As Australia transitions into a new financial year, savvy investors will be assessing their stock portfolio’s performance and evaluating what stocks to add to drive gains in the fiscal year ahead.
This fiscal year is sure to be an exciting one for the stock market, especially as investors realise there are arguably more returns to be made in stocks than having their money sit in a low-interest rate bank account.
From booming tech, to entertainment, to financial powerhouses, there are plenty of opportunities for budding investors looking to reap the rewards of a strategically curated portfolio in what has been one of the most interesting years for the market.
So where should you start?
Here are some stocks that could provide value over the next financial year.
The entertainment giant has suffered tough times since the pandemic began worldwide. Global lockdowns have seen the company's parks closed worldwide and beneficiaries such as ESPN have struggled as live sport continues to be halted.
Recently, we saw some positive news from the Transport Security Administration (TSA) in the US, reporting 300,000 passengers through the airport gates. This is a positive sign for Disney especially as their parks are set to reopen in early July. Disney has seen a rebound of more than 40 per cent in its share price since its low in March, but still has more room to grow to its record high of $150.
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Over the pandemic, Disney has seen its streaming service, Disney+, receive more than 50 million paid subscribers, which has helped the companies revenue grow in Q1 of this year. Disney also decided to cut its dividend for the month of July which should help save the company around $1.6 Billion.
With its streaming service propping up revenues and a dividend cut helping the balance sheet, Disney will look to be in for a rebound when restrictions are lifted. They can welcome back theme parks, movie productions and also advertising revenue from its TV arm. Disney will have to be cautious that a second wave of the virus doesn’t appear as this could a big part of their revenues shut down.
The industrial colossus GE, is a household name to many and has had a tough start to 2020, down more than 30 per cent since the start of the year. It’s not hard to see why the Industrials sector has underperformed during the coronavirus pandemic. The combination of supply chain disruptions, factory closures, and lower customer demand has impacted the sector significantly.
As we see many countries around the world beginning to ease lockdown restrictions, the industrial sector is one that would be classified as essential, therefore allowing employees to go back to work quicker than other sectors.
The company has exposure to a number of different areas of the market, Aviation, Healthcare, Renewable Energy and Power. Their biggest cash flow comes from Aviation with healthcare following just behind. GE have recently produced an engine for South Korea's fighter jet program, which is a huge step for their Aviation business. The company is hoping to land more business from government defence programs in 2020 and 2021.
With this, GE not only offers exposure to the industrial sector which could be in line for a sharp rebound but also the aviation industry, where we have seen a rally in recent weeks. Away from the fundamentals, the technical analysis of GE looks strong and shows a rebound of past $10 in the not too distant future. However, investors will have to be wary of GE’s limited cash flow after a recent major sell-off from their healthcare business.
The social network firm is one of the biggest companies in the world by market capitalization. Facebook has recently just reached record highs as it rebounded more than 59 per cent since the coronavirus. Their recent recovery can be put down to increased revenues from online advertisements as companies move away from TV advertising, which grew 17 per cent in Q1 and the addition of its shop offering.
Facebook Shops is a service that was launched in May by the company, which led to a spike in the social networking site’s share price after the announcement. The launch, which will let individuals become sellers and set up digital stores on Facebook and Instagram, is very similar to services that Amazon offers. They have also teamed up with Shopify to allow users to integrate their brands to the social network.
Instagram is a social media giant in today’s world, which has more than 1 billion monthly active accounts. The recent pandemic has highlighted more than ever the need for businesses owners to be flexible, most prominently in the digital space. As we see consumers increasingly shopping digitally, we can expect to see more businesses setting up via Facebook to not only sell but to promote their products.
The company has also branched out into crypto assets with the launch of the Libra whitepaper. This again will provide another revenue stream for Facebook and shows they are keeping up with the latest technological developments and innovations.
Facebook has a very diverse base of apps and generates a strong growth value through advertising revenues. This new offering will enable more users to shop through Facebook, in turn, we should expect to see an increase in advertising revenues moving forward.
As we move into a more digital age, the largest payment network in the world has benefited from greater use in its products and services since COVID-19. Visa’s recently reported strong revenues of $5.85 Billion, beating analyst expectations. As we continue to see an increase in e-commerce, credit card usage and a world that’s moving away from physical cash completely, Visa is set to benefit from this.
Visa has a great dividend, which will be attractive for investors as well as the long term growth. They recently announced they plan to continue providing a dividend to investors at a time when others have halted payouts because of COVID-19. Visa currently pays an impressive 30 cents per share for its dividend. On top of this, the board recently authorised a share repurchase program to buy back a huge $9.5 billion of stock following on from the repurchase in 2019. Visa has repurchased more than 20 per cent of its stock in the last 5 years.
With a steady dividend, strong revenues and with the company only set to benefit from continued online growth, Visa looks like a strong stock to hold moving forward. The stocks record high is $210 which was set in February, this could be a key resistance level for investors to look towards as the stock remains bullish. The company will also have to ensure it fights off cryptoassets as a competitor to digital payments. Coca-Cola Amatil recently announced a deal with Centrapay, which will provide Australians with the ability to purchase Coca-Cola Cans from its vending machines using Bitcoin.
The computing software company has had great growth over the last five years, seeing its share price rise more than 450 per cent and now sitting at record highs of $452 (price accurate at time of writing 7th July 2020). Adobe was one of the leaders in creating cloud software early in 2012, but have faced tough competition since then from the likes of Dropbox and Salesforce.
They provide software through a subscription model, which is a great way to increase earnings over a period of time. Not only has Adobe’s share price grown 450 per cent in the last 5 years, but their earnings have grown by 63 per cent annually over that same time frame.
Adobe provides software to big industries that rely on their products such as filmmakers, photographers, designers and publishers. With the development of their photoshop technology, the app is a staple feature in any serious photographer's computer. This has therefore allowed Adobe to come through the years with flying colours.
I’m sure we have all used a PDF in our lifetime and Adobe had more than 250 million PDF files used in the past year. This shows a continued popularity of the company’s products among consumers but, they will need to continue to develop their services to stay up to date with the latest technology as competitors such as Apple and Microsoft continue to do so, increasing their market share.
With more peaks and troughs driven by a second-wave of COVID-19, more Aussies are recognising the value in buying high-potential stocks at record lows.
It's important to note that investing inherently carries a level of risk, so during periods of extreme market volatility, it may be wise for Aussie investors to diversify their investments, only risk money you can afford to lose and do your homework when stock picking. As any experienced investor knows, it’s crucial to pay close attention to news cycles which are significantly impacting market performance and confidence.
By Josh Gilbert, analyst at global multi-asset investing platform eToro.
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