Tag: Motley Fool Australia

ASX gold stocks have been on a tear and the sector is likely to remain well supported as the price of the precious metal is forecasts to hit a record high of US$2,000 an ounce in the next 12-months.

The bullish prediction comes from Joe Foster who is the portfolio manager at VanEck – the world’s largest gold exchange-traded fund, reported the Australian Financial Review.

The gold price couldn’t muster enough momentum to reach that price barrier after the GFC when it peaked at a little over US$1,900 an ounce.

But Foster highlights four reasons why it can this time round.

Gold’s 4 tailwinds

The first is the US$9 trillion ($14 trillion) in stimulus that central banks and governments around the world have pumped into the economy to soften the COVID-19 blow.

If the record amount of stimulus triggers an inflationary cycle or if the impact from the coronavirus is worse than expected, gold could even head north of US$2,000 an ounce, Foster told the AFR.

The second tailwind for gold is its ability to protect investors from any short-term deflationary shock that’s triggered by the COVID-19 pandemic.

Works as an inflation and deflation hedge

Interestingly, gold is about the only asset that can also protect against inflation. If inflation does rear its ugly head due to the massive liquidity injection, the gold price will outperform.

Finally, ballooning sovereign debt from the stimulus is likely to devalue fiat currencies. This loss of faith in paper money is anther boon for the gold price.

The ASX gold stocks shining bright

For these reasons, Foster allocated around 20% of his portfolio to Australian gold miners. He commented that the drop in the Australian dollar rejuvenated the industry and prompted greater exploration activity.

The mid-tier ASX gold miners that he believes are great companies include Evolution Mining Ltd (ASX: EVN), Northern Star Resources Ltd (ASX: NST) and Saracen Mineral Holdings Limited (ASX: SAR).

However, he also likes earlier stage Australian miners. These include Gold Road Resources Ltd (ASX: GOR), West African Resources Ltd (ASX: WAF) and Bellevue Gold Ltd (ASX: BGL).   

Foolish takeaway

Foster’s views follow my article on April 16 when I outlined reasons why the gold price will break new highs.   

The tailwinds supporting the commodity are unlikely to reverse or ease anytime soon. If anything, they can persist for the next few years.

This is why I have been recommending investors go overweight on the sector even as we recover from the coronavirus disaster.

While the yellow metal tends to outperform during a crisis, history shows that it keeps running well into the recovery phase.

More reading

• These are the latest ASX shares to be downgraded by top brokers
• 5 things to watch on the ASX 200 on Wednesday
• Macquarie picks the best stocks to buy for the post COVID-19 rebound
• Why Fisher & Paykel Healthcare, Mesoblast, Northern Star, & TechnologyOne are tumbling lower
• ASX 200 climbs 1% in positive start to the week

Motley Fool contributor Brendon Lau owns shares of Evolution Mining 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.

The post Why this expert is predicting gold to hit record high of US$2000 appeared first on Motley Fool Australia.

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You can save your future self from financial misery by making sure you take advantage of this volatile share market period.

At the moment the S&P/ASX 200 Index (ASX: XJO) is down around 22% from the pre-coronavirus heights. Ignoring that the share market has been even lower, I think today’s lower price is broadly attractive. (However, I wouldn’t call every share a buy just because it’s priced lower.)

The thing is, our 65-year-old selves don’t suddenly wake up with a $1 million share portfolio out of thin air. It takes a lifetime of good financial habits, saving your dollars and investing diligently, to build that kind of wealth.

No-one can know how generous (or not) the Australian pension will be in two or three decades from now in ‘real’ terms. I’d bet it won’t be as generous as today as the demographics change.

If you want to have a good portfolio when you retiree you need to starting building it today. Or at least as soon as you can.

Would you rather buy shares when they’re priced 20% lower or 20% higher? I think it’s obvious what the answer should be! Warren Buffett has a good analogy for this with buying burgers from a supermarket. He’s going to keep buying burgers, so rejoice when prices are a lot lower.

What shares will help your future self financially?

I don’t think you can go too wrong with low-cost, quality exchange-traded funds (ETFs) like BetaShares Australia 200 ETF (ASX: A200), iShares S&P Global 100 (ASX: IOO) and iShares S&P 500 ETF (ASX: IVV).

I also believe there are some great fund managers to chose from. Shares like Magellan High Conviction Trust (ASX: MHH), MFF Capital Investments Ltd (ASX: MFF) and PM Capital Global Opportunities Fund Ltd (ASX: PGF) could be solid picks at these prices. Managers can be worth the fees if they outperform or you buy at a good discount to the assets. 

More reading

• ASX 200 ends the day higher, EML share price rises another 12%
• These are the latest ASX shares to be downgraded by top brokers
• $3,000 invested in these 3 ASX industries could make you a fortune in the future
• Down 10% in 2 months. Are Coles shares a buy today?
• Why this ASX 200 stock could surge higher tomorrow

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Investment company Stockspot has just released its 2020 ETF research report, revealing the best and worst-performing ASX exchange-traded funds (ETFs) and providing insight into this increasingly popular investment option. 

The report found that the Australian ETF market grew by 24% over the 12 months to March 2020, with ETF funds under management (FUM) increasing from $45.8 billion to $56.9 billion.

Over the last year, 23 new ETFs were introduced to the market, taking the total number of ETFs in Australia to 212.

Investors turn to ETFs amid heightened uncertainty

The report revealed that ETF trading volumes in March 2020 set an all-time record that was almost triple the previous monthly record. As the ASX entered a bear market, there were nearly 800,000 ETF trades in March. That’s 8 times the historical average of 110,000 monthly trades.

According to the report, the market sell-off welcomed consistent inflows to Australian-focused ETFs and those focused on other parts of the world, while active ETFs experienced significant outflows. This reflects the greater importance investors place on transparency and liquidity in times of volatility.

Best-performing ASX ETFs

Commodities were front and centre in the report’s best performers for the 12 months to March 2020, with the ASX gold sector performing strongly. ETF Securities’ ETFS Physical Gold ETF (ASX: GOLD) posted a 43.1% return. Hot on its heels was Perth Mint Gold (ASX: PMGOLD), which saw a 1-year return of 42.9%.

This reflects the safe-haven status of gold, with investors flocking to the precious metal on the back of increasing COVID-19 uncertainty and record-low interest rates. Notably, the report also found that there is now $2.3 billion in physical gold ETFs listed on the ASX, more than double last year’s figure of $906 million.

According to the report, physical gold outperformed ASX gold mining companies, which delivered a return of 23%.

Worst-performing ASX ETFs

The dreaded pole position belonged to the BetaShares Crude Oil Index ETF (ASX: OOO), racking up a negative return of 64.6%. This is a synthetic ETF that aims to provide investors with exposure to WTI crude oil futures, which have been on a downward spiral and crashed into negative territory at the back-end of last month.

In second place was the BetaShares Global Energy Companies ETF (ASX: FUEL) which experienced a 46.7% fall. Since most major energy companies are largely exposed to crude oil prices, this ETF suffered a similar fate to OOO.

Most popular ASX ETFs

The Vanguard Australian Shares Index ETF (ASX: VAS) retained its crown as the largest ASX ETF and was the most popular choice for investors in terms of net flows. In the 12 months to March 2020, the VAS ETF experienced $1.6 billion of inflows. According to Vanguard, VAS now manages $4.8 billion of ETF funds as of 30 April 2020.

The second most popular choice for investors was another broad-based Australian share market ETF, iShares Core S&P/ASX 200 ETF (ASX: IOZ). IOZ enjoyed $871 million in new money coming in.

Perhaps unsurprisingly, gold also featured, with the ETF Securities GOLD ETF experiencing the third-highest inflows of $629 million.

If you’re interested in investing in ETFs, be sure to check out the Fool’s top ETFs for 2020. And if shares are also up your alley, don’t miss the report below.

More reading

• Buffett? Lynch? Here are the investing experts you should take advice from when buying ASX shares
• Should ASX investors just buy ETF index funds for better returns?
• Don’t delay: Start investing today in shares to become rich
• Here’s how to create a $1 million ASX portfolio by investing $1,000 a month
• Why a buy and hold strategy for ASX shares is best

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

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The Commonwealth Bank of Australia (ASX: CBA) may emerge from the coronavirus pandemic as the best bank to invest in among its Big 4 cohorts: Australia and New Zealand Banking Group Limited (ASX: ANZ), Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd. (ASX: NAB).

Could it be the big four bank to buy? 

No deferred dividend or capital raising 

CBA’s strong capital position enabled the bank to deliver 1H20 interim dividend of $2.00 per share or $3.5 billion to its ~830,000 shareholders. A much-needed cash benefit to the economy. 

Comparing this to the likes of Westpac and ANZ, which both deferred their interim dividend, and NAB, which offered its existing shareholders more capital in its $3.5 billion capital raising yet still opted to pay them a small interim dividend. 

Despite paying $3.5 million in dividends, Commonwealth Bank was still able to maintain a March CET1 (Common Equity Tier 1) ratio of 10.7% above APRA’s ‘unquestionably strong’ benchmark of 10.5%, notwithstanding the timing of the 1H20 dividend payment and additional COVID-19 and remediation provisions. 

I believe Commonwealth Bank’s commitment to paying a dividend in today’s uncertain climate – without having to raise additional capital, while also meeting APRA’s stringent capital requirements – is a reflection of its position as the leading big four bank. 

Sturdy relative earnings

Commonwealth Bank demonstrated relatively sturdy earnings compared to its peers. Cash net profit after tax for the big four banks in comparison to 1H19 was:

• CBA down 44% 
• Westpac down 70%
• NAB down 51.4%
• ANZ down 60%

Commonwealth Bank is well placed to manage the challenging market conditions, with strong balance sheet settings and a favourable business mix. The group is 70% deposit funded, underpinned by the bank’s peer lending franchise strength in stable household deposits. Deposit balances grew strongly in Q3, influenced by growth in retail/SME deposits and corporate clients drawing down on funding lines and placing these funds into CBA deposits for liquidity purposes. 

Is it a buy?

There are a number of risks and scenarios that could play out following COVID-19. Commonwealth Bank’s report outlines key drivers in the housing market including unemployment, underemployment, changes to income and house prices.

Government assistance programs such as the JobKeeper scheme have been able to prop up the economy and employment levels. However, the implicit end of JobKeeper combined with structural changes in Australian sectors and ongoing China trade tensions could see economic conditions worsen. Despite a potentially weaker economic outlook, I would still consider Commonwealth Bank the better of the big four banks, given its earnings and commitment to dividends. 

More reading

• Are NAB shares a bargain buy?
• ASX 200 down 0.2%: Big four banks lower and TPG announces demerger plans
• Are ASX bank shares worth buying despite dividend cuts?
• Is it time to buy ASX banks?
• Are CBA shares in the buy zone?

Motley Fool contributor Lina Lim 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 S&P/ASX 200 Index (ASX: XJO) ended the day higher by 0.24% to 5,573 points after being down in the morning.

The New South Wales government is now encouraging people to visit regional NSW in another sign of areas of the country opening up.

Strongest ASX 200 performance

The biggest rise within the ASX 200 belonged to EML Payments Ltd (ASX: EML). The EML share price went up 12% today.

It gave a trading update which included solid growth in certain sections of the business. While the gift & incentive section is suffering, other areas are still growing nicely.

Despite everything that’s going on the company managed to generate $2.7 million of earnings before interest, tax, depreciation and amortisation (EBITDA) including the PFS acquisition. It ended April 2020 with $125 million of cash.

Australian Agricultural Company Ltd (ASX: AAC) moo-ves upwards

The cattle company announced its FY20 report today.

AAC announced that Wagyu beef sales were up 20% after price and volume growth. The company generated an operating profit of $15.2 million compared to a loss of $22.9 million last year.

It managed to generate its strongest operating cashflow in three years of $20.1 million.

AAC said that COVID-19 had a negligible impact on FY20 results, the impact on FY21 is uncertain and couldn’t be reasonably estimated.

The business saw its share price rise 12.8% today.

Fletcher Building Limited (ASX: FBU) lets go of some workers

Fletcher building provided a COVID-19 update today.

It recorded an earnings before interest and tax (EBIT) loss of around $55 million in April, which excludes significant items. The loss was made in New Zealand whereas Australia was a breakeven result.

As a result of the difficult conditions, Fletcher Building is reducing its workforce by around 10% which equates to around 1,000 jobs in New Zealand and another 500 in Australia.

The share price of the construction company dropped 2.8% today.

More reading

• These are the latest ASX shares to be downgraded by top brokers
• $3,000 invested in these 3 ASX industries could make you a fortune in the future
• Down 10% in 2 months. Are Coles shares a buy today?
• Why this ASX 200 stock could surge higher tomorrow
• ASX 200 construction share warns of bleak outlook for the sector

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Emerchants Limited. The Motley Fool Australia has recommended Emerchants 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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If you’re looking to invest $1,000 into the share market right now, then there are a lot of quality options to choose from.

Three ASX shares that I think would be smart choices are listed below. Here’s why I like them:

Jumbo Interactive (ASX: JIN)

Jumbo Interactive is an online lottery ticket seller and the operator of the Oz Lotteries website. In addition to this, the company has a Software as a Service (SaaS) business, Powered by Jumbo Software. This is the most exciting part of the business in my opinion. The total addressable market for its SaaS business is significant. Last year management noted that approximately 7% of the world’s lottery tickets are sold online, which implies that 93% of a ~US$300 billion global market has yet to transition online. I suspect a greater portion of ticket sales will be made online in the future and for its SaaS business to underpin strong earnings growth over the next decade.

REA Group Limited (ASX: REA)

Another option for a $1,000 investment is REA Group. It is the operator of the realestate.com.au website and several international equivalents. Although the housing market is struggling at the moment, this has not stopped the company from growing its earnings. During the third quarter it delivered an 8% lift in EBITDA to $119.6 million despite dealing with a 7% decline in listings. And while listings in the fourth quarter are likely to be markedly lower, its cost cutting plan should offset some of this weakness. Looking further ahead, when conditions improve I expect REA Group’s earnings growth to accelerate and drive its share price higher.

Zip Co Ltd (ASX: Z1P)

A final option to consider is growing buy now pay later provider, Zip Co. There were concerns that Zip Co’s business model could struggle if trading conditions deteriorated materially. Pleasingly, this hasn’t proven to be the case. The company recently released a trading update which revealed that transaction volume jumped 86% to $181.6 million in April. But perhaps the even better news was that its net bad debts came in at just 1.99%. This is higher than previously, but at a very strong level compared to many of its peers. I’m confident its strong growth will continue over the coming years. Especially given its new verticals, international expansion, and the growing popularity of the payment method with consumers and merchants.

More reading

• 3 ASX 200 blue chip shares I would buy today
• 4 ASX 200 shares exposed to a fall in house prices
• The newspaper killers: 3 ASX 200 online classifieds shares dominating the market
• 3 quality ASX tech shares to buy for strong long term returns
• Leading brokers name 3 ASX shares to buy today

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 Jumbo Interactive Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia has recommended Jumbo Interactive Limited and 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.

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Warnings from some experts about overvalued share prices aren’t enough to keep our market down!

The S&P/ASX 200 Index (Index:^AXJO) reversed its morning losses and is trading 0.4% higher as we head into the close.

Our market may have gotten a tat too excited about the COVID-19 economic recovery, but I don’t think that in itself will send the ASX 200 into a new bear market – at least not in the shorter-term.

But the air of optimism hasn’t stopped brokers from downgrading their recommendations on a handful of ASX stocks.

Not ‘Appening anymore

One stock that might be looking maxed out is tech darling Appen Ltd (ASX: APX), according to Credit Suisse.

The broker lowered its rating on the stock to “neutral” from “outperform” despite the artificial intelligence product developer’s upbeat trading update.

Appen highlighted a robust demand outlook, increasing use of its products across various industries and growing efficiencies in its business.

“Our rating downgrade is primarily a function of share price rather than change in thesis,” said Credit Suisse.

“In March APX was trading 26x consensus 12-month forward P/E vs 42x currently, and its share price is now near an all-time high.

At these levels in our view an upgrade is required to support further share price appreciation, although in the current environment, it may be more challenging to achieve.”

The broker’s price target on Appen is $30 a share.

Playtime over

Another stock that’s issued good news but is hit by a downgrade is Baby Bunting Group Ltd (ASX: BBN).

Citigroup cut its recommendation on the baby products retailer to “hold” from “buy” after management reported strong like-for-like (LFL) sales growth.

This may be due to shoppers stockpiling essentials, like diapers, and pre-orders from consumers worried about delays in getting products.

But despite the good results, Citigroup thinks Baby Bunting’s margins will come under pressure from a sales shift towards skinnier margin consumable products and higher freight costs from online orders.

“We expect outperformance relative to the broader retail sector to slow as more discretionary segments outperform as the Australian lock down is eased, and consumer stockpiling unwinds,” said the broker.

“We see the FY21e PE of 17x, a 9% premium to peers, as fairly reflecting the rewards and risks.”

Citi’s price target on the stock is $3.35 a share.

Losing its shine

A bullish outlook for the gold price isn’t enough to keep Evolution Mining Ltd (ASX: EVN) on Morgan Stanley’s buy list.

The broker chopped its rating on the gold miner to “equal weight” (equivalent to “hold”) from “overweight”.

While the outlook for the precious metal is positive due to the uncertain economic environment from COVID-19 and negative bond yields, Evolution is starting to look fully priced compared to its peers.

“In the last year, our gold coverage’s average forward 12m EV/EBITDA has fallen ~13% to 6.3x, and are trading an average of 7% below three-year averages,” said Morgan Stanley.

“If we assume our coverage returns to respective peak multiples of 7-11x, we find 30% upside for all but EVN.”

The broker’s price target on Evolution Mining is $4.70 a share.

More reading

• ASX 200 ends the day higher, EML share price rises another 12%
• $3,000 invested in these 3 ASX industries could make you a fortune in the future
• Down 10% in 2 months. Are Coles shares a buy today?
• $2,500 invested in these 3 ASX shares could make you a fortune in 10 years
• The Bubs share price is up 20% in May, will it catch up to the A2 Milk share price?

Motley Fool contributor Brendon Lau owns shares of Evolution Mining Ltd. 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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When it comes to investing in the ASX, I always prefer to look well into the future. Markets like the S&P/ASX 200 Index (ASX: XJO) already operate based on many forward-looking mechanisms.

But in order to outperform the market over the long-term, you sometimes have to be bolder than the market. This is particularly true when it comes to contemplating how the economy will function in 1, 5 or even 10 years’ time.

So what are the ASX future fortune-making industries?

With this in mind, here are 3 ASX industries I think will be alive and thriving for the foreseeable future and beyond! I think if you invest $3,000 in any of these industries, you have a strong possibility of making a fortune over the next decade.

Healthcare

Healthcare is the very definition of an evergreen industry. Until humanity discovers the elixir of life (not too likely in my view), we’re always going to need medical services and supplies. Furthermore, Australia (along with most of the world’s advanced economies) has an ageing population. This alone should ensure a decades-long tailwind for the healthcare sector.

Luckily, the ASX is full of quality companies that operate in this space. Private hospital operator Ramsay Health Care Limited (ASX: RHC) is one such company. Ramsay has a massive portfolio of well-regarded private hospitals in Australia as well as around the world.

CSL Limited (ASX: CSL) is another consistent winner, as is Cochlear Limited (ASX: COH) and, more recently, Polynovo Ltd (ASX: PNV). Plenty of choices here!

Software-as-a-Service (SaaS)

Software-as-a-Service is a relatively new business concept. This is because it is only enabled by the pervasiveness of the internet and by the cloud infrastructure that now underpins it. But this doesn’t mean it’s not a great place to invest for growth over the coming decade.

Many ASX SaaS companies have already delivered substantial fortunes for their investors on the back of surging share prices over the last few years. Investors have been especially attracted to companies committed to aggressive expansion plans and long-term, strategic outlooks. Altium Limited (ASX: ALU) and Xero Limited (ASX: XRO) are two such examples. Despite the fact both companies’ share prices have rocketed over the past couple of years, I still think this space remains primed for massive growth down the road. I believe this growth is likely to be enjoyed by the ASX’s existing SaaS key players as well as some possible new entrants.

ASX resources

Although this sector is somewhat boring when compared with the first two on my list, I do believe it has the potential to make investors sizeable amounts of money over the coming decade. Whilst some might argue resources is an ‘old-world’ industry, the fact remains that almost all facets of the economy still rely on one resource or another – whether it be steel, copper or aluminium.

And I believe there’s still room for future growth too. The economy of tomorrow is probably going to be less fossil-fuel focused (hopefully) and more reliant on resources used in electronics. Things like silver, lithium and cobalt. Thus, smaller resources players like Galaxy Resources Limited (ASX: GXY) and Pilbara Minerals Ltd (ASX: PLS) could currently be worth investing in for long-term growth potential.

Foolish takeaway

Whilst it’s easy to become obsessed with the coronavirus-led volatility in the market right now, no one can predict what ASX shares will do in the immediate future. I believe, a smarter approach is to focus on the decades ahead and consider investing in ASX industries that are well positioned for long-term, future growth.

More reading

• Down 10% in 2 months. Are Coles shares a buy today?
• Why this ASX 200 stock could surge higher tomorrow
• Do the Altium and Xero share prices still represent good long-term buys?
• Can we value ASX shares with P/E ratios in 2020?
• Why this ASX funeral share is well positioned for future growth

Sebastian Bowen owns shares of Ramsay Health Care Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd., CSL Ltd., and Xero. The Motley Fool Australia owns shares of Altium. 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 Coles Group Ltd (ASX: COL) share price is down around 10% over the past two months.

Coles shares are today trading at $15.23 at the time of writing. Seeing as Coles shares were over $17 back in March, is this a buying opportunity for this ASX consumer staples giant?

Why are Coles shares falling?

Since mid-March, the broader S&P/ASX 200 Index (ASX: XJO) has surged over 22% in value. In this period, Coles’ share price has gone backwards. So what’s going on?

Well, Coles shares were one of the few stocks that investors were flocking to during March. Investors were evidently drawn to the company’s defensive qualities and were responding to the panic buying of essentials we saw across the country at the time.

Today, the situation is remarkably different.

The initial bump in revenue Coles experienced during the first quarter of 2020 has likely evaporated. We know this because just today, the Australian Bureau of Statistics released its April retail data, which found food retail spending fell by 17.1% in April, compared with March.

Meanwhile, most of the additional spending Coles has had to implement recently on safety equipment and extra store sanitisation looks like it’s here to stay for at least the remainder of 2020. Coles also employed a massive number of new staff over the last few months, which is another cost the company has to absorb.

Are Coles shares a buy today?

Coles shares certainly look a lot more attractive than they did two months ago, but I’m still not convinced they’re a screaming bargain on today’s prices. This is a company that I don’t think will see significant growth over the next few years. Its ‘Smarter Selling’ cost-cutting program has also had a major wrench thrown into it by the coronavirus.

In saying that, dividend income is hard to find on the ASX these days and so I think Coles shares have a lot of merit from an income investing perspective. On current prices, Coles shares are offering a trailing dividend yield of 2.76%, or 3.94% grossed-up with full franking.

That’s a lot better than a term deposit or a non-existent dividend from Westpac Banking Corp (ASX: WBC).

Foolish Takeaway

Coles is a good business with strong fundamentals and many attractive defensive qualities, which it certainly showed off during the market panic we saw in March with aplomb. I wouldn’t buy this company for its future growth prospects, but I think Coles shares remain a sound choice for reliable ASX dividend income today.

More reading

• $3,000 invested in these 3 ASX industries could make you a fortune in the future
• Aussie retail numbers paint a gloomy ASX picture
• The Bubs share price is up 20% in May, will it catch up to the A2 Milk share price?
• Why this ASX 200 stock could surge higher tomorrow
• Can we value ASX shares with P/E ratios in 2020?

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. 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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Is the Webjet Limited (ASX: WEB) share price a buy?

Just over a week ago I looked at whether the Webjet share price was a buy. I concluded it seemed cheap if travel can return sooner rather than later. Since then it’s gone up about 12% in a week – that’s a quick return if you bought at the time!

I wasn’t expecting it to make such a quick double digit return. So I thought I’d revisit my thinking on the Webjet share price. Investment thoughts can change if something goes up or down over 10% in such a short time.

Why I was feeling bullish 

The company raised around $350 million in a capital raising which is being used to strengthen the balance sheet because of the travel restrictions that are in place globally due to the coronavirus. I think this puts the business in a much stronger position compared to a lot of its travel peers – Webjet should be able to easily survive to December 2020 even if strict restrictions remained. That alone was a boost to the Webjet share price. 

But the restrictions are lifting much earlier than expected. I believe international travel is nowhere close to coming back yet though. But the possibility of domestic travel has been brought forward with some other restrictions ending. The NSW government has said that people will be able to visit regional NSW. I think that’s very promising that domestic bookings could start again sooner rather than later.

I think Webjet also has an advantage in that it delivers its service online. That means it has a lower cost base and customers will still be able to access all of the options, it’s not like a closed physical travel agent shop.

Is the Webjet share price a buy now?

After a quick 12% rise from around a week ago I think I’d be inclined to take profits off the table today. The share market has returned an average of 10% a year over the decades, so making 12% in a week is an attractive return and I’m cautious about investors expecting too much from Webjet this year.

Hopefully it can keep rising and I still believe it could be a solid performer over the next 5 to 10 years, but taking profits off the table today wouldn’t be a terrible decision.

More reading

• Can we value ASX shares with P/E ratios in 2020?
• Why James Hardie, Oil Search, Webjet, & Westpac shares are jumping higher
• 3 industries that may never recover from COVID-19
• Why a buy and hold strategy for ASX shares is best
• Why Qantas, Webjet and these ASX travel shares are dropping lower today

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet 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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