Tag: Motley Fool Australia

Perhaps the biggest piece of news ASX investors received today was the price of gold reaching a new all-time high. An all-time high price for any asset is normally newsworthy in itself. But for an asset that is thousands of years old and predates every stock exchange on the planet, it’s truly a momentous occasion.

So this morning, gold breached the US$1,920 an ounce high watermark that we last saw back in 2011 and went on to set a new record high of US$1,944 an ounce. Since gold was asking around US$1,500 an ounce at the start of the year, it has been a great year to own gold or gold-backed assets.

So, with gold at these new highs, is it too late to invest in gold? Well, before we answer that question, it’s worth noting that there are many different ways to invest in gold. There are physical bullion or gold exchange-traded funds (ETFs) for one. But today, we’re going to be talking gold miners, an increasingly popular way of gaining leveraged exposure to the gold price.

I say ‘leveraged’ because a gold miner is theoretically leveraged to the gold price. If it costs a gold miner US$1,000 to extract an ounce of gold, and gold is priced at US$1,500 an ounce, then the value of that ounce is only worth US$500 to the miner. But if the gold price rises 33.33% from US$1,500 an ounce to US$2,000 an ounce, the miners’ profitability rises by 100%. So you can see why miners are a popular way to try and profit from rising gold.

And on the ASX, there’s one major gold miner ETF that has been gaining a lot of attention recently.

Enter the VanEck Vectors Gold Miners ETF (ASX: GDX)

This ETF is from investment stalwart VanEck and tracks a basket of (currently) 53 global gold mining companies. It charges a management fee of 0.53% per annum. Some of its top holdings are the internationally-based Newmont Corp, Barrick Gold and the Franco-Nevada Corporation. But ASX-listed Newcrest Mining Limited (ASX: NCM) makes an appearance with a 4.98% weighting as well.

In the last 12 months, this ETF has delivered an eye-watering return of 46.43%. Over the past 5 years, it boasts a still-respectable annual average return of 18.84%. Of this number, only 0.71% was from dividend distributions, the remaining coming from raw capital appreciation.

Is this ETF a buy today?

A buy case for this ETF today rests on one tenet – do you think gold will climb higher from here? Nothing is free in this world, and ASX gold miners are no different. If the gold price rises further from here, it is likely that this ETF will follow suit. However, if it falls, you might be looking at some serious capital losses. Remember, leveraged investments cut both ways.

So if you’re bullish on gold for the rest of 2020 and beyond, I think this ETF could be a nice avenue to walk down. But it remains a risky investment strategy, and one I would only allocate a small portion of your total portfolio to as a result.

More reading

• ASX 200 up 0.25%: Lynas rockets on U.S. deal, gold miners surge, bank shares tumble
• Why the gold price just stormed to a record high
• ASX 200 Weekly Wrap: ASX has week of high volatility
• 5 things to watch on the ASX 200 on Monday
• New tailwind pushes gold price closer to record highs

Motley Fool contributor Sebastian Bowen owns shares of Newcrest 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.

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The S&P/ASX 200 Index (ASX: XJO) rose 0.3% today to 6,044 points despite initially being in the red this morning.

In NSW, first home property buyers are getting boost as brand new homes priced under $800,000 temporarily won’t have to pay stamp duty. The NSW government hopes this will boost construction and support building industry jobs. Vacant land will also be eligible for the relief.

Perpetual Limited (ASX: PPT) US acquisition

Fund manager Perpetual announced that it’s going to acquire a 75% stake in US-based asset manager Barrow Hanley for $465 million.

Barrow Hanley manages approximately US$44.1 billion of funds across US, global, and emerging market equities as well as fixed income strategies.

Perpetual said it was an important acquisition to deliver sustained quality growth and it will diversify its investment capabilities.

The ASX 200 fund manager business expects to add more than 20% of underlying earnings per share (EPS) on an annualised basis from the date of completion. The acquisition is expected to complete by the end of the first half of FY21, subject to the usual approvals.

The acquisition will be funded by a combination of a capital raising, a new debt facility and existing cash.

Perpetual is going to raise $225 million in a fully underwritten institutional placement and then it hopes to raise another $40 million in a share purchase plan (SPP). The debt facility is for $284 million. The raising price is $30.30 per share, a 9.8% discount to the last closing price.

The acquisition is expected to more than triple Perpetual’s funds under management (FUM) from $28.4 billion to $92.3 billion.

The ASX 200 business said it’s expecting a statutory net profit of $82 million for FY20 and an underlying profit after tax of $93.5 million.

Emeco Holdings Limited (ASX: EHL) FY20 result

Mining heavy equipment rental business Emeco announced its FY20 result today.

Emeco’s revenue rose by 16.3% to $540.4 million. Iron ore revenue more than tripled and gold revenue more than doubled. Operating earnings before interest, tax, depreciation and amortisation (EBITDA) increased 15% to $246.1 million. Operating earnings before interest and tax (EBIT) rose by 10% to $138.2 million and operating net profit after tax (NPAT) went up 39% to $87.5 million.

The statutory NPAT rose 94.7% to $66.1 million.  Emeco said it generated “strong” free cash flow of $71.2 million.

Managing director of Emeco, Ian Testrow, spoke about the company’s aims for this year: “Our goals for FY21 are consistent to continue to diversify our commodity mix, expand the services the business provides, adding capital-light earnings, and continue to generate strong return on capital and cash flows to further deleverage. This will ensure we drive sustained shareholder returns.”

St Barbara Ltd (ASX: SBM) acquisition

The ASX 200 gold miner announced today it has agreed to acquire 100% of the shares in Moose River Resources Incorporated (MRRI). After this acquisition, St Barbara will own 100% of the Touquoy Mine and surrounding exploration tenements.

The proposal is that St Barbara will acquire the remaining shares for cash of approximately C$60 million. It will be funded from St Barbara’s existing cash reserves. The deal will require approval of 75% of MRRI shareholders and it’s subject to normal approvals.

St Barbara expects to complete the deal in early September 2020.

Mr Craig Jetson, managing director and CEO of St Barbara, said: “Touquoy is a low-cost operation, generating impressive margins and is located in a very favourable and prospective jurisdiction. It produced a record 106,663 ounces of gold in FY20, reinforcing the credentials of this operation and the value it is delivering to St Barbara.

“Assuming full control of the business will provide operational efficiencies , deliver financial benefits and allow us to truly realise the potential of the asset. In addition to developing our existing project pipeline we are exploring in the Moose River Corridor and elsewhere in Nova Scotia to identify further development opportunities.”

More reading

• Is it too late to buy the outperforming Woolworths share price and Coles share price?
• How investors can make the most of all this uncertainty
• 3 Warren Buffett quotes to start the week off right
• Why these brokers are telling you to buy the crashing IAG share price today
• 2 ASX shares to buy as alternatives to the pitiful returns from a term deposit

Motley Fool contributor Tristan Harrison 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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It’s hard to get away from the Coles Group Ltd (ASX: COL) share price and Woolworths Group Ltd (ASX: WOW) when it comes to defensive businesses that benefit from COVID-19.

Grocery sales are booming due to the coronavirus lockdown but many may feel they’ve missed the boat.

The Coles share price jumped over 20% since the start of the year while the Woolworths and Metcash Limited (ASX: MTS) share prices have gained around 8% each.

In contrast, the S&P/ASX 200 Index (Index:^AXJO) lost 10% despite the big bounce from its March bear market low.

More room to climb

But I don’t think it’s too late to buy these stocks as we head into what is likely to be a nerve wrecking reporting season.

Stocks with profit upside and a relatively low level of earnings risks are in demand and will continue to command a market premium.

Supermarket stocks fit the bill and this isn’t the only reason to buy the sector.

Profit margin boost

The analysts at Macquarie Group Ltd (ASX: MQG) believe Woolies and Coles will enjoy fatter profit margins in the nearer-term, although this tailwind won’t last.

“We believe COL and WOW should have a tailwind to margins on the back of improved volumes over at least FY20 and FY21,” said the broker.

“However, we note that excess margins in supermarkets have consistently been lost to competition, inflation, regulation, staff costs or management follies.”

Excess profits to flow online

There’s another reason why the benefits from expanding margins won’t flow to shareholders. The broker noted that Woolies and Coles have underinvested in their online capabilities and will be using any extra profit they can get to play catch up.

This isn’t a bad thing, in my opinion. Having a strong online business will provide the two supermarket giants with a competitive edge over rivals like Aldi.

But despite the potential negatives, Macquarie has an “outperform” (meaning “buy”) recommendation on both stocks.

This is in part due to expectations that investors will rotate out of the consumer discretionary sector and into retailers that sell staple goods.

Better placed than other retailers

“We are cautious on the current level of consumer discretionary spending and believe a second wave of the virus, coupled with a gradual reduction in fiscal stimulus will see some spending divert from consumer durables into services,” explained Macquarie.

“This puts pressure on the discretionary space into FY21. We see more sustainability of earnings in the staples sector at the current point in the cycle.”

Looking for other ASX stocks that can outperform during the reporting season? The experts at the Motley Fool have picked a number of bargain stocks to buy today.

Follow the link below to find out for free what these stocks are.

More reading

• How investors can make the most of all this uncertainty
• 3 Warren Buffett quotes to start the week off right
• Coles launches new collectables! Is the Coles share price a buy?
• Why these brokers are telling you to buy the crashing IAG share price today
• 2 ASX shares to buy as alternatives to the pitiful returns from a term deposit

Motley Fool contributor Brendon Lau owns shares of Woolworths Limited. Connect with me on Twitter @brenlau.

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.

The post Is it too late to buy the outperforming Woolworths share price and Coles share price? appeared first on Motley Fool Australia.

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Aroa Biosurgery Ltd (ASX: ARX) knocked the lights out on its ASX opening day debut on Friday.

The New Zealand-based medical company entered the Australian market on the final day of trading last week. It sold 40 million new shares at an initial offering of 75 cents per share, raising $30 million. Early investors sold another $15 million worth of shares.

New investors clearly saw that as a bargain. By 11.10 am (AEST) on Friday, the Aroa share price had more than doubled to $1.52. By the closing bell, Aroa shares had declined slightly, finishing the day at $1.35. Still a healthy 80% daily gain.

As you’d expect, Aroa founder and CEO Brian Ward was elated by the results. He told AAP, “We knew after the roadshow that we had good institutional demand, we knew today would go well, but it’s been surprising how well it’s gone. … It’s been quite a party.”

What does Aroa Biosurgery do?

Aroa is a soft tissue regeneration company focused on improving wound healing. Its regeneration platform, Endoform, is developed from sheep forestomach.

The company says that Endoform is 20% to 60% less expensive than similar biological products manufactured by its competitors. Its products have been used in more than 4 million procedures at 600 hospitals.

What next for Aroa?

Aroa doesn’t plan to sit on its laurels. The company intends to use its initial public offering (IPO) funds to expand into the massive United States (US) market. It already has 5 commercial products approved for sale in the US.

Today, the Aroa share price closed trading at $1.47, up another 8.89% from Friday’s close.

While it would have been nice to get your hands on some shares at 75 cents, we may well look back at the current price of $1.47 as a grand bargain in a year’s time.

More reading

• Is it too late to buy the outperforming Woolworths share price and Coles share price?
• Is the Megaport share price a long term buy?
• How investors can make the most of all this uncertainty
• Why I would buy and hold NEXTDC and these quality ASX growth shares
• What APRA’s latest release means for ASX bank shares like Westpac

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

The post Aroa Biosurgery surges 80% on ASX IPO. Is it still good value? appeared first on Motley Fool Australia.

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The Megaport Ltd (ASX: MP1) share price has been an incredible performer over the last 12 months.

Although its shares have fallen almost 17% from their June high, they are still up approximately 70% since this time last year.

This compares to an 11.5% decline by the S&P/ASX 200 Index (ASX: XJO) over the same period.

Why is the Megaport share price up 70% in 12 months?

Investors have been scrambling to buy the shares of the global leading provider of elastic interconnection services after the pandemic accelerated the shift to the cloud.

Its global platform allows users to organise all their connections from one place and bring their network together into an easy-to-use platform.

This means businesses can build hybrid, multi-cloud, cloud-to-cloud, and disaster recovery solutions with multiple connections to regional and global services. And instead of managing each resource separately, Megaport brings everything together into a seamless process.

Among its 1,842 customers (up 24% year on year), you’ll find a diverse range of companies such as Adobe, BHP Group Ltd (ASX: BHP), FedEx, ING, Tesla, and Zoom.

Management notes that another driver of this strong customer growth has been its growing ecosystem, which is adding value to users.

The company’s CEO, Vincent English, explained: “Megaport’s strategy revolves around driving more value for our customers, partners, and shareholders. We have grown our ecosystem to over 360 service providers and now connect customers to 197 cloud onramps – the most of any neutral global interconnection fabric.”

“We’ve made it easier than ever for our customers and partners to securely connect to the services that power their businesses. This has paid off with strong growth in our regional business units which is underpinned by increased customer usage and the growing adoption of multicloud.”

What about revenues and profits?

From the aforementioned customers, the company is currently generating Monthly Recurring Revenue (MRR) of $5.7 million. This MRR equates to approximately $68.5 million on an annual basis.

And while Megaport is making a loss at the moment while it pursues growth, it recently revealed that it is aiming to achieve EBITDA breakeven by the end of FY 2021.

Mr English commented: “Profitability remains a company-wide priority. We will focus on achieving EBITDA breakeven by the close of Fiscal Year 2021 by driving further customer growth across all regions.”

Looking ahead, the CEO appears confident that its strong growth can continue.

“With our SDN reaching over 700 enabled data centres across 23 countries, we are well positioned to capture the demand for elastic interconnection to support the ever-increasing surge of data powered by the digital economy,” he added.

Should you invest?

Although the Megaport share price is up 70% over the last 12 months, I would still be a buyer if you’re planning to make a long term investment.

Along with Macquarie Telecom Group Ltd (ASX: MAQ) and NEXTDC Ltd (ASX: NXT), I believe Megaport is well-placed for long term growth thanks to the structural industry tailwinds which are accelerating the cloud computing boom.

More reading

• Why I would buy and hold NEXTDC and these quality ASX growth shares
• All Technology Index celebrates 6 months with stunning outperformance
• 3 exciting ASX growth shares to buy and hold
• Where to invest $20,000 into ASX shares right now
• Why Kogan and these popular ASX shares just hit record highs

James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT FPO. 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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As if the global coronavirus pandemic isn’t creating enough uncertainty in the stock markets, United States President Donald Trump and Chinese President Xi Jinping are back at it.

It seems ages ago — though my calendar assures me it’s less than 6 months — that investors’ biggest concerns revolved around the US–China trade dispute.

On one week, Donald Trump and Xi Jinping would make nice, and stock market indexes around the world would rally.

The next week, the two leaders would promptly backflip, indicating a range of sticking points remained to reach a trade deal. And global stock market indexes would fall.

In renewed sparring, the US ordered China to shutter its consulate in Houston, Texas last week. China swiftly responded, directing the US to close its consulate in Chengdu.

Investors didn’t like it.

In the US, the S&P 500 Index (INDEXSP: INX) fell 0.6% on Friday. All the major European indexes lost ground too, with Germany’s DAX PERFORMANCE-INDEX (INDEXDB: DAX) dropping 2%.

ASX bucks the losing trend

The news also saw ASX futures trading 0.5% lower. But futures traders look to have gotten that one wrong.

At the time of writing, Aussie investors appear to have shrugged off the gloom, with the All Ordinaries Index (ASX: XAO) up 0.2% in afternoon trading.

That tells you most of this new turmoil is already priced into the markets, which tend to be forward-looking.

That doesn’t mean the markets always get it right. But what the numbers are telling you is that there are plenty of great opportunities on the ASX right now.

No one can predict with any accuracy how US–Chinese relations will progress. And no one can tell you when and how the world will conquer COVID-19. Though rest assured, we will beat this virus together!

But that uncertainty doesn’t mean you should sell your stock holdings and remain paralysed on the sidelines.

Far from it…

Buy your favourite stocks

Since bottoming out on 23 March, the All Ords is up an eye-popping 35%. Yes, that’s still down 15.1% from its 20 February all-time high. But a remarkable recovery nonetheless.

According to corporate advisory firm Vesparum Capital, we largely have retail investors like you to thank for those gains. Vesparum says retail investors have timed their entry back into the stock markets well. At least so far…

Now I’m not suggesting you try to time the highs and lows here. Leave that to those day traders with cast iron stomachs and hefty credit lines.

Rather, to follow the lead of Collins St Value Fund principal Michael Goldberg, you should buy your favourite stocks. 

“I think what differentiates us is that we manage a concentrated portfolio of our favourite ideas,” Goldberg is quoted as saying in the Australian Financial Review (AFR).

Collins St Value Fund returned 13.5% in 2019–2020. During that same time, the S&P/ASX 200 Index (ASX: XJO) lost 7.7%. That’s an impressive 21.2% outperformance.

But you have to be willing to get outside your comfort zone. As quoted in the AFR article, Goldberg says:

Over the last 12 months it’s been exceptional and 70 per cent of the stocks we’ve owned over the last year went up, in a market that was down more than 7 per cent. We’re not getting it right every time, but we’re spending all the time we can to get that informational advantage and ensure we’re not taking risks we don’t understand. … Sometimes doing those things that are a little bit uncomfortable, because no one else likes to be uncomfortable, can generate massive opportunity. It’s there if you go and grab it, but it’s not always comfortable to go grab it.

The fund focuses on a small number of stocks, holding an average of 10 to 15 stocks. 

As far as your own stock portfolio goes, you may choose to hold a few more. But keeping in mind the importance of diversification to help reduce risks, you probably don’t want to own any less.

Foolish takeaway

Trump and Xi may rattle their sabres. And the coronavirus may linger for longer than we’d like. But every day brings new opportunities to potentially make money in the stock markets.

Don’t let the uncertainty scare you away.

More reading

• 3 Warren Buffett quotes to start the week off right
• Why these brokers are telling you to buy the crashing IAG share price today
• 2 ASX shares to buy as alternatives to the pitiful returns from a term deposit
• 2 top ASX growth shares to buy for long-term growth
• Is it time to dollar-cost average into ASX shares?

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

The post How investors can make the most of all this uncertainty appeared first on Motley Fool Australia.

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One of the keys to successful long-term investing is being able to identify companies that can consistently grow their earnings long into the future.

If you can do this then you could set yourself up for some market beating returns over the long run.

With that in mind, here are three top ASX shares that I think have strong long term growth prospects:

a2 Milk Company Ltd (ASX: A2M)

One of my favourite ASX growth shares is a2 Milk Company. Although its shares are certainly not cheap, I would still be a buyer of them if you’re prepared to make a long term investment. This is because of the incredible demand for its infant formula products in China, its strong pricing power, and its ongoing expansion in the North American fresh milk market. Combined with potential earnings accretive acquisitions and new product launches, I believe the company is well-placed to achieve further strong growth in FY 2021 and beyond.

NEXTDC Ltd (ASX: NXT)

Another top growth share to consider buying with a long term view is NEXTDC. Once again, although the data centre operator’s shares look expensive, I believe they are worthy of the premium. I remain confident that NEXTDC is in a strong position to deliver a level of earnings growth over the next decade that justifies the lofty multiples its shares trade at. This is because as the cloud computing boom accelerates, demand for NEXTDC’s innovative data centre outsourcing solutions and connectivity services is likely to increase significantly.

Xero Limited (ASX: XRO)

A final growth share to consider buying is this cloud-based business and accounting software provider. Xero has been growing at an explosive rate over the last few years thanks to the rapid adoption of its software by small businesses across the globe. The good news is that I believe this strong form can continue for some time to come. Especially given how management estimates that less than 20% of its global English-speaking target market is using cloud-based accounting software at present. I expect this number to increase materially in the future given the overwhelming benefits of cloud-based software over traditional alternatives.

More reading

• All Technology Index celebrates 6 months with stunning outperformance
• 3 ASX 200 shares to buy for the long-term
• 3 stellar ASX tech shares I would buy in August
• 3 exciting ASX growth shares to buy and hold
• Which ASX 200 shares are the safest?

James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why I would buy and hold NEXTDC and these quality ASX growth shares appeared first on Motley Fool Australia.

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The Australian Prudential Regulation Authority (APRA) this week released its Banking COVID-19 frequently asked questions (FAQs). 

Here are a few of the key takeaways from the release and what it could mean for ASX bank shares like Westpac Banking Corp (ASX: WBC).

What APRA’s update means for ASX bank shares

Importantly, the update tackled the issue of loan repayment deferrals. Authorised deposit-taking institutions (ADIs) offering payment deferrals to businesses and other borrowers do not need to treat this as a period of arrears.

That’s good news for ASX bank shares ahead of the earnings season. It’ll be interesting to see how Commonwealth Bank of Australia (ASX: CBA) reports its loan book with the rest of the big four to follow in October / November.

APRA also gave some guidance on residential mortgage lending. The Aussie regulator acknowledged the challenges associated with loan serviceability assessments for borrowers amid the coronavirus pandemic.

That could mean results for the ASX bank shares don’t fully reflect underlying deterioration in debt serviceability. 

The Aussie regulator provided some commentary on both market risk and credit risk. Thanks to the volatility in the March bear market, APRA expects to see an increased level of market risk capital held by the Aussie banks.

In terms of credit risk, one of the FAQs discussed revaluation of residential properties. That’s a hot topic right now and one that would concern both ASX bank share investors and homeowners.

Thankfully for both, ADIs will not be expected to revalue residential mortgage properties. That could mean the loan book is looking a touch healthier in these earnings results.

Foolish takeaway

There’s a lot to unpack from APRA’s Banking COVID-19 FAQs. No one really wants to read regulatory documents just for fun.

However, there are some important implications for ASX bank shares ahead of upcoming earnings releases. 

While the longer-term implications of the pandemic aren’t yet clear, this clarification is a good thing. It means both investors and the banks are clearer on what’s ahead for annual and half-year reporting.

More reading

• HUB24 and 2 more ASX 200 shares to watch this week
• 3 ASX dividend shares I like ahead of the August earnings season
• ASX 200 Weekly Wrap: ASX has week of high volatility
• 5 simple steps to financial independence
• Buffett buys more bank shares: Should you?

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

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Warren Buffett – chair and CEO of Berkshire Hathaway Inc (NYSE: BRK.A)(NYSE: BRK.B) – is often regarded as the greatest investor of all time. Not only does Buffett have an incredible track record of investing, but he is also well-known for his folksy approachability and pithy wisdom when it comes to stock picking.

As such, for most investors (including yours truly), he is a great person to draw inspiration from in navigating the sometimes-treacherous waters of the financial world. Our Fool colleagues over in the US have a comprehensive list of Buffett’s best quotes, so here are 3 that I think are worth keeping in mind as we embark on another week in the trenches of investing.

1) “Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.”

Whenever I think about the ‘flash crash’ that S&P/ASX 200 Index (ASX: XJO) shares went through back in March, this is the quote that comes to mind. In my opinion, there was a period (around 19–24 March), where there were deals going left, right and centre in the share market. Whether it was Wesfarmers Ltd (ASX: WES) offering a price of $29.75 or Afterpay Ltd (ASX: APT) going for $8.01, there were more fish in the barrel than I had bullets.

In times like these, the more cash you have at your disposal, the more ‘gold’ you can collect. So if you think there are storm clouds on the ASX horizon, you better be working on converting your ‘thimble’ of cash to a bucket and fast!

2) “Since I know of no way to reliably predict market movements, I recommend that you purchase Berkshire shares only if you expect to hold them for at least five years. Those who seek short-term profits should look elsewhere.”

I love this quote as it wittily sums up the benefits of having a long-term investing horizon. There is no way in my view that Buffett could achieve a compounded annual average return of more than 20% per annum for Berkshire if he didn’t have this kind of mindset. If you own quality companies that effectively turn cash into more cash, short-term market fluctuations shouldn’t bother you too much!

So, I think all investors should aim to replicate Berkshire’s success in this way. You may not find Buffett’s style of investing congruent with your own, but I think his attitude towards time horizons is universally applicable and advantageous for all investing types.

3) “The most important thing to do if you find yourself in a hole is to stop digging.”

This one seems like common sense, but don’t underestimate how emotionally difficult it can be to let go of an under-performing investment. You might be hesitant to crystallise a loss, or otherwise be holding onto some irrational hope that a misfiring company can miraculously turn things around. I once had an investment where I doubled down when I should have just held my nose and sold out. I ended up losing almost all of my capital anyway.

So, if you have a loser in your portfolio, take a breath and assess whether the investment in question is irrevocably in the hole. If it is, then perhaps it’s time to put down the shovel. It’s tough, but, speaking from experience, turning a 50% loss into a 90% loss is even harder to deal with.

More reading

• Why these brokers are telling you to buy the crashing IAG share price today
• 2 ASX shares to buy as alternatives to the pitiful returns from a term deposit
• 2 top ASX growth shares to buy for long-term growth
• Is it time to dollar-cost average into ASX shares?
• All Technology Index celebrates 6 months with stunning outperformance

Sebastian Bowen 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 Berkshire Hathaway (B shares) and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short September 2020 $200 calls on Berkshire Hathaway (B shares). The Motley Fool Australia owns shares of AFTERPAY T FPO and Wesfarmers Limited. The Motley Fool Australia has recommended Berkshire Hathaway (B shares). We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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My ASX share of the week this time is listed investment trust (LIT) Magellan Global Trust (ASX: MGG) at today’s share price.

A quick overview of Magellan Global Trust

Magellan Global Trust is a LIT that was listed in October 2017. It is operated by the fund manager Magellan Financial Group Ltd (ASX: MFG).

The job of a LIT is to invest in other shares on behalf of shareholders. This particular LIT invests in global shares.

The two portfolio managers of the LIT are Stefan Marcionetti and Magellan co-founder Hamish Douglass.

The investment style of Magellan is to invest in the highest-quality shares at prices where it can make good long-term returns.

At the end of June 2020 its top 10 holdings and allocations were: 9.4% to Microsoft, 6.6% to Facebook, 6% to Alibaba, 5.9% to Alphabet, 4.9% to Tencent, 4.4% to Reckitt Benckiser, 3.8% to Atmos Energy, 3.3% to Visa, 3.1% to Eversource Energy and 3% to MasterCard.

Why I like the trust’s investment style and holdings

Only a certain number of businesses deliver outperformance of the market over the short-term and long-term. If you stay invested in the quality businesses for the long-term then they can deliver strong compound growth. Just look at how well Microsoft, Alphabet, Visa and Mastercard have done for investors.

The less investment decisions you have to make the better, if you’re invested in the right shares. I like that Magellan Global Trust tries to be a long-term investor. But it’s willing to sell as well, when it seems right to do so.

Whether it’s good times or bad, quality businesses are usually able to perform strongly. Just look at how shares like Alphabet and Microsoft have bounced back since the March 2020 crash.

Many of its top holdings are well positioned with whatever happens next with COVID-19. Businesses like Microsoft, Alphabet, Facebook, Alibaba and Tencent are internet, IT and ecommerce businesses which can keep thriving through COVID-19. Energy and utility companies are solid defensive options – they should continue to be robust businesses because of their essential service.

The Magellan Global Fund, a sibling fund, is one of the oldest Magellan funds. At 30 June 2020 it had generated returns of 15.8% per annum over the past decade, which shows the types of returns that Magellan Global Trust could make over the long-term.

Why I think it’s a buy today

I think Magellan Global Trust is a buy at this share price for a few key reasons.

The first is its quality portfolio that I outlined above. I think quality global businesses will be able to perform better than the ASX over the next 12 months and the long-term. The Magellan portfolio is stuffed full of quality businesses. I like the mix of growth and defence.

Another reason I think it’s a buy is that it’s trading at decent value. The current intraday indicative net asset value (NAV) per unit is $1.824, which means the Magellan Global Trust share price is at a 2.5% discount to the NAV. I like being able to buy assets cheaper than what they’re worth, with a manager that consistently outperforms its benchmark after fees.

The third reason why I think it’s a buy today is that the Australian dollar is the highest it has been against the US dollar. That means it’s cheaper to buy US shares in Australian dollar terms. Many of the shares in Magellan Global Trust’s portfolio are listed in the US.

The final reason why I think it’s a good buy today is its cash position. At 30 June 2020, 18% of the portfolio was allocated to cash. This gives the trust good downside protection if the share market were to fall again due to COVID-19 impacts, or perhaps due to the upcoming US election.

I do think the US election will cause more volatility over the next few months. So if you don’t think it’s good enough value to buy today, I think that the US election could create an even better buying opportunity.

More reading

• How to become a millionaire with ASX shares starting with $0
• Where should you invest $1k into ASX shares?
• How to create a yearly income of $65,000 in dividends
• 2 ASX shares for investors aged 50+
• Got $3,000? Here are 3 great ASX shares to buy

Motley Fool contributor Tristan Harrison owns shares of MAGLOBTRST UNITS. 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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