The CBA share price has outperformed the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index over the past month with a 3.5% gain compared to a less than 2% rise in the stock benchmark.

This is due in part to hope that the bank will announce a share buyback or some other capital return program later this year that would be funded through the sale of its wealth management and mortgage broking business following the successful $4.1 billion divestment of Colonial First State Global Asset Management business to Mitsubishi UFJ in October last year.

Divestments put on hold

The bank said this morning that it would deprioritise asset sales as it focuses on implementing the recommendations of the Hayne Royal Commission, refunding customers for its past misdeeds and fixing past issues.

The news won't come as a surprise to some though as there have been mounting speculation that CBA would struggle to off-load these assets, according to the Australian Financial Review.

Some experts believed that CBA won't get the price it wants from a sale due to the lack of scale in the businesses and the value erosion from the Royal Commission's recommendations, which included the banning of trailing commissions.

Is there a Silver-lining?

The silver-lining is that the value of CBA's mortgage broking division (Aussie Homeloans) has probably gotten a boost as the Federal Government made a back-flip in supporting this change after intense lobbing from the mortgage broking industry.

Listed mortgage brokers like the Mortgage Choice Limited (MOC) share price and Yellow Brick Road Holdings Ltd (ASX: YBR) share price have gotten a big boost on the news.

CBA has paid or provisioned $1.46 billion to address the issues uncovered by the Royal Commission with 83% of the amount relating to its wealth management division.

Foolish takeaway

CBA and Australia and New Zealand Banking Group (ASX: ANZ) were seen as the two banks most likely to launch new capital return initiatives this year but this looks increasingly unlikely (or at the very least be scaled back).

A proposal by the Reserve Bank of New Zealand to lift the capital adequacy ratios of financial institutions operating in that market will divert more capital away from shareholders.

It's also likely that big banks like CBA will have to cough up more cash as they face multiple class action lawsuits from aggrieved shareholders and customers.

I would remain underweight on the sector for now.

The post Capital return prospects for Commonwealth Bank of Australia dims further appeared first on The Motley Fool Australia.

It's no surprise Hayne has singled out some of the fee-gouging business models of the mortgage broking industry that bring little value to consumers other than charging them additional fees to arrange a home loan with a bank such as Westpac (ASX: WBC).

In particular the Royal Commission has recommended banning trailing commissions from lenders to mortgage brokers for loans issued from 1 July 2020 and instead forcing them to take fees upfront.

It seems Commissioner Hayne has recognised that trailing fees mean the longer a loan the greater the potential recurring commission to a mortgage broker, although a longer loan may not be in the best financial interests of the borrower.

For its part the mortgage broking industry including AFG, Yellow Brick Road Ltd (ASX: YBR) and Mortgage Choice Limited (ASX: MOC) (down 23% today) claims that it lowers costs and increases choice for consumers by acting as a middle person between a lender and borrower.

This is only true though if a borrower does not have the capacity or time for whatever reasons to arrange their own loan directly with many free online services such as iSelect Ltd (ASX: ISU) and Canstar helping make this process easier in 2019.

The post Why the AFG share price and mortgage broking industry is getting smashed today appeared first on The Motley Fool Australia.

However, if you're avoiding the Big 4 banks because you think the housing market is overheated, there are plenty of other companies that could be worth steering clear of. Here are 3 of the riskiest, in my opinion:

Genworth Mortgage Insurance Australia (ASX: GMA)

Genworth is a company that investors should be majorly wary of if they think that the housing market has become too risky. As a provider of lenders mortgage insurance, Genworth could be on the hook for reimbursing billions of dollars of losses if the housing market collapses.  Not only that, but if housing sale/purchase activity declines (or lending standards tighten), Genworths' income falls because it will be writing fewer insurance policies.

Yellow Brick Road Holdings Ltd (ASX: YBR)

Along with other mortgage brokers and non-bank lenders like Homeloans Limited (ASX: HOM), Yellow Brick Road could expect to see a significant decline in its ability to write loans and earn commissions. The company also has a wealth management offering, but it appears its market-leading low-cost loans are the primary driver of both revenues and attracting new customers.

Nick Scali Limited (ASX: NCK)

Furniture retailers like Nick Scali Limited (ASX: NCK) and Harvey Norman Holdings Limited (ASX: HVN) could also be ones to watch, with their sales being an indirect beneficiary of the housing boom, as new construction led to huge growth in demand for furnishings.

The post 3 companies that could prove just as risky as the big banks appeared first on The Motley Fool Australia.

That will give REA a footprint to grow its Australian business by becoming a 'one stop shop' for both buying/ selling, and financing property transactions.

Today, REA's biggest competitor Domain, which is owned by Fairfax Media Limited (ASX: FXJ), also announced that it was also moving into the space with the establishment of its own mortgage broking service, Domain Loan Finder.

This venture is a partnership (Domain owns 60%) with online mortgage broker Lendi, and will offer borrowers access to a panel of mortgage brokers. REA Group's offering is through a partnership with National Australia Bank Ltd. (ASX: NAB) and Domain took a stab at its larger competitor today, quoted in Fairfax media as stating "It would be disingenuous to partner with a single bank."

It's an open question as to whether either of the large players has a winning proposition as yet. Perhaps there will be no ultimate change to their relative market shares – the market is big enough for more than one player.

However, if I was a shareholder in other mortgage brokers like Australian Finance Group Ltd (ASX: AFG), Yellow Brick Road Holdings Ltd (ASX: YBR), Mortgage Choice Limited (ASX: MOC), and Homeloans Limited (ASX: HOM), I would be getting concerned.

Both advertising platforms will be able to feed a monstrous number of prospective leads (i.e., nearly everyone who buys or sells a house) into their in-house brokers which could prove highly lucrative. Mortgage brokers also operate through personal connections, not just via advertising, so it is possible that Domain and REA will find it harder to disrupt the industry than they expect.

The post Property portal Domain pushes into home loans to rival REA Group Ltd appeared first on The Motley Fool Australia.

The move will give REA an 80% stake in a business with 300 advisers and a $25 billion loan book. The remaining 20% of the business will be retained by current management, although they may elect to sell their shares to REA in 3 years' time if certain performance conditions are met. If not, REA will acquire the remainder of the shares 4 years from now.

Later this year, REA Group will launch REA Home Loans, making it a one-stop shop for property buying, selling, and financing. The move is reminiscent of Carsales.Com Ltd's (ASX: CAR) move into vehicle financing, although that has so far had mixed results.

REA's move into finance could put the pressure on conventional mortgage brokers like Australian Finance Group Ltd (ASX: AFG), Yellow Brick Road Holdings Ltd (ASX: YBR), Mortgage Choice Limited (ASX: MOC), and Homeloans Limited (ASX: HOM).

Each of these brokers will soon be competing with a super-broker that is fed leads by an advertising titan that gets millions of eyeballs on its website per month.

It sounds pretty bad when I put it that way, but like many other things in investing I'm guessing that REA's expansion into mortgages will be a slow burn over years. If successful, the company could continue to grow market share and the remainder of the sector could end up consolidating over the next decade. However, Carsales' experience suggests that the addition of financial services to an advertising platform isn't an automatic winner.

Still, I think today's announcement is good news for shareholders.

The post REA Group Limited is about to disrupt the mortgage market appeared first on The Motley Fool Australia.

It wasn't good news all round though unfortunately. Four shares that were acting as a drag on the market today are as follows:

Aconex Ltd (ASX: ACX) shares dropped over 4% to $8.02 after releasing a few details about its full year results to the market. When the market darling announced it would report its full year results on August 23, it also mentioned that its fourth quarter performance was consistent with expectations. Whilst this is normally positive news, I believe the market had been anticipating a performance that exceeded expectations.

Aconex's share price has rocketed higher by 54% this year.

Admedus Ltd (ASX: AHZ) shares dropped almost 17% to 37.5 cents after announcing its capital raising plans just 16 months after its last raise. The company stated that the capital raising will be used to fund the company's ongoing operations, including a ramp up of manufacturing and new product development. This capital raising clearly hasn't gone down well with investors, leading many to head for the exits.

Admedus Ltd's share price is now down over 45% this year.

MG Unit Trust (ASX: MGC) shares dropped over 8% to $1.14 after announcing the loss of a key supply contract with Woolworths. The contract was worth over $100 million in annual sales to Murray Goulburn. Management has tried to reassure shareholders by stating that it plans to adjust future manufacturing planning to redirect this capacity to other markets. But so far it appears to have failed to convince shareholders that this plan will be successful.

MG Unit Trust's share price has lost over half of its value this year.

Yellow Brick Road Holdings Ltd (ASX: YBR) shares fell around 5% to 19.5 cents after the wealth management company reported its fourth quarter results. Although by no means a bad performance, the results reveal that the company is falling a long way behind its 2020 mortgage book target of $100 billion. Currently the company's mortgage book stands at $37.8 billion, after growing an impressive 23% year on year.

Yellow Brick Road shares are down by around 30% in 2016.

The post Why these 4 ASX shares got smashed today appeared first on The Motley Fool Australia.

The company released its fourth quarter results to the market this morning, which were acceptable but not inspiring:

• Settlements were up 5% compared to the prior corresponding period ("PCP"; i.e., fourth quarter 2015) due to a slowdown in offshore borrowing, plus continued tight investment lending conditions
• Mortgage book grew 23% to $37.8 billion* compared to PCP
• Funds under management rose 5% to $703 million compared to PCP, effectively flat compared to third quarter 2016
• Increase in marketing spending lead to a 33% increase in applications in the pipeline**
• Q4 receipts from customers effectively flat at 25% of the full year's receipts
• Positive operating cash flow of $0.7 million for the quarter, outflows of $2.4 million for the year
• $6.8 million cash on hand plus $3.7 million undrawn loans

*Yellow Brick Road has previously said it would like to have a $100 billion mortgage book by 2020… which it might struggle to achieve

**Yellow Brick Road has $3 million in media spend that won't be paid until 2017, which could hit its cash flows

So What?

On the whole it looks as though tougher market conditions have held back Yellow Brick Road's growth, despite its market-leading 3.82% interest rate on home loans. Additionally, the wealth management business has stagnated which is not ideal – this is an important area of growth, according to management. The company has recently begun an organisational restructure to increase the focus on wealth management.

On the plus side, Yellow Brick Road experienced a 55% increase in 'leads', including unsolicited branch walk-ins, as well as a 33% uplift in its application pipeline compared to the same quarter last year. Not only does this bode well for growth in the near future, it also suggests YBR is good at converting leads into applicants.

New products like the 'Agility' range in particular broaden the company's offering by relaxing some of the inflexible lending rules applied by institutions. An example given to me by an acquaintance at YBR was that some clients now won't have to save their own cash for a deposit, it could be 100% a gift from parents. Unlikely to revolutionise the company's lending activity, it's nevertheless pleasing to see the company again go one better than the banks.

Now What?

Yellow Brick Road continues to spend big on marketing up front in order to generate leads and applications further down the road. The expenses continue to take up a fair chunk of the company's cash and ultimately YBR must scale up further in order for its sales to cover its outgoings. This is why a tighter lending market (although not unexpected) and slower wealth growth are a bit disappointing.

With $11 million of funding available the company has enough for another three years or so at current cash burn rates, but acquisitions and increased advertising could eat through this fairly quickly. At 20 cents per share Yellow Brick Road isn't expensive, but it could take a couple of years for the company to really gain traction.

The post Why the Yellow Brick Road Holdings Ltd share price is falling today appeared first on The Motley Fool Australia.

The company's small size alone will usually mean that any meaningful success will lead to rapid growth in its share price. Here are five small companies I actually bought with $5,000:

Lifehealthcare Group Ltd (ASX: LHC) is a junior medical device seller that has been on a rollercoaster ride in the past two years after a successful acquisition followed by a sub-par annual report. The company uses skilled salespeople to sell medical devices from manufacturers to surgeons and captures a percentage of the margins for itself. Vulnerable to a weaker Australian dollar, my $500 investment hasn't played out as expected, but I also think the business was likely oversold by the market.

Nearmap Ltd (ASX: NEA) is an aerial imaging company with a profitable Australian business and a slowly expanding US footprint. New technology will allow the company to capture greater swathes of the US at a lower cost, and Nearmap can now offer 3-d images to customers. Nearmap has a good cash balance, although spending in the US has been heavy and investors will want to watch this bears fruit. I accidentally placed two identical orders in the market when I topped Nearmap up a while ago, and it takes up a little more of my portfolio than it should at over $2,000.

Yellow Brick Road Holdings Ltd (ASX: YBR) is a minuscule home loan financier and wealth manager with an estimated 4% of the market. Its opportunity comes from taking market share away from the major players – and there's plenty to go around. Growing via acquisition as well as targeted advertising and the lowest lending rates around, Yellow Brick Road nevertheless has to spend heavily up front in order to capture mortgage revenues (which pay back over many years). Shares have been sold down heavily thanks to investor fears about the Australian mortgage market, but I believe the market's concern is overdone. I've bought in twice now, for a total of $1,000.

Admedus Ltd (ASX: AHZ) sells a variety of products used in heart repair operations. Although I was initially optimistic about the success of its treatment and its growing sales, the company has failed to turn heavy spending into corresponding sales success. A recent contract win has management confident they can become profitable in financial year 2018, yet I believe investors should remain cautious. I continue to hold, but my $500 of shares is now worth $230.

Last but not least, A2 Milk Company Ltd (Australia) (ASX: A2M) caught my eye when I realised the bulk of its sales success to date had come from its Australian operations – and it was just launching in the US, UK, and China. If the company's milk really catches on with consumers and leads to improved digestion, I suspect there'll be more success to come – plus its baby formula is booming in China. So far, A2 can charge a premium for its products and if it really leads to scientifically-validated proof of better digestion, I expect the company could have an edge over the competition.

The post 5 small-cap shares I actually bought with $5,000 appeared first on The Motley Fool Australia.

Currently out of favour with the market, none of these businesses are suited for investors that haven't got the ability to grin and bear it until sentiment improves – but for those that can, there looks to be some great value on offer here.

FlexiGroup Limited – trades on a Price to Earnings (P/E) ratio of ~12, yields 9.3% fully franked

Like Thorn Group below, FlexiGroup shares have been hit hard by market bearishness about the consumer leasing and credit segments. Additionally, FlexiGroup's earnings this year will be impacted by write-downs and closure of non-core businesses that deliver lower returns than its core segments. However, cash profits remain unaffected (and actually grew), which will comfortably cover the 9.3% dividend.

With the dividend payout costing only around half the company's cash earnings, FlexiGroup appears in a solid financial position and could prove a bargain even if its business does little more than stagnate.

Thorn Group Ltd – trades on a P/E of 10, yields 9.2% fully franked

Thorn Group's profits were also hit recently by write-downs and the closure of underperforming segments, although again its cash earnings remained strong and covered the company's monster dividend. Unlike FlexiGroup, Thorn carries the additional baggage of an investigation from the Australian Securities and Investment Commission (ASIC) and regulatory uncertainty about the fees it can charge customers.

The outcome is uncertain at this stage, but with a sustainable business that delivers a valuable service to its target segment, Thorn could be good value today.

Yellow Brick Road Holdings – unprofitable, no dividends

Yellow Brick Road is a home loans and investment manager currently focussed on growing scale in the Australian market and taking market share from the big banks. Run by Mark Bouris, Yellow Brick Road now controls an estimated 4.3% of the mortgage market – up from 3.3% a year ago – and scale continues to grow through acquisitions and clever marketing.

The company boasts a number of products that have been rated best-in-class and also has one of Australia's lowest home loan rates. A higher risk investment and as yet unprofitable, Yellow Brick Road shares currently look like good value for the patient, risk-tolerant investor.

The post 3 beaten-up bargains for investors with a cast-iron stomach appeared first on The Motley Fool Australia.

At the time of writing, the share price was still up 4% at $2.08, after the company responded to an ASX query that it had no explanation for why the share price had jumped so much.

A dividend bonanza?

Mortgage Choice is likely to report its 2016 full year results (FY16) in mid-August, and analysts expect the company to report earnings per share of around 16.25 cents in FY16 and 17.35 cents in FY17.

After reporting a 15.5 cents fully franked dividend in 2015, a slight increase in the dividend is possible this year. That would place Mortgage Choice on a prospective dividend yield of around 7.7% – and near 11% when franking credits are included.

Shares are also trading on a relatively undemanding prospective P/E ratio of 12.6x for FY16. A bargain price, combined with a ripper dividend is more than likely the reason for the share price rise over the past two weeks.

It's not the housing sector

Interestingly, competitors, Australian Financial Group Ltd (ASX: AFG) and Yellow Brick Road Holdings Ltd (ASX: YBR) have seen their share prices fall 3.9% and 11.6% over the same period, suggesting it's not an industry-wide phenomenon.

Source: Yahoo Finance

All stocks offering mortgage broking could see their share prices rise if there was positive news about credit growth or the property market.

However, Mortgage Choice did state in February that it has seen an 'incredibly strong start to the 2016 calendar year', which bodes well for a record result when the company reports in August 2016.

Foolish takeaway

With both its mortgage broking and financial planning businesses headed for profit next year, now could be the perfect time to add Mortgage Choice to your watchlist – despite the recent strong gains in the share price.

The post Is Mortgage Choice Limited a buy at this share price? appeared first on The Motley Fool Australia.

The following are three shares have all taken heavy hits to their share price this year, yet I believe could offer value to shareholders.

Here's why:

Lifehealthcare Group Ltd (ASX: LHC) – market cap of $56 million, down 61% for the year

Lifehealthcare shares have been smashed in the aftermath of a dismal interim report and investor fears over the pricing of prosthetics, which are reportedly very high. Prosthetics account for a significant amount of Lifehealthcare's revenue, although management has stated that media reports have overestimated price variations. At today's prices, much of the impact of both poorer operating performance and a hit to prosthetic sales (which may not even materialise) appears to be priced in, and with Lifehealthcare continuing to diversify its product range and revenue sources, I believe the company is decent value today.

I am strongly considering buying more Lifehealthcare shares at today's prices.

Yellow Brick Road Holdings Ltd (ASX: YBR) – market cap of $79 million, down 51% for the year

Yellow Brick Road ("YBR") shares plummeted over the past year as investor fears of a slowdown in mortgage lending as well as cash flow concerns became apparent. YBR indicated that its strategy is to focus on growing market share over the long term, rather than short-term profitability. This is likely bad news for the share price – especially with cash dwindling – although good news for investors with patience to look through near term falls. The recent purchase of online investment company brightday will likely prove an increasingly important avenue for customer engagement over time. With new products in the works and rapidly growing revenues and market penetration, Yellow Brick Road appears solid value at today's prices.

I recently bought more shares at $0.19 and am not interested in buying any more, however I would be comfortable buying in to the company at today's prices.

Yowie Group Ltd (ASX: YOW) – market cap of $102 million, down 13% for the year

Although Yowie shares are down just 13%, they're significantly cheaper than prices of $1 or more which have prevailed for most of the last year. The recent falls came on the back of litigation against the company as well as a relocation of manufacturing operations to a new facility. Yowie sales have been growing rapidly thanks to a number of recent retailer signings, and with management heavily incentivised to sign more accounts, this could be set to grow further. Yowie also has a catalyst for re-rating thanks to its contract to produce the Angry Birds chocolate figures, which will be released to coincide with the eponymous movie this month.

With demand growing rapidly, Yowie appears to be decent value today even if the Angry Birds venture is a flop. I recently topped up at 70 cents, and am considering buying more under 60 cents.

The post Are these 3 beaten-up small caps worth a closer look? appeared first on The Motley Fool Australia.

Sean O'Neill: Yellow Brick Road Holdings Ltd (ASX: YBR)

Mortgage broker Yellow Brick Road ("YBR") has taken a big hit from recent housing market wobbles – down 54% for the year. However, after several years building a brand and a network, YBR is well positioned to claim market share and has several new products as well as a big push into wealth management in the works.

YBR also recently acquired an online investment company to broaden its reach and complement its expanding store network. The company is in a good place, yet shares are the lowest they've been in roughly five years. YBR looks like great value today, and I topped up in February.

Motley Fool contributor Sean O'Neill owns shares in Yellow Brick Road Holdings.

Ryan Newman – XERO FPO NZX (ASX: XRO)

Xero is a provider of accounting software via its Software-as-a-Service (SaaS) platform, and it's taking the world by storm. It seems that the market is taking a short-term focus on the business. The company is not yet profitable, although this is mostly due to its heavy focus on marketing and development of its products. It's rapidly attracting new customers which will provide the business with a solid and reliable source of income for years.

An investment in Xero today is not without risk, but if it can continue to expand its brand around the world, the long-term rewards could be significant.

Ryan Newman owns shares in Xero. The Motley Fool Australia owns shares in Xero.

Tim McArthur: IOOF Holdings Limited (ASX: IFL)

IOOF is a diversified wealth management group which reported 18% growth in underlying profit for the half year ending December. With the stock down around 10% since the beginning of calendar year 2016, value appears to be emerging.

The strong growth in interim earnings can be expected to continue through to the full year result, which suggests IOOF will report significantly higher results this year compared to the prior. With a trailing fully franked dividend yield of 6.1% and an undemanding price-to-earnings ratio, the investment case for IOOF is appealing.

Tim McArthur does not own any shares in IOOF Holdings Ltd.

Matt Bugden: Sirtex Medical Limited (ASX: SRX)

The best time to buy a promising growth stock is on a pullback. With this in mind, now looks like a good opportunity to invest in Sirtex Medical – down around 30% this year.

Sirtex provides targeted radiation treatment for liver cancer. Market penetration at a mere 2% suggests massive further growth potential, with positive results from clinical trials and growing support in the medical community. Sirtex is progressing towards entry into China and Japan, with potential for its technology to be applied to treating other cancers.

Motley Fool contributor Matt Bugden has no financial interest in Sirtex Medical.

James Mickleboro: Caltex Australia Limited (ASX: CTX)

The share price of Caltex is down over 10% in 2016 and finds itself priced at just under 15 times estimated FY2016 earnings. The company is in a fortunate position where low oil prices mean the fuel retailer has been able to operate with record high gross retail margins that are easily absorbed by consumers.

I expect this will allow the company to produce bumper earnings this year which make the shares appear to be a bargain right now. An estimated fully-franked dividend of 3.7% yield makes it more appealing in my opinion.

Motley Fool contributor James Mickleboro has no financial interest in Caltex Australia Limited.

Christopher Georges:  Sirtex Medical Limited (ASX: SRX)

‪Shares of Sirtex were sold down heavily during the month of March as investors became increasingly concerned about the impact of the rising Australian dollar, slowing growth in unit dose sales and another departure of a senior manager – this time in the critical Americas market. Despite these issues, Sirtex remains one of the fastest-growing companies on the ASX and the recent sell-off appears to be overdone. Analysts are forecasting FY16 earnings per share of 101.5 cents and this sees the shares now trading on a price to earnings ratio of less than 28.

Motley Fool contributor Christopher Georges owns shares in Sirtex Medical.

Rachit Dudhwala: Sydney Airport Holdings Ltd (ASX: SYD)

Sydney Airport owns and operates Sydney's Kingsford Smith International Airport and is in pole position to negotiate the terms to construct and operate Sydney's second proposed airport at Badgery's Creek in Western Sydney. This makes Sydney Airport best placed to capitalise on increased passenger numbers to Australia's largest capital city. Its latest airport traffic performance released in February reinforces this growing trend, with total passenger movements increasing 10% compared to the same time last year.

Accordingly, these tailwinds should allow the group to organically grow earnings over the long term, making it a top stock to own.

Motley Fool contributor Rachit Dudhwala does not own shares in Sydney Airport Holdings Ltd.

Regan Pearson: Emerchants Ltd (ASX: EML)

Don't be fooled. Growth star Emerchants is much more than just a gift card company. Emerchants solves the costly problems of cash handling and delayed money transfer for lending, retail and gaming companies.

The company collects revenue of around 1.2%-1.5% of loaded card value (depending on the type of card), while processing the payments itself and avoiding costly transaction fees from third party companies. The system is easily scalable, allowing quick, efficient growth. Shares look pricey after the recent jump, but reflect the strong prospects, high gross margins, and zero debt position.

Motley Fool contributor Regan Pearson does not own shares in Emerchants. 

Mike King: TPG Telecom Ltd (ASX: TPM)

TPG Telecom is one of Australia's largest telecommunications companies, providing mainly broadband services to Australian households. The company also has a growing number of mobile subscribers, and has entered into a relationship with Vodafone, providing the mobile operator with dark fibre connections to more than 3,000 mobile cell sites. TPG is also rolling out its own fibre connections to a number of apartment blocks, in competition with the NBN.

The current P/E ratio of ~30x earnings can be misleading, especially with earnings growing at an average annual rate of 23% for the past decade, and no signs of a slowdown anytime soon.

Motley Fool writer/analyst Mike King owns shares in TPG Telecom.

Tom Richardson: Mesoblast limited (ASX: MSB)

The company is in the process of developing a range of therapies for common diseases and medical complaints, the science being to develop stem cells that regenerate ageing or diseased body parts such as cartilage, bone, and muscle. Unsurprisingly this means it has whopping addressable markets to potentially sell its products into if they receive regulatory approval.

However, this company is speculative and carries significant downside risk if it cannot deliver on its potential, on the other hand if it succeeds shares are likely to zoom far above today's prices around $2.50.

Motley Fool writer/analyst Tom Richardson owns shares in Mesoblast. 

The post Top stock picks for April appeared first on The Motley Fool Australia.

Although each of the following three companies face headwinds, arguably this is priced into the stock already and continued growth could lead to big returns for shareholders of:

Lifehealthcare Group Ltd (ASX: LHC) – last traded at $1.47, down 50% for the year

Lifehealthcare Group shares were pummelled after a sub-standard profit report recently, as well as investor fears that a potential review into prosthetics pricing could hurt the group's profits and margins. As I wrote in this article, Lifehealthcare management stated that their business is probably not at risk from a pricing review. Management also hinted at a stronger second half after lifting their working capital requirements. There is a risk that Lifehealthcare continues to underperform in the second half, but the group operates in a vital industry and a significant amount of underperformance is already priced in to the company.

I am looking to buy more shares when Foolish trading rules and funds permit.

Yowie Group Ltd (ASX: YOW) – last traded at $0.70, up 22% for the year

Although up 22% for the year, Yowie shares have declined 40% in the past six months on a variety of market worries, including a change of manufacturer. The business recently reported positive operating cash flow, which is the first step towards achieving overall profitability and sustainable ongoing operations. However, this is likely to reverse in coming months as production ramps up at the Madelaine Chocolate facility. I expect several months of mediocrity from Yowie as the company transitions, but new accounts and management incentives should drive sales higher over the next twelve months. A key consideration is making sure that the number of shares on issue stay under control and that management doesn't become too short-term focussed.

I recently topped up Yowie at $0.78, and am not buying more unless it heads under $0.70.

Yellow Brick Road Holdings Ltd (ASX: YBR) – last traded at $0.29, down 52% for the year

Yellow Brick Road ("YBR") disappointed investors recently when it announced that it was focussed on prioritising growth over achieving positive cash flow, even though this should lead to a more substantial company in the medium term. YBR is focussed on taking market share in mortgages, financial advice, and wealth management. It has a small share of the market that could make for a profitable investment. I believe YBR is making good progress on this front with its expanding branch network as well as a stable of high-quality products. One downside is the risk of a housing/lending collapse, but without the ability to predict one that's an 'if-and-when' scenario.

I recently topped up Yellow Brick Road at $0.19, and have no interest in buying more shares unless they head back to that level.

The post 3 explosive small-caps that could be a bargain at today's prices appeared first on The Motley Fool Australia.

The share price of all four companies has taken a hit in the past 12 months as it increasingly looks like profits have peaked, while competition is squeezing profit margins.

On other fronts, some believe that a slowing economy will lead to higher levels of unemployment and consequently more bad debts, which are currently at decade-low levels. Weak house prices and higher interest rates for investors are also likely to hurt demand for loans, potentially reducing profits.

These are all real threats, but they are well covered in the media and it is possible to become well-researched enough to be comfortable with the risks. However, investors are also overlooking the propensity of financial technology, or 'fintech' businesses to disrupt the banks' cosy oligopoly.

Here are three of the biggest threats:

• Peer-to-peer (P2P) lending

Companies like Directmoney Ltd (ASX: DM1) accept deposits from investors, repackage them, and then loan them to consumers at lower rates. Theoretically, this can lead to receiving a substantially higher interest rate on your deposit, and paying a lower interest rate on your loan as a result of removing the middleman (the banks).

It has mixed effects in practice, although Directmoney is growing and a number of private peer lenders like ThinCats and SocietyOne are also entering the market. Some of these are part-owned by major banks.

• Automated financial advice

The banks (and others) have hurt consumer trust in recent years thanks to a number of financial advice scandals involving conflicts of interest. There is substantial opportunity for companies to reduce costs and personalise advice through the use of automation and customer data.

The big banks are likely to dominate this business too, but change brings opportunity for companies like AMP Limited (ASX: AMP) and IOOF Holdings Limited (ASX: IFL) to grow at their expense.

• Plain old product innovation

Simply put, you can no longer get the best deal on loans, deposits, wealth management services and superannuation from your local bank. Often investors pay too much to receive too little, and an enormous number of companies are nibbling away at the edges.

Yellow Brick Road Holdings Ltd (ASX: YBR) is one company that outperforms the banks in many categories (even though they fund most of its loans) and has had several of its products declared best-in-class by Morningstar.

There are many more threats to bank supremacy out there, including Apple Pay and a squazillion new payment and international currency transfer solutions, as well as new products from Mastercard and Visa. Even Carsales.Com Ltd (ASX: CAR) is getting in on the action – sort of – with its financing services on automotive vehicle sales.

With technology and the internet vastly expanding the reach of businesses, the opportunity for companies to encroach on competitors' territory is growing rapidly. One Macquarie analyst even estimated up to $27 billion of bank revenue was under threat from fintech start-ups.

Do you really need more bank shares?

The post Think it's time to buy bank shares? Think again appeared first on The Motley Fool Australia.

Resource stocks in particular are on the nose, although one defence contractor sank on a profit downgrade, and a health insurer lost some ground as investors worried about possible increased competition.

Here's what you need to know:

Austal Limited's (ASX: ASB) share price dropped 27.1% to $1.66 on a shock market update, with the company announcing that previously expected Earnings Before Interest and Tax (EBIT) margin improvements on its US Littoral Combat Ship (LCS) program would not materialise.

Today's announcement indicated that the current year's earnings from US shipyards are expected to be lower than in the 2015 financial year. EBIT margins would be between 4.5% and 6.5%, compared to 5.5% in 2015. I believe the sell-off is vastly overdone, but do not think the stock is yet in buying territory as it is a low-margin business with lumpy revenues and uncertain demand.

Yellow Brick Road Holdings Ltd (ASX: YBR) shares lost 10.5% to $0.255 on no news, although with property prices and auction clearance rates declining in Sydney and Melbourne, shareholders are likely becoming nervous about Yellow Brick Road's mortgage portfolio and future income.

At today's prices I believe that Yellow Brick Road is an attractive investment option as its one-stop-shop for everything finance-related is likely to resonate with consumers in future years. While home loans are a significant source of income, the company also offers a host of wealth management and financial advice services that will only grow in demand in the future.

WHITEHAVEN COAL LIMITED (ASX:WHC) shares plunged 9% to $0.747 – down 89% in past five years – as investors worry just how far the fallout from Anglo-American is likely to spread. The massive US-based coal miner is reportedly reducing its asset base and sacking more than 85,000 workers, or 3/4s of its workforce.

Weak coal prices look likely to stick around for the time being, and it's no surprise investors jumped ship on Whitehaven. Despite the falls, I do not believe it to be a buying opportunity.

NIB Holdings Ltd (ASX: NHF) shares slipped 5.3% to $3.58 as Suncorp Group Ltd (ASX: SUN) is reportedly contemplating an entrance into the health insurance market. NIB already competes with Medibank Private Ltd (ASX: MPL) and the privately-owned business Bupa, and another competitor can only lead to additional price pressures for NIB.

With NIB looking like the most pricey of existing health insurers, I suspect there could be a little further downside to come in the near term as investors weigh up the competition.

The post Here's why these 4 shares crashed today appeared first on The Motley Fool Australia.

An estimated 40% of mortgage holders say they haven't switched lenders in the past decade, despite the availability of cheaper rates elsewhere.

Comparison service Finder estimates that these 1.17 million households could save more than $8,000 each over the term of a 30-year loan by switching to variable home loan rate of just 0.1% below the current average 5.2%. That's based on the average mortgage size of $379,400.

There are more than 150 home loans with rates under 5.2%, including Yellow Brick Road Holdings Ltd (ASX: YBR) rate smasher home loan at just 3.91%, which would save borrowers $291 a month in interest and $104,992 over the life of the loan – as the image below depicts.

The average variable rate of the big four banks Australia and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) is now 5.61%.

If a borrower switched from an average loan with one of the big four banks to the Yellow Brick Road mortgage, they'd save $139,956 over 30 years. Millions of big four bank mortgage customers saw their interest rates rise in the past two weeks after the banks announced rate hikes last month.

However, many customers will likely have negotiated rates below that. My new mortgage rate with NAB is 4.75%, but I'm considering switching, given the cheaper rates available, and monthly savings of around $220 on a 20-year loan.

Despite the savings on offer, Finder's survey of more than 1,300 Australians found that only 6% were considering switching lenders. Among those who haven't switched, 24% admitted they couldn't be bothered with the paperwork and 13% said they thought it would cost too much.

I can understand many people thinking switching is too hard. Banks certainly don't make it easy to do, and the process is by no means quick. From application through to having the loan switched can take weeks. And it's not just the loan application process that's a pain. It could also mean switching savings accounts and amending regular direct debits.

The problem is compounded because the savings aren't that tangible to most people – unless they go through the process. I also suspect the additional issue is that Australians put a lot of faith in the big four banks as safe, and view other lenders as 'higher risk'.

Foolish takeaway

If the process was easier and quicker, we'd definitely see more people switching away from the big four banks. But as the exercise motto applies here, 'no pain, no gain'.

The post Big four banks to reap an extra $9.9 billion appeared first on The Motley Fool Australia.

Moore's law is famous in the computing and electronics industries and, to this day, has more or less held true.

While the "law" is a projection and not a physical or natural law, the rate of technological change today has undoubtedly altered the business environment. Consider the speed with which Airbnb and Uber changed the accommodation and taxi industries and spread their model over the world.

Additionally, the global economy continues to connect on a deeper scale. Never has it been so easy for an international competitor, such as Aldi or Costco, to start business operations in an overseas destination like Australia. The same applies to the Australian digital businesses REA Group Limited (ASX: REA) and SEEK Limited (ASX: SEK) which are expanding internationally with the aim to upset the status quo.

Which S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) blue chips are highly-exposed to the modern business environment?

The Big 4 

The Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd. (ASX: NAB) face increasing competition across many digital fronts, which will ultimately lead to reduced market share and squeezed margins.

Ozforex Group Ltd (ASX: OFX) has slashed the cost for consumers wanting to transfer money overseas or pay bills in other currencies. Also, innovative upstarts such as Yellow Brick Road Holdings Ltd (ASX: YBR) are winning customers by offering lower rates on home loans and providing financial planning and fund management services suitable for every budget.

The supermarkets

The high-profit margins our Australian supermarket duopoly of Wesfarmers Ltd (ASX: WES) and Woolworths Limited (ASX: WOW) enjoyed in the past are being challenged by foreign entrants such as Costco and Aldi.

Increasing competition in this commodity market means the past performance of our supermarket giants will unlikely resemble that of their future.

Telecoms

Telstra Corporation Ltd (ASX: TLS) was our national telecom carrier which dominated the market due to its historically superior network. But, to quote Bob Dylan's famous song, 'The times they are a-changin'.

Companies such as TPG Telecom Ltd (ASX: TPM) and Vocus Communications Limited (ASX: VOC) are young, innovative businesses that are expanding in the market with competitive, low-cost services covering the consumer and corporate markets.

The aggressive competitive landscape is already affecting profit margins within the industry. Vocus reported in its FY15 results that it suffered a 40% decline in pricing power over the year, but revenue still increased 17% due to volume growth of 111% over the prior 18 months.

Foolish takeaway

Due to the change of the business landscape, aided by technology, the ASX200 blue chip companies of yesterday are facing an uncertain future.

Whilst I am not suggesting that these high-quality businesses are likely to collapse, the competitive advantages they have enjoyed for so long are being eroded away, along with their future growth, profit margins and subsequently investor returns.

It is important to consider the rapid change in today's business landscape when trying to find the ASX blue chips of tomorrow.

The post Beware the dangers of losing money in the ASX "blue chips" appeared first on The Motley Fool Australia.

Ironically however, many investors steer a wide path around companies that are bumping along at low prices, perceiving them to be more risky. Markets are notorious for overreacting, and the patient investor can occasionally pick up a bargain by being greedy when others are fearful.

Here are three stocks that have been beaten up by the market recently, and my take on whether they offer value at today's prices:

Capitol Health Ltd (ASX: CAJ) – last traded at $0.325, down 52% for the year

Shares in Capitol Health have taken a pummelling over fears that a government review of the healthcare system is likely to impact imaging volumes in its clinics. The fall was compounded by a very lofty valuation of up to 48 times earnings earlier this year.

Investors are also sceptical of Capitol's memorandum of understanding with Enlitic (which could require a USD$10 million investment), wondering whether the investment in 'data-driven' healthcare will contribute to earnings.

Either way, Capitol is a well-positioned player in a growing business, notwithstanding investors selling on short-term fears. I believe the company has potential and I would consider buying shares under 30 cents, after the impacts of the government review become apparent.

Yellow Brick Road Holdings Ltd (ASX: CAJ) Last traded at $0.355, down 39% for the year

Yellow Brick Road has seen a heavy sell-down in recent times as investors have twigged to the dangers of increased regulation and interest rates (and possibly falling house prices) in our mortgage market.

Despite its exposure to the mortgage market, Yellow Brick Road is also working to offer a full range of financial services to customers including insurance, accounting, wealth management and lending services. Management indicates that its recently announced securitisation program will lead to higher profit margins as well as freeing the company to adjust its rates further.

The company is now profitable on an underlying basis (excluding acquisitions, integration and abnormal costs) and with a number of products declared 'best in class' by independent experts I believe Yellow Brick Road will deliver further growth in the future. The company looks to represent decent, albeit moderately risky value at today's prices.

BHP Billiton Limited (ASX: BHP) – last traded at $19.80, down 39% for the year

Just when you thought your BHP shares couldn't fall any further, comes the environmental disaster at the company's joint-venture Samarco mine in Brazil. Shares lost another 10% in recent days, wiping a further $6 billion off the value of the company.

I once wrote that I was hoping to buy BHP shares below $30, but that was pre-Samarco, pre-iron ore price collapse, and pre-borrowing to pay dividends. With some of the iron ore weakness yet to make its way through to profits and significant uncertainty regarding the costs of Samarco and the value to shareholders of a 'progressive dividend policy', I have trouble seeing a bargain in BHP. Investors looking to pick up shares might be better served to watch and wait a while longer.

The post Is it time to dive into these 3 market rejects? appeared first on The Motley Fool Australia.

The post An Interview with Mark Bouris of Yellow Brick Road Holdings Ltd appeared first on The Motley Fool Australia.

Typically, when the economy slows, many enterprising investors look to small-cap stocks for growth because some may be less prone to the direction of the broader economy.

"There's no free kicks from the economy and in many cases the large cap companies don't have the capability or the ingenuity to build new technologies," Paul Hannan, BT's head of smaller companies, was quoted as saying during the Australian Microcap Investment Conference this week.

Mr Hannan said BT favours companies with little-to-no debt and solid track records of profit growth.

One of BT's success stories is retailer RCG Corporation Limited (ASX: RCG). RCG owns The Athlete's Foot and has exclusive distribution agreements for many leading apparel brands throughout Australia and New Zealand.

Since buying RCG shares in 2008, Mr Hannan said the business had grown well. "In seven years this business has continued to go from strength to strength, it is now a $600 million market cap business."

Other stocks in the BT portfolio include printed circuit board technology business, Altium Limited (ASX: ALU), and the growing diversified wealth management company run by Mark Bouris, Yellow Brick Road Holdings Ltd (ASX: YBR).

Foolish takeaway

In my opinion, small-cap stocks are a great way to get exposure to industries that are otherwise unattainable from the blue-chip stocks.

The post BT Investment Management Ltd owns these growth stocks: Do you? appeared first on The Motley Fool Australia.