Tag: Motley Fool

Most fintech ASX shares operate in contested markets of high volume transactions with low margins. Nonetheless, many of them have been able to rapidly increase their level of transactions via careful strategic partnerships.

For instance, Tyro Payments Ltd (ASX: TYR) recently announced a partnership with Bendigo and Adelaide Bank Ltd (ASX: BEN). ASX share Tyro is currently Australia’s 5th largest merchant acquiring bank, falling just after the big four banks. Meanwhile, Bendigo is Australia’s 5th largest retail bank.

In this deal, Tyro will provide its payments processing services to all of Bendigo’s business customers. This includes both the card-present and card-not-present solutions. Accordingly, Tyro believes it has captured approximately $19 million in gross profit for FY22 via this agreement. Moreover, shortly afterwards, and in an apparent vote of confidence, Morgan Stanley secured $142 million in Tyro shares.

Financial ASX shares in strategic deals

Buy now, pay later (BNPL) giant, Afterpay Ltd (ASX: APT) recently announced a tie up with Westpac Banking Corp (ASX: WBC). Westpac’s digital banking-as-a-service platform will enable Afterpay to introduce savings accounts and cash flow tools to its 3.3 million customers without the need for a banking license. 

Although not an exclusive arrangement, Afterpay believes it will be the default BNPL mechanism on the platform. Moreover, it can scale using the bank infrastructure while retaining the customer relationship. In addition, earlier in the year, Afterpay announced a deal with eBay Inc (NASDAQ: EBAY) in Australia to provide consumers the ability to pay across four payment instalments. 

Rival ASX share, Zip Co Ltd (ASX: Z1P) also has a strategic partnership with eBay. Since August, it offers 40,000 Australian small and medium-sized businesses access to working capital. In addition, it announced a recent deal with Visa Inc (NYSE: V) for its new Zip and Go service. At the same time, the company announced partnerships with Apple Inc.‘s (NASDAQ: AAPL) Apple Pay and Alphabet Inc‘s (NASDAQ: GOOGL) (NASDAQ: GOOG) Google Pay, thus linking its BNPL services to both physical and digital payment methods. Company CEO Larry Diamond, said:

We continuously hear from Zip customers that they want to use their digital wallet to pay for everyday purchases like groceries and petrol or to buy products and services from merchants that don’t accept BNPL.

The company believes this will not only improve customer experience, but also provide additional revenue opportunities for merchants using its service. 

Foolish takeaway

Successful ASX shares in the fintech sector have recently inked several strategic partnerships in an attempted shortcut to faster growth. Of all of the companies discussed above, only the Tyro deal provides for a guaranteed increase in customers. Nevertheless, both Afterpay and Zip are using partnerships to potentially access broader client bases. 

More reading

• Afterpay (ASX:APT) share price on watch after stellar Q1 growth
• Tyro Payments (ASX:TYR) share price tumbles lower following AGM update
• The ASX 200 sank almost 2% today
• Do you have to pay tax on your ASX shares? – A common question answered
• Douugh and Ioupay were among the most traded shares on the ASX last week

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Daryl Mather 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 Alphabet (A shares), Alphabet (C shares), Apple, and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Tyro Payments and ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends eBay and recommends the following options: long January 2021 $18 calls on eBay and short January 2021 $37 calls on eBay. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Apple. 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 How ASX shares like Afterpay (ASX:APT) push for explosive growth appeared first on Motley Fool Australia.

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The Reserve Bank of Australia (RBA) has indicated the Australian recession could be over and this may be good news for ASX shares and the S&P/ASX 200 Index (ASX: XJO).

Why is the RBA saying the recession is over?

Although third quarter data isn’t available yet, RBA Deputy Governor, Guy Debelle, believes that the technical recession may be over. A recession occurs when there are two consecutive periods of negative GDP growth, which we saw in the first and second quarters this year.

However, the coronavirus pandemic and subsequent response has made this recession different to many others. Instead of a steady activity decline, we saw a sharp drop due to lockdowns and border closures in March. That coincided with the March bear market which saw ASX shares plummet lower.

The June quarter saw many states across Australia enter lockdown which reduced economic output, while just Victoria remained locked down in the September quarter. That means there is a good chance that GDP growth will be positive in next Friday’s data.

What does this mean for ASX shares?

In my opinion, the short answer is, not much. While we may be out of a technical recession, the economy is still on life support and heavily reliant on government stimulus measures.

However, that doesn’t mean upcoming RBA announcements won’t impact on valuations. The RBA is set to meet next Tuesday to discuss monetary policy while next Friday’s data could be key.

Forecasts showing strong expected growth could boost market sentiment and send ASX shares climbing. However, a hawkish outlook may create further investor uncertainty and add to current volatility.

Foolish takeaway

It would be a remarkable turnaround to exit the recession after only two quarters. However, investors know that there is likely more pain on the way in 2021 and I don’t expect ASX shares to surge higher on the latest news.

More reading

• 5 things to watch on the ASX 200 on Wednesday
• The ASX 200 sank almost 2% today
• Why the Probiotec (ASX:PBP) share price is trading higher
• Will COVID-19’s second wave crash share markets a second time?
• ASX 200 down 1.2%: Blackmores jumps, Bendigo and Adelaide Bank’s update, Zip sinks

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Afterpay Ltd (ASX: APT) share price will be one to watch on Wednesday after the release of its first quarter update.

How did Afterpay perform in the first quarter?

The payments company continued its explosive growth during the first quarter of FY 2021 and recorded strong performances across all regions.

For the three months ended 30 September, Afterpay reported a 115% increase in underlying sales to a record of $4.1 billion.

The biggest driver of this growth was its US business, which delivered a 229% increase in underlying sales to $1.6 billion. This was supported by a 346% jump in UK underlying sales to $0.3 billion and a 63% lift in Australian underlying sales to $2.2 billion.

Pleasingly, Afterpay advised that its revenue margin remained stable and in-line with what it achieved in FY 2020.

Another positive was that the trend towards lower gross losses continued throughout the first quarter. Afterpay revealed that customer default payments remain below historical rates in all regions. This has resulted in its net transaction losses as a percentage of underlying sales also remaining low.

What were the drivers of its strong quarter?

This strong result was driven by another large increase in active customers and the growing frequency of use by its customers.

In respect to its customer numbers, Afterpay reported a 98% increase in active customers to 11.2 million. This comprises 3.4 million ANZ customers, 1.2 million UK customers, and 6.5 million US customers. The latter was up 175% on the prior corresponding period and now accounts for 58% of its total customer base.

Interestingly, Afterpay notes that 45% of its like for like sales growth in the first quarter was driven by Millennials, with Gen X and Gen Z driving 25% and 24% respectively.

Also growing strongly was its active merchants. At the end of September there were a total of 63,800 merchants on its platform, up 70% on the prior corresponding period. This comprises 48,000 ANZ merchants, 13,900 US merchants, and 1,900 UK merchants.

Management advised that the new merchants added over the quarter bring over $10 billion of total addressable online sales.

This has had a positive impact on customer acquisition in October. Management advised that it has seen an 18% increase in the daily average number of new customers month to date compared to the first quarter average.

Expansion update.

The company’s launch into Canada has progressed well with a number of large retailers now live, integrating, or signed. Key new retailers in the country include Aritzia, Lush, Ardene and Goop.

In Europe, the acquisition of Pagantis is progressing well and is on track for completion by the end of the 2020 calendar year. This remains subject to regulatory approval by the Bank of Spain.

Management notes that Pagantis provides it with a licence to operate in Spain, France, Italy and Portugal, as well as pending licence passport applications in Germany and Poland.

A cross functional detailed 100-day integration and launch plan has been developed to ensure Afterapy can launch as soon as possible post completion.

Finally, its plans to expand into Asia are progressing well. The company has established a base in Singapore to drive the development of the South East Asia market. Initial development of the EmpatKali opportunity in Indonesia is also underway.

More reading

• The ASX 200 sank almost 2% today
• Do you have to pay tax on your ASX shares? – A common question answered
• Why Afterpay, LiveTiles, PointsBet, & Santos shares are tumbling lower
• How did ASX buy now, pay later shares perform in the latest quarter? 
• ASX 200 Weekly Wrap: ASX snaps winning streak… just

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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I think Warren Buffett is one of the world’s best investors. There are some wonderful ASX dividend shares he’d like in my opinion.

Warren Buffett’s Berkshire Hathaway is one of the world’s largest businesses. Mr Buffett likes to stick to investing in businesses that he understands. I think these two ASX shares are really good Warren Buffett options:

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

Soul Patts is the business that’s most comparable to Berkshire Hathaway in Australia.

It is an investment conglomerate. It has both listed and unlisted business investments, just like Berkshire Hathaway.

The ASX shares that Soul Patts is invested in includes TPG Telecom Ltd (ASX: TPG), New Hope Corporation Limited (ASX: NHC), Australian Pharmaceutical Industries Ltd (ASX: API), Clover Corporation Limited (ASX: CLV), Milton Corporation Limited (ASX: MLT) and Bki Investment Co Ltd (ASX: BKI).

It’s also invested in various unlisted industries like financial services, resources, agriculture and swimming schools. Soul Patts is invested in private businesses like Ampcontrol, Seven Mile Coffee Roasters and Dimeo.

This ASX share is a lot older than Warren Buffett’s Berkshire Hathaway. It has been listed since 1903, so it has shown it has great staying power.

It has grown its dividend ever year since 2000, including through COVID-19. That’s the best dividend growth record on the ASX. This is one of the main reasons why I think Soul Patts is such a good dividend. A dividend certainly isn’t guaranteed, but it’s very reassuring to know that your investment is very likely to grow the dividend in the next financial year.

Soul Patts has built a substantial profit reserve and franking credits balance. It will be able to continue pay growing dividends for the foreseeable future.

At the current Soul Patts share price it offers a grossed-up dividend yield of 3.4%.

Brickworks Limited (ASX: BKW)

Brickworks is another ASX dividend share that I think Warren Buffett would really like.

Berkshire Hathaway has a house building division called Clayton Homes, so I think that Brickworks is close enough to Clayton that Mr Buffett wouldn’t be put off by Brickworks.

I really like how long-term focused Brickworks is. It aims to be the market leader in the bricks market. It is the leading bricks business in Australia as well as the north east of the US. In Australia, Brickworks also sells a number of other building products including masonry, paving, roofing and precast.

Brickworks actually owns around 40% of Soul Patts. So it receives a reliable and growing stream of dividends from the investment conglomerate. The Soul Patts dividends and earnings have helped Brickworks to be a stable business over the previous decades, particularly during the lull periods for the construction industry.

Another pillar that Brickworks is building effectively is its property segment. It owns half of an industrial property trust along with Goodman Group (ASX: GMG). This property trust is seeing steadily-growing valuations of the property and rising net rental income. The trust recently secured a lease pre-commitment for 20 years with Amazon at the Oakdale West Estate in Western Sydney. It also has an agreement with Coles Group Limited (ASX: COL).

Brickworks hasn’t cut its dividend for over 40 years. In other words, for more than four decades it has maintained or grown its dividend each year. That’s a great record for an ASX dividend share.

At the current Brickworks share price it offers a grossed-up dividend yield of 4.8%. It’s also trading at 17x FY21’s estimated earnings.

Foolish takeaway

I think Warren Buffett would like both of these ASX dividend shares. I know I do. That’s why Soul Patts is one of the biggest ASX shares in my portfolio. I really like the defensive nature of it. It’s likely to be something that I’m still holding in 20 or 30 years.

More reading

• Why you should pay attention when management buy (or sell) ASX shares
• Why it makes sense to invest in ASX shares
• 2 Warren Buffett ASX shares to buy right now
• 3 must-have ASX income shares for your portfolio
• Why the Soul Patts (ASX:SOL) share price is up 25% in 2 months

Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Clover Limited. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET. 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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Is the BetaShares Australia 200 ETF (ASX: A200) the best exchange-traded fund (ETF) to get exposure to ASX shares?

What is the BetaShares Australia 200 ETF about?

As the name may suggest, it aims to give investors exposure to the ASX 200. That represents 200 of the biggest businesses on the ASX.

This ETF is provided by BetaShares, one of the biggest ETF providers in Australia. It offers other popular ETFs like Betashares Nasdaq 100 ETF (ASX: NDQ) and BetaShares Global Sustainability Leaders ETF (ASX: ETHI).

What shares does it own?

The BetaShares Australia 200 ETF is designed to track the ASX 200, so it gives investors the biggest exposure to Australia’s blue chips, and some smaller ones. The bigger the business, the more the ETF will own of that business because it’s just tracking the ASX 200.

Its biggest 10 positions were: CSL Limited (ASX: CSL), Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB), Australia and New Zealand Banking Group (ASX: ANZ), Wesfarmers Ltd (ASX: WES), Woolworths Group Ltd (ASX: WOW), Macquarie Group Ltd (ASX: MQG) and Transurban Group (ASX: TCL).

In terms of the sector allocation, you’re getting a big allocation to just two sectors. There’s a 26.2% allocation to financials and a 20% allocation to materials. Healthcare is the only other sector with an allocation of more than 10% (largely thanks to the CSL investment).

How much is the annual management fee?

The lower the annual management cost the better it is for investors’ net returns. This is helpful for building long-term wealth. 

This ETF has an annual management fee of just 0.07% per annum. That’s one of the cheapest available to investors on the ASX.

Is it the best ETF for ASX shares?

This ETF is certainly the cheapest for Aussie investors. So if you just want to invest in the broad ‘Australian share market’ then this could be the best option.

However, for me it’s certainly not the best investment option around. That’s nothing against BetaShares, I’m just not a fan of most of the biggest holdings of this ETF.

I think CSL is a great business. Macquarie is pretty good too. But the rest of the larger businesses don’t excite me.

They offer very limited earnings growth over the next few years with the economic impacts of COVID-19. They are also at the peak of the market share because they already dominate in Australia (and New Zealand). 

Compare this ETF to a global one like Vanguard Msci Index International Shares ETF (ASX: VGS) where there are much higher quality businesses that make up the largest positions like Apple, Microsoft, Alphabet and Amazon. I don’t think the ASX can compare, in terms of growth and diversification, to the global share market. 

The initial dividend (in normal times) of the BetaShares Australia 200 ETF may be high, but it doesn’t offer much growth. Indeed, since inception in May 2018 the BetaShares Australia 200 ETF has only returned an average of 2.08% per annum, which includes the distributions.

I think there are other ETFs that invest in ASX shares such as BetaShares Australian Ex-20 Portfolio Diversifier ETF (ASX: EX20) and BetaShares S&P/ASX Australian Technology ETF (ASX: ATEC) which are better in my opinion.

However, there are also plenty of other ASX shares that offer diversified investments that I’d prefer to buy like WAM Leaders Ltd (ASX: WLE), Brickworks Limited (ASX: BKW) and Washington H. Soul Pattinson and Co. Ltd (ASX: SOL). In my opinion, these ASX shares would be better dividend ideas than the overall BetaShares Australia 200 ETF. I think the bank exposure brings down the long-term potential of the ETF. 

I think the BetaShares Australia 200 ETF isn’t a terrible option for investing, I just think that the largest underlying holdings are going to be disappointing in the next few years.

More reading

• This is how you can become a millionaire with ASX shares
• Why you may not need ASX REITs for dividends

Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BETANASDAQ ETF UNITS and CSL Ltd. The Motley Fool Australia owns shares of and has recommended Brickworks, Macquarie Group Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of Transurban Group and Wesfarmers Limited. The Motley Fool Australia has recommended BETANASDAQ ETF UNITS and Vanguard MSCI Index International Shares ETF. 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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According to the latest cash rate futures, the market is currently pricing in an 84% probability of a rate cut to zero by the Reserve Bank next week.

While this is more good news for borrowers, it will be another bitter blow for income investors who will have to contend with even lower rates.

But don’t worry if you’re part of the latter group, as there are a number of quality dividend shares that will help you beat low interest rates.

Two that I would buy are listed below. Here’s why I like them:

BWP Trust (ASX: BWP)

The first dividend share I would buy is BWP. It is a real estate investment trust (REIT) that invests in and manages commercial assets. The majority of its assets are leased to home improvement giant, Bunnings Warehouse, which has proven to be a big positive during the pandemic. At a time when many retail landlords have struggled to collect rent, business has been booming for Bunnings, allowing BWP to collect rent largely as normal.

Looking ahead, with tax cuts and government stimulus likely to support solid sales growth for Bunnings in the years ahead, I believe BWP is well-positioned to continue increasing its rental income and growing its distribution. Based on the current BWP share price, I estimate that it offers investors a forward 4.4% yield.

Rural Funds Group (ASX: RFF)

Another option for investors to consider buying is fellow property company Rural Funds. It owns a diversified portfolio of high quality Australian agricultural assets that are leased to experienced agricultural operators. The company’s revenues are derived from long-term leases across five sectors: almonds, cattle, vineyards, cropping and macadamias.

Given their ultra-long leases and built-in rental increases, I believe Rural Funds is perfectly positioned to continue growing its rental income and distribution at a solid rate over the next decade. In FY 2021, the company plans to increase its distribution by 4% to 11.28 cents per share. Based on the latest Rural Funds share price, this equates to a generous 4.6% yield.

More reading

• Extreme levels of demand AND future growth prospects. Are you invested in these niche ASX shares?
• Don’t worry about low interest rates, just buy these ASX dividend shares
• Why Rural Funds (ASX:RFF) is a great ASX dividend share
• 2 must-buy ASX dividend shares for income investors to snap up
• Buy Coles (ASX:COL) and this dividend share before the next RBA meeting

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. 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 Tuesday the S&P/ASX 200 Index (ASX: XJO) was out of form and sank notably lower after record new COVID-19 cases spooked markets. The benchmark index fell 1.7% to 6,051 points.

Will the market be able to bounce back from this on Wednesday? Here are five things to watch:

ASX 200 expected to drop lower again.

It looks set to be another tough day of trade for the Australian share market after COVID-19 cases continue to rise globally. According to the latest SPI futures, the ASX 200 is expected to open the day 26 points or 0.4% lower. In late trade on Wall Street, the Dow Jones is down 0.7% and the S&P 500 has dropped 0.25%. Pleasingly, the Nasdaq is defying the selloff and is up 0.45%. 

Coles Q1 update.

The Coles Group Ltd (ASX: COL) share price will be one to watch this morning when it releases its first quarter sales update. Expectations are high for the supermarket giant, with Goldman Sachs forecasting supermarket same store sales growth of ~7% for the quarter. According to a note out of the investment bank, it expects total first quarter sales of $9,365 million, up 7.7% on the prior corresponding period. 

Oil prices rebound.

It could be a better day of trade for energy producers such as Oil Search Limited (ASX: OSH) and Santos Ltd (ASX: STO) after oil prices rebounded overnight. According to Bloomberg, the WTI crude oil price is up 2.3% to US$39.45 a barrel and the Brent crude oil price has risen 1.7% to US$41.15 a barrel. Oil prices rebounded after an upcoming storm forced the shutdown of energy production in the U.S. Gulf of Mexico.

ANZ takes $528 million earnings hit.

The Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price could come under pressure after it became the latest big four bank to announce notable items that will impact its upcoming results. ANZ has announced that its second half 2020 cash profit will be impacted by an after tax charge of $528 million as a result of large notable items. This is expected to impact its common equity tier one capital by approximately 5 basis points. The notable items include remediation costs and accelerated software amortisation.

Gold price pushes higher.

It could be a good day for gold miners such as Evolution Mining Ltd (ASX: EVN) and Saracen Mineral Holdings Limited (ASX: SAR) after the gold price pushed higher. According to CNBC, the spot gold price is up 0.25% to US$1,910.1 an ounce following weakness in the U.S. dollar overnight.

More reading

• ANZ (ASX:ANZ) share price on watch after revealing $528 million earnings hit
• The ASX 200 sank almost 2% today
• Why the Probiotec (ASX:PBP) share price is trading higher
• Are Coles (ASX:COL) or Woolworths (ASX:WOW) shares a better ASX dividend buy today?
• Will COVID-19’s second wave crash share markets a second time?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET. 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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Are you looking for some small cap ASX shares to add to your watchlist? Then I would highly recommend you take a look at the ones listed below.

Here’s why I think they have a lot of potential and are worth keeping a close eye on:

Avita Medical Ltd (ASX: AVH)

The first small cap ASX share to watch is Avita Medical. It is the global regenerative medicine company behind the exciting Recell system. This system allows healthcare professionals to produce a suspension of Spray-On Skin Cells using a small sample of the patient’s own skin. This suspension contains the cells necessary to regenerate the outer layer of natural, healthy skin and is prepared and applied at the point-of-care in as little as 30-minutes. While the company has a huge market opportunity already, it is seeking to extend Recell’s use to treat vitiligo. If successful, combined, the company will have a significant runway for growth over the next decade.

Over The Wire Holdings Ltd (ASX: OTW)

Another small cap to look at is Over The Wire. It is a telecommunications, cloud, and IT solutions provider which has been growing at a solid rate in recent years. For example, in FY 2020, the company delivered revenue of $87.6 million, up 10% on the prior corresponding period. I expect more of the same from the company in FY 2021 and beyond. Especially given its recent acquisition of Digital Sense Hosting for $27 million. It is a high-quality cloud business that provides a customisable and scalable cloud offering to Enterprise and Government customers.

Readytech Holdings Ltd (ASX: RDY)

Finally, I think ReadyTech is another small cap to add to your watchlist. It is a leading provider of mission-critical people management software for educators, employers, and facilitators of career transitions. Management notes that its software represents a new way to manage the complex human journey through study, work, and career transitions. Demand has been growing for its software, leading to ReadyTech delivering a 19.1% increase in revenue to $39.3 million in FY 2020.

More reading

• The ASX 200 sank almost 2% today
• Over the Wire (ASX:OTW) share price rockets to record high on acquisition plans

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 Avita Medical Limited, Over The Wire Holdings Ltd, and Readytech Holdings Ltd. The Motley Fool Australia has recommended Avita Medical Limited, Over The Wire Holdings Ltd, and Readytech Holdings 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.

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Buying crashing shares to retire early may seem like a risky strategy to many investors. They may view an uncertain economic outlook as a reason to avoid stocks and instead purchase other assets such as gold following its recent price rise.

However, the long-term prospects for the stock market seem to be relatively bright. Buying a range of high-quality businesses at cheap prices could lead to impressive returns that have a positive impact on your retirement plans.

A rising gold price

Of course, a rising gold price may seem more attractive than crashing shares at first glance. The precious metal has soared to a new record high this year as a combination of low interest rates and an uncertain economic outlook have increased demand for gold.

While this trend may continue in the short run, further growth may be more limited than many investors realise. Buying any asset when it is trading close to a record high can mean there is less capital growth potential versus buying a cheaper asset. And, while economic uncertainty may continue over the coming months, the track record of the global economy shows that a return to strong growth is likely. This may cause investor sentiment towards defensive assets such as gold to weaken, while riskier assets such as shares may become more popular as investors become less risk averse.

Buying opportunities among crashing stocks

Previous global economic downturns and bear markets suggest that buying crashing shares is a sound investment strategy. Ultimately, no bear market has ever persisted indefinitely. Therefore, investor sentiment and the operating conditions for undervalued companies are likely to improve over the coming years.

Furthermore, weak investor sentiment towards the stock market means that some high-quality businesses may be grossly undervalued. Even though they have difficult near-term futures, their solid financial positions and wide economic moats mean that they are very likely to recover in the long run. As such, buying them today when they are undervalued may provide significant capital growth potential for new investors that boosts their portfolio returns.

A long-term outlook

Of course, crashing shares could keep falling over the short run. There is a very real threat of a second market crash as a result of risks such as the US election and coronavirus. They may hold back global economic growth in the coming months and weigh on investor sentiment.

However, investors who have a long time period until they will retire are likely to have sufficient time available for the stock market to mount a successful recovery.

Therefore, while paper losses cannot be ruled out in the short run, buying crashing shares today while they are cheap could be a very profitable strategy that outperforms other assets such as gold. Over time, it may boost your portfolio returns and improve your chances of enjoying an early retirement.

More reading

• ANZ (ASX:ANZ) share price on watch after revealing $528 million earnings hit
• Why the Nick Scali (ASX:NCK) share price jumped today
• Tyro Payments (ASX:TYR) share price tumbles lower following AGM update
• Here’s why the Ainsworth Game (ASX:AGI) share price gained today
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The Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price will be one to watch on Wednesday.

This afternoon it became the latest big four bank to announce notable items that will impact its upcoming results.

What did ANZ announce?

ANZ has announced that its second half 2020 cash profit will be impacted by an after tax charge of $528 million as a result of large notable items. This is expected to impact its common equity tier one capital by approximately 5 basis points.

According to the release, the notable items include remediation costs and accelerated software amortisation.

Remediation charges recognised in the second half of 2020 will be $188 million after tax. These are largely related to an acceleration of remediation programs and product reviews across the bank.

Whereas changes to the application of ANZ’s software amortisation policy have resulted in a $138 million after tax charge being recognised in the second half.

The company revealed that these changes were made to reflect the increasingly shorter useful life of various types of software assets. This has been caused by rapidly changing technology and business requirements.

What about the rest?

The remaining charges of $202 million after tax include the write-down of goodwill in ANZ’s Pacific business, the impact of AASB 9 accounting changes on its investment in PT Panin, and restructuring charges.

ANZ’s Pacific business has had its goodwill written down by $77 million, restructuring charges total $41 million, and accounting changes make up the balance.

FY 2020 totals.

These latest notable items bring ANZ’s total for FY 2020 to $1,539 million, up materially from $231 million in FY 2019.

The biggest contributor has been the impairment of its Asian businesses, which totalled $815 million for the year. After which, customer remediation is once again a thorn in the bank’s side.

This year a total of $279 million is going towards customer remediation, following $475 million a year earlier.

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• What to expect from the ANZ Bank (ASX:ANZ) full year result next week

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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