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The Monadelphous Group Limited (ASX: MND) share price will be on watch this morning after the release of a very positive announcement.

What did Monadelphous announce?

This morning the engineering company announced that it has secured construction and maintenance contracts in the resources sector worth a combined value of approximately $120 million.

According to the release, two of the contracts Monadelphous has been awarded relate to the WAIO Asset Panel Framework Agreement it has previously signed with mining giant BHP Group Ltd (ASX: BHP).

The first contract is to provide structural, mechanical, and electrical upgrades at the Newman Hub site in the Pilbara, Western Australia. Work will commence immediately and is expected to be completed before the end of 2021.

Whereas the second contract is associated with the dewatering of surplus water at the Jimblebar mine site in Newman, Western Australia.

Olympic Dam.

Pleasingly, there could be more contracts coming Monadelphous’ way in the future from BHP.

The company also revealed that it has entered into an Olympic Dam Asset Projects Framework Agreement with BHP to provide it with multi-disciplinary construction services at the Olympic Dam copper mine in South Australia.

Monadelphous has secured its first contract under the agreement. This is for the supply and construction of acid storage tanks and connection to the existing operating acid plant.

Saraji Mine.

Finally, the company advised that its Maintenance and Industrial Services division has also been awarded a contract.

This contract will see the company undertake a major dragline shutdown for the BHP Mitsubishi Alliance at its Saraji Mine, located near Dysart, Queensland. Management advised that the work will be completed by the end of December 2020.

With the Monadelphous share price down over 37% since the start of the year, shareholders will no doubt be hoping that these contracts get it heading in the right direction again.

More reading

• Brokers name 3 ASX shares to buy right now
• BHP’s climate plan is rubbish: shareholder group
• IGO share price surges on potential sale of Tropicana
• Why the Rio Tinto share price is outperforming its peers
• An all-weather ASX resources shares strategy

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

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The S&P/ASX 200 Index (ASX: XJO) has just notched up its fourth week in a row in the red, giving investors another hefty 1.1% loss for the week. It caps off a wild and furious month, which has seen the ASX 200 index fluctuate between 6,167 points and the 5,859 points the index finished up at on Friday.

We now start this week at the lowest point the ASX has seen since early June – not exactly a comfortable position for investors to be in. The last time the ASX 200 had four weeks in the red, it was back in February and March and we all know how that felt. Thankfully, the past four weeks haven’t been anything close to how the markets were in March, but we still aren’t going in the direction that most of us would like.

So the ASX was again dominated last week by the (frankly) crazy levels of volatility we saw over in the United States, particularly from tech shares. We saw moves of more than 8% over just a day or two in Apple Inc. (NASDAQ: AAPL) shares last week, just to give some context (no mean feat for a US$2 trillion+ company). And Tesla Inc (NASDAQ: TSLA) – perhaps the poster-child for tech volatility these days – saw its shares fall by more than 16% on Tuesday (US time), backed up by an 11% rise the following day.

It was ASX tech shares as well as some blue chips that were the big draggers on the index last week. The S&P/ASX All Technology Index (ASX: XTX) was down more than 3% last week, as buy now, pay later (BNPL) shares blew off steam. Combining the general tech shares sell-off with news that both Commonwealth Bank of Australia (ASX: CBA) and National Australia Bank Ltd. (ASX: NAB) are launching no-interest credit card products with a BNPL spin cooled the payments space significantly. Afterpay Ltd (ASX: APT) shares were down 5.54% for the week, while Zip Co Ltd (ASX: Z1P) shed 11.4%, including 6.7% on Friday alone.

It’s also worth mentioning that shares of mining giant Rio Tinto Limited (ASX: RIO) were up 4.48% for the week. It followed an announcement on Friday that its CEO JS Jacques will be stepping down in the fallout over the company’s much-criticised destruction of the Juukan Gorge rock shelters in Western Australia’s Pilbara region.

How did the markets end the week?

It was another topsy-turvy week for ASX 200 shares. As we flagged earlier, the ASX 200 index fell 1.12% for the week, after opening at 5,925.5 points on Monday and closing at 5,859.4 points on Friday. Monday saw a good start to the week with a 0.3% gain, which was doubled down on Tuesday with a substantial 1.1% rise. But it was all downhill from there (and not in a good way). Wednesday brought with it a nasty 2.2% slide, which was countered on Thursday with a 0.5% rebound. But Friday saw another day of selling, with ASX 200 shares losing another 0.83%.

Meanwhile, the All Ordinaries Index (ASX: XAO) also slumped 1.14% after falling from 6,108.8 points on Monday to 6,038.9 points by Friday.

Which ASX 200 shares were the biggest winners and losers?

Time to get the kettle on for our Foolish gossip pages. So let’s see which ASX shares were making investors the happiest and the saddest last week. As always, we’ll start with the losers:

Worst ASX 200 losers	% loss for the week
Nearmap Ltd (ASX: NEA)	(15.5%)
Origin Energy Ltd (ASX: ORG)	(12%)
Resolute Mining Limited (ASX: RSG)	(11%)
Graincorp Ltd (ASX: GNC)	(10.5%)

Taking out last week’s wooden spoon was aerial mapping company Nearmap. Nearmap has been issuing shares as part of a capital raising which concluded last week and appears to be the primary catalyst for this company’s drop. Remember, a capital raising decreases the value of a company’s shares by increasing the supply.

Next up we had utility provider Origin. There was no major news out of Origin last week, but the company is now down around 20% over the past month. Clearly, investors haven’t found a bottom for this falling knife just yet.

ASX 200 gold miner Resolute was next up on investors’ hit list. A lacklustre gold price in recent weeks, as well as problems in one of the company’s mines in Mali, appear to be behind this share’s 11% fall.

Lastly, Graincorp was also under pressure after some negative broker notes out last week, despite no major news out of this company either.

Now with the losers out of the way, let’s have a look at the week’s winning shares:

Best ASX 200 gainers	% gain for the week
Nufarm Limited (ASX: NUF)	12.9%
Clinuvel Pharmaceuticals Limited  (ASX: CUV)	7.9%
Vocus Group Ltd (ASX: VOC)	7.9%
Sims Ltd (ASX: SGM)	7.8%

Leading last week’s gainers was chemical manufacturer Nufarm, despite (again) no major news out of the company. Nufarm was the beneficiary of some positive broker notes, however, which is probably the reason behind its near 13% gain.

Next up we had biopharma company Clinuvel, which got investors excited when it announced it plans on expanding the range of potential applications for its flagship Scenesse product.

Telecom Vocus was next up, and there’s no obvious reason why Vocus shares rose 7.9% last week. The shares have been on a bit of a run lately (up more than 25% in the past month), so perhaps some investors are just jumping on the bandwagon with this one.

Finally, we had steel recycler Sims, which benefitted from some positive broker attention.

What does this week look like for the ASX 200?

After the volatility of the past few weeks, predicting what this week might have in store is even more of a fool’s game than usual. I’ll be (once again) watching the US markets this week, as they seem to be setting the ASX’s agenda these days. Tech shares have been front and centre of the action recently, so I would wager that watching what Apple, Tesla and other big US tech names are doing this week will give us a fair sense of how the ASX 200 is going to travel. Especially with tech and BNPL shares like Afterpay.

Other than that, it’s still a sea of relative calm on the ASX boards after the wild earnings month we’ve just endured in terms of news and company developments. So nothing more to do now than grab the popcorn, fellow investors!

But before you do, here’s a snapshot into how the major ASX 200 blue chip shares are looking as we start a new week:

More reading

• 5 things to watch on the ASX 200 on Monday
• 3 ASX 200 shares I’d buy right now
• 5 things to watch on the ASX 200 next week
• These were the best performing ASX 200 shares last week
• These were the worst performing ASX 200 shares last week

Sebastian Bowen owns shares of National Australia Bank Limited, Newcrest Mining Limited, Telstra Limited, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Apple and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd., Nearmap Ltd., and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited and Telstra Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO, COLESGROUP DEF SET, Transurban Group, Wesfarmers Limited, and Woolworths Limited. The Motley Fool Australia has recommended Apple and Nearmap 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.

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At the current share price I’d buy A2 Milk Company Ltd (ASX: A2M) shares this week.

I really like the infant formula company. It has been a wonderful investment since it listed on the ASX and I think there is plenty more growth potential for the coming years.

Let’s just quickly recap the main highlights of the FY20 result:

A2 Milk FY20 result

For shareholders, the key figure was that earnings per share (EPS) rose 33.5% to NZ 52.39 cents. Net profit after tax (NPAT) rose by 34.1% to NZ$385.8 million. The EPS and profit growth are key for A2 Milk shares going higher

This growth was driven by revenue increasing by 32.8% to NZ$1.73 billion. Earnings before interest, tax, depreciation and amortisation (EBITDA) jumped by 32.9% to NZ$549.7 million. The EBITDA margin was 31.7% against a longer-term target of 30%.

Group infant nutrition revenue rose by 33.8% to NZ$1.42 billion. China label infant nutrition grew strongly, more than doubling to NZ$337.7 million. Overall China and other Asia segment revenue rose 65.1% to NZ$699.1 million.

USA milk revenue also rocketed higher, up 91.2% to NZ$66.1 million.

One of the great things about the result was there was growth across the board. Even the ANZ segment, which has been around the longest, managed to grew revenue by 14.6% to NZ$965.7 million and EBITDA increased by 19.9% to NZ$465.6 million.

Operating cash flow generated was NZ$427.4 million and it finished with a closing cash balance of NZ$854.2 million.

It has a great future

A2 Milk has a very compelling range of products. But it takes a while to win over new customers when they first come across the product. That means that the new store distribution it added in FY20, particularly in the second half, could continue to add new customers and revenue for a while. So I think A2 Milk has growth built-in for a couple of years even if it doesn’t increase its store distribution number.

In the second half of FY20 it grew its store footprint from 18,300 stores to 19,100 stores in China. In the US in FY20 it increased its store count to 20,300 stores, up from 17,500 stores from December 2019 and 13,100 stores at June 2019.

A2 Milk shares have plenty of growth potential from the US and China alone in my opinion.

It’s also just starting to generate earnings in Canada. In March 2020 it entered into an exclusive licensing agreement with Agrifoods International for the production, distribution, sales and marketing of A2 Milk branded liquid milk for the Canadian market. A2 Milk has provided access to intellectual property and marketing assets as well as proprietary systems and know-how relating to the local sourcing and processing. Agrifoods will distribute the products and fund the venture. The product has recently been launched to a number of customers in Western Canada.

In FY21 A2 Milk is expecting continued strong revenue growth whilst investing in marketing and the organisational capability. It’s expecting an FY21 EBITDA margin of 30% to 31%. It’s aiming for a longer-term EBITDA margin target of 30%.

Why I think the A2 Milk share price is a buy

A2 Milk shares have plenty of earnings growth potential, much more than the market is giving it credit for in my opinion.

The A2 Milk share price has fallen 16% since 18 August 2020 despite still having a very attractive growth runway.

FY21 will face some difficulties. Management said there will be higher raw and packaging material costs partially offset by price increases, an increase of marketing costs, foreign currency benefits not likely to be replicated and COVID-19 pantry stocking unlikely to reoccur again.

A2 Milk is now just trading at 24x FY23’s estimated earnings. I think this is a really good price to buy A2 Milk shares considering its global growth aspirations. A2 Milk may soon decide to pay out some excess capital to shareholders, which would improve shareholder returns.

More reading

• 3 ASX 200 shares I’d buy right now
• 3 ASX shares for beginners to buy
• Top brokers name 3 ASX shares to sell today
• Why you shouldn’t be concerned by the high PE multiples of ASX tech shares
• Are these the ASX growth shares to buy right now?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Investors that are looking to add some quality dividend shares to their portfolio this week might want to consider the ones listed below.

I believe these two ASX dividend shares are among the best on offer on the Australian share market right now. Here’s why I would buy them:

Rural Funds Group (ASX: RFF)

I think this agriculture-focused property group would be a great option for income investors. I believe Rural Funds is well-positioned to grow its distribution at a solid rate over the 2020s. This is because of its high quality portfolio of assets spread across several different industries and their very long leases. In respect to the latter, Rural Funds currently has a weighted average lease expiry of almost 11 years. It also has rental increases built into these contracts.

I expect this to allow the company to deliver on its target of increasing its distribution by 4% per annum over the long term. This certainly looks to be the case in FY 2021, with management intending to increase its distribution to 11.28 cents per share. Based on the latest Rural Funds share price, this equates to a 4.9% yield.

Telstra Corporation Ltd (ASX: TLS)

Another ASX dividend share I would buy is Telstra. After a decade of disappointment, I’m confident that the 2020s will be a lot more positive. This is thanks to some major changes that are happening at the company right now with its T22 strategy. This is stripping out costs, making it more efficient, and simplifying its business.

But perhaps best of all, is that the end of the NBN rollout is now in sight. When this headwind finally ends, I expect Telstra to return to growth again. Until then, I’m optimistic that the company will be able to sustain its dividend if it changes its policy to a free cash flow based one. Based on this and the current Telstra share price, this would mean a very generous fully franked 5.6% dividend yield.

More reading

• Why ASX dividend shares are still king in 2020
• ASX dividend shares raising their dividends like clockwork
• Where to invest your JB Hi-Fi (ASX:JBH) dividends today
• Is the Telstra (ASX:TLS) dividend sustainable? This analysts thinks it is
• Why I would buy Telstra (ASX:TLS) and this outstanding ASX 50 share

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

The post Why I would buy Telstra (ASX:TLS) and this ASX dividend share appeared first on Motley Fool Australia.

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On Friday the S&P/ASX 200 Index (ASX: XJO) was out of form and sank notably lower. The benchmark index fell 0.8% to 5,859.4 points.

Will the market be able to bounce back from this on Monday? Here are five things to watch:

ASX 200 expected to rise.

It looks set to be a better day of trade for the ASX 200 index. According to the latest SPI futures, the ASX 200 is poised to start the week higher. Current futures contracts are pointing to a 4-point or 0.1% gain at the open. This follows a reasonably positive night of trade on Wall Street on Friday which saw the Dow Jones rise 0.5%, the S&P 500 edge slightly higher, and the Nasdaq fall 0.6%.

Oil prices mixed.

Energy shares such as Beach Energy Ltd (ASX: BPT) and Woodside Petroleum Limited (ASX: WPL) will be on watch today after a mixed night of trade for oil prices on Friday. According to Bloomberg, the WTI crude oil price rose 0.1% to US$37.33 a barrel and the Brent crude oil price dropped 0.6% to US$39.83 a barrel. Oil prices recorded their second straight week of declines.

Tech shares on watch.

Tech shares including Afterpay Ltd (ASX: APT) and Appen Ltd (ASX: APX) could start the week in the red after their U.S. counterparts continued their slide. The tech-heavy Nasdaq index tumbled 0.6% lower on Friday night and current Nasdaq futures are pointing to further declines tonight. The S&P/ASX All Technology Index (ASX: XTX) has lost 9.3% of its value since the start of the month.

Gold price drops lower.

The shares of Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) could come under pressure today after the gold price softened. According to CNBC, the spot gold price fell 0.8% to US$1,947.90 an ounce on Friday night. Despite this decline, the precious metal recorded a small weekly gain due to economic recovery concerns.

Vocus given conviction buy rating.

The Vocus Group Ltd (ASX: VOC) share price could be on the rise today after analysts at Goldman Sachs put the telco on its conviction buy list. Goldman believes Vocus delivered a solid FY 2020 result and constructive FY 2021 guidance. It notes that it is the only telco guiding to growth this year. The broker has a price target of $4.70 on its shares.

More reading

• How to tell if this is the end of the ASX bull market
• 3 ASX 200 shares I’d buy right now
• Forget day trading and get rich with these top ASX shares
• Are higher P/E ratios really here to stay?
• 5 things to watch on the ASX 200 next week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO and Appen 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.

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I think the healthcare sector is a great place to look for buy and hold options.

This is because in this sector you’ll find a number of companies that have the potential to grow significantly in the future thanks to favourable tailwinds and new technologies.

Three small cap ASX healthcare shares I am watching closely are listed below. Here’s why I like them:

Alcidion Group Ltd (ASX: ALC)

Alcidion is a growing informatics solutions company. It provides software that aims to improve the efficacy and cost of delivering services to patients and reduce hospital-acquired complications. It has been winning a number of contracts over the last couple of years in the UK with the NHS and privately in Australia.

Telix Pharmaceuticals Ltd (ASX: TLX)

Another small cap ASX healthcare share to watch is Telix Pharmaceuticals. It is a clinical-stage biopharmaceutical company developing an advanced pipeline of molecularly-targeted radiation (MTR) products. I think MTR is an exciting treatment approach. It chemically links radioactive isotopes to target molecules specific to cancer cells. One key therapy in its portfolio is TLX591, which is also known as Illumet. It is a metastatic prostate cancer radionuclide therapy. Management estimates that it has a $2 billion market opportunity in late-stage disease alone.

Volpara Health Technologies Ltd (ASX: VHT)

A final small cap ASX healthcare share to look at is Volpara. It is a healthcare technology company that provides software which leverages artificial intelligence imaging algorithms to help with the early detection of breast cancer. It has been a very strong performer in recent years and has consistently grown its market share in the United States at a strong rate. I expect more of the same in the coming years and for recent acquisitions to start supporting the growth of its average revenue per user metric. Combined, this should underpin strong revenue growth over the next decade.

More reading

• 3 very exciting small cap ASX shares to watch
• Why IOOF, SKYCITY, Starpharma, & Telix shares are storming higher
• Alcidion share price drops despite FY20 revenue growth
• 3 exciting small cap ASX shares to watch in FY 2021
• Why you should add these small cap ASX shares to your watchlists

James Mickleboro owns shares of TELIXPHARM DEF SET. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Alcidion Group Ltd and VOLPARA FPO NZ. The Motley Fool Australia has recommended Alcidion Group Ltd and VOLPARA FPO NZ. 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 roller coaster ride on equity markets is enough to send your head spinning with many investors questioning if this is the end of the bull market.

The sharp fall in the share prices of tech darlings both in the US and Australia is sapping confidence.

It’s not only the crash in the Tesla Inc (NASDAQ: TSLA) share price along with other FAANG favourites that I am talking about.

Tech standing on the neck of the bull market

The pullback in the Afterpay Ltd (ASX: APT) share price, Appen Ltd (ASX: APX) share price and Xero Limited (ASX: XRO) share price are also rattling the bull market cage.

The rest of the S&P/ASX 200 Index (Index:^AXJO) hasn’t faired too well either. It retreated around 1% for the week and shed 5% since hitting its COVID-19 high less than a month ago, thanks to a pleasing August reporting season.

Is the bull party over and should you be taking profits now? I don’t think we are at a sinister turning point, but I will admit this call is a bit of crystal ball gazing on my part.

Bears still yielding to bulls

But there are three things my crystal ball is showing me to support the belief that ASX investors should stay hold the line.

The first is the yield curve. This is the difference between the two-year bond yield and the 10-year yield on US government bonds.

While equity markets were whiplashed and volatility spiked, the gap between the two yields remains more than 50 basis points apart.

The fact that the 10-year is providing a fatter return than the 2-year is promising. The curve tends to be steep when credit markets are anticipating growth and curve flattens, or even inverts, when the outlook sours.

Earnings still positive in uncertain world

The second point is that company profits are still growing on the most part. This is true for the ASX as it is for the US share market in general.

The “good performance” for ASX stocks is no doubt artificially bolstered by government handouts, but analysts are still tipping earnings growth for FY21 when these measures mostly expire.

I doubt we will slip into a bear market when earnings are expanding, even though the growth isn’t particularly exciting. But hey, growth is growth.

Least dirty shirt

The third reason I think the bull market will survive is the lack of alternatives. Love them of hate them, equities are still the best major asset class for Australian investors.

If you did cash in your chips now, where would you put the cash for the medium to longer-term? Credit investments aren’t dead (and may even outperform in the short-term if the RBA cuts rates to 0.1% as some speculate), but shares still offer the best risk-reward, in my view.

ASX 200 correction still a strong possibility

However, there are two caveats to my optimistic outlook. The first is that the ASX 200 may drop into correction territory in the near-term.

This means there may be another 5% plus drop for our market if this happens – and that’s a good reason to keep some powder dry.

Rotation from growth to value not over

The second is that the dramatic price-earnings (P/E) expansion that boosted many market darlings is probably over as we move into a “late-stage” bull market.

I know this prediction was made before and proved to be wrong. But there have been recent signs of this transition.

As the bull market pushes on each week or month, it increases the probability that value stocks will dominate.

More reading

• Forget day trading and get rich with these top ASX shares
• Are higher P/E ratios really here to stay?
• 5 things to watch on the ASX 200 next week
• Buy these ASX growth shares after the market selloff
• 3 five-star ASX stocks to buy right now

Brendon Lau has no position in any of the stocks mentioned. Connect with me on Twitter @brenlau.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of AFTERPAY T FPO and Appen 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.

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Once again, a large number of broker notes hit the wires last week. Some of these notes were positive and some were bearish.

Three sell ratings that caught my eye are summarised below. Here’s why top brokers think investors ought to sell these shares next week:

ASX Ltd (ASX: ASX)

According to a note out of Morgans, its analysts have retained their reduce rating and lowered the price target on this stock exchange operator’s shares to $74.82. Morgans made the move following the release of the company’s activity statement for the month of August. The broker felt that ASX’s update was a touch weak, particularly in respect to futures. In light of this, it has reduced its earnings estimates and its valuation accordingly. The ASX share price was changing hands for $82.76 on Friday.

Fortescue Metals Group Limited (ASX: FMG)

A note out of Morgan Stanley reveals that its analysts have downgraded this iron ore producer’s shares to an underweight rating with an improved price target of $14.50. Although the broker has upgraded its iron ore price forecasts to reflect strong steel production in China, it isn’t enough to stop it downgrading its shares. Its analysts believe Fortescue’s valuation is looking stretched at the current level and the risk/reward on offer isn’t sufficient. The Fortescue share price ended the week at $17.34.

Mineral Resources Limited (ASX: MIN)

Analysts at Morgan Stanley have also downgraded this mining and mining services company’s shares to an underweight rating with an improved price target of $23.50. As with Fortescue above, the broker made the move on valuation grounds after some exceptionally strong gains in 2020 for the Mineral Resources share price. The company’s shares are up over 64% year to date thanks to its exposure to the rising iron ore price. This left them trading at $27.15 at Friday’s close.

More reading

• Are higher P/E ratios really here to stay?
• 3 top ASX dividend shares I would buy next week
• A definitive guide to September ASX share trends
• 2 ASX shares I would buy again and one I regret
• Why the Rio Tinto share price is outperforming its peers

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

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Buying crashing stocks to make a million may not be an appealing idea to many investors at the present time. The uncertain global economic outlook may cause them to buy other assets, such as gold and Bitcoin, in the hope of generating higher returns than those offered by the stock market.

However, the track record of equity markets suggests that they offer excellent long-term recovery potential. As such, buying cheap stocks today, and holding them for the long run, may be a better means of obtaining a seven-figure portfolio than purchasing gold or Bitcoin.

Crashing stocks with recovery potential

While it may be natural to initially view crashing stocks as potential risks to your financial prospects, they could offer excellent long-term capital returns. Certainly, this process is likely to take a sustained period of time. And, in the meantime, further falls could be ahead even for high-quality businesses that face difficult operating conditions. However, in the coming years, stocks that are experiencing major falls and high volatility today could become stunning recovery shares.

The stock market’s track record suggests that a long-term recovery after the recent market crash is very likely. It has experienced several major bear markets over recent decades, and has been able to post new record highs in the bull markets that have followed them. Therefore, while stocks that have fallen heavily may take some time to return to valuations that are similar to their historic averages, a reversion to the mean seems to be a likely long-term outcome.

Gold and Bitcoin

Of course, some investors may feel that recent trends which have pushed Bitcoin and the gold price higher will continue. As such, they may decide to avoid crashing stocks in favour of the precious metal and the cryptocurrency.

However, gold’s defensive appeal is a major reason why its price has soared to a record high. As the world economy returns to a higher growth rate, and investors become more optimistic about the outlook for undervalued businesses, they may shift their capital towards riskier assets such as stocks. This could limit gold’s capital returns from what is a very high current price level.

Likewise, buying Bitcoin instead of crashing stocks may not produce high returns. The virtual currency faces competition from other cryptocurrencies that may cause investor demand to moderate. Since its price is based solely on demand and supply due to its lack of fundamentals, this may lead to a disappointing performance compared to the stock market in the coming years.

Making a million

Making a million from crashing stocks is a realistic prospect for many investors over the long term. Indexes such as the FTSE 100 and S&P 500 have produced annualised total returns of at least 8% since their inceptions. Assuming a similar rate of return on a monthly investment of $750 would produce a seven-figure portfolio within 30 years.

However, by purchasing cheap stocks after the market crash, you could achieve a higher rate of return as the market recovers. This may allow you to obtain a seven-figure portfolio at an even faster pace.

More reading

• Top brokers name 3 ASX shares to sell next week
• 3 ASX 200 shares I’d buy right now
• Forget day trading and get rich with these top ASX shares
• Are higher P/E ratios really here to stay?
• Top brokers name 3 ASX shares to buy next week

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

The post Forget gold and Bitcoin. I’d buy crashing stocks today to make a million appeared first on Motley Fool Australia.

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I think there are some great shares in the S&P/ASX 200 Index (ASX: XJO) that are worth buying.

However, there are some ASX shares that are trading with very high expectations like Afterpay Ltd (ASX: APT). There are some ideas that are probably near their (medium-term) peak like Fortescue Metals Group Limited (ASX: FMG). I also think that some shares face a disappointing future compared to the past like Westpac Banking Corp (ASX: WBC).

That only leaves a certain group of businesses that I would be happy to invest in at today’s prices. Here are three ASX 200 share ideas I’d buy today:

A2 Milk Company Ltd (ASX: A2M)

I think that A2 Milk is the one of the highest-quality ASX 200 shares that investors can choose. It has done extraordinarily well for a number of years. It grows its profit and revenue year after year. In FY20 it grew its revenue and profit by around a third – a strong result.

A2 Milk is growing strongly in both China and the USA. These are much larger markets than Australia and New Zealand. I believe that A2 Milk can become a much larger business over the next decade by doing well in just the US and China. However, places like Canada and Europe are large long-term opportunities for further growth. I don’t think the market is appreciating how long A2 Milk’s growth runway is. 

The A2 Milk share price has dropped 16% since 18 August 2020. That puts it at 24x FY23’s estimated earnings.

Magellan Financial Group Ltd (ASX: MFG)

Magellan is a leading ASX-listed fund manager. Most of its funds under management (FUM) is focused on international equities, not ASX shares.

I think Magellan is one of the highest-quality managers in Australia. I really like how it operates with an aim of investing in high-quality businesses across all of its investing strategies. The unlisted Magellan Global Fund has a solid performance over the past decade with average returns per annum of 16.1%.

The manager recently reached $100 billion of FUM (again) as it recovered from the COVID-19 share market crash. That’s a good milestone. 

Magellan has always been a great business. I’m excited by the different growth ideas and it’s intriguing to know that the retirement product is coming soon.

In recent weeks the Magellan share price has dropped 13%. Lower prices are better for a good business. It’s priced at 18x FY23’s estimated earnings with a current grossed-up dividend yield of 5.4%.

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

Soul Patts is a regular pick of mine because it’s genuinely one of the ASX shares I’d buy (and have bought) a lot for my portfolio. It’s actually one of the largest positions in my portfolio. The reason for that is that it’s a solid ultra-long-term pick. The investment conglomerate has been listed since 1903 and I think it could keep going for many more decades.

I like the idea of investing in businesses that I’d never have to sell. For starters, it limits capital gains tax events. Soul Patts could definitely be a hold-forever idea due to its investment house nature. It can steadily shift its investment holdings to the new opportunities over time. For example, it’s looking to invest in regional data centres.

Its existing portfolio of businesses are attractive. It owns fairly defensive names like TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW), Australian Pharmaceutical Industries Ltd (ASX: API), Clover Corporation Limited (ASX: CLV), agriculture, resources, financial services and swimming schools.

I like the underlying ASX share holdings and I really like the direction that Soul Patts is investing recently.

At the current Soul Patts share price it offers a grossed-up dividend yield of 4.1%.

Foolish takeaway

I think each of the above ASX 200 shares are really good ideas to buy today. At today’s prices I think each of them can beat the ASX 200 index return over the next few years, particularly A2 Milk with its international growth.

More reading

• 3 ASX shares for beginners to buy
• 5 things to watch on the ASX 200 next week
• These were the best performing ASX 200 shares last week
• ASX dividend shares raising their dividends like clockwork
• These were the worst performing ASX 200 shares last week

Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Clover Limited. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of A2 Milk and 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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