Tag: Motley Fool Australia

If you want become rich then I think you should start investing in shares today.

There’s a common saying that the best time to start investing is 20 years ago, the second best time is today. You could say the same thing about trees – we only get to sit in the shade of a tree today because someone had the foresight to plant a tree years ago.

It takes a long time to become rich. Becoming rich with shares doesn’t happen in a day or in a month. It takes many years, or a lifetime, of disciplined saving and investing to reach a desired financial goal or wealth position.

Why you should start investing today 

If you delay your investing journey it will dramatically reduce your final wealth balance. Shares have historically made an average of 10% a year. Whether that’s Australian shares as represented by Vanguard Australian Shares Index ETF (ASX: VAS) or international shares represented by something like iShares S&P 500 ETF (ASX: IVV).

Imagine if you give yourself 25 years to build wealth and at the end of it you have $990,000. A great total. But if you delayed and only had 24 years, you’d miss out on that last year of 10% growth and you’d only have $900,000. One year of delay could mean almost $100,000 of growth lost!

Why you should invest in shares to become rich

Why specifically shares? I think there’s a number of good reasons why shares will help you become rich. I prefer shares to property for a number of reasons.

On the one hand, I think property ‘returns’ don’t reflect the full picture. Quoted property returns usually don’t include the effects of negative gearing – which is an alternative description to ‘losing real money’. Returns usually don’t include transaction costs like stamp duty and real estate agent selling fees. The property prices quoted don’t reflect the tens or hundreds of thousands of dollars of renovations (or just repairs) that have gone into the property – it hasn’t simply been growth from a $500,000 property to $1 million with no cost to the investor. And what happens if an investment property doesn’t have a (paying) tenant? The costs are still heading out of the bank account.

With shares you can be invested in the best businesses on the ASX or even the best in the world. I think it’s these shares that will help people become rich. Don’t forget that usually the share return totals don’t include franking credits which is a big bonus for investors. Shares are pretty cheap right now because of the coronavirus. 

Which shares will help you become rich? I like the idea of investments like the iShares S&P 500 ETF, Magellan High Conviction Trust (ASX: MHH), MFF Capital Investments Ltd (ASX: MFF) and Future Generation Global Invstmnt Co Ltd (ASX: FGG).

More reading

• The importance of diversifying your ASX portfolio and how you can do it
• The smartest shares to buy if you have $2,000
• Here’s how to create a $1 million ASX portfolio by investing $1,000 a month
• How I’d invest $50,000 into ETFs
• ASX shares can help millennials retire before their parents

Motley Fool contributor Tristan Harrison owns shares of Magellan Flagship Fund 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 Don’t delay: Start investing today in shares to become rich appeared first on Motley Fool Australia.

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I think it’s fair to say that 2020 has been a bad year for dividends. Due to the pandemic, a large number of popular dividend shares have had to defer or cancel their dividends.

While this is disappointing, I’m confident that most dividend payments will resume again next year. In light of this, now could be a good time to look at the dividend shares to own in 2021 and beyond.

Here are two dividend shares I think should be considered:

Stockland Corporation Ltd (ASX: SGP)

Stockland is a property company which owns, manages and develops a diverse range of property assets. These include retirement villages, retail centres, business parks, offices, and logistics centres. Its shares have been hit very hard during the pandemic and are now down almost 50% from their 52-week high. I think this has left them trading at bargain prices for income investors. I’m not the only one that thinks this.

A recent note out of Goldman Sachs reveals that it has a buy rating and $4.43 price target on Stockland’s shares. It has been running the rule over the company and expects it to pay a distribution of ~26 cents per share in FY 2021. This equates to a whopping 9.2% distribution yield.

Sydney Airport Holdings Pty Ltd (ASX: SYD)

The Sydney Airport share price is down 41% from its 52-week high. Investors have of course been selling the airport operator’s shares after travel restrictions left its runways and terminals virtually empty. The good news is that Australia is now reopening and over the coming months Sydney Airport will start to see a recovery in domestic passenger numbers. While a full domestic recovery will take time and international tourism will take even longer, the company looks well-placed to pay a dividend in FY 2021.

Another recent note out of Goldman Sachs reveals that it expects Sydney Airport to pay a 29 cents per share dividend in FY 2021 and then a 37 cents per share dividend in FY 2022. If this proves accurate, it means that the company’s shares offer 5.3% and 6.7% yields, respectively, over the next couple of years. I think this is achievable and makes it well worth being patient with its shares.

More reading

• Why this overlooked ASX 200 stock just got upgraded by 3 leading brokers to “buy”
• 3 industries that may never recover from COVID-19
• ASX 200 Weekly Wrap: Gold miners help edge ASX ever higher
• Top brokers name 3 ASX 200 shares to sell next week
• What to watch on the ASX 200 next week

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

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The Australian Bureau of Statistics (ABS) released the third Household Impacts of COVID-19 Survey today, conducted throughout the country between 29 April and 4 May 2020.

According to the ABS, the series is designed to provide a snapshot of how people in Australian households are faring in response to the social and economic challenges brought about by COVID-19.

The third survey collected data relating to changes to people’s job situation, working from home arrangements, personal and household stressors, and lifestyle changes, among other topics.

The results of the survey were taken from telephone interviews conducted with around 1,000 Australian households.

Key findings

On the lifestyle front, the survey highlighted changes to people’s daily routines in the period of late April to early May:

• 22% said they were eating more snack foods, such as chips, lollies and biscuits
• 58% said they were spending more time in front of their television, computer, phone, or other devices
• 29% reported less frequent consumption of takeaway or delivered meals
• 38% said they were spending more time baking or cooking.

Additionally, 21% of people reported purchasing additional household supplies, which was much lower than the 47% recorded in April. This is in line with announcements from our major ASX supermarkets Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW) that trading is beginning to return to normal levels. As such, both companies have resumed home delivery services.

While ASX supermarket shares have been the beneficiaries of people cooking more at home, so too has meal kit provider Marley Spoon AG (ASX: MMM). The company, which delivers fresh ingredients and recipes to customers’ doors, has reported a surge in demand amid COVID-19.

In terms of employment, the survey found that 46% of working Australians were working from home, while 59% of respondents were working paid hours as of early May. 

The survey also found that loneliness was the most widely reported source of stress for Australians, affecting 22% of the sample, with other factors such as relationship difficulties and mortgage repayment difficulties reported as further stressors.

Importantly, the majority of Australians were continuing to keep their distance from people outside of their household (94%) and avoid public spaces (85%). The most common reasons for leaving the house were shopping for food (88%) and exercising or walking pets (73%).

What next?

This data provides some insight into how a sample of Australian households have been dealing with COVID-19 and the associated restrictions. 

The ABS followed up with the same survey respondents again on 12 May to undertake the fourth cycle of the survey. Topics include superannuation, loan repayments, childcare and schooling arrangements, and temporary living arrangements.

From a financial and investing perspective, the findings relating to superannuation will be one to watch in the wake of the government’s early access to super scheme.

The information from this fourth survey will be released later this month on 29 May 2020.

More reading

• Why is the Woolworths share price flat for 2020?
• ASX 200 Weekly Wrap: Gold miners help edge ASX ever higher
• How this $70m ASX small cap is cutting down a $50bn industry
• 5 things to watch on the ASX 200 on Monday
• ASX shares that could benefit from the Internet of Food

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

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The coronavirus pandemic saw shoppers flock to supermarkets around Australia to panic buy essentials and non-discretionary items. Despite the surge in consumer demand, the share price of Australia’s largest supermarket retailer, Woolworths Group Ltd (ASX: WOW), remains flat for the year.

So, is the Woolworths share price a long-term bargain and should you buy?

How has Woolworths performed?

Late last month, Woolworths reported its strongest quarterly sales growth in more than a decade. The group’s sales surged more than 10% to $16.5 billion for the quarter, with supermarket sales rising more than 40% in the week ending March 22. Long-life items such as toilet paper, pasta, flour and bread mixes fuelled sales growth as consumers rushed to stock up their pantries.

Woolworths saw total sales within its Endeavour Drinks business rise 9.5% for the quarter to $2.25 billion. Boasting brands such as Dan Murphy’s and BWS, Endeavor Drinks reported a surge in sales as consumers stocked up on takeaway liquor amid fears surrounding lockdown restrictions.

All of this should have been a boost for the Woolworths share price. However, following the federal government’s response to the coronavirus pandemic, the company closed the operations of its Hotels business in late March and, as a result, sales dropped more than 12% for the quarter.

$5 million boosts from Marley Spoon

Woolworths has also made a handy profit from its stake in subscription-based meal kit provider Marley Spoon AG (ASX: MMM). The Marley Spoon share price has surged around 400% since mid-March as the company enjoyed a boom in demand for at-home meal consumption.

As a result, according to the Australian Financial Review (AFR), Woolworths stands to make approximately $5 million in profit from its stake in the meal box delivery service. In 2019, Australia’s largest retailer invested $30 million in Marley Spoon through a debt and equity transaction. The deal issued Woolworths with 8.2 million in ASX-listed chess depositary notes in Marley Spoon at 50 cents each.

Why is the Woolworths share price flat?

Despite strong sales growth in its supermarket and liquor divisions, as well as profit from its stake in Marley Spoon, Woolworths has also incurred increased costs. According to the company’s management, increased costs for wages, security, supply chain and e-commerce will partially offset sales growth.

In order to satisfy consumer demand whilst also maintaining social distancing measures, Woolworths saw costs soar between $70 million and $90 million in March. These costs are expected to increase to a range of between $220 million and $275 million for the June quarter as Woolworths looks to prepare itself for future trading amid a potential second wave of the pandemic.

Should you buy?

The Woolworths share price is currently trading on a price-to-earnings ratio of around 27 times future earnings, which could prompt some investors to assess the stock as being too expensive. In my opinion, even though Woolworths has seen a surge in costs and substantial losses in its hotel business, the company’s share price still looks attractive for long-term growth.

There are, however, many moving parts in the short term, given the uncertain trading environment resulting from the coronavirus pandemic. For this reason, I think a prudent strategy would be to see how Woolworths handles future costs before making an investment decision.

More reading

• Latest ABS data reveals how Australians are responding to COVID-19
• ASX 200 Weekly Wrap: Gold miners help edge ASX ever higher
• How this $70m ASX small cap is cutting down a $50bn industry
• ASX shares that could benefit from the Internet of Food
• 4 top ASX 200 shares for blue chip investors

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

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The Ramsay Health Care Limited (ASX: RHC) share price is continuing its momentum today, up by 3.46% at the time of writing after providing 2 positive updates to the ASX this morning.

Ramsay announced it will provide support for the UK healthcare system for a 14-week period during the COVID-19 pandemic. This continues support it has been providing the UK National Healthcare Service (NHS) since 23 March. 

This new deal continues Ramsay’s strategy of making its private hospital beds available for public health sectors across Australia. Today, the company also announced it has finalised a deal with the Western Australian Government where, in return for maintaining full workforce capacity at its facilities, Ramsay will receive net recoverable costs for its services. 

On Friday, Ramsay announced a similar binding heads of agreement with NSW. Both Queensland and Victoria have already reached similar deals with the company.

Shoring up finances

The Ramsay share price finished last week up 5.3% from Monday’s opening price. Given today’s news and the market’s response so far, I believe it will continue its upward share price momentum. These agreements replace revenue the company had lost due to pandemic restrictions, in particular the cancellation of all non-urgent elective surgeries. The company wisely withdrew its FY20 guidance on 18 March in response to rising uncertainty in Europe particularly at the time. 

The deals over the past 4 to 5 weeks will cover the company’s costs. Also, the capital raising will shore up its finances and place it in a good position as we all emerge from lock down. 

Is the share price momentum justified?

At the time of writing, the Ramsay share price remains down by 8.65%, year to date. At this price, it is trading at a price-to-earnings ratio of 24.7. This is ~2 points higher than its 10-year average and underscores investors belief in the company as a growth opportunity. I personally think it is a great opportunity.

Ramsay has achieved high 10-year compound annual growth rates (CAGR) across all major valuation indicators. This marks it as a very well managed company with a product that is in demand.

Its performance includes a 12.9% CAGR in sales, a 42.4% CAGR in free cashflow and a 13.7% CAGR in earnings per share (EPS). 

Foolish takeaway

Ramsay is set to continue its share price momentum after striking a number of revenue replacement deals across Australia and now in the UK. This underscores the very strong management as shown by its historic financial performance. The company has delivered strong growth over a decade. 

More reading

• How to invest $5,000 in ASX 200 healthcare shares today
• 5 ASX 200 winners and 5 losers of the week
• These small cap ASX shares could be stars of the future
• 3 ASX healthcare shares to buy for strong long-term growth
• The next ASX sector in a post COVID-19 earnings upgrade cycle

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has recommended 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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There are some industries that may never recover from the COVID-19 global pandemic. What are you supposed to think about the shares in those industries?

It’s clear that some shares are going to see a long-term boost to user numbers and growth, such as Pushpay Holdings Ltd (ASX: PPH) and Kogan.com Ltd (ASX: KGN).

But what about some of the industries that are seeing the opposite? A huge drop off of activity, perhaps a permanent shift in the mindset of their customers?

Travel is one industry that many never recover from COVID-19

Australia has virtually blocked international travel because of the ongoing coronavirus pandemic. I think the travel industry may never be able to fully recover from COVID-19. Particularly if there are permanent costs and screenings of passengers. I’m somewhat confident that domestic travel will be available sooner rather than later. But international travel and tourism could be limited for some time.

How long will it take Sydney Airport Holdings Pty Ltd (ASX: SYD) to see most of its international volume to come back? The physical retail network of Flight Centre Travel Group Ltd (ASX: FLT) may never be the same again. When will Air New Zealand Limited (ASX: AIZ) be able to report good passenger numbers again?

I do think that Webjet Limited (ASX: WEB) and Qantas Airways Limited (ASX: QAN) could be some of the strongest ASX travel performers due to Australia’s good infection position, the need for flights to travel to most parts of Australia and the desire of people to travel.

Physical retail stores

Forcing everyone to stay at home for a few weeks may have caused a fundamental shift in people’s mindsets about shopping. Online shopping can be very convenient. You don’t have to drive all that way, find a car park spot and so on. I think the physical retail store industry may never recover from COVID-19. We’re already hearing some shares like Adairs Ltd (ASX: ADH) and Premier Investments Ltd (ASX: PMV) report huge online growth, and those shoppers may stay online. Retailers reliant on their physical stores could struggle. 

There are some shares that have been doing eCommerce very well such as City Chic Collective Ltd (ASX: CCX).

Property trusts in general

The knock-on effects of COVID-19 will be very interesting for property. Some commercial property bulls are claiming that social distancing will require businesses to rent twice as much space so all employees can be appropriately separate. I’m not so sure that will happen.

I think this period is going to kickstart a longer-term shift to a lot of workers working at home. Imagine the costs that could be saved if businesses can downsize or completely leave their expensive CBD building.

It’s also an interesting question for shopping centres and hotels. Almost the entire real estate investment trust (REIT) industry may never recover from COVID-19.

There are some interesting questions for REITs like Scentre Group (ASX: SCG), Vicinity Centres (ASX: VCX), Hotel Property Investments Ltd (ASX: HPI) and DEXUS Property Group (ASX: DXS). They all still have significant value, I’m not not sure they’ll command the same premium as before. 

But I do believe that REITs like Goodman Group (ASX: GMG) and Rural Funds Group (ASX: RFF) still have promising futures.

Foolish takeaway

There are industries out there that will fully recover from COVID-19. Those shares could be cheap, but you have to consider each idea carefully.

More reading

• Why this overlooked ASX 200 stock just got upgraded by 3 leading brokers to “buy”
• 2 high yield ASX dividend shares to buy for 2021
• The smartest shares to buy if you have $2,000
• ASX 200 Weekly Wrap: Gold miners help edge ASX ever higher
• 5 ASX 200 winners and 5 losers of the week

Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd, Premier Investments Limited, PUSHPAY FPO NZX, RURALFUNDS STAPLED, and Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited and Scentre Group. 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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Investing is a tricky game and one that is impossible to perfect. Even great investors like Warren Buffett, Ray Dalio and Peter Lynch have all made mistakes during their successful careers. Even as recently as this year, Warren Buffett sold out of Berkshire Hathaway‘s airline companies, resulting in huge losses.

But even though no investor is perfect, there are still some mistakes we can all try to avoid making in order to increase the chances of long-term investing success.

One of the biggest mistakes any investor can make is to get emotional about their investments. Usually, when we talk about emotional investing, the pitfalls of buying as a result of euphoria and selling as a result of panic are the main topics of conversation.

But those are not the mistakes we’ll be discussing today (although you should still heed them!).

Today, I want to talk about getting sentimental about investing. See, we normally regard investors who show a real interest in their companies as pretty shrewd. Loving a company and its products is a great way to find hidden gems the markets might be overlooking or underappreciating. It’s how early investors in Afterpay Ltd (ASX: APT) might have discovered this gem ahead of the pack, for example.

But there’s a difference between having an emotional connection with a company and an emotional attachment. The latter is the one to avoid. See, if you get too emotionally attached to a company, you may be unwilling to sell your shares if things take a turn for the worse, even if it’s logically the sound to do so.

Attachment – a mistake to avoid

One investor I know held shares of the old Fairfax Media Ltd (now defunct) for many years because they loved reading the newspapers Fairfax produced. Because of this devotion and attachment, they missed the writing on the wall, which was that the old business model newspapers were following was fast becoming obsolete. In hindsight, this investor let an emotional attachment get in the way of good investing practice. Perhaps they should have continued to buy Fairfax’s newspapers, but sold out of their shares before they were acquired by Nine Entertainment Co Holdings Ltd (ASX: NEC) for a fraction of what they were purchased at.

Foolish Takeaway

Incidentally, I love reading newspapers too. But that doesn’t mean I’m willing to invest in their future. You can always support a struggling company by buying their products instead of buying their shares! Letting sentiment and emotional attachment get in the way of prudent investing is a common mistake among ASX investors. Don’t let it happen to you!

More reading

• This ASX fintech share is soaring again as the economy reopens
• Will the Afterpay share price stop at $40 or keep on running?
• These ASX 200 shares are up over 40% in 2020
• 3 fantastic ASX shares to buy when you’re young
• Why a buy and hold strategy for ASX shares is best

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Nine Entertainment Co. Holdings 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 Why all ASX investors should avoid this easy mistake in 2020 appeared first on Motley Fool Australia.

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In order to maximise your potential returns and limit the damage of market shocks, I believe investors should ensure that their portfolio is diversified.

A good example of why this is important is the big four banks. The best performer in the group in 2020 has been the Commonwealth Bank of Australia (ASX: CBA) share price with a decline of 26% year to date. The other three big banks are each down approximately 38% since the start of the year.

While Commonwealth Bank’s decline may not look that terrible compared to the 18% decline by the benchmark S&P/ASX 200 Index (ASX: XJO), it is important to note that the big four banks are playing a major role in the ASX 200’s decline.

If you were to take out the banks from the index, the performance of the ASX 200 would be significantly better.

While I still think having exposure to the banks would be a good idea for diversification and dividends, I would suggest investors restrict this to just one bank. That way any weakness in the sector is cushioned by the rest of the portfolio.

There are other ways to diversify your portfolio as well. Buying a conglomerate such as Wesfarmers Ltd (ASX: WES) gives investors exposure to a number of industries through the one company.

Then there are exchange traded funds (ETFs) which give investors the option of investing in whole indices, countries, sectors, or even themes in a single investment.

With that in mind, two ETFs that I think would be great for diversification are summarised below:

iShares S&P 500 ETF (ASX: IVV)

As its name implies, the iShares S&P 500 ETF gives investors exposure to Wall Street’s famous S&P 500 index. This index is home to many of the largest companies in the world such as Amazon, Apple, Starbucks, and Warren Buffett’s Berkshire Hathaway. While 2020 looks likely to be a shaky year, I expect it to return to form once the crisis passes.

Vanguard MSCI Index International Shares ETF (ASX: VGS)

The Vanguard MSCI Index International Shares ETF is arguably as diverse as it gets. This ETF provides investors with exposure to many of the world’s largest companies listed in major developed countries. This allows investors to participate in the long-term growth potential of international economies outside Australia. Among its largest holdings are the likes of Apple, Microsoft, Amazon, Nestle, and Visa.

More reading

• 3 ASX 200 shares to watch this week
• ASX 200 Weekly Wrap: Gold miners help edge ASX ever higher
• 5 ASX 200 winners and 5 losers of the week
• Beat falling rates with these strong ASX dividend shares
• ASX 200 up 0.25% this week, CBA reveals Q3

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool Australia has recommended Vanguard MSCI Index International Shares ETF. 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 plans in place to relax coronavirus restrictions across all the states and territories, things are feeling decidedly more optimistic than they were a few weeks ago. Australians are starting to get their first glimpse at what life will be like in a (slightly) less socially distanced world. Pubs are reopening, and both the AFL and NRL have announced that their seasons will resume within the next few weeks.

It’s that last development that is a scintillating prospect for online bookmakers that have suffered in a world essentially devoid of sport. So, here are some ASX shares to keep an eye on.

Tabcorp Holdings Limited (ASX: TAH)

Tabcorp shares had been trading more or less sideways for years prior to the COVID-19 pandemic, hovering just under $5, but rarely pushing above that psychological price barrier. However, they rarely threatened to fall below $4 either and paid out a dependable fully franked dividend – making Tabcorp a nice little earner for long-term shareholders.

However, that all changed when the coronavirus hit. Tabcorp shares plunged below $3 for the first time in years, falling as low as $2.09 by late-March. And while they have managed to recover since then, they are still well short of their pre-coronavirus highs.

The difficulty for Tabcorp – and a potential reason why its share price hasn’t rebounded as strongly as its shareholders may have hoped – is its large retail presence. According to its most recent annual report, Tabcorp operated in over 9,000 venues – all of which would have been forced to close during the pandemic.

Pointsbet Holdings Ltd (ASX: PBH)

ASX corporate bookmaker Pointsbet was shaping up as one of the best growth shares on the ASX prior to the COVID-19 pandemic. Investors seemed particularly enamoured with its aggressive expansion strategy targeting the US market.

After listing on the ASX for $2 in June 2019, Pointsbet shares raced to a high of $6.65 by January 2020. But the company’s shares plunged at the height of the coronavirus panic, plummeting all the way down to just $1.10 by mid-March.

Since then, the Pointsbet share price has rallied strongly and is within striking distance of $5 as at the time of writing. In its March quarter update, Pointsbet noted lower growth in active customers due to the suspension of major sporting codes, although revenue from Australian racing remained largely unaffected.

Should you invest?

The return of the major Australian sporting codes presents some welcome good news for these 2 major ASX bookmakers. But the full benefit won’t be felt until the September quarter, meaning that investors may still have to weather some short-term volatility.

However, both companies also present a different set of risks. Tabcorp’s extensive retail network has been a heavy burden during these lockdowns. But the uncertainty around US sport in the near-term is a concern for Pointsbet.

Neither bookmaker is a sure bet. But they are still ones to watch as global sporting codes try to resume in a post-coronavirus environment.

More reading

• 3 ASX shares I should have bought last month
• Are ASX shares about to surge higher in 2020?
• Why I’m holding onto my Pointsbet shares
• Is Pointsbet on a winning streak after its solid Q3 result?
• Why these 3 ASX tech shares are surging higher today

Rhys Brock owns shares of Pointsbet Holdings Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Pointsbet Holdings Ltd. The Motley Fool Australia has recommended Pointsbet Holdings 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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China is rattling its trade war sabre at Australia and is threatening to bar imports of a range of products into its country.

But the market is brushing aside such fears when it comes to Australian iron ore. You can tell how relaxed investors are with the Fortescue Metals Group Limited (ASX: FMG) share price surging 6% to a record high of $13.30 in after lunch trade.

Its two bigger competitors are outperforming the S&P/ASX 200 Index (Index:^AXJO) too. The BHP Group Ltd (ASX: BHP) share price jumped 4.3% to $33.04 while the Rio Tinto Limited (ASX: RIO) rallied 6.2% to $90.64 at the time of writing.

Trade war comes to Australia

Investors are less confident about soft commodities and Chinese visitors. China is moving closer to slapping a up to 80% tariff on Australian barley and there’s speculation that beef and wine exports might be next.

China’s ambassador to Australia, Jingye Cheng, also threatened to stop his fellow countrymen from coming over for holidays or to study.

But experts believe China cannot afford to alienate our iron ore producers even though China is their only customer.

No one else to dance with

The problem facing the Chinese is replacing Australian ore, which UBS estimates account for 60% of the country’s supply. This contrasts to Brazil’s 23% market share, the only other country with the potential to make up the shortfall from Australia in any meaningful way.

However, it’s unlikely that Brazil can step up to the plate.

“Channel checks suggest absenteeism in Brazil is driving weak production ahead of any [government] enforced mobility restrictions,” said UBS.

“In the week to 11 May 20, Brazilian iron ore shipments were 4.2Mt [million tonnes], with YTD shipments at 87.1Mt, down 12% y/y.”

Brazilian production not up to the task

At the going rate, Brazil’s annual production volume is likely to be around 240Mt a year, or nearly a third below 2019.

Even if demand in Europe and other major markets like Japan were to drop due to COVID-19, the iron ore market is forecast to remain tight unless Brazil finds a way to significantly crank-up production.

But UBS thinks this will be a long shot for the Latin American (LATAM) country.

“The UBS LATAM team have [sic] taken a look at Brazil in terms of the spread of Covid-19 suggesting the spread from large cities to small towns may be increasing,” explained the broker.

“New Google Mobility data shows adherence to stay-at-home measures remains low in Brazil.”

High iron ore price in good and bad times

What’s more, one of the coronavirus hotspots is the Para State, which is the second largest iron ore producing states in the country.

On the demand side, China’s inventory of the mineral is low and that explains why the price of the commodity is holding up despite the looming global recession.

“On balance we expect the iron ore market to remain tight and support an iron ore price above US$80/t through 2020e,” added UBS.

“Substitution away from Australia at the current time appears difficult, but we note China has begun to invest in iron ore in Guinea, albeit 5+ years from first production.”

Looks like China needs our iron ore majors as much as they need China.

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Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited and Rio Tinto 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.

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