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The Corporate Travel Management Ltd (ASX: CTD) share price is currently rated as a buy by the broker Morgans.

There’s currently a price target on Corporate Travel of $25.25. At the current level, that implies Corporate Travel shares could rise by around 17% over the next 12 months.

What does Corporate Travel Management do?

It describes itself as a global leader in business travel management services. The company’s aim is to drive savings, efficiency and safety for businesses and their travellers around the world.

One of the selling points of the business is that it aims to demonstrate a useful return on investment (ROI).

Why is Morgans attracted to the ASX travel share?

The broker was impressed by the FY21 result, thanks to a return to positive earnings before interest, tax, depreciation and amortisation (EBITDA) in the fourth quarter of FY21, which also helped the second half EBITDA.

Morgans points to the northern hemisphere clients that are helping the recovery and it continues to win new clients, whilst having a scalable business model as the recovery continues.

Whilst the broker is expecting Corporate Travel to return to profit and dividend payments in FY22, it is FY23 where the real earnings recovery could happen.

Using Morgans’ numbers, the Corporate Travel share price is valued at 23x FY23’s estimated earnings. Its projected FY21 grossed-up dividend yield of 3%.

How much profit did Corporate Travel generate in FY21?

The company still saw quite a significant net loss after tax. It made an underlying net loss of $33.4 million in FY21 (down 218%) and a statutory net loss of $57.8 million (down 445%).

However, whilst the company reported an underlying EBITDA loss of $7.2 million for the full year, it generated a positive $13.6 million of EBITDA in the fourth quarter. This represented a $19.1 million turnaround for the third quarter and resulted in the FY21 second half underlying EBITDA being a positive $8.1 million.

It generated these numbers after processing $1.61 billion of total transaction value (TTV) in FY21 and $200.5 million of total income. However, $74.1 million of that income came in the fourth quarter, which was led by the “rapid recovery” in North America and Europe.

On top of the fourth quarter numbers, North America was the best region for new client wins in the 2021 calendar year. The Corporate Travel Management share price may also have upside thanks to its “strong synergy realisation” from the Travel & Transport acquisition, which is delivering as planned.

What are the positive signs for the Corporate Travel Management share price for FY22?

Whilst July is only one month, it could mark the start of a stronger year. Corporate Travel said that July 2021 delivered a record post-COVID revenue result and defied the seasonal activity reduction in North America and Europe during the seasonal vacation period.

In the second half of FY22, it’s expecting domestic North American and UK domestic travel to recover rapidly after the summer vacation period as clients return to offices in September. The trans-Atlantic and intra-Europe travel is also expected to open up in the first half of FY22. Vaccinations are expected to allow for a more predictable and sustainably strong Australian domestic travel environment in the second half of FY22.

It’s continuing to look for niche acquisition opportunities that support the global strategy and it’s also targeting a return to dividend payments in the 2022 calendar year.

The post Why this broker sees 17% upside in the Corporate Travel (ASX:CTD) share price appeared first on The Motley Fool Australia.

More reading

• 2 ASX travel shares to consider buying
• Is it too late to buy Qantas (ASX:QAN) and other ASX travel shares?
• Is the Corporate Travel (ASX:CTD) share price a buy right now?
• 2 COVID-hit ASX shares that could be buys now

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 Corporate Travel Management 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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Up until earlier this month, the S&P/ASX Small Ordinaries (ASX: XSO) had gained 30% in 12 months.

That amazing run has moderated somewhat after the market dip in the past week but you would still gladly take a 24.6% gain any year of your life.

And, of course, we’re always reminded that all the successful S&P/ASX 100 [XTO] (INDEXASX: XTO) companies were once small caps. Over time, they grew into their now-mammoth valuations.

But there is inherently more risk in backing smaller businesses. Much can go wrong, as much as it can go right.

So it’s interesting to hear when experts pick out some small-cap ASX shares that they think will grow into the next darlings.

It’s all about scale for small caps

Australian Ethical head of domestic equities Mike Murray told a Livewire video that in the small-cap world, the key is to find companies that will scale well.

“It’s just the nature of the beast that some of those industries scale better than others,” he said.

“We tend to find that product-style businesses with that degree of intellectual property are quite scalable, particularly if they’ve got a global market.”

One company he currently likes, Mach7 Technologies Ltd (ASX: M7T), is at “the intersection of healthcare and technology”.

According to Murray, it operates in a similar area to the far-larger Pro Medicus Limited (ASX: PME).

“Mach7 really grew out of a company that specialised in archiving the images that come out of radiology practices in hospitals,” he said.

“And increasingly it’s moved into actually the software around the viewing of those images, which is where Pro Medicus operates.”

Since the transition, Mach7 has won a few “very big” contracts, according to Murray.

“They’re generating a nice rate of growth and you don’t pay the multiples that you pay for Pro Medicus,” he said.

“So that’s an example of a company where we think we’re not paying over the top and it’s a smaller company, so it’s got quite a long runway of growth ahead of it.”

Health insurance is back

After decades of dropping numbers, the private health insurance industry this year has actually seen a rise in Australians signing up.

That’s why Murray reckons NIB Holdings Limited (ASX: NHF) is not just a “boring” insurance stock.

“It’s actually a very innovative company that has been diversifying out of health insurance,” he said.

“Some of the things they’ve been doing include a joint venture called Honeysuckle Health. It’s really a data science play and it’s really all about developing new programs to help people manage their health better and investing in prevention.”

Prevention of health problems benefits both the customer and the insurer, as it reduces future payouts for expensive treatments.

“It helps our system which has some affordability problems.”

The post 2 small-cap ASX shares with an edge over rivals appeared first on The Motley Fool Australia.

More reading

• NIB (ASX:NHF) share price lower despite ACCC authorisation
• Here are 3 reasons why Pro Medicus (ASX:PME) is a great ASX share to own
• 2 growing small cap ASX shares to watch
• Top brokers name 3 ASX shares to sell today
• Why BlueBet, Fortescue, Hansen, & Pro Medicus shares are sinking

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. owns shares of and has recommended MACH7 FPO and Pro Medicus Ltd. The Motley Fool Australia owns shares of and has recommended Pro Medicus Ltd. The Motley Fool Australia has recommended MACH7 FPO and NIB Holdings 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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Investors searching for growth shares, might want to look at three named below.

Here’s why analysts rate these ASX growth shares as buys right now:

Appen Ltd (ASX: APX)

The first growth share to look at is Appen. The shares of this leading developer of high-quality, human annotated datasets for machine learning and artificial intelligence (AI) have recently hit a multi-year low. This has been driven by concerns over softening demand for its services during the pandemic. While this is disappointing, one leading broker remains confident on the company’s future and expects demand to pick up. As a result, it appears to see this pullback as a buying opportunity for investors. That broker is Citi. It currently has a buy rating and $18.80 price target on the company’s shares.

Breville Group Ltd (ASX: BRG)

Another ASX growth share to look at is Breville. This leading appliance manufacturer has been growing at a strong rate over the last few years and continued this positive form in FY 2021. Last month the company revealed a significant lift in both sales and profits. This was driven by strong demand, recent acquisitions, its international expansion, and its continued investment in research and development. The latter ensures that Breville has a strong and innovative product portfolio. The team at Morgans appears confident that Breville’s growth can continue for the foreseeable future. As a result, its analysts currently have an add rating and $34.00 price target on its shares.

PointsBet Holdings Ltd (ASX: PBH)

A final growth share to look at is PointsBet. It is a sports wagering operator and iGaming provider with operations in the ANZ and US markets. PointsBet has been growing at a rapid rate over the last couple of years thanks to the popularity of its innovative sports betting products and services and the shift to mobile betting from stores. The latter has increased accessibility and opened the market up to other demographics. Goldman Sachs is expecting its strong growth to continue in the future. In light of this, the broker currently has a buy rating and $14.75 price target on its shares.

The post Analysts name 3 stellar ASX growth shares to buy right now appeared first on The Motley Fool Australia.

More reading

• Why this top broker thinks the Appen (ASX:APX) share price can double
• 2 leading ASX shares that are growing rapidly
• 2 ASX growth shares analysts rate as buys right now
• Leading broker says the PointsBet (ASX:PBH) share price has 51% upside
• 3 excellent ASX growth shares named as buys

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 Appen Ltd and Pointsbet Holdings Ltd. The Motley Fool Australia owns shares of and has recommended Appen Ltd. The Motley Fool Australia has recommended Pointsbet Holdings Ltd. 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 some high-quality ASX shares that may be worth owning for the long-term. 

Quality investments may be able to provide better growth potential or more reliability over time.  

There are a number of factors to consider with businesses, including their market share, profit margins and ongoing growth. 

Here are two to consider: 

Xero Limited (ASX: XRO) 

Xero is one of the world leaders when it comes to cloud accounting software. Its customer base is focused on small and medium businesses. It has built a very impressive market share in its home market of New Zealand, yet the growth isn’t really slowing – in FY21 New Zealand subscribers grew by 14% to 446,000. 

Indeed, the ASX share is growing strongly in multiple countries. During FY21, Australian subscribers jumped 22% to 1.12 million, UK subscribers surged 17% to 720,000, North American subscribers grew 18% to 285,000 and the rest of the world subscribers increased 40% to 175,000.  

Xero actually has a very high gross profit margin, one of the highest on the ASX. The gross profit margin was 86% in FY21, an increase from 85.2% in FY20. Despite the business’ preference for a high-growth strategy, involving lots of investing, it’s experiencing a high level of free cashflow growth. FY21 free cashflow rose 110% to $57 million.  

The ASX share may already have some revenue growth baked in for FY22 and beyond. Whilst FY21 operating revenue was $849 million, its annualised monthly recurring revenue was $964 million (up 17%) and its total lifetime value of subscribers increased 38% to $7.65 billion.  

Despite the huge amount of growth it has already achieved, Xero is still targeting growth long-term growth. It says: 

Xero will continue to focus on growing its global small business platform and maintain a preference for reinvesting cash generated, subject to investment criteria and market conditions to drive long-term shareholder value.  

Betashares Nasdaq 100 ETF (ASX: NDQ) 

This is an exchange-traded fund (ETF) which is all about giving investors exposure to 100 businesses on the NASDAQ, which is a stock exchange in North America.  

It just so happens that most of the North American tech giants have chosen to list on the NASDAQ.  

So, when you look at the ASX share’s top holdings, it’s full of names like Apple, Microsoft, Amazon, Alphabet, Facebook and Nvidia.  

But there’s more to the ETF than just those few tech giants. There are plenty of industry leaders including Tesla, Adobe, PayPal, Netflix, Costco, Moderna, Advanced Micro Devices, Intuitive Surgical, Booking, MercadoLibre, ASML, Regeneron, Zoom, Autodesk and Docusign. 

Having such a high-quality group of businesses gives this ETF the potential to perform well over time. 

Whilst past performance is not reliable indicator of future performance, it shows how well the ETF has done in the past. Including the 0.48% per annum management fee, it has delivered an average return per annum of 27.9% over the last five years.  

Many of the businesses in this portfolio are the ones that are releasing new products and services. This means, as a group, they may be capturing market share, opening up new earnings streams and hopefully achieving rising profit margins.

The post 2 very high quality ASX shares to own appeared first on The Motley Fool Australia.

More reading

• Is the Xero (ASX:XRO) share price heading down to $130?
• Top brokers name 3 ASX shares to sell next week
• Top brokers name 3 ASX shares to sell today
• 2 top ASX ETFs that give investors access to Wall Street’s best tech shares
• What $10,000 invested in Xero (ASX:XRO) shares 5 years ago would be worth today

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. owns shares of and has recommended BETANASDAQ ETF UNITS and Xero. The Motley Fool Australia owns shares of and has recommended BETANASDAQ ETF UNITS and 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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Investors that are interested in boosting their income portfolio with some dividend shares might want to look at the ones listed below.

Here’s what you need to know about these top dividend shares:

Coles Group Ltd (ASX: COL)

This supermarket giant could be a dividend share to buy. This is due to Coles having a very positive long term growth outlook and a favourable dividend policy.

In respect to the former, the supermarket giant’s positive outlook is being underpinned by its strong market position, defensive qualities, and focus on cutting costs and automation. This has seen the company invest heavily in new distribution centres with automation giant Ocado.

The team at Morgans are positive on Coles. They currently have an add rating and $19.80 price target on its shares.

In addition, the broker is forecasting dividends per share of 61 cents in FY 2022 and 62 cents in FY 2022. Based on the current Coles share price of $17.08, this will mean yields of 3.5% and 3.6%, respectively.

Suncorp Group Ltd (ASX: SUN)

Another ASX dividend share to consider is Suncorp. It is one of Australia’s leading insurance and banking companies.

Suncorp was back on form in FY 2021 and reported a 42.1% increase in cash earnings to $1,064 million. This allowed the insurance giant to reward shareholders with a special dividend and a $250 million on-market share buyback.

Positively, analysts at Credit Suisse expect the positive form to continue, albeit at more modest growth rates. As a result, the broker has put an outperform rating and $14.00 price target on its shares.

Credit Suisse is also forecasting fully franked dividends of 73 cents per share in FY 2022 and then 74 cents in FY 2023. Based on the current Suncorp share price of $12.43, this will mean 5.9% and 6% yields, respectively.

The post 2 excellent ASX dividend shares named as buys appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Wednesday
• Why is the Woolworths (ASX:WOW) share price underperforming Coles today?
• Climbing mortgage stress: Are the CBA, ANZ, NAB and Westpac share prices in danger?
• Why are Coles (ASX:COL) shares defying the ASX 200 selloff today?
• The next ASX 200 shares that could undertake a big capital return

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 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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On Tuesday the S&P/ASX 200 Index (ASX: XJO) returned to form and pushed higher. The benchmark index rose 0.35% to 7,273.8 points.

Will the market be able to build on this on Wednesday? Here are five things to watch:

ASX 200 futures pointing lower

The Australian share market is expected to drop on Wednesday. According to the latest SPI futures, the ASX 200 is poised to open the day 11 points or 0.15% lower. This follows a disappointing night on Wall Street which saw the Dow Jones fall 0.15%, the S&P 500 drop 0.1%, but the Nasdaq rise 0.2%. US markets roared back in early trade but ultimately gave back their gains.

Harvey Norman shares upgraded

The Harvey Norman Holdings Limited (ASX: HVN) share price could be in the buy zone according to analysts at Goldman Sachs. This morning the broker upgraded the retail giant’s shares to a buy rating with a price target of $6.00. Goldman believes Harvey Norman is well positioned to capitalise on the stronger outlook for housing related categories like consumer appliances and furniture.

Oil prices rise

Energy producers Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) could have a decent day after oil prices pushed higher. According to Bloomberg, the WTI crude oil price is up 0.3% to US$70.51 a barrel and the Brent crude oil price is up 0.8% to US$74.53 a barrel. Tighter US supplies boosted prices.

Dividends being paid

Today is payday for the shareholders of a number of ASX 200 shares. This includes the likes of Challenger Ltd (ASX: CGF), Insurance Australia Group Ltd (ASX: IAG), Sandfire Resources Ltd (ASX: SFR), Sonic Healthcare Limited (ASX: SHL), and Suncorp Group Ltd (ASX: SUN).

Gold price rises

Gold miners Evolution Mining Ltd (ASX: EVN) and Newcrest Mining Limited (ASX: NCM) could have a solid day after the gold price pushed higher overnight. According to CNBC, the spot gold price is up 0.6% to US$1,775.0 an ounce. Evergrande fears continue to weigh on sentiment and boost the appeal of gold.

The post 5 things to watch on the ASX 200 on Wednesday appeared first on The Motley Fool Australia.

More reading

• How does the AFIC (ASX:AFI) share price compare to its net tangible assets?
• IAG (ASX:IAG) share price gains after Chief Risk Officer resignation
• Here are the ASX 200’s most active shares this Tuesday
• ASX 200 rebounds into positive territory led by energy and materials shares
• Here’s what has been moving the IAG (ASX:IAG) share price in September 2021

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 owns shares of and has recommended Challenger Limited and Insurance Australia Group Limited. The Motley Fool Australia has recommended Harvey Norman Holdings Ltd. and Sonic Healthcare 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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If you’re looking for S&P/ASX 200 Index (ASX: XJO) shares to buy, then you may want to consider the two listed below.

Here’s why these ASX 200 shares have been named as buys:

Goodman Group (ASX: GMG)

The first ASX 200 share to consider is Goodman Group. It is a leading integrated commercial and industrial property company with a portfolio of in-demand properties.

Goodman focuses on investing in and developing high quality industrial properties in strategic locations. These are close to large urban populations and in and around major gateway cities globally. This strategy has proven to be very successful and underpinned strong earnings growth over the last decade.

Citi is very positive on the company and expects its solid growth to continue. So much so, the broker has a buy rating and $26.00 price target on its shares.

Last month Citi commented: “GMG’s FY21 EPS was +2% above guidance and +1%/+0.5% above consensus/Citi, with the beat vs our estimate driven by higher investment income and lower interest expense/tax. FY22 EPS guidance was introduced at 10% growth or 72.2c, -2% below consensus and -3.5% below our prior estimate. However, we see upside to guidance and the share price, and re-iterate our Buy rating.”

Treasury Wine Estates Ltd (ASX: TWE)

Another ASX 200 share that is highly rated is this global wine giant. Although it is facing disruption after being effectively shut out of the China market, its North American operations have picked up the slack. This led to a better than expected result in FY 2021.

The team at Morgans are very positive on Treasury Wine. They also believe its shares are undervalued at the current level. The broker has an add rating rating and $14.01 price target on its shares.

It commented: “TWE has the China reallocation risk and it will take 2-3 years to recover these earnings in new markets. However, outside of China, its key markets, particularly the US, are recovering faster than expected from COVID.”

“The new business units centred around the brands, are now fully in place and we are excited to see what they can earn with TWE effectively creating the benefits of a demerger without the extra costs. It also demonstrates that the SOTP is worth materially more than the whole. It shines a light on Penfolds and its best-in-class margins and may ultimately lead to corporate activity in some form in the future. We rate this management team highly,” the broker added.

The post 2 ASX 200 (ASX:XJO) shares that brokers rate as buys appeared first on The Motley Fool Australia.

More reading

• Is the current Treasury Wine (ASX:TWE) share price a bargain?
• Qantas (ASX:QAN) share price slips as buyers line up for land package
• 2 more of the best ASX share ideas according to this leading broker
• 2 ASX 200 (ASX:XJO) shares that analysts love
• Here are the 3 hottest ASX shares to buy right now: expert

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 owns shares of and has recommended Treasury Wine Estates 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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The tech sector is home to a number of companies with strong growth potential.

Three that are highly rated are listed below. Here’s what you need to know about these tech shares:

Nitro Software Ltd (ASX: NTO)

The first ASX tech share to look at is document productivity software company. It was a solid performer during the first half of FY 2021 and more of the same is expected in the second half and beyond. Particularly given its investment in sales staff and favourable tailwinds which are supporting demand for its software.

The team at Bell Potter are positive on the company. So much so, Nitro is currently the broker’s number one pick in the sector. It has a buy rating and $4.00 price target on Nitro’s shares.

NEXTDC Ltd (ASX: NXT)

Another tech share to look at is NEXTDC. It is one of the Asia-Pacific region’s leading data centre operators. NEXTDC has been experiencing very strong demand for data centre capacity due to the structural shift to the cloud. This has underpinned strong sales and operating earnings growth in recent years. Positively, this is expected to continue as the shift to the cloud continues. It could also boost its growth further if its international expansion is a success.

Goldman Sachs has a buy rating and $14.40 price target on its shares.

VanEck Vectors Video Gaming and eSports ETF (ASX: ESPO)

A final tech share to look at is actually an ETF that gives investors access to a large group of tech shares. The VanEck Vectors Video Gaming and eSports ETF provides investors with exposure to companies involved in the growing video gaming market. Among the shares included in the fund are hardware giant Nvidia and game developers Activision Blizzard, Electronic Arts, Roblox, and Take-Two. VanEck notes that these companies are in a position to benefit from the increasing popularity of video games and eSports.

The post 3 ASX tech shares to buy this week appeared first on The Motley Fool Australia.

More reading

• 2 great ETFs to think about for the long-term
• These ASX tech shares have been tipped as buys by analysts
• 3 highly rated ETFs for ASX investors in September
• The NEXTDC (ASX:NXT) share price is down 5% in a week. Is it a buy?
• 2 outstanding ASX growth shares named as buys

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 recommended Nitro Software Limited and VanEck Vectors ETF Trust – VanEck Vectors Video Gaming and eSports ETF. 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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I regularly get asked my opinion on matters investing.

Or, at least, the markets.

I make that distinction because some of the questions aren’t really about ‘investing’ as such.

Investing should be a long term pursuit; an effort to create long term value.

And that’s where I focus my time, energy and attention.

Partly, because I hope I’m decently good at it.

But also because asking me where the ASX is going this week, or this month, or by Christmas is just not a question I think can be reliably answered — by me or anyone else.

Because in the short term the market is fickle.

Does anyone really know what mood traders will be in over the next 10 days?

I doubt it.

It’s hard enough to know what mood the market is in, today, let alone tomorrow, or next week.

And by Christmas?

It’s just not — in my view — knowable.

Even many of those who accurately predicted the impact of COVID missed the market reaction (a short, sharp slump, followed by a short, sharp, recovery of most of those losses).

I’m not going to say it’s a waste of time trying to guess but…

Ah, bugger it. I’ll just say it:

It’s a waste of time.

And so?

And so, I try to spend my time focussing on two things:

1. The long term; and

2. Probabilities, not predictions

You’re never going to be right 100% of the time.

Probably not even 80% of the time.

As US fund manager Peter Lynch famously remarked:

“In this business, if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.”

But, if you stop trying to make low probability guesses (like, say, where the ASX will be by September 30) and instead look to the long term (where results rely more on business performance than the whim of a fickle market), it’s my guess — and I’ve put my money where my mouth is — that you’ll do much better.

Truth be told, I wrote everything above this line before the ASX opened yesterday (Monday).

Before I knew the ASX would fall more than 2% yesterday but up 0.2% today, as of the time of writing.

But it’s a neat example, right?

After all, just last week I suggested you needed to be ready for the next crash.

No, Monday wasn’t a crash.

Not even close.

But the timing was as coincidental as it was fortuitous, and I hope the lessons were useful.

Bottom line: One or two days changes nothing. Nor does a 2%, 12% or a 22% fall — as long as you’ve picked quality investments, paid a decent price, and keep a long term perspective.

And now I want to turn to another crash: iron ore.

It wasn’t that long ago that the red dirt was priced north of US$220 per tonne.

That’s now under US$95, at the time of writing.

Shares of mining companies have been taken to the woodshed, too.

I hope you’ve seen my writing (and media appearances) over the last 6 – 12 months.

If you had, you’d know I’ve long been saying that an iron ore price with a 2 in the front (and a 1, for the record!) should have been unsustainable.

Here’s why:

If I have the (authentic) Jackson Pollack painting Blue Poles, and a lot of (very rich) people want it, I can name my price (and/or let an auction work out its worth)

On the other hand, if I’m selling a bushel of wheat, and you’re selling one, and 1,000 of our closest friends are selling them, too… there’s not much chance of me setting the price. If a buyer wants some wheat, she’ll go as far and wide as technology and time make feasible, to make sure she’s not paying more than she has to. More than that, the sellers will beat a path to her door, making sure she knows what prices are on offer. Yes, she might pay a little more for better quality, or shorter delivery times… but otherwise, she’s going to pay the lowest price possible.

That’s because (and wheat farmers, please excuse me the simplification here) wheat is wheat is wheat.

But if the market all of a sudden demands more wheat than the 1,002 of us can produce? The price will rise. That’s high school Commerce 101.

But remember what comes next?

Soy bean and canola farmers see the price of wheat skyrocket, and decide to grow wheat instead.

The result?

In a few months, there’s more wheat than the market can possibly buy.

The price plummets below where we started.

Demand picks up a little (cheap wheat means people will buy it instead of other, more expensive foods) and some of those farmers go back to soy beans.

The price rises.

Played out enough times, over a large enough industry, the price tends to stabilise. Not without volatility, as supply and demand wax and wane, but it tends to sit not far above the cost of production.

Why there?

Because if it was too far above the cost of production, that potential profit would attract more growers, adding to supply, and pushing down the price.

Okay, now back to iron ore.

The biggest Australian miners have a cash cost of around $15 – $20 per tonne.

All-in costs might be double that. Let’s add a bit more for fun, and call it $60.

If something costs $60 to produce, and you can sell it for $220, don’t you reckon one of two things will happen?

Either a high price will scare away customers and/or that juicy profit margin will entice more miners into the industry and entice existing miners to dig more up!

Both actions should see the price fall.

Now… I’m the first to say I didn’t predict the timing.

And I’m not suggesting it can’t go back up.

Markets, especially in the short term, can be fickle, moody beasts.

But, given the wheat example, above, you would have needed to be very brave to believe US$220 per tonne was sustainable for any length of time!

It’s why I’m not ‘buying the dip’.

Maybe the price goes back up. Maybe it doesn’t.

But supply and demand — as iron a law as they come, absent cartel behaviour or some sort of external pressures — is a hard taskmaster.

I’m not betting against history — or human nature. So I’m giving iron ore a miss.

Something you shouldn’t miss, though (see what I did there?) is the newest episode of our brand new podcast, The Good Oil with Scott Phillips.

A sister-podcast to our long-running Motley Fool Money podcast, The Good Oil is an interview format, where I chat to entrepreneurs, executives and experts to really understand what’s going on in their businesses or the economy at large.

Our first two episodes featured well-known economist Stephen Koukoulas of Market Economics and Eliza Owen, head of Australian research at property mob CoreLogic.

This week’s guest was Ruslan Kogan, founder and CEO of Kogan.com (I own shares, for full disclosure).

It was a fascinating chat, including his view on the future of e-commerce, what really makes the difference between success and failure, and what he said when someone asked him ‘What do you think of my website?’.

I really think you’ll enjoy it, so if you haven’t yet, now is a great time to subscribe and have a listen!

Fool on!

The post Why I’m not buying miners (but own this ecommerce stock) appeared first on The Motley Fool Australia.

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Motley Fool contributor Scott Phillips 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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Investors watching the Amcor plc (ASX: AMC) share price probably want to pack it up and send it away. Over the past month, shares in the blue-chip company have fallen hard – losing 7.87% in that time. The S&P/ASX 200 Index (ASX: XJO), meanwhile, is only 2.89% lower.

By the end of trade on Tuesday, shares in the packaging manufacturer were 0.24% lower to $16.33 despite the ASX 200 ending 0.35% higher.

While the company hasn’t made any price-sensitive announcements in that time, something is clearly spooking investors.

Let’s take a closer look.

Amcor FY21 results

While announced just over a month ago, investors may still be analysing the entrails of the Amcor FY21 results. It’s possible they could still be affecting the Amcor share price.

To recap, for the 12 months to 30 June, Amcor declared the following:

• Net income of $939 million (up 53%).
• Earnings per share (EPS) of 60.2 cents (up 58%).
• Adjusted free cash flow of $1.1 billion, which was at the upper end of its guidance.
• An annual dividend of 47 cents per share, including a final dividend of 11.75 cents per share.

Looking forward, Amcor says it expected a strong financial year but that COVID-19 created “a high degree of uncertainty” for the company. It forecast EPS to grow between 7% to 11% by the end of FY22, which would be somewhere between 79 to 81 cents.

Amcor is also looking to purchase $400 million worth of shares off the market this financial year.

This predicted uncertainty may be one reason for the lagging Amcor share price.

Is the delta variant affecting the Amcor share price?

Being a global packaging company, supply chain logistics for most industries, but especially consumer goods, are crucial for Amcor’s financial performance. More goods being shipped means more packaging needed which, in turn, means more revenue for Amcor and potentially a better Amcor share price.

However, there are currently constraints in the global supply chain.

As Alastair MacLeod of Wheelhouse Partners wrote:

“Historically the global supply chain, and the shipping industry that underpins it, operates in an orderly market with a relatively smooth flow of containers and ships around the world. However, due to the stop-start nature of the current economy, this orderly flow has been majorly impacted.”

MacLeod goes on to list several examples where the delta variant has caused supply issues – such as the shutdown of China’s third busiest port, Ningbo, and a shortage of truck drivers in the US.

As well as a shortage in supply, MacLeod argues there has been a spike in demand in “durable goods” such as vehicles and white goods because of the pandemic. Consumers haven’t been able to spend their money on holidays and leisure and so have turned to purchasing products, usually online.

“Pre-pandemic supply chains were not designed for this level of sharp demand shift and this imbalance and demand for containers is impacting the traditional flow of goods in every other global market,” according to MacLeod.

These supply chain issues may be another reason for the falling Amcor share price.

Amcor share price snapshot

Over the past 12 months, the Amcor share price has risen 5.76%. This is a 19-point underperformance of the ASX 200. Year-to-date, it is 6.45% higher. This also falls short of the performance of the benchmark index.

The post The Amcor (ASX:AMC) share price has lost 8% in 4 weeks. What’s happening? appeared first on The Motley Fool Australia.

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• 2 ASX shares that could be buys for both growth and dividends

Motley Fool contributor Marc Sidarous owns shares of Amcor 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 owns shares of and has recommended Amcor 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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