But one little-known ASX share is leaving those gains in the dust, soaring 15% higher.

Any guesses?

If you said diversified financial services organisation Thorn Group Ltd (ASX: TGA), give yourself a gold star.

Why is the Thorn Group share price rocketing?

The Thorn Group share price is soaring after the ASX share announced a special dividend payment as well as a proposed capital return and share consolidation.

The company opted to make the special dividend payment based on Thorn's strong cash balance and the simplification of its business. According to the release, the directors consider that Thorn is presently holding funds in excess of its requirements.

The fully franked special dividend of 3 cents per share will total approximately $10.4 million. The ex-dividend date is 24 August and the special dividend will be paid on 8 September.

Thorn's dividend reinvestment plan (DRP) won't apply to the special dividend.

Also sending the ASX share higher today was the announcement that Thorn's directors are considering an additional 12 cent per share return of capital, worth around $41.7 million, along with a share consolidation in Q3 FY23. That would be subject to both regulatory and shareholder approvals.

Commenting on the developments, Thorn's CEO, Pete Lirantzis said:

We are delighted to be providing our shareholders with these returns following a three-year program to transform the company, both in a cash and operating position.

We are now a simpler and more efficient organisation well placed to grow further in the SME market with an expanded finance offering through a sophisticated technology solution.

Our balance sheet has been strengthened with the sale of assets, including Radio Rentals, and our capital position has enabled us to announce a special dividend and planned return of capital to shareholders.

How has this little-known ASX share been tracking? 

Over the past 12 months, the Thorn share price has gained 42%. That compares to a full-year loss of 5% posted by the All Ordinaries.

Atop the price moves, the ASX share notes that "Collectively, shareholders have already received a total return of capital of approximately $52.6 million for the last two financial years."

The post Guess which little-known ASX share is soaring 15% on special dividend news appeared first on The Motley Fool Australia.

• Thorn Group shares are trading ex-dividend
• The proceeds of asset sales will be distributed to shareholders
• A special dividend of 7 cents is to be paid on 9 February

The Thorn Group Ltd (ASX: TGA) share price is one of the worst performers on the All Ordinaries (ASX: XAO) so far today.

At the time of writing, the diversified financial services company's shares are down a sizeable 21.74% to 27 cents apiece.

Why is the Thorn Group share price falling today? 

Investors are selling off Thorn Group shares after securing a special dividend today.

Last week, management announced that it completed the sale of the Radio Rentals consumer finance business to Credit Corp Group Ltd (ASX: CCP).

Thorn received a cash consideration of around $44 million, with an additional $2.3 million on a deferred basis.

As such, the board decided to return the surplus funds to shareholders, totalling $23.792 million. Each eligible investor will collect a fully-franked special dividend of 7 cents per share.

In addition, the directors decided to temporarily suspend the dividend reinvestment plan (DRP) for the special dividend.

What does this mean for Thorn Group shareholders?

Typically, one business day before the record date, the ex-dividend date, is when investors must have purchased shares. If the investor does not buy before this date, the dividend will go to the seller.

Historically, when a company reaches its ex-dividend day, its shares tend to fall in proportion to the dividend paid out. This is because investors tend to sell off the company's shares after securing the dividend.

For those eligible for Thorn Group's special dividend, shareholders will receive payment on 9 February.

It's worth noting that because the dividend is fully-franked, this means investors can expect to receive tax credits from this.

Thorn Group share price snapshot

In the past 12 months, the Thorn Group share price has gained around 53% despite today's significant drop. The S&P/ASX 200 Consumer Discretionary (ASX: XDJ) index is up around 7% over the same timeframe.

Thorn Group shares reached an all-time high of 36 cents last week as investors moved in to secure the special dividend.

Based on today's price, Thorn Group commands a market capitalisation of roughly $93.47 million, with around 340 million shares outstanding.

The post Why the Thorn Group (ASX:TGA) share price is plummeting 22% today appeared first on The Motley Fool Australia.

Let's take a look at what investors can expect with the company's dividend.

Thorn Group dividend summary

Thorn Group will pay shareholders a fully franked 1 cent per share final dividend on 21 July.

At the current share price of 21 cents, the dividend yield of the 1 cent payment is 4.44%.

The company reinstated the dividend distribution schedule from October 2020, after it was periodically terminated in January 2018.

Prior to this, the company had made good on each payment from December 2012 to January 2018.

Time extension on target statement

Yesterday, Thorn Group released a statement referring to the unsolicited on-market takeover offer made by Somers Limited on 18 June.

Somers has offered to acquire all shares in Thorn that it does not already own for 21 cents per share all cash.

In the statement, Thorn outlined it had received a declaration from the Australian Securities and Investments Commission (ASIC) granting an extension of time to provide its target's statement in respect of the offer.

Thorn states the extension permits the company to include an independent expert's report, and the target's statement shall be made to the ASX, ASIC and Somers and Thorn shareholders on or before Friday 16 July 2021.

Thorn has confirmed it will provide the documentation on or before this date.

In the statement, Thorn said:

Thorn reiterates its previous recommendation that shareholders TAKE NO ACTION in relation to the Offer
until they have received and considered Thorn's target's statement.

Thorn Group share price snapshot

The Thorn Group share price is around 13% in the green this year-to-date. Over the previous 1 month, Thorn's share price has increased 2.38%.

This week, the Thorn share price is 2.27% in the red, and on a current share price of 21 cents, Thorn Group has a market capitalisation of $75.9 million.

The post Thorn Group (ASX:TGA) share price closes 6% lower as it goes ex-dividend appeared first on The Motley Fool Australia.

Takeover bid

Thorn Group shares are well in the green today after the company announced Somers Limited is making an on-market, unconditional cash offer to acquire it for 21 cents per share.

Somers is a financial services investment holding company listed on the Bermuda Stock Exchange. The company's core investments are primarily in banking, asset financing and wealth management sectors across Australia, the United Kingdom and Bermuda. Somers has about US$625 million in funds under management.

The Thorn Group share price closed Thursday's session at 20.5 cents, so today's offer isn't quite the premium takeover offer ASX shareholders often see.

However, Somers' bidder statement said that:

This [the offer] may be attractive for Thorn Shareholders given the risks and uncertainties associated with remaining a Thorn Shareholder including, but not limited to:

a) the long term impacts of the COVID-19 pandemic on Thorn's borrowers and their businesses; and

b) general economic and equity market risk

Thorn Group response

Thorn Group has advised that its shareholders should take no action in relation to the offer.

The company has established an independent committee to assess and respond to the Somers offer.

Until then, the company will continue to operate 'business as usual'.

Its been an ugly ride for the Thorn Group share price

Thorn Group provides alternate consumer and commercial leasing products, with one of its divisions better known as Radio Rentals. The company also provides financial products and services, tailored to the needs of Australian SMEs.

In its prime, Thorn Group was a highly profitable business delivering solid year-on-year growth. Back in FY15, when its shares were fetching more than $2.00 apiece, the company delivered a 25.1% increase in revenue to $293.8 million and a 13.6% increase in underlying cash net profit after tax (NPAT) of $34.2 million.

Fast forward to today, the company is attempting to turn things around, announcing a forecast NPAT of $8.4 million for FY21, after an $81 million loss in the previous year.

The Thorn Group share price is up 10% year to date, but down by almost 90% since its 2015 highs.

The post Thorn Group (ASX:TGA) share price jumps 7% on takeover offer appeared first on The Motley Fool Australia.

Four shares that are climbing more than most today are listed below. Here's why they are charging higher:

Accent Group Ltd (ASX: AX1)

The Accent share price is up 3.5% to $2.43. This follows the release of a trading update after the market close on Thursday. That update revealed that the footwear retailer's strong performance continued over the important holiday period. For the two months to 27 December, the company's total sales were up 12.3% and like-for-like sales grew 7.4%. Excluding the closure of Auckland, Victoria, and Adelaide stores, like-for-like sales grew 12.3% during the first half.

Afterpay Ltd (ASX: APT)

The Afterpay share price is up 5% to $114.25. Investors have been buying the payments company's shares following a strong rise on the Nasdaq index overnight. The technology-focused index rose over 2.5% to close above the 13,000 points mark for the first time. The local tech sector has a habit of following the lead of the Nasdaq.

Creso Pharma Ltd (ASX: CPH)

The Creso Pharma share price has jumped a further 5.5% to 28 cents. The catalyst for this was the Democrats winning control of the Senate on Thursday. This is expected to lead to significant policy change in the United States in relation to the decriminalisation of cannabis. Creso Pharma believes it is well-positioned to benefit from any changes to legislation.

Thorn Group Ltd (ASX: TGA)

The Thorn share price is up 3% to 19 cents following the release of a business update. Thorn revealed that initiatives underway in its Radio Rentals and Business Finance divisions are going well. The company's CEO, Pete Lirantzis, commented: "These initiatives are already reaping tangible results and we expect will deliver enhanced value for all shareholders."

The post Why Accent, Afterpay, Creso Pharma, & Thorn shares are charging higher appeared first on The Motley Fool Australia.

On publication of the company's quarterly report, it stated that Thorn held $54.1 million of free cash. As this is excess to requirements, the directors have decided to return $24.2 million to shareholders, thus producing the high dividend yield payment. 

Investors seeking to capitalise on this yield would need to act fast. The Thorn share price already spiked by 19.05% yesterday. A payment of this magnitude is going to attract attention.

Performance of Thorn Group

Thorn Group is a company with two main lines of business. First, it is the owner of Radio Rentals, a consumer leasing company. Second, it owns Thorn Business Finance, which provides a range of tax effective credit options for small to medium enterprises (SMEs). 

The company has had a difficult couple of years. However, FY20 has been a turning point for Thorn Group, sparked by the pandemic crisis. By the end of the year, it had changed several substantial shareholders, appointed a new board of directors, installed a new CEO, changed several members of senior management, settled a class action, and completed a capital raising. 

Nonetheless, this is the third time this year that Thorn Group has seen its share price rally. Yesterday, of course, it rose in anticipation of the large dividend yield. The first time it rose by 60% on news it would permanently close all Radio Rentals stores, changing it to a digital only business. The second time it rallied by 30% on the release of its June quarter report, in which it announced a boost to free cash of $54.1 million. 

Strategies for the dividend yield

Investors interested in securing this payment would need to buy quickly to ensure a dividend yield as close as possible to 30%. They would then need to hold onto the shares past the ex-dividend date. Unfortunately, I am pretty confident the Thorn Group share price will collapse on Friday. This is because share prices often fall by the approximate value of a dividend payment after the ex-dividend date has passed. So, investors buying shares only for the dividend, and not trading out of them on Thursday afternoon to lock in share price gains, would need to be prepared to hold onto them until they rise again.

Nonetheless, I believe this company is truly at the beginning of a disciplined turnaround. We're entering a period where SME finance is likely going to be very important to the country, so I believe the Thorn Group share price will continue to rise gradually over time.

The post Want up to 30% dividend yield in 3 weeks? appeared first on The Motley Fool Australia.

What was in the announcement?

The company announced that the closure of its Radio Rentals stores was completed. According to Thorn group, the company had initially closed its stores temporarily due to the coronavirus pandemic, later deciding to close them permanently. The store closures were completed at the end of May 2020 with significant redundancies occurring as a result. The company's Radio Rentals business now utilises a purely online model which onboards customers digitally. Progress was made towards the development of this new structure during the second quarter of 2020.

Thorn reported that its business finance division faced difficulties during the second quarter of 2020 due to reduced cash repayments from customers. The company is in discussion with the lenders of its warehouse funding trust about relief options.  

In the June quarter of 2020, Thorn Group had positive cash flow of $45.5 million. This came as receipts from previously written lease contracts exceeded operating expenses and outgoings for new leases.

Thorn Group paid off $21.3 million of debt funding in the June quarter along with $2 million of its corporate debt facility. 

The company is currently undergoing cost reductions and collecting receivables from its Radio Rentals business after remodelling this division into an online business. It expects both these initiatives to be cash positive for the group. 

At the end of the June quarter, Thorn Group had $71.8 million in cash. This compared to $49.6 million cash at the end of the March quarter.

About the Thorn Group share price

Thorn is a financial services company that provides leasing and financing to consumers and businesses.

In December 2019, Thorn Group settled a class action brought against the company for $25 million. The class action was related to the previous lending practices of its Radio Rentals business.

The Thorn Group share price is up 333% from its 52 week low of 3 cents, however, it is down 40.9% since the beginning of the year. The company's share price is also down 53.6% since this time last year.

The post Thorn Group share price surges 30% on quarterly report appeared first on The Motley Fool Australia.

Here's a short recap of the Australian market:

• S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) higher 0.10% to 6,590.30
• ALL ORDINARIES (Index: ^AXAO) (ASX: XAO) higher 0.10% to 6,670.10
• AUD/USD at US 68 cents
• Gold at US$1,491.65 an ounce
• Brent Oil at US$58.35 a barrel

The best-performing ASX 200 share today was the JB Hi-Fi Limited (ASX: JBH) share price which went up around 10% after impressing the market with its report.

The share price of Bendigo and Adelaide Bank Ltd (ASX: BEN) went up over 3% after it also reported its result to the market.

Glovemaker Ansell Limited (ASX: ANN) reported its 2019 annual result to the market, sending its share price higher by around 6%.

The share price of Nine Entertainment Co Holdings Ltd (ASX: NEC) rose around 1% as the media business made acquisition plans to move into radio.

Rail freight company Aurizon Holdings Ltd's (ASX: AZJ) share price increased by almost 2% as it revealed its FY19 report to the market.

The Praemium Ltd (ASX: PPS) share price rose by around 3% after releasing its FY19 numbers to investors.

The share price of Thorn Group Ltd (ASX: TGA) fell 7% after announcing progress of its strategic review and the departure of its CEO.

Finally, the Wesfarmers Ltd (ASX: WES) share price rose by 0.8% after completing the acquisition of Catch Group.

Here are some of today's top stories:    

• 2 ETFs to buy for a perfect investment combination
• I think Altium Limited (ASX:ALU) is a great ASX share for these 3 reasons
• Why Aristocrat could become one of the fastest growing ASX blue chips
• Bargain hunter's paradise: 2 ASX shares under $5

The post ALL ORDINARIES finishes higher Monday: 8 shares you missed appeared first on The Motley Fool Australia.

The Thorn Group share price copped a 13.4% blow to trade at 42 cents during lunch time trade when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) and All Ordinaries (Index:^AORD) (ASX:XAO) have dipped around 0.1% each.

Thorn Group, which owns the Radio Rental chain, posted a worse than expected net loss of $14.9 million for the year ended 31 March, 2019, compared to a loss of $2.2 million in the previous year.

Thorn in the side

A big $10 million asset impairment in its consumer leasing business and an $11.5 million provision for its business financing division contributed to the below company guidance result.

The small silver lining is that volumes at Radio Rentals increased 1% due to higher average prices on their consumer leasing contracts although lower interests, a smaller receivables book, high bad debt provisioning and promotional costs have more than offset the gain.

Management is also trying to put on a brave face in its outlook statement. While challenging conditions are expected to persist in its consumer leasing business, it believes the worst may be over as volumes are stabilising and bad debts and discounting are improving slowly.

The group believes that it can return to a trading profit in the current financial year although investors are likely to shun the stock until it releases a plan for its strategic restructuring and settles the class action.

As one falls, another rises

Thorn Group had been hit by allegations of fleecing vulnerable consumers a few years ago and the stock has never recovered. Interestingly, its downfall coincided with the rise of another form of consumer financing – the buy now, pay later (BNPL) phenomena.

You only need to look at the superstar rise of the Afterpay Touch Group Ltd (ASX: APT) share price along with its rival Zip Co Ltd (ASX: Z1P) and the much hyped IPO of Splitit Ltd (ASX: SPT).

Even the forefather of the BNPL service FlexiGroup Limited (ASX: FXL) has managed to reinvent itself after emerging from some turbulent times of its own.

The problems at Thorn Group aren't linked to rise of these stocks but it shows that shifting consumer spending patterns and changing regulatory frameworks can make all the difference. Being able to predict these inflection points is key to generating superior returns.

The experts at the Motley Fool have identified one emerging inflection point that is likely to bring bumper returns for investors.

Follow the free link below to find out what this opportunity is and the stock they believe is best placed to ride this wave.

The post The Thorn Group downfall coincides with the rise of Afterpay and friends appeared first on The Motley Fool Australia.

Here's a short recap of the Australian market:

• S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) lower 0.74% to 6,392.10
• ALL ORDINARIES (Index: ^AXAO) (ASX: XAO) lower 0.73% to 6,489.20
• AUD/USD at US 69 cents
• Gold at US$1,277.94 an ounce
• Brent Oil at US$69.84 a barrel

The best-performing ASX 200 share today was the Syrah Resources Ltd (ASX: SYR) share price which climbed more than 12%.

The big news of the day was a profit downgrade which sent the share price of Costa Group Holdings Ltd (ASX: CGC) down by 27.4%.

The Worleyparsons Limited (ASX: WOR) share price dropped 5% despite the company announcing two contract wins over the past two days.

The share price of Westpac Banking Corp (ASX: WBC) fell 0.7% on analysis that the big banks could lose some of their revenue to the big US technology companies.

The Woolworths Group Ltd (ASX: WOW) share price fell 0.3% even though we learned that the big supermarkets have a plan to use data to outperform Aldi.

The share price of Thorn Group Ltd (ASX: TGA) rose 5.4% today after giving an update about its strategic review.

The Mesoblast Limited (ASX: MSB) share price declined 2% today after announced it had filed the first component of a rolling submission for a Biologics License Application (BLA) to the US FDA.

Finally, the share price of vitamin and supplements business Blackmores Limited (ASX: BKL) rose 6.1%.

Here are some of today's top stories:

• Goldmans just labelled Australia's growth shares a waste of money
• 3 ASX shares to buy and hold for a decade
• Top 3 ASX shares for beginners to buy
• Why I am avoiding Suncorp and NAB for the next few months

The post ALL ORDINARIES finishes lower Thursday: 8 shares you missed appeared first on The Motley Fool Australia.

Four shares that have not let that hold them back are listed below. Here's why they have stormed higher:

The Blackmores Limited (ASX: BKL) share price has climbed over 4% higher to $97.23. Today's gain appears to be attributable to a broker note out of Morgan Stanley this morning. According to the note, its analysts have upgraded the health supplements company's shares to an equal-weight rating from underweight. The broker believes that Blackmores could benefit from increasing demand for its products due to the severe flu season Australia is experiencing.

The Lynas Corporation Ltd (ASX: LYC) share price has continued its impressive run and is up a further 3.5% to $2.86. At one stage today the rare earths producer's shares were up as much as 12% to a 52-week high of $3.09. Investors have been snapping up its shares due to speculation that China could block rare earths exports to the United States.

The Syrah Resources Ltd (ASX: SYR) share price has rocketed 10% higher to $1.23 despite there being no news out of the graphite miner. Earlier this week analysts at Credit Suisse retained their outperform rating and lofty $3.30 price target. This price target implies potential upside of almost 170% even after today's strong share price gain.

The Thorn Group Ltd (ASX: TGA) share price has risen 5.5% to 48.5 cents following the release of an update on its strategic review. The company advised that its "strategic review is ongoing and while some parties have expressed interest, no decisions have been made by Thorn as to the course of action that will maximise value for shareholders." It also reminded shareholders that on Friday the company will be releasing its FY 2019 results.

The post Why Blackmores, Lynas, Syrah, & Thorn Group shares stormed higher today appeared first on The Motley Fool Australia.

That's fair enough as the professionals should be doing the most in-depth research and often have the advantage of being able to meet with company management teams to get an even better read on the likely direction of the business.

One prominent fundie in the media is Steve Johnson of Forager Funds Management that runs an ASX-focused equity fund.

Forager is a 'value investor' which traditionally describes an investment style popularised by U.S. academic and investment guru Ben Graham who even taught the 'world's most successful investor' in Warren Buffett.

Graham essentially taught that professional investors should value stocks and then look to buy them at a discount or with a "margin of safety" to their exchange traded price as that would offer the surest chance of positive returns.

Value investing also traditionally favours buying "cheap" stocks, rather than "growth" stocks, where it's harder, inter alia, to find a margin of safety.

Unfortunately though traditional "value investing" on the ASX has proven tough going for many professional fund managers on the ASX over the last few years with the likes of Forager and Perpetual Limited (ASX: PPT) failing to beat the market.

For example the Forager Australian Share Fund has returned 6.16%pa (net of fees) over the last 3 years (as at its January 2019 report) while the benchmark S&P All Ords. Accum. Index has returned 10.01%pa.

In fairness though "since inception" the Forager Australian Share Fund is around 3.7% ahead of the index.

So let's take a look at its top 5 ASX share holdings as at January 2019.

• Macmahon Holdings Limited (ASX: MAH) is a mining and engineering services business forecasting "adjusted" full year EBIT between $70 million to $80 million, with net debt between $25 million to $30 million. The stock is flat over the past year.
• iSelect Ltd (ASX: ISU) saw its H1 FY 18 revenue fall 8% to $74.3m and produced an interim statutory net loss of $6.9 million.
• Enero Group Ltd (ASX: ENO) is a digital media and public relations aggregator that just reported a half year profit of $6m on revenue of $108m.
• Thorn Group Ltd (ASX: TGG) is expecting a full year loss of $6m. The equipment leasing and lending group has seen shares fall steadily since 2015.
• MMA Offshore Limited (ASX: MRM) just reported a half-year normalised loss of $14.6 million on revenue of $119.5 million. It provides offshore engineering services, the stock has gone from $2.18 in March 2014 to 16 cents today.

Foolish takeaway

The surest way to make money in the share market is to charge others to manage their money, failing that you can either manage your own money, or pay others to manage it.

I'd suggest learning to manage your own money and appreciating that in the share market today growth and value are indivisible, while share prices over the medium term will always follow cash flows higher or lower.

Therefore, I'd suggest investors look to companies likely to consistently grow earnings while selling for reasonable valuations.

The post Fund manager reveals top 5 ASX holdings appeared first on The Motley Fool Australia.

Management has revised down its cash net profit after tax (NPAT) guidance for the 2019 financial year to be in the range of $76 – $80 million, down from previous guidance of $95 – 100 million.

The cause of the impairment is FlexiGroup's exposure to the voluntary liquidation of one of its equipment finance vendor program partners.

The financial services group meets a similar fate as Thorn Group Ltd (ASX: TGA) last Friday, with both companies evidently exposed to the same issue. The Thorn Group share price fell 21% after announcing that it had a $10.5m exposure to defaults on lease payments for an equipment finance product. The writing had been on the wall for FlexiGroup shareholders, with Thorn Group having warned that it was a "widespread exposure in the equipment finance industry".

FlexiGroup Chief Executive Officer, Rebecca James, said: "Following good volume, customer and retailer growth across the business, it is disappointing to announce a significant one-off impairment in our commercial leasing business."

Excluding the impact of the impairment, underlying 1H19 NPAT is expected to be 3% higher than the previous corresponding period.

FlexiGroup will announce its interim result on February 26.

The post FlexiGroup share price crashes to 52-week low after profit warning appeared first on The Motley Fool Australia.

The Thorn Group share price has plunged 21% this morning in response to a profit warning announced after close of business yesterday. The company estimated that its profit after tax for the year ending 31 March 2019 will be a loss of $6m, a heavy fall from previous guidance of $6m to $8m in profit.

The company attributed the profit downgrade to an issue in its Business Finance division where a majority of lessees have defaulted on lease payments for a certain product and are disputing the enforceability of the leases.

Thorn's total exposure to the issue is estimated at $10.5m. The company said that it is considering its options, but at this point, it looks as if it will be unable to collect on these receivables and this could flow through to a $7.4m hit to profit after-tax.

But that's not all. The resulting reduction in Thorn's cash flows combined with persistently challenging conditions in its consumer leasing business are expected to result in a non-cash write-down of the company's intangible assets which could result in a reduction in reported profit of up to $4m.

The Thorn Group share price has recovered somewhat as the morning has gone on, having been down 30% in early trade.

The post Thorn Group share price plunges 21% on profit warning appeared first on The Motley Fool Australia.

But what is contrarian investing?

In his book 'Contrarian Investment Strategies' David Dreman explains that contrarian investing is about buying those companies that are so unloved by the market that the likelihood of a positive surprise (and subsequent increase in the share price) is far higher than with other companies. In the long run, Dreman argues that this means that the returns on contrarian strategies are likely to be higher than the market return.

Dreman explains that the limitations of investors in forecasting the future earnings of companies means that surprises are inevitable. The basic premise of contrarian investment strategies is that when one buys companies that are priced as if they are going out of business, forecasting mistakes are most likely to be those that underestimate future earnings.

How do you find a contrarian investment?

According to Dreman, the best way to measure the extent to which a company is out of favour with the market is to use the price-to-earnings, price-to-cashflow, or price-to-book ratios. Investors should buy solid companies with low ratios. These could be companies with low absolute ratio values (i.e., the lowest price-to-earnings ratio of all companies) or low relative ratio values (e.g., the lowest price-to-earnings ratio of all companies in a particular industry).

Tobias Carlisle (in his book The Acquirers Multiple), Joel Greenblatt (in his book The Little Book that Beats the Market) and Dreman himself (in his book Contrarian Investment Strategies) have all reported tests of versions of this contrarian investment strategy with strong returns.

At any given time, investors will find companies that are out of favour with the market.

For example, companies with low price-to-earnings ratios on the ASX currently include:

• Retail Food Group Limited (ASX: RFG),
• The Reject Shop Ltd (ASX: TRS)
• Cash Converters International Ltd (ASX: CCV)

Companies with low price-to-book values include:

• Thorn Group Ltd (ASX: TGA)
• Shine Corporate Ltd (ASX: SHJ)
• United Overseas Australia Limited (ASX: UOS)

Lastly, those with low price-to-cashflow include:

• Collection House Limited (ASX: CLH)
• Qantas Airways Limited (ASX: QAN)
• Shaver Shop Group Ltd (ASX: SSG)
• Air New Zealand Limited (ASX: AIZ)

Foolish Takeaway

Contrarian investment strategies can be profitable because investors systematically underestimate the potential for upside surprises. A basket of low price-to-earnings, low price-to-book value, or low price-to-cashflow companies have been shown to produce strong returns over the long run.

The post Contrarian Investing and the ASX appeared first on The Motley Fool Australia.

You will often see high performance in one year and then perhaps a year of smaller returns whilst the market gets to grips with the new valuation.

It's very hard for a fund manager to be a high performer every single year. The returns speak for themselves over a three, five or ten year period, but a single year alone can show an underperformance.

Over the past year the Forager Australian Shares Fund (ASX: FOR) performance, net of fees, has been 6.5%. However, the ASX/S&P All Ordinaries Accumulation Index has returned 13.73%.

But, over the past three years Forager's portfolio has returned 16.32% per annum net of fees compared to the index's 9.48%. Over the past five years the Forager net return has been 15.78% per annum compared to 10.28% per annum for the index.

Forager is essentially a contrarian investor. Steve Johnson and his team look at deeply unloved stocks that they believe could be turnaround stories. Some of its investments in recent times have been mining services businesses, iSelect Ltd (ASX: ISU) and Thorn Group Ltd (ASX: TGA).

Forager's ideas are not your typical ideas for investing. These picks are 'deep value' which could drop further and can go wrong, just like any fund manager's picks. However, it is clearly possible to outperform with unloved stocks, as Forager has shown.

Foolish takeaway

Not only is a Forager a proven long-term picker, but relative underperformance by 'value stocks' in one year regularly turns into outperformance the next year. Although I don't own shares, I respect the Forager way of doing things and would gladly have it in my portfolio at the current price.

The post Why now could be the time to buy Forager Australian Shares Fund (ASX:FOR) appeared first on The Motley Fool Australia.

Will things be better on Thursday? Here are five things that could shape the day's trade:

ASX futures are pointing higher.

According to the latest SPI futures, the Australian share market is expected to open the day 40 points or 0.7% higher on Thursday. This follows a strong night of trade on Wall Street which saw the Dow Jones Industrial Average rise 1.3%, the S&P 500 climb 1.3%, and the Nasdaq push 0.9% higher.

Oil prices bounce back.

It wasn't just the share market bouncing back overnight. Oil prices have rebounded after reports that Saudi Arabia and other OPEC members plan to stick to a global pact on cutting oil supplies until the end of 2018. According to Bloomberg, WTI crude oil is up 2.5% to US$68.38 a barrel and Brent crude oil has risen 3% to US$77.62 a barrel. This could be good news for Beach Energy Ltd (ASX: BPT) and Oil Search Limited (ASX: OSH) which have been under pressure following recent oil price declines.

U.S. banks rebound.

One of the biggest drivers of the rise on Wall Street was its major banks rebounding from a selloff on Tuesday. This could set up our banks for a solid day of trade on Thursday. Especially Macquarie Group Ltd (ASX: MQG) which fell hard on Wednesday in response to the declines on Wall Street.

Thorn Group shares will be on watch.

The Thorn Group Ltd (ASX: TGA) share price will be on watch today after the household goods renter reported its full-year results last night. Thorn reported FY 2018 cash profit (excluding goodwill write-off) of $17 million, which was in line with its previous guidance. However, management has warned that the outlook for Thorn will continue to be challenging and expects cash profit to be down significantly in FY 2019.

Shares going ex-dividend.

A number of popular shares are going ex-dividend this morning for their respective pay outs. These include CSR Limited (ASX: CSR), Orica Ltd (ASX: ORI), Ruralco Holdings Ltd (ASX: RHL), and Technology One Limited (ASX: TNE).

The post 5 things to watch on the ASX on Thursday appeared first on The Motley Fool Australia.

Will the Australian share market be able to build on this and finish on a high on Friday? Here are five things that could shape the day's trade:

ASX futures are pointing lower.

According to the latest SPI futures, the Australian share market is expected to open the day lower by 27 points or 0.45%. This follows declines on Wall Street overnight after President Trump pulled the plug on his meeting with North Korea's Kim Jong Un. The Dow Jones Industrial Average was down 0.3%, the S&P 500 was off 0.2%, and the NASDAQ was down slightly.

Trump cancels the North Korea meeting.

While the cancellation of President Trump's meeting with North Korea sent U.S. markets lower, it has given the gold price a lift. The spot gold price is up 0.9% to US$1,304.5 an ounce, which could mean the likes of Northern Star Resources Ltd (ASX: NST) and Resolute Mining Limited (ASX: RSG) have a positive day of trade.

Results are due to be released.

Yesterday it was Aristocrat Leisure Limited (ASX: ALL) reporting its results, today it is the turn of Mesoblast limited (ASX: MSB) and Thorn Group Ltd (ASX: TGA) to release their respective results. Mesoblast's shares fell heavily yesterday ahead of the release, which could be an indication that some shareholders are concerned that it could fall short of expectations.

Oil prices give back gains.

The shares of many of Australia's leading energy producers such as Oil Search Limited (ASX: OSH) and Woodside Petroleum Limited (ASX: WPL) could come under pressure today after oil prices fell. WTI crude oil has fallen 1.6% to US$70.67 a barrel and Brent crude oil is down 1.3% to US$78.77 a barrel.

The Royal Commission continues.

Banking giant Commonwealth Bank of Australia (ASX: CBA) took to the stand at the Royal Commission on Thursday. The bank's shares tumbled to a 52-week low after an executive admitted the bank put off writing to overcharged small business customers so he could avoid being grilled at a parliamentary hearing.

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Four shares that have acted as a drag on the market today are listed below. Here's why they have tumbled lower:

The Sigma Healthcare Ltd (ASX: SIG) share price is down 6% to 82.7 cents following the release of its half-year results. The pharmacy chain operator and distributor reported revenue of $4,130 million and underlying net profit after tax of $59.9 million. This was a 5.4% and 10.5% decline, respectively, on the prior corresponding period. A softer consumer environment has been blamed for the weak result. Sigma also announced the appointment of Goldman Sachs as its financial adviser to assist with M&A and strategic advice.

The Thorn Group Ltd (ASX: TGA) share price has plunged 11% to 63.5 cents after the rental equipment and financial services company provided the market with a trading update. According to the update, a weakening performance by its Radio Rentals business means that it expects to achieve the lower end of its guidance range. This appears to have many investors concerned that it may once again breach its debt covenants.

The Vicinity Centres Re Ltd (ASX: VCX) share price has fallen 3% to $2.41 after the Federal Reserve raised interest rates in the United States overnight. This has led to the yields on treasury bonds widening and appears to have caused bond proxies such as Vicinity Centres to be sold off during trade today.

The Webjet Limited (ASX: WEB) share price is down 4% to $11.58 despite there being no news out of the company. The only related news that I am aware of is a broker note out of Ord Minnett. This morning that note revealed that its analysts have retained their buy rating but cut the price target on the online travel agent's shares.

The post Why these 4 ASX shares have tumbled lower today appeared first on The Motley Fool Australia.

At the time of writing the financial services company's shares are down 18% to 58.5 cents.

This means that Thorn Group's shares have now lost 62% of their value since this time last year.

Why are they being crushed again today?

This morning the company released an update which advised that trading conditions in its Consumer Leasing division have deteriorated. As a result of this deterioration, the company's future financial results will be materially impacted.

According to the release, management now expects the company's full-year cash profit after tax to be at the lower end of its guidance range of $17 million to $20 million.

This is largely down to the weakening performance of its Radio Rentals business and expectations that trading conditions are unlikely to improve in the medium term. Management has also blamed the adverse publicity from Thorn's settlement with ASIC and its ongoing class action for the soft result.

In order to combat this decline, the company is developing a refreshed and extended retail offering for Radio Rentals. This will be supported through further promotional activities and a strategic review to improve business performance.

One bright spot, however, is that the company's Business Finance segment continues to show strong results. But considering the Consumer Leasing segment accounted for 82% of revenue as of its half-year results, the strong performance of the Business Finance segment isn't going to move the needle too much.

Why the heavy decline?

Considering the company has merely downgraded its guidance to the low end of its guidance range, some readers may be wondering why its shares are down 18%.

There appears to be concerns that this underperformance could lead to the company breaching its debt covenants once again. This could test the patience of its lenders and lead to action being taken.

Should you invest?

Although Thorn Group looks cheap on paper I would suggest investors stay well clear of it. Like Myer Holdings Ltd (ASX: MYR), I think Radio Rentals is outdated and not relevant to today's consumer.

Instead of Thorn, I would suggest investors look at its modern day equivalents Afterpay Touch Group Ltd (ASX: APT) or Zip Co Ltd (ASX: Z1P).

The post Why Thorn Group Ltd shares have been crushed today appeared first on The Motley Fool Australia.