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The Challenger Ltd (ASX: CGF) share price has come under pressure following the release of its half year results.

In morning trade the annuities company’s shares are down 6% to $6.77.

How did Challenger perform in the first half?

For the six months ended 31 December, Challenger reported annuity sales of $2.2 billion and total life sales of $3.4 billion.

While this was a solid 12% and 10% increase, respectively, over the prior corresponding period and a mammoth 87% and 71% increase, respectively, over the second half of FY 2020.

Together with funds management net inflows of $6.4 billion for the half, Challenger ended the period with assets under management of $96 million. This was a 13% lift on the prior corresponding period.

Things weren’t quite as positive for its profits, with Challenger reporting a sizeable (but expected) decrease in half year earnings.

Normalised net profit before tax (NPBT) came in at $196 million, down 30% on the same period last year. This puts in on track to achieve its FY 2021 normalised NPBT guidance of $390 million to $440 million

This ultimately led to profit after tax falling 29% on a normalised basis to $137 million and rising 1% to $223 million on a statutory basis. The latter includes positive investment experience of $87 million.

Finally, Challenger is resuming its dividend payments after a brief hiatus and declared a fully franked interim dividend of 9.5 cents per share.

How does this compare to expectations?

According to a note out of Morgans, it expected the company to reveal that it was tracking in line with its guidance and was forecasting a half year underlying profit before tax of $204 million. Its analysts also pencilled in an interim dividend of 9.8 cents per share.

While Challenger is tracking in line with its guidance, it has fallen short of Morgans’ profit and dividend forecasts for the half.

This appears to be why the Challenger share price is under pressure today.

Outlook

As mentioned above, management expects its normalised net profit before tax in FY 2021 to be in the range of $390 million to $440 million.

It notes that earnings are expected to be weighted to the second half, reflecting the gradual deployment of excess cash and liquid investments over the year.

Managing Director and Chief Executive Officer, Richard Howes, commented: “Our strategy of diversifying revenue is working with strong book growth in our Life business and industry leading organic flows in Funds Management.”

“We remain strongly capitalised with prudent portfolio settings which are appropriate given our growing customer franchise. The investment portfolio is in good shape, with no significant credit defaults and stable property valuations during the half year. We are gradually deploying our excess cash and liquidity to enhance future returns.”

“Challenger enters the second half of the 2021 financial year in good shape, having withstood industry and COVID-19 related disruption of recent years. Our strong performance in funds management, building momentum in annuities, and new opportunities in banking mean Challenger is well placed to achieve our vision of providing customers with financial security for retirement,” he concluded.

More reading

• 5 things to watch on the ASX 200 next week
• Top ASX shares to buy in February 2021

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

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There are some ASX small cap shares worth owning according to fund manager Naos Asset Management.

What is Naos Asset Management’s investment approach?

Naos is led by chief investment officer (CIO) Sebastian Evans. NAOS Small Cap Opportunities Company Ltd (ASX: NSC) is one of the listed investment companies (LIC) operated by Naos.

That particular LIC looks at businesses with market capitalisations between $100 million and $1 billion.

The fund manager has a number of investment focuses. It looks for businesses that are good value with long term growth potential. With its portfolio, Naos believes it’s better to have a quality portfolio rather than numerous holdings. That’s why it only holds around 10 positions in each fund, with each ASX share representing a high-conviction position.

Naos invests in the small cap ASX shares for the long-term. It considers the performance and the liquidity of its positions whilst ignoring the index. Performance can sometimes be quite variable when compared to the index.

It looks to invest purely in industrial companies whilst also considering the ESG factors (environmental, social and governance).

COG Financial Services Ltd (ASX: COG)

COG was the only business in the Naos Small Cap Opportunities portfolio to give a meaningful update during January.

This small cap ASX share, as the name suggests, provides a number of financial services including finance, broking, aggregation and it also owns a stake of a debenture issuer.

Naos explained that COG revealed its FY21 half-year net profit after tax and amortisation (NPATA) would be $10.1 million, which would be an increase of 140% compared to the prior corresponding period.

The fund manager was pleased that the profit growth is translating into strong free cash flow with unrestricted cash and term deposits of $53 million (not including the $17 million investment in Earlypay Ltd (ASX: EPY)), compared to a market capitalisation of $149 million with minimal gross debt.

Naos said the small cap ASX share’s profit growth was driven by two main factors, the first of these being the finance, broking and aggregation division, where margins have increased as the business continues to improve efficiencies through automation as well as offering complementary services to their clients such as insurance broking.

The other key driver, according to the fund manager, was the increased ownership of debenture issuer Westlawn Finance. Naos believes that Westlawn has continued to be a beneficiary in the growth of the debenture book, as well as the growth of its insurance broking arm.

COG said that it will be rolling out a ‘hub and spoke’ insurance broking model to all their owned and aggregated broker members in the coming months.

BSA Limited (ASX: BSA)

Naos describes BSA as a solutions-focused technology services small cap ASX share.

BSA assists clients in implementing their physical assets, needs and goals in the areas of building services, infrastructure and telecommunications. BSA clients include the National Broadband Network (NBN), Aldi Supermarkets, Foxtel and the Fiona Stanley Hospital.

The fund manager outlined the investment case for BSA. Even though the company had an eventful 2020, Naos thinks there are some significant catalysts.

The first relates to the $4.5 billion that the NBN is looking to spend over the next three years to continue to upgrade specific parts of the network. Naos believes that the small cap ASX share is well positioned to secure part of this work as it continues to deepen its relationship with the NBN, as demonstrated through its recent contract win.

Secondly, Naos thinks the recent acquisition of Catalyst One provides an opportunity to potentially transform a $15 million revenue business into a $100 million business over the next three to five years if BSA can successfully combine the Catalyst One offering with the existing skillset of the business to offer a one-stop solution for customers around both their current and future wireless capability needs.

The fund manager also said that BSA could be more aggressive with an active buyback and a higher payout ratio could be achieved given the large cash balance on the balance sheet.

More reading

• 2 little-known small cap ASX shares rated as buys by fundie

Motley Fool contributor Tristan Harrison owns shares of NSC. 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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American Pacific Borates Ltd (ASX: ABR) shares will be on watch today following an update regarding the company’s Fort Cady Borate Mine. At market close yesterday, the ABR share price finished the day at $1.86.

It will be interesting to watch how the company’s shares perform today as investors digest this morning’s update.

What did ABR announce?

The ABR share price will be in focus this morning after the company released a positive update.

According to this morning’s release, ABR reported that it has selected Matrix Service Co (NASDAQ: MTRX) to finish the Phase 1A construction at the Fort Cady Borate Mine.

Established in 1984, Matrix is focused on construction, maintenance and fabrication services primarily across the North American region. However, the company extends its reach in energy and industrial markets throughout the United States, Canada, South Korea, and Australia.

ABR stated that it has begun discussions with Matrix to ensure timely completion of the project. It’s estimated the works will be completed sometime in the third quarter of the 2021 calendar year. ABR also highlighted that it has a healthy cash balance of $67.3 million as of 31 January, to fully-fund the first phase of the project.

Furthermore, ABR noted that it intends to retain Matrix for the remaining three production phases at the Fort Cady Borate Mine.

Management commentary

ABR CEO and managing director Mike Schlumpberger welcomed the partnership, saying:

We are delighted with the appointment of Matrix to complete the construction of Phase 1A of our Fort Cady Borate Mine. Matrix is a leading North American industrial engineering and constructor contractor headquartered in Tulsa, Oklahoma. Matrix’s core values of safety and community involvement align perfectly with ABR’s core values and intention to ensure the mine is delivered safely and with positive community involvement.

This is another important step in the fulfilment of our aspiration to become a globally significant producer of borates and specialty fertilisers.

About the ABR share price

Over the past 12 months, the ABR share price has performed well for investors, gaining more 280%.

The company’s shares dipped to a 52-week low of 14.5 cents in March, before storming higher.

Just last month, ABR shares reached an all-time high of $1.88, and are within a whisker of that record today.

At the present share ABR price, the company has a market capitalisation of around $697 million.

More reading

• American Pacific Borates (ASX:ABR) share price pops following latest presentation

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 market’s attention is on the earnings recovery during this profit reporting season, but the real surprise may be dividends.

It’s the expected rebound in earnings from the impact of COVID-19 that’s dominating the spotlight and fuelling much of the recent rally in the S&P/ASX 200 Index (Index:^AXJO).

There’s nothing like a “V-shape” profit recovery to get the blood racing. We have already seen some ASX shares issue profit upgrades.

Profit upgrades are only half the story

Some recent examples are the Amcor CDI (ASX: AMC) share price, BlueScope Steel Limited (ASX: BSL) share price and ARB Corporation Limited (ASX: ARB) share price.

We can expect more positive earnings surprises and upgrades during this month’s reporting season. But the real action may be on the dividends front.

That’s the view from Morgan Stanley who is predicting dividend upgrades will surpass profit upgrades.

Dividend upgrades could dominate profits

“During 2020 the primary focus shifted from solvency and liquidity to leverage to a recovery,” said the broker.

“The debate around earnings also evolved with a focus on how quickly pre-COVID levels of earnings could be regained.

“Left in the back of the analyst spreadsheet is the dividend, anchored to a savage COVID adjustment and well below FY19 levels in many cases.”

Higher upside from lower expectations for dividends

As the market isn’t pricing in much of a dividend recovery, at least not as much as earnings, ASX shares that boost their payouts could be the bigger winners.

The fact is, the tailwinds that are lifting earnings expectations apply equally to dividends!

The pandemic recession isn’t as bad as initially feared, cheap money is lubricating the wheels in the corporate machinery, jobs are rebounding and consumers are cashed up.

Dividend upgraders have an extra edge

These factors are as conducive for dividend growth as it is for profits. But dividends may have one extra advantage – capital raises.

ASX companies have gone to investors for emergency capital injections during the height of the COVID scare. As it turned out, many didn’t need quite as much as feared and have excess cash on their balance sheets to restore some, if not all, of their dividend cuts.

Some companies that went cap in hand to shareholders in 2020 but are expected to cut dividends in FY21 include the Shopping Cntrs Austrls Prprty Gp Re Ltd (ASX: SCP) share price, Perpetual Limited (ASX: PPT) share price and Lendlease Group (ASX: LLC) share price.

Others like the Metcash Limited (ASX: MTS) share price, Tabcorp Holdings Limited (ASX: TAH) share price and Newcrest Mining Ltd (ASX: NCM) are also on the list.

More reading

• Here’s a bargain ASX share in a sea of expensive stocks
• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 rises 0.6%, Vocus jumps on takeover offer, Afterpay hits new record
• Why the Afterpay (ASX:APT) share price is exploding even higher today
• ASX 200 up 0.6%: Vocus rockets, Zip surges, & Treasury Wine rebuffs speculation

Motley Fool contributor Brendon Lau owns shares of BlueScope Steel Limited and Newcrest Mining Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended Amcor Limited. The Motley Fool Australia owns shares of Shopping Centres Australasia Property Group. The Motley Fool Australia has recommended ARB 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Tesla Inc (NASDAQ: TSLA) made a game-changing disclosure on Monday.

The electric-vehicle (EV) leader purchased $1.5 billion worth of bitcoin (CRYPTO: BTC) in a move that could bring legitimacy to the digital currency markets and pave the way for more companies to adopt the cryptoasset as a key part of their treasury-management strategies.

Tesla’s entry into the crypto arena is likely to accelerate this trend. Tesla’s blockbuster bitcoin purchase could create “a safe zone for some of the smaller companies and possibly everyone in the S&P 500 Index (SP: .INX) to allocate into bitcoin,” Antoni Trenchev, co-founder of crypto lender Nexo, said in January. 

Moreover, with $19.4 billion in cash reserves as of the end of 2020, Musk could choose to bolster Tesla’s bitcoin holdings in the year ahead. The EV leader also said that it intends to begin accepting payments in bitcoin for its vehicles, subject to applicable laws. 

Bitcoin’s price soared on the news to a record high above $44,000 before pulling back close to $43,000 as of 3:25 p.m. EST on Monday. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• Should short selling be banned?
• Tesla finally recalls 134,951 vehicles for defective touchscreens
• GameStop (NYSE:GME) dominates the US shares ASX investors have been buying
• GameStop chaos: Love always wins over shorting
• Don’t fall for Elon Musk’s self-driving car fallacy

Joe Tenebruso has no position in any of the stocks or cryptocurrencies mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends MicroStrategy. The Motley Fool has no position in any cryptocurrencies 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Suncorp Group Ltd (ASX: SUN) shares will be on watch today after the company announced a 39.5% increase in half-year cash profit. At Monday’s close, the Suncorp share price was sitting at $10.44.

Why is the Suncorp share price in focus?

Suncorp reported its results for the half-year ended 31 December 2020 (1H 2021) this morning. That announcement was headlined by a 39.5% increase in cash profit to $509 million.

Strong earnings across all businesses, including insurance (Australia), banking & wealth and Suncorp New Zealand helped boost profits.

Group net profit after tax fell 23.7% on the prior comparative period (pcp) to $490 million. It’s worth noting the 1H 2020 figure included a $293 million gain on the sale of the Capital S.M.A.R.T and ACM Parts businesses in October 2019.

The Suncorp share price will be one to watch this morning following the latest earnings update. That included a 109.8% surge in insurance (Australia) profit to $258 million.

Suncorp also announced a fully franked interim dividend of 26 cents per share. That represents a 65.2% payout of cash earnings compared to 89.5% in 1H 2020.

Suncorp CEO Steve Johnston said the result demonstrates the focus on core businesses and digitisation is yielding results. 

The Aussie insurer recorded $1,026 million of excess common equity tier 1 (CET1) after dividends. All businesses are holding CET1 at or above targets with $789 million held at the group.

Suncorp hailed a renewed brand strategy and increased digitisation as key initiatives.

However, it wasn’t all positivity from the Aussie insurer. It will be interesting to see how the Suncorp share price responds as investors process the latest update, including an “uncertain” outlook for 2021.

The coronavirus pandemic and its economic impact remain front of mind for the Aussie insurer. Suncorp’s catastrophe reinsurance covers remained fully intact at 31 December 2020 with availability to be used throughout FY2021.

Mr Johnston said Suncorp enters the second half of the year in “good shape”. According to the company, momentum is building across Suncorp’s segments while the balance sheet remains “very strong”.

Foolish takeaway

The Suncorp share price is one to watch this morning after the company reported a significant increase in cash earnings. Suncorp’s payout ratio dipped below 1H 2020 numbers while its balance sheet remains intact.

The Suncorp share price has fallen 16.6% in the last 12 months to $10.44 as at Monday’s close while the S&P/ASX 200 Index (ASX: XJO) is down 1.9% in the same period.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• 5 things to watch on the ASX 200 next week
• NRW (ASX:NWH) share price jumps as it moves closer to Primero acquisition
• Broker lists the best ASX stocks to own for an up to 30% gain in 2021
• Why the QBE (ASX:QBE) share price is in focus today

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.

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Ask A Fund Manager

The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In this edition, Sage Capital portfolio manager Kelli Meagher tells how her team steered through the COVID crash last year and which companies are set to take off in 2021.

 

Investment style

The Motley Fool: What’s your fund’s philosophy?

Kelli Meagher: We have two funds. We have the Sage Equity Plus Fund and the Sage Absolute Return Fund. The difference is the Absolute Return Fund is market-neutral, and its returns are uncorrelated to the equity market; and the Sage Equity Plus fund does give exposure to the S&P/ASX 200 Index (ASX: XJO). The overall strategy of stock selection and risk control for both of those funds is the same.

We basically are looking to invest in a broad range of stocks, both long and short. And to build a diversified portfolio that’s style-neutral, so not just value stock or growth stock. 

A unique element of our strategy is our use of our proprietary Sage Groups, which groups companies by how they tend to perform in different market conditions. This is quite different from grouping companies by GICS sectors. It allows for more of an ‘apples vs apples’ comparison of stocks and helps to control macro risks.

We end up having about 80 to 100 positions, both long and short. 

And we use a really tight risk control overlay to minimise the systemic risks in the market – the broad macro risks that are completely unpredictable, like bond yields, FX changes, sudden changes in sentiment, pushes to growth and value. 

We’re basically just focused on managing our stock selection and making sure our returns are coming from that and trying to remove all the other external risk factors. That way, we can offer investors a portfolio that can produce good returns no matter where we are in the cycle.

MF: For your long positions, what’s your investment horizon usually?

KM: We like to say 1 to 2 years, but it really does vary. Some companies are good investments for years and years and years, and the underlying fundamentals support that. Otherwise, sometimes it’s more of a short term share price move, and it’s time to move on to something more attractive.

MF: How have you performed the past year?

KM: We’ve actually had a really good year. We have outperformed our benchmark substantially and had very few months where we were down. So it’s been a really good start to our funds, particularly in the context of a global pandemic.

MF: Did you manage to buy some shares back in March or April?

KM: We take long and short positions, so what we did really well through COVID is, we were quite early in positioning the portfolio. Watching the numbers in China each day, we were getting concerned quite early about COVID, and so we managed to position ourselves before the market got smashed – by selling out of our travel stocks and buying Resmed CDI (ASX: RMD) and buying Fisher & Paykel Healthcare Corp Ltd (ASX: FPH), the COVID winners. We also went all-out on supermarkets. 

So we were well-positioned for when the market had its big pullback. Then once that happened, we started to enter the market and started buying some of the stocks that we sold like Flight Centre Travel Group Ltd (ASX: FLT), Corporate Travel Management Ltd (ASX: CTD) and the various stocks that had been smashed. We were able to produce a pretty good return, which we’re happy with.

Buying and selling 

MF: What do you look at closely when considering buying a stock?

KM: We look at a whole range of things. We do a lot of fundamental analysis on the quality of the company, and that determines how much we’re willing to pay. We spend a lot of time looking at the structure of the industry the company operates in, how competitive the industry is, what position the company has in that industry, how hard that the barriers to entry are, what the company’s competitive advantage is, and what the regulatory risks are.

We’re always also looking ahead to see if we can spot any changes in industry structure and how that may impact the company either in a positive or negative way. 

Then we also examine the company specifics really carefully: The quality of the management and board, and long term advantage, what return on the shareholders’ capital has the company generated, is there good long term growth prospect, how much cash do they generate and getting their general trade record. 

And we then value the company either on earnings before interest, tax, depreciation and amortisation (EBITDA) or price-to-earnings (P/E) ratio, then it’s the combination of the quality and our valuation that dictates whether we take a position and how big that position is.

MF: And as you said before, you’re agnostic about growth and value?

KM: That’s right, that’s right. We very much try to make our portfolio style-neutral, so that we can produce good returns for our investors no matter what the latest [fad] stock is in the market – be it growth, value, big cash, small cash, take on, take off.

MF: What triggers you to sell a share?

KM: I would like to say because the stock went up to our evaluation. It might be there’s been a maturation of the fundamentals of the business. There might be red flags regarding major sell-downs or a lot of senior management running to the exit. That’d be a major red flag to us to dig a bit deeper. Or just any change [that] basically affects the original buy thesis. 

And because we’re active investors, it might be we just trim a position and put the money to work elsewhere where we see a better opportunity.

MF: Are you most of the time fully invested, or do you have some cash in hand?

KM: We try to be fully invested all the time. We carry very little cash.

What’s coming up?

MF: Where do you think the world is heading at the moment?

KM: Great question. We think the world’s in a pretty good place. We’ve obviously got the vaccine rolling out globally, and we’ve got huge amounts of fiscal and monetary stimulus.

There will be some bumps in the road though. [Last year] the share markets lost almost half then now it’s almost up to its pre-COVID highs, after taking in a lot of good news and recovery. 

So it’s certainly not going to be a straight line [for] the market, and we’ll be watching a bit carefully to see what the impact is. There will be the expiry of JobKeeper, and it remains to be seen how long it actually takes out to roll the vaccination programs around the world. 

But given where rates are, shares are obviously an attractive asset class – [you’re] not getting your return from your money in the bank.

Generally, I’m optimistic about the market, as long as you’re in it for the long term. 

MF: The Australian market underperformed last year compared to other regions. Do you think it’ll pick up this year?

KM: I do… we’re quite bullish on Australia I think. Obviously, we’ve managed really well through this pandemic and compared to a lot of other countries we’re in a really good place. 

With all the fiscal as well as the monetary stimulus, we’re quite bullish in areas like housing. Australians love housing. We see very strong data coming in for approvals, etc. We’re positioning the portfolio for a strong housing market in the next year.

Overrated and underrated shares

MF: What’s your most underrated stock at the moment?

KM: It’s interesting that question because with how strong the market’s been across the board, it’s hard to pick a stock that’s genuinely underrated.

MF: There aren’t many bargains left, are there?

KM: There are not many bargains out there. There’s one though that we really like that has underperformed in the last quarter or so and we think it has good long-term growth prospects – and that’s Resmed, the healthcare company.

There are two strong themes for the future of healthcare, and that’s technology and value. For a healthcare company, [Resmed is] extremely innovative and a very high amount of technology integrated to all their products and services. And you need that technology to be able to also prove to payers that you’re saving them money.

COVID has really highlighted the importance of respiratory health and the value in being able to manage and monitor patients remotely… It has fantastic long-term global growth. It generates a huge amount of cash, it’s got good management and a really good track record of allocating shareholder capital.

So we think over the long term it will continue to deliver really good growth.

MF: Is the health technology sub-sector generally pretty attractive in the long term because of the aging population?

KM: You can’t go too [wrong] on investing in that part of the market over the long term.

MF: What do you think is the most overrated stock at the moment?

KM: There are pockets of the market that are overvalued, and that’s purely a function of interest rates, plus I guess a bit of a flight to quality.

So a lot of the companies that are actually really good quality I would say are overrated at the moment – simply because they’re trading on evaluations where it’s baking in a huge amount of earnings growth that may not be able to be delivered.

MF: As a long-short manager, do you have thoughts on the recent GameStop chaos in the US?

KM: We’ve been watching the circus from afar. I think it’s a symptom of the shift to a huge amount of inexperienced retail money chasing something. And I guess a lot of people having more time on their hands.

MF: Do you think structurally such uprisings are less likely to happen in the Australian market?

KM: Yes. I do. Certainly, our options market is structured very differently, and we don’t have that same social [pressure]. Obviously, there are [Australian] chat rooms, but I just feel like there’s not that same social media. 

Looking back

MF: Which stock are you most proud of from a past purchase?

KM: The thing I’m most proud of is how we navigated COVID and being quite agile with our positions. We were early in reducing our exposure to the travel sector then positioning the portfolio with COVID winners like healthcare stocks Resmed and Fisher & Paykel, the supermarkets, and JB Hi-Fi Limited (ASX: JBH).

I know that’s probably not the answer you’re looking for. But there’s not one [stock] because there was so much volatility… I’m just proud of how agile we were.

We are active investors, and we were always incorporating incremental information into our portfolio. I think our process really helped in outperforming through that time.

MF: The travel shares that you guys sold off before the pandemic, have you bought back in anticipation of a recovery?

KM: We did buy some Flight Centre and Corporate Travel. We still own Corporate Travel. I think that’s a good long term story with its acquisition in the US. It’s got more going for it than just simply a pick up in business travel. 

MF: Is there a move that you regret from the past? For example, a missed opportunity or buying a stock at the wrong timing or price.

KM:  Yes, definitely the missed opportunity of the online e-commerce stocks – the retail online stocks. 

[Meagher previously spoke of her regret at missing the rise of Temple & Webster Group Ltd (ASX: TPW)]

I regret how conservative I was with my valuation discipline, I suppose, when it came to pure online retail stocks when they first started moving last year. And they’ve gone up, doubled and tripled, I saw that I’d missed the opportunity – and they just kept going. So there’s definitely some remorse from sitting on the sidelines there.

More reading

• 3 great ASX tech shares to buy
• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 rises 0.6%, Vocus jumps on takeover offer, Afterpay hits new record
• Why the Afterpay (ASX:APT) share price is exploding even higher today
• How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

Tony Yoo owns shares of Corporate Travel Management Limited and Temple & Webster Group Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited. The Motley Fool Australia has recommended Flight Centre Travel Group Limited, ResMed Inc., 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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There are some ASX dividend shares that a number of brokers like and have rated as ‘buys’

It can be quite hard to find good businesses that are trading at a good price. One investor might say that BHP Group Ltd (ASX: BHP) is a good buy, whilst another might say that Woolworths Group Ltd (ASX: WOW) is the share to buy.

Brokers are constantly looking at businesses and share prices, thinking about what would be a good investment. There are various brokers out there like Bell Potter, Macquarie Group Ltd (ASX: MQG) and UBS that provide different recommendations about shares.  

With that in mind, these ASX dividend shares are liked by more than one broker. Of course, this still isn’t a guarantee of success – they could all be herding together.

Charter Hall Long WALE REIT (ASX: CLW)

This ASX dividend share is a real estate investment trust (REIT) that is managed by Charter Hall Group (ASX: CHC). It has a diversified portfolio of 459 properties, with 75% of those located on the eastern seaboard.

Those properties are spread across different sectors including agri-logistics, telco exchanges, office, industrial and logistics and long WALE retail. Its total portfolio has a valuation of $4.5 billion.

This REIT is currently liked by at least three brokers, including Morgan Stanley.

In the just-announced FY21 half-year result, the weighted average lease expiry (WALE) increased slightly to 14.1 years, which is one of the longest on the ASX. It has an occupancy rate of 97.5%.

It has large and stable tenants including Telstra Corporation Ltd (ASX: TLS), Australian government entities, BP, Woolworths, Ingham’s Group Ltd (ASX: ING), Coles Group Ltd (ASX: COL) and David Jones.

In the half-year result, the ASX dividend share reported a 3.6% increase of operating earnings per share (EPS) to 14.5 cents per unit, a 3.6% increase of the distribution to 14.5 cents per unit and a 5.1% increase of the net tangible assets (NTA) per unit to $4.70.

Charter Hall Long WALE REIT reaffirmed its guidance that operating EPS will be at least 29.1 cents per unit, equating to a FY21 distribution yield of at least 6.2%.

Super Retail Group Ltd (ASX: SUL)

Super Retail is currently one of the retailers that is experiencing elevated levels of sales during these unprecedented COVID-19 times. It’s known for four businesses: Supercheap Auto, BCF, Rebel and Macpac.

This ASX dividend share is currently liked by at least four brokers, including Citi.

The company recently gave a trading update for the 26-week period ending 26 December 2020. It said that it had achieved a record result driven by large consumer demand. Group sales were up 23% and like for like sales increased by 24%. Online sales went up 87% to $237 million.

Not only did sales rise, but the profit margins increased as well. The overall gross profit margin went up by 270 basis points compared to the prior corresponding period, supporting higher earnings before interest and tax (EBIT) margins across all four core brands.

Looking at the individual businesses, Supercheap Auto total sales rose 20%, Rebel sales went up 15%, BCF sales grew 51% and Macpac sales declined 5%.

Underlying EBIT for the ASX dividend share is expected to be in a range of between $253 million to $256 million, which would represent growth of 119% to $122%. Underlying net profit after tax (NPAT) is expected to be in a range of $174 million to $177 million – this would be growth of between 135% and 139%.

At the current Super Retail share price, it has a projected (by Citi) grossed-up dividend yield for FY21 of 9.6%.  

More reading

• ASX 200 rises 0.6%, Vocus jumps on takeover offer, Afterpay hits new record
• Leading brokers name 3 ASX shares to buy today
• What’s moving the Charter Hall Long WALE (ASX:CLW) share price today?
• 2 ASX dividend shares with yields above 5%
• 2 ASX dividend shares with yields above 4.5%

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited, Super Retail Group Limited, and Telstra Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths 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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You’ve probably heard by now that Amazon.com Inc (NASDAQ: AMZN) CEO Jeff Bezos is stepping back from his role running the company.

He’s been doing it for a long time, and apparently wants to focus on championing innovation in the company as its executive chair, letting incoming CEO Andy Jassy take the company’s reins.

Now, I’m an Amazon shareholder. I’ve known this day would come, at some point, but was hoping it was still a decade or so away (Bezos has run Amazon since 1996, but he’s still only 57).

See, Bezos is one out of the box. He — with help from others, of course — conceived of Amazon, then built and ran it for the last 25 years, turning it into the poster child for e-commerce, while also creating a highly valuable cloud computing business (essentially started because Amazon had spare computing capacity) and leading the charge into e-books.

Oh, and Amazon is now a US$1.7 trillion company, doing around US$1 billion of sales a day.

If that’s not enough, it’s still growing at almost 40%.

You can see why I’m a shareholder.

You can probably also see why I’m a little nervous that Bezos is stepping aside.

Frankly, I was very surprised that shares didn’t fall meaningfully on the news.

I guess he’s still staying at the company, and will still be executive chair, meaning his hand won’t be far from the tiller, if it’s needed.

Still, it’s hard not to see this as the first step away from Amazon. Maybe the second one never comes, or perhaps it comes sooner than we think.

Either way, Amazon is a stronger company, the more Bezos has to do with it, and a weaker one to the extent he loosens his grip.

That doesn’t mean it’s worth a lot less. Or even that we should be unduly worried.

But it’s fair to say that, given the choice, I would have preferred him to stay in the big chair.

Is that a logical view, though?

Is a company really worth that much less when its founder leaves?

The answer is, unfortunately, far from clear.

A prime example is Amazon’s FAANG counterpart, Apple Inc (NASDAQ: AAPL).

There aren’t many people who wouldn’t have preferred to see what Steve Jobs would be doing with Apple in 2021, if he was still alive. 

We can only imagine the innovations that might have come from his creative brilliance had he not been taken from us too early, nearly a decade ago.

That said, his successor, Tim Cook, has been hard to fault. He might not have Jobs’ instinctive ability to imagine, design and, famously, create a ‘reality distortion field’ that had his staff run through walls, but Cook has brought new products to market, supported innovation, and dealt deftly with consumers, competitors and regulators.

We’ll never know where Apple would be, today, under Jobs, but Cook has done a great job at the helm — there’s certainly no sign that Apple has been hurt by his leadership.

Staying in the US, though, we have another high profile consumer products brand, Starbucks Corporation (NASDAQ: SBUX), where the leadership baton seems to have been dropped after it was passed on.

At least, that seems to be the view taken by the board in 2008, when they reappointed long-time chair Howard Schultz back to the CEO role he held for 12 years before vacating it in 2000. 

(Schultz again stepped down in 2016, and shares have since doubled.)

There are plenty of other examples, too, and with mixed results. Moreover, even including the cases, above, it’s hard to know the ‘counterfactual’ — what might have happened if the changes hadn’t taken place.

Maybe Schultz would have done a terrible job between 2000 and 2008, anyway?

What if Steve Jobs had bet the company on a new technology, or, unlike Cook’s pragmatic decision to offer different phone sizes and use styluses on the iPad, had stuck to his guns on those issues?

We’ll never know. 

It’s fair to say that I much prefer founder-CEOs where I can get them. Or, as a close second, members of the founding family.

Among the companies I own, I’m glad Ruslan Kogan continues to run the eponymous retail juggernaut, Kogan.com Ltd (ASX: KGN), Jamie Pherous retains the reins at Corporate Travel Management Ltd (ASX: CTD), and Robert Millner is the fourth generation managing director of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).

(Kogan and Soul Patts are current Motley Fool Buy recommendations, by the way — and shares we reckon you can buy today! — while CTM remains on Hold, as COVID works its way through the tourism industry, but we’re very impressed with how Pherous steered the company before and during the worst of the pandemic.)

I don’t own the shares, but I think (despite people taking potshots) Gerry Harvey has done a great job at Harvey Norman Holdings Limited (ASX: HVN). And I wouldn’t have wanted anyone else at the helm of Flight Centre Travel Group Ltd (ASX: FLT) during the COVID pandemic, other than its founder-CEO Graham ‘Skroo’ Turner.

Still, that’s not all that matters.

After all, Apple’s compound returns since Cook took over have been nothing short of phenomenal. Microsoft Corporation (NASDAQ: MSFT)’s stunning third act, under Satya Nadella has been astonishing.

Here at home, the Xero Limited (ASX: XRO) share price has gone through the roof after founder Rod Drury stepped back to a non-executive role, while few of the largest ASX companies are still run by the people who started them.

Which kinda brings me back to where I started.

All else being equal, you have to reckon that someone running a company that is her life’s work, and that the vast bulk of her wealth is tied up in, might just work that little bit harder and care just a little bit more than someone else who could run the company. Not to mention they had the insight, energy and passion for actually getting the thing off the ground in the first place. I sleep just a little easier with founder-CEOs.

So, yes, I’m going to be keeping a closer eye on Amazon than I had in the past.

But just as it would have been a mistake to sell Apple and Microsoft just because they had new CEOs, I’m not intending to part ways with Amazon any time soon.

It’s yet another example of why investing can be difficult. Rules of thumb are useful starting points, but rarely, if ever, do they provide absolute answers.

Remember, Alan Bond’s Bond Corp and Christopher Skase’s Qintex also failed…

Fool on!

More reading

• Amazon introduces new electric delivery trucks in Los Angeles
• 4 most trusted ASX companies (and the 4 least trusted)
• Report: Kia to build Apple’s electric car in Georgia in 2024
• GameStop (NYSE:GME) appoints 3 new Vice Presidents from Amazon and Chewy
• Amazon (NASDAQ: AMZN) shares rise despite Bezos resignation

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Scott Phillips owns shares of Amazon, Corporate Travel Management Limited, Kogan.com ltd, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon, Apple, Microsoft, and Starbucks. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of Xero. The Motley Fool Australia has recommended Amazon, Apple, Flight Centre Travel Group Limited, Kogan.com ltd, and Starbucks. 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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Are you wanting to bolster your portfolio with a few new additions? Then you might want to take a look at the ones listed below.

Here’s why they have been tipped as shares to buy right now:

Goodman Group (ASX: GMG)

The first ASX share to look at is Goodman Group. It is an integrated commercial and industrial property group that owns, develops, and manages industrial real estate across a total of 17 countries. Goodman counts a large number of blue chips as customers such as Amazon, Coles Group Ltd (ASX: COL), DHL, and Walmart.

Thanks partly to its exposure to growing markets such as ecommerce, Goodman has been performing very positively during the pandemic. In fact, at the end of the first quarter of FY 2021, the company reported 2.9% like-for-like net property income growth across its managed partnerships.

It also revealed a sky high occupancy rate of 97.8% across its partnerships and a whopping $7.3 billion of development work in progress. The latter was ahead of management’s guidance.

Morgan Stanley is positive on the company and has an overweight rating and $20.90 price target on its shares.

Xero Limited (ASX: XRO)

Another ASX share to look at is Xero. This New Zealand-based cloud-based business and accounting software provider is quickly becoming an invaluable resource for small businesses across the world.

At the end of the first half of FY 2021, Xero had grown its subscriber numbers to a sizeable 2.45 million and was generating half year operating revenue of NZ$409.8 million from them. While the latter might sound like a large number, even when annualised it is still only a fraction of its addressable market.

According to a recent note out of Goldman Sachs, it estimates that Xero currently has a total addressable market (TAM) of NZ$14 billion per annum across its key markets. This means it has penetrated less than 6% of its market based on annualised figures.

However, it is worth noting that Goldman believes Xero’s TAM can grow by a further NZ$62 billion in the future if it can successfully broaden and monetise its app ecosystem and expand into new geographies.

Because of this, the broker believes Xero has a multi-decade runway for strong revenue growth. Its analysts have put a buy rating and $157.00 price target on its shares.

More reading

• 2 reliable ASX dividend shares to buy
• ASX 200 Weekly Wrap: RBA unleashes ASX’s inner animal
• 3 ASX dividend shares to own for retirement income
• Why the Wesfarmers (ASX:WES) share price has soared 24% in a year
• Goldman Sachs names 2 growing ASX dividend 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. owns shares of Xero. The Motley Fool Australia owns shares of 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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