Day: February 4, 2022

2 highly rated blue chip ASX 200 shares to buy

asx blue chip shares represented by pile of blue casino chips in front of bar graph

asx blue chip shares represented by pile of blue casino chips in front of bar graphasx blue chip shares represented by pile of blue casino chips in front of bar graph

If you’re wanting to build a strong portfolio, then having a few blue chips in there could be a good starting point.

But which blue chips should you buy? Two highly rated blue chip shares are listed below. Here’s why they could be in the buy zone right now:

Goodman Group (ASX: GMG)

The first blue chip ASX 200 share to look at is Goodman Group. It is a leading integrated commercial and industrial property company with a portfolio of warehouses, large scale logistics facilities, and business and office parks.

It has been experiencing very strong demand for these properties in recent years, which is underpinning solid earnings and distribution growth.

Goodman’s CEO, Greg Goodman, recently commented: “The results of the deliberate positioning of our portfolio over the last decade to adapt to and leverage the changes in the digital economy, are now being realised. Customer demand for high-quality properties close to consumers has never been greater.”

But it gets better. Goodman has $12.7 billion of development work in progress, which is expected to underpin further growth over the coming years.

Citi is a fan of Goodman. It currently has a buy rating and $28.00 price target on the company’s shares. The broker believes that Goodman’s earnings per share guidance for FY 2022 is conservative.

ResMed Inc. (ASX: RMD)

Another blue chip ASX 200 share to look at is ResMed. It is a sleep treatment-focused medical device company with a portfolio of industry-leading products that are improving the lives of sufferers of conditions such as sleep apnoea.

The good news is that this is a huge market with just an estimated one fifth of sufferers currently diagnosed. This gives ResMed a long runway for growth in the future.

For example, ResMed’s CEO, Mick Farrell, recently reaffirmed his expectation for the company to improve a quarter of a billion lives by 2025.

He commented: “Despite constantly evolving market dynamics, we remain focused on our goal to improve 250 million lives in the year 2025; supporting patients with the sleep apnea therapy, respiratory care therapy, and digital health solutions they need as we deliver value for all of our customers.”

The team at Morgans is very positive on ResMed. It has an add rating and $40.46 price target on the company’s shares. The broker believes ResMed is “well-placed as it builds a unique, patient-centric, connected-care digital platform that addresses the main pinch points across the healthcare value chain.”

The post 2 highly rated blue chip ASX 200 shares to buy 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 over ten 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 January 12th 2022

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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 recommended ResMed Inc. 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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Well priced with a dividend yield over 5%, this ASX share ‘is a standout’: expert

Female shop attendant wearing apron and mask standing in grocery aisle in small local shopFemale shop attendant wearing apron and mask standing in grocery aisle in small local shopFemale shop attendant wearing apron and mask standing in grocery aisle in small local shop

The roll into the new year of 2022 has been one for the ages for global equities markets, with this January’s performance firmly on the podium as the 8th worst on record, and the worst since 2008.

The benchmark S&P/ASX 200 Index (ASX: XJO) has fallen 500 points off its previous highs in January and is down 4% for the month, whereas the S&P/ASX Small Ordinaries Index (ASX: XSO) is down 7%.

ASX shares have been hit hard so far in 2022 as shifting yields on long dated bonds and the inflation narrative play havoc on stocks throughout the globe.

That’s important seeing as there tends to be an inverse correlation in the benchmark index and the yields on long duration bonds, as seen in the chart below. The chart shows this relationship, by plotting the return on the benchmark ASX 200 index (left hand side) versus the yield on the Australian Commonwealth Government 10 year bond (right hand side) going back to 1985.

As can be seen, bar a few anomalies in the data (the global financial crisis in 2007-09′ and the COVID-19 crash in 2020), long-term correlations have been negative for these two asset classes. In fact, this tends to be one of the many reasons portfolio managers include bonds into their allocations, to help smooth portfolio returns.

TradingView Chart

Over the past few months, these correlations have manifested heavily in the small cap domain of the market. Yields on longer bonds are rising, hurting the valuations on speculative assets as investors flock to more quality corners of the market. This activity has erased much of the gains that smaller ASX shares have earned in 2022. The same effect is observed on the chart below, although with the US Treasury 10 year yield.

TradingView Chart

Hence, any stock that offers long-term upside potential with additional features such as an attractive dividend yield to cover the downside is a key standout in this current market.

According to Investors Mutual Limited (IML) portfolio manager Simon Conn, wholesale distribution and marketing company Metcash Limited (ASX: MTS) might just fit that bill. Let’s take a look.

Why’s this ASX share a standout?

Conn is bullish on Metcash given his firm’s concentration and focus on the Australian mid and small cap sector.

Speaking to an episode of “Buy Hold Sell” on Livewire Markets on Friday, Conn stated his posture on Metcash is that it is “an underappreciated franchise, and a business that’s no doubt benefited from COVID, but [one] that’s delivered enduring benefits to their food business”.

“But also their liquor business has been growing and is a very resilient business. But really its the hardware business, where they position themselves as the second player in the hardware, retail and wholesale markets that we think is underappreciated by investors”, he said.

“Their acquisition of Total Tools looks really well priced. They bought that prior to COVID, effectively on about three-and-a-half times EBITDA”.

Conn also reckons that Metcash has grown exceptionally well after navigating its way throughout the COVID-19 landscape.

As such, the portfolio manager believes that local vendors and franchisees will continue reinvesting into their own stores with profits generated, leading local consumers to spend more in their local communities. This cycle looks set to play on repeat as well, according to the expert.

Not only that, but Conn is impressed by Metcash’s current valuation, its balance sheet and the total return prospects it offers investors with its current dividend yield of over 5%.

These are imperative characteristics for chasing quality names within the current investing climate – especially with the pullback in small cap stocks, Conn argues.

“The thing about Metcash is it’s really attractively priced on 13 times [earnings], and a yield of over 5%, with a really strong balance sheet. For us, it looks like a standout in the market, where a lot of stocks look pretty fully priced”.

Metcash shares finished Friday less than 1% up at $4.16, marking an impressive gain on the week.

Metcash share price snapshot

In the last 12 months, the Metcash share price has gained 22% after a strong performance in 2021. This year to date it has pared gains and is now down 7%, just in behind the broad indices.

However, investors are showing support once more and shares have gained around 7% in the past week of trading.

The post Well priced with a dividend yield over 5%, this ASX share ‘is a standout’: expert appeared first on The Motley Fool Australia.

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

Before you consider Metcash, 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 Metcash wasn’t one of them.

The online investing service he’s run for over 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 January 13th 2022

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Motley Fool contributor Zach Bristow 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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Some BNPL shares finished a horror week on a high. Why?

A family of three look scared as they watch a movie on the sofa with popcorn.A family of three look scared as they watch a movie on the sofa with popcorn.A family of three look scared as they watch a movie on the sofa with popcorn.

Key points

  • Buy now, pay later shares started February in the red
  • Block’s ASX listing crashed amid a sell-off in the United States
  • Interest rate rises in 2022 were flagged by the RBA this week
  • Block and Zip recovered some of their losses today

Buy now, pay later (BNPL) shares have had a shocking start to the month but some edged higher today.

Block Inc CDI (ASX: SQ2) share price has fallen nearly 15% since market open on 1 February. Zip Co Ltd (ASX: Z1P) has fallen nearly 13% in the same time period. However, in today’s trade Block climbed 0.88% while Zip Co jumped 3%.

Let’s take a look at what’s been happening to BNPL shares lately.

BNPL woes

Block and Zip are not the only BNPL shares to fall in February. The Openpay Group Ltd (ASX: OPY) share price has descended 13% since market open on 1 February, while Beforepay Group Ltd (ASX: B4P) has slipped 9%.

Sezzle Inc (ASX: SZL) has also shed 13% in the same time period. In today’s trade, Openpay held steady while Beforepay fell 4.64% and Sezzle finished 0.89% in the red.

Block’s ASX listing dived after the company’s US listing plummeted. Block Inc (NYSE: SQ) fell 20% between market close on 1 February in the US and 3 February.

Investors sold Block shares after rival Paypal’s quarterly results fell short of market expectations. Paypal Holdings Inc (NASDAQ: PYPL) fell a mammoth 29% between market close on 1 February and 3 February in the US.

However, in after-hours trade, Block’s US listing has gained more than 3% and Paypal has edged ahead 1.5%. This could be helping the company’s ASX listing and confidence in the BNPL sector overall.

Zip’s shares also fell heavily this week amid negative sentiment in the industry. My Foolish colleague Aaron noted any Reserve Bank of Australia rate hikes could impact consumer spending. And the Zip business model depends on this spending.

BNPL’s shares suffered amid an overall tech stock slide this week. The S&P/ASX All Technology Index (ASX: XTX) dived almost 4% between market open on 1 February and close today. The index finished today 0.39% ahead.

BNPL share price recap

BNPL shares have suffered major losses in the past 52 weeks.

In the past year, the Zip Co share price has dived 63%. Meanwhile, Openpay has crashed 82% and Sezzle has plunged 74%. Meanwhile, Beforepay has shed 55% since joining the ASX this year, while Block has slipped 17%.

Meanwhile, the S&P/ASX 200 Index (ASX: XJO) has returned more than 5% in the past year.

The post Some BNPL shares finished a horror week on a high. Why? 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 over ten 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 January 12th 2022

More reading

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Block, Inc. and ZIPCOLTD FPO. 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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SEEK (ASX:SEK) share price tumbles on broker sell rating. Here’s why it is bearish

Keyboard button with the word sell on it.

Keyboard button with the word sell on it.Keyboard button with the word sell on it.

The SEEK Limited (ASX: SEK) share price was out of form on Friday.

The job listings giant’s shares ended the day 4% lower at $28.31.

This means the SEEK share price is now down almost 14% since the start of the year.

Why did the SEEK share price tumble today?

The catalyst for this weakness in the SEEK share price today appears to have been a broker note out of Goldman Sachs this morning.

According to the note, the broker has retained its sell rating and cut its price target on the company’s shares by 15% to $27.30.

Following today’s decline, this implies potential downside of 3.5% for its shares.

What did the broker say?

Goldman is expecting SEEK to deliver a strong result later this month, but not one that achieves the market consensus estimate.

It said: “We expect a strong result from SEK, with 1H22 Rev/EBITDA of $483mn/$223mn, driven by +56%/+58% growth in ANZ Rev/EBITDA. However despite this strong growth, our SEK Rev/EBITDA estimates sit -3% below VA Consensus.”

In addition, the broker has adjusted its price target to reflect changes to valuation multiples in line with other classifieds peers and a discount to the valuation of its Seek Growth Fund business.

It made the move on the latter following industry feedback which suggests valuation pressure on venture capital assets. Goldman highlighted a recent de-rating of Bailador Technology Investments Ltd (ASX: BTI) as proof of this.

The broker explained: “Consistent with global classifieds (and peer REA) we lower our EV/EBITDA valuation multiples 3X within our SOTP (except for Latam).”

“We also introduce a 20% discount to SEK growth fund carrying value, reflecting: (1) peer BTI.AX de-rating (c.25% decline since Oct levels when SEK last provided an ESV valuation); and (2) industry commentary suggesting valuation pressure on VC assets in Australia. Overall our SOTP-based TP decreases by c.15% to $27.30,” it concluded.

The post SEEK (ASX:SEK) share price tumbles on broker sell rating. Here’s why it is bearish appeared first on The Motley Fool Australia.

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

Before you consider SEEK, 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 SEEK wasn’t one of them.

The online investing service he’s run for over 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 January 13th 2022

More reading

Motley Fool contributor James Mickleboro owns SEEK Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Bailador Technology Investments Limited. The Motley Fool Australia has recommended Bailador Technology Investments Limited and SEEK 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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