Tag: Motley Fool

On Wednesday the Kogan.com Ltd (ASX: KGN) share price came under pressure after the ecommerce company revealed that both its chief executive officer (CEO) and chief financial officer (CFO) were selling down their holdings.

Between the both of them, the executives offloaded just under $158 million worth of shares.

This comprises the sale of 2,025,214 shares at $21.60 by CFO David Shafer and 5,284,441 shares at $21.60 by CEO Ruslan Kogan.

But they’re not the only CEOs that have been selling shares this month.

Which other CEO has been selling shares?

According to a change of director’s interest notice, the CEO of REA Group Limited (ASX: REA) has been selling shares since the release of its full year results.

The notice reveals that CEO Owen Wilson has offloaded a total of 1,682 shares through on market trades on 13 August and 18 August.

Mr Wilson received a total consideration of $195,399.39 for the shares. This equates to an average of $116.17 per share.

Following these sales, the chief executive is left with a holding of 12,000 shares and 15,677 performance rights.

Should you be concerned?

Insider selling rarely goes down well with investors. This is because many believe it is a sign that a share price has hit its ceiling, at least in the short term. After all, if you felt a share price was going notably higher, you wouldn’t be inclined to sell.

No explanation was given for the sale, which is a little unhelpful. But it is worth noting that the chief executive still has a decent holding worth approximately $1.4 million at today’s prices.

You could, therefore, argue that his interests remain aligned with the rest of the property listings company’s shareholders. But whether that will be enough to stop its shares from dropping lower today, only time will tell.

More reading

• The REA Group share price is closing in on its record high
• 2 ASX dividend shares with yields over 6% today
• Why I would buy CSL and these ASX 200 blue chip ASX shares
• 4 quality ASX shares to buy in August
• Results: News Corp share price on watch as net income drops 919%

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

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Is the Westpac Banking Corp (ASX: WBC) share price a buy today for the prospect of future dividend income after COVID-19?

Westpac may not be popular among income investors right now after the major ASX bank decided not to pay a dividend for the FY20 first half. Westpac’s board wants to retain a strong balance sheet amid the ongoing uncertainty in the current operating environment. Westpac said that it will next consider dividends as part of finalising its full year 2020 result.

What happened in the FY20 third quarter

COVID-19 has definitely hurt the Australian banking sector. Indeed, banks around the world have been affected by the pandemic.

The Westpac share price is down more than 32% over the past six months.

Westpac had already recognised an impairment charge of $2.24 billion in its FY20 half year result which included $1.9 billion of potential impacts of COVID-19. In the FY20 third quarter it recognised another impairment charge of $826 million.

The lower impairment charge helped the bank deliver decent earnings for the quarter. Statutory earnings was $1.12 billion. It generated cash earnings of $1.32 billion compared to the first half’s quarterly average of $497 million, or $1.14 billion excluding notable items.

The charge for extra provisioning wasn’t great news for investors. It also reported a lower net interest margin (NIM) of 2.05% which was down 8 basis points, due to low interest rates. The NIM is an important measure of profitability for the banking sector.

The big ASX bank said that at 31 July 2020, 78,000 mortgages were still being deferred. Westpac said that the percentage of its Australian mortgages that are now more than 90 days past due (including hardship mortgages) was 1.49%, up 55 basis points from March 2020. Currently there is government stimulus and other elements of support for borrowers in hardship, but that won’t last forever.

Despite these various troubling statistics, Westpac had a common equity tier 1 (CET1) capital ratio of 10.8% at 30 June 2020. The Westpac share price would have fallen even further if it wasn’t well capitalised. The ASX bank is currently reviewing its businesses, so that could lead to more divestments.

Is Westpac a buy for future dividends?

ASX banks have been favourites for income investors for many years. So the current environment is unnerving.

But what about the future? COVID-19 won’t be around forever. Will Westpac’s net profit bounce back to above $5 billion or $6 billion in a year or two? If profit can bounce back then perhaps the Westpac share price and the dividend can rebound too?

Will the 2019 Westpac dividend of $1.74 per share be a pretty close payout to the 2022 dividend payout? If that were to be the case then Westpac’s 2022 grossed-up dividend yield would be 14.3%. That sounds like a good yield!

But there’s a good chance that it will take longer for Westpac’s earnings to recover. The board may want to hold onto capital for the longer-term. The dividend payout ratio may never be as high as it was before COVID-19. This recession may take a while for all of the elevated bad debts to go through Westpac’s results. Just look how long it is taking for the royal commission remediation to be finalised.

There’s also the upcoming AUSTRAC penalty. Westpac has provisioned $1 billion (after tax) for AUSTRAC matters, with $900 million for the potential penalty.

Westpac is the only major ASX bank that hasn’t paid a dividend this year. Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ) have all paid a dividend, even if it was heavily reduced.

I think Westpac is making the right capital management calls to ensure the business stability. There’s not much point paying a dividend and then needing to do a capital raising at highly discounted Westpac share price. But it’s facing the biggest difficulties. 

Westpac’s dividend will hopefully bounce back in the future. But I think there are other ASX dividend shares that offer big yields that perhaps aren’t as risky like listed investment companies (LICs) WAM Leaders Ltd (ASX: WLE) or NAOS Small Cap Opportunities Company Ltd (ASX: NSC).

More reading

• Top brokers name 3 ASX 200 shares to buy today
• What you need to know about the ANZ share price and profit result today
• ASX 200 rises 0.8%, Treasury Wine Estate shares turn sour
• Westpac share price slides 4% after third quarter result
• ASX 200 up 0.2%: Westpac cancels dividend, Treasury Wine hammered, Coles impresses

Motley Fool contributor Tristan Harrison owns shares of NAO SMLCAP 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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On Wednesday the S&P/ASX 200 Index (ASX: XJO) was on form again and stormed notably higher. The benchmark index rose 0.7% to 6,167.6 points.

Will the market be able to build on this on Thursday? Here are five things to watch:

ASX 200 expected to edge lower.

The benchmark ASX 200 looks set to end its winning streak on Thursday. According to the latest SPI futures, the benchmark index is poised to open the day 14 points or 0.23% lower. This follows a disappointing night of trade on Wall Street which saw the Dow Jones fall 0.3%, the S&P 500 drop 0.45%, and the Nasdaq tumble 0.6% lower.

Afterpay upgrades guidance.

The Afterpay Ltd (ASX: APT) share price will be on watch on Thursday following a surprise after-market update on its FY 2020 performance. Since the end of the financial year, the company’s collections have been stronger than expected. This led to a better than expected Net Transaction Loss (NTL) as a percentage of underlying sales. In light of this, it has upgraded its EBITDA guidance to approximately $44 million. This compares very favourably to its previous EBITDA guidance of $20 million to $25 million.

Webjet posts major loss.

The Webjet Limited (ASX: WEB) share price will be in focus today after the release of its full year results. The online travel agent posted a 27% decline in revenue to $266.1 million for FY 2020. This comprises first half revenue of $217.8 million and second half revenue of just $48.3 million. On the bottom line, Webjet recorded a statutory net loss after tax of $143.6 million and an underlying net loss after tax of $42.3 million.

Oil prices soften.

Energy producers including Beach Energy Ltd (ASX: BPT) and Woodside Petroleum Limited (ASX: WPL) will be on watch today after oil prices softened further. According to Bloomberg, the WTI crude oil price is down 0.15% to US$42.82 a barrel and the Brent crude oil price is down 0.4% to US$45.27 a barrel. Demand concerns were weighing on energy prices overnight.

Gold price sinks.

Gold miners Evolution Mining Ltd (ASX: EVN) and Newcrest Mining Limited (ASX: NCM) could come under pressure today after the gold price sank lower. According to CNBC, the spot gold price is down 4% to US$1,933 an ounce. This follows the release of minutes from the latest U.S. Federal Reserve meeting.

More reading

• Afterpay share price on watch after upgrading FY 2020 guidance
• ASX 200 rises 0.7%, CSL soars 6.4%
• Webjet share price on watch after reporting $143.6 million loss
• This ASX fund manager is going back to value in a post-COVID world. Here’s why.
• 4 market experts’ opinions as US shares hit record and WiseTech share price soars 33%

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

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It certainly was a busy day of results releases on Wednesday.

The likes of A2 Milk Company Ltd (ASX: A2M) and CSL Limited (ASX: CSL) were just two of a large number of companies handing in their report cards.

Given how many releases were made, a few results will inevitably have slipped under the radar.

Three that you might have missed are summarised below. Here’s how they performed:

McPherson’s Ltd (ASX: MCP)

The McPherson’s share price rose almost 4% on Wednesday after the beauty products company delivered a solid FY 2020 result. For the 12 months ended 30 June, McPherson’s reported a 6% increase in total sales revenue to $222.2 million. On the bottom line the company posted an underlying profit after tax of $15.5 million, up 13% on the previous year. On statutory basis, profit after tax fell 56% to $6.1 million. This includes a $10.7 million pre-tax non-cash impairment in its A’kin and Moosehead brands and its investment in the Kotia joint venture.

Moelis Australia Ltd (ASX: MOE)

The Moelis share price jumped over 9% higher yesterday following the release its half year results. Investors were very pleased to see the company deliver a result 6.5% ahead of the guidance it provided at its annual general meeting in May. Moelis reported a slight reduction in revenue to $67.4 million and a 19.4% increase in statutory net profit to $8.9 million. And although no guidance was given for the full year, management revealed that the second half has started positively.

Saracen Mineral Holdings Limited (ASX: SAR)

The Saracen share price tumbled lower on Wednesday following the release of its full year results. Though, this decline had more to do with a pullback in the gold price than its profits. In fact, had the gold price remained stable the Saracen share price would likely have risen. For the 12 months ended 30 June, Saracen reported a whopping 173% increase in underlying net profit after tax to $257.5 million. This was driven by a 47% jump in production, steady costs, and a stronger gold price.

More reading

• The latest ASX stocks upgraded by brokers to “buy” today
• Why the Saracen share price is shooting higher today
• Evolution Mining and 1 other ASX gold share in the buy zone
• 5 things to watch on the ASX 200 on Friday
• Northern Star share price falls 1.6% on trading update

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 CSL Ltd. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If you’re searching for dividends in this low interest rate environment, then I would suggest you consider the ASX dividend shares listed below.

Here’s why I think they are in the buy zone right now:

BWP Trust (ASX: BWP)

The first option to consider is BWP Trust. It is the largest owner of Bunnings Warehouse sites in Australia with a portfolio of 68 stores leased to the hardware giant. Earlier this month the company released its full year results and revealed a 1% increase in profit before gains on investment properties to $117.1 million. I believe this demonstrates the resilience of its business.

Another example of this was its property valuations. At a time when retail properties are being impaired, BWP Trust recognised a $93.6 million increase in the gains in fair value of its investment properties. Management advised that this reflects the continuing strong market support for Bunnings Warehouse properties from an investment and risk perspective. In FY 2021, BWP Trust expects to pay a distribution in the region of 18.29 cents per unit. This works out to be an attractive 4.6% yield.

Telstra Corporation Ltd (ASX: TLS)

This telco giant’s shares have come under pressure this month following the release of its full year results. Investors were selling its shares amid concerns that its guidance for FY 2021 would force a dividend cut. While a cut is certainly a possibility, a switch to a free cash flow-based dividend policy could allow for it to be maintained.

A number of analysts believe this will happen, securing its 16 cents per share dividend for the foreseeable future. If that proves correct, then Telstra’s shares will offer a fully franked 5.2% dividend yield in 2021. In light of this, I would be a buyer of the company’s shares right now. It is also worth noting that if it cuts its dividend to 12 cents, it would still provide an attractive 3.9% yield.

More reading

• 3 fantastic ASX 200 shares for retirees to buy
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• Have $3,000 to invest? Try these 2 dirt-cheap ASX shares
• Telstra share price hit by broker downgrade today
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Catapult Group International Ltd (ASX: CAT) share price will be in focus on Thursday following the release of its FY 2020 results.

What happened in FY 2020?

For the 12 months ended 30 June 2020, the sports analytics and wearables company reported a 6% increase in revenue to $100.7 million. The key driver of this was a 21% lift in its subscription revenue to $77.6 million. This was boosted by new contract wins and a 39% lift in customers with more than one Catapult solution.

This led to Catapult delivering earnings before interest, tax, depreciation and amortisation (EBITDA) of $13.3 million in FY 2020. This was an improvement of $9.2 million and driven by the continued strong subscription revenue growth and a decline in operating expenses.

As a result, the company has now delivered five consecutive half-years of consistent EBITDA growth. Management notes that this is due to its continued focus on efficient implementation of a SaaS business model resulting in higher operating leverage and profitable growth.

Pleasingly, after committing to deliver positive free cash flow in FY 2021, Catapult has achieved its goal a year earlier than planned. Catapult posted positive free cash flow of $9 million, up from a cash outflow of $17.1 million in FY 2019.

Where did Catapult’s growth come from?

Management advised that its subscription revenue growth of 21% was driven by positive performances across all verticals.

Performance & Health grew 29%, Tactics & Coaching lifted 10%, Management increased 26%, and Media and Engagement jumped 27%.

This was supported by continued low churn levels. Despite the pandemic, Catapult recorded ACV churn of 6.7% compared to 6.3% in FY 2019.

Catapult’s CEO, Will Lopes, commented: “Despite our Q4 slowdown, our staff was able to grow subscription revenue 21% from last year and deliver 26 new features to our customers. Our ability to execute in such trialing times is a great sign of our product strength, our employees’ dedication to our customers, and the experience of our executive team.”

Outlook.

Management advised that FY 2021 will be a shorter financial year comprising just nine months. This is the result of Catapult changing to a 31 March year end.

It feels this change and a switch to a USD reporting currency will better reflect its underlying successful operating and earnings profile driven by its growth in the northern hemisphere market.

In respect to its financials, management aims to continue being free cash flow positive in FY 2021.

However, it believes it is too early to comment on revenue growth rates for FY 2021 because of the pandemic. Though, it does expect a decent portion of sales that would otherwise have been made in the fourth quarter to be made in the first half.

Longer term, management expects its underlying revenue growth rate to return to historic levels.

More reading

• Catapult share price surges on award of record contract
• 3 ASX small cap shares with serious growth potential
• Why Catapult, Perseus Mining, Prospa, & Spark shares are dropping lower
• ASX stock of the day: Catapult share price leaps 15% on US college football contract
• Is this why the Catapult share price sank lower today?

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Catapult Group International Ltd. The Motley Fool Australia owns shares of and has recommended Catapult Group International 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 Brambles Limited (ASX: BXB) share price will be under the spotlight tomorrow after it unveiled its full year profit results after the market closed.

The logistics group could find favour with investors as it managed to deliver sales and earnings growth despite the COVID-19 market meltdown.

Brambles delivers profit and sales growth

Group revenue came in at US$4.73 billion ($6.52 billion) in FY20, which is 6% ahead of last year in constant currency terms. Its adjusted net profit of US$477.2 million was 11% above FY19 if you ignored the exchange rate.

Management also declared a final dividend of US9 cents a share, which converts to 12.54 cents (franked at 30%). That’s a cut from last year’s 14.5 cents per share payout.

A change in accounting standards from AASB 16 takes some of the gloss off the results too. This change contributed to around 3 percentage points to underlying profit growth.

The stronger US dollar hurts its earnings as all its income is reported in US dollar. Sales growth would halve otherwise to 3% while net profit growth would only hit 5%.

Marginal profit issue could save Brambles’ share price

However, I think the market will overlook this small negative given that the results imply stronger margins – regardless of how you treat the exchange rate.

It’s hard enough to grow both top and bottom lines amid the largest economic disruption in living memory, let alone lift margins.

What’s more, most currency forecasters are expecting the US dollar to weaken through to 2021, which will suit Brambles well.

COVID-19 a double-edged sword for BXB share price

The COVID-19 pandemic was both a blessing and a curse to Brambles. Its main business is to provide pallets and logistic services to supermarkets and other consumer staple retailers.

Demand for food and other household products surged during the onset of pandemic in March. That’s good news for Brambles if not for the fact that it left the group scrambling to meet volatile demand.

Meanwhile, the virus outbreak had a big negative impact on Brambles’ Automotive containers and Kegstar keg-pooling businesses. No one was buying cars in the sharp and sudden downturn, while lockdowns forced pubs to shutter. Luckily, these businesses only account for around 5% of group revenue.

Cold water on good result

However, the thing that might disappoint shareholders is the lack of a V-shape earnings recovery for the group. Management believes that on a constant currency basis, revenue will be anywhere between flat and +4%, while underlying profit will range from zero to +5%.

For a stock that’s trading on a price-earnings multiple of 26.5 times, the prospect of zero growth in FY21 could spook investors.

On the other hand, one has to wonder if management is being too conservative. The group is leveraged to economic activity, and economists are tipping a decent if not substantial rebound in the global economy within the next 12 months.

It’s hard to imagine Brambles posting no or low single-digit growth in such a scenario.

More reading

• The rocketing Aussie is shaping up as a new threat to the profit season
• What would deflation mean for your ASX shares?
• Is the Brambles share price a hidden buy?
• One thing you should be doing ahead of the ASX reporting season

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

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With populations around the world getting older, demand for healthcare services is expected to grow materially over the next couple of decades.

In light of this, I think the healthcare sector is a great place to look for long term investment options.

Two quality ASX healthcare shares that tick a lot of boxes for me are listed below. Here’s why I think they could be great options:

iShares Global Healthcare ETF (ASX: IXJ)

The first healthcare option for investors to consider is actually an exchange traded fund (ETF). I think the iShares Global Healthcare ETF would be a fantastic option due to the large number of quality companies that it is invested in. It provides investors with exposure to healthcare companies across a range of sectors including biotechnology, pharmaceutical, and medical devices.

This means investors will be investing in many of the world’s biggest healthcare companies such as CSL Limited (ASX: CSL), Johnson & Johnson, Novartis, and Pfizer. I believe this group of companies has the potential to outperform the market over the long term thanks to the favourable industry tailwinds. As a result, I feel the iShares Global Healthcare ETF could be a great long term option.

Ramsay Health Care Limited (ASX: RHC)

Another option for investors to consider buying is Ramsay Health Care. This private hospital operator has been facing tough trading conditions for a couple of years and things are unlikely to get easier in the immediate term. But I wouldn’t let that put you off investing with a long term view. Especially given how this appears to have already being factored into the Ramsay share price.

I believe Ramsay’s long term outlook is very positive. This is due to the aforementioned forecasted increase in demand for healthcare services and its global footprint. Another positive is that Ramsay’s management team has a track record of accelerating its growth through acquisitions. I suspect there will be further acquisitions in the coming years that expand its footprint into new markets and drive further growth.

More reading

• ASX 200 rises 0.7%, CSL soars 6.4%
• How will the University of Oxford’s COVID-19 vaccine impact ASX share prices?
• ASX 200 up 0.8%: ANZ to pay dividend, a2 Milk tumbles, CSL impresses
• Why Corp Travel, CSL, Domino’s, & WiseTech Global shares are storming higher
• The latest ASX stocks upgraded by brokers to “buy” today

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has recommended Ramsay Health Care 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 Afterpay Ltd (ASX: APT) share price will be on watch on Thursday following a surprise after-market update on its FY 2020 performance.

What did Afterpay announce?

This afternoon the payments company revealed that its unaudited FY 2020 Net Transaction Loss (NTL) as a percentage of underlying sales is going to be better than previously expected.

On 7 July 2020, the company released an update which advised that its NTL as a percentage of underlying sales was expected to be up to 55 basis points in FY 2020.

However, the company now expects to report an NTL of just 0.38% for the financial year.

Management advised that this improvement is primarily due to higher than anticipated collections of instalment payments relating to its 30 June 2020 receivables balance that have occurred since then.

This has translated into a materially lower provision and lower losses than previously expected.

Earnings guidance lifted.

In light of this positive change in NTL, Afterpay’s unaudited FY 2020 Net Transaction Margin (NTM) as a percentage of underlying sales and its EBITDA (excluding significant items) are expected to be higher than previously thought.

Management expects its NTM to be at approximately 2.25% and its EBITDA (excluding significant items) to be approximately $44 million. This compares very favourably to its previous NTM guidance of 2% and EBITDA guidance of $20 million to $25 million.

In respect to its provisions, Afterpay’s unaudited provision for expected losses is expected to be approximately $34 million. This is based on an unaudited gross consumer receivables balance of approximately $817 million.

Management explained: “The July Trading Update for the FY20 NTL% was based on a relatively short period of collections data relating to the 30 June 2020 receivables balance from 1 July 2020 through to the date of the 7 July 2020 announcement. Since that time, and with the benefit of more collections data reviewed as part of the process of preparing the full year financial statements, a reduced NTL% is now expected.”

More reading

• This ASX fund manager is going back to value in a post-COVID world. Here’s why.
• Afterpay share price hits new, all time high
• Afterpay and Mesoblast were among the most traded shares on the ASX last week
• Tech shares race to record highs as Bank of America tips BHP and Rio shares
• New investors should do this before investing in ASX shares

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

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If you have $2,000 to invest then I think there are a number of smart ASX shares that you could buy.

The share market has recovered strongly from the COVID-19 crash, but I think there are several ASX shares that would still make great buys today:

Citadel Group Ltd (ASX: CGL)

Citadel is an ASX tech share that provides software to essential sectors like defence, education and healthcare. I think its earnings are fairly defensive with the high-quality clients it works with. A large amount of its revenue comes from government-related entities.

One of the main reasons why I think Citadel looks like a good buy is that it’s trading cheaply. At the current Citadel share price it’s trading at 13x FY22’s estimated earnings.

I’m also excited by the UK healthcare software acquisition called Wellbeing. It increases Citadel’s recurring revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) margin. Plus, it will allow management to help sell Citadel’s software into the UK market and sell the Wellbeing software into Australia. The combined package can be sold into other markets.

Pushpay Holdings Ltd (ASX: PPH)

Pushpay is an electronic donation business. Its main client base is the medium and large church sector in the US. Management think this is a big opportunity for the ASX share, which is why the company has a long-term target of US$1 billion of annual revenue.

I was very impressed by the scalability of Pushpay in FY20. It increased its gross margin from 60% to 65% in just one year. In FY21 the ASX share is hoping to double its earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) to US$50 million to US$54 million.

Church donations could prove to be a pretty defensive source of earnings for Pushpay in my opinion. I think it could become even more profitable as it grows larger. The current pandemic circumstances are very unfortunate, but they’re helping bring forward adoption of Pushpay.

At the current Pushpay share price it’s trading at 33x FY22’s estimated earnings.

Bubs Australia Ltd (ASX: BUB)

Bubs is an infant formula business with plenty of growth potential. It’s growing strongly overseas with Asian consumers rapidly taking up its goat milk formula. In the fourth quarter of FY20 Bubs said Chinese direct sales increased by 26% and other export market sales rose by 71%. Vietnam is one market that Bubs is finding good early traction in.

The company is reporting steady growth of its gross profit margin which could go even higher because its infant formula has a much higher gross margin than its other products. Higher margins is good for the bottom line. Bubs has good control over its supply chain through acquisitions with access to the largest goat herd in Australia. It also owns its own Chinese-approved manufacturing facility.

At the current Bubs share price of $0.92 I think it has a lot of growth potential over the next five years.

City Chic Collective Ltd (ASX: CCX)

City Chic is one of the few ASX retail shares I’d be willing to buy. It’s a plus-size women’s fashion retailer of clothes, footwear and accessories.

The company is doing incredibly well at increasing its sales and distribution network in the northern hemisphere. It’s working with both US and European partners to sell products. The core business is going well, even through the pandemic, thanks to a high level of online sales. City Chic was positioned well coming into this difficult period.

I’m particularly excited by the ASX share’s strategy of buying financially-distressed competitors in the US. City Chic can turn them into online-only offerings which decreases costs substantially. It should lead to the company steadily building market share in the US.

City Chic is currently trading at 24x FY22’s estimated earnings.

MFF Capital Investments Ltd (ASX: MFF)

I think that MFF Capital is one of the best listed investment companies (LICs) on the ASX. It’s very capably run by Chris Mackay. He has led the LIC to total shareholder returns of 18.1% per annum over the past decade. That’s a great run.

This investment choice is a bet on Mr Mackay continuing the strong run over the next decade. MFF Capital has moved to a large cash position which means the ASX share is well placed to weather any market downturn later this year – it also gives lots of financial ammunition for MFF Capital to buy beaten-up shares at lower prices.

MFF Capital recently announced it intends to keep increasing its dividend. Its two biggest share holdings are currently Visa and Mastercard – two quality businesses.

BetaShares Global Quality Leaders ETF (ASX: QLTY)

I think that it’s quality businesses that are best suited to get through whatever comes next. Businesses that can keep growing, despite COVID-19, are attractive propositions.

This exchanged-traded fund (ETF) is invested in shares that rate well on four metrics: return on equity (ROE), debt to capital, cash flow generation ability and earnings stability.

The businesses that feature at the top of this ETF’s holdings are indeed quality. It owns names like Nike, Intuit, Intuitive Surgical, Nvidia, Apple, Accenture and Adobe. These aren’t ASX shares, these are some of the best businesses in the world.

It has performed well since inception in November 2018 with net returns of around 19% per year. Past performance isn’t a guarantee of future performance, but I think these quality names can keep on producing for the long-term.

Vitalharvest Freehold Trust (ASX: VTH)

Vitalharvest is an agricultural real estate investment trust (REIT). It owns berry and citrus fruit farms.

The REIT generates both fixed rent and variable rent in the form of a profit share from its main tenant.

At the current Vitalharvest share price, the ASX share is trading at a 19% discount to the net asset value (NAV) at 31 December 2019. This is a large discount, assuming the NAV hasn’t changed negatively. The NAV may even have risen.

There is a new manager of Vitalharvest which is looking to target more acquisitions across the food logistics process with potential buys relating to food processing and storage.

As a bonus, Vitalharvest offers a distribution yield of 6.2%.

Foolish takeaway

I think each of these ASX shares has the potential to beat the overall ASX over the next 12 months and the longer-term. At the current prices I’d probably go for Citadel first, along with Pushpay and Bubs. I think those smaller businesses have a lot of long-term growth potential.

More reading

• Should you buy the beaten down shares of Bubs and Webjet?
• Where to invest $20,000 into ASX shares immediately
• 3 ASX dividend shares to buy for income
• Where I’d invest $10,000 today into ASX shares
• Why I would buy Afterpay and this quality ASX tech share

Tristan Harrison owns shares of Magellan Flagship Fund Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BUBS AUST FPO and PUSHPAY FPO NZX. The Motley Fool Australia has recommended BUBS AUST FPO, 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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