Tag: Motley Fool Australia

A second stock market crash in 2020 could occur over the coming months. Risks such as a second wave of coronavirus and rising tensions between the United States and China may contribute to weak earnings growth across many industries.

While this may lead to disappointing returns in the short run, it could provide buying opportunities for the long run. Through buying high-quality businesses while they offer wide margins of safety, you could benefit from a likely long-term recovery in stock prices.

A further market crash

Many listed companies have delivered impressive rebounds since the stock market crash earlier in 2020. However, their performances could be negatively impacted by ongoing risks facing the world economy’s outlook that may lead to a second downturn for share prices.

Relatively little is still known about coronavirus. As such, it may be too early to say that lockdowns across many major economies will be successful in combatting it. Likewise, even though there was apparent progress in trade talks between the US and China prior to the pandemic, tensions between the two countries could rise. This may cause investor sentiment to come under pressure, which could lead to falling share prices over the near term.

Margin of safety

While a further stock market crash may cause some investors to worry, it could provide long-term investors with an opportunity to buy high-quality companies while they offer wide margins of safety.

Buying a stock at a discount to its intrinsic value may equate to a more attractive risk/reward ratio, since many of the risks it faces may already be priced in. As such, buying undervalued shares could be a means of building a solid portfolio that is well placed to deliver long-term growth as the economy recovers.

During a stock market downturn, there may be a wide range of businesses that appear to offer good value for money. As such, it may be worth assessing their financial strength and being selective about which companies you purchase.

Furthermore, buying a diverse range of stocks could be a shrewd move. It may help to protect your portfolio against challenging trading conditions for specific companies and sectors during what could prove to be a difficult period for the world economy.

Recovery potential

A stock market crash is not an especially unusual event. Stock prices have a track record of experiencing sharp downturns in a short space of time. The key takeaway for investors is that the stock market has always recovered from its bear markets to produce record highs.

Therefore, even if there is a further decline in stock prices over the near term, a recovery is very likely. Through purchasing a range of companies while they offer wide margins of safety, you could generate higher returns in the coming years as investor sentiment and company earnings gradually improve.

More reading

• 2 ASX dividend shares with yields over 6%
• 2 dirt-cheap ASX shares to buy next week
• ASX 200 closes 0.4% higher, Cochlear share price up 6%
• Here are the 10 shares that move global markets
• Where to invest $5,000 into ASX 200 shares immediately

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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With interest rates now at a fresh record low of 0.25%, the attraction of ASX dividend shares has rarely been more acute. Many investors are asking themselves why they’re settling for an interest rate under 2% from the bank when some ASX dividend shares are offering more than triple that in potential yields. After all, 2% will barely cover inflation as it is, you wouldn’t be too much worse having your cash under the mattress.

But 2020 has seen a lot of former dividend heavyweights deliver cuts in their shareholder payouts. These include the big four ASX banks, Transurban Group (ASX: TCL) and Sydney Airport Holdings Pty Ltd (ASX: SYD).

So here are 2 ASX dividend shares that: 1) offer grossed-up dividend yields over 6%; and 2) are not likely (in my opinion) to cut said dividend going forward.

Origin Energy Limited (ASX: ORG)

Origin is a utility company that provides electricity and gas connections as well as owning several electrical generation assets. I like these kinds of companies as dividend plays, because energy is a very inelastic service (meaning its use doesn’t fluctuate too much, regardless of what else is happening in the economy). Origin shares haven’t been doing too well as of late. Friday’s closing price was $5.95, which is still well below the ~$8.70 highs we were seeing back in February.

Still, I think this is a safe-and-steady kind of investment that will give off some robust returns over the next few years, especially from dividend payments. On current prices, Origin shares are offering a trailing dividend yield of 5.04%, which grosses-up to 7.2% with full franking credits.

Metcash Ltd (ASX: MTS)

Metcash is the company behind the IGA chain of grocery stores in Australia, as well as the Mitre 10 and Home Timber & Hardware chains. The company also owns a small network of bottle shops, which include the Thirsty Camel and Bottle-O brands. Metcash is perennially the underdog in the grocery war, often overlooked for its larger rivals Woolworths Group Ltd (ASX: WOW) and Coles Group Ltd (ASX: COL).

But I think there is value still left in this underdog. Many people prefer shopping at the smaller, friendlier IGAs and the company has managed to hold on to a small but significant market share in the grocery industry overall. And hardware is also a fairly robust and defensive business to be in as well.

On current prices, Metcash shares are offering a trailing dividend yield of 4.45% – which grosses-up to 6.36% with full franking.

More reading

• Here are the 10 shares that move global markets
• Here’s how to play China’s V-shaped growth story
• What’s going on with the Coles share price?
• Why Lovisa, PointsBet, Transurban, & WiseTech shares are racing higher
• Risk to supermarkets is rising but is Woolworths share price still a buy?

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET, Transurban Group, and 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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As the S&P/ASX 200 Index (ASX: JXO) keeps climbing (up another 0.42% on Friday), many investors will be celebrating. Rising ASX share prices normally equates to rising wealth for anyone already invested in ASX shares. But for those investors who might still be sitting on a cash position and looking for more opportunities to invest in, it’s also a bittersweet time to be alive. That’s because the higher ASX shares climb, the more unattractive adding new money to one’s share market portfolio becomes.

So that’s why I’ve found 2 ASX shares that I still think are dirt cheap today.

1) A diversified ASX conglomerate

Washington H. Soul Pattinson & Co Ltd (ASX: SOL) is one of the oldest companies on the ASX and is even older than our modern nation, having started life back in pre-Federation days. Back then, Soul Patts owned a small chain of chemists in Sydney. Today, Soul Patts is a diversified conglomerate that is often described as the ASX’s answer to Warren Buffett’s Berkshire Hathaway. That’s because this company primarily invests in other ASX companies these days (although it still retains a couple of pharmacies). Some of its largest stakes are in the newly-merged TPG Telecom Ltd (ASX: TPG), Brickworks Ltd (ASX: BKW) and New Hope Corporation Ltd (ASX: NHC).

The Soul Patts share price has recovered somewhat since the lows of March but is still trading far below the highs we saw back in February. At under $20 a share, I think this company is dirt cheap right now.

2) An ASX telco giant

Telstra Corporation Ltd (ASX: TLS) is our second dirt-cheap ASX share today. Telstra shares have had an exceptionally good week, rising from $3.12 on Monday to finish on Friday at $3.36 (up 7.7%). Despite this, I think this company is still undervalued. We were seeing prices above $4 last year, and I think Telstra can easily get back there when investors start appreciating its solid dividend yield. On current prices, this amounts to 4.76% (or 6.8% grossed-up with full franking) if you include the special nbn dividends.

Further, Telstra is also investing heavily in a new 5G network, which could end up paying off handsomely over the rest of the decade. The commercial impacts of a 5G rollout are not too certain just yet, but I’m optimistic Telstra will be able to work it’s new network into a profitable business venture. As such, I think this telco is a good deal at the current prices, with (in my view anyway) a lot of potential upside without too much downside

More reading

• ASX 200 closes 0.4% higher, Cochlear share price up 6%
• Here are the 10 shares that move global markets
• Where to invest $5,000 into ASX 200 shares immediately
• The latest ASX stocks to be downgraded by top brokers today
• Fund managers have been buying these ASX 200 shares

Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks, Telstra Limited, 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 S&P/ASX 200 Index (ASX: XJO) finished higher by 0.4% today to 6,068 points. It has managed to stay above that 6,000 level going into the weekend.   

There continue to be worries about the Victorian COVID-19 outbreak spreading across the state and into other states which are free of community transmissions.

Cochlear Limited (ASX: COH) leads the way

The Cochlear share price went up by more than 6% today. It was the best performer within the ASX 200.

The share price rose after an announcement that the US FDA has approved four of Cochlear’s new products.

The hearing device business has received approval for the Nucleus Kanso 2 Sound Processor, the Nucleus 7 Sound Processor for Nucleus 22 implant recipients, the Custom Sound Pro fitting software, and the Nucleus SmartNav system.

These four new systems will be commercially released in the US and Western Europe in the next few months, subject to local approvals.

The Nucleus Kanso 2 Sound Processor is the first and only off-the-ear cochlear implant sound processor to offer direct streaming from compatible Apple or Android devices. The Nucleus SmartNav system provides wireless, actionable, intraoperative insights to help surgeons with real-time navigation, helping improve surgical outcomes.

Adbri Ltd (ASX: ABC) share price collapses

The Adbri share price was crunched by 25.4% today after giving an update about its Alcoa lime supply contract.

Cockburn Cement, a subsidiary of Adbri (previously known as Adelaide Brighton), has been told by Alcoa of Australia that it won’t be renewing its current lime supply contract. The contract expires on 30 June 2021. 

The contract makes up around $70 million in annual revenue for the ASX 200 business. However, the loss of the contract isn’t expected to hurt revenue until after June 2021. Management will evaluate potential actions. At this stage management can’t quantify the full financial impact of the contract loss. 

Adbri CEO Nick Miller said: “We are disappointed with Alcoa’s decision to displace locally manufactured product with imports from multiple sources, particularly considering our almost 50-year uninterrupted supply relationship. We will work quickly to mitigate the impact on local jobs supporting our lime business and we remain committed to supplying our WA resources sector customers.”

Worley Ltd (ASX: WOR) wins another contract

The Worley share price dropped around 1% despite announcing another contract win today.

Worley has been awarded a services contract for its European battery material investment project in Finland. The project is to build a plant that will produce precursor battery material for the European market. The plant will be powered by electricity generated from renewable energy.

Worley will provide engineering, procurement and construction management services. The ASX 200 company has already completed early engineering and design services for the project. The plant will be built in Finland for the fast-growing electrical vehicle market.

Pointsbet Holdings Ltd (ASX: PBH) signs on with a US baseball team

Pointsbet just announced it has been chosen as the first sports betting partner for any Major League Baseball (MLB) team.

It has signed a multi-year deal to become the gaming partner of the Detroit Tigers MLB team. It’s also the first partnership with any professional sports team in Michigan.

Pointsbet will have television broadcast-visible branding at Comerica Park and will be featured on the Detroit Tigers Radio Network. It will also have a sponsored presence on the Tigers’ digital platforms. Pointsbet will also feature on ‘The Wood on Woodward’ which is a twice-weekly live streaming show. Finally, Pointsbet will appear in relevant apps.

More reading

• 2 dirt-cheap ASX shares to buy next week
• Here are the 10 shares that move global markets
• Where to invest $5,000 into ASX 200 shares immediately
• The latest ASX stocks to be downgraded by top brokers today
• Fund managers have been buying these ASX 200 shares

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. and Pointsbet Holdings Ltd. The Motley Fool Australia has recommended Cochlear Ltd. and Pointsbet Holdings 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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We Aussies are mostly preoccupied with the S&P/ASX 200 Index (ASX: XJO) and the companies within it for our day-to-day investing activities. And fair enough too. We are a relatively small country, but we have every right to be proud of our companies and the wealth they have created for generations of Australian families.

But when it comes to the global stage of investing, even ASX blue-chip shares like Commonwealth Bank of Australia (ASX: CBA), Telstra Corporation Ltd (ASX: TLS) and Woolworths Group Ltd (ASX: WOW) are relatively insignificant. I doubt too many investors in Hong Kong, the United Kingdom or the almighty United States of America really care what these companies are doing.

Last month, I looked at the top 10 companies that move our ASX 200 index. But today, I want to take things up a notch and take a look at which companies move global markets. I’ll be drawing from the Vanguard MSCI Index International Shares ETF (ASX: VGS) for this exercise. VGS tracks the MSCI World Index, which tracks the largest companies across the advanced economies of the world, including the USA, Japan, Canada, the UK and Europe.

1) Apple

Everyone knows Apple. The iPhone is perhaps as ubiquitous a product as any – I think almost every person on the planet would know what an iPhone is and how it works. And this is perhaps why Apple is the largest publicly listed company in the world right now. The company’s core product remains the iPhone, but its iPad, Mac, services (like Apple Music and TV) and accessories lines are also formidable in their own right

2) Microsoft

Microsoft is a rare breed of company. It remains the only US-listed company to still be in the top 10 American businesses by size in the year 2000 and today in 2020. Its Office suite of products is also renowned around the world, as is its flagship Windows operating system. Microsoft is also heavily invested in the gaming space, where its Xbox consoles remain industry-leading. Microsoft is the ‘original tech blue chip’ and it’s not a company I would want to bet against.

3) Amazon.com

Amazon is perhaps one of the most phenomenal growth stories in corporate history. Just 20 years ago, this was a company with a share price of around US$42.50. Today, those same shares of this e-commerce behemoth will set you back around US$2,890 – a staggering 6,700% return. No wonder Amazon’s founder Jeff Bezos is the richest man in the world right now.

4) Facebook

Again, everyone knows Facebook and its ambitious and talented (if not controversial) founder and CEO Mark Zuckerberg. But you may not know that Facebook also owns the Messenger, Whatsapp and Instagram platforms as well. The company has also been working on a cryptocurrency of its own as well as a line of virtual reality equipment known as Oculus. Like Zuck or not, Facebook shares are certainly written off at your own peril.

5) Alphabet

Facebook’s largest competitor in the world of online advertising is the search engine pioneer known as Alphabet. Alphabet is best known for its Google subsidiary, which holds a fairly monopolistic grip on the global search engine market (outside China anyway). But the company also owns video platform YouTube, the G suite platform of productivity apps, the Android mobile operating system, and (of course) Google Maps.

6) Johnson & Johnson

Johnson & Johnson is by far the largest healthcare company in the world. You might know it from its Band-Aid and Listerine personal hygiene products, but that’s just the tip of this company’s iceberg. It is also heavily involved with medical equipment research and manufacturing and also makes pharmaceuticals and other medicines.

7) Visa

Visa is a global payments giant. Its devilishly simple business model of clipping the ticket of every transaction going through its network has transformed this former collective into a global payments giant. Chances are every reader gracing this article with their presence has a card in their wallet (or on their phone) with a Visa logo in the corner. Think about that scale, and you have a fair idea of how large this company is.

8) Nestlé

Our first non-American company is this Swiss global foods and drinks titan. Nestlé has its finger in so many pies it’s hard to keep track of them all. Nescafe is probably Nestlé’s most successful product line, but there are many others that you might not have even heard of. A large presence in an evergreen industry is never a bad thing, so it’s no surprise Nestlé joins our market movers list.

9) Procter & Gamble

Like many large conglomerates, you might not have directly heard of Procter & Gamble. But you will almost certainly have heard of some of their brands. This company is a consumer staples giant, with a truly global market. Some of its brands include Gillette razors, Tide laundry detergent, Old Spice deodorant, Fairy dishwashing liquid and Oral-B toothpaste.

It wouldn’t be uncommon to find at least one of Procter & Gamble’s products in any Australian household. Think about that in a global context, and we can see why P&G makes the list.

10) JPMorgan Chase & Co

JP Morgan is the largest bank in the United States and one of the largest banks in the world. Think of it as a quasi-equivalent of one of our own ASX big four banks, for the US. It has extensive retail banking operations through its Chase branches as well as significant presence in commercial banking as well. It’s also a company with a certain myth surrounding it. J.P. Morgan was a ‘titan of industry’ back in his day and is still held up today as one of America’s capitalistic forefathers.

More reading

• Where to invest $5,000 into ASX 200 shares immediately
• The latest ASX stocks to be downgraded by top brokers today
• Fund managers have been buying these ASX 200 shares
• What’s going on with the Coles share price?
• Brokers name 3 ASX 200 shares to buy right now

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Alphabet (A shares), Facebook, Procter & Gamble, JPMorgan, Johnson & Johnson, Telstra Limited, and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Facebook, and Visa. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of Woolworths Limited. The Motley Fool Australia has recommended Alphabet (A shares), Facebook, and Vanguard MSCI Index International Shares ETF. 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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Given the bleak outlook for interest rates in Australia, if I had $5,000 sitting in a bank account, I would put it to work in the share market.

This is because the potential returns on offer with ASX shares are vastly superior to the 0.05% base rate you’ll get on the Australia and New Zealand Banking GrpLtd (ASX: ANZ) Online Saver account.

But which ASX shares should you buy? Here are three top ASX 200 shares which I think could provide strong returns for investors over the coming years:

Altium Limited (ASX: ALU)

I think this electronic design software provider is a great long term investment option. Especially after recent weakness in the Altium share price means it is trading 20% lower than its 52-week high. This weakness has been caused by a disappointing performance in FY 2020. However, it is worth noting that this has been caused by the pandemic and should only be a short term headwind. Looking ahead, I believe its outlook is as positive as ever. This is thanks to its exposure to the Internet of Things boom which looks like to accelerate in the coming years thanks to 5G internet.

Nanosonics Ltd (ASX: NAN)

Another top share that I would invest $5,000 into is Nanosonics. I think the infection control company has a very bright future ahead of it thanks to its market-leading disinfection system for ultrasound probes. Although it has been growing its footprint materially over the last few years, it still only has a 19% share of its global addressable market. Given its status as the best in its class, I expect further market share gains in the coming years. This should lead to strong unit sales growth and recurring revenues from the consumables it requires. But perhaps best of all, is that Nanosonics is planning to launch new products in the near future targeting unmet needs. If these are anywhere near as successful, it could launch the Nanosonics share price materially higher over the coming years.

Nearmap Ltd (ASX: NEA)

A final share to consider investing $5,000 into is Nearmap. It is a leading aerial imagery technology and location data company. Its products allow users to conduct accurate virtual site visits without leaving the home or office. This ultimately enables informed decisions, streamlined operations, and, importantly, significant cost savings. Given the quality of its software and the highly fragmented market it operates in, I believe it is well-positioned to grow its market share materially in the coming years. And with the Nearmap share price down 36% from its 52-week high, now could be an opportune to make a patient long term investment.

More reading

• Here are the 10 shares that move global markets
• The latest ASX stocks to be downgraded by top brokers today
• Fund managers have been buying these ASX 200 shares
• What’s going on with the Coles share price?
• Brokers name 3 ASX 200 shares to buy right now

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Nanosonics Limited and Nearmap Ltd. The Motley Fool Australia owns shares of Altium. 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 (Index:^AXJO) running out of puff with the big banks like the National Australia Bank Ltd. (ASX: NAB) share price giving up their morning gains.

But there are others that could be facing some pressure after these leading brokers downgraded their recommendations on these ASX stocks today.

Weakening platforms

The Hub24 Ltd (ASX: HUB) share price and Netwealth Group Ltd (ASX: NWL) share price took a hit today after Credit Suisse cut its rating on both.

The HUB share price tumbled 1.3% to $18.66 while the NWL share price slumped 7% to $8.82 at the time of writing.

The broker was reviewing the latest industry data for ASX-listed wealth platforms, which saw the industry record its second consecutive quarter of capital inflows in the three months to March.

Good times can’t last

“We expect the inflows to be short-lived with the impact of COVID-19 to result in outflows in the typically seasonally stronger June quarter due to superannuation withdrawals and lower contributions,” said Credit Suisse.

“NWL/HUB remained leaders on net flows, capturing an outsized share from the major institutional platforms who generally remained in outflow.

“While NWL/HUB are benefiting from switching, we expect switching to temporarily slow in the June quarter as COVID-19 diverts advisers’ attention to servicing clients.”

Both stocks have also outperformed in recent months and the broker believes consensus expectations may be too lofty.

Credit Suisse lowered its recommendation on HUB24 to “neutral” from “outperform” and Netwealth to “underperform” from “neutral”.

Singing out of key

Meanwhile, UBS cut its rating on the Chorus Ltd (ASX: CNU) share price to “sell” from “neutral”. The NZ and ASX-listed telco outperformed through the coronavirus pandemic as investors sheltered under its relatively defensive earnings and dividends.

But there’s too much optimism priced into the stock and the broker warns that the company could be cutting its dividend.

Bad news-flow

“CNU benefits from being a COVID-19 defensive but share price assumes ‘more for more’ with implied cumulative over-recovery of ~$2bn and implied retail prices over $100 which most consumers can’t afford,” said UBS.

“Our catalyst tracker expects neutral/negative news over the next 12 months (regulation, dividend policy & 5G launches).”

The broker is forecasting around a 10% drop in Chorus’ long run dividend to NZ55 cents a share from NZ60 cents a share.

UBS’ 12-month price target on the NZ stock is NZ$6.75 a share.

More reading

• Here are the 10 shares that move global markets
• Where to invest $5,000 into ASX 200 shares immediately
• Fund managers have been buying these ASX 200 shares
• What’s going on with the Coles share price?
• Brokers name 3 ASX 200 shares to buy right now

Brendon Lau owns shares of National Australia Bank Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Hub24 Ltd. The Motley Fool Australia owns shares of Netwealth. The Motley Fool Australia has recommended Hub24 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 Westpac Banking Corp (ASX: WBC) share price was out of form on Friday and dropped lower.

The banking giant’s shares fell almost 0.5% to $18.54.

Why did the Westpac share price drop lower?

Investors appear to have been selling the banking giant’s shares after it admitted to underpaying some of its staff.

According to a media release, Westpac will be remediating current and former employees who were not paid their correct long service leave entitlements due to some calculation errors.

Westpac advised that the errors led to underpayment and overpayment of some long service leave entitlements. These errors were identified as part of a wider review of its payroll and long service leave arrangements.

The bank explained that in some instances, it found that the wrong rules were inadvertently applied in Westpac’s payroll system. This then affected people’s long service leave entitlements.

What is the damage?

At present, the bank estimates that it will be paying approximately $8 million in total to around 8,000 people who were underpaid their long service leave. This figure includes interest.

The good news for those that were overpaid, is that Westpac will not be asking anyone who has been overpaid to repay any money.

Westpac’s Group Executive of Enterprise Services, Alastair Welsh, commented: “We apologise to anyone impacted by these errors and our priority is to make payments as soon as possible.”

“For long service leave entitlements, different rules apply to different employees based on their employment history and work arrangements. Regrettably, our system didn’t correctly capture the right methodology every time,” he added.

Westpac will now put in place measures to ensure that this doesn’t happen again and that future long service leave is correctly calculated.

“We are committed to putting things right for our people and preventing the issue from re-occurring, and we will continue to check our processes to ensure employees receive their correct entitlements,” Mr Welsh concluded.

More reading

• ASX 200 up 0.9%: Citi lifts Afterpay price target, Webjet boosts liquidity
• Down 32% in FY20, is the NAB share price a buy this year?
• Why this leading broker has upgraded Westpac shares to “buy”
• ASX 200 up 0.9%: Big four banks rising, NEXTDC rockets higher
• 5 things to watch on the ASX 200 on Wednesday

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

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Despite being the country where the outbreak of COVID-19 originated, China was the first economy to emerge from the pandemic. Some analysts now predict China’s economy will experience a V-shaped rebound, going from -2% growth this year to 8% in 2021. 

Given the underlying weakness in the Chinese economy – including a soft export market, low domestic demand and lingering trade wars – it’s easy to see why investors would be wary of this market. However, when compared with the bleak economic outlook globally – which will hamper recovery in corporate earnings – some exposure to China looks justified, in my opinion.

It is the only global economy that’s expected to be in positive territory this year.

With full year growth expected to come in at 1.8%, the country appears to have has miraculously dodged a technical recession, and some economists, like BlackRock, expect the world’s second largest economy to experience “near-trend growth” as soon as late 2020.

In addition to the return of strong export markets, what China’s economic stimulus is now focused on is middle-class shoppers spending more as job stability returns to post-COVID-19 levels. China’s reliance on consumer spending cannot be understated, with consumption contributing to two-thirds of the country’s economic growth, according to recent figures.

Greater risk in not investing in China

Despite trade wars, geopolitical tensions and post-COVID-19 economic uncertainty, there are still ways to take measured bets on China. If you’re prepared to do your homework, it’s possible to get good exposure to China’s recovery story. Despite the pandemic, some fund managers have already done this.

For example, back in March at the height of the pandemic, Magellan fund manager, Hamish Douglass increased his allocation to China from 14% a year ago to 25%, via exposure to just a handful stocks. While the fund manager used to be invested only in Apple, Starbucks and Yum Brands, it has now added LVMH, Estee Lauder, Alibaba and Tencent to its holdings in China.

Assuming the focus remains on quality companies, Douglass believes it’s more risky not to invest in China over the next 20 years. He cited Starbucks as a great way to access the Chinese middle-class, where a new store was opening in China on average every 15 hours.

Then there’s Zenith Investment Partners, which pre-COVID had already increased its average exposure to China from 18% to 22%. Zenith’s exposure to what are referred to as A-shares – those listed on the Shanghai and Shenzhen stock exchanges – also doubled from 2% to 4%.

Despite being relatively out of favour, and underweight within (most) global portfolios, in my view Chinese equities look to have been oversold. This creates opportunities for those willing to take a long-term view.

Signs of a rebound are already evident, with recovery picking up steam in June on the back of the Chinese government’s ‘new style’ infrastructure spending (like 5G) – plus other fiscal stimulus measures – designed to drive both domestic consumption and help reopen overseas markets.

Exposure to China through ASX ETFs

If you like the idea of having exposure to China, but don’t have the stomach to be a stock-picker within this market, another way to play China’s recovery story is through ASX-listed China exchange traded funds (ETFs).

Despite rallying 34% in the last year, my favoured ASX-listed China ETF is VanEck Vectors China New Economy (ASX: CNEW). The shares on this index seem to be in the sweet-spot of China’s economic stimulus measures.

In an effort to help stabilise its domestic market, the People’s Bank of China is committed to extending more credit to small businesses that had their liquidity stretched during the lockdown. Unlike the global financial crisis (GFC), this time around economic stimulus measures are primarily focused on technologies of the future, including everything from electric cars, industrial robotics, through to artificial intelligence (AI). As investor with exposure to China, this is something to be aware of.

CNEW seeks to provide investors with access to a portfolio of the most fundamentally sound companies, with the best growth prospects – in consumer discretionary, consumer staples, healthcare, and technology sectors – that are domiciled and listed in mainland China. The three biggest holdings within CNEW (which holds 120 shares) include Guangdong Biolight Meditech Co Ltd, Jiangsu Zitian Media Technology Co Ltd and G-bits Network Technology (Xiamen) Co Ltd A.

Other China-based ETFs listed on the ASX include VanEck Vectors China A-Share (ASX: CETF), which is up by 2.81% over the last 12 months, and Ishares China Large-Cap (ASX: IZZ), which is down 1.28% over the last 12 months.

ETFs aside, it’s also important to note that any ongoing fiscal stimulus-driven upswing for China stocks also bodes well for fund managers whose exposure to China may have fallen along with the market last year. For example, ASX-listed Platinum Asset Management Ltd (ASX: PTM), which has around a 5th of its holdings in China, looks well positioned to benefit from China’s new infrastructure stimulus measures. Since peaking at around $8.50 early February 2018, the Platinum share price is now trading at below half of that high, at $3.76 per share.

Then there are another 30 to 40 funds that could also benefit from their exposure to a Chinese recovery, including the Magellan Global Trust (ASX: MGG) and the Fidelity Asia Fund.

Exposure to China through ASX shares

While resource stocks aren’t in the direct eye of China’s current stimulus measures, some sub-sectors, like base metals (notably iron ore, which is currently selling for around US$100/tonne) are still a net beneficiary of the strong demand for steel. Fortescue Metals Group Limited (ASX: FMG) is the most dominant playmaker in this space in my opinion. Also adding to Fortescue’s fortunes are the export downgrades by its biggest competitors Vale and Rio Tinto Limited (ASX: RIO).

China’s plans to move from coal to gas-fired power, also presents enormous long-term opportunities for Australian providers. Despite a notable deterioration in trade relations, China became Australia’s biggest market for LNG in April, accounting for 40% of total exports. Key beneficiaries include the Queensland-based Origin Energy Limited (ASX: ORG)’s Australia Pacific LNG Venture and the Woodside Petroleum Limited (ASX: WPL)-run North-West Shelf venture in WA.

Resource shares aside, with China’s stimulus measures focused squarely on consumers, any improvement in confidence could also provide a kicker to ASX shares that export high-end consumer discretionary products such as meat, seafood, dairy, fruit, alcoholic beverages and pharmaceuticals. While a growing number of ASX shares export to China, those with the greatest China exposure include winemaker Treasury Wine Estates Ltd (ASX: TWE), milk and infant formula companies A2 Milk Company Ltd (ASX: A2M), and Synlait Milk Ltd (ASX: SM1) plus vitamins company Blackmores Limited (ASX: BKL).

Foolish takeaway

Given the tensions with China on myriad levels right now, it’s important to pick shares with strong exposure to this market carefully. So do your homework – look for shares with 30% or more exposure to China, within markets that appear to be outside the turmoil of any ongoing trade tariff tension, and that will benefit from the ‘translation effect’ when foreign earnings are domiciled back into Australian dollars.

More reading

• Why I would buy Appen and this ASX growth share right now
• Why Adbri, BlueScope, Netwealth, & Rio Tinto shares are tumbling lower
• Rio Tinto share price on watch after Oyu Tolgoi update
• Why I would buy and hold a2 Milk and this ASX 200 share until 2030
• Fund managers have been snapping up Sonic and these ASX 200 stocks

Motley Fool contributor Mark Story owns VanEck Vectors China New Economy shares. The Motley Fool Australia owns shares of and has recommended Blackmores Limited and Treasury Wine Estates Limited. The Motley Fool Australia owns shares of A2 Milk. 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 Here’s how to play China’s V-shaped growth story appeared first on Motley Fool Australia.

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If you’re looking to diversify your portfolio to protect it against potential market shocks, then you might want to consider the ASX shares listed below.

I have picked out three top ASX shares in different sectors which I feel could bolster your portfolio if you don’t already have exposure to that particular area of the market.

They are as follows:

BHP Group Ltd (ASX: BHP)

I think having a little exposure to the resources sector can be a good thing for a portfolio. And if you’re going to buy a mining share, you might as well go for the best in the sector. Which I believe to be BHP due to its diverse, world class, and low costs operations, its strong balance sheet, and its attractive valuation. Another positive is its penchant for returning funds to shareholders. Based on the current BHP share price, I estimate that it provides investors with a fully franked ~5% FY 2021 dividend.

ResMed Inc. (ASX: RMD)

If you don’t have exposure to the healthcare sector then ResMed could be a good option. It is a leading medical device company which specialises in sleep treatment hardware and software. I believe ResMed shares could provide strong returns for investors over the next decade thanks to its very positive long term outlook. This is thanks to its exposure to the proliferation of obstructive sleep apnoea (OSA). The company estimates that only 20% of OSA sufferers have been diagnosed at this point. If this is accurate, it gives ResMed a significant runway for growth over the next decade and beyond.

Wesfarmers Ltd (ASX: WES)

Finally, investors looking for exposure to the retail sector may want to consider Wesfarmers. I think the conglomerate is a top option due to its collection of leading retail brands, which all look well-placed for growth over the long term. Especially its key Bunnings brand, which is now its biggest generator of revenue. In addition to its retail exposure, Wesfarmers gives investors a little access to the industrials and chemicals industries through its portfolio. Combined, I believe it is capable of growing its earnings and dividend at a solid rate in the coming years. This could lead to the Wesfarmers share price charging notably higher from where it trades today.

More reading

• Why you can expect further gains for ASX shares this quarter
• Fund managers have been snapping up Sonic and these ASX 200 stocks
• 3 top ASX dividend shares to buy for FY21
• These 3 ASX healthcare shares are at all-time highs!
• ASX 200 stocks to watch for FY2021

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers Limited. 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.

The post Diversify your portfolio with BHP, ResMed, and Wesfarmers shares appeared first on Motley Fool Australia.

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