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It’s no secret that the coronavirus pandemic has had an extremely negative impact on the S&P/ASX 200 Index (ASX: XJO) and the broader share market.

As of today, the ASX 200 is still down around 7.5% in 2020 so far. That’s after falling more than 32% between 20 February and 23 March earlier this year.

ASX 200 shares are up more than 36% off of the March lows. Even so, one ASX fund manager sees further upside for at least some ASX shares.

Simon Mawhinney is the portfolio manager at Allan Gray – a contrarian-style fund manager. Rather than chasing the ASX shares like Afterpay Ltd (ASX: APT) that have already recovered strongly from their March lows, this fundie is instead looking elsewhere.

Mawhinney said the companies to watch were the ones trading at levels very close to, and in some cases below, their March 2020 lows. He said:

These companies have been affected by COVID-19. Their earnings are depressed, if they even exist at all. But this needs to be seen in context. The true economic impost for a company that would have traded at 20 times earnings, which loses one year of earnings in a market where things revert to normal after a year, is one-twentieth or five per cent of that company’s value.

One area Mawhinney is not looking right now are companies with “a combination of operating and financial leverage”.

That would include the ASX banks like Commonwealth Bank of Australia (ASX: CBA). Mawhinney sees the greatest downside risk with these companies, which he believes may face permanent loss of capital.

Can we take a lesson from this fund manager’s views?

I think so. Many investors are, in my opinion, still giddy from the eye-watering returns that ASX shares like Afterpay and Zip Co Ltd (ASX: Z1P) delivered over April, May and June. Hoping for a repeat performance in the months ahead is wildly optimistic in my view. As Mawhinney puts it: “Our stock market strength is dominated by an ever-narrowing group of companies that have done extraordinarily well, but they are not the ones on which to focus.”

I think returning to a long-term lens, as described by Mawhinney above, would benefit many ASX share investors today. It might be time for a value investing strategy along these lines to shine in the months and years ahead after a few years of growth investing-style dominance. Whatever happens, this sure is an unprecedented time to be navigating the ASX share market.

More reading

• 4 market experts’ opinions as US shares hit record and WiseTech share price soars 33%
• A LIT time: LITs, LICs prove popular with ASX investors
• Can the US election impact the ASX? You bet!
• Top brokers name 3 ASX 200 shares to buy today
• Nearmap share price slides 13% on release of financial results

Sebastian Bowen 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 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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The Nasdaq Composite Index (NASDAQ: IXIC) hit another new record high yesterday (overnight Aussie time). The tech-heavy index closed up 0.7%. That’s up 23% year-to-date and 63% from its March 23 low.

More remarkably, yesterday the S&P 500 Index (INDEXSP: INX), which had yet to fully recover from its COVID-19 selloff, hit its own new record. The S&P 500 gained 0.2%. Year-to-date that’s a gain of 4.0%. And it’s up 51.5% from the March 23 low.

Australian shares are gaining too. In today’s trade the S&P/ASX 200 Index (ASX: XJO) is up 0.9%. That’s still down 13.7% from its 20 March all-time high. But the top 200 companies on the ASX have now gained an average 34.7% since March 23.

Leading the charge on the ASX 200 today is WiseTech Global Ltd (ASX: WTC).

The WiseTech share price is up 33% in late afternoon trading following the release of its 2020 financial year results. WiseTech reported its revenue was up 23% and earnings before interest, taxes, depreciation and amortisation (EBITDA) leapt 17%.

What these 4 market experts are saying about rocketing share prices

Indeed, the pace of recovery since the March lows has been sizzling, with many companies seeing their share prices double, or more.

Market analysts are almost unanimously pointing to record low interest rates as the primary driver for the rapid rebound.

Here’s what 4 leading market analysts have to say about share prices, as quoted by Bloomberg:

Jonathan Krinsky, chief market technician at Bay Crest Partners, commented:

While a new all-time closing high would certainly be encouraging, it’s not always the pedal to the metal trade that it would seem. There is lot of optimism out there, which often makes breakouts harder to sustain.

Tobias Levkovich, chief US equity strategist at Citigroup, wrote in a note last week:

Takeaways from discussions with institutional investors indicate significant comfort with central banks’ willingness to keep rates low for an extended period. This is a marked shift from commentary heard a month or two ago and reflects both complacent/ebullient investor sentiment and a sense of rationalization for the relentless bull run.

Goldman Sachs’ David Kostin (who recently lifted his 2020 target for the S&P 500 by 20% to 3,600) wrote in a note:

Share prices reflect not just the expected future stream of earnings but also the rate at which the profits are discounted to present value. A plunging risk-free rate partially explains why equities have performed so well despite downward revisions to expected earnings.

Peter Cecchini, founder of AlphaOmega Advisors LLC, sounds a note of caution, saying that investors are putting too much faith in the US Federal Reserve:

The equity markets are now like an old elevator way over capacity. It’s just a matter of time before the cable snaps and its passengers end up in the basement. That’s where the Fed will be waiting.

While the Australian share market tends to follow the general trends of the US share markets, it’s worth remembering that the ASX 200 is still well off its March highs. That could leave Aussie share prices with more room to run higher before overloading the old elevator.

More reading

• 4 ASX tech shares surging higher today on strong FY 2020 earnings
• This ASX fund manager is going back to value in a post-COVID world. Here’s why.
• Why the WiseTech Global share price rocketed 37% higher today
• A LIT time: LITs, LICs prove popular with ASX investors
• Can the US election impact the ASX? You bet!

Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of WiseTech Global. 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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S&P/ASX 200 Index (ASX: XJO) healthcare shares have been a major benefactor of the COVID-19 pandemic. While the containment of COVID-19 cases continues to be a challenge around the globe, here are two ASX 200 healthcare shares to watch closely in August. 

2 ASX 200 healthcare shares I’m watching closely

1. Nanosonics Ltd (ASX: NAN) 

There could be some nerves around Nanosonics’ FY20 full year results that are due later this month. The last market sensitive announcement from the company was its business update back in early April. This business update highlighted that unaudited sales for Q3 FY20 were significantly up on the prior corresponding period (pcp) and sales of consumables were in line with the company’s pre-COVID-19 expectations. However, limited direct access to hospitals may extend the time needed for hospital departments to adopt the company’s ultrasound disinfection products. This may result in lower than anticipated overall growth for its installed base in Q4 and therefore FY20.

I believe in today’s COVID-19 world, where there is a heightened focus on hygiene, Nanosonics plays an ever important role in the disinfection of ultrasound probes. However, mobility restrictions are likely to impact its ability to further penetrate new markets across Europe, the Middle East and Asia Pacific. Notwithstanding the inherent risks in its FY20 result, Nanosonics is a leading ASX 200 healthcare share to watch closely this earnings season.

2. Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) 

The Fisher & Paykel share price has soared more than 50% this year following COVID-19 tailwinds for its business. August, however, had appeared to be a challenging month for the company with its shares tumbling 10% from the all-time record highs set in July. This was the case until the business provided an upbeat FY21 trading update on Tuesday that saw the Fisher & Paykel share price jump by 4%. 

This trading update highlighted strong demand for the company’s hospital respiratory care products. Managing Director and CEO, Lewis Gradon, said that “Hospital hardware sales have continued to steadily increase over the first four months of FY21 with +390% constant currency revenue growth to the end of July compared to pcp”. He also noted that “Global sales of both invasive ventilation and Optiflow consumables in July have returned to similar levels to the peak we saw in April”. The company is seeing that revenue by geography tends to follow the incidence of COVID-19 cases.

Fisher & Paykel estimates that FY21 operating revenue will be approximately $1.61 billion and net profit after tax will be approximately $365 million to $385 million (or an increase of 27-34% on FY20). I believe the company is delivering phenomenal growth figures for a large cap ASX 200 healthcare share. While its share price has pushed to extraordinary highs, I would be watching closely for a pullback buying opportunity. 

More reading

• Fisher & Paykel share price on watch following FY21 trading update
• 3 ASX shares that could grow rapidly during the 2020s
• 5 quality ASX shares to buy in August
• 3 ASX shares fighting COVID-19 and rewarding shareholders
• 3 quality ASX shares to buy in August

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Nanosonics 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 WiseTech Global Ltd (ASX: WTC) share price has been a stunning performer on Wednesday.

The logistic solutions company’s shares are the best performers on the S&P/ASX 200 Index (ASX: XJO) this afternoon with a 33% gain to $27.60.

At one stage the WiseTech Global share price was up as much as 37% to $28.46.

Why is the WiseTech Global share price rocketing higher?

Investors have been fighting to get hold of the company’s shares this morning following the release of its full year results.

For the 12 months ended 30 June 2020, WiseTech Global overcame COVID-19 headwinds to deliver a 23% increase in revenue to $429.4 million and a 17% lift in earnings before interest, taxes, depreciation and amortisation (EBITDA) to $126.7 million.

This was driven by growth from both its CargoWise platform and newly acquired businesses. The CaregoWise platform delivered a 20% increase in revenue to $263 million and newly acquired businesses generated a 29% lift in revenue to $166.4 million.

But perhaps the biggest cause for celebration among shareholders was the company’s guidance for FY 2021.

FY 2021 outlook.

At a time when many companies are not providing guidance due to the uncertain economic environment, WiseTech Global is not only offering guidance, but forecasting very strong growth over the next 12 months.

Based on a number of underlying assumptions, management currently anticipates FY 2021 revenue of $470 million to $510 million and EBITDA of $155 million to $180 million. This represents revenue growth in the range of 9% to 19% and EBITDA growth of 22% to 42%.

The company’s CEO, Richard White, commented: “The COVID-19 challenges faced by the global logistics and supply chain sectors are accelerating the longer term trend towards consolidation and integration. Within this environment, we are seeing increased demand amongst large global logistics service providers for our technological and digital solutions that drive efficiencies and productivity improvements.”

“WiseTech is ideally placed to address this growing demand, with our logistics execution technology and 40 development centres delivering seamless, global capabilities that improve productivity, functional depth, data integration and visibility, regulatory compliance and value for over 17,000 customers worldwide,” he concluded.

More reading

• 4 ASX tech shares surging higher today on strong FY 2020 earnings
• 4 market experts’ opinions as US shares hit record and WiseTech share price soars 33%
• 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
• WiseTech share price jumps 12% on solid revenue growth and dividend

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

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The Data#3 Limited (ASX: DTL) share price has lifted 3% higher today after the technology company reported a record result. The software provider increased revenues by 14.9% and upped earnings per share by 30.5% despite the challenges of the COVID-19 pandemic. 

What does Data#3 do? 

Data#3 is the largest enterprise software supplier in the Asia Pacific.  Targeting enterprise and government customers, the company delivers technology solutions in cloud, mobility, security, data and analytics, and IT lifecycle management.

Data#3 provides services across consulting, procurement, projects, resourcing, and managed services sectors. The software provider is headquartered in Brisbane, with facilities across 12 locations in Australia and Fiji. 

What did the company report? 

Data#3 reported a revenue of $1.6 billion, up 14.9% on the previous year. This was driven by growth in public cloud revenue which lifted 60.4% to $581 million. The cloud revenue stream is accelerating and now accounts for around a third of total revenue.

Earnings before interest and taxes (EBIT) went up by 32.3% to $34.1 million and EBIT margin increased 0.3pp to 2.1%. This contributed to a net profit after taxes of $23.6 million, up 30.5%. Earnings per share were also up 30.5%.  

Data#3 declared total dividends of 13.9 cents a share, a 29.9% increase on FY19.

Chairman Richard Anderson said:

Data#3’s performance both in increased profit and solid underlying cash flow has delivered a significant increase in dividend. Combined with a very strong share price performance, this provides shareholders with an outstanding return for the year.

The Data#3 share price has gained 133% over the past year and is up 98% since March. 

Data#3 responded to the pandemic by mitigating supply chain risk and responding to shifts in customer projects and investment priorities. The company offered pre-packaged pandemic technology solutions and received excellent customer satisfaction feedback.

CEO Laurence Baynham said:

We are delighted with the performance of the consolidated Data#3 business, which delivered another record result in what has been an extraordinary year. The result demonstrates the inherent strength and relevance of our solution offerings in an evolving market.

What’s the outlook for Data#3? 

Data#3 remains confident in its longer-term strategy. It has a robust business with no material debt and solid long-term customer relationships. The company expects that technology will play a major role in Australia’s economic recovery from the pandemic and says it is well-positioned to capitalise on opportunities.

Nonetheless, given the timing of recovery is uncertain, Data#3 has declined to provide commentary on its FY21 outlook, saying only that the long-term financial goal is to deliver sustainable earnings growth. 

The Data#3 share price was trading 3.1% higher at $5.32 at the time of writing.

More reading

• 4 ASX tech shares to buy that aren’t BNPL shares

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

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I think there are a few ASX dividend shares that Warren Buffett would like to own if he were investing in Australian shares.

Warren Buffett is one of the world’s greatest investors in my opinion. Berkshire Hathaway is the business he leads. Berkshire Hathaway doesn’t pay a dividend but plenty of its investments do. Plus, the US doesn’t have franking credits – it makes more sense for ASX shares to pay dividends.

I think there are some ASX shares that Warren Buffett would have in his Australian portfolio:

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

Soul Patts is an investment house that is often compared to Berkshire Hathaway with how it operates. They both invest in listed and unlisted businesses. Franking credits help Soul Patts lose less value through its ownership structure.

The ASX dividend share is invested across a variety of industries including telecommunications, building products, property, resources, agriculture and pharmacies.

I like the Soul Patts effort to expand its diversification into different industries. Soul Patts has been expanding in the financial services industry in recent years. It plans to invest into regional data centres as well. As an investment conglomerate, Soul Patts can alter its investments to be focused on long-term growth.

The ASX dividend share has a number of pleasing attribute dividend attributes. I think the most important one is the fact that it has increased its dividend every year since 2000. No other ASX share has a record as good as that.

Over time the business will make more investments that should improve and diversify its earnings stream further.

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

Brickworks Limited (ASX: BKW)

One of Berkshire Hathaway’s larger businesses is Clayton Homes – so it shows that Warren Buffett likes exposure to property-related earnings.

Brickworks is a manufacturer and seller of building products like bricks, masonry, roofing, paving, precast and so on. It’s the largest brickmaker in Australia.

The ASX dividend share actually owns a significant chunk of Soul Patts shares. It owns 39.4% of the investment conglomerate. So that investment alone provides Brickworks with a source of reliable earnings and dividends.

Brickworks can normally rely on a good flow of earnings from its construction product businesses. COVID-19 is making that difficult at the moment, though the economy will hopefully bounce back with a return to normal construction at some point. It’s a similar situation in the US – where Brickworks is the brickmaking market leader in the north east of the US – with COVID-19 having an impact.

Another segment of Brickworks is doing very well. It owns a 50% stake of an industrial property trust along with Goodman Group (ASX: GMG). Industrial properties are important for the operation of ecommerce and logistics. The property trust is currently building two large distribution warehouses for Amazon and Coles Group Limited (ASX: COL) which should increase the rental income and value of the trust significantly.

Brickworks is a really good ASX dividend share. It hasn’t cut its dividend for over four decades. It currently offers a grossed-up dividend yield of 4.8%.

APA Group (ASX: APA)

APA Group is an infrastructure giant of Australia. It owns a vast gas pipeline across Australia and delivers half of the nation’s natural gas. I think it’s somewhat similar to Berkshire Hathaway’s energy division and its railroad business.

APA also has investments in a number of energy generation and energy storage assets.

APA funds its annual distribution to shareholders from its cashflow. That cashflow is steadily growing as more projects are finished. The ASX dividend share is steadily investing into new projects which sometimes take a few years to complete. So it has a medium-term growth outlook even if it makes no more investments. 

It has grown its dividend every single year for a decade and a half. That’s one of the best records on the ASX.

APA increased its distribution to 50 cents per unit in FY20. It currently offers a distribution yield of 4.4%.

Foolish takeaway

I think each of these ASX dividend shares offer something that every income investor should want. Soul Patts has the best dividend record and the most diversification, though Brickworks is probably the best value and it offers the biggest starting dividend yield.

More reading

• Top brokers name 3 ASX 200 shares to buy today
• I think Soul Patts is the best ASX dividend share
• Is the Coles share price a post-earnings buy for ASX dividend income?
• ASX 200 up 0.2%: Westpac cancels dividend, Treasury Wine hammered, Coles impresses
• Coles share price on watch after strong FY 2020 result

Motley Fool contributor Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of APA Group and COLESGROUP DEF SET. 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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In an investing world increasingly dominated by exchange-traded funds (ETFs), it can be easy to forget about good old listed investment companies (LICs) and listed investment trusts (LITs). Yet, unlike ETFs, LICs and LITs have been around in Australia for a long time — about 95 years in fact.

Perhaps it’s this wealth of experience that has led to LITs and LICs holding up well in 2020 so far, a year that has seen its fair share of sharemarket turmoil and volatility.

According to the Listed Investment Companies and Trusts Association (LICAT), the sector’s market capitalisation has dropped just 2% over 2019-20. That compares favourably with a 10.9% drop in the market capitalisation of the S&P/ASX 200 Index (ASX: XJO) over the same period.

The advantages of the LIC, LIT structures

Unlike an ETF, LICs and LITs are usually ‘closed-ended’. That means that there is a finite number of shares issued under each structure. ETFs, by comparison, are normally ‘open-ended’. That means new shares are issued every time a buyer makes an investment (and cancelled when the units are sold).

As such, the value of the shares of a LIT or LIC can depart from the ‘true value’ of the assets that it might hold. This can give LIC or LIT investors an advantage over ETF investors.

Let’s look at an LIC as an example: WAM Global Ltd (ASX: WGB). As of 31 July, WAM Global reports it has $501.6 million in assets within the company. That works out to be worth $2.33 per share. Yet today, WAM Global shares are trading for just $2.07. That means a potential investor is only being asked to pay $2.07 for every $2.33 in assets. You are effectively getting a 12.5% discount on those assets compared to buying the underlying holdings yourself. Or buying dollar bills for 87.5 cents each, as Warren Buffett might say.

What about dividends?

An LIC (although not an LIT) also has another built-in advantage. It can ‘store’ dividend payments in reserve to smooth out income payments to its shareholders in tough times. In contrast, ETFs and LITs are trust structures. That means they are legally compelled to pay out all income to their beneficiaries every year. The LICAT released quotes from Geoff Driver, General Manager of one of the ASX’s oldest LICs, Australian Foundation Investment Co. Ltd (ASX: AFI) in this respect:

During the (COVID market crash) period, AFIC continued to adjust the portfolio and took advantage of the decline in share prices to increase holdings in companies in which it wanted to own more. This included participation in the recent deeply discounted capital raisings that have occurred… Drawing upon reserves, the final dividend was maintained despite the fall in income. We think this speaks to the strength of the LIC structure in more difficult times, particularly for AFIC which has a long history”

The chairman of LICAT, Angus Gluskie, echoes these sentiments:

The efficiency and stability of their closed-end structure coupled with the corporate governance disciplines of ASX listing have proven to be far more durable than many other investment structures.

Foolish takeaway

ETFs might be all the rage with investors in today’s investing landscape But I think that LICs and LITs shouldn’t be overlooked. They offer many advantages to managed funds and ETFs. As the data shows, they can be great investments to hold in times of market turmoil.

More reading

• 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%
• Can the US election impact the ASX? You bet!
• Top brokers name 3 ASX 200 shares to buy today
• Nearmap share price slides 13% on release of financial results

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

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The Michael Hill International Ltd (ASX: MHJ) share price is down by 4.5% at the time of writing. The jeweller has disclosed an estimated $80 million reduction in revenue due to the initial Australia-wide lockdown. Accordingly, the company saw a reduction in full year revenue by 13.6% and a reduction in underlying earnings before interest and taxes (EBIT), or operating profit, of 25.8%.

Lastly, the company has cancelled its final dividend and deferred its interim dividend of 1.5 cents. Given the current wave of dividend cancellations during earnings season, I believe this is what most impacted the Michael Hill share price.

Nevertheless, on closer review, there are a lot of signs of healthy shoots for this small-cap, discretionary retail company. Moreover, it appears the challenges of FY20 have forced the organisation to take decisions that will have a largely positive impact.

The opportunity for change

If you dissect the earnings report a little further, you wonder if investors are unfairly selling down the Michael Hill share price. There are a number of interesting statistics worth considering. 

First, there is a very large difference between gross profit and operating profit. To explain further, gross profit is the difference between earnings and the price of the product. For example, a diamond ring costs, say, $2,000 to make. If the company sells it for $3,000 it has made a gross profit of $1,000. Operating profit, on the other hand, is the difference between earnings, the price of the product, and the costs required to sell it. For instance, rent, logistics, warehousing costs, and so forth. Operating profit is an interchangeable term with EBIT.

So, having said that, operating profit as a percentage of revenue is 5.2%. That is not a great margin in most businesses. Nonetheless, at the same time, gross profit as a percentage of revenue is 60.6%. That is an outstanding margin! As a result, it becomes clear that the operating costs and activities of the business require attention.

Revenues lost under lock down, while costs remained, helped to cause this poor result. Moreover, it can be seen that the operating profit margin for Australia is 10.3%, a respectable margin. In New Zealand it is 19.7%, which is very profitable. However in Canada it is -2.2%, so the opportunity becomes even clearer.

Digital top line improvement

I believe the future strategy appears positive for the Michael Hill share price, largely due to the digital-first approach. FY20Q4 saw the company’s digital sales grow to 5% of total sales, up from 2.8% in FY19. The forced closure of its storefronts made the company move quickly to online sales. Just as consumers have also made a large transition to online shopping.

For example, the company is rolling out a range of digital sales options. These include delivery concepts like click and collect, click and reserve, as well as ship from store capabilities. Moreover, Michael Hill is working on a bespoke product, a digital ring builder technology, something I have seen work very well in other sectors.

A range of sectors have tried and tested most of the initiatives above. Therefore the company should be able to introduce them relatively seamlessly into the Michael Hill sales model. There are two final initiatives which could build additional sales lines. First, to develop key vendor partnerships for a drop shipping model. Second, the company has already launched a pure online brand for affordable jewellery called Medley.

The digital-first approach provides the company with increased sales channels, customer centric delivery options, and the potential to sell jewellery globally. I expect this to stir interest in the Michael Hill share price after the market has time to digest the earnings report. 

Cost reduction

The move to increase sales via an omni channel digital environment will undoubtedly reduce operating costs after the initial implementation. Moreover, the company has the potential for productivity improvement in its Canadian operations as a quick win for operating margins. Furthermore, the company has highlighted the need to focus on inventory management via its new ERP platform, as well as enhancing higher margin offerings. 

For instance, the company has flagged increased use of laboratory created diamonds. These are absolutely real diamonds – the chemical makeup and optical properties are identical to natural diamonds. They are also far more ethical as they reduce the level of potential exploitation that has dogged the diamond mining industry since the early 20th century. 

The final major initiative that caught my eye is the company’s new ‘Brilliance’ loyalty initiative. I joined this recently as part of my research into this company and I think it is a great little scheme. Consequently, the company can start to develop a loyal shopper base. This reduces the costs of customer acquisition, while potentially increasing revenue through repeat sales. While revenue growth is important, I believe the largest impact on the Michael Hill share price will come from higher profit margins, and a reinstated dividend. 

Foolish takeaway

I have concluded that investors sold down the Michael Hill share price unfairly. In the heat of earnings season, it is hard to grasp the true potential of companies under such a constant barrage of information. Storefront closures badly impacted the company’s results. However it has forced decisions that will transform it into a true omni channel enterprise. 

I think Michael Hill is on track to reduce operating costs while expanding sales. It has already seen gross margin improvements in FY21, and its initiatives are already underway. In my view, this company is likely to see a return to higher profitability in the near future, which will help to reinstate a healthy dividend. As such, I feel the current Michael Hill share price of 31.5 cents is a good entry point for growth over a 2 – 3 year period. 

More reading

• 2 off the grid ASX retail shares for higher returns
• 4 trends to invest in before August earnings season

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

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The Enegex Ltd (ASX: ENX) share price has surged 103% higher today to be currently trading at 6.5 cents per share.

The rapid share price rise follows an announcement of a successful capital raising. An additional raising to be implemented in the coming weeks will further fuel its expansion strategy.

Enegex is a petroleum exploration company that operates in Western Australia. The ASX microcap currently has a market capitalisation of around $5.23 million.

Details of Enegex’s successful capital raising

Enegex announced today that placement of 20 million fully paid has successfully raised $440,000 for the company at 2.2 cents per share. Unlisted options are to be issued by Enegex on a 1-for-2 basis, and are exercisable at 3 cents on or before 31 August 2022.

The company had been previously approached by a group of sophisticated and professional investors with an offer of investment. This offer has been accepted and the transaction was settled via Fresh Equities Pty Ltd.

The funds raised from the placement will be used to further Enegex’s exploration projects, which will be strongly focused on its South West Terrane initiative. The company has already established a significant tenement position in this emerging region of Western Australia. In a presentation released to the market today, Enegex noted that it has a 100% interest in a total of 4 projects areas comprising 20 tenement applications that cover 3,550 square km areas in the area. 

Further $760,000 to be raised

Enegex noted its intention today of raising addition funds of around $760,000. This will be done via a pro-rata shareholder entitlement offer during the next few weeks, under similar terms to the current raising.

Enegex chair Geoff Albers commented: “It will be an exciting period ahead for Enegex as we initiate our planned programs to unlock the geology of our tenements in the South West Terrane. Enegex welcomes new shareholders and thanks new and existing shareholders for their support. We look forward to delivering on our exploration programs.”

How has the Enegex share price performed lately?

The Enegex share price has been trading around the 1 cent mark over the past 12 months up until late May. It then climbed up to around the 3 cent mark by close of trade yesterday, before its meteoric rise today.

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Motley Fool contributor Phil Harpur 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 Here’s why the Enegex share price has surged 103% higher today appeared first on Motley Fool Australia.

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As most of us would know by now, the US is in election season. Although it’s less than 3 months away, I think it’s time to have a think about what the outcome of the world’s greatest political theatre could mean for ASX shares. Because like it or not, the fortunes of our share market are intrinsically linked to how the US markets perform.

To illustrate, the S&P/ASX 200 Index (ASX: XJO) took a rather large dive when it became clear that Donald Trump won the 2016 Presidential Election. Why? Well, it’s probably because the US markets did the same thing, and probably not because ASX investors simply weren’t too keen on Trump.

So I’m fully expecting the US election that will be held on the first Tuesday in November (Wednesday our time) will be a market-moving event.

As such, I think it’s a good idea to have a look at both presumptive candidates and determine what will happen if either gentleman is elected (or re-elected in Trump’s case). The Republican nominee is, of course, Donald Trump and the Democrat nominee is former Vice President Joe Biden. We Fools generally like to stay out of politics on a professional level. So today we’ll just stick to talking about possible impacts of either a Trump or Biden administration on the world of investing today.

Trump vs Biden

Before the coronavirus pandemic hit, Donald Trump had built a reputation as an ‘economy first’ president. At his State of the Union address in January, Trump touted the ‘blue-collar boom’ that his policies had elicited. Those policies include a ‘cutting red-tape’ agenda as well as passing one of the largest tax cuts (for both corporations and individuals) in American history. Trump frequently cited a stock market at (then) record highs as evidence of his economic prowess. Trump has also vaunted a ‘tough on China’ approach to foreign policy. This has caused some global economic tension over the past few years.

Most of that narrative has been lost today in the face of the pandemic. Trump is positioning himself as the candidate best suited to ‘lead the recovery’. However, there are very few concrete policies on the table as of yet.

In contrast, Democrat Joe Biden is running against Trump on a ‘battle for the soul of the nation’ ticket. He is emphasising the need for Americans to have better access to healthcare. Also, resuming America’s leadership role on the global stage (including on climate change) is on the agenda. He is also advocating higher taxes and a reinvigorated response to the coronavirus pandemic that is currently crippling the nation.

On the face of it, it seems President Trump is running on a more ‘pro-business, pro-markets’ ticket. Thus, conventional wisdom would point to market reacting more positively to a re-elected Trump administration compared to Biden getting elected. Biden is putting higher taxes on the table, as well as a significant shakeup of the private sector-dominated US healthcare system with a public option. That’s not normally a recipe for a higher share market.

Foolish takeaway

However, this is no ordinary election. I think its fair to say President Trump’s handling of the coronavirus response has been received with mixed reviews. And even before this pandemic, Trump has been a controversial commander-in-chief. He was even impeached at the start of the year. It’s possible that the markets would welcome a changing of the guard on these fronts.

In the end, the extreme nature of this election makes it hard to predict how markets will react. Trump is the ‘devil America knows’ so a Biden win might cause some more volatility on that front. Whatever happen though, I would be expecting some large moves either way.

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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.

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