Tag: Motley Fool Australia

My ASX share for the week is A2 Milk Company Ltd (ASX: A2M).

I think the infant formula business still has plenty more growth potential for the years ahead.

The company was recently added into the S&P/ASX 50 Index at the expense of AMP Limited (ASX: AMP).

I have been continually impressed by A2 Milk’s growth over the past five years. You may not have thought that A2 Milk is the kind of business to grow even faster during a global pandemic, but it is so far.

How is FY20 going?

A couple of months ago the ASX share gave an update that said that revenue for the three months to 31 March 2020 was above expectations. Customers were buying more product to stock the pantry. A2 Milk is also benefiting from the fact that its Chinese segment revenue is transacted in US dollars which was helped by foreign currency movements.

A2 Milk said it’s expecting FY20 revenue to be in the range of $1.7 billion to $1.75 billion. This would be growth of 30% to 34% on FY19’s revenue. I think that would be a really strong result considering it’s after years of good growth already.

The ASX share also said that the full year earnings before interest, tax, depreciation and amortisation (EBITDA) margin is expected to be higher than what was advised at the half-year result and in the range of 31% to 32%. That estimate includes spending the full $200 million marketing budget, weighted to the second half of FY20, will be fully spent before the end of the financial year.

I think this shows how profitable A2 Milk can be if/when its marketing cost growth can rise at a slower pace when it has reached sufficient scale in a region. 

There were three main reasons for the higher EBITDA margin. I’ve already mentioned the first two – higher revenue (and therefore higher margins) and the favourable exchange rate. There were also lower than expected costs for travel and other costs relating to delayed recruitment.

The A2 Milk board is still aiming for an EBTIDA margin of 30% in the medium-term to maintain a balance between growth and investment.

Why A2 Milk is my ASX share of the week at this price

In this type of uncertain environment I think it’s a good idea to go for businesses that can keep growing whether there’s more global lockdowns ahead or not.

In the short-term there could be another spike in demand. Particularly from Chinese customers because there are more COVID-19 Chinese restrictions again.

Over the longer-term I believe that this ASX share still has a long growth runway ahead. A2 Milk is expanding into the Canadian market with Agrifoods for the production, distribution, sale and marketing of A2 Milk branded liquid milk. Canada is a sizeable potential market for A2 Milk.

What’s most attractive about A2 Milk’s growth plans is the US and Asia. In the FY20 half-year result the company said USA revenue increased by 115.7% and Asian revenue rose by 76.7%. These markets could continue to generate great results because they have such big populations and A2 Milk’s market penetration isn’t that big, particularly in the US. It has been rapidly increasing its US store distribution over the past three years but it takes time to win over new customers.

A2 Milk is only just getting started in Canada too and there are plenty of other countries for A2 Milk to expand into.

Is A2 Milk a buy?

The ASX share is generating excellent revenue and profit growth each year. The growth is on par with some of the highly-valued ASX tech shares. Yet A2 Milk’s price/earnings ratio seems much more reasonable for its growth rate. It’s currently trading at 28x FY22’s estimated earnings. I’d be happy to buy some shares today for the long-term.

More reading

• Top brokers name 3 ASX 200 shares to buy next week
• How to become a millionaire in 25 years with $20 a day
• Why a2 Milk, Afterpay, and Pushpay shares just hit record highs
• The a2 Milk share price just hit a record high: Is it too late to invest?
• ASX 200 down 1.3%: Big four banks tumble, Afterpay tipped to go higher

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. 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.

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The S&P/ASX 200 Index (ASX: XJO) decisively shook off the wobbles and was well and truly back in the green last week.

After smashing the previous 6-week winning streak with a week of volatility and heavy selling activity over the prior week, last week was a healthy return to form for the ASX 200 – making it 7 out of 8 weeks of gains as we start another week anew.

The week began with news that the United States Federal Reserve has initiated an unprecedented purchasing program for corporate bonds on the secondary market. This new wave of central bank intervention saw a massive shift in sentiment for both US and ASX shares that carried through the week.

But it wasn’t the blue chips that were in the ASX 200 driving seat. Instead, it was retail and tech shares that were making waves.

ASX 200 retail and tech shares shine

Some surprisingly positive retail sales figures were released to the market on Friday, which showed that retail sales during the month of May surged 16.3% to $4.03 billion – the largest increase in 36 years. This is obviously fantastic news for both the struggling retail sector and the broader economy.

As a result (and as you would expect), most ASX retail shares had an impressive day on Friday. Some noteworthy performers included Wesfarmers Ltd (ASX: WES), JB Hi-Fi Limited (ASX: JBH), Harvey Norman Holdings Limited (ASX: HVN) and, in particular, Adairs Ltd (ASX: ADH) and Nick Scali Limited (ASX: NCK), which were up 10.53% and 19.65% respectively over Friday’s trading.

For less obvious reasons, ASX tech shares also had a top week. Appen Ltd (ASX: APX) was a standout performer, despite no major news of significance coming out of the dataset provider. In fact, Appen shares were up close to 14% last week alone and hit a new, all-time high of $34.03 on Friday. Appen shares are now up 115% since March. Also in the ASX tech space, Xero Limited (ASX: XRO), WiseTech Global Ltd (ASX: WTC) and (of course) Afterpay Ltd (ASX: APT) also had strong weeks.

How did the markets end the week?

It was a tale of two markets on the ASX last week. On the surface, the ASX 200 started the week off at 5,847.8 points and finished at 5,942.6 points – a 1.6% bump for the week.

Monday was all about the bears. The ASX 200 lost a hefty 2.2% that day and looked in danger of breaching the 5,700 point threshold. But then we heard from the US Fed overnight and everything changed. Tuesday saw one of the best days in recent months with a 3.9% surge. This was followed up on Wednesday by another 0.8% rally tempered with Thursday’s cool-off that gave us a 0.9% drop. Friday was a dramatic day which saw ASX 200 shares spike early above a 1% gain, which was then whittled away until we were left with a mere 0.1% gain for the day. All in all, it was a very unpredictable week!

Meanwhile, the All Ordinaries (INDEXASX: XAO) also had a topsy-turvy week, but managed to eke out a 1.7% gain.

Which ASX 200 shares were the biggest winners and losers?

Let’s now brew a pot of tea and have a look at which ASX 200 shares were the week’s biggest winners and losers on the Foolish gossip pages. As always, let’s start with the losers:

Worst ASX 200 losers	% loss for the week
Pilbara Minerals Ltd (ASX: PLS)	(16.13%)
Mayne Pharma Group Ltd (ASX: MYX)	(14.63%)
Orora Ltd (ASX: ORA)	(12.17%)
Fortescue Metals Group Limited (ASX: FMG)	(6.89%)

Taking out the wooden spoon last week was lithium miner Pilbara Minerals – a company that hasn’t delivered too much joy to its investors for a few years now. Pilbara shares slumped over 16% last week after the miner was kicked out of the ASX 200 Index. Pilbara shares remain more than 50% below where they were trading at this time last year.

The same fate as Pilbara awaited Mayne Pharma last week, whilst Orora’s slump can be attributed to the company’s shares going ex-dividend last week.

Lastly, Fortescue is a rare sight in the losers column these days. It’s possible that some investors were looking to take some profits off the table. This mining giant has made several new, all-time highs in recent weeks and is still up nearly 28% year to date.

With the losers out of sight and mind, let’s take a look at which ASX shares were making investors happiest last week:

Best ASX 200 gainers	% gain for the week
Clinuvel Pharmaceuticals Limited (ASX: CUV)	21.3%
Healius Ltd (ASX: HLS)	19.76%
Appen Ltd (ASX: APX)	14.68%
Viva Energy Group Ltd (ASX: VEA)	13.92%

Clinuvel Pharma continued its massive run of recent months, taking out top spot with a 21.3% gain. This doesn’t appear to have been catalysed by anything of substance, although the shares have been strongly in favour since March, more than doubling in value since then.

Helius was in the spotlight after announcing the sale of its medical centres arm. Clearly investors approved of the company using the proceeds to pay down debt.

We’ve already discussed the positivity surrounding ASX tech shares like Appen, but Viva Energy surprised investors with upbeat guidance for the first half of the year. Investors always love to be pleasantly surprised, after all.

What is this week looking like for the ASX 200?

Last week demonstrated (yet again) how much of an impact the monetary policy of the United States can have on our markets. We were seemingly heading for a nasty week before the Fed (literally) intervened.

This week, I’m keeping my eye on the worrying possibility of another outbreak of coronavirus infections in Victoria and elsewhere across the country. This could have a significant impact on investors’ confidence this week, so I think it’s a situation well worth keeping an eye on. It’s also an unfortunate reminder that we’re not out of the woods with this pandemic just yet.

Before we begin it though, here’s a snapshot of how the major ASX blue chips are looking:

And finally, here is the lay of the land for some leading market indicators:

•     S&P/ASX 200 (XJO) at 5,942.60 points
•     All Ordinaries (XAO) at 6,061.6 points
•     Dow Jones Industrial Average at 25,871.46 points after falling 0.8% on Friday night (our time)
•     Gold (Spot) swapping hands for US$1,743.95 per troy ounce
•     Iron ore asking US$103.04 per tonne
•     Crude oil (Brent) trading at US$41.92 per barrel
•     Crude oil (WTI) going for US$39.43 per barrel
•     Australian dollar buying 68.16 US cents
•    10-year Australian Government bonds yielding 0.85% per annum

Foolish takeaway

As we start yet another week, we’re all keeping our fingers crossed that the success Australia has had in fighting the coronavirus continues on its current trajectory. We all knew from the start that this fight wasn’t to be quick or easy and last week we got another uninvited reminder of this. That’s why I think investing with a long-term mindset is more important than ever. So as always, stay safe, stay rational and stay Foolish!

More reading

• Beat low interest rates with Telstra and these ASX dividend shares
• These are the 10 most shorted ASX shares
• 5 things to watch on the ASX 200 on Monday
• These fantastic healthcare ASX shares could make you wealthy
• Are these small cap ASX tech shares the next Afterpay or Appen?

Sebastian Bowen owns shares of National Australia Bank Limited, Newcrest Mining Limited, and Telstra Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd., WiseTech Global, and Xero. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited and Telstra Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO, Appen Ltd, COLESGROUP DEF SET, Transurban Group, Wesfarmers Limited, 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.

The post ASX 200 Weekly Wrap: ASX back in the green appeared first on Motley Fool Australia.

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The most recent weekly economic report from Westpac Banking Corp (ASX: WBC) reveals that its team continues to forecast the cash rate staying at the record low of 0.25% until at least the start of 2022.

Given the state of the economy, unemployment, and inflation, I suspect that this forecast will prove accurate. Which means the interest rates on offer with savings accounts and term deposits are likely to remain lower for longer.

But don’t worry, because these three ASX dividend shares could help you beat low rates:

BWP Trust (ASX: BWP)

BWP is a real estate investment trust which leases the majority of its warehouses to Bunnings. I think the hardware giant is arguably the highest quality retailer in the country and a fantastic tenant to have. Especially right now when Bunnings is delivering very strong sales growth despite the pandemic, which should make rental increases easier. At present, I estimate that BWP’s units offer investors a forward 4.9% yield.

Dicker Data Ltd (ASX: DDR)

Another dividend share to consider buying is Dicker Data. It is a wholesale distributor of computer hardware and software which has consistently grown its earnings and dividends at a solid rate over the last few years. This has been driven by new vendor agreements and solid demand. Things are going particularly well in FY 2020. As a result, the company intends to increase its dividend by 31% to 35.5 cents per share. This represents a 5% fully franked dividend yield.

Telstra Corporation Ltd (ASX: TLS)

A final dividend share to consider buying this week is Telstra. I believe the telco giant’s outlook is the best it has been in a long time due to the easing NBN headwind and its T22 strategy. This strategy is simplifying its business and cutting costs materially. While a return to growth may still be a couple of years away, I’m confident its dividend cuts are over now and 16 cents per share is sustainable. This represents a very attractive fully franked 5% dividend yield.

More reading

• ASX 200 Weekly Wrap: ASX back in the green
• What is the price/earnings (p/e) ratio?
• Consider these blue chip ASX shares for strong dividend yields
• The ASX big bank stock with the best forecast dividend yield for the new year
• ASX 200 up 0.9%: Big four banks rebound, Appen hits record high

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. 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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At the start of each week I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

I believe it is worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Speedcast International Ltd (ASX: SDA) is now the most shorted share on the Australian share market with short interest of 13.2%. Short sellers have done very well with this one. The communications satellite technology provider is currently in the process of declaring itself bankrupt.
• Myer Holdings Ltd (ASX: MYR) has seen its short interest slide to 13%. Short sellers have been targeting the retailer amid concerns that the pandemic has accelerated the structural decline of department stores.
• Super Retail Group Ltd (ASX: SUL) has seen its short interest pull back to 9.6%. Short sellers may believe that some of this retailer’s brands are going to underperform in a tough retail market.
• Webjet Limited (ASX: WEB) has seen its short interest rise to 9.6%. I suspect that short sellers are targeting the online travel agent due to its current valuation. It is worth noting that although its shares have crashed lower this year, its market capitalisation is actually higher than it was in January.
• Inghams Group Ltd (ASX: ING) has 9.35% of its shares held short, which is up slightly week on week. Earlier this year management warned that a change in its sales mix could weigh on the poultry company’s performance in FY 2020.
• Perpetual Limited (ASX: PPT) has entered the top ten with short interest of 9.2%. This fund manager has been a poor performer in FY 2020, reporting a 14% decline in profit in the first half. This was driven by fund outflows and lower performance fees.
• Nearmap Ltd (ASX: NEA) has seen its short interest edge lower again to 8.9%. Short sellers continue to close their positions after the aerial imagery technology company impressed with its performance during the pandemic.
• Clinuvel Pharmaceuticals Limited (ASX: CUV) has seen its short interest fall to 8.8%. Short sellers may be regretting this one. Last week the biopharmaceutical company’s shares rocketed a massive 21% higher.
• Bank of Queensland Limited (ASX: BOQ) has entered the top ten with 8.4% of its shares held short. Investors appear to believe the regional bank is going to have a tough 12 months.
• JB Hi-Fi Limited (ASX: JBH) has seen its short interest fall to 8.1%. Short sellers have been closing their positions in a hurry after the retailer revealed explosive sales growth during the second half.

More reading

• ASX 200 Weekly Wrap: ASX back in the green
• These were the best performers on the ASX 200 last week
• Short-sellers are stepping up their attack against these popular ASX shares
• Australian retail sales up 16.3% in May
• Temple & Webster shares continue to grow despite coronavirus restrictions

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 Nearmap Ltd. The Motley Fool Australia owns shares of and has recommended Super Retail Group Limited and Webjet Ltd. The Motley Fool Australia has recommended Nearmap Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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On Friday the S&P/ASX 200 Index (ASX: XJO) finished a very positive week with a small gain. The benchmark index edged 0.1% higher to 5,942.6 points.

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

ASX 200 set to fall heavily.

The ASX 200 looks set to fall heavily on Monday after a mixed finish to the week in the United States. According to the latest SPI futures, the benchmark index is expected to open the week 78 points or 1.3% lower this morning. On Wall Street on Friday the Dow Jones fell 0.8%, the S&P 500 dropped 0.55%, and the Nasdaq index traded flat.

Oil prices higher.

Energy producers including Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL) could be on the rise today after a strong end to the week for oil prices. According to Bloomberg, the WTI crude oil price jumped 2.3% to US$39.75 a barrel and the Brent crude oil price rose 1.65% to US$42.19 a barrel. Oil prices have now posted seven weekly gains out of eight.

Gold price jumps.

Gold miners including Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) could have a positive day after the gold price jumped higher on Friday. According to CNBC, the spot gold price stormed 1.3% higher to US$1,753.00 an ounce. Coronavirus concerns sent traders to the safe haven asset on Friday.

Metcash results.

The Metcash Limited (ASX: MTS) share price will be on watch when it releases its full year results this morning. According to a note out of Goldman Sachs, it expects the wholesale distributor to post revenue of $13 billion and earnings before interest and tax of $326 million. This will be a 3% and 4.6% increase, respectively, on FY 2019’s result.

Jumbo Interactive to return.

The Jumbo Interactive Ltd (ASX: JIN) share price is scheduled to finally return from its trading halt this morning. The online lottery ticket seller requested the halt on Monday of last week while it prepared an announcement relating to the Western Australia lottery market. Last year the state government suggested it might privatise its wagering.

More reading

• Chance of oil surging to US$190 is higher now than before COVID-19: JPMorgan
• 3 long-term ASX 200 shares I’d buy right now
• Top brokers name 3 ASX 200 shares to sell next week
• Top brokers name 3 ASX 200 shares to buy next week
• Why the ultra-rich are hoarding gold

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Jumbo Interactive Limited. The Motley Fool Australia owns shares of and has recommended Jumbo Interactive 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 world’s population is getting older and will continue to do so over the coming decades.

According to data from the United Nation’s World Population Prospects: the 2019 Revision, by 2050, one in six people will be over the age of 65 globally.

In addition to this, the number of people aged 80 years or over is projected to triple from 143 million in 2019 to 426 million in 2050.

Given these huge shifts in demographics, demand for healthcare services is expected to increase materially over the next three decades.

In light of this, I think that investing in the healthcare sector is a smart move.

But which shares should you buy? Sticking with quality seems like the best move in my eyes, which means these three healthcare stars could be the ones to buy today:

Cochlear Limited (ASX: COH)

The first healthcare share to look at buying is Cochlear. I think the hearing solutions company has a very positive long term outlook thanks to its exposure to the aforementioned ageing populations tailwind. This is because as people age, their hearing will generally fade and require some form of assistance. I expect this to lead to increasing demand for hearing solutions products over the next couple of decades.

CSL Limited (ASX: CSL)

My favourite healthcare share is this biotherapeutics giant. I believe that both its CSL Behring and Seqirus businesses are well-placed to deliver strong sales and earnings growth over the next decade. This is thanks to their in-demand therapies and vaccines and their lucrative research and development pipelines. Within CSL’s current pipeline are therapies that have the potential to generate billions of dollars in sales over the next decade.

Ramsay Health Care Limited (ASX: RHC)

A final healthcare share to consider buying is Ramsay Health Care. It is a leading private healthcare company with a total of 480 facilities across 11 countries. Given its global footprint, I believe Ramsay’s network is well-placed to benefit greatly from the expected increase in demand for healthcare services in the future. This could make it worth looking beyond the short term headwinds it is facing and focusing on its positive long term outlook.

More reading

• How to turn $20,000 into $250,000 in 10 years with ASX shares
• Why I’m desperate to add CSL and 2 other ASX shares to my portfolio in 2020
• Is the Cochlear share price in the buy zone now that it’s down 23%?
• I would buy and hold Kogan and these ASX shares until 2030
• 3 undervalued ASX growth companies to add to your portfolio

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 Cochlear Ltd. and CSL Ltd. The Motley Fool Australia has recommended Cochlear Ltd. and Ramsay Health Care 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 likes of Afterpay Ltd (ASX: APT) and Appen Ltd (ASX: APX) weren’t always multi-billion dollar tech companies.

At one stage they were small cap tech shares flying under the radar, just like the ones listed below.

Whether these three shares will follow in their footsteps, only time will tell, but I think they are well worth keeping a very close eye on. Here’s why I like them:

ELMO Software Ltd (ASX: ELO)

The first small cap ASX tech share to watch is this cloud-based human resources and payroll software company. ELMO provides users with a unified platform that streamlines processes such as recruitment, on-boarding, learning, and payroll. It has a sizeable market opportunity in the ANZ market and the potential to expand globally in the future. This is thanks to its platform being jurisdiction agnostic.

Volpara Health Technologies Ltd (ASX: VHT)

Another small cap ASX tech share to watch is this healthcare technology company. Volpara’s software uses artificial intelligence imaging algorithms to assist with the early detection of breast cancer. Demand for its software has been growing strongly, leading to the company recently delivering a 172% increase in annual recurring revenue (ARR) to NZ$18 million in FY 2020. This is still only scratching at the surface of an estimated US$750 million ARR opportunity in breast cancer screening.

Whispir (ASX: WSP)

A final small cap ASX tech share to watch is this software-as-a-service communications workflow platform company. It provides an industry-leading software platform that allows users to deliver actionable two-way interactions at scale using automated multi-channel communication workflows. During the first half of FY 2020, its annualised recurring revenue increased 22% to $36.7 million. Pleasingly, the second half looks set to be even stronger thanks to the work from home initiative.

More reading

• Top brokers name 3 ASX 200 shares to buy next week
• Where to invest $10,000 into ASX shares next week
• Which shares to buy if the ASX tumbles
• How to become a millionaire in 25 years with $20 a day
• These were the best performers on the ASX 200 last week

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 VOLPARA FPO NZ and Whispir Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Elmo Software. The Motley Fool Australia owns shares of and has recommended Elmo Software. The Motley Fool Australia owns shares of AFTERPAY T FPO and Appen Ltd. The Motley Fool Australia has recommended VOLPARA FPO NZ and Whispir 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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Unfortunately for income investors, it looks likely to be some time until interest rates return to normal levels again.

In light of this, I continue to believe the share market is the best place to earn a passive income.

But which ASX dividend shares should you buy out of the hundreds on offer? Three that I would buy are listed below:

Coles Group Ltd (ASX: COL)

The first dividend share to look at buying right now is Coles. I think the supermarket giant is a top option due to my belief that it is well-placed to grow both its earnings and dividend at a solid rate during the 2020s. This is thanks to the positive industry outlook, its long track record of delivering same store sales growth, and its cost cutting and automation plans. At present I estimate that Coles’ shares offer investors a fully franked 3.7% FY 2021 dividend.

Rural Funds Group (ASX: RFF)

Another dividend share that I would be buying is Rural Funds. This property group owns a diversified portfolio of high quality Australian agricultural assets which include cattle properties, vineyards, and orchards. One of the main attractions to the company for me is its long tenancy agreements. With a weighted average lease expiry of over a decade and rental increases built into contracts, Rural Funds appears perfectly positioned to consistently increase its distribution on a yearly basis. This will be the case in FY 2021, with management intending to lift its distribution by 4% to 11.28 cents per share. This represents a 5.4% yield.

Vanguard Australian Shares High Yield ETF (ASX: VHY)

A final dividend share for income investors to look at is the Vanguard Australian Shares High Yield ETF. I think this exchange traded fund is a great option because it gives investors exposure to a diverse group of high yielding ASX dividend shares through a single investment. This could make it ideal for investors that don’t have enough funds to maintain a truly diverse portfolio. At present I estimate that its units provide a forward dividend yield of at least 4.5%.

More reading

• These 3 ASX ETFs are yet to recover from the market crash
• Australian retail sales up 16.3% in May
• Why the Wesfarmers share is beating the ASX 200
• 3 high quality ASX shares to bolster your retirement portfolio
• 3 high yield ASX dividend shares for income investors

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. The Motley Fool Australia owns shares of COLESGROUP DEF SET. 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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This isn’t a typo. The Brent crude oil price could rocket to as much as US$190 a barrel in 2025, according to JPMorgan Chase.

This might sound like an outlandish call but it will be sweet music to the ears of the shareholders of ASX energy stocks.

While the sector heavyweights have bounced strongly with the rest of the S&P/ASX 200 Index (Index:^AXJO) since hitting the bottom of the bear market three months ago, they are still trading substantially below their pre COVID-19 levels.

ASX oil stocks on cusp of supercycle?

This includes sector heavyweights like the Woodside Petroleum Limited (ASX: WPL) share price, Santos Ltd (ASX: STO) share price and Oil Search Limited (ASX: OSH) share price.

This could be the time to be jumping back into the sector if JPMorgan’s prediction comes through.

The investment bank issued a report back in March saying we were on the cusp of an oil super cycle – but that was before the COVID-19 meltdown, reported CNN.

Probability of surging oil price is rising

But the pandemic, which was one of the key factors that sent the oil price crushing, isn’t putting off JPMorgan. If anything, its analysts are doubling down on its call.

“The reality is the chances of oil going toward $100 at this point are higher than three months ago,” CNN quoted Christyan Malek, JPMorgan’s head of Europe, Middle East and Africa oil and gas research as saying.

That view stands in stark contrast to what’s happened in the oil market. A big drop in demand for crude as the world curtailed activity to stem the coronavirus outbreak is only one factor.

Crude oil price on slippery slope

A price war between major oil producers Saudi Arabia and Russia exacerbated the worsening situation and sent the WTI into negative territory for the first time ever in April.

While the oil glut seems to be easing, most do not expect the oil price to move much higher from here. The Brent oil price last traded at US$42.19 a barrel while the WTI price is at US$39.75 a barrel.

But JPMorgan thinks there’s a real chance Brent could surge five-fold in a “bull case” scenario as it sees the oversupplied market swinging into undersupply scenario starting in 2022.

Why oil could surge higher

This isn’t seen as the most probable outcome by the investment bank. All the stars will need to align for oil before it can head towards the US$200 mark and JPMorgan’s base case scenario is for Brent to hit US$60 a barrel instead.

But Malek told CNN that he thinks it’s even more likely now than before COVID-19 that the bull case outcome becomes a reality.

He was bearish on oil since 2013 but is now predicting that a very large supply-demand deficit will emerge in 2022 that could reach 6.8 million barrels a day by 2025.

“The deficit speaks for itself. That implies oil prices will go through the roof,” he said. “Do we think it’s sustainable? No. But could it get to those levels? Yes.”

Investors in oil-exposed ASX stocks will be cheering him on.

More reading

• 3 long-term ASX 200 shares I’d buy right now
• Top brokers name 3 ASX 200 shares to sell next week
• Top brokers name 3 ASX 200 shares to buy next week
• Why the ultra-rich are hoarding gold
• 2 blue chip ASX 200 dividend shares to buy next week

Motley Fool contributor Brendon Lau 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 Chance of oil surging to US$190 is higher now than before COVID-19: JPMorgan appeared first on Motley Fool Australia.

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Investing for the long-term is the right way to go with S&P/ASX 200 Index (ASX: XJO) shares.

We just don’t know what the share market is going to do next week, next month or even for the rest of the year. We can hope it’s going to go up in the short-term, but over the long-term share prices are more likely to do well if earnings rise.

So which ASX 200 shares will produce good returns? The bigger the business is, the harder it is to grow at a good pace. The law of big numbers makes it difficult to keep up the growth rate. That’s partly why I don’t want to invest in blue chip shares like Westpac Banking Corp (ASX: WBC) and Telstra Corporation Ltd (ASX: TLS).

But you can still find opportunities which are ASX 200 shares which are market leaders in their respective industries with good growth prospects. Here are three ideas:

Share 1: Bapcor Ltd (ASX: BAP)

Bapcor is the leader in automotive parts in Australia. It provides car parts and it also has a growing truck parts division. Burson and Autobarn are two of the biggest divisions. 

The Bapcor share price was severely sold off during the COVID-19 selloff. It fell 52% between 21 February 2020 and 23 March 2020. Bapcor decided to do a capital raising to strengthen the balance sheet. The ASX 200 share is in a well-capitalised position now.

FY20 year to date revenue to the end of February 2020 was strong with growth of 12.7% compared to the prior corresponding period. However, Bapcor said the trading performance in March was below expectations with revenue growth of 11.5% which includes the benefit of acquisitions but it was offset by the impact of COVID-19 restrictions.

The ASX 200 company’s share price has come storming back as restrictions lift. More people are driving again and this should benefit Bapcor as parts in cars fail in more normal numbers again.

Indeed, Bapcor could actually see more activity as people avoid public transport, using their cars to get around. New car sales are also down heavily, people are more likely to replace car parts than just buy a new car altogether.  

I’m also very excited by the prospect of growth in Asia as more outlets are opened there.

Share 2: Challenger Ltd (ASX: CGF)

Challenger is the market-leader of annuities in the country, it turns a retiree’s capital into a guaranteed source of income.

The ageing demographics of Australia is a strong tailwind for the ASX 200 share. The number of Australians over 65 is expected to increase by 32% over the next 10 years and 56% over the next 20 years.

Australia’s superannuation system is also a very powerful factor that should drive Challenger’s future growth. Most employees get a mandatory 9.5% contribution of their wage paid into their superannuation and the long-term tax benefits encourages everyone to add to their super funds.

Challenger currently has a grossed-up dividend yield of 9.5%. The dividend alone should produce decent returns if it’s maintained.

Low interest rates are a problem for Challenger, but hopefully interest rates will go back up again in a few years to a more normal level.

Share 3: Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

Soul Patts is one of the best long-term ASX 200 shares in my opinion. It’s an investment conglomerate that invests in a variety of different businesses. It has already been going for over a century.

Some of the shares that it’s currently invested are TPG Telecom Ltd (ASX: TPM), Brickworks Limited (ASX: BKW), Clover Corporation Limited (ASX: CLV), Milton Corporation Limited (ASX: MLT) and Bki Investment Co Ltd (ASX: BKI).

The Soul Patts management team take a long-term, contrarian approach with the investments. I think that means it’s a lot easier to be long-term with this ASX 200 share too.

It’s always looking out for new opportunities to invest in. It recently invested in some agriculture assets and it’s now looking to invest in regional data centres. I think these are two attractive industries. 

Foolish takeaway

Each of these ASX 200 shares looks good value to me. I think they have good prospects over the next five years. In 2020 Bapcor may prove to be the best investment pick at today’s prices. But for the long-term I’d prefer Soul Patts with its diversification and defensive nature.

More reading

• Top brokers name 3 ASX 200 shares to sell next week
• Top brokers name 3 ASX 200 shares to buy next week
• Why the ultra-rich are hoarding gold
• 2 blue chip ASX 200 dividend shares to buy next week
• These were the best performers on the ASX 200 last week

Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Clover Limited. The Motley Fool Australia owns shares of and has recommended Bapcor, Brickworks, Challenger Limited, 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.

The post 3 long-term ASX 200 shares I’d buy right now appeared first on Motley Fool Australia.

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