Tag: Motley Fool Australia

The S&P/ASX 200 Index (ASX: XJO) was on form again last week and recorded a 4.7% gain to finish it at  5755.7 points.

While a good number of shares climbed higher with the market, not all were on form last week.

Here’s why these were the worst performing ASX 200 shares over the period:

The TechnologyOne Ltd (ASX: TNE) share price was the worst performer on the ASX 200 with a 7.8% decline. The enterprise software company’s shares have come under pressure since the release of its half year results the previous week. One broker that wasn’t overly impressed was UBS. It has downgraded TechnologyOne’s shares to a sell rating with an $8.20 price target. Its shares ended the week at $9.14.

The Worley Ltd (ASX: WOR) share price wasn’t far behind with a decline of 7.2% last week. The majority of this decline came on Friday when its shares fell 6% on the back of no news. Not even a positive broker note out of Citi could stop its shares from sliding lower. The broker has slapped a buy rating and $12.20 price target on its shares. This is materially higher than where its shares finished the week.

The Saracen Mineral Holdings Limited (ASX: SAR) share price was out of form and fell 5.4% last week. A number of gold miners tumbled lower last week after the price of the precious metal pulled back. This was driven by lower demand for safe haven assets after investors switched back to risk assets.

The CSL Limited (ASX: CSL) share price was an uncharacteristically poor performer last week and dropped 5.1%. This appears to have been driven by profit taking after some strong gains over the last 12 months. One broker that believes this is a buying opportunity is Citi. Last week it upgraded its shares to a buy rating with a $334.00 price target.

More reading

• Insiders have been buying these ASX shares this week
• Build wealth for life with these 2 ASX 200 shares
• Why I think the CSL share price is a strong buy today
• 10 quality ASX shares to buy in June
• 3 fantastic ASX growth shares I would buy and hold for decades

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 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.

The post These were the worst performing ASX 200 shares last week appeared first on Motley Fool Australia.

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Investing in exchange-traded funds (ETFs) is one of the best vehicles you can use to create wealth on the share market, outside purchasing individual shares. Firstly, ETFs require almost no effort on your part. Secondly, you can use them to get easy exposure to literally thousands of different companies in one easy trade. This includes companies that might be otherwise unavailable individually to the typical ASX investor.

So with that said, here’s how I would build a $100,000 ETF-based ASX portfolio for diversification and easy returns.

Vanguard Australian Shares Index ETF (ASX: VAS) – $30,000

VAS is the most popular ASX ETF for good reason. It covers the largest 300 companies in Australia, which captures more of the small-cap market that other S&P/ASX 200 Index (ASX: XJO) funds.

With VAS, you are getting most Aussie public companies you can think of. This includes everything from Commonwealth Bank of Australia (ASX: CBA), Telstra Corporation Ltd (ASX: TLS) and Woolworths Group Ltd (ASX: WOW) to JB Hi-Fi Limited (ASX: JBH), Afterpay Ltd (ASX: APT) and Xero Limited (ASX: XRO). All wrapped up in one investment, I like to think of VAS as a ‘slice of Australia’.

VAS charges a fee of 0.1% per annum.

iShares Global 100 ETF (ASX: IOO) – $30,000

This ASX ETF is a little different from VAS in that invests in the largest 100 companies across the advanced economies of the world. Thus, you are getting exposure to American giants like Apple, Alphabet and McDonalds, as well as British companies like BP and Diageo and Japanese companies like Toyota and Panasonic.

These companies have enjoyed enormous success through their powerful brands, global reach and universality of their products. Hence, I think this ETF is a great asset to have in a well-balanced and diversified portfolio.

IOO charges a management fee of 0.4%

iShares Global Consumer Staples ETF (ASX: IXI) – $30,000

Many investors consider consumer staples shares to be boring. That’s because they represent companies that make the everyday essentials we all rely on. This includes canned food, personal hygiene products, drinks and cleaning materials.

It’s true that these products may not garner the same excitement as the latest tech innovations. Even so, I believe the panic buying we experienced at the beginning of the COVID-19 crisis helps reinforce the overall worth of these types of companies. Thus, I feel this ETF makes a strong addition to an ASX ETF portfolio. Some of this ETF’s top holdings include Procter & Gamble, Nestle, The Clorox Company, Philip Morris International and Kimberly-Clark.

IXI has a management fee of 0.47%.

BetaShares Asia Technology Tigers ETF (ASX: ASIA) – $10,000

ASIA is a fund that tracks the largest companies across Asia, with a focus on those companies that are tech heavyweights. Countries like Taiwan, South Korea, India and Hong Kong are covered, but the fund is dominated by Chinese tech giants like Tencent, Alibaba, Baidu and JD.com.

Even though these markets carry a little more risk, I still think the growth opportunities they offer can’t be ignored in the 21^st century. Therefore, ASIA has a place in our $100,000 portfolio.

ASIA has a management fee of 0.67%

More reading

• The TPG share price is up 26.68% in 2020. Too late to invest?
• 3 ASX dividend shares with yields over 10%
• How does the economy affect the ASX 200 share market?
• Is the Fortescue share price under threat from a potential multi-million dollar earnings hit?
• Brokers name 3 ASX 200 shares to buy right now

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Alphabet (A shares), Procter & Gamble, Philip Morris International, Baidu, Kimberly Clark, McDonalds and Telstra Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares). The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF and Telstra Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO, iShares Global Consumer Staples ETF, and Woolworths Limited. The Motley Fool Australia has recommended Alphabet (A shares). 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 How I would build a $100,000 ASX portfolio with ETFs appeared first on Motley Fool Australia.

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When it comes to maintaining a balanced portfolio, I think having a few blue chip ASX shares is a smart move.

Traditionally, blue chips are companies that are well-known, long-established, and have strong financial positions. In other words, they are not going anywhere any time soon, which makes them safer than average options for investors.

But not all blue chip ASX shares are equal and some are better than others.

Right now, I think three of the best ASX blue chip shares are the ones named below. Here’s why I like them:

REA Group Limited (ASX: REA)

The first blue chip share to consider buying is REA Group. I’m a big fan of the property listings company due to the strength of its business, its leadership position, and its solid long term growth potential. Although times are hard for the company right now, it has still been able to generate earnings growth. I believe this bodes well for when these headwinds ease.

Telstra Corporation Ltd (ASX: TLS)

Another ASX blue chip share to consider buying is Telstra. I think it is a great option right now due to the ongoing success of its T22 strategy. This strategy is cutting costs and putting it in a position to return to growth in the coming years. In the meantime, I’m becoming increasingly confident that the company’s dividend cuts are over. I believe its free cash flows will be sufficient to maintain its 16 cents per share dividend.

Wesfarmers Ltd (ASX: WES)

A final blue chip share to consider is Wesfarmers. I think it is one of Australia’s best blue chip shares and well-positioned to deliver solid earnings and dividend growth over the next decade. This is thanks to the quality and diversity of its portfolio, which includes the likes of Bunnings, Kmart, and several chemicals and industrials businesses. The company also has a hefty cash balance which is likely to be used for acquisitions in the near future.

More reading

• Here’s why it’s vital your ASX shares have a moat
• The TPG share price is up 26.68% in 2020. Too late to invest?
• Are Coles shares a buy after falling 12% in 2 months?
• Brokers name 3 ASX 200 shares to buy right now
• Should you worry about geopolitical events in investing?

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

The post The best ASX blue chip shares to buy in June appeared first on Motley Fool Australia.

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Do your ASX shares have a moat?

If you’re not familiar with the investing term ‘moat’, it’s one that the great Warren Buffett coined many years ago. It refers to the concept of an intrinsic and protective competitive advantage a company has. In an ideal world, this moat should be wide enough that competitors can’t possibly cross it when they attempt to challenge said company. 

What does a moat entail?

Just think of 2 of Buffett’s favourite companies: Coca-Cola and Apple. Coca-Cola is the world’s most iconic cola drink. Its brand dominance is so entrenched that I reckon almost every human being on the planet knows what a ‘Coke’ is.

This enables Coca-Cola to charge more for a drink than its competitors, whilst still being able to maintain its dominant market share. Thus, we can say Coca-Cola has a ‘brand moat’.

Apple operates with a similar level of branding power. It’s able to charge far more than any of its competitors for a computer or a smartphone, safe in the knowledge that people will be willing to fork out semi-exorbitant prices just for the privilege of owning ‘an Apple’.

What about ASX shares?

So how can we apply this concept to S&P/ASX 200 Index (ASX: XJO) shares or the companies in your own portfolio? Well, ask yourself, ‘what makes a consumer buy this product?’ Is it a lack of competition? A powerful brand that helps a company stay above the pack? There are many different kinds of moats, but if a company has one, this is usually a sign that its shares will make a good investment at the right price.

Let’s take Telstra Corporation Ltd (ASX: TLS). Telstra is arguably the most expensive telecom company offering mobile plans in Australia. Yet almost 50% of the market chooses to go with Telstra. That’s probably because Telstra’s mobile network is the fastest and most comprehensive in the country (as its ads keep reminding us).

This is something that Telstra’s competitors can’t easily overcome, hence I would classify Telstra as having a ‘moat’.

It’s a similar story with Transurban Group (ASX: TCL).

Transurban owns and operates a network of toll-roads across the country. If you don’t wish to use one of Transurban’s roads, the only alternative is to find another, longer route around the road which doesn’t attract a toll.

Thus, Transurban doesn’t really have any competitors apart from a free ‘long way round’.

Foolish takeaway

Which companies in your ASX share portfolio would you say have a moat? Moats can protect a business in good times and in bad. And, as Warren Buffett’s track record shows, can also make a company an extremely lucrative investment. So make your next buy a company with a nice moat and your future self will probably thank you!

More reading

• The best ASX blue chip shares to buy in June
• The TPG share price is up 26.68% in 2020. Too late to invest?
• Brokers name 3 ASX 200 shares to buy right now
• Should you worry about geopolitical events in investing?
• 3 dirt cheap ASX shares to buy before it is too late

Sebastian Bowen owns shares of Coca-Cola and Telstra Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Apple. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of Transurban Group. The Motley Fool Australia has recommended Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Here’s why it’s vital your ASX shares have a moat appeared first on Motley Fool Australia.

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The TPG Telecom Ltd (ASX: TPM) share price has been an amazing outperformer in 2020 so far. Since the start of the year, the broader S&P/ASX 200 Index (ASX: XJO) has lost 13.89% of its value. In contrast, the TPG share price has rallied 26.68%, based on today’s closing price of $8.50.

This means TPG has outperformed the ASX 200 by over 40%. Not bad!

But investors who may have been watching this extraordinary rally might be wondering if there’s still time to buy in.

Why TPG shares have been rocketing higher in 2020

The TPG share price has been benefitting from a number of key events that have gone its way in recent months. Firstly (and most importantly), the proposed merger of TPG and Vodafone Hutchison Australia has been approved by the Federal Court. This comes following attempts by the ACCC to block the merger last year.

Assuming all goes well and the merger proceeds, this will result in a special dividend being paid to TPG shareholders. The dividend has been estimated at up to 67 cents per share (which would be worth a yield of nearly 8%). The merger will also result in TPG finally securing the ticker symbol ‘TPG’, which is a win for simplicity, if nothing else.

Furthermore, TPG has told investors it plans to spin-off its Singaporean business into a separate company named Tuas Limited. All existing TPG shareholders will then receive shares in Tuas if this spin-off is executed. I believe this move is a positive for the TPG share price, as spin-offs generally deliver benefits for existing investors. We saw this play out with Wesfarmers Ltd (ASX: WES) and its spin-off of Coles Group Ltd (ASX: COL) in 2018.

All of these factors are building a very positive picture for investors and are behind the surge in the TPG share price this year.

Is the TPG share price a buy today?

With all of these changes ahead, it’s hard to know exactly what TPG shares are currently worth. After all, this company is set to be altered dramatically when its merger goes ahead. Furthermore, existing TPG shareholders will only own 49.9% of the new entity.

Still, let’s have a look at what the TPG share price is telling us today. So on current prices, TPG shares are offering a dividend yield of 0.59% on a price-to-earnings (P/E) ratio of 29.16.

This doesn’t really indicate good value from my perspective. TPG’s main competitor Telstra Corporation Ltd (ASX: TLS), by contrast, is trading on a P/E ratio of 18.69 and a dividend yield of 3.09%.

As such, I would much rather bet on Telstra shares today than TPG, given Telstra offers better value on current prices and a far heavier investment in 5G technology.

More reading

• 3 ASX dividend shares with yields over 10%
• How does the economy affect the ASX 200 share market?
• Is the Fortescue share price under threat from a potential multi-million dollar earnings hit?
• Are Coles shares a buy after falling 12% in 2 months?
• Brokers name 3 ASX 200 shares to buy right now

Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Wesfarmers 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 The TPG share price is up 26.68% in 2020. Too late to invest? appeared first on Motley Fool Australia.

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Finding ASX dividend shares with yields over 10% can be a dangerous game. A yield over 10% normally indicates that the market views the yield as risky, and primed for a possible dividend cut. Otherwise, it’s likely that the share price would be bid up until the yield is lower.

So let’s take a look at these 3 ASX dividend shares with trailing yields over 10% to see if we can find a diamond in the rough.

BetaShares Australian Dividend Harvester Fund (ASX: HVST)

This exchange-traded fund (ETF) employs a ‘dividend harvesting’ strategy. This means it buys ASX dividend-paying shares just before they’re about to go ‘ex-dividend’, after which the fund sells them again. In this way, it rotates in and out of most of the dividend heavyweights on the S&P/ASX 200 Index (ASX: XJO).

On one level, this strategy works to produce formidable dividend income. HVST currently has a trailing yield of 12%, or 16.8% grossed-up with franking.

Sounds pretty good, right?

Well, the downside is that this strategy trades capital value for income. There’s usually no free lunch when it comes to investing. And swapping in and out of dividend shares is no exception. Since its inception in October 2014, the fund has actually gone backwards, delivering a return of (1.17%). As such, I’m not too wild on this investment.

WAM Research Limited (ASX: WAX)

This listed investment company (LIC) specialises in buying undervalued ASX growth companies and selling them after a pricing ‘catalyst’ comes to pass. It has managed to do this quite successfully, netting investors a 13.4% return per annum on average since 2010.

WAM Research pays most of its profits out as dividends, which have been rising every year since 2010 as well. On current prices, this dividend equates to a yield of 7.01%, or 10.01% grossed-up.

LICs normally pay dividends out of a profit reserve, so let’s take a look at WAX’s tank to see how well-funded this dividend is. As of 30 April, WAM Research has 26.2 cents per share in profits against its most recent dividend of 4.9 cents per share. As such, I think this is a rare diamond of an investment which can sustain a grossed-up yield over 10%.

Alumina Limited (ASX: AWC)

Alumina is Australia’s largest aluminium pure play and has amassed a reputation as a generous dividend payer over the last few years.

On current prices, Alumina is offering a trailing yield of 7.74% – which grosses-up to 11.06% with full franking.

Unfortunately, I think Alumina’s dividend yield is unsustainable. Aluminium prices have fallen substantially in 2020, which will crimp the ability of this company to keep shovelling cash out the door. This is probably the reason Alumina shares have collapsed in 2020 so far, falling from $2.30 at the start of the year to today’s closing price of $1.51.

I have to agree with the market sentiment on this one that Alumina’s dividend isn’t sustainable going forward.

More reading

• How does the economy affect the ASX 200 share market?
• Is the Fortescue share price under threat from a potential multi-million dollar earnings hit?
• Brokers name 3 ASX 200 shares to buy right now
• Ready to invest your first $1,000? Try these 2 ASX shares
• 3 cheap ASX 200 shares I’d buy today

Motley Fool contributor Sebastian Bowen owns shares of WAM Research Limited. 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 PayGroup Ltd (ASX: PYG) share price had an impressive run on the ASX today, closing 12.10% higher after being up by as much as 19.35% throughout the day.

Based on today’s closing price of 69.5 cents, PayGroup’s market capitalisation stands at only $48 million. So it’s important to note that we’re very much at the smaller end of the ASX spectrum here.

PayGroup is a specialist human capital management software and services provider, tasked with performing payroll, pay to bill, human resources, and treasury services on behalf of clients. It has 2 businesses, PayAsia and Astute, the latter of which was acquired in late 2019.

The company operates primarily in the Asia Pacific region for multinational companies and has 875 clients throughout 33 countries.

Why did the PayGroup share price race higher today?

Well, this afternoon, PayGroup released its preliminary final report for the year ended 31 March 2020.

The company delivered FY20 annual recurring revenue of $17.8 million, exceeding guidance of $17.5 million. Meanwhile, revenue came in at $10.9 million, up 110% on the prior corresponding period, including a $2.9 million contribution from Astute.

Astute provides workforce management solutions, automating placement through to payroll and invoicing. The acquisition was completed on 1 November 2019 and its 5-month contribution to FY20 results have reportedly exceeded forecasts. During this period, Astute has been profitable and cash flow positive.

Overall, PayGroup reported growth across all segments in FY20, including 26.5% growth in PayAsia payslips. This was supported by strong sales momentum and new contract wins from the fourth quarter of FY19 and throughout FY20.

Additionally, PayGroup launched its Treasury Services offering in the second quarter of FY20. Live treasury transactions processed increased from 155 per month at the end of 1H20 to 3,653 per month at the end of 2H20. Given strong initial customer demand in the first year of its launch, PayGroup expects this offering to make a growing financial contribution in FY21.

The company’s new contract wins in FY20 amounted to $5.5 million, representing an increase of 12% on FY19. Meanwhile, new contract wins in FY21 to date (being 1 April 2020 to 25 May 2020) total $2.7 million.

Looking to cash flow, the company saw an improvement in its operating cash flow from negative $4.8 million in FY19 to negative $0.1 million in the current period. Cash flow momentum was particularly strong in the second half of FY20 on the back of continued new sales uplift and the Astute acquisition.

The company’s cash balance as at 31 March 2020 stood at $2 million, supported by a $3 million capital raising in November 2019.

COVID-19 update and outlook

As previously announced last month, PayGroup’s business has been able to adapt to a remote working environment with limited impact.

The company notes that COVID-19 stimulus packages have added to payroll complexity, which increases opportunities for both its Astute and PayAsia businesses. Against this backdrop, its sales pipeline continues to strengthen.

PayGroup expects to continue to deliver improved operating cash flows and the pathway to positive statutory earnings in FY21, driven by cost efficiencies, continued sales momentum and the positive contribution from Astute.

Commenting on the full-year results, managing director and CEO Mark Samlal said:

“We are only 2-months into our FY21 year and we expect that our businesses will continue to perform well, even if various lock down provisions continue to exist globally. In Australia we see that businesses are hiring, particularly contractors, which will positively improve Astute’s metrics. Our key markets in Asia are very resilient with many countries back to work.”

“We enter FY2021 in a good position, with a strong book of recurring revenue, 95% client retention, a cost efficiency plan and strong industry fundamentals in spite of the current COVID-19 headwinds,” he added.

More reading

• 3 ASX dividend shares with yields over 10%
• Fund managers have been buying these ASX 200 shares
• Insiders have been buying these ASX shares this week
• How does the economy affect the ASX 200 share market?
• Why this ASX 200 share is up 8% and poised for more explosive growth

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.

The post Why the PayGroup share price surged 19% higher today appeared first on Motley Fool Australia.

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I think it is well worth keeping a close eye on what substantial shareholders are doing.

Substantial shareholders are shareholders that hold 5% or more of a company’s shares. These tend to be large investors, asset managers, and investment funds. These shareholders are obliged to update the market when they make meaningful changes to their holdings.

I feel investors should look to use these notices to their advantage. After all, they give investors an idea of where the smart money is going.

Two notices that have caught my eye are summarised below:

ARB Corporation Limited (ASX: ARB)

According to a change of interests of substantial holder notice, Bennelong Australian Equity Partners has been topping up its position in this four-wheel drive vehicle accessories company. The notice reveals that Bennelong has bought 1,052,952 shares on-market over the last couple of months.

The fund manager clearly took advantage of its share price weakness during the market crash (to good effect) and was able to buy as low as $13.26. The company’s shares are now trading above $17.00. These purchases took Bennelong’s holding to a total of 6,821,451 shares, which equates to an 8.55% stake.

Charter Hall Group (ASX: CHC)

A change of interests of substantial holder notice reveals that Commonwealth Bank of Australia (ASX: CBA) has increased its stake in this property company. According to the notice, the banking giant has lifted its holding in Charter Hall by ~4.7 million shares to a total of 37,363,414 shares. This means the bank now has an 8% interest in the company.

It appears as though Commonwealth Bank believes that Charter Hall’s shares have been oversold during the market crash. Even after a strong recovery over the last couple of months, the property developer’s shares are still down by almost a third from their 52-week high.

More reading

• 2 high yield ASX dividend shares to buy right now
• ASX 200 rises again, ASX banks push higher
• Are ASX bank shares finally back in the buy zone?
• ASX 200 up 2.4%: Blackmores raises $92m, big four banks jump, Nearmap rockets
• ASX 200 edges down, bank share prices fly

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended ARB 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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Once a week I like to take a look to see which shares have experienced meaningful insider buying.

This is because insider buying is often regarded as a bullish indicator, as few people know a company and its intrinsic value better than its own directors.

A number of shares have reported meaningful insider buying this week. Here are a couple which have caught my eye:

Dicker Data Ltd (ASX: DDR)

According to a change of director’s interest notice, this distributor of computer software and hardware has experienced more insider buying this month. The company’s Chief Operating Officer and Executive Director, Vladimir Mitnovetski, has added to his considerable holding. Mr Mitnovetski picked up 5,000 shares through an on-market trade on May 27. The director paid an average of $7.40 per share, which equates to a total consideration of $37,000.

Mr Mitnovetski has made several purchases over the last 12 months and now owns a total of 831,961 Dicker Data shares.This has proven to be an astute move.  The company’s shares have rallied over 50% higher since this time last year. And judging by his latest purchase of shares, this director sees further gains ahead.

TechnologyOne Ltd (ASX: TNE)

The directors of this enterprise software company have been busy buying and selling its shares this month. Masterbah Pty Ltd, of which Non-Executive Director John Mactaggart and Chairman Adrian Di Marco have a beneficial interest in, offloaded 4 million shares for a total of $36.8 million through an on-market trade on May 26. Fellow Non-Executive Director Ronald McLean sold 41,263 shares for $394,450.06 the same day through an on-market trade.

However, one director was still buying. The following day Peter Ball picked up 5,000 shares for a total of $47,715.36. This director appears to believe TechnologyOne’s shares are in the buy zone following a pullback after the release of its full year results.

More reading

• Build wealth for life with these 2 ASX 200 shares
• 3 top ASX dividend shares to buy in June
• ASX 200 up 1.7%: Flight Centre and Webjet rocket, Afterpay hits record high
• Why Leigh Creek, Lynas, Monadelphous, & TechnologyOne are dropping lower
• Top brokers name 3 ASX shares to sell next week

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. 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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How connected are the S&P/ASX 200 Index (ASX: XJO) and the broader ASX share market to the Australian economy as a whole?

If the ASX 200 is having a good year, it’s often cited as a barometer of the economy as a whole. And if there’s an economic recession on the horizon, you’ll usually find the share market isn’t doing so well.

So case closed, right?

Well, not quite.

See, the economy is just another name for the commercial network that connects every consumer and business within our society. The government forms a major part of the economy, as does overseas investment.

In contrast, the share market represents the value of every public company in the country. Nothing more, nothing less.

And the health of the economy is only one factor that influences how much investors are willing to pay for each company (represented by each company’s share price).

Mixed messages

Just take last year. In 2019, the ASX 200 had one of its best years in recent times, banking a 20.8% gain over the year. That was in stark contrast to the broader economy, the growth of which was so slow it prompted the Reserve Bank of Australia (RBA) to cut interest rates 3 times in 2019.

These interest rate cuts were a large driving force behind the share market gains. Lower interest rates lead to higher values being placed in riskier assets like shares. This in itself proves that the ASX 200 doesn’t always move in tandem with the economy.

Another point to note is that the share market is a forward-looking mechanism. This means it is always trying to price in the most likely future scenario of economic growth. As such, the share market is not necessarily a reflection of where an economy is at the present.

This is why we’ve seen a massive rally in the ASX 200 since mid-March. And this growth hasn’t corresponded to our economy improving over the same period. Rather, it’s the signs that the economy is likely to improve over the rest of 2020 that is causing the ASX 200 to surge.

The same thing occurred back in 2009 when the world was just starting to recover from the global financial crisis. The ASX 200 had one of its best years ever in 2009 – rising over 30%. In contrast, it took a few more years for the economy to bounce back fully.

Foolish takeaway

The share market is heavily influenced by the economy, but not in ways that are always obvious or easy to predict. It’s probably better to think of the ASX 200 as being shaped by what investors think the economy of tomorrow is going to look like. Of course this sentiment should also be considered in combination with other macro-factors like interest rates, unemployment and geopolitical tensions on the world stage.

All in all, I believe success with investing depends on finding long-term, winning companies. This means investing in companies that have the ability to weather the economy’s ups and downs rather than trying to predict what the ASX 200 will do over the short term.

More reading

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• 3 cheap ASX 200 shares I’d buy today
• ASX 200 down 1.2%: Westpac tumbles, Appen reaffirms guidance, Costa CEO to retire

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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