Day: 24 January 2022

Key points

• ETFs can give investors useful ways of investing in strong portfolios
• VanEck Morningstar Wide Moat ETF looks for high-quality, attractively priced businesses
• Betashares Global Cybersecurity ETF is invested in the world’s leading cybersecurity companies

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Exchange-traded funds (ETFs) can offer investors the ability to buy into a whole group of top quality investments at the same time.

There are some ETFs that give exposure to sectors with growth tailwinds. Other ETFs may be able to provide access to leading investment strategies.

With that in mind, the below two options are possibilities for long-term growth:

VanEck Morningstar Wide Moat ETF (ASX: MOAT)

This ETF is provided by VanEck, but it is based on the investment choices of the analysts at Morningstar.

The investment strategy is to find businesses with good economic moats, or competitive advantages. But the most important thing is that the economic moat can endure for a long time and keep allowing the business to earn outsized profits for at least a decade and probably many more years after that.

Once these high-quality businesses have been identified, the analysts only add the business to the portfolio if the stock is priced attractively compared to the Morningstar estimate of fair value.

So, it ends up being a portfolio of long-term, quality businesses that are seemingly priced attractively. Past performance is not a guarantee of future results, however the last five years of performance by the VanEck Morningstar Wide Moat ETF has been a net return per annum of 18.3%.

On 21 January 2022, these are the positions with a weighting of at least 2.7%: Wells Fargo, Cheniere Energy, Merck & Co, Berkshire Hathaway, Lockheed Martin, Altria, Philip Morris, Constellation Brands, Kellogg, Bristol-Myers Squibb, Dominion Energy and Campbell Soup.

Betashares Global Cybersecurity ETF (ASX: HACK)

This ETF is about providing investors with exposure to one of the most unfortunate growth trends – the necessary increase in cybersecurity protection due to the growing threat of cybercrime.

There have been many high profile cyber attacks in this century. There are plenty of businesses involved in protecting individuals and organisations against cybercrime. Some of the businesses in the portfolio looking to help the world includes: Cisco Systems, Accenture, Palo Alto Networks, Crowdstrike, Checkpoint Software, VMware, Juniper Networks, Leidos, Booz Allen Hamilton and Akamai Technologies.

Between 2019 and 2023 the global cybersecurity market is expected to grow from US$167.1 billion to US$248.26 billion, suggesting attractive tailwinds for the businesses involved.

BetaShares notes that Australian investors currently have few local options for gaining exposure to the fast-growing sector and that there are very few pure-play cybersecurity businesses listed on the ASX.   

It is worth noting again that past performance is not a reliable indicator of future performance. However, over the past five years the Betashares Global Cybersecurity ETF had produced an average return per annum of 22.40% to 31 December 2021, after the annual fee of 0.67%.

The post 2 strong ETFs for potential growth appeared first on The Motley Fool Australia.

More reading

• 2 popular ETFs for ASX investors in 2022
• 2 excellent ETFs for ASX investors to buy this month
• 2 market-beating ETFs for ASX investors in January
• Here are 2 ASX tech ETFs to buy after recent weakness
• How did the VanEck Morningstar Wide Moat ETF (ASX:MOAT) more than double the ASX 200’s returns in 2021?

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. owns and has recommended BETA CYBER ETF UNITS. The Motley Fool Australia owns and has recommended BETA CYBER ETF UNITS. The Motley Fool Australia has recommended VanEck Vectors Morningstar Wide Moat ETF. 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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Key Points

• Qantas shares on watch following a late Friday afternoon announcement
• Domestic capacity slashed by 10%
• International route via Perth on hold

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The Qantas Airways Limited (ASX: QAN) share price will be in the spotlight today.

The company released a statement to the ASX after market close on Friday regarding the Western Australian border delay.

At the end of last week, the airline operator’s shares closed at $4.89, down 2.98%. This fall came from the heavy sell-off on the S&P/ASX 200 Index (ASX: XJO), which lost 2.27% on Friday.

Qantas provides update on domestic capacity

Following the Western Australian government’s decision to delay the reopening of its borders, Qantas has had to review its domestic capacity settings.

Consequently, management advised that it will cut its planned domestic capacity by roughly 10% from 5 February to 31 March. Although, this is subject to change depending on how the pandemic plays out across Australia.

Qantas stated that whilst it operates at a reduced capacity, core connections between Perth and other capital cities will remain. This will see up to 15 flights per week from Sydney, Melbourne, Brisbane, Adelaide and Darwin supporting essential personnel and freight.

Factoring in the latest changes, total group domestic capacity stands around 60% of pre-COVID levels for the third-quarter of FY22.

Qantas affirmed it will provide a further update on its domestic capacity settings at its half-year results on 24 February.

On the international scale, the Perth to London route had been scheduled to recommence sometime in late March this year. However, the route is currently under review, with the Darwin to London service continuing to fill in the gap.

Investors will likely be bracing for some turbulence in the Qantas share price when the market opens up. It’s worth noting that the Dow Jones Industrials (DJINDICES: ^DJI) slumped 1.30% to 34,265.37 points on Friday night.

Furthermore, the S&P/ASX 200 Futures is down 2.31% to 7,013 points.

Qantas share price snapshot

Since the start of 2022, Qantas shares have moved relatively sideways, posting a loss of more than 2%. However, when looking at a larger time frame such as the last 12 months, its shares are relatively flat.

Qantas commands a market capitalisation of roughly $9.22 billion, making it the 65th largest company on the ASX.

The post Why the Qantas (ASX:QAN) share price will be on watch today appeared first on The Motley Fool Australia.

More reading

• Top brokers name 3 ASX shares to buy next week
• Can the Qantas (ASX:QAN) share price fly higher in 2022?
• ASX travel shares are nosediving today amid border opening delays
• Own Qantas (ASX:QAN) shares? Here’s why the airline is fronting up to the Fair Work Commission
• What could help the Qantas (ASX:QAN) share price take flight soon?

Motley Fool contributor Aaron Teboneras owns Qantas Airways Limited. 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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Man, last week was a doozy, huh?

The ASX fell 2.3% on Friday, alone (measured by the All Ordinaries Index (ASX: XAO).

It was down almost 3% for the week.

And it’s been a tough month.

From its early January high, the Aussie market is down by more than 5%.

If you own tech stocks, you likely know the ride has been rougher.

The US NASDAQ, from which our tech companies take their lead, is off more than 10% since late December.

And some companies are down even more, including the formerly high-flying Afterpay, which had accepted a takeover deal from US payments business Square — now called Block Inc (NYSE: SQ) — early last year. And because that deal was payable in Square shares, the Afterpay share price fell just as Square did, turning a ~$150 takeover price into a $66 share price just before it stopped trading on the ASX.

In short, there are some — most — ASX company shareholders nursing some red in their portfolios right now.

Why?

The causes are many and varied. Usually, inflation and interest rates bear the brunt. And most of that is US-based. Inflation there touched an annual rate of 7% just recently, prompting the US central bank, the Federal Reserve, to talk about raising interest rates there, sooner rather than later.

Here? We don’t have the same degree of inflation worries, but the direction is the same. Many economists are now predicting that instead of late 2023 or early 2024, the Reserve Bank might increase the official cash rate by the end of the year – perhaps as early as August.

Now, I won’t bore you with the algebra on a Monday morning. But the bottom line is that interest rate movements should have an impact on asset prices. Higher returns on cash make other assets less attractive by comparison (and lower interest rates make other assets more attractive).

But here’s an important point to remember: That doesn’t mean share prices can’t or won’t rise. It just means that they’ll be lower than they would have been if rates were lower.

And so?

Well, I have to tell you, I have no idea how far my portfolio has fallen over the past couple of months.

I’ve learned that obsessive checking of share prices, and my portfolio’s value, has nothing to offer me, in terms of improving my investment returns. And, indeed, is probably going to lead me astray.

The temptation to “don’t just sit there, do something” is very strong if you keep checking share prices. And it’s magnified when the market is falling.

Moreover, though, I’ve invested in my shares for the long term. A timeframe measured in years.

Why would I bother checking hourly? Why would I assume that market volatility is a time to do anything differently?

If I owned a cafe, and takings were down 15% one week because it was raining, I’m 100% sure I wouldn’t be looking to sell it by Sunday.

I own my house. If the place next door sold cheaply because it was a mortgagee sale, or because there was a temporary drop in house prices, I’m not going to sell mine and find a cardboard box to live in.

And if I own shares, and I know that history suggests that company profits tend to rise, and that share prices tend to rise, over the long term (about 10% per annum, over the very long term), why would I try to play silly buggers over short-term volatility?

It would, by any objective measure, be nuts.

“Ah”, some people say “but there’s a bear market coming”.

Is there?

I mean, it’s possible, sure. But my crystal ball is broken.

And we went through the fastest bear market in history in early 2020, and many, many people were left waiting to get back into the market while share prices rose. And rose. And rose.

You really want to gamble your financial future on being able to sell, and buy back in, at the right time and price?

Are you really that good?

Is anyone?

I don’t think so.

And, even if you thought you were?

If the stock market has historically offered an average return of 10% (let’s say somewhere between 9% and 11% to be safe) – and if you think it’s likely that the forces of capitalism aren’t going anywhere soon – do you really want to eschew the potential of that sort of gain, while you try to time the market?

Sure, maybe you get it right and make a few more percentage points.

Or, like some of the smartest investors around in 2020, you miss out on 20%, 30% or 40% gains because you’re not invested when the recovery comes.

Truly, I cannot fathom why people play that game.

Hubris? Arrogance? Greed? 

I’m not sure.

Me? I try to remain humble in success, and philosophical through loss.

I know I can’t time the market.

And I think that while history doesn’t repeat, it does – as Mark Twain said – rhyme,

So here’s what I do:

I remain almost always fully invested. Yes, that means I don’t have the cash to invest when the market falls. But – and here’s the thing – it means I get full value for my money when the market rises.

And because the market tends to go up, more than down…

And because the market tends to go up… and up… and up… over time…

I think that gives me the best chance of the best possible long term compound returns.

I’ve just learned to ride the waves.

I don’t love it – seeing my portfolio fall isn’t fun.

But I’ve learned to live with it.

I think you should, too.

When was the worst time to sell over the last 40 years?

Well, almost any time, given the market is near an all-time high.

But the very worst times?

During the ‘87 crash. During the dot.com crash. During the GFC. During the COVID crash.

And over that time?

Well, Vanguard tells us that in the 30 years to June 30, 2021, a hypothetical $10,000 invested in the ASX 200 turned into $160,498.

By doing nothing.

Literally nothing, other than letting share prices compound and reinvesting dividends.

Despite the dot.com crash, and the GFC and COVID.

Despite the almost-constant reporting of the pundit who was forecasting the next crash.

Despite constant volatility.

As the ASX fell 2.33% on Friday, I tweeted:

I’ve said this before, and it’s not an original thought or metaphor(s), but…

Volatility is the ticket to the dance. It’s the price of admission.

It makes the long term returns possible

And:

The #ASX is down today.

Me?

I’m buying.

Not because I know this is the bottom, but because companies I liked the price of yesterday are cheaper today.

I’m not backing up the truck. I’m just putting my dollar-cost-averaging money to work.

In other words?

Business as usual.

I’m investing in things I think will be worth more in 5 years. And much more in 10 years.

Isn’t that what we all should be doing?

And doesn’t that make the obsessive stock-watching and hyper-activity look, well, just a little silly?

I think so.

To finish, an anecdote I’ve shared before.

I’m glad I can invest and write. Because as much as I like doing it, I’d have never made it as a carpenter.

But I have always vividly remembered a poster that was in our Year 7 Woodwork room when I was at school:

“Don’t be like a rocking horse… plenty of movement, but no progress”

Doesn’t that sound like most days on the ASX?

Movement can be observed daily.

But progress – real progress – comes over years and decades.

I have no idea what the stock market will do next.

Neither does anyone else (and if they say they do, they’re lying to you… or themselves).

And so?

I look for wonderful businesses, available at good prices. I aim to hold them for years, preferably decades. 

And I treat declines, no matter how painful, as a rainy week at the cafe.

If the coffee, the food and the service are good, customers and profits will return.
And if we own quality businesses, and dollar cost average, I have a high degree of confidence that left alone, we’ll do very well over the long term.

Or as Charlie Munger pithily put it: “The first rule of compounding is to never interrupt it unnecessarily.”

If you’re smarter than Charlie Munger, then feel free to do it differently. And if you’re not (and trust me, as smart as you are, you’re not smarter than Munger), I’d take his advice.

Keep your eyes on the long-term prize.

Fool on!

The post ASX falls almost 3% More on the way? appeared first on The Motley Fool Australia.

More reading

• Has the Zip (ASX:Z1P) share price fallen on Block’s ASX debut?
• Block (ASX:SQ2) shares are now trading on the ASX
• 5 things to watch on the ASX 200 on Thursday
• ASX tech shares sink amid Megaport (ASX: MP1) crash and NASDAQ fall
• Are the worst-performing ASX 200 shares turnaround opportunities?

Motley Fool contributor Scott Phillips has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Afterpay Limited and Block, Inc. The Motley Fool Australia owns and has recommended Afterpay Limited. 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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Key points

• Aristocrat is aiming to acquire UK listed Playtech for $5 billion
• Rival bidder, JKO Play, has withdrawn its higher offer
• There are concerns that a large group of Asia-based investors wouldn’t accept JKO Play’s higher offer
• This could mean the lower Aristocrat offer is not approved by Playtech shareholders next week

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The Aristocrat Leisure Limited (ASX: ALL) share price will be on watch this morning.

This follows the release of an update on its proposed $5 billion acquisition of UK listed real money gaming company Playtech.

Why is the Aristocrat share price on watch?

The Aristocrat share price will be on watch today after it revealed that one of its biggest rivals in the pursuit of Playtech has pulled out of the race.

According to the release, on Friday rival suitor JKO Play confirmed that it does not intend to make an offer to acquire Playtech.

This could be a big win for Aristocrat as JKO Play was proposing an offer of 750 pence per share for Playtech, which is higher than its own offer of 680 pence per share.

The company said: “The Playtech Board Recommended Acquisition remains the only firm offer available to Playtech shareholders, despite the substantial amount of time provided to potential bidders to make alternative proposals. Aristocrat further confirms that the regulatory approvals process remains well on track, and it is committed to completing the acquisition as quickly as possible. Aristocrat reiterates that the terms of the Recommended Acquisition provide full and fair value for Playtech shareholders, with attractive cash certainty.”

What’s next?

Playtech shareholders will soon vote on Aristocrat’s proposal at a meeting on 2 February.

However, what will happen at the shareholder meeting remains uncertain. This is because, as the Financial Times has reported, a large group of Asia-based investors have been building a ~27% stake in Playtech.

These investors are understood to be planning to obstruct any deal that does not meet their valuation of the company and are believed to be the reason why JKO Play and a previous bidder withdrew offers.

Given that JKO Play has withdrawn a higher offer than Aristocrat’s proposal, if these reports are accurate, it seems unlikely that this group will vote in favour of its proposal.

Aristocrat appeared to acknowledge this risk. It commented: “Aristocrat also notes comments in Playtech’s announcement regarding a number of material investors who have not to date engaged meaningfully about their views on the Recommended Acquisition. Aristocrat urges all Playtech shareholders to vote in favour of the Recommended Acquisition at the relevant shareholder meetings to be convened on 2 February 2022.”

All eyes will be on that vote early next month.

The post Why the Aristocrat Leisure (ASX:ALL) share price is one to watch today appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Monday
• 2 outstanding ASX 200 shares to buy this month according to analysts
• 3 top ASX 200 shares to buy in January
• Why Afterpay, Altium, Aristocrat Leisure, and Pro Medicus shares are sinking
• Why the Aristocrat Leisure (ASX:ALL) share price is tumbling lower today

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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Key points

• PointsBet shares have fallen heavily over the last 12 months
• Goldman Sachs believes this has created a buying opportunity
• The broker’s price target implies potential upside of over 80%

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The PointsBet Holdings Ltd (ASX: PBH) share price could be a bargain buy after recent weakness.

That’s the view of one of Australia’s leading brokers, which has reiterated its buy rating on Monday morning.

Why is the PointsBet share price a bargain buy?

According to a note out of Goldman Sachs, its analysts have reiterated their buy rating with a trimmed price target of $11.00.

Based on the current PointsBet share price of $6.05, this implies potential upside of 82% over the next 12 months.

Goldman believes that the company’s shares could rerate to higher multiples this year, particularly given the transformational year that it has ahead of it.

What did the broker say?

Goldman feels the weakness in the PointsBet share price has created a buying opportunity for investors.

It commented: “Online sports-betting stocks significantly sold off in CY21, particularly US listed peers, which we believe can be attributed to: i) concerns around competition and sustainability of the sector, ii) generally slower-than-expected new state openings, and iii) market inflation concerns and rotation from these high-growth names. That said, we see this as an attractive entry point for PBH given the lowered expectations and transformational year ahead wherein it is targeting a tripling of North American state exposures.”

“In our view CY22 will be a transformational year for PBH, given a confluence of some US states maturing, rationality playing out between competitors, potentially consolidation across the industry as well as PBH’s target of almost tripling its North American state exposure from the 8 currently operational in Q2FY22E. Some of the next states set to be announced will include New York where PBH already had success in previous tenders, Ontario Canada, Pennsylvania, Maryland, Tennessee and Louisiana,” the broker added.

Looking ahead, Goldman is expecting PointsBet’s second quarter update later this month to “continue to highlight strong momentum across its domestic franchise.” The broker expects the company to be “firmly 4th place in terms of market share across digital wagering domestically noting its target of 10% share by 2025 (~4% now).”

The post Top broker tips 80% upside for the PointsBet (ASX:PBH) share price appeared first on The Motley Fool Australia.

More reading

• 2 buy-rated ASX tech shares with 100% upside in 2022
• Here’s why the PointsBet (ASX:PBH) share price stormed 5% higher today
• PointsBet (ASX:PBH) share price falls on mixed broker note
• Why BrainChip, PointsBet, PolyNovo, and Syrah shares are pushing higher
• Why is the PointsBet (ASX:PBH) share price winning today?

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. owns and has recommended Pointsbet Holdings Ltd. The Motley Fool Australia has recommended Pointsbet Holdings Ltd. 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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Key points

• One leading expert has said that investors shouldn’t buy this market dip
• Morgan Stanley fund manager Andrew Slimmon thinks that investor sentiment could leave the growth names for a while
• Better priced tech names like Microsoft and Alphabet are more attractive to him

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In the last few weeks, there has been widespread declines for plenty of ASX shares as well as the global share market.

Looking at the S&P/ASX 200 Index (ASX: XJO), it has fallen 5% since the start of the year. But plenty of ASX shares have fallen even more.

For example, the Xero Limited (ASX: XRO) share price has dropped 20% this year. The REA Group Limited (ASX: REA) share price has fallen 14% in 2022. Buy now, pay later business Zip Co Ltd (ASX: Z1P) has seen its share price fall 23% in 2022. The Temple & Webster Group Ltd (ASX: TPW) share price has fallen 23% this year.

It has been a rough start to 2022 for the names that are known as growth stocks. 

One common saying in the investment world is ‘buy the dip’. But one leading fund manager does not think that the current decline of (international) high-growth shares is an opportunity.

A warning against buying the dip

Andrew Slimmon, senior portfolio manager at Morgan Stanley Investment Management, recently spoke on the “What Goes Up” Bloomberg podcast.

The key line he said was: “Avoid the temptation to step in and buy into the selloff in high-growth stocks. My experience is: Once the fever breaks, it’s done for quite a while.”

He doesn’t think that many ultra-growth shares are going to see a V-shaped recovery because if share prices start to recover, there will always be someone looking to get out at a breakeven price to what they bought it for.

Mr Slimmon doesn’t think that this is quite the same as the dotcom bust in 2000. The big tech names like Microsoft and Alphabet are not trading at extremely high earnings multiples. However, the ‘uber-growth shares’ are/were as expensive as they were in 2000.

When could prices recover?

He went on to say on the podcast that there could be a bit more of a decline to come with the share market, or at least these high-growth names:

Well, I think it’s first seller exhaustion, where stocks stop going down on bad news because there’s no one left to sell them. And I’m just not sure we’re there yet. I haven’t seen big capitulation. I mean, the stocks are down a lot, but there hasn’t been big capitulation in these stocks. The other way I think about it is when no one believes that they can buy the dip anymore. That’s when the bottom happens, right? When people say, “I don’t want to touch them. These are un-investible,” that’s when I get interested. But when people are saying, “Hey, well, what do you think?” Because the memory of making a lot of money is too recent and that leads people to try to bottom fish.

Mr Slimmon said that once those shares stop having ‘counter trend rallies’ and people aren’t interested in that investment any more, that’s when it could be kind of interesting to him.

What shares look good?

According to the fund manager, some of the out-of-love names that look good at the moment are Microsoft, Alphabet and Danaher.

However, the sectors that have an outsized allocation in the portfolio he manages are: financials, real estate investment trusts (REITs) and energy shares. But bear in mind, he is not an Australian-based fund manager.

The post Top fund manager says don’t buy the share market dip appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Monday
• Is the prospect of rising interest rates battering ASX shares?
• These were the best performing ASX 200 shares last week
• These were the worst performing ASX 200 shares last week
• Does the NAB (ASX:NAB) share price make it the best value bank right now?

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. owns and has recommended Temple & Webster Group Ltd, Xero, and ZIPCOLTD FPO. The Motley Fool Australia owns and has recommended Xero. The Motley Fool Australia has recommended REA Group Limited and Temple & Webster Group Ltd. 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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Key points

• Megaport has been rated as a buy by Goldman Sachs
• It believes the company has a massive $129 billion market opportunity
• Goldman sees 35% upside for its shares in 2022

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The Megaport Ltd (ASX: MP1) share price could be great value according to the team at Goldman Sachs.

This follows a sharp pullback in the elastic interconnection services provider’s shares last week following the tech selloff and the release of its second quarter update.

What did Goldman say about the Megaport share price?

According to the note, Goldman believes the Megaport share price is trading on attractive multiples compared to historical levels.

In light of this, the broker has initiated coverage on Megaport’s shares with a buy rating and $20.00 price target.

Based on the current Megaport share price of $14.80, this implies very attractive potential upside of 35% over the next 12 months.

Why is the broker bullish?

Goldman Sachs is bullish on the company due to its first mover advantage as a global provider of cloud connectivity and networking solutions. This is a massive market, with the broker estimating that Megaport has a $129 billion opportunity in current geographies.

Its analysts commented: “MP1 is benefiting from its first-mover advantage, and two structural tailwinds that accelerated through covid-19, including: (1) The adoption of public cloud & multi-cloud usage; and (2) The growth in Networking as a Service (NaaS).”

“Although volatile on a quarterly basis, MRR growth has remained robust at > 40% (cc) for 6 qtrs, and is now annualizing $110mn. However, the opportunity for further growth is immense (GSe A$129bn p.a. spent on fixed enterprise networking across MP1 geographies). Hence with +35% upside to our TP (A$20), and attractive current trading multiples (vs. history), we initiate at Buy,” it added.

In addition to Megaport, Goldman is a fan of NEXTDC Ltd (ASX: NXT) in the cloud space. It has a conviction buy rating and $14.40 price target on its shares.

The post Goldman says Megaport (ASX:MP1) share price has 35% upside appeared first on The Motley Fool Australia.

More reading

• These were the worst performing ASX 200 shares last week
• ASX tech shares sink amid Megaport (ASX: MP1) crash and NASDAQ fall
• Why Allkem, Megaport, Redbubble, and Temple & Webster’s shares are falling
• ASX 200 (ASX:XJO) midday update: BHP’s update, Megaport sinks, HUB24 impresses
• Why the Megaport (ASX:MP1) share price is crashing 12% today

Motley Fool contributor James Mickleboro owns NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT FPO. 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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The Telstra Corporation Ltd (ASX: TLS) share price will be one to watch on Monday.

This follows news that one of Australia’s leading brokers has downgraded the telco giant’s shares.

Who downgraded the Telstra share price?

According to a note out of Goldman Sachs this morning, its analysts have downgraded the company’s shares to a neutral rating but held firm with their price target of $4.40.

Based on the current Telstra share price of $4.09, this implies potential upside of 7.6% for investors.

However, this was deemed to be insufficient for Goldman to maintain its buy rating, hence its downgrade to neutral this morning.

What did the broker say?

Goldman made the move on valuation grounds, believing that the risk/reward on offer with the Telstra share price was no longer attractive enough following a very strong gain in 2021.

The broker explained: “Following strong share price performance in 2021, TLS now trades: (1) at a premium to global peers; (2) a 2.0% yield spread vs. 10Y AU, > 1std below its LT avg; and (3) broadly in-line with our 12m TP of A$4.40. Hence we downgrade our rating to Neutral (from Buy), given a more even risk/reward.”

Though, it is worth noting that Goldman has provided a few scenarios that pose upside risk to its valuation.

It said: “We see upside risk from: (1) continued mobile strength; (2) infrastructure valuations; (3) Capital management, given strong FCF; and (4) Improved NBN pricing/FWA penetration.”

But for each of those potential positives, the broker has named a downside risk for investors to consider as well.

Goldman explained: “We see downside risk from: (1) FY25 targets requiring strong execution and market rationality; (2) concern around NBN re-sale margin targets; (3) Enterprise headwinds from SD-WAN, NBN & HyperOne; and (4) timing of infrastructure monetisation (we prefer data centre operator Nextdc Ltd (ASX: NXT) (on CL, +41% upside) for digital infra exposure).

The post Why this leading broker just downgraded Telstra (ASX:TLS) shares appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro owns NEXTDC Limited. 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 and has recommended Telstra Corporation Limited. 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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Although the outlook for interest rates is improving, it looks likely to be some time until rates rise to a sufficient level for income investors. In light of this, dividend shares could remain very important for income investors for a little while to come.

With that in mind, here are two dividend shares that offer good yields:

BWP Trust (ASX: BWP)

The first dividend share to look at is BWP. It is a commercial property company and the largest owner of Bunnings Warehouse sites in Australia.

Thanks to strong demand for hardware products and Bunnings being able to open during lockdowns, the hardware giant has been a positive performer over the last couple of years. This has allowed BWP to collect rent largely as normal during the entirety of the pandemic.

In FY 2021, BWP paid was able to pay shareholders a 18.29 cents per unit distribution. It also plans to pay a similar distribution in FY 2022. Based on the current BWP share price of $3.96, this will equate to a 4.6% dividend yield.

National Storage REIT (ASX: NSR)

Another dividend share to look at is National Storage. It is one of the ANZ region’s largest self-storage operators. It has a portfolio of over 210 centres providing tailored storage solutions to over 85,000 residential and commercial customers.

As with BWP, National Storage was on form in FY 2021. It delivered a 28% increase in underlying earnings to $86.5 million. This was driven by both organic growth and the benefits of acquisitions. This allowed the company to pay a full year distribution of 8.2 cents per share.

Management is guiding to 10% earnings growth in FY 2022. If it grows its dividends by the same margin, this will mean a 9.02 cents per share. Based on the current National Storage share price of $2.48, this will mean a yield of 3.6%.

The post 2 top ASX dividend shares with good yields appeared first on The Motley Fool Australia.

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• 2 ASX dividend shares with attractive yields
• Here are 2 ASX dividend shares with attractive yields

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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On Friday the S&P/ASX 200 Index (ASX: XJO) finished the week deep in the red following a market selloff. The benchmark index fell a disappointing 2.3% to 7,175.8 points.

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

ASX 200 expected to fall again

The Australian share market looks set to start the week with another decline. According to the latest SPI futures, the ASX 200 is expected to open the day 49 points or 0.7% lower this morning. This follows a poor end to the week on Wall Street, which saw the Dow Jones fall 1.3%, the S&P 500 drop 1.9%, and the Nasdaq tumble 2.7%.

Oil prices fall

Energy producers such as Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL) could come under pressure today after oil prices pulled back on Friday. According to Bloomberg, the WTI crude oil price fell 0.5% to US$85.14 a barrel and the Brent crude oil price fell 0.55% to US$87.89 a barrel. Despite this, oil prices rose for the fifth consecutive week amid supply concerns.

Aristocrat acquisition update

The Aristocrat Leisure Limited (ASX: ALL) share price will be one to watch today after the release of an update on its proposed $5 billion acquisition of UK listed real money gaming company Playtech. On Friday, rival suitor JKO Play advised that it does not intend to make an offer. This means that Aristocrat’s offer is the only firm one available to Playtech shareholders. Playtech shareholders will vote on the offer, which is being recommended by its board, at a meeting on 2 February

Gold price softens

Gold miners Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) could start the week in the red after the gold price softened on Friday night. According to CNBC, the spot gold price fell 0.35% to US$1,836.1 an ounce. The gold price recorded a 2.7% weekly gain despite its soft finish.

Fortescue update

The Fortescue Metals Group Limited (ASX: FMG) share price will be on watch today following a late announcement on Friday. That announcement reveals that it has signed an agreement with China’s state-owned Sinosteel. The two parties have signed a binding Memorandum of Understanding to complete a rapid project assessment of Sinosteel’s Midwest Magnetite Project in Western Australia. This includes a rail and port development at Oakajee.

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

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• Is the prospect of rising interest rates battering ASX shares?
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• Fortescue (ASX:FMG) share price on watch amid Sinosteel Oakajee agreement

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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