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Last week was an unforgettable one for the S&P/ASX 200 Index (ASX: XJO). The benchmark index had its strongest week in almost six months and saw it record a 5.4% gain to end at 6,102.2 points.

A small number of shares were unable to follow the lead of the ASX 200 last week. Here’s why these were the worst performers on the index over the five days:

Megaport Ltd (ASX: MP1)

The Megaport share price was the worst performer on the ASX 200 last week with a 1.9% decline. This was despite there being no news out of the elastic interconnection services provider. However, a week earlier Commonwealth Bank of Australia (ASX: CBA) revealed that it had been selling shares. The banking giant appears to have been locking in gains after Megaport’s year to date gain of over 50%.

Nanosonics Ltd (ASX: NAN)

The Nanosonics share price was out of form and dropped 0.9% lower over the five days. Last week analysts at Goldman Sachs reiterated their neutral rating and $5.50 price target on the infection prevention company’s shares. This compares to the latest Nanosonics share price of $5.62.

Transurban Group (ASX: TCL) 

The Transurban share price underperformed the market last week with a 0.9% decline. This follows the release of its annual general meeting update which revealed that its quarterly traffic volumes were still down notably. However, there have been big improvements in certain markets. Transurban also advised that it has commenced a process for the potential introduction of equity partners into its Greater Washington Area assets. It expects this to release significant capital into the business.

Bravura Solutions Ltd (ASX: BVS)

The Bravura Solutions share price wasn’t far behind with a decline of almost 0.9%. This was despite there being no news out of the financial technology company. However, the Bravura share price has been under a lot of pressure since the release of its full year results in August. Investors appear disappointed by its outlook for FY 2021, which indicated that earnings could be flat because of the pandemic.

More reading

• ASX 200 rises, Cimic (ASX:CIM) share price climbs
• 3 ASX stocks the rally left behind that brokers are urging you to buy today
• Up 22% in a month, is the Soul Patts (ASX:SOL) share price a buy?
• Top brokers name 3 ASX dividend shares to buy today
• ASX 200 down 0.2%: Big four banks drop, CIMIC jumps, CSL slides lower

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends MEGAPORT FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nanosonics Limited. The Motley Fool Australia owns shares of and has recommended Bravura Solutions Ltd. The Motley Fool Australia owns shares of Transurban Group. The Motley Fool Australia has recommended MEGAPORT FPO and Nanosonics 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.

The post These were the worst performing shares on the ASX 200 last week appeared first on Motley Fool Australia.

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The S&P/ASX 200 Index (ASX: XJO) was in sparkling form last week and recorded its best weekly gain in almost six months. The benchmark index rose 5.4% over the five days to 6,102.2 points

While the majority of shares on the index pushed higher last week, some recorded particularly strong gains.

Here’s why these were the best performing ASX 200 shares last week:

CIMIC Group Ltd (ASX: CIM)

The CIMIC share price was the best performer on the ASX 200 with a massive 20.4% gain. A good portion of this came on Friday when the engineering company released its third quarter update which revealed an uptick in its performance. In addition to this, the Federal Budget is aiming to ignite the Australian economy with heavy infrastructure investment. This could lead to strong demand for its services in the near term. For the same reason, the Seven Group Holdings Ltd (ASX: SVW) share price stormed 17.9% higher last week.

Virgin Money UK CDI (ASX: VUK)

The Virgin Money UK share price wasn’t far behind with a 20% rise over the five days. This was despite there being no news out of the UK-based bank. However, the banking sector was a solid performer last week, with the big four banks all recording notable gains over the five days. The latter appears to have been driven by optimism over the Federal Budget’s impact on the economy and the sector.

Eagers Automotive Ltd (ASX: APE)

The Eagers Automotive share price was on form last week and stormed 17.5% higher. Once again, this appears to be related to the Federal Budget. Investors may believe that tax cuts will support vehicle sales in the near future. In addition to this, the government will allow businesses with turnover of up to $5 billion a year to immediately write-off all assets up to $150,000. This could support new vehicle sales for business use.

Zip Co Ltd (ASX: Z1P)

The Zip share price was a very strong performer and jumped 16.5% higher over the five days. This appears to have been driven by bargain hunters swooping in after a sharp decline in September. In addition to this, a very strong update from one of its buy now pay later provider peers gave its shares a lift.

More reading

• ASX 200 rises, Cimic (ASX:CIM) share price climbs
• Why the Zip (ASX:Z1P) share price is sinking 6% lower today
• Why Domino’s, Harvey Norman, WiseTech Global, & Zip shares are dropping lower
• ASX 200 down 0.2%: Big four banks drop, CIMIC jumps, CSL slides lower
• Why ARB, CIMIC, Janus Henderson, & Netwealth shares are charging higher

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia 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 think there are a number of leading S&P/ASX 200 Index (ASX: XJO) shares that are worth buying for growth and income.

Businesses in the ASX 200 have already been growing for years. I think these companies could be worth buying for their growth credentials as well as the income they currently provide:

Brickworks Limited (ASX: BKW)

Brickworks is one of my favourite ASX 200 shares. The Brickworks share price has done well in recent times. It has gone up 11.7% over the past month and 48% over the past six months.

The construction company may benefit from a number of positives in Australia. The country is almost entirely in control of COVID-19, helping the economy. A number of measures announced by the government in recent months should help first home buyers purchase newly-built properties, driving up construction demand. It is supposedly about to get a little easier for borrowers to get access to money. There is serious talk of another slight interest rate cut by the RBA. All of these measures may help Brickworks in Australia.

The ASX 200 share recently acquired some brick businesses in the USA. That is a long-term growth market for the company because the population on the eastern side of the US is so much larger than Australia’s entire population. The American economy has more work to do to recover from COVID-19, but I believe Brickworks can boost its margins and efficiency there.

I’m also confident about Brickworks’ other assets. Its large shareholding of investment conglomerate Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) continues to do well. Indeed, the Soul Patts share price just reached a 52-week high, it has risen 41% over the past six months.

I really like Brickworks’ 50% stake in an industrial property trust. The other joint venture partner is ASX 200 share Goodman Group (ASX: GMG). Industrial property is in higher demand since the onset of COVID-19. Both Coles Group Limited (ASX: COL) and Amazon want large, high-tech distribution warehouses built on land owned by the trust. After those warehouses are built, it should boost the gross assets of the trust to above $3 billion.

At the current Brickworks share price it offers a grossed-up dividend yield of 4.2%.

Magellan Financial Group Ltd (ASX: MFG)

Magellan is one of the best fund managers in Australia in my opinion. Its main focus is on international shares, though it also has very sizeable funds that invest in global infrastructure and Australian shares.

The ASX 200 share is organically growing its funds under management (FUM) from investment performance and net inflows. In September 2020 it reached $102 billion of FUM.

I like that Magellan is always looking for new ways to diversify profit and serve clients. Magellan recently announced it was going to take a 40% economic stake in Barrenjoey, a new investment bank which will have highly capable people involved.

The fund manager is also working on launching a retirement product which could be attractive considering the long-term growth of the superannuation pool thanks to mandatory contributions and the tax-advantaged status of super.

Magellan also plans to launch a set of lower-costing exchange-traded funds (ETFs) which may be attractive for investors looking for lower fees. Hopefully this attracts a wider group of investors, rather than cannibalising its own FUM.

At the current Magellan share price the ASX 200 share is trading at 20x FY23’s estimated earnings with a trailing grossed-up dividend yield of 4.9%.

Foolish takeaway

These are two of the best ASX 200 shares that can provide a good mix of income and growth in my opinion. However, they have both run hard in recent weeks. So I’d be inclined to wait a little bit before buying shares.

I’m looking at other share opportunities at the moment for my own portfolio.

More reading

• This is where I’d invest $1,000 right now into ASX shares
• Up 22% in a month, is the Soul Patts (ASX:SOL) share price a buy?
• 3 unique ASX shares I’d buy and hold forever
• Why growth investors still have a lot to like about the Magellan (ASX:MFG) share price
• Brokers name 3 ASX shares to buy right now

Motley Fool contributor Tristan Harrison owns shares of Washington H. Soul Pattinson and Company 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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There are still a number of cheap stocks available to buy after the 2020 market crash. Despite this, finding them could prove to be a difficult task.

Therefore, looking in industries that face uncertain near-term prospects could be a sound move. It may enable you to unearth a range of high-quality businesses that trade at low prices.

Through analysing their financial positions and market opportunities, you could build a portfolio of undervalued shares that produces impressive returns in the long run.

Searching for cheap stocks in unloved industries

While many shares have rebounded following the market crash, some sectors contain a large number of cheap stocks. In many cases, they are industries that are set to be among those hit hardest by the weak economic outlook. For example, industrial businesses that are relatively cyclical and consumer goods companies that are reliant on consumer sentiment may post disappointing financial performances in the short run.

As such, there may be an opportunity for long-term investors to buy undervalued shares while they face a difficult outlook. Certainly, this strategy may mean that you experience paper losses in the short run due to ongoing risks such as the coronavirus pandemic. However, over the coming years many unloved companies operating in sectors that are currently out of favour among investors could produce impressive returns. As such, buying them today may prove to be a profitable long-term move.

Analysing potential purchases

Of course, not all cheap stocks are worth buying at the present time. Some companies are priced at low levels for very good reasons. For example, they may have weak balance sheets that are unlikely to withstand a prolonged period of weak sales growth. As such, they may deserve to trade at low prices to reflect their higher risks.

Analysing not only the financial positions of potential purchases, but also their market positions, could allow you to find high-quality companies trading at bargain prices. Purchasing those companies with sound balance sheets and wide economic moats may mean that you benefit more fully from a likely economic recovery. They may be able to extend their market influence at the expense of weaker peers. This may lead to higher profitability in the long run that has a positive impact on your portfolio.

A second market crash

Clearly, some investors may be dissuaded from buying cheap stocks today because of the threat of a second market crash. Since that outcome is a known unknown, it is difficult to try to time the market to take advantage of it.

Therefore, buying undervalued shares today could be a sound move. Their valuations may already price in a disappointing economic outlook and the threat of a market downturn. While paper losses cannot be ruled out in the short run, their capital gains over the long run may prove to be very impressive.

More reading

• The 1300 Smiles (ASX:ONT) share price reaches record high. Here’s why.
• Why the Westgold (ASX:WGX) share price shot up today
• ASX 200 rises, Cimic (ASX:CIM) share price climbs
• Looking for income? Buy these strong ASX dividend shares
• Why has the K2Fly (ASX:K2F) share price just hit a record high?

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The 1300 Smiles Limited (ASX: ONT) share price has been on the run today following a trading update for the September quarter.

In mid-afternoon trade, the 1300 Smiles share price reached a record high of $6.80, but has since slightly pulled back. The 1300 Smiles share price finished the day at $6.75, up 5.6%.

Let’s take a look at 1300 Smiles and how it performed for Q1 FY21.

What does 1300 Smiles do?

1300 Smiles owns and operates full-service dental facilities in New South Wales, South Australia, and Queensland.

The company provides the use of dental surgeries, practise management and other related services to self-employed dentists who run practises.

Strong Q1 result

1300 Smiles announced it recorded positive revenue growth for the quarter on its over the counter (OTC) service. All practises across the network saw a 21.5% rise in earnings over the prior corresponding period. This was underpinned by an easing of COVID-19 restrictions, which allowed clinics to re-open and sell 1300 Smiles services.

The company said that excluding the two practises that were severely affected by COVID-19, its performance would have been stronger. It highlighted that OTC revenue growth jumped 23.8% in September and 20.1% in Q1 FY21, eliminating the prior clinics.

1300 Smiles attributed the surge in revenue to a range of factors as a result of the pandemic. These include increased patient demand for dental services, treatment rates, extended clinic operating hours and growth in the number of dentists engaged with the company.

Managing director Dr Daryl Holmes said the company’s performance during 1Q FY’21 was “extremely pleasing and a testament to the long-term strength and resilience of the 1300SMILES business”, adding:

The board and I are grateful to all our dental professionals, support staff and management team for their continued dedication and focus during this challenging period, which has allowed 1300SMILES to achieve these excellent results.

About the 1300 Smiles share price

The 1300 Smiles share price has made a stunning recovery since plummeting to a 52-week low of $4.69 in March. The company reached a record high today of $6.80, and has risen 10% in year-to-date trading.

More reading

• Why the Westgold (ASX:WGX) share price shot up today
• ASX 200 rises, Cimic (ASX:CIM) share price climbs
• Looking for income? Buy these strong ASX dividend shares
• Why has the K2Fly (ASX:K2F) share price just hit a record high?
• This is where I’d invest $1,000 right now into ASX shares

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has recommended 1300SMILES 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 Westgold Resources Ltd (ASX: WGX) share price rocketed up this morning after the company released its first quarterly report for the financial year. The Westgold share price reached a 52-week high of $2.70 in early morning trade, before dropping back during the day to close at $2.64, up 0.74%.

Westgold is a gold miner located in Western Australia. The company currently operates the Fortnum and Rover projects, and also the Meekatharra and Cue gold operations.

So what?

The group reported a solid first quarter of FY21, in what was described as a “transforming year for the company”. The gold miner reported revenue of $145 million with the same amount in cash after the quarter.

Westgold’s operations performed as planned with only minor impacts from the COVID-19 pandemic which were largely associated with restricted travel arrangements for staff.

The company achieved its output guidance and executed on delivery of lower than expected unit cost outcomes. The company’s gold production and gold sales were 60,797 oz and 60,030 oz respectively (guidance 60,000 – 67,500 oz). The group’s cash balance continued to rise even after spending significant capital on the ramp up of the Big Bell mine, a plus for investors.

All mines performed in line with expectations during the quarter. As mentioned, the Big Bell ramp up continued, with the production run-rate now more than 600,000 tonnes per annum based on the September output.

What now for the Westgold share price

Westgold looks to de-risk moving forward as it repaid its pre-pay debt in full during the last quarter. Its only debt now is mining equipment leases.

Additionally, Westgold’s $5 million exploration expenditure for the quarter paid off as it saw outstanding exploration results. These will be reported in a later announcement, leaving shareholders plenty to look forward to.

With the Westgold share price trading at $2.64, its market capitalisation is sitting just above $1.1 billion.

More reading

• ASX 200 rises, Cimic (ASX:CIM) share price climbs
• Looking for income? Buy these strong ASX dividend shares
• Why has the K2Fly (ASX:K2F) share price just hit a record high?
• This is where I’d invest $1,000 right now into ASX shares
• Charter Hall Social Infrastructure REIT (ASX:CQE) announces acquisition

Motley Fool contributor Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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) went up slightly today to 6102 points.

Here are some of the highlights from the ASX 200 today:

Cimic Group Ltd (ASX: CIM)

Cimic gave a profit update for the nine months to 30 September 2020.

The ASX 200 company said that it generated net profit after tax (NPAT) of $474 million in the first nine months of its FY20.

Revenue for the nine months was $9.3 billion, down from $10.7 billion in the prior corresponding period.

Cimic said that it returned to growth in the third quarter of FY20. Revenue in the third quarter of FY20 was up 8% compared to the second quarter. COVID-19 led to a slowdown of revenue across its activities both domestically and overseas. It also caused a temporary delay in the award of some new projects.

Management were pleased to report that its margins remained resilient with operating profit, profit before tax (PBT) and NPAT margins at 8.6%, 6.9% and 5.1% respectively. The ASX 200 company’s leadership said the business mix and cost efficiency measures were helpful for the margins.

Cimic said that its factoring balance was reduced by $134 million year to date, and reduced by $142 million year on year, to $1.83 billion. Its supply chain finance balance was reduced by $705 million year to date, and reduced by $561 million year on year, to $146 million.

It finished the period with net debt of $1.67 billion, with gross cash of $3.6 billion.

During the quarter, the ASX 200 share won approximately $1.4 billion of new work. It finished with $35.5 billion of work in hand, which is equivalent to more than two years of revenue.

CIMIC executive Chair Marcelino Fernandez Verdes said: “We are seeing improved operating conditions, which is providing momentum as we enter the last quarter of the year.

“Governments have announced numerous stimulus packages in our core construction and service markets, with additional opportunities through the strong PPP pipeline, and the mining market is proving resilient.

“The transaction with a new equity investor for Thiess is well progressed, with due diligence completed and negotiations expected to be finalised in the coming days.

“The introduction of an equity partner into Thiess capitalises on the outlook for mining, provides capital for Thiess’ continued growth and enables CIMIC to strengthen its balance sheet.”

The Cimic share price climbed by 9.2% today. 

Newcrest Mining Limited (ASX: NCM)

Newcrest’s board announced the approval of two projects moving to the execution phase.

The stage 2 of the Cadia expansion project has been approved. This is estimated to increase plant capacity from 33mtpa to 35mpta, life of mine (LOM) gold recoveries are projected to increase by 3.5%, LOM copper recoveries are estimated to increase by 2.7% and the all-in sustaining cost (AISC) is estimated to reduce by an estimated $22 per ounce.

The estimated capital cost for stage 2 is $175 million, which is $5 million lower than the estimate from October 2019. The timing for the project remains in schedule, with completion expected in late FY22.

The ASX 200 company’s board also approved the Lihir front end recovery project. This primarily comprises the installation of flash flotation and additional cyclone capacity, as well as cyclone efficiency upgrades, to improve grinding classification and reduce gold losses through the flotation circuits. This should result in LOM gold recoveries increasing by 1.2% and incremental LOM gold production increasing by 244,000 ounces.

Newcrest managing director and CEO Sandeep Biswas said: “It is an exciting time at Newcrest as we advance our growth pipeline with both of these projects adding value to our existing large scale, long life operations while we pursue the development of Red Chris and Havieron and exploration opportunities globally.”

The Newcrest share price went up 3.2% today in response.

More reading

• 3 ASX stocks the rally left behind that brokers are urging you to buy today
• Up 22% in a month, is the Soul Patts (ASX:SOL) share price a buy?
• ASX 200 down 0.2%: Big four banks drop, CIMIC jumps, CSL slides lower
• Why ARB, CIMIC, Janus Henderson, & Netwealth shares are charging higher
• Why the CIMIC (ASX:CIM) share price is storming higher today

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It looks as though interest rates are going to remain at their low levels for several years. As a result, I continue to believe ASX dividend shares are the best place to earn a passive income right now.

But which ASX dividend shares are in the buy zone? I think these two would be top options:

Aventus Group (ASX: AVN)

The first ASX dividend share I think investors ought to buy is Aventus. It is a retail property company which specialises in large format retail parks. Aventus currently operates a total of 20 centres, which are home to a diverse tenant base of 593 tenancies. Among its tenants are major retailers such as ALDI, Bunnings, and The Good Guys.

Thanks to its high weighting to major retailers and every day needs, Aventus has been relatively unaffected by the pandemic. This allowed the company to report a 4.2% increase in funds from operations to $100 million with its full year results. It also revealed solid rent collections of 87% through the COVID-19 period and a high occupancy rate of 98%, which allowed it to pay an 11.9 cents per security distribution for the year. Based on the current Aventus share price, this equates to a generous 4.9% yield. I expect more of the same in FY 2021. Especially given the favourable Federal Budget.

National Storage REIT (ASX: NSR)

Income investors might want to consider this storage giant. Due partly to tailwinds such as population growth and downsizing by baby boomers, demand for storage facilities has been growing at a steady pace over the last few years. National Storage has been able to meet and profit from this demand with new developments, redevelopments of existing sites, and acquisitions. While population growth may be stifled in the short term because of the pandemic, I’m optimistic that a rebound in the housing market in 2021 will give demand a boost.

It also has exposure to the rapidly growing ecommerce market, with a growing number of small businesses actually running their operations from a storage unit. All in all, I believe National Storage is well-placed to continue its steady growth over the 2020s and beyond. For now, I estimate that it will pay an ~8 cents per unit distribution in FY 2021. Based on the current National Storage share price, this represents an attractive 4.3% yield.

More reading

• Why Macquarie (ASX:MQG) analysts are tipping share price gains for this ASX retail landlord
• Forget term deposits and buy these ASX dividend shares instead
• Buy Fortescue (ASX:FMG) and this ASX dividend share for income
• Are these 3 ASX shares strong recovery opportunities?
• Why Mirvac (ASX:MGR) and these ASX REITs could boom in 2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended AVENTUS RE UNIT. 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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K2Fly Ltd (ASX: K2F) shares have been on the rise today as the company released its update for the quarter. At the market’s close, the K2Fly share price was trading 9.72% higher at 39.5 cents on the news.

What K2Fly does

K2Fly is a technology company that provides technical assurance and reporting solutions. Its software aids companies’ environmental, social and governance needs. To do this, the tech company supplies people and products as well as helps to form strategic alliances focused on solving problems for clients.

Primarily, K2Fly services the mining, oil and gas, utility and agriculture sectors through two main platforms. RCubed is the company’s mineral resource and reserve reporting program while Infoscope is a solution that supports enterprise land management.

Quarterly update

The K2Fly share price is flying today following the release of some impressive results. The company announced that it had raised invoices for $1.64 million in Q1, which is an improvement of 15% over the equivalent quarter in FY20.

Furthermore, as at 30 September, its cash available was $3.1 million. Adding to this was $0.88 million in receivables collected, predominantly from Tier 1 clients. These numbers reflect that during Q1, K2Fly’s current operations achieved net positive cash flows of approximately $0.37 million. This follows on from being cash flow positive in the previous quarter by $0.7 million.

Moreover, the company’s sales pipeline remains strong. Earlier in the year, K2Fly  announced it had signed a contract with Orano SA. Orano is a multinational, nuclear fuel cycle company with uranium mining operations, and is headquartered in France. Orano signed a five-year contract to implement the RCubed resource governance solution, and the total contract value was in excess of $300,000.

What now for the K2Fly share price?

With the Australian mining sector performing strongly during the global pandemic, K2Fly has seen some strong tailwinds. This looks set to continue for the company with a number of its customers, such as Imerys SA (EPA: NK), recently signing for proof of concept (POC) offerings. Imerys is conducting a paid POC study to implement K2Fly’s land management solution across its 200+ sites globally.

Additionally, K2Fly is continuing to progress a new tailings management and governance solution with its partners SAP SE (NYSE: SAP) and Decipher, which is part of the Wesfarmers Ltd (ASX: WES) group.

Investors are clearly impressed as the K2fly share price has been bid up today.

More reading

• ESG investing after the Rio (ASX:RIO) resignations

Motley Fool contributor Daniel Ewing 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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I’d invest $1,000 right now into ASX share Bubs Australia Ltd (ASX: BUB).

Many ASX shares have been performing strongly recently with a strong run over the past month by many of my preferred picks like Pushpay Holdings Ltd (ASX: PPH), Citadel Group Ltd (ASX: CGL), WAM Microcap Limited (ASX: WMI), Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) and Brickworks Limited (ASX: BKW).

The share market seems to be a bit jubilant at the moment. I’m not sure we’re out of the COVID-19 woods yet, particularly when it comes to the US election.

There are still a couple of places which I think look like really nicely priced long-term opportunities such as infant formula. However, there’s a bit of volatility in that sector right now.

About Bubs

Bubs is a fast-growing infant formula ASX share with a specialisation in goat milk products. Indeed, it has exclusive milk supply from Australia’s largest milking goat herd.

But the company actually sells a variety of products. Not only does it sell a range of goat milk formula, it sells organic grass-fed cow’s milk infant formula, organic baby food, cereals, toddler snacks.

It recently launched Vita Bubs, which is for infant and children’s vitamin and mineral supplements. It is hoped that this segment will be able to achieve relatively high profit margins.

The company has a rapidly growing distribution network. It’s sold across major retailers including Woolworths Group Ltd (ASX: WOW), Coles Group Limited (ASX: COL) and Baby Bunting Group Ltd (ASX: BBN) in Australia. It’s also exported to China, Vietnam, South East Asia and the Middle East.

Why I think the Bubs share price is an ASX share opportunity today

The Bubs share price has been on a bit of a losing run over the past few months. Over the past month it’s down 8.5% and since 11 May 2020 it has dropped 36%.

Some investors may have been a bit bemused by the launch of Vita Bubs and the decision to hire Jennifer Hawkins as global brand ambassador. The choice to move to local manufacturing in China may also be concerning investors – why the change in strategy?

The company’s fourth quarter may have disappointed too, with revenue not being as much as hoped.

No ASX share is perfect. There will be bumps along the way, particularly as we’re going through one of the worst global pandemics in human history with COVID-19.

The quarter to 31 March 2020 saw a lot of pantry stocking sales. But the last few months has seen disruption to sales channels and a de-stocking effect. I believe good growth will return, as early as the quarter to 31 December 2020.

A business shouldn’t be judged on a quarter (or two) of sales in my opinion. Investors need to think about the long-term growth. FY20 saw full year revenue growth of 32% to $62 million with 32% growth of direct sales to China. FY20 infant formula sales – a product with a higher gross margin – went up by 58% to $30 million. It’s largely why the normalised gross margin was able to improve by 3 percentage points to 24%.  

What I’m focused on most is the ex-China export market. There are undoubtedly risks when it comes to selling products in China, but the rest of Asia is a very promising market for the ASX share. Outside of Chin, export sales saw five-fold growth and represented 10% of group revenue. The successful launch in Vietnam was very helpful. That country alone is a big potential market for Bubs.

Foolish takeaway

With a market capitalisation of under $500 million, I think that Bubs has plenty of growth potential. The shift to more sales being infant formula will help margins and profit growth of the overall business. The rapid sales growth in Asia, barring any short-term COVID-19 impacts, looks very promising.

I think this ASX share could be a strong performer over the next five years, particularly if its cow milk infant formula takes off.

I’m looking at other share opportunities at the moment too.

More reading

• Insiders have been buying these ASX shares this week
• Up 22% in a month, is the Soul Patts (ASX:SOL) share price a buy?
• Here’s why the Soul Patts (ASX:SOL) share price is at a new 52-week high
• Top ASX growth shares to buy in October 2020
• Why I would buy Afterpay (ASX:APT) and these ASX growth shares

Tristan Harrison owns shares of WAM MICRO FPO and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX. The Motley Fool Australia owns shares of and has recommended Brickworks, BUBS AUST FPO, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended 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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