Tag: Motley Fool Australia

I think the Australian information technology sector is a great place to look for buy and hold investments.

This is because there are a good number of companies that I believe have the potential to grow materially over the next decade.

Three which I feel could generate outsized returns for investors over the long term are listed below. Here’s why I would buy them:

Altium Limited (ASX: ALU)

Altium is an award-winning electronic design software provider which I believe has a long runway for growth. This is thanks to its exposure to the fast-growing Internet of Things and artificial intelligence markets. These two markets are underpinning the proliferation of electronic devices globally. This is a big positive for Altium, as its software is used as an integral part of the design process by companies such as HP, Lenovo, Boeing, Philips, and BMW. Given the positive industry tailwinds, I expect demand for its software to continue increasing for a long time to come.

Appen Ltd (ASX: APX)

Another company which is benefiting from the artificial intelligence boom is Appen. This is because it has a leadership position in the development of high-quality, human-annotated training data for machine learning and artificial intelligence. As with Altium, Appen has worked closely with some very big companies. These include Apple, Facebook, and Microsoft. I believe this is a testament to the quality of its offering. Looking ahead, with spending on artificial intelligence expected to grow materially over the next decade, I believe Appen is positioned perfectly to deliver above-average profit growth over the long term.

Xero Limited (ASX: XRO)

A final tech share to look at is Xero. It is a provider of cloud-based business and accounting software which has been growing at an explosive rate over the last couple of years. This has been driven by increasing subscriber numbers and strong recurring revenue growth. Given its massive global market opportunity, high quality and sticky product, and strong pricing power, I believe it is in a great position to continue this trend for a long time to come.

More reading

• Where to invest $10,000 into ASX shares immediately
• 2 ASX tech shares to buy and hold beyond 2026
• If you invested $50k in these ASX shares 3 years ago, you’d be a millionaire today
• Want to invest $3,000 into ASX blue chips?
• Why I would invest $50,000 into these excellent ASX shares

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 and recommends Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of Appen 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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Investors in lithium producer Galaxy Resources Limited (ASX: GXY) enjoyed a tremendous 41.0% share price gain in July.

The stock hit a monthly high of $1.12 per share on 28 July. It closed the month at $1.10 per share, up from 78 cents at the start of July. That puts Galaxy high on the top gainers list for the All Ordinaries Index (ASX: XAO) last month.

It’s been a wild ride for the company’s investors in 2020. The Galaxy Resources share price plummeted a gut-wrenching 42.3% from 5 February to 4 May. Investors who held their nerve were rewarded handsomely though. Since 4 May, the share price has gained 63.4%.

Year-to-date, the share price is up 16.0%, giving the company a market cap of $475 million. Over that same time the All Ords — down 0.5% yesterday — lost 9.9%.

What does Galaxy Resources do?

Galaxy Resources Limited is a lithium producer working to create a large scale, global lithium chemicals business to power the future. It has a diversified portfolio of lithium hard rock and brine assets at different levels of development.

Those include its hard rock operations in Mt Cattlin, Western Australia. Galaxy is also progressing with its development of its flagship brine project, Sal de Vida in Argentina, among the world’s largest undeveloped lithium brine assets. The company is also progressing the early stage development of its James Bay project in Quebec, Canada.

Short sellers beware!

On 6 July, Galaxy Resources made the top 10 list of shorted stocks, coming in at number six, according to figures from ASIC. Believing the weakness in lithium prices would see the company’s share price fall, short sellers held 8.1% of the stock on 6 July.

With the stock gaining 36.5% since then, the short sellers got this one completely wrong.

And the company’s outlook remains strong.

On 13 July the company reported:

A multiyear offtake extension has been executed with long term major customer Yahua Industrial Group. Yahua has recently doubled their lithium hydroxide production capacity and has agreed to purchase additional spodumene concentrate from Mt Cattlin.

If you’re out for the specifics, Yahua agreed to purchase an additional 30,000 dmt of 6% Li2O spodumene concentrate in 2020. It also agreed to buy 120,000 dmt per year from 2021 to 2025 on a take or pay basis.

More reading

• Why the Pinnacle Investment share price has rocketed 40% since 1 July
• ASX marching higher despite COVID-19: Where should you invest?
• These are the 10 most shorted shares on the ASX
• How investors can make the most of all this uncertainty
• ASX 200 Weekly Wrap: ASX has week of high volatility

Motley Fool contributor Bernd Struben 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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Alliance Aviation Services Ltd (ASX: AQZ) reported a 24.1% jump in profit before tax after the close of trading on Wednesday. The company’s diverse business model enabled it to pivot in mid-stride during the coronavirus pandemic quicker than any other airline. Consequently, it was able to continue flying throughout the pandemic.

The company’s FY20 top line revenue was $298.6 million, versus $277.1 million in FY19. In addition, flying hours were only 1% lower. As a brief financial summary, the company flew basically the same hours for an additional 7% of revenue, and saw profit before tax increase by 24.1%. This underlines very disciplined cost management throughout the period in addition to higher paying flights.

The company also ended the year with 4 additional aircraft, and reduced debt by $6 million.

Alliance Airlines high points

Contract sales made up 68% of company revenue. Specifically, they contributed $202.5 million for the year, which is an increase of 22.5% compared to FY19. This was the result of two factors. First, the continuation of resource sector companies as part of the nation’s essential services. Second, the social distancing requirements. This resulted in more flights required for existing customers to traffic workers to and from remote sites safely.

Wet leases were down by 46.3%. This is when the company’s planes fly under another company’s brand. This is due to the suspension of the group’s wet lease agreement with Virgin Australia Holdings Limited (ASX: VAH) in March 2020.

Another standout performer for Alliance Airlines was chartered flights. This increased by 97% over the year. The group performed charter services for a number of new resource sector clients, sporting teams and various emergency services from the lockdown period to the end of the financial year.

Its stoic performance throughout the coronavirus pandemic has resulted in additional work. For example, the company was awarded flights to the Whitsundays by the Queensland Government. In addition, it announced a new 10-year airline services contract with South32 Ltd (ASX: S32) for the Cannington and Groote Eylandt (GEMCO) mine sites on 1 May.

Company outlook

Alliance Airlines carried out a placement to institutional investors for an amount of $91.9 million. In addition, it raised a further $3.9 million via a share purchase plan for retail investors. These funds are to increase the fleet size to take advantage of opportunities in the market.

On the 3 August 2020, the group announced it had entered an agreement with Azorra Aviation of the United States. Specifically, this was for the purchase of 14 Embraer E190 aircraft. Moreover, the package included related inventory, ground support equipment, tooling and training devices.

The company has a number of new routes already planned in regular public transport (RPT) for these aircraft. Furthermore, it expects several of its charter flights to mature into long term charter contracts. Lastly, most requirements for social distancing has now ceased, however contracted schedules continue to be higher than pre-COVID-19 levels.

Nevertheless, the airline is not without competitors. Today’s announcement by Virgin Australia that it was going to kill off its Tigerair brand reduces low cost flight competition. However, it still finds itself competing head first with the Qantas Airways Limited (ASX: QAN) regional carrier Qantaslink, as well as Regional Express Holdings Ltd (ASX: REX).

Foolish Takeaway

The performance of Alliance Airlines during the pandemic has vindicated the company’s diverse business model. Moreover, based on its performance, it has won extra contracts. I believe the company’s financial results are sustainable, and will continue to improve into the future. This is due to the planned expansion building on existing successes, thereby reducing the risk of failure.

As a result of its planned expansion, there will be no final dividend for FY20. The company is currently trading at a price-to-earnings (P/E) ratio of 19.4 and has a market valuation of $571.59 million.

More reading

• Top broker warns Afterpay and these ASX stocks could disappoint on profit results
• Qantas share price lower after Virgin Australia announces future plans
• This is the only ASX sector tipped to report earnings growth this reporting season
• Earnings season: What to expect from the CSL FY 2020 result
• Afterpay and Qantas were among the most traded shares on the ASX last week

Motley Fool contributor Daryl Mather 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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I think the BHP Group Ltd (ASX: BHP) share price could be a good hedge right now.

Investors are starting to talk about a “two-speed” share market. We’re seeing a real split across the S&P/ASX 200 Index (ASX: XJO) between the winners and losers in the current economy.

On the one hand, industries like travel and hospitality are struggling. However, some mining sectors, tech and gold are booming in the current climate.

I think the BHP share price could be part of that “quicker speed” part of the economy. And that’s why it could be a good coronavirus hedge right now.

Why the BHP share price has been surging higher

Shares in the Aussie iron ore miners have done reasonably well this year.

The BHP share price is down 2.6% for the year while Fortescue Metals Group Limited (ASX: FMG) and Rio Tinto Ltd (ASX: RIO) shares have climbed 69.8% and 2.8% higher, respectively.

For context, the S&P/ASX 200 Index (ASX: XJO) is down 10.3% in the year to date.

The key factor here has been surging iron ore prices. Demand out of China has been strong as the country’s infrastructure boom continues.

That is good news for the BHP share price and the miner’s August earnings result. BHP is set to announce its FY20 result on August 18 and it’ll be one worth watching.

Why BHP could be a coronavirus hedge

It seems like much of BHP’s fortunes currently rest with China. While many ASX 200 shares are struggling, this unconventional share price driver could make BHP a good hedge.

Despite all the rhetoric around trade diversification and a move away from China, it still makes up 48.8% of Australia’s exports.

That’s good news for the iron ore miners like BHP. If the demand for iron ore remains strong, the BHP share price could break even in no time.

In fact, if Australia starts an infrastructure boom of its own, BHP shares could be back in positive territory by the end of the year.

More reading

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• Will the Domino’s share price continue to surge in August?
• Nick Scali share price bolstered by strong outlook and dividend upgrade
• Up 21% in a month, is the Northern Star share price a buy?
• Why I would buy CBA and this ASX dividend share

Motley Fool contributor Ken Hall 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 ELMO Software Ltd (ASX: ELO) share price will be on watch on Thursday after the release of the cloud-based HR, payroll, and rostering software provider’s full year results this morning.

How did ELMO perform in FY 2020?

For the 12 months ended 30 June 2020, ELMO‘s strong form continued and its delivered further strong growth in annualised recurring revenue (ARR), statutory revenue, cash receipts, and customer numbers.

The company reported ARR of $55.1 million and statutory revenue of $50.1 million for FY 2020. This represents a 19.7% and 25% increase, respectively, over the prior corresponding period. Also growing strongly were its cash receipts. They came in at $57.5 million for the year, up 27.6% on FY 2019’s result.

Over the period the company’s gross profit margin fell 1.3% to 85.3%. However, this was due to its investment in client services to support an enlarged and growing customer base.

Statutory earnings before interest, tax, depreciation, and amortisation (EBITDA) was a loss of $4.2 million. Management advised that this reflects its continued investment to support its longer term growth initiatives.

Despite this, the company finished the period in a very strong financial position. Thanks partly to its capital raising in May, ELMO had a cash balance of $139.9 million at the end of the period.

Management advised that this means it is well capitalised to continue investing in both organic growth and strategic acquisitions.

What were the drivers of its growth?

One of the key drivers of ELMO’s growth was its increasing customer numbers. The company’s customer base grew to 1,682 organisations over the year, an increase of 25.4%.

Also supporting its growth was an increase in average modules per customer from 2.4 to 2.7.

Pleasingly, management notes that customer concentration remains very low, with the largest customer representing less than 2% of ARR. Furthermore, the 10 largest customers account for less than 7% of its ARR.

Another positive is that ELMO’s Customer Lifetime Value to Customer Acquisition (LTV:CAC) ratio remains high at 8.1. Management believes this underpins its continued investment thesis in growth.

ELMO’s CEO and Co-Founder, Danny Lessem, was pleased with the company’s performance in FY 2020.

He commented: “Despite some of the challenges associated with COVID-19, FY20 has been another year of robust growth for ELMO. Particularly at this time, businesses are recognising the benefits of cloud-based technologies to deliver flexible and innovative workplace solutions.”

“ELMO’s overall strategy remains unchanged: delivering organic growth supplemented with strategic acquisitions, continuing our growth trajectory into FY21 and beyond. We are well placed to capitalise on anticipated tailwinds in the adoption of cloud-based business tools, including HR-technology,” he added.

FY 2021 outlook.

Management appears confident that another year of strong growth awaits the company in FY 2021.

It has provided guidance for ARR of $65 million to $70 million, which represents year on year growth of 18% to 27%.

It will be a similar story for revenue, with the company expecting this to be in the range of $57 million to $61 million. This is expected to be driven by strong organic growth, supplemented with selective acquisitions.

Once again, the company is expecting to post an operating loss as it focuses on its growth strategy. ELMO’s EBITDA is expected to be -$4 million to -$7 million in FY 2021.

More reading

• Could these small cap ASX shares be the next Afterpay?
• 3 ASX SaaS shares to buy this week
• Add these ASX small cap shares to your watchlist immediately
• How to get rich by investing in small cap ASX shares
• ASX 200 jumps almost 2% today, Afterpay rises

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 and recommends Elmo Software. The Motley Fool Australia has recommended Elmo Software. 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 ELMO Software Ltd (ASX: ELO) share price will be on watch on Thursday after the release of the cloud-based HR, payroll, and rostering software provider’s full year results this morning.

How did ELMO perform in FY 2020?

For the 12 months ended 30 June 2020, ELMO‘s strong form continued and its delivered further strong growth in annualised recurring revenue (ARR), statutory revenue, cash receipts, and customer numbers.

The company reported ARR of $55.1 million and statutory revenue of $50.1 million for FY 2020. This represents a 19.7% and 25% increase, respectively, over the prior corresponding period. Also growing strongly were its cash receipts. They came in at $57.5 million for the year, up 27.6% on FY 2019’s result.

Over the period the company’s gross profit margin fell 1.3% to 85.3%. However, this was due to its investment in client services to support an enlarged and growing customer base.

Statutory earnings before interest, tax, depreciation, and amortisation (EBITDA) was a loss of $4.2 million. Management advised that this reflects its continued investment to support its longer term growth initiatives.

Despite this, the company finished the period in a very strong financial position. Thanks partly to its capital raising in May, ELMO had a cash balance of $139.9 million at the end of the period.

Management advised that this means it is well capitalised to continue investing in both organic growth and strategic acquisitions.

What were the drivers of its growth?

One of the key drivers of ELMO’s growth was its increasing customer numbers. The company’s customer base grew to 1,682 organisations over the year, an increase of 25.4%.

Also supporting its growth was an increase in average modules per customer from 2.4 to 2.7.

Pleasingly, management notes that customer concentration remains very low, with the largest customer representing less than 2% of ARR. Furthermore, the 10 largest customers account for less than 7% of its ARR.

Another positive is that ELMO’s Customer Lifetime Value to Customer Acquisition (LTV:CAC) ratio remains high at 8.1. Management believes this underpins its continued investment thesis in growth.

ELMO’s CEO and Co-Founder, Danny Lessem, was pleased with the company’s performance in FY 2020.

He commented: “Despite some of the challenges associated with COVID-19, FY20 has been another year of robust growth for ELMO. Particularly at this time, businesses are recognising the benefits of cloud-based technologies to deliver flexible and innovative workplace solutions.”

“ELMO’s overall strategy remains unchanged: delivering organic growth supplemented with strategic acquisitions, continuing our growth trajectory into FY21 and beyond. We are well placed to capitalise on anticipated tailwinds in the adoption of cloud-based business tools, including HR-technology,” he added.

FY 2021 outlook.

Management appears confident that another year of strong growth awaits the company in FY 2021.

It has provided guidance for ARR of $65 million to $70 million, which represents year on year growth of 18% to 27%.

It will be a similar story for revenue, with the company expecting this to be in the range of $57 million to $61 million. This is expected to be driven by strong organic growth, supplemented with selective acquisitions.

Once again, the company is expecting to post an operating loss as it focuses on its growth strategy. ELMO’s EBITDA is expected to be -$4 million to -$7 million in FY 2021.

More reading

• Could these small cap ASX shares be the next Afterpay?
• 3 ASX SaaS shares to buy this week
• Add these ASX small cap shares to your watchlist immediately
• How to get rich by investing in small cap ASX shares
• ASX 200 jumps almost 2% today, Afterpay rises

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

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With the banks slashing the interest rates on their savings accounts and term deposits to ultra low levels this year, it is getting harder and harder to generate a sufficient passive income to live on.

In light of this, I think savers should look to the share market for their income needs due to the high quality dividend shares on offer.

Two dividend shares that I would buy are listed below:

BHP Group Ltd (ASX: BHP)

The first dividend share to consider buying is BHP. I believe the mining giant is a great option for income investors due to its world class operations, strong balance sheet, and its positive long term growth outlook. Combined with its low costs and favourable commodity prices, I believe BHP is well-placed to deliver strong free cash flows over the coming years. This is particularly the case given that iron ore prices are hovering above US$110 a tonne at the moment.

Pleasingly for shareholders, given the aforementioned strength of its balance sheet, I expect the majority of its free cash flow to be returned in the form of dividends. As a result of this and based on the current BHP share price, I estimate that its shares offer investors a forward fully franked ~5% dividend yield.

Commonwealth Bank of Australia (ASX: CBA)

Another option for income investors to consider buying is Commonwealth Bank. This banking giant is facing very tough trading conditions at present, particularly after the Victorian lockdowns. However, with its shares down 21% from their high, I’m optimistic that the worst has been priced into its shares now.

In light of this, I feel now could be a good time to pick up shares if you don’t already have exposure to the banking sector. And while estimating what kind of dividend Commonwealth Bank will pay in FY 2021 is difficult, I expect a fully franked yield in the region of 4% to 5% at present.

More reading

• This is the only ASX sector tipped to report earnings growth this reporting season
• ASX 200 jumps 2% higher, Afterpay soars
• 4 things you need to know about the RBA’s rate decision today
• Should you invest in Commonwealth Bank shares?
• Beat interest rate cuts with BHP and this ASX dividend share

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 Why I would buy CBA and this ASX dividend share appeared first on Motley Fool Australia.

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On Wednesday the S&P/ASX 200 Index (ASX: XJO) was out of form. The benchmark index dropped 0.6% to 6,001.3 points.

Will the market be able to bounce back from this on Thursday? Here are five things to watch:

ASX 200 to bounce back.

It looks set to be a better day of trade for the ASX 200 index on Thursday. According to the latest SPI futures, the benchmark index is expected to open the day 27 points or 0.45% higher this morning. This follows a positive night of trade on Wall Street which saw the Dow Jones rise 1.4%, the S&P 500 climb 0.65%, and the Nasdaq index push 0.5% higher.

Oil prices higher.

Energy producers such as Beach Energy Ltd (ASX: BPT) and Woodside Petroleum Limited (ASX: WPL) could be pushing higher today after another positive night for oil prices. According to Bloomberg, the WTI crude oil price has risen 1.2% to US$42.20 a barrel and the Brent crude oil price has climbed 1.7% to US$45.20 a barrel. Oil prices climbed to a five-month high after a larger than expected inventory decline.

Gold price rises again.

Gold miners including Northern Star Resources Ltd (ASX: NST) and Saracen Mineral Holdings Limited (ASX: SAR) will be on watch today after the gold price pushed higher again. According to CNBC, the spot gold price rose 1.5% to US$2,053.00 an ounce. This means the gold price hit a new record high overnight.

ResMed results.

The ResMed Inc. (ASX: RMD) share price could be on the rise this morning after the release of its fourth quarter result. ResMed delivered a 10% increase in revenue to US$770.3 million. This compares to the consensus estimate of US$752 million. This was largely down to strong ventilator demand during the period.

Mirvac result.

The Mirvac Group (ASX: MGR) share price will be on watch this morning when it releases its full year results. The property company has been battling with difficult trading conditions, so all eyes will be on its occupancy rates, property valuations, and rental collections. Mirvac has already indicated that it will pay a final distribution of 3 cents per stapled security. This is down by over half compared to the prior corresponding period.

More reading

• ASX 200 drops 0.6%, Telstra sells data centre for $416.7 million
• Top broker warns Afterpay and these ASX stocks could disappoint on profit results
• Why the Netwealth Group share price leapt 33% in July
• The latest ASX stocks to be hit by broker downgrades today
• Top brokers name 3 ASX 200 shares to buy today

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

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The Advance NanoTek Ltd (ASX: ANO) share price could come under pressure on Thursday following the after-hours release of its FY 2020 results.

How did Advance NanoTek perform in FY 2020?

For the 12 months ended 30 June 2020, the sunscreen-focused advanced materials company delivered revenue from ordinary activities of $17.97 million. This was a 46% increase on the prior corresponding period and in line with its May guidance for revenue of $18 million.

One metric that did fall short of its guidance was its profit before tax. Advance NanoTek reported a 121% increase in profit before tax to $7.46 million. This compares to the guidance of $8.4 million for FY 2020 it gave on 11 May. No explanation was given in relation to why the company hit its sales target but fell short of its profit before tax guidance.

On the bottom line, the company reported a net profit after tax of $5.3 million, which was down 44.7% on the prior corresponding period. Though, it is worth noting that FY 2019’s profit after tax was positively impacted by its decision to write back a tax benefit of $6.25 million.

FY 2021 outlook.

The increasing demand for hand sanitiser globally during the pandemic looks set to impact its sales in FY 2021. Management notes that this increase is limiting the production capacity of manufacturers for products such as sunscreens.

The company is also anticipating a gap in sales over the next three months as distributors sell down inventory. While management expects the first half to be an improvement on the first half of FY 2019, it looks likely to be down on the corresponding period in FY 2020.

Despite this, Advance NanoTek has been ramping up production and building up its inventory. Management commented: “The Board is very satisfied with this new strategy because ANO has significantly shortened delivery times-frames to five days and reduced the cashflow burden on our distributors of having to hold significant inventory in their warehouses.”

More reading

• Why the Pinnacle Investment share price has rocketed 40% since 1 July
• Why I would add Coles and this ASX share to my retirement portfolio
• 2 ASX shares that are absurdly cheap right now
• ASX 200 drops 0.6%, Telstra sells data centre for $416.7 million
• 3 top ASX shares that could be quality buy and hold options

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 Advance NanoTek 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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Investment management firm Pinnacle Investment Management Group Ltd (ASX: PNI) saw its share price rocket 28.8% higher in July alone, and it’s now up by 40.3% since the start of last month.

The Pinnacle Investment share price hit a monthly high of $5.19 on 30 July, before following the broader market down to close the month at $5.01 per share. That earns it a spot among the top performers on the All Ordinaries Index (ASX: XAO) last month.

Year-to-date, the Pinnacle Investment share price has gained 18.02%, after falling 1.96% in today’s trade. Over that same time the All Ords — down 0.5% today — lost 9.9%.

Like most stocks, Pinnacle fell sharply during the big pandemic-fuelled equity selloff in late February into mid-March. Pinnacle shares bottomed on 25 March at $2.51 per share. Since then, the Pinnacle Investment share price has gained a whopping 119%.

What does Pinnacle Investment Management do?

Pinnacle is an Australian-based investment management firm with multiple affiliates. The company works to establish and support a wide range of investment management firms. It provides investment managers with distribution, fund infrastructure and support services. Its affiliated managers operate autonomously.

As at 31 May 2020, Pinnacle’s 15 affiliates managed a combined $57.0 billion in assets covering a range of asset classes.

Why did the Pinnacle Investment share price shoot higher?

In an announcement on 6 July, Pinnacle reported that 5 its affiliates earned approximately $25.8 million in performance fees for the 2020 financial year. At the time, Pinnacle forecast the performance fees would increase its net profit after tax (NPAT) by $6.7 million. Pinnacle’s share price surged 10.4% the day following its announcement.

Pinnacle also is a likely beneficiary of a wider shift away from traditional banks as investors seek to take more control of their finances. This trend gained traction after the Royal Commission into banking and financial services unearthed a range of unethical practices amongst some of Australia’s best known banks and financial institutions.

Annual shareholder report

Pinnacle released its annual shareholder report yesterday. Coming in at $32.2 million, the company’s NPAT attributable to shareholders is up 5.6% from the $30.5 million achieved in the 2019 financial year (FY19).

Earnings per share (EPS) attributable to shareholders also increased year-over-year to 17.9 cents. That’s up 4.7% from 17.1 cents in FY19.

Pinnacle’s fully franked final dividend per share of 8.5 cents saw total dividends reach 15.4 cents, the same total dividend payout as the previous year.

The Pinnacle Investment share price is currently sitting at $5.50 per share with a market capitalisation of $1.02 billion.

More reading

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Motley Fool contributor Bernd Struben 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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