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Ask a fundie

The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In this edition, Prime Value portfolio manager Richard Ivers tells us how he picks the shares for his fund and how he sees the post-COVID-19 world playing out.

The Motley Fool: What’s your fund’s philosophy?

Richard Ivers: The way I invest is GARP (growth at a reasonable price). We basically focus on quality and growth, but with a valuation overlay. 

We’re effectively looking for companies that can grow their earnings sustainably over long periods of time. And then we use a valuation overlay to ensure that we’re not paying excessively. 

Often companies become a little bit overvalued. If they’re growing, I don’t mind that too much.

We were the number one small cap fund in Australia in the financial year just finished under in the Mercer survey. So we did 18% and the market was down 11%, I think… And that was our first year in the survey as well.

Buying and selling

MF: What do you look at closely when considering buying a stock?

RI: I’m trying to generate a 10 to 15% return for our investors and we’re trying to do that over long periods of time. So the turnover in the portfolio is relatively low. We’re trying to find businesses that can compound their capital, compound our capital over 3 to 5 years, ideally. 

With that perspective, it really makes you focus on the quality of the business. We’re looking 3 to 5 years out, and trying to work out what businesses can grow, and sustain themselves, and compete in the industry against technological change and competitive forces. 

And that really then pushes you towards the quality businesses. And so then we typically invest in the best of breed within any sector, in the belief that the strong get stronger.

MF: What triggers you to sell a share?

RI: It’s typically when the fundamentals have changed. It could be a change in the competitive environment, technology causing a lot of change, or the economic environment with COVID-19. 

(COVID-19)’s basically turned everything on its head. We’ve completely reassessed every business in the portfolio. 

It can also be internal. It can be things like changing the company strategy, or changing management, that makes us reassess our assumptions. Sometimes we just get it wrong and we just have to reassess.

Outlook for the share market

MF: Where do you think the world is heading at the moment?

RI: Generally, I think things are looking positive. Australia in the global economy, has rebounded quicker than we all initially expected. And it should continue to rebound, as we come out of what has been a pretty deep downturn experienced in March and April. And so, corporate profits should also be accelerating over the next couple of years.

Government support is going to have to roll off (eventually) and so there’s question marks around how people will react. 

I think governments are going to… probably spend more and step in more than what people generally expect. And the reason for that is because this crisis is different to most other crises. The economic impacts were created by the government doing what they should have done, which was forcing us to take precautions.

It’s not like the GFC, which was irrationally exuberant and from speculative areas of the market, which is typically where the downturns come from. So (this time) the governments really have a certain obligation to step up and support the economy. 

MF: What’s your most underrated stock at the moment?

RI: I reckon EQT Holdings Ltd (ASX: EQT) is a really high quality business that doesn’t get a lot of focus. Equity Trustees… There’s not a lot of coverage of it, not a lot of market and media focus on it.

There’s two elements to it. 

You’ve got the corporate trustee side of the business, where they are a beneficiary of the Royal Commission that happened last year, which put increased focus on independence of trustees. And EQT is one of the two large independent trustees in Australia.

Colonial being sold by CBA caused Colonial to outsource the trustee role. And there’ll be more of these things happening. There’s a real tailwind in the industry for corporate trustees.

And then on the other side, you’ve got the personal trustee side. They have a number of charitable trusts which are perpetual in nature. They manage the money for [the trustees], and they also distribute the money to charities. And they grow over time. 

So, it’s typically left when somebody dies and they leave it to EQT to manage it. And as long as I do a good job… as the name should suggest, perpetual, which is a fantastic, long duration earning stream.

MF: What do you think is the most overrated stock at the moment?

RI: I think there’s a couple of areas of the market that look pretty stretched on the valuation side at the moment. 

There is the buy now, pay later sector – particularly the second and third tier players, where it’s becoming very competitive and there’s a lack of earnings. And some of these have pretty big market caps. 

And the other area, medical devices, is an area where there’s also valuations pretty stretched. But some of these businesses remain stretched for long periods of time. In this space, you’re selling into hospitals and you need doctors to utilise the product. They’re pretty conservative customer bases to sell into, so it takes a long time to penetrate the market. 

Some of these players have very little revenue and they have valuations well into the hundreds of millions and sometimes over a billion dollars, (with) a revenue of $20 or $30 million dollars. At some point, something’s going to have to change.

MF: Those investors are hanging in there for a massive windfall at some stage, aren’t they?

RI: Yeah. I think they get seduced by the margins and the fact that it’s healthcare. The big markets that they are, that they typically take much longer than you think, in the Australian market.

Looking back

MF: Which stock are you most proud of from a past purchase?

RI: The one in the last couple of years would be City Chic Collective Ltd (ASX: CCX). 

It was probably 10 years of looking at specialty fashion and analysing specialty fashion and not buying it. Then something happened whereby… they divested all of the lower quality assets. 

All that work, over many, many years, put us in that position where we were able to act very quickly when the opportunity arose. We still went through the process – we modelled the company, we spoke with the CFO – and then we bought into the company within two days, for around 70 cents. (MF: CCX is now $3).

So we followed a process: We’ve done a lot of work over a number of years, when the opportunity arose, we moved really quickly, and we made a lot of money over it. So it’s been a five-bagger in about two years. 

We made more money on other ones, but that one was just rewarding.

MF: What was your take on the reporting season that just finished?

RI: It was better than expected, I thought. And the markets were up over that period too. 

Some of the key points that we took out of it was that there was a lot of uncertainty from management, or lack of guidance. But that wasn’t really because conditions were bad. In many cases, the conditions were okay, it’s just that I didn’t know what was coming… They didn’t know what they didn’t know, if you like.

The trading conditions have improved significantly since March and April. March and April were really tough months, but generally speaking, the conditions were generally okay, outside of the real structural impact of ones, like the travel, and bricks and mortar retailers.

I think cost reductions is another big factor. Almost every company cut costs. And many of them actually said that in the rebound scenario too, that they won’t have to put all those costs back in. So you could see that earnings are higher, if you look out a couple of years… Margins will be higher.

COVID-19 and risk management

MF: Has the arrival of COVID-19 changed your investment strategy at all?

RI: No, it hasn’t changed my investment strategy. It has caused us to completely reassess every business in the portfolio and continually reassess because things are changing. We went through that initial phase where the economy just collapsed through March and April, but then has recovered. 

And some of the winners out of this experience have been unusual. Alliance Aviation Services Ltd (ASX: AQZ), which is an airline, has been a winner. You wouldn’t have thought an airline would be a winner, but it does regional flights. It does fly in, fly out workers… And social distancing on planes meant they had to fly many more flights. The capacity was low, you couldn’t have as many people on the plane. So, there were some strange winners.

MF: How do you practise risk management?

RI: It’s fundamentally from the type of businesses we invest in. That’s probably the most important thing. And it comes out in the numbers that we produce… In the months when the market falls, we outperform by around 85% of the time. 

Every month, we have a number of factors which we assess to determine the risk of the portfolio. And this is done independently of me, this is done by a guy whose business is separate to the investment team. He looks across on a number of different factors. 

Factors like what’s our largest exposure to a specific sector, so we’re not concentrating risk in specific areas. We look at the proportion of the portfolio under a hundred million (dollar) market cap, as a sort of a proxy for liquidity. We also do a quality score, so every stock that goes in the portfolio, I rank out of 1 to 10. And then we look at the average of the portfolio and how it’s changing through time, just to see if there’s any sort of style drift going on.

More reading

• 3 ASX shares you’ll regret not buying during this correction
• ASX shares to buy for post COVID-19 profits
• Why the City Chic (ASX:CCX) share price crashed 15% lower today
• Why City Chic, Fortescue, Nearmap, & Zip shares are dropping lower today
• 3 ASX tech shares that are still in the buy zone

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

The post I waited 10 years before pouncing on this stock appeared first on Motley Fool Australia.

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The BHP Group Ltd (ASX: BHP) share price has fallen today despite a positive announcement that it has entered into an option agreement. At the time of writing, the BHP share price is trading at $36.67, down 1.79%.

The drop could also be attributed to the overall market weakness following the heavy sell-off on the Dow Jones Industrial Average Index (DJX: .DJI) overnight.

The S&P/ASX 200 Index (ASX: XJO) has also lost 1.29% in late-morning trade and is currently trading at 5,853.50 points.

Option agreement

BHP and Encounter Resources Ltd. (ASX: ENR) announced an option agreement to mine copper at the Elliot Cooper Project. The Northern Territory site will cover roughly around 4,500 square km, comprised of seven tenements.

New datasets provided by Geoscience Australia have supported targeting models at Elliot which found base metal deposits under shallow cover. The copper-in-groundwater anomaly has resulted in Encounter securing the first mover Elliot copper opportunity.

Following the completion of a jointly designed validation program, BHP will be able to enter an earn-in and joint venture agreement. The mining giant could earn up to 75% interest in Elliot by spending $22 million over 10 years.

Encounter Managing Director, Will Robinson, was upbeat about the new partnership. He said:

New data has shone a light on the potential for copper to be found under shallow cover in the Northern Territory. Encounter moved early and aggressively to secure first mover opportunities in this new frontier.

We are delighted to be teaming up with BHP in the search for Tier 1 copper deposits at Elliott. We look forward to working alongside the highly respected BHP exploration team to validate this compelling opportunity.

Next steps

Both parties will complete a program to compile, interpret and model data packages at Elliot. It is anticipated that this will be completed by the end of the calendar year.

However following completion, BHP could fund additional validation programs during 2021 prior to deciding on whether to enter a joint venture agreement.

Should you invest?

Despite the short-lived BHP share price hiccup in March this year, the company has been making tailwinds since 2016. The BHP share price has jumped from a 2016 low of $15.26 to record a 140% increase based on today’s price.

I think that BHP is a strong company with a diversified portfolio that will continue to see increased revenues in future. Today’s market announcement is another step in the right direction for BHP to maximise its value. In light of this, I believe today’s BHP share price would make a sound addition to a diversified portfolio. 

More reading

• Crashing gold price could still rally to record high before year-end: Citi
• ASX 200 down 1.2%: Westpac hit with $1.3bn penalty, Brickworks disappoints, tech shares lower
• The ASX stocks most leveraged to the Victorian economy re-start
• 5 things to watch on the ASX 200 on Thursday
• ASX 200 jumps 2.4% higher, numerous shares rise

Motley Fool contributor Aaron Teboneras 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.

The post BHP (ASX:BHP) share price falls despite new option agreement appeared first on Motley Fool Australia.

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Don’t throw in the towel just yet on gold. While the price of the precious metal is tumbling, at least one broker is predicting new highs for gold by December.

If this comes to pass, it will be welcomed news for ASX gold miners as the waning gold price dragged these stocks lower.

The Evolution Mining Ltd (ASX: EVN) share price crashed 4.5% to $5.58, Newcrest Mining Limited (ASX: NCM) share price lost 3.5% to $30.78 and Northern Star Resources Ltd (ASX: NST) share price decline 2.1% to $13.32 in morning trade.

In contrast, the S&P/ASX 200 Index (Index:^AXJO) lost around 1% at the time of writing.

Gold losing its shine as it falls from record high

But gold miners are on the nose as gold continues its retreat after hitting a record high of US$2,070 an ounce just last month. The yellow metal entered correction territory as it lost 10% of its value since and is hovering at US$1,864.

The resurgence in the US dollar is taking the shine off the commodity as they tend to move in opposite directions.

Not only is gold priced in the US currency (which tends to depress the gold price when the dollar is high), but they both compete as a safe haven asset.

Gold’s got the Trump factor

Right now, investors are favouring green over yellow, but Citigroup doesn’t think this will last. It’s all thanks to US President Donald Trump, who is fighting for re-election this November.

There’s every reason to think that Trump won’t hand over the reigns of power if he’s defeated at the ballot box.

That means the US could enter into a period of political turmoil that could send tremors through the world’s largest economy and financial markets.

Risk not priced into the market

Citigroup believes investors are under appreciating this risk which could send gold surging to a new high, reported Bloomberg.

“[The election] could be an extraordinary catalyst for gold flat price and volatility skew late in the fourth quarter, even though historically there is no clear pattern for gold trading or price volatility into and after U.S. elections,” said Citi.

“That is one reason why we expect gold prices to hit fresh records before year-end.”

Other golden tailwinds

What’s more, the US dollar strength may not last as the country is failing dismally at controlling the COVID-19 outbreak.

The impact of the pandemic is yet to be fully felt by consumers, but that could quickly change.

Also, the extended period of zero interest rates will provide a floor to the gold price, in my view.

This bull run isn’t over and it’s too early to go underweight on gold or ASX gold miners.

More reading

• BHP (ASX:BHP) share price falls despite new option agreement
• ASX 200 down 1.2%: Westpac hit with $1.3bn penalty, Brickworks disappoints, tech shares lower
• Why Afterpay, Evolution, Westpac, & Whitehaven shares are sinking lower today
• The ASX stocks most leveraged to the Victorian economy re-start
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor Brendon Lau owns shares of Evolution Mining Limited and Newcrest Mining Limited. 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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Something I hear quite often from new investors is whether it is worth putting $500 into the share market.

My answer to them is that if they’re going to do it on a semi-regular basis, then it certainly would be worth it.

Although it may not seem like a life-changing sum of money to invest, if you do it consistently you can generate material wealth.

For example, if you were to invest $500 every three months (a total of $2,000 a year) and earned a 9% per annum return, in 30 years your investments would be worth $300,000.

With that in mind, I have picked out three top ASX shares which I think would be great options for that first $500 investment. Here’s why I would buy them:

ELMO Software Ltd (ASX: ELO)

The first ASX share to consider investing $500 into is ELMO Software. It provides a clever software platform which allows businesses to streamline a range of everyday processes. It has been growing at a strong rate over the last few years, leading to stellar recurring revenue growth. Pleasingly, this continued during the pandemic and is expected to continue in FY 2021. Management recently provided annual recurring revenue (ARR) guidance of $65 million to $70 million for the year ahead. This represents year on year growth of 18% to 27%. This is likely to be boosted further in the near future from acquisitions. ELMO had $140 million in cash at the end of FY 2020.

Nearmap Ltd (ASX: NEA)

Another ASX share to consider investing $500 into is Nearmap. It is a leading aerial imagery technology and location data company. I believe it could be a long term market beater thanks to the quality of its software and its strong position in the fragmented Australian and North American markets worth an estimated $2.9 billion per year. In addition to this, the company has the option to increase its addressable market by expanding into other geographies in the future.

Pushpay Holdings Group Ltd (ASX: PPH)

A final ASX share to consider investing $500 into is Pushpay. It is a leading donor management and community engagement platform provider for the faith sector. Due to the digitisation of the church and the shift to a cashless society, I believe Pushpay’s platform is becoming indispensable to its users, positioning it perfectly for growth over the 2020s. This certainly will be the case in FY 2021. Management advised that it is on course to deliver EBITDAF of between US$48 million and US$52 million this year. This will be a 91.2% to 107% increase, respectively, year on year.

More reading

• 2 top ASX shares I’d buy with $2,000 right now
• Top brokers name 3 ASX shares to buy today
• Forget BrainChip (ASX:BRN) and buy and hold these outstanding ASX shares
• 4 unstoppable ASX shares to buy with $4,000
• Why I would buy these ASX growth shares right now

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 Elmo Software. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. and PUSHPAY FPO NZX. The Motley Fool Australia has recommended Elmo Software, Nearmap Ltd., and PUSHPAY FPO NZX. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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At lunch on Thursday the S&P/ASX 200 Index (ASX: XJO) is off its morning lows but still trading notably lower. The benchmark index is currently down 1.2% to 5,853.3 points.

Here’s what has been happening on the market today:

Westpac hit with $1.3 billion penalty.

The Westpac Banking Corp (ASX: WBC) share price has dropped lower today after revealing that it has agreed to a settlement with AUSTRAC. The banking giant has agreed to pay a penalty of $1.3 billion for its Anti-Money Laundering and Counter-Terrorism and Financing Act 2006 (AML/CTF) contraventions. This makes it the largest fine in Australian corporate history. It was also more than the $900 million the bank was expecting to pay. The Federal Court still needs to approve the settlement.

Tech shares tumble.

It has been a disappointing day of trade for the tech sector. The likes of Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P) have come under pressure after a tech selloff on Wall Street led to the Nasdaq index dropping 3% overnight. At the time of writing, the S&P/ASX All Technology Index (ASX: XTX) is down 1.7%.

Brickworks FY 2020 result.

The Brickworks Limited (ASX: BKW) share price is trading lower today after the release of its full year results. For the 12 months ended 31 July 2020, the building products and property development company posted a 4% increase in revenue to $953 million and a 38% decline in underlying net profit after tax to $146 million. This was driven largely by its Australian operations and its investments. This fell short of the market’s expectations.

Best and worst ASX 200 performers.

The best performer on the ASX 200 on Thursday has been the Challenger Ltd (ASX: CGF) share price with a gain of almost 4% despite there being no news out of the annuities company. Though, last week Credit Suisse upgraded its shares to an outperform rating with a $4.25 price target. The worst performer has been the Evolution Mining Ltd (ASX: EVN) share price with a decline of almost 5%. This follows a sharp pullback in the spot gold price.

More reading

• BHP (ASX:BHP) share price falls despite new option agreement
• Crashing gold price could still rally to record high before year-end: Citi
• Why Afterpay, Evolution, Westpac, & Whitehaven shares are sinking lower today
• Why I would buy Altium (ASX:ALU) and these ASX growth shares
• The ASX stocks most leveraged to the Victorian economy re-start

James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Brickworks and Challenger Limited. 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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The Osprey Medical Inc (ASX: OSP) share price is on the move today as the company announced a deal with Regional Health Care Group to distribute Osprey products. At the time of writing, the Osprey share price is trading 4.17% higher at 2.5 cents.

What Osprey does

Osprey Medical aims to make heart imaging procedures safer for patients with poor kidney function. The company’s core technologies originated from research conducted by Dr David Kaye at Melbourne’s Baker Institute.

Its proprietary dye reduction and monitoring technologies are designed to help physicians minimise dye usage and monitor the dose levels of dye in real time throughout the procedure, potentially saving lives and money in the process.

Distribution agreement

This morning, the Osprey share price has shot up as the company announced a new distribution agreement. Osprey announced an agreement with Australian owned medical distribution company, Regional Health Care Group (RHCG). The deal will see RHCG exclusively distribute Osprey’s products across Australia and New Zealand.

The three year deal will result in Osprey’s technology being made available to healthcare professionals across both Australia and New Zealand for the first time. Furthermore, the contract has annual minimum sales volumes and a fixed transfer price over the term of the agreement providing sales security for Osprey.

This agreement complements the company’s strategic alliance with GE Healthcare which provides exclusive distribution of Osprey’s product portfolio.

Osprey’s President and CEO, Mike McCormick, said of the deal:

We are excited to enter this agreement with RHCG which will see the Australian developed technology coming to the Australian and New Zealand markets. Our technology originates from Australia and it has been a long-held desire to offer it to Australian healthcare professionals. This agreement is the first step in addressing the rising issue of CI-AKI as a result of heart imaging procedures in patients with CKD.

An alarming 25% of patients having heart procedures are at risk of having a CI-AKI event, which is sudden damage to the kidneys caused by the x-ray imaging dye. CI-AKI frequently leads to negative patient outcomes, longer hospital stays and, in some cases, kidney failure and death.

What now for the Osprey share price?

The Osprey share price has been on a steady decline since the initial announcement of the deal with GE Healthcare at the end of July. Shareholders will be hoping that as the company starts to reap the rewards of the partnership, it will have a change in fortunes.

The Osprey share price is currently up 4.17%, however it remains more than 60% lower than its 52-week high of 6.3 cents. The Osprey share price is down 16.67% since the start of the year.

More reading

• I waited 10 years before pouncing on this stock
• BHP (ASX:BHP) share price falls despite new option agreement
• Crashing gold price could still rally to record high before year-end: Citi
• New to investing? I would invest $500 into these exciting ASX shares
• ASX 200 down 1.2%: Westpac hit with $1.3bn penalty, Brickworks disappoints, tech shares lower

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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It has been a disappointing day of trade for the S&P/ASX 200 Index (ASX: XJO) on Thursday. At the time of writing, the benchmark index is down 1% to 5,869.3 points.

Four shares that have not let that hold them back are listed below. Here’s why they are pushing higher today:

The Iron Road Limited (ASX: IRD) share price has rocketed 59% higher to 17.5 cents. This morning the iron ore company announced that it has entered into a joint development agreement with Macquarie Capital and Eyre Peninsula Co-operative Bulk Handling. The agreement provides the framework to advance development and financing plans for the proposed $250 million Cape Hardy Stage I multi-user, multi-commodity port facility.

The Nuchev Ltd (ASX: NUC) share price is up 7% to $1.99. This morning the junior infant formula company announced a strategic partnership with Blue Ocean International. Blue Ocean is a top tier distributor and will manage the sales and distribution of Nuchev’s premium Oli6 goat infant formula brand across a number of key platforms and territories in China.

The Telix Pharmaceuticals Ltd (ASX: TLX) share price is up 3% to $1.83. Investors have been buying the biopharmaceutical company’s shares after it provided an update on its TLX591-CDx product. According to the release, Telix has submitted a New Drug Application to the United States Food and Drug Administration for the prostate cancer imaging product.

The Treasury Wine Estates Ltd (ASX: TWE) share price has climbed 1.5% to $9.04. The catalyst for this gain appears to be a broker note out of Credit Suisse. According to the note, the broker has upgraded the wine company’s shares to an outperform rating with a $12.30 price target. It made the move largely on valuation grounds but also on the belief that the Penfolds brand image has been unaffected by anti-dumping investigations in China.

More reading

• Telix (ASX:TLX) share price charges higher on FDA update
• Where I’d invest $20,000 into ASX shares right now
• 3 exciting small cap ASX healthcare shares to watch
• Smash low interest rates with these high yield ASX dividend shares
• Bubs share price trading at a 5-month low. Is this a buying opportunity?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates 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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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.

Amazon.com, Inc (NASDAQ: AMZN) is the ultimate growth stock. That’s not just because it has a ton of room to grow in the huge retail and cloud computing markets, but also because it’s constantly working to invent big new businesses from scratch. No other company continuously surprises investors with unexpected value creation from new ventures. So where could Amazon be in 10 years?

Retail and cloud businesses  

It’s no secret that Amazon’s e-commerce business is a juggernaut, and it’s only been getting stronger because of the acceleration of e-commerce adoption due to COVID-19. There just aren’t a lot of compelling reasons to frequent physical retail stores in a post-COVID world when you can order online from your couch, usually at lower prices, and receive your order in a day or two. That’s especially true when Amazon offers such a great customer value proposition.

But what’s less appreciated is Amazon’s still tiny market share of the global retail market. The global retail market is a massive $25 trillion market. Over the last 12 months, Amazon’s e-commerce business had $202 billion of net sales, which is only about a 0.8% share of the retail market. So as much of a juggernaut as Amazon’s retail business is, it’s still a tiny – but rapidly growing – fish in a huge pond.

The same is true with public cloud leader Amazon Web Services (AWS), which also has a tiny market share of a huge market. AWS boss Andy Jassey said late last year that AWS was addressing the $3.7 trillion global enterprise IT market. If that’s the case, then AWS’s $40 billion of net sales over the last 12 months is only 1.1% of the opportunity.

Known and unknown emerging ventures

The most underappreciated aspect of Amazon is the company’s constant work to build additional big new businesses from scratch. The third-party marketplace and AWS were one-time development stage ideas that have grown into wildly successful businesses.

One newer initiative is Amazon’s interest in physical retail, specifically technology-enabled grocery stores. The company started out with the Amazon GO convenience stores with “just walk out” technology, where customers scan their phones on the way in, grab items off the shelves, and then just walk out. Amazon’s slew of cameras and sensors can tell what the customer left with, and informs the company what to charge the customer’s Amazon account.

This year, Amazon has parlayed that technology into Amazon GO Grocery stores, a full-size grocery store version with the same concept. And it’s recently launched a different grocery store concept altogether called Fresh, which uses the Amazon Dash Cart and Alexa-based technology to improve the grocery store shopping experience.

Amazon has a huge interest in the grocery segment because grocery stores are a massive $682 billion category in the US alone. That’s why the company is developing at least two different concepts in order to learn and optimise its approach. Given Amazon’s track record, it won’t be surprising if Amazon eventually captures a sizable share of the category. 

Amazon is also perfecting its drone delivery capabilities, and recently got approval from the Federal Aviation Administration (FAA) to begin testing its drone delivery program. In the future, this should help Amazon deliver packages to more rural customers more efficiently by saving on last-mile delivery costs. 

In addition, the company’s rapidly growing advertising business has quickly become the No. 3 online advertiser in the U.S. after Alphabet subsidiary Google and Facebook. Amazon also acquired autonomous car technology company Zoox earlier this year, which could minimise transportation and fulfillment costs in the long term.

These are just a few of the newer initiatives, and there are almost certainly more that we don’t know about yet.

Much bigger and more profitable in 10 years

Amazon should be much bigger and more profitable just from the continued growth of the retail and AWS businesses. But it has so many additional irons in the fire that it should have surprising growth coming out of nowhere in the years ahead.

Not all of Amazon’s pioneering efforts work. Online auctions, the Fire phone, online travel, and high-end jewellery are a few examples of the company’s failures. But failures help the company learn, make adjustments, and change course. For example, the online auctions failure led to the development of the third-party marketplace, which now represents the majority of retail units sold.

Over the next decade, Amazon should grow enormously and could grow to 2% or 3% of global retail sales, 3% of the global enterprise IT opportunity, 25% of the online advertising market, and 5% of the U.S. grocery market. And it would still have a huge runway ahead.

Considering its still low market shares of these big categories, investors should consider the Amazon of 2030 to be just getting started.

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

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, 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. Andrew Tseng owns shares of Amazon and Facebook. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), 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 Alphabet (A shares), Alphabet (C shares), 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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In late morning trade the S&P/ASX 200 Index (ASX: XJO) is on course to give back a good portion of yesterday’s gains. At the time of writing the benchmark index is down 1% to 5,861.6 points.

Four shares that are falling more than most today are listed below. Here’s why they are sinking lower:

The Afterpay Ltd (ASX: APT) share price is down almost 4.5% to $75.34. Investors have been selling Afterpay and other tech shares on Thursday following a tech selloff on Wall Street overnight. The likes of Apple, Amazon, and Tesla all fell heavily, leading to the Nasdaq dropping a sizeable 3%. This has led to the S&P/ASX All Technology Index (ASX: XTX) sinking 1.8% lower this morning.

The Evolution Mining Ltd (ASX: EVN) share price has fallen 5.5% to $5.52. Evolution and other gold miners have come under pressure today after the gold price continued its slide. The spot gold price has dropped to a two-month low of US$1,862.30 an ounce amid a strengthening U.S. dollar. In light of this, the S&P/ASX All Ordinaries Gold index is down a disappointing 4% at the time of writing.

The Westpac Banking Corp (ASX: WBC) share price is down over 1.5% to $16.13. This follows an announcement by the banking giant this morning relating to its dealings with AUSTRAC. According to the release, Westpac has agreed to pay a penalty of $1.3 billion for its Anti-Money Laundering and Counter-Terrorism and Financing Act 2006 (AML/CTF) contraventions. This was more than the $900 million it previously estimated. The Federal Court still needs to approve the agreement.

The Whitehaven Coal Ltd (ASX: WHC) share price is 3% lower to 92 cents. Today’s decline appears to have been driven by a broker note out of Morgan Stanley this morning. Although the broker has retained its overweight rating on the coal miner’s shares, it has slashed its price target by almost a third. Morgan Stanley’s price target now sits at $1.30, down from $1.90.

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Motley Fool contributor James Mickleboro owns shares of Westpac Banking. 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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The market may be dropping lower today but that hasn’t stopped the Telix Pharmaceuticals Ltd (ASX: TLX) share price from charging higher.

In morning trade the biopharmaceutical company’s shares are up 3.5% to $1.82.

Why is the Telix share price charging higher?

Investors have been buying Telix’s shares on Thursday after it provided an update on its TLX591-CDx product.

TLX591-CDx is a proprietary formulation of PSMA-11, a novel imaging agent targeting prostate-specific membrane antigen (PSMA). It was originally developed by the Heidelberg group of the Deutsches Krebsforschungszentrum.

The cold kit format of TLX591-CDx enables rapid radiolabelling at room temperature with high radiochemical purity and production consistency, optimised for the radiopharmacy setting.

What was today’s update?

This morning Telix revealed that it has submitted a New Drug Application (NDA) to the United States Food and Drug Administration (FDA) for TLX591-CDx.

This NDA submission includes clinical data from over 600 patients obtained from both prospective and retrospective clinical studies. It also builds on definitive peer-reviewed clinical research conducted at leading academic centres. These include the University of California, the Peter MacCallum Cancer Centre in Australia, and the Heidelberg University Hospital in Germany.

A significant milestone.

Telix USA President, Dr Bernard Lambert, commented: “We are pleased to have achieved this significant milestone with the submission of the first commercial NDA for PSMA imaging in the United States.”

“Telix has engaged with the FDA since July 2019, with valuable guidance resulting in what we believe to be a comprehensive submission. Subject to FDA approval, we look forward to bringing this product to market with our commercial partners to serve the needs of men living with prostate cancer,” he added.

Telix’s CEO, Dr Christian Behrenbruch, believes this submission is a “major commercial inflection point” for the company.

“The Telix team and our advisors have done an outstanding job of preparing this submission, which we believe is founded on compelling clinical evidence that supports broad diagnostic utility in the management of prostate cancer,” Dr Behrenbruch concluded.

No date has been given for when an FDA decision is likely to be announced.

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Motley Fool contributor James Mickleboro owns shares of TELIXPHARM DEF SET. 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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