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The likes of Coles Group Ltd (ASX: COL) and Wesfarmers Ltd (ASX: WES) shares may have recorded solid gains in 2020, but not all blue chips have fared as well.

Two blue chip ASX shares which have fallen heavily this year are listed below. Here’s why I think they could be in the buy zone now:

Lendlease Group (ASX: LLC)

The Lendlease share price is down 34% since the start of the year. This has been driven largely by the negative impacts of the pandemic on the international property and infrastructure company’s performance. These impacts led to Lendlease recording a net loss of $310 million in FY 2020.

The good news is that since then, the company has announced the divestment of its engineering business and a new strategy. That strategy is shifting Lendlease’s earnings mix and business model towards that of industrial property giant Goodman Group (ASX: GMG). I think this is a great move by management and believe its shares could re-rate notably higher in the future if the strategy shift delivers results.

Sydney Airport Holdings Pty Ltd (ASX: SYD)

Another beaten down blue chip ASX share to consider buying is Sydney Airport. Since the start of the year, the Sydney Airport share price is down a disappointing 28%. This has of course been driven by the pandemic’s impact on travel and tourism. With the number of passengers passing through its terminals falling materially this year, the airport operator’s earnings have collapsed.

The good news is that the company has gone into a hibernation mode of sorts and is burning through very little cash compared to others in the industry. It also appears extremely well-positioned to ramp up when the tourism market inevitably rebounds. In FY 2021 I expect Sydney Airport to pay shareholders 15 cents per share. After which, I expect this dividend to double the following year if tourism levels improve notably as expected.

More reading

• The Sydney Airport (ASX:SYD) share price rebounds from early morning losses
• ASX 200 Weekly Wrap: Budget, US election sparks 5% surge in ASX shares
• 3 top ASX shares to buy and cash in on the Federal Budget
• Is the Lendlease (ASX:LLC) share price a buy today?
• One ASX share every patient investor should own

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and 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 Cann Group Ltd (ASX: CAN) share price got smoked today on news that a major shareholder and partner sold out of the stock.

Shares in the medicinal cannabis group tanked 7.1% to 39 cents in after lunch trade when the S&P/ASX SMALL ORDINARIES (Index: ^AXSO) and S&P/ASX 200 Index (Index:^AXJO) gained around 0.1% each.

Investors dumped the stock after Aurora Cannabis Inc (TSE: ACB) informed Cann Group that it sold its 11.84% shareholding in the ASX company.

Cann Group share price takes a blow

The sale was done via off-market trades to a small number of undisclosed buyers after the market closed on Friday.

Management tried to appease shareholders by stating that Aurora’s decision to sell down the shares was “consistent with Aurora’s current strategic priorities”.

It also added that Aurora’s exit won’t have an impact on Cann Group’s business plans. Cann Group remains focused on developing a growing and diversified supply base with B2B customers in Australia and overseas.

Off-take partner exits right

But investors aren’t listening. Aurora isn’t only a substantial shareholder, but it’s also a partner as it signed a five-year off-take agreement with Cann Group in March 2019.

Under the agreement, Cann Group will supply good manufacturing practice (GMP) processed dry flower, extracted resin and medicinal cannabis products to Aurora, which is one of the world’s largest cannabis companies.

No commercial details were released then but it’s believed to include a price review mechanism. It also allows for the inclusion of new products that the group develops.

No sugar coating the Cann Group share price fall

It’s interesting that Aurora said the sale of its remaining holdings in Cann Group was inline with its strategic priorities. Back when it struck the off-take agreement with Cann Group, the CAN share price was trading at around $2 a share.

It looks like Aurora decided to bite the bullet and crystalise the loss. That perception won’t help confidence in the Cann Group share price.

Let-down effect

But Cann Group isn’t the only stock that’s fallen out of favour with the market. In fact, the ASX medicinal cannabis sector is nursing a big hangover as it comes off a high.

The Thc Global Group Ltd (ASX: THC) share price and Creso Pharma Ltd (ASX: CPH) are also among the fallen angels.

The sector serves as a warning about how dangerous it can be to be buying hype ahead of fundamentals, even though medicinal cannabis is a real industry.

More reading

• The valuable lesson Dr Takao Inui has for every ASX investor
• ASX 200 down 0.1%: CBA’s COVID-19 loan deferrals improve, Link receives takeover approach
• Why I’d watch the Platinum (ASX:PTM) share price this week
• ASX 200 Weekly Wrap: Budget, US election sparks 5% surge in ASX shares
• 5 things to watch on the ASX 200 on Monday

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. Connect with me on Twitter @brenlau.

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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Today, the PYC Therapeutics (ASX: PYC) share price is up 11.11% to 20 cents at the time of writing. The surge in the PYC Therapeutics share price came after the company added a new drug to its pipeline.

What was the announcement?

PYC Therapeutics has added a new drug to its pipeline for the treatment of ‘Autosomal Dominant Optic Atrophy’ (ADOA) caused by mutations in the OPA1 gene. The disease causes blindness and, according to PYC Therapeutics, it affects 1 in every 30,000 people. The company has also advised that no treatment is currently available for this type of ADOA, with those suffering from the disease losing vision rapidly in childhood and early adolescence. 

The new drug, known as VP-002, works by correcting a protein deficiency in cells which are affected by the OPA1 type of ADOA. The company expects the drug to have a rapid path into clinical development due to synergies across its existing drug programs. The drug will utilise the same proprietary delivery method as other drugs in PYC Therapeutics’ pipeline. The company has stated that it is in the pre-clinical stages of developing a technology for the delivery of drugs directly into the retina for blinding eye diseases. According to PYC Therapeutics, it will also use its existing ‘backbone’ chemistry to develop VP-002.

About the PYC Therapeutics share price

PYC Therapeutics is a pharmaceutical company which is developing a range of drugs that can be injected directly into cells. The drug maker has been listed on the ASX since 2005.

On 6 October 2020, PYC Therapeutics made an announcement that it had added another drug to its pipeline. The new drug is intended to treat diabetes-related retinopathy and age-related macular degeneration which, according to the company, are the two leading causes of blindness globally.

In the year to 30 June 2020, PYC Therapeutics posted a loss of 0.26 cents per share. The company had $7.24 million cash on hand at 30 June 2020.

The PYC Therapeutics share price is up 365.12% since its 52-week low of 4.3 cents and is up 233.33% since the beginning of the year. The PYC Therapeutics share price is up 233.33% since this time last year.

More reading

• Why the PYC Therapeutics (ASX:PYC) share price is up 9% today

Motley Fool contributor Chris Chitty 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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With so many shares to choose from on the ASX, it can be hard to decide which ones to buy.

The good news is that brokers across the country are doing a lot of the hard work for you.

Three top shares that leading brokers have named as buys this week are listed below. Here’s why they are bullish on them:

Audinate Group Ltd (ASX: AD8)

According to a note out of Morgan Stanley, its analysts have retained their overweight rating and $7.50 price target on this audio-visual networking solutions company’s shares. Morgan Stanley believes that Audinate’s leadership position is strengthening and expects its earnings growth to accelerate once the pandemic passes. In light of this, it sees a compelling risk/reward on offer with its shares at the current level. I agree with Morgan Stanley and would be a buyer of Audinate’s shares.

CSL Limited (ASX: CSL)

Analysts at UBS have retained their buy rating and $346.00 price target on this biotherapeutics giant’s shares. According to the note, the broker believes that plasma collection headwinds are now well-known by the market and priced into its shares. In light of this, it feels investors should be focusing on the future, which appears very positive to the broker due to its research and development pipeline. I think UBS is spot on and CSL is well-positioned for growth over the long term.

Newcrest Mining Limited (ASX: NCM)

A note out of Citi reveals that its analysts have upgraded this gold miner’s shares to a buy rating with a $37.00 price target. The broker made the move after the Newcrest board approved the expansion of its Cadia operation last week. It also notes that approval has been granted for Lihir to increase its production via a Front End Recovery Project. It appears optimistic that its earnings will pick up following these developments. While it isn’t my preferred pick in the gold sector, I think it could be worth considering.

More reading

• ASX 200 down 0.1%: CBA’s COVID-19 loan deferrals improve, Link receives takeover approach
• Why Evolution, Link, Newcrest, & NEXTDC shares are charging higher
• ASX 200 Weekly Wrap: Budget, US election sparks 5% surge in ASX shares
• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 next week

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 AUDINATEGL FPO and CSL Ltd. The Motley Fool Australia has recommended AUDINATEGL 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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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.

Five years is a long time, and predicting the future path for a social media giant like Facebook, Inc (NASDAQ: FB) is fraught with uncertainties as it is with any company.

Facebook has succeeded in getting a significant percentage of the world’s population on its platform. However, that level of success naturally leads to questions as to whether investors can continue to friend this communication stock over the long term. Nonetheless, the company has moved into other tech niches that could ensure its growth for another five years, and perhaps beyond.

The coming growth crunch

Indeed, the near-term outlook for Facebook could bring an increasing number of likes. Although the company declined to give earnings guidance in its second-quarter 2020 report issued in late July, it believes year-over-year ad revenue will grow by about 10% in the upcoming quarter. Also, analysts expect profits to rise by 25% this year and by 27% in fiscal 2021. Facebook also maintains a base of 3.1 billion monthly active users, an increase of 12% over the last year.

Still, its current apps could face a significant growth limitation over the next five years that investors normally associate with companies like Coca-Cola Co (NYSE: KO) and McDonald’s Corp (NYSE: MCD). Facebook’s current user base is about 40% of the world’s population. Given that a large percentage of the unserved population does not have broadband access, Facebook could soon face global market saturation.

Where Facebook will find additional growth

Hence, for the next five years, the company will likely have to lean on additional platforms to maintain its current growth rate. For now, those platforms are Portal and Oculus.

Portal is Facebook’s smart video hardware. It allows for video calls using WhatsApp and Facebook Messenger and has Amazon.com, Inc‘s (NASDAQ: AMZN) Alexa built into its product. However, Amazon offers a similar product called Echo Show, so the growth prospects for Portal remain unclear.

Nonetheless, Facebook could bring a more profound change to the tech market through Oculus. Oculus is Facebook’s virtual reality (VR) hardware, which will offer a simulated environment for users.

To Facebook’s credit, it holds a competitive advantage with Oculus. Facebook technically lags Sony Corp (NYSE: SNE) in the sale of VR headsets, according to technology market research provider TrendForce. However, Facebook sells untethered devices, while Sony ties its headsets to its PlayStation gaming console.

Moreover, high consumer demand for VR devices exists, and at $299, the new Oculus Quest 2 will sell for $100 less than its predecessor. Facebook will likely develop applications aimed at its massive user base, further widening its competitive advantage over prospective competitors.

For now, Facebook defines sales of Portal and Oculus as “other revenue.” While the $366 million in other revenue made up only a small portion of Facebook’s $18.7 billion in revenue in the second quarter, the category grew by 40% from year-ago levels. In percentage terms, this growth rate is far ahead of advertising, which expanded by 10% over the same period.

Furthermore, considering the anticipated growth, Facebook remains a reasonably priced stock. It trades at a forward price-to-earnings (P/E) ratio of about 24, a modest multiple considering the profit growth predicted in the near term.

Facebook in five years

At its current valuation, Facebook is a clear buy. Looking five years ahead, investors who friend Facebook stock now should benefit from significant growth, especially if the company meets analyst profit-growth estimates.

However, investors should expect the company to have a different focus at that time. Instead of looking at ad revenue through rose-colored glasses, stockholders should put on an Oculus headset and prepare for a ride that is virtually assured to bring a more profitable reality. Even though VR products make up only a small percentage of revenue now, this category should continue to grow much faster than Facebook’s ad revenue.

VR’s power will not lie so much in hardware, which tends to become commoditized. Since Facebook now has over 3.1 billion users, VR will probably help it monetize its customer base, offering Facebook a competitive advantage over its peers.

Investors have already seen massive returns from Facebook’s ability to connect people. Over time, the stock will probably move much higher as it makes VR-driven returns a reality.

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

More reading

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• Amazon (NASDAQ:AMZN) is going all out to dominate this bustling e-commerce market
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• This is my favourite ASX share right now
• ASX investors were buying Tesla (NASDAQ:TSLA) and Apple (NASDAQ:AAPL) shares last week

Will Healy has no position in any of the stocks mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, 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 Amazon and Facebook and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool Australia has recommended Amazon and Facebook. 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 Fortescue Metals Group Limited (ASX: FMG) share price is edging lower on Monday despite the release of a positive announcement.

The iron ore producer’s shares are down 0.2% to $16.92 at the time of writing.

What did Fortescue announce?

This morning the mining giant revealed that it intends to continue buying back shares for the foreseeable future.

According to the release, Fortescue has further extended its on-market buy-back as part of its ongoing capital management programme.

The buy-back period will now continue for an unlimited duration, with the maximum number of shares that may be bought-back to be determined periodically by the company’s 10/12 limit.

The 10/12 limit is defined in section 257B(4) of the Corporations Act 2001 and limits the company to buying back no more than 10% of its voting shares within the span of any 12 month period.

Though, that doesn’t necessarily mean that the company will buyback 10% of its shares each year.

Management advised: “The number of shares purchased and timing of any buy-back will depend on Fortescue’s share price and market conditions at the time. Fortescue reserves the right to vary, suspend or terminate the buy-back at any time.”

Bankers at Macquarie Group Ltd (ASX: MQG) have been tasked with the job of buying shares on Fortescue’s behalf.

What’s next for Fortescue?

Fortescue has just completed its first quarter and will be providing the market with an update on its performance towards the end of the month.

According to a note out of Goldman Sachs from last week, it expects the company to report iron ore shipments of 42.5Mt.

While this will be a 10% decline on its fourth quarter shipments, it will be a 1% increase on the prior corresponding period.

One metric the broker expects to grow quarter on quarter is the price it commands for its iron ore. Goldman estimates that Fortescue will report an average realised price of US$102 a tonne. This is 87% of the 62 fines benchmark iron ore price and up 27% from US$81 a tonne in the fourth quarter.

Goldman Sachs has a neutral rating and $16.80 price target on the company’s shares.

More reading

• ASX 200 Weekly Wrap: Budget, US election sparks 5% surge in ASX shares
• Top brokers name 3 ASX shares to buy next week
• 3 ASX stocks the rally left behind that brokers are urging you to buy today
• Why I would buy these 3 ASX dividend shares for income today
• Why you may not need ASX REITs for dividends

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group 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 Sydney Airport Holdings Pty Ltd (ASX: SYD) share price is flat in early afternoon trading, after being down almost 1% in earlier trading. This comes after Sydney Airport’s shareholders enjoyed a 3.1% gain over the course of last week.

After shares plunged more than 48% earlier in the year, driven by the wider COVID-19 market panic, Sydney Airport’s share price has choppily moved higher, regaining 30% from the March lows.

But with investors still focused on the near-term travel restrictions that have gutted international and domestic air travel, the share price remains down 32% from 17 January.

What does Sydney Airport do?

Sydney Airport Holdings owns a 100% interest in Sydney Airport, offering an international gateway connecting to more than 90 other airports around the world.

Headquartered in Sydney, the company provides aeronautical, retail, property, car rental, and parking and ground transport services through its 2 main business units: Aviation (Sydney Airport) and Leasing & Advertising Opportunities.

Sydney Airport shares began trading on the ASX in 2002. Today it’s part of the S&P/ASX 200 Index (ASX: XJO).

What next for the Sydney Airport share price?

In intraday trading, Sydney Airport’s share price is flat. That’s despite receiving the thumbs up from Morgan Stanley this morning.

Citing the potential benefits of capital expenditure tax write-offs and its belief that more air travel routes will open over the coming 12 months, the broker upgraded Sydney Airport shares from equal-weight to over-weight. Its new price target of $6.67 per share represents an 11% upside from the current price of $6.02 per share.

I believe Morgan Stanley’s analysts have this one right, though if anything they may be being a bit conservative.

While the European and American continents look likely to remain no fly zones for the next 12 months as their respective nations struggle to contain the coronavirus, the likelihood of expanded air travel bubbles is looking up.

Domestic air travel will be the first to recover, assuming Australia’s virus cases continue to head towards zero. The New Zealand travel bubble will most likely follow, with negotiations between the two governments on the finer details continuing.

And over the weekend Prime Minister Scott Morrison added the Pacific island nations, Japan, South Korea and Singapore to the list of nations Australians may be able to fly to (and whose citizens may be able to fly here) within the coming months.

Speaking in Queensland, Morrison said he’d “had a number of discussions with Pacific leaders this week.” He also noted there had been discussion with Japan’s and South Korea’s leaders and that, “The Foreign Minister, this week, has been talking to the Prime Minister of Singapore.”

These may be baby steps towards the full reutilisation of Sydney Airport’s facilities. But it’s a good indication that patient investors could again see the Sydney Airport share price trading at January’s $8.81, a gain of 46% from the current price.

More reading

• ASX 200 Weekly Wrap: Budget, US election sparks 5% surge in ASX shares
• One ASX share every patient investor should own
• Leading brokers name 3 ASX shares to buy today
• Sydney Airport (ASX:SYD) share price tipped to ascend 20% from here
• How to generate a passive income of $50,000 with ASX shares

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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ASX mid-cap technology company Nitro Software Ltd (ASX: NTO) has performed strongly this year. Despite a minor blip during the March coronavirus sell-off, the Nitro Software share price has climbed close to 90% higher since January. In fact, savvy investors who picked up shares at the height of the COVID-19 panic selling would now be sitting on gains of almost 300%.

What’s driven the Nitro Software share price gains?

Despite COVID-19 causing some disruption to its sales pipeline, Nitro Software still managed to deliver above its prospectus forecasts across most financial metrics for the half year ended 30 June 2020. Total revenue was up 14% against the June half 2019 to US$19.1 million, driven by a 60% increase in subscription revenue. Annual recurring revenue jumped 57% to US$20.2 million, and the company reaffirmed its prospectus guidance for full year 2020 total revenue of at least US$40.5 million.     

What does Nitro Software do?

Although its market capitalisation has almost doubled this year – at around $570 million, Nitro is now on a par with other mid-sized ASX tech growth companies like Bigtincan Holdings Ltd (ASX: BTH) and Whispir Ltd (ASX: WSP). But Nitro is still flying under the radar for a lot of investors.

The company develops a suite of software solutions to allow individuals and businesses to streamline and digitise document workflows. This means that companies can create, edit, sign and store important documents entirely online, reducing the need for printing and traditional forms of hardcopy file management. Not only does this simplify workflows, but it can massively reduce printing costs for large companies, and even make them more environmentally friendly.

Nitro Software has already had massive success in the United States, with some 68% of Fortune 500 companies already among its clients. These include renewing customers like General Electric Company (NYSE: GE) and Exxon Mobil Corporation (NYSE: XOM). And while the COVID-19 global pandemic has interrupted some of its sales channels, the shift towards remote working arrangements for many large companies may play in Nitro’s favour. These companies will now be forced to digitise outdated workflows and cut operating costs.

Nitro also made the decision to make its eSignature solution free throughout 2020 to help companies transitioning to working from home. This move could rapidly increase brand recognition and market penetration.

Should you invest?

I believe Nitro Software is an exciting company as it taps into a number of investment thematics that are coming to a head in 2020.

Firstly, the social restrictions many governments have put in place to fight the spread of coronavirus are forcing companies to find new ways of doing business. This involves digitising many old processes so that more work can be done online. These sorts of fundamental changes are likely to long outlive the effects of the virus. In fact, many believe the pandemic has really only sped up changes that were already happening anyway.  

Secondly, Nitro’s suite of products also helps companies reduce their amount of paper waste. Not only does this help cut operating costs, but it is also great for the environment – especially at a time when concerns around climate change are putting corporate social responsibility under increased focus.

More reading

• 2 ASX growth shares I’d buy today for growth and income
• Why the Opticomm (ASX:OPC) share price has zoomed up 9% today
• 3 reasons Pfizer and BioNTech will have coronavirus vaccine data before Moderna
• 2 of the best ASX dividend shares you can buy today
• The valuable lesson Dr Takao Inui has for every ASX investor

Rhys Brock owns shares of BIGTINCAN FPO, Nitro Software Limited, and Whispir Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends BIGTINCAN FPO and Whispir Ltd. The Motley Fool Australia has recommended BIGTINCAN FPO, Nitro Software Limited, and Whispir 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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I think there are some exciting ASX shares that would be good picks for growth and income.

Over the long-term, I believe that growing businesses will deliver the best long-term results for investors. But I can understand why investors are also looking for a bit of income in this environment.

I think the below ASX shares could offer market-beating growth as well as income that’s better than what you can get from a bank:

Class Ltd (ASX: CL1)

Class is a financial technology business. It aims to provide software that automates and simplifies administration. Class helps clients do work quicker and more cheaply, it improves data accuracy and reduces compliance risk.

One of the main reasons to like this ASX share is its high customer retention rate, which was 99% in FY20 for the Class suite of products.

FY20 was a strong year. Operating revenue increased 15% to $44.1 million (beating guidance) and the underlying earnings before interest, tax, depreciation and amortisation (EBITDA) margin was 42% (beating guidance).

During FY20 it grew its number of accounts by 4.6% to 187,254. Annual recurring revenue (ARR) increased to $46.8 million in FY20, which also doesn’t include $2.4 million of ‘pay as you go’ revenue.

The ASX share continues to invest for organic growth by regularly improving its existing software. It has also been making changes to improve its addressable market with the acquisition of NowInfinty and the launch of Class Trust.

Class is looking to grow its FY21 revenue by 20%. It’s trading at 27x FY23’s estimated earnings with a grossed-up dividend yield of 3.25%.

Clover Corporation Limited (ASX: CLV)

Clover and its ‘Nu-Mega’ products are important in adding ingredients to products like infant formula, without taking away from the taste.

The ASX share’s success is linked to the demand for infant formula. There’s a reason why the Clover share price has risen by almost 400% over the past five years.

Clover had a pretty strong FY20, which included the disruptive effects of COVID-19 and pantry stocking. Clover’s sales revenue grew 15.1% to $88.3 million and net profit after tax (NPAT) soared 23.6% to $12.5 million.

The company is expanding its product range and growing geographically, so I think that it has a long growth runway.

Management said that its concentrated DHA powders have won additional business in a range of new applications covering bread, yogurt, health cars and sport nutrition. New legislation in the EU should also help growth.

However, there was one negative in the FY20 result for the ASX share where it said that COVID-19 has prevented travel of customers to audit the new Melody Dairies nutritional spray dryer in New Zealand, which Clover has 42% ownership and access to 42% of the manufacturing capacity. The travel restrictions will slow production volume initially. The dryer will add capacity and reduce risks for Clover, it’s needed to help grow Clover’s manufacturing for the coming years of growth.

I believe the company has a positive long-term outlook and it continues to grow its ordinary dividend. In FY20, the ASX share grew its dividend by 5%.

At the current Clover share price it’s trading at 17x FY23’s estimated earnings. It also offers a grossed-up dividend yield of 1.75%.

Foolish takeaway

Both Clover and Class offer an attractive mix of growth with a decent starting dividend yield. At the current share prices I’d probably go for Clover, I like its international growth and the continuing earnings diversification. But Class could definitely one to watch over the next few years.

But there are other ASX shares that I prefer even more for the growth part of my portfolio. 

More reading

• Where I’d invest $10,000 into ASX dividend shares
• Could these small cap ASX shares be the next Afterpay (ASX:APT) or Zip (ASX:Z1P)?
• Is the Soul Patts (ASX:SOL) share price a buy?
• Leading brokers name 3 ASX shares to buy today
• Why Byron Energy, Clover, DEXUS, & Webjet shares are sinking lower 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 Clover Limited. The Motley Fool Australia owns shares of Class 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 Opticomm Ltd (ASX: OPC) share price has rocketed up 9.4% today and is trading at $6.52 at the time of writing. This comes after the telecommunications company received an amended takeover offer from superannuation fund, Aware Super.

What was the offer?

Aware Super’s amended offer proposes to take over all Opticomm shares at $6.50 per share, including a 10c per share fully franked special dividend. This is subject to 50.1% shareholder approval and there being no material adverse changes or regulatory events affecting Opticomm. 

The latest offer from Aware Super represents an 11.11% premium on a earlier offer from internet service provider Uniti, made on 15 September 2020. Uniti now has 3 business days to submit an amended bid if it chooses to do so. Opticomm will be liable to pay Uniti a break fee of $6.1 million if management recommends an alternative offer to its previous proposal or if an alternative offer is accepted. This suggests that if the updated offer from Aware Super is accepted, a fee of $6.1 million could be owed to Uniti.

Opticomm directors are currently considering the amended offer from Aware Super. At this stage, they still recommend that Opticomm shareholders accept the amended offer from Uniti. 

In the meantime, due to the revised offer from Aware Super, Opticomm will seek court approval to postpone its meeting to consider Uniti’s amended offer that was scheduled for tomorrow.

About the Opticomm share price

Opticomm is a telecommunications company that provides fibre connections for broadband services. The company has been listed on the ASX since 2019.

In the 2020 financial year, Opticomm’s revenue was $73.04 million, up 17% compared to the 2019 financial year. Opticomm had net profit after tax (NPAT) of $23.06 million in FY2020, an increase of 14% compared to the prior year.

The Opticomm share price is up 115% since its 52-week low of $3. It has risen 65.81% since the beginning of the year. The Opticomm share price is up 75.41% since this time last year.

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• Uniti (ASX:UWL) share price surges higher on revised OptiComm (ASX:OPC) takeover offer

Motley Fool contributor Chris Chitty 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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