Tag: Motley Fool

The prospects for many dividend shares may be relatively uncertain after the market crash. In fact, some companies have cancelled their dividends to provide them with greater financial stability in the short run.

However, it is still possible to build a portfolio of dividend stocks that produces a growing passive income. Through obtaining a wide margin of safety and focusing on a company’s dividend cover, you can select the best stocks to buy right now.

Dividend cover after a market crash

The recent market crash has brought risk more sharply into focus for many investors. After all, the weak global economic outlook may mean that the operating conditions for many businesses come under pressure. This may make it more difficult for them to afford their current level of shareholder payouts.

Therefore, it is prudent to check the affordability of a company’s dividend before buying it. This can be done through dividing its net profit by dividends paid to provide a dividend cover multiple. A figure of one means that profits covered dividends once, while a higher figure means the company in question had headroom when making shareholder payouts.

Given the uncertain economic outlook and the potential for a second market crash, investors may wish to only purchase stocks that have ample headroom when making their dividend payouts. Otherwise, the chances of a dividend cut may be relatively high should the economic outlook deteriorate further.

Long-term dividend growth potential

As well as assessing the affordability of a company’s dividend after the market crash, understanding its potential to grow shareholder payouts in the long run could be a shrewd move. It may enable you to not only enjoy a higher income return compared to other assets today, but to obtain an inflation-beating rate of growth in the coming years that boosts your financial outlook.

Assessing a company’s dividend growth potential is, of course, subjective. However, by focusing on its growth strategy, considering the size of its economic moat, and understanding how its operating environment may be impacted by coronavirus, you can paint a picture of its potential for rising profitability and higher dividends.

A margin of safety

While the market crash has caused many dividend stocks to trade at dirt-cheap prices, some companies may merit a low valuation. For example, they may struggle to grow profitability in an uncertain economic period, or may endure a painful process of changing their business model in response to changing consumer trends

Therefore, it could be a good idea to demand a wide margin of safety when buying dividend stocks. This may help to reduce your overall risks, as well as improve your long-term total return prospects as the stock market gradually recovers from the challenges it has faced in 2020.

More reading

• IGO share price surges on potential sale of Tropicana
• Is the Telstra (ASX:TLS) dividend sustainable? This analysts thinks it is
• A guide to using the dollar-cost averaging strategy
• Should you buy these beaten down ASX 200 shares?
• Rio Tinto (ASX:RIO) announces CEO exit following Juukan destruction

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.

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Many investors leap into the share market with a lump sum amount hoping that all of their new ASX shares will rise. Unfortunately, this is hardly the case. While some ASX shares will indeed be in positive territory, chances are there will be a few in the red.

Without doing the proper research on the shares beforehand, you are exposing yourself to a great risk of it falling in value. It pays to have a plan of attack to protect your portfolio should your quality share drop in value due to small company hiccups or macroenvironmental factors.

Thus, enter the dollar-cost averaging strategy (DCA).

What is dollar-cost averaging?

DCA is a simple strategy that involves investing an amount of funds in the same ASX share at regular intervals over a period of time.

For example, say you invested $1,000 in Zip Co Ltd (ASX:Z1P) shares at $6.00 a piece. You would own 166 shares of Zip shares. If the share price of Zip fell by 10% (to $5.40) after you had bought the shares, the current value would be $896.40.

Now, some investors may be happy to just wait until the Zip share price goes back past $6.00 again before possibly selling or just sit on their original investment for the long term. However, if you employed a DCA strategy, when the Zip share price falls to $4.00, you might possibly buy another $1,000 worth. You would then have your original 166 shares plus an extra 250 shares from your latest investment.

This would total 416 Zip shares at a cost basis of $4.80. It may not seem like much, but this 20% discount is just from your first regular investment interval. Eventually, you would smooth out your purchase price over time and ensure you’re not dumping your money into the one share at a high price point.

DCA reduces the impact of market volatility on the overall purchase. It is known as a risk-reduction tool and can be very effective, especially in uncertain climates like the one we currently face.

It’s worth considering, however, that if you are buying Zip shares at regular intervals and the price keeps going up, you will be increasing your cost basis and essentially getting less value than if your had initially purchased all the shares at once. Similarly, should the Zip share price keep falling and not recover at all, DCA would not be a wise strategy to implement.

Foolish takeaway

DCA is suited to investors with a lower risk tolerance and a long-term investment horizon.

I apply the DCA strategy across most of my ASX share purchases and have done pretty well with it. 

Tiptoeing in small increments during a market dominated by COVID-19 news will protect your portfolio and help to avoid slumps. Obviously there is no guarantee of good returns on any investment, and it is still important to research any company you wish to own a part of.

But overall, I believe company research and using the DCA strategy is a great way to build serious wealth.

More reading

• Is the Zip (ASX:Z1P) share price a buy in the tech crash?
• Why the Laybuy (ASX:LBY) share price is tanking today
• The Zip (ASX:Z1P) share price is down 30% since August: is it a buy? 
• Afterpay and Brainchip were among the most traded shares on the ASX last week
• Afterpay, Zip founders team up for ‘Aussie Robinhood’ app

Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of 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.

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The recent market volatility has been very disappointing and weighed heavily on a number of ASX shares.

One positive is that I believe it has dragged the shares of some quality companies down to very attractive levels.

Two beaten down ASX 200 shares that I would buy are listed below. Here’s why I think they could be good value:

Altium Limited (ASX: ALU)

The Altium share price has been caught up in the tech selloff and is down 22% from its high. While this is disappointing for shareholders, I believe it is a buying opportunity for non-shareholders. This is because I’m confident that this electronic design software company has an exceptionally bright future ahead of it.

The key product in its portfolio is Altium Designer, which has exposure to the rapidly growing Internet of Things and artificial intelligence markets. These two markets are underpinning the proliferation of electronic devices globally and look set to drive strong demand for Altium Designer and its newly released cloud-based Altium 365 offering over the coming years. Management is aiming to grow its revenue to US$500 million by 2025-2026. This compares to revenue of US$189 million in FY 2020. Due to the quality of its offering and favourable industry tailwinds, I’m very confident it will get there.

CSL Limited (ASX: CSL)

The CSL share price has fallen just under 18% from its 52-week high. I think this is a buying opportunity for investors that are looking for long term options. This is because I believe the biotherapeutics giant is perfectly positioned to deliver consistently solid earnings growth over the next decade thanks to its CSL Behring and Seqirus businesses.

CSL Behring is the global leader in plasma therapies and the name behind immunoglobulins products such as Privgen and Hizentra. It also owns haemophilia products Idelvion and Afstyla, among others. The Seqirus business is the second-largest player in the influenza vaccines industry. It plans to manufacture COVID-19 vaccines for Australia should they be successfully developed. Both businesses are also investing heavily in research and development activities and have a large number of potentially lucrative therapies and vaccines at various stages of development.

More reading

• 3 outstanding ASX shares to buy and hold for decades
• Why you shouldn’t be concerned by the high PE multiples of ASX tech shares
• Where to invest your first $1,000 into ASX shares
• 5 things to watch on the ASX 200 on Thursday
• 2 ASX shares I’d buy if this crash gets worse

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. 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 Rio Tinto Limited (ASX: RIO) share price has come under pressure today after the mining giant announced the impending exit of its chief executive.

At the time of writing the Rio Tinto share price is down almost 1% to $99.70.

What did Rio Tinto announce?

This morning Rio Tinto revealed that following a review of Cultural Heritage Management, which was undertaken in response to the destruction of the Juukan rockshelters in May, the board has been engaging extensively with shareholders, Traditional Owners, Indigenous leaders, and other stakeholders.

While the company notes that there has been support for the changes recommended by the review, significant stakeholders have expressed concerns about executive accountability for the failings identified.

In light of this, by mutual agreement, Mr J-S Jacques will step down from his role as an Executive Director and Chief Executive of Rio Tinto.

A search for a successor has begun and Mr Jacques will remain in his role until the earlier of an appointment being made or 31 March 2021. This is to ensure business continuity and maintain the strong performance of its global operations during COVID-19.

Other executive changes.

It isn’t just J-S Jacques that will be exiting the company. Following him will be the Chief Executive of Iron Ore, Chris Salisbury. He has stepped down from the role with immediate effect and will be replaced on an interim basis by Ivan Vella. Mr Vella is currently Managing Director for Rail, Port & Core Services within Rio Tinto Iron Ore.

Simone Niven will also step down as Group Executive, Corporate Relations, and will leave the company on 31 December 2020 after completing an orderly transition of her responsibilities.

“What happened at Juukan was wrong”.

Rio Tinto chairman Simon Thompson commented: “What happened at Juukan was wrong and we are determined to ensure that the destruction of a heritage site of such exceptional archaeological and cultural significance never occurs again at a Rio Tinto operation.”

“We are also determined to regain the trust of the Puutu Kunti Kurrama and Pinikura people and other Traditional Owners. We have listened to our stakeholders’ concerns that a lack of individual accountability undermines the Group’s ability to rebuild that trust and to move forward to implement the changes identified in the Board Review.”

“I would like to thank J-S for his strong leadership of the Group since becoming Chief Executive in 2016. During that time, he has led the best safety performance in Rio Tinto’s history, simplified the portfolio, divested the Group’s coal assets, established a clear strategy to address climate change and generated exceptional shareholder returns. His leadership during the COVID-19 pandemic, in particular, has been exemplary,” he concluded.

More reading

• IGO share price surges on potential sale of Tropicana
• Why the Rio Tinto share price is outperforming its peers
• Why you should use the market sell-off to buy these ASX stocks
• Half of ASX 200 stocks at risk as China-Australia relations hit new low
• ASX 200 Weekly Wrap: Friday crash pulls ASX back below 6,000 points

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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I recently wrote about my number 1 type of ASX share avoid at all cost. But there are some more terrible ASX shares that I will never buy. My original article goes into more detail about why you want to avoid terrible ASX shares, but here is a summary:

• If you lose 30% of your money, you need to make 50% to break even.
• Legendary investor Warren Buffett agrees and has provided lessons on this in the past.

So with that in mind, here are 2 terrible ASX shares that I will probably never buy.

Government supported industries

Government support (like subsidies or tariffs) or revenue (like government contracts) can seem like a great reason to buy an ASX share. You have a debtor that won’t go broke. You have a guaranteed revenue floor per customer. You have an artificial advantage over other countries. However in my opinion, over the long term I believe that these incentives create shares that are potentially terrible investments.

Economic incentives such as subsidies or protection like tariffs create uncompetitive and inefficient businesses. I believe that this can sometimes lead to terrible investments. A great example of this is in childcare. Providers such as G8 Education Limited (ASX: GEM) were incentivised to make investments to increase capacity at their centres or even buy more centres. However, the businesses were not disciplined in their growth. A quick look at a 3 or 5-year price chart paints an ugly picture.

Hidden gems

This isn’t true for all ASX shares though. Some shares such as Electro Optic Systems Hldg Ltd (ASX: EOS) can (and I believe will) do well in the future with the government help. However it is worth noting that Electro is operating in the defence industry, which along with other necessary industries like agriculture, can be special cases for regulation and the like.

2 terrible ASX shares

Motley Fool co-Founder David Gardner is in my opinion one of the best investors of the 20th century. His numbers back that up. A favourite phrase of his is, “winners, win”. 

I believe that the inverse is also true. Flawed businesses such as AMP Limited (ASX: AMP) or Virgin Australia Holdings Ltd (ASX:VAH), that have destroyed investor capital over decades, will potentially continue to do so. Turning around a business is difficult for a number of reasons. It could be brand damage, terrible business or market economics, poor leadership, or simply a bad company culture.

There are more than enough great ASX shares to buy out there. There’s no need to risk your cash on a value trap.

The Foolish bottom line

Share traders might be able to make money through short term volatility, but they aren’t going to make the exponential returns that the share market, compound interest and time provide. Long term investors are best to steer clear of these capital destroying terrible ASX shares.

More reading

• Will the S&P downgrade derail the recovery in the AMP share price?
• Broker picks best ASX small cap stocks to buy from the reporting season
• ASX 200 Weekly Wrap: Friday crash pulls ASX back below 6,000 points
• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 next week

Lloyd Prout has no position in any of the stocks mentioned and expresses his own opinions. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia has recommended Electro Optic Systems Holdings 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 Clinuvel Pharmaceuticals Limited (ASX: CUV) share price had a good day on Thursday. Shares in the Aussie pharma group rocketed 9.2% higher to lead the S&P/ASX 200 Index (ASX: XJO) winners.

So, what’s causing a surge in Aussie pharma shares like Clinuvel and is it still in the buy zone?

What does Clinuvel Pharmaceuticals do?

Clinuvel is an Australian-headquartered, global pharmaceutical company. The group focuses on developing and delivering treatments for patients “with a range of severe genetic and skin disorders”.

The company has operations across photomedicine, pharmaceutical and photocare within the broader industry.

As at Thursday’s close, the Clinuvel share price was trading at $21.51 per share with a market capitalisation of $1.1 billion.

Why did the Clinuvel Pharmaceuticals share price surge higher?

The big announcement yesterday was an expansion of Clinuvel’s SCENESSE drug (afamelanotide 16mg) to treat the disease xeroderma pigmentosum (XP).

Clinuvel has made great strides in the development and application of SCENESSE for a number of years. Yesterday’s announcement is the latest step as it looks to treat XP, a rare genetic disorder affecting one in one million people in the USA and Europe.

That was good news for shareholders who were quick to buy in and bid up the Clinuvel Pharmaceuticals share price.

Is the Aussie pharma share still in the buy zone?

Despite yesterday’s surge, the Clinuvel Pharmaceuticals share price is down 24.9% for the year.

Given that it also trades at a price to earnings (P/E) ratio of 65.2, I’m not sure I’m keen on buying just yet.

Thursday’s announcement was a promising step but I think I’d like to see more positive test results before buying.

In the meantime, I think there are some other strong candidates in the biotech and pharmaceuticals sector.

Personally, I like the look of Polynovo Ltd (ASX: PNV) as it expands into new, lucrative markets with its NovoSorb BTM technology.

More reading

• 5 things to watch on the ASX 200 on Friday
• 2 exciting ASX growth shares to buy in September
• ASX 200 rises 0.5%, gold miners glitter
• Why the Rio Tinto share price is outperforming its peers
• Is the Wesfarmers (ASX:WES) share price a quality buy for ASX dividends?

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 POLYNOVO 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.

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After 30 years of investing I have made my fair share of mistakes, but I have also had some great investments. A good ASX share in my view can be 1 of 2 things. A solid value investment, where I have been able to find an undervalued good company. Alternatively, I also actively look for great growth opportunities. That is, companies that I think are likely to increase my investment by 5 to 10 times over the medium term. 

Here are 3 ASX shares I have owned – 2 that I would willingly buy again if the sale price was right, and 1 of my more recent bad choices. 

ASX shares in mining

I generally choose mining shares today only if I think they are likely to grow considerably in the near- to mid-term. Nonetheless, I used to focus almost exclusively on this sector. I started to buy Fortescue Metals Group Limited (ASX: FMG) shares at about $2.40. I knew Andrew Forrest from Anaconda Nickel, I knew the iron ore mining industry, and I thought the two things would go well together. I didn’t anticipate the scale of his success though.

Even at around Thursday’s closing price of $17.89 per share, I would buy FMG shares again and may do soon. The company is now very disciplined, very innovative, and has a solid future in front of it. At Thursday’s closing price it is trading at a price-to-earnings ratio of 8.49, which I consider low, and pays a trailing 12-month yield of 9.84%.

Healthcare sector

In 2001, I purchased shares in Cochlear Limited (ASX: COH) for about $39 (from memory), and sold out later at approximately $130 per share. This was a wonderful investing experience and I earned a lot in share price growth and dividends. I bought it because of the pedigree of the science, the management style, and because there was clearly a large addressable market. I remain fascinated with innovative healthcare technology shares up to this day.

Right now, for me, Cochlear is too expensive for an ASX share. However, if the price was right I think I would buy the company again.

Regrets, I’ve had a few…

Although I have regretted buying several ASX shares, my biggest mistake was Avita Therapeutics Inc (ASX: AVH), but not because it is a bad company. Today the company is enjoying a second wind and I have been watching it closely.

I regret it because of how I managed the situation. Avita was started by Dr. Fiona Wood, who invented spray-on skin to treat burns victims. The treatment was used to help victims of the 2002 Bali bombings. I purchased these shares for around $63, then I watched as they went down to $31, then to $23, and finally to $5.30. 

There were many reasons why it failed then. Reasons that are unlikely to occur again. However, I regret not selling them sooner. I held them and held them thinking that they would come back again. Had I acted sooner I could have reinvested what I had left and started to get higher returns.

Foolish takeaway

I continue to apply the lessons I learned from these 3 investments when I buy ASX shares today. First, management is the most important thing. A great manager in an average company beats a bad manager in a great company. I invested in Fortescue partly because I understood iron ore mining, but mainly because I had seen Andrew Forrest in action before.

Second, make sure you understand the addressable market and the company’s competitive advantage. Cochlear was clearly taking proven technology into a wide open market. The IP it held was enough to see it gain a clear leadership position as the first mover.

Third, know when to give up. Every day I spent waiting for Avita to turn around was another day I wasn’t getting a positive return on what was left of my investment. 

Good luck!

More reading

• 3 outstanding ASX shares to buy and hold for decades
• Why the Rio Tinto share price is outperforming its peers
• 3 reasons Fortescue (ASX:FMG) shares will make you richer
• ASX 200 drops over 2%, tech and oil fall
• 3 ASX shares that are trading at bargain prices

Daryl Mather owns shares of Fortescue Metals Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Avita Medical Limited and Cochlear Ltd. The Motley Fool Australia has recommended Avita Medical Limited and Cochlear 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 have several ideas if I were investing $10,000 into ASX shares today.

One of the great things about investing in shares is that prices are constantly changing. That presents different opportunities over the weeks and months.

Looking at the current prices, these are the ASX shares that I’d love to buy today:

Citadel Group Ltd (ASX: CGL) – $2,500

Citadel is an ASX software business with a lot of international growth potential. In FY20 the ASX share acquired UK healthcare business Wellbeing. That acquisition turned Citadel into the software market leader for radiology and maternity in the UK.

The ASX software business thinks there is significant cross-selling market opportunities valued at between $250 million to $350 million in total contract value revenue in tenders over the next two to three years.

Citadel now has a high level of recurring revenue and a pro forma gross profit margin of more than 65%. The company thinks it’s well placed to benefit from an increase in digital health spending on the next few years.

In its software divisions it’s targeting long-term organic revenue growth of more than 15% per annum. In the services divisions it’s aiming for organic revenue growth of 5% to 10% per annum.

The ASX share plans to diversify its technology into new verticals and building contracts. It’s looking for further opportunities for acquisitions as well as investing into research and development.

At the pre-open Citadel share price it’s priced at under 12x FY23’s estimated earnings.

Brickworks Limited (ASX: BKW) – $2,000

Brickworks nearly always looks good value to me when you consider the various elements of the ASX share.

One key long-term asset is the share holding of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL). Brickworks owns almost 40% of the investment conglomerate, which itself is a quality investment with diversified businesses in its portfolio like TPG Telecom Ltd (ASX: TPG), Brickworks, Clover Corporation Limited (ASX: CLV), Bki Investment Co Ltd (ASX: BKI) and Milton Corporation Limited (ASX: MLT).

Brickworks owns a 50% stake of an industrial property trust along with Goodman Group (ASX: GMG). Over the next couple of years both Amazon and Coles Group Limited (ASX: COL) will be tenants at large warehouses that are being built by the trust. 

The pre-tax value of the above two assets alone support the current Brickworks market capitalisation.

It also has both an Australian and American building product division. Obviously COVID-19 is hurting construction at the moment, but hopefully economic conditions will go back to (a new) normal sooner rather than later. I think it’s a good time to buy a somewhat cyclical ASX share like Brickworks whilst there is uncertainty.

At the pre-open Brickworks share price it offers a grossed-up dividend yield of 4.6%.

Pushpay Holdings Ltd (ASX: PPH) – $5,500

Pushpay is an electronics donation business. It helps facilitate digital giving to organisations like large and medium US churches.

There is a large amount of money donated to churches each year. COVID-19 is causing more of that money to be given digitally, which is helpful in bringing forward the adoption curve for Pushpay. The company is aiming for annual revenue of US$1 billion per year, which would turn it into a much larger business.

In FY21 the ASX share is aiming to double its earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) to US$50 million to US$54 million.

It’s the scalability of the business that is very exciting. In FY20 alone it grew its gross margin from 60% to 65%.

At the pre-open Pushpay share price it’s valued at 30x FY22’s estimated earnings.

Foolish takeaway

I think each of these ASX shares are attractively priced, particularly Pushpay and Citadel after the recent falls. I believe they can both deliver market-beating returns over the long-term. It’s hard to pick a winner because I believe both ASX tech shares can deliver good profit growth.

More reading

• 3 small cap ASX shares I’d buy with $3,000 right now
• 3 quality ASX shares that could provide monster returns
• Where to invest $10,000 into ASX shares
• 2 top ASX shares I’d buy with $2,000
• 3 ASX shares I’d buy to quickly add diversification

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

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The Zip Co Ltd (ASX: Z1P) share price has been smashed in recent days as investors have sold out of ASX tech shares.

Heavy sell-offs in the US markets are continuing and we’re seeing similar moves on the ASX. That’s not good news for shareholders in some of the hottest tech shares right now.

The Zip share price is down 8.9% since Tuesday morning and could be heading even lower today. So, is now a good time to buy the dip and enter the buy now, pay later (BNPL) share?

Why the Zip share price is under pressure

There’s no denying 2020 has been a strong year for global and domestic tech shares. Many of the biggest shares have been surging in value since the bottom of the March bear market.

That has all been against a backdrop of intense economic stress and recessionary conditions. Investors are a bit spooked right now and we’ve seen heavy sell-offs in US tech stocks this week.

Much of the value in ASX tech shares like Zip is based on future growth expectations. That’s a hard thing to value right now, which has left investors wondering how high is too high for these tech shares.

The Zip share price is still up a whopping 81.4% for the year. I don’t think it’s panic stations by any means but is now a good time to buy in?

Is now a good time to buy?

The lofty valuations are an obvious concern for investors. Zip increased full-year revenue by 91% to $161.0 million as transaction volumes also jumped 91% to $2.1 billion.

However, the company still posted an adjusted loss before tax of $44.9 million. That can be beneficial for tax reasons but the point stands that the Zip share price is high for a company that isn’t turning a profit (yet). 

Regulatory risk is also always a concern for the BNPL operators.

There’s also increasing competition in the BNPL space. Major banks like Commonwealth Bank of Australia (ASX: CBA) and National Australia Bank Ltd (ASX: NAB) are wading in.

Both of these big four banks announced yesterday that they were introducing no-interest, flat monthly fee card options.

That could open up the market and potentially entice merchants to go to the bank rather than pay fees to Zip.

Foolish takeaway

The Zip share price has been under pressure in recent days but is still up strongly in 2020. I don’t think there is any cause for alarm just yet but I won’t be entering as a first-time buyer right now.

More reading

• Tech shares lead ASX rebound but Afterpay (ASX:APT) faces mounting competition
• Why the CBA (ASX:CBA) share price has fallen 26% since February
• ASX 200 up 0.7%: Nearmap (ASX:NEA) launches capital raising, Afterpay (ASX:APT) rebounds
• ASX 200 drops over 2%, tech and oil fall
• Why the Laybuy (ASX:LBY) share price is tanking today

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 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.

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The Australian Securities and Investments Commission (ASIC) wants everyone to know its holding onto $1.1 billion for Australians to claim.

The “unclaimed money” stash includes dividends and shares that have lost touch with their rightful owners.

“This can happen when people change address or go overseas and forget to update their details with a financial institution or company,” states ASIC.

“Or people may be unaware there is money to which they have a rightful claim.”

Lost bank accounts, insurance payouts and investments are also in the pool, officially called the Commonwealth of Australia Consolidated Revenue Fund.

“Bank accounts become unclaimed after 7 years if the account is inactive,” the corporate regulator states.

“Life insurance policies become unclaimed 7 years after the policy matures and is not claimed.”

Amazingly, the government will pay interest for any period your money’s been parked in the unclaimed fund after 1 July 2013.

The interest rate is based on the consumer price index, so you could get as much as 2.93% for the 2015 financial year. The current financial year will earn you 2.19%.

That’s not bad, considering banks will only pay you a fraction of a percent in a savings account these days.

How to claim your piece of the $1.1 billion pie

Luckily it’s easy to check whether you have unclaimed money, as ASIC hosts a search engine for exactly that purpose.

“It is available to be claimed at any time by the rightful owner and there is no time limit on claims,” states the corporate watchdog.

If you find money from a lost bank account, you should approach the financial institution directly to get your hands on it.

But if you have lost shares or other investments showing up, your next step will depend on the situation:

• If the shares are marked “company money”, ASIC is holding it. So you’ll need to provide proof of ownership to ASIC.
• If the shares are marked “company gazette”, the company is holding it. So you’ll need to contact the company.
• For other circumstances, such as when a deregistered company or a deceased person is involved, refer to further advice from ASIC.

Don’t ever pay someone to search for unclaimed money

ASIC warns of third party agents that will offer to find unclaimed money on your behalf for a commission or flat fee.

But any ‘middleman’ service provider is probably just using the same ASIC database.

“If a private money search company approaches you to find money for you for a fee, remember that you can search unclaimed money for free on the Moneysmart website.”

More reading

• Where to invest $10,000 into ASX shares today
• Is the Zip (ASX:Z1P) share price a buy in the tech crash?
• Why Afterpay (ASX:APT) and Domino’s (ASX:DMP) are smashing the market in 2020
• This ASX tech share is still cheap to buy
• 5 things to watch on the ASX 200 on Friday

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

The post $1.1 billion pot: Do you have lost shares to claim? appeared first on Motley Fool Australia.

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