Day: August 13, 2021

3 ASX ETFs that invest in companies fighting climate change

woman holds sign saying 'we need change' at climate change protest

A new landmark report by the Intergovernmental Panel on Climate Change (IPCC) was released earlier this week. It provided a stark warning about the impacts of human industrialisation on the global climate.

The IPCC report found human activity could likely lead to a 1.5-degree Celsius increase in global average temperatures above pre-industrial levels within just the next two decades.

The report also warned that opportunities to reverse the warming trend were rapidly diminishing, and governments needed to do more to reach net-zero carbon emissions sooner.

This all makes for some pretty sobering reading. But it may also prompt you to reflect a little more deeply about the types of companies you are invested in. Perhaps it’s time to really think about how much the companies that make up your portfolio are contributing to a greener, more sustainable future.

And it’s not only so that you can sleep better at night – it might even boost your returns, too. As governments create further economic incentives for companies to become more environmentally friendly, forward-thinking “greener” companies may actually be the ones most likely to succeed and become profitable.

So, let’s say you do want to shift some of your investments into more climate-friendly companies. It can be pretty difficult to know where to start. Luckily, there are plenty of exchange-traded funds (ETFs) currently trading on the ASX that offer easy access to a diversified basket of ethically conscious companies.

ETFs trade on the ASX just like ordinary shares, but they actually pool together money from a group of small investors and use that cash to purchase shares in a range of companies, based on a specified investment mandate.

While there are quite a few options available on the ASX, here are three ETF ideas to consider.    

Betashares Global Sustainability Leaders ETF (ASX:ETHI)

With more than $1.76 billion in net assets, the Betashares Global Sustainability Leaders ETF is easily the largest fund on this list. The fund only invests in international (non-Australian) companies that pass its strict ethical screening process, and it prefers companies that are proven “climate leaders”.

The fund invests globally, although close to 70% of its holdings are in the US, according to its June 2021 fact sheet, with smaller allocations going to Japan and the Netherlands.

ETFS Battery Tech & Lithium ETF (ASX:ACDC)

This battery and lithium fund – which trades on the ASX with the appropriate ticker ACDC – is the smallest fund on this list with just over $300 million in net assets to its name. This might interest shareholders wishing to gain exposure to the developing trend in electronic vehicles.

The fund aims to replicate the performance of the Solactive Battery Value-Chain Index, which includes companies involved in the mining and refinement of lithium and associated products used in energy storage. The fund’s largest holding is currently Australian lithium miner Pilbara Minerals Ltd (ASX:PLS).

Vanguard Ethically Conscious International Shares Index ETF (ASX:VESG)

The last fund on the list is this ethically conscious option from Vanguard. It offers investors access to some of the world’s largest companies – think Apple Inc (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT) and Amazon.com Inc (NASDAQ:AMZN) – but screens out any companies involved in fossil fuels, nuclear power, gambling, and a range of other unsavoury enterprises.

The fund tracks the FTSE Developed ex Australia Choice Index (formerly the FTSE Developed ex Australia ex Non-Renewable Energy, Vice Products and Weapons Index). It has delivered the best year-to-date returns of the funds included on this list – up more than 20% so far in 2021.

The post 3 ASX ETFs that invest in companies fighting climate change appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of May 24th 2021

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Rhys Brock owns shares of Pilbara Minerals Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Amazon, Apple, and Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2022 $1,920 calls on Amazon, long March 2023 $120 calls on Apple, short January 2022 $1,940 calls on Amazon, and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Amazon and Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Top broker names Fortescue (ASX:FMG) shares as a sell

A man holds his head and look in horror at a betting slip, indicating share price drop on the ASX market

Fortescue Metals Group Limited (ASX: FMG) shares have been out of form in recent weeks.

Since this time last month, the iron ore miner’s shares have tumbled 11%.

During the same period, the S&P/ASX 200 Index (ASX: XJO) has risen almost 4%.

Where next for Fortescue shares?

Unfortunately for shareholders, one leading broker believes Fortescue shares could continue to slide.

According to a note out of Morgans, its analysts have retained their reduce rating and $19.30 price target on the company’s shares.

Based on the latest Fortescue share price of $22.30, this implies further downside potential of almost 14%.

What did Morgans say?

Morgans has concerns over how Fortescue shares may perform once they go ex-dividend next month.

Its analysts highlight that in February, all three large miners fell by more than three times their dividend in the month after going ex-dividend.

Last week it explained: “With Rio Tinto Limited (ASX: RIO) due to go ex-dividend tomorrow (12 August) this is a pressing concern and material to our short-term investment strategy for the bulk miners. The iron ore miners have shown a diminishing ability to carry their dividends as the iron ore cycle has progressed.”

“In February, we saw all three large miners fall by more than three times their dividend in the month after going ex-dividend. With more signs of the iron ore cycle slowing, we see a similar risk this dividend season. In particular for RIO & BHP Group Ltd (ASX: BHP), who have both outperformed iron ore prices over the last month, while Fortescue’s share price has trailed its bigger peers.”

“While we expect the big miners to come under selling pressure once they go ex-dividend, we do expect strong equity market support around their dividend announcements. For example RIO which rose on a large dividend being announced at its result while 1H21 earnings slightly trailed estimates. This is a tactical call not relevant for all long-term investors.”

But it doesn’t stop there. Morgans also has operational concerns as well.

It concluded: “FMG is battling difficult execution/cost pressures around its Iron Bridge magnetite project, slipping C1 cost performance and growing market concern around its aggressive grassroots push into global renewables.”

The post Top broker names Fortescue (ASX:FMG) shares as a sell appeared first on The Motley Fool Australia.

Should you invest $1,000 in Fortescue right now?

Before you consider Fortescue, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Fortescue wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of May 24th 2021

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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 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 Bruce Jackson.

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Is now a good time to buy Woolworths (ASX:WOW) shares?

Family having fun while shopping for groceries

Could it be a good time to buy shares of Woolworths Group Ltd (ASX: WOW)? The Woolworths share price has been rising in recent months.

In just the last month the Woolworths share price has risen by almost 6%. Since 3 May 2021, Woolworths shares have risen by 23%.

What has happened recently?

COVID-19 has been a very strange and difficult time for many people and businesses.

Last year during the original onset of COVID there was a large amount of demand for food at supermarkets as households stocked up on necessities.

But that was last year.

COVID-19 is again affecting many areas of the country. Sydney, Melbourne and Canberra are under lockdowns currently.

This might be reducing demand for food from non-supermarket establishments and increasing it for companies like Woolworths, Coles Group Ltd (ASX: COL), and Metcash Limited (ASX: MTS) which supplies IGA.

It’s reporting season in August 2021 and investors will probably get a trading update about what’s happening in the current environment. But that’s not until 26 August 2021.

Aside from the demerger of Endeavour Group Ltd (ASX: EDV), the last material update that the market got was for the 13 week period to 4 April 2021.

FY21 third quarter update

In that update, Woolworths said that its quarterly group sales were up 0.4% to $16.57 billion. That includes group e-commerce sales of $1.34 billion, an increase of 64.2% year on year.

Woolworths’ third quarter of FY20 was a strange time. The first half of that quarter was normal living, the ‘before’ time. Then the second half of that quarter was when supermarkets went crazy. That’s why Woolworths Australian food sales saw FY21 third quarter sales in the first seven weeks rise 8.2%, but the following six weeks showed a decline of 9.6% against the last six weeks of the FY20 third quarter.

Overall, Australian food sales were down 0.7% in the third quarter. New Zealand food sales were down 6.9% in New Zealand dollar terms. Big W sales jumped 18.3% for the quarter, which is the only remaining major non-food business.

Time will tell what the sales have been like in the fourth quarter of FY21 and in the weeks after June 2021.

Is it time to look at Woolworths shares?

Brokers are not particularly hopeful about the Woolworths share price.

For example, Citi has a price target of $37.60 for the supermarket business. That suggests the shares could drop around 7.5% over the next 12 months. Citi thinks that it might be a better performer than Coles.

The broker Credit Suisse goes even further, rating it as a sell with a price target of $32.92. That means that the broker thinks the Woolworths share price might fall almost 20% over the next 12 months if it’s right. Valuation is a key reason for that rating.

According to Credit Suisse, Woolworths is trading at 26x FY21’s estimated earnings with a grossed-up dividend yield of 3.75%.

The post Is now a good time to buy Woolworths (ASX:WOW) shares? appeared first on The Motley Fool Australia.

Should you invest $1,000 in Woolworths right now?

Before you consider Woolworths, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Woolworths wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of May 24th 2021

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Motley Fool contributor Tristan Harrison 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 owns shares of and has recommended COLESGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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How do you value the a2 Milk (ASX:A2M) share price?

The A2 Milk Company Ltd (ASX: A2M) share price has been among the worst performers on the S&P/ASX 200 Index (ASX: XJO) in 2021.

Since the start of the year, the fresh milk and infant formula company’s shares are down a disappointing 49%.

In light of this, investors may be wondering if the a2 Milk share price is good value now.

How do you value the a2 Milk share price?

One way that investors might value the a2 Milk share price is with a price to earnings (PE) ratio.

The PE ratio measures a company’s current share price against its earnings per share (EPS).

This method can be useful for valuing companies like a2 Milk in normal times, but things are far from normal for the company right now. The collapse in the daigou channel and excess supply have weighed heavily on its near term earnings. This means that its shares are trading on elevated earnings multiples currently.

For example, a recent note out of UBS reveals that it expects earnings per share of ~11 cents in FY 2021. Based on the current a2 Milk share price, this will mean a PE ratio of ~59x.

For a company that has downgraded its guidance four times in FY 2021, has an uncertain outlook, and is seeing its earnings go backwards, that would appear to be vastly overvalued. So why are investors happy to pay this to own its shares?

Forward PE

Investors appear to be looking beyond FY 2021 and to the future when valuing the a2 Milk share price.

Going back to the UBS note, its analysts expect the company’s earnings to rebound in FY 2022 and have pencilled in EPS of ~24 cents.

Based on this, the company’s shares are trading at a more reasonable 25x FY 2022 earnings. This compares to the ASX 200’s PE ratio of 23x earnings according to Blackrock.

Though, it is worth remembering that this is a forecast and a2 Milk still needs to achieve it. Which, unfortunately as we have seen from its disastrous performance over the last 12 months, is far from guaranteed.

The post How do you value the a2 Milk (ASX:A2M) share price? appeared first on The Motley Fool Australia.

Should you invest $1,000 in A2 Milk right now?

Before you consider A2 Milk, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and A2 Milk wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of May 24th 2021

More reading

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 recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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