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The ELMO Software Ltd (ASX: ELO) share price has been a very strong performer on Thursday.

In afternoon trade the cloud-based HR and Payroll software provider’s shares are up over 11% to $6.53.

Why is the ELMO share price surging higher?

Investors have been buying ELMO’s shares today after it announced another bolt-on acquisition.

According to the release, the company has agreed an initial payment of 20 million pounds (A$35.3 million) to acquire UK-based Webexpenses.

This consideration comprises a combination of cash (51%) and scrip (49%). The deal also comes with an earnout consideration of ~13 million pounds (A$23 million), which is payable in the same balance of cash and scrip, and is subject to the achievement of financial targets.

What is Webexpenses?

Webexpenses is a high growth, cloud-based expense management solution.

Management notes that the acquisition provides ELMO with highly complementary technology, as well as a large customer base. It expects this to accelerate its mid-market expansion in the UK. It also adds to ELMO’s revenue, customer base, and its market opportunity.

In respect to the latter, management estimates that the acquisition increases ELMO’s Total Addressable Market (TAM) by A$1.4 billion to A$12.8 billion across the UK and ANZ markets.

“An exciting and significant step.”

ELMO’s CEO and Co-Founder, Danny Lessem, believes the acquisition of Webexpenses is an exciting and significant step for the company’s growth.

He commented: “The acquisition of Webexpenses is an exciting and significant step in ELMO’s growth journey. The Webexpenses platform is highly complementary to ELMO’s existing offering. Customers will have the ability to manage employee expenses effectively and efficiently as part of our convergent HR and payroll solution.”

Mr Lessem also sees the opportunity for cross-selling between the two companies’ customer bases.

“The cross-sell opportunity for ELMO’s comprehensive product suite into Webexpenses’ large customer base is substantial. ELMO’s market opportunity has increased markedly, and our strategic positioning is further strengthened,” he added.

FY 2021 guidance.

The acquisition of Webexpenses has led to ELMO increasing its guidance for FY 2021.

It now expects annualised recurring revenue (ARR) of $81.5 million to $88.5 million and an EBITDA loss of $2.4 million to $7.4 million. This compares to its previous guidance for ARR of $72.5 million to $78.5 million and an EBITDA loss of $3.5 million to $7.5 million.

More reading

• Why all eyes will be on the ELMO Software (ASX:ELO) share price on Thursday
• 3 ASX growth shares to buy for 2021
• 2 ASX growth shares to buy in December
• These ASX tech shares have been tipped for big things
• 3 small cap ASX tech shares growing at a rapid rate

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 and recommends Elmo Software. The Motley Fool Australia has recommended Elmo Software. 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 Orthocell Ltd (ASX: OCC) share price is edging higher today. This comes after the company announced it has completed an important step to obtaining its commercial licence in Australia for its CelGro medical device.

During market open, the Orthocell share price reached as high as 43.5 cents. However, at the time of writing, the company’s shares have slightly retreated to 42.5 cents, up 1.2%.

Quick take on Orthocell

Orthocell focuses on the development and commercialisation of novel collagen medical devices and cellular therapies.

Its lead product, CelGro, facilitates tissue repair and healing in a variety of orthopaedic, reconstructive and surgical applications. This includes treating defects in areas of the body such as tendons, bones, nerves and cartilage.

Orthocell recently received European regulatory approval for CelGro, allowing the collagen medical device to be sold within the European Union. In addition, the company is striving for approval in the United States and Australian markets.

What’s moving the Orthocell share price today?

The Orthocell share price is in positive territory today as investors appear pleased with the company’s latest update.

According to its release, Orthocell has successfully completed the Therapeutic Goods Administration (TGA) conformity assessment process for CelGro .

The regulatory application looked at the safety and performance of CelGro in dental bone and tissue regeneration procedures. Furthermore, the conformity assessment reviewed the company’s management system and manufacturing process.

What’s next for Orthocell?

Following the positive outcome announced today, Orthocell has begun its application for market authorisation from the TGA to commercialise CelGro. The company anticipates the application will be completed within the first quarter of the new calendar year.

Orthocell has also progressed its application to the Prostheses List Advisory Committee for an inclusion on the prostheses list. This will enable the company to be reimbursed for its products by private health insurance agencies when patients have hospital cover. This application is expected to be finalised towards the last quarter of 2021.

Lastly, based on the successful completion of the conformity assessment, Orthocell believes it’s well placed to obtain US approval for CelGro next year.

What did management say?

Mr Paul Anderson, Orthocell managing director, commented on the achievement, saying:

This is an important milestone for the Company as we continue to commercialise our collagen medical device platform and I am excited to complete this important step towards gaining Australian and US FDA regulatory approval.

About the Orthocell share price

The Orthocell share price is hovering around 15% below the 50 cents level at which it commenced 2020. Orthocell shares have, however, strongly recovered from their 52-week low of 18 cents seen in March, up 136%.

More reading

• Orthocell (ASX:OCC) share price jumps 17% on positive clinical trials

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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If you’ve grown tired of reading about new record highs on the Nasdaq Composite (NASDAQ: .IXIC) you may want to skip ahead a bit.

But don’t skip too far!

We’ll get back to the increasingly positive outlook for shares on the S&P/ASX 200 Index (ASX: XJO) shortly.

First, however, the tech-heavy Nasdaq gained 0.5% yesterday (overnight Aussie time). That means…wait for it…it closed at yet another new all-time high.

Year to date the Nasdaq is now up 41%. That’s despite the index crashing 30% from 19 February through to 23 March.

In case you’re wondering, following yesterday’s gains, it’s now up 85% from the 23 March low.

“Buy stocks”

The US Federal Reserve provided some of the tailwinds pushing the Nasdaq to new record highs.

Yesterday, at the Fed’s last meeting in 2020, the world’s most influential central bank opted to continue with its monthly bond purchases to the tune of at least $120 billion (AU$160 billion).

Fed Chair Jerome Powell said the bank will continue its unprecedented level of bond purchases until inflation and employment demonstrate “substantial further progress”.

Commenting on the Fed’s meeting, Neil Dutta, head of US economic research at Renaissance Macro Research, said (quoted by Bloomberg):

The Fed marked up growth in each of the next two years, marked down unemployment, and marked up core inflation. Despite this, they don’t expect to move rates. Good for risk appetite. Buy stocks.

Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey, also pointed to the expectation of low rates for longer supporting share prices (quoted by the Australian Financial Review):

To the extent that we are seeing a slight rise post the meeting, it likely reflects continued confidence on the part of investors who believe low rates for an extended period provides support to stock prices even at these elevated levels.

Here in Australia (if you skipped ahead, you should start reading again!), we can expect similar long-term share market support from the Reserve Bank of Australia (RBA).

Governor Philip Lowe has repeatedly indicated that interest rates will most likely remain at rock bottom levels for the next 3 years. And the RBA’s own quantitative easing (QE) program continues apace.

Which helps support the growing consensus that next year will be a very different year for the ASX 200. And that perhaps, in 2021, US investors may be waking up to regular headlines trumpeting yet another new record high for Australia’s top 200 listed companies.

ASX 200 share price and dividend growth forecasts

It’s more than low rates, QE, and continuing fiscal support from the Australian Government that has many analysts forecasting an outperformance from the ASX 200 next year.

It’s also that the ASX 200 is far less dominated by technology shares and far more populated with cyclical shares. These are shares, like the banks and miners, that tend to do well when the economy is growing.

With expectations that the rollout of COVID vaccines will drive a strong global economic recovery in 2021, and with Australia’s own economy well-positioned for growth, ASX 200 shares could take the spotlight.

As Bloomberg reports:

Strategists from AMP Capital Investors Ltd. and [Commonwealth Bank‘s] Commsec expect the local benchmark [ASX 200] to reach a record high in 2021, while Macquarie Group Ltd. forecasts double-digit returns amid a recovery in earnings on economic stimulus and rising commodity prices.

The ASX 200 reached its previous record close on 20 February. Although it’s gaining again today, the index is still down 6% from that all-time high.

Morgan Stanley and Macquarie are also both bullish on their outlook for the ASX 200 in 2021. They forecast average earnings for the top 200 companies will increase 20% year on year.

According to Shane Oliver, the head of investment strategy at AMP Capital:

Just as 2020 was dominated by the pandemic and this determined the relative performance of investment markets and stocks, 2021 is likely to be dominated by the recovery.

Oliver added that ASX shares are “likely to be relative outperformers”.

And in good news for ASX income investors, Oliver forecasts, “The dividends will start to go up again as we go through 2021, as banks and others say ‘well, things haven’t been as bad as we thought’.”

Emilio Gonzalez, CEO of global investment management firm Pendal Group Ltd (ASX: PDL) has a laundry list of reasons for investor optimism in 2021. That includes Australia’s enviable position with very limited virus cases as the world moves to reopen.

In the AFR’s annual Chanticleer CEO Outlook Poll, Gonzalez says:

Whilst it has been an extraordinary and tough year, there is every reason to be optimistic for 2021. Australia is on the path to recovery and ahead of the world in that respect. We should seize the opportunity and not be too risk averse despite the current uncertainties.

Companies with strong balance sheets and in a strong cashflow position should demonstrate the courage of their convictions and invest where they see an opportunity to grow their business.

As 2020 winds to an end, here’s hoping that this time next year investors around the globe will be waking to yet another headline announcing new all-time highs for the ASX 200.

More reading

• Some things ASX investors should watch out for in 2021
• ASX 200 up 0.7%: Zip capital raising, A2 Milk trading halt, Sydney Airport dividend update
• Citigroup picks the best ASX retail stocks to own for 2021
• Why the Bapcor (ASX:BAP) share price is rocketing 9% higher today
• Why 2021 may be an even better year for ASX investors

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

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Many of today’s cheap shares could hold appeal for investors such as Warren Buffett. His focus on achieving a discount to a company’s intrinsic value when purchasing shares could provide scope for capital appreciation over the long run.

With many other mainstream assets such as bonds and cash offering low returns at the present time, undervalued stocks may prove to be a profitable long-term investment.

Weak investor sentiment towards today’s cheap shares

Despite the stock market’s rebound since its March lows, many cheap shares are currently available to buy. Investors have a downbeat view of a number of sectors that face challenging operating conditions in the short run.

Where companies within those sectors have solid financial positions and competitive advantages, they may be likely to survive difficult current circumstances to benefit from a likely economic recovery.

Warren Buffett has previously purchased cheap stocks to generate high returns in the long run. Buying a company for less than it is worth may also reduce an investor’s overall risks. They will obtain a wider margin of safety in case its future performance is less positive than expected.

Recovering share prices

Of course, there is no guarantee that today’s cheap shares will recover from their current low prices. The economic outlook could worsen, while some companies may be unable to adapt their business models to changing operating conditions.

However, the track record of investors such as Warren Buffett shows that a long-term recovery is likely. He has benefitted from the world economy’s persistent return to impressive levels of GDP growth following a variety of crises.

For example, over the past 20 years, the early 2000s recession and the global financial crisis caused some stocks to trade at extremely low levels for a period of time. Following them, the world economy returned to positive growth over the long run, which prompted improving operating conditions and stronger investor sentiment towards previous cheap shares.

A lack of relative appeal

Cheap shares may also be appealing today because of a lack of opportunities available elsewhere. Low interest rates mean that cash and bonds have disappointing returns.

Therefore, they are unlikely to make up the majority of an investor’s portfolio. Meanwhile, high house prices may mean that the returns on property investment may be less impressive than those made on undervalued shares.

Of course, there may be further challenges ahead for the stock market. Risks such as the ongoing coronavirus pandemic and Brexit may limit the scope for stock markets to rise in the short run.

Therefore, diversifying across a range of cheap stocks could be a sound move. It may limit risk and allow an investor to follow in Warren Buffett’s footsteps to outperform the stock market as it delivers likely further growth in the coming years.

More reading

• Why the ASX 200 could be the Nasdaq of 2021
• Why Codan, Pro Medicus, Uniti, & Zip shares are storming higher
• Why the Nutritional Growth (ASX:NGS) share price jumped 9% today
• Disney+ to hit $4 billion in revenue by 2022
• Why Blackmores, Service Stream, Sydney Airport, & Webjet shares are dropping lower

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. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It has been another positive day of trade for the S&P/ASX 200 Index (ASX: XJO) on Thursday. In afternoon trade the benchmark index is up 0.85% to 6,736 points.

Four shares that are climbing more than most today are listed below. Here’s why they are storming higher:

Codan Limited (ASX: CDA)

The Codan share price has jumped 10% to $11.08. Investors have been buying the metal detector-focused electronics products company’s shares since it provided guidance for the first half of FY 2021 on Wednesday. Codan has been experiencing very strong demand for its metal detectors and expects this to lead to a net profit after tax of $40 million for the half. This is almost double the $22.2 million it achieved in the prior corresponding period.

Pro Medicus Limited (ASX: PME)

The Pro Medicus share price is up 3% to $32.02 after announcing a major contract win. According to the release, Pro Medicus has signed a five-year contract with MedStar Health worth a total of A$18 million. MedStar Health is the largest health system in the Maryland and Washington, D.C. metropolitan region, comprising 10 hospitals.

Uniti Group Ltd (ASX: UWL)

The Uniti share price has rocketed 13.5% higher to $1.68. Investors have been fighting to get hold of shares after the telco announced an agreement to acquire the Telstra Velocity and South Brisbane Exchange assets from Telstra Corporation Ltd (ASX: TLS). In order to fund the acquisition, Uniti has raised $50 million at a 1.4% premium of $1.50 per new share.

Zip Co Ltd (ASX: Z1P)

The Zip share price is up 1.5% to $5.65. Investors have been buying the buy now pay later provider’s shares after it announced the completion of the institutional component of a $150 million capital raising. Zip raised $120 million from institutional investors at a 4.1% discount of $5.34 per new share. These funds will be used to support its growth in the United States, product development, and its UK expansion.

More reading

• ASX 200 up 0.7%: Zip capital raising, A2 Milk trading halt, Sydney Airport dividend update
• Here’s why the Pro Medicus (ASX:PME) share price is storming 5% higher
• Why the Uniti (ASX:UWL) share price is zooming 13% higher today
• Here’s why Zip (ASX:Z1P) launched a $150 million capital raising
• 5 things to watch on the ASX 200 on Thursday

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 ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of and has recommended Pro Medicus 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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Nutritional Growth Solutions Ltd (ASX: NGS) shares jumped by more than 9% this morning after the company released two major announcements to the market. In early trade, the Nutritional Growth share price surged as high as 30 cents before retreating to its current level of 28 cents at the time of writing.

In its first announcement, Nutritional Growth reported it has obtained a trademark for its Healthy Height brand from the Korean Intellectual Property Office (KIPO). The second release announced that the company has signed an agreement to acquire the Kidzshake brand in the United States.  

Why is this good news for the Nutritional Growth share price?

The Nutritional Growth share price has been on the move today with investors clearly pleased at the company’s latest endeavours. So what exactly was announced? 

Kidzshake

Nutritional Growth reported that it has acquired the Kidzshake brand from the US-based company, Ausmerica Wellness Services LLC, for a total consideration of US$150,000.

The agreement involves acquiring all of Kidzshake’s business and associated assets, including inventory, and intellectual property, as well as existing contracts.

Kidzshake is a nutritional shake for kids, and was founded by an Australian doctor living in the US.

Nutritional Growth says the potential market for Kidzshake is significant, with about a third of children in the US using dietary supplements. 

Kidzshake has also created a vegan, plant-based nutritional shake, targeting a growing category in US. According to Nutritional Growth, the plant-based food market in the US is growing at 18%, outpacing even the growth of organic, gluten-free, and non-GMO products. 

Korean trademark

Nutritional Growth says the trademark received from the Korean Government relates to its nutritional shake, Healthy Height.

The company reported that the new trademark will strengthen its position for potential partnership discussions in South Korea.

South Korea is said to be the biggest consumer of pediatric nutritional supplements globally, with up to 54% of children aged 1 to 6 years using these products.

About the Nutritional Growth share price in 2020

The Nutritional Growth share price has fallen by nearly 10% this year, with a 52-week high of 38 cents and a low of 25.5 cents.

The company currently commands a market capitalisation of $13 million.

More reading

• Disney+ to hit $4 billion in revenue by 2022
• Why Blackmores, Service Stream, Sydney Airport, & Webjet shares are dropping lower
• Some things ASX investors should watch out for in 2021
• Here are the best 5 ASX financials shares of 2020
• PlaySide Studios (ASX:PLY) share price doubles on ASX debut

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.

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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.

So sweeping has been consumer acceptance of Walt Disney Co‘s (NYSE: DIS) streaming service in its first year of operation that Disney+ is now expected to generate over $4 billion in revenue in the next two years.

The industry watchers at eMarketer say the service’s revenue will hit $1.94 billion by the end of 2020, but with the $1 price increase coming next year, that will catapult Disney+’s contribution to the entertainment giant.

House of Mouse powerhouse

Ever since launching in November 2019, Disney+ has been a commercial success, racking up an astounding 86.6 million subscribers in its first year of operation.

While it got a big assist from Verizon Communications, which offered various customers free one-year subscriptions, which Disney is now beginning to lap, then-CEO Bob Iger said they amounted to only 20% of the first quarter’s total subscriptions.

There are other promotions still out there that will slightly artificially inflate the numbers, but it’s clear Disney+ has been an unmitigated success that even eMarketer sees as soon being able to challenge Netflix Inc (NASDAQ: NFLX).

It forecasts that by the end of 2022, the combined streaming services of Disney+, Hulu, and ESPN+ will generate some $12.36 billion in revenue for Disney compared to $12.95 billion for Netflix.

Certainly, Disney+ got a tremendous boost from the pandemic as families with young children eagerly signed up for the library of Disney programming. It might not be able to keep reporting such meteoric growth, but analysts still see it expanding its subscriber base, potentially hitting 194 million by 2025.

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

More reading

• Better Buy: Starbucks vs. Netflix
• 10 most searched shares in Australia
• Will Netflix stock crash in 2021?
• I have too many tech shares: Do I sell, buy or hold?

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Netflix and Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Verizon Communications and recommends the following options: short January 2021 $135 calls on Walt Disney and long January 2021 $60 calls on Walt Disney. The Motley Fool Australia has recommended Netflix and Walt Disney. 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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In afternoon trade the S&P/ASX 200 Index (ASX: XJO) is on course to record another strong gain. At the time of writing, the benchmark index is up 0.85% to 6,736.6 points.

Four shares that have not been able to follow the market higher today are listed below. Here’s why they are dropping lower:

Blackmores Limited (ASX: BKL)

The Blackmores share price is down over 4% to $77.31. Investors appear to have been selling the health supplements company’s shares amid speculation that A2 Milk Company Ltd (ASX: A2M) is about to downgrade its guidance for FY 2021. Given the similar channels they sell in, investors may be worried that Blackmores could be underperforming.

Service Stream Limited (ASX: SSM)

The Service Stream share price has crashed a further 15% lower to $1.79. The network services company’s shares have fallen materially over the last couple of days since the release of an announcement. That announcement revealed that it has been awarded a multi-year contract with the NBN but will be sharing the work with three other providers. This means it will be generating notably less revenue that the market was expecting.

Sydney Airport Holdings Pty Ltd (ASX: SYD)

The Sydney Airport share price is down 1.5% to $6.54. Investors have been selling the airport operator’s shares today after it announced that it will not be paying a final dividend this year. This will be the first time in its history that it has not paid shareholders a dividend in a financial year. COVID-19 impacts are of course to blame.

Webjet Limited (ASX: WEB)

The Webjet share price has fallen 2.5% to $5.14. A number of travel shares have taken a tumble on Thursday. This may be down to concerns over a spike in COVID-19 cases in New South Wales. If the situation isn’t brought under control quickly, domestic borders could start to close to Australia’s most populous state.

More reading

• ASX 200 up 0.7%: Zip capital raising, A2 Milk trading halt, Sydney Airport dividend update
• Sydney Airport (ASX:SYD) share price lower on dividend and traffic update
• ASX 200 rises 0.7% on Wednesday
• Service Stream (ASX:SSM) share price falls despite NBN agreement
• ASX 200 up 1.1%: ANZ AGM, Resolute jumps, travel shares soar

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended A2 Milk, Blackmores Limited, and Webjet Ltd. The Motley Fool Australia has recommended Service Stream Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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There are no shortage of commentators predicting a healthy 2021 for ASX markets and the global economy. The S&P/ASX 200 Index (ASX: XJO) has just emerged from one of its best months in history. 

December is proving to be a good month so far as well, given the ASX 200 is already up around 3.2% since the start of the month. In fact, as of today (at the time of writing anyway), the ASX 200 is now also in the green year to date, and up almost 48% from the lows of 23 March.

My Fool colleague Brendon Lau covered some of the reasons commentators are bullish on 2021 this morning, which you can (and should) look at. These include a bullish outlook for cyclical shares (such as banks) due to an expected global rollout of coronavirus vaccines, as well as strong economic growth overall.

But I’m here to take the punchbowl away from the party as it were.

We all hope for a great year in 2021, don’t get me wrong. But let’s look at some reasons why 2021 might not go as planned on that front.

ASX in frothy territory?

According to reporting in the Australian Financial Review (AFR) this week, Liz Ann Sonders, chief investment officer at the giant US broker Charles Schwab, says that investors need to be wary in 2021:

The success of the market this year has bred what I believe is its most significant risk at present — elevated optimistic sentiment… that nearly all behavioural and attitudinal measures of sentiment show at best complacency, and at worst speculative froth. There have been a myriad of comparisons between today’s markets and the 2000 tech bubble era; but perhaps a better comparison would be to 2009-2010 as we look ahead to 2021.

Ms. Sonders points out that it took a “brutal” 17-month bear market back in 2008-09 before the market finally found a bottom. By comparison, the ‘coronavirus crash’ that 2020 saw early in the year lasted just over a month. That doesn’t sit well with Ms. Sonders, who states that corrections (sometimes heavy) often come after periods of market exuberance.

Keep an eye on monetary policy

Separate reporting in the AFR today outlines some additional risks for 2021. This report posits that the largest risks facing the market next year come from (in ascending order of likelihood) monetary policy reversal (rising global interest rates), a “market accident” due to excessive risk taking, and mounting corporate bankruptcies.

This report notes that “while investors will continue to surf a highly profitable liquidity wave for now, things are likely to get trickier as we get further into 2021″. It also states that, “central banks’ deepening distortion of markets will be harder to defend in a recovering economy amid rising inflationary expectations”. It concludes by telling investors who want to navigate through these uncharted waters, they need “a willingness to re-examine some conventional wisdom” when it comes to investing. Not an easy ask!

Foolish takeaway

We all want a prosperous 2021. But what we want and what the share market delivers are, of course, very different things. Judging by what these commentators are saying, we should all keep a very close eye on monetary policy next year.

More reading

• ASX 200 up 0.7%: Zip capital raising, A2 Milk trading halt, Sydney Airport dividend update
• Citigroup picks the best ASX retail stocks to own for 2021
• Why the Bapcor (ASX:BAP) share price is rocketing 9% higher today
• Why 2021 may be an even better year for ASX investors
• What today’s economic outlook means for the BHP (ASX:BHP) share price

Motley Fool contributor Sebastian Bowen 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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Today, we’re looking at some of the best performing ASX financials shares of 2020. Financials shares have been some of the hardest-hit shares in 2020, thanks in large part to the coronavirus-induced recession.

Although sub-sectors within financials (ie. banking, insurance, asset management) are all affected in different ways by the prevailing economic conditions of the day, financials as a whole are viewed as a rather cyclical sector – meaning they tend to rise and fall in line with broader economic growth.

We won’t be looking at ASX bank shares, or those involved with buy now, pay later (BNPL) today. Even though these companies are technically financials, we will examine them separately to get a better grip on their individual eccentricities.

So, here are the top 5 ASX financials shares for 2020 so far:

ASX Financial Share	YTD share price gain (as of 16 December)	Market Capitalisation
Netwealth Group Ltd (ASX: NWL)	101.91%	$3.78 billion
Hub24 Ltd (ASX: HUB)	80.54%	$1.34 billion
AUB Group Ltd  (ASX: AUB)	41.73%	$1.27 billion
Pinnacle Investment Management Group Ltd (ASX: PNI)	34%	$1.18 billion
Janus Henderson Group plc (ASX: JHG)	21.17%	$8.83 billion*

Wealth platforms top ASX financials sector

One theme that stands out from this list is the success of ‘investment services’ providers, namely Netwealth and Hub24.

These 2 companies both offer investment platforms for money management. Individuals and financial advisers can use these platforms to access all of their investments in one place, as well as providing other tools like superannuation and insurance management.

These companies have arguably benefitted from the 2018 banking royal commission, the aftermath of which saw many of the big four banks face criticism over questionable practises in relation to ‘vertically integrated’ wealth products. This likely damaged broader consumer confidence over having a big four bank managing customers’ wealth. Since then, many of the banks have divested their wealth management arms.

In fact, Hub24 pointed this out during its recent annual general meeting. The company’s chair Bruce Higgins stated the following on that matter:

This disruption [of the financial services industry], including the incumbents divesting of their wealth businesses, continues to create a significant opportunity for HUB24 to continue to grow.

That comment came after Hub24 reported revenue growth of 14% for FY2020, and earnings growth of 60%.

Likewise, back in August we saw Netwealth report earnings growth of 24.8% for FY2020. Both Netwealth and Hub24 have clearly been sitting in a healthy tailwind in 2020.

Fund managers close behind

We also see 2 fund managers in this list, Janus Henderson and Pinnacle.

Janus Henderson is an interesting one. This dual-listed company (hence the star on the table above) has had a solid, if not spectacular year. For the second quarter of 2020 (ending 30 June), the company reported revenues were down 7% compared to the first quarter (ending 31 March). However, the company also reported earnings per share (EPS) growth of 12% over the same period.

The company has been going on a buying spree over its own stock. It has been executing a US$200 million share buyback program over the course of 2020 . We covered how this program is likely behind much of the Janus share price gains in 2020 here.

Similarly, Pinnacle has been benefitting this year as well. Back in July, the company reported that it had raked in $25.8 million in performance fees for FY2020, which prompted its share price to surge more than 10% that day. It also reported EPS growth of 4.7% for FY2020 in August, as well as a 5.6% rise in net profits after tax.

Finally, we have financial insurance company AUB Group. AUB reported its strongest year on year growth results in 7 years back in August. The company experienced a 9.2% increase in revenue for FY2020, which helped push net profits after tax up by 15.2% for the year.

The company also managed to jack up its final dividend by 9.2% compared with FY19. It even upped its guidance for FY2021 on these numbers. No wonder investors were chasing this company’s shares up this year.

More reading

• Easton Investments (ASX:EAS) share price up 8%, hits 52-week high
• ASX stock of the day: Janus Henderson (ASX:JHG) opens at new 52-week high
• ASX 200 up 0.3%: Premier Investments update, big four banks rise, gold miners tumble
• Kelly Partners (ASX:KPG) share price surges up on deal with Austbrokers
• IOOF (ASX:IFL) share price lifts after investor briefing

Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Hub24 Ltd and Netwealth. The Motley Fool Australia has recommended Hub24 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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