Tag: Motley Fool

Last week the S&P/ASX 200 Index (ASX: XJO) managed to keep its winning streak alive and recorded its sixth straight week of gains. The benchmark index rose 0.1% to finish the period at 6,642.6 points.

Not all shares were able to climb higher with the market. Here’s why these were the worst performers on the ASX 200 over the period:

Appen Ltd (ASX: APX)

The Appen share price was the worst performer on the ASX 200 last week with a disappointing 14.5% decline. Investors were selling the artificial intelligence services company’s shares after it downgraded its FY 2020 guidance. Due to COVID-19 headwinds, Appen expects to report full year underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of $106 million to $109 million (or $108 million to $111 million when applying the originally assumed exchange rate). This is a reduction from its previous guidance of $125 million to $130 million. Management advised that many of its major customers in California have been hit by lockdowns, which has impacted investment decisions.

IDP Education Ltd (ASX: IEL)

The IDP Education share price was out of form and dropped 8.9% lower over the five days. This appears to have been driven by concerns over the impact that the Australia-China trade war could have on the language testing and student placement company’s performance. Analysts at Morgan Stanley estimate that 10% of its profit come from Chinese students and this could decline if they stop coming to Australia to study. Though, it is worth noting that this hasn’t stopped the broker giving its shares an overweight rating with a $24.00 price target.

Webjet Limited (ASX: WEB)

The Webjet share price wasn’t far behind with a decline of 8.7% last week. This decline appears to have been driven by profit taking after a particularly strong gain in November by the online travel agent. The company’s shares stormed a massive 65% higher during the month thanks to border re-openings and positive COVID-19 vaccine developments.

Pendal Group Ltd (ASX: PDL)

The Pendal share price was a poor performer over the five days and dropped 8.2%. Last week the fund manager held its annual general meeting. Not even some positive commentary from management was enough to keep investors from selling shares. It commented: “As we enter FY21 we do so in a much-improved position despite the global uncertainty. We have seen an improvement in investment performance, and we are investing in areas that will grow our funds under 5 management, with a team that is focused and motivated. Our strategy is clear and we are working hard to make it successful.”

More reading

• Will China’s tariffs cripple the Aussie economy’s 2021 recovery plan?
• ASX 200 drops on Friday
• Why JPM just upgraded the beaten-down Appex (ASX:APX) share price to “buy”
• Brokers name 3 ASX shares to buy right now
• UBS just downgraded these outperforming ASX mining stocks

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 Appen Ltd and Idp Education Pty Ltd. The Motley Fool Australia owns shares of and has recommended Webjet 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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Relations between China and Australia have been sinking to new lows. And they show few signs of turning around in the immediate future.

China is Australia’s largest export partner, purchasing 35% of Australia’s exported goods and services.

Enter the tariffs

In what Australia claims is a violation of the World Trade Organisation’s core rules, yet China claims are legitimate tariffs in response to Australian subsidies and dumping of products, China has slapped punitive tariffs on a range of Australian exports, rattling share markets.

To date these include import tariffs on barley, wine, meat, lumber, lobsters and (unofficially) coal. But that list might well grow. Honey producers, cotton and wheat farmers, and pharmaceutical companies are all reportedly in China’s sights.

Should ASX investors be concerned about China’s trade disruptions?

The impact of the tariffs to date has been painful to some specific industries and put the share prices of companies in those sectors under pressure.

The Treasury Wine Estates Ltd (ASX: TWE) share price is an obvious example, down 11% since 25 November.

In November, China revealed it would level tariffs as high as 200% on Aussie wine. Yesterday, the Communist Party upped that with an additional 6.3% “anti-subsidy” tariff.

Now the additional 6.3% won’t have much, if any, impact atop the much bigger existing punitive import duties. In fact, the Treasury Wine share price is up 4.0% in afternoon trading even as the broader S&P/ASX 200 Index (ASX: XJO) is down 0.6%.

However, it does show that China isn’t done with its tariff measures yet.

Which begs the question, just how serious could this get for the wider Australian economy?

According to Shane Oliver, the head of investment strategy & economics and chief economist at AMP Capital, a subsidiary of AMP Ltd (ASX: AMP), it’s unlikely to grow to the point of impacting the majority of Australia’s trade with China.

Speaking at AMP’s webinar on Wednesday, Oliver said:

The exports affected so far amount to $6–7 billion per annum. That’s horrible for those affected, if you’re a wine maker or barley farmer or beef producer… But the overall macro-economic impact is relatively minor. $6 billion is only 0.3% of our economy.

The big impact, Oliver said, would be tariffs on Aussie gas or iron ore. But he believes it’s unlikely China can do that without negatively impacting its own economy. And with iron ore reaching US$156 per tonne earlier today and the price of coking coal in China at 4-year highs, he’s got a good point.

More reading

• ASX 200 drops on Friday
• Why JPM just upgraded the beaten-down Appex (ASX:APX) share price to “buy”
• UBS just downgraded these outperforming ASX mining stocks
• Why the Eagers Automotive (ASX:APE) share price broke its all-time record today
• ASX 200 down 0.3%: CSL sinks, Zip’s Facebook deal, IGO rockets

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates 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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The E&P Financial Group Ltd (ASX: EP1) share price has gained a boost today, after the company received a full takeover offer. A bid to buy out the remaining shares of the embattled financial adviser came from its shareholder, 360 Capital Group Ltd (ASX: TGP).

At the time of writing, the E&P Financial share price is up by 3.13% to 66 cents, while the 360 Capital share price is down 1.04% to 95.5 cents.

What’s the offer

On 27 October, 360 Capital offered E&P 61 cents a share for 80.45% of the shares it doesn’t already own. This was rejected.

360 Capital made a fresh bid today, this time offering E&P’s shareholders 69 cents per share, a 13% increase on its first bid.

The offer has been structured at $0.30 per E&P share, plus 2 36o Capital shares for every 5 E&P shares or part thereof, less any dividends declared or paid after today.

E&P subsequently released an announcement through the ASX late this afternoon, telling its shareholders not to take any action until the board has issued its recommendations.

Why does 360 Capital want to take over E&P

360 Capital already owns 19.55% of E&P’s shares through its private equity subsidiary, 360 Capital ED1 Pty Limited.

In early October, 360 Capital sent a letter to its shareholders explaining why it had acquired 19.55% of E&P, and why it made a conditional offer to acquire the remaining shares.

In that letter, 360 Capital argued that E&P should be privatised. This would provide greater flexibility in managing its capital base, and a faster response to opportunities by removing the complexities associated with public listing. 

In addition, 360 Capital noted that the E&P Financial share price had decreased by 79% since the company’s initial public offer (IPO) in May 2018. It believed a takeover would offer a compelling opportunity for E&P shareholders to realise part of their investment in cash, and also receive 360 Capital shares which would benefit from the potential turnaround of E&P.

About the E&P share price

E&P has been battling the Australian Securities And Investments Commission (ASIC) in court over 126 alleged breaches by company representatives. These relate to 51 instances of advice provided by its advisory business. ASIC said these breaches carried a maximum penalty of $1 million per instance before March 2019, and $10.5 million per instance after that date. The court case is ongoing.

The E&P Financial share price has lost 33% in 2020. The company currently commands a market value of $150 million.

More reading

• 4 small cap ASX dividend shares with large yields
• 360 Capital (ASX:TGP) share price edges higher on earnings forecast

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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The Hydrix Ltd (ASX: HYD) share price is trading lower despite a positive update at the company’s annual general meeting (AGM) this afternoon. Shares in the innovative small cap have dropped 3.57% to trade at 27 cents at the time of writing.

What was covered at the AGM?

Hydrix executive chair Gavin Coote told investors how the company’s strong product innovation has lead to an impressive year.

Driving the Hydrix share price was its 16% revenue growth, which was up to $15.7 million. This is turn lead to $1.2 million in operating profit.

Furthermore, the company retained a strong balance sheet with $9.5 million cash on hand.

This growth has seen the Hydrix share price trading 25% higher than at the same time last year, and outperforming the All Ordinaries Index (ASX: XAO) by 24.57%.

What does Hydrix do?

Hydrix is a product innovation company that aims to enhance people’s wellbeing through three growth platforms. These are: 

• Hydrix Services – designs and engineers client products
• Hydrix Ventures – generates equity returns through investing in companies
• And Hydrix Medical – the most notable platform, it aims to bring innovative medical technologies to market. The implantable heart attack warning system is one such example that has largely behind the company’s share price gain this year.

From these platforms, Hydrix boasts more than 200 client programs over its 18 years in existence.

What now for the Hydrix share price?

Also at today’s AGM, Hydrix management outlined some anticipated events in coming months.

These include the submission of its AngelMed battery testing results to the United States Food and Drug Administration (FDA). There is potential for its first ever implants to come in the third quarter of FY21, the company said.

In addition, if the company gains FDA approval for its AngelMed device in quarter four, it would expect significant ramifications for the Hydrix share price.

More reading

• Vulcan (ASX:VUL) share price rises 20% and breaks new record. Here’s why.
• Why ‘ASX dividend king’ Soul Patts (ASX:SOL) is a top income share for 2021
• The Archer (ASX:AXE) share price lifts on partnership deal
• S&P Global set to launch world’s first cryptocurrency index
• Why the MSM (ASX:MSM) share price has gone gangbusters again

Motley Fool contributor Daniel Ewing 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) fell by 0.6% to 6,643 points.

Here are some of the highlights from the ASX today:

CSL Limited (ASX: CSL)

The CSL share price fell more than 3% after the healthcare giant decided to abandon the phase 2 and phase 3 trial of the University of Queensland (UQ) COVID-19 vaccine.

CSL said that the COVID-19 vaccine from UQ elicits a robust response towards the virus and has a strong safety profile. There were no serious adverse events or safety concerns reported in the 216 trial participants.

However, the phase 1 trial data showed the generation of antibodies directed towards the molecular clamp component of the vaccine, which interfere with HIV diagnostic assays (tests). The potential for this cross-reaction had been anticipated before the commencement of the trial. Participants were fully informed prior to their involvement so that this could occur.

Blood samples from study participants were tested after vaccination and it was found that these molecular clamp antibodies did cause a false positive of a range of HIV assays. Follow-up tests confirmed that there is no HIV virus present. CSL stated that there is no possibility the vaccine causes infection.

With advice from experts, CSL and UQ have worked through the implications that this issue presents to rolling out the vaccine into broad populations. It is generally agreed that significant changes would need to be made to well-established HIV testing procedures to accommodate rollout of this vaccine. Therefore, CSL and the Australian Government have agreed that vaccine development will not proceed to phase 2 or phase 3 trials.

Afterpay Ltd (ASX: APT)

The Afterpay share price went up around 5% after investors learned the ASX 200 buy now, pay later (BNPL) business had won over some new retailers in Canada.

According to reporting by media, Afterpay has partnered with fashion and beauty retailers SHEIN, Rains, Triarchy and Clarins.

Melissa Davis, head of North America for Afterpay said: “Afterpay is growing rapidly in Canada, especially among Millennial and Gen Z consumers, because our service helps young shoppers budget their own money and pay over time. In doing so, our retail partners benefit by attracting new, highly engaged young consumers – helping them increase sales, basket sizes and conversion during the most important retail season of the year.”

It was also reported that last month Afterpay launched cross border shopping, providing its Canadian retailers access to its international network of young and engaged shoppers.

Eagers Automotive Ltd (ASX: APE)

ASX 200 car dealership business Eagers announced an update today. It said that for the year ending 31 December 2020, it’s expecting to deliver an underlying operating profit before tax from continuing operations in the range of $195 million to $205 million for 2020, compared to $100.4 million. This guidance reflects the full year of trading for the enlarged company after its merger with Automotive Holdings Group.

The company said that vehicle sales have continued to rebound strongly from the historical lows experienced during April and May 2020. Customer orders have continued on their strong trajectory and supply constraints caused by global manufacturer factory closures during the June quarter have started to ease as shown by the 12% increase in national vehicle deliveries recorded during November by VFACTS.

Management said that the industry’s tight inventory position, along with its cost reduction initiatives that have been implemented, have helped the strong underlying trading performance.

The Eagers share price went up 3%. 

Zip Co Ltd (ASX: ZIP)

BNPL business Zip announced today that it was partnering with Facebook to help small and medium sized Australian businesses to use Zip Business to pay for advertising on the social platform.

Currently in the testing phase, the service will enable small businesses advertising on the platform to reach online shoppers without impacting their cashflow.

The Zip share price finished the day higher by around 2%.

More reading

• Why JPM just upgraded the beaten-down Appex (ASX:APX) share price to “buy”
• Why the Afterpay (ASX:APT) share price is surging higher today
• UBS just downgraded these outperforming ASX mining stocks
• Why CSL, Lovisa, Lynas, & Syrah shares are dropping lower
• Why the Eagers Automotive (ASX:APE) share price broke its all-time record today

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. and ZIPCOLTD FPO. 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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I’m no Nostradamus.

I possess no special extra-sensory perception, and my crystal ball is broken. Truth be told, it’s never worked.

But I’ve managed, thus far (and, as ever, past performance is no guarantee of future returns) to deliver market-beating performance over the last 9 or so years at Motley Fool Share Advisor.

I say that not to brag, but to differentiate between the power of ‘specific prediction’ and ‘a process that, on average and over time, has tended to deliver market-beating results’.

The former is fortune telling. The latter is a combination of analysis, research and pattern recognition: otherwise known, in the trade, as ‘fundamental analysis’: looking at a company and assessing its attractiveness based on things like financial statements, business model and competitive position (among much else).

So what I’m about to share is not a prediction. As Keynes famously said, ‘the market can remain irrational longer than you can remain solvent’ — which makes predictions, frankly, silly.

Instead, I’m going to use fundamentals to share a view of how, on balance, I think a given situation is likely to unfold.

That situation is one of the great Australian export commodities: iron ore.

I can’t tell you how often I’ve been asked about iron ore in the past couple of weeks. It is riding sky-high at the moment, selling for around US$156 per tonne as I write this.

Everyone wants to know how they can get on board.

My general advice is: Don’t.

And here’s why.

While the price is over US$150 per tonne at the moment, Fortescue Metals Group Limited (ASX: FMG) reported cash cost of production was under US$13 per tonne in the last financial year.

That gives it — assuming the cash cost hasn’t materially moved recently — a cash profit margin of over 90%.

That is spectacularly, eye-wateringly good.

It’s also — in all probability — unsustainable.

Why?

Well, generally commodities are pretty substitutable. With some allowances for quality, grade, contracts and reputation, my iron ore is the same as your iron ore, and that’s the same as their iron ore.

Now, when prices are low, it pays to be the lowest cost producer. You want to be the ‘last man standing’ if a price war breaks out.

But when the price is US$150 a tonne? It’s an exaggeration to say that just anyone could make money mining iron ore… but only a little.

Now, let me take you back to high school economics.

Remember supply and demand?

They usually — and especially, for an almost-perfectly substitutable product — find an equilibrium at a given price.

Supply matches demand.

Now, let’s say demand starts to rise.

In the first instance, prices rise, as more buyers compete (pay more) for a limited quantity.

But what happens next?

Well, absent market-failure, the response to higher prices is… increased supply.

And step three in our little example?

Increased supply acts to push prices back down.

Now, my guess is that we’re currently at Step 2.

Increased demand (and, in our increasingly ‘financialised’ world, futures traders’ expectations of increased demand) have pushed prices up.

A lot.

Now, it’s possible there’s no reasonable likelihood of increased supply. Maybe the miners will act rationally and simply not mine any extra iron ore, keeping demand down.

But if so, that’ll be the first time I know of, outside of the artificially constrained OPEC oil cartel, and the diamond industry.

Yes, there’s a first time for everything, but that doesn’t make it particularly likely.

So, on balance, I think it’s likely that supply will, over time, increase.

And that makes it likely, in my view, that current prices are unsustainably high.

Does that mean they can’t go higher, in the short term? No.

Does that mean I know when they’ll fall? Or how fast and how far? No.

But here’s the thing about investing: we should be looking for investment ideas where the probabilities are in our favour.

The probability of iron ore cash margins remaining at 90% is about as low as Harold Holt wandering up Portsea Beach on Christmas Day.

Which means buying — or owning — shares in iron ore miners right now is a tough case to make.

If you buy now maybe you get lucky. Maybe iron ore prices go up and you get in and out at the right time.

Maybe.

But it’s not a very high percentage play.

And long term wealth is rarely made by making low percentage shots.

For the record, I think Fortescue is one of the great modern Australian business success stories. What Andrew Forrest and team have achieved is sensational.

But that doesn’t mean you should buy shares in it — or any other iron ore miner — when the commodity price is unsustainably high.

Miners’ shares, like commodity prices, can always go higher from here. It’s always possible.

But if I was trying to create long-term wealth, I wouldn’t be buying shares in a company whose major commodity is trading at what I think are unsustainably high prices.

Instead?

I thought you’d never ask.

You want to find businesses with pricing power.

Companies that aren’t selling commodity products.

Businesses with strong brands that are in high demand.

You’re looking for differentiation. Growth. Quality.

In short: a company with a sustainable competitive advantage.

And, ideally, an attractive price.

(For the record, I’m on Warren Buffett’s side when he says he’d prioritise quality over price, but I’ll take ‘both’ whenever I can find them together in the one company.)

You might, like me, scoff at the fact Apple is about to start selling $900 headphones.

“How much?” you ask, in head-shaking disbelief.

And yet, people will pay that price. Many, many people.

Are they silly? Maybe. I can think of a couple of hundred things I’d spend 900 big ones on, before some new headphones.

But then again, plenty of people would disagree with my purchases, too.

My point is that Apple will sell heaps of those things.

Because the tech is 30 times better than other headphones you can get at JB HiFi?

Nah.

Because they just love the brand. They’ll convince themselves they’re 30 times better… because that’s the impact a brand can have on our rational minds.

I don’t own Apple, for the record. But the example of pure, raw, brand power is hard to beat.

Don’t get me wrong: Fortescue is a great business with a bright future. Those cash costs are stunningly low. What they’ve achieved is astonishing.

But paying a high price for shares of a company currently enjoying a remarkably — and unsustainably — high price for its product is something else entirely.

Fool on!

More reading

• UBS just downgraded these outperforming ASX mining stocks
• Fortescue (ASX:FMG) share price hits record all-time high, here’s what brokers think
• 5 things to watch on the ASX 200 on Friday
• Why Asaleo Care, Fortescue, Perpetual, & Starpharma shares are storming higher
• ASX 200 down 0.4%: Appen downgrades guidance, Fortescue hits a record high

Scott Phillips 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 Apple. The Motley Fool Australia has recommended Apple. 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 Appen Ltd (ASX: APX) share price continues to tumble after its disappointing outlook but this is a good time to buy the stock, according to JPMorgan.

The broker upgraded its recommendation on the APX share price to “overweight” from “neutral” despite the bad news.

Appen share price falls despite broker upgrade

The move is yet to help shares in the artificial intelligence (AI) company though. The Appen share price lost another 2.4% to $25.58 in the last hour of trade when peers like the Afterpay Ltd (ASX: APT) share price and Xero Limited (ASX: XRO) share price are outperforming.

Today’s loss comes on top of Appen’s 12.4% plunge yesterday when it downgraded its earnings guidance.

Appen share price rocked by earnings downgrade

Management warned that FY20 earnings before interest, tax, depreciation and amortisation (EBITDA) would range between $106 million to $109 million. This compares to its earlier forecast of $125 million to $130 million.

Reprioritisations of projects by its key customers and the falling US dollar are largely to blame for the downgrade.

“Slowing momentum over Q3 and Q4 was driven by APX’s major clients reprioritizing resources towards new product areas, which has impacted volumes in APX’s large mature relevance projects,” said JPMorgan.

“Although some of this spend has likely been deferred into FY21, there remains an element of uncertainty over the next couple of months as work programs and purchasing decisions are made by APX’s major clients.”

Sales pipeline has a silver lining

Despite the setback, Appen reported a 32% increase in the number of projects from its customers. This bodes well for its pipeline of future projects even though these new projects are still in the very early stages.

“Although these projects are still in their infancy, we see APX’s ability to increase the breadth of its exposure as a testament to APX’s market leading AI data annotation credentials,” added JPMorgan.

“Management expects to provide more clarity on the order book into 2021 at the full-year result in February.”

Why JPM upgraded the stock to buy today

But the broker doesn’t think investors should wait till next year to buy the stock. JPMorgan is feeling confident in the Appen share price as the company is well placed to benefit from the growth in global AI investment.

JPMorgan’s 12-month price target is $30 a share. This leaves a more than 17% upside to fair value.

More reading

• Why the Afterpay (ASX:APT) share price is surging higher today
• Brokers name 3 ASX shares to buy right now
• UBS just downgraded these outperforming ASX mining stocks
• Why the Eagers Automotive (ASX:APE) share price broke its all-time record today
• ASX 200 down 0.3%: CSL sinks, Zip’s Facebook deal, IGO rockets

Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Appen Ltd and Xero. 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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Iron ore producer Fenix Resources Ltd (ASX: FEX) share price has continued its rise, up 14% today amid a broader lift in ASX mining shares. This comes as iron ore price continues its rise to US$156 per tonne as of today.

Moreover, the Fenix share price has increased 1,000% since March, with more than 40% of that gained just this month.

At the time of writing, shares in the miner are trading at 23 cents, up by 2.5 cents.

Why has the Fenix share price risen by 1,000% since March

The Fenix share price has gained ground along with the rise in the iron ore price.

In November 2019, Fenix released a feasibility study which forecast potential earnings from the 1.25 million tonnes annual production expected out of its Iron Ridge project in WA.

At that time, it predicted an annual earnings before interest, tax, depreciation, and ammortisation (EBITDA) of $16.4 million, based on a projected Australian dollar iron ore price of just $111.43 a tonne.

The iron ore price has since risen to almost US$156 per tonne today, and at this price, Fenix’s projected EDITDA would be closer to $100 million a year.

This bodes well for a project where the capital expenditure was just $11.9 million. The break-even price for Iron Ridge is only about $US70 a tonne, and the mine also has some of Australia’s highest grade iron ore.

Strategic partnerships

The company has also made some strategic partnerships in preparation for its first sales in early 2021.

In October, Fenix announced a sales agreement with Chinese heavyweight Sinosteel. That agreement would cover the sale of half of the production from Iron Ridge, adding to the company’s existing marketing agreement with Atlas Iron.

The biggest cost for Fenix is hauling iron ore 490km by road to Geraldton port, where there is a dedicated iron ore ship loader. Last week, Finex signed binding port access and lease agreements with Mid West Ports Authority (MWPA), which operates the Port of Geraldton. That agreement has secured for Fenix a port allocation of 1.25 million tonnes per annum of iron ore, to be exported utilising the port’s Berth 5 ship loader.

More reading

• Here’s why the Fenix (ASX:FEX) share price rocketed up 26% today

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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TerraCom Ltd (ASX: TER) shares are soaring today after the company provided investors with an operational update. At the time of writing, the TerraCom share price is up a whopping 18.75% to 19 cents.

TerraCom is a resource company with a large portfolio of assets in Queensland as well as in South Africa. The business is currently undergoing a growth strategy to become a mid-tier player in the coal industry.

What’s driving the TerraCom share price?

The TerraCom share price is rocketing higher today, with investors clearly happy about the way the company is operating.

According to its release, TerraCom is continuing to deliver a robust performance at its Blair Athol coal mine in Australia.

Following the transition in July to become owner-operator of the mine, TerraCom highlighted that free on board (FOB) costs have significantly reduced. Original forecasts estimated that FOB costs would decrease by 17% to $59 per tonne. The company revealed that these savings have been achieved and maintained over the last four months. In perspective, this places the Blair Athol mine within the first quartile of seaborne export FOB operating costs per tonne.

TerraCom noted that the thermal coal market has experienced some challenges in recent times. In light of this, the company said its hard work to deliver cost savings has paid off as the demand and price for coal recovers. Since 1 July, the Newcastle thermal coal index has advanced by more than 45% to register at US$76 on Wednesday.

As a result of the improving conditions, TerraCom anticipates recording strong earnings before interest, tax, depreciation and amortisation (EBITDA) margins for Blair Athol.

Across the Pacific in South Africa, the company discussed its strategic acquisition of Universal Coal in June. TerraCom highlighted that the takeover allowed it to diversify its coal sales mix from the domestic market to international exports.

Furthermore, TerraCom is projecting its first full shipment of thermal coal from South Africa to an overseas buyer next month. The milestone achievement is expected to mark the beginning of increased export sales for the company.

What did the CEO say?

TerraCom CEO Mr Danny McCarthy commented on the company’s coal sales. He said:

The coal sales achieved year to date continue to be positive regardless of the ongoing market challenges. Based on an annualised assessment the Company is well positioned to achieve annual coal sales of approximately 9.9 Mt, consistent with FY2020.

With low-cost mining already implemented at Blair Athol, the Company is well positioned to deliver stronger EBITDA results as coal pricing continues to improve.

TerraCom share price summary

The TerraCom share price reached a 6-month high today, hitting the 20-cent mark in earlier trade. Despite this positive milestone, TerraCom shares remain almost 50% lower in year-to-date trading. 

Based on the current TerraCom share price, the company has a market capitalisation of around $124 million.

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

The post Why the TerraCom (ASX:TER) share price is soaring 19% today appeared first on The Motley Fool Australia.

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One investment strategy that is very popular with investors is buy and hold investing.

And given the success that Warren Buffett has had with this strategy over several decades, it isn’t hard to see why it is so popular.

With that in mind, listed below are two shares which could be top buy and hold options:

Domino’s Pizza Enterprises Ltd (ASX: DMP)

Due to its bold expansion plans, this pizza chain operator is being seen as a top option for buy and hold investors. At the end of FY 2020, the pizza chain operator had a network of 2,668 stores across Australia, New Zealand, Belgium, France, the Netherlands, Japan, Germany, Luxembourg, and Denmark.

While this is might sound like a very large number, management still sees a lot of room for store growth in the future. It is aiming to more than double its network to 5,500 stores by 2033. In addition to this, it has a medium term target of growing its same store sales by 3% to 6% per annum.

One broker that appears confident this will underpin strong growth in the future is Goldman Sachs. At the start of the month its analysts put a conviction buy rating and $88.00 price target on its shares. It believes Domino’s has the potential to maintain a double digit operating earnings CAGR over the medium term.

Pushpay Holdings Ltd (ASX: PPH)

Pushpay is a donor management and community engagement provider to the church market. Thanks to the quality of its platform, its leadership position, and the shift to a cashless society, it has been growing at a very strong rate.

For example, last month the company released its half year results and revealed a 53% increase in operating revenue to US$85.6 million and an even more impressive 177% jump in EBITDAF to US$26.7 million. The good news is that management appears confident this growth can continue and has set itself bold long term targets. This includes winning a 50% share of the U.S. medium to large church market, which is estimated to be worth US$1 billion a year.

Helping it achieve this will be its recent launch of ChurchStaq. It is the combination of its Pushpay and Church Community Builder software. It brings together digital giving, donor development, church apps, and ChMS to deliver a fully integrated engagement platform.

Goldman Sachs is also a fan of Pushpay. The broker has a conviction buy rating and $10.35 price target (now $2.59 after its 4-1 share split).

More reading

• 3 of the best ASX shares you can buy today
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• Why this analyst thinks the Domino’s (ASX:DMP) share price is a ‘buy’
• Top ASX shares to buy in December 2020
• 3 great ASX tech shares to buy

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX. The Motley Fool Australia has recommended Domino’s Pizza Enterprises Limited and PUSHPAY FPO NZX. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post 2 outstanding ASX shares to buy and hold appeared first on The Motley Fool Australia.

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