Three S&P/ASX 300 Index (ASX: XKO) healthcare shares were flying higher than their peers this afternoon.

This may be surprising as the S&P/ASX 200 Health Care Index (ASX: XHJ) spent a great deal of its trading session in the red today, even notching the title of worst performing sector at one stage. However, a late rally saw the index close lightly in the green, up 0.17%.

On a broader level, the S&P/ASX 300 Index also struggled, closing 1.4% lower at the end of trading.

Healthcare and other defensive shares, such as consumer staples, tend to outperform other sectors during an economic downturn.

So it’s possible that shares of healthcare companies may rise higher in the months ahead following anticipated interest rate hikes in Australia and inflation predicted to surge higher in the United States.

But for now, let’s recap the healthcare shares that performed strongly on Wednesday.

Ramsay Health Care (ASX: RHC)

Ramsay managed to outperform the Health Care Index and ASX 300 today, closing 0.35% higher for the day at $71 apiece.

The company was featured in a Foolish article this morning in which a Shaw and Partners senior investment advisor said that its outlook looks bright after beating off headwinds of COVID-19.

Shares in the private hospital operator are down 1.21% year to date.

Resmed CDI (ASX: RMD)

The Resmed share price had a cracker of a day today, closing a hefty 4.23% higher at $33.51 and snatching poll position as today’s top performing ASX 200 share. Earlier, shares in the medical equipment company lifted to an intraday high of $33.86 apiece.

Resmed also received some positive coverage from a broker this morning. Morgans said that the outlook for the company was positive, stating:

While we expect the next few quarters to be volatile as COVID-related demand for ventilators continues to slow and core sleep apnoea volumes gradually lift, nothing changes our medium/longer term view that the company remains well-placed as it builds a unique, patient-centric, connected-care digital platform that addresses the main pinch points across the healthcare value chain.

The company’s shares are down 7.38% year to date.

Polynovo Ltd (ASX: PNV)

Polynovo shares were up 0.77%, trading at $1.31 apiece at the close on Wednesday. The company produces medical devices.

There has been no news from Polynovo today, nor has a broker covered the company recently. The most recent announcement was made on 26 August, when the company announced its results for FY22.

Polynovo reported a surge in revenues for the reporting period as it grew 42.8%. However, investors sent its shares plummeting 15% on the day of the announcement.

Polynovo plans to expand its presence in the United States, New Zealand, and Australian markets.

The company’s shares are down 16% year to date.

The post 3 ASX 300 healthcare share winners on Wednesday appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Morgans names 3 more of the best ASX shares to buy in September
• 2 healthcare ASX shares ready to go off like a cracker: experts
• Broker names 2 excellent ASX growth shares to buy right now
• These ASX 200 shares are going ex-dividend on Monday

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 positions in and has recommended POLYNOVO FPO and ResMed Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended ResMed. The Motley Fool Australia has positions in and has recommended ResMed Inc. 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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This isn’t a good day for ASX banking shares, but it’s the National Australia Bank Ltd (ASX: NAB) share price that’s worse for wear on Wednesday.

Shares in the bank tumbled 3.1% to $29.31 while the S&P/ASX 200 Index (ASX: XJO) lost 1.4%.

Other ASX big bank shares were also dragged lower by the sell-off, but they weren’t as badly hit. The Commonwealth Bank of Australia (ASX: CBA) share price lost 2.1%, Westpac Banking Corp (ASX: WBC) share price fell by 2.07% and Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price declined 1.37%.

Why is the NAB share price lagging?

The underperformance of the NAB share price is likely due to a broker downgrade. Macquarie Group Ltd (ASX: MQG) cut its recommendation on NAB to neutral from outperform.

The broker noted that the divergence between ASX banks’ short- and medium-term outlooks is reaching new highs.

The upside is the next six months stem from the benefits of rising interest rates and lagging term-deposit rates.

Rising rates and bank margins

The Reserve Bank of Australia (RBA) jacked up the cash rate by another 50 basis points yesterday to 2.35%.

Every time it does that, it gives the banks an excuse to lift their mortgage rates. But when it comes to lifting term deposit rates, ASX banks tend to be slower to pass on the extra and often do not hand over the full rate increase. This gives their profit margins a boost.

Hard to be optimistic about ASX bank shares

Macquarie explains:

This dynamic creates a challenging backdrop to formulate the investment thesis. On the one hand, we see further upside risk to bank earnings in 1H23, leaving the sector in a relatively good spot given the uncertain outlook for the broader market.

On the other hand, our earnings forecasts remain well below consensus in FY24 and beyond.

The broker believes consensus is overestimating the profit margins for ASX bank shares, including the NAB share price, over the medium term.

It finds it difficult to be bullish on the sector given potential credit-quality concerns. Then there is also their demanding pre-provision valuations and elevated multiples relative to global peers.

When it comes to the NAB share price, Macquarie reckons it is fully valued. In other words, any good news is already priced in.

NAB share price snapshot

Given that the NAB share price has rallied ahead of the other big ASX bank shares, Macquarie’s view is understandable.

Shares in NAB are up 1.6% over the past year. This compares to the 20% plunge in the ANZ and Westpac share prices over the period.

Not even the mighty CBA share price can match NAB as it shed 8.6% in the last 12 months.

Macquarie’s 12-month price target on the NAB share price is $30.25 a share.

The post Why is the NAB share price diving more than the other big 4 ASX banks today? appeared first on The Motley Fool Australia.

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More reading

• Why rising rates are a ‘sugar hit’ for ASX 200 bank shares: Macquarie
• Rates go up, and CBA beefs up its business cred. Scott Phillips on Nine’s Late News
• Down 19% since April, is the ANZ share price in the buy zone?
• NAB shares offer 15% upside and growing dividends: broker
• Experts say these 2 ASX dividend shares are buys

Motley Fool contributor Brendon Lau has positions in Australia & New Zealand Banking Group Limited, Commonwealth Bank of Australia, Macquarie Group Limited, National Australia Bank Limited, and Westpac Banking Corporation. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited and Westpac Banking Corporation. 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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When it comes to passive investment vehicles on the ASX, there’s no doubt that the star of the listed investment company (LIC) has waned in recent years in favour of the exchange-traded fund (ETF). ETFs have never been more popular on the ASX than in the post-COVID years. In stark contrast, LICs have arguably fallen out of favour.

But there are some LICs that are still commanding respect on the ASX. Argo Investments Limited (ASX: ARG) is arguably one. Helped no doubt by its age and pedigree, Argo remains a popular ASX LIC. After all, it was founded way back in 1946, and was even helmed by the legendary cricketer Sir Donald Bradman for a while.

But for investors these days, little matters aside from performance. So let’s have a look at how Argo measures up against its larger rival – the Australian Foundation Investment Co Ltd (ASX: AFI). We’ll also look at how these two LICs compare to the index ETFs they so ferociously compete against.

What returns have Argo investors enjoyed?

So let’s jump straight into the numbers. So according to Argo itself, the LIC has delivered an average return of 7.7% per annum over the past three years on average, as of 31 July. That figure is based on the LIC’s share price and assumes dividends are reinvested.

Over the past five years, it has delivered an average of 7.1% per annum. This rises to 9.7% over the past ten years.

Let’s now see how that stacks up against AFIC.

How do these stack up against the ASX 200 and AFIC?

So AFIC does not report its three-year data. However, it does tell us that its share price has averaged a return of 11.6% per annum over the past five years. This extends to 12.2% per annum over the past ten years. These figures also assume dividends are reinvested, but also include the value of franking credits, which Argo doesn’t.

Still, it seems that AFIC’s share price has given investors greater overall shareholder returns over both the past five and ten years on average.

Both AFIC and Argo use the S&P/ASX 200 Accumulation Index as a benchmark. Many popular index ETFs on the ASX also track the ASX 200 Index. So let’s see how an investment in an ASX 200 ETF like the iShares Core S&P/ASX 200 ETF (ASX: IOZ) compares to these returns.

Assuming dividend distributions are reinvested, the iShares ASX 200 ETF has delivered an average of 4.28% over the past three years on average. This rises to 7.89% per annum over the past five years, and 9.19% per annum over the past ten.

So while Argo shares may not have outperformed AFIC over the past five and ten years on average, it has managed to eke out a better performance than the ASX 200 benchmark it uses. Perhaps the LIC is not about to give way to the index ETF just yet.

The post How do Argo shares measure up to other LICs like AFIC? appeared first on The Motley Fool Australia.

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More reading

• Are AFIC shares outperforming the ASX 200 this year?
• How has the AFIC ASX share portfolio changed over FY22?
• Argo share price lifts on record 2022 financial year profit results
• Why is the AFIC share price sliding today?
• The CBA share price looks downright expensive

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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ASX 200 bank shares have been somewhat of a mixed bag this year, starting off with a bang before receding back to range.

The benchmark and index funds tracking the sector are also down so far in 2022. The VanEck Australian Banks ETF (ASX: MVB) is down 8% this year to date and around 9.5% in the red for the past 12 months.

Despite the volatility, the banking majors in Australia look well positioned to capitalise on a series of macroeconomic and industry-specific tailwinds, analysts say.

Surging rates: good in the short term for ASX 200 banks

With interest rates now front and centre of the economic landscape, the Australian banking majors have seen a shakeup to their earnings outlook.

The increase in policy rates from the Reserve Bank of Australia (RBA) continues to be passed through to consumers at the retail and commercial levels, with interest rates on both home and business mortgages lifting to multi-year highs.

As such, net interest income (NII) obtained by the sector is set to increase, while the net interest margins (NIMs) on NII will also theoretically grow.

This is also seen on the deposit side too, where the recent spike in rates has been likened to a “sugar hit” by Macquarie analysts. It comes at a time when competition in the mortgage market remains at an all-time high.

Maquarie analysts said in a recent note:

In the short term, banks continue to benefit from highly lucrative retail deposit pricing, which will likely provide margin upside in the next six months.

If we are heading into an environment where credit growth is going to be slow for a long period of time, it does have a substantial impact on the earnings outlook and the valuation of banks.

The market is certainly pricing the effect of changing interest rates into ASX 200 bank shares.

All of the majors are down this year to date and have been tracing sideways for a good portion of a month now.

The below chart tracks the progress of: Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), Westpac Banking Corporation (ASX: WBC), Australia and New Zealand Banking Group Ltd (ASX: ANZ), and Bendigo and Adelaide Bank Ltd (ASX: BEN).

It remains to be seen if Macquarie’s forecast of the short-term impact of rate changes will result in a short-term thrust on the charts.

The post Why rising rates are a ‘sugar hit’ for ASX 200 bank shares: Macquarie appeared first on The Motley Fool Australia.

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More reading

• Rates go up, and CBA beefs up its business cred. Scott Phillips on Nine’s Late News
• Down 19% since April, is the ANZ share price in the buy zone?
• NAB shares offer 15% upside and growing dividends: broker
• Experts say these 2 ASX dividend shares are buys
• Own CBA shares? Here’s the bank’s warning on rapid RBA rate hikes

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Bendigo and Adelaide Bank Limited. The Motley Fool Australia has recommended Westpac Banking Corporation. 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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