Tag: Motley Fool

Analysts at Bell Potter have been busy finding ASX shares from several industries that they believe are best placed to have a strong 2021.

On this occasion, I’m going to look at the tech sector. Here are a couple of shares they rate highly:

Accent Group Ltd (ASX: AX1)

The first retail share that Bell Potter is a fan of is Accent. It is the owner and operator of a number of footwear businesses in the performance and lifestyle side of the market. The broker has been very pleased with the company’s performance during the pandemic and appears confident in its growth trajectory.

Bell Potter commented: “We believe management has steered the company exceptionally through the pandemic, underpinned by a quick adoption to online as top priority, successful negotiations with landlords/suppliers, effective cost management and the successful unwind of excess inventory.”

The broker also notes that its valuation is undemanding given its strong position in the market.

“We believe AX1 has emerged as a stronger retailer across online capability, vertical product presence, rental terms, balance sheet strength, as well as levers to drive growth (store network and online). Based on these factors, we believe AX1’s valuation is undemanding with FY21 PE of ~16x. AX1 also offers an attractive FY21 fully franked yield,” it concluded.

Domino’s Pizza Enterprises Ltd (ASX: DMP)

Another discretionary retailer that Bell Potter is fond of its Domino’s. It is the largest franchisee outside of the USA and holds the Master Franchise licence to the pizza chain brand for Australia, New Zealand, France, Belgium, the Netherlands, Germany, Japan, Denmark and Luxembourg.

The broker notes that management has plans to double its store network organically over the next decade or so to 5,550 stores. In addition to this, it believes the company could accelerate its growth inorganically through acquisitions.

Bell Potter sees a lot of promise internationally for the company. It commented: “Amongst DMP’s current territories, Germany and Japan are key large growth markets which continue to go from strength-to-strength. Germany is now leveraging off TV advertising under one brand, with rising brand awareness driving market share growth in a highly fragmented market. In Japan, DMP is successfully changing consumer habits towards more frequent pizza consumption rather than just seasonally.

“Overall, we believe DMP has significant long-term growth prospects with Europe, Japan and acquisitions the major drivers,” it added.

Bell Potter has a buy rating and $99.30 price target on its shares.

More reading

• ASX 200 rises 0.7% on Friday
• Brokers name 3 ASX shares to buy right now
• Why Accent, Afterpay, Creso Pharma, & Thorn shares are charging higher
• Why the Accent (ASX:AX1) share price will be on watch this morning
• 2 ASX dividend shares with attractive yields

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Accent Group and Domino’s Pizza Enterprises Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Leading broker names the ASX retail shares to buy in 2021 appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3s6jPIa

The SelfWealth Ltd (ASX: SWF) share price has jumped 3.8% at the open following a strong quarterly update from the Aussie online brokerage group.

What’s in the update?

There were a number of highlights from SelfWealth for the second quarter of FY21 ending 31 December 2021.

The brokerage group reported record quarterly operating revenue of $4.46 million, up 298% year-on-year (YoY). The number of active traders on the platform surged 17% from the prior quarter and 208% YoY to 67,394.

Quarterly trade volume jumped 377% YoY to 378,430 trades with client cash up 220% YoY to $435 million.

Securities held on HIN surged 153% YoY to $4.30 billion as SelfWealth’s strong growth trajectory continued through to the end of 2020.

Why is the SelfWealth share price surging?

The SelfWealth share price has reacted today, with investors pushing the group’s shares up 3.8% to $0.55 per share in early trade. At the time of writing, the share price is trading at 54.5 cents, up 2.8%.

SelfWealth said it is continuing to grow its market share by attracting both new market entrants and clients from competitors.

SelfWealth managing director Rob Edgely described 2020 as a “transformational year” with an “encouraging” take up by existing clients on its US trading platform.

US stock trading began on 14 December with 13% of existing clients applying for US trading to be added to their existing ASX portfolios. 

Seasonally adjusted trade volumes continued to grow despite trade volume edging lower from the September quarter on an absolute basis. The Aussie brokerage group also recorded its largest-ever trading day on 10 November with 11,421 trades placed.

The SelfWealth share price had a year that reflected the group’s strong performance in calendar year 2020. Shares in the Aussie financials group are now up 243.8% for the year after climbing higher in early trade.

Foolish takeaway

Shares in the Aussie brokerage group are on the move this morning after a strong quarterly trading update. This as the S&P/ASX 200 Index (ASX: XJO) edges 0.3% lower at 6736 points.

More reading

• Why the Costa Group share price (ASX:CGC) is crashing this morning
• 5 things to watch on the ASX 200 on Monday
• This ASX sector is facing a tough 2021
• These were the worst performing ASX 200 shares last week
• ASX 200 rises 0.7% on Friday

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

The post Why the SelfWealth (ASX:SWF) share price has popped 3.8% higher this morning appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/2LaTxUJ

The Afterpay Ltd (ASX: APT) share price has been on fire in the last few years. 

Afterpay initially listed on 4 May 2016 for $1.00 per share to give it a market capitalisation of $125 million. Given its strong run of success, that now pales in comparison to what the Aussie payments group is worth today.

At the time of writing, Afterpay now boasts a market capitalisation of over $32 billion.

Why has the Afterpay share price surged higher?

The Afterpay share price has now surged to $113 and is up more than 250% in the last year.

There’s no doubt 2020 was a good year for shareholders, despite a slump in the March bear market. Afterpay shares plunged as low as $8.01 per share in March 2020, before rebounding strongly to close out the year.

This was largely due to a successful international expansion and a strong coronavirus response.

Australia contained COVID-19 as the federal government and Reserve Bank of Australia (RBA) rolled out billions in stimulus measures. That included a boost to JobSeeker and introduction of the JobKeeper scheme from the government.

For its part, the RBA  drove interest rates lower by slashing rates and targeting the yield curve. More money in circulation, low interest rates reducing debt burdens, and restrictions on movement saw online retail sales surge across the country.

As a result, Afterpay was able to record strong sales numbers, despite initial investor concerns over increasing bad debts in what looked to be a looming recession.

The Afterpay share price continued to climb late in the year after a bumper FY20 result. Afterpay reported a 112% increase in underlying sales to $11.1 billion for the 12 months ended 30 June 2020. The buy now, pay later group also managed to retain customers and increase active customers to 9.9 million.

UK and USA customer numbers grew strongly as the group continued its steady diversification away from its Australian and New Zealand roots.

Total income increased 97% to $519.2 million as earnings before interest, tax, depreciation and amortisation (EBITDA) climbed 73% to $44.4 million.

That gave the Afterpay share price some strong momentum to close out the year at $118.00 per share — just shy of its record high.

Foolish takeaway

The Afterpay share price has been on fire in recent years but remains in a holding pattern in early 2021. All eyes will be on the Aussie fintech as it pushes forward with new initiatives in the new year.

More reading

• 5 things to watch on the ASX 200 on Monday
• Top brokers name 3 ASX shares to buy next week
• ASX 200 rises 0.7% on Friday
• Leading broker names the ASX tech shares to buy in 2021
• ASX 200 up 0.4%: Afterpay & Zip charge higher, NAB rises, Harvey Norman hits new high

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. 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.

The post Why the Afterpay (ASX:APT) share price has rocketed 250% in 12 months appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3bq6FzZ

The Wisr Ltd (ASX: WZR) share price is up by 5.26% this morning, following a release from the company regarding its second quarter FY21 performance.

At the time of writing, the Wisr share price is sitting at 20 cents per share. The non-bank lender’s shares have fallen 14.89% in the last 12 months.

For comparison, other lending companies such as Mortgage Choice Ltd (ASX: MOC) and Resimac Group Ltd (ASX: RMC) have returned 18.8% and 43.43%, respectively.

Wisr’s second quarter FY21 highlights

In today’s release to the ASX, Wisr informed the market of its continued record quarterly growth with prime loan customers. The company’s loan originations experienced a growth of $83.8 million quarter on quarter, an increase of 35%. This also represents a significant 165% increase in loan originations from the second quarter of FY20.

Including the reported figures for this most recent quarter, Wisr’s total loan originations now sit at a record $390.5 million as at 31 December 2020. While achieving this record, Wisr also managed to improve the average credit score of its customers to 757.

Reportedly, Wisr’s recently launched secured vehicle loan product has been delivering strong initial results. Wisr CEO Mr Anthony Nantes stated, “[o]ur new secured vehicle product has also significantly increased the total addressable market for Wisr.”

Management commentary

The strong growth defies any concerns of the short-term impact from COVID-19 on the company’s ability to grow its loan originations. Mr Anthony Nantes provided the following comments on the results:

We had a very strong start to the quarter and it’s fantastic to see that momentum continue through the holiday period, delivering 35% growth while attracting the best borrowers in Australia. The consumer sentiment shift we witnessed from COVID-19, for better financial products and services, has certainly not slowed down.

Mr Nantes also expressed excitement for the potential growth in 2021, pointing to the company’s differentiated business model, consumer proposition, technology platforms, and funding capability as foundations for aggressive growth.

At the current Wisr share price, the company holds a $219 million market capitalisation.

More reading

• Why the Costa Group share price (ASX:CGC) is crashing this morning
• 2 exciting small cap ASX shares to watch this month
• Viva (ASX:VVA) share price moves on acquisition news
• What’s been happening with the Magellan (ASX:MFG) share price?
• Why the Shaver Shop (ASX:SSG) share price is roaring 14% higher

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

The post Why the Wisr (ASX:WZR) share price popped 5% this morning appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/39loRYU

The market is holding on to recent gains but the big rally in the Costa Group Holdings Ltd (ASX: CGC) share price came to a jarring halt after it was downgraded by a leading broker.

The CGC share price tumbled 5.6% to $4.05 in early trade when the S&P/ASX 200 Index (Index:^AXJO) is trading a little under breakeven.

This makes the Costa share price the worst performing stock on the ASX 200 at the time of writing. The fruit and mushroom grower is the only non-gold stock on the worst losers list.

The Resolute Mining Limited (ASX: RSG) share price and Gold Road Resources Ltd (ASX: GOR) share price are in second and third positions.

Costa share price downgraded by broker

The underperformance of the CGC share price comes after it surged by around 70% over the past year.

All the good news and little of the 2021 risks looks to be priced into the stock, according to Citigroup.

The broker downgraded the Costa share price to “neutral” from “buy” even as it lifted its 12-month price target to $4.30 from $3.75 a share.

Blueberries leave sour taste

“We believe Costa remains well positioned to benefit from better growing conditions and higher prices in some produce categories,” said Citi.

“However, the fundamentals in berries are still mixed with elevated supply likely to restrict growth in margins.”

There has been an oversupply of blueberries over the past five years. While consumption jumped by 2.5 times over the period, prices have been falling, according to Citi.

No price recovery expected in 2021

While the market is looking more balanced today, the broker doubts we will see any price growth due to higher crop yields.

“In response to more competition in blueberries, Costa is shifting its mix both through the time it harvests and the type of berries it produces,” added Citi.

“We expect the company to deliver 3%-5% revenue growth sustainably in berries, largely through a better mix of sales. Blackberry hectare growth is also a source of upside.”

Risks and rewards are finely balanced

Citrus exports are another sweet spot for the group and a big reason behind Citi’s decision to boost its target price on the Costa share price.

The price of citrus fruits is up by more than 60% in some markets, although this is partially offset by weaker mushroom prices.

Other headwinds for Costa include the risks of higher costs from its Moroccan operations and higher rental expenses.

More reading

• 5 things to watch on the ASX 200 on Monday
• This ASX sector is facing a tough 2021
• These were the worst performing ASX 200 shares last week
• ASX 200 rises 0.7% on Friday
• Mesoblast (ASX:MSB) share price could be facing more pressure in 2021

Motley Fool contributor Brendon Lau owns shares of COSTA GRP FPO. Connect with me on Twitter @brenlau.

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.

The post Why the Costa Group share price (ASX:CGC) is crashing this morning appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/2MIW74u

If you’re interested in gaining exposure to the small side of the market, then you might want to take a look at the shares listed below. 

Here’s why these two small cap shares have been named as ones to watch in 2021:

Nitro Software Ltd (ASX: NTO)

Nitro Software is a software company aiming to drive digital transformation in organisations around the world across multiple industries.

Its core solution is the Nitro Productivity Suite. This provides integrated PDF productivity and electronic signature tools to customers through a horizontal, software-as-a-service, and desktop-based software solution.

Demand for its subscriptions has been strong despite the pandemic. This led to Nitro delivering third quarter cash receipts of $11.6 million, up 17% on the previous quarter.

This has put the company on course to deliver subscription annualised recurring revenue (ARR) of $26 million to $27 million in FY 2020, which is ahead of its prospectus guidance of  $24.4 million.

Analysts at Morgan Stanley have been pleased with its performance. They have an overweight rating and $3.50 price target on its shares. This compares to the latest Nitro share price of $3.14.

Openpay Group Ltd (ASX: OPY)

Another small cap to watch is buy now pay later provider Openpay. Like many of its peers such as Afterpay Ltd (ASX: APT), it has been growing at a strong rate over the last 12 months.

For example, Openpay’s total transaction value (TTV) in November reached a record of $35.7 million. This was driven by strong Black Friday and Cyber Monday sales, with the former representing the best day of trading in Openpay’s history. Black Friday 2021 saw TTV of $2.3 million, almost double a year earlier.

At present the company operates in Australia and the UK, but has announced plans to enter the lucrative US market. If this expansion is a success, it could give its TTV a major boost in 2021.

One broker that is bullish on the company is Shaw and Partners. Its analysts have a buy rating and $5.00 price target on its shares at present. This compares to the current Openpay share price of $2.30. Shaw and Partners notes that that Openpay’s shares are trading at a significant discount to its peers.

More reading

• Why Nick Scali, Nitro Software, Silver Lake, & Xero shares are dropping lower
• 2 more small cap ASX shares to watch in 2021
• ASX sector of the year: BNPL goes from strength to strength
• Top ASX shares to buy in January 2021
• 2 exciting ASX mid cap tech shares to buy in 2021

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

The post 2 exciting small cap ASX shares to watch this month appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3oBK2fB

The Viva Leisure Ltd (ASX: VVA) share price climbed 2% this morning, after the company announced the acquisition of 6 health clubs in Victoria.

However, the Viva share price has since retreated from $2.99 to $2.93 – the same price it closed at on Friday.

What’s moving the Viva share price

In a statement before market open today, Viva Leisure advised it has signed a binding agreement to buy out six Pinnacle health clubs with a combined total of at least 6,500 members. The clubs are located at Caribbean Park, Mulgrave, Oakley, Parkdale, Scoresby, and Upwey.

The deal is for a consideration of between $6.05 million and $6.25 million, depending on various completion conditions. It’s expected to be completed within the next 60 days. Viva will fund it using 50% debt, and 50% equity from a recent capital raise.

Commenting on the deal, Viva Leisure chief executive Harry Konstantinou said,

The Pinnacle business is a highly complementary business to Viva Leisure, and provides attractive membership options which could be rolled out through the rest of the Viva Leisure network.

Why the purchase

The acquisition will boost Viva Leisure’s presence in Victoria from 8 locations to 14 locations.

This is consistent with the company’s strategy to own more than 400 corporate locations by 2025, up from the 79 locations it has at the end of FY20.

Furthermore, Viva said the financials for the Pinnacle clubs have been solid, with the company reporting a FY19 revenue of $7.5 million, and an earnings before interest, tax, depreciation, and ammortisation (EBITDA) of $1.75 million.

For FY20, the Pinnacle clubs being acquired reported a COVID-19 impacted revenue of $5.8 million.

What does Viva Leisure do

Founded in 2014, Viva Leisure operates health clubs in Australia. The company’s brands include Clublime, Ladies Only, Psyclelife, Hiit Republic, Swim School, GymmyPT and others. 

It also owns the master franchise for the Plus Fitness, which comprise approximately 200 clubs.

About the Viva share price

Despite disruptions as a result of the government imposed lockdowns last year, the Viva share price still returned a respectable 8% in one year.

This is after the share price lost more than 70% of its value in March 2020, at the height of the pandemic.

Viva Leisure commands a market cap of $240 million.

More reading

• Why the Wisr (ASX:WZR) share price popped 5% this morning
• Why the Costa Group share price (ASX:CGC) is crashing this morning
• 2 exciting small cap ASX shares to watch this month
• What’s been happening with the Magellan (ASX:MFG) share price?
• Why the Shaver Shop (ASX:SSG) share price is roaring 14% higher

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

The post Viva (ASX:VVA) share price moves on acquisition news appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/38Bp8b7

Iconic Australian fund manager Magellan Financial Group Ltd (ASX: MFG) has a lengthy history of success.

Looking back, 2019 was a particularly strong year for Magellan, with the Magellan share price rocketing more than 158% higher during the calendar year.

Shares in the company, co-founded by Hamish Douglass, reached an all-time closing high on 14 February 2020 of $73.67 per share.

Then came the COVID-19 market panic. By 23 March 2020, the share price had crashed 58%. While shares have recovered strongly from that low, up 68%, the Magellan share price remains down 31% from the 14 February peak. And, so far, it’s been sliding in the new year, down 4% year-to-date in 2021.

Which has many investors wondering, is now the time to buy Magellan shares?

What are analysts saying about the Magellan share price?

After a stellar 2019, the latter quarters of 2020 were certainly not the best for Magellan shareholders.

As the Australian Financial Review (AFR) reports:

Weighing on Magellan’s share price are the below-par fund returns in recent months of its Magellan Global equities fund. At November 30, that fund’s six-month return trailed the index by 8.2 per cent and most likely fell further behind in December as its largest holding Alibaba has sold off.

The AFR also notes that there’s no consensus at this time among analysts on whether or not the stock is a buy, “[b]roadly speaking, analysts are split on Magellan, with three buys, four holds and five sells on the stock.”

With that said, it’s worth having a look at the company’s funds under management and performance fee update, released to the ASX this morning.

Magellan reported that in December it had $579 million of net inflows, comprised of $252 million in net institutional inflows and $327 of net retail inflows. The company stated it will pay distributions of roughly $132 million in January.

The company also revealed it is entitled to performance fees of around $12 million for the 6-month period ending 31 December.

Magellan Financial Group company snapshot

Magellan is a funds management business that invests in some of the world’s top companies. Magellan’s investment team manages global equity and infrastructure strategies to high net worth and retail investors in Australia, New Zealand and institutional investors globally.

Magellan shares began trading on the ASX in 2004 and it is now part of the S&P/ASX 200 Index (ASX: XJO). On current prices, the company pays a 4.2% dividend yield, 75% franked.

More reading

• 4 ASX shares with sturdy balance sheets
• Are these 2 men vying to be the ASX’s Warren Buffett?
• 3 ASX 200 shares that keep growing the dividend
• ASX 200 drops over 1%
• 2 reasons why the Magellan (ASX:MFG) share price is attractive

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.

The post What’s been happening with the Magellan (ASX:MFG) share price? appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3q5lnjU

The Shaver Shop Group Ltd (ASX: SSG) share price is surging today. This comes after the company provided a positive update to its trading performance.

At the time of writing, the Shaver Shop share price is up 14.1% to $1.21.

What’s driving the Shaver Shop share price?

The Shaver Shop share price is driving higher following the release of its robust first-half year result.

In today’s release, Shaver Shop announced that it has achieved growth in key categories, underpinned by favourable trading conditions.

For the period ending 31 December, the personal grooming retailer delivered an increase of 12.4% for total sales in Q2. Like-for-like sales across the business improved 13.7%, and online sales represented a 64.7% jump for the quarter. The latter was the driving force behind the like-for-like sales performance.

A snapshot for the upcoming half-year result indicated that Shaver Shop continued to grow in all business segments. Total sales lifted 15.2%, and like-for-like sales surged 17.3% over the prior corresponding period. Most notably, demand for shopping over the internet rocketed, with a 100.2% increase for online sales, reflecting 30.3% of total sales.

The company also revealed that its gross margin profit is projected to reach more than 200 basis points from the first-half of the year. This is due to management executing strategic decisions in balancing volume growth and profit margins during key holiday periods.

Management commentary

Shaver Shop managing director and CEO Cameron Fox welcomed the result,saying:

I am exceptionally proud of our team and our first half performance. Shaver Shop has now delivered 24 months of consecutive like for like sales growth, underpinned by the accelerating trends towards DIY personal care solutions. Our customer database now exceeds 600,000 members and our online sales more than doubled in the first half to $37.5 million reflecting our position as the leading omni channel retailer in our core categories.

 Mr Fox said Shaver Shop teams across Australia and New Zealand had “remained focused and resilient”, consistently delivering “exceptional customer service during an incredibly uncertain time”.

With in-store sales conversion more than 50% and average transaction values increasing more than 10%, our store teams were able to more than offset the 20% plus decline in outside foot traffic we saw in December. We expect our first half profit to increase 75-85% when we release our results in February and we are on track deliver another record profit for the full year.

First half FY21 guidance

Taking into account its performance so far, Shaver Shop is gearing up for a positive half-year results release in February. The board advised that net profit after tax will be in the range of $13.5 million to $14 million. Previously, the company reported $7.6 million in net profit after tax for the first half of FY20.

More reading

• Stock market rally: why I’d invest today to achieve financial freedom
• Why the Althea (ASX:AGH) share price is flying high this morning
• Liontown (ASX:LTR) share price is shooting up this morning. Here’s why.
• Why the Sayona (ASX:SYA) share price is rocketing 100% higher today
• Here’s why the Splitit (ASX:SPT) share price is surging 7% higher today

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.

The post Why the Shaver Shop (ASX:SSG) share price is roaring 14% higher appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/39flP8q

The past performance of equities suggests that a long-term stock market rally is likely to take place. After all, indices such as the FTSE 100 Index (FTSE: UKX) and S&P 500 Index (SP: .INX) have recorded annualised total returns in the high-single digits over recent decades despite experiencing challenging periods along the way.

Even though many shares have made gains following the 2020 stock market crash, a number of companies continue to trade at low prices. As such, buying them today and holding them ahead of a sustained bull market could increase an investor’s chances of obtaining financial freedom.

A long-term stock market rally

The prospect of a long-term stock market rally may seem unlikely to some investors at the present time. After all, risks such as political instability in Europe and a weak global economic outlook could hold back company performance and investor sentiment.

However, the past performance of the stock market shows that it has always overcome short-term threats to post impressive returns over the long run. Furthermore, the global economy is expected to recover sharply over the coming years following present challenges. With significant monetary policy stimulus already announced in major economies, the prospects for many businesses could improve dramatically over the long run. This may allow them to command higher valuations that have a positive impact on an investor’s financial outlook.

Buying cheap stocks today

Despite a likely stock market rally over the long run, many shares currently trade at cheap prices. Investor sentiment is relatively cautious, which is understandable after what was a very challenging 2020. Many investors continue to demand wide discounts to the intrinsic values of companies that trade in industries where operating conditions are tough. For example, many banking shares, energy stocks and consumer goods companies trade on valuations that could undervalue their long-term recovery prospects.

Buying a diverse range of cheap stocks could lead to high returns in the long run. They may be able to outperform the wider stock market, since their prices are starting from a low level. And, with share valuations having historically reverted to their long-term averages in the past following bear markets, a similar outcome could lift the prices of today’s cheap shares in a stock market rally.

Achieving financial freedom

Clearly, achieving financial freedom from buying shares will take a long time – even with a likely stock market rally in the coming years. However, an investor can enjoy an improving financial situation in the long run – even if they obtain the same return as the stock market has delivered in the past.

For example, assuming an 8% annual return on a $500 monthly investment, it is possible to build a portfolio valued at around $1 million over a 35-year time period. By investing money in today’s cheap shares, it may be possible to beat that rate of return and build an even larger portfolio over the same time period.

More reading

• Why the Althea (ASX:AGH) share price is flying high this morning
• Liontown (ASX:LTR) share price is shooting up this morning. Here’s why.
• Why the Sayona (ASX:SYA) share price is rocketing 100% higher today
• Here’s why the Splitit (ASX:SPT) share price is surging 7% higher today
• Why the CV Check (ASX:CV1) share price is charging 8% 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.

The post Stock market rally: why I’d invest today to achieve financial freedom appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/38waTEg