In an article released by top fund manager Firetrail Investments yesterday, analyst Scott Olsson discusses the Australian banks and the current economic outlook.

What is the outlook for the Australian Banks?

According to Olsson, the banks’ recovery from the current crisis will happen slowly, as they face headwinds such as coronavirus-induced bad debts, a slow economy and low interest rates. These factors combined will lead to a lower return on equity for the banks.

However, he believes that the days of the big four offering 5–6.5% dividend yields will return, given their “formidable franchises”.

Olsson also suggests that while the banks have made provisions for bad debts, there is likely to be additional bad debts for the next 1–2 years. He believes that bad debts will return to mid-cycle levels in 2022 to 2023, which will drive an earnings recovery.

He suggests that he would be a buyer of banks in a scenario that was more favourable, with much lower bad debts than anticipated. However, he stated that even in a more favourable scenario, other sectors and other stocks will be better performers than the banks. 

Which bank would the analyst buy?

According to Olsson, of the major banks Firetrail Investments prefers National Australia Bank Ltd. (ASX: NAB). This is for a number of reasons, including the current management team.

In the interview, Olsson stated:

We really like the CEO and Chairman combo of Ross McEwan and Phil Chronican – they bring a lot of experience which you want going through a crisis like this…The new CEO, I think he’s going to bring a lot of accountability to the business and pull out a lot of unnecessary costs. And when you’re looking medium-term, I think there’s an opportunity for him to improve the retail franchise. So we like the NAB story.

Olsson did suggest that NAB is “very overweight” on small to medium enterprises and will have higher bad debt losses than the other banks. However, he believes that following its capital raising, NAB now has the capital position to deal with these debts.

About the NAB share price 

NAB was formed via a merger in 1982 and is now Australia’s third largest bank by market capitalisation.

In May, NAB raised $1.25 billion from investors through a share purchase plan at a price of $14.15 per share. It raised $3 billion from institutional shareholders at the same price in April.

In the half year to March 2020, NAB had net profit after tax of $1.31 billion and net interest income of $6.89 billion.  

The NAB share price is down 1.33% on Friday to $17.82. It is up 35% from its 52 week low of $13.20 reached in March. The NAB share price is down 27% since the beginning of January.

More reading

• ANZ said there will be another wave of Victorian businesses collapsing
• The hidden risk to early superannuation withdrawal that no one told you about
• The embattled ASX 200 stocks that could deliver a dividend surprise
• 3 large cap ASX shares primed for expansion and M&A activity
• Why NAB and Telstra shares could be top options for income investors

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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The Pushpay Holdings Ltd (ASX: PPH) share price has rocketed over the past few months, hitting highs of over $9 in June. This represents a whopping 19% increase for the month, and a 211% leap from its lows of $2.64 in March.

Since the end of June, Pushpay’s share price has continued its strong growth, sitting at $8.70 at the time of writing. The Pushpay share price is up 122% for the year, which is a huge gain particularly when compared to the 9.2% drop in the S&P/All Ordinaries Index (ASX: XAO) over the same period.

What does Pushpay do?

Pushpay is a New Zealand-based company that provides a digital donor management system to the faith sector, non-profit organisations and education providers. It operates in the US, Australia, New Zealand and has had a meteoric rise since listing in late 2016.

What drove the Pushpay share price higher in June?

Pushpay’s share price rise has seen its market cap soar to $2.37 billion as the company has continued to post impressive growth. In June, strong tailwinds and reports from the company’s AGM saw its share price rise.

On 18 June, Pushpay released details of its annual meeting for 2020, which included a recap of its FY20 results and saw the Pushpay share price increase by 9.9% that day alone. Highlights from the AGM presentation included:

• Solid total revenue growth of 32% for the year ended 31 March 2020 (FY20)
• Expanding operating margins with gross profit margin for FY20 increasing by 5% to 65%
• Impressive growth in the company’s FY20 operating cash flow, which went from negative US$2.8 million to US$23.5 million, an increase of 953%
• A strengthened value proposition through the strategic acquisition of leading US-based church management system, Church Community Builder
• Confirmation Pushpay achieved or exceeded all guidance provided to the market over the year, including operating revenue, gross margin, EBITDAF and total processing volume.

What now for the Pushpay share price

Pushpay has set guidance for the year ending 31 March 2021 to between US$50 million and US$54 million – an increase of roughly 100% from last year.

At the time of writing, the Pushpay share price is up 1.05% to $8.70.

More reading

• 2 fantastic ASX growth shares to buy with $2,000
• Are these the best ASX tech shares to buy for market beating returns?
• How to beat the market with 2 kids and no time
• 2 fantastic ASX tech shares to buy and hold
• 3 of the best ASX growth shares to buy for the 2020s

Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX. The Motley Fool Australia has recommended PUSHPAY FPO NZX. 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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If you have space in your portfolio to add a few growth shares, then I think the two listed below could be great options.

I believe these growth shares can deliver above-average earnings growth over the next few years and potentially strong returns for investors.

Here’s why I would invest $2,000 across their shares:

Bubs Australia Ltd (ASX: BUB)

Bubs is a goat’s milk-focused infant formula and baby food company which I believe has enormous potential. This is due to the expansion of its footprint across supermarkets and pharmacies in Australia and its growing presence on Chinese ecommerce platforms. Another positive is its recent expansion into cow’s milk infant formula, which could be a big boost to its earnings growth in FY 2021. But perhaps the biggest positive of all is that after years of cash burn, Bubs now appears to have reached a scale that makes its operations profitable. This should mean the days of dilution from capital raisings are now over.

Pushpay Holdings Group Ltd (ASX: PPH)

Pushpay is a donor management platform provider for the faith sector. It has been growing at an explosive rate in recent years thanks to increasing demand for its platform in a church market that is rapidly embracing digital transformation. And although the Pushpay share price has been a very strong performer this year, I don’t believe it is too late to invest. After all, the company still has a very long runway for growth. Management is aiming to capture a 50% share of the medium to large church market in the future. This represents a US$1 billion revenue opportunity, which is many times FY 2020’s revenue of US$127.5 million. Given the quality of its offering, I believe there is a strong probability of the company achieving its target.

More reading

• Why the Pushpay share price soared 19% in June
• 3 ASX shares I’d invest $1,000 into right now
• Are these the best ASX tech shares to buy for market beating returns?
• How to beat the market with 2 kids and no time
• 3 ASX shares I’d buy with $6,000 today

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 PUSHPAY FPO NZX. The Motley Fool Australia owns shares of and has recommended BUBS AUST FPO. The Motley Fool Australia has recommended PUSHPAY FPO NZX. 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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Australia and New Zealand Banking Group (ASX: ANZ) has said that there is going to be another wave of business collapses in Victoria.

ANZ head of retail and business banking Mark Hand thinks the new lockdown will cause more loan deferrals and business failures according to the Australian Financial Review.

Before COVID-19 came along Victoria was one of the most popular states for migration, which has currently stopped. Mr Hand said that Victoria’s outlook was already not as good as other states. He thinks Melbourne will have higher defaults than the rest of the country.

Is there hope for Victorian businesses?

APRA recently said that banks can give borrowers an extension for the loan payment holidays for another four months. This could be very important for the economy because the end of September was looming where both jobkeeper is scheduled to end and the payment holidays were due to stop.

However, Mr Hand said that some businesses may have to face reality and liquidate their asset or close the business rather than wait another four months. It seems that ANZ will only be lenient with businesses where it seems there is genuinely light at the end of the tunnel.

According to ANZ data, around two thirds of customers who have deferred their loan repayments should be able to make some form of repayment. However, he also said: “Some of that will be driven by customers who look at their circumstances and say it’s time to do something different. I would expect to see a rise in distressed loans and loan defaults at the back end of the year.”

He’s particularly worried about Melbourne’s restaurants, bars and cafes which won’t see the required level of earnings for some time yet.

The OECD has previously warned that Australia’s economy could fall by 6.3% in 2020 if there’s a second wave of COVID-19 and lockdowns. Hopefully the rest of the country can stay COVID-19 free until a healthcare solution is created.

What does this mean for ASX banks?

As the second biggest city in Australia, Melbourne is an important part of the economy. It’s understandable that investors may lower their expectations for earnings over the rest of 2020. The ANZ share price has dropped 5% since 2 July 2020. Over that same time period the National Australia Bank Ltd (ASX: NAB) share price is down 5%, the Commonwealth Bank of Australia (ASX: CBA) share price is down 0.5% and the Westpac Banking Corp (ASX: WBC) share price is down 5%.

With the rest of the country in a good COVID-19 position, national businesses like ASX banks don’t face the same level of impacts as the initial nationwide lockdown.

If COVID-19 has sneaked into NSW from Victoria over the past fortnight then that would be a different (and worse) situation.

I think the US situation could cause the biggest worry for markets over the next few weeks. There are rising COVID-19 numbers across a number of economically important American states, the country just set a new one-day record of over 60,000 cases.  

If ASX shares do sell off over the next few weeks due to domestic or international reasons then I plan to buy more shares. In hindsight, the March 2020 selloff was a clear, cheap buying opportunity. I think lower share prices would be another buy signal with how low interest rates are these days. The RBA interest rate is just 0.25% at the moment, and could be that low for years!

Some of the share ideas I’m interested in at the moment are: Brickworks Limited (ASX: BKW), Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), Bubs Australia Ltd (ASX: BUB), PM Capital Global Opportunities Fund Ltd (ASX: PGF) and MFF Capital Investments Ltd (ASX: MFF).

More reading

• Why one top fund manager likes NAB shares, despite preferring other sectors
• Why I would buy CBA and this high yield ASX dividend share
• ASX 200 down 0.2%: Big four banks tumble, Afterpay surges higher again
• The hidden risk to early superannuation withdrawal that no one told you about
• The embattled ASX 200 stocks that could deliver a dividend surprise

Motley Fool contributor Tristan Harrison owns shares of Magellan Flagship Fund Ltd, PM Capital Global Opportunities Fund Ltd, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks, BUBS AUST FPO, and 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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The Openpay Group Ltd (ASX:OPY) share price has latched onto the momentum of the buy now, pay later (BNPL) sector and soared more than 10% higher in today’s trade. It has since pulled back to be up 3.93% to $2.91 at the time of writing.

How much higher can the Openpay share price go and is it too late to buy?

What is fuelling the Openpay share price?

Following today’s price action, the Openpay share price has surged more than 38% since the start of July. Considering the company has not released any price-sensitive news within that time, it’s fair to assume that investors and traders are jumping on Openpay shares as the BNPL sector soars.

Fuelled by the raging Afterpay Ltd (ASX:APT) share price, other companies in the BNPL sector have performed strongly over the past few weeks. Zip Co Ltd (ASX:Z1P) and Sezzle Inc (ASX:SZL) are also both trading at all-time highs after seeing monster share price gains recently.

What does Openpay do?

Openpay is yet another payment solutions company that services the fast-growing BNPL sector. In comparison with other operators, Openpay offers larger payment plans, financing purchases up to $20,000, and offers payment ranges between 2 and 24 months with no interest.

Openpay services a range of specialised industries such as automotive, healthcare and home improvements, boasting notable brands such as UltraTune, Total Tools and Bunnings. The company services customers in Australia, the UK and New Zealand.

How has Openpay performed during the pandemic?

In early March, Openpay released a response to the COVID-19 pandemic, assuring investors that the company remained in a strong financial position with $45.7 million cash on hand. The company also highlighted that its established online presence and strong technology will allow it to adapt to increased demands in online trading.

The company completed a $33.7 million capital raise in early June. According to Openpay’s management, proceeds from the placement will be used to support the company’s future growth strategies. These include growing the company’s presence in its core markets, investing in product development and facilitating strategic growth partnerships.

Is it too late to buy shares in Openpay?

Apart from surging in the past month, the Openpay share price has rocketed more than 800% since late March. In my opinion, the short-term trajectory of the price action is unsustainable. Therefore, I can’t advocate buying shares in Openpay after such a phenomenal rally.

I think a more prudent strategy would be to wait until the August reporting season to get a better idea of how companies in the BNPL have fared during the pandemic and how they’re positioned for the future.  

More reading

• Why Kogan, Netwealth, Silver Lake, & Zip Co shares are storming higher
• ASX 200 down 0.2%: Big four banks tumble, Afterpay surges higher again
• These ASX fintech shares are tackling COVID-19 head on
• Sezzle share price halted as it undertakes $86.3 million capital raising
• Zip share price surges 30% in a week. Are we calling bubble yet?

Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle Inc. 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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In the mid cap side of the Australian share market, I believe there are a number of shares that have the potential to become much larger companies in the future.

Two mid cap shares that tick a lot of boxes for me are listed below. Here’s why I think they could grow significantly over the next decade:

Kogan.com Ltd (ASX: KGN)

I think that this ecommerce company could be a great long-term investment. Over the last few years it has been benefiting greatly from the structural change that is happening in the retail industry. Pleasingly for the company and its shareholders, this change has been accelerated by the pandemic. In fact, Adobe estimates that the pandemic has accelerated ecommerce growth by 4 to 6 years. This looks set to underpin exceptionally strong earnings growth for Kogan in FY 2020 and FY 2021. Which could yet be boosted further inorganically. Last month the company announced a $115 million capital raising (which was later revised to $120 million). It intends to use the funds to acquire businesses that will add value and drive further growth.

Megaport Ltd (ASX: MP1)

Another exciting tech share to look at is Megaport. It is a provider of elastic interconnection services across data centres globally. This service allows its users to increase and decrease their available bandwidth in response to their own demand requirements. The benefit of this is that it means they don’t need to be tied to fixed service levels on long-term and expensive contracts. Instead, they can just use what they need, when they need it. Thanks to the quality of its service and the cloud computing boom, demand for its services has been growing very strongly and has driven further strong revenue growth in FY 2020. Pleasingly, with the migration to the cloud expected to accelerate because of the pandemic, Megaport appears well-placed to continue its growth for many years to come.

More reading

• Why Kogan, Netwealth, Silver Lake, & Zip Co shares are storming higher
• A surprise ASX share that’s doubled since March
• Why the Kogan share price soared 38% in June
• Kogan share price hits record high after upsizing share purchase plan
• Why Coles, Kogan, Northern Star, & Splitit are charging higher

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 MEGAPORT FPO. The Motley Fool Australia has recommended Kogan.com ltd and MEGAPORT FPO. 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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If you are looking to build on your share portfolio this month, I believe that Vocus Group Ltd (ASX: VOC) and Nearmap Ltd (ASX: NEA) are two ASX shares that are well worth considering.

Here’s why both these companies are in my buy zone right now:

Vocus

Local Australian telco, Vocus specialises in providing fibre and networking solutions. Its services also include fixed broadband, data centre services and Unified Communications. Vocus has a small presence in the residential sector for fixed broadband. However, it mainly targets the enterprise, government, wholesale and small business markets.

Vocus’ retail division has struggled in recent years due to the tight margins associated with wholesaling fixed broadband services under Australia’s National Broadband Network. However, I believe a three-year turnaround strategy is positioning Vocus well for solid, long-term growth. The telco is now beyond the mid-point of this growth strategy.

Last month, Vocus reiterated its FY 2020 guidance with EBITDA anticipated to be in the range of $359 million to $369 million. On another positive note, the company anticipates that its core Network Services business will see EBITDA growth of 10% during FY 2020.

Vocus is also well positioned to capitalise on the rollout of 5G services over the next few years. This is due to its market position as a specialist fibre and network services provider. This, I believe, will further strengthen Vocus’ growth potential over the next few years.

The Vocus share price has risen more than 60% from its March low and is currently trading at $2.96. This is still considerably less than its pre-pandemic high of $3.86.

Nearmap

Another company I think could make a good addition to your ASX share portfolio this month is Nearmap.

Nearmap is an Australian aerial imagery and specialist location data company. It provides geospatial map technology for enterprise and government customers across Australia, New Zealand, the United States, and Canada. It has been growing strongly over the past few years, especially in the US market.

Nearmap’s customer base, in particular, continues to climb higher. This ASX tech share is now anticipating closing FY 2020 with an actual cash value (ACV) portfolio of between $103 – $107 million, on a constant currency basis. Customer churn for Nearmap is now below 10% on a 12-month rolling basis. This is a pleasing reduction from the 11.5% that it reported at the end of 2019.

I believe there is strong growth potential for Nearmap over the next three to five years, especially in the massive US market.

This growth will be assisted by the recent launch its new artificial intelligence (AI) product, which targets a range of industries including insurance, utility and local government. The Nearmap share price is currently trading at $2.37 which is 175% up from its March low but well below the highs of over $3 seen last year. 

More reading

• Brokers name 3 ASX 200 shares to buy today
• 2 five-star ASX shares for strong long-term growth
• These were the 5 best performing ASX shares last week
• ASX 200 Weekly Wrap: Afterpay, Tech push ASX 200 back above 6,000
• These are 10 most shorted shares on the ASX

Phil Harpur owns shares of Nearmap Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. The Motley Fool Australia has recommended Nearmap Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If you’re not happy with the interest rates on offer with savings accounts and term deposits, then you might want to consider buying one of the dividend shares listed below.

I estimate that these dividend shares offer FY 2021 yields that are among the most generous on the market. Here’s why I like them:

Commonwealth Bank of Australia (ASX: CBA)

If you don’t have meaningful exposure to the banking sector, then I think it would be well worth considering an investment in Commonwealth Bank. Especially given how the banking giant’s shares are trading 22% lower than their 52-week high. While a decline in the CBA share price is certainly not unwarranted, I believe the extent of its decline has been overdone and feel confident that the coronavirus provisions it has made are more than sufficient.

In light of this, while I expect a dividend cut in FY 2021, I don’t believe the cut will be as severe as some expect. I forecast a fully franked dividend in the region of $3.70 per share next year. This would be a generous 5.2% dividend yield based on the current Commonwealth Bank share price.

Sydney Airport Holdings Pty Ltd (ASX: SYD)

Another high yield ASX dividend share to consider buying is Sydney Airport. While I wouldn’t necessarily expect a final dividend from the airport operator in the second half of FY 2020, I’m optimistic that the domestic travel market will have recovered enough in 2021 to support a decent dividend payment. Just as long as the situation in Victoria doesn’t escalate and spread into other states.

At present, I estimate that Sydney Airport will pay a dividend in the region of 29 cents per unit next year. Which, based on the latest Sydney Airport share price, represents a 5.4% FY 2021 dividend yield.

More reading

• ASX 200 down 0.2%: Big four banks tumble, Afterpay surges higher again
• The hidden risk to early superannuation withdrawal that no one told you about
• The embattled ASX 200 stocks that could deliver a dividend surprise
• Why Sydney Airport and 2 other ASX shares could surprise this reporting season
• The CBA share price is up 30% since March

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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