Tag: Motley Fool

At present the Commonwealth Bank of Australia (ASX: CBA) is offering a base rate on its savings account of just 0.05%. This is largely in line with what the rest of the big four are offering.

This means that if you have $5,000 sitting in one, it would gain interest of just $25 per year.

Unfortunately, with economists tipping the cash rate to remain on hold at 0.25% for the next three years, things are unlikely to get any better in the near future.

On the assumption that this base rate will stay the same for the next three years, that $5,000 would grow to be worth a touch over $5,075 in September 2023.

Historically, the share market has generated a return of ~10% per annum for investors over the long term.

If you were to invest that $5,000 into the share market and earned a 10% annual return for three years, those funds would be worth $6,655 in September 2023. That’s a difference of $1,580!

In light of this, if I had $5,000 in a savings account and no immediate use for it, I would consider investing into the share market.

But which ASX shares should you buy? Two that I like are listed below:

Appen Ltd (ASX: APX)

The first share to consider buying is Appen. It is the global leader in the development of high-quality, human annotated datasets for machine learning and artificial intelligence. Given the explosive growth of these markets, I believe it is well-positioned to deliver strong earnings growth over the 2020s.

ResMed Inc. (ASX: RMD)

Another option for the $5,000 is ResMed. I believe the medical device company could be a long term market beater. This is due to its leading position in the fast-growing sleep treatment market. The vast majority of sleep apnoea sufferers are yet to be diagnosed, but education around the condition is increasing. I expect this to lead to more and more diagnoses over the next decade, supporting consistently solid earnings growth.

More reading

• 3 ASX 200 shares to buy for strong returns
• UBS picks the best and worst ASX stocks from the reporting season
• 5 things to watch on the ASX 200 on Wednesday
• 5 things to watch on the ASX 200 on Tuesday
• Top ASX Stock Picks for September 2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Appen Ltd. The Motley Fool Australia has recommended ResMed 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.

The post Where to invest $5,000 into ASX shares right now appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3jCHPh7

The S&P/ASX 200 Index (ASX: XJO) is a great place to find good ASX shares to invest in.

If a business is in the ASX 200 it probably means it has grown enough to command an attractive market position in its industry. If you ignore the ASX 20, there are plenty of ASX shares with enough growth potential to beat the market over the longer-term.

That’s why I really like the below three ASX 200 shares:

ResMed Inc (ASX: RMD)

ResMed is one of the ASX’s leading healthcare businesses in my opinion.

A key focus of the business is developing equipment and technology used to help treat sleep apnoea which help people sleep better. However, over the past six months it has been a key business involved in helping support the COVID-19 pandemic response.

The ASX 200 share is a manufacturer of ventilators, including bilevels, as well as ventilation mask systems. In the fourth quarter of its FY20 it saw revenue grow by 9% and underlying net profit growth of 24%. Over FY20 it managed to grow its gross margin by 80 basis points to 59.8%. This increasing profitability helps the business grow net profit faster.

It also helps that ResMed is accelerating the launch of its cloud-based remote monitoring software for ventilators and Lumis devices across Europe. This increases the attractiveness of the ResMed offering.

I think ResMed is a very promising business, particularly with its growing software as a service segment which comes with high gross profit margins.

At the current ResMed share price it’s trading at 35x FY22’s estimated earnings. I think it could be smart time to buy this ASX 200 share whilst the Aussie dollar is looking stronger compared to the US dollar.

A2 Milk Company Ltd (ASX: A2M)

A2 Milk is perhaps the world’s best infant formula business. ASX investors are lucky to be able to buy a piece of this New Zealand business.

It has been quite a few years since bare supermarket infant formula shelves first made news headlines and the company has kept growing strongly since 2015.

In FY20 alone the ASX 200 share reported full year revenue growth of 32.8% to NZ$1.73 billion, earnings before interest, tax, depreciation and amortisation (EBITDA) growth of 32.9% to NZ$549.7 million and net profit after tax (NPAT) growth of 34.1% to NZ$385.8 million.

It’s growing impressively in both China and the US. The gross profit margin keeps improving. Even the ANZ segment keeps delivering double digit growth.

A2 Milk is expecting further strong revenue growth in FY21 and it may use some of its large cash pile to buy a 75% stake in Mataura Valley Milk, which has a newly-commissioned manufacturing facility in New Zealand.

I believe A2 Milk has many years of double digit growth ahead of it. Particularly because it keeps expanding its product range to new markets.

The A2 Milk share price is trading at 27x FY22’s estimated earnings. It has fallen back over the past few weeks, presenting a good buying opportunity in my opinion.

Service Stream Limited (ASX: SSM)

This ASX 200 share looks like a solid investment opportunity to me.

It’s somewhat of an infrastructure play as it’s involved in the design, construction and maintenance of various networks such as telecommunications and utilities.

The company boasts that more than 84% of its revenue is ‘annuity revenue’ with long-term, low-risk agreements. Its customer base are clients like network owners, operators, regulators and government organisations. Sounds like a reliable group of clients to me.

The underlying performance of the business in FY20 was good with revenue growth of 9% to $929.1 million and EBITDA growth of 15.9% to $93.3 million. The EBITDA margin improved by 90 basis points to 11.4%.  

Service Stream said it continues to have a good pipeline of opportunities and it’s also looking for acquisition targets.

The ASX 200 share has a grossed-up dividend yield of 6.6%. Combine that good yield with the fact it’s trading at only 14x FY21’s estimated earnings makes me think this is an undervalued growth share.

Foolish takeaway

I believe all three of these ASX 200 shares have a higher-than-average chance of beating the market over the next 12 months and the longer-term at today’s prices. I think A2 Milk could produce the best return of my three ideas, though Service Stream looks like a solid dividend idea right now.

More reading

• Where to invest $5,000 into ASX shares right now
• Some ASX winners and losers from a high Aussie dollar
• UBS picks the best and worst ASX stocks from the reporting season
• 3 ASX shares to buy for international growth
• The a2 Milk share price sank 12% lower in August: Should you buy the dip?

The post 3 ASX 200 shares to buy for strong returns appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2QMKOXO

I don’t usually get to give guarantees.

ASIC, the financial services regulator, rightly takes a very dim view of such language.

And frankly I wouldn’t usually give one, either – I don’t sell false promises.

But this time, in full view of the corporate cop, I get to give you a rock-solid, cast-iron, guaranteed return.

But first, let me ask you some questions:

How far would you go to save 5c a litre on petrol?

What about 10c.

Do you shop at different supermarkets sometimes, to get their specials?

Money for jam, right? (If you’ll excuse the pun)

Do you shop around for the best price on your favourite beer, wine or whisky?

And how long has it been since you got a pay rise?

What would you say if your boss offered you more money?

If the answer is ‘no’, please say ‘yes’ anyway, and you can just send me the extra cash you don’t want!

These are smart and simple ways to save money… (but please don’t drive 40km to save 2c a litre on juice!)

But what if I offered you something even better than all that.

What if, with a single phone call, you could be better off by thousands of dollars – maybe even tens of thousands… and tax free?

No, I’m not spruiking some ‘get rich quick’ foreign exchange or CFD trading ‘system’.

No, it’s not a Nigerian Prince email scam.

It’s way simpler than that.

I don’t want your bank details. I don’t want you to stay up all night trading the Yen Sterling cross (that’s a thing, right?).

I want you to make a single phone call.

No, not to a dealer of illicit substances. And no, you’re not going to start demanding protection money.

This is a very simple, polite phone call, with a very simple request.

And it’s to your bank.

To explain, I want you to take a trip of logic with me.

Let’s say there are maybe 40 lenders of significance in Australia (there’s probably closer to double that, but let’s keep it simple).

And let’s say they each offer 5 different loan types (again, that’s likely to be a significant underestimate.)

Simple multiplication tells us there are at least 200 different loan products available.

Now, let’s assume half of those are unsuitable for you, for one reason or another.

That leaves 100 different loan ‘products’ you could be choosing.

And with each of those loans having different interest rates, fees, features, terms and conditions, that means there’s essentially a 1% chance you’re using the product that’s best for you.

Put another way, I reckon the odds are excellent that 99 out of every 100 people reading this, right now, are paying too much for their home loan.

Now, if your bank is your favourite charity, that’s cool.

By all means, donate extra to their CEO bonuses, Christmas parties and cheesy marketing budgets.

But if it’s not…

And if you think the money could be better spent elsewhere…

Then don’t you owe it to yourself to make sure you’re not paying too much on your home loan?

Let’s see what the numbers say.

If you have a $500,000 mortgage, and you can get a 0.5 per cent reduction in your interest rate, that’ll save you $50,000 over the life of a 30-year loan.

That’s a new car.

Again, if you don’t want a new car, or you can’t find anything else to do with 50-large, email me and I’ll send you my bank account details.

(Or, you know, you could find a charity that desperately needs more donations, right now.)

But trust me when I say your bank doesn’t need your generous donation.

Now, back to my guarantee.

I can’t make promises of future market returns. I can’t promise you won’t lose money on shares, property, art or Beanie Baby collections.

But the easiest guarantee in the world is one I don’t even need to promise – because the money will be right there, in your bank account, every single month: the money you save by paying less interest on your loan.

And, on your own home, it’s tax-free!

Now, I’ve been running something of a campaign on social media this week.

I’m using the hashtag #getabetterrate

(You can follow me on Twitter, Facebook or Instagram to see it in action!)

Here are three pieces of feedback:

“I recently moved to ANZ fixed rate 2.19. Unfortunately, I was with another lender with 3.85 last year. I’m saving around $700 each month now.”

“Finally changed to Macquarie this year after being too lazy to look into it. 2.19% fixed for next two years was 4.6% elsewhere #getabetterrate”

And:

“For my investment loan, moved from 3.67% with a monthly fee, to 2.83% without a monthly fee and 100% offset. Had to change banks. The old bank just could not match it. The new bank made it easy, just needed to fill in a few forms. Glad I was able to #getabetterrate”

Seriously. Can you imagine how much those people are saving?

And not just this week, this month or this year.

That’s extra money in their pockets.

And, hopefully, they kept their repayments at the same level, meaning they’ll pay the loan off a helluva lot faster.

Yes, normally I write to you about investing. I think it’s a wonderful way to secure your financial future.

But if I’m going to do that, I should also be helping you in other ways – after all, the sooner you pay off your loan, and the less you waste in unnecessary interest, the closer you are to your goal and the quicker you’ll get there!

So, the ball is in your court, fellow Fool.

You can donate more to your bank.

Or you can #getabetterrate.

I know which one I’d prefer.

– – –

Oh, and if you’re wondering, here’s a very, very simple template for you to follow:

1. Check your loan statement, and find out what interest rate you’re paying.

2. Jump online and use a comparison site to see what else is on offer for your circumstances.

3. Call your bank, and ask them to match the best rate you can find, so you don’t have to leave.

4. If they won’t match – or won’t get close enough – then start the process of switching. Yes, there’s paperwork, but it could save you thousands!

See – it’s that easy.

– – –

So, what’s stopping you? Go on… #getabetterrate

(Oh, and if you do end up benefiting, please pay it forward by adding your story on social media using the #getabetterrate hashtag, so others might be motivated to try! Thanks in advance!)

Fool on!

More reading

• Praemium share price edges higher after Powerwrap offer goes unconditional
• Where to invest $5,000 into ASX shares right now
• 3 ASX 200 shares to buy for strong returns
• Strike Resources share price wanes despite moving closer to an off-take agreement
• Top brokers name 3 ASX shares to buy today

Motley Fool contributor Scott Phillips 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 Unless you think bank CEOs need more money? appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2YWXwYs

The Strike Resources Limited (ASX: SRK) share price may be a victim of buy the rumour, sell the fact.

Shares in the iron ore hopeful fell 2.9% to 16 cents even as the broader market rallied hard with the S&P/ASX 200 Index (Index:^AXJO) jumping 2% at the time of writing.

The sell-off comes on the back of news that Strike Resources took a step forward in completing its off take agreement at its t Paulsens East project in Western Australia.

Strike Resources share price outperforming

But Strike Resources shareholders are unlikely to be too fussed. The stock is still sitting on 170% gains over the past month.

The miner announced today that it completed a test pit and collected approximately three tonnes of bulk samples. The rock samples will be used for marketing, metallurgical test work and plant design.

The excavation exposed the multiple bands of high-grade hematite iron ore, which extend to depth and three kilometres east to west along strike.

Striking while the iron’s hot

The test pit is close to the eastern edge of the three kilometre long outcropping hematite ridge. This ridge contains the Joint Ore Reserves Committee Code (JORC) Indicated Mineral Resource of 9.6 million tonnes at 61.1% iron ore content.

Some of the samples were taken to ALS Ltd’s (ASX: ALQ) labs in Perth for testing. The results will help Strike Resources design of the mine crushing and screening circuit at Paulsens East.

Samples were also sent to potential customers who have expressed interest in securing an offtake agreement with Strike Resources. Management said that this was a key step in advancing discussions to a final agreement.

Are stars aligning for Paulsens East?

“The test pit excavation and bulk sample extraction are important steps in the advancement of the high grade Paulsens East Iron Ore Project,” said Strike Resources’ managing director, William Johnson.

“The excavation clearly highlighted the bands of high-grade hematite iron ore, which extend from the top of the ridge to depth and which make up the three kilometre long outcropping ridge.   

“Testwork on the sample material will allow us to optimise our final plant design and the production of Lump and Fines samples, which will be representative of our final products, will be important for concluding agreements with our potential customers.”

Strong interest in the sector

Investors interest in iron ore is burning hot as the price of the gravity-defying price of the commodity is stuck above US$120 a tonne.

Analysts have been continually upgrading their forecast for the iron ore price over the next three years. They may be forced to keep playing catchup the longer the iron ore price stays at current levels as their 2021 forecasts are well below the spot price.

The growing optimism towards the steel making ingredient is the key reason behind the Fortescue Metals Group Limited (ASX: FMG) share price and Rio Tinto Limited (ASX: RIO) share price rally.

More reading

• Praemium share price edges higher after Powerwrap offer goes unconditional
• Top brokers name 3 ASX shares to buy today
• Some ASX winners and losers from a high Aussie dollar
• Why we’re on track for more record ASX share prices
• UBS picks the best and worst ASX stocks from the reporting season

Motley Fool contributor Brendon Lau owns shares of Rio Tinto 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.

The post Strike Resources share price wanes despite moving closer to an off-take agreement appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/32Mzi4q

Many of Australia’s top brokers have been busy adjusting their financial models again, leading to the release of a large number of broker notes this week.

Three broker buy ratings that have caught my eye are summarised below. Here’s why brokers think these ASX shares are in the buy zone:

Fortescue Metals Group Limited (ASX: FMG)

According to a note out of the Macquarie equities desk, its analysts have retained their outperform rating and $20.00 price target on this iron ore producer’s shares. With the spot iron ore price trading well above expectations, the broker appears to believe there could be upside risk to earnings forecasts. In addition to this, Macquarie is positive on dividends in FY 2021 and expects the miner to payout 80% of its earnings to shareholders. This is the high end of its guidance range. I agree with Macquarie and think Fortescue is a good option in the resources sector.

Temple & Webster Group Ltd (ASX: TPW)

Another note out of Macquarie reveals that its analysts have retained their outperform rating and lifted the price target on this online retailer’s shares to $10.50. According to the note, the broker was pleased with its strong performance in FY 2020 and the operating leverage it is achieving. And while it acknowledges that current growth rates won’t be sustainable over the long term, it remains positive on its prospects in the near term and sees value in its shares at the current level. While I think Macquarie makes some good points, I feel its shares are looking a bit expensive now.

Westpac Banking Corp (ASX: WBC)

Analysts at Credit Suisse have retained their outperform rating and $20.60 price target on this banking giant’s shares. According to the note, the broker feels that softness in its capital position is weighing on its shares. However, it notes that Westpac is currently undertaking a major strategic review of its operations. It feels the bank could remove these concerns by divesting some of its non-core businesses. The broker estimates it could command upwards of almost $5 billion in total if it sold the majority of these businesses. I agree with Credit Suisse and feel it is worth sticking with Westpac.

More reading

• Some ASX winners and losers from a high Aussie dollar
• A strange thing is happening with index funds…
• Why the Fortescue share price went backward in August
• ASX 200 down 1.7%: Afterpay sinks on PayPal news, QBE sacks its CEO, bank shares lower
• This chart shows why big banks are in trouble

James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd. The Motley Fool Australia has recommended Temple & Webster Group Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Top brokers name 3 ASX shares to buy today appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3jADw5L

Australia is today officially in recession for the first time in 29 years.

The Australian Bureau of Statistics (ABS) has just released data which confirms that Australia’s gross domestic product (GDP) fell by 7% in the quarter ending 30 June 2020. It’s the largest single drop in quarterly GDP for the Australian economy on record.

Australia in recession

GDP is the metric used to measure the monetary value of all goods and services sold in an economy. A recession is officially defined as 2 consecutive quarters of negative GDP growth. Seeing as the Australian economy recorded a fall in GDP of 0.3% for the quarter ending 31 March, today’s data means we are officially in recession for the first time in almost 3 decades.

Michael Smedes, the head of national accounts at the ABS, had this to say on the data:

The combined effect of the pandemic and the community and government responses to it led to movements of unprecedented size, not only in GDP but also in many of the other economic aggregates… The global pandemic and associated containment policies led to a 7.0 per cent fall in GDP for the June quarter. This is, by a wide margin, the largest fall in quarterly GDP since records began in 1959.

The drivers for this precipitous drop in GDP for the June quarter were a 7.9% drop in private demand, which in turn was triggered by a 12.1% fall in household consumption expenditure. Spending on services such as vehicle operations, transport, hotels, cafes and restaurants was down 17.6%.

Meanwhile, savings rates were unsurprisingly up for the quarter, with the savings-to-income ratio climbing from 6% to 19.8%. That was despite total hours worked falling by 9.8% (the sharpest on record). Social assistance benefits (such as JobSeeker) rose by a record 41.6% as well.

What do these numbers mean for ASX shares?

These numbers are a stark reminder that we are facing a once-in-a-generation economic event. Up until now, the effects of this economic catastrophe have been somewhat masked by the record levels of government assistance that have been pouring into the economy. This has helped many ASX businesses, in turn, stay afloat and even prosper during these tough times.

However, I think investors need to brace for the next 12 months, which will see programs like JobSeeker pared back substantially and eventually wound down. The first of these pare backs for the JobKeeper payment will come into effect on 28 September. The coronavirus supplement will also be curtailed on 24 September down to $250 a fortnight (down from the current $500). It is currently scheduled to end altogether on 31 December.

All ASX shares are going to have to ride this wave down, and some will fare better than others. It’s going to be a tough few years for the Australian economy. My advice is to make sure the companies in your portfolio are well-equipped for these tough times.

More reading

• Top brokers name 3 ASX shares to buy today
• Woolworths quietly launches new business
• New market analysis every ASX investor should read
• PayGroup share price tanks 11% on capital raise
• Some ASX winners and losers from a high Aussie dollar

Motley Fool contributor Sebastian Bowen 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 Australia officially in recession as GDP slumps 7% appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2YWVqI4

Woolworths Group Ltd (ASX: WOW) has soft-launched a new business, to sell groceries to other companies.

The company kicked off its ‘Woolworths at Work’ business on Tuesday, without any announcement to the ASX.

Woolworths at Work general manager Jarad Nass said the new arm would make it easier for businesses across Australia to purchase food and essentials on a monthly invoice cycle.

“It includes their own dedicated website and features built specifically for their needs,” he wrote on a blog post.

“Our new digital platform allows for multiple shoppers and delivery locations. All your organisation’s spend is captured in your Work Account in real time, which means no more company credit cards or tedious reimbursements.”

Nass said buy now, pay later supplier Openpay Group Ltd (ASX: OPY) would facilitate a line of credit to corporate customers.

How Woolworths at Work fits into the family

The launch of the new business comes after Woolworths last month bought a 65% stake in PFD Food Services.

PFD is the number 2 player in the B2B food service sector, supplying hospitality businesses like pubs, restaurants, cafes and convenience stores.

The Woolworths at Work venture will target non-hospitality clients such as hospitals, childcare centres and white-collar corporates.

The online shopping experience sounds similar to the existing consumer-facing website.

“It’s supported by our nationwide delivery options, including free next day delivery for orders over $99 and Delivery Now, which sees your order picked, packed and delivered within two hours,” Nass said.

“[It’s] an extension of our existing online grocery business.”

Woolworths at Work will have more than 10,000 items of groceries, stationery and cleaning products available.

The supermarket is currently calling for expressions of interest in its new B2B store.

Woolworths had previously earmarked business customers as a new source of income, reportedly setting a target of $1 billion in revenue by 2024.

More reading

• PayPal scares investors in BNPL shares, time to sell?
• 3 ASX blue-chip shares I would buy at today’s prices
• Zip and Brainchip were among the most traded shares on the ASX last week
• 5 things to watch on the ASX 200 on Tuesday
• Why Fortescue, Openpay, Pointsbet, & Sezzle shares are dropping lower

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Woolworths 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 Woolworths quietly launches new business appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3jBtDVt

This morning, Frank Uhlenbruch, investment strategist in the Janus Henderson Australian fixed interest team, released his latest Australian economic analysis and market outlook.

Uhlenbruch notes that the ever-increasing supply of government debt, alongside the US Fed’s shift towards an average 2% inflation target, has spurred risk appetite to the benefit of shares.

Meanwhile, investors hunting for yield in the low rate environment saw a sharp lift in longer-dated government bond yields, dragging on the sector’s returns.

Shorter-term Australian government bond yields were held in check by the Reserve Bank of Australia’s (RBA) forward guidance and yield curve control measures. The 3-year government bond yield ended August at 0.26%, down 0.01%.

With an eye on potential rising inflation, the 10-year government bond yield climbed 0.17% to close the month at 0.98%, and the 30-year government bond yield gained 0.26% to reach 1.91%.

Fiscal stimulus buoys retail spending

Uhlenbruch reported a 20% increase in retail sales between April and June. The overall 3.4% fall in the June quarter was better than expected, largely due to Jobseeker and Jobkeeper payments, alongside early access to Super.

Wages growth came in at just 0.2% for the June quarter, and unemployment rose slightly to 7.5% in July. The underemployment rate — those with work but seeking more hours — was more alarming, coming in at 18.7%.

According to Uhlenbruch, partial demand indicators show we should expect a historically large drop in output in the upcoming release of the national accounts.

Market outlook

The Janus Henderson Australian fixed interest team expects the economy to contract some 7% in the June quarter, with further pain in the September quarter. Uhlenbruch forecasts GDP to fall 5.75% in 2020 and grow 5.50% in 2021. He doesn’t see it reaching end of 2019 levels until the beginning of 2022.

Uhlenbruch states: “This implies a massive build up in slack that will take years to absorb and will exert downward pressure on wages and inflation. The RBA have the unemployment rate peaking at 10% at the end of this year and falling to 7% by end 2022.”

With an unemployment target of 4.5%, this means we can expect an extended period of accommodative policies from the RBA and the government.

Janus Henderson’s Australian fixed interest team remains attracted to spread sectors. But the team has shifted, “from accumulating holdings following the widening in spreads over March, to becoming more selective about the names and tenors” it is adding.

The team expects spread sectors to be supported by low yields on government bonds and the huge amount of central bank support for both sovereign and non-sovereign debt markets.

The team cautions that inflation in the medium to longer-term is a risk, stating “We think it remains prudent to hold a core exposure to inflation-protected securities while inflation protection remains cheap.”

More reading

• Top brokers name 3 ASX shares to buy today
• Australia officially in recession as GDP slumps 7%
• Woolworths quietly launches new business
• PayGroup share price tanks 11% on capital raise
• Some ASX winners and losers from a high Aussie dollar

Motley Fool contributor Bernd Struben 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 New market analysis every ASX investor should read appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/31RyZWS

The PayGroup Ltd (ASX: PYG) share price has tanked more than 11% after the company announced a $3.5 million capital raise.

Details on PayGroup’s capital raise

PayGroup announced today that the company had successfully raised $3.5 million via institutional placement.

The payroll provider said new and existing investors supported the placement, in which 6 million new shares would be issued at 58 cents per share. That’s a 14.5% discount from the company’s last closing price.

PayGroup will use the capital raise to integrate its latest acquisition, TalentOz. The capital will also allow the company to pursue growth initiatives and working capital for its payroll platform, Astute One Limited.

In addition, PayGroup management said the placement would enable the company to capitalise on immediate growth opportunities, including possible further acquisitions. It noted PayGroup’s strong sales pipeline gave the company a positive outlook in FY21.

What does PayGroup do?

PayGroup is an Australian-based company that provides payroll and human capital management solutions to medium and large enterprises. The company services more than 915 client entities, representing more than 5 million payslips per annum.

In July, the company acquired Malaysian-based payroll provider TalentOz for $1.2 million. The new purchase follows PayGroup’s 2019 acquisition of the human capital management company, Asute One.

For the first quarter of FY21, PayGroup reported an operating cash flow surplus of $1 million. In addition, the company received $4.5 million in receipts over the period, as well as $3 million in new contract wins. PayGroup ended the first quarter of  FY21 with $2.1 million cash on hand and additional access to around $260,000 in unused finance facilities.

Securities in PayGroup were placed in a trading halt yesterday pending the release of today’s announcement. At the time of writing, the PayGroup share price has rallied slightly to 61 cents after tanking more than 11.5% earlier to an intra-day low of 60 cents.

More reading

• Top brokers name 3 ASX shares to buy today
• Australia officially in recession as GDP slumps 7%
• Woolworths quietly launches new business
• New market analysis every ASX investor should read
• Some ASX winners and losers from a high Aussie dollar

Motley Fool contributor Nikhil Gangaram 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 PayGroup share price tanks 11% on capital raise appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2DkyU4m

One of the biggest surprises on financial markets over the past 2 weeks has been the surging Australian dollar. The Aussie dollar is today asking 73.52 US cents after going as high as 74.1 US cents earlier in the week.

It’s been a remarkable 2 weeks for our national currency, which dipped as low as 71.3 US cents a fortnight ago. The Aussie is now more than 33% higher than the 55 US cents level it touched during the coronavirus-induced share market crash back in March.

The exchange rate is one of the largest single influencers of national economic activity, so with such a strong rise in the dollar, what does this mean for ASX shares?

Which ASX shares benefit from a rising dollar?

Whilst some people (mistakenly, in my view) see a strong dollar as a source of national pride, the reality is that a rising currency both helps and hinders the economy in different ways. That’s because when our dollar appreciates in value, it both lowers the cost of importing goods and services from other countries and increases the cost of exporting goods and services.

As such, the companies that are the biggest winners from a rising dollar are those that import what they sell. Shares like JB Hi-Fi Limited (ASX: JBH), Harvey Norman Holdings Limited (ASX: HVN) and Wesfarmers Ltd (ASX: WES) will therefore be cheering a rising dollar.

Think of all the TVs, computers, and white goods that companies like JB Hi-Fi and Harvey Norman sell. Or the hardware and office supplies that Wesfarmers’ Bunnings and Officeworks chains stock. These are almost always manufactured overseas, and thus a rising dollar makes it cheaper for the companies to import these goods and sell them on to us. They can then pass on these savings to customers at no cost to their bottom lines, or else keep their prices steady and bank the profits.

Which ASX shares lose out from a rising dollar?

Hard truths cut both ways, and so does a rising dollar. Any company that exports goods or services to other countries around the world will be hurting from a stronger dollar. Most prominent will be our mining companies like BHP Group Ltd (ASX: BHP), Fortescue Metals Group Limited (ASX: FMG), Newcrest Mining Limited (ASX: NCM) and Rio Tinto Ltd (ASX: RIO). These companies export their iron ore, gold and other resources to countries like the United States and China and will now be receiving less for these resources, in Australian dollar terms.

It’s also not good news for companies like the A2 Milk Company Ltd (ASX: A2M), Xero Limited (ASX: XRO), Afterpay Ltd (ASX: APT), Bubs Australia Ltd (ASX: BUB) and any other company trying to sell products and services beyond our shores. These companies will all be taking a hit when they convert their profits back to Aussie dollars and will either have to choose to raise prices to compensate, or otherwise just take the hit to the bottom line.

Foolish takeaway

A fluctuating exchange rate is just one of the inevitable variables that we investors have to accept as part of the investing process. Nevertheless, it’s important to understand how things like the Aussie dollar can affect the companies in your portfolio. Hopefully, you now have a better grasp of the impacts that a higher dollar can bring!

More reading

• Top brokers name 3 ASX shares to buy today
• Here’s why the Sezzle share price crashed 37% lower in just a few days
• Why we’re on track for more record ASX share prices
• UBS picks the best and worst ASX stocks from the reporting season
• Why the Zip share price is plummeting 15% today

Sebastian Bowen owns shares of Newcrest Mining Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BUBS AUST FPO and Xero. The Motley Fool Australia owns shares of A2 Milk, AFTERPAY T FPO, and Wesfarmers Limited. The Motley Fool Australia has recommended BUBS AUST FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Some ASX winners and losers from a high Aussie dollar appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/34UmU4Y