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The A2 Milk Company Ltd (ASX: A2M) share price has slumped more than 15% since the release of its FY21 outlook and more than 25% since highs back in July. Is the recent share price slump an opportunity to buy the market darling for cheap, or should more caution be exercised? 

FY21 outlook 

The updated FY21 outlook unravelled a number of factors slowing the growth of the infant formula giant. The company first noted the flow-on effect of pantry destocking continuing into FY21 following a strong sales uplift in 3Q20. Furthermore, reduced tourism, international students and lockdown measures will result in lower than anticipated sales to retail daigous in Australia. The stage 4 lockdown in Victoria will also serve as an additional disruption to corporate daigous and resellers. A2 anticipates that the disruption in daigou channels will continue for the remainder of the first half of FY21. Daigou channels represent a significant proportion of infant formula sales in Australia & New Zealand and it expects ANZ revenue to be materially below plan for the first half. 

Despite such challenges, the business continues to see strong underlying consumer demand in China. It believes the daigou challenge is largely a logistical issue which should be temporary, assuming the stabilisation of COVID-19 related issues. The other areas of business including liquid milk in Australia and the USA, and local China business continues to perform well. 

All things considered, the company forecasts FY21 revenue to be in the range of $1.80 billion to $1.90 billion. This would represent a year on year increase of between 4-9%. 

Is it worth buying the A2 Milk share price dip? 

The company is expecting a flat 1H21 with growth picking up in the second half. On a more positive note, it highlighted that the sale of infant formula through the daigou channel is only one component of its multi-channel and multi-product sales strategy into China. It believes that its mother and baby stores (MBS) and new baby cross-border eCommerce (CBEC) sales will represent an increasing proportion of infant nutrition over time. This diversification will reduce the dependency on the daigou channel.

With that said, the reopening of borders and recovery in consumer spending is still an unknown variable given the fluctuations in COVID-19 cases and lockdown measures. Furthermore, it is difficult to tell whether Chinese tourists and students will visit or return to Australia.  

From a valuation perspective, A2 Milk sits at a reasonable price-to-earnings (P/E) ratio of 28. However, should business conditions continue to swing against the company, its share price could be in for another discount. 

Foolish Takeaway

A2 Milk has been a longstanding market darling of the ASX. Its share price ticked green today after 5 consecutive days of harsh selling. The $14 mark could be an indicative bottom. While I would be cautious with trying to catch the bottom, I am also optimistic about how the A2 Milk share price will deliver in 2H21 and beyond. 

More reading

• Here are the 10 most shorted ASX shares
• Top brokers name 3 ASX shares to sell next week
• These were the worst performing shares on the ASX 200 last week
• These ASX growth shares could be strong buys in October
• The a2 Milk (ASX:A2M) share price crashed 17.5% lower in September

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended A2 Milk. 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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If you’re new to investing, it can be hard to know when it’s the right time to buy ASX shares.

2020 has been a crazy year with the coronavirus pandemic, March bear market and oil price war combining to make for a volatile share market.

The S&P/ASX 200 Index (ASX: XJO) has fallen 11.2% lower this year to 5,941.60 points. That might be enough to keep some beginners from buying into the market with fears of further declines.

Here are a few reasons why I think right now is a great time to buy more ASX shares.

Not all ASX shares are falling lower

For all of the struggling parts of the economy, some sectors are doing very well. Technology, gold and online retail shares are all booming right now due to various factors.

That means that you can still be tactical about how and where you invest in ASX shares. For instance, the Afterpay Ltd (ASX: APT) share price has rocketed 159.6% higher in 2020 thanks to booming sales and successful international expansion.

Of course, you still want diversification in your portfolio. The key is to be able to ’tilt’ your portfolio in various directions depending on what you think will outperform in the medium-term.

Keep a long-term mindset

I think it pays to have a strategic asset allocation in mind for the long-term with the flexibility to change your investments in the short-term.

It’s easy when you’re starting out to focus on the daily fluctuations. I used to do exactly the same – watch the market each day to see how much my investments had changed.

This isn’t a great habit for most investors. I find that it just made me stress about the losses without adding anything of any benefit.

It’s best to keep in mind why you are investing in ASX shares for the first place. Over a 10+ year timeframe, the movements today or tomorrow shouldn’t worry you.

Foolish takeaway

The best time to start investing in ASX shares was March, the second best time is today. It’s easy to get spooked by online commentators and ‘experts’ who are predicting a doomsday scenario.

However, I think it’s best to trust my own investment strategy and investing for my retirement in the decades ahead.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• Afterpay vs Zip, which is the better investment?
• Altium (ASX:ALU) updates market on restructure
• The latest ASX small cap buy ideas from leading brokers
• ASX 200 jumps 2.6%, big 4 banks surge

Motley Fool contributor Ken Hall 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’ve got some ideas for where I’d invest $10,000 into ASX dividend shares.

Having cash in the bank just doesn’t earn the same amount of interest as it used to. That’s because Australia’s official interest rate is now just 0.25%. I think the answer is to put some money into the share market into businesses that generate profit and pay dividends. 

Here are some of the best ASX dividend shares that I’d be willing to invest in right now:

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) – $3,500

I think that Soul Patts is the best ASX dividend share that Aussies can buy. It has been listed since 1903 and it has paid a dividend every year since then, including through the world wars.

The investment house owns a variety of different listed and unlisted businesses. It has shares in things like TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW), Clover Corporation Limited (ASX: CLV) and Palla Pharma Ltd (ASX: PAL). It also has unlisted investments like resources, swimming schools, property and financial services.

Soul Patts has grown its dividend every year for the past two decades. It’s quite reassuring knowing your investment is likely to increase the dividend this year.

At the current Soul Patts share price it offers a grossed-up dividend yield of 3.5%.

Rural Funds Group (ASX: RFF) – $2,500

Rural Funds has been one of the most consistent ASX dividend shares over the past five years. Management aim to grow the distribution by 4% every year, and it has achieved that. It’s a solid growth rate when it’s compounded year after year.

The farmland real estate investment trust (REIT) owns various farm types including almonds, cattle, macadamias, vineyards and cropping (sugar and cotton) which are leased to high-quality tenants.

Rural Funds manages to grow its distribution consistently because rental indexation is built into the contracts. Some contracts see the rental income grow by a fixed 2.5% per annum. Other contracts have rental growth linked to CPI inflation. It has long rental contracts, so its distribution growth is almost locked in. It also benefits from investing in productivity improvements at its farms.

At the current Rural Funds share price it has a FY21 distribution yield of 5%. That’s a solid yield for an ASX dividend share.

WAM Microcap Limited (ASX: WMI) – $1,500

I think that WAM Microcap is one of the best listed investment companies (LICs) on the ASX. The purpose of a LIC is to invest in other shares on behalf of shareholders.

WAM Microcap looks to invest in businesses with market capitalisations under $300 million at the time of acquisition.

It has done extremely well since the bottom of the COVID-19 crash. Since 23 March 2020 the WAM Microcap share price has grown 92%.

The ASX dividend share is steadily growing its dividend and it has also paid a special dividend in each of the last three financial years. That’s a great income record.

The LIC’s investment team are very effective at finding those opportunities. Returns won’t also be good as the last six months, but I think it can produce total shareholder returns that beat the market over the long-term.

At the current WAM Microcap share price it offers an ordinary grossed-up dividend yield of 5.25%.

Future Generation Investment Company Ltd (ASX: FGX) – $2,500

Future Generation is another LIC, but it’s quite different.

It invests in the funds of fund managers who work for free so that Future Generation can donate 1% of its assets each year to youth charities.

All of those funds offer a lot of diversification. Future Generation’s portfolio has outperformed the ASX since inception yet it’s trading at a 9% discount to the net tangible assets (NTA) at the end of August 2020.

Future Generation is steadily growing its dividend and it currently has a grossed-up dividend yield of 6.5%.

More reading

• Where I’d invest my first $500 into ASX shares
• 3 alternative ASX shares to buy for defensive income
• 3 ASX shares I’d buy if the share market crashes again
• Forget the tech boom, these ASX shares are primed for the recovery trade
• 2 ASX shares to buy for rock solid retirement income

Tristan Harrison owns shares of FUTURE GEN FPO, RURALFUNDS STAPLED, 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 Clover Limited. The Motley Fool Australia owns shares of and has recommended Brickworks, RURALFUNDS STAPLED, and Washington H. Soul Pattinson and Company 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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On Monday the S&P/ASX 200 Index (ASX: XJO) was in sensational form and surged materially higher. The benchmark index jumped 2.6% to 5,941.6 points.

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

ASX 200 expected to rise again.

The Australian share market looks set to continue its positive run on Tuesday. According to the latest SPI futures, the ASX 200 is expected to rise 29 points or 0.5% at the open. This follows a strong start to the week on Wall Street, which saw the Dow Jones rise 1.7%, the S&P 500 climb 1.8%, and the Nasdaq storm 2.25% higher. News that President Trump is being discharged from hospital helped drive markets higher.

Reserve Bank meeting.

This afternoon the Reserve Bank will hold its October meeting and make a decision on the cash rate. According to the latest cash rate futures, the market is currently pricing in a 67% probability of a rate cut at the meeting. A number of economists are tipping the Reserve Bank to make a partial cut from 0.25% down to 0.1%.

Oil prices rebound strongly.

Energy shares such as Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL) could be on the rise today after oil prices rebounded strongly. According to Bloomberg, the WTI crude oil price is up 6.2% to US$39.37 a barrel and the Brent crude oil price is up 5.6% to US$41.48 a barrel. Stimulus hopes helped drive oil prices higher.

Gold price rises.

The shares of Newcrest Mining Limited (ASX: NCM) and St Barbara Ltd (ASX: SBM) will be on watch today after the gold price pushed higher. According to CNBC, the spot gold price has climbed 0.55% to US$1,918.20 an ounce. This was driven by a combination of COVID-19 stimulus hopes and a weakening U.S. dollar.

Federal Budget.

Tonight Josh Frydenberg will be handing down the Federal Budget. The government will be making this a budget focused on creating jobs and driving Australia out of its recession. One major policy will be the bringing forward of personal tax cuts from 2022 and backdated to July. Investors may want to keep an eye out for further policy announcements that may be drip fed to the media during the day. 

More reading

• Altium (ASX:ALU) updates market on restructure
• The latest ASX small cap buy ideas from leading brokers
• ASX 200 jumps 2.6%, big 4 banks surge
• Top broker tipping turnaround in ASX big bank profit margins
• Ignore the noise and focus on these ASX shares instead

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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Later today the Reserve Bank of Australia will meet to discuss the cash rate.

While a full rate cut to zero seems unlikely, a number of economists believe a partial cut down to 0.1% from 0.25% could happen.

This would be great news for borrowers, but certainly not for savers and income investors who will have to contend with even lower interest rates.

Luckily for the latter group, the Australian share market is home to a large number of dividend shares that can help you beat these low rates.

Two that I would buy are listed below:

Dicker Data Ltd (ASX: DDR)

The first ASX dividend share I would buy is Dicker Data. It is a wholesale distributor of computer hardware and software. Due to an increasing number of vendor relationships and robust demand for information technology products, Dicker Data has been growing its earnings and dividends at a strong rate over the last five years. This has continued even during the pandemic thanks to the work from home initiative and the shift to the cloud. Based on the current Dicker Data share price, I estimate that it offers a fully franked forward 4.55% dividend yield.

Telstra Corporation Ltd (ASX: TLS)

I think this telco giant would be a great option for income investors due to its improving outlook. This is due to its T22 strategy, 5G internet, and the easing of the NBN headwind. Combined, I believe a return to earnings and dividend growth could be on the cards in the coming years. In the meantime, I believe its 16 cents per share dividend is sustainable if it shifts its dividend policy to be based on free cash flow. Based on the latest Telstra share price, investors would receive a very generous fully franked 5.65% dividend yield if it does sustain its current payout in FY 2021.

More reading

• How to generate a passive income of $50,000 with ASX shares
• Beat the RBA rate cuts with these ASX dividend shares
• Meet the ASX 200 stock with a dividend yield that’ll hit ~14% in FY22
• The Telstra (ASX:TLS) share price is at a new 52-week low
• 2 high yield ASX dividend shares to solve your income needs

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited and Telstra 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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Afterpay vs Zip? From both a consumer and investor standpoint, I see this question come up online time and time again.

Founded in 2017 in Melbourne, Afterpay Ltd (ASX: APT) is arguably the most well-known buy now, pay later (BNPL) brand in Australia. You have to hand it to the team though. They have their marketing stickers in almost every shop window and on every ecommerce website. The Afterpay business model is essentially short-term, interest-free lending. Similar to a lay-by type deal, but the consumer gets the product instantly.

Zip Co Ltd (ASX: Z1P) was founded in 2009 and just like Afterpay, it is well-known in the BNPL sector. It has a slightly different business model to Afterpay, offering not only BNPL services, but also personal finance management/education through its Pocketbook app. Additionally, Zip offers unsecured loans in different capacities.

Operations and locations

Afterpay has a broad reach, operating in Australia, New Zealand, the United States, Canada and the United Kingdom. It operates through a variety of brands such as Afterpay ANZ, Afterpay US, Clearpay and Pay Now. In August 2020, Afterpay signed off on a deal to acquire Spanish fintech company Pagantis, with the goal to expand its BNPL reach throughout Europe.

Zip is also a major international player, operating in Australia, the United Kingdom, the United Stated, New Zealand and South Africa. The company has multiple brands, including ZIP AU, Zip Global and Spotcap. It offers users digital wallets called either Zip Pay or Zip Money. They are essentially just for different sized purchases.

Afterpay has much more of the European market (after the recent acquisition) and also Canada. Zip has South Africa. In the question of Afterpay vs Zip, aside from those locations, they share a lot of geography.

Financial reports 

Afterpay’s FY20 results really showed it to be a market leader in the BNPL sector. 

• Almost 10 million active users
• 55,000+ partners/merchants
• Revenue of $519.2 million, up 97%
• Earnings before interest, taxes, depreciation and amortisation (EBITDA) of $44.4 million, up 73%

Zip Co’s FY20 results were also very strong, but clearly show it to be a much smaller player.

• More than 2 million active users
• Almost 25,000 partners/merchants
• Revenue of $161 million, up 91%
• EBITDA of $3.5 million

Afterpay vs Zip? Afterpay is clearly the bigger player here.

Share price performance

Year to date, Afterpay shares are up around 170%, with the price rising from $29.15 to around $79.52.

Since its initial public offering (IPO), Afterpay shares are up a staggering 2,887%!

Zip shares have risen 91% in 2020, with prices moving from $3.53 to $6.76.

IPO-wise, Zip has been listed for a lot longer than Afterpay. The Zip share price has risen 2,599% approximately.

Looking at the performance, Afterpay shares have offered investors higher returns in 2020 and also since inception. 

Afterpay vs Zip key takeaways

Afterpay is a bigger player with more market share, a European and Canadian audience and higher returns for investors. For consumers however, Zip offers more options and this could be a key difference over time. Zip also has no scheduled repayments (you determine them within the account), so this can be a competitive advantage over Afterpay.

Even though Afterpay seems to be a clear winner for investors, it still has a lot of competition in general. Also, in the BNPL sector, companies are something only 1 good partnership away from securing huge amounts of market share. As BNPL is such a hot sector this year, it could be worth considering hedging bets and securing shares in both.

More reading

• You could become very wealthy by investing $1,000 into these ASX shares
• 5 things to watch on the ASX 200 on Monday
• This ASX share is my top contrarian play right now
• These were the best performing shares on the ASX 200 last week
• These ASX growth shares could be strong buys in October

glennleese 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 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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When COVID-19 arrived uninvited on Australia’s shores on 25 January, few could have imagined the massive disruptions that soon followed.

Among the biggest of those disruptions was a rapid shift towards shopping and working from home.

The shopping from home shift saw the share prices of ASX-listed brick and mortar retailers – and their landlords – fall hard. Most of them have yet to recover their January share price levels.

On the flip side, a handful of shrewd ASX-listed online retailers not only recovered from the viral selloff in February and March, but have gone on to post hefty gains.

The share price winners and losers

Take online retail darling Kogan.com Ltd (ASX: KGN), for example. Despite falling more than 52% earlier in the year, Kogan’s share price is up 173% since 2 January.

Most of those gains have come as the company’s 200 some staff work from home. Like the majority of businesses across Australia, Kogan’s offices have not been able to accommodate their normal occupancy in these days of social distancing.

But now even Kogan’s tech savvy management is eager to open the office doors and get its staff back in for face to face engagement.

As founder Ruslan Kogan said in the Australian Financial Review:

I’m craving to get back into the office and I know that the majority of our team also can’t wait to get back.

I think as humans we have a tendency to extrapolate the current environment when predicting the future so lots of people are saying that offices will never be the same. I think it’s the wrong view. The same happens when your poor football team wins two matches in a row and all of a sudden you think they’re a chance at the premiership.

The office environment is currently undergoing massive disruption and we’re not permitted to use our offices. I’m sure once it’s safe to do so, things will return to just how they were very quickly.

Office shares emerging from massive disruption

Like brick and mortar retailers, most office shares are still posting significant losses for 2020. But if Kogan is correct and the office market returns to how it was very quickly, then the share price gains should come just as fast.

One way to gain exposure to a basket of quality office assets is with the Centuria Office REIT (ASX: COF), which makes up part of the S&P/ASX 300 Index (ASX: XKO).

Real estate investment trusts (REITs) trade on the ASX just like any other share.

Centuria holds 23 quality office assets valued at $2.1 billion as at 30 June. Most of the assets are located in or near Australia’s major city centres, close to transport. The REIT pays an 8.6% annual dividend yield, unfranked.

Centuria was a strong performer in 2019, with the share price gaining 33% from February 2019 through to February 2020. But after office buildings largely closed in the wake of the pandemic, the share price fell 55% from 21 February through to 23 March. It has since regained 40%.

Year-to-date, the Centuria share price is still down 31%. As the work from home shift reverses and workers return to the office, this could prove an attractive entry point.

More reading

• 4 stellar ASX growth shares to buy right now
• Centuria Capital’s fund managers’ insights on A-REITs and unlisted property funds
• 3 ASX tech shares to buy and hold for the next decade
• Meet the ASX 200 stock with a dividend yield that’ll hit ~14% in FY22
• How to generate $50k a year from ASX dividends

Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post With even Kogan (ASX:KGN) eyeing a return to the office, where next to invest? appeared first on Motley Fool Australia.

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Altium Limited (ASX: ALU) advised the market of a restructure this afternoon, sending the Altium share price rocketing up to $35.76, before falling back to intra-day levels. The Altium share price was trading relatively flat, up 0.43% to $35.23 at close of trade.

This compares to the S&P/ASX 200 Index (ASX: XJO) which was up 2.6% at 5,941 points.

Expansion and restructure

Altium advised it was expanding its leadership and organisation capacity to drive growth and further invest in its new cloud platform, Altium 365. The company’s successful launch and strong early adoption of its product created the opportunity for structural review.

In the restructure, Altium will separate its cloud operations from its software business. The company will also focus on its growing market opportunity and expansion into the broader electronics ecosystem.

Altium CEO Aram Mirkazemi said the launch of Altium 365 marked a significant turning-point in the company’s journey. He said:

We are deep in execution mode toward our dominance and transformation goals. This has led to the creation of a new organisational structure to support us on this journey and to drive the high performance required to achieve our goals. I refer to this as Altium’s Netflix moment, which is commonly referred to in the high-tech industry as a hard pivot to the cloud.

Under the restructure, the cloud and software departments will have their own leadership teams and roadmaps. This will allow both divisions to develop at their own pace to its product and go-to-market processes. The separation of high-volume sales from high-touch sales is expected to support Altium’s goal to reach 100,000 subscribers by 2025.

Leadership changes

Altium’s executive director Sergey Kostinsky was appointed president in the restructure. He will focus on executing business operations, with emphasis on the rapid deployment and adoption of Altium 365.

Altium chair Sam Weiss was upbeat with Mr Kostinsky’s new role, saying:

We are excited to see Sergey appointed to the new role of president at Altium. Sergey has been the driving force behind Altium’s technology development that underpins the company’s bid for market dominance and to transform the electronics industry.

Under Sergey’s leadership, Altium’s PCB design tools have become world-class and Altium 365 is set to revolutionise the way that electronic products are designed and manufactured. We are confident that Sergey will bring his unique focus on discipline and value to all of Altium’s product development and go-to-market domains to deliver winning outcomes.

Furthermore, Altium CFO Joe Bedewi will assume the new role of EVP corporate development and external affairs. This role was created to capitalise on the growing market opportunity for Altium 365 and the wider electronics industry.

The vacant CFO role will be filled by Martin Ive, who has led the company’s global finance function for more than 15 years. Mr Ive has provided strong business support to Altium’s sales teams, while being a key figure in strategic and operational decision-making. As CFO, Mr Ive will work closely with Mr Kostinsky to push Altium’s performance.

More reading

• The latest ASX small cap buy ideas from leading brokers
• ASX 200 jumps 2.6%, big 4 banks surge
• Top broker tipping turnaround in ASX big bank profit margins
• 2 outstanding ASX tech shares to buy for the long term
• Ignore the noise and focus on these ASX shares instead

Aaron Teboneras 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 Altium. 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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Risk appetite has come roaring back on Monday and these ASX small caps are outperforming as they are listed as the latest broker buy ideas.

The S&P/ASX SMALL ORDINARIES (Index: ^AXSO) and S&P/ASX 200 Index (Index:^AXJO) rallied around 2.4% each at the close.

If the rebound is sustained, ASX small caps could pull ahead as these higher risk propositions tend to perform better when fear turns to greed.

ASX small cap that’s ripe for the picking

There are two on the Small Ordinaries that stand out today. The first is the Costa Group Holdings Ltd (ASX: CGC) share price, which gained 3.3% to $3.47 today.

UBS reiterated its “buy” recommendation on the fruit and mushroom grower after it noted wholesale prices for most of its key products have improved.

Sweet outlook puts Costa on “buy” list

“Overall, wholesale trends through 3QCY20 were strong with prices (ex-Blueberries) up 19-34% y/y, accelerating vs. 2QCY20,” said UBS.

“Mushrooms have been particularly strong, with progressive improvement since July despite additional capacity.

“While the Blueberry category was weak during Jul/Aug, a significant improvement during Sep-20 resulted in ~flat y/y prices during 3Q.”

The other worry about the lack of pickers during COVID-19 travel restrictions. But the broker believes this isn’t an issue, in part due to Costa’s geographically diverse operations.

UBS’ 12-month price target on Costa is $3.55 a share.

Fallen far enough

Meanwhile, the Integrated Research Limited (ASX: IRI) share price surged 4.4% to $3.60 after Bell Potter upgraded the stock.

The big drop in the share price of the IT services group since the August reporting season meant there is a 20% upside including dividends.

The broker is forecasting earnings per share growth of 10% for the current financial year, 11% for FY22 and 15% for FY23.

Double-digit earnings growth

“The lower forecast growth in FY21 is due to the release of new SaaS and hybrid products this half which are only expected to start contributing in 2HFY21,” said the broker.

“There is, however, a lack of short term catalysts for the stock – at least which we can see – and we also only expect modest growth in 1HFY21 with the anticipated skew in earnings towards 2HFY21.

“But we do expect solid growth for the full year result which in our view supports the upgrade in recommendation.”

Bell Potter lifted its rating on the stock to “buy” from “hold” with a 12-month price target of $4.25 a share.

More reading

• Altium (ASX:ALU) updates market on restructure
• ASX 200 jumps 2.6%, big 4 banks surge
• Top broker tipping turnaround in ASX big bank profit margins
• Ignore the noise and focus on these ASX shares instead
• ASX 200 up 2.3%: Big four banks charge higher, Qantas soars, energy shares jump

Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Integrated Research Limited. The Motley Fool Australia owns shares of and has recommended COSTA GRP 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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The S&P/ASX 200 Index (ASX: XJO) went up 2.6% today to 5,942 points.

If the ASX fell last week because of President Trump’s COVID-19 diagnosis, then it may have reversed that negative sentiment with a prediction that he could leave hospital as early as Monday.

Tax cuts

The ASX may be getting a bit of a boost today after more of the upcoming federal budget was reported by media.

Tax cuts will reportedly be backdated to 1 July 2020. The tax first bracket that gets taxed (with a 19% rate) will be extended to $45,000 (up from $37,000) and earners above $90,000 will benefit with the 37% tax rate changed to start at $120,000 rather than $90,000.

Plenty of ‘Australian economy’ ASX 200 shares went up today.

The Commonwealth Bank of Australia (ASX: CBA) share price grew 3.6%, the Westpac Banking Corp (ASX: WBC) share price rose 4.4%, the Australia and New Zealand Banking Group (ASX: ANZ) share price rose 4.2% and the National Australia Bank Ltd (ASX: NAB) share price grew 4%.

In other movements, the biggest gain today came from Mesoblast Limited (ASX: MSB), its share price jumped 11.6%. According to the ASX, the worst performer was the Viva Energy Group Ltd (ASX: VEA) share price which dropped 12.1%.

Altium Limited (ASX: ALU)

The ASX 200 software business announced today that it’s expanding its leadership and organisational capacity to improve performance and invest more into Altium 365.

Altium said that the successful launch and the strong early adoption of Altium 365 has created the opportunity to pivot Altium’s leadership and organisation structure towards the cloud. It’s separating its cloud operations from its software business and will focus on growing its market opportunity and expansion into the broader electronics ecosystems.

Under the new organisation structure, the ‘cloud’ and ‘software’ sections will each have their own leadership and organisational roadmap. It will allow the cloud business to develop at a different cadence and to form a “SaaS-like organisational structure around its product and go-to-market processes.”

The company said that another benefit would be the separation of high-volume sales from high-touch sales for its journey to market leadership.

Altium has appointed executive director Sergey Kostinsky to the role of president. He will be focused on driving high performance of operations with an emphasis on developing and adopting Altium 365.

Joe Bedewi has stepped down as Altium CFO in order to take on the new role of EVP corporate development and external affairs. This role has been created to capitalise on the Altium 365 market opportunity and the interest in it from the electronics industry.

Altium has appointed Mr Martin Ive as the new CFO, who has led the ASX 200 share’s global finance function for over 15 years.

Altium CEO Mr Aram Mirkazemi said: “The launch of Altium 365 marks a significant turning-point in Altium’s journey. We are in deep execution mode toward our dominance and transformation goals. This has led to the creation of a new organisational structure to support us on this journey and to drive the high performance required to achieve our goals. I refer to this as Altium’s Netflix Moment, which is commonly referred to in the high-tech industry as a hard pivot to the cloud.”

The Altium share price rose 0.4% today.

McMillan Shakespeare Limited (ASX: MMS)

The McMillan Shakespeare share price went up after announcing that the class action has been settled.

The class action related to a warranty product business which McMillan Shakespeare acquired in 2015. A significant portion of the relevant period that the claim was when the business wasn’t actually owned by McMillan Shakespeare.

The company said that the parties have reached agreement to settle the matter with no admission of liability. The agreement is subject to the approval of the Australian federal court.

McMillan Shakespeare provided a net charge of approximately $2 million plus legal costs in its statutory FY20 result. Management said this would be sufficient to deal with the agreed settlement.

The McMillan Shakespeare share price grew around 4.75%.

More reading

• Top broker tipping turnaround in ASX big bank profit margins
• Why the Mesoblast (ASX:MSB) share price jumped 14% higher today
• 2 outstanding ASX tech shares to buy for the long term
• Why the Viva Energy (ASX:VEA) share price crashed 14% lower today
• Why today’s NAB (ASX:NAB) share price gains could be just the beginning

Tristan Harrison owns shares of Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. 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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