Tag: Motley Fool

Is the Xero Limited (ASX: XRO) share price a buy after it reported its FY21 half-year result?

The Xero share price has comfortably beat the market over 2020 in the calendar year to date, rising by 51%.

What was in the FY21 half-year result?

The cloud accounting software business reported that for the six months ending 30 September 2020, its operating revenue grew by 21% to NZ$409.8 million.

Total subscribers rose by 19% to 2.45 million whilst net subscriber additions decreased by 30% to 168,000. The total lifetime value of subscribers increased by another 15% to NZ$6.17 billion.

The rest of the world subscribers demonstrated the fast growth rate with an increase of 37% to 136,000, with revenue growth of 38%. This was led by South Africa, with progress in Singapore.

UK subscribers rose by 19% to 638,000 with revenue growth of 33%. Australian subscribers grew by 21% with revenue growth of 18%. New Zealand subscribers rose by 13% with revenue also increasing by 13%.

The average revenue per user decreased by 4% to NZ$29.81 whilst annualised monthly recurring revenue increased by 15% to NZ$877.55 million. The number of months it takes to recover customer acquisition costs increased from 12.3 months to 14.9 months.

The ASX 200 share’s gross margin percentage rose by 0.5 percentage points to 85.7%. This means more of the new revenue falls to the next profit line.

Xero’s earnings before interest, tax, depreciation and amortisation (EBITDA) went up by 86% to NZ$120.8 million. The net profit after tax (NPAT) rose from NZ$1.3 million to NZ$34.5 million and the free cash flow jumped from NZ$4.8 million to NZ$54.3 million.  

During this period of uncertainty, the company pointed out that COVID-19 has made it harder to market its product. This led to a reduction in advertising spending, which meant the cost of marketing (as a ratio of sales) declined, which is partly why its profit margins went up. Management expect to spend more on marketing as life returns to normal.

The company’s monthly recurring revenue (MRR) churn continued to remain low. In the first half of FY21 it saw MRR churn of 1.11%.

On the balance sheet the company’s net cash on the balance sheet improved by NZ$76.3 million to NZ$177.7 million.

The Xero share price has gone up 9.4% in November 2020 so far.

What is Xero’s outlook?

The company itself said that it’s a long-term orientated business with ambitions for high-growth. It said it continues to operate with a disciplined cost management and targeted allocation of capital.

Xero wants to remain agile so it can continue to innovate, invest in new products and customer growth, and respond to opportunities and changes in its operating environment. Due to the uncertainty caused by COVID-19, Xero said it couldn’t provide any guidance for its FY21 performance.

Is the Xero share price a buy?

The Motley Fool Pro team recently commented on the result: “We’re pleased with Xero’s performance through the first half. While customer acquisition was certainly impacted, we’re encouraged by management’s ongoing dedication to product development and its ability to continue offering significant value through the pandemic: not only does it allow its customers to continue operating remotely, much of its development was also based around creating new tools and functionality to help customers through. As an example, it was the first major cloud-accounting platform in Australia to enable small business customers to access JobKeeper through Single Touch Payroll. We expect customer growth, and its all-important SaaS metrics, to improve over time.”

The Pro team still rate Xero as a buy.

More reading

• 3 big things you might have missed from the Xero (ASX:XRO) results
• Why Orocobre, Ramsay, Webjet, & Xero shares are dropping lower
• The ASX 200 fell 0.5% on Thursday
• Why are ASX tech shares all over the place today?
• ASX 200 down 0.1%: Xero hits record high, Telstra and Wesfarmers updates impress

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 Xero. 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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The good news for income investors in this low interest rate environment is that there are a large number of dividend shares on the Australian share market.

Two ASX dividend shares with attractive yields are listed below. Here’s what you need to know about them:

BHP Group Ltd (ASX: BHP)

BHP, also known as the Big Australian, is one of the world’s biggest mining companies. It owns a collection of high quality assets across various commodities and regions. This includes the Escondida and Olympic Dam copper operations and the Western Australia Iron Ore and Samarco iron ore operations. Thanks to favourable prices and its low costs, BHP is currently generating significant free cash flow from its operations in 2020.

This bodes well for shareholders in FY 2021 according to analysts at Macquarie. The broker expects BHP to pay a ~$2.80 per share fully franked dividend this year. Based on the current BHP share price, this would mean a very generous 7.7% dividend yield.

Wesfarmers Ltd (ASX: WES)

Wesfarmers is one of Australia’s leading conglomerates. It owns a wide range of popular businesses including Kmart, Target, Catch, Officeworks, and Bunnings. The latter is the company’s key business and contributes materially to its overall earnings. The good news is that the hardware giant has been in fine form this year and delivered sales growth of 25.2% for the first four months of FY 2021.

One broker that believes this has left the company well placed to grow its dividend in FY 2021 is Morgans. According to a note out of the broker, its analysts have pencilled in a 157 cents per share fully franked dividend this year. Based on the current Wesfarmers share price, this represents an attractive forward 3.2% dividend yield.

More reading

• What can you do when the ASX is down?
• ASX 200 Weekly Wrap: ASX continues to hit post-COVID highs
• Is the Wesfarmers (ASX:WES) share price a buy for dividends?
• These blue chip ASX dividend shares offer 5%+ yields
• Is the Wesfarmers (ASX:WES) share price a buy?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers Limited. 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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The S&P/ASX 200 Index (ASX: XJO) could be given a boost today from news that there is now a second potentially effective COVID-19 vaccine.

Overnight, biotechnology company Moderna released an update on its Phase 3 study of mRNA-1273.

What did Moderna announce?

According to the release, the National Institutes of Health-appointed Data Safety Monitoring Board (DSMB) for the Phase 3 study informed Moderna that the trial has met the statistical criteria pre-specified in the study protocol for efficacy, with a vaccine efficacy of 94.5%.

This study enrolled more than 30,000 participants in the U.S. and is being conducted in collaboration with the National Institute of Allergy and Infectious Diseases (NIAID).

The primary endpoint of the phase 3 study is based on the analysis of COVID-19 cases confirmed and adjudicated starting two weeks following the second dose of vaccine.

This first interim analysis was based on 95 cases, of which 90 cases of COVID-19 were observed in the placebo group versus 5 cases observed in the mRNA-1273 group. This resulted in a point estimate of vaccine efficacy of 94.5% (p <0.0001).

Pleasingly, the interim analysis did not report any significant safety concerns. A review of solicited adverse events indicated that the vaccine was generally well tolerated.

“A pivotal moment.”

Moderna’s Chief Executive Officer, Stéphane Bancel, commented: “This is a pivotal moment in the development of our COVID-19 vaccine candidate. Since early January, we have chased this virus with the intent to protect as many people around the world as possible. All along, we have known that each day matters.”

“This positive interim analysis from our Phase 3 study has given us the first clinical validation that our vaccine can prevent COVID-19 disease, including severe disease,” he added.

The company expects to have approximately 20 million doses of mRNA-1273 ready to ship in the U.S. by the end of the year. After which, it remains on track to manufacture 500 million to 1 billion doses globally in 2021.

Moderna’s vaccine candidate, like that of the Pfizer vaccine, is using mRNA technology. This is a new approach to vaccines that uses genetic material to provoke an immune response.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• ASIC to investigate if ASX is fit to hold market licence
• How the pandemic is making some investors super-rich
• ASX ends trading early, ASX 200 up 1.2%
• Update: Trading on ASX remains in ‘enquire’ state after market data error

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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On Monday the S&P/ASX 200 Index (ASX: XJO) started the week in a strange manner. The benchmark index rose 1.2% to 6,484.3 points but was only open for 24 minutes after a system failure at the Australian stock exchange.

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

ASX 200 expected to edge lower.

The Australian share market looks set to edge lower this morning if it opens as planned. According to the latest SPI futures, the ASX 200 is expected to fall 3 points this morning. In late trade on Wall Street, the Dow Jones is up 1.15%, the S&P 500 has risen 0.75%, and the Nasdaq is up 0.5%.

Moderna COVID-19 vaccine 94.5% effective.

And then there were two. Overnight Moderna revealed that preliminary phase three trial data shows that its COVID-19 vaccine is 94.5% effective in preventing COVID-19. This follows an update by Pfizer last week which revealed that its vaccine was more than 90% effective again COVID-19. Moderna’s vaccine candidate, like that of the Pfizer vaccine, is using mRNA technology. This is a new approach to vaccines that uses genetic material to provoke an immune response.

Oil prices charge higher.

It could be a good day for energy shares such as Beach Energy Ltd (ASX: BPT) and Woodside Petroleum Limited (ASX: WPL) after oil prices charged higher. According to Bloomberg, the WTI crude oil price is up 2.9% to US$41.34 a barrel and the Brent crude oil price is up 2.5% to US$43.86 a barrel. These gains were driven by the COVID-19 vaccine news.

Afterpay annual general meeting.

The Afterpay Ltd (ASX: APT) share price could be on the move today when it holds its annual general meeting. Last month the payments company released a business update which revealed first quarter underlying sales growth of 115% to $4.1 billion. If Afterpay releases another trading update, investors will no doubt be keen to see if this sales growth has been maintained.

Gold price flat.

Gold miners including Evolution Mining Ltd (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) will be on watch today after the gold price traded flat. According to CNBC, the spot gold price is fetching US$1,886.20 an ounce. The precious metal gave back its earlier gains after the COVID-19 vaccine news sunk in.

More reading

• ASIC to investigate if ASX is fit to hold market licence
• These ASX shares have been unstoppable in FY 2021
• How the pandemic is making some investors super-rich
• ASX ends trading early, ASX 200 up 1.2%
• This cheap ASX share is supplying US giants: fundie

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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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ASX Ltd (ASX: ASX)’s nightmare Monday could spill over into Tuesday as the corporate watchdog announced it would examine whether the company met its licence obligations.

The trading day was cancelled on Monday after the ASX could not recover from technology issues understood to have arisen from a systems upgrade.

Late in the afternoon, the Australian Investments and Securities Commission announced that such outages are of “significant concern”.

“The ASX is one of the world’s most active and visible public markets and forms a critical part of Australia’s national economic infrastructure,” stated ASIC.

“Well-functioning financial market infrastructure is critical to the integrity and reputation of the Australian equity market and the trust and confidence investors have in it.”

As such, the commission on Tuesday would investigate whether ASX had met its Australian Market Licence requirements. 

“Market licensees are required to operate a market that, to the extent reasonably practicable, is fair, orderly and transparent, and to have sufficient resources (financial, technological and human) to operate the market, including for any outsourced services,” ASIC announced.

ASIC will also examine ASX’s regulatory compliance under the Corporations Act.

Sorry, but upgrades will continue

The watchdog stated it is in regular contact with the ASX, and is focused on a reopening of markets on Tuesday morning in “an orderly manner”.

“In addition to ASIC’s expectations that this outage will be resolved as soon as is possible in a safe manner, ASX will be required to provide a full incident report to ASIC.”

ASX Ltd apologised to the market for the outage while announcing it would reopen at the normal 10am AEDT time on Tuesday.

The company and its technology supplier Nasdaq have found the root cause and a resolution.

“Notwithstanding the extensive testing and rehearsals, and the involvement of our technology provider, ASX accepts responsibility,” said ASX Ltd chief executive Dominic Stevens.

“The obligation to get this right and provide a reliable and resilient trading system for the market rests with us.”

Stevens said the company would nevertheless continue on with its tech upgrades.

“We are determined to continue our program of contemporising ASX’s technology stack from top to bottom. This initiative is critical to ASX building an exchange for the future.”

More reading

• How the pandemic is making some investors super-rich
• ASX ends trading early, ASX 200 up 1.2%
• Update: Trading on ASX remains in ‘enquire’ state after market data error
• ASX 200 up 1.2%: Afterpay ASIC response, Elders result, CSL vaccine facility
• Afterpay (ASX:APT) share price underperforming after ASIC finds more BNPL customers falling behind

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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I’ll let you in on a little secret: more often than I’d like to admit, my scribblings are inspired by conversations with the investing team here at The Motley Fool.

Not that it’s a bad thing, of course, but I just have to acknowledge having far fewer great ideas than I’d like to admit…

This is one such piece.

See, I really hope you haven’t noticed, but the ASX has been frozen for most of the trading day, today.

(Why do I hope you haven’t noticed? We’ll get to that, but suffice it to say, I don’t own shares in the ASX, nor do I benefit from an uninformed market!)

We’re not the sort of investors who avidly watch the market here at The Motley Fool, but we have mentioned the ASX’s woes a couple of times today.

We’ve wondered whether it was related to the website relaunch, recently.

One of the team unkindly suggested the ASX should reconsider the quality and/or quantity of its tech team.

And yet another was happy, given the market was up 1.2% when everything went offline, to just call today a ‘win’ and come back tomorrow!

And then one of our investors, Kevin Gandiya, made an astute observation:

“Time for [an article] from Scott Phillips with the following Buffett quote, ‘I buy on the assumption that they could close the market the next day and not reopen it for five years’.”

My only objection was that I wish I’d thought of it before he did!

Because today really is a great ‘teaching moment’ as the HR gurus call them.

Yes, we’re all used to the market closing on weekends. 

And yes, on most public holidays.

But today? When it’s supposed to be open?

What on Earth are we to think? And to do?

Certainly a decent proportion of my social media feeds include varying amounts of criticism, hand-wringing and not just a little ‘what do we do now?’.

And you can bet there’ll be recriminations, both inside the ASX itself and people taking potshots from the sidelines.

It’ll get headlines.

More than one writer will compare it to the US or other markets, and bemoan that we’ll look unprofessional, and like a backwater for not having a working market.

Now, I don’t know what time you’ll read this. For all I know, the ASX will be trading again by then.

But let’s just take stock, shall we?

What do we really lose, if the market isn’t open?

Some brokers lose some money from those of us who would have bought or sold today.

A lot more brokers will lose a lot more money from those who’d otherwise over-trade or day-trade today. Frankly, the ASX’s tech team has done those traders a favour!

But other than that?

BHP Group Ltd (ASX:BHP) is still digging up iron ore today.

Woolworths Group Ltd (ASX: WOW) is still serving millions of us.

Cochlear Limited (ASX: COH) is still manufacturing and supplying hearing implants (and working on the next generation of them).

In other words, business as usual for 99.999% of the economy.

Those companies won’t feel any impact of the ASX’s tech glitch.

At all.

And those of us who own shares, who owned them yesterday and still owned them tomorrow? 

No impact for us, either.

I have to say, I’d be completely fine with the ASX only opening one day a week.

Even once a fortnight.

If there’s something I want to buy, it’s nice to have the convenience of being able to do it, 5 days a week. But if I had to wait until Wednesday, or Friday… well, that’s fine by me.

It would save many of us from ourselves… and save traders plenty of money, besides.

It won’t happen, of course.

These days, it’s all about immediacy.

24/7 access.

I want it all, and I want it now.

(That one’s not Buffett, but you probably know that. I’m not sure what sort of investor Brian May is, but I’d bet he’s a better songwriter and guitarist.)

I’m going to suggest to you that such an approach, though common, is not a great one for investors.

Yes, yes, we’re all used to instant access. We demand our every whim is sated, stat.

And the peanut gallery will have a field day bagging the ASX, and those poor bastards who are, as I write this, sweating up a storm trying to find and fix the problem.

But does it actually matter?

Nope. Not a bit.

In fact, that approach I suggested – where the ASX is only open once a week – is probably a useful mental model for most investors.

Why not limit yourself to checking your portfolio once a week. Ideally after the market closes, say on Friday.

Because, unless you think a company you own is suddenly hugely overvalued, checking the price isn’t very productive.

Unless you want to buy shares in a company, checking the share prices of your watchlist isn’t very productive, either.

If you must, use your broker’s website to set SMS ‘alerts’ if they have them, to let you know if a company goes into your Buy or Sell zone.

Otherwise, just pretend the ASX is down all week.

You’ll almost certainly be a better investor as a result.

(And thanks, Kevin, for the idea!)

Fool on!

More reading

• ASX 200 Weekly Wrap: ASX continues to hit post-COVID highs
• These blue chip ASX dividend shares offer 5%+ yields
• After 8 months, ASX 200 shares are finally out of correction territory
• Woolworths (ASX:WOW) share price flat after AGM and sustainability update
• Best and worst ASX retail stocks to own in the COVID recovery

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 Cochlear Ltd. The Motley Fool Australia owns shares of Woolworths Limited. The Motley Fool Australia has recommended Cochlear Ltd. 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.

The post What can you do when the ASX is down? appeared first on Motley Fool Australia.

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The pandemic has hit the global economy hard this year and has been stifling the growth of a large number of companies in FY 2021.

However, not all companies are being held back by the crisis. In fact, some have continued their unstoppable growth this year.

Here’s why these three ASX shares are growing rapidly in FY 2021:

Afterpay Ltd (ASX: APT)

Thanks to the ongoing popularity of the buy now pay later payment method, the shift to online shopping, its successful international expansion, and the growing frequency of use, this payments company was on fire in FY 2020. Pleasingly, its strong growth has not abated in FY 2021. Afterpay recently released a trading update which revealed that it recorded underlying sales growth of 115% to $4.1 billion in the first quarter.

Kogan.com Ltd (ASX: KGN)

This ecommerce company has been a big winner during the pandemic. With most retail stores across the country closing to stop the spread of the virus, shoppers migrated online in large numbers. Many of these making the shift for the first time. This led to Kogan delivering a very strong FY 2020 result in August. As with Afterpay, this strong form has continued in FY 2021. During the month of August, the company reported gross sales growth of more than 117% and adjusted EBITDA growth of more than 466%. This was driven by the addition of 152,000 new customers to its platform during the month, bringing its total to 2,461,000. A further update will be provided at its annual general meeting later this week.

Pushpay Holdings Ltd (ASX: PPH)

Finally, Pushpay is a fast-growing donor management and community engagement provider to the church market. It has been an extremely strong performer this year. This has been driven by its high quality platform, its strong market position, and the COVID-induced shift to a cashless society. Earlier this month the company released its half year results and revealed a 48% increase in total processing volume to US$3.2 billion and a 53% increase in operating revenue to US$85.6 million. Things were even better for its earnings, thanks to further operating leverage. Pushpay reported EBITDAF growth of 177% to US$26.7 million.

More reading

• Fund managers have been buying Kogan (ASX:KGN) and this ASX share
• ASX ends trading early, ASX 200 up 1.2%
• This cheap ASX share is supplying US giants: fundie
• Leading brokers name 3 ASX shares to buy today
• ASX 200 up 1.2%: Afterpay ASIC response, Elders result, CSL vaccine facility

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 Kogan.com ltd and PUSHPAY FPO NZX. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Kogan.com ltd and PUSHPAY FPO NZX. 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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The Auscann Group Holdings Ltd (ASX: AC8) and Cannpal Animal Therapeutics Ltd (ASX: CP1) share prices will be on watch tomorrow. (Assuming, of course, that the ASX system has returned to functionality by then!)

Both companies entered a trading halt on Friday, prior to revealing that Auscann has entered into a scheme implementation deed (SID) with Cannpal.

Neither company escaped the ravages of the COVID-19 market rout in February and March. But Cannpal came roaring back, with shares up 8.3% year-to-date. Auscann shareholders have had a more difficult year, with Auscann’s share price down 53.3% since 2 January. By comparison the All Ordinaries Index (ASX: XAO) is down 1.8% for the year.

What do Auscann and Cannpal do?

Auscann is a pharmaceutical company based in Western Australia. Its focus is on developing, producing and distributing a range of cannabinoid treatments for use in Australia and internationally.

CannPal Animal Therapeutics develops natural plant-based therapeutic products for pets. The company has a research focus on cannabinoids, the active pharmaceutical ingredients extracted from the cannabis plant, to provide veterinarians and pet owners a means to treat animals in a safe and ethical way.

What’s the plan?

Auscann advised the ASX this morning that it had entered into a SID to acquire 100% of Cannpal for around $17.5 million.

That works out to 18.4 cents per Cannpal share, 53% more than the closing price of 12 cents per share on Thursday 12 October.

The company expects the transaction to create a larger and complementary product offering across both human and animal health, with 2 products already in the market and 2 more products expected to be launched within 12 months.

Other benefits should be increased research and development (R&D) capabilities and an expanded geographic footprint.

Commenting on the deal, CannPal chair Geoff Starr said:

There is a great logic to combining Cannpal Animal Therapeutics Ltd with AusCann Group Holdings Ltd with the new business having enhanced capability to exercise the potential for new and stronger commercial pathways.

The synergies around local and overseas market knowledge and research and development know-how will enable faster to market solutions. It represents a unique and compelling value proposition for both companies.

Auscann chair Max Johnston added:

The combined business is expected to have the financial resources and technical expertise to accelerate the growth, commercialisation and market penetration of its pipeline products in Australia and offshore.

The scheme still needs to clear the normal hurdles, such as receiving Cannpal shareholder and court approvals.

The Auscann and Cannpal share prices emerge from their trading halts tomorrow.

More reading

• Why the Global Health (ASX:GLH) share price is surging up today
• Why the DroneShield (ASX:DRO) share price shot up 10% today
• The Cleanspace (ASX:CSX) share price is soaring 12% higher today. Here’s why.
• Sky Network (ASX:SKT) share price shoots 6% higher on upgraded guidance
• Auscann (ASX:AC8) share price climbs higher on sale agreement

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. 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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By now, we’d probably all be familiar with most of the effects of the coronavirus pandemic that have come to dominate 2020. From working from home to food shortages at supermarkets, the pandemic has resulted in many changes across society. The same can be said of the investing world. 2020 has seen the S&P/ASX 200 Index (ASX: XJO), as well as markets around the world, have one of the shortest and sharpest market crashes in history, followed by one of the most rapid and enthusiastic recoveries we have ever seen. We have also witnessed the first recession Australia has had in almost three decades.

In Australia, it has been a recession like no other. That’s what a piece from Vimal Gor, head of bond, income and defensive strategies at Pendal Group Ltd (ASX: PDL) in the Australian Financial Review (AFR) asserts anyway. Mr. Gor points out that, unlike recessions of the past, the 2020 coronavirus-induced recession has seen an unprecedented influx of government spending, which has cushioned a large portion of the workforce.

Mr. Gor eloquently sums this paradigm up with the following:

Tragically, small businesses, particularly in hospitality, where people… create their own living, have felt the full impact. Public servants and most employees in big business, cashing their guaranteed pay cheques, have actually got richer. Most super funds are back to levels of a year ago and real estate prices are actually higher in many places. Hardly a standard recession.

Property and ASX shares set to benefit

He also commented on the government’s response to the recession. He noted that “the RBA [Reserve Bank of Australia] has flooded the system with cash… Not surprising then that when encouraged to invest, not save money, many reach for the only tool they know, property investment.”

And it’s not just property that Mr. Gor thinks will do well out of this situation. ASX shares also stand to benefit from the RBA’s actions, as Mr. Gor states:

Equities also promise to keep rising as the economy opens up. Some earnings may be under pressure for a while but with zero rates, massive fiscal stimulus and an improving economy, the highs from February are within our sights.

So, according to Mr. Gor, as a direct result of the RBA’s actions this year, property is set to boom, as is the share market. And he thinks this trend will continue for a while yet, noting that the Treasurer and RBA governor have both said they will “keep their foot to the floor for some time”.

So what does this mean for investors? Well, the report concluded with the following:

So we will leave this pandemic with a large proportion of the population richer. As per usual, owners of capital get rescued and policymakers wait for the trickle down.

More reading

• ASX ends trading early, ASX 200 up 1.2%
• Update: Trading on ASX remains in ‘enquire’ state after market data error
• ASX 200 up 1.2%: Afterpay ASIC response, Elders result, CSL vaccine facility
• Afterpay (ASX:APT) share price underperforming after ASIC finds more BNPL customers falling behind
• ASX 200 Weekly Wrap: ASX continues to hit post-COVID highs

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. 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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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.

It’s a question that cuts straight to the heart of investors’ indecision. Is this the time to seek safety in numbers, or does one take a shot on what’s arguably the market’s highest-quality stock?

Either choice would be fine, for the record. But Apple Inc (NASDAQ: AAPL) is a better pick than a broad-based fund for most investors right now, even when that fund includes all 30 blue-chips found within the Dow Jones Industrial Average Index (DJX: .DJI). Although the iPhone is losing steam as the company’s breadwinner, more than a few blue-chip stalwarts are bumping into a headwind at the same time Apple’s poised to catch at least one tailwind.

Apple’s catalyst

Apple’s impending tailwind is 5G connectivity. While most wireless carriers deployed some 5G coverage last year, this is the year these long-awaited wireless broadband speeds have finally become widely available to consumers. AT&T Inc. (NYSE: T) has launched hundreds of new 5G markets since March. T-Mobile US Inc (NASDAQ: TMUS) added 5G service in 121 cities in October alone. Verizon Communications Inc. (NYSE: VZ) is in the fight as well, announcing last month that its 5G service is now available to more than 200 million people in 1800 US cities.

Largely missing from this explosion, however, are the smartphones capable of 5G connections.

That’s not to say they’re not out there. The Galaxy S20 Plus from Samsung has been well received, and Alphabet Inc‘s (NASDAQ: GOOGL) (NASDAQ: GOOG) Pixel 5 has garnered some respect even if reviewers balk at its price.

If there’s any one single 5G phone consumers have been holding out for, however, it’s the iPhone 12 series unveiled last month. As Counterpoint’s research director Jeff Fieldhack commented in October: “There is significant pent-up demand from iOS subscribers putting off upgrades until these 5G devices launch.”

The iPhone 12 was available for pre-order earlier this month, and deliveries began just a few days ago.

Of course, these next-gen iPhones are a means to an increasingly important end for Apple. That’s sales of apps and digital services. While services only accounted for 22% of Apple’s revenue last quarter (versus the iPhone’s 40%), service sales grew 16% year over year. Product margins are also significantly higher on digital goods than they are on hardware. Firm demand for the iPhone 12 should lead to equally firm growth in service revenue and overall earnings, though, since the former fuels the latter. That is to say, faster wireless broadband speeds make a smartphone much more functional.

This bullish dynamic could persist for a long, long time.

Too many drags

Of course, this isn’t to suggest diversification is no longer important. It is important. Being a collection of 30 hand-picked stocks, however, the Dow Jones Industrial Average isn’t nearly as diversified as, say, the S&P 500 Index (SP: .INX). And more than a few of its old-school constituents are running into challenges that may be size and age-related.

Take Cisco Systems Inc (NASDAQ: CSCO), for instance. Once the king of networking hardware, it’s struggled to maintain its edge now that smaller rivals such as Juniper Networks Inc (NYSE: JNPR) and Arista Networks Inc (NYSE: ANET) have figured out how to compete with the behemoth. Cisco shares have been sliding lower since mid-2019 to nearly reach March’s low late last month, reflecting this challenge. They’re still down 33% from that 2019 high, and still trending lower.

IBM (NYSE: IBM) is another Dow name that’s proven problematic. It finally snapped a multi-year streak of declining quarterly revenue in 2018, but only temporarily. The tech giant remains unable to meaningfully plug into the industry’s most important area opportunities right now — like cloud computing and cybersecurity — despite investments on those fronts, while it continues to languish with its legacy businesses like mainframe computers. It’s planning a breakup to better focus on its individual product lines, but with no guidance offered in last quarter’s report (and none on the horizon), shares continue their march into multi-year low territory.

Walgreens Boots Alliance Inc (NASDAQ: WBA), Intel Corporation (NASDAQ: INTC), and Boeing Co (NYSE: BA) are three other Dow names struggling for reasons beyond mere market volatility. All three face company-specific hurdles like COVID-19-crimped consumerism, failure to make competitive technological advancements, and the fallout from a flawed aircraft design, respectively. None of those hurdles will be cleared quickly, or easily.

These weak constituents won’t be enough to hold the Dow Jones Industrial Average down from posting solid gains over time. They are enough of a drag on the index right now, however, to favor the risk/reward proposition offered by a name like Apple.

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

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James Brumley owns shares of AT&T and Boeing. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, and Arista Networks. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Intel, T-Mobile US, and Verizon Communications. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Apple, Arista Networks, and T-Mobile US. 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.

The post Better buy: Apple (NASDAQ:AAPL) or every Dow Jones stock? appeared first on Motley Fool Australia.

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

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