Day: 1 June 2022

The S&P/ASX 200 Index (ASX: XJO) is experiencing a lukewarm reception on Wednesday.

Investors are being cautious today amid strong wage data that suggests the Reserve Bank of Australia (RBA) may be inclined to raise the cash rate by 40 basis points. This would bring the country’s cash rate to 0.75% — making debt more expensive.

So, it might not come as a surprise to hear that the tech sector is the worst-performing today. Tracking closely behind is the materials corner of the market. Specifically, lithium shares are feeling the sting of Goldman Sachs’ negative outlook on the battery commodity.

However, there are a few ASX 200 shares that are performing far better than the index today.

These ASX 200 shares are green all over

More than half of the companies inside the ASX 200 are in the red on Wednesday afternoon. Under these circumstances, it can be insightful to get a sense of which shares investors are remaining confident in.

One of the three holding its own today is iron ore miner, Fortescue Metals Group Limited (ASX: FMG). Shares in the ASX 200 constituent are swapping hands at $20.73, up a tidy 3.1% from their previous close.

For context, the benchmark index is only up 0.15% this afternoon. With no announcements out, it appears the strength stems from an improvement in iron ore prices overnight.

Another company showering in gains today is TPG Telecom Ltd (ASX: TPG), one of Australia’s largest telecos. As the closing bell approaches, the company’s shares are ~3% above where they were at the end of yesterday’s session at $5.92.

While it’s hard to say, the solid showing might be attributable to news that Optus is not happy with plans for TPG and Telstra Corporation Ltd (ASX: TLS) to buddy up. A deal is on the table for the two to share access to each other’s respective networks — a move that could hurt Optus’ edge.

Speak of the devil… Telstra is our final ASX 200 share going above and beyond the benchmark this afternoon. The largest network provider in Australia is trading 2.84% higher at $3.99 per share. As mentioned above, this might be due to Optus’ nervousness.

The post 3 ASX 200 shares smashing the market today appeared first on The Motley Fool Australia.

More reading

• Why Bailador, Fortescue, Nufarm, and Telstra shares are rising
• Why is the Telstra share price dialling higher today?
• Why did the Telstra share price backtrack in May?
• Investing in ASX hydrogen shares? Here’s what you should know
• Iron ore price to fall 27% by end of 2022: CBA

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Corporation Limited. The Motley Fool Australia has recommended TPG Telecom 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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It’s a rough day on the market for most ASX uranium shares despite seemingly good news for the industry. In fact, there’s no clear reason behind uranium stocks’ underperformance today.

The price of the nuclear-necessity seems to be on a slight upwards trend – though it’s still significantly lower than it was five weeks ago. Additionally, a major South Australian uranium project was finally given the green light after being put on the back burner years ago.

Let’s take a closer look at what might be weighing on ASX uranium shares.

What’s weighing ASX uranium shares down?

ASX uranium shares are having a rough trot today alongside many of their peers.

In fact, the S&P/ASX 200 Materials Index (ASX: XMJ) is currently down 0.64%, with lithium miners among its worst performers. At the same time, the S&P/ASX 200 Energy Index (ASX: XEJ) has slumped 0.14%. For context, the S&P/ASX 200 Index (ASX: XJO) is currently up 0.1%.

Meanwhile, the share prices of uranium producers Paladin Energy Ltd (ASX: PDN), Deep Yellow Limited (ASX: DYL), and Bannerman Energy Ltd (ASX: BMN) are down 8.18%, 5.96%, and 8.7%, respectively.

Interestingly, Boss Energy Ltd (ASX: BOE) is also 5.7% lower, despite good news out of its Honeymoon uranium project.

The company announced work at the project will restart this morning after being put on ice in 2013 amid untenable uranium prices.

Speaking of uranium prices, after a multi-year lull, the spot price of uranium started to gain traction in 2021 but, since reaching a notable high in April, the commodity’s value has slumped around 20%. Though, it has gained around 4% since this time last week.

Thus, ASX uranium shares could be slipping in response to the commodity’s strung-out tumble.

Additionally, the world’s largest physical uranium fund, the Sprott Physical Uranium Trust, has fallen 9% over the last 30 days.

It’s worth noting that, today’s falls included, all mentioned ASX uranium shares except for Deep Yellow have fallen relatively in line with the trust over that time.

They’ve each slipped between 8% and 10% over the last month. Meanwhile, Deep Yellow’s stock has dumped 19%.

The post What’s going wrong for ASX uranium shares on Wednesday? appeared first on The Motley Fool Australia.

More reading

• Paladin Energy share price down 9%
• Boss Energy share price slides 5% despite project milestone
• TGIF: Here’s why ASX 200 energy shares are outperforming today
• Here are the 3 most heavily traded ASX 200 shares on Monday
• Here are the 3 most heavily traded ASX 200 shares on Friday

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 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 Zip Co Ltd (ASX: ZIP) share price is taking a big fall today, down 9.29% in afternoon trade.

Zip shares opened this morning at 92 cents and are currently trading for 83 cents.

Today’s selling won’t come as good news to Zip shareholders. Nor will it be the first time they’ve watched the ASX buy-now, pay-later (BNPL) company slide lower.

Having soared a remarkable 872% in the 11 months following the post-pandemic selloff lows on 20 March 2020, it’s been mostly downhill for Zip shares since.

Since the 19 February 2021 highs, the Zip share price is down a gut-wrenching 93%. In 2022 alone, shares are down 81%.

But for ASX investors hoping the worst was over, the former chair of diversified financial services group Humm Group Ltd (ASX: HUM) and a major Humm shareholder, Andrew Abercrombie, has some unsettling news.

What unsettling issues are ASX BNPL shares facing?

The former chair of Humm, which has offered consumers the option to pay off loans in instalments for more than 10 years, said most BNPL companies are going to see an increase in bad debts. That’s because they’ve been offering instalment payments to customers for very small figures, without ensuring these customers can make those repayments.

According to Abercrombie (quoted by The Age):

Nothing can change the fundamental flaw with this ultra-small ticket buy now, pay later. You’ve got to do these things super quickly, and super accurately. And that is where everyone has done it super quickly, but no one has done it super accurately, and that is what is killing every single one of these guys, is losses.

Indeed, Zip shares have come under pressure due to the company’s worsening credit losses.

Following Zip’s recent third-quarter update, the Motley Fool reported, “Management revealed that due to a combination of both internal and external factors, credit losses increased outside the company’s target range during the quarter.”

What’s the outlook for Zip shares?

The new environment of rising interest rates isn’t likely to help Zip shares in the year ahead. With more consumers coming under pressure amid higher mortgage and car loan repayments, bad debts could creep higher.

“No question. Interest rates affect everybody including us,” Abercrombie said. “But we know we have a profitable model because over the 15 years we’ve been in the game we’ve had interest rates well in excess of 10%.”

The post Is this a ‘fundamental flaw’ with ASX BNPL shares like Zip appeared first on The Motley Fool Australia.

More reading

• Why Allkem, Origin, PointsBet, and Zip shares are sinking today
• Why Bubs, PolyNovo, Suncorp, and Zip shares are dropping
• ASX 200 midday update: Beach, Santos rise but EML, Zip tumble
• May was another shocker of a month for the Zip share price. Here’s why
• ASX 200 midday update: AGL demerger scrapped, A2 Milk jumps

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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In late afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to record a small gain. At the time of writing, the benchmark index is up a few points to 7,215.1 points.

Four ASX shares that are weighing on the index today are listed below. Here’s why they are dropping:

Allkem Ltd (ASX: AKE)

The Allkem share price is down 14% to $11.83. There have been a few catalysts for this. This includes a broker downgrade by Credit Suisse, Argentina setting a lithium reference price of US$53 per kilo, and Goldman Sachs reiterating its view that lithium prices will fall heavily in the coming years. This seems to have undone investor optimism that prices will remain higher for longer following the recent Pilbara Minerals Ltd (ASX: PLS) digital auction.

Origin Energy Ltd (ASX: ORG)

The Origin share price is down 14% to $5.87. Investors have been selling this energy giant’s shares after it withdrew its earnings guidance. Due largely to coal supply challenges, Origin now expects its energy markets earnings to be well short of previous guidance. And with management appearing unsure how long these tough trading conditions will last, it has withdrawn its FY 2023 guidance.

PointsBet Holdings Ltd (ASX: PBH)

The PointsBet share price is down 12% to $2.61. This is despite the release of an update on its global leadership team which revealed some key appointments. Though, it is worth highlighting that rival DraftKings saw its shares tumble 8% on Wall Street overnight. That was driven by a broker note out of Citi, which revealed that its analysts have slashed their Draftkings valuation by 20%.

Zip Co Ltd (ASX: ZIP)

The Zip share price is down 8.5% to 83.5 cents. This decline comes amid broad weakness in the tech sector today. That weakness has seen the S&P ASX All Technology index trade over 1% lower this afternoon. Today’s decline means that Zip’s shares are now trading within half a cent of a multi-year low.

The post Why Allkem, Origin, PointsBet, and Zip shares are sinking today appeared first on The Motley Fool Australia.

More reading

• Is this a ‘fundamental flaw’ with ASX BNPL shares like Zip
• What’s dragging the Lynas share price 6% lower today?
• Why is the Pilbara Minerals share price cratering 17% today?
• Why are ASX lithium shares tanking on Wednesday?
• ASX 200 midday update: NAB completes acquisition, lithium miners sink, Origin tumbles

Motley Fool contributor James Mickleboro has positions in Allkem Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Pointsbet Holdings Ltd and ZIPCOLTD FPO. 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 Scott Phillips.

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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to start the month with a small gain. At the time of writing, the benchmark index is up 0.25% to 7,229.5 points.

Four ASX shares that are climbing more than most today are listed below. Here’s why they are rising:

Bailador Technology Investments Ltd (ASX: BTI)

The Bailador share price is up 4.5% to $1.44. Investors have been buying this investment company’s shares following an update on its dividend policy. Bailador revealed that will continue with its dividend policy of paying 4% of its pre-tax net tangible assets (NTA) per annum. Furthermore, this year it will include a special dividend of 2% of pre-tax NTA.

Fortescue Metals Group Limited (ASX: FMG)

The Fortescue share price is up 3% to $20.71. This gain appears to have been driven by a rise in the iron ore price overnight. According to CommSec, the spot iron ore price rose US$1.51 or 1.1% overnight to US$135.02 a tonne.

Nufarm Ltd (ASX: NUF)

The Nufarm share price is up 2% to $5.39. This appears to have been driven by bargain hunters swooping in after a recent decline. For example, prior to today, the agricultural chemicals company’s shares were down ~20% over the last couple of weeks. One broker that sees a lot of value in Nufarm’s shares is Macquarie. It has an overweight rating and $7.20 price target on the company’s shares.

Telstra Corporation Ltd (ASX: TLS)

The Telstra share price is up 3% to $4.00. This is despite there being no news out of the telco giant. However, it is worth noting that similar gains are being made by a number of telco shares. This could be a sign that investors are switching to more defensive options on a day that many high risk shares are crumbling.

The post Why Bailador, Fortescue, Nufarm, and Telstra shares are rising appeared first on The Motley Fool Australia.

More reading

• Why is the Telstra share price dialling higher today?
• Why did the Telstra share price backtrack in May?
• Investing in ASX hydrogen shares? Here’s what you should know
• ASX 200 midday update: NAB completes acquisition, lithium miners sink, Origin tumbles
• Iron ore price to fall 27% by end of 2022: CBA

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bailador Technology Investments Limited. The Motley Fool Australia has positions in and has recommended Telstra Corporation Limited. The Motley Fool Australia has recommended Bailador Technology Investments 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 Lynas Rare Earths Ltd (ASX: LYC) share price is crashing to a two-week low today amid ASX lithium shares going into meltdown.

The sharp sell-off appears to be triggered by a warning from Goldman Sachs that calls time on the battery metals bull market.

Mind you, the minerals that Lynas sells aren’t used to make batteries. Battery metals are lithium, nickel, and cobalt.

Lynas share price: guilt by association

Lynas is a rare earths miner. It’s the world’s second-largest producer of Neodymium and Praseodymium (NdPr) used in magnets. Magnets are essential in electric motors.

This distinction seems to be lost on the market today. The Lynas share price tanked to a low of $9.15, down 7%, before edging back to $9.31 at the time of writing — 5.48% lower.

That isn’t as bad as ASX lithium and nickel miners. The IGO Ltd (ASX: IGO) share price reversed 11%, the Allkem Ltd (ASX: AKE) share price is down 12.5%, and Pilbara Minerals Ltd (ASX: PLS) is 19.32% lower at the time of writing.

Peak of the lithium boom

Goldman reckons investors have chased ASX battery metal miners to extremes in their rush to get on the green revolution bandwagon, pulled by electric vehicles.

The broker said:

That fundamental mispricing has in turn generated an outsized supply response well ahead of the demand trend in focus.

In this context, we see prices on a downward trajectory over the course of the next two years, with a sharp correction in lithium.

Goldman is forecasting lithium prices to average US$53,982 a tonne in 2022 and US$16,372 in 2023. This compares to the current spot lithium price of US$60,350 a tonne.

The broker also thinks cobalt and nickel prices will also come down from their current spot prices. Although the falls aren’t as dramatic.

Why the Lynas share price is suffering

As mentioned, Lynas does not produce these metals. But in a panic sell-off when everyone is rushing for the exits, anything linked to EVs gets trampled on.

Interestingly, the old school polluting commodities are faring better. This includes ASX energy shares and the iron ore majors.

For instance, both the Santos Ltd (ASX: STO) and Woodside Energy Group Ltd (ASX: WDS) share prices are up, 0.24% and 0.02% respectively.

Meanwhile, the Fortescue Metals Group Limited (ASX: FMG) and BHP Group Ltd (ASX: BHP) share prices also gained 3% and 1.54% respectively.

However, the drop in the Lynas share price shouldn’t worry longer-term investors. The company’s shares are still up 76% over the past 12 months when the S&P/ASX 200 Index (ASX: XJO) is sitting on a 1% gain.

The post What’s dragging the Lynas share price 6% lower today? appeared first on The Motley Fool Australia.

More reading

• UBS warns of more downgrades for ASX 200 shares… but not all
• Here are 3 highly profitable shares I’ll be buying this month
• Why are ASX nickel shares tumbling today?
• IGO share price crumbles amid battery material price warning
• Why is the Pilbara Minerals share price cratering 17% today?

Motley Fool contributor Brendon Lau has positions in Allkem Limited, BHP Billiton Limited, Fortescue Metals Group Limited, Independence Group NL, Lynas Corporation Limited, and Santos 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 Scott Phillips.

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Our market is staging a comeback, but it may be too early to bottom pick as many ASX 200 shares are facing more downgrades, according to a top broker.

The S&P/ASX 200 Index (ASX: XJO) peaked on 21 April and lost around 9% over the next three weeks. But improving risk appetite has helped it stage a recovery.

More pain around the corner for ASX 200 shares

However, the sell-off may not be over, according to UBS. The broker believes market expectations for earnings are still too high and equities may not find a bottom for another year.

The broker commented:

Stocks benefitted from unprecedented stimulus during the pandemic, but global central banks are now tightening at the fastest pace in decades.

This tightening is a good leading indicator of the growth cycle (with a longer lead than the OECD) and hikes signals continuing headwinds for equities.

Recession risks weigh on sentiment

UBS noted that 29 out of 37 central banks have hiked interest rates in the last three months. Some are early in their tightening cycle – notably our reserve bank and the United States Federal Reserve.

The tightening in monetary conditions in the US is probably enough to tip the world’s largest economy into a mild recession, according to the broker.

As the saying goes, if the US sneezes, we catch a cold. ASX 200 shares will not be immune to the US economic malaise even if our economy does not contract.

Why ASX 200 shares could face more downgrades

From that perspective, the recent derating in price-earnings (P/E) multiples for ASX shares is more the start than the end of earnings weakness. UBS pointed out that the contraction in P/Es led to a drop in earnings per share (EPS) by around six months.

Further, the EPS downgrade tends to lag interest rate hikes by around 18 months.

UBS added:

If you look at EPS realisation ratio, or how reported EPS compares to what was expected, current FY23 and FY24 estimates may be 10-20% too high (and PEs higher than they look).

We think it’s too early to buy the dip given downgrades are still modest.

When to buy the ASX dip

If now isn’t the time to be buying the dip, then when? The broker reckons a better time to buy ASX 200 shares is when EPS downgrades are more dramatic.

The only thing is that this may not happen until 2023, when UBS believes we would have hit the midpoint of the recession.

But it isn’t all bad news. The broker thinks that Australian shares will outperform US equities. It also believes the best way for ASX investors to weather the storm is to go overweight on ASX 200 resources shares and defensive shares.

ASX 200 shares to buy in this volatile period

Some of the mining shares on UBS’ buy list include the BHP Group Ltd (ASX: BHP) share price, the Newcrest Mining Ltd (ASX: NCM) share price and South32 Ltd (ASX: S32) share price.

The types of defensive shares the broker is bullish on include the Ramsay Health Care Limited (ASX: RHC) share price and Coles Group Ltd (ASX: COL) share price – just to name a few.

The post UBS warns of more downgrades for ASX 200 shares… but not all appeared first on The Motley Fool Australia.

More reading

• Here are 3 highly profitable shares I’ll be buying this month
• ASX 200 midday update: NAB completes acquisition, lithium miners sink, Origin tumbles
• How might ‘green premiums’ impact the value of ASX mining shares?
• The BHP special dividend is being paid today. Here’s the lowdown
• Why is the South32 share price falling today?

Motley Fool contributor Brendon Lau has positions in BHP Billiton Limited, Newcrest Mining Limited, and South32 Ltd. 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 COLESGROUP DEF SET. The Motley Fool Australia has recommended Ramsay Health Care 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 S&P/ASX 200 Index (ASX: XJO) is down 5% since the start of the year and the tech-heavy Nasdaq index is down a devastating 23%. It is clear to see there’s plenty of blood on the investing battlefield. Nonetheless, this month I’ll be channeling my inner Warren Buffett and buying shares in what I believe are high-quality companies.

Make no mistake, it is difficult to look at a volatile market dead in the eyes and still pull the trigger. However, I personally haven’t been this motivated to invest heavily since the COVID-19 crash.

Hindsight is a beautiful thing. Though the reality is this might turn out to be one of those rare chances to get highly profitable shares at a discount — only time will tell.

This brings me to the two ASX shares and one US stock that I will be loading up on this month.

Two ASX shares I’m buying

As we all know, the share market has not been in its finest form as of late. Rather than looking at my portfolio in despair, I’ve been trawling through my watchlist. The exciting attribute I have found about the current selloff is its indiscriminate nature.

If investors want to pull the plug on unprofitable companies as rates go higher (though, I think some of those still have potential too), fair enough. But liquidating positions in companies with high profitability and a track record of high capital efficiency… ludicrous (in my opinion).

That’s why this month I will be buying shares in Pro Medicus Limited (ASX: PME) and Jumbo Interactive Ltd (ASX: JIN). Both companies have been in my portfolio for more than three years. During that time, these businesses have demonstrated continued growth in the face of adversity. Yet, these shares have fallen harder than the benchmark index, as shown below.

Firstly, Pro Medicus is a provider of medical imaging software across several regions around the world. For the 12-months ending 31 December 2021, the company made $37.99 million in profits with a margin of ~47%. In addition, it has an immaculate balance sheet without a spec of debt on it. To top it off, it offers a 0.5% dividend yield — a pleasing sight from a high-growth company.

The second ASX share I’ll be buying this month is online lottery operator Jumbo Interactive. Excitingly, Jumbo has stretched its wings and expanded abroad since I first invested in the company. With the acquisitions of Gatherwell, StarVale, and Stride; Jumbo has stepped its feet into the United Kingdom and Canada. For the 12 months ending December 2021, the company boasted an earnings margin of ~32%.

Keeping the portfolio beautiful

Venturing further abroad, there is also one US share I’ll be buying this month. InMode Ltd (NASDAQ: INMD) supplies a range of proprietary medical products that are used in predominantly non-invasive aesthetic surgeries.

According to the latest data, InMode is operating with an earnings margin of ~45%. At the same time, it has a US$399.5 million stash of cash and zero debt. Yet, the share price is down nearly 60% from where it was at the beginning of the year.

As a result, InMode currently trades on a price-to-earnings (P/E) ratio of 13.2. This is despite the company holding a formidable track record for high earnings growth.

The post Here are 3 highly profitable shares I’ll be buying this month appeared first on The Motley Fool Australia.

More reading

• ASX 200 midday update: NAB completes acquisition, lithium miners sink, Origin tumbles
• These were the worst performing ASX 200 shares in May
• These were the best performing ASX 200 shares in May
• What went wrong for the Wesfarmers share price in May?
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor Mitchell Lawler has positions in Jumbo Interactive Limited and Pro Medicus Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Jumbo Interactive Limited and Pro Medicus Ltd. The Motley Fool Australia has positions in and has recommended Pro Medicus Ltd. The Motley Fool Australia has recommended Jumbo Interactive 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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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.

With many top stocks on sale right now, every investor needs to know about one of the best-kept secrets on Wall Street.

Within 45 days of the last day of the previous calendar quarter, professional money managers who oversee $100 million or more in assets are required to disclose their holdings on Form 13F with the Securities and Exchange Commission. This public disclosure requirement gives others (including retail investors) the ability to peek at the recent moves of some of the most successful investors in the world, and it can be super valuable in times like these.

When market volatility hits abnormal extremes like it has in the last few months, it’s not surprising to see some of these top investors picking up their buying and selling activity. Let’s look at two popular stocks that could be significantly undervalued right now and have gotten some attention from top-level investors.

1. Meta Platforms

Facebook operator Meta Platforms (NASDAQ: FB) has seen its stock plummet this year over several issues. The war in Ukraine and uncertainty about the US. economy have caused advertisers to rethink their spending budgets, hurting social media companies that generate revenue primarily from advertising.

Facebook has also taken a hit from Apple‘s privacy changes in iOS that restrict app developers from tracking users’ activity for the purpose of delivering more relevant ads. 

Investors want to see more of the 20%-plus revenue growth that Meta Platforms was reporting through 2021, but the company reported top-line year-over-year growth of just 7% in the first quarter. Wall Street is more focused on making money now, so regardless of how great Meta’s prospects look over the long term, the stock is down primarily due to a weak outlook for growth in 2022. This gives patient investors a great opportunity to buy this tech giant at a deeply discounted valuation.

A few investors adding to their position in the first quarter were Pat Dorsey of Dorsey Asset Management, Michael Burry of Scion Asset Management (who famously predicted the 2008 mortgage crisis), and the investment firm Ruane, Cunniff & Goldfarb, which manages the Sequoia Fund.  

These investors obviously believe Meta is undervalued and should trade for a much higher price. Speaking to the company’s long-term value, CEO Mark Zuckerberg mentioned during the first-quarter earnings call that more people are using the company’s services than ever before. Meta’s apps, including Facebook and Instagram, are massively popular and still give the company opportunities to grow, especially as more users are starting to shop in online stores through Instagram.

The company is directing more investment toward short-form video, which is more in demand by users, and also investing more in artificial-intelligence-driven recommendation models to deliver more relevant results for users and advertisers over the next few years. “On the Family of Apps side, I am confident that we can return to better revenue growth rates over time and sustain high operating margins,” Zuckerberg said. 

Meta also offers additional upside potential if Zuckerberg’s vision of the metaverse comes to fruition. It’s for these reasons that the sell-off in the shares looks like a great buying opportunity.

2. PayPal Holdings

Share prices of PayPal Holdings (NASDAQ: PYPL) are down 57% year to date. The digital payments leader is experiencing slowing growth, which can be attributed to soft e-commerce spending compared to a year ago when people were receiving stimulus checks. More people are also returning to local stores to shop, which is dampening the volume that PayPal normally sees from people using its online checkout services. 

In the first quarter, PayPal reported growth in total payment volume of just 13% year over year, which is well below the 20%-plus numbers that the company has consistently reported for many years. The company generates revenue from fees charged on each transaction, so revenue growth has decelerated too.

But there is still a lot to like here if you’re focused on the long-term value of the business — and the most successful managers usually buy and sell stocks with a focus on a company’s long-term intrinsic value. PayPal is well entrenched in the digital payment landscape, with 426 million active customer accounts. It also has 34 million businesses using its services for checkout. 

PayPal has a ubiquitous brand in e-commerce, which no one thinks is going to stop growing over the coming decades. Research from eMarketer projects e-commerce spending to grow 50% to $7.4 trillion by 2025 and PayPal will almost certainly ride that wave, along with its many competitors in mobile payments.

This outlook for growth explains why several notable value investors were buying shares in the first quarter, including Pat Dorsey, David Rolfe of Wedgewood Partners, and David Katz of Matrix Advisors Value. 

CEO Dan Schulman said he believes that PayPal will bounce back and deliver more growth. During the recent earnings call, he mentioned that we’re going to see economic cycles come and go, but “that does not take away at all the fundamental secular tailwinds that we’re going to benefit from long term, which are the increasing proliferation of e-commerce and digital payments.” 

The stock’s sell-off means the market has much lower expectations for growth. This is setting up the potential for PayPal to deliver better-than-expected results over the next year, which could make it a great investment from these lows.

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

The post 2 top Nasdaq stocks the world’s best investors were buying last quarter appeared first on The Motley Fool Australia.

More reading

• Why Meta Platforms stock just rose while Amazon sank
• Will Microsoft and Apple shares finally give way in the stock market’s downturn?
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Ballard has positions in Sequoia Fund. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Meta Platforms, Inc. and PayPal Holdings. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Meta Platforms, Inc. and PayPal Holdings. 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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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.

In its recently released minutes from its May meeting, the Federal Reserve indicated that it may need to raise its benchmark overnight lending rate, the federal funds rate, potentially even more aggressively than the market had anticipated. Rising rates increase the cost of debt for consumers, whether it’s for a mortgage, a credit card, or another type of consumer loan. Rising bond yields, which tend to move with the federal funds rate, could also continue to create volatility in the stock market, which is why investors pay such close attention to how the Fed moves the federal funds rate. 

The Fed’s recent meeting minutes have investors wondering just how much it will raise rates this year. Luckily, JPMorgan Chase (NYSE: JPM) just dropped a big hint at its recent investor day about where the federal funds rate could land at the end the year. Let’s take a look.

JPMorgan’s hint

So far, the Fed has raised the federal funds rate to a range of 0.75% and 1%, which has included a 25-basis-point hike (0.25%) at its March meeting and then the big half-point move earlier this month. Not too long ago, many experts might have said that this is the range where the federal funds rate would end the year. But inflation has been much more aggressive than the Fed seems to have anticipated, and now the agency looks to be playing catch-up with every intent of getting consumer prices back under control. 

Prior to the release of the Fed’s meeting minutes, the market anticipated that the federal funds rate would end 2022 inside a range of 2.5% to 2.75%. Baked into this estimate is the Fed raising rates by a half-point at both of its meetings in June and July. But now the market seems to think it may have been too conservative with those estimates. 

In its meeting minutes, the Fed stated that “most participants judged that 50 basis point increases in the target range would likely be appropriate at the next couple of meetings.” The Fed added that “a restrictive stance of policy may well become appropriate depending on the evolving economic outlook and the risks to the outlook.”

JPMorgan Chase held its annual investor day earlier this week, during which the bank raised its outlook for net interest income (NII), which is a key source of revenue for banks. Baked into JPMorgan’s assumptions is the upper bound of the federal funds rate reaching 3% by the end of the year, meaning the range would be between 2.75% and 3%, higher than the broader market’s prior assumptions.

The Fed has five remaining meetings left in June, July, September, November, and December. That means to get to a range of 2.75% to 3%, the Fed would need to do half-point hikes in three of its remaining meetings and then 25-basis-point hikes at the other two. If you had asked a lot of intelligent investors at the end of 2021 if the Fed would do four half-point hikes this year, I think a lot of them would have answered with a decisive “No.”

Banks are conservative

Banks are not all-knowing and have missed their fair share of financial estimates and guidance over the years. However, banks have the pulse of the economy because they serve so many different businesses across various sectors and so many different consumer segments. As the largest bank in the U.S., JPMorgan Chase has arguably the most comprehensive view of the economy. Furthermore, banks are conservative. If they are providing financial guidance like JPMorgan Chase just did, they know they are now under a microscope. That’s why JPMorgan saying the federal funds rate will end the year with the upper bound of the range at 3% means management could actually be thinking higher if they’re being conservative. 

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

The post How high will interest rates rise in 2022? JPMorgan Chase just dropped a big hint appeared first on The Motley Fool Australia.

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Bram Berkowitz has no position in any of the stocks mentioned. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. 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. 

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

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