed 5% to US$435.5 million for the half-year with a minor improvement in its United States segment margin and cash flow.

    Overall, I was impressed with Brambles’ half-year result. The big question now is whether the Aussie company can follow that up with another good result in August.

    What do the share price metrics say?

    As I said, the Brambles share price has climbed 19.4% higher since mid-march. However, it remains down 4.9% for the year.

    That’s still an outperformance against the S&P/ASX 200 Index (ASX: XJO) but no doubt investors will want more.

    The Brambles share price is trading at a price-to-earnings (P/E) ratio of 8.6 right now. That’s not bad in the current climate but could also be unreliable given the pandemic’s potential impact on earnings.

    The company’s 2.52% dividend yield is nothing to sneeze at but is also far from certain to be maintained this year.

    Has Brambles provided any recent updates?

    In its April third-quarter trading update, Brambles forecast FY20 sales revenue growth of 5-7% at constant-FX rates. FY20 underlying profit growth is expected to come in at 3-5% at constant FX rates and including AASB16 impacts.

    Those earnings are underpinned by fortunate industry dynamics. For instance, 80% of the CHEP pallets business revenues come from the consumer staples sector like supermarkets which have seen strong demand in 2020.

    The company also noted its ‘conservative balance sheet and strong liquidity profile’. That, combined with reaffirming its February guidance for FY20, could make the Brambles share price a hidden buy.

    Is the Brambles share price a buy?

    Overall, I think the company’s 8.6 P/E makes the Brambles share price at least worth considering.

    In the current climate, cash is king. With a strong balance sheet and significant expected cash flow generation in FY20, the Brambles share price could be headed higher this year.

    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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    Motley Fool contributor Ken Hall 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 Tassal share price a potential outperformer?

    Could salmon be the secret to outperforming the S&P/ASX 200 Index (ASX: XJO) this year?

    The Tassal Group Limited (ASX: TGR) share price is down 10.1% this year. That means the Aussie salmon producer isn’t smoking its ASX 200 peers just yet.

    But, is now the perfect chance to snap up Tassal shares for a bargain ahead of the company’s August earnings?

    What does Tassal do?

    Tassal is an Australian seafood producer based in Tasmania. It is the largest producer of Tasmanian grown Atlantic salmon across domestic and international markets.

    According to Tassal’s FY19 Annual Report, 50.3% of its $551.3 million sales revenue came from the domestic retail market. Domestic wholesale contributed $185.5 (33.6%) million while exports comprised $88.5 million (16.1%).

    The group’s products fall into four categories: fresh deli, canned, smoked and fresh packaged. 

    What do the numbers say?

    The Tassal share price has fallen 10.1% this year. The company’s shares are trading at a price-to-earnings (P/E) ratio of 10.8 right now.

    It’s hard to get comparable companies given Tassal’s unique operations and cost structure. However, a 10.8 P/E could suggest the Aussie salmon producer is a good value buy.

    The company’s February half-year earnings were well-received by investors. In fact, the Tassal share price soared 9% higher on the back of the strong result.

    Total salmon sales fell 14.4% with a 0.6% increase in domestic salmon sales offsetting a 45.9% decrease in exports.

    The company forecast positive market dynamics for both salmon and prawns back in February. That was all pre-coronavirus but I think there are still some good signs.

    Aussie supermarket sales have been strong as highlighted by growth in the Coles Group Ltd (ASX: COL) updates and share price gains.

    There is still plenty of uncertainty around agriculture and aquaculture. However, I think we could see steady demand when Tassal delivers its full-year result in August.

    Is the Tassal share price good value?

    The Aussie food producer is certainly an interesting company. I like that Tassal is continuing to expand with its strategic investment in De Costi Seafoods.

    The company is also looking to diversify away from its salmon-producing roots. That strategy is being largely driven through its investment in the higher-yielding prawn aquaculture industry.

    I think Tassal’s significant investment in smart-farming could also pave the way to long-term operational efficiency and reduced expenditure.

    Foolish takeaway

    The numbers suggest that the Tassal share price is reasonably valued. However, I’m not sure the Aussie aquaculture company is a cheap buy.

    Much of that potential value will depend on its August full-year earnings and outlook.

    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 Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET. 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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  • How Long Will Norwegian Cruise Line’s Liquidity Last After Capital Raise?

    How Long Will Norwegian Cruise Line's Liquidity Last After Capital Raise?Cruise operators remain docked, as the CDC has extended its "no sail" orders through Sept. 30. The protracted suspension in the wake of the COVID-19 pandemic has severely impaired the financials of these companies.Despite recent fundraising, the liquidity position in the cruise sector remains precarious.The Cruise Line Analyst: BofA Securities analyst Andrew Didora has Neutral ratings on shares of Norwegian Cruise Line Holdings Ltd (NYSE: NCLH) and Carnival Corp (NYSE: CCL).The analyst reduced his price targets for Norwegian shares from $19 to $17 and for Carnival shares from $17 to $16.Didora has an Underperform on Royal Caribbean Cruises Ltd (NYSE: RCL) with a price target lowered from $40 to $$39. The Cruise Line Thesis: Cruise lines continue to burn cash with operations suspended, Didora said in a Tuesday note. (See his track record here.)The companies face record refunds and minimal new spending on cruises given the global travel restrictions and the rise in U.S. cases, the analyst said. BofA Says Norwegian Has 15 Months Of Liquidity: Norwegian plans to use the $1.4 billion in proceeds from the debt and equity offering it announced last week to pay down its $675-million revolver, Didora said.With beefed-up liquidity of $3 billion, a cash burn rate of $120 million to $160 million per month and an estimated $35 million per month in cash refunds, the analyst said he expects Norwegian's liquidity to last through November 2021.This estimate assumes continued suspension of cruises and no improvement in cash refunds. Carnival's Cash Runway To End In Mid-2021? Carnival's pro forma liquidity position is estimated at $11.6 billion, taking into account the $1.3 billion debt raised this week and the $2.8 billion raised in June.The analyst estimates Carnival's cash burn rate at $900 million per month."At these cash burn rates, we estimate CCL has sufficient liquidity to fund its requirements through July 2021."See more from Benzinga * Square's Cash App Growth Adoption Curve Steepens Amid Improving User Metrics: KeyBanc * Why Nanocap Biotech Immuron's Stock Is On A 2-Day Run * The Daily Biotech Pulse: Opko Wins CDC Contract, Novartis Lowers Guidance, Pieris Study Placed On Partial Clinical Hold(C) 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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  • Texas Instruments Gives Strong Forecast on Inventory Buildup

    Texas Instruments Gives Strong Forecast on Inventory Buildup(Bloomberg) — Texas Instruments Inc. projected third-quarter revenue that topped analysts’ estimates, indicating the company is seeing increased orders from customers trying to cushion themselves against any supply disruptions as the coronavirus pandemic drags on.Earnings will be $1.14 to $1.34 a share, on revenue of $3.26 billion to $3.54 billion, in the period ending in September, the Dallas-based chipmaker said Tuesday in a statement. On average, analysts predicted profit of 98 cents and sales of $3.07 billion, according to data compiled by Bloomberg.Texas Instruments, which has the broadest customer list and biggest product catalog in the industry, is benefiting from greater-than-anticipated inventory purchasing by its clients, executives said on a conference call. The company is the first major U.S. manufacturer to report earnings. Its reach gives investors a forward look into demand for everything from space hardware to home electronics.“The business has certainly troughed and is starting to show signs of life again,” said Logan Purk, an analyst at Edward Jones. Still, the pandemic and continuing trade strife between the U.S. and China may hurt demand in the near future, he said.Covid-19 illnesses have shut factories and transportation worldwide, placing an unprecedented strain on a global supply chain that provides electronics makers with components only at the moment they need it. Chip consumers — everyone from automakers to Apple Inc. — now want stockpiles to guard against future disruptions and make sure they can keep manufacturing rolling.The chipmaker has said it would keep production running and build its own inventory to make sure it can satisfy the demand.Texas Instruments “did not experience the depths of the downturn we saw in the 2008 downturn,” Dave Pahl, head of investor relations, said on the conference call. Still, “weremain cautious on how the economy might behave for the next few years,” he said.In the second quarter, net income rose to $1.38 billion, or $1.48 per share, from $1.31 billion, or $1.36 per share, a year earlier, the company said. Revenue dropped 12% to $3.24 billion.Shares increased about 1% in extended trading after closing at $135.48 in New York. The stock is has gained 5.6% this year, lagging behind the Philadelphia Stock Exchange Semiconductor Index’s advance of 13%.(Updates with analyst’s comments in the fourth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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  • 5 things to watch on the ASX 200 on Wednesday

    ASX share

    On Tuesday the S&P/ASX 200 Index (ASX: XJO) was in sensational form and surged notably higher. The benchmark index jumped 2.6% to 6,156.3 points.

    Will the market be able to build on this on Wednesday? Here are five things to watch:

    ASX 200 expected to give back some gains.

    The ASX 200 index looks set to give back some of its gains on Wednesday. According to the latest SPI futures, the benchmark index is expected to open the day 62 points or 1% lower. This follows a mixed night of trade on Wall Street which saw the Dow Jones climb 0.6% higher, the S&P 500 rise 0.2%, and the Nasdaq drop 0.8%.

    Tech shares on watch… again.

    Tech shares such as Altium Limited (ASX: ALU) and Appen Ltd (ASX: APX) were exceptionally strong performers on Tuesday after following the lead of their U.S. counterparts. However, it looks likely that they may give back some of these gains on Wednesday after major tech companies on the Nasdaq index tumbled lower overnight. Profit taking put pressure on the likes of Facebook, Amazon, and Apple.

    Oil prices jump.

    It looks set to be a positive day for energy producers such as Oil Search Limited (ASX: OSH) and Woodside Petroleum Limited (ASX: WPL) on Wednesday after oil prices jumped higher. According to Bloomberg, the WTI crude oil price rose 2.3% to US$41.76 a barrel and the Brent crude oil price pushed 1.7% higher to US$44.01 a barrel. Coronavirus vaccine hopes gave oil prices a major lift.

    Gold price storms higher.

    Gold miners including Evolution Mining Ltd (ASX: EVN) and Saracen Mineral Holdings Limited (ASX: SAR) will be on watch on Wednesday after the gold price stormed higher. According to CNBC, the spot gold price rose 1.4% to US$1,842.80 an ounce after the U.S. dollar weakened further.

    BHP rated as a buy.

    Analysts at Goldman Sachs think the BHP Group Ltd (ASX: BHP) share price offers value for investors. This morning the broker has retained its buy rating and $38.80 price target on the mining giant’s shares. It likes the Big Australian due to its valuation, strong and improving free cash flow, high returning green/brownfield projects, and possible portfolio optimisation/assets sales.

    Where to invest $1,000 right now

    When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

    Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

    See The 5 Stocks

    *Returns as of June 30th

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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 Altium. 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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  • Analyst reveals ‘the real question’ to be asking on next stimulus round

    Analyst reveals 'the real question' to be asking on next stimulus roundRaymond James Washington Policy Analyst Ed Mills joins Yahoo Finance’s Akiko Fujita to discuss the latest developments on another stimulus package in Congress.

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  • If You Own ADP (ADP) Stock, Should You Sell It Now?

    If You Own ADP (ADP) Stock, Should You Sell It Now?Polen Capital Management recently released its Q2 2020 Investor Letter, a copy of which you can download here. During the second quarter of 2020, the Polen Focus Growth Model Portfolio returned 27.60% gross of fees, while the Russell 1000 Growth Index was up 27.83% and the S&P 500 Index was up 20.54%. You should check […]

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  • I would buy Coles and these ASX dividend shares right now

    Coles share price

    Fortunately for income investors in this low interest rate environment, there are plenty of dividend shares that offer superior yields to those that you’ll find with term deposits and savings accounts.

    Three strong ASX dividend shares that I would buy today are listed below. Here’s why I like them:

    BWP Trust (ASX: BWP)

    BWP is a real estate investment trust which has strong ties with Wesfarmers Ltd (ASX: WES). Not only are the majority of BWP’s warehouses leased to the conglomerate’s Bunnings business, Wesfarmers is also a major BWP shareholder. I see this as a big positive as I feel the Bunnings owner is very unlikely to do anything that would have a negative impact on BWP’s performance and ultimately its investment. As a result, I believe the company is well-placed to continue delivering consistent income and distribution growth over the next decade. Based on the latest BWP share price, I estimate that it offers investors a forward 4.7% yield.

    Coles Group Ltd (ASX: COL)

    Another dividend share that has close ties with Wesfarmers is Coles. It was spun out of the conglomerate back in 2018. Since then it has been onwards and upwards for the supermarket giant’s share price. Despite this, I don’t believe it is too late to invest. I’m confident that it can grow its earnings and dividend at a solid rate over the next decade thanks to its defensive earnings, refreshed strategy, expansion opportunities, and its focus on automation. For now, based on the current Coles share price, I estimate that its shares offer a fully franked 3.4% FY 2021 dividend.

    Transurban Group (ASX: TCL)

    A final dividend share to consider buying is Transurban. I think it would be a great long term option for patient investors. This is because although its performance is likely to underwhelm in the immediate term, I expect a swift recovery for its toll roads once the pandemic passes. I also expect the same for its distributions and believe a 44 cents per unit distribution is possible next year. Based on the current Transurban share price, this equates to a 3.1% distribution yield.

    Where to invest $1,000 right now

    When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

    Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

    See The 5 Stocks

    *Returns as of June 30th

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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 COLESGROUP DEF SET, Transurban Group, and Wesfarmers 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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  • Tesla sinks after JMP Securities downgrade

    Tesla sinks after JMP Securities downgradeYahoo Finance’s Emily McCormick discusses why Tesla is getting downgraded at JMP a day before the company’s earnings results with Akiko Fujita.

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