Tag: Motley Fool Australia

Over the weekend I demonstrated how buy and hold investing can generate significant wealth for investors.

With that in mind, here are three shares which I think have the potential to be market beaters over the next decade, making them great buy and hold options today:

Altium Limited (ASX: ALU)

I think Altium is one of the best buy and hold options on the ASX. This is because of the strong growth potential of its printed circuit board (PCB) design software platform, Altium Designer. This platform has exposure to the fast-growing Internet of Things (IoT) market. As almost all IoT devices have PCBs inside them, I feel this bodes well for subscriber numbers in the future. Management certainly believes this will be the case. It is aiming to grow its revenue to US$500 million by FY 2025. This compares to Altium FY 2019’s revenue of US$171.8 million.

CSL Limited (ASX: CSL)

I think that this global biotherapeutics company could arguably be the best buy and hold option on the Australian share market. Over the last 10 years the CSL share price has provided investors with an average total return of approximately 24.45% per annum. I believe that its shares could continue to provide outsized returns for shareholders over the next decade thanks to the quality of its products, management team, and lucrative research and development pipeline.

ResMed Inc (ASX: RMD)

A final buy and hold option to consider is ResMed. It is a leading developer of products that treat sleep apnoea, chronic obstructive pulmonary disease, and other chronic respiratory diseases. According to management, approximately 1 billion people are estimated to be impacted by sleep apnoea worldwide. The vast majority of these people are undiagnosed and at risk of life-threatening conditions such as chronic daytime fatigue, heart disease, stroke, type 2 diabetes, and depression. With education around the condition increasing, I expect more and more people to be diagnosed over the next decade. This is likely to lead to increasing demand for its industry-leading products and services.

More reading

• 3 high quality ASX 100 shares to buy right now
• How to beat the market with 2 kids and no time
• Why CSL and these ASX 200 shares could be fantastic buy and hold options
• 3 of the best ASX tech shares to buy in July
• 2 ASX shares I would buy for growth and income

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 and CSL Ltd. The Motley Fool Australia has recommended ResMed 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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If you’re looking to boost your income by adding a few dividend shares to your portfolio, then the ones listed below could be great options.

Both ASX dividend shares listed below have strong businesses and offer generous yields at current prices. Here’s why I think they are in the buy zone right now:

BHP Group Ltd (ASX: BHP)

I think this mining giant is a top ASX dividend share to buy right now. This is because I believe BHP is well-positioned to pay generous dividends over the next couple of years at least. This is thanks to its world class and low cost operations, its growth opportunities, and its strong balance sheet.

I feel the latter should allow the company to return the majority of its free cash flow to shareholders in the form of dividends. And thanks to the sky high prices that iron ore is currently commanding, this looks likely to be billions of dollars. Based on the current BHP share price, I estimate that the mining giant provides investors with a forward fully franked ~5% dividend yield.

Sydney Airport Holdings Pty Ltd (ASX: SYD)

Another ASX dividend share for investors to consider buying is Sydney Airport. Although its terminals have been a ghost town because of the pandemic, I’m optimistic that this will change in the coming months. And if the current situation in Melbourne doesn’t get out of control, I’m confident the domestic travel market will recover enough in 2021 for it to pay a decent dividend.

At this point, I estimate that the airport operator will pay a dividend in the region of 29 cents per unit next year. Based on the latest Sydney Airport share price, this represents a 5.35% FY 2021 dividend yield.

More reading

• These ASX shares are the winners and losers in the “new normal”
• Top brokers name 3 ASX shares to buy right now
• Rio Tinto share price on watch following broker downgrade
• Why I see good value in the BHP share price today
• Why brokers have just downgraded BHP and these ASX stocks today

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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The S&P/ASX 200 Index (ASX: XJO) fell by just over 1.5% today with Melbourne entering into a lockdown again today.

Australia’s second largest city faces a lockdown of six weeks to halt the spread of COVID-19 in Victoria.

Northern Star Resources Ltd (ASX: NST) impresses the market

The top performer within the ASX 200 today was Northern Star, its share price rose by 6.5% after delivering its June 2020 update.

Within the update the gold miner said that its cash, bullion and investments rose by 40% to A$769.5 million at 30 June 2020 compared to A$551.4 at 31 March 2020. This meant the company finished with a net cash position. It had corporate bank debt of $700 million at 30 June 2020. It repaid $200 million of that debt on 6 July 2020.

Northern Star stated that it generated underlying free cashflow of $217.9 million in the three months to June 2020 after selling 262,717 ounces of gold. This took the total sales for the 2020 financial year to 900,388 ounces, while gold produced totalled 905,177 ounces. This was 1.6% lower than the low end of the FY20 guidance.

In light of the “solid result”, Northern Star said it will pay its FY20 fully franked interim dividend of 7.5 cents per share on 16 July 2020. The payment of this dividend, which totals A$55 million, was postponed when the ASX 200 gold miner withdrew its FY20 guidance a few months ago.

The company expects to resume dividend payments in the ordinary course of business.

Afterpay Ltd (ASX: APT) completes its $650 million institutional capital raising

The buy now, pay later business said that it had successfully raised the target amount of $650 million from institutional investors. The placement was priced at $66 per share.

Afterpay said the capital raising was strongly supported by existing and new shareholders. Co-founders Anthony Eisen and Nicholas Molnar managed to each sell 2.05 million shares at the placement price of $66 per share. They have committed not to sell any other shares until after the 2020 annual general meeting (AGM).

Afterpay director Elana Rubin said: “The market has responded strongly to our aspiration to further accelerate our investment in growing underlying sales and expanding our global footprint, with the placement being oversubscribed. We are very pleased with the support we have received from our existing shareholders and we welcome our new investors to the register.”

Regular retail investors will soon be able to buy up to $20,000 worth of the ASX 200 share at the lower price of $66 and the 5-day value weighted average price of Afterpay shares up to the share purchase plan (SPP) closing date.

Splitit Ltd (ASX: SPT) share price jumps 8%

The rapidly-rising buy now, pay later business released its quarterly update today.

Splitit’s merchant sales volume grew 260% to US$65.4 million in the three months to 30 June 2020 compared to the prior corresponding period. This was a 176% increase on the previous quarter.

The company’s non-GAAP revenue rose 460% to US$2.4 million for the quarter, it represented a 246% rise on the first quarter of 2020.

Total merchants rose 104% over the past 12 months to 1,000 merchants. Total unique shoppers jumped 85% to 309,000.

Splitit’s average order value increased by 44% (compared to the prior corresponding period) to US$893.

Some of the large new merchants that are now live and signed include Purple, Daily Sale, Quiet Kat, Dreamcloud, Bedmart, Scorptec, Tatami Fightwear, Sofa Club and Alpina Watches.

New Splitit partnerships have been made with Mastercard, Finance for Group and Blue Snap.

More reading

• Why the Splitit share price soared 140% in June
• Why it’s time to rotate out of JB Hi-Fi share price and these popular ASX stocks: Macquarie
• 2 reasons early super withdrawal might be a bad idea
• Top brokers are urging investors to buy these ASX stocks today
• My bull and bear case for the ASX share market

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T 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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ASX shares are a great way to start building your wealth, even if you only have $500.

It can be hard to know where to start. ASX shares have proven to be long-term performers. Generally, shares have returned around 10% per annum over the long-term. The returns look even better when you add in the bonus of franking credits which boost the after-tax return of dividends.

Now you know that shares have broadly performed well. But what are you supposed to invest in? There are thousands of different investment options on the ASX.

To help get you started, I have two ASX share ideas for you:

Share 1: Future Generation Investment Company Ltd (ASX: FGX) 

I think diversification is important for beginner investors. For example, if you put your $500 into Commonwealth Bank of Australia (ASX: CBA) shares then all of your money is tied up in one business. I think it could make a lot of sense to go for an initial investment that offers a lot of diversification upfront.

There is a certain group of businesses called ‘listed investment companies’ (LICs). Their job is to invest on behalf of shareholders. Future Generation is one of my favourite LICs for a number of reasons.

I like it because of the philanthropic nature of it. Future Generation donates 1% of its net assets each year to youth charities. This amounts to millions of dollars every year.

Future Generation doesn’t invest directly into ASX shares, instead it invests into the funds of fund managers who invest in ASX shares. These fund managers are meant to be the best in Australia and are chosen by the Future Generation investment committee. Those fund managers work for free so that the annual donation can be made. Each of those funds represents a diversified portfolio, so Future Generation is probably indirectly invested in dozens of different businesses. That’s good diversification.

Returns and dividend

A LIC should be judged for the returns that it generates. Since inception in September 2014 to May 2020, Future Generation’s investment portfolio delivered a gross return of 7.2% per annum. This outperformed the S&P/ASX All Ordinaries Accumulation Index’s return of 5.1% per annum. I think that’s a solid performance. 

Indeed, Future Generation outperformed the index over one month, six months, 12 months, three years and five years. It has done well during this COVID-19 period. 

LICs can turn the investment performance into a consistent dividend for shareholders. At the current Future Generation share price it offers a grossed-up dividend yield of 7.1%.

The ASX share is currently trading at a share price of $1, which is a 12% discount to the net tangible assets (NTA) at 31 May 2020.

Share 2: Betashares Global Sustainability Leaders ETF (ASX: ETHI) 

Another good option for beginner investors is an exchanged-traded fund (ETF). An ETF is a fund you can buy just like a share through an exchange, like the ASX.

There are lots of different types of ETFs. Some are based on countries like Australia or the US. Some ETFs are focused on specific industries like healthcare, gold or technology.

There are ETFs which are based on a particular theme, or have particular standards when it comes to quality or ‘ethics’. It can be hard to definite ethical investing because each person may prefer to exclude different things. For example, some people may want to exclude companies involved with poor environmental credentials whereas other people may want to leave out businesses involved with gambling.

Betashares Global Sustainability Leaders ETF excludes many different things like gambling, tobacco, alcohol, junk food, human rights and supply chain concerns. It has a particular focus on businesses that are climate leaders that try to be carbon efficient.

Its top share holdings as of yesterday were: Apple, Mastercard, Nvidia, Visa, Home Depot, Adobe, Paypal, Netflix and Toyota. Obviously none of these are ASX shares. So you’re getting good international diversification if you go with this ETF as your first investment pick.

Past performance is not a guarantee of future performance. But the returns of this ETF have been impressive and it shows that you don’t need to give up good performance to be invested in this ETF. Since inception in January 2017 it has returned 20.7% per annum after fees.

It’s pretty cheap for an ‘ethical’ investment pick – the annual cost is 0.59% per annum.

Foolish takeaway

I think both of these ASX shares would be good first investments. Indeed, I’d be happy enough to just invest in these two ideas and nothing else. Future Generation is good way to get ASX share exposure, plus it has a good dividend and it’s at good value. I think Betashares Global Sustainability Leaders ETF can provide strong international returns, like it has done, with its focus on sustainable businesses.

More reading

• 3 ASX dividend shares to grow and diversify your income
• 3 very reliable dividend shares I plan to pay for my retirement
• Do you have $1k to invest? Buy 1 of these ASX shares
• 2 ETFs for easy investing and good returns

Motley Fool contributor Tristan Harrison owns shares of FUTURE GEN FPO. 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.

The post Starting to invest with $500? Here are 2 ASX shares appeared first on Motley Fool Australia.

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Normally, conventional wisdom tells us that ‘saving money is good’ and ‘spending money is bad’. We tend to view people who are natural savers as financially responsible, and those who perhaps struggle with keeping their wallets shut as financially reckless.

But according to reporting in the Australian Financial Review (AFR), it’s the savers in our economy that might be causing some problems.

Whilst saving on a personal level is usually the more respected activity, the reality is that its spending that makes the economy go round. Every dollar spent is someone else’s income, as the saying goes.

According to the AFR, saving rates not just in Australia, but across the advanced economies of the world, have ballooned as a result of the coronavirus pandemic. Economic uncertainty and the prospect of lost employment, together with ambiguity over how long various government support programs will last, have resulted in plenty of belt-tightening.

Eurozone households have reportedly bumped up the percentage of disposable income saved on average to 16.9% in the first 3 months of the year. In Britain, it’s up from 5.4% to 8.6%. And in the United States, savings rates rose from 7.9% to more than 32% by April.

We already discussed the impacts of higher saving on economic growth. But it’s also presenting a headache for governments. If consumers suddenly start spending again, it could overheat the economy and lead to inflation if the government stimulus keeps flowing. But if consumers don’t start spending, then permanent economic damage is on the cards. This would be greatly exacerbated in my view if the government cuts off support payments like JobKeeper in September.

What does higher saving mean for ASX shares?

Consumers saving more is not good news for ASX shares. Whether consumers are planning on loosening their purse strings over the next year or 2 is going to have far-reaching consequences for the earnings of many ASX businesses.

If you hold ASX retail shares like JB Hi-Fi Limited (ASX: JBH) or Premier Investments Limited (ASX: PMV) or really any consumer discretionary companies, I think it’s very important to keep on eye on these kinds of economic figures going forward.

Consumer staples companies and utility providers are better positioned though. Consumer staples providers like Woolworths Group Ltd (ASX: WOW) and utilities like AGL Energy Limited (ASX: AGL) tend to provide ‘needs’ rather than ‘wants’. This means demand for their products is less dependent on savings rates and economic growth.

But regardless of which companies you invest in, I think it’s important to keep an eye on what’s happening in the economy. It’s the ocean that all ASX shares swim in, after all.

More reading

• Why it’s time to rotate out of JB Hi-Fi share price and these popular ASX stocks: Macquarie
• Goldman Sachs names the ASX retail shares to buy and the ones to avoid
• My bull and bear case for the ASX share market
• Plummeting retail spend puts ASX fashion shares under the microscope
• These ASX shares are swept up by the new Victorian COVID-19 lockdown

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. The Motley Fool Australia owns shares of Woolworths 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 Splitit Ltd (ASX: SPT) share price rocketed up to yearly highs of $1.915 during June, taking its market cap soaring to over $350 million. Its price of $1.12 at the end of June represents a monthly gain of 140% and was almost 450% up on its recent lows in March.

Since the end of June, Splitit’s share price has continued to storm higher, sitting at $1.48 dollars at the time of writing. Shares of Splitit are up more than 193% for the year – a huge gain, particularly when compared to the 10.6% drop in the S&P/All Ordinaries Index (ASX: XAO) over the same period.

What was driving Splitit’s share price gains in June?

The increase in the Splitit share price follows a number of other well-known buy now, pay later (BNPL) shares that have been storming to new highs this year. However, it was the news that Splitit had partnered with global payments company Mastercard Inc (NYSE: MA) in particular that sent the share price surging.

On 18 June, Splitit announced its partnership with Mastercard, which saw the payments company’s share price increase a whopping 108% in one day. The agreement allows Splitit to integrate its instalment solution around the world by partnering with Mastercard. Splitit will be able to leverage Mastercard’s network of partners though the multi-year deal.

In Splitit CEO Brad Paterson’s words, the deal represents “a fantastic way to broaden the distribution of our solution, leveraging Mastercard’s incredible global reach, and build out a range of instalment services.”

Splitit and Mastercard will jointly develop instalment and related products, and there are plans to launch pilots across 3 markets ahead of a global rollout.

This announcement follows on from news in early March that Splitit had partnered with Mastercard’s rival Visa.

Now what?

There is plenty of talk that the investor-popular BNPL shares may be in a bubble, with the combined market cap of these companies exceeding $20 billion yet none turning a profit as yet.

Despite this, the Splitit share price has been on a fantastic run of late and found itself up another 8.42% today to close the day at $1.48 per share. 

More reading

• ASX buy now, pay later shares leading the recovery
• Why Coles, Kogan, Northern Star, & Splitit are charging higher
• Splitit share price surges 24% higher after record second quarter growth
• Does Afterpay have a competitive advantage?
• Afterpay expects sales to double to $11bn and launches $800m cap raise

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 and recommends Mastercard. The Motley Fool Australia has recommended Mastercard. 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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It has been a couple of weeks since the Freedom Foods Group Ltd (ASX: FNP) share price was last active on the ASX board.

On 24 June the diversified food company requested a trading halt while it investigated its financial position following the sudden exit of its CEO and CFO.

What’s the latest?

Unfortunately for shareholders, it is going to be some time until Freedom Foods shares return to action.

This afternoon the company provided an update on its suspension and requested an extension until 30 October 2020. Yes, you read that correctly, the embattled food company’s shares will remain suspended for over three and a half more months.

Why did Freedom Foods announce?

The Freedom Foods board requested the lengthy suspension because there are a number of interconnected activities that need to be completed before it will be able to provide a comprehensive update on the historical issues identified and the financial position and outlook of the company.

These activities include the conclusion of its investigation of the historical issues previously announced to the market such as doubtful debts from prior periods.

It also requires time to provide appropriate guidance in relation to the outlook for FY 2021. This includes any ongoing impacts of COVID-19 on the business, as well as the impact of potential operational improvements, strategic, and product initiatives.

The board also notes that it is busy searching for a permanent Chief Executive Officer and Chief Financial Officer. It is seeking to resolve these appointments as soon as possible. Though, given the circumstances, these roles may not be the easiest ones to fill.

Finally, it may require time for any potential capital initiatives. This may include the amendment of its syndicated and bilateral banking facilities to ensure it has sufficient balance sheet strength and financial flexibility to support its business going forward.

The Freedom Foods board commented: “The Board has formed the view that significant resources and time will be required to achieve a position where all of these activities are announced or finalised. Based on the work done to date, a period of voluntary suspension up to close of trading on Friday 30 October 2020 is considered a prudent and realistic timeframe to achieve these outcomes. If it is possible to reduce this period and thereby reduce the period of suspension that will be done.”

More reading

• ASX 200 rises 1.4%, Collins Foods delivers tasty returns
• Here’s why the Freedom Foods share price will be suspended for 14 days
• ASX 200 finishes higher, Afterpay hits new record
• Freedom Foods share price drops 14% as CEO goes “on leave”
• Short-sellers are stepping up their attack against these popular ASX shares

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Freedom Foods 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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Listed investment company (LIC) WAM Capital Limited (ASX: WAM) has just announced a 7.75 cents per share final dividend. That brings the total dividend paid to WAM Capital shareholders over the past 12 months to 15.5 cents per share.

At today’s share price (at the time of writing) of $1.89, WAM Capital is now offering a trailing dividend yield of 8.2%. WAM Capital’s dividend typically comes fully franked as well (as is the case with this payout). Including these franking credits, WAM Capital’s grossed-up dividend comes in at a staggering 11.71%.

How does WAM Capital invest?

As a LIC, WAM Capital invests in a diversified portfolio of ASX shares. Originally, WAM Capital concentrated more on the small-cap side of the ASX investing world. but since this LIC has over $1.14 billion in assets under management, it now dabbles in the mid- and large-cap space as well. WAM Capital’s modus operandi is finding growing ASX companies with what the company describes as a ‘catalyst’ for further share price appreciation. This might be the identification of market undervaluation of a particular ASX share, an expected earnings beat, or an industry growth trend.

WAM Capital buys these undervalued companies and then sells them when the catalyst has been realised. This strategy has worked pretty well for WAM Capital. Since its inception in 1999, the LIC has returned an average of 15.6% per annum to its investors (before fees and taxes). Over just the past year, WAM Capital has lost 2.8% compared with the broader market’s 7.2% loss, meaning the company has delivered outperformance of 4.4%.

Right now, some of WAM Capital’s holdings include Elders Ltd (ASX: ELD), Bapcor Ltd (ASX: BAP), Adairs Ltd (ASX: ADH) and the A2 Milk Company Ltd (ASX: A2M).

Is WAM Capital a buy for ASX dividend income today?

A stupendous grossed-up dividend of 11.71% might make this company look like a no-brainer buy right now. But perhaps things aren’t as rosy as they seem for WAM Capital. An LIC is only able to fund dividend payments through its profit reserve. If the reserve is full, the dividends can flow freely. But if the reserve is empty, no such bounty is possible.

As of 31 May, WAM Capital had 6.1 cents per share left in the profit reserve after funding this 7.75 cents per share payout. Now, even if mathematics isn’t your strong suit, you can probably see the problem here. WAM Capital is going to have to pull more than one rabbit out of its hat if it is to keep its current payout levels going forward.

The company even hinted at this upcoming flashpoint in its dividend announcement today, stating:

In FY2021, the Company’s ability to continue paying fully-franked dividends is dependent on generating additional profit reserves and franking credits. the ability to generate franking credits is reliant on the receipt of franked dividends from investments and the payment of tax on profits.

In other words, ‘we’re in trouble here’.

Foolish takeaway

In my view, WAM Capital’s generous dividend is masking the possibility this company may be a dividend trap right now. As such, I would stay away from WAM Capital today — especially as the company is trading at a premium to its underlying assets anyway. There are better deals out there for dividend investors, in my opinion.

More reading

• These ASX shares are the winners and losers in the “new normal”
• My bull and bear case for the ASX share market
• Why I’m watching the a2 Milk share price
• You’re probably a customer of these 3 ASX shares. Should you own them too?
• Do you have $5,000 to invest? Here are the ASX shares I would buy right now

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bapcor. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended Elders 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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I continue to believe that the mid cap space is a great place to look for long term investment ideas.

This is because I feel there are a number of mid cap shares that have the potential to grow into large caps in the future, potentially generating outsized returns for investors.

Two mid cap shares that I would buy this month are listed below:

Bravura Solutions Ltd (ASX: BVS)

Bravura Solutions is a provider of software products and services to the wealth management and funds administration industries. I’ve been very impressed with the solid earnings growth the company has generated over the last couple of years. This has been driven largely by the increasing popularity of its Sonata wealth management platform.

And thanks to the Sonata platform’s large market opportunity, I expect it to underpin strong earnings growth over the next few years. This should be complemented by its acquisitions of Midwinter for $50 million and FinoComp for $25 million. Both businesses are expected to bolster its offering and open it up to new and lucrative markets.

PolyNovo Ltd (ASX: PNV)

I think this medical device company is another mid cap share to buy. PolyNovo is the company behind the NovoSorb Biodegradable Temporising Matrix (BTM) technology, which was developed at CSIRO. When trauma to the skin occurs, large portions of the surface of the skin and its deeper layers are destroyed. NovoSorb BTM can be used to temporarily close the wound and aid the body in generating new tissue.

NovoSorb BTM has a sizeable $1.5 billion market opportunity in the treatment of full-thickness wounds and burns. But management isn’t resting on its laurels and is seeking to extend its usage into other markets. It has its eyes on the hernia and breast treatment markets, which are even more lucrative. It estimates that these two markets would add an additional $6 billion to its addressable market.

More reading

• 3 innovative ASX shares to buy
• Analysis: Is the Polynovo share price good value?
• How I’d build a $100,000 portfolio with ASX growth shares
• 3 exciting ASX growth shares to buy with $3,000 today
• Why Polynovo and JB Hi-Fi shares outperformed in FY20

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 POLYNOVO FPO. The Motley Fool Australia owns shares of and has recommended Bravura Solutions 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 recent surge in ASX retailers like the JB Hi-Fi Limited (ASX: JBH) share price may be running out of puff. A leading broker is recommending investors rotate to better value stocks.

This advice comes at a time of renewed worries about a second wave of COVID-19 infections as large parts of Victoria re-enters a lockdown.

While several ASX retail stocks benefitted from the first nationwide shutdown to contain the pandemic, they may not get a repeat boost this time round.

ASX retailers at risk of a de-rating

In fact, the analysts at Macquarie Group Ltd (ASX: MQG) thinks the re-rating that lifted the sector is at risk of deflating.

This is because government support programs like JobKeeper have provided a temporary shot in the arm to consumers, limited the spike in unemployment and given many low wage earners a pay rise even.

“We believe these short-term catalysts are likely to be unwound in next couple of months, the early wins from holding these names are likely to have already occurred,” said Macquarie.

COVID-19 ASX winners losing their crown in second lockdown

Consumers that were forced to stay and work from home have rushed to buy home office supplies. Many have also started on DIY projects around the home to occupy and distract themselves.

This provided the Wesfarmers Ltd (ASX: WES) share price a big boost as group benefitted through its Bunnings and Officeworks stores.

The JBH share price was also another big winner as sales of computers and IT accessories took off, while the demand for home delivered food made the Domino’s Pizza Enterprises Ltd. (ASX: DMP) share price a tasty treat for investors.

While these retailers will continue to benefit from the ongoing COVID-19 disruption, they probably won’t get the same uplift the second time round.

Earnings forecasts at risk

“As the world and consumer settings return to a more normal setting over the next couple of years, so too will spending patterns,” said Macquarie.

“This suggests that using FY20 or FY21 as a base year for calculating sustainable earnings and valuation is likely to lead to disappointment.”

For this reason, Macquarie downgraded its recommendation on Wesfarmers, JB Hi-Fi and Domino’s to “neutral” from “outperform” even though it didn’t change its earnings forecasts for the trio.

ASX stocks to buy on second wave fears

The broker now favours consumer staple stocks, namely the major supermarkets. These include the Woolworths Group Ltd (ASX: WOW) share price and Coles Group Ltd (ASX: COL) share price.

Both these stocks outperformed the S&P/ASX 200 Index (Index:^AXJO) today as panic buying of groceries due to the new Victorian lockdown will provide a lift to sales that analysts weren’t counting.

Macquarie is recommending both supermarket stocks as “outperform”.

More reading

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• Top brokers are urging investors to buy these ASX stocks today
• Goldman Sachs names the ASX retail shares to buy and the ones to avoid
• My bull and bear case for the ASX share market
• ASX 200 down 0.5%: Afterpay completes placement, big four banks tumble

Motley Fool contributor Brendon Lau owns shares of Macquarie Group Limited and Woolworths Limited. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET, Wesfarmers Limited, and Woolworths Limited. The Motley Fool Australia has recommended Domino’s Pizza Enterprises 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.

The post Why it’s time to rotate out of JB Hi-Fi share price and these popular ASX stocks: Macquarie appeared first on Motley Fool Australia.

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