Tag: Motley Fool Australia

Investors remain on edge with the S&P/ASX 200 Index (Index:^AXJO) bouncing between gains and losses on conflicting reports of a new US-China trade war.

Those looking to buy any dips in the market may find the following stocks enticing. These are the latest ASX shares leading brokers are recommending investors buy today.

Better than expected

One to watch is the SEEK Limited (ASX: SEK) with Credit Suisse reiterating its “outperform” recommendation on the stock following its profit update.

The online jobs classifieds group provided earnings guidance that was a little ahead of what the broker was expecting.

SEEK is expecting to post revenue of around $1.58 billion and earnings before interest, tax, depreciation and amortisation (EBITDA) of about $410 million in FY20. Credit Suisse had pencilled in $1.55 billion and $405 million, respectively.

“Divisionally, Zhaopin, ANZ and Seek Asia have continued to see a recovery with Zhaopin May billings only down 10% y/y and lower costs mitigating the earnings impact,” said the broker.

Management also managed to increase its debt covenants, which is reassuring to investors that the group won’t run into trouble with its lenders.

On the downside, SEEK’s Latin America operations are more heavily impacted by the COVID-19 pandemic and that will force management to take a $190 million to $230 million writedown.

Credit Suisse’s price target on the stock is $24 a share.

Deserving a premium

Meanwhile, Morgan Stanley stuck to its “overweight” recommendation on the Metcash Limited (ASX: MTS) share price after yesterday’s profit results announcement.

“We had expected a strong trading update but were still surprised (most notably with Liquor and Hardware),” said the broker.

“Beyond current tailwinds we believe MTS warrants a higher multiple vs. history given diversification and balance sheet strength.”

Management reported 9% growth in its grocery distribution business in the first seven weeks of FY20. This is despite the loss of the Drakes contract.

Morgan Stanley estimates that this means growth in supermarkets was actually running around 11% when the broker was only forecasting around 9%.

The broker upped its price target on the stock to $3.50 from $3.30 a share.

Back in businesses

Finally, the Stockland Corporation Ltd (ASX: SGP) share price surged by 4.1% in after lunch trade to $3.66 after Goldman Sachs restated its “buy” recommendation on the property group.

Stockland provided an update on property revaluation and dividend. The value of its commercial property portfolio will decline by 6%, which is better than what the market expected.

Its commercial properties include malls, which have been hit by the coronavirus lockdown. However, its malls are reopening faster than expected with around 95% of its retail tenants by income starting to trade again.

The devaluation also compares favourably with its peers with GPT Group (ASX: GPT) cutting the value of its retail portfolio by 9% and Vicinity Centres (ASX: VCX) expecting an 11% to 13% drop.

Stockland also said it expected to pay a second half distribution of 10.6 cents per share. This takes the full year payout to 24.1 cents when consensus was expecting only 23.9 cents.

Goldman’s price target on the stock is $4.43 a share.

More reading

• Why the AMP share price is up 9% today
• Leading fund manager names 3 undervalued Chinese shares to buy
• Is a Fortescue Metals mega-merger on the cards?
• Leading brokers name 3 ASX 200 shares to sell today
• ASX shares in danger? Why the gold price is creeping towards all-time highs

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia has recommended SEEK 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 AMP Limited (ASX: AMP) share price is up 8.92% to $1.92 a share at the time of writing today. The broader S&P/ASX 200 Index (INDEXASX: JXO) is having a bit of a roller-coaster kind of day, up 1%, then down 1% and now flat. But in contrast, AMP shares are surging and are back to the levels we were seeing before the March stock market crash. In fact, since 24 March, AMP shares are up nearly 80%.

So why are AMP shares surging today? And more importantly, are AMP shares still a buy at these levels?

Why the AMP share price is raising the roof

We can safely say that the AMP share price surge we are seeing today is the direct result of the company receiving the green light for its AMP Life sale. This morning the company announced that it has been given the all-clear by the Reserve Bank of New Zealand (RBNZ) for the sale of its life insurance business to go ahead. The RBNZ blocked AMP’s initial proposal last year on the grounds that the deal endangered the wellbeing of AMP’s New Zealand clients.

If the sale does indeed go ahead, it will result in approximately $1 billion in proceeds for AMP. The sale was the central tenet of AMP’s new-ish CEO Francesco De Ferrari’s turnaround plan for the emballed wealth manager.

The AMP share price is still recovering from the revelations that came to light during the 2018 Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. Before this time, AMP was worth around $5 a share. But revelations of systemic fraud, mischarging of customers and charging fees for no service saw an exodus of customers and AMP’s share price smashed.

That’s why the cash injection that the now-cleared sale will provide the company is welcome for shareholders today.

Is AMP still a buy today?

I say ‘still a buy’ only because picking up AMP shares at any time over the past 3 months would likely have netted a tidy profit on today’s AMP share price. But how are things looking from here?

Well, there’s no doubt that AMP will be a stronger company once it amputates the struggling AMP Life business. There is now little prospects of a dilutive capital raising and the company can continue to focus on the avenues where it has the most strength – namely asset management.

AMP shares are still cheap today from a valuation perspective, in my view. But then again, there is still a lot of uncertainty in this company’s future. So much so that I’m not tempted at all. I like to invest in companies with clear competitive advantages and strong brands. AMP has neither of these things in my opinion and so I’ll be looking elsewhere for a future winner.

More reading

• Leading fund manager names 3 undervalued Chinese shares to buy
• Is a Fortescue Metals mega-merger on the cards?
• Leading brokers name 3 ASX 200 shares to sell today
• ASX shares in danger? Why the gold price is creeping towards all-time highs
• Renewed US-China trade war puts these ASX 200 stocks in the firing line

Motley Fool contributor Sebastian Bowen 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 Rox Resources Limited (ASX: RXL) share price is soaring today after the small-cap ASX miner reported more high gold grades at Youanmi.

At the time of writing, Rox Resources shares have jumped 17.74% to 7.3 cents after rallying as much as 29.03% in morning trade.

Rox Resources is an emerging Australian minerals exploration company, with advanced gold and nickel projects in Australia.

The company owns a 70% interest in the Youanmi Gold Mine, and wholly-owns the Mt Fisher Gold Project, Fisher East Nickel Project and Colluabbie Nickel Project, all located in Western Australia.

Why is the Rox Resources share price spiking?

This morning, Rox Resources reported further high-grade gold results from the drilling program underway at the Grace prospect at Youanmi.

Rox stated that shallow infill drilling has returned more high gold grades, including:

• 4 metres at 88.81 grams per tonne (g/t) gold from 27 metres, including:
  • 2 metres at 176.03 g/t gold from 28 metres;
• 11 metres at 18.75 g/t gold from 8 metres, including:
  • 3 metres at 61.27 g/t gold from 10 metres; and
• 9 metres at 9.28 g/t gold from 9 metres, including:
  • 2 metres at 33.53 g/t gold from 11 metres.

These results relate to reverse circulation drilling designed to tighten drill spacing on the shallow high-grade part of the emerging Grace prospect to facilitate resource estimation.

Commenting on the results, managing director Alex Passmore said:

“These strong infill results are extremely encouraging and endorse our interpretation for Grace. The results, along with outstanding RC assays, will be complemented by upcoming diamond drilling to facilitate a maiden resource estimate, which we are aiming to have completed later this year.”

Recent developments

Today’s announcement follows another promising ASX release last week which saw the Rox Resources share price more than double.

The release also related to the drilling program being undertaken at the Grace prospect, with the deepest drilling completed to date returning impressive gold grades. This included 25 metres at 34.79 g/t gold from 143 metres, including 6 metres at 140.7 g/t gold from 150 metres.

With a share price of 7.3 cents at the time of writing, Rox Resource’s market capitalisation currently stands at around $145 million. With today’s rise, the Rox Resources share price has now rocketed 192% since the beginning of last week.

More reading

• Why the AMP share price is up 9% today
• Leading fund manager names 3 undervalued Chinese shares to buy
• Western Areas share price blasts 14% on successful drilling results
• Is a Fortescue Metals mega-merger on the cards?
• Leading brokers name 3 ASX 200 shares to sell today

Motley Fool contributor Cathryn Goh 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 Western Areas Ltd (ASX: WSA) share price has jumped by 14.94% to $2.66 per share at the time of writing. This significant jump comes on the back of the miner reporting successful drilling results from its Sahara prospect within the Western Gawler project in South Australia. 

What did Western Areas report?

The company discovered over 200 metres (down-hole length) of nickel and copper-bearing sulphides at the Sahara prospect within the Western Gawler Project. This was the first diamond hole completed by the company on the lluka farm-in and joint venture ground. 

Western Areas managing director Mr Dan Lougher said:

This is an excellent result from our first drill hole at the Sahara prospect, intercepting broad widths of nickel and copper bearing mineralisation. We keenly await the assay results, but it is already clear from what we have seen in the drill core, that we have a significant exploration result that merits immediate follow up work.

Importantly, we originally targeted this area due to its geological similarities to the Nova-Bollinger and Nebo-Babel nickel/copper deposits and this result adds to our belief that this area could host similar mineral accumulations. A lot more work is required to determine the extent of this mineralisation and we are in the process of updating our exploration plans to focus on this area.

According to the company, the drilling site was selected following an extensive campaign of target generation and assessment in 2019. The diamond drilling project commenced at Sahara on 10 June.

Western Areas reports that it is highly encouraged by these results, commenting that they vindicate its “long-held belief that the Fowler Domain has the potential to host significant magmatic nickel and copper sulphide accumulations.”

The Sahara prospect lies within 10km of the Trans Australian railway.

How has the Western Areas share price performed recently?

The Western Areas share price is up 60% from its 52-week low of $1.62, however, it is down by 11%, year to date. It reached a 52-week high of $3.48 in October 2019. Since 2015, the Western Areas share price is down by 22%. 

At its current share price, Western Areas trades on a fully franked trailing dividend yield of 1.3%. 

More reading

• ASX 200 flat: Westpac tumbles, Woolworths reveals strong sales growth, Challenger sinks
• Why Afterpay, Flight Centre, TPG Telecom, & Western Areas are charging higher

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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If you’re looking to diversify your portfolio with international shares, then you might want to take a look at the three shares listed below.

Jacob Mitchell, the Chief Investment Officer at Antipodes Global Investment Company Ltd (ASX: APL), has been running the rule over the Chinese share market and has found a few gems which he believes are undervalued.

Yum China

The first share that Antipodes rates highly is Yum China. It is the largest operator of quick service restaurants in China, with a number of popular brands including KFC and Pizza Hut.

Mr Mitchell believes the company offers a compelling opportunity for investors, particularly given its long runway for growth.

He explained: “Chain restaurant penetration in China is only 5% versus the US at 65%, so there is a long runway for growth and a major opportunity to take market share. With a sustainable growth rate approaching 10%, we believe the company is cheap on a normalised P/E of about 22x.”

Another reason to like Yum China is its lead over the competition. This is in respect to its delivery network and its digital footprint.

The chief investment officer commented: “… it has built a big digital distribution platform, with 180 million digital users. It is also receiving about 30-40% of all online orders through its own app, which is a significant lead versus other online players.”

Alibaba

The second share which Antipodes believes is undervalued is ecommerce giant Alibaba.

The fund manager notes that Alibaba is 14x the size of the largest offline player and hugely dominant across all retail. This is very different to the U.S. market where Amazon’s retail business is only half the size of Walmart.

Despite Alibaba’s size, Antipodes sees plenty of opportunities to grow in this post-COVID-19 world.

Mr Mitchell explained: “Organised channels for fresh grocery sales are hugely under-developed in China compared to those in the US, where established super/hypermarkets account for more than 90% of sales.”

“In China, wet markets – the Asian equivalent of farmers markets – still account for more than 70% of fresh grocery. Given the COVID-19 outbreak likely originated in a wet market, China will now permanently modernise its fresh food supply chain. Alibaba is deploying multiple strategies to attack this opportunity,” he added.

Alibaba is currently priced on a CY21 price to earnings ratio of 20x, which Antipodes believes is an attractive multiple relative to its forward growth profile. Especially when compared to other large retail and internet platform peers globally.

Ping An

A final Chinese share which Antipodes believes is undervalued is Ping An Insurance. It is a life insurance powerhouse and the leader in digital distribution.

Mitchell notes: “Life insurance in the largely underpenetrated market is the safety net for Ping An, which is an innovator of protection products. It also has industry leading tech and the fact it holds data on +750m Chinese residents leads to competitive advantages – including the effective cross-selling of insurance products.”

And despite the company growing its earnings at 20% per annum, with a return on capital employed of 30%, its shares are changing hands at just 10x earnings today. Another positive is that the company holds an investment portfolio worth 15% of its market capitalisation.

How can you invest in these shares?

If you don’t have direct access to the Chinese market, don’t worry.

Antipodes has an exchange traded fund (ETF) which give you exposure to a wide range of quality global businesses, including the three listed above. That ETF is the Antipodes Global Shares ETF (ASX: AGX1).

More reading

• Why the AMP share price is up 9% today
• Is a Fortescue Metals mega-merger on the cards?
• Leading brokers name 3 ASX 200 shares to sell today
• ASX shares in danger? Why the gold price is creeping towards all-time highs
• Renewed US-China trade war puts these ASX 200 stocks in the firing line

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.

The post Leading fund manager names 3 undervalued Chinese shares to buy appeared first on Motley Fool Australia.

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Fortescue Metals Group Limited (ASX: FMG) has been one of the best shares to own in 2020. Whilst the S&P/ASX 200 Index (INDEXASX: XJO) is still down around 10.7% year to date, the Fortescue share price is actually up nearly 30% since 1 January.

High iron ore prices, a supply squeeze in Brazil and an ultra-low-cost basis have all helped Fortescue achieve multiple all-time highs in a year where most ASX shares have tanked.

When a company is flush with cash and surrounded by potentially distressed competitors, the merger and acquisition (M&A) rumour mill often go into overdrive. And that’s what we are being treated to a slice of today.

A Fortescue merger down south?

According to reporting in the Australian Financial Review (AFR), analysts at Citi Bank have been running the numbers on a potential merger of Fortescue Metals with South32 Ltd (ASX: S32).

South32 is a ~$10 billion diversified ASX miner that was spun out of BHP Group Ltd (ASX: BHP) back in 2015. Back then BHP’s management restructured the businesses to focus on its ‘core’ assets of oil, coal, copper and iron ore.

Everything else was shunted off into the newly-formed South32, which became a separately listed entity in its own right. Today, that ‘everything else’ includes metallurgical coal, lead, alumina, aluminium, nickel, zinc and silver operations.

Fortescue gets more than 95% of its earnings from purely iron ore mining. Citi Bank analysts clearly see South32 complementing Fortescue, diversifying the company away from iron ore.

Would Fortescue shares benefit from a merger?

In a sense, this could be a great move by Fortescue in my view. You have to make hay while the sun shines. Right now, Fortescue is getting so much sun it’ll soon have the best winter tan in Australia. The company is cashed up and is benefitting from the highest iron ore prices in years.

Iron ore is also a highly volatile commodity. It has whipsawed between US$40 and US$120 a tonne over the past 5 years. Diversifying through M&A right now makes great sense from this perspective.

However, South32 has had problems of its own in recent years. Its shares are sitting not too far from 4-year lows right now. The company is not benefitting from the same kind of commodity pricing tailwinds as Fortescue. It’s coal mines in South Africa have also faced significant production issues in recent years and the company is now trying to exit the market completely.

Foolish takeaway

Fortescue is one of the best ASX miners in the country in my view, and I think that its shareholders would benefit enormously if this rumoured acquisition comes to pass. Andrew Forrest, Elizabeth Gaines and the rest of Fortescue’s management team have almost as many runs on the board as Sir Donald and would bring some fresh energy to South32 in my view. But we’ll have to wait and see if Fortescue acts on this idea or looks for greener grass elsewhere.

More reading

• Why the AMP share price is up 9% today
• Leading fund manager names 3 undervalued Chinese shares to buy
• Leading brokers name 3 ASX 200 shares to sell today
• ASX shares in danger? Why the gold price is creeping towards all-time highs
• Renewed US-China trade war puts these ASX 200 stocks in the firing line

Motley Fool contributor Sebastian Bowen 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 Is a Fortescue Metals mega-merger on the cards? appeared first on Motley Fool Australia.

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On Monday I looked at three ASX shares that brokers have given buy ratings to this week.

Unfortunately, not all shares are in favour with them right now. Three that have just been given sell ratings are listed below.

Here’s why these brokers are bearish on these ASX 200 shares:

Evolution Mining Ltd (ASX: EVN)

According to a note out of UBS, its analysts have retained their sell rating and cut the price target on this gold miner’s shares to $4.90. The broker notes that Evolution has downgraded its production guidance after recent drilling at its Mt Carlton operation led to a reduction in its life of mine plan. In light of this and the short life of some of its assets, the broker doesn’t believe that Evolution’s shares deserve to trade at a premium to its peers. The gold miner’s shares are changing hands at $5.24 this afternoon.

Fortescue Metals Group Limited (ASX: FMG)

A note out of Citi reveals that its analysts have retained their sell rating and $11.70 price target on this iron ore producer’s shares. The broker believes the market is expecting too much from iron ore prices over the medium term. It suspects that prices will soften when steel production peaks and demand falls. And while the miner is busy with exploration activities, it doesn’t expect this to result in meaningful project development for a number of years. Fortescue’s shares are up at $13.98 on Tuesday.

Stockland Corporation Ltd (ASX: SGP)

Another note out of Citi reveals that its analysts have retained their sell rating and $3.21 price target on this property company’s shares. According to the note, the broker is concerned that its retail property assets could experience a sizeable decline in valuations in the short term. It also notes that Stockland has declared a distribution notably lower than its guidance and has indicated that its CEO will soon retire. The Stockland share price is trading at $3.67 this afternoon.

More reading

• ASX shares in danger? Why the gold price is creeping towards all-time highs
• Renewed US-China trade war puts these ASX 200 stocks in the firing line
• ASX 200 flat: Westpac tumbles, Woolworths reveals strong sales growth, Challenger sinks
• The A2 Milk share price is up 27% in 2020, but is it time to buy?
• These ASX stocks might be a better option than Carsales.Com

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 Kalamazoo Resources Ltd (ASX: KZR) share price is flying higher today on the back of an acquisition from Northern Star Resources Ltd (ASX: NST).

Yesterday, Northern Star announced its decision to divest the Mt Olympus Project, comprising most of the Ashburton Project in Western Australia, to Kalamazoo.

While Northern Star shares jumped 4% on the news, Kalamazoo shares were stuck in a trading halt and only resumed trading this morning. At the time of writing, the Kalamazoo share price has rocketed 42% to 69 cents.

Kalamazoo is a gold and base metals explorer. Its focus is on identifying commercial mineral deposits to explore at its Victorian gold projects and Western Australian gold-base metals projects.

What’s the deal?

Kalamazoo has acquired the Ashburton Gold Project, which is located on the southern edge of the Pilbara Craton in Western Australia.

The project produced 350,000 ounces of gold between 1998 and 2004. It currently holds a JORC Code (2012) resource estimate of 20.8 million tonnes at 2.5 grams per tonne gold for a contained 1.65 million ounces.

Under the terms of the agreement, Kalamazoo will pay Northern Star deferred contingent cash consideration of $17.5 million. This consists of:

• $5 million on mining of the first 250,000 tonnes of ore;
• A 2% net smelter royalty (NSR) on the first 250,000 ounces of gold produced, with a 0.75% NSR on any subsequent gold produced from the tenements; and
• The same NSRs on any other metals produced from the tenements.

Kalamazoo views the acquisition as an important addition to its Pilbara gold assets. And in a similar investment strategy to the acquisition of its flagship Castlemaine Gold Project in Victoria, the deal structure enables the company to invest funds directly “into the ground”.

The company believes the project has significant regional greenfields and brownfields exploration potential; a large drilling, geological, geochemical, and geophysical database; and numerous walk-up drilling targets.

The exploration team will be led by Kalamazoo director Paul Adams, who was previously the managing director of Spectrum Metals. Exploration focus will include an immediate review of the exploration datasets, field reconnaissance of identified prospect areas, and target generation.

Management commentary

Commenting on the deal, Kalamazoo chair and chief executive Luke Reinehr said:

“This is a tremendous outcome for our shareholders and an outstanding addition to our prospective portfolio of gold projects in the Pilbara. Kalamazoo is in the unique position of having major assets and tenure in two of the most highly rated gold exploration provinces in the world today – the Victorian Goldfields and the Pilbara.”

Meanwhile, Northern Star executive chair Bill Beament said:

“The Ashburton project no longer fits in Northern Star’s portfolio but still has strong potential on both the exploration and production fronts. The royalty structure also enables Northern Star to retain an exposure to the project.”

More reading

• 5 things to watch on the ASX 200 on Tuesday
• Why Austal, James Hardie, Northern Star, & Ramelius are storming higher
• A $73m boost sends the Austal share price to the top of the ASX 200 today
• 5 things to watch on the ASX 200 on Monday
• 5 ASX shares that would’ve made you a fortune in 5 years

Motley Fool contributor Cathryn Goh 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 Gold price is on the rise!

The S&P/ASX 200 Index (INDEXASX: XJO) is having a pretty flat day so far. At the time of writing, the ASX 200 is flat after ‘sine-curving’ up and then back down this morning. But that’s not what has caught my eye in early morning trade.

Instead, it’s a very special metal of the yellow variety that has me choking my coffee this morning.

Yes, gold is on the move this week and are creeping towards all-time highs. In early trading this morning, gold hit US$1,760 an ounce for the first time since 2012. It has since pulled back slightly but is still sitting around US$1,750 an ounce at the time of writing.

Why is gold suddenly in demand?

This may seem to have come out of the blue, but gold had actually been in its own mini bull market for a while now. Since dropping below US$1,200 an ounce back in September 2018, gold has been steadily climbing since. According to macrotrends.com, the commodity rose nearly 19% in 2019 and are up another 13.5% in 2020 so far.  There was a moderate dip during the ‘rush to cash’ we saw during the March market sell-off, but this was quickly bought up and gold has resumed surging. We’re now just below the all-time high of U$1,896.50 that we saw back in 2012.

I think gold is in demand right now for several reasons. Many investors (particularly our friends over in the United States) are very worried about inflation. The US government has been ploughing an unprecedented amount of cash into financial markets over the last few months in order to shore up markets in the face of the coronavirus pandemic. This is keeping the markets afloat right now, but printing money usually leads to long term inflation if history is anything to go by. And gold is traditionally viewed as a good asset to hold during inflationary periods.

Low-interest rates are also a factor. Almost every advanced economy around the world right now has interest rates at 0% or very close to it (our own cash rate is currently 0.25%). Low-interest rates make using cash and debt instruments very unattractive s investments. Why bother buying a government bond when it yields you less than 1%?

That leaves property and shares as likely the only real assets worth holding right now. And if you’re worried about having all of your money in these ‘risky’ assets, gold is the only real alternative.

Foolish takeaway

Whilst some investors like to diversify their wealth with gold, I think it’s not really a path that most ASX investors should follow. Warren Buffett likes to say that gold has no real use or ability to generate wealth – it’s simply worth what someone else is willing to pay for it at any one time. That’s why he sticks with good-quality shares, and that’s why I think most ASX investors should follow his example.

Take heed, though. A rising gold price could indicate that investors are seeing trouble for the share market on the horizon. So just make sure you’re prepped for anything in this market!

More reading

• Leading brokers name 3 ASX 200 shares to sell today
• Renewed US-China trade war puts these ASX 200 stocks in the firing line
• ASX 200 flat: Westpac tumbles, Woolworths reveals strong sales growth, Challenger sinks
• The A2 Milk share price is up 27% in 2020, but is it time to buy?
• These ASX stocks might be a better option than Carsales.Com

Motley Fool contributor Sebastian Bowen 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 Afterpay Ltd (ASX: APT) share price dropped from $40.50 on February 19 to just $8.90 on 23 March in the early phase of the coronavirus pandemic. That’s a whopping decrease of 78%.

Since then the Afterpay share price has been on an amazing uphill climb. At the time of writing it is trading at $57.94. That’s an increase since late March of 550%!

A positive recent business update in mid-April has definitely helped to push the Afterpay share price higher.

Afterpay has proved many critics wrong. It has continued to deliver explosive underlying sales growth despite subdued economic times.

Is it too late to buy shares in Afterpay? Or is there still a long-term opportunity for investors right now?

What other factors are driving the Afterpay share price higher?

A very positive update for its US operations in late May also helped push its share price higher. Almost 9 million US consumers have now joined its platform since its launch over 2 years ago.

In addition, WeChat owner Tencent Holdings recently become a significant shareholder in Afterpay. The popularity of the WeChat app in Asia is massive. This could potentially be an important stepping stone for Afterpay in entering the Asian market in the future.

The buy-now, pay-later (BNPL) provider continues to make significant investments to scale the business into a world-class global platform. This has included a number of recent senior management hires, and Afterpay is investing heavily in marketing. It also has brought on board a growing number of global brands such as Samsung and Foot Locker.

Afterpay also recently launched a partnership with Apple that will enable its platform to be integrated with Apple Pay. This will further simplify the process of using Afterpay and could assist in increasing adoption and usage, particularly in the US market.

Competition growing, but Afterpay’s scale advantage is still significant

Afterpay is still growing strongly in its home market of Australia and New Zealand (ANZ). However, it is now starting to face growing competition from other BNPL providers such as Zip Co Ltd (ASX: Z1P) and Openpay Group Ltd (ASX: OPY).

Despite this, Afterpay’s size and scale superiority provide a distinct advantage in winning major deals.

Afterpay is still 6 times bigger than its nearest rival Zip Co, and more than 60 times bigger than Openpay. The BPNL provider has a current market capitalization $15.5 billion, compared to only $2.34 billion for Zip Co and to only $269 million for much small rival Openpay.

Is it too late to buy Afterpay shares?

With the Afterpay share price now reaching over $55, it is now looking a bit pricey. Well factored into Afterpay’s current share price are expectations for very strong growth to continue over the next few years. However, I believe that Afterpay is relatively well-positioned to achieve this goal.

Afterpay is expanding rapidly into the massive US market and could possibly expand into mainland Europe and Asia in the future.

Further expansion globally in the BPNL sector led by Afterpay, is also likely to see further investment injected into this sector globally over the next few years.

More reading

• Zip Co share price higher despite insiders selling almost $48 million shares
• Is the Afterpay share price a boom or a bubble?
• How to try and beat the market with ASX shares
• Afterpay and 2 more ASX 200 shares to watch this week
• These 5 ASX shares were last week’s top performers

Phil Harpur owns shares of AFTERPAY T FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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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