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Due to favourable long term industry tailwinds, many investors are positive on the healthcare industry.

But with so many top shares to choose from in the industry, it can be difficult to decide which ones to buy.

To narrow things down, I have picked out an ASX healthcare share that could be fantastic long term option for investors.

ResMed Inc. (ASX: RMD)

ResMed is a medical device company aiming to change lives by developing, manufacturing and distributing innovative medical devices and cloud-based software solutions that better diagnose, treat, and manage sleep-disordered breathing, chronic obstructive pulmonary disease (COPD), and other key chronic diseases.

Over the last decade, it has developed a portfolio of world class products and become a leader in its field. This has underpinned very strong sales and earnings growth over the period ang generated impressive returns for investors.

The good news is that its strong form has continued in FY 2021. ResMed recently released its second quarter update and revealed a 9% increase in quarterly revenue to US$800 million and a 17% increase in net profit to US$206.4 million.

Looking ahead, ResMed still has a huge and growing market opportunity due to the increased education around sleep disorders and the growing prevalence of sleep apnoea. It also has a massive digital health ecosystem with millions of connected devices generating valuable patient data.

The latter is expected to play a role in helping the company achieve its goal of improving 250 million lives in out-of-hospital healthcare in 2025.

One broker that is particularly positive on the company is Morgans. Last week the broker put an add rating and $30.09 price target on the company’s shares.

It notes that ResMed delivered a result ahead of its expectations. The broker also believes its outlook is positive thanks to new sleep patient diagnoses, strong mask resupply, and the favourable pricing environment.

This compares to the latest ResMed share price of $26.69.

More reading

• 2 ASX shares rated as buys by brokers
• Leading brokers name 3 ASX shares to buy today
• Why Afterpay, ResMed, Temple & Webster, & Worley shares are dropping lower
• 3 very impressive ASX quarterly updates from last week
• ASX 200 up 0.6%: ResMed Q2 update, Kogan sinks, NAB acquires 86 400

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended ResMed Inc. 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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Do you have some money to invest into ASX shares for dividends?

There are some good contenders to think about for income:

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

Soul Patts has the best dividend record when it comes to consecutive years of dividend increases.

The ASX dividend share has increased its income payment to shareholders every year since 2000. It has also paid a dividend every year since it listed in 1903.

Soul Patts started out as a pharmacy business. It still has an indirect investment in the Soul Pattinson Chemists business through its holding of Australian Pharmaceutical Industries Ltd (ASX: API) shares.

But that isn’t the only investment that Soul Patts owns. It now runs as an investment conglomerate, so it has a diversified portfolio across telecommunications, healthcare, property, building products, listed investment companies (LICs), resources, agriculture and financial services.

Those sectors are represented by listed businesses like TPG Telecom Ltd (ASX: TPG), Apex Healthcare, Brickworks Limited (ASX: BKW), Bki Investment Co Ltd (ASX: BKI), Milton Corporation Limited (ASX: MLT), Round Oak Minerals and Pengana Capital Group Ltd (ASX: PCG). Those investments pay dividends to Soul Patts, which it can then pay on to shareholders. 

Bapcor Ltd (ASX: BAP)

Bapcor currently has a grossed-up dividend yield of 3.1%. It was one of the few S&P/ASX 200 Index (ASX: XJO) shares that increased its dividend in FY20. Bapcor has increased its dividend consecutively for the last several years.

The company’s trading conditions have been elevated in recent months after everything that has happened with COVID-19 and the related impacts.

The ASX dividend share is expecting to report a “strong” FY21 first half result. For the first five months of FY21 to November 2020, revenue was up 26% with the net profit after tax (NPAT) achieving operating leverage from lower expenses in areas such as travel and other areas of discretionary expenditure, as well as lower interest rates and the contribution from Truckline which was not included in the prior corresponding period.

For the first half of FY21, Bapcor anticipates that it will achieve revenue growth of at least 25% over FY20, and a net profit after tax increase of at least 50%.

Over the next few months, Bapcor is expecting its automated picking system to become operational at its Victorian distribution centre that will deliver significant operational benefits.

Charter Hall Long WALE REIT (ASX: CLW)

This ASX dividend share is one of the few real estate investment trusts (REITs) that increased its distribution in FY20. Another increase is expected in FY21.

What is Charter Hall Long WALE REIT? It’s a commercial property trust with long rental leases which is operated by Charter Hall Group (ASX: CHC). It’s liked by brokers such as Morgan Stanley which like the high quality tenant base and the access to the Charter Hall platform. 

Some of the tenants that are leasing the properties include Telstra Corporation Ltd (ASX: TLS), Australian government entities, BP, Woolworths Group Ltd (ASX: WOW), Inghams Group Ltd (ASX: ING), Coles Group Ltd (ASX: COL), Metcash Limited (ASX: MTS) and Arnott’s Group.

The REIT is steadily adding to its portfolio. Recent acquisitions include the flagship David Jones store in Sydney and a portfolio of BP service stations.

There is rental growth built into the contracts and it has a weighted average lease expiry (WALE) of 14.2 years, which is among the longest in the sector.

FY21 it’s expecting to generate at least 29.1 cents per unit, which equates to a distribution yield of 6.1% for the ASX dividend share.

More reading

• 3 highest yielding ASX dividend shares
• 2 ASX dividend shares for steady income in retirement
• 3 ASX 200 shares that keep growing their dividends
• 2 ASX dividend shares rated as strong buys by brokers
• 3 ASX dividend shares with yields above 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 Bapcor, Brickworks, and Washington H. Soul Pattinson and Company 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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On Wednesday the S&P/ASX 200 Index (ASX: XJO) was on form for a third day in a row. The benchmark index jumped 0.9% higher to 6,824.6 points.

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

ASX 200 futures pointing lower

The Australian share market looks set to end its winning streak on Thursday. According to the latest SPI futures, the ASX 200 is poised to open the day 14 points or 0.2% lower this morning. This is despite stocks on Wall Street pushing higher overnight. In late trade, the Dow Jones is up 0.25%, the S&P 500 is up 0.5%, and the Nasdaq has climbed 0.6% higher.

Oil prices rise again

It could be a good day for energy producers such as Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) after another positive night for oil prices. According to Bloomberg, the WTI crude oil price is up 1.6% to US$55.62 a barrel and the Brent crude oil price has risen 1.6% to US$58.39 a barrel. Oil prices are closing in on one-year highs after a stronger than expected inventory drawdown in the United States.

Northern Star-Saracen merger completes

The Saracen Mineral Holdings Limited (ASX: SAR) share price won’t be going anywhere today after being suspended at the close of play on Wednesday. This happened after its mega merger with fellow gold miner Northern Star Resources Ltd (ASX: NST) became effective. The transaction will create a new top-10 global gold major with immediate production of 1.6 million ounces per annum and a pathway to 2.0 million ounces.

Gold price edges higher

Gold miners including Evolution Mining Ltd (ASX: EVN) and Newcrest Mining Ltd (ASX: NCM) will be on watch after the gold price edged higher. According to CNBC, the spot gold price is up 0.1% to US$1,835.10 an ounce. Elsewhere, the silver price rose 1.7% overnight after crashing lower a day earlier when the Reddit trade ran out of steam.

Iron ore price rises

It could be a good day for BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO) shares after the iron ore price climbed higher on Thursday night. According to Metal Bulletin, the iron ore price has pushed 1.9% higher to US$152.65 a tonne.

More reading

• ASX 200 up 0.9%, Afterpay drops, CBA rises
• Why this Goldman Sachs forecast could see these 3 ASX energy shares lift off
• RBA relief! Why the ASX 200 is set for a bumper year… or 3
• Fleetwood (ASX:FWD) share price soars 10% following half-year results announcement
• Why BHP, Estia Health, HUB24, & South32 shares are dropping lower

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 S&P/ASX 200 Index (ASX: XJO) went up by 0.9% to 6,825 points today.

Here are some of the highlights from the ASX:

Afterpay Ltd (ASX: APT)

The Afterpay share price fell by over 1% today after the buy now, pay later (BNPL) business gave a market announcement relating to its UK business called Clearpay.

Clearpay said that it welcomed the UK’s Woolard review proposal to bring BNPL under FCA oversight with proportionate regulation.

The UK BNPL business said that it has always supported fit for purpose regulation that recognises the diversity of the industry and desire from consumers for flexible payment options that don’t trap them in long-term debt.

Damian Kassabigi EVP of public policy at Clearpay said: “We welcome today’s recommendations and look forward to working with the FCA, the government and stakeholders to build on the consumer protections we already provide to create the applicable regulation for the sector.

“It has always been Clearpay’s view that consumers will be best served by products designed with strong safeguards and appropriate industry regulation with oversight from the FCA.”

Amcor CDI (ASX: AMC)

The Amcor share price went up by 4.5% today in reaction to the first half result of FY21.

The ASX 200 company said that its statutory net income was up 65% to $417 million, whilst statutory earnings per share (EPS) went up 71% to 26.5 cents.

Adjusted EPS went up 16% in constant currency terms to 33.3 cents whilst adjusted earnings before interest and tax (EBIT) grew by 8% to $743 million.

Amcor said that it achieved $35 million of Bemis cost synergies in the first half, it’s expecting $70 million of cost synergies of approximately $70 million in FY21.

A further $200 million of share repurchases have been approved, bringing the total announced in FY21 to $350 million. The board also decided to slightly increase the dividend to 11.75 cents per share.

Amcor CEO Ron Delia said: “Sales growth of 3% was balanced across our businesses and regions, cost performance has been strong and synergies from the Bemis acquisition are running ahead of schedule. We have built momentum in both operating segments resulting in adjusted EBIT growth of 9% in flexibles and 10% in rigid packaging in constant currency terms. That momentum translates into higher expectations for the full year with adjusted EPS growth now forecast at 10% to 14% in constant currency terms as well as an increased dividend and additional share repurchases.”

BWP Trust (ASX: BWP)

BWP also released its FY21 half-year result today. It achieved like for like rental growth of 2%, but overall revenue was flat at $76.1 million. Profit before gains on investment properties was also flat at $56.9 million.

The business reported gains in the value of its investment properties of $87 million. That helped net profit increase by 6% to $144 million and the net tangible assets (NTA) per unit increased by 5% to $3.20. Its gearing finished December 2020 at 17.8%.

BWP decided to maintain its interim distribution per unit at 9.02 cents.

In terms of the outlook, BWP said that it’s well positioned in the current COVID-19 environment with the significant majority of rental income being from Bunnings and other national large format retailers which are all trading well during this time.

Big four banks rise

After the RBA’s announcement yesterday of more quantitative easing, the big bank share prices all went higher today.

The Commonwealth Bank of Australia (ASX: CBA) share price went up 1.1%, the Westpac Banking Corp (ASX: WBC) share price climbed 1.5%, the National Australia Bank Ltd (ASX: NAB) share price went up 1.9% and the Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price grew 1.9%.

More reading

• Financials sector rallies as ASX 200 sees third day of gains
• RBA relief! Why the ASX 200 is set for a bumper year… or 3
• 2 ASX shares that humbled successful fundies
• Amcor (ASX:AMC) share price shoots up 6% as company raises FY21 outlook
• Why Amcor, Carsales, Rent.com.au, & Temple & Webster are surging higher

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

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The Zicom Group Limited (ASX: ZGL) share price has had an exceptional trading run today, closing 128% higher at 13 cents.

The Zicom share price blasted off the blocks this morning – even reaching a new 52-week high of 22 cents – off the back of a multi-million dollar deal announced yesterday.

Zicom Group is an integrated manufacturer of marine deck machinery, fluid regulating and metering stations, transit concrete mixers, foundation and geotechnical equipment and precision engineered and automation equipment. The company also provides production integration solutions and hydraulic system services. 

Why is the Zicom share price rocketing? 

Yesterday, Zicom announced a $60 million deal to design and supply LNG propulsion systems for several oil product tankers being built for a leading European oil tanker owner. The orders have been scheduled for delivery in 2022/2023.

The company cited this deal as a testament of its momentum to transform Zicom’s marine sector. Zicom advised that it has been developing technology for green energy propulsion systems for ocean-going vessels over the past 3 years.

The company believes that this strategy now enables Zicom to expand into the entire shipping industry rather than only focussing on offshore marine applications.

Zicom also noted that demand in the offshore marine sector appears to be showing some positive signs.

New shipping regulations position Zicom for growth

The International Maritime Organisation (IMO), which is part of the United Nations, regulates international shipping.

According to Zicom’s announcement, the IMO 2020 rules mandate ocean-going vessels to reduce sulphur emission from engines to 3.5%, down from 4.5%.

Meeting this mandate will require that vessels install scrubber filtration systems or use a low sulphur fuel in place of diesel. 

Each of these options will require technological updates which Zimcom believes the company can support. It therefore views the implementation of the new IMO 2020 rules as a strong growth opportunity.

Today’s gains see the Zimcom share price recover from its trading lows over the previous 12-month period. Its shares fell from 12 cents last February to a low of 4 cents in the coronavirus market meltdown of March.

More reading

• 2 ASX 200 shares to buy for growth
• 2 ASX shares rated as buys by brokers
• Financials sector rallies as ASX 200 sees third day of gains
• GameStop chaos: How Aussie fund doubled money in 2 days
• Why this Goldman Sachs forecast could see these 3 ASX energy shares lift off

Motley Fool contributor Gretchen Kennedy 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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There are some S&P/ASX 200 Index (ASX: XJO) shares that continue to generate growth despite all of the impacts from COVID-19.

Here are two of the ASX 200 shares generating growth and could be worth looking at:

Wesfarmers Ltd (ASX: WES)

Wesfarmers is largely a retail conglomerate that runs various major retailers such as Bunnings, Officeworks, Catch, Kmart and Target.

During this difficult COVID-19 pandemic period, the department store businesses have been struggling with lower foot traffic going into the stores. However, online sales across the business has been booming to help the overall picture.

The ASX 200 share gave a trading update in November to outline how it had done in the first four months of FY21 to October 2020.

It said that Bunnings total sales were up 25.2%, Kmart total sales had risen by 3.7%, Target sales had fallen by 2.2%, Catch’s gross transaction value had gone up 114.4% and Officeworks sales had climbed 23.4% higher.

In the year to date, Wesfarmers’ retail businesses had achieved total online sales growth of 166%, excluding Catch. Excluding online sales in metro Melbourne, which were significantly elevated due to government trading restrictions, online sales growth was 98%. Including Catch, total online sales across the group increased to $1.3 billion in the year to date.

Bunnings is by far the largest profit generator for Wesfarmers. Management said that the DIY hardware business had seen continued strong growth in both consumer and commercial segments. Consumer sales were particularly strong as customers spent more time undertaking projects around the home. Excluding metro Melbourne stores, total sales growth of 29.3% was recorded for the year to date.

Management are pleased with Bunnings’ digital strategy, with online sales penetration excluding metro Melbourne of 1.5% during the year to date, and digital engagement with both consumer and trade customers continuing to increase.

According to Commsec, the Wesfarmers share price is valued at 29x FY21’s estimated earnings.

Premier Investments Limited (ASX: PMV)

Premier Investments is another ASX 200 retail share. It owns various brands like Just Jeans, Jay Jays, Peter Alexander and Smiggle.

FY20 was a year of disruption and transition as Premier Investments adapted to the COVID-19 impacts on retail.

In a trading update for the first 24 weeks of FY21, it generated $146.2 million of online sales, which was up 60% compared to the prior corresponding period. This contribution was 20.4% of total sales, up from 13.4% in the prior corresponding period.

Premier Retail said that its online sales delivered a significantly higher earnings before interest and tax (EBIT) margin than the retail store network.

The ASX 200 share now expects Premier retail EBIT for the 27-week period to 30 January 2021 to be in the range of $221 million to $233 million, up between 75% and 85%.

Total global like for like sales for the 24 weeks to 9 January 2021 were up 18%, with Australian like for like sales growth of 26.2%. Premier said that there has been “outstanding” sales and gross margin growth in Peter Alexander, Just Jeans and Jay Jays in both Australia and New Zealand.

The company has also been focused on reducing its rental costs. In the trading update, Premier Investments said that it had achieved strong cost controls, including reaching agreements with key landlords on COVID-19 rent abatements.

According to Commsec, the Premier Investments share price is valued at 15x FY21’s estimated earnings.

More reading

• The ASX small cap with the best global expansion potential may not be tech
• ASX 200 Weekly Wrap: Reality (and GameStop) finally hits ASX
• RBA to cut the cash rate again? These ASX dividend shares have attractive yields
• What to expect from the Wesfarmers (ASX:WES) first half result
• These ASX clothing retailers’ share prices are storming to record highs

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. The Motley Fool Australia owns shares of Wesfarmers 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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Brokers regularly update their estimates and recommendations about many ASX shares. The two in this article have been rated as buys by at least three brokers. 

Some ASX shares are well liked by many brokers, whilst others get mixed reviews. 

These two ASX shares are ones rated as buys by brokers:

A2 Milk Company Ltd (ASX: A2M)

A2 Milk shares are liked by at least four brokers including UBS and Morgans.

The A2 Milk share price is down by around 45% over the last six months.

UBS believes that A2 Milk could benefit from a recovery of sales with infant formula as it reactivates its daigou channel over the next year and a half. The broker also thinks that company could achieve market share gains at Chinese mother and baby stores.

However, whilst there continues to be COVID-19 restrictions for international visitors, combined with disappointing export data, it’s likely that there will be weak infant formula sales for the time being.

A2 Milk itself has admitted to these problems. In the most recent update the company said that the disruption in the daigou channel, which represents a significant portion of the infant nutrition sales in the Australia and New Zealand business, was proving to be more significant and protracted than was previously anticipated.

One problem for the ASX share is that the daigou channel disruption is having a material impact on the cross border e-commerce channel (CBEC). A2 Milk says that the daigou channel plays an important role in stimulating demand across multiple sales channels, including CBEC.

A2 Milk said that it intends to strengthen its focus on reactivating the daigou channel in the second half of FY21.

On the mother and baby store (MBS) front in China, A2 Milk said that this remains very strong – it’s expecting to report revenue growth of 40% from this channel. The 12-month rolling market value share in MBS also continues to increase, it was 2.3% as at the end of October, with increases in both same store sales and the number of new stores in the first half.

ResMed Inc (ASX: RMD)

The ASX share is rated as a buy by at least three brokers.

ResMed recently announced its FY21 second quarter result for the three months to 31 December 2020.

In US dollar terms, it said that revenue increased by 9% to $800 million and went up 7% on a constant currency basis. The non GAAP (generally accepted accounting principle) gross profit margin improved by a further 20 basis points to 59.9%.

Net operating profit went up by 12%, whilst non GAAP operating profit went up 16%.

In the company’s core businesses of sleep apnea, chronic obstructive pulmonary disease (COPD) and asthma it’s seeing improvements in new patient volume and ongoing adoption of the mask and accessories resupply program. ResMed has also seen accelerated adoption of digital health and an increase in the usage of out-of-hospital healthcare over the last 12 months.

The above result was better than Morgans was anticipating with the revenue growth and expanding gross margins. The broker also liked the limited expense growth, leading to growing operating leverage.

Morgans thinks that ResMed’s core sleep apnea business will steadily improve whilst the mask supplies remain in strong demand.

More reading

• Leading brokers name 3 ASX shares to buy today
• Why Afterpay, ResMed, Temple & Webster, & Worley shares are dropping lower
• Here are the 10 most shorted shares on the ASX
• 2 beaten-up infant formula ASX shares to buy
• 3 very impressive ASX quarterly updates from last week

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool Australia has recommended ResMed Inc. 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 (XJO) popped up 0.9% today after touching an 11-month high this morning of 6852.9, and the financials sector was a major driver.

Financials sector continues its rally

The financials sector is presently powering up 1.82%. It’s the third consecutive day that the sector has been on the rise.

Australia and New Zealand Banking Grp Ltd (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) all posted gains of between 1–2%for the day.

The Australian Financial Review reported that the rally of the big four banks has collectively added $8 billion in market capitalisation today alone. 

According to Nasdaq, the financials price jump can be put down to the central bank’s upbeat economic outlook, as the market responded to Reserve Bank of Australia (RBA) governor Philip Lowe’s latest update.

Reserve Bank reiterates quantitative easing

In his speech, governor Philip Lowe reiterated that quantitative easing (QE) has been an effective mechanism to lower interest rates and keep the Australian dollar lower than it would otherwise be.

Dr Lowe also announced that the RBA will hold the official interest rate at 0.1% for now. This is with the aim of reaching an inflation target of 3%. 

Dr Lowe added that he doesn’t expect this target to be reached until 2024.

With the QE outlook extended, it means that the banks can keep selling securities back to the central bank. These sales create liquidity for the banks, which can potentially support issuing more loans and offering more products.

Does quantitative easing mean that bank share prices go up?

Put simply, no. QE supports low-interest loan environments, however, demand is impossible to predict. QE does not guarantee the banks, or any other business, a strong financial performance.

While the banks continue to work in the QE environment going forward, the RBA will no doubt be keeping its eye on the inflation rate with hope that its current policy approach continues to bolster the Australian economy.

More reading

• 2 generous ASX dividend shares to beat low rates
• GameStop (NYSE:GME) dominates the US shares ASX investors have been buying
• ASX 200 up 0.9%: Credit Corp impresses, Afterpay jumps, bank shares rise
• ASX 200 Weekly Wrap: Reality (and GameStop) finally hits ASX
• 2 strong blue chip ASX shares rated as buys by brokers

Motley Fool contributor Gretchen Kennedy 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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An Australian shares fund doubled its investment in just a few days, thanks to collateral damage from the GameStop Corp (NYSE: GME) saga.

Forager Funds international shares fund portfolio manager Gareth Brown and analyst Chloe Stokes gave an update to clients this week that would have made them all smile.

No, the fund didn’t own GameStop shares before they rocketed up.

Their story was how the short squeeze super-charged a more conventional stock pick that they made.

It was all about the journey of US retailer Bed Bath & Beyond Inc (NASDAQ: BBBY).

This company was heavily shorted, just like GameStop.

“One of the stocks highest on our to-do list was also one of the market’s shorted stocks, with more than 60% of its outstanding shares sold short,” said Stokes.

This was because the homewares chain had been in deep strife in recent times.

According to Stokes, Bed, Bath & Beyond had an overpaid management team that had neglected to get on the e-commerce wagon and the industry trend towards own-brand products.

“Add the expected cash burn from COVID-impacted sales, and many bears expected the company to go bankrupt.”

Why was Forager interested in a dud stock?

Stokes told clients that 2 years ago a group of activist investors dragged the company into the 21st century.

“Since then we’ve had a complete board and management team overhaul,” she said.

“And many of the new hires had experience with business transformation and operating omni-channel businesses.”

Bed, Bath & Beyond’s online presence ramped up, non-core businesses and assets were sold off and debts repaid.

“In the most recent quarter, 31% of the company’s sales were online, and it should be even higher than that in the next quarter.”

Stokes and Brown’s team felt that the bear case had now eroded considerably. With the share price still pretty low, they judged that it now had “almost 100% upside”.

How GameStop triggered a Bed Bath & Beyond windfall

But as they were thinking about the case, the GameStop saga exploded.

This was because the hedge fund that was devastated by the GameStop short squeeze, Melvin Capital, also had a huge short position on Bed Bath & Beyond.

Melvin would likely have to liquidate some holdings to survive. If Forager was to buy in, they didn’t have much time.

“We had to work really really quickly. There was massive short interest in a market where everyone was suddenly taking notice of that,” said Brown.

“We need to hurry up because [Melvin] might need to close out their position in a hurry, which means they have to buy stock. The stock skyrockets, we miss our opportunity.”

Stokes said Forager managed to buy Bed, Bath & Beyond shares about “10 days ago”. This would have been around 20 January when it was priced around US$25.

A few days later, the GameStop short squeeze hit the fan. 

As Melvin Capital was sent broke, just as Forager predicted, it had to buy Bed, Bath & Beyond shares to cover its short positions. 

“The stock has doubled,” said Stokes.

“So it’s hit our base case estimate in just 10 days.”

At the height of the GameStop mania last week, Bed, Bath & Beyond shares hit US$53.90.

The higher the price went, the riskier it became to hold onto the shares – so Stokes’ team quickly sold off to lock in the profits.

Brown admitted this isn’t the usual way to make money.

“It’s really hard to grumble about doubling your money in a couple of days,” he said.

“[But] we feel more comfortable when an investment thesis takes a year or two to play out.”

The share market is currently in “a very, very unusual” state and many of Forager’s recent purchases have “worked out blisteringly quickly”.

“Others that we’ve been looking at and hoping to buy have skyrocketed before we’ve had the chance.”

More reading

• COVID, US stimulus, Gamestop and a retreating Reddit army: The battles continue
• Millionaire maker! Rent.com.au (ASX:RNT) share price now up 300% in a week
• Here’s what could really feed a stock market bubble
• GameStop (NYSE:GME) dominates the US shares ASX investors have been buying
• Why investors should look beyond the Reddit army to these ASX fundamentals

Motley Fool contributor Tony Yoo 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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Like it or not, fossil fuels are going to be powering much of our energy needs for decades to come. 

Despite the rise of electric vehicles, that remains particularly true for many of our cars and trucks. Not to mention boats, planes and… well, you get the idea. 

Yes, the price of oil crashed in 2020. With demand evaporating as COVID-19 travel restrictions idled planes, boats and cars, Brent crude oil tumbled to US$19.33 a barrel on 21 April last year.

Since then energy prices have been steadily regaining lost ground. Brent crude currently is worth US$57.67 per barrel. That’s up 54% (from US$37.46 per barrel) just since 30 October.

Part of the price rise is due to increased demand as parts of the world relaxing some of the stricter virus restrictions. Reduced supply due to output cuts from OPEC members has also helped lift the oil price.

According to an analysts at UBS and Goldman Sachs, oil prices are likely to head still higher from here.

As Bloomberg reports:

UBS forecast that Brent crude would reach $US63 a barrel by the second half of this year and $US65 by the first quarter of 2022. Goldman Sachs said it expected the benchmark to reach $US65 by July.

Those forecasts would mean another 13% hike in the price of Brent crude. So what does that mean for ASX energy shares? 

3 leading ASX energy shares that stand to benefit

The ASX has no shortage of energy shares. While many factors determine how their share prices move, they’re all likely to perform better when they receive more for the oil and gas they pump from the ground.

We’ll stick to 3 of the biggest energy stocks trading on the S&P/ASX 200 Index (ASX: XJO).

First, there’s Oil Search Ltd (ASX: OSH), with a market cap of $8.3 billion. Since oil prices hit a low on 21 April last year, the Oil Search share price is up 62%. Oil Search pays an annual dividend yield of 1.7%, unfranked.

Next, we have Santos Ltd (ASX: STO), with a market cap of $14 billion. Santos’ share price has gained 70% since Brent bottomed on 21 April. Santos pays an annual dividend yield of 1.6%, fully franked.

Third, there’s Woodside Petroleum Limited (ASX: WPL), with a market cap of $24 billion. Since 21 April’s rock bottom oil prices, the Woodside share price is up 27%. Woodside pays an annual dividend yield of 4.8%, fully franked.

More reading

• 5 things to watch on the ASX 200 on Wednesday
• Oil Search (ASX:OSH) share price rises today after a week in the red
• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 Weekly Wrap: Reality (and GameStop) finally hits ASX
• 5 things to watch on the ASX 200 on Monday

Motley Fool contributor Bernd Struben 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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