Month: May 2022

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Warren Buffett has spoken to scores of groups of students over the years, answering questions, and he and his business partner Charlie Munger answer shareholder questions for hours at annual meetings of their company, Berkshire Hathaway.

A frequently asked question is how one might get better at investing, and a frequently offered bit of advice is simply to “read a lot”. In fact, Buffett has suggested reading 500 pages per day!

Here’s a closer look at that recommendation, along with some suggestions of what you might read.

The value of reading

The 500-page recommendation has been recounted by Todd Combs, one of Buffett’s two investing lieutenants (the other being Ted Weschler). Back in 2000, when he was earning his MBA at the Columbia Business School, Buffett pointed at a stack of papers and advised: “Read 500 pages like this every day … That’s how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it.”

Combs did, though, and he has reportedly read as many as 1,000 pages on many days. Much of it isn’t light reading, either —  the recommended kind of reading is informative fare, such as annual reports, trade magazines for various industries, transcripts of conference calls that managements hold every quarter, newspapers, and so on.

Buffett’s partner Munger is equally bullish on the value of reading, having said, “In my whole life, I have known no wise people who didn’t read all the time — none, zero … If you want wisdom, you’ll get it sitting on your a–. That’s the way it comes.”

He views reading as very profitable — literally: “I’ve gotten paid a lot over the years for reading through the newspapers.” He has quipped about it, too: “You’d be amazed at how much Warren reads — at how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out.”

What to read

Just as Buffett predicted, most of us probably won’t achieve the reading level of 500 pages per day, but that doesn’t mean we can’t change our reading habits for the better. For example:

• If you’re not much of a reader, start reading.
• If you have trouble getting around to reading, make it part of your routine, perhaps finding time early in the morning or before you go to bed.
• If you are a reader, aim to read more.

Here are some ideas of what you might read:

1. Annual reports

It’s smart to read the annual reports (including the financial statements) from any companies in which you’ve invested — and companies you’re thinking of investing in. Consider reading annual reports from competing companies, too. Buffett has explained: “If we owned stock in a company, in an industry, and there are eight other companies that are in the same industry … I want to be on the mailing list for the reports for the other eight because I can’t understand how my company is doing unless I understand what the other eight are doing.”

2. News stories and magazine articles

Both Buffett and Munger are longtime newspaper lovers, and they tend to read several each day. Those who can’t do that might still try to read as much of one good newspaper as they can each day. On top of that, read magazines about business and/or investments and magazine and/or online articles that relate to companies and industries of interest. Keeping up with financial news can give you an edge over other investors.

3. Trade magazines

Each industry will tend to have one or more trade magazines for folks in the industry, and these periodicals can impart a lot of inside information, helping you spot up-and-comers in the industry and learn about problems that the industry is facing. The hotel industry has Lodging Magazine, for example, while the fast-food industry has QSR — which stands for “Quick Serve Restaurant”. Many of these magazines exist in not only paper but also online form.

4. Conference call transcripts

It’s very common, when a publicly traded company releases its quarterly results (including its annual report), for its management to hold a conference call with analysts who ask questions. These calls can be treasure-troves of insights, and they can give you a sense of what the managers are like, too.

5. Biographies

Reading about impressive people and how they moved through their lives and achieved whatever they achieved can be very instructive — sometimes inspiring us, too. A great biography that informs your investing process and decisions doesn’t have to be about an investor or businessperson, either. Reading about politicians, scientists, philosophers, and others can also be valuable.

6. Books about great businesses

Reading about great businesses — how they were formed and how they’ve overcome challenges — can help investors learn to spot other great businesses and develop a sense of why some succeed, and others don’t. You might read books centered on particular companies, but books such as Great by Choice: Uncertainty, Chaos, and Luck — Why Some Thrive Despite Them All by Jim Collins and Moten T. Hansen that review many companies, addressing common themes, can also be great.

7. Books about great investors

There’s much to be learned from other investors, too — and reading about very successful investors might help you refine your own investing strategy. You can learn from other investors’ mistakes, which can help you avoid making them yourself. Some great investors to investigate include John Bogle, Peter Lynch, John Templeton, T. Rowe Price, and Phil Fisher.

8. Buffett’s letters to shareholders

Learn from Warren Buffett himself while you’re at it — the Berkshire Hathaway website offers links to more than 50 years’ worth of his annual letters to shareholders, each of which will impart some investing insights while also delivering a chuckle or two. He writes in a very accessible manner, as if he’s addressing his non-financial-professional sister.

So consider taking on Buffett’s challenge and see how much you can manage to read. Your investing performance can improve greatly as you absorb many insights and lessons.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Do you dare take on this bold challenge from Warren Buffett? appeared first on The Motley Fool Australia.

More reading

• 10 reasons Warren Buffett is such a successful investor
• Warren Buffett’s been bargain hunting following the stock market sell-off. Here’s the sector he’s been buying (and selling)
• $16 trillion ‘wiped off’ share markets. Buffett doesn’t care
• The single greatest investing lesson I ever learned
• Thinking about selling all your stocks? Here are 2 big risks you’ll face

Selena Maranjian has positions in Berkshire Hathaway (B shares). The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Berkshire Hathaway (B shares). The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The S&P/ASX 200 Index (ASX: XJO) is not having such a cracking day thus far this Tuesday. At the time of writing, the ASX 200 is down by a mild 0.35% at just over 7,250 points. That makes the performance of the Beach Energy Ltd (ASX: BPT) share price even more noteworthy. 

Beach Energy shares are comprehensively defying the markets today. This ASX 200 energy share is presently up a cracking 3.78% at $1.70 a share. This latest rise means Beach shares are now up close to 5% over the last five trading days, and up nearly 30% over 2022 thus far.

So what might be behind Beach’s market defiance this Tuesday?

Why is the Beach share price defying the ASX 200’s selloff today?

Well, it’s got nothing to do with Beach itself it seems, given there are no market announcements out from this oil producer so far today. 

However, there is a noticeable trend going on today. Beach is not the only company rising in the face of a falling market. Santos Ltd (ASX: STO) is also doing rather well, although not as well as Beach. Santos shares are currently up by 1.5% at $8.32 a share. Indeed, the energy sector is one of the better performing ones on the ASX 200 today. 

As such, this, and Beach’s impressive share price performance, can probably be put down to the strong showing for oil that we’ve seen over the past 24 hours. As my Fool colleague James flagged this morning, WTI crude oil prices were up 1.8% to US$117.17 a barrel overnight. Brent crude oil prices also rose, this time by 1.9% to US$121.72 a barrel. These rises could be a result of the EU meeting being held over whether to impose additional sanctions on Russian energy. 

So it appears this is the most likely explanation as to why ASX 200 energy shares like Beach are enjoying such cracking gains today in the face of the broader market’s falls.

At the current Beach Energy share price, this ASX 200 energy share has a market capitalisation of $3.88 billion, with a dividend yield of 1.18%. 

The post Why is the Beach Energy share price having such a cracking Tuesday? appeared first on The Motley Fool Australia.

More reading

• ASX 200 midday update: Beach, Santos rise but EML, Zip tumble
• 5 things to watch on the ASX 200 on Tuesday
• TGIF: Here’s why ASX 200 energy shares are outperforming today
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• Australia’s renewable energy output could triple by 2030 under Labor. Will that impact these ASX 200 shares?

Motley Fool contributor Sebastian Bowen 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.

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The Woodside Energy Group Ltd (ASX: WDS) share price could be good value following its merger with the petroleum assets of BHP Group Ltd (ASX: BHP).

That’s the view of one of Australia’s leading brokers.

What is being said about the Woodside share price?

According to a note out of Morgans from this morning, the broker has been looking over the merger of its operations with BHP’s petroleum assets.

The good news is that its analysts believe this combination is a winning one and greatly enhances fundamentals.

And while the broker feels the immediate impact on its value is broadly neutral (due to the issue of shares to BHP shareholders), it still sees upside in the current Woodside share price.

The note reveals that Morgans has retained its add rating with a price target of $32.90. This implies potential upside of 9.3% over the next 12 months.

But it gets better with the broker forecasting an FY 2022 dividend of approximately $2.56 per share. This equates to a yield of 8.5% at today’s Woodside share price.

Morgans commented:

A well-timed deal enlarging WDS’ earnings at a time of active investment in new growth. WDS had already expected to protect its shareholder returns post merger, however the earnings growth delivered by the cycle has now positioned the company also for a potential buyback and/or special dividend at its August result.

Post the merger with BHP Petroleum we maintain our Add recommendation with a $32.90 target price. We view WDS as ideally positioned to generate high quality earnings, maintaining its leverage to the continuing upcycle in oil & gas, tackle its diversified growth profile to unlock more value upside and potentially deliver a shareholder return surprise at its next result.

The post Broker gives its verdict on the Woodside share price post-merger appeared first on The Motley Fool Australia.

More reading

• Why is the Woodside share price bouncing back on Monday?
• 5 things to watch on the ASX 200 on Monday
• Why we’re still buying ASX 200 shares that are ‘high emitters’: fundie
• TGIF: Here’s why ASX 200 energy shares are outperforming today
• ‘We’re close to the bottom’: Expert flags share market sectors to buy before the rally

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 Scott Phillips.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

You could rightly say that Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett knows a thing or two about investing in the stock market.

Since becoming CEO in 1965, he’s led Berkshire’s Class A shares (BRK.A) to an average annual return of 20.1% and created almost $690 billion in value for shareholders (himself included). On an aggregate basis, Buffett has overseen a greater than 3,600,000% increase in his company’s share price in 57 years. Berkshire Hathaway’s share price could plummet 99% tomorrow, and it would still be handily outperforming the S&P 500, including dividend payouts, since the beginning of 1965.

But perhaps the greatest aspect of Buffett’s success isn’t his vast outperformance, so much as the transparency and simplicity of the strategy that’s allowed him (and his shareholders) to flourish. What follows are the 10 reasons Warren Buffett has been such a successful investor for nearly six decades as Berkshire’s CEO.

1. The Oracle of Omaha lets his winners run over the long term

Despite generating a 20.1% average annual return over 57 years, Buffett isn’t infallible. Berkshire Hathaway has had down years, and will almost certainly have negative-return years in the future.

But one of his many keys to outperformance has been allowing his winners to run over long periods. Winning stocks like beverage giant Coca-Cola, credit servicer American Express, credit ratings agency Moody’s, and insurer Globe Life, have been continuous holdings since 1988, 1993, 2000, and 2001, respectively.

2. He tends to gravitate to cyclical companies and industries

To build on the previous point, the Oracle of Omaha absolutely loves to buy cyclical stocks. By “cyclical,” I mean companies that perform well when the economy is expanding and struggle when it’s contracting.

Even though recessions are inevitable, periods of expansion last considerably longer. Rather than trying to guess when a recession might occur, Buffett has set Berkshire Hathaway’s portfolio up to benefit from these disproportionately long periods of expansion and the natural growth of the U.S. and global economy over time.

3. Brand-name, time-tested businesses are popular buys

Another reason for Buffett’s incredible success is his willingness to invest in brand-name, time-tested businesses. While management teams come and go, Buffett is well aware of the power behind branding and a loyal customer base.

For instance, Apple (NASDAQ: AAPL) is one of the most recognized brands in the world, and it has an exceptionally loyal customer base. Apple has relied on product innovation to control the lion’s share of the U.S. smartphone market, and is in the process of reinventing itself to emphasize subscription services moving forward. After generating $116.4 billion in operating cash flow over the past 12 months, the data suggests Apple’s strategy is working.

4. Meanwhile, potential fads and momentum plays are often avoided

Equally important is Buffett’s avoidance of trends and investments that can be viewed as fads. Although next-big-thing investments, such as genomics, 3-D printing, cannabis, and blockchain technology, have offered incredible growth potential, these trends have also endured large bubble-bursting events.

Buffett has been particularly critical of crypto blue chip Bitcoin (CRYPTO: BTC), stating that, “If you… owned all of the Bitcoin in the world and you offered it to me for $25, I wouldn’t take it.” The Oracle of Omaha prefers businesses with longevity that produce something. In Buffett’s view, Bitcoin is a major red flag because it doesn’t produce anything. 

5. Buffett focuses on sectors and industries he knows well

A fifth reason for Warren Buffett’s success is his narrow research focus. Instead of trying to understand a little bit about every sector of the market, the Oracle of Omaha aims to be highly knowledgeable in a few sectors and industries.

In particular, Buffett has a keen eye for spotting value and well-rounded businesses in the financial, energy, and consumer staples sectors. Peruse Berkshire Hathaway’s portfolio and its owned/acquired assets, and you’ll find plenty of banks, insurance companies, energy providers, and food/beverage companies. Financial stocks have been Buffett’s go-to for decades.

6. He leans on his investing team for sectors/industries outside his comfort zone

Warren Buffett realizes he can’t cover the entire stock market, which is why he relies on his investment team to help him out in the sectors and industries he doesn’t have a firm grasp on. This team includes right-hand man Charlie Munger, as well as “investing lieutenants” Todd Combs and Ted Weschler.

Combs and Weschler have often been leaned on for their expertise in tech and healthcare. However, a recent example of their investing prowess can be seen in Berkshire’s Kroger position. Buffett’s company is sitting on hearty gains thanks to one or both investing lieutenants recognizing that COVID-19 and inflation would ultimately turn out to be a positive for the nation’s largest grocery chain.

7. Berkshire’s portfolio is relatively concentrated

In spite of holding stakes in more than four dozen securities, Berkshire Hathaway’s portfolio is concentrated in just a small handful of stocks. Apple, Bank of America (NYSE: BAC), Chevron (NYSE: CVX), Coca-Cola, and American Express, combine to account for 72.2% of the nearly $343 billion investment portfolio. Further, Berkshire’s top-10 holdings make up 85.3% of invested assets.

Warren Buffett has long believed that diversification is only necessary is you don’t know what you’re doing. With a narrow research focus and plenty of help from his investing lieutenants in other areas of the market outside of his comfort zone, it’s plainly evident that Buffett and his team feel confident in their research.

8. Buffett buys when others are fearful

Yet another reason for Buffett’s long-term outperformance is his inability to be scared away from market corrections, bear markets, and complete meltdowns. Whereas it’s common for investors’ emotions to bait them into poor decision-making during market downturns, Buffett chooses to be greedy when others are fearful.

As an example, the Oracle of Omaha invested $5 billion into preferred stock of Bank of America in 2011. BofA was struggling mightily at the time under the weight of legal settlements following the housing crash. Since then, Buffett has pivoted this initial investment, as well as subsequent buys, into a nearly $38 billion stake in Bank of America. Today, BofA is highly profitable and returning boatloads of capital to its shareholders. 

9. Buffett’s company is a passive income powerhouse

Speaking of returning capital to shareholders, Buffett’s success is also due to his company collecting massive amounts of passive income each year. Taking into account an active first quarter that saw Buffett and his team make a number of investments, Berkshire Hathaway appears to be on track to collect more than $6 billion in dividend income over the next 12 months.

Integrated oil and gas stock Chevron is currently Berkshire’s golden goose for dividends, with $904.1 million expected to be collected over the next year. Chevron is benefiting from multidecade highs in crude oil and natural gas, and can rely on its midstream (e.g., transmission pipelines and storage) and downstream assets (refineries and chemical plants) if crude and natural gas prices back significantly off their highs.

10. He’s a big believer in share buybacks

Lastly, Buffett and Munger have invested heavily in what’s clearly their favorite stock on the planet: their own company. Since Berkshire’s board of directors introduced new share repurchase parameters in July 2018, the Oracle of Omaha has green-lit $61.1 billion worth of buybacks.    

Buying back stock tends to have a positive impact on the share price of companies that are profitable on a recurring basis. By reducing the number of shares outstanding, earnings per share tends to climb over time. This can make a stock appear more fundamentally attractive, thereby lifting its share price.

This transparent strategy is the secret sauce that’s allowed Warren Buffett to run circles around the S&P 500 for decades. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 10 reasons Warren Buffett is such a successful investor appeared first on The Motley Fool Australia.

More reading

• Warren Buffett’s been bargain hunting following the stock market sell-off. Here’s the sector he’s been buying (and selling)
• $16 trillion ‘wiped off’ share markets. Buffett doesn’t care
• The single greatest investing lesson I ever learned
• Thinking about selling all your stocks? Here are 2 big risks you’ll face
• Worried about inflation? Here’s what Warren Buffett says Berkshire Hathaway is doing

Sean Williams has positions in Bank of America. Bank of America is an advertising partner of The Ascent, a Motley Fool company. American Express is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Berkshire Hathaway (B shares), Bitcoin, and Moody’s. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short March 2023 $130 calls on Apple. The Motley Fool Australia owns and has recommended Bitcoin. The Motley Fool Australia has recommended Apple and Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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There are a number of quality S&P/ASX 200 Index (ASX: XJO) shares that give investors the opportunity to utilise their dividend reinvestment plan (DRP).

Dividends can be a way for businesses to reward shareholders by paying out a portion of the profit to investors each year.

Companies can choose to pay out most of the profit they generate, or retain a good amount of the generated profit to reinvest back into the business.

But what are investors meant to do with the dividends they receive?

I think there are three main options that investors can do with it.

First, investors could spend the dividends on something – living expenses, travel, whatever they want.

Next, shareholders could decide to receive the dividends as cash and then allocate that cash dividend towards their next share investment.

Finally, investors could decide to utilise the dividend reinvestment plans (DRP) on offer.

Benefits of a dividend reinvestment plan

A DRP allows investors to receive more shares in the business rather than receiving cash.

Buying more shares gives investors the chance of benefiting from compounding. Over time, the power of compounding can really help boost long-term wealth.

It’s automatic. Once you select the DRP option, investors don’t need to worry about what to do with the cash or when to invest. This can make things simpler.

Another benefit is that some ASX 200 shares offer discounts on the shares they issue to investors that use the DRP. For example, DRP shares could be issued at a 2% discount.

The final benefit, which is more for the business than the shareholder, is that it allows that business to keep more cash in the bank.

Ansell Limited (ASX: ANN)

Ansell is one of the ASX 200 shares that offer a DRP. This company is one of the world’s largest manufacturers of safety gloves for industrial and healthcare settings. It also sells things like protective clothing and face masks.

The Ansell share price has seen a 20% decline since mid-January 2022, so it’s now at a cheaper price.

Macquarie Group Ltd (ASX: MQG)

Macquarie is another business that has a DRP. It’s Australia’s largest investment bank and operates in a number of categories including banking and financial services, commodities and global markets, Macquarie Capital (investment banking), and asset management (Macquarie Asset Management).

Macquarie provides a 1.5% discount with its DRP, allowing investors to receive shares at a cheaper price. The Macquarie share price has fallen by around 10% since the start of 2022.

Rural Funds Group (ASX: RFF)

Rural Funds is the third business that I’m going to mention. It has a market capitalisation of more than $1 billion. The ASX 200 share owns a variety of farmland across different sectors including almonds, macadamias, vineyards, cattle, and ‘cropping’ (cotton and sugar).

The real estate investment trust (REIT) also gives investors a DRP discount, of 1.5%. Rural Funds’ share price has fallen by 5% in 2022 to date.

The post 3 quality ASX 200 shares with dividend reinvestment plans appeared first on The Motley Fool Australia.

More reading

• Why has the Macquarie share price lost ground in May?
• Brokers name 3 ASX shares to buy today
• The ANZ share price is ‘trading at its largest discount to its peers in 15 years’: Is this justified?
• Broker names 2 ASX 200 shares with major upside potential
• ASX shares paid out a record $98b in dividends in the 12 months to March. Which are the star performers?

Motley Fool contributor Tristan Harrison has positions in RURALFUNDS STAPLED. 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 RURALFUNDS STAPLED. The Motley Fool Australia has recommended Ansell Ltd. and Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The CSL Limited (ASX: CSL) share price has outperformed this month despite the company releasing potentially disappointing news.

The biotechnology stock has slipped 0.03% since the end of April. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) has fallen 2.22%.

At the time of writing, the CSL share price is $273.22.

Let’s take a look at all the market has heard from the company this month.

What’s been going on with CSL this month?

The CSL share price has seemingly shrugged off the downturn spurred by a delay to the company’s $17.2 billion acquisition earlier this month.

The biotech giant announced its planned takeover of Vifor Pharma had hit a hurdle on 12 May.

Regulatory approvals are expected to drag the process out for a few months longer than was previously planned.

The news dragged the CSL share price 1.8% lower. Though, it lifted another 3.3% the following day.

The news also wasn’t enough to throw the stock off the course of the S&P/ASX 200 Health Care Index (ASX: XHJ).

As the above chart shows, CSL shares – represented in orange – have been trading closely in line with the company’s sector – represented in teal – over the last month.

Meanwhile, the ASX 200 – represented in blue – has been underperforming both.

There were a number of other happenings that might have bolstered market sentiment in CSL’s stock this month.

The company announced its plasma collections had reached pre-pandemic levels in early May.

Additionally, plenty of brokers are bullish on CSL’s stock. Notably, Citi slapped it with a $335 price target and Bell Potter expects big things to come.

CSL share price snapshot

While CSL’s stock has outperformed over the last month, it’s struggled over the longer term.

The company’s shares have slipped 8% year to date. They have also fallen 6% since this time last year.

The post What happened to the CSL share price in May? appeared first on The Motley Fool Australia.

More reading

• Buy these 2 impressive ASX 200 shares in June 2022: experts
• Why is the CSL share price losing ground on Friday?
• Why I think these 3 ASX shares are top-quality buying at today’s prices
• After being stuck in the mud for 3 years, are CSL shares a buy today?
• The best 2 ASX shares money can buy right now: expert

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Brooke Cooper 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 CSL Ltd. 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.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Investing in stocks can be a risky prospect. Stock values can fluctuate a lot, and that means on a day-to-day or week-to-week basis, you could end up seeing your fair share of on-screen losses in your portfolio.

But investing in stocks also has a lot of upside — namely, that stocks tend to generate high returns that could make you very wealthy. That assumes, of course, that you’re willing to take a buy-and-hold approach to investing — that is, buy stocks and hang on to them for many years so they can gain value. But, all told, loading up on stocks is a great way to build a lot of wealth for retirement, and it could be your ticket to meeting other major goals as well.

But if you’re going to buy stocks, it’s important that you do so strategically. And so the next time you’re tempted to add shares of a given stock to your brokerage account, be sure to ask yourself this important question.

Why am I investing in this company?

There are different factors that may be motivating you to invest in a given company. Maybe you like the way that company has expanded its product line without taking on too much debt. Maybe you’re a fan of the company’s management team and think it will take the business to a very profitable place. Or maybe you’re looking to diversify your portfolio, so you’ve landed on a company whose market sector you’re currently light on.

All of these are valid reasons for buying a stock. But one thing you don’t want to do is choose a stock at random without there being a specific thought pattern behind it.

Along these lines, it’s generally not a good idea to invest in a specific company simply because it tends to be in the news a lot. Sometimes, companies gain publicity for reasons that aren’t ideal (think executive scandals or speculative products). And so hearing a company name mentioned a lot isn’t automatically a good reason to buy it.

Have a specific plan

It’s always a good idea to establish an investment strategy based on your goals and risk tolerance. Whenever you’re tempted to buy a stock, you should really make sure the company in question fits into your strategy to some degree.

If part of your strategy is to load up on a certain number of growth stocks, and you come across a company that you think has solid growth potential, then you should feel comfortable moving forward with that investment. But you definitely shouldn’t just pick stocks out of a hat, or buy the same stocks your friends are buying and hope for the best.

The more strategic you are in the course of building your portfolio, the more success you’re likely to have as an investor. So digging into the “why” is a good bet before moving forward with any investment choice, even if it’s a company whose shares you’ve purchased many times before.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post The 1 question you must ask yourself before buying a stock appeared first on The Motley Fool Australia.

More reading

• What happened to the CSL share price in May?
• Guess which ASX All Ordinaries share is soaring 16% on a new $140 million contract win
• ASX 200 midday update: Beach, Santos rise but EML, Zip tumble
• 3 key reasons why I think the Adairs share price is a buy
• May was another shocker of a month for the Zip share price. Here’s why

The Motley Fool has a disclosure policy.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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It’s proving a good day so far for ASX All ordinaries share Wagners Holding Co Ltd (ASX: WGN), with its share price surging in early afternoon trade.

At the time of writing, the Australian construction materials provider’s shares are swapping hands at $1.38, up 15.97%.

What did the ASX All Ordinaries share announce?

Investors are fighting to get a hold of Wagners shares after the company announced it has secured a significant contract.

In its statement, the ASX All Ordinaries share advised it has won a material contract for the Sydney Metro – Western Sydney Airport Project.

This will see the supply of more than 67,000 precast concrete tunnel segments, manufactured from the company’s facility in Wacol, Brisbane.

Production of the segments will commence in late 2022 with the final segments scheduled for completion in early 2024.

The project is being delivered by the CPB Contractors Ghella (CPBG) joint venture, and involves the construction of 9.8 kilometres of twin metro rail tunnels.

Following the project’s completion, this will provide a public transport service to the new Western Sydney International (Nancy-Bird Walton) Airport.

Subject to timing parameters, Wagners is expected to reap around $140 million over the 20-month period of the contract.

Speaking on the news fuelling this ASX All Ordinaries share today, Wagners CEO Cameron Coleman commented:

The Sydney Metro-WSA-SBT is a significant project providing important transport infrastructure for the people of Sydney.

Wagners are extremely proud to work with the CPBG joint venture on this critical scope of works for the project which will also deliver significant job opportunities. The segments will be manufactured locally at our Wacol precast facility, before being transported to Sydney for installation into the project.

Wagners have been involved in the construction of the last three significant tunnel projects in Queensland, and is looking forward to being able to utilise this expertise in the manufacture and delivery of these segments for the Sydney Metro-WSA-SBT project.

About the Wagners share price

Despite its strong gains today, the Wagners share price has tumbled 42% over the past 12 months.

When looking at the year to date, its shares are down 15%.

Based on today’s price, this ASX All Ordinaries share has a market capitalisation of $212.01 million and a price-to-earnings (P/E) ratio of 16.7.

The post Guess which ASX All Ordinaries share is soaring 16% on a new $140 million contract win appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras 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.

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At lunch on Tuesday, the S&P/ASX 200 Index (ASX: XJO) is on course to end the month on a disappointing note. The benchmark index is currently down 0.25% to 7,268.5 points.

Here’s what is happening on the ASX 200 today:

Tech sector under pressure

The Australian tech sector has run out of steam and is dropping on Tuesday. The likes of EML Payments Ltd (ASX: EML) and Zip Co Ltd (ASX: ZIP) are trading notably lower, which has led to the S&P ASX All Technology index falling 1.5% today.

BHP rated as a buy

The BHP Group Ltd (ASX: BHP) share price is edging higher today. This could have been driven by a broker note out of Citi this morning. According to the note, the broker has put a buy rating and $50.00 price target on the mining giant’s shares. Its analysts believe that further demergers could benefit BHP.

Energy shares rise

One area of the market that isn’t in the red today is the energy sector. A number of energy producers such as Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) are pushing higher today after oil prices continued to climb overnight. Traders were bidding up oil ahead of an EU meeting on Russian sanctions and news that China is easing its COVID-19 restrictions.

Best and worst ASX 200 performers

The best performer on the ASX 200 on Tuesday has been the Beach share price with a 3.5% gain. This follows another rise in oil prices during overnight trade. Going the other way, the Life360 Inc (ASX: 360) share price is the worst performer with a 4% decline. The location technology company’s shares have come under pressure amid weakness in the tech sector.

The post ASX 200 midday update: Beach, Santos rise but EML, Zip tumble appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Life360, Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended EML Payments and Life360, Inc. The Motley Fool Australia has positions in and has recommended EML Payments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Adairs Ltd (ASX: ADH) share price looks good value to me; that’s why I’d call it a buy.

Adairs is a business that sells homewares and furniture through three different brands – Adairs, Mocka, and Focus on Furniture.

The Adairs share price has suffered in 2022 almost as much as many tech shares. It has fallen around 40% since the start of the calendar year.

I think it’s worth paying attention to the simple advice of ‘buy low, sell high’ at times like this. For a business with a compelling future, I think investors should consider businesses such as these at their lower prices.

These are some of the reasons why I think this ASX share could be a good pick today.

Membership numbers

Adairs says that the growth of its membership program, Linen Lover, is a “key” driver of sales.

The ASX share says that members account for more than 80% of total sales and spend around 1.5 times more than non-members with each transaction.

The business points out that total Adairs sales are highly correlated to the number of members and each new member adds around $400 in total sales. It’s looking to grow the number of members by between 10% to 15% per annum over the next few years.

At its annual general meeting (AGM), Adairs said that member retention initiatives and the facilitation of online sign-ups through the upgrade of its digital platform in FY22 could offer “significant upside” to growth rates. Keeping members will be important for the Adairs share price in my opinion.

Store floor area

There is another positive relationship between store sales and retail floor spare.

The company has said each additional square metre typically adds around $4,000 in in-store sales. Average annual growth of floor space was 7.5% over the last five years. It’s expecting to add at least 5% annually to its floor space in the coming five years.

Upsizing stores is part of the company’s tactic, with larger stores materially more profitable than smaller ones as they can show off more products.

Focus on Furniture also adds to the company’s long-term growth potential. It can increase the number of stores, grow online sales, and Focus on Furniture can benefit from being part of a larger business.

Online sales

The company is focused on being an omnichannel retailer. That means customers can buy however they want – offline or online.

In the FY22 first half, online sales actually made up 43% of total sales. As well, online sales continue to grow across all brands. Total online sales for the half were up 185% compared to the first half of FY20. I think online sales will have an increasingly important influence on the Adairs share price.

While online sales come with delivery costs, it is an effective way to connect with customers and ensure members keep coming back because of their good experience in dealings with the company.

I think it will be the retailers that are effective at e-commerce that will do well in the coming years as more customers do their shopping online.

Dividend yield

The dividend isn’t everything with Adairs, but it’s an attractive bonus to boost returns.

The broker Morgans thinks that the ASX share could pay a grossed-up dividend yield of 11.6% and 15.9% in FY23. Even if the dividend yield were only 10%, that’s still a very attractive income yield in my opinion.

Adairs share price valuation

As an ASX retail share, the business has a pretty low price/earnings (P/E) ratio. If it can grow earnings in the longer-term, I think it can do quite well over time. According to Commsec, the Adairs share price is valued at eight times FY22’s estimated earnings.

The post 3 key reasons why I think the Adairs share price is a buy appeared first on The Motley Fool Australia.

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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 positions in and has recommended ADAIRS FPO. The Motley Fool Australia has positions in and has recommended ADAIRS FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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