Day: 4 September 2022

The Lynas Rare Earths Ltd (ASX: LYC) share price fell 4.6% on Friday, now down 24.6% over the past six months.

Shares of the rare earth mining company finished Friday at $8.30 each. During the session, they made an intraday high of $8.68 each.

The S&P/ASX 200 Materials Index (ASX: XMJ) has declined less over the past six months, losing 14.89%.

So the Lynas share price has clearly been sold off. The question is whether investors should fill their bags with the company’s shares or not?

Recently Lynas was put under a bullish spotlight courtesy of a broker. Let’s find out what they said.

What did the broker say?

Lynas was named among five ASX rare earth production shares by Datt Capital chief investment officer Emanuel Datt as being hot picks, as the Motley Fool reported previously.

These rare earth companies were chosen due to the rising geopolitical tensions between China and the West.

Datt said:

Should the Taiwan situation worsen and/or should China use force to control Taiwan, it’s likely there will be sanctions on goods sold to China and restrictions of the supply of strategic materials exported by China.

Datt continued:

China produces around 80% of the rare earth elements globally. And given their critical nature in the production of a wide range of modern technologies, a logical first step would be China restricting this supply to the rest of the world in which it is in disagreement.

Besides recommending Lynas, it was also reported that Datt personally bought an undisclosed amount of Lynas shares, cementing his opinion that the company is the “gold standard” of rare earth producers.

Lynas reported its earnings Friday last week, which sent its share price soaring on 244% gains, amid my Fool colleague Tony observing “revenue, net profit and earnings all made massive leaps”.

Lynas Rare Earths share price snapshot

The Lynas share price is down 24.8% year to date. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is only down 10% over the same period.

The company’s market capitalisation is $7.85 billion.

The post Should investors ‘buy the dip’ in Lynas shares right now? appeared first on The Motley Fool Australia.

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More reading

• Guess which ASX rare earths share is rocketing 13% on a ‘resounding success’. Hint: not Lynas
• Down 24% since April, have investors fallen out of love with Lynas shares?
• Top ASX shares to buy in September 2022
• 5 ASX shares that could rocket from a rare earths crisis: expert
• Guess which ASX All Ords share rocketed 15% on a rare earths deal with Twiggy Forrest

Motley Fool contributor Matthew Farley 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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S&P/ASX 200 Index (ASX: XJO) investors could be feeling wary of an article posted by Grantham, Mayo, & van Otterloo (GMO) co-founder and chief investment strategist Jeremy Grantham on Wednesday this week.

Grantham has a track record of successfully predicting financial crises. He predicted the dot-com bubble in the 90s and the subprime mortgage crisis that occurred in 2007.

Grantham stated that the United States stock market, as well as the economy in general, is in a “superbubble”. He cited the expensive valuations of most types of assets, including stocks, bonds, housing, and commodities. He called them “critically overpriced and now rapidly losing momentum”.

These premium valuations, combined with a perceived bear market rally for the S&P 500 in June, and deteriorating fundamentals of the economy, foreshadowed previous superbubble explosions.

He said the headwinds of COVID-19, the invasion of Ukraine, inflation, and supply chain shortages would undermine the fundamentals of shares, with rising interest rates and commodity shocks rocking the boat further.

Grantham stated today’s superbubble consists of several dangerous elements observed from the collapse of previous superbubbles. He said: “If history repeats, the play will once again be a Tragedy. We must hope this time for a minor one.”

So, should ASX 200 investors be worried about a stock market crash in the US and subsequently in Australia?

Alternative points of view

Not all experts are convinced by Grantham’s doom and gloom scenario. In fact, many question whether it’s possible to know if an asset bubble actually exists in the first place.

This includes Motley Fool chief investment officer Scott Phillips who, in response to Grantham’s article, said:

Is there a bubble? Realistically, no-one knows. Sometimes high prices are bubbles in hindsight. The tech crash of 1999/2000 is a great example. Other times, they simply reflect optimism that ends up being well-placed. How can you tell? You can’t.

I’m not going to tell you there’s no chance we’re in a bubble — that’s as impossible as saying we definitely are… and around and around we go. And so? Well, if you can’t know when we’re in a bubble — and similarly, you can’t know when a slump will end — I think the best option is to fall back on the investor’s friend — dollar cost averaging.

Sure, I’d love to know if we were, but because I can’t, I focus on what I can control: regular saving and investing; being diversified and choosing my investments well, and letting time do the work.

Furthermore, Grantham provides some falsifiability to his thesis of the impending crisis, noting:

If the bear market has already ended, the parallels with the three other U.S. superbubbles – so far so strangely in line – would be completely broken. This is always possible.

The arguments against

As my US Fool colleague, Keith Speights, noted on Monday, the S&P 500 is technically not in a bear market just yet. That’s based on the standard barometer of the index losing a minimum of 20% from the recent high. However, the NASDAQ does meet this criterion.

So Grantham’s thesis could turn out to be correct but a large part of it hinges on the presence of a bear market. That hasn’t been proven yet for the world’s most important stock index. Therefore, his conclusion that a massive asset bubble is about to burst is also missing one of its key assumptions.

Furthermore, my colleague Speights also noted that July data suggests that US inflation has possibly peaked. It observed a decline in house and gas prices, which takes the pressure off stocks.

Lastly, Speights also penned that stocks could be entering a new bull market rather than a bear market rally. This is based on analysing previous bear markets and seeing encouraging signs of inflation abating in the country.

The post Should ASX investors worry about this expert’s stock market crash prediction? appeared first on The Motley Fool Australia.

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More reading

• Top brokers name 3 ASX shares to buy next week
• Experts name 2 top ASX dividend shares to buy next week
• 2 exciting ETFs named as buys by experts
• 2 small cap ASX shares that analysts rate as buys
• Why did the Dogecoin price tumble 12% in August?

Motley Fool contributor Matthew Farley 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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Last week saw a number of broker notes hitting the wires once again. Three buy ratings that investors might want to be aware of are summarised below.

Here’s why brokers think investors ought to buy them next week:

Macquarie Group Ltd (ASX: MQG)

According to a note out of Morgan Stanley, its analysts have retained their overweight rating and increased their price target on this investment bank’s shares to $231.00. Morgan Stanley has upgraded its earnings estimates for FY 2023 to reflect favourable trading conditions. This is particularly the case for Macquarie’s commodity business, which the broker believes is benefiting from US gas prices. The Macquarie share price ended the week at $177.20.

Megaport Ltd (ASX: MP1)

A note out of Macquarie reveals that its analysts have retained their outperform rating and $11.00 price target on this network as a service company. Macquarie has been busy reviewing the technology sector following earnings season. It was impressed enough with Megaport to name it as its new top pick in the sector. The broker believes the market isn’t giving enough credit to the stickiness of Megaport’s product. The Megaport share price was fetching $6.91 at Friday’s close.

REA Group Limited (ASX: REA)

Analysts at Goldman Sachs have reiterated their conviction buy rating and $164.00 price target on this property listing company’s shares. Goldman Sachs has also been looking at the tech sector following earnings season. It was pleased with REA and continues to rate it as a conviction buy. The broker is forecasting solid earnings growth in the coming years. For example, in FY 2023 and FY 2024, Goldman is expecting net profit growth of almost 10% and 18%, respectively. from REA. The REA share price ended the week at $123.77.

The post Top brokers name 3 ASX shares to buy next week appeared first on The Motley Fool Australia.

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More reading

• Is this why the Macquarie share price was ‘steaming ahead’ on Friday?
• Brokers name 3 ASX shares to buy today
• Here are the top 10 ASX 200 shares today
• Why Dexus, Dusk, Macquarie, and Qantas shares are pushing higher
• It’s a cloudy day on the ASX, but some All Ords shares are still shining brightly

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 MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT FPO, Macquarie Group Limited, and REA 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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