Tag: Motley Fool Australia

On Wednesday I looked at three ASX shares that brokers have given buy ratings to this week.

Unfortunately, not all shares are in favour with them right now. Three ASX shares that have just been given sell ratings by brokers are listed below.

Here’s why these brokers are bearish on them:

Commonwealth Bank of Australia (ASX: CBA)

According to a note out of Morgan Stanley, its analysts have retained their underweight rating and $63.50 price target on this banking giant’s shares. The broker notes that APRA has eased restrictions on dividend payments and will now allow 50% of earnings to be paid out to shareholders this year. It believes this means that Commonwealth Bank will pay a $1.30 per share final dividend later this year. Nevertheless, the broker continues to have issues with its valuation and retains its underweight rating. The Commonwealth Bank share price is trading at $73.13 this afternoon.

Domino’s Pizza Enterprises Ltd (ASX: DMP)

A note out of UBS reveals that its analysts have downgraded this pizza chain operator’s shares to a sell rating but with an improved price target of $64.00. UBS notes that Domino’s has defensive qualities and is positive on its medium term growth prospects. This is thanks partly to its store expansion plans and the shift to online food ordering. However, it believes this is already priced into its shares and has downgraded them on valuation grounds. The Domino’s share price is changing hands for $74.19 on Thursday.

Paradigm Biopharmaceuticals Ltd (ASX: PAR)

Analysts at Morgans have downgraded this biopharmaceutical company’s shares to a reduce rating with a $1.74 price target. This follows the release of a fourth quarter update which revealed a sharp increase in research and development expenses. In addition to this, the broker has concerns about a number of things behind the scenes. This includes the exit of its chairman and insider selling. In light of this and recent share price gains, it has decided to downgrade its shares. The Paradigm share price is trading at $3.22 this afternoon.

More reading

• Why the Paradigm share price is rising today
• Leading strategist highlights risk of double dip recession, predicts gold to hit $2000.
• ASX 200 jumps 0.7%: Fortescue impresses, Macquarie’s tough Q1, big four banks rise
• Here are the dividends this broker thinks CBA and the big four will pay in 2020
• ASX 200 drops 0.2%, APRA boosts big 4 ASX banks

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Domino’s Pizza Enterprises 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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We are almost into August where reporting season will tell us about the impact of COVID-19 on many businesses. I think there are some top ASX dividend shares that are worth buying for long-term dividend income:

Future Generation Investment Company Ltd (ASX: FGX)

Future Generation is a fairly unique listed investment company (LIC). It is philanthropic – it donates 1% of its net assets each year to youth charities. It’s able to do this because there are no management fees charged by the LIC or its investments. Future Generation invests in the funds of ASX share-focused fund managers who work for free for the LIC.

In terms of the dividend, Future Generation has increased its dividend consecutively over the past few years. In FY19 it increased the dividend by 8.7% compared to FY18. At the current Future Generation share price it offers an attractive grossed-up dividend yield of 7%. I think it’s a great ASX dividend share.

Aside from the dividend, I really like two elements of Future Generation. The underlying diversification is strong with investments in a number of portfolios of shares.

I also like that it’s possible to buy Future Generation at a sizeable discount to its net tangible assets (NTA). Future Generation is trading at 11% of its June 2020 NTA. Plus, its portfolio has outperformed the ASX over the long-term.

Vitalharvest Freehold Trust (ASX: VTH)

Vitalharvest is an agricultural real estate investment trust (REIT). It owns some of the largest aggregations of berry and citrus farms in Australia. These farms are leased to Costa Group Holdings Ltd (ASX: CGC). Not only does Vitalharvest receive a solid fixed rent from Costa, it also has a profit share agreement for 25% of the profit that the farms make.

The REIT has a distribution yield of 6.2% based on the current Vitalharvest share price. If profitability returns to 2019 levels, then Vitalharvest could offer a yield of 7.3%. I think those are solid yield numbers for an ASX dividend share.

I’m attracted to the new strategy that Primewest Group Ltd (ASX: PWG) could bring as the new manager of Vitalharvest. It’s going to look at more food-related properties used for storage and processing, not just farms.

The net asset value (NAV) per share of Vitalharvest was $0.95 at December 2019, so it’s trading at a 19% discount.

Food is a very important resource, so I think Vitalharvest could be a solid ASX dividend share over the long-term.

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

For dividends, I believe that Soul Patts is the best ASX dividend share available to Aussie investors.

The main reason I think that is due to dividend reliability. If you’re investing for dividends then I imagine you aren’t not looking for an unreliable dividend. Dividends may be essential for providing cashflow to fund your life’s expenses. I think dividend share picks should be reliable year to year and over the long-term, particularly when you need them most such as during this COVID-19 period. Many prior dividend favourites like ASX banks and infrastructure shares have cut dividends. 

Soul Patts has increased its dividend every year since 2000. It has provided dividend growth guidance for this year. It has paid a dividend every year in its 100+ year history.

The investment conglomerate owns a defensive portfolio of diversified businesses including telecommunications, building products, property, LICs, resources, swimming schools and agriculture.

Soul Patts is also planning to start investing in regional data centres, which opens up an interesting growth avenue for the company.

At the current Soul Patts share price it offers a grossed-up dividend yield of 4.25%. I think that’s a solid yield, given the low interest rate environment we find ourselves in.

More reading

• A dirt-cheap ASX dividend share to add to your portfolio today
• These 2 cheap Warren Buffett shares could be top picks right now
• 3 ASX dividend shares with yields over 5%
• Where I’d invest $9,000 in ASX shares
• Got $1,000? You should buy 1 of these 6 ASX shares

Motley Fool contributor Tristan Harrison owns shares of FUTURE GEN FPO and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO and Washington H. Soul Pattinson and Company Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Treating your super like a child? Bit of a strong statement, you might think?

Well, I stand by it. And here’s why.

What’s the big deal about superannuation?

Superannuation is the national retirement savings scheme. It’s the main thing helping the average Australian live out their retirement without relying solely on the age pension.

There’s nothing wrong with the pension in itself, don’t get me wrong.

But the Keating government initiated compulsory superannuation based on the acceptance that we as a country couldn’t afford to rely solely on the pension as a universal retirement income scheme.

That’s unfortunately what happens when you have an ageing population. And according to the 2016–17 NSW Intergenerational Report, titled ‘Future State NSW in 2056’, the NSW Government expects that by the year 2056, there will be just 2 workers for every 1 retiree (persons aged over 65) in the state, down from a 4:1 ratio in 2016.

So you can see why a universal aged pension is not sustainable going forward.

That brings me back to super. The government knows we have a demographics problem. That’s why it has allowed generous tax benefits for using super. Most earnings that go into super (a compulsory 9.5% of most workers’ salary) are taxed at 15% instead of at a workers’ marginal tax rate.

Earnings within super (such as dividends or interest) are also taxed at 15%. And once a super fund switches into ‘pension phase’ (i.e. when a worker retires and begins to live off super), then any earnings are tax free. So you can think of super as basically a legal tax haven of sorts.

Why super is so super

All of these facets of the superannuation scheme make it a highly lucrative vehicle you can use to build wealth. But raising your super fund to maturity requires years of patience and discipline (I hope you’re getting the ‘child’ reference now).

Super works so well because it enables us to harness the miracle of compound interest through investing in growth assets like ASX shares. Einstein reportedly described compound interest as the ‘8th wonder of the world’. It requires time and good returns to work its magic though — helped of course by regular, blind and automated contributions over decades. It’s how you can turn $100,000 worth of contributions earning 8% annually over 45 years into almost $1.5 million.

Minimising fees and maximising contributions is the best way to get this ball rolling. And withdrawing money early is the best way to kneecap it.

That’s why I was dismayed to hear that more than half a million Australians have now completely wiped out their super balances under the government’s program that allows early withdrawals.

Most of these people are reportedly under 35. That’s half a million of us with severely diminished prospects of a comfortable retirement. It’s not good for them, it’s not good for our budget, it’s not good for our future level of taxation and it’s not good for the country, in my view.

Foolish takeaway

If you’re one of those people who has withdrawn your super, I highly recommend topping it back up when circumstances allow. Super should be your reward of a lifetime of hard work. Don’t treat it as a bank to be raided, it needs nurturing and a bit of love instead. That’s the best shot you have of your super looking after you in old age

More reading

• Top brokers name 3 ASX shares to sell today
• 3 top ASX dividend shares for income investors in August
• 3 underloved ASX healthcare shares with strong comeback potential
• Why the Buddy Technologies share price more than doubled in a week
• Atomos share price surges 5% despite 17% revenue slump

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

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The healthcare industry is a solid gamble – people are going to seek healthcare regardless of the state of the economy. According to Deloitte, global healthcare spending is expected to rise at a compound annual rate of 5% between 2019 and 2023. This will present many opportunities for the sector. 

A report from the Australian Institute of Health and Welfare also found that $467 million was spent on an average day in Australia’s health system. With the aging population and increasing emergence of chronic diseases, this number is likely to grow. Healthcare is something that everyone will need at some point in their life, leading to a huge opportunity for investors. 

The healthcare industry is made up of many different types of companies that are impacted by different variables. Broadly, the sector can be divided into pharmaceutical companies, medical device companies, and healthcare provider companies. Pharmaceutical companies manufacture drugs and typically spend highly on R&D. Medical device companies create devices used in patient care, including everything from disposable gloves to pacemakers. Healthcare providers are at the front line of patient care, delivering healthcare services to patients. 

Australia boasts a significant number of listed healthcare companies, including stars such as CSL Limited (ASX: CSL). Here we take a look at 3 underloved ASX healthcare shares with the potential to make a strong comeback. 

Cochlear Limited (ASX: COH) 

The Cochlear share price remains more than 23% down from its February high, with the spread of coronavirus impacting on its bottom line. Cochlear is a medical device company which produces cochlear implants used to help the hearing impaired. The implants use electrical stimulation to replace the function of the inner ear, but require surgery to implant. 

Infection control measures introduced to combat coronavirus resulted in many implant operations being deferred. This caused a significant decline in surgeries across major markets with elective surgeries postponed across the United States and Eastern Europe. The decline in surgeries caused a 60% fall in Cochlear’s sales revenue in April. 

Implant surgeries have been restarting but the rate of recovery is unclear. In China, surgeries recommenced in late February and are now running close to pre-virus rates. Implant surgeries have also restarted in the US, Germany, and Australia.

Cochlear has significantly reduced non-essential spending and capex (capital expenditure) pending a sustained increase in surgeries. Ultimately, many of the delayed surgeries are expected to progress once hospitals resume normal operations. In the meantime, the company has strengthened its liquidity position with a $1.1 billion equity raising. 

Longer term, Cochlear says there remains a significant unmet need for cochlear and acoustic implants that should underpin its long-term growth. The company’s enhanced liquidity position will enable it to weather the temporary decline in demand caused by COVID-19 while continuing to progress the R&D pipeline. 

Ramsay Health Care Limited (ASX: RHC)

The Ramsay Health Care share price remains nearly 21% down from its February high, with the private hospital operator drafted into the coronavirus fight. Ramsay Healthcare is one of the largest hospital operators in Australia and operates more than 500 facilities across 11 countries. Ramsay has promised to assist governments in managing the pandemic and, in return, governments have guaranteed its viability. 

Covid-19 resulted in the suspension of non-urgent elective surgery in each of Ramsay Healthcare’s major operating regions. As a private hospital operator, the cancellation of elective surgeries hit Ramsay Healthcare’s bottom line hard. However, COVID-19 partnership agreements were entered into with governments under which the hospital operator agreed to retain capacity to respond to the pandemic. Under these arrangements, governments and health authorities agreed to a core principle of meeting private hospital operators’ operating costs, or in the case of France, providing 85% of revenue from the previous corresponding period. Arrangements vary from region to region and the duration of agreements also varies.

The suspension of elective surgeries resulted in an uncertain operating environment, with Ramsay choosing to raise $1.2 billion in equity in April to enhance its financial flexibility. Managing Director Craig McNally said, “the equity raising will strengthen Ramsay’s balance sheet and liquidity position, as well as increase financial flexibility during the unprecedented operating environment. More importantly, it will ensure that we can continue to pursue our growth initiatives and position us to take advantage of other growth opportunities that may arise”.

Ramsay operates 72 hospitals in Australia which have seen the controlled reintroduction of some surgeries. The effect of the government agreements is that profits cannot be generated during the period of their operation. But the very fact that governments are contributing to the ongoing viability of private hospital operators demonstrates their importance. These government initiatives will also ensure Ramsay Health Care can maintain its extensive hospital platform intact, ready to support previously deferred surgeries when the operating environment normalises. 

Nanosonics Ltd (ASX: NAN)

The Nanosonics share price is down over 14% from its February high. Nanosonics manufactures a disinfection device for ultrasound probes that is used globally. Ultrasound probes are used in many medical procedures. These include pregnancy screening, real time imaging guidance during procedures, and to diagnose and treat soft tissue injuries. 

Nanosonics saw a significant increase in Q3 FY20 sales versus the prior corresponding quarter, demonstrating continued underlying growth momentum. Nonetheless, access to hospitals became more limited as a result of COVID-19 which may extend the timeline of planned adoption by some hospitals. This may result in lower than anticipated growth in the installed base in the fourth quarter. 

Prudent measures were taken on operating expenses which were likely to decrease in the fourth quarter, without impacting underlying strategy. The supply chain is being closely managed and is currently well positioned to meet customer demand for capital equipment and consumables. Consumables sales in the third quarter were in line with pre-COVID expectations, with the impact of COVID-19 on sales in the final quarter yet to be revealed. 

Understanding and awareness of the importance of ultrasound probe decontamination is growing, which could lead to increased sales in future. “Now more than ever the importance of infection prevention has gained prominence not only within the healthcare community, but across the broader community“, CEO Michael Kavanagh said.

Nanosonics has a strong balance sheet with no debt and has been benefitting from the stronger US dollar. 

More reading

• 2 top ASX dividend shares to buy for income in 2020
• 2 must-buy ASX 50 shares to snap up today
• Nanosonics and 2 other ASX healthcare shares to buy
• Are ASX tech shares the only way to protect your portfolio against the coronavirus?
• What would deflation mean for your ASX shares?

Kate O’Brien owns shares of Cochlear Ltd. and CSL Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd., CSL Ltd., and Nanosonics Limited. The Motley Fool Australia has recommended Cochlear Ltd., Nanosonics Limited, 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 Buddy Technologies Ltd (ASX: BUD) share price more than doubled over the past week as sales of its new smart lights gain traction in Europe and the US.

Shares in the IoT solutions group jumped a further 7.7% today to 2.8 cents and is up 180% from a week ago.

Management provided a number of updates during the period, including the launch of sales of its low-cost smart light LIFX White on Amazon.com, Inc. (NASDAQ: AMZN) and Best Buy Co Inc (NYSE: BBY).

Improving earnings loss

The company also reported strong June sales results as shops in the US started to reopen from the COVID-19 shutdown, including  Best Buy’s more than 1,000 stores across the country.

“Consolidated revenue for Buddy was A$2.5 million – up 39% from May (A$1.8 million) and up 4%from June 2019 (A$2.2 million), underscoring that demand for the Company’s products remains strong even while the pandemic continues to be prominent in several territories,” said Buddy’s chief executive David McLauchlan.

However, $600,000 of the total came from government subsidies relating to the COVID-19 pandemic. Its earnings before interest, tax, depreciation and amortisation (EBITDA) was also still stuck in a loss of $266,000.

Best quarter yet

But management was quick to point out that the June quarter’s negative EBITDA is still its best one yet despite the period traditionally being a “slow period” for sales.

“Both topline revenue and EBITDA were down on internal management forecasts due to the slightly delayed shipment of the first order of the Company’s new LIFX White product,” added Mr McLauchlan.

“This product, which was expected to partially ship by 30 June, instead did so in the first week of July.”

Does Buddy have enough cash?

Total cash on hand fell 11% on the prior month to $2.5 million at the end of June. Buddy managed to restructure its US$6 million inventory finance loan into a purchase order financing facility.

This will enable the company to use the facility to fund the $3.8 million initial order of LIFX White smart lights.

“The Company can report no change to its other working capital facility, provided by ScottishPacific,” said Mr McLauchlan.

“This remains a A$20 million facility, where advances are made against trade receivables, and will continue to be used as the Company’s trade receivables permit.”

European rollout

Buddy also announced that it’s rolling out its new point of sale (“POS”) LIFX units in Europe with 15 locations currently on sale at Germany’s do-it-yourself (“DIY”) retailer, Bauhaus.

It claimed that its LIFX smart lights have displaced major lighting rival Osram in the process and the new POS units will gradually roll out to retail partners in France, Russia, Norway, Sweden, Denmark and Finland.

More reading

• Top brokers name 3 ASX shares to sell today
• 3 top ASX dividend shares for income investors in August
• Why you should treat your superannuation like a child
• 3 underloved ASX healthcare shares with strong comeback potential
• Atomos share price surges 5% despite 17% revenue slump

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

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The Atomos Ltd (ASX: AMS) share price has jumped 5.62% higher today despite announcing a 17.6% drop in unaudited FY20 revenue.

Why has the Atomos share price surged?

Atomos is a global video technology company that creates products for the social, pro-video and entertainment markets.

In today’s business update, Atomos reported unaudited FY20 revenue of $44.5 million, down from FY19 revenue of $54.0 million. The coronavirus pandemic was understandably cited as a big factor behind the full-year revenue slump.

The pandemic has slowed earnings growth after a bumper 1H20 result saw the company deliver $32.6 million of half-year revenue. In contrast, 2H20 revenue was $11.9 million, largely thanks to the impact of COVID-19.

However, the update cites that the video market in July is “starting to open” and show positive signs, with July revenue up ~50% on 2H20 run rate.

Atomos’ current cost base has been reduced by approximately 60% to ~$1.0 million per month, fully implemented from April 2020.

On the balance sheet side, Atomos reported that it is “well-funded”. That includes having $19 million of cash on hand as at 30 June, with access to a $5 million debt facility.

It’s been a tough start to the year for the Atomos share price, which has fallen 66.4% lower in 2020.

What’s happening on the operations side?

Atomos started shipping the AtomX SYNC module during the quarter ended June 2020, which brings “wireless timecode, sync and control technology to the Ninja V”.

For those unaware, the Ninja V is a 5″ on-camera monitor/recorder that records and plays back DCI 4K, UHD 4K, and HD video from purpose-built mini-SSDs.

Beyond quarter-end, Atomos yesterday announced that the new Sony Alpha 7S III will be able to record the Apple ProRes Raw format via the Ninja V.

Market outlook

There were no specific figures provided in today’s market update.

However, Atomos did cite “some initial positive signs” of market recovery from COVID-19 and “cause for optimism”.

That includes the strong July revenue figures, which are up 50% on 2H20 run-rate. The company did say it is too early to predict how sustainable that earnings rate will be.

Regardless, the tentative signs of recovery and strong July figures have been reflected in this morning’s share price move, with the Atomos share price climbing 5.62% higher to $0.47 per share.

Atomos did note it is “more confident” in its medium to long-term growth profile. That’s largely due to the rapid adoption of video technologies, including video streaming, across the globe.

More reading

• Top brokers name 3 ASX shares to sell today
• 3 top ASX dividend shares for income investors in August
• Why you should treat your superannuation like a child
• 3 underloved ASX healthcare shares with strong comeback potential
• Why the Buddy Technologies share price more than doubled in a week

Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Atomos 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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The S&P/ASX 200 Index (ASX: XJO) has risen more than 33% since bottoming out on 23 March this year.

While this has been great for investors already in the market, it also means that ASX shares aren’t as dirt cheap as they were even a few weeks ago. That makes finding bargains just that little bit harder.

But luckily, I think there are still good deals out there. As the investing legend, Peter Lynch, once said, the more rocks you look under, the more investment opportunities you will find. So here’s a rock I’ve been looking under today.

Enter Brickworks Limited (ASX: BKW)

Brickworks is an ASX blue chip share that has a robust presence in the construction and building materials industry (as the name suggests). It’s one of the oldest companies on the ASX, having started life way back in 1934.

Building materials is a highly cyclical industry that tends to boom during good economic times and contract when times aren’t so good. Right now, we happen to be in the latter stage of the economic cycle for obvious reasons.

Luckily, Brickworks has been here before. It also has two other parts to its business that tend to cushion its cyclical business components. Firstly, it has a portfolio of land assets that it rents out for steady profits. Recently, this has expanded to include a warehousing partnership with the eCommerce giant Amazon.com Inc (NASDAQ: AMZN) and Goodman Group (ASX: GMG). Steady income from these kinds of assets greatly improves the Brickworks business model in my view.

Secondly, it owns a significant chunk of other ASX businesses, most of which is in shares of dividend stalwart, Washington H. Soul Pattinson & Co Ltd (ASX: SOL). Soul Patts is known for its diverse range of investments, which include large stakes in TPG Telecom Ltd (ASX: TPG) and New Hope Corporation Limited (ASX: NHC). This diversifies Brickworks’ earnings even further in my view.

How does the Brickworks share price stack up?

The Brickworks share price is $16.67 at the time of writing, which I think is dirt cheap. Its 39.4% stake in Soul Patts alone is worth approximately $1.88 billion, which is indicative of significant value given the total market capitalisation of Brickworks is $2.46 billion on current prices.

The company also offers a strong dividend, offering a trailing yield of 3.53% (or 5.04% grossed-up with full franking credits) on current prices. Brickworks has also held steady or increased this dividend every year for more than four decades.

My conclusion? Brickworks is a dirt-cheap share today and a worthy addition to any long-term focused ASX share portfolio. 

More reading

• Why the Sandfire share price is the worst performer on the ASX 200 today
• 3 latest ASX 200 stocks to be downgraded by top brokers today
• ASX 200 jumps 0.7%: Fortescue impresses, Macquarie’s tough Q1, big four banks rise
• Fortescue’s share price in focus as it beats guidance on record quarterly shipments
• 2 top ASX dividend shares to buy for income in 2020

Motley Fool contributor Sebastian Bowen owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The JB Hi-Fi Limited (ASX: JBH) share price has been one of the strongest performers on the S&P/ASX 200 Index (ASX: XJO) over the last 12 months.

Since this time last year the retailer’s shares have gained a sizeable 52%. This strong form has continued on Thursday, with the JB Hi-Fi share price hitting a record high of $46.30 earlier today.

Investors appear confident that the company will deliver a strong full year result when it hands in its report card on 17 August.

Ahead of the results release, I thought I would take a look to see what the market is expecting from the company.

What is expected from JB Hi-Fi in FY 2020?

According to a note out of Goldman Sachs, it expects JB Hi-Fi to deliver group sales of $8,026.6 million in FY 2020. This is 2.1% ahead of the company’s guidance of $7,860 million and up 13.1% year on year.

In respect to earnings, the broker is forecasting earnings before interest and tax (EBIT) of $519.6 million or $502.5 million on a pre-AASB16 basis. This represents impressive year on year growth of 34.8%.

What will be the drivers of this growth?

The JB Hi-Fi Australia business is expected to contribute EBIT of $408.6 million for the year. Goldman expects this to be driven by like for like sales growth of 13%, the addition of three new stores, and a 100-basis point increase in its EBIT margin.

Elsewhere, the broker is forecasting The Good Guys business to deliver EBIT of $115.9 million. This will be a 51.9% increase on the prior corresponding period. Goldman expects this to be driven by a 12% increase in like for like sales and EBIT margin expansion of 115 basis points.

Not all of its businesses are expected to deliver earnings growth. Goldman Sachs expects the JB Hi-Fi New Zealand to drag on its performance slightly with a $5.4 million loss.

Should you invest?

Goldman Sachs appears to believe the JB Hi-Fi share price has peaked now and has given it a neutral rating with a $44.40 price target.

It prefers rival Harvey Norman Holdings Limited (ASX: HVN) and has a buy rating and $4.60 price target on the retailer’s shares. This compares to its current share price of $3.58.

More reading

• Don’t be blinded by gold fever…consider these ASX dividend shares instead
• JB HiFi and 1 other quality ASX share to buy right now
• 3 ASX dividend shares I like ahead of the August earnings season
• 2 off the grid ASX retail shares for higher returns
• Extended jobkeeper: Which ASX shares to buy?

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 Paradigm Biopharmaceuticals Ltd (ASX: PAR) share price rallied 9.6% in morning trade before pulling back to a gain of 0.9% at the time of writing. The rise in the Paradigm share price came after the company reported pain reduction in osteoarthritis patients being treated under a United States FDA (Food and Drug Administration) expanded access program (EAP).

Osteoarthritis is caused by joint damage and is most often experienced by older people. It is a leading cause of disability and impacts 30 million men and women in the US alone. 

The US EAP is a compassionate-use pathway for investigative treatments where there is no comparable or satisfactory therapy options outside clinical trials. However, this is monitored by the FDA and requires the cooperation of the healthcare organisation.

Update

In the update, Paradigm reported a 65% pain reduction in patients with osteoarthritis 12 weeks following the initiation of treatment with company’s product, ‘Zilosul’. This was using the ‘WOMAC Pain Subscale’. The WOMAC Pain Subscale is a self-administered measurement tool used to assess the severity of pain.

Pleasingly, patients in the program reported improvements in pain felt whilst performing common daily tasks such as walking, using stairs, sitting and standing. Patients also reported a reduction in night pain.

Additionally, patients reported tolerance to the treatment with no adverse side effects reported. Patients also released testimonials regarding their satisfaction with the program. The company has released videos featuring professional NFL players detailing their experiences with osteoarthritis caused by joint injuries sustained during their careers. 

Furthermore, Paradigm believes if replicated in a confirmatory Phase 3 clinical study, Zilosul would provide an alternative to the current treatments of moderate to severe osteoarthritis pain. At present, the treatment is NSAIDs (nonsteroidal anti-inflammatory drugs) and Opioids which have undesirable side effects.

CEO comments

Paradigm’s CEO and Interim Executive Chairman, Paul Rennie said “This is a fantastic outcome not only for Paradigm as our first treatment of a cohort of patients in the US under an FDA approved program, but also for all patients that have participated in the program”. He went on to say “We are very encouraged with the EAP results which were reported at 12 weeks, with the same pain scoring system Paradigm (we) will use in its Phase 3 clinical trial…”.

About the Paradigm share price

Paradigm was listed on the ASX in August 2015. Its focus is on repurposing pentosan polysulphate sodium (PPS). A key feature of PPS is its anti-inflammatory and tissue regenerative properties. 

Additionally, injectable PPS is not currently registered in Australia however it is registered in four of seven major global pharmaceutical markets.

Presently, the Paradigm share price is trading at $3.27 which represents a gain of .93% in today’s trade. 

More reading

• 4 exciting ASX biotech shares surging higher today
• 3 ASX medical shares to hold for the long term
• Stock of the day: Paradigm Biopharmaceuticals share price climbs 6% on clinical data
• Why Afterpay, ELMO, Oil Search, & Paradigm shares are racing higher

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

The post Why the Paradigm share price is rising today appeared first on Motley Fool Australia.

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You’ve likely heard that Australia has just entered a period of historic deflation.

Despite what you may be reading in some financial headlines, that’s not all bad news. Far from it…

According to the latest data from the Australian Bureau of Statistics (ABS) the Consumer Price Index (CPI) fell 1.9% in the June 2020 quarter. “This was the largest quarterly fall in the 72-year history of the CPI,” said chief economist for the ABS, Bruce Hockman.

This brings the annual inflation rate to -0.3% for the year through the end of June.

The record price falls were largely due to the government providing free child care and plummeting petrol prices. Rents also headed lower. Not surprisingly, the price of cleaning and maintenance products bucked the trend, gaining 6.2%. Hand sanitiser, anyone?

Why deflation isn’t the Hydra it’s made out to be

I’ll avoid a deep dive into the deflation debate and just skim the surface here.

You’ll most often hear deflation is bad because consumers will put off spending money today if they know they can get the same item cheaper tomorrow.

In a world of hyper-deflation, where prices are falling by, say, 10% each day, that may be true. But if prices are falling by 0.3% per year that’s hardly going to keep you from buying that new couch or pair of running shoes.

No nation in the world has ever experienced anything approaching hyper-deflation. And I’ll stick my neck out and say none ever will.

So why is the Reserve Bank of Australia so focused on its 2–3% inflation target?

The simple answer is debt. According to the Australian Debt Clock, total government debt now stands at over $1.17 trillion dollars. With an inflation rate of 3%, the real value of that debt will fall to ‘just’ $585 billion in 24 years without having to pay back a cent.

Enough said.

Here’s the good news

Not only will the cash in your wallet hold its value — or even gain a bit — in a deflationary scenario, but the real returns (inflation-adjusted) of your stock holdings will gain as well.

The even better news for equity investors is that the latest deflation numbers indicate interest rates should stay at record lows for a long time yet. And the share markets tend to love low interest rates. Beyond that, we can expect continued quantitative easing (QE) from the Reserve Bank of Australia, which also helps fuel equity prices.

But not all ASX shares will benefit equally. In fact, some are likely to suffer.

2 ASX shares to avoid

In general, I’d tread carefully around property developers and real estate investment trusts (REITs) in the current environment. Their time will come again, but many are facing stiff headwinds.

The latest statistics from the ABS show that rents across Australia fell during the last quarter. That marks the first quarterly fall since 1972.

The first ASX share I’d steer clear of is Stockland Corporation Ltd (ASX: SGP). Stockland owns residential, industrial and retail properties, along with retirement homes.

It was a great stock to own in 2019, gaining more than 38%. But 2020 has been a different story, with the share price down more than 30% so far this year. And with a gloomy mid-term outlook for the Aussie property markets, I believe it could have a good bit further to fall from its current share price of $3.22.

The second ASX share I’d avoid is Scentre Group (ASX: SCG). Scentre owns and operates Westfield shopping malls in both Australia and New Zealand. The impact of COVID-19 saw it suspend its interim dividend distribution. And the Scentre share price has already tumbled more than 47% this year.

There’ll be a time to revisit Scentre. But I don’t believe now is that time.

2 ASX shares to buy

It’s no secret the technology sector has, on average, outperformed the broader market this year.

Many tech shares will be resilient in today’s mildly deflationary environment. After all, the price of most electronic goods, and the parts inside them, tend to get cheaper over time regardless. And with remote working, shopping and even dating likely to be a growing trend in the decade ahead, here are 2 ASX shares that are well placed to benefit.

First, Altium Limited (ASX: ALU). The company, with a market cap of $4.3 billion, specialises in electronic printed circuit boards. These are crucial to the growth of the burgeoning 5G market and every kind of smart device you can imagine.

Altium hasn’t fully recovered from its steep plunge in February. The share price is still down 3.6% year-to-date. But at its current price of $33.12, I think it could go a lot higher in the months ahead.

The second ASX share you should consider adding to your portfolio, in my opinion, is Appen Ltd (ASX: APX). Appen, with a market cap of $4.4 billion, provides data to improve artificial intelligence systems, a market with sky-high growth potential.

The Appen share price is up 63.8% since 2 January, but I believe it could have much further to run.

More reading

• Invest $5,000 into these ASX shares immediately
• WAAAX or FAANG? Which ASX tech shares to buy in 2020
• Are ASX tech shares the only way to protect your portfolio against the coronavirus?
• 3 of the best ASX tech shares to buy and hold until 2030
• WAAAX shares see mixed recovery from COVID-19

Bernd Struben 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 owns shares of Appen Ltd. The Motley Fool Australia has recommended 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.

The post 2 ASX shares to buy and 2 to avoid as deflation bites appeared first on Motley Fool Australia.

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