Tag: Motley Fool Australia

The Dorsavi Ltd (ASX: DVL) share price shot 276.92% higher on Thursday following the announcement of a strategic partnership with QBE Insurance Group Ltd (ASX: QBE).

About Dorsavi

Dorsavi is a biotechnology company that develops innovative technologies that offer human body motion analysis for use in clinical applications, elite sports, and occupational health and safety.

Why the Dorsavi share price shoot higher?

Dorsavi announced yesterday that is has entered an agreement with QBE Australia to provide its wearable technology to QBE customers. The goal is to provide data insights that could help in reducing movement risk, injury claims and workers’ compensation premiums. 

QBE will allocate $250,000 over 12 months to allow new and existing customers to access Dorsavi’s equipment. QBE customers will be able to access both ViSafe and myVisafe technologies.

QBE Australia General Manager People Risk, Rob Kosova, stated; “safe work Australia estimates that workplace injury and disease costs around 4% of GDP.” Additionally, he stated that over one third of these cases are due to body stressing or manual handling. The executive also stated that “partnering with Dorsavi is one way we can assist more customers prevent these injuries from happening.”

The technology to be provided by Dorsavi will include on body sensors that will be used in real time and real work environments. These sensors will measure movement and muscle activity, quantify movement risk and guide decision making on risk mitigating strategies. 

CEO of Dorsavi, Dr Andrew Rochi, said;

“We are very excited to be working with QBE Australia to provide their customers with access to cutting edge technology and to profile risk more accurately. One of the goals for insurers is to be able to pro-actively manage risk and have remote visibility on where their potential risks are, allowing insurers and corporate groups to mitigate these risks and prove solutions before they are implemented. We look forward to adding value to the QBE Australia business and to their clients’ businesses.”

About the Dorsavi share price

Dorsavi released a business update and cash flow report in April for the March quarter. The company’s cash balance was down to $1.92 million compared to $2.56 million at 31 December 2019. Net cash flow from operations was $870,000, however, the negative reduction in cashflow was 41% lower than the prior corresponding period. For the first 3 quarters of the 2020 financial year, recurring revenue was $1.16 million. This was a 22% increase on the prior corresponding period.

The business anticipated a challenging period as a result of the coronavirus with many clients of Dorsavi’s technology requesting a pause in their subscriptions. All staff agreed to a pay cut of approximately 30% until the end of May 2020 and the company slashed operating expenses by 20% in order to optimise cash reserves.

The Dorsavi share price is up 512.5% from its 52 week low and is currently up 63.3% since the beginning of the year. The Dorsavi share price is down 2% since this time last year.

More reading

• Fund managers have been snapping up Sonic and these ASX 200 stocks
• ASX 200 falls 0.9%, Afterpay share price hits new record
• ASX winners and losers from last week

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 Lovisa Holdings Ltd (ASX: LOV) share price will be one to watch on Friday after the release of a business update.

What did Lovisa announce?

According to the release, the fashion jewellery retailer’s performance in the fourth quarter was unsurprisingly below expectations because the closure of stores during the pandemic.

And despite an impressive 256% increase in online sales during the quarter, it wasn’t enough to stop its full year sales declining in comparison to FY 2019. Sales revenue (excluding franchise revenue) for the full year ended 28 June 2020 came in at $237 million. This represents a 4.8% decline on FY 2019’s sales revenue of $249 million.

Same store sales declines.

In addition to the above, the company revealed that comparable store sales for the period since stores have re-opened, based on the actual days each store traded, were down 32.5% on last year.

Looking ahead, management warned that forecasting trading conditions remains challenging and no guidance will be provided at this stage.

Spain exit.

After previously putting its store rollout on hold in Spain, Lovisa has made the decision to exit this market.

Management explained that it was disappointed with the lack of support from its landlords in the country.

As a result of this exit, Lovisa expects to recognise an impairment charge of $3.3 million in its FY 2020 results.

Balance sheet remains strong.

One positive is Lovisa’s balance sheet strength. Thanks to decisive action taken on costs and cash management since the outbreak of the pandemic, its balance sheet position remains strong and its inventory levels are well managed.

At the end of the financial year, Lovisa had a net cash balance of $21 million. This is $10 million more than this time last year.

Management notes that this cash balance, combined with undrawn financing facilities of $44 million, leaves it well placed to invest in future growth opportunities as the global economy emerges from the current situation.

More reading

• A great ASX small-cap share for your watchlist
• Coronavirus second wave potential could drive investment portfolio changes
• Here are 3 Australian share market trends to watch this week
• Short-sellers are stepping up their attack against these popular ASX shares
• Why the Lovisa share price is at risk of falling further over the coming weeks

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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With interest rates at ultra-low levels and unlikely to improve for some time to come, I continue to believe that the share market is the best place to earn a passive income.

But which dividend shares should you buy? Listed below are two top ASX dividend shares which I think are high quality options right now. Here’s why I like them:

Dicker Data Ltd (ASX: DDR)

Dicker Data is a wholesale distributor of computer hardware and software. It has been an exceptionally strong performer in 2020 despite the pandemic. In fact, this week Dicker Data released a half year update which revealed unaudited first half revenue of $1 billion and net profit before tax of $40 million. This represents an 18.3% and 25% increase, respectively, over the prior corresponding period.

In light of this, I’m confident it is in a position to deliver on its plan to increase its dividend by 31% this year. This will bring it to 35.5 cents per share, which based on the current Dicker Data share price, equates to a fully franked 4.6% dividend yield.

Telstra Corporation Ltd (ASX: TLS)

Another dividend share that I think income investors ought to buy is Telstra. After several years of struggles because of the decline of its fixed line business due to the NBN rollout, I believe a return to growth is finally on the horizon. This is thanks to its sizeable cost cutting, the arrival of 5G internet, and of course the easing of the NBN headwinds.

In respect to the latter, peak pain from the NBN rollout is expected to hit in the near future. After which, the pressure on its earnings will ease and growth could be on the agenda once again. Positively, until then I’m confident that its free cash flows are more than enough to sustain its 16 cents per share dividend. Based on the current Telstra share price, this equates to an attractive fully franked 5% dividend yield.

More reading

• Why Afterpay, Bigtincan, Dicker Data, & NIB shares are racing higher
• Dicker Data share price surges higher after revealing strong first half profit growth
• Fund managers have been snapping up Sonic and these ASX 200 stocks
• These 2 ASX tech shares show stellar growth prospects
• Top ASX Stock Picks for July 2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited and Telstra 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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On Thursday the S&P/ASX 200 Index (ASX: XJO) was on form again and stormed through the 6,000-point level. The benchmark index jumped 1.65% to 6,032.7 points.

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

ASX 200 expected to rise again.

The ASX 200 looks set to end the week on a high on Friday. According to the latest SPI futures, the benchmark index is expected to rise 36 points or 0.6% at the open. This follows a solid night of trade on Wall Street which saw the Dow Jones rise 0.35%, the S&P 500 climb 0.45%, and the Nasdaq push 0.5% higher. U.S. equities pushed higher after a better than expected U.S. jobs report.

Oil prices push higher.

Energy producers such as Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) could end the week on a high after oil prices continued their recovery. According to Bloomberg, the WTI crude oil price is up 1.2% to US$40.30 a barrel and the Brent crude oil price is 1.7% higher to US$42.75 a barrel. Solid U.S. economic data drove oil prices higher overnight.

Gold price recovers.

Gold miners including Northern Star Resources Ltd (ASX: NST) and Saracen Mineral Holdings Limited (ASX: SAR) could end the week on a positive note after the gold price pushed higher. According to CNBC, the spot gold price has risen 0.4% to US$1,787.70 an ounce despite the strong economic data.

Magellan rated neutral.

The Magellan Financial Group Ltd (ASX: MFG) share price could be overvalued according to one leading broker. A note out of Goldman Sachs reveals that its analysts have retained their neutral rating and $51.69 price target on the fund manager’s shares. Goldman notes that Magellan’s shares are currently trading at 23.5x FY 2021 earnings. This is ahead of its five-year average of 20x. Magellan share price closed at $61.68 on Thursday.

Aristocrat and Reliance block sales.

Aristocrat Leisure Limited (ASX: ALL) and Reliance Worldwide Corporation Ltd (ASX: RWC) shares will be on watch on Friday after reports of large block trades. According to the AFR, someone was selling $127 million worth of Aristocrat shares yesterday afternoon. After which, an investor offloaded the equivalent of a 4.4% stake in Reliance Worldwide

More reading

• Is the CSL share price fairly valued?
• Should you buy these 2 new ASX 200 index additions?
• This ASX fund manager is still ultra-bearish on shares
• Should you buy ASX gold shares like Saracen Minerals in July?
• Why I would buy and hold a2 Milk and this ASX 200 share until 2030

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 Reliance Worldwide Limited. The Motley Fool Australia has recommended Reliance Worldwide 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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With the S&P/ASX 200 Index (ASX: XJO) surging above the 6,000 points level again, a number of shares have been pushing higher in recent days.

Some have pushed so hard they are now trading at record highs. Two which have achieved this feat are listed below. Here’s why they are on form right now:

Afterpay Ltd (ASX: APT)

The Afterpay share price continued its remarkable run and hit a record high of $68.62 on Thursday. This latest gain means that the payments company’s shares are now up an incredible 850% from their March low. This strong gain has been driven by its very positive performance during the pandemic, strong customer growth in the United States and the United Kingdom, international expansion options, and positive broker notes.

The latter appears to have been the catalyst for taking its shares to a new high yesterday. As I mentioned here, analysts at Citi retained their neutral rating but more than doubled their price target on Afterpay’s shares to $64.25. Citi lifted its price target after upgrading its earnings estimates to reflect strong customer growth and the acceleration of the shift to online shopping.

Temple & Webster Group Ltd (ASX: TPW)

The Temple & Webster share price rocketed 18% higher to a record high of $7.44 yesterday. This means the online homewares retailer’s shares are now up 435% from their March low. Investors were fighting to get hold of shares on Thursday after it successfully completed a $40 million share placement to institutional investors. These funds will be used to make further investments in its growth strategy, while also improving its technology, product, and service offerings.

In addition to this, it released a business update which revealed that its sales were strong again in June. Monthly gross sales to 28 June were up 130% on the prior corresponding period. This appears to have put the company in a position to deliver a bumper profit result in FY 2020.

More reading

• Afterpay share price hits $67! Are BNPL shares in a bubble?
• Why the Afterpay share price zoomed to a new record high today
• Temple & Webster share price at an all-time high after capital raise
• Why Afterpay, Bigtincan, Dicker Data, & NIB shares are racing higher
• ASX 200 up 0.9%: Citi lifts Afterpay price target, Webjet boosts liquidity

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 Temple & Webster Group Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Temple & Webster Group 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 CSL Limited (ASX: CSL) share price has gone off the radar somewhat in recent months. If we cast our minds back to 2019, CSL shares were the hot stock to own. Everyone was talking about how high CSL could go. And boy did it get high, so to speak. Over the course of the 2019 calendar year, CSL shares rose from around $188 in early January to around $276 by the end of December (nearly 47%).

But over the course of 2020, sentiment on CSL shares has cooled somewhat. The CSL share price started the year at $275.04 and climbed another 24.5% all the way to its all-time high of $342.75 in mid-February. But then the March coronavirus-induced crash came and CSL plummeted back down to roughly $270. Today, CSL shares are asking $288.88 (at the time of writing).

Now, CSL shares are beating the S&P/ASX 200 (INDEXASX: JXO) on a year-to-date returns benchmark. CSL shares are still up roughly 5.12% year to date, whereas the ASX 200 is still nursing a 10% loss for the year so far.

But since 23 March (when the ASX 200 bottomed), the index has risen more than 32%, whilst CSL shares are up 2.5%.

So I think it’s fairly safe to draw the conclusion that CSL is no longer considered the ‘growth wunderkind’ that it was last year in many ASX investors eyes.

Is the CSL share price fairly valued?

So with the current CSL share price inertia, can we consider the shares to be ‘fairly valued’ today? Well, let’s look at how the market is currently pricing CSL shares.

The current CSL share price (at the time of writing) is $288.88. this gives CSL a market capitalisation of $131.18 billion and a price-to-earnings (P/E) ratio of 44.8. It also offers a trailing dividend yield of 1.01% on these current prices.

In the 2018/19 financial year, CSL brought in US$8.21 billion in revenues and US$1.92 billion in net profits after tax (NPAT). This was an increase of 8.13% and 11% respectively over the 2017/18 financial year.

This is healthy growth to be sure, but does it really justify a P/E ratio of 44.8? I’m not so sure.

The current ASX 200 average P/E ratio is around 16.6, going off the iShares Core S&P/ASX 200 ETF (ASX: IOZ). So you are paying a ~2.5x premium for this company over the market average. Does revenue growth of ~8% and profit growth of 11% justify this premium? Not in my eyes.

Foolish takeaway

Therefore, I don’t think CSL shares are trading at ‘fair value’ today, just going off these humble calculations. I like CSL as a company. It has grown spectacularly over the past 2 decades. But I’m not willing to pay nearly 45x earnings for this company today and I think there are better offers elsewhere.

More reading

• Should you buy these 2 new ASX 200 index additions?
• This ASX fund manager is still ultra-bearish on shares
• Should you buy ASX gold shares like Saracen Minerals in July?
• Why I would buy and hold a2 Milk and this ASX 200 share until 2030
• Top brokers name 3 ASX 200 shares to sell right now

Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. 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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Each quarter the S&P/ASX 200 (INDEXASX: XJO) is rebalanced to reflect companies with the largest-weighted market capitalisations. This rebalance ensures that the broader market remains liquid and tradeable. Companies added to the benchmark ASX 200 index can experience an increase in demand as fund managers and institutions balance and hedge their portfolios.

The Q3 FY20 rebalance of the ASX indices was abandoned due to the extreme volatility caused by the coronavirus pandemic. As a result, the June rebalance of the index has attracted more interest and activity.

Here are 2 new additions to the ASX 200 index that you should keep your eye on.

Megaport Limited (ASX: MP1)

With businesses relying on the internet to work remotely, shares in the IT sector showed incredible resilience during the coronavirus pandemic. Megaport has been one of the company’s that has thrived during the lockdown period.

The company is a global leader in interconnection services. It uses software-defined networking (SDN) centres to provide bandwidth, allowing customers to connect their network to other services. This allows users to quickly build and access connections to various services.  It also offers users scalable solutions with flexible terms, allowing businesses to scale up or down as required.

Megaport’s services are essential which was reflected in the company’s share price recovery. Megaport’s share price soared 120% from its March low to its June high. This gave the company a market capitalisation of more than $2 billion and a place in the ASX 200 index.

With many companies considering the potential of having remote workers post-pandemic, Megaport’s services could receive increased attention.

Mesoblast Limited (ASX: MSB)

Mesoblast’s share price nearly tripled in the 3 months to 30 June with news of the company’s potential coronavirus treatment. This propelled the biotechnology company into the ASX 200 index.

Mesoblast is a world leader in developing regenerative medicines for inflammatory diseases. It prides itself on innovation surrounding stem cell research. The company made headlines in April after it announced promising results for its Remestemcel-L treatment for COVID-19.

In a US trial, the company recorded an 83% survival rate in ventilator-dependent COVID-19 patients. Furthermore, 75% of patients had successfully come off ventilator support within 10 days. Due to the urgent nature of COVID-19 therapies, Mesoblast’s treatments undertook a $46 million phase 2/3 trial in order to gain approval from the US Food and Drug Administration.

Mesoblast also completed a $138 million capital raising in order to scale-up manufacturing of its products and is also in the process of conducting clinical trials in Australia. Mesoblast’s treatments, if approved, will likely generate significant interest from fund managers.

Should you buy these additions?

The addition of a company to the ASX 200 can lead to increased demand in their share registry as many funds have a mandate that requires them to have exposure to companies on a certain index.

In my opinion, the most prudent strategy would be to keep these new additions to the index on a watchlist and let price action dictate before making an investment decision.

More reading

• Is the CSL share price fairly valued?
• This ASX fund manager is still ultra-bearish on shares
• Should you buy ASX gold shares like Saracen Minerals in July?
• Why I would buy and hold a2 Milk and this ASX 200 share until 2030
• Top brokers name 3 ASX 200 shares to sell right now

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 MEGAPORT FPO. The Motley Fool Australia has recommended 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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The Aurelia Metals Ltd (ASX: AMI) share price has surged 14.95% higher today on the back of its Q4 FY20 update.

The group is an Australian gold and base metals mining exploration company. Aurelia has a landholding in New South Wales’s polymetallic Cobar Basin and operates the Peak and Hera Mine projects.

The 2 major processing plants possess a combined capacity of approximately 1.3 million tonnes per annum (Mtpa).

Q4 FY20 production update

The company has reported preliminary production increases in gold, copper, lead and zinc. However, the standout performer was in its gold production figures with gold increasing from 14.3 thousand ounces (koz) in Q3 FY20 to 32.8 koz in Q4 FY20. For FY20, preliminary gold production totalled 91.7 koz.

In addition, Aurelia’s cash balance at 30 June 2020 is $78.6 million which is an increase from $51.4 million at 31 March 2020. The group had no debt other than usual creditors. 

Maiden Federation Resource Estimate announcement

On 9 June, Aurelia Metals released a Maiden Resource Estimate (MRE). The Federation deposit contains 197,000 tonnes of lead, 348,000 tonnes of zinc, 67,000 ounces of gold and 755,000 ounces of silver.

Drilling is ongoing to test the prospects of the mine with mineralisation ranges from 80–550 metres in depth and remains open in multiple directions.

A scoping study has commenced to evaluate project development options and the company is anticipating processing at the existing Hera Mine plant.

About Aurelia Metals

As stated in the introduction, the group operates the Hera Mine and Peak Mine. 

Aurelia purchased Hera Mine as an undeveloped gold, lead, zinc and silver deposit in September 2009. The NSW government approved the development in July 2012 after extensive exploration and a feasibility study in September 2011. In FY19, the mine produced 58,025 ounces of gold at an all-in sustaining cost (AISC) of $809 per ounce. 

In April 2019, the company purchased the Peak Mine for $59 million. The group was able to achieve investment payback on this purchase price within 4 months. In FY19, the mine produced 59,496 ounces at an all-in sustaining cost (AISC) of $1,143 per ounce. 

After Aurelia Metals share price gain today, the company’s market capitalisation is worth $515 million. 

More reading

• 3 high quality ASX dividend shares for patient investors
• This ASX fund manager is still ultra-bearish on shares
• 2 exciting small cap ASX shares that could be destined for big futures
• Should you buy ASX gold shares like Saracen Minerals in July?
• Why I would buy and hold a2 Milk and this ASX 200 share until 2030

Motley Fool contributor Matthew Donald 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.

The post Why the Aurelia Metals share price is up 15% today appeared first on Motley Fool Australia.

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If you’re looking to invest in dividend shares and you’re not in immediate need for income, then I think the three ASX dividend shares listed below could be worth considering.

All three dividend shares have been negatively impacted by the pandemic this year. However, I’m confident their performances will improve in FY 2021 and allow them to pay generous dividends again.

Here’s why I would buy them:

Lendlease Group (ASX: LLC)

Earlier this week this international property and infrastructure company released its unaudited results for FY 2020 and revealed a sharp decline in profit. While this was disappointing, I believe all the bad news is now built into the Lendlease share price and the company can start afresh in FY 2021. I’m confident that its burgeoning global development pipeline have positioned the company perfectly for solid earnings growth in FY 2021 and beyond. As a result, I estimate that Lendlease will pay a 57 cents per share dividend next year. This equates to a 4.4% dividend yield.

Sydney Airport Holdings Pty Ltd (ASX: SYD)

Another company which I expect to bounce back strongly in FY 2021 is Sydney Airport. Unfortunately, its terminals are a bit of a ghost town right now because of the pandemic. But with restrictions easing and state borders reopening, I expect domestic travel markets to recover in 2021 to the point that it is able to pay a decent distribution in the region of 29 cents per unit. Based on the current Sydney Airport share price, this represents a 5% FY 2021 dividend yield.

Transurban Group (ASX: TCL)

A final dividend share to look at buying is Transurban. As with Sydney Airport, its toll roads were virtually empty at the height of the pandemic. However, with restrictions easing, traffic volumes have been recovering and toll revenues are improving. I’m not convinced the company will pay a final distribution, but I expect them to return to relatively normal levels in FY 2021. I estimate that it will pay shareholders a 49 cents per unit distribution next year. Based on today’s Transurban share price, this equates to a 3.4% distribution yield.

More reading

• Lendlease share price jumps 6% after being given conviction buy rating
• Fund managers have been snapping up Sonic and these ASX 200 stocks
• ASX 200 finishes 0.6% higher, Aussie house prices fall
• Don’t let low interest rates hold you back! Buy these ASX dividend shares
• Top ASX Stock Picks for July 2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Transurban Group. 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 (INDEXASX: XJO) has been faring relatively well over the past 3 months. Since the lows we saw on 23 March, the ASX 200 has recovered more than 32%. Even though the ASX 200 is still down around 9.8% since the start of the year, considering all that has gone on with the coronavirus pandemic, ASX investors may be feeling a slight sense of relief.

But after the run of the past few months, many investors are now asking “where to from here?”. After all, the outlook for the broader Australian economy and the ASX shares that dwell within it is still very uncertain. 

One ASX fund manager is taking a big bet on this question and the direction of this bet should at least cause some angst for investors today.

Enter the ultra-bear

Chris Mackay is the fund manager of MFF Capital Investments Ltd (ASX: MFF). MFF Capital is a Listed Investment Company (LIC) that used to be part of the Magellan Financial Group (ASX: MFG), which Mr Mackay was a co-founder of. There are still some links between the 2 companies, but they are more-or-less independent of each other these days.

Mackay has proved himself as one of Australia’s best fund managers in my view. Over the past 10 years, Mackay has grown MFF’s value by a cumulative 350% (an average of 16.21% per annum). This figure excludes dividend payments.

MFF Capital primarily invests in US-listed shares like Visa, Mastercard, Microsoft and Home Depot, forming the lion’s share of the company’s portfolio.

But MFF’s largest position these days is in cold, hard cash. In an update yesterday, Mr Mackay informed the market that the company’s portfolio is sitting at 44% in cash as of 30 June 2020.

Having 44% of your fund’s assets in cash is another way of saying you’re bearish over shares in the short-term.

So, what has Mr Mackay spooked?

Well, here is some of what he had to say to his investors in the ASX update:

“Cash is MFF’s largest holding. We prefer not to hold significant amounts of cash for long periods. Cash is a wasting, non earning asset… We far prefer significant holdings in sustainably advantaged businesses on sensible terms. Cash and savers fare badly under inflation and financial repression. However, cash is usually valuable in crises for managing advantaged purchases when asset prices fall significantly in relative and absolute terms. Our investment approach has benefited from past market cycles, when purchases were possible at low prices but near term economic and business outlooks were terrible.

Assessment of successful longer term investments looks beyond short term marks to meet market and comparisons with indices and other investors. So far this time we have retained cash rather than risk permanently destroying capital with overpriced purchases or seeking to trade for prices in the market recovery in recent months.”

Should ASX investors follow MFF into bearish territory?

As an investor of MFF myself, I have a lot of respect for Mr Mackay. Therefore, I find his bearish insights troubling.

In my view, having a 44% cash position isn’t just having a foot in both camps; it’s an all-out bearish bet on lower share prices in the near future. It’s not too hard to read between the lines of what Mr Mackay had to say; he clearly is expecting some kind of correction or crash on the horizon.

I myself have been trying to increase my portfolio’s cash position recently (though not to the extent of Mr Mackay). None of us knows what will happen in the markets next year, next month or even tomorrow. But I do think the current circumstances warrant a lot of caution.

So, if you agree with Mr Mackay, looking at your own cash position might be a good idea. Remember, the worst time to sell a share and increase your cash is when the market is already crashing.

More reading

• Should you buy ASX gold shares like Saracen Minerals in July?
• Why I would buy and hold a2 Milk and this ASX 200 share until 2030
• Top brokers name 3 ASX 200 shares to sell right now
• ASX 200 up 0.9%: Citi lifts Afterpay price target, Webjet boosts liquidity
• Fund managers have been snapping up Sonic and these ASX 200 stocks

Sebastian Bowen owns shares of Magellan Flagship Fund Ltd, Mastercard, and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Mastercard and Visa. 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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