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The new bull market has thrust many shares to record highs. However, it is still possible to buy cheap shares due to an uncertain outlook for the economy in the short run.

Buying stocks that trade at cheap prices has historically been a sound means of capitalising on stock market cycles.

Therefore, building a portfolio right now of high-quality businesses while they trade at low prices could be a means of generating high returns. It may even double an initial investment at a relatively fast pace over the coming years.

Buying cheap shares with capital growth potential

One of the major reasons to buy cheap shares is their capacity to deliver high returns. Buying any asset at a low price is likely to be a better idea than purchasing it at a higher price. There is more scope for capital growth, which equates to greater returns for an investor.

Even though the new bull market has pushed many stocks to new highs, some sectors and companies trade at cheap prices. In many cases, they are businesses that face challenging short-term prospects that could mean their financial performances disappoint. However, since the world economy has always recovered from periods of low growth to deliver an improving performance, the long-term prospects for many industries may be more positive than market sentiment suggests.

Focusing on quality companies at low prices

Of course, some cheap shares may be priced at low levels for good reason. For example, they may have weak balance sheets or lack an economic moat that means they fail to deliver strong profit growth in the long run.

As such, it is imperative to focus on the quality of any company before buying it. This means analysing its industry position, strategy and financial position through assessing its latest investor updates and annual reports. Otherwise, it is possible to end up with a portfolio filled with unattractive companies that may not be able to recover even in a long-term bull market. This could mean high risks, as well as low returns.

Doubling an investment in undervalued shares

Investing in cheap shares could be a means of generating higher returns than the wider stock market over the long run. It allows an investor to capitalise on the new bull market via companies for whom investors may currently have a negative standpoint that may not be merited in the coming years.

Even matching the returns of the stock market could lead to 100%+ returns in the coming years. For example, indices such as the FTSE 100 Index (FTSE: UKX) and S&P 500 Index (SP: .INX) have delivered annualised total returns of 8-10% in recent decades. This means that an investment that matches their performance could double within 7-9 years.

However, an investor may be able to reduce this timeframe by purchasing undervalued companies now. They could be among the top performers in the new bull market.

More reading

• Facebook strikes first deal with Seven West (ASX:SWM) as media bargaining code looms large
• These ASX retail shares are smashing sales expectations
• City Chic (ASX:CCX) share price to grab attention after HY21 profit growth
• Why the Simmonds (ASX:SIO) share price will be on watch today
• Leading broker tips Costa (ASX:CGC) share price to rocket higher

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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ASX media share will be in the spotlight after Facebook, Inc. Common Stock (NASDAQ: FB) and stuck a deal with Seven West Media Ltd (ASX: SWM).

The Aussie media group is believed to be the first to sign a letter of intent with the social media titan, according to the Australian Financial Review.

It isn’t only Seven West that likes the deal. The Facebook share price broke its four-day losing streak last night.

Seven West first but not last to strike deal with Facebook

Nine Entertainment Co Holdings Ltd (ASX: NEC) and News Corporation Class B Voting CDI (ASX: NWS) are believed to be close to penning their own agreement with Facebook.

The news should keep the Seven West share price close to its two-year high even as the S&P/ASX 200 Index (Index:^AXJO) is set to open lower this morning. The company, which owns the West Australian newspaper and Channel Seven free-to-air stations, closed at 54 cents yesterday.

The Nine Entertainment share price and News Corporation share price are also hovering close to multi-year or record highs on the belief that Silicon Valley tech giants will inject more than $200 million a year into local journalism.

Facebook throws a tanty

The proposed media bargaining law has dragged Facebook and Google’s owner Alphabet Inc Class C (NASDAQ: GOOG) kicking and screaming to the negotiation table.

Google was the first to capitulate but Facebook played hardball and blocked Australian news organisations (and then some) from posting on its platform. That wasn’t to be a well calculated move as Facebook underestimated the public backlash.

It has since promised to restore access to its service to all Australian organisations.

Facebook share price jumps on media bargaining code compromise

Facebook’s three-finger salute to Australia also didn’t help the Facebook share price. It tumbled for four straight days before news that it struck a compromise with the federal government sent the shares jumping over 2% to US$265.86 last night.

The stumbling block that stopped ASX media groups from striking a deal with Facebook was the “poison pill” clause that gave Facebook the right to immediately terminate deals.

But Facebook has dropped that after the federal government agreed to amend its media bargaining code.

The changes mean that the government will need to consider existing commercial deals between the platforms and media companies before applying the media bargaining code.

The government also has to give the US giants at least a one-month warning before enforcing the code.

More reading

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• 2 interesting ASX shares rated as strong buys by brokers
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors.

Brendon Lau 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 Alphabet (C shares) and Facebook. The Motley Fool Australia has recommended Alphabet (C shares) and Facebook. 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 coronavirus pandemic has had a mixed impact on ASX retail shares. Those with a strong online presence have benefitted from an influx of online shoppers. Those reliant on high street trade have been more vulnerable to lockdowns and social distancing requirements.

But retail sales have come back strongly as the economy has opened up. According to the Australian Bureau of Statistics, Australian retail turnover rose 10.7% in January 2021 compared to January 2020.

ASX shares such as JB Hi-Fi Limited (ASX: JBH) have benefitted from the increase in consumer spending. The electronics retailer reported a 23.7% increase in sales for the half-year ended 31 December 2021.

But it’s not just JB Hi-Fi that’s been seeing a significant increase in sales. Adairs Ltd (ASX: ADH) reported a 34.8% increase in sales over the same period. Online only retailer Temple & Webster Group Ltd (ASX: TPW) did even better, reporting a 118% increase in revenue for the most recent half year. Kogan.com Ltd (ASX: KGN) is due to report its half-year results on Friday, and investor expectations are high.

Let’s take a closer look at how these ASX retail shares are performing this reporting season. 

JB Hi-Fi 

Australia’s favourite electronics retailer made record sales in 1H FY21. Selling some $4.9 billion worth of TVs, computers, gaming devices, and mobiles, JB Hi-Fi saw continued elevated demand for consumer electronics and home appliances.

“We are pleased to report record sales and earnings for HY21, in what has been an extraordinary period,” said CEO Richard Murray. “Investments in our online business and supply chain have enabled us to seamlessly meet our customers’ increased demand,” he added. The increased demand pushed JB Hi-Fi’s profits up 86.2% to $317.7 million. This allowed for an 81.8% increase in dividends, which reached 180 cents per share. 

Online sales increased 161.7% over the half year to $678.8 million. JB Hi-Fi has been continuing to invest in this channel, upgrading websites and providing expanded delivery and warehouse options.

Australian sales were up 23.3%, thanks to the key growth categories of communications, computers, games hardware, and small appliances. In New Zealand, total sales were up 9.1%, and online sales were up 69.2%. The Good Guys grew total sales by 26.4% thanks to continued elevated demand for home appliances and consumer electronics. Strong sales momentum continued into January across all brands. Murray says the company recognises that the operating environment is uncertain but remains excited by the outlook for the business. 

Adairs

Homewares retailer Adairs has benefitted from customers spending more time at home during lockdowns. Many have taken the opportunity to upgrade their home furnishings and decor. Despite the impact of store closures on the company’s 43 Greater Melbourne locations, Adairs managed to deliver an increase in gross sales to $243 million in 1H FY21. Online sales accounted for $90.2 million, or 37.1%, of sales. Earnings per share (EPS) were 25.9 cents (compared to 7.8 cents in 1H FY20) and profits leapt 233.4% to $43.9 million. 

With profits on the rise, Adairs has announced it will repay its $6.1 million JobKeeper wage subsidy to the government. Shareholders, in turn, will receive an interim dividend of 13 cents per share.

Investment in its omni-channel strategy is showing benefits for Adairs, with membership of its Linen Lovers club now exceeding 900,000. “Our first-half FY21 results are outstanding and a clear testament to the strategic health, operational excellence, and resilience of our business,” said CEO Mark Ronan. “These results highlight the benefits of investing early in our omni-channel strategy.”

Temple & Webster Group 

Temple & Webster reported first-half revenue of $161.6 million as active customer numbers grew 102% to 687,000. “It is great to see our revenue growth translating into operating leverage and significant profit growth,” said CEO Mark Coulter. “This allows us to accelerate our investment into areas such as data, technology, private label, and brand awareness.”

The company is a pure-play online retailer in the furniture and homewares market with a strategy of being a category specialist. The customer offering is built around the biggest range of furniture and homewares in the country. Coulter says the advantages of being an online leader are apparent as the company continues to grow its market share. 

Temple & Webster reported earnings before interest, taxes, depreciation and amortisation (EBITDA) of $14.8 million in 1H FY21, up 556% from $2.3 million in the prior corresponding period. Cash flow was positive, and the business ended the half with a cash balance of $85.7 million (including $40 million in placement proceeds).

Temple & Webster says the second half has started strongly, with January revenue growth tracking in excess of 100%. Strong tailwinds are expected to aid performance. Tailwinds include ongoing adoption of online shopping due to structural and demographic shifts and increases in discretionary income due to travel restrictions. 

Kogan

Kogan’s half-year financials are due out on Friday. In its January business update, the company reported a strong Christmas trading period with record-breaking sales during Black Friday week. Gross sales for 1H FY21 grew by more than 96%, with gross profit up 120%.

Founder Ruslan Kogan said, “We are proud to have delivered another record half while undertaking significant investments into the future of the business.” Investors will be expecting big things when Kogan unveils its results later in the week. 

Can it continue?

These ASX retail shares have seen major surges in sales thanks to the COVID-19 pandemic. Lockdowns have meant people are spending more time at home, and travel bans are leaving them with extra discretionary income.

Whether this will continue as the vaccine rolls out and we return to a new normal remains to be seen. But a continued economic recovery should support sales as the world moves out of pandemic mode. 

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Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd and Temple & Webster Group Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends ADAIRS FPO. The Motley Fool Australia has recommended ADAIRS FPO, Kogan.com ltd, and Temple & Webster Group 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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All eyes will be on the City Chic Collective Ltd (ASX: CCX) share price today after the company reported its FY21 half-year result.

City Chic is a global retailer of plus-size apparel, footwear and accessories for women. It has websites and wholesale agreements for the northern hemisphere, with a large physical store network in Australia and New Zealand.

FY21 half-year highlights

City Chic reported that half-year sales increased by 13.5% to $119 million. It achieved comparable sales growth of 20.8% excluding Victorian store closures, or 12.7% including the store closures.

Online sales continue to grow strongly. Digital sales grew 42% and represented 73% of total sales. In FY20, online sales made up 65% of sales and in the first half of FY20 online sales were 53% of the total. US online sales contributed $45 million of sales, partly thanks to the Avenue acquisition.

There was also growth of its northern hemisphere business. Sales in the northern hemisphere made up 45% of total sales, up from 42% in FY20. However, wholesale and marketplace sales were down $6.4 million because of COVID-19 challenges for its US partners. The company also said that revenue was impacted by the strengthening of the Australian dollar as well as the closure of 14 stores in June 2020 due to some landlords wanting too much rent.

City Chic reported that its global customer base increased 56% year on year to 801,000 active customers.

The gross trading profit margin, excluding fulfilment costs, declined 70 basis points (0.70%) to 61.2% because of the shift in channel mix to online and full period contribute of the lower gross margin of the Avenue business.

The underlying cost of doing business reduced to 41.6% of sales, down from 43.7% last year. This was helped by a bigger contribution from the lower-costing online channel as well as cost management of head office and store costs.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 21.8% to $23.3 million. The EBITDA margin improved from 18.2% to 19.6%.

Statutory net profit after tax increased by 24.8% to $13.1 million. The normalised operating cash flow was $21.5 million, up 25.7%.

UK acquisition

City Chic completed the Evans acquisition on 23 December 2020, which it bought for £23.1 million. It has acquired the e-commerce and wholesale businesses. It’s a UK market leader in the plus-size apparel and footwear space. In the year to August 2020, it made £23 million of online sales whilst the wholesale business generated £3 million of sales.

The City Chic share price has risen more than 26% since announcing this acquisition. 

Financial position and dividend

City Chic said it had no debt at the end of the half-year, with $83 million of cash. It said it’s well positioned for further organic growth as well as acquisition opportunities.

Due to the potential opportunities to accelerate growth and COVID-19 uncertainty, City Chic’s board decided not to pay a dividend. It will review the idea of paying a dividend at the full year result.

FY21 outlook

In the first eight weeks of FY21, City Chic said that it has continued to deliver strong positive comparable sales growth.

It will continue to focus on growing its northern hemisphere businesses, particularly in the UK and Europe. The company also plans to introduce a conservative product for the Australia and New Zealand market.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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Simonds Group Ltd (ASX: SIO) shares will be on watch this morning following the release of the company’s first-half results late yesterday. At Tuesday’s market close, the Simonds share price finished the day flat at 63 cents.

Let’s take a look and see how the home builder performed for the period.

What could impact the Simonds share price today?

The Simonds share price could come under pressure today after the company reported a drop in its key business metrics.

In yesterday’s release, Simonds advised that revenue and earnings took a hit due to COVID-19 impacting trading conditions.

For the six months ending 31 December, Simonds delivered total revenue of $325 million, down 0.8% from the prior corresponding period. The slight fall was attributed to the effects of COVID-19 restrictions on site productivity. However, the company recorded 1,172 site starts, which was 29 starts above the comparative period in H1 FY20.

Although Simonds’ home results saw a 1.1% dip in revenue to $318.1 million, its education segment rose strongly to achieve growth of $5.7 million, up 22.8%. The sound performance was underpinned by the take up of a virtual classroom delivery model, growing 72% in the first half of FY21.

Earnings before interest, tax, depreciation and amortisation (EBITDA) dropped to $14 million, a decline of 11.9% from this time last year. The company invested in new sales channels and increased its marketing spend which offset the additional margin obtained in H1 FY21.

The builder reported that net profit after tax (NPAT) from continuing operations sank to $1.9 million, shedding a mammoth 53.7% compared to the pcp.

The company generated net cash flows of $2.8 million, plunging 39.1% from H1 FY20. The poor result came from the ill timing of cash collections and payments.

Simonds closed the calendar year with a cash balance of $31.1 million. The group’s headroom stood at $56.1 million with undrawn facilities on hand to weather any future crisis.

In a move that could possibly weigh down the Simonds share price today, the board declared that no interim dividend will be paid to shareholders.

Management commentary

Simonds group CEO and managing director Rhett Simonds touched on the first-half results amid challenging COVID-19 trading conditions. He said:

The ability of our customers, staff, suppliers, and sub-contractors to adapt in these conditions has ensured the Group could continue to generate positive cashflows. We remain focused on improving and delivering sustainable operating performance through cost efficiency, increasing sales through our traditional display homes and expanding through digital channels, as well as investing in new business channels.

Our business, like many others across the housing sector, has benefitted from government stimulus and in particular the Federal Government’s HomeBuilder program. This has helped to mitigate the impact of the lockdowns initiated in each of the geographic areas the Group operates.

Outlook

Looking ahead to the current second-half, Simonds predicts COVID-19 to continue having an impact on its earnings. Government-mandated measures such as restrictions on access to sites and display centres as well as supply chain constraints are expected to remain.

The company noted that robust demand for the government’s HomeBuilder stimulus package may prolong build times and impact trade rates. Despite the volatility, the group is forecasting positive growth through to FY22.

Simonds share price snapshot

Over the last 12 months, the Simonds share price has gained 70% reflecting positive investor sentiment in the market. Simonds shares hit a low of 20 cents in March, before strongly rebounding to their current levels.

Based on the current share price, Simonds has a market capitalisation of around $90 million.

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Motley Fool contributor Aaron Teboneras 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 Costa Group Holdings Ltd (ASX: CGC) share price has been a very strong performer over the last 12 months.

Since this time in 2020, the horticulture company’s shares have risen a sizeable 48%.

Can the Costa share price go even higher?

The good news for investors is that the Costa share price has been tipped to go even higher from here.

According to a note out of Goldman Sachs this morning, the broker has upgraded the company’s shares to a buy rating and lifted the price target on them by a massive 55% to $5.35.

Based on the latest Costa share price, this price target implies potential upside of 21.6% excluding dividends.

And with Goldman forecasting a 2.8% fully franked dividend yield over the next 12 months, this potential return stretches to over 24%.

Why is Goldman Sachs bullish on Costa?

Goldman Sachs made the move due to the improved outlook across Costa’s key categories, more clarity on its growth projects, and its stronger balance sheet. It feels the latter is supportive of acquisitions and organic growth.

It commented: “We have upgraded our rating to Buy (previously Neutral). The following factors are driving our thinking: (1) the improved outlook across key categories; (2) better disclosure and renewed focus on planting growth projects; (3) a stronger balance sheet to support acquisitions and organic growth.”

“High density Avocado roll out; long cane strategy for raspberries and blackberries; China and Morocco planting programs; continued ramp up of Arana premium blueberry production; shift to higher margin pre-cut and packed mushroom lines; rebound in snacking tomato demand and pricing following COVID disruption; roll out of 3rd-party blueberry royalties with new South African region and continued growth in other key regions.”

Goldman Sachs expects the sum of the above to result in its earnings growing by a compound annual growth rate of 17% between FY 2020 to FY 2023.

In light of this growth profile, it feels its shares are good value at 22x estimated FY 2021 earnings.

More reading

• Why these ASX shares just raced to 52-week highs or better
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• Why Costa, Lovisa, OZ Minerals, & Tyro shares are racing higher today
• Costa (ASX:CGC) share price in focus after its results smash expectations

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COSTA GRP 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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If you’re looking for buy and hold options, then you might want to take a look at the mid cap space.

At this side of the market, there are a number of companies with the potential to grow materially over the next decade or two.

If these companies deliver on their potential, their shares could generate mouth-watering returns for investors.

With that in mind, here are two mid cap ASX shares to consider as buy and holds:

Adore Beauty Group Limited (ASX: ABY)

The first mid cap ASX share to consider is Adore Beauty. It is the country’s leading pureplay online beauty retailer. It aims to deliver users an empowering and engaging beauty shopping experience personalised to their needs.

This means that as well as being a place to buy beauty products, its website is also a destination for education and entertainment. As a result, beauty consumers frequent its website even when they are not seeking to purchase items.

This strategy is working wonders for Adore Beauty. This week it released its half year results and revealed an 82% increase in active customers to 777,000. From these customers, the company generated revenue of $96.2 million over the six months. This was an increase of 85% on the prior corresponding period.

Pleasingly, this is still only scratching at the surface of a growing Australian beauty and personal market currently worth ~$11 billion a year.

Analysts at Morgan Stanley currently have an overweight rating and $8.35 price target on the company’s shares. This compares to the latest Adore Beauty share price of $5.49.

Nuix Limited (ASX: NXL)

Another mid cap ASX share to consider as a buy and hold option is Nuix. It is a growing provider of investigative analytics and intelligence software.

Its Discover, Workstation, and Investigate platforms allow users to transform massive amounts of data from emails, social media, communications, and other human-generated content into actionable intelligence.

Given how much data people and businesses are generating today, it’s no surprise that demand for its offering is growing fast.

In fact, in FY 2020 the company reported an impressive 25.9% increase in total revenue to $175.9 million. Positively, this revenue is largely (~89%) from recurring subscriptions. This gives it a great base to build from.

Morgan Stanley is also a fan of Nuix. It currently has an overweight rating and $11.00 price target on the company’s shares. The broker feels the company is a structural growth story.

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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.

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Accent Group Ltd (ASX: AX1) shares will be closely watched by investors today following the release of the company’s half-year financial results. At market close yesterday, the Accent share price finished the day down 3.4% to $2.26.

Let’s take a look at how the footwear retailer has been performing.

What could impact the Accent share price today?

It will be interesting to see where the Accent share price moves today after the group reported a positive set of numbers.

For the six months ending 27 December, Accent reported total sales of $541.3 million, reflecting a 6.6% increase on the prior corresponding period (pcp). This was primarily driven by the company-operated stores which contributed sales of $466.8 million, a 5.1% lift on the same period last year. Digital sales represented 22.3% of retail sales and grew by 110% to $108.1 million.

During the period, Accent opened a total of 50 new stores, and closed 5 existing stores where rent outcomes could not be settled. For the full-year, the company expects to open more than 90 stores across its umbrella of brands.

Earnings before interest, tax, depreciation and amortisation (EBITDA) came to $138.4 million, a 29% jump over H1 FY20.

Net profit after tax (NPAT) surged to $52.8 million, up 57.3% over the comparable period. Accent noted that this is the seventh consecutive half-year of record profit.

The Accent share price will be in focus after the board declared a fully franked interim dividend of 8 cents per share to be paid to eligible shareholders on 18 March. The group amplified its interim dividend by 52.4% over H1 FY20’s payout of 5.25 cents.

Accent closed the calendar year with a healthy cash balance of around $72.8 million.

Words from the CEO

Accent Group CEO Daniel Agostinelli touched on the company’s performance, saying:

The Group’s unrelenting focus on VIP (our loyalty customers), Vertical and Virtual along with our integrated digital and store operating model has delivered another record profit driven through strong sales and gross profit margin.

The team continued to adapt and accelerate the business, delivering strong execution and sales through the key cyber events in November and the Christmas trading period.

Outlook

In the first 8 weeks of trading into the second half, Accent stated that like-for-like sales across its network have soared 10.7% over the pcp.

It recognised that the back-to-school market is extremely robust with its Athlete’s Foot brand achieving like-for-like sales up 20.4% in January alone. This result signified the company’s biggest trading month of the year.

Given the positive momentum, Accent cautioned investor expectations as the COVID-19 environment remains fluid. It said that it would not provide sales or profit guidance for the FY21 full year.

Accent share price snapshot

Since hitting a low of 55.5 cents in March last year, the Accent share price has rebounded strongly. Whilst Accent shares may only show a 20% gain on a 12-month historical chart, they have surged more than 300% from their March lows. 

Based on the current Accent share price, the company commands a market capitalisation of approximately $1.2 billion.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Accent Group. 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 SEEK Limited (ASX: SEK) share price was out of form on Tuesday and sank 7%.

Investors were selling the job listings giant’s shares due to weakness in the tech sector and the shock revelation that its founder and CEO, Andrew Bassat, was stepping down.

Will the SEEK share price perform better today?

The SEEK share price could be given a boost today by news that it has finalised an agreement to sell down its stake in the China-based Zhaopin business.

According to the release, the company has entered into an agreement with a consortium of investors led by Primavera Capital Group.

Primavera is a leading China-based global investment firm, which will become Zhaopin’s largest shareholder. Following the completion of the sale, SEEK’s ownership will reduce from 61.1% to 23.5%.

The company expects to receive gross proceeds of ~A$697 million, which implies a Zhaopin valuation of ~A$2.2 billion.

Management advised that the sale is a continuation of SEEK’s strategy to manage its portfolio and create the right structure to support Zhaopin’s long-term growth aspirations.

What’s next?

When SEEK released its half year results yesterday, it decided against declaring an interim dividend.

However, in lieu of an interim dividend, the Board intends to declare and pay a dividend of ~20 cents per share following receipt of SEEK’s proceeds. The record and payment dates will be determined upon declaration of the dividend.

Management also notes that the sell down of Zhaopin will impact its ability to meet its $5 billion aspirational revenue target by FY 2025. Depending on completion, it could also impact its ability to achieve its FY 2021 guidance.

However, management notes that its long-term strategic drivers and substantial revenue opportunity remains intact regardless of the sale.

SEEK’s CEO and Co-Founder, Andrew Bassat, commented, “We are very proud of our journey with Zhaopin. When we first invested 15 years ago Zhaopin was a loss-making and distant number three player. Our long-term approach combined with the strong management team led by Evan Guo has transformed Zhaopin into a market leader across many key metrics and it now generates strong cash flows.”

“The Consortium will play an important role in helping Zhaopin to deliver on its long-term growth strategy.” “Through this transaction, SEEK has achieved a strong return of over 5x and we have rebalanced our portfolio weightings. This transaction also creates significant balance sheet flexibility to re-deploy capital into high returning initiatives across SEEK.”

More reading

• ASX 200 goes higher, Afterpay sinks, Adbri impresses
• Why the Afterpay (ASX: APT) share price is down 8% today
• Why Afterpay, Austal, Perenti, & SEEK shares are tumbling lower
• ASX 200 flat: SEEK CEO exits, Afterpay sold off, BOQ surges higher
• Seek (ASX:SEK) shares sink as founder steps down

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended SEEK 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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Exchange traded funds (ETFs) can be a fantastic way to balance out your portfolio.

This is because ETFs provide investors with easy access to a large and diverse group of shares that you wouldn’t usually have access to.

With that in mind, I have picked out two ETFs that are popular with investors right now. Here’s what you need to know about them:

BetaShares NASDAQ 100 ETF (ASX: NDQ)

The first ETF to look at is the incredibly popular BetaShares NASDAQ 100 ETF. As you might have guessed from its name, this ETF gives investors exposure to 100 of the largest non-financial companies on the famous Nasdaq index.

This means that investors will be buying a slice of some of the world’s most well-known and highest quality companies. These include the likes of Amazon, Apple, Facebook, Microsoft, Netflix, Tesla, and Google parent, Alphabet.

In addition to this, the index includes a number of upcoming companies which could be the tech stars of the future.  

The BetaShares NASDAQ 100 ETF share price has generated a return of 17% over the last 12 months.

Vanguard MSCI Index International Shares ETF (ASX: VGS)

Another ETF to consider is the Vanguard MSCI Index International Shares ETF. This ETF provides investors with exposure to 1,528 of the world’s largest listed companies from major developed countries.

Vanguard notes that it offers investors low-cost access to a broadly diversified range of securities that allows them to participate in the long-term growth potential of international economies outside Australia.

Among its largest holdings are the likes of Apple, Johnson & Johnson, JP Morgan, Nestle, Procter & Gamble, and Visa.

The ETF also offers investors a source of income. At the last count, its units were providing investors with a 1.9% yield. While not the largest yield you’ll find, it is still significantly better than term deposits and savings accounts.

More reading

• 2 top ETFs to buy and hold
• 2 of the best ETFs for ASX investors to buy today
• 2 great ASX growth shares to buy
• Nasdaq at record high! Here’s what it means for the ASX 200
• 2 ETFs to buy for strong diversification

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 BETANASDAQ ETF UNITS. The Motley Fool Australia has recommended BETANASDAQ ETF UNITS and Vanguard MSCI Index International Shares 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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