Tag: Motley Fool

October will be yet another pivotal moment in 2020 for Australian investors. Victoria is likely to open up further, enabling more people to get closer to normal life. And some state borders will reopen.

On the business front, banks are likely to start renegotiating loans and calling in bad debts. In addition, several states have already extended the Government’s Commercial Tenancy Code of Conduct.

The result is a unique chance for investors to choose which ASX shares to buy for medium to long-term profits.

Retail companies

Premier Investments Limited (ASX: PMV) is a great retail share to buy. It is already starting to see revenues return after openings in most of Australia. With Victoria representing a large percentage of its annual sales, it is likely to see a fast recovery from its physical shops. The company achieved an increase in online sales by 50% in 2H20 against the previous corresponding period. This resulted in 25.5% of total sales for the half.  The company still expects its earnings before interest and taxes to be 9.7% – 11.7% when compared with 2H19.

Premier owns 100 of The Just Group, who’s brands include Smiggle, Just Jeans, Jay Jays, and Dotti. It also owns 28.06% of Breville Group Ltd (ASX: BRG) which is performing very well. 

Premier Investments is currently selling at a price to earnings ratio (P/E) of 25.61, with a trailing 12-month dividend yield of 3.75%.

Bank shares to buy

National Australia Bank Ltd. (ASX: NAB), like all banks, has carried much of the economic burden of the coronavirus. Primarily this has been due to demands from banking regulator, APRA. The treasurer has indicated that temporary insolvency and bankruptcy protections will be extended a further three months to December 31. Nevertheless, banks are already contacting more than 450,000 borrowers to see if they can restart payments, or if they require further assistance. 

All care has been taken by banks and government to ensure that borrowers impacted by COVID-19 are not tipped into insolvency early. Nonetheless, they will be moving to normalise financing terms. Those unable to restart payments may be offered restructuring, such as interest-only loans. But, if borrowers are judged as unable to repay, there may be a need for  “tailored assistance”, according to the Australia Banking Association.

National Australia Bank is currently trading at a P/E of 15.52 with a trailing 12-month dividend yield of 6.5%. This is a solid ASX share to buy at a good price. 

Entertainment shares

Right now, South Australia is talking about opening borders with NSW. In addition Victoria appears to be moving faster than anybody thought it would. The likelihood of further border opening is high, and already there is a 50km bubble around the NSW/Victorian border. 

One of the companies able to take advantage of this is Ingenia Communities Group (ASX: INA). It develops, operates and sells residential housing in retirement, lifestyle and holiday communities. Despite the pandemic, the company still managed to increase earnings per share (EPS) by 5%, and increased operating cash flow by 13%. I think Ingenia is a great share to buy for short term gains as well as strong performance over the medium to long-term.

More reading

• ASX 200 Weekly Wrap: ASX 200 snaps 4 week losing streak… just
• 3 ASX 200 growth shares to buy right now
• 5 things to watch on the ASX 200 next week
• Negative rates may be coming to a big four ASX bank near you
• ASX 200 down 0.1%: Tech shares push higher, AMP (ASX:AMP) sinks lower

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments 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 The 3 best ASX shares to buy before October appeared first on Motley Fool Australia.

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The S&P/ASX 200 Index (ASX: XJO) snapped a losing streak last week as the benchmark index edged 0.1% higher to 5,864.50 points. That’s despite ongoing volatility in tech shares as ASX 200 mining shares like Saracen Mineral Holdings Limited (ASX: SAR) saw strong gains.

As I look ahead to another big week of trade, I’ve got my eye on a few potential movers and shakers. Here are 3 ASX 200 shares that I think are worth watching this week.

3 ASX 200 shares to watch this week

Let’s start with Saracen. The Saracen share price was one of the top performers last week as the ASX gold share rocketed 4.2% higher on Friday.

Market volatility has been good for gold shares with the precious metal in high demand right now for its perceived safety. That’s certainly been reflected in the Saracen share price this year which has rocketed 63.3% higher in 2020.

There’s always the risk of commodity-based shares overinvesting and seeing a medium to long-term slump. However, I think we’ll see more volatility in 2020 which could push ASX gold shares higher through to the end of the year.

Outside of gold shares, I’ve got my eye on a potential growth stock: Qube Holdings Ltd (ASX: QUB). The ASX 200 logistics share fell 2.6% lower on Friday which could present a buying opportunity.

Qube has a market capitalisation of $4.8 billion and a 2.0% dividend yield right now. I’m bullish on the logistics sector as more retailers shift from bricks-and-mortar to an online warehouse model similar to Amazon.com, Inc. (NASDAQ: AMZN).

That could increase demand for Qube’s expertise like we’ve seen in the $1 billion deal with Woolworths Group Ltd (ASX: WOW).

I’ve also got my eye on an ASX 200 media share in the form of Domain Holdings Australia Ltd (ASX: DHG).

The Domain share price slipped 2.4% lower on Friday but I think the short-term outlook for property isn’t all bad. Prices are starting to stabilise which is good news for more listings and higher traffic to the Domain site.

Shares in the real estate media group are down 1.4% for the year but could be worth a look if the housing rebound continues in 2020.

More reading

• Why I like Saracen (ASX:SAR) and these ASX mining shares today
• ASX 200 drops 0.3%, gold miners keep rising
• Why the St Barbara (ASX:SBM) share price is climbing higher today
• Why Mineral Resources, Redbubble, Saracen, & Temple & Webster shares are pushing higher
• Are ASX gold shares like Newcrest (ASX:NCM) still good value?

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Ken Hall 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 Amazon and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool Australia owns shares of Woolworths Limited. The Motley Fool Australia has recommended Amazon. 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 Saracen (ASX:SAR) and 2 more ASX 200 shares to watch this week appeared first on Motley Fool Australia.

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While everyone has been busy looking at buy now, pay later (BNPL) shares, there are plenty of other ASX shares that have also grown considerably since the start of the year. Each of the following companies has developed a solid foundation based on innovative technology, patents, or medical research. As such, I think it’s likely that these ASX shares will continue to grow. 

Whispir Ltd (ASX: WSP)

Whispir provides mass communication tools for organisations. Accordingly, it has won clients across a very diverse spectrum of Australian industries. To illustrate, some of these include Transport for NSW, RACQ, APA Group (ASX: APA), Roy Hill, and the country’s number one health booking app, Health Engine. 

This ASX share rose by 9.65% on Friday alone, and has risen by 140.38% since the start of the year. The company has a high gross operating margin of 62%, and recurring revenues make up greater than 95% of its income. 

Zoono Group Ltd (ASX: ZNO)

Zoono is a very special ASX share. The company produces hand sanitiser which is certified against a range of bacteria and viruses. This includes the African Swine Flu, and on 28 February, it announced its product tested favourably in protecting against COVID-19. The company has rapidly scaled up production to keep up with escalating demand and has rapidly put together a range of distribution deals covering the globe. 

Over the past year, the Zoono share price has risen by 2,550%. Since 1 January it has risen by 207.25%.

Recce Pharmaceuticals Ltd (ASX: RCE)

Recce is a drug researcher working on synthetic antibiotics. In particular the company is working to develop treatments for antibiotic resistant super bugs. Moreover, the company is pioneering work on treatments for sepsis. According to the medical journal The Lancet, sepsis killed 11 million people in 195 countries in 2017. Right now, sepsis remains an unmet challenge.

The Recce share price has risen by 380.88% since 1 January. Interest piqued after the ASX share announced two of its products had been selected for a CSIRO trial into antiviral treatments for COVID-19.

Brainchip Holdings Ltd (ASX: BRN)

I think Brainchip is one of the year’s great ASX shares. The company is the largest listed pure-play artificial intelligence company in the world. A range of security applications use its products for facial recognition and pattern recognition. This include casinos, subways and airports. 

The market has become more interested in Brainchip after the announcement that it had completed the wafer for its latest product. This is called a neuromorphic chip and is the first of its kind. In recent announcements, the company has entered into proof of concept partnerships across a range of sectors including gaming and autonomous cars. The Brainchip share price is up 760% in 2020.

More reading

• 3 exciting small cap ASX tech shares that could be the next big thing
• Zoono (ASX:ZNO) share price jumps 9% on United Airlines deal
• Redbubble (ASX:RBL) and this ASX share have more than doubled in 2020
• Could this be the large cap version of the Brainchip (ASX:BRN) share price? 
• BrainChip (ASX:BRN) share price crashes a further 20% lower: Where next for its shares?

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

The post These 4 ASX shares have grown more than 100% this year appeared first on Motley Fool Australia.

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We have seen a surge in companies positioning themselves for the rise of the lithium battery industry. For example, lithium mining company Galaxy Resources Limited (ASX: GXY) has seen a 56.5% rise in share price in year to date trading. Other metals required for cathodes include manganese, mined by South32 Ltd (ASX: S32), also nickel and cobalt, currently being developed by Ardea Resources Ltd (ASX: ARL). Nevertheless, one of the few listed Australian miners focused on graphite, the anode material is Ecograf Ltd (ASX: EGR). 

What is moving EcoGraf ASX shares?

In the past week, EcoGraf ASX shares rose by 72.414%. The company has two bases of operation. First, in Tanzania it is developing The Epanko Graphite Project. This is a long life, highly profitable graphite project. It is forecast to produce 60,000 tonnes / yr of natural flake graphite products.

Second, the company is developing a processing plant in Kwinana, Western Australia. This will to produce spherical graphite using a new eco-friendly process to sell directly to lithium-ion battery manufacturers. The plant will draw both from recycled battery materials as well as graphite flak products from the Americas, Asia and Australia. 

Over the past 6 months it has had a succession of very promising and positive releases. For example, it recently reported solid results from its proprietary purification process to recover high purity battery anode material from lithium-ion battery materials. Furthermore, it has also provided electrochemical analysis supporting the claim that battery products uniquely positioned as a superior and cost competitive material for battery anodes.

EcoGraf has already had a lot of positive support from the West Australian government. The company believes that it can deliver a plant in Kwinana within 11 months of a final investment decision.   

Foolish Takeaway

EcoGraf ASX shares currently value the company at $54.6 million. It appears to have a pathway top funding in Tanzania as well as  in Kwinana. The management team includes several resources professionals with a solid track record of bringing in large scale developments. 

With no funding secured, the company remains a speculative play. However, EcoGraf has an experienced leadership team, and is starting its development stage. I think this could be a great growth story in the battery business over the next few years. 

More reading

• Why Galaxy (ASX:GXY) and these ASX shares just hit new highs
• Leading brokers name 3 ASX shares to sell today
• Ecograf (ASX:EGR) responds to ASX price query after shares rocket 51%
• An all-weather ASX resources shares strategy
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor Daryl Mather 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 EcoGraf (ASX:EGR) shares up 72% in a week appeared first on Motley Fool Australia.

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The Telstra Corporation Ltd (ASX: TLS) share price has been under pressure in 2020, but is the Aussie telco in the buy zone?

How has the Telstra share price performed this year?

The Telstra share price has slumped 21.0% lower in 2020 compared to a 12.3% fall in the S&P/ASX 200 Index (ASX: XJO).

That could mean the telco’s shares are cheap or there are some underlying issues that are weighing on investors’ minds.

What do the numbers say?

At the current Telstra share price of $2.83 per share, the company’s shares have a price-to-earnings (P/E) ratio of 18.5x. That on its own doesn’t tell us that much but let’s try to compare it to a fellow telco peer company.

Vocus Group Ltd (ASX: VOC) is an ASX-listed rival albeit with a market capitalisation of $2.2 billion compared to Telstra’s $33.7 billion.

Vocus’ full-year result was a mixed bag for investors. The telco made a statutory net loss after tax and minority investments of $178.2 million.

That saw earnings per share (EPS) fall to negative 28.74 cents with fully diluted underlying EPS of 16.04 cents per share.

That means at $3.51 per share, Vocus has an underlying P/E of 21.9x compared to 18.5x for Telstra.

That could mean Telstra is slightly undervalued relative to Vocus right now.

Is Telstra a cheap buy in September?

It’s hard to judge whether the Telstra share price is cheap based on just that one metric. However, the company did maintain its final dividend of 16 cents per share which is a positive signal for future earnings.

It’s also a signal that investors need as the TPG Telecom Ltd (ASX: TPG)-Vodafone merger looms large and NBN continues to cause the company headaches.

One saving grace could be the company’s leadership in the 5G network space. Telstra has emerged as a serious player in the growing technology and much of its future success could be based on 5G success in Australia.

I don’t think the Telstra share price is overvalued at $2.83 per share. The shift towards more working from home and a potential population boom in regional Australia could be good news for its network services.

I think Telstra could be a good pickup for investors looking for dividends right now. After all, blue chip ASX dividend shares like Telstra are hard to come by in the current market.

More reading

• ASX 200 Weekly Wrap: ASX 200 snaps 4 week losing streak… just
• Goldman Sachs names 4 reasons to buy Telstra shares
• Top brokers name 3 ASX shares to buy next week
• Telstra (ASX:TLS) share price hits a 52-week low: Is this a buying opportunity for investors?
• Interest rates to stay low for years? Buy these ASX dividend shares

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended 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.

The post Why the Telstra (ASX:TLS) share price looks cheap today appeared first on Motley Fool Australia.

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ASX mining shares had a bumper day on Friday. Shares in top miners like Saracen Mineral Holdings Limited (ASX: SAR) rocketed higher despite the S&P/ASX 200 Index (ASX: XJO) edged 0.3% lower.

Here are a few of my favourite Aussie miners that I’d like to buy with some spare cash today.

Saracen and 2 more ASX mining shares to buy today

The Saracen share price has been absolutely flying in 2020. The ASX gold share is up 63.3% for the year including a 4.2% gain on Friday.

Gold prices have been rocketing in 2020 as the coronavirus pandemic has fuelled significant volatility in global share markets. That has seen investors seek the safe haven of gold and increased demand for ASX gold shares like Saracen.

Given the uncertain outlook for FY21, I think ASX gold shares could continue to outperform. That means the Saracen share price is a potential buy even at $5.42 per share.

It’s not just Saracen that I’m watching right now. I think the BHP Group Ltd (ASX: BHP) share price could be worth a look after slumping 3.0% lower this year.

The ASX mining share has been under pressure despite strong iron ore prices this year. That’s largely thanks to the group’s Petroleum segment which comprises a significant portion of earnings.

Oil prices are under pressure this year as supply has increased despite a slump in demand. That means BHP could be a better value buy compared to a pure play iron ore miner like Fortescue Metals Group Limited (ASX: FMG) if we see a strong economic recovery.

The last ASX mining share on my watchlist right now is Lynas Corporation Ltd (ASX: LYC).

The Lynas share price jumped 3.3% higher on Friday but has been largely out of the spotlight in recent months. I think there’s plenty to like about the rare earths miner after securing a lucrative US military tender in April this year.

Foolish takeaway

Momentum can be a funny thing in the share market. These are just a couple of the ASX mining shares I’ve got my eye on as potential outperformers in FY21.

More reading

• Iron ore slumps: Does this make the BHP (ASX:BHP) share price and other miners a buy? 
• Why these ASX laggards could start to rally in the next few months
• ASX 200 Weekly Wrap: ASX 200 snaps 4 week losing streak… just
• 5 things to watch on the ASX 200 on Monday
• Buy Fortescue and this ASX dividend share for a source of income

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

The post Why I like Saracen (ASX:SAR) and these ASX mining shares today appeared first on Motley Fool Australia.

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The iron ore spot price fell sharply this week following rising port inventories and signs that supply has caught up to the strong demand from China. This has caused the Fortescue Metals Group Limited (ASX: FMG) share price to slump 7.5% last week while the more diversified commodity portfolios of Rio Tinto Limited (ASX: RIO) and BHP Group Ltd (ASX: BHP) saw their share prices flat for the week.  

Is this the top for iron ore? 

Iron ore prices have been able to enjoy the merits of tight supply conditions and soaring demand from China. China’s industrial output increased at its fastest pace this year in August, while crude steel production set a monthly record high. Infrastructure and property investment seem to be the key drivers for China’s economic recovery. It estimates that it will finish 2020 with a GDP growth of approximately 2%, outperforming all its G20 peers. 

While this is a positive signal for iron ore, the tides are slowly turning as inventories and steel stockpiles continue to rise in China. Iron ore prices have soared to levels only seen when global supply took a hit following the tailings dam disaster in Brazil. The higher cost of raw materials combined with increasing inventories may see demand settle in the near-term.

From a supply side perspective, Brazilian miner Vale has operationally struggled to meet its guidance amidst COVID-19 and challenging weather conditions. On Wednesday, the company announced that it expects to reach an iron ore capacity of 400 million tonnes per year by increasing output across its operations, including the state of Minas Gerais, the location of the deadly dam disaster in 2019. It is currently producing 318 million tonnes per year, and before the dam disaster in 2019, it produced 385 million tonnes. A recovery in seaborne supply from Vale could further cool down the iron ore price, and adversely impact Fortescue, and to a lessor extent the Rio Tinto and BHP share price. 

Is this bad for the Fortescue share price?

Fortescue is a pure iron ore play which is why its share price has been more adversely affected by iron ore pullback. The improvement in production and exports out of Brazil, combined with the strong Australian dollar could weaken the profitability of Fortescue for FY21. However, even if iron ore prices were to fall back to US$80 per tonne, Fortescue would still be a highly profitable company with the ability to pay market leading dividends.

Could the Rio Tinto or BHP share price be better value?  

While the top might be in for iron ore, other commodities in Rio’s and BHP’s portfolios have been booming. Copper prices are at an almost five-year high, with coal at a one-year high and crude oil holding steady at US$40. I believe the Rio Tinto and BHP share price represent fair value at today’s prices, and could be worth a closer look once the near-term volatility subsides. 

More reading

• Why I like Saracen (ASX:SAR) and these ASX mining shares today
• ASX 200 Weekly Wrap: ASX 200 snaps 4 week losing streak… just
• Buy Fortescue and this ASX dividend share for a source of income
• How to generate $1,000 a month in dividends
• ASX 200 drops 1.2%, Mineral Resources (ASX:MIN) fell 9%

Motley Fool contributor Lina Lim 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 Zip Co Ltd (ASX: Z1P) share price has tanked almost 30% in September following a parabolic run to almost $10. Looking ahead, will the negative news involving Paypal Holdings Inc (NASDAQ: PYPL) and banks entering the buy now, pay later (BNPL) space continue to weigh down the Zip share price? Or will a general recovery in the broader market and other factors make its September pullback a buying opportunity? 

Paypal a threat but banks are not 

The Australian Financial Review highlights the concerns that Paypal will create headwinds for BNPL players in the United States. It cites that the key concern is Paypal’s cheaper price point for merchants and its product being a closer than expected copycat of Afterpay Ltd (ASX: APT). 

The good news is that the new, interest-free credit cards issued by the likes of the Commonwealth Bank of Australia (ASX: CBA) and National Australia Bank Ltd. (ASX: NAB) are “nothing new and unlikely to be felt by Afterpay in the Australian market given its dominance”. The Commonwealth Bank’s ‘CommBank Neo’ card will provide customers with up to $3,000 of credit with no interest payments, no late payments and no foreign currency fees but with a fixed monthly fee. From a cost perspective, it would still be cheaper to use BNPL platforms as opposed to these new, interest-free credit cards. 

Klarna’s ballooning valuation 

Swedish BNPL player, Klarna, was valued at $11 billion ahead of a likely stock market listing. The company recently raised $650 million from US private equity firm Silver Lake, Singapore’s sovereign wealth fund GIC, BlackRock and HMI Capital to accelerate its growth, expand globally and improve its product offering. Klarna estimates that it will generate US$1 billion revenue in FY20, valuing the company at approximately 11 times revenues. This compares to the likes of Afterpay at 15 times revenue and Zip at 7.5 times revenue. 

Zip appears to be good value given Klarna’s valuation and Afterpay trading at a much higher multiple. The company has also expressed its plans to launch in the United Kingdom market in 1H21 and explore further geographic opportunities. Furthermore, Zip also provides credit offerings for SMEs in Australia, which may prove to be another unique market and revenue opportunity. 

What’s next for the Zip share price? 

Zip is in a comfortable capital position with the flexibility to explore many geographic and product-driven growth opportunities. I believe the main challenge for the Zip share price will be the way the general market moves. With the Nasdaq Composite (NASDAQ: .IXIC) struggling on Friday and weakness in the S&P/ASX 200 Index (ASX: XJO), it is likely that the Zip share price will continue to see weakness and volatility in the near term. 

More reading

• Why the Splitit (ASX:SPT) share price is on the move today
• Why City Chic, Fortescue, Nearmap, & Zip shares are dropping lower today
• Is the Openpay (ASX:OPY) share price a bargain?
• Buy and hold these ASX shares to grow your wealth
• Forget Afterpay (ASX:APT) shares, buy these 3 growth shares

Lina Lim 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 PayPal Holdings. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and ZIPCOLTD FPO and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool Australia has recommended PayPal Holdings. 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 Is the Zip (ASX:Z1P) share price headed higher or lower?  appeared first on Motley Fool Australia.

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The Bubs Australia Ltd (ASX: BUB) share price looks like a buy to me this week. Particularly if it falls further. 

A quick overview of Bubs Australia

Bubs was founded in 2006 by current CEO Kristy Carr. Bubs describes itself as Australia’s only vertically integrated producer of goat milk formula, with exclusive milk supply from Australia’s largest milking goat herd.

It sells a variety of products, with some of those arising after making acquisitions. Goat milk infant formula is the key segment with rapidly rising revenue and a gross profit margin of around 40%. It also sells organic grass-fed cow milk infant formula, food for young children and goat milk based formula for adults.

Products are widely sold in major supermarkets and pharmacies throughout Australia, as well as exported to China, Vietnam, South East Asia and the Middle East. Other ASX shares like Woolworths Group Ltd (ASX: WOW), Coles Group Limited (ASX: COL) and Baby Bunting Group Ltd (ASX: BBN) are among the large Aussie retailers that sell Bubs products. The Bubs share price responded positively when the ASX share announced its extended distribution. 

Bubs recently announced the launch of Vita Bubs, which is a vitamin and mineral supplement which will be ranged nationally across 400 Chemist Warehouse stores from October 2020. This is expected to materially add to Bubs’ domestic revenue. More high-margin revenue is obviously good news. 

The ASX share also recently signed Jennifer Hawkins as its global brand ambassador.

What’s been happening recently?

The Bubs share price has fallen by 27% since 9 July 2020 despite the company reporting a solid FY20 result.

The FY20 report showed a number of pleasing points.

Bubs’ FY20 revenue increased by 32% to $62 million. Most importantly, Bubs infant formula revenue rose by 58% to $30 million – which represented 55% of total revenue. Direct sales to China rose by 32% to $13 million. Export markets outside of China grew five-fold, representing 10% of total revenue.

The normalised gross profit margin increased by three percentage points from 21% to 24%.

Looking at the bottom line, the ASX share reported a statutory loss after tax of $8 million, a big improvement from the $36 million loss in FY19.

After the release of the FY20 result, Bubs announced a $38 million capital raising to fund various initiatives. One of the most important uses of the money is funding its acquisition of a stake in the Beingmate infant formula manufacturing facility in China and the application for China-made infant formula. It will also fund working capital requirements to launch China label products into the general trade channel, fund the lunch of Vita Bubs, extend production capability, expand into new global markets and pay for global and regional influencers to expand the brand.

Why I think the Bubs share price is a buy today  

I’m not sure how low the Bubs share price will go over the next few months. It could go lower. I think it would be even better value if it fell further. It’s rapidly growing revenue across a number of markets whilst its gross profit margin rises significantly.

The business has a very good opportunity to greatly increase its export revenue to markets outside of China, which is what I’m focusing on. Vietnam alone could be a very good profit centre for Bubs.

There are lots of risks associated with doing business in China, so I think Bubs’ solution to that is probably the best one for the situation. I like that Bubs is launching new products to capture more of a household’s overall spending. The high-quality cow milk products could also do well over time.

When the Bubs share price falls I think it’s an exciting opportunity because it’s a cheaper price to buy a fast-growing business. It’s racing towards being cashflow breakeven, which would be a big step on its growth journey.

I’d be comfortable buying a decently sized parcel of Bubs shares today because of its international growth potential and the lower share price.

More reading

• Where I’d invest $20,000 into ASX shares right now
• 3 ASX growth shares I’d buy right now
• Where I’d invest $20,000 into ASX shares right now
• 3 small cap ASX shares I’d buy with $3,000 right now
• Bubs Australia (ASX:BUB) share price falls as share purchase plan opens

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BUBS AUST FPO. The Motley Fool Australia owns shares of COLESGROUP DEF SET. The Motley Fool Australia has recommended BUBS AUST 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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Every Monday I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Webjet Limited (ASX: WEB) continues to be the most shorted share on the ASX following a sharp rise in its short interest to 17.5%. Short sellers appear increasingly confident that the online travel agent’s shares are going a lot lower from here. I would have to agree that Webjet looks severely overvalued at present.
• Speedcast International Ltd (ASX: SDA) has short interest of 11.15%. The communications satellite technology provider’s shares continue to be suspended whilst it undertakes its chapter 11 recapitalisation. Further progress was made last week when it filed a motion seeking court approval to replace its debtor-in-possession financing.
• Myer Holdings Ltd (ASX: MYR) has seen its short interest rise to 10.9%. Short sellers have been increasing their positions after the department store operator’s full year results. Myer posted a 41.6% decline in earnings before interest, tax, depreciation and amortisation (EBITDA) to $305.3 million.
• InvoCare Limited (ASX: IVC) has short interest of 9.5%, which is up week on week yet again. Short sellers have been building a position in this funerals company since the release of its weak half year result. They appear confident more of the same is coming in the months ahead.
• FlexiGroup Limited (ASX: FXL) has 8.2% of its shares held short, which is up week on week. While the company’s buy now pay later business is performing well, there appears to be concerns over the rest of its business.  
• CLINUVEL Pharmaceuticals Limited (ASX: CUV) has also seen its short interest increase slightly to 8.2%. Short sellers have been increasing their positions despite the biopharmaceutical company announcing plans to extend the use of its SCENESSE product to treat xeroderma pigmentosum.
• Inghams Group Ltd (ASX: ING) has 8.2% of its shares held short, which is flat week on week. Concerns over higher input costs has been weighing on this poultry company’s shares in 2020.
• Bank of Queensland Limited (ASX: BOQ) has seen its short interest rise to 7.4%. This regional bank has come under pressure this year after it warned that trading conditions were expected to remain tough for the foreseeable future.
• Freedom Foods Group Ltd (ASX: FNP) has entered into the top ten despite being halted from trade. The diversified food company has 6.95% of its shares in the hands of short sellers. Freedom Foods is currently suspended whilst it sorts out its accounts after some shocking revelations this year.
• Orocobre Limited (ASX: ORE) is back in the top ten with short interest of 6.9%. Australian lithium miners have been strong performers in recent months due to the belief that prices of the battery making ingredient have now bottomed. Though, it looks as though some short sellers don’t appear convinced that this is the case.

More reading

• 3 ASX shares I wouldn’t touch with a 10-foot pole
• Is now the time to be buying ASX travel shares? 
• Why Afterpay, Clinuvel, Kogan, & SEEK shares are storming higher today
• ASX 200 falls slightly, miners surge higher
• BNPL shares like Afterpay (ASX:APT) and Zip (ASX:Z1P) are soaring today. Here’s why

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended FlexiGroup Limited, Freedom Foods Group Limited, and InvoCare 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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