Austal Ltd (ASX: ASB) shares have experienced serious volatility so far in 2026. 

After doubling in 2025, Austal’s share price is now down more than 35% since it hit a 52-week high in January. 

It seems investors have had one foot in and one foot out amidst the broader defence tailwinds.

Austal shares snapshot

Austal is an Australian-based shipbuilder that specialises in the design, construction, and support of defence and commercial vessels globally.

Austal’s products include naval vessels, defence surface warfare combatants, high-speed support vessels, patrol boats for law enforcement, offshore vessels, as well as passenger and vehicle ferries.

In December last year, Austal shares surged on news of key contract wins for the company. 

In mid-January, the share price hit a record high of $8.82. 

However since then, it has been on a steady decline. This could be partly due to profit taking, as well as negative sentiment after the company released a statement noting it had overstated its potential earnings for the year.

It closed yesterday at $5.61 after a 10.95% intra-day fall.

Why did it close 11% lower yesterday?

Yesterday, Austal released its H1FY2026 half-year report. 

This included: 

• Revenue of $1.1 billion (FY2025 H1: $825.7 million), up 34.4% on positive contribution from both shipbuilding and support
• EBIT of $60.3 million (FY2025 H1: $42.7 million), up 41.3% with improved margins of 5.4% (FY2025 H1: 5.2%)
• Net Profit After Tax of $30.5 million (FY2025 H1 $25.1 million), up 21.4%. 

It seems investors were not thrilled with these results, as Austal shares fell 10.95% on Monday. 

With its share price now significantly lower than a month ago, is now the time to buy the dip?

A new report from Bell Potter following the financial results indicates investors should hold for the time being. 

Here’s what the broker had to say. 

Price target downgraded for Austal shares

In yesterday’s report, Bell Potter said Austal reported revenue of $1,109 million, representing a 34% year-on-year increase. This growth was supported by a 26% rise in revenue in the USA and a strong 60% increase in Australasia.

EBIT increased by 41% year-on-year to $60.3 million, driven primarily by the award of the Strategic Shipbuilding Agreement (SSA) programs. However, this was partially offset by ongoing onerous contracts that continued to impact the USA segment

Based on this guidance, the broker maintained its hold recommendation, and lowered its price target to $6.30 (previously $6.60). 

The broker said Austal trades in line with global peers on an EV/EBIT basis for FY26. 

Based on yesterday’s closing price of $5.61, the revised price target indicates an upside of 12.3%. 

Although ASB exhibits superior revenue growth, operational risks are relatively elevated as ASB transitions from legacy to new shipbuilding contracts in the USA.

The post Should you scoop up Austal shares after yesterday’s 11% crash? appeared first on The Motley Fool Australia.

More reading

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• Austal shares take off on new Aussie contract win
• Are Austal shares a buy, hold or sell after soaring 20% on Monday?

Motley Fool contributor Aaron Bell has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

It is fair to say the technology sector has been under significant pressure this year.

Concerns around artificial intelligence (AI) disruption, shifting software economics, and stretched valuations have created sharp swings across many tech-heavy portfolios. While some investors are happy to ride it out, others may prefer exposure to sectors less exposed to AI headlines.

Here are three ASX exchange traded funds (ETFs) that steer clear of heavy technology concentration and offer diversification into different parts of the global economy.

iShares Global Consumer Staples ETF (ASX: IXI)

Consumer staples are about as far from speculative tech as you can get.

The iShares Global Consumer Staples ETF invests in global household brands that sell everyday essentials. Its holdings include companies such as Procter & Gamble (NYSE: PG), Coca-Cola (NYSE: KO), and Walmart (NYSE: WMT).

These businesses generate revenue from products people buy regardless of market sentiment. Demand for groceries, beverages, cleaning products, and personal care items tends to remain steady through economic cycles.

In volatile markets, defensive earnings streams can provide stability. The iShares Global Consumer Staples ETF offers exposure to global brands with pricing power and resilient cash flows, without the heavy technology weighting seen in many broad market indices.

Betashares Global Defence ETF (ASX: ARMR)

Geopolitical tensions and rising defence budgets have pushed military spending higher across many developed nations.

The Betashares Global Defence ETF provides investors with exposure to global defence and aerospace companies such as Lockheed Martin (NYSE: LMT), Northrop Grumman (NYSE: NOC), and BAE Systems (LSE: BA).

These companies generate revenue from long-term government contracts and defence programs. Their earnings are influenced more by national security priorities than by developments in Silicon Valley.

While defence stocks can still experience volatility, their growth drivers are tied to structural government spending rather than consumer technology trends. This fund was recently recommended by analysts at Betashares.

Global X Battery Tech & Lithium ETF (ASX: ACDC)

The Global X Battery Tech & Lithium ETF focuses on stocks involved in lithium mining, battery production, and electric vehicle supply chains.

Holdings include Albemarle (NYSE: ALB), Tesla (NASDAQ: TSLA), and Contemporary Amperex Technology. The fund’s performance is driven primarily by demand for electric vehicles, energy storage systems, and battery materials.

Lithium prices have been strengthening again amid renewed demand, and the long-term electrification trend remains intact. This theme is more connected to energy transition and industrial demand than to software or AI disruption fears. This fund was recently recommended by the team at Global X.

The post 3 top ASX ETFs that avoid the tech wreck appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended BAE Systems and Lockheed Martin. The Motley Fool Australia has positions in and has recommended iShares International Equity ETFs – iShares Global Consumer Staples ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

With just a few days left in February, the ASX remains near record highs. But once again, those highs are being driven by a relatively narrow group of stocks.

Away from the banks and major miners, a number of quality names have been sold off heavily over the past year. In my view, some of that weakness looks overdone.

Here are five oversold ASX shares I would be looking at before the end of February.

Xero Ltd (ASX: XRO)

Xero has been caught up in the broader sell-off across global software stocks.

Concerns around valuation, artificial intelligence (AI) disruption, and slowing growth have weighed on sentiment. But when I look at the business itself, I still see a high-quality subscription model with sticky customers and strong recurring revenue.

Xero continues to expand internationally and improve margins. If earnings and subscriber growth continue, I think its share price could be due to a major re-rating.

Zip Co Ltd (ASX: ZIP)

Zip has had a volatile journey over the past few years.

After scaling aggressively during the buy now, pay later boom, the company has since tightened credit settings, exited weaker markets, and focused on profitability. The share price has reflected both extremes of sentiment.

To me, this now looks like a more disciplined business. If execution continues to improve and losses remain under control, I believe the market could reassess its long-term earnings potential.

Telix Pharmaceuticals Ltd (ASX: TLX)

Telix has delivered strong commercial growth, yet its share price has pulled back significantly from recent highs on US FDA product approval delays.

The company continues to expand its precision medicine franchise while investing heavily in its therapeutic pipeline. Revenue growth has been robust, and guidance for further growth in FY26 remains in place.

When a high-growth healthcare business with commercial traction trades below prior peaks, I start to pay attention. I think the recent weakness may offer an opportunity for patient investors.

Block Inc. (ASX: XYZ)

Block’s Australian-listed shares have also been sold off amid broader tech weakness.

Digital payments and fintech remain competitive and fast-evolving industries. But Block still has a strong ecosystem across payments, point-of-sale solutions, and consumer finance.

If growth stabilises and margins improve over time, the current share price could look overly pessimistic. For investors willing to accept some volatility, I see potential upside from here.

REA Group Ltd (ASX: REA)

REA has faced pressure due to softer property listings volumes, broader market caution, and AI disruption fears.

However, the company’s dominant position in Australian online property advertising remains intact. It has pricing power, strong brand recognition, and high-margin digital operations.

While short-term listing volumes can fluctuate, the long-term shift to digital property search is not reversing. If volumes recover even modestly, earnings could rebound more quickly than the market expects.

Foolish takeaway

Oversold does not automatically mean undervalued. Sometimes shares fall for good reasons.

But I think Xero, Zip, Telix, Block, and REA each represent cases where sentiment may have swung too far to the downside relative to long-term business quality.

The post 5 oversold ASX shares to buy before the end of February appeared first on The Motley Fool Australia.

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Motley Fool contributor Grace Alvino has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Block, Telix Pharmaceuticals, and Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool Australia has recommended Telix Pharmaceuticals. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

As earnings season continues, brokers are adjusting their outlooks on ASX shares based on results. 

Here are three fresh ratings from the team out of Morgans.

Brambles Ltd (ASX: BXB)

Brambles is the world’s largest supplier of reusable wooden pallets and crates used for storing and transporting goods. 

According to Morgans, the company’s 1H26 earnings were better than expected, driven by supply chain and productivity improvements. 

The broker also said management has adjusted FY26 revenue growth guidance to between 3-4% (vs 3-5% previously) with underlying EBIT growth guidance maintained at between 8-11%. 

Free cash flow (before dividends) is now expected to be between US$950-$1100m (vs between US$850-950m previously) due mainly to lower pallet purchases. 

Based on this guidance, Morgans adjusted FY26/27/28F underlying EBIT by +2%/+1%/+0%. 

Our target price rises to $27.00 (from $25.70) and we move our rating to ACCUMULATE (from HOLD). Following another solid result, we believe BXB is well positioned to deliver earnings growth through continued conversion of white-wood pallets to pooling and further margin improvement driven by ongoing operational efficiencies, including enhanced use of its digital and data capabilities.

From yesterday’s closing price, this target indicates an upside of roughly 10%. 

PWR Holdings Ltd (ASX: PWH)

PWR Holdings is a designer, manufacturer, and supplier of cooling solutions for motorsports and the performance automotive industry.

According to Morgans, the 1H26 result was above expectations, driven by strong growth in Motorsports (new Formula 1 regulations) and Aerospace & Defence (delivery of most of a US government contract).

Our target price increases to $11.15 (from $8.50) due to a roll-forward of our model to FY27 forecasts. We continue to view PWH as a high-quality business, supported by a strong balance sheet, an experienced management team, and access to large addressable markets that offer significant growth potential. With the disruption from relocating to the new Australian manufacturing facility now behind it, we believe PWH is well positioned to embark on its next phase of growth.

Morgans maintained its accumulate rating on these ASX shares. 

From yesterday’s closing price of $9.75, there is a potential upside of 14.36%. 

MoneyMe Ltd (ASX: MME)

MoneyMe is a digital consumer credit business. The company touts its technology and AI as offering financial solutions targeted at younger people.

MME’s 1H26 was broadly per expectations, achieving gross revenue of ~A$117m, on a gross loan book of ~A$1.75bn. Momentum seen in originations growth (+18% to A$536m) continues to augur well for 2H26, and we expect MME to maintain a balance between profitability and growth as it seeks to benefit from scale. 

Our price target remains unchanged at A$0.21 and we maintain our Speculative Buy recommendation.

From yesterday’s closing price of $0.115, Morgans sees an upside potential of 82.6% for these ASX shares. 

The post 3 ASX shares that look cheap according to Morgans appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Bell has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended PWR Holdings. The Motley Fool Australia has positions in and has recommended PWR Holdings. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Despite some headwinds, Ord Minnett has a positive view on ASX 300 companies Breville Group Ltd (ASX: BRG) and Electro Optic Systems Holdings Ltd (ASX: EOS). 

Here’s what the wealth and investment services firm had to say. 

Breville Group

This ASX 300 company has struggled since releasing half year results earlier this month. 

It is an Australian designer and distributor of small kitchen and home appliances to more than 70 countries.

According to Ord Minnett, Breville posted flat first-half FY26 earnings, which was a solid achievement in the face of significant US tariff headwinds. 

Having largely navigated its manufacturing transition, execution risks have diminished materially. 

Ord Minnett believes the company is well-positioned to return to double-digit earnings growth beginning in FY27.

In terms of outlook, the company expects a modest increase in earnings before interest and tax in FY26. Such guidance appears prudent to us given residual risk from the impact of tariffs and the transition to new manufacturing facilities. Overall, as transitional pressures subside, we forecast a return to double-digit earnings growth in FY27, and upgrade our recommendation to Accumulate from Hold.

Electro Optic Systems Holdings

Electro Optic Systems has been one of the hottest ASX 300 shares over the past year. 

It has benefited from global defence tailwinds and subsequently seen its share price rise 525% over the last 12 months. 

This included a big gain yesterday on the back of  FY25 results.

The ASX defence stock signed $424 million worth of contracts during FY25, compared to just $70 million in FY24.

The company engages in the development, manufacture, and sale of telescopes and dome enclosures, laser satellite tracking systems, and remote weapon systems.

The company recently faced a short-selling attack from US firm Grizzly Research, which EOS rejected as “misleading” and “manipulatory.” 

While Ord Minnett said EOS provided credible rebuttals to many of the claims, questions remain regarding its $120 million conditional Korean high-energy laser contract.

Ord Minnett notes that while EOS produced enough data and credible explanation to counter the Grizzly report, their response still leaves questions around the $120 million conditional Korean High Energy Laser Weapon (HELW) contract. 

Despite the recent upheaval, our investment thesis of increasing geopolitical tensions and defence expenditure on C-UAS, RWS, HELW and Space remains unchanged. As such, we maintain our Speculative Buy recommendation on EOS and our target price is unchanged at $12.72.

From yesterday’s closing price of $7.75, Ord Minnett’s price target indicates an upside of approximately 64%. 

The post Top broker sees upside for these ASX 300 shares appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Bell has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Electro Optic Systems. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

There are a lot of ASX dividend shares to choose from on the Australian share market.

But which ones could be buys for passive income? Let’s take a look at two that analysts at Bell Potter are bullish on right now:

Harvey Norman Holdings Ltd (ASX: HVN)

This leading household goods retailer could be an ASX dividend share to buy according to the broker.

It likes Harvey Norman due to its attractive valuation, global property portfolio, and good yield. It said:

Despite the strong re-rate in the name, HVN trades at ~2.0x market capitalisation to freehold property value as Australia’s single largest owner in large format retail with a global portfolio surpassing $4.5b and collectively owning ~40% of their stores (franchised in Australia and company operated offshore). This sees our view that of the 1-year forward ~19x P/E multiple as justified considering the multiple catalysts near/mid-term.

The broker expects this to underpin fully franked dividends of 30.9 cents per share in FY 2026 and then 35.3 cents per share in FY 2027. Based on its current share price of $6.28, this would mean dividend yields of 4.9% and 5.6%, respectively.

Bell Potter has a buy rating and $8.30 price target on its shares.

Rural Funds Group (ASX: RFF)

The broker also believes that Rural Funds could be an ASX dividend share to buy for passive income.

Rural Funds is an Australian agricultural property company with over 60 assets across five sectors. This includes vineyards, orchards, and cattle farms.

It currently boasts a weighted average lease expiry (WALE) of almost 14 years, which gives it great visibility on its future earnings and distributions. Despite this, Rural Funds’ shares are trading at a deep discount to their net asset value (NAV). Bell Potter said:

Our Buy rating is unchanged. The -~35% discount to market NAV remain higher than average (~6% premium since listing) and likely reflects the proportion of assets that are underearning as operating farms. With a continued improvement in most counterparty profitability indicators in recent months (i.e. cattle, almond and macadamia nut prices), resilience in farming asset values and the progress made in creating headroom in funding lines to complete the macadamia development we see this as excessive.

The broker is expecting dividends per share of 11.7 cents in both FY 2026 and FY 2027. Based on its current share price of $2.12, this would mean dividend yields of 5.5% for both years.

Bell Potter currently has a buy rating and $2.50 price target on its shares.

The post 2 ASX dividend shares to buy for passive income appeared first on The Motley Fool Australia.

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• 3 top ASX dividend shares to buy with $5,000
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Harvey Norman and Rural Funds Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

These three ASX ETFs provide a relatively low-cost, diversified way to tap into China’s long-term growth story.

China’s economy remains the world’s second largest. And despite a choppy few years, it continues to grow at a pace that outstrips most developed markets. Policymakers are targeting consumption, advanced manufacturing, renewable energy and technology as the next engines of expansion.

For ASX investors wanting exposure to China without picking individual stocks, these three low-cost ASX ETFs offer a simple entry point.

iShares China Large-Cap ETF (ASX: IZZ)

This fund tracks the FTSE China 50 Index and provides exposure to 50 of the largest Chinese companies. Most of them are listed in Hong Kong.

Major holdings typically include Tencent Holdings Ltd (HKEX: 700), Alibaba Group Holding Ltd (HKEX: 9988) and China Construction Bank Corp. (SSE: 601939). These are dominant players in technology, e-commerce, financial services and consumer platforms.

The strength of IZZ lies in its focus on established giants that sit at the heart of China’s corporate landscape. Investors gain diversified exposure to market leaders with strong balance sheets and deep competitive advantages.

The flip side is concentration risk. Large technology and financial stocks can dominate returns, and regulatory crackdowns or geopolitical tensions can hit these names hard. Reporting standards and government influence also remain ongoing risks.

VanEck China New Economy ETF (ASX: CNEW)

This ASX ETF targets companies positioned to benefit from China’s shift toward innovation, healthcare, consumer brands and advanced technology.

Instead of old-economy state-owned banks and energy firms, investors gain access to areas such as biotech, electric vehicles, online services and premium consumer goods.

Holdings have included companies like BYD Company Ltd (SZSE: 002594), Contemporary Amperex Technology Co. (HKEX: 3750) and healthcare and technology innovators.

The key appeal of this ASX ETF is its alignment with structural growth themes. As China’s middle class expands and domestic consumption rises, these sectors could outpace traditional industries.

However, growth stocks can be volatile. Earnings expectations are often high, and policy changes affecting data security, gaming, education or healthcare can quickly dent valuations.

VanEck FTSE China A50 ETF (ASX: CETF)

A third fund worth a look is the VanEck FTSE China A50 ETF. This ASX ETF tracks the FTSE China A50 Index and invests in 50 of the largest companies listed on mainland exchanges in Shanghai and Shenzhen.

That means direct exposure to so-called A-shares. Top holdings commonly include Kweichow Moutai Co. Ltd (SSE: 600519), China Merchants Bank Co. Ltd (HKEX: 3968) and leading industrial or renewable energy names.

The advantage of CETF is its closer link to China’s domestic economy. A-shares often capture companies more focused on internal demand rather than offshore listings. This can provide diversification relative to Hong Kong-listed giants.

The risk, however, lies in sensitivity to domestic policy settings and liquidity conditions. Mainland markets can be more volatile, and foreign investor access rules can evolve over time.

Foolish Takeaway

All these ASX ETFs give investors the opportunity to enter China’s long-term growth story. Yet investors must factor in currency movements, regulatory shifts and geopolitical tensions before diving in.

For those comfortable with the risks, adding measured China exposure through an ASX-listed ETF could offer meaningful diversification and growth potential over the long haul.

The post 3 ASX ETFs to target China’s long-term growth appeared first on The Motley Fool Australia.

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Motley Fool contributor Marc Van Dinther has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

On Monday, the S&P/ASX 200 Index (ASX: XJO) started the week in the red. The benchmark index fell 0.6% to 9,026 points.

Will the market be able to bounce back from this on Tuesday? Here are five things to watch:

ASX 200 to rebound

The Australian share market looks set to rebound on Tuesday despite a poor start to the week in the US. According to the latest SPI futures, the ASX 200 is poised to open the day 22 points or 0.25% higher. In late trade on Wall Street, the Dow Jones is down 1.7%, the S&P 500 is down 1.2%, and the Nasdaq is down 1.3%.

Oil prices slip

It could be a poor session for ASX 200 energy shares including Karoon Energy Ltd (ASX: KAR) and Santos Ltd (ASX: STO) after oil prices dropped overnight. According to Bloomberg, the WTI crude oil price is down 0.45% to US$66.18 a barrel and the Brent crude oil price is down 0.6% to US$71.35 a barrel. Traders were selling oil amid fresh US-Iran talks.

EOS shares named as a buy

The team at Bell Potter thinks Electro Optic Systems Holdings Ltd (ASX: EOS) shares are undervalued at current levels. This morning, in response to its results, the broker has retained its buy rating on the ASX defence stock with a reduced price target of $9.70. It said: “EOS is positioned as a market leader in C-UAS solutions, particularly in directed energy, and is leveraged to increasing budget allocations to C-UAS technologies. We see positive news flow over the next 6 months stemming from C-UAS and RWS contract awards.”

Gold price jumps

ASX 200 gold shares such as Evolution Mining Ltd (ASX: EVN) and Ramelius Resources Ltd (ASX: RMS) could have a good session on Tuesday after the gold price jumped overnight. According to CNBC, the gold futures price is up 3% to US$5,234.3 an ounce. This was driven by US tariff uncertainty.

Woodside results

Woodside Energy Group Ltd (ASX: WDS) shares will be on watch on Tuesday when the energy giant releases its full-year results. According to a note out of Macquarie, its analysts are expecting the company to report an underlying profit of US$2,693 million. This is expected to underpin a final dividend of 60 US cents per share.

The post 5 things to watch on the ASX 200 on Tuesday appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Woodside Energy Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Electro Optic Systems. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Guzman y Gomez Ltd (ASX: GYG) shares have been attracting plenty of broker attention over the past week. 

The fast food chain’s share price has slowly declined over the last 12 months, with international performance has dragging down sentiment despite positive domestic results. 

Last Friday, the company released its half-year result.

This included:

• Global network sales of $681.8 million, an increase of 18% on the prior corresponding period
• Revenue rose 23% to $261.2 million
• Underlying EBITDA increased 23.3% to $33 million
• Statutory net profit after tax (NPAT) of $10.6 million, up 44.9% from $7.3 million a year earlier.
• Underlying EBITDA for Australia increased 30% to $41.3 million
• An interim dividend per share of 7.4 cents. 

This sent investors running for the hills as Guzman y Gomez shares crashed 10% on Friday. 

During Friday’s trade, Guzman y Gomez shares hit an all-time low. 

Brokers quick to see upside

Following the company’s earnings results, experts were quick to point out the potential upside for Guzman y Gomez shares. 

In a note out of Macquarie, the broker reiterated its outperform rating, but trimmed its price target to $27.30. 

Yesterday, UBS also provided a positive outlook for the company. 

The broker has a price target of $21 on Guzman y Gomez shares. 

These targets indicate between 10% and 44% upside.

A consistent theme from analysts has been the conflicting success of the company in Australia compared to overseas.

Here in Australia, Guzman y Gomez is performing well, while results in the United States are lagging behind. 

That being said, the US quick service restaurant (QSR) market is the largest globally and therefore attractive, though execution risk is high.

Investors seemed to agree it was oversold last week, as Guzman y Gomez shares recovered more than 8% on Monday. 

It closed trading yesterday at $19.04. 

Morgans joins the party 

The team at Morgans have also weighed in on the future of the Mexican restaurant chain. 

Over the weekend, the broker said here in Australia, Guzman y Gomez continues to outperform the broader QSR industry both in terms of comp sales and network expansion. 

But it’s not just about Australia. GYG came to market with a strategy for global expansion that was breathtakingly ambitious. The first big opportunity was the US. Unfortunately, the pace of network expansion in the US so far has been pedestrian and the restaurants it has opened have lost more money than expected. 

It was a further step-up in US losses that disappointed investors most today and caused group EBITDA to fall 7% short of our forecast. We do believe global growth will click into gear at some point to complement a very healthy Australian business.

The broker has retained its buy recommendation on Guzman y Gomez shares, but trimmed its price target to $24.00. 

From yesterday’s closing price, that indicates an upside of 26%. 

GYG has a bit to prove, but we can be certain it is going to give it all it’s got to ultimately realise its growth ambitions.

The post Another broker puts a buy recommendation on Guzman y Gomez shares appeared first on The Motley Fool Australia.

More reading

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Motley Fool contributor Aaron Bell has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Building wealth does not have to mean chasing speculative stocks or trying to time the market perfectly. In my opinion, it is usually about consistency, discipline, and unleashing the power of compounding.

If your goal was to build a $40,000 ASX share portfolio over five years, here is how I would think about it.

Focus on quality ASX shares

If I were building this portfolio, I’d focus on high-quality blue chip ASX shares with strong balance sheets, exposure to structural growth markets, and long runways. I’d also aim for a mix of sectors to reduce concentration risk.

For example, that might mean combining a major bank like Commonwealth Bank of Australia (ASX: CBA) or a diversified conglomerate like Wesfarmers Ltd (ASX: WES) with a leading healthcare name like ResMed Inc. (ASX: RMD) and a high-quality technology stock like Xero Ltd (ASX: XRO). You could also use a broad-based ASX exchange-traded fund (ETF) as a core holding and then add a few individual shares around it.

The goal is not to guess which stock will double next year. The goal is to own businesses that can grow earnings steadily and reinvest capital effectively over time.

Make it automatic

One of the best ways to remove emotion from investing is to automate it.

Investing every month regardless of headlines forces you to buy during both good and bad markets. When prices fall, your money buys more shares. When prices rise, your portfolio benefits from appreciation.

This approach, often called dollar-cost averaging, can smooth out volatility and reduce the temptation to try to time the market.

Reinvest dividends

If you are targeting strong annual returns, dividends can play a meaningful role.

Reinvesting dividends rather than spending them increases your compounding power. Over five years, that difference can be material, especially if you are consistently adding new capital each month.

Growing a $40,000 ASX share portfolio

Let’s assume you can invest $525 per month and you stay invested for five years.

At $525 per month, if your portfolio compounds at around 9% per year, those regular investments could grow to roughly $40,000 by the end of year five. 

But it is important to be realistic.

A 9% annual return is broadly in line with the long-term historical average of the Australian share market. But it is not guaranteed. Markets can deliver higher returns in some periods and lower, or even negative, returns in others.

Depending on how the market performs over those five years, you could reach $40,000 sooner than expected. Or it could take longer. Short-term volatility is part of investing.

The key is staying invested and sticking to the plan, provided your investment thesis for each holding remains intact.

Foolish takeaway

To build a $40,000 ASX share portfolio in five years, I would focus on three things: consistent monthly investing, high-quality shares, and patience.

At $525 per month and an average 9% return, the maths can work in your favour. But more important than the exact numbers is the habit. If you can commit to investing regularly and thinking long term, the results can take care of themselves over time.

The post How to build a $40,000 ASX share portfolio in 5 years appeared first on The Motley Fool Australia.

More reading

• Is Wesfarmers stock a post-earnings buy?
• How much could the CBA share price rise in the next year?
• Buy, hold, sell: Wesfarmers, Westpac, and Woolworths shares
• 4 reasons to buy Wesfarmers shares today
• 3 of the best Aussie stocks I would buy

Motley Fool contributor Grace Alvino has positions in Commonwealth Bank Of Australia and Wesfarmers. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ResMed, Wesfarmers, and Xero. The Motley Fool Australia has positions in and has recommended ResMed and Xero. The Motley Fool Australia has recommended Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.