The Australian share market has produced yet another disappointing month of returns for investors, with the ASX 200 slipping 1.3% since November 15.

However, there have certainly been some diamonds in the rough for investors, with certain companies substantially outperforming the market over the last month, including Trade Me Group Ltd (ASX: TME), Costa Group Holdings Ltd (ASX: CGC) and Yancoal Australia Ltd (ASX: YAL).

Let's take a look at why…

Trade Me Group

Shareholders of New Zealand's leading online auction site will be pleased with how the company has fared over the last month, with the Trade Me Group share price rising 24% since November 15.

This is primarily due to the takeover offer received from private equity firm, Apax Partners, which is in a bid to acquire 100% of the shares in Trade Me Group for $6.45 per share. This represents a 35% premium to the company's share price before the takeover bid on November 20. The agreement is subject to approval from Trade Me Group shareholders, the High Court of New Zealand and from the New Zealand Overseas Investment Office.

Trade Me Group is currently priced at $5.97 per share, indicating that the market isn't completely certain that the takeover will materialise. Although it does look likely to me that shareholders will approve the takeover, given the substantial premium that has offered by Apax Partners to purchase their shares. If the proposal is approved, the Trade Me Group share price will most likely converge to the $6.45 mark, representing further share price appreciation of around 8%.

Costa Group Holdings

Australia's largest grower and marketer of fresh fruit and vegetables is also enjoying a positive end to 2018, with the Costa Group share price rising 23% since November 15. This is on the back of the company's annual general meeting on November 22, which was very well received by the market.

Key highlights include:

• Net profit after tax before self-generating and regenerating assets (SGARA) and material items of $76.6 million, up 26.3% on FY17
• Revenue of $1,002 million, up 10.2% on FY17
• EBITDA before SGARA and material items of $150.8 million, up 30.9% on FY17

Costa Group also re-affirmed its prior guidance that in the transitional half year from July to December 2018, the company will generate softer earnings compared to July to December 2017, which is driven by the impact of seasonal trends, new capital investments and higher expected depreciation and interest charges.

The company advised that it expects to generate strong earnings growth of around 30% in the 2019 calendar year, which is clearly making shareholders more optimistic about Costa Group's long-term outlook.

Yancoal Australia

Australia's largest pure-coal producer has also been a standout performer over the last month, with the Yancoal share price rising by around 18% since November 15.

This comes following the announcement that Yancoal is in the process of undertaking an initial public offering on the Hong Kong Stock Exchange (SEHK), meaning that the company is seeking to be dual listed on both the SEHK and the ASX.

The offer price for shares in connection with the global offering is $23.48 per share in Hong Kong Dollars, which converts to around $4.20 in Australian Dollars. This represents a 28% premium to the company's November 28 closing price of $3.25.

In conjunction with this, Yancoal has also announced an entitlement offer to existing shareholders, who have the opportunity to apply for 0.05387 new shares for every 1 share held on the record date, at the offer price of HK$23.48.

This global offering will reportedly raise total proceeds of HK$1.605 billion (c. A$287 million), while the entitlement offer is expected to raise up to HK$1.589 billion (c. A$284 million). Yancoal indicates that the funds raised will primarily be used to repay existing debts, to finance potential future acquisitions and for working capital and general corporate purposes.

The post Why these 3 ASX shares are up 20% in a month appeared first on The Motley Fool Australia.

More reading

• 7 ASX 200 shares just upgraded to strong buy ratings
• ASX 200 energy shares whipsaw amid fragile ceasefire
• These were the best-performing ASX 200 shares in March
• Here are the top 10 ASX 200 shares today
• Here are the top 10 ASX 200 shares today

If you are interested in investing some of your savings into the Australian share market for the first time, there is no better place to start than the ASX 200, which includes the 200 largest publicly listed companies in Australia.

If you are a first-time investor, you should consider the importance of diversifying your funds across various companies, sectors and investment styles, to smooth expected returns and reduce the risk of losing large amounts of money. This is particularly relevant given the recent volatility in the market.

With this in mind, let's take a look at 3 ASX 200 shares I would buy today with $10,000.

Macquarie Group Ltd (ASX: MQG)

Macquarie Group is currently my favourite financial services company on the ASX 200 and has proven to be a very well managed organisation over the years.

Macquarie Group has generated a total shareholder return of around 18% over the last 12 months, outperforming the ASX 200 financials index (excluding REITs) (ASX: XXJ) by roughly 34%.

This is primarily due to strong financial performance, with the company generating a net profit of $1.31 billion in H1 2019, up 5% on H1 2018. Macquarie Group has also been relatively unscathed from the Hayne Royal Commission compared to the Big 4 Banks.

I also like Macquarie Group due to its diversified service offering, operating as the world's largest infrastructure asset manager and Australia's top ranked mergers & acquisitions advisor, as well as having operations in corporate and asset finance, banking and financial services and in capital markets facing businesses.

Currently trading at a price to earnings ratio of less than 13x and with a dividend yield of 5%, I believe Macquarie Group is currently the best way to gain financials exposure in the ASX.

CSL Limited (ASX: CSL)

CSL has been a standout performer on the ASX 200 over the last 25 years, with the company initially listing at $2.30 per share and now trading at around $180 per share. In the last 12 months, CSL has generated a total shareholder return of nearly 32%.

The company continues to outperform the share market by successfully marketing its R&D program and dominating the biotechnology industry with its cutting-edge vaccines and blood plasma products. CSL consistently exceeds market expectations by delivering outstanding earnings growth year on year, with the company generating a net profit of $1.73 billion USD in FY18, up 30% on FY17.

Currently trading at a price to earnings multiple of 32.5x and with a dividend yield of around 1.5%, I believe CSL is a must have for every Australian share market investor, with the company being one of the most successful growth shares ever listed on the ASX.

Inghams Group Ltd (ASX: ING)

Inghams is currently my favourite value stock on the ASX 200, with the poultry producer offering investors a consistent and reliable earnings stream. In the last 12 months, Inghams has generated a total shareholder return of nearly 29%.

As the largest vertically integrated poultry business in Australia, Inghams is well positioned to benefit from Australia's rising consumption of Chicken, which is a staple in our diet and is consumed more than beef and pork combined.

Furthermore, poultry production is a defensive industry, as demand for chicken meat would be unlikely to soften significantly in a declining economy. Therefore, Inghams is well poised to generate reasonably stable earnings irrespective of how the economy performs.

Currently trading at a modest price to earnings ratio of 13.3x and with a dividend yield of 4.5%, I believe Inghams offers investors exceptional value and should have a place in any well-diversified Australian share portfolio.

Foolish takeaway

I believe that these 3 companies will outperform the market in the long run, due to their strong management and sustainable competitive advantages.

If you are looking to invest in the Australian share market for the first time, I believe that Macquarie Group, CSL, and Inghams are a great starting point to build a well-diversified portfolio around.

The post 3 blue-chip ASX 200 shares I would buy today appeared first on The Motley Fool Australia.

More reading

• $5,000 to invest? 3 ASX shares that could be no-brainer buys right now
• 5 ASX 200 shares that could be a bargain right now
• Better buy? CSL vs Rio Tinto shares
• ASX 200 shares rip with financials leading a remarkable recovery last week
• How to build a winning 10 ASX share portfolio from scratch in 2026

It has been a tough year for the Australian housing market, with median house prices falling in our major cities, while property listings and auction clearance rates have also dropped significantly.

Australia's second largest real estate marketing provider, Domain Holdings Australia Ltd (ASX: DHG), also appears to be bearing the brunt of the cooling housing market, with its share price falling more than 30% in the last 3 months.

Let's take a closer look at why…

October trading update

Domain released a trading update on October 12, which covered the FY19 year to date (the prior 15 weeks of trading).

The key highlights include:

• Digital revenue growth of 6%
• Total revenue growth of 1%
• Underlying costs up 1%
• Total costs up 6%

Domain states that the cooling housing market has adversely affected the business due to lower new listings and auction volumes, as well as reduced levels of new development projects. The company reports that for the September quarter, auction volumes were down between 18-22% in Sydney and Melbourne, while new market listings were down 8% in Sydney and 1% in Melbourne.

This is clearly a troubling statistic for Domain shareholders, as fewer listings on www.domain.com.au and fewer advertisements in Domain's print channels, result in the company generating weaker digital and print revenues.

However, Domain also highlighted some promising updates, including that the company is restructuring its digital media sales channels to adopt a fully programmatic offering, which should benefit the company's margins in FY19 and onwards.

Property market outlook

I believe that the outlook of the Australian housing market is heavily weighing on the minds of Domain shareholders. AMP Capital recently revised its housing forecasts downwards, with chief economist Shane Oliver now believing it's likely prices will fall 20% by 2020 primarily due to tighter credit conditions and growth in housing supply.

The housing market is also likely to be negatively impacted if the Labor party wins the federal election next May, with experts claiming its planned reforms to negative gearing and the capital gains tax will significantly reduce investor demand for Australian real estate, which could put further downward pressure on property prices.

However, I believe the impact of the cooling housing market is being overplayed, as falling house prices aren't a major concern for Domain per se, with the real issue being the falling number of new listings.

I have previously argued that a cooling housing market could actually be beneficial for real estate listing sites like Domain and REA Group Limited (ASX: REA); as sellers are likely to spend more on the marketing of their properties to stand out from the crowd. In addition, with properties experiencing a longer time on the market, sellers will inherently have to spend more on their Domain listings to keep their property advertised online.

Foolish takeaway

It may not all be doom and gloom for Domain shareholders, particularly if more properties list on the market throughout summer, which is typically the busiest time of the year for residential real estate. If you're optimistic about the outlook of Domain, it could be a good time to buy shares in the company, while it trades at a significant discount relative to earlier this year.

However, with the company still trading at a price-to-earnings multiple of 32x, I'll happily sit on the sidelines for now, with Carsales.com Ltd (ASX: CAR)and Trade Me Group Ltd (ASX: TME) being my preferred ways of gaining exposure to the online classifieds space.

The post Why the Domain Holdings share price has plunged 30% since September appeared first on The Motley Fool Australia.

More reading

• 2 ASX growth shares to buy now while they're on sale
• Here's why this $9 billion ASX tech share could be a buy right now
• 5 ASX 200 shares that could be a bargain right now
• 5 things to watch on the ASX 200 on Monday
• The ASX 200 shares I think smart investors are buying after the tech selloff

Australia and New Zealand's leading integrated facility services provider has given shareholders an early Christmas present this year, with the Spotless Group Holdings Ltd (ASX: SPO) share price rising more than 60% since the start of August.

Lets take a look at why….

FY18 financial results

Spotless Group started surging higher immediately following the release of its FY18 financial statements in August, with investors clearly responding well to the turnaround in its performance.

The key highlights include:

• Revenue from ordinary activities of $3,045 million, up 1.3% on FY17
• EBITDA (Earnings before interest, debt, amortisation and appreciation) of $131.5 million, up by more than $330 million from the loss before interest, debt, amortisation and appreciation of $199.2 in FY17
• EBITDA margin of 4.3%, up from negative (6.6%) in FY17
• Net loss after tax of $2.3 million, reflecting a 99.3% improvement on the $347.4 net loss incurred in FY17
• Net debt of $735.4 million, down 6% from FY17
• Leverage ratio (Net debt / EBITDA) of 2.8x, down slightly from the ratio of 2.9x achieved in FY17

The company's FY18 results were impacted significantly by a number of one-off items resulting from the takeover of Spotless Group by Downer EDI Limited (ASX: DOW) in 2017.

The significant items related to the takeover totalled $120 million in FY18, including contract rationalisation and restructuring costs of $9.5 million, laundries goodwill impairments of $40 million, management redundancies and integration costs of $9.5 million and other balance sheet items of $61 million.

I expect further improvement in Spotless Group's EBITDA margins in FY19, with the company likely to incur less one-off costs associated with the Downer takeover.

Leadership changes

In October Spotless Group also announced that Dana Nelson, Chief Executive Officer and Managing Director of the company, would step down effective from October 16, while still working with Spotless Group on its integration with Downer until early 2019.

Peter Tompkins was appointed as the new Chief Executive Officer and Managing Director of Spotless Group. Mr Tompkins has been a member of the Downer Executive Committee since 2011 and played a key role in addressing a range of operational and commercial issues at the Royal Adelaide Hospital for Spotless Group.

The company highlighted the operational experience of Mr Tompkins that will reportedly help drive high levels of performance for Spotless Group. I believe new leadership could be just what Spotless Group needed to revitalise the business following its recent operational and ownership changes.

Foolish takeaway

In its annual report, Spotless Group highlighted that Downer's 87.8% ownership stake strengthens the company's outlook, benefiting its balance sheet and cash flow performance, while also creating operational synergies.

I believe that Spotless Group has indeed turned around its financial performance significantly and will report even stronger earnings in FY19 – bolstered by the resources and personnel of Downer.

However, following its recent share price growth and considering the company is trading at an elevated price-to-earnings multiple of 22.5x, I will happily to sit on the sidelines for now; instead favouring ASX200 industrials companies like Transurban Group (ASX: TCL) and Brambles Limited (ASX: BXB).

The post Why the Spotless Group share price has raced 60% higher since August appeared first on The Motley Fool Australia.

More reading

• Brambles shares: Class action judgment update
• How to build a winning 10 ASX share portfolio from scratch in 2026
• 3 ASX blue chips I'd buy for a $250,000 retirement portfolio
• How to build a $10,000 annual income with ASX shares
• My top ASX passive income picks for April

After suffering a horror start to 2018, Australia's largest listed early childhood education and care provider has recently turned its fortunes around, with the G8 Education Ltd (ASX: GEM) share price rising around 50% in the last month.

Let's take a look at why…

Execution of debt refinancing agreements

In late October, G8 Education announced that it had finalised its debt refinancing process, with the successful execution of a $450 million senior secured syndicated bank facility, as well as a $100 million subordinated secured syndicated debt facility.

The new debt facilities give G8 Education increased capital capacity, giving the company ample liquidity to meet its medium-term strategic initiatives, while also providing improved covenants and an extended lending maturity profile of roughly 4.5 years.

Positive trading update

G8 Education also presented a trading update on November 15, which was well received by the market. The company highlighted steady improvements in occupancy rates, which are now trending well ahead of prior year growth rates, with the gap widening in H2 2018.

Improved occupancy rates are beneficial for G8 Education because it enables the company to generate stronger earnings from its existing network of childcare centres and, therefore, improving its return on capital employed (ROCE).

The company also highlighted improved wage efficiencies in the H2 2018, with fortnightly wage hours per booking now tracking in line with the prior corresponding period, after experiencing poor wage performance in H1 2018, which was largely due to regulatory changes that increased staff requirements.

The childcare provider also reported that 2016/2017 greenfield centre acquisitions are performing in line with expectations, while new brownfield acquisitions have performed below expectations due to issues with the management of web inquiries – issues which have since been rectified.

G8 Education has outlined that it expects to deliver EBIT of $136 – 139 million for the 2018 calendar year. The company also outlined its strategic medium-term targets, which it aims to achieve by 2022, including:

• Average group occupancy rates growing to 81%
• Greenfield pipeline achieving 25% ROI (return on investment)
• Achieving a ROCE greater than 15%

Improving sector outlook

The outlook of the childcare sector is also showing signs of improvement, with a slowdown expected in the rate of supply growth expected in the short to medium term due to the tightening of bank lending to developers. The demand for childcare centres is also forecast to increase consistently due to the Jobs for Families package, which is providing $2.5 billion in funding over 4 years.

It also appears likely that demand will be further bolstered by the prospects of a Labor government following next years federal election, as the Labor party has pledged a further $1.75 billion in childcare subsidies, which aim to achieve 90% enrolment of three-year-olds in preschool by 2023.

Foolish takeaway

I believe that the G8 Education share price is currently near its fair value following the recent spike, with the childcare provider trading around the $3 mark, at a price to earnings multiple of 16.2. The company offers a fully franked yield of 7.6% to investors, which is supported by its defensive earnings stream.

I put G8 Education up there with APA Group (ASX: APA), AGL Energy Limited (ASX: AGL) and Transurban Group (ASX: TCL), as some of my favourite consistent dividend-paying stocks on the ASX 200.

The post Why the G8 Education share price has zoomed 50% higher in the last month appeared first on The Motley Fool Australia.

More reading

• Buy, hold, sell: AGL, Origin Energy, and Woodside shares
• $1,000 buys 100 shares in an incredibly reliable ASX 200 dividend stock
• How to build a winning 10 ASX share portfolio from scratch in 2026
• 3 ASX blue chips I'd buy for a $250,000 retirement portfolio
• How to build a $10,000 annual income with ASX shares

Shopping Centres Australasia Property Group Stapled Securities (ASX: SCP) shareholders should be delighted with how the shopping centre REIT has fared this year, achieving a total shareholder return of 18.4% in FY18, comfortably outperforming the ASX200 A-REIT Accumulation Index by 5.4%.

SCA Property Group, which wholly owns 85 convenience-based shopping centres across Australia, is currently trading near its all-time high price of $2.74 per share; here's why.

Strong FY18 performance

In its FY18 results, SCA Property Group reported strong financial results, including:

• FFO (Funds From Operations) of $114 million, up by 5.4% on FY17
• Distributions of 13.9 cents per unit, up by 6.1% on FY17, reflecting a distribution yield of 5.1% at the current unit price.
• Net Tangible Assets per unit of $2.30, up 4.5% on FY17
• Sales growth of 1.9% among anchor tenants (i.e. supermarkets and discount department stores) and specialty sales growth of 3.3%.
• Average rental increases of 6.1%

In addition to strong financial performance, SCA Property Group also demonstrated prudent capital management in FY18, achieving a gearing ratio of 31.2%, which is at the lower end of its target range.

Acquisition activity

SCA Property Group has purchased 12 assets since the start of July, including 10 properties from Vicinity Centres Re Ltd (ASX: VCX). These acquisitions total $678 million in value and increase the REITs portfolio value by 23% to $3.1 billion. This was partly funded by an institutional placement of $262 million and a successful Unit Purchase Plan, which has raised approximately $110 million.

There are numerous reasons why these asset purchases have been so well received by investors:

• The acquisitions are earnings accretive; with its expanded asset base, SCA Property Group is expected to generate stronger FFO, with FY19 FFO guidance being raised from 15.6 cents per unit to 16.2 cents per unit.
• Stronger distributions; as a result of stronger FFO guidance, distribution guidance has also been raised from 14.3 cents per unit to 14.7 cents per unit.
• Cost efficiencies; these acquisitions give SCA Property Group a more efficient cost base, due to an expanded asset base, resulting in a management expense ratio of less than 40 basis points (0.4%)

Foolish takeaway

SCA Property Group is continuing to show investors that it is a well-managed REIT, backed by a growing portfolio of quality shopping centre assets. While there are some long-term headwinds facing Australian shopping centres, including the growth of online retail, SCA Property Group has a track record of prudent asset management and has established a judicious core strategy.

I believe that the REITs focus on convenience-based, supermarket-anchored assets that are weighted towards non-discretionary retail will prove to be a sound strategy, with this segment being less cyclical to the economic cycle and less prone to the threat of online retail. SCA Property Group is therefore well placed to deliver consistent and resilient distributions to unit-holders.

SCA Property Group has grown its earnings and distributions by 5-6% per annum over the last 5 years while growing the value of its underlying net tangible assets by 40%. The REIT currently offers investors a distribution yield of 5.4%, based FY19 guidance.

If you are looking to gain exposure to Australian convenience-based retail and desire consistent and reliable distributions, SCA Property Group could be the right investment for you.

The post Why this retail REIT is currently trading near its all time high appeared first on The Motley Fool Australia.

More reading

• Bell Potter names the best ASX shares to buy in April
• Region Group extends $100m securities buy-back – earnings update

Earlier this month the demerger of Wesfarmers Ltd (ASX: WES) and Coles Group Limited (ASX: COL) became official, with the Wesfarmers conglomerate retaining just 15% ownership of Coles Group and 50% of its Flybuys business.

Wesfarmers still owns a collection of quality retailers, including Bunnings Warehouse, Kmart, Target and Officeworks, as well as a range of industrial businesses.

I believe the demerger positions Wesfarmers for long-term success and creates a great opportunity for investors who want to gain exposure to the Australian retail sector.

What does this mean for Wesfarmers?

Wesfarmers will earn significantly lower revenues after parting ways with Coles Group, with the supermarket chain having generated nearly 60% of the conglomerate's $66.9 billion revenue in FY18.

However, Wesfarmers will now be a higher margin and higher growth business, which is able to generate a superior return on capital for investors. In fact, a recent report commissioned by the company indicates that post-merger, the conglomerate's FY18 EBIT (earnings before interest and tax) margins grow from 6.5% to 11.1%, while EBIT growth increases from 4.5% to 10.4%.

I also believe the demerger has come at a good time for Wesfarmers, as Coles supermarkets are facing significant industry headwinds including intense price competition from Woolworths and Aldi. This is likely to worsen when global hypermarket Kaufland enters the Australian market, with experts also believing that this could be the precursor to German discount supermarket Lidl coming to Australia.

Retail price deflation is one result of this rising competition, with Coles experiencing price deflation of 0.8% (excluding fresh and tobacco) last quarter, further squeezing the supermarket's already tight margins.

Bunnings Warehouse performance is key

The conglomerate's future performance will largely hinge on Bunnings Warehouse, which accounted for around 60% of Wesfarmers' post-merger FY18 EBIT.

Bunnings Warehouse generated a record EBIT of $1.5 billion in FY18, up nearly 13% on FY17, although concern has been raised about how the hardware store will perform amidst a cooling housing market. Hardware sales are typically cyclical to the property market, achieving stronger earnings in periods of high housing turnover and housing construction because there is more demand for the building materials and tools that are used in the construction and renovation of homes.

However, the outlook may not be so bleak for Bunnings Warehouse, with a Goldman Sachs study finding that in addition to housing construction activity, household income is also a significant driver of home improvement earnings, a factor that has a positive outlook for the next 1-2 years.

Therefore, it is possible that homeowners could choose to invest some of their disposable income into renovating their homes, rather than selling their homes in the current market. This could explain why Bunnings Warehouse was able to generate record earnings in FY18, despite the housing downturn.

Foolish Takeaway

While the jury is out on the short to medium term outlook of Bunnings Warehouse, I'm optimistic that the hardware store will continue to perform strongly as it did in FY18.

I also believe that irrespective of short-term cyclicality, Wesfarmers has a very positive long-term outlook, with its quality portfolio of consumer-favourite retail brands, including Bunnings, Kmart, Target and Officeworks, as well as its range of industrial businesses.

If you want broad exposure to the Australian retail landscape, now could be a good time to buy Wesfarmers shares, which I believe is a superior investment to Woolworths Group Ltd (ASX: WOW).

The post Why I think the 'new look' Wesfarmers Ltd (ASX:WES) is a buy appeared first on The Motley Fool Australia.

More reading

• 3 simple ASX shares to start investing today
• Buy, hold, sell: CBA, Reece, and Wesfarmers shares
• 3 ASX dividend shares I'd buy for reliable passive income
• How to build a winning 10 ASX share portfolio from scratch in 2026
• 3 ASX blue chips I'd buy for a $250,000 retirement portfolio

It has been a tough couple of months for equity markets, with the ASX 200 down 7.2% and the S&P 500 down 6.5% since the start of October and many investors fearing the worst. However, I believe that recent sharemarket activity is merely a correction in what is still a long-term upward trend, or a 'bull market'. This is likely the result of market sentiment dominated by fear and heightened risk aversion, rather than the underlying fundamentals, which I believe give investors plenty of room for optimism.

Strong US and Australian economic performance

The performance of equities is highly correlated with that of the broader economy; simplistically, when the economy is booming and economic output is increasing, companies tend to generate stronger profits, which is a key driver of long-term share price performance. Therefore, investors should be pleased about the encouraging economic data coming out of the US and Australia, with all key indicators being positive.

The US economy is very strong on the back of the Trump Administration's fiscal stimulus, including the reduction of the corporate tax rate from 35% to 21% and the Administration's extensive deregulation efforts.

US consumer confidence is at an 18 year high, while GDP growth is very strong at 3.5%, the unemployment rate is at a 49 year low of 3.7% and wages are edging higher.

The Australian economy is also showing positive signs, including a strong GDP growth rate of 3.4% and unemployment currently sitting at a 7 year low of 5%.

Robust earnings growth

The widely held consensus among financial theorists is that a company's share price primarily reflects investors' expectations of its future earnings per share, which are often partially or fully paid out to shareholders as dividends. Simply put, higher earnings expectations should translate to higher equity valuations. Therefore, investors should be very pleased with the strong earnings being reported out of the US and Australia.

Companies listed in the S&P 500 have reported exceptional earnings for the 3 rd quarter to date, including year on year earnings growth of 25.7%, which is the highest rate of growth experienced since Q3 2010 according to FactSet.

In addition, FactSet reports that 78% of S&P 500 listed companies reported earnings per share above estimates, while on average companies are reporting earnings that are 6.8% above analyst expectations.

In a similar fashion, almost 93% of companies listed on the ASX 200 reported a profit in FY18, which is only slightly below the record high of 94% that was experienced in the prior earnings season in February, according to CommSec.

Furthermore, the aggregate earnings of ASX 200 companies have risen by 8.4%, or by 20% when excluding key market movers; BHP Billiton Limited (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA) and Telstra Corporation Ltd (ASX: TLS).

Are US/China trade tensions overplayed?

This issue has been worrying investors for most of the year, with many believing it could have significant impacts on the global economy, including Australia, given China is our largest trading partner.

However, Shane Oliver of AMP Capital argues that "it's still not as bad as it looks", highlighting that only 12% of US imports have received a tariff hike, which has averaged around 15%, resulting in an average tariff hike of just 1.8% across all imports.

Investors should also be encouraged that the US has successfully renegotiated trade agreements with key trading partners, most notably Canada and Mexico, with the 'North American Free Trade Agreement' (NAFTA) set to be replaced by the United States –Mexico- Canada Agreement (USMCA). This signals that the US is open to negotiation and isn't interested in long-lasting trade conflicts.

US President Donald Trump has also spoken optimistically about how trade 'discussions are moving along nicely', with China already having lowered tariffs and improving intellectual property protections. It is likely that Trump will want to negotiate a deal before his 2020 presidential campaign.

With the economy typically being a major election issue, Trump will want to avoid hurting the economy through prolonged trade tensions, particularly given how the strong US economy and sharemarket is being touted as one of the major achievements of his presidency thus far.

Foolish Takeaway

With their strong underlying economies and robust earnings growth, I am bullish on the outlook of the US and Australian sharemarket. Therefore, it could be a good time to buy equities, while fundamentals remain strong and the sharemarket sits at a significant discount (relative to earlier this year).

To gain broad exposure to the ASX 200, you could invest into the SPDR 200/ETF (ASX: STW), while you can gain exposure to the S&P 500 through the iShares Core S&P 500 ETF (ISCS&P500/ETF (ASX: IVV)).

The post 3 reasons to be optimistic about US and Australian equity markets appeared first on The Motley Fool Australia.

More reading

• 3 simple ASX shares to start investing today
• Buy, hold, sell: CBA, Reece, and Wesfarmers shares
• Missed BHP shares' massive run? Here's what could happen next
• Why I'd buy BHP and DroneShield shares next week
• ASX 200 shares rip with financials leading a remarkable recovery last week

It has been a disappointing year for leisure, entertainment and gaming stocks on the ASX, with Star Entertainment Group Ltd (ASX: SGR), Ardent Leisure Group (ASX: AAD) and Crown Resorts Ltd (ASX: CWN) share prices down 27%, 20%, and 10% respectively. Although, the future may not be so bleak for these companies.

Time to invest?

Star Entertainment Group and Crown Resorts operate some of Australia's best casinos, restaurants, and resorts, while Ardent Leisure operates major theme parks and attractions such as Dreamworld, WhiteWater World and the SkyPoint Observation Deck on the Gold Coast.

While these are clearly three different businesses, as they are all in the entertainment and leisure industry, they all directly benefit from tourism, which is generating strong tailwinds for these companies.

The Australian market has encountered consistent growth in international tourism over the last decade, welcoming more than 9 million visitors in the year ending August 2018. In fact, the number of tourists flocking to Australia has grown by a whopping 7.7% per annum over the last 6 years.

A range of factors are driving this growth:

• Successful marketing campaigns by Tourism Australia in key markets such as China and the USA, including the widely popular advert featuring 'Crocodile Dundee', which was shown during the Superbowl on US television.
• The ageing population; as a growing proportion of the world's population is shifting into higher age brackets, we are seeing more retired individuals – who typically have more disposable income – seeking to enjoy their later years through exploring the world.
• Heightened competition and the entry of new low-cost carriers in the airline industry have lowered the cost of international travel for consumers.
• Favourable exchange rates; the value of the Australian dollar has slipped against other major currencies, in particular, the US Dollar, which currently buys $1.36 Australian dollars. This makes it more affordable in US Dollar terms to travel to Australia, relative to historical levels.

Strong growth in inbound tourism is expected to continue going forward, as Australia is forecast to accommodate 15 million annual visitors by 2027. Holding all else constant, this means more visitors to the casinos and resorts owned by Star Entertainment Group and Crown Resorts and more tourists visiting the attractions owned by Ardent Leisure.

Foolish Takeaway

Strong growth in Australian inbound tourism clearly bodes well for the entertainment and leisure sector, however, as an investor it is also important to consider company-specific factors related to Star Entertainment, Ardent Leisure and Crown Resorts.

In particular, it is worth assessing whether the River Rapids Ride tragedy at Dreamworld will have lasting reputational damage for Ardent Leisure, leading to reduced patronage over the long term, or whether the losses in earnings and patronage experienced in FY17 and FY18 will be the full extent of the damage.

It is also worth considering what the long-term outlook of the gaming industry is in Australia and how changing social attitudes towards gambling and the potential for increased regulatory oversight could impact Star Entertainment Group and Crown Resorts.

With all three companies trading near their 52-week lows, they could all be considered to be sitting in the 'bargain bin'. If you are looking to get exposure to the booming Australian tourism sector, it could be a good time to invest in one of these companies.

The post Are these leisure and entertainment companies a buy? appeared first on The Motley Fool Australia.

More reading

• This beaten-down ASX stock just secured a $550 million lifeline. So why is it falling?
• Why 4DMedical, Brainchip, Catapult, and Star Entertainment shares are falling today

In the latest Ipsos poll, the Labor party comfortably leads the Coalition government by 45% to 55% on a two-party preferred basis, leaving a large gap for the government to make up before election time next year.

I believe that now is a good time to evaluate how your Australian equity portfolio would perform under a new government. There are certain shares I would personally avoid under a Bill Shorten led Labor government, including those within the financial sector.

A year to forget for the Australian financial sector

It has been a tough 12 months for Australian financial sector, following the Government's $6 billion dollar 'bank tax'; as well as the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, which has tarnished the sectors already questionable image and has drawn extensive public scrutiny.

The Royal Commission has brought some shocking revelations, including that AMP Limited (ASX: AMP) charged customers for financial advice they never received, including dead people; and that National Australia Bank Ltd. (ASX: NAB) staff accepted cash bribes to wave through loans that they knew were based on fake documents.

Above all, it revealed the appalling behaviours that have become entrenched within our major financial institutions, including poor risk management practices, sluggish customer remediation and sales driven remuneration packages.

This has caused the ASX200 financials index (excluding REITs) (ASX: XXJ) to fall more than 12% in the last 12 months, as the reputation of the Australian financial sector has arguably reached an all-time low.

How would a Shorten Government impact the financial sector?

The financial sector is by no means in the clear, as it appears a Shorten government would be much tougher on the sector, which is something that could extend its woes into the foreseeable future.

It is worth remembering that the Royal Commission came about largely due to pressure from the Labor Party, who called for one as early as April 2016 – calls the Government initially resisted until September 2017. The opposition is now pressuring the government to extend the Royal Commission to allow more victims to share their stories and examine options for further reforms, citing that only 27 customers had been heard in the Royal Commission despite there being over 9,300 submissions.

Bill Shorten has also recently flagged the idea of increased regulation in the superannuation industry, by giving regulators the power to force bank-owned retail superannuation funds to appoint independent trustees to ensure members' interests are put ahead of company profits, a move which would directly impact the big 4 banks. The opposition leader is also considering giving APRA the authority to sack the
trustees of underperforming funds.

Foolish Takeaway

Bill Shorten has made it clear that he is no friend of the big banks or big business in general for that matter. Should he become prime minister, it seems likely that further regulations will be imposed on the sector; or at least that the financial sector will be subject to a higher degree of scrutiny. That is why I'm happy to sit on the sidelines, avoiding National Australia Bank, Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group (ASX: ANZ) for the time being.

The post Why I won't be buying shares in the big 4 banks anytime soon appeared first on The Motley Fool Australia.

More reading

• Buy, hold, sell: CBA, Reece, and Wesfarmers shares
• Here's the dividend forecast out to 2028 for Westpac shares
• ASX 200 shares rip with financials leading a remarkable recovery last week
• How to build a winning 10 ASX share portfolio from scratch in 2026
• If I invest $8,000 in CBA shares, how much passive income will I receive in 2027?

If you are a retail investor like myself, you will know that our investment options are limited compared to those available to institutional investors. This makes it difficult to properly diversify your portfolio and hedge against downside risks.

However, there are 3 quality ETFs, which you can use to diversify your stock portfolio if you're feeling pessimistic about the outlook of the Australian stock market.

SPDR S&P/ASX Australian Government Bond Fund (ASX: GOVT)

One limitation of being a retail investor is we typically cannot invest directly into corporate or government bonds. However, there is a range of ETFs (exchange-traded funds) available to the everyday investor, which mimic the returns of bonds.

The SPDR S&P/ASX Australian Government Bond Fund (listed as SPDR GOVT/ETF on Google Finance) closely tracks the S&P/ASX Government Bond Index, which includes all securities within the Commonwealth Government Bond and State Government Bond indices. This fund charges a management fee of 0.22% and has a current yield of 3.7% p.a.

This ETF is a great option if you want to reduce the overall risk of your portfolio and provide a cushion against a potential market downturn. If the stock market does happen to fall significantly, many investors will likely shift their funds into low-risk assets like government bonds due to the safety of their principal and periodic coupon payments, which would be beneficial for the returns of this fund.

ETFS Physical Gold (ASX: GOLD)

As a retail investor it can also be difficult, or at least impractical, to invest into commodities like silver and gold, both directly and through the use of derivatives. However, the ETFS Physical Gold ETF allows investors to gain exposure to the gold market.

The ETFS Physical Gold fund provides investors with a return that is equivalent to movements in the gold spot price (less fees). The fund holds physical gold bullion within vaults in London; therefore, each share of the ETF represents a beneficial interest in this physical gold. The fund charges a management fee of 0.40% and has returned -0.06% over the last 12 months.

This fund is a great way to get exposure to gold. If you are feeling bearish about the ASX, it could be worth buying some shares in this ETF. Investors will often flock to 'safe haven' assets like gold when there is uncertainty in the economy because gold is seen as a good store of value due to its durability and scarcity. Therefore, in a bear market, ETFS Physical Gold should outperform the stock market, making it a good way to reduce the downside risk of your portfolio.

BetaShares Australian Equities Bear Hedge Fund (ASX: BEAR)

Another limitation of being a retail investor is we are generally unable to hold short positions, or in other words, we are unable 'bet against' the sharemarket and profit from falling stock prices. However, the BetaShares Australian Equities Bear Hedge Fund ETF provides investors with a simple way to profit from (and protect against) a declining Australian sharemarket.

The BetaShares Australian Equities Bear Hedge Fund (listed as BETA BEAR/ETF on Google Finance) is an actively managed ETF, which is negatively correlated to the ASX200 index, meaning when there is a 1% fall in the Australian sharemarket, the fund can be expected to generate a positive return of roughly 1%. The fund charges management fees of 1.38% p.a. and has returned -10.5% over the last 12 months, due to positive sharemarket returns in this period.

If you are feeling pessimistic about the Australian economy and think the sharemarket is about to crash, this ETF is probably perfect for you. It is also a good way to hedge your Australian equities portfolio against falling markets and to manage your overall downside risk.

Foolish Takeaway

If you think the Australian sharemarket is overpriced and destined for a crash sometime soon, investing in these 3 ETFs is a simple and effective way for to diversify your portfolio and protect it against a contracting economy and falling equity values.

The post 3 ETFs that could help hedge against a market downturn appeared first on The Motley Fool Australia.

More reading

• Should you buy the dip on gold shares? Expert
• Which ASX ETFs have Aussies traded most since the Iran war began?
• 5 ASX ETFs to navigate rising interest rates
• Which ASX gold shares have risen the most in 2026?
• 3 defensive ASX ETFs to battle through market turmoil

Inghams Group Ltd (ASX: ING) is Australia's blue chip poultry producer, as well as one of my favourite consumer staples companies on the ASX 200.

There are 5 reasons I believe Inghams is a good long-term investment.

Chicken meat is growing in popularity

Chicken meat is consumed more than any other meat in Australia, with the average Australian consuming it 2.2 times per week, which exceeds the consumption of beef and pork combined. According to the Australian Chicken Meat Federation, over the last 20 years, the annual per capita consumption of chicken has surged by nearly 80%, from 28 kg per person in 1997 to nearly 50 kg per person in 2017, while the consumption of other popular meats has generally declined per capita.

The Australian Bureau of Agricultural and Resource Economics expects this trend to continue going forward, with chicken consumption per capita expected to rise 5% by 2023, while beef and veal consumption is expected to drop 8% and sheep consumption is forecast to drop a further 6%.

The growth in chicken consumption is due to multiple factors:

• Chicken is increasingly seen as a healthy food choice, being relatively high in protein and low in fat
• Chicken is much cheaper than other meats in Australia. In 2017 the average retail price was $5.30/kg, while beef and veal was $19.30/kg, lamb was $14.80/kg and pork was $11.90/kg
• There have been significant increases in the efficiency of chicken meat production over time. As a result, the Australian retail price inflation of chicken meat has been very low compared to other meats. In the period from 1997 – 2017, the retail price of beef, veal and sheep rose between 3.4% – 4.2% per annum, while the retail price of chicken meat rose only 0.4% per annum

Poultry production is a defensive industry

Inghams could be considered a 'safe investment', as the demand for chicken meat would be unlikely to soften significantly in a declining economy. In fact, due to its cost advantages relative to other meats, the demand for chicken could actually increase during an economic slowdown. Therefore, holding all else constant, Inghams should be expected to generate reasonably consistent and stable earnings irrespective of how the economy performs.

Australian and New Zealand poultry production has high barriers to entry

Australia and New Zealand operate in strict quarantine regimes, which restrict the importation of chicken meat due to the risk of introducing harmful foreign pathogens into the Australian ecosystem. This virtually shuts out foreign competitors from the Australian market, with around 99% of the chicken consumed in Australia being produced here.

The capital requirements to establish vertically integrated chicken production facilities are also very high, not to mention the difficulty of getting regulatory approval to develop new farming facilities.

Inghams is an established and trusted brand

Inghams has been operating for 100 years and has developed a strong reputation for quality and reliability amongst its consumers, having a market share of 40% in Australia and 34% in New Zealand.

Inghams is also the largest vertically integrated poultry business in both Australia and New Zealand, with geographically dispersed operations across both countries, which gives the company access to economies of scale and flexibility, whilst managing agricultural and environmental risks. These factors give the business competitive advantages over its competitors.

Company fundamentals

Inghams has a track record of consistently generating solid earnings. The company reported revenues of $2,373 million and EBITDA (earnings before interest, tax, depreciation and amortisation) of $212 million in FY18.

The company is also expected to deliver fully franked dividends of 18 cents per share in 2019 according to Morningstar estimates, which would translate to a very attractive grossed-up dividend yield of 6.8% at Inghams' current share price of ~$3.80.

Foolish Takeaway

I believe Inghams is a great investment if you are looking to get exposure to the Australian consumer staples sector and desire stable earnings and a high dividend yield. I put Inghams up there with A2 Milk Company Ltd (ASX: A2M) and Costa Group Holdings Ltd (ASX: CGC), as the Australian consumer staples stocks I am most excited about in FY19.

The post 5 reasons why this Australian poultry producer is on my buy list appeared first on The Motley Fool Australia.

More reading

• Why A2 Milk, Metallium, Northern Star, and St Barbara shares are sinking today
• Why are A2 Milk shares sinking 18% today?
• The a2 Milk Company lowers FY26 guidance amid supply chain challenges
• Why A2 Milk, BWP, Core Lithium, and Newmont shares are sinking today
• 5 things to watch on the ASX 200 on Thursday

It has been another strong year for technology stocks in Australia – with IT stocks on the S&P/ASX 200 Info Tech (ASX: XIJ) index returning 30% over the last 12 months, despite the growing sentiment that many listed tech companies may be overpriced at their current valuations.

I believe that the best investments of the next decade will be in the technology sector, which is why I'm so excited about the initial public offerings of Nanoveu Limited (ASX: NVU) and Shekel Brainweigh Limited (ASX: SBW).

Nanoveu Limited

Nanoveu is a Singaporean company, which was established in 2012 and is committed to the development and commercialisation of nanoimprint science applications.

The company is offering 22.5 – 30 million shares at $0.20 per share, in the aim to raise between $4.5 million and $6 million. Its prospectus outlines an implied valuation of $25 million – $27 million for Nanoveu.

Nanoveu's signature product is EyeFly3D, which is a protective film that enables real-time, affordable and easy to use 3D rendering, allowing users to view 3D multimedia without needing 3D glasses and enabling the instant conversion of 2D photos and videos on smartphones and tablets to 3D format.

I believe EyeFly3D could be hugely popular if the company executes a successful launch campaign, due to our growing desire for more realistic experiences when viewing images, videos and while gaming, as is evidenced by the rapid growth of augmented reality and virtual reality functionality within other tech applications.

Nanoveu is also currently developing a prototype for another product called EyeFyx, which is a thin film that can be applied to mobile and tablet screens to enable users who normally require glasses to read digital displays without the need for their glasses.

As EyeFly3D is yet to be launched to market, Navoveu reported a loss of $639,311 in 2017, although I believe once the product is launched globally it has great potential to achieve rapid sales growth, by tapping into the massive mobile accessories market. If Navoveu successfully develops EyeFyx, it will also have the potential to cater to the growing proportion of the population who are elderly – as this segment of the population is more likely to be visually impaired.

Shekel Brainweigh Limited

Shekel Brainweigh is the holding company of an established Israeli group, which has been creating and distributing advanced weighing technology solutions for the retail, healthcare and manufacturing markets for nearly 50 years.

The company is offering 29 million shares at $0.35 per share, in the aim to raise $10.2 million. Its prospectus outlines an implied valuation of $48 – $49 million for the company.

Shekel Brainweigh has an established track record of profitability in its existing operations, having generated revenue of US$18.2 million and an operating profit of $2.5 million in 2017.

However, what really excites me about the business is its development of new innovative solutions in the retail sector, such as its Product Aware Service Technology, which instantly identifies the quantity and location of shelf items to provide retailers with real-time insight into on-shelf inventory levels. The Promotion Bay is another new Shekel Brainweigh solution, which provides retailers and consumer goods vendors with extensive real-time data on the performance of promotion campaigns and consumer behaviour. The company is also developing Innovendi, a fully automated vending machine.

I believe this technology could help 'brick and mortar' retail address existing profitability challenges and compete with e-commerce through leveraging data and automation, to improve the efficiency and speed of operational processes and create a more targeted and engaging retail experience for consumers.

Foolish takeaway

Shekel Brainweigh is expected to start trading on the ASX on October 26, while Nanoveu is expected to join the ASX on November 1. I put both Shekel Brainweigh and Nanoveu up there with WiseTech Global Ltd (ASX: WTC), REA Group Limited (ASX: REA) and Nextdc Ltd (ASX: NXT) as the Australian tech stocks that I am most excited about for FY19.

The post 2 tech IPO's that excite me appeared first on The Motley Fool Australia.

More reading

• $5,000 to invest? 3 ASX shares that could be no-brainer buys right now
• 2 ASX growth shares to buy now while they're on sale
• 5 ASX 200 shares that could be a bargain right now
• How to build a winning 10 ASX share portfolio from scratch in 2026
• The ASX 200 shares I think smart investors are buying after the tech selloff

Today has been a tough day for the ASX, with most stocks in the red amid a market meltdown that has the ASX200 index (ASX: XJO) down around 2.5% currently.

Despite these sell-offs, Evolution Mining Ltd (ASX: EVN) has surged higher today by nearly 6%.

Why is Evolution Mining on the rise?

This morning the gold and silver miner received board approval to proceed with its underground development of the Mt Carlton mine, which is expected to be operational until 2025 at least. This comes after the company was granted regulatory approval to increase the processing rate of its Cowal Gold Operation by 31% late last week.

Evolution Mining is confident that the initial Mt Carlton reserve can be expanded and that once the development is underway, the company indicates that additional drilling will be undertaken on numerous additional drill intersections, which at this stage look promising.

This project will cost Evolution Mining around $60 million in capital expenditure, with $10m expected to be spent in FY19, which Evolution Mining has already accounted for in its recent guidance.

Mt Carlton has proven to be a very profitable asset for Evolution Mining, having generated over $100 million in net mine cash flow per annum over the last three years. This development ensures the continued mining of high margin ores for the gold and silver miner, which investors are clearly pleased about.

The development is subject to regulatory approval, with submissions to the Department of Environment and Science to be lodged within the next month. Nonetheless, Evolution Mining is confident that the mine will be fully operational within 3 years, with the first ore expected by FY21.

Should you invest?

If you're pessimistic about the outlook of the ASX at the moment, it could be a good time to buy shares in Evolution Mining or another gold miner. In times of stock market turbulence and uncertainty, exposure to gold and other 'safe-haven assets' provides investors with diversification because these assets are generally uncorrelated or negatively correlated with the broader market.

Therefore, holding a gold miner like Evolution Mining could help you hedge some of your downside risks, as the value of gold and hence, gold mining companies, often rises in value as the rest of the stock market falls. Evidence of which we have seen today with the outperformance of Evolution Mining and other gold miners like Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST).

The post Why Evolution Mining Ltd (ASX:EVN) is surging higher today appeared first on The Motley Fool Australia.

More reading

• Leading brokers name 3 ASX shares to buy today
• Why A2 Milk, Metallium, Northern Star, and St Barbara shares are sinking today
• 5 things to watch on the ASX 200 on Monday
• Buy, hold, sell: Life360, Northern Star, and Sigma shares
• 2 ASX gold stocks to buy next week

As much as I'd love to own shares in Australia's oldest and largest airline, Qantas Airways Limited (ASX: QAN) and Australia's second largest airline, Virgin Australia Holdings Ltd (ASX: VAH); I have some fundamental issues with these companies at the moment.

Airlines are capital intensive businesses

It is not cheap to run an airline. Consider the cost associated with purchasing and maintaining hundreds of state of the art airplanes and the massive quantities of jet fuel that is required daily to fly these planes; not to mention the other inherent costs of doing business, such as employing thousands of workers to enable these labour intensive businesses to operate.

In FY18 Qantas had capital expenditure of $1.97 billion, while Virgin Australia had $547 million of capital expenditure. These extensive investments into capital, as well as the other inherent day to day costs of operating, drags on the profitability of airlines. In FY18 Qantas generated a net profit before abnormals of $980 million from $16,628 million of revenue, reflecting a net profit margin of 6.9%; while Virgin Australia generated a loss before abnormals of $363 million from $5,417 million of revenue.

The narrow margins at which airlines operate worry me as an investor. A relatively minor change in business conditions or unexpected capital expenditure requirements in future years could make all the difference between the company reporting a solid profit and making a loss, therefore, weighing heavily on the free cash flows that are distributed to me as an investor in the form of dividends or otherwise.

The air transportation industry is highly competitive

The air transportation industry has also become increasingly competitive, which has forced airlines to either differentiate their offering from their competitors or compete on the basis of price. This is a major challenge for airlines as transportation has become somewhat of a fungible commodity for consumers, who generally only care about getting from 'point A to point B', without giving much attention to the quality of service.

This has made it difficult for airlines to differentiate their service on anything other than price, in my opinion creating a 'race to the bottom', which has led to aggressive price discounting in many cases and has arguably eroded the overall profitability of the air transportation industry.

The crude oil price

The price of jet fuel is one of the biggest –and most unavoidable – expenses that airlines like Qantas and Virgin Australia incur in their everyday operations. In FY18 Qantas spent $3.2 billion on jet fuel, while Virgin Australia spent $986 million. It is unfortunate that such a major expense item is a necessity for airlines to do business, especially as the crude oil price continues to rise globally and as a result, so does the cost of jet fuel.

Brent crude oil currently costs around US$85 a barrel and leading economists believe it could easily reach the US$100 mark over the next couple of years. This could have a significant negative impact on the profit margins of Qantas and Virgin Australia over the coming years.

Foolish takeaway

In my opinion, the air transportation industry is far too competitive and capital intensive to see long-term value as an investor, with many airlines losing money faster than they fly.

That is not to say you can't make great returns by investing in Qantas or Virgin Australia; but for me, from the perspective of investing being owning part of a business, there are too many underlying issues with their business models. Instead, to gain exposure to the air travel industry, I would take a look at Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB).

The post 3 reasons I don't hold shares in our major airlines appeared first on The Motley Fool Australia.

More reading

• These are the 10 most shorted ASX shares
• 7 ASX 200 shares just upgraded to strong buy ratings
• Why are Santos and Woodside shares crashing today?
• Why is the Flight Centre share price soaring 9% on Wednesday?
• Flight Centre Travel Group sells Pedal Group stake for $61.7 million

If you're fortunate enough to have a long-term investment horizon and you're patient enough to 'set and forget' an allocation of your portfolio, I may have just the stocks for you.

There are two ASX200 stocks in particular that I would buy if I had a long-term horizon, due to their relatively stable sources of revenue and their long-term growth prospects. These are listed below.

InvoCare Limited (ASX: IVC)

InvoCare is the largest funeral provider and private cemetery/crematorium operator in Australia, operating over 270 funeral locations and 16 cemeteries and crematoriums across Australia, New Zealand and Singapore.

It is often said that only two things in life are certain; death and taxes. While we almost always think of death as a dark and harrowing reality of life; the certainty of people dying every year gives InvoCare a consistent and reliable revenue stream. Moreover, as the proportion of elderly people in the Australian population continually rises due to the ageing of the baby boomer generation, the death rate will rise in a similar fashion. This means more demand for funeral services, for lots in cemeteries and for crematorium services.

While the funeral market underperformed in FY18, which has negatively affected the share price of InvoCare this year, the long-term picture is strong irrespective of these short-term fluctuations. InvoCare also has a lot of market power, owning over 40 brands in the Industry and having around 30% market share, a share which is continually growing. What also attracts me to InvoCare, is that the company has been de-leveraging consistently over the last 10 years, while consistently improving operating margins and bottom-line returns year on year. InvoCare is currently trading at a price-to-earnings multiple of 17.9.

Estia Health Ltd (ASX: EHE)

Estia Health is one of Australia's leading providers of residential aged care services, operating 68 aged care homes across the country. The clear fact here is that the demand for aged care, clinical healthcare, and respite care – like the demand for funeral services – will rise as the population ages.

Estia Health reported EBITDA (earnings before interest, tax, depreciation and amortisation) of $90.1 million in FY18, up 4.1% on FY17. The company successfully opened 2 new homes last year and has started construction on 3 new homes, while 2 new homes are in the advanced stages of planning. In addition to this, 19 homes have been recently refurbished and the refurbishment of 13 more homes is underway. By continually growing and improving its network, Estia Health will increase the quality of its offering and could increase its occupancy rates.

Estia Health has also been significantly reducing its debt in recent years, currently holding net bank debt of $64 million with a gearing ratio of 0.7x EBITDA. The company also offers a healthy fully franked dividend yield of more than 10% and is trading at a modest price-to-earnings ratio of 13.4.

Foolish takeaway

I believe that both InvoCare and Estia Health have strong long-term prospects as a result of their reliable income streams and Australia's rapidly ageing population. I would put them up there with Primary Health Care Limited (ASX: PRY) and Healthscope Ltd (ASX: HSO) as great 'buy and hold' investments for investors focusing on long-term value.

The post 2 of my favourite 'buy and hold' shares on the ASX appeared first on The Motley Fool Australia.

More reading

• 6 ASX shares hitting 52-week lows amid today's market rally
• 4 ASX shares at 52-week lows: Buy, hold, or sell?

WiseTech Global Ltd (ASX: WTC) has been trading at an astronomical valuation in recent times, demanding a price-to-earnings multiple above 120x currently.

However, following WiseTech's share price plunging 10% over the last week, is the software solutions provider now in buy territory?

Time to invest?

It could be easy to see WiseTech as a missed opportunity following the stock seeing a 110% return in the last 12 months; however, I believe the company may be a good buy at today's price for growth investors with a long-term horizon. WiseTech has the characteristics of a high-quality company which has the capacity to continue its sturdy growth and expand its market valuation.

CargoWise One is WiseTech's flagship product, a cloud-based software platform designed to enhance supply chain efficiency through enabling users to seamlessly execute complex logistics transactions and manage their operations in an integrated manner across multiple users, languages, and offices. WiseTech offers CargoWise One through the SaaS – or "software as a service" – model, giving customers 24/7 access to the platform and only charging them based on the modules they use.

This places CargoWise One in the tailwinds of tech's highest growth area, which is estimated to grow by nearly 28% per annum to reach US$165 billion by the end of 2022, as companies are increasingly moving to the cloud and relying on software solutions to support and optimise their operations.

Some reasons I like WiseTech include:

• CargoWise One, being a SaaS application, is a highly scalable product which WiseTech can provide to new customers for very little additional costs, giving the company scope to rapidly grow its market penetration while improving its operating margins over time.
• WiseTech has kept its customer attrition rate below 1% for the last five years, illustrating a high degree of customer satisfaction with the CargoWise One product, which will lead to significant recurring revenues.
• Despite high levels of M&A and R&D activity, WiseTech maintains prudent financial management, with its balance sheet having more than $121 million of cash currently and debt of only $2.5 million.
• WiseTech is currently in a phase of extraordinary earnings growth, achieving $78 million of EBITDA in FY18, which is up 45% from FY17. This is likely to be further boosted by its global growth strategy which seeks to rapidly grow the market penetration of CargoWise One through geographical expansion, the acquisition of strategic assets and improving product capability.

Foolish Takeaway

While it's by no means cheap, for me, WiseTech Global Ltd is up there with NEXTDC Ltd (ASX: NXT), Altium Limited (ASX: ALU) and Afterpay Touch Group Ltd (ASX: APT), as well managed technology companies with sustainable competitive advantages and scope for consistent earnings growth.

It may be worth reflecting on the old adage 'you get what you pay for' before snubbing WiseTech at its current valuation, particularly given its tendency to outperform the expectations of the market in earnings season.

The post Should you buy WiseTech Global Ltd (ASX:WTC) at today's share price? appeared first on The Motley Fool Australia.

More reading

• $5,000 to invest? 3 ASX shares that could be no-brainer buys right now
• 5 ASX 200 shares that could be a bargain right now
• How to build a winning 10 ASX share portfolio from scratch in 2026
• The ASX 200 shares I think smart investors are buying after the tech selloff
• Could these ASX stocks double by the end of 2026?

G8 Education Ltd (ASX: GEM), Australia's largest listed early childhood education and care provider, has suffered a horror 2018, with its share price slumping more than 50% over the last 12 months.

This is largely due to regulatory changes which have increased wage expenses, as well as a new subsidy regime which came into play in July and the rising supply of childcare centres in Australia, which are putting downward pressure on occupancy rates across the industry.

Could a new government be just what G8 Education needs?

Last week Labor party leader, Bill Shorten, pledged to expand existing childcare subsidies to give three-year-old children access to 15 hours of subsidised weekly care at preschool if it wins the next election.

This promise is valued at $1.75 billion over four years according to Mr. Shorten, a value the opposition is well placed to fund if it follows through with its array of planned tax reforms, including adjustments to the existing capital gains tax framework and the scrapping of some existing dividend imputation credit refunds currently available to investors.

This additional funding to the sector would provide a significant tailwind for childcare operators like G8 Education and would be likely to put upward pressure on the occupancy rates of its centres, therefore, strengthening its revenues in the medium term.

What is also promising for G8 Education is the apparent likelihood of a Shorten Government come election time in 2019, with the Labor party maintaining a strong 53-47 lead over the Coalition on a two-party preferred basis.

Should you buy G8 Education at today's prices?

With G8 Education shares trading close to the $2 mark, it could be an attractive investment for value investors looking to get exposure to the childcare industry.

G8 Education is currently trading at a modest price-to-earnings multiple of 10.9 and is expected to produce fully franked dividends of 16 cents per share in 2019 according to Morningstar estimates, resulting in a very healthy fully franked yield of around 11% at a share price of $2.

The outlook of the childcare sector is also improving, as a slowdown in the rate of supply growth is expected in the short to medium term, while demand for centres is forecast to increase consistently as a result of the Jobs for Families package. These promising fundamentals would be further bolstered by Shorten's proposed subsidies which aim to have 90% of three-year-olds enrolled in preschool by 2023.

Foolish Takeaway

If G8 Education maintains a prudent and disciplined network growth strategy in combination with the improving sector fundamentals, I believe the company could turn its luck around soon.

G8 Education is expected to provide a performance update in late October / early November- so if you are looking to invest, now may be a good time to do so.

The post Did this childcare centre operator just become a buy? appeared first on The Motley Fool Australia.

More reading

• How to turn $20,000 into $100,000 with ASX ETFs
• Expert names 1 ASX ETF to buy, 1 to hold, and 1 to sell
• Why this $5 billion ASX financial stock is slipping today
• Will EOS shares ever go back to $5?
• Guess which ASX ETF just hit an all-time high today?

It is no secret that the Australian property market is cooling, particularly in Sydney and Melbourne, as residential property prices are generally expected to stagnate in the coming months and years.

It may seem counterintuitive, but the cooling property market could actually benefit online real estate listing sites like Domain Holdings Australia Ltd (ASX: DHG) and REA Group Limited (ASX: REA), as property sellers are forced to invest more into marketing to sell their properties, with increased housing stock to compete with (and fewer buyers), lower auction clearance rates and a longer average time on the market for residential properties.

These trends could force sellers to spend more on their Domain.com.au or Realestate.com.au listings; such as through premium placements, through a multi-channel strategy (e.g. utilising both print and online media), or as a result of listings staying online for longer (therefore, costing more on average). It is important, however, that the property market is buoyant enough to provide Domain and REA Group with ample listings to generate strong revenues. In essence, a balance is required between the number of listings on their site and the average customer expenditure per listing.

While there is uncertainty regarding the future growth of property listings over the next 12 months, it is arguable that this optimal balance in the market is currently being achieved, which may explain why both Domain and REA Group are up by about 8% over the last 6 months, diverging from the returns of the Australian property market.

Where to invest? Domain or REA Group?

Both Domain and REA Group operate solid digital business models. However, unlike Carsales.Com Ltd (ASX: CAR), which operates in a quasi-monopoly in online car classifieds, they compete in what is essentially a duopoly in online real estate listings.

In its FY18 results, REA Group reported EBITDA of $464 million, 22% stronger than FY17, while Domain reported EBITDA of $116 million, 12.5% higher than last year.

It is my view that REA Group currently operates a superior business for the following reasons:

• In recent years REA Group has consolidated its market share to 75%, while Domain has slid to 25%, giving REA Group the dominant market position.
• At present, REA Group operates more efficiently, with an EBITDA margin (Earnings before interest, tax, depreciation and amortisation/revenues) of 52%, which the company has considerably improved over time, while Domain operates with an EBITDA margin of just 24%. Therefore, REA Group is currently more profitable and enjoys a higher return on capital than Domain.
• REA Group has exhibited strong and prudent management, which has a proven ability to consistently grow profits over a long period of time; while the stability of Domain's management is still questionable after the resignation of its former CEO early this year, less than 3 months after its spin-off from Fairfax Media Limited (ASX: FXJ).

Therefore, I believe REA Group is your best bet for getting exposure to the online real estate listings industry. REA Group is a solid company that I'd love to own at a price of $70 or so, but while the company is trading at a price-to-earnings ratio of 38x, I will happily stay on the sidelines awaiting a minor downward market correction.

The post Should you buy Domain Holdings Australia Ltd (ASX:DHG) and REA Group Limited (ASX:REA) amidst the cooling Australian property market? appeared first on The Motley Fool Australia.

More reading

• 2 ASX growth shares to buy now while they're on sale
• Here's why this $9 billion ASX tech share could be a buy right now
• 5 ASX 200 shares that could be a bargain right now
• 5 things to watch on the ASX 200 on Monday
• The ASX 200 shares I think smart investors are buying after the tech selloff

The share price of telecommunications provider and IT company TPG Telecom Ltd (ASX: TPM) is up around 8.5% this morning after reporting record profits and exceeding guidance in their full year results.

Below is the summary of the results.

• Net profit after tax (NPAT) grew 9% on FY16 figures, to $413.8 million
• The company's underlying NPAT grew 16% to $417.3.
• Earnings before interest, tax, depreciation and amortisation (EBITDA) grew 5% to $890.8 million.
• Excluding irregular items, underlying EBITDA increased by 8% to $835 million.
• Earnings per share (EPS) increased by 6% to 47.9 cents per share.
• Cash generated from operations (pre-tax) totalled $869.7 million in FY17
• The group announced a final FY17 dividend of 2 cents per share fully franked which reaches its ex-dividend date on October 17th.

TPG also highlighted in their guidance that solid growth is expected for FY18, whilst acknowledging the headwinds presented by the NBN, which is likely to squeeze its margins on fixed line residential broadband services. The company predicts underlying EBITDA in FY18 will be in the range of $800-$815 million, down from the $835 million reported in FY17.

The company also highlighted that it has secured additional debt financing of $750 million, bringing the group's total committed debt facilities to $2,385 million to finance planned mobile network builds. TPG highlighted that their mobile strategy is on track after making solid progress in the implementation of mobile network rollouts in Australia and Singapore.

TPG Telecom presently is trading at a market valuation of around $4,827 million and its share price has hit levels between $5.05 and $11.6 in the past 12 months, following a tough year for ASX Telcos. After its promising results and guidance on their mobile strategy, I believe TPG is a good buy at its modest price-to- earnings multiple of 11.55.

The post Why the TPG Telecom Ltd (ASX: TPM) share price is rising today appeared first on The Motley Fool Australia.

More reading

• Should you buy Coles, Light & Wonder, and TPG Telecom shares in April?
• Telstra shares hit new highs: what's next?