Tag: Motley Fool

Talk about going against the grain. While analysts have pared earnings expectations for this financial year, one ASX sector could be about to enjoy consensus upgrades!

The economic rebound from the COVID-19 fallout will take longer to eventuate than experts were predicting in the early days of the pandemic.

Most ASX stocks won’t see earnings return to FY19 levels until FY22 at least. It’s only our miners like BHP Group Ltd (ASX: BHP) that is driving much of the earnings growth on the S&P/ASX 200 Index (Index:^AXJO) for this financial year.

Margin to fuel upgrade

Earnings upgrades will be hard to come by in this environment. Just ask Macquarie Group Ltd (ASX: MQG), which revealed a shock profit warning.

But ASX-listed petrol station operators look well placed to surprise on the upside, according to Morgan Stanley.

“Retail margins in 2H20 continue to outperform our forecasts, and with volumes likely recovering in late 2020 as Victoria comes out of lockdown,” said the broker.

“Retail fuel margins for July (18c/L), August (17c/L) and September (21c/L) remain well above 2019 average margins of 14c/L.”

Viva to benefit more than Ampol

The expanding margin benefits Viva more than Ampol. Every one cent a litre change in retail margins equates to around a 12%, or $24 million, movement in net profit for Viva. In contrast, Ampol’s net profit will move by 7%, or $34 million.

The competition watchdog has been silent on the “profiteering” by fuel retailers so far, probably because these companies need bigger margins to offset the drop in volume to stay afloat.

VEA share price and ALD share price at turning point?

It’s also worth noting that the Viva Energy Group Ltd (ASX: VEA) share price and Ampol Ltd (ASX: ALD) share price are lagging the market. Viva shed around 16% while Ampol tumbled 31% over the past year when the ASX 200 lost 12%.

But if Morgan Stanley is right, these stocks could see their fortunes turn and it isn’t only the fatter than expected margin that will drive the re-rating.

Volume recovery in 2021

“Apple mobility data suggest that Australian driving volumes in September (down 10%) have improved since August (down 15%) from January base levels, weighed by Victoria (down ~50%),” explained Morgan Stanley.

“However, we think retail performance will accelerate in the next 12 months as volumes recover after Victoria eases lockdown restrictions.”

Foolish takeaway

The reluctance for commuters to return to public transport due to worries about catching COVID-19 is also another positive trend for volumes.

It will be interesting to see if the ACCC starts to wave a big stick if margins don’t narrow as volumes recover.

Morgan Stanley reiterated its “overweight” (or “buy”) recommendation on Viva and Ampol.

More reading

• SEEK (ASX:SEK) shares surge 9% today. Here’s why.
• Bear vs Strong Bear: Choosing the right hedge for your portfolio
• Firefly (ASX:FFR) share price tanks despite further positive drill results
• Here’s how I would spend $10,000 on ASX shares right now
• Brokers upgraded JB Hi-Fi (ASX:JBH) share price and this other ASX stock to “buy” today

Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited and Macquarie Group Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Meet the ASX sector that is cum-consensus upgrade for FY21 appeared first on Motley Fool Australia.

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I think exchange traded funds (ETFs) can be great additions to a balanced portfolio.

This is because they allow you to invest across a large and diverse number of shares through just a single investment.

But which ETFs should you buy today? Three of the best ETFs in my opinion are listed below. Here’s why I would buy them:

BetaShares NASDAQ 100 ETF (ASX: NDQ)

My favourite ETF is the BetaShares NASDAQ 100 ETF. This ETF gives investors access to 100 of the biggest non-financial companies on the legendary Nasdaq index. These means investors will be getting a slice of a large number of tech giants such as Apple, Microsoft, and Netflix. Due to the positive outlooks of the majority of the companies in the ETF, I believe it can generate strong returns for investors over the next decade. Another positive is a recent pullback following a tech selloff on Wall Street. This gives investors an opportunity to buy in at a more attractive price.

BetaShares S&P/ASX Australian Technology ETF (ASX: ATEC)

Another option for investors to consider buying is the BetaShares S&P/ASX Australian Technology ETF. It is the Australian equivalent of the BetaShares NASDAQ 100 ETF and a great option if you don’t already have exposure to the tech sector. Included in the fund are the likes of Afterpay Ltd (ASX: APT), Appen Ltd (ASX: APX), and Xero Limited (ASX: XRO). I believe this ETF has the potential to outperform the broader ASX 200 index by a decent margin over the long term.

iShares Global Healthcare ETF (ASX: IXJ)

A final option to consider is the iShares Global Healthcare ETF. This exchange traded fund gives investors a piece of some of the largest healthcare companies across the world. This includes giants such as CSL Ltd (ASX: CSL), Johnson & Johnson, Novartis, and Pfizer. Given the expected increase in demand for healthcare services over the next few decades, I believe it is a great place to invest with a long term view.

More reading

• BrainChip (ASX:BRN) and Zip (ASX:Z1P) were among the most traded shares on the ASX last week
• Investing $1,000 into these ASX shares could be a very smart move
• 3 five-star ASX stocks to buy right now
• 3 ways Aussies can buy Tesla (NASDAQ:TSLA) shares
• 3 exotic ASX tech ETFs you might want to add to your portfolio today

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 BETANASDAQ ETF UNITS, CSL Ltd., and Xero. The Motley Fool Australia owns shares of AFTERPAY T FPO and Appen Ltd. The Motley Fool Australia has recommended BETANASDAQ ETF UNITS. 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 Buy BetaShares NASDAQ 100 ETF (ASX:NDQ) and these outstanding ETFs today appeared first on Motley Fool Australia.

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The outlook for global mobility and travel is looking increasingly grim as many countries enter a second or third wave of COVID-19. Has the market already priced in the worst case scenario and now be a time to start picking up ASX travel shares? Or should investors wait for a proper restart of flying or a vaccine before considering ASX travel shares? 

Could the worst be over? 

There are almost 30 million COVID-19 cases recorded around the world. Countries such as the US, India, Brazil and Russia account for more than 50% of the worlds cases. While COVID-19 will continue to be a trending topic, it appears that the markets have largely shrugged off its near-term impacts. The combination of record monetary stimulus and ultra-low interest rates have been able to buoy the global equity market, and it could be an opportunity to buy ASX travel shares at record low prices. 

ASX travel shares are hoarding cash

Household ASX travel shares such as Qantas Airways Limited (ASX: QAN), Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB) have all focused on preserving liquidity, reducing costs while maintaining the flexibility to respond to changes in travel restrictions.

Taking a closer look at Qantas, the company experienced a significant drop in operating cash flow due to travel restrictions and border closures. To support the business, the company undertook a $1.36bn institutional placement and raised $1.75bn in new debt. By the end of FY20, the company held a significant $3.52bn in cash and $1.0bn in undrawn credit facilities.

Similarly, Flight Centre saw a 99.4% decrease in Australian outbound travel during Q4 with limited revenue generating opportunities. Like Qantas, the company has more than $1b in cash and liquidity for its survival. 

Interestingly, Webjet announced a change in substantial shareholding on Wednesday. Goldman Sachs now holds 5.01 per cent of Webjet as of 11 September. This does show some degree of institutional interest on the challenged sector. 

What post COVID-19 could look like

China has been one of the few countries to truly conquer COVID-19. Data from the Civil Aviation Administration of China showed that air passenger traffic rose to 45.35 million passenger trips in August. This represents more than 80% of that in the same period last year, and the highest level this year. China’s figures could be a beacon of hope as to what post COVID-19 could look like for ASX travel shares. The combination of pent up demand and potential travel bubbles could see a broad recovery for travel related businesses. 

Foolish takeaway

COVID-19 is still a significant challenge for Australia. Notwithstanding current travel restrictions and challenges, ASX travel shares are sitting on strong balance sheets with a focus on cutting costs. China has shown what a post COVID-19 world could look like, but it is difficult to tell when that world could come for Australians. I believe ASX travel shares have bottomed, but perhaps more time is needed to see business conditions improve. 

More reading

• Qantas (ASX:QAN) considers leaving Sydney
• Here are the 10 most shorted ASX shares
• 2 ASX shares that could rocket from viral cash hoarding
• This devastated sector is ripe for buying: fundie
• Is the Flight Centre (ASX:FLT) share price about to take off?

Motley Fool contributor Lina Lim 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 Flight Centre Travel Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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A shareholder group has complained that Fortescue Metals Group Limited (ASX: FMG) has rejected its resolution to ban desecration of cultural sites.

The Australasian Centre for Corporate Responsibility (ACCR) resolution came after the controversy arising from Rio Tinto Limited (ASX: RIO) blowing up Juukan Gorge in May.

Rio Tinto, after shareholder pressure, let go of three senior executives last week, including its chief Jean-Sébastien Jacques. 

Investor advocacy body ACCR has since widened the call for better protection of historically significant sites to other mining companies.

One of its actions was to submit a resolution for Fortescue’s coming annual general meeting. It called for a ban on damage to culturally significant locations.

But Fortescue this week declined to put it on the agenda for the 11 November meeting, citing the physical submission missed the deadline.

ACCR is furious at the rejection, saying the electronic document was received by the company well before the cut-off. The physical mail was delayed due to COVID-related delivery issues.

“Given that FMG briefed external lawyers when the documents arrived electronically, they suffered no prejudice by the short delay in receiving the physical documents,” said ACCR executive director Brynn O’Brien.

“That FMG is using the pandemic to their advantage is reprehensible. That they are doing this to avoid shareholder scrutiny of their relationships with Aboriginal traditional owners begs the question: What are they hiding?”

Rejection on a ‘minor technicality’

The physical documents were sent express to arrive at Fortescue well on time, but courier TNT notified on the deadline afternoon that the parcel was delayed.

ACCR says it immediately notified Fortescue of the delay and the package arrived the next morning.

“That FMG has knocked this resolution back on a minor technicality — especially after the international investor outrage heaped on Rio — calls into doubt its interest in dealing with the important issues raised by its shareholders and indeed Aboriginal traditional owners,” O’Brien said.

“FMG’s major competitor and peer, BHP, saw it fit to accept electronic documentation during the pandemic.”

Fortescue stated that the moratorium was proposed by people “unfamiliar with the West Australian mining industry”.

“It would disempower local Aboriginal people in the Pilbara and limit the positive contribution the mining industry is making to the state and national economies, at a time when it is needed most.”

The company added that it has already collaborated with Indigenous communities to “avoid and protect” almost 6,000 heritage locations.

“Fortescue does not have heritage ‘gag order’ clauses in its agreements and Aboriginal groups are free and open to disagree and publicly voice their concerns,” the statement read.

“Fortescue supports the modernisation of the WA Aboriginal Heritage Act, and has called for an increased voice for Aboriginal people in the process and equitable right of appeal to all parties in the heritage process.”

The iron ore company stated if ACCR’s resolution was deemed eligible, it would be put up at the next company meeting.

The Fortescue share price was down 0.73% at 2:35pm AEST, to trade at $17.57. It has risen 63% since the start of the year.

More reading

• Why the RBA’s latest minutes spell good news for these 3 ASX shares
• 3 ASX shares with high-flying dividend yields
• Leading brokers name 3 ASX shares to buy today
• The latest ASX 200 stocks that top brokers just upgraded to “buy”
• Why Althea, BrainChip, Rio Tinto, & Starpharma shares are pushing higher

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.

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The Sezzle Inc (ASX: SZL) share price has been among the best performers on the Australian share market on Wednesday.

In afternoon trade the buy now pay later provider’s shares are up 8% to $7.21.

Why is the Sezzle share price zooming higher?

Investors have been buying Sezzle and other tech shares today after the Nasdaq continued its rebound overnight.

This appears to have sparked hopes that the tech rout is finally over and that tech shares will now commence their recovery.

And given how hard the Sezzle share price has fallen in recent weeks, I can’t say I’m surprised to see it rebound stronger than others. Since peaking at $11.83 just under three weeks ago, the Sezzle share price has lost around 40% of its value.

However, a rebound back to its record high may be out of the question in the near term. This is because the recent weakness hasn’t just been driven by the Nasdaq tech selloff.

Also weighing on Sezzle’s shares was news that PayPal will be launching a buy now pay later offering in the $5 trillion United States market in the final quarter of the year.

There are concerns that its entry could weigh on the growth of smaller players like Sezzle and the Zip Co Ltd (ASX: Z1P) owned QuadPay business.

Should you buy Sezzle shares?

Given the size of the U.S. market, Sezzle wouldn’t have to dominate it to generate significant revenues. It also has plans to expand into new geographic markets in the future to support its growth.

In light of this, I think the Sezzle share price could still go higher from here. However, it will need to prove that it can continue its growth alongside a PayPal offering in 2021 before I’ll consider it as an investment.

For now, I would class it as a hold and sooner buy larger rival Afterpay Ltd (ASX: APT). Especially given the latter’s very strong market position and global expansion plans.

More reading

• BNPL shares like Afterpay (ASX:APT) and Zip (ASX:Z1P) are soaring today. Here’s why
• The Sezzle (ASX:SZL) share price has now fallen 45% in 2 weeks as air continues to go out of the BNPL sector
• Are higher P/E ratios really here to stay?
• 3 exotic ASX tech ETFs you might want to add to your portfolio today
• Why the Afterpay (ASX:APT) and Sezzle (ASX:SZL) share prices are falling again today

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

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There are many investors out there who love the rough and tumble of investing in the share market. Buying, selling, finding your next big investment… these are all things that we investors find absolutely thrilling. But not all investors love the cut and thrust of the markets. Some people choose to invest passively. They want to share in the spoils of investing, but are unable or unwilling to ‘do the work’ of researching stock picks or analysing companies.

Instead, these ‘passive investors’ choose to invest solely in index exchange-traded funds (ETFs), such as the Vanguard Australian Shares Index ETF (ASX: VAS). This is typically done via a dollar-cost averaging (DCA) strategy, where the investor puts their investing on ‘autopilot’ by blindly investing a set amount of capital on a periodic basis (e.g. $100 a week or $1,000 a month).

Some investors choose to invest this way because it takes the ’emotional aspect’ out of the game. Many people (understandably) simply can’t handle the pressure of deciding what price to buy at. Thus, it’s easier to automate the whole process with a consistent approach. But for many investors who try their hand at ‘active investing’, perhaps a passive approach would be better suited.

When is passive investing the best strategy?

We’ve already established that a passive ETF-only strategy is best for those investors who don’t find investing interesting or fun, but still want to benefit from the compounding that the share market brings to the table.

But it might also suit those potential investors whose temperaments aren’t suited to a long-term focused, active approach. The last thing you want to do is put yourself off investing entirely by losing money chasing unrealistic gains. It might look glamorous when one of your friends decided to bet the house on Zip Co Ltd (ASX: Z1P) shares and rakes in a massive gain when Zip goes from $6 to $10 (as is what happened last month). But this isn’t too different from going to the casino and putting it all on red in my eyes. And it is not glamorous in the slightest when the odds cut the other way.

If you’re a thrill-seeker and bring that attitude to the share market, a passive strategy might be a better way to go. The share market isn’t a place for high-octane entertainment, in my opinion. Instead, as legendary investor Warren Buffett once said, it’s instead a place where wealth is transferred from the impatient to the patient. If you’re not ‘the patient investor’ that Buffett speaks of, chances are you’ll end up funding someone else’s retirement.

Foolish takeaway

But if you genuinely want to start a journey as an active share picker who looks for the best businesses to invest in, you can always start with ETFs and work your way up to finding individual companies as your experience grows. Understanding yourself is the first step to becoming a great investor. There’s no shame in going for a passive approach if it suits you best. You’ll still be far better off in the long run that those who don’t invest at all.

More reading

• 3 simple ways to save more cash to buy ASX shares today!
• Here’s how to make a $1 million portfolio by investing $1,000 a month
• Why investing more in super can turbo charge your retirement plans
• Here’s how much money you can actually make from investing in ASX shares
• 2 ASX ETFs I would buy for growth and income

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

The post Is a passive ASX investing strategy for you? appeared first on Motley Fool Australia.

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The SEEK Limited (ASX: SEK) share price has been on the move today. At the time of writing, the SEEK share price is up 8.1% to $20.78, and reached an intra-day high of $21.74. This compares with the S&P/ASX 200 Index (ASX: XJO) which has risen 0.9% to 5,946 points.

While the company has released no new news to the market, let’s take a look at what could be driving these gains.

Zhaopin investment

Overnight, international markets revealed that major e-commerce provider Alibaba Group Holding Ltd (NYSE: BABA) could invest in SEEK’s Chinese business, Zhaopin. The reported investment is said to be worth hundreds of millions of dollars in the online job ads company.

Should the speculation materialise, SEEK’s partnership with Alibaba would be a major push for greater presence in the Chinese market. Alibaba’s large customer base and reach closely associated with Zhaopin, would strengthen the online job ads brand positioning and revenue streams.

In its FY20 results, Zhaopin reported an average of 4.9 million unique visitors per day. This was a 29% on the previous corresponding year. Net income for the financial year ending 30 June came to $42.2 million. This was underpinned by performance to revenue from business process outsourcing as well as cost efficiencies taken during COVID-19.

China’s urban unemployment levels have been steadily decreasing from a record high of 6.2% reached in February. Since the re-opening of the economy, latest figures reveal that the urban unemployment rate dropped to 5.7% in June and July.

The country is expecting a record 8.74 million graduates to enter the job market this summer which in turn will benefit Zhaopin. In addition, the Chinese government also pledged to support job growth with a raft of initiatives to be announced.

Recent Zhaopin news

Late last month, news broke out that several shareholders were weighing up their options in regards to their holdings. Zhaopin’s investors FountainVest Partners Co. and Hillhouse Capital Management were reportedly looking to reduce their stake through a $500 million private placement.

As the firm’s gauge potential investor interest, it was noted that the owners intend to retain a collective 51% stake in the Chinese online recruitment business. The additional holding is anticipated to be sold off in stages.

The SEEK share price sharp recovery

The SEEK share price has strongly recovered from the onset of COVID-19 which halted the global economy. The SEEK share price hit a 52-week low of $11.23 and has gained 87% in the last 6 months.

At a market capitalisation of $7.37 billion, I think that SEEK share price is good value as it closes in on its 52-week high of $24.09. The world’s economic climate is starting to show sunnier days ahead and I believe SEEK will become a much leaner business post COVID-19.

More reading

• Bear vs Strong Bear: Choosing the right hedge for your portfolio
• Firefly (ASX:FFR) share price tanks despite further positive drill results
• Here’s how I would spend $10,000 on ASX shares right now
• Brokers upgraded JB Hi-Fi (ASX:JBH) share price and this other ASX stock to “buy” today
• The Tabcorp (ASX:TAH) share price is flat following ASX announcement

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has recommended SEEK 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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According to the latest cash rate futures, the market is becoming increasingly confident that another rate cut is coming.

The latest futures contracts are pointing to a 64% probability of a cut to zero in October and a 36% probability of rates remaining on hold at 0.25%.

Whatever does happen next month, I feel it is safe to say that rates will be staying at very low levels for some time to come.

In light of this, I think ASX dividend shares will remain the best option for income investors for the foreseeable future.

But which ASX dividend shares should you buy? Here are two which I think could be great options for investors right now:

Coles Group Ltd (ASX: COL)

The first ASX dividend share I would buy is this supermarket giant. I like Coles due to its yield, defensive qualities, and positive long term growth outlook. The latter is underpinned by its strong market position, expansion opportunities, and focus on automation. Based on this and the current Coles share price, I estimate that its shares currently offer investors a fully franked ~3.2% FY 2021 dividend yield. I think this is very attractive in the current environment.

Wesfarmers Ltd (ASX: WES)

Another option to consider buying is Coles’ former parent, Wesfarmers. I think the conglomerate would be a great option right now due to its strong performance during the coronavirus pandemic and its positive long term outlook. The latter is thanks to its portfolio of solid businesses and particularly the Bunnings business. Bunnings has been performing exceptionally well during the crisis. This is a big positive given its importance to Wesfarmers’ overall earnings. In addition to this, I suspect that management may look to accelerate its growth with acquisitions in the near term. Based on the current Wesfarmers share price, I estimate that it offers a fully franked 3.5% FY 2021 dividend yield.

More reading

• Top brokers name 3 ASX shares to buy today
• 5 ASX shares to avoid in October
• 3 ASX dividend shares to buy in a downturn
• How to position your ASX share portfolio for a downturn
• 3 simple ways to save more cash to buy ASX shares today!

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

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The S&P/ASX 200 Index (ASX: XJO) is down around 4% or about 250 points since its high on 25 August. 

Failing to break past the 6,200 point barrier multiple times has now led to a steady decline in the market. For those investors holding ASX 200 companies in their portfolio, this can be a little daunting. Choosing the right hedge is important if you are looking for portfolio protection.

What is hedging?

A hedge reduces risk of the overall portfolio. Its kind of like having an insurance policy.

I think hedging is sometimes over-complicated in the market. This can be quite confusing, particularly for newer investors. One thing to understand is that a hedge is normally an additional investment. As investors, you have the ability to purchase certain assets that can ‘offset’ the risk of loss.

This is possible in all markets and all asset classes, not only shares. It’s a concept that you can embrace and deploy to protect a portfolio without needing to sell your shares.

Of course, as any transaction imposes a potential tax impact or future impact, you should always consult an accountant and a financial advisor. However, generally, you can purchase these ‘hedge’ assets very easily and apply instant levels of protection. It’s an effective measure when the market looks rocky.

2 popular exchange-traded funds (ETF) used for hedging ASX 200 share portfolios are: BetaShares Australian Equities Bear Hedge Fund (ASX: BEAR) and BetaShares Australian Strong Bear Hedge Fund (ASX: BBOZ).

These ETFs are designed for slightly different purposes. So let’s compare.

BetaShares Australian Equities Bear Hedge Fund

‘Bear’ is an appropriate name for a hedge fund used to combat a bear market.

Even when we aren’t quite yet in a ‘bear market’, we can use Bear as a hedge against potential corrections.

About Bear

Bear aims to produce returns that are negatively correlated to the returns of the ASX 200. If the ASX 200 moves -1%, Bear can be expected to be positive +0.9 – 1.1%.

This is a really interesting concept. Negative correlation means the effect will be the opposite of the market movement. I say this to make it clear that it works both ways. For example, if you were to purchase Bear in a rising ASX market, it would effectively lose value. This fund requires active management.

These are the top 3 uses for Bear:

Hedging

Protect portfolios from market declines. No need to sell your existing holding if you don’t want to

Profiting

Astute investors will have worked out that if Bear increasing in value in a falling market, it can also be used for profit purposes. 

Convenience

Purchasing Bear units is simple and fast. You can purchase units the same way you purchase shares. 

BetaShares Australian Strong Bear Hedge Fund 

‘Strong Bear’ is also an appropriate name here. You have to hand it to BetaShares, their naming skills are up there.

About Strong Bear

Strong Bear aims to produce magnified returns that are negatively correlated to the returns of the ASX 200. If the ASX 200 moves -1%, it can be expected to be positive +2 – 2.75%.

Therefore, active management is even more important for Strong Bear.

Investing tactics are more or less the same as for Bear above.

Deciding on Bear vs Strong Bear

One thing you will notice above is that the multiplier factor is different between our 2 bears.

• Bear – 1% fall in market produces +0.9 – 1.1%
• Strong Bear – 1% fall in market produces +2 – 2.75%

This multiplier is the key to making a decision.

• If you have a lot of cash ready to deploy as a hedge, you might prefer Bear.
• If you have less cash at the ready, you might prefer Strong Bear.

As Strong Bear has a higher multiplier factor, you need less cash in the fund to produce a higher return on the way down.

Foolish Takeaway

Negative correlation ETFs are avoided by investors at times, as they seem risky and are poorly understood. They just require you to pay a little more attention.

The great thing is that they can be purchased instantly, the same as shares. This means that you can purchase them on the day of a market crash, if you had to. If you prefer to be a little more prepared, they can be purchased ahead of time.

The number one thing to be aware of is that the market could move either way. 

More reading

• SEEK (ASX:SEK) shares surge 9% today. Here’s why.
• Firefly (ASX:FFR) share price tanks despite further positive drill results
• Here’s how I would spend $10,000 on ASX shares right now
• Brokers upgraded JB Hi-Fi (ASX:JBH) share price and this other ASX stock to “buy” today
• The Tabcorp (ASX:TAH) share price is flat following ASX announcement

Motley Fool contributor glennleese owns shares of BetaShares Australian Equities Strong Bear Hedge Fund. 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 Firefly Resources Ltd (ASX: FFR) share price is tanking even after management announced more good news at its Yalgoo gold project.

Shares in the explorer crashed 19.6% to $0.18 during lunch time trade as the broader market is rallying.

The All Ordinaries (Index:^AORD) (ASX:XAO) and the S&P/ASX 200 Index (Index:^AXJO) gained around 1% each with every sector trading in the black at the time of writing.

Second drill results fail to save the Firefly share price

But the Firefly share price got swatted as it announced “standout” intercept of 48 metres at 1.71 grams a tonne (g/t) of gold from 33 metres at its project in Western Australia.

The miner said this is the widest “true-width” or “across BIF” intercept drilled to date at Melville. It correlates well with a historical “scissor” drill-hole of 56m @ 1.34g/t from 16m.

These intersections were drilled at opposing angles to each other and validate the potential for a large volume of consistent shallow BIF-hosted gold mineralisation at Melville.

Profit takers strike

But investors may have decided to take some profit off the table today given that the stock had raced up to a one-and-a-half year high since the start of the month.

The rally was triggered by an earlier announcement on 7 September, which reported spectacular gold hits from maiden drill program at Yalgoo.

The initial results came from the first four reverse circulation (RC) drill holes that uncovered 1m at 1,439.55g/t within a broader zone of 6m at 244.91g/t from outside the historical resource envelope at the Melville Deposit.

High expectations

Perhaps this first set of results set a high bar for expectations that today’s findings could not jump over.

“We have had an exciting start to our maiden drilling program at the Yalgoo Gold Project,” said Firefly’s managing director, Simon Lawson.

“Our inaugural program at the Melville Gold Deposit has delivered a mixture of exciting high-grades and thick wide zones of gold mineralisation at shallow depths.

“This drilling gives us confidence that the historic geological interpretation and mineral resource estimate at Melville was done in a reasonably systematic and robust manner.”

What’s next for the FFR share price

While the stock failed to hold its ground today, shareholders will be hoping that the dip is temporary given the big rise in the gold price.

The next catalyst for the stock may come next week as the miner embarks on the next phase of its 10,000m drill program.

The Yalgoo Project is located 175km east of Geraldton and encompasses a 600km² tenement package. The project covers an entire historical goldfield that has an extensive history of high-grade gold production but has had no exploration for the past 15 years.

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Motley Fool contributor Brendon Lau 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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