Tag: Motley Fool

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Shares of Tesla (NASDAQ: TSLA) finally began trading on a split-adjusted basis Monday morning, completing a stock split that was announced on Aug. 11. The lower price represents a forward stock split in which shares split 5-for-1. Tesla stock opened the day trading at about $445 — one-fifth of what the stock was trading at before the split.

If the electric-car maker’s stock split has grabbed your attention and you’re now taking a closer look at the growth stock, here’s a quick overview of important factors investors should keep in mind.

A stock split doesn’t make Tesla stock a better buy

First and foremost, investors should note that while Tesla shares are more affordable after the split, the split does not make the stock a more attractive investment than it was at its much higher pre-split price of $2,225.

Why is this the case? Simply because both price and ownership in the company on a per-share basis were divided by five. Put another way, each Tesla share is now assigned only one-fifth of the ownership in the company that was allotted previously.

On the flip side, of course, a stock split doesn’t make Tesla stock any worse of an investment either. A stock split is simply a nonfactor when it comes to making investment decisions and should have no impact on an investment thesis.

Several key catalysts for Tesla stock

Nevertheless, some investors may be more interested in Tesla stock now simply because shares have become more affordable. Some retail investors could have been in a position in which it was more difficult to spend $2,225 on a single share. Or perhaps there are other investors who have coincidently become more interested in Tesla stock recently.

For those investors, let’s take a quick look at the automaker and the catalysts that could help the stock over the long haul.

First, there’s Tesla’s recent launch of its Model Y. Debuting in March, the Model Y is Tesla’s second-most affordable vehicle yet. With a starting price of about $50,000, the new vehicle gives the automaker a smaller SUV that is much more affordable than its larger Model X SUV. Model X pricing comparatively starts at $80,000. The automaker has big expectations for the Model Y, with management saying that it believes deliveries could eventually surpass those of the Model 3, which is Tesla’s best-selling car by far. Specifically, Tesla CEO Elon Musk has said he believes annual Model Y deliveries could eventually grow to 1.25 million. With total Tesla vehicle deliveries estimated to come in at about 500,000 this year, the Model Y has the potential to be a huge catalyst for Tesla.

Second, there’s Tesla’s fast-growing energy business, which includes sales of energy storage and solar panels. While revenue from the segment only accounts for about 6% of total revenue today, Musk believes Tesla Energy will eventually rival its automotive business. 

Finally, Tesla hopes its vehicle software will eventually bring in far more revenue for the company. Management has indicated two ways it plans to improve monetization of the software. First, it will continue raising the price for its driver-assist technology as it improves (the company believes the software will eventually get to the point where Tesla can release an over-the-air update that makes its vehicles self-driving, helping it command a much higher price tag). Second, Tesla plans to eventually launch a ride-sharing network that will operate with self-driving Tesla vehicles.

One key reason to avoid Tesla stock

Despite these exciting potential catalysts for Tesla stock, investors should keep in mind the automaker’s pricey valuation. Today, Tesla has a market capitalization of $426 billion even though trailing-12-month sales and net income are just $25.7 billion and $368 million. This means that investors have already priced in a wildly optimistic growth story for the company over the next decade.

It’s always possible, of course, that Tesla executes so well that even the rosy outlook priced into the stock today proves to be an underestimate of the company’s potential. But investors should bear in mind the risks of the underperformance the stock could endure if investor expectations prove too optimistic.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• Why Alphabet should split its stock
• 2 Advantages of Stock Splits for Apple and Tesla Investors
• Tesla stock split: Should you buy now or wait?
• The 1 Warren Buffett quote that tells us how to invest right now
• Analyst says Tesla best-case scenario could see share price spike 70% to $3,500

Daniel Sparks 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 Tesla. 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Shares of Apple‘s (NASDAQ: AAPL) stock are suddenly a whole lot more affordable.

The tech titan’s shares began trading at their new split-adjusted price Monday. Following its 4-for-1 stock split, Apple’s shares are now trading for roughly 75% less than they were before.

But does that mean the stock is a buy?

First of all, investors need to understand that a stock split does not change the fundamental value of a business. Stock splits simply divide up a company into more pieces, with the value of each piece reduced in kind. In Apple’s case, investors received three new shares for each share they owned. Those four shares are now worth one-quarter of the original share’s price. So, if you owned one share of Apple worth roughly $500 on Friday, today you own four shares worth approximately $125.

Here’s another way to think about it: A 4-for-1 stock split is like exchanging a $1 bill for four quarters. You still have the same amount of money, it’s just divided into more portions.

But if a stock split doesn’t change the value of a company, why has Apple’s stock price run up so much ahead of its split and continues to rise after the split?

It’s a fair question, and one with multiple answers. One reason is that less-experienced investors might not understand exactly how stock splits work and are simply excited about the chance to own more shares of Apple. Another reason is that investors who could not afford to buy a share at $500 may now be able to buy one at $125. (Though this is less of a factor today, now that many brokers allow their customers to buy fractional shares.)

Perhaps the best explanation is that professional traders know that many people do get excited about splits, and so they buy the stock ahead of what they expect will be a herd of individual investors rushing in to buy shares after the split is announced.

However, none of this alters Apple’s long-term value, and so the effects can be fleeting. Said differently, it’s possible that Apple’s stock could surrender some of its recent gains now that the split has occurred.

So, is Apple’s stock a buy today?

To answer this question, investors should shift their focus from the stock split to the true drivers of Apple’s long-term value. And nothing is more important for Apple in this regard than the iPhone.

Fortunately, the company appears to be gearing up for a 5G-driven sales bonanza for the newest version of its prized product. The fifth-generation wireless technology could help to spur hundreds of millions of device sales in the coming year, driving Apple’s sales and profits sharply higher. 

Profits are what ultimately determines a company’s – and, by extension, a stock’s – true value. And in this regard, Apple’s future is bright. Its stock, in turn, remains a buy post-split.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• Why Alphabet should split its stock
• Apple shares will surge 20% after its stock split, according to this analyst. Is he right?
• 2 Advantages of Stock Splits for Apple and Tesla Investors
• Is Apple’s market cap headed to $3 trillion? One analyst thinks so
• Apple shareholders are either correcting a mistake… or making one

Joe Tenebruso 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 Apple. The Motley Fool Australia has recommended Apple. 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P) shares were on fire in August, with the two buy now pay later providers smashing the market with gains of 33.4% and 54%, respectively.

Unfortunately, September hasn’t started as positively and both shares are tumbling notably lower this morning.

At the time of writing the Afterpay share price is down 6% to $86.17 and the Zip share price is down 7.5% to $8.46.

Why are Afterpay and Zip Co shares sinking lower today?

Investors have been hitting the sell button this morning in response to an announcement out of payments giant PayPal overnight.

That announcement reveals that PayPal will be launching “Pay in 4” to customers in the United States in the fourth quarter of 2020.

As its name implies, Pay in 4 is a short-term payment solution that allows consumers to make a purchase and pay over four interest-free instalments.

PayPal commented: “Pay in 4 can help merchants drive conversion, revenue and customer loyalty without taking on additional risk or paying any additional fees, while enabling consumers to make a purchase and pay over four, interest-free instalments.”

It is part of the company’s growing suite of Pay Later solutions, enabling merchants and partners to get paid upfront while enabling customers to pay for purchases between $30 and $600 over a six-week period.

Pay in 4 is automatically included in the merchant’s existing PayPal pricing, so merchants won’t have to pay any additional fees to enable it for their customers.

PayPal’s SVP of Global Credit, Doug Bland, said: “In today’s challenging retail and economic environment, merchants are looking for trusted ways to help drive average order values and conversion, without taking on additional costs. At the same time, consumers are looking for more flexible and responsible ways to pay, especially online.”

“With Pay in 4, we’re building on our history as the originator in the buy now, pay later space, coupled with PayPal’s trust and ubiquity, to enable a responsible and flexible way for consumers to shop while providing merchants with a tool that helps drive sales, loyalty and customer choice,” he added.

Foolish Takeaway.

Competition certainly is heating up in the lucrative market. However, given Afterpay’s strong market position in the United States, I’m not overly concerned by this news. 

Though, given the smaller market share Zip Co’s QuadPay business has, it might have a fight on its hands in 2021.

More reading

• 4 ASX growth shares I’d buy in September
• Why the Zip Co share price rocketed 54% higher in August
• 2 financial services for the fiscal cliff
• The Afterpay share price jumped 33% in August: Is it too late to invest?
• These market veterans believe a share market pullback is coming. Here’s their surprising advice…

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 PayPal Holdings. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended PayPal Holdings. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The 2020 stock market crash could mean that buying the best stocks becomes even more profitable over the long run. While a decade of economic growth may have caused investors to overlook the risks posed by weak business models, companies with poor operating outlooks may now struggle to deliver rising share prices during what could be a more difficult period for the world economy.

As such, by following Warren Buffett’s strategy of buying the best businesses in a specific industry, you could gain exposure to the most appealing investment opportunities available.

A quality focus after the stock market crash

Focusing on quality stocks may become even more important after the market crash. The uncertain economic outlook could mean that only those companies with sound finances and a dominant market position are able to survive the short run, and prosper in the long run. Therefore, it could be a good idea to focus your portfolio on those businesses that can extend their market share amidst difficult operating conditions.

Warren Buffett has always sought to purchase the most attractive businesses in a specific industry. For example, he has focused on buying those companies with the widest economic moats. This essentially means that they have a competitive advantage over their peers that enables them to deliver more impressive financial performance. An economic moat is subjective, but can consist of factors such as a unique product, brand loyalty or a lower cost base that, over time, produce strong profit growth.

Paying a premium for quality

Of course, the best stocks may not necessarily be the cheapest stocks – even after the recent market crash. Investors may currently be seeking to lower their overall risks, and could therefore reposition their portfolios towards the strongest companies around. This may lead to many of the best stocks trading at high prices relative to their weaker peers.

While this may dissuade some investors from buying them, it could be worth paying a premium price for stronger businesses. They may offer superior risk/reward opportunities to their sector peers, and could deliver higher returns in the long run. Therefore, in terms of value for money, more expensive stocks that are better quality may be more appealing.

Diversification

Even if you purchase the best stocks around after the market crash, it is still imperative to diversify. This not only reduces your risks through limiting exposure to a small number of holdings, it may also enable your portfolio to benefit from a wider spectrum of growth opportunities.

Since the outlook for the world economy continues to be uncertain, investors with diverse portfolios may generate smoother, and more impressive, returns in the long run. As such, now could be the right time to build a diverse portfolio of high-quality stocks.

More reading

• Afterpay and Zip shares sink lower after PayPal announces Pay in 4 BNPL product
• In the race for a coronavirus vaccine, can there be multiple winners?
• 4 ASX growth shares I’d buy in September
• Starpharma share price rockets to record high on DEP remdesivir COVID-19 news
• QBE share price tumbles lower after shock CEO sacking

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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Everyone is wondering which company will win the race to produce a coronavirus vaccine. With 31 candidates in clinical development and six of those in phase 3 studies, competition is high.

That’s if we expect only one winner. But the fact is, one winner likely won’t be sufficient, a fact that becomes clear when we consider the number of people who need the vaccine and the manufacturing capacity of any single company. Let’s take a look at some of the numbers and what all of this means for those in the vaccine race, as well as investors.

To stop the coronavirus from spreading, the goal is to reach herd immunity. That’s when most of the population is immune to an illness, halting the spread. Experts have said 70% of the population must be immune to the coronavirus to reach that point. With the world’s population totalling 7.7 billion, about 5.4 billion people will need vaccination.

Now, let’s see where leaders in the race stand in terms of supplying a possible vaccine. The following are all involved in phase 3 or phase 2/3 trials. Moderna (NASDAQ: MRNA) is set to deliver 500 million doses annually, with the possibility of increasing that to 1 billion as of next year. AstraZeneca (NYSE: AZN) says its manufacturing capacity is 3 billion doses. Pfizer (NYSE: PFE) and its partner BioNTech (NASDAQ: BNTX) aim to produce more than 1.3 billion doses by the end of 2021.

Does supply meet demand?

Before calculating whether supply meets demand, keep in mind that certain vaccines involve two doses. That’s the case for Moderna’s program and the Pfizer/BioNTech team. Though AstraZeneca tested its vaccine in both one- and two-dose treatments, researchers said the strongest immune response was seen in the two-dose group. So, when regulators approve any vaccine, its number of doses will affect how much supply is needed for a population.

And even if all three vaccine candidates mentioned above gain approval, supply will still fall short of demand, regardless of a one- or two-dose schedule — at least considering today’s manufacturing capacity. That’s probably one reason why countries have been scrambling to pre-order vaccines from more than one company.

For example, the U.S. has pre-ordered doses of potential vaccine candidates under development by Moderna, AstraZeneca, Pfizer/BioNTech, and others. Through a $1.5 billion investment this month, the U.S. ordered 100 million doses from Moderna; it has offered $1.2 billion to AstraZeneca for 300 million doses; and for a $1.95 billion investment in Pfizer/BioNTech’s program, the U.S. will own 100 million doses. Europe and the U.K. have also signed supply agreements with vaccine developers.

Making extra sure they’re ready

All this willingness to order vaccines from several producers might also be a case of countries hedging their bets. If one company’s program fails, at least there’s a chance of obtaining a vaccine elsewhere. But knowing the supply problem that lies ahead — even if a few vaccine candidates are approved — it’s likely governments will have to seek doses from several vaccine makers well into the future, and they know that.

Pricing is another concern, and prices so far have varied. For instance, the U.S. is paying $10 a dose for 100 million doses of Johnson & Johnson‘s (NYSE: JNJ) investigational vaccine. And Moderna has recorded some small volume orders in the range of $32 to $37 a dose. It’s too early to say whether lower-priced vaccines will have an edge. Supply and product quality will determine that further down the road.

Crossing the finish line

So, to answer our question: Yes, there is room for more than one winner in this vaccine race. But these winners may not all cross the finish line at the same time. The one that does, though, is likely to see its shares climb. Companies that are ahead from a timeline perspective — such as Moderna, AstraZeneca, and Pfizer/BioNTech — stand a good chance if the data cooperate.

And then there may be a later winner (or winners): a biotech or pharmaceutical company whose vaccine candidate is in phase 1 or 2 studies today. If that player’s potential vaccine eventually performs well, revenue and share gains will be on the horizon.

The key point to keep in mind here, regarding the companies close to the finish line and those further behind, is this: Clinical trial results will be the first benchmark to determine the winners of this race. So, if you’re looking to get an edge on who will dominate the market, be on the lookout for clinical trial reports this fall.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• Johnson & Johnson to launch late-stage coronavirus vaccine trials in September
• This could be the ace in the hole for Johnson & Johnson’s COVID-19 vaccine
• How Moderna went from coronavirus sequence to a phase-1-ready vaccine candidate in 42 Days
• Everything you need to know about the coronavirus vaccine race

Adria Cimino 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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I think there are a number of ASX growth share opportunities in September 2020.

The growth delivered by businesses like Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P) is impressive – but who knows if they are worth buying today after the meteoric rise?

There are still plenty of other opportunities that aren’t priced to the moon.

Here are four ASX growth shares I’d buy in September:

Citadel Group Ltd (ASX: CGL)

Citadel is a technology business that provides software to help organisations manage data. It serves clients in sectors like education, defence and healthcare.

Its underlying FY20 result was impressive in my opinion. Total revenue grew by 29.4% to $128.4 million and total software revenue increased by 35.7% to $47.5 million.

I expect FY21 to be a bumper year for the ASX growth share with the Wellbeing business under Citadel’s ownership for the full year. Wellbeing is a UK healthcare software business with high levels of recurring revenue and an attractively high earnings before interest, tax, depreciation and amortisation (EBITDA) margin.

The world is becoming increasingly reliant on software and I think Citadel is a good ASX growth share to get exposure to this trend.

At the current Citadel share price it’s trading at under 14x FY22’s estimated earnings.

Pushpay Holdings Ltd (ASX: PPH)

I think Pushpay is one of the most promising ASX growth shares around.

It’s an electronic donation payment business that facilitates digital giving to not-for-profits. Its current client base is largely medium and large US churches. This provides exposure to a large (and growing) amount of electronic donations. The opportunity so large that Pushpay is targeting annual revenue of US$1 billion per annum over the long-term.

In FY20 alone it grew its gross margin from 60% to 65%, which shows the business has excellent profit margin improvement potential over the long-term as it scales. As it grows its revenue it should be able to become much more profitable, at the net profit after tax level, as time goes on.

The ASX growth share is looking to double its earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) to at least US$50 million in FY21.

At the current Pushpay share price it’s trading at 35x FY22’s estimated earnings.

City Chic Collective Ltd (ASX: CCX)

City Chic is steadily becoming a world leader in the retailing of plus-size women’s clothes, footwear and accessories. It has a national footprint of City Chic stores across Australia. It also has websites in Australia and the northern hemisphere. The company has partnerships with northern hemisphere partners like ASOS.

I particularly like the ASX growth share’s strategy of buying distressed competitors in the US. The United States is a huge market compared to Australia. City Chic aims to turn the acquired US retailers into online-only offerings – which would have lower costs and still have a national footprint. The latest target is a business called Catherines.

In FY20 City Chic grew revenue by 31% to $194.5 million. Around 65% of total sales were online and 42% of global sales were in the northern hemisphere. I think City Chic has plenty of pleasing factors which will help long-term growth.

At the current City Chic share price it’s trading at 22x FY22’s estimated earnings.

BWX Ltd (ASX: BWX)

BWX is one of the world’s leading natural beauty businesses. The ASX growth share sells a number of brands including Sukin, Mineral Fusion and Andalou Naturals.

The company has really turned things around under new management. FY20 was a strong year with revenue growth of 26%, EBITDA growth of 30% and statutory net profit growth of 59% to $15.2 million.

BWX continues to increase its market share and gross profit margin, so I think it’s definitely an ASX growth share to watch because increasing profitability as it grows revenue is very attractive for market-beating returns.

It’s expecting double digit revenue and EBITDA growth in FY21. At the current BWX share price it’s trading at 31x FY22’s estimated earnings.

Foolish takeaway

I think each of these ASX growth shares have very good outlooks for the next few years. Their valuations look reasonable for their growth prospects and they have plenty of international avenues for growth. At the current prices I think Citadel and Pushpay looks particularly good value for the long-term.

More reading

• Afterpay and Zip shares sink lower after PayPal announces Pay in 4 BNPL product
• Why the Zip Co share price rocketed 54% higher in August
• 2 financial services for the fiscal cliff
• The Afterpay share price jumped 33% in August: Is it too late to invest?
• These market veterans believe a share market pullback is coming. Here’s their surprising advice…

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended BWX Limited and PUSHPAY FPO NZX. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Citadel 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.

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The Starpharma Holdings Limited (ASX: SPL) share price has been a positive performer on Tuesday.

In morning trade the dendrimer products developer’s shares have jumped 12% to a record high of $1.70.

Why is the Starpharma share price storming higher?

Investors have been buying Starpharma’s shares this morning after it announced the development of a slow release soluble DEP remdesivir nanoparticle.

According to the release, the company has applied its novel DEP drug delivery technology to create a long-acting, water soluble version of remdesivir.

Remdesivir is an antiviral drug which is currently being developed by US giant Gilead to treat COVID-19. It has emergency use authorisation from the US Food and Drug Administration for the treatment of COVID-19 in adults and children hospitalised with severe disease.

It has broad-spectrum antiviral activity. However, current formulations of remdesivir are required to be administered intravenously due to the drug’s low solubility, with each infusion taking up to two hours and requiring daily administration for either 5 or 10 days.

Whereas, Starpharma’s DEP remdesivir is a highly water-soluble nanoparticle formulation of remdesivir with controlled release properties. This would potentially allow for less frequent dosing and use in a non-hospital setting, such as aged care. Furthermore, the solubility of DEP remdesivir is 100-fold higher than standard remdesivir.

This means that DEP remdesivir’s enhanced aqueous solubility would enable subcutaneous (under the skin) injection rather than intravenous infusion. This is a positive as it allows for outpatient treatment and would reduce the burden on hospitals.

Management commentary.

The company’s CEO, Dr Jackie Fairley, was very pleased with the development.

She said: “Given the limited treatment options available for COVID-19 patients, Starpharma has been actively reviewing development programs globally, and evaluating where Starpharma’s proprietary DEP technology has potential to improve delivery, expand use or reduce frequency of dosing.”

“The ability to deliver remdesivir via a long-acting, subcutaneous injection has the potential to expand its application outside hospitals, into settings like aged care, and also facilitate its use in countries with less developed healthcare systems. It would also improve patient convenience and reduce the burden on the healthcare system. We’re pleased to be able to utilise the DEP platform to improve the delivery of this important antiviral medicine,” she added.

More reading

• Starpharma share price rockets to 52-week high on full year update
• Starpharma share price bolts 14% on COVID-19 nasal spray
• The Starpharma share price jumps on new partnership deal
• Why Altium, Beach, JB Hi-Fi, & Starpharma shares are charging higher

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 Starpharma Holdings Limited. The Motley Fool Australia has recommended Starpharma 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 QBE Insurance Group Ltd (ASX: QBE) share price has come under pressure on Tuesday.

At the time of writing the insurance giant’s shares are down 5.5% to $10.03.

Why is the QBE share price under pressure today?

Investors have been selling the company’s shares after the shock announcement of the departure of its chief executive officer, Pat Regan.

According to the release, Mr Regan will be departing the company after almost three years in the role following an external investigation concerning workplace communications.

The outcome of this investigation found these communications did not meet the standards set out in the company’s code of ethics and conduct, leading to the board taking decisive action.

QBE Chairman, Mike Wilkins, commented: “We are committed to having a respectful and inclusive environment for everyone at QBE. The Board concluded that he had exercised poor judgement in this regard.”

“While these are challenging circumstances the Board recognises and thanks Mr Regan for his hard work and contribution to strengthening QBE. However, all employees must be held to the same standards.”

What now?

Mr Wilkins will now assume the role of Executive Chairman, taking on day-to-day oversight of QBE, while an extensive internal and external international search process is underway to appoint a new chief executive officer.

The new executive chairman appears confident that this change won’t disrupt the company’s performance.

He commented: “The fundamentals of our business are strong, supported by cell reviews and Brilliant Basics which continue to grow in sophistication and remain key drivers of our performance. Alongside this, we are accelerating our program of work to build best-in-class data and digital capabilities to meet the evolving needs of our customers. Coupled with a greatly improved external pricing environment, these factors give me great confidence in our future.”

Mr Wilkins also notes that the company is navigating through the COVID-19 pandemic successfully.

“While COVID-19 has created significant challenges, QBE is successfully navigating this period of uncertainty, and the Group’s demonstrable financial strength positions us well to capitalise on accelerating pricing momentum and emerging organic growth opportunities,” he explained.

Culture changes.

The company also advised that the board will put in place additional initiatives in the coming weeks to further develop a vibrant and inclusive culture.

This will commence with a board sponsored and externally supported culture review and the creation of an additional avenue for employees to safely raise concerns and receive support that will supplement existing channels.

“We want our people to have the avenues they need to safely speak up, with the confidence that they will be heard and that all concerns raised will be treated consistently across our workforce,” Mr Wilkins concluded.

More reading

• Telstra and 2 more ASX dividend shares I like in August
• Why AMP, Premier Investments, QBE, & Treasury Wine shares are storming higher
• QBE share price surges 7% despite reporting first-half loss
• Link share price buoyed by appointment of new CEO

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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), the conglomerate led by billionaire investor Warren Buffett, just announced a relatively large investment in five Japanese companies. The investment, which is meant to be a long-term holding, is the latest in a string of billion-dollar buys Berkshire has made that we’ve learned about in recent weeks.

With that in mind, here’s what we know about Berkshire’s investment and why shareholders should be excited about it.

Berkshire is putting billions to work in Japan

Berkshire Hathaway just announced that it has acquired a little more than a 5% stake in five Japanese companies: Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo. All five trade on the Tokyo Stock Exchange, where Berkshire made its purchases over the course of the past year, according to the Berkshire press release. They’re all trading companies (diverse conglomerates – known as “sogo shosha” in Japan) with operations in a variety of industries.

Just to name one example, Mitsubishi Corporation (not to be confused with the automaker of the same name) has operations in information technology, infrastructure, finance, metal mining, energy, heavy machinery, chemicals, and consumer products.

While we don’t know how much Berkshire paid for its shares in each company, the current value of Berkshire’s investment is roughly $6.5 billion (depending on how much more than 5% of the shares Berkshire bought).

Berkshire made it clear in its press release that these are intended as long-term investments, meaning that Buffett isn’t simply attempting to capitalise on a short-term mispricing or anything like that. And Berkshire says that it may buy even more – up to 9.9% of each, with larger stakes possible with the permission of each company’s board of directors.

It’s also worth mentioning that although these are technically five separate investments, they are very similar in nature. Think of this in the same manner as Berkshire owning shares of several different bank stocks, or (until recently) all four major US airlines. Buffett seems to have identified a market opportunity, so instead of trying to pick a winner, he’s using the idea that a rising tide will lift all ships and spreading his money around.

A relatively small piece of Berkshire, but here’s why it matters

Now, an investment of more than $6 billion may sound like a large amount of money, and to most people and companies it is. However, it’s important to point out that this represents just over 1% of Berkshire’s total market capitalization. So even if they’re very successful, these Japanese stock investments aren’t likely to be a major needle-mover for Berkshire all by themselves. But that’s not the point.

The key takeaway here is that this tells us a few things that Berkshire shareholders desperately needed to hear. First, it shows that the recent investments in Dominion‘s (NYSE: D) natural gas assets and Bank of America (NYSE: BAC) stock weren’t just a blip – Buffett seems truly ready and committed to putting Berkshire’s 12-figure cash hoard to work. After all, while this is technically five different investments, in terms of actual cash spent, this is the most Buffett has put to work in a single type of investment in some time.

Furthermore, it tells investors that when the US and world stock markets were in a tailspin earlier this year, Berkshire may not have been as inactive as it seemed. From the press release, we learned that the company had built these stakes over a period of about 12 months – it didn’t just buy shares, it acquired them over a period of time, including the turbulent first half of 2020.

The bottom line is that investors have been frustrated by Berkshire’s lack of investment action for some time, but this move just goes to show that Buffett has some tricks up his sleeves – even at 90 years old.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Matthew Frankel, CFP owns shares of Bank of America and Berkshire Hathaway (B shares) and has the following options: short January 2021 $23 puts on Bank of America. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Berkshire Hathaway (B shares) and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short September 2020 $200 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Berkshire Hathaway (B shares). 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 Warren Buffett just invested billions in Japan – here’s why it matters appeared first on Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Zip Co Ltd (ASX: Z1P) share price was among the best performers on the Australian share market last month.

The buy now pay later provider’s shares stormed a remarkable 54% during the month of August.

Why did Zip Co share price smash the market in August?

There were a couple of reasons for Zip Co’s incredibly strong performance last month.

The first was its impressive performance in FY 2020, which led to the company reporting an 87% increase in transaction volume to $2.1 billion and a 91% lift in revenue to $161 million.

Key drivers of this growth were strong increases in customer and merchant numbers in the ANZ region during the 12 months. At the end of the period, Zip Co had more than 2.1 million customers and 24,500 partners on the Zip platform. This was an increase of 62% and 51%, respectively, year on year.

Another positive from the result was its bad debt. Zip Co reported a strong credit performance with net bad debt write-offs of 2.24% and arrears at 1.33%. This was in line with management’s expectations and significantly outperforming the market.

Zip Business and eBay Partnership.

Also getting investors excited in August was the announcement of the launch of Zip Business and a partnership with eBay Australia.

This new partnership gives 40,000 Australian small and medium-sized businesses the opportunity to access working capital via the eBay marketplace.

Management notes that it has been designed to give merchants the freedom to purchase inventory, cover short-term expenses such as marketing campaigns, and manage their cashflows, via access to flexible lines of credit.

As part of the launch, the company is bringing its Spotcap brand into the Zip Business portfolio. Zip Business will be leveraging the deep credit experience in the Spotcap business and combining it with Zip’s sophisticated risk decisioning and real-time onboarding to rapidly scale the SMB Buy Now Pay Later offering.

Pleasingly, management appears to have more products up its sleeve. It advised that this is the first in a series of exciting integrated products and solutions Zip will progressively roll out as it launches Zip Business.

This could mean more positive news flow in September, further supporting the Zip share price.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia 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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