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The Suncorp Group Ltd (ASX: SUN) share price has been out of form in recent weeks following a disappointing insurance claims update.

Since this time last month, the banking and insurance giant’s shares have fallen 12% to $11.23.

Is the Suncorp share price in the buy zone?

The team at Citi appear to believe that recent weakness in the Suncorp share price is a buying opportunity for investors.

Following Suncorp’s banking update earlier this week, the broker retained its buy rating and $12.80 price target on the company’s shares.

Based on the current Suncorp share price, this implies potential upside of 14% for investors over the next 12 months.

In addition, Citi is forecasting a fully franked 56 cents per share dividend in FY 2022. If you include this, the total return stretches to an even more attractive 19%.

What is the broker saying?

Citi was pleased with the performance of Suncorp’s banking business during the first quarter.

It commented: “SUN’s APS 330 release shows improving momentum in its home loan portfolio offering initial signs that its new growth strategy is beginning to work, albeit growth is below system and there is still a long way to go. A small specific provision release also helped the quarter with the collective provision untouched and still seemingly conservative ahead of a promised review at 1H22, albeit the FY review may be more significant. While we remain sceptical the bank can achieve its targeted 50% FY23 cost to income ratio, this quarter is a mildly encouraging one with digital transactions also increasing.”

The broker also feels that the current Suncorp share price could be an attractive entry point for investors.

“While we still see SUN as more of a medium term than shorter term story, our analysis suggests the current share price is a reasonable entry point even so. Largely to reflect lower impairment charges, we nudge up our FY22E EPS by 1% and retain our Buy call and A$12.80 TP,” it concluded.

The post Broker sees 14% upside for the Suncorp (ASX:SUN) share price appeared first on The Motley Fool Australia.

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• ASX 200 (ASX:XJO) midday update: NAB hits 52-week high, CSL upgraded
• Suncorp (ASX:SUN) share price higher on banking update
• Brokers name 3 ASX shares to buy today
• Why the Suncorp (ASX:SUN) share price is dropping today
• Suncorp (ASX:SUN) share price wobbles amid natural hazard costs update

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The BHP Group Ltd (ASX: BHP) share price will be one to watch out for in the near-term future. This comes after the miner is set to receive US$1.35 billion from disinvesting its 80% interest in BHP Mitsui Coal (BMC).

At Thursday’s market close, BHP shares ended the day 2.57% higher to $36.66.

Will shareholders be rewarded from BHP’s sale?

Last week, BHP announced that Stanmore Resources will acquire metallurgical coal mines, the South Walker Creek and Poitrel coal mines. 

The US$1.35 billion purchase price will be made up of US$1.2 billion in cash and a potential follow-up payment of up to $150 million after two years linked to the performance of coal prices.

The transaction is said to be consistent with BHP’s decarbonisation strategy as it pulls away from fossil fuels.

In August, the company unveiled a deal with Woodside Petroleum Limited (ASX: WPL) to offload oil and gas operations in exchange for new shares.

In June, BHP agreed to the sale of the Cerrejon thermal coal mine to Glencore Plc for around $294 million.

A strong free cash flow coupled with BHP’s balance sheet could mean that shareholders are rewarded with a special dividend. It’s anyone’s guess how much the company will give, but this is likely to be supplemented with its mid-2002 dividend.

For the sale to go ahead, a number of conditions are still required to be met along with regulatory approvals.

Completion of the deal is expected to happen sometime by around June 2022. Up until then, BHP will closely work with Stanmore Resources to bring up to speed and ensure a smooth transition.

About the BHP share price

Over the past 12 months, BHP shares have registered nil gains, but have lost almost 15% in 2021. The company’s share price trekked higher up until August, before plummeting to November 2020 lows.

BHP commands a market capitalisation of roughly $108.16 million, making it the third most valuable company on the ASX.

The post BHP (ASX:BHP) will reap US$1.35 billion from its coal asset sales. Where might the cash go? appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras owns shares of Woodside Petroleum Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Zip Co Ltd (ASX: Z1P) share price fell below the $6 mark for the first time in nearly 10 months yesterday.

Making the dip more boggling, is the fact the market hasn’t heard anything from the company since the middle of last month when it released its latest quarterly update.

As of yesterday’s close, the Zip share price is $5.70, 5.16% lower than it was at the end of Wednesday’s session.

On top of that, Zip’s stock was swapping hands at $5.68 in intraday trade yesterday, marking the lowest price the company’s shares have experienced since January.

Let’s take a look at what might be weighing on the buy now, pay later service provider’s share price lately.

What drove the Zip share price down?

Yesterday’s session was a bad one for the Zip share price, but at least it wasn’t alone in its suffering.

As The Motley Fool Australia reported yesterday,  struggles exhibited by the Nasdaq Composite and the S&P 500 Index likely weighed on the ASX and, in particular, ASX tech shares.

Indeed, the S&P/ASX 200 Index (ASX: XJO) fell 0.5% yesterday. The S&P/ASX 200 Info Tech Index (ASX: XIJ) had a worse time, tumbling 2.5%.

Zip’s BNPL peer, Afterpay Ltd (ASX: APT), also had a shocking day yesterday. Its share price fell 2.2%.

Additionally, as my Foolish colleague reported yesterday, some analysts are bearish on the Zip share price. Though, Morgans still has an $8.56 price target on the stock.

However, today looks like it could be a better day for Zip on the ASX. Overnight, the Nasdaq Composite gained 0.5% while the S&P 500 was up 0.05%.

Right now, the Zip share price is hanging in the long-term green by the skin of its teeth. It is currently 1.9% higher than it was at the start of 2021.

Though, yesterday’s slide sees it 14.2% lower than it was this time last month.

The post The Zip (ASX:Z1P) share price sank below $6 for the first time since January. What’s happening? appeared first on The Motley Fool Australia.

More reading

• Is the Zip (ASX:Z1P) share price a buy now, or wait for later?
• Zip (ASX:Z1P) CEO: ‘We’d be very, very profitable, but we’re reinvesting for growth’
• These are the 10 most shorted ASX shares
• Zip (ASX:Z1P) and these ASX tech shares are rated as buys
• Expert highlights big threat to the Zip (ASX:Z1P) share price

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The National Australia Bank Ltd. (ASX: NAB) share price could receive a boost following the company’s strategic offering.

At Thursday’s closing bell, NAB shares finished the day 1.63% lower to $29.66 apiece. Despite falling wayside as a result of the broader S&P/ASX 200 Index (ASX: XJO) selloff, NAB shares have gained almost 4% in a week.

Let’s take a look at what the major bank has planned.

NAB brings further support to SMEs

Investors will be closely watching this space as the company introduces new low-rate loans to small business enterprises (SME).

NAB will be supporting businesses in need of a quick cash flow injection to stay open and keep workers employed.

SMEs can apply for a loan of up to $250,000 within 20 minutes from NAB’s platform. The rate has been reduced to 4.5% per annum. Furthermore, no repayments are required in the first six months of the principal and interest loan.

This is only eligible for businesses that have an annual turnover of $50 million or less. The term of the loan is valid for three years.

NAB’s latest offering is a direct response to businesses that have been severely impacted by COVID-19. Thousands of personal and business customers that have sought deferrals on their loans have been supported by the bank.

NAB chief customer experience officer, Rachel Slade commented:

We are proud to partner with the Government to bring vital relief to businesses so they can stay open, and keep Australians in jobs.

This pandemic has hit at the heart of Australian business – great businesses right across this country are overnight finding themselves with zero cashflow.  With the Government’s Coronavirus SME Guarantee Scheme, NAB is able to support even more businesses and ensure they are set for recovery when we get through this.

NAB share price review

In 2021, the NAB share price has continued to rise in value, gaining more than 30% for investors. However, when looking at this time last year, the company’s shares are hovering above 35%.

NAB commands a market capitalisation of approximately $97.34 billion, with about 3.28 billion shares on its books.

The post NAB (ASX:NAB) offers $250,000 loans in 20 minutes in latest competitive push appeared first on The Motley Fool Australia.

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• Here are the top 10 ASX shares today
• Race to the top: These 3 ASX shares all smashed new 52-week highs today

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Xero Limited (ASX: XRO) share price was out of form on Thursday.

The cloud accounting platform provider’s shares dropped 6% to $138.12.

Why did the Xero share price tumble lower?

Investors were selling down the Xero share price after its half year results fell short of expectations.

In case you missed it, for the six months ended 30 September, Xero reported a 23% increase in operating revenue to NZ$505.7 million but a 19% decline in EBITDA to NZ$98.1 million.

Xero’s top line growth was driven by double-digit revenue growth across all segments other than its North American segment, which reported a 5% increase in revenue and just 23,000 net subscriber additions.

Is this a buying opportunity?

Goldman Sachs’ analysts remain very positive on the Xero share price.

According to a note out of investment bank this morning, the broker has reiterated its buy rating but trimmed its price target by 4% to $158.00.

Based on the current Xero share price, this implies potential upside of 14.4% for investors over the next 12 months.

What did the broker say?

Goldman appeared to be a little disappointed with Xero’s half year results, noting that its revenue was softer than expected due to its international operations.

Goldman commented: “In our view, Xero delivered a 1H22 result marginally below expectations, with weaker International net adds (following a strong 2H21) and ARPU growth (following Hubdoc/Sep-21 price rises), offset by continued improvement in unit economics (decreasing churn, improving LTV), announced plans to introduced similar price rises in US/RoW and upside risk in the terminal penetration assumptions given continued subscriber strength in ANZ.

In light of this soft half, the broker has revised its estimates lower.

It explained: “We revise our ANZ revenues lower in FY22 driven by a smaller than expected ARPU growth following Hubdoc/Sep-21 price rises (+5% vs. prev. GSe +8%), while higher in FY23+ driven by higher terminal subs, noting that Xero continues to exceed expectations for terminal SME penetration rates (mgmt. suggesting upside in Trusts, Partnerships and other business structures).”

“International revenues are revised lower primarily driven by a slower ramp of net adds in NA/UK, with a push back in new RoW market launches to FY24 (was FY23). In respect to ARPU, we incorporate lower UK benefits from Sep-21 price rises, while also include Nov-21 price rises in RoW/NA (phasing across FY22-23),” it added.

However, despite the above revisions, Goldman continues to see the company’s revenue almost doubling between FY 2021 and FY 2024.

In light of this, it remains very positive on the Xero share price at the current level and continues to recommend it as a buy.

The post Goldman says the Xero (ASX:XRO) share price selloff is a buying opportunity appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Friday
• Why Liontown, Nearmap, Ramsay, and Xero shares are sinking today
• Why is the Xero (ASX:XRO) share price tumbling 7% if the company is growing revenue?
• ASX 200 (ASX:XJO) midday update: Xero’s results and Nearmap’s guidance disappoint
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Xero. The Motley Fool Australia owns shares of and has recommended Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Thorney Investment Group chief executive Alex Waislitz knows what he’s talking about when it comes to investments.

He founded Thorney Group after overseeing the investments of cardboard magnate Richard Pratt and Australia’s first billionaire Robert Holmes a Court.

These days he’s in the rich list himself, ranked the 73rd wealthiest person in the nation on the current The Australian rankings.

As well as a private fund, Waislitz runs 2 ASX-listed investment funds — Thorney Technologies Ltd (ASX: TEK) and Thorney Opportunities Ltd (ASX: TOP).

He recently named 3 ASX shares those funds hold that he currently has the most hope for:

Signing up massive clients and cash in the bank

Perth business Yojee Ltd (ASX: YOJ) makes software that manages logistics and supply-chain management.

The share price hasn’t done a great deal this year, dropping from 20 to 18 cents as of Thursday’s market close.

But Waislitz likes how it looks ready for explosive growth.

“This is a company that’s progressively signed up 4 of the largest 10 logistics companies in the world,” he told a Reach Markets webinar.

“It’s got cash in the bank to roll out that growth with those companies and it’s time is coming.”

For the 2021 financial year, Yojee reported 63% revenue growth — but that failed to sustainably push the stock price up.

The Thorney team is willing to be patient though.

“We’re quite excited about them,” said Waitslitz.

“It’s a company to watch… At the moment the revenues are relatively small, but we’re hopeful that over the next 1 to 3 years you might see them really power ahead.”

2 engineering ASX shares that’ll cash in on infrastructure boom

The other 2 ASX shares, which are both engineering-related, are held by the Thorney Opportunities fund.

Southern Cross Electrical Engineer Ltd (ASX: SXE) provides services to clients like data centres, mining sites, and utilities.

For a business that provides a 6% dividend yield, the share price is very low.

“We think it’s really cheap because it’s trading at just over 3 times EBITDA [earnings before interest, taxes, depreciation, and amortisation] to the enterprise value,” said Waislitz.

“Sitting on cash, it’s really well-positioned to win a lot of work into that [resources and infrastructure] thematic.”

He also thought management was “too conservative” in its performance forecasts.

Southern Cross shares closed Thursday at 66 cents, after starting the year at 57 cents.

Construction engineering company Decmil Group Limited (ASX: DCG) has just been a nightmare for investors recently.

Its stock price has dropped about 90% over the past 2 years.

But after dealing with those “bad contracts”, Waislitz is convinced the ASX share has hit the bottom now.

“They had to recapitalise their balance sheet to deal with their debt and allow them some growth capability, which they’ve done,” he said.

“They’ve had a change of leadership at the CEO level, which has happened, and some other executives.”

The Thorney team thinks Decmil is set to rake in more than $500 million of revenue for the current financial year, compared to $298.1 million for the 2021 financial year.

“In a sense, a new beginning for this company that’s been around for a while.”

The post 3 ASX shares Australia’s 73rd richest person loves appeared first on The Motley Fool Australia.

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• Broker gives its verdict on the Ramsay Health Care (ASX:RHC) share price
• 2 stellar ASX growth shares that could be strong buys
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Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Ramsay Health Care Limited (ASX: RHC) share price came under pressure on Thursday.

The private hospital operator’s shares fell 4% to $69.38.

Why did the Ramsay Health Care share price fall?

Investors were selling down the Ramsay Health Care share price following the release of a trading update.

That update revealed a decent 1.3% increase in unaudited first quarter revenue to $3.2 billion, but a 39.5% decline in unaudited quarterly profit after tax to $58.1 million.

This was driven by the impacts of elective surgery restrictions and disruptions caused by isolation orders and lockdowns across Australia.

Is it time to buy?

One leading broker that sees value in Ramsay Health Care’s shares following their decline is Goldman Sachs.

According to a note from this morning, the broker has reiterated its buy rating and $74.00 price target on the company’s shares.

Based on the Ramsay Health Care share price, this implies potential upside of almost 7% for investors. This potential return stretches to almost 9% if you include dividends.

What did the broker say?

While the broker acknowledges that trading conditions will remain challenged for a little while longer, it believes Ramsay is well-placed to bounce back strongly in 2022.

Goldman commented: “Whilst operating performance will remain challenged in 2Q22, we see scope for much stronger operating conditions to manifest from early-2022: 1) elevated utilisation profile (backlog-assisted and catalysed by reduction/removal of remaining surgery restrictions): 2) improving cost absorption (two-thirds of costs are fixed); 3) tapering of cash ‘covid costs’ (GSe: 5-10% of pre-Covid EBIT currently); 4) improving sales mix (non-surgical); and 5) improving surgical mix (higher-acuity).”

The broker also highlights that the Ramsay Health Care share price is trading on attractive multiples and sees scope for a rerating in the future.

It concluded: “The stock is trading at 8.7x EBITDA for a +7% EBITDA CAGR (FY21-24E), towards the bottom of its 5-year range. We believe the strong potential for improvement in near-term fundamentals is still not reflected in consensus forecasts or current trading multiples. We reiterate our Buy rating and $74 12-month Target Price.”

The post Broker gives its verdict on the Ramsay Health Care (ASX:RHC) share price appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Friday
• Why Liontown, Nearmap, Ramsay, and Xero shares are sinking today
• ASX 200 (ASX:XJO) midday update: Xero’s results and Nearmap’s guidance disappoint
• Ramsay Health (ASX:RHC) share price falls 6% as earnings take a dive
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ramsay Health Care Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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There are a lot of growth shares to choose from on the Australian share market.

To help narrow things down, I have picked out two ASX growth shares that have been rated as buys. They are as follows:

Breville Group Ltd (ASX: BRG)

The first ASX growth share to look at is Breville. It is one of the world’s leading appliance manufacturers.

Breville’s primary strategy is the design and development of the world’s best kitchen appliances, together with expanding distribution and dynamic marketing on a global scale. The company’s Breville and Sage brands are at the core of this strategy and represent the majority of its revenues and marketing activities.

This strategy has been highly successful and underpinned consistently strong sales and earnings growth over the last decade. For example, in FY 2021 Breville delivered revenue growth of 24.7% to ~$1.2 billion and a 42% jump in net profit after tax to $91 million.

The good news is that Breville appears well-placed to continue its growth over the next decade. This is thanks to popularity of its brands, its international expansion, acquisitions, favourable consumer trends, and its continued investment in R&D.

The team at Morgans is very positive on the company’s future. As a result, its analysts have an add rating and $34.00 price target on Breville’s shares.

NEXTDC Ltd (ASX: NXT)

Another ASX growth share to consider is NEXTDC. It provides colocation services to local and international organisations from a growing network of Tier III and Tier IV data centre facilities in key locations across Australia.

Given how the world is rapidly shifting to the cloud, demand for data centre capacity has been increasingly strongly in recent years. This has led to NEXTDC growing its revenue and operating earnings at a solid rate.

Positively, the structural shift still has a long way to go, which bodes well for demand over the next decade and beyond. Combined with NEXTDC’s plan to expand into the Asia market, this could put the company in a position to continue its growth over the long term.

Goldman Sachs is a big fan of NEXTDC. It currently has a buy rating and $14.40 price target on its shares. The broker believes NEXTDC will grow its EBITDA by ~20% per annum through to at least FY 2024.

The post 2 stellar ASX growth shares that could be strong buys appeared first on The Motley Fool Australia.

More reading

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Motley Fool contributor James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Woolworths Group Ltd (ASX: WOW) share price has underperformed the Coles Group Ltd (ASX: COL) share price over the last month.

Woolworths shares have dropped 2.6%, whilst Coles shares have gone up by 1.9%. That means there has been a 4.5% outperformance by Coles over the last month.

What has happened in the last month?

Both businesses have given their FY22 first quarter updates.

Woolworths said that its continuing group sales were up 7.8% year on year to $16 billion, with group e-commerce sales up 53.5% to $1.88 billion.

However, the biggest division – Australian food – only saw growth of 3.9% and comparable growth of 2.7%.

The Australian business to business (B2B) division saw 196.4% sales growth to $952 million. That segment includes PFD Food Services and Woolworths International.

New Zealand food experienced a 12.9% increase in sales in Australian dollar terms to $1.96 billion.

However, Big W experienced a 17.5% decline in the sales to $920 million. Lockdowns impacted the trading here.

The broker UBS recently rated the Woolworths share price as a sell, with a price target of $37. It’s expecting Woolworths shares to drop by more than 5% over the next 12 months.

UBS notes that supermarket sales growth is slowing and profit margins may not be as strong in the future as they are now.

Credit Suisse is much more bearish. It also thinks Woolworths is a sell/’underperform’, but the price target is $31.84.

Woolworths noted in October to date, sales had slowed in its Australian supermarkets as the lockdown restrictions eased, though Big W sales improved as stores reopened.

Coles performance

The Coles sales growth rate was actually lower than Woolworths. Total Coles sales in the first quarter only rose by 1.5% year on year to $9.76 billion. Supermarket sales increased 1.8% to $8.62 billion and liquor sales rose 2.6% to $874 million, though Coles Express sales dropped 10.1% to $262 million. Supermarkets e-commerce sales grew by 48%. The Coles business on track to deliver ‘smarter selling’ benefits of more than $200 million in FY22.

Coles said it was optimistic for the Christmas and holiday period as families and friends get together again.

In the first four weeks of the second quarter, supermarkets comparable sales were “broadly in-line” with the first quarter and approximately 8% up on a two-year basis.

However, Coles Express current fuel volumes are impacting profitability, though volumes are expected to recover in the second half of FY22 as consumer behaviour normalise and mobility increases.

What’s the valuation of the Woolworths share price and Coles share price?

Credit Suisse thinks that Woolworths shares are valued at 33x FY22’s estimated earnings. But it’s ‘neutral’ on Coles, with a price target of $16.93, and thinks that it’s valued at 26x FY22’s estimated earnings.

So, on Credit Suisse’s numbers, Coles is materially cheaper than Woolworths on a price/earnings ratio (p/e ratio) basis.

However, brokers believe that both Coles and Woolworths are going to see inflation cost pressures in the coming months, which could be a negative.

The post Why has the Woolworths (ASX:WOW) share price underperforming Coles in the last month? appeared first on The Motley Fool Australia.

More reading

• Coles (ASX:COL) share price slips as the company prepares for a new era
• 5 things to watch on the ASX 200 on Wednesday
• Can Woolworths (ASX:WOW) win its delivery battle against Coles?
• Is the Coles (ASX:COL) share price a buy for the 5% dividend yield?
• Top brokers name 3 ASX shares to sell next week

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COLESGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Ask A Fund Manager

The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In this edition, Fidelity International portfolio manager Kate Howitt reckons she could hold one particular ASX share for 10 years without a worry.

The ASX share for a comfortable night’s sleep

The Motley Fool: If the market closed tomorrow for 4 years, which stock would you want to hold?

Kate Howitt: Let’s shut it down for 10 years. That’d be WiseTech Global Ltd (ASX: WTC).

WiseTech is a software business, and software is very asset-light. So the economics can be brilliant. There’s a lot of businesses out there that are software-ish, WiseTech is pure software. All they sell is software. 

We spend a lot of time trying to understand things and it can help to have an analogy. I think the closest analogy for WiseTech is Bloomberg. It’s the same thing, right? You’ve got logistics, and you’ve got finance. Both of them are global industries, both of them are incredibly data-driven, both of them have very disparate data sets. 

Mike Bloomberg went around hoovering up all of the finance data sets around the globe to put them into one platform. And it’s now pretty hard to operate in global finance without at least one Bloomberg terminal sitting in the corner. Richard White is doing a similar play for all of the data sets in global logistics. Equally very, very disparate.

But I actually think it goes a bit further than that. I think WiseTech is more like Bloomberg plus the LSE, plus the NYSE, plus the SGX — because [WiseTech] is also becoming the platform on which business gets conducted. 

He [White] copped a lot of flack a couple of years ago for all the acquisitions, but what he’s done is just kind of buy-in people and data. That means his lead is pretty much unassailable. It’s hard to see how there could be a competitor to WiseTech that can build a kind of integrated data set and functionality that WiseTech now offers to its clients. And you can see that the largest logistics players are just kind of progressively adopting WiseTech.

Now, the caveat is it’s on a triple-digit PE, right?

What I remind myself of this one is if you are at the dot-com peak — that frenzy back in ’99 and early 2000 where the internet was changing the world — it turns out it was right. The internet was changing the world, but there were only a couple of companies that were the real winners out of that. So there were a lot of ‘pets.com’ that blew up. It all went to zero and everyone lost money. There were a couple like Microsoft Corporation (NASDAQ: MSFT), and Alphabet Inc (NASDAQ: GOOGL), and Amazon.com Inc (NASDAQ: AMZN), who were around then and who did go on to change the world. But for some of them, it was about 16 years until they regained those highs.

So with WiseTech, [what] if we had a big tech meltdown?

Tech valuations are a stretch, and partly that’s driven by the low capital intensity of the business model, partly that’s driven by low-interest rates and the discount factor that you’re applying… But if sentiment reversed, interest rates went up, all of those valuations collapsed, who’s the stock that in a decade’s time, will have the earnings growth come through to eventually regain those highs? I think WiseTech is going to be one of those stocks, especially out of our market. 

Tech has the risk of being disrupted. They come and then they disrupt others — Blackberry gets disrupted by the iPhone.

I think the really powerful ones are the tech companies that just get such broad network effects that they become unsellable and undisruptable. I think WiseTech has that kind of business model. 

Totally I could see it going backwards for years and years if the valuation mindset changed, but the earnings power will eventually bring that one back.

But it’s the kind of stock you should either only hold as much as you are prepared to not worry about for 10 years, or if you know you’ve got the stomach to not sell at a loss. 

If you’re saving up for something in a couple of years’ time, or if you know that you tend to be a bit trigger-happy, then that’s not a stock to own. Not now.

Read Kate Howitt’s thoughts on getting more women involved in the finance world here.

The post The ASX share with ‘unassailable’ lead over rivals: expert appeared first on The Motley Fool Australia.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tony Yoo owns shares of Alphabet (A shares), Amazon, and Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Alphabet (A shares), Microsoft, and WiseTech Global. The Motley Fool Australia owns shares of and has recommended WiseTech Global. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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