Tag: Motley Fool

The Nuix Ltd (ASX: NXL) share price is rebounding after a horror run.

At the time of writing, the investigative analytics and intelligence software provider’s shares are up over 5% to $5.28.

Why is the Nuix share price?

Investors have been buying Nuix shares this morning after it responded to an article in the Australian Financial Review.

Within that article, one analyst likened Nuix’s IPO as putting lipstick on a pig. “There was so much lipstick caked on, no one could recognise it was a pig,” the analyst said.

This comment is in relation to the disappointing half year results release by Nuix in February. Given that Nuix’s shares hit the ASX boards on 4 December, just a matter of a few weeks short of the end of the financial period, investors were very surprised to see it fall short of expectations.

This led to concerns among some shareholders that Nuix “was fattened up for market day.”

This goes some way to explaining why the Nuix share price was down 58% from its high and trading below its IPO price at Friday’s close.

The Nuix response

This morning Nuix released a response to the article. It commented:

“Both 1H FY21 revenue and 1H FY21 Annualised Contract Value (ACV) reported by Nuix on 26 February 2021 were in line with management’s expectations when considering the impact of currency headwinds and the timing of certain deals which subsequently completed in January. As noted in its prospectus, Nuix’s contract completions are typically weighted towards the end of Nuix’s financial half years. In 1H21 for example, more than 30% of that half’s revenue was signed in December 2020.”

Management also notes that the US election had an impact on its first half performance due to delays in contracts being signed. It explained:

“In the case of ACV, this also included a delay in spending with the US government associated with the US election, in particular the unexpected delay in transitioning the Administration which impacted access to government agencies and officials required for signing contracts. Given the strength of Nuix’s government relationships, Nuix is well positioned to capture US government spend as it is released.”

FY 2021 guidance explained

The company also decided to add more colour to its guidance for FY 2021. It said:

“The FY21 revenue forecast, prepared on a consistent basis with applicable accounting standards, is based on estimated renewals, upsell renewals and new business. Renewals and upsell renewals, in the form of additional cores, licences and application add‑ons, are forecast at $164.1 million representing 85% of total revenue. New customer revenue, which has the longest sales cycle and provides opportunity for future renewals and upsell, is forecast at $29.4 million representing 15% of FY21F revenue. In 1H FY21, renewals and upsell of $72.2m was 85% of total revenue and new business at $13.1 million was 15% of total revenue, both in line with the full year forecast mix.”

Nuix’s CEO, Rod Vawdrey, concluded: “Nuix has been a trusted partner for more than fifteen years to leading organisations around the world including governments, law enforcement agencies, regulators and major corporations. As a newly listed company we are committed to building the same long-term trust with the market. The fundamentals of our business remain strong supported by our powerful processing engine and sticky customer base.”

More reading

• Nuix (ASX:NXL) share price hits all-time low: Time to buy?
• The Nuix (ASX:NXL) share price has a lot of ground to make up in FY21
• Here’s why the Nuix (ASX:NXL) share price is tanking 27%
• 2 exciting mid cap ASX shares to buy and hold
• 2 outstanding ASX growth shares to buy

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

The post Here’s why the Nuix (ASX:NXL) share price is storming 5% higher today appeared first on The Motley Fool Australia.

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The Douugh Ltd (ASX: DOU) share price has been a strong performer on Monday morning.

In early trade, the financial wellness app provider’s shares are up 12.5% to 22.5 cents.

Why is the Douugh share price rising today?

The catalyst for the rise in the Douugh share price today has been the release of an announcement.

According to the release, the company has appointed Rakuten Advertising to provide it with affiliate marketing services. Management believes this is a cost-effective and low-risk way to increase mobile app downloads and accelerate customer acquisition.

Douugh’s Founder and CEO, Andy Taylor, commented: “We’ve seen the unparalleled expertise and distinctive marketing solutions that Rakuten offers, and how they will help us to influence and activate audiences across the many paths and platforms of their digital journeys.”

“Rakuten Advertising creates unique opportunities to amplify our digital marketing performance, compared to other affiliate marketing companies because of its unrivalled audience scale, partner diversity, and technology innovation.”

Mr Taylor notes that Rakuten Advertising has a strong history of driving success for finance brands. It has 60 active clients in the vertical. These include five of the top 10 U.S. banks.

It has helped these clients acquire 10 million credit cards, 100,000 personal loans, and 55,000 mortgages. Though, it is worth noting that marketing such products for a well-established bank is far easier than an unknown wellness app with no competitive advantage.

What now?

Douugh hopes that by leveraging affiliate marketing, it will raise brand recognition, expand its customer base, and increase conversions and customer engagement.

The company also revealed that it intends to introduce new services and technologies in the future. This includes cash back rewards across international markets and Australia.

Management believes cash back rewards will be a central strategy for its affiliate program and expects it to accelerate the loyalty lifecycle of Douugh customers.

It also intends to integrate a member-get-member program, with a monetary incentive to Douugh users for inviting friends to sign up to the platform.

However, such programs are not cheap to run and are likely to lead to significant cash burn. So with a cash balance of $16 million at the end of December, another capital raising could be required in the near future.

More reading

• Douugh (ASX:DOU) share price falls as losses grow
• What’s with the Douugh (ASX:DOU) share price today?
• Why Chorus, Douugh, IOUpay, & Reliance shares are tumbling lower
• Douugh (ASX:DOU) share price plummets 9% today despite strong start
• Payright (ASX:PYR) shares get speeding ticket after 32% surge

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 ALS Ltd (ASX: ALQ) share price is charging higher on Monday morning.

At the time of writing, the global testing, inspection, and certification company’s shares are up 6.5% to $10.12.

Why is the ALS share price charging higher?

Investors have been buying ALS shares today following the announcement of an acquisition and the release of a trading update.

According to the release, the company has acquired pharmaceutical testing business Investiga for an undisclosed fee.

Investiga is a pharmaceutical testing business with operations in Brazil and the east coast of the United States. It currently has 360 employees and generated A$20 million of revenue in FY 2020.

The release explains that Investiga specialises in the cosmetic and personal care market, providing services to a portfolio of major global clients. Management intends to integrate the business into the existing ALS Life Sciences network, with a particular focus on growing in the USA. It notes that this represents over a quarter of the global market.

ALS will acquire Investiga at a multiple of 11x adjusted FY 2020 EBITDA, on a deferred basis, paid from existing debt facilities. There is no requirement for shareholder approval.

ALS Managing Director and CEO, Raj Naran, commented “Growing the Life Sciences division is a key part of the ALS strategy and Investiga significantly increases our presence in the Pharmaceutical market. We have a strong track record of integrating acquisitions into our existing Life Sciences network and Investiga provides us with the platform to grow our cosmetic and personal care offering, particularly in the USA.”

Trading update

Also giving the ALS share price a boost this morning has been the release of a positive trading update.

According to the update, ALS continued to trade resiliently in the third quarter and early in the fourth quarter despite the uncertainty created by the COVID-19 pandemic.

Life Sciences volumes have been stable, with laboratories providing their essential services to clients in major markets.

In addition, the Commodities division is starting to benefit from the improving cycle. Geochemistry sample flows increased by 13% in the third quarter, with this momentum continuing in the fourth quarter.

Management notes that major miners, as well as junior and intermediate miners, have contributed to this growth.

Finally, in the Industrial division, Tribology saw some improvement in the third quarter, whilst the trading environment for Asset Care remained challenging.

More reading

• Why brokers rate these 4 ASX shares a buy this month

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

The post Why the ALS (ASX:ALQ) share price is surging over 6% higher today appeared first on The Motley Fool Australia.

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Zip Co Ltd (ASX: Z1P) shares has taken a beating in the past few weeks, along with its peers such as Afterpay Ltd (ASX: APT) and Openpay Group Ltd (ASX: OPY). Investors are most likely querying if the Zip share price has finally bottomed out following the recent market shocks.

It’s worth noting that last month, the company’s shares hit an all-time high of $14.53, before suffering a severe fall. At Friday’s market close, Zip shares ended the day 5.2% down to $9.56 — a 34% decline from its record high.

Below, we take a closer look into what could be affecting the buy-now, pay-later (BNPL) company’s share price.

Why is the Zip share price sinking?

With the company’s latest half-year results wrapped up, there are a few catalysts as to what could be weighing down Zip shares.

Investors have again been spooked by renewed fears about a possible fourth COVID-19 wave in the United States. This comes as Texas and Mississippi opened up their doors to pre-COVID social norms. And to make matters worse, this could lead to the virus mutating into a new highly infectious strain.

So, what does this have to do with Zip?

Well, the company has been making strides to accelerate its growth strategy in the United States. Last August, the BNPL provider purchased QuadPay in a bid to capture the world’s largest retail market. In its H1 FY21 report, Zip revealed that 40% of the total transaction value (TTV) in December came from the United States.

However, with the rise of a potential new COVID-19 variant along with a possible fourth wave, the outlook appears grim. The Zip business could be heavily affected should the economic climate again turn south.

Another factor that may be negatively impacting the Zip share price is two broker notes that were released early this month. Analysts at RBC Capital Markets raised its target price for Zip by 29% to $9.00. However, that’s a current discount of 6% on today’s value.

On the other hand, a note from Macquarie also slightly lifted its estimate, but to a bearish price of $5.70. Again, that is 40% lower than the going rate at the moment.

Foolish takeaway

While the Zip share price may be trading lower than what it was 4 weeks ago, patient investors have done extraordinary well. In comparison to this time last year, the company’s shares are up 332%, and 80% year-to-date.

More reading

• Why interest rates matter for ASX 200 shares
• ASX 200 Weekly Wrap: ASX finishes higher, despite tech selloff
• 2 fantastic ASX growth shares to buy this week
• 5 things to watch on the ASX 200 on Monday
• Top brokers name 3 ASX shares to sell next week

Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and ZIPCOLTD FPO. 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.

The post The Zip (ASX:Z1P) share price is down 34% in less than a month appeared first on The Motley Fool Australia.

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There’s been increasing talk in recent days about rising bond yields and how that may impact ASX 200 shares. Many investors may be thinking, “what do interest rates have to do with my shares?”

There could be some important relationships and potential implications from the current interest rate spike.

What’s going on with interest rates?

In simple economic terms, central banks like the Reserve Bank of Australia (RBA) lower interest rates to kickstart the economy.

When rates are low, individuals and corporations are more likely to borrow money. That money is then invested back into assets and projects that boost employment and help drive economic growth.

One common misconception is that central banks like the RBA set interest rates. The RBA meets each month to discuss monetary policy and does set a target official cash rate (OCR).

Actual interest rates are set by the market, and while influenced by monetary policy, are subject to market forces.

What’s been happening is interest rates on long-term bonds are starting to spike higher. Bond yields increase when prices decrease, which happens when there is lots of selling. Here is where it starts to matter for investors in ASX 200 shares.

That increase in yields (or increase in selling) could be for a variety of reasons, one of which may be investors expecting higher inflation.

Increased money supply and an early-stage economic recovery could see an increase in inflation, which is bad for long-duration investments like 10-year Treasuries.

Why do interest rates matter for ASX shares?

The vast majority of investors diversify their portfolio across asset classes based on expected risk and return metrics, as well as intra-portfolio correlations.

If bond yields are spiking, buyers of those bonds should receive a higher premium for holding that investment. If that’s due to expected higher inflation, there are a number of ASX 200 shares that could be impacted.

One area that has been hammered recently in global markets is technology. ASX 200 tech shares like Afterpay Ltd (ASX: APT) and Xero Limited (ASX: XRO) boomed in 2020 as investors looked for long-term growth potential amid the uncertainty.

However, the “bird in the hand” adage means that a dollar today should be worth more than a dollar tomorrow. That’s especially the case if there’s high inflation, which would erode the present value of those future earnings.

That could be a key driver in higher share price volatility for ASX 200 shares like Afterpay in recent weeks.

Foolish takeaway

No one really knows why interest rates are spiking around the world but there are some fundamental economic principles that can help to provide context to the recent market movements.

If interest rates are moving up in the expectation of inflation increases, that could have knock-on effects for a number of ASX 200 shares including those in the tech sector.

If it’s due to expected economic growth and subsequent interest rate rises, then it could be a very different story.

More reading

• ASX 200 Weekly Wrap: ASX finishes higher, despite tech selloff
• 5 things to watch on the ASX 200 on Monday
• ASX 200 drops again, Zip sinks, Worley wins
• This was the week that ASX dividend shares proved their worth
• Why is everyone talking about bond yields?

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO 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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Is the Telstra Corporation Ltd (ASX: TLS) share price a good buy right now?

In the middle of February 2021 Telstra shares climbed as high as $3.32, but it has since dropped back down to $3.10. Does that mean it’s worth thinking about as a buy?

What was the Telstra report like?

Telstra said that on a reported basis, total income for the six months fell 10.4% compared to the prior corresponding period to $12 billion, while net profit after tax (NPAT) declined 2.2% to $1.1 billion.

Reported earnings before interest, tax, depreciation and amortisation (EBITDA) dropped by 14.7% to $4.1 billion. After adjusting for lease accounting on a like for like basis, EBITDA fell by 11.7% to $4 billion.

Underlying EBITDA dropped 14.2% to $3.3 billion. The largest two contributors to the decline were the estimated impact of the NBN in FY21 of $370 million and another $170 million from COVID-19. Excluding both of those, underlying EBITDA was essentially flat compared to the first half of FY20.

One part of the business that continues to deliver growth in users is the mobile division.

During the half, Telstra added more than 80,000 postpaid handheld mobile services with good performance from all segments and brands. Telstra also added more than 46,000 prepaid handheld users and more than 163,000 wholesale mobile services across prepaid, postpaid and internet of things services.

However, mobile revenue declined due to lower hardware sales and the impact on international roaming due to COVID-19 impacts. In the COVID-19 crash, the Telstra share price dropped down to just above $3. However, the lowest point over the last 12 months was $2.68 at the end of October 2020.

How is 5G going?

The telco said that it continues to extend its 5G leadership, with its networking expanding to cover more than 50% of the Australian population and delivering coverage to more than 100 cities and towns across the country. One million 5G mobile devices are now connected to Telstra’s network. The company also boasted about achieving a world-first with a download speed of greater than 5Gbps on a commercial network using the mmWave spectrum.

Costs and going digital

The company said that its consumer and smaller business digital sales increased to 40% of Telstra’s transactions. It also said that 70% of service interactions were also handled digitally.

Telstra said that it continues to work on lowering costs. It reduced its underlying fixed costs by a further $201 million, or 7%. The company also increased its productivity targets to $450 million in FY21 and from $2.5 billion to $2.7 billion by the end of FY22. Around $2 billion has already been delivered.

It also announced that it intends to transition to full ownership of its branded retail stores across Australia, to enable Telstra to keep pace with the digital economy.

Telstra dividend

The Telstra board decided to pay a dividend of 8 cents per share, with guidance for the full year dividend to be 16 cents per share. It currently has a grossed-up dividend yield of 7.4%. 

Is Telstra a buy at this share price?

The company is now expecting total income to be between $22.6 billion to $23.2 billion, whilst underlying EBITDA is expected to be between $6.6 billion to $6.9 billion.

In FY22 it’s aiming to grow underlying EBITDA by high single digits, then achieve $7.5 billion to $8.5 billion of underlying EBITDA in FY23.

Broker Credit Suisse has a Telstra share price target of $3.85 and rates it as a buy. However, Morgan Stanley only has a price target of $3 for Telstra.

More reading

• ASX 200 Weekly Wrap: ASX finishes higher, despite tech selloff
• 2 ASX dividend shares with attractive yields to buy this week
• Leading broker names 2 ASX dividend shares to buy next week
• Why is the Macquarie Telecom (ASX:MAQ) share price down today?
• 2 ASX dividend shares with generous yields

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra 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 S&P/ASX 200 Index (ASX: XJO) dropped another 0.74% on Friday, taking losses to more than 2% for the past month.

Growth stocks have especially suffered recently, as investors shift to value shares in anticipation of an economic recovery and inflation.

For example, the S&P ASX All Technology Index (ASX: XTX) index has nearly lost a painful 15% over the past month.

Ouch.

While we’re nowhere near the definition of a crash, the current correction has brought some darlings of 2020 back down to earth.

At the start of the year, a group of fund managers picked out shares that they thought were too expensive but would love to snap up if the price ever tumbled.

The Motley Fool takes a look back at 5 of those to see how much they have discounted:

Fisher & Paykel Healthcare Corp Ltd (ASX: FPH)

Sage Capital portfolio manager Kelli Meagher snapped up healthcare player Fisher & Paykel for cheap during last year’s COVID-19 crash and did pretty well out of it.

But of course, that same appreciation made it too expensive by the end of the year.

“It’s trading at a particularly high multiple at the moment given its earnings have been very elevated from COVID,” she said in January.

“COVID-19 has actually put a spotlight on just how useful and beneficial their products are and how quickly it helps people breathe again, get out of the hospital, and save the hospitals’ money. So, I think their addressable market from here is going to be a lot bigger and their growth trajectory is going to be a lot higher than what it would have been if COVID-19 had never happened.”

At the end of the 2020, Fisher & Paykel traded for $30.95. It is now 15% cheaper, selling for $26.33 after market close on Friday.

REA Group Limited (ASX: REA)

At the start of the year, Spheria portfolio manager Matthew Booker loved the look of REA — but thought it was just too expensive.

“We think REA is a good business, but in a sell-off, I would probably pick it up at the right price,” he told Livewire in January.

“We own some in one of our strategies, but it’s too expensive for us at the moment and we’re cycling out of it and we’re finding better relative [opportunities] outside of that.”

REA closed out 2020 at $148.86. It has now come down almost 9%, closing Friday at $135.89.

Hub24 Ltd (ASX: HUB)

TMS Capital portfolio manager Ben Clark reckoned Hub24 will eventually hold a duopoly in its field.

“I think Netwealth and HUB24 are going to be two dominant players in this industry for many years to come and they’re going to have strong revenue growth for many years,” he said in January.

“But they’re about to hit the operating leverage part of the cycle, which is the sweet spot when you want to own those companies. I should have stepped in and done something about it and now they’re quite pricey again.”

Hub24 ended 2020 at $21.34. Clark said back then that he would buy if the stock went down to $15 or $16. 

It was trading at $19.48 at market close on Friday, which is nearly 9% down year-to-date.

IDP Education Ltd (ASX: IEL)

Two experts selected education services provider IDP as the stock they would like to nab during a market correction.

“It is a global leader in the placement of international students and also does the IELTS English testing distribution,” Paradice portfolio manager Julia Weng told Livewire in January.

“It has obviously been impacted by COVID, but prior to COVID, volumes were growing at 30% a year and even now there’s strong pent-up demand with a lot of students choosing to study online.”

Lennox Capital equity analyst Olivia Salmon agreed at the time.

“Love the business, love that tertiary education sector — don’t love the share price at the moment given the worries that you have with the China-Australia relationship… and even China’s relationship with the rest of the world,” she said.

“It’s a stock I’d love to own, just at a lower price.”

So is it cheaper now? Unfortunately for Weng and Salmon, the stock price has actually gone up.

IDP ended 2020 at $19.85. It was trading for $23.55 at the close of trade Friday.

Pro Medicus Limited (ASX: PME)

Eley Griffiths portfolio manager David Allingham told Livewire at the start of the year that he would love to swoop on Pro Medicus if it were a bit cheaper.

“It’s got genuinely disruptive technology and is winning major clients and major market share in the US,” he said at the time.

“We’ve followed it for a number of years. The management team [has] done an exceptional job on an execution standpoint, but it’s just always been too expensive for us. The valuation is astronomical; whether it’s revenue multiple, P/E ratio, or EBITDA multiple.”

Allingham would be disappointed to see that Pro Medicus shares have appreciated even further this year. The stock closed out last year at $34.16 but traded at $43.87 at the end of Friday’s session.

More reading

• Why the Omni Bridgeway (ASX:OBL) share price is one to watch
• Why the Nine (ASX:NEC) share price is up 26% in 2021
• ASX 200 Weekly Wrap: ASX finishes higher, despite tech selloff
• 5 things to watch on the ASX 200 on Monday
• 3 highly rated ASX growth shares to buy now

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 recommends Pro Medicus Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Hub24 Ltd and Idp Education Pty Ltd. The Motley Fool Australia has recommended Hub24 Ltd, Pro Medicus Ltd., and REA Group 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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At the start of each week I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Tassal Group Limited (ASX: TGR) has seen its short interest rise week on week once again to 13.2%. The Australian seafood company’s shares have come under pressure due to weak prices and concerns that it could be impacted by the Australia-China trade war.
• Webjet Limited (ASX: WEB) has seen its short interest remain firm at 12%. Although trading conditions are starting to improve, short sellers aren’t giving up on this online travel agent just yet. They may have concerns over its valuation.
• Inghams Group Ltd (ASX: ING) has 9.2% of its shares held short, which is up slightly week on week again. Even though the poultry producer’s shares recently hit a 52-week high, short sellers aren’t giving up on it. During the first half of FY 2021, Inghams reported a 28.4% increase in underlying profit.
• Speedcast International Ltd (ASX: SDA) has short interest of 9%. This communications satellite technology provider’s shares have been suspended for over a year while it undertakes a recapitalisation after its debts spiralled out of control.
• Mesoblast limited (ASX: MSB) has seen its short interest remain flat at 8.8%. Last week this biotech company’s shares dropped lower after it raised US$110 million to keep its operations going.
• Resolute Mining Limited (ASX: RSG) has seen its short interest increase week on week to 8.4%. This gold miner’s shares have come under a lot of pressure due to a weakening gold price and industrial disruption at its Syama operation. The latter has led to management forecasting further production declines and cost increases in FY 2021.
• AVITA Medical Inc (ASX: AVH) has seen its short interest rise week on week to 8.2%. The medical device company’s sales have been growing but at a slower rate compared to the market’s expectations. Short sellers don’t appear confident that things will improve in the near term.
• Service Stream Limited (ASX: SSM) has short interest of 7.6%, which is up again week on week. The essential network services provider’s shares have been sold off this year due to its underperformance in the first half and very weak outlook.
• Western Areas Ltd (ASX: WSA) is back in the top ten with short interest of 7.4%. Last month the nickel producer released a very disappointing half year result. It reported a 21.5% decline in revenue to $122.7 million and a 65.5% decline in EBITDA to $24 million.
• Metcash Limited (ASX: MTS) has seen its short interest rise to 7.3%. Short sellers may be concerned by reports that a price war is brewing in the supermarket industry.

More reading

• Why the Resolute Mining (ASX:RSG) share price is at a 52-week low
• Is it time to buy these 2 ASX travel shares?
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 slides lower, A2 Milk surges, Gold Road sinks
• ASX 200 up 0.3%: Mesoblast raises US$110 million, tech shares rebound

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 Avita Medical Limited. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended Avita Medical Limited and Service Stream 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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Despite the recent stock market rally, it may still be possible to unearth under-the-radar pandemic bargains. After all, a number of companies and sectors continue to be unpopular among investors due to their uncertain outlooks.

Through focusing on the quality of companies and comparing their valuations to those of sector peers, it may be possible to find attractive investment opportunities. Over time, they could deliver impressive returns in a potential long-term stock market recovery.

Defining under-the-radar pandemic bargains

Of course, different investors will have differing views on which stocks can be classed as under-the-radar pandemic bargains. However, they could include those companies that have solid fundamentals, including a sound balance sheet, but trade at low prices compared to their sector peers.

For example, a clothing retailer may currently be struggling to generate rising sales because of lockdown restrictions. Consumers may be avoiding spending on clothing because of a lack of opportunities for social interaction. This could mean a challenging financial outlook for the company in question. However, if it has a solid financial position that means it can survive and a wide economic moat, it could deliver a significant improvement in profitability as the pandemic subsides.

Furthermore, investors may have factored in many of the challenges faced by such businesses. This could mean that they offer wide margins of safety that make them under-the-radar pandemic bargains at the present time when purchased on a long-term view.

Searching for bargain stocks in unpopular sectors

Some sectors may be more likely to contain under-the-radar pandemic bargains than others. For example, the travel & leisure industry currently faces a very challenging outlook due in part to the impact of coronavirus. This may have caused many businesses to trade at low prices, since investor sentiment could be weak.

Where they have strong customer loyalty and sufficient liquidity to overcome present challenges, they could offer investment appeal. By comparing their current valuations to their historic averages, as well as to those of sector peers with similar business models, it may be possible to unearth the most attractive buying opportunities. While their share prices may remain unpopular for some time, they could offer strong recovery potential over the long run.

Building a portfolio

Clearly, under-the-radar pandemic bargains could experience further challenges in future. As well as the prospect of ongoing risks associated with coronavirus, they may struggle to adapt to a fast pace of change in the world economy. Therefore, it is important to build a portfolio that contains a wide range of companies to reduce risk.

Through identifying sound businesses that may be undervalued by other investors, it may be possible to generate attractive long-term returns. Over time, this could have a positive impact on an investor’s portfolio performance as the world economy experiences a likely recovery from what has been an extremely challenging 12-month period.

More reading

• 5 ASX shares to buy in a market crash
• These are the 10 most shorted shares on the ASX
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Motley Fool contributor Peter Stephens 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 Omni Bridgeway Ltd (ASX: OBL) share price is one to watch in early trade after an update from the Aussie litigation funder.

Why is the Omni Bridgeway share price on watch?

Omni Bridgeway has this morning announced that it will remain listed on the Australia Securities Exchange (ASX). The company reviewed its listing venue after a request from “a number of institutional shareholders” as announced at its annual general meeting (AGM).

The board has now conducted the review including a “detailed analysis” of the “optimum” listing venue for the group. Remaining ASX listed is the best way forward following the board’s review.

The Omni Bridgeway share price is one to watch following the review. Shares in the Aussie litigation funder surged 4.4% higher on Friday despite no new announcements.

Share price gains have been hard to come by for shareholders in 2021. The Omni Bridgeway share price has slid 24.2% lower this year to $3.36 per share with an $880.9 million market capitalisation.

The company’s focus is on executing against its new 5-year business plan announced in November 2020. That includes completing its evolution into a “global alternative investment manager of legal assets”.

The last year has been something of a rollercoaster for the Omni Bridgeway share price. That culminated in the group’s shares hitting a new 52-week low of $3.16 per share on Friday.

Foolish takeaway

This morning’s announcement means Omni Bridgeway shares look set to stay on the ASX boards.

Investors in the Aussie litigation funder will be watching the company’s shares in early trade following the latest update. The Omni Bridgeway share price is currently trading just shy of a 52-week low with a 2.1% per annum dividend yield.

The S&P/ASX 200 Index (ASX: XJO) is tipped to open higher this morning based on the latest SPI futures numbers led by higher oil prices.

More reading

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• ASX 200 Weekly Wrap: ASX finishes higher, despite tech selloff
• 5 things to watch on the ASX 200 on Monday
• These were the best performing ASX 200 shares last week
• These were the worst performing ASX 200 shares last week

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. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why the Omni Bridgeway (ASX:OBL) share price is one to watch appeared first on The Motley Fool Australia.

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