The ASX is throwing up a lot of opportunities thanks to the coronavirus sell-off.
The central banks across the world are cutting interest rates. The Reserve Bank of Australia (RBA) and US Federal Reserve both cut interest rates this week. Canada may be another to cut soon.
But it hasn’t been enough it seems. The ASX and US shares dropped again over the past 12 hours.
However, I think there are opportunities, like these:
MFF Capital Investments Ltd (ASX: MFF) – $2,000
Chris Mackay is one of the best investors in Australia. He has guided MFF Capital to excellent returns over the past decade, particularly with a large portion of the portfolio (around a third) invested in Visa and Mastercard.
Whenever he buys shares of MFF Capital I think investors should sit up and take notice. Last week MFF Capital disclosed that he had bought 263,500 shares in a share price range of $3.27 to $3.40. Not too far off $1 million.
That means the current share price of $3.30 is right in the range of Mr Mackay’s purchasing. At the end of February 2020, it had a pre-tax net tangible asset (NTA) of $3.395, which is a discount of 3%.
Webjet Limited (ASX: WEB) – $1,500
The Webjet share price has fallen another 8.5% today. It’s interesting that the wider market isn’t pricing in shutdowns and so on, but Webjet’s share price is being punished as though its earnings will be significantly harmed for more than just a few months.
Management has said that its earnings have already been affected for FY20. The next month will show us how far the coronavirus will affect western countries. Hopefully Spring and Summer will be arriving at just the right time to stop the spread.
Webjet’s WebBeds business continues to see fast growth of its earnings before interest, tax, depreciation and amortisation (EBITDA) as well as the EBITDA margin.
It’s now trading at under 10x FY22’s estimated earnings, which is just an educated guess.
Australian Ethical Investment Limited (ASX: AEF) – $1,500
The ethical-focused fund manager has seen its share price fall 23.5% since 19 February 2020.
I don’t think its prospects are 23.5% worse than a couple of weeks ago. Wind has been taken out of its share price, but its long-term prospects are still attractive.
After the coronavirus issues subside, some people will go back to thinking about other topics like climate change. I think Australian Ethical will continue to be effective at attracting more funds under management (FUM) at an attractive rate which will mean it can lower fees and attract even more funds.
The half-year result saw revenue grow 18%, first half net inflows going up 100% and net profit jumping 40%.
I believe all three shares can beat the market over the next two years. I have high confidence in Chris Mackay to keep performing, though Webjet is looking very cheap now for a longer-term buy.
5 stocks under $5
We hear it over and over from investors, "I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" And it's true.
And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!
*Extreme Opportunities returns as of June 5th 2020
Tristan Harrison owns shares of Australian Ethical Investment Ltd. and Magellan Flagship Fund Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Australian Ethical Investment Ltd. The Motley Fool Australia has recommended Australian Ethical Investment Ltd. and Webjet 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.
- 3 ASX dividend shares to grow and diversify your income – July 7, 2020 9:31am
- Have $10,000 to invest? I’d pick these ASX shares – July 6, 2020 5:45pm
- ASX 200 falls 0.7%, Qantas and Afterpay make a partnership – July 6, 2020 5:07pm