Month: October 2022

It’s very interesting when directors of an S&P/ASX 200 Index (ASX: XJO) share decide to buy shares of their own company. Can investors take this as an investing prompt?

There are a number of stated reasons why directors may decide to sell their shares, whether the announced reason is the real reason or not. Paying tax and buying a property are two often-used reasons.

But, there may only be one reason for buying – they think it’s good value.

Which directors have bought ASX 200 shares?

The Millner family have been involved with the investment conglomerate Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) and they have increased their financial investment to the tune of millions of dollars.

Rob Millner is the current chair of Soul Pattinson. Between 17 October to 19 October 2022, it was announced that entities he’s involved with had bought 80,000 shares, spending almost $2.19 million.

But another announcement today showed that entities involved with Millner had bought another 70,000 Soul Pattinson shares at the end of last week and spent around $1.9 million on them.

Tom Millner, the son of Rob Millner, also made the same investment announcements as he’s involved with the same entities.

Wealth tied up in Soul Pattinson shares

For most people, spending around $4 million on shares would be a major move.

But the Millners have large amounts of their wealth tied up in shares.

Rob Millner’s disclosure showed that he now has a total interest in 22.83 million shares. That’s close to around $630 million at the current Soul Pattinson share price.

Tom Millner’s disclosure revealed that his total interest is now 21.98 million shares. That’s worth around $605 million.

So, despite having an enormous amount of their wealth already tied up in the investment conglomerate, both thought that the company’s current situation was worth investing in.

Investment follows outperformance in FY22 result

These investments by the Millner family come after last month’s Soul Patt’s report for the 12 months ending 31 July 2022.

The company’s net asset value (NAV), pre-tax, outperformed the All Ordinaries Index (ASX: XAO) by 20.2% in FY22. As well, its net cash flow from investments on a per-share basis increased 28% compared to FY21. It also grew the total ordinary dividend by 16.1% to 72 cents per share.

Soul Pattinson also declared a special dividend of 15 cents per share on the back of the bigger dividends it was receiving from New Hope Corporation Limited (ASX: NHC).

In terms of “managing risk”, Soul Patts said that it’s using active portfolio management to enhance returns and manage risk. It has increased diversification while increasing liquidity to take advantage of new opportunities, the company said.

The post Guess which ASX 200 directors bought $4m worth of their company shares last week appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Why did ASX 200 gold shares have such a top run today?
• ASX 200 bank shares have had a stellar month. Here’s why this expert is now worried
• 3 ASX mining shares going nuts on new discoveries
• Here are the 3 most heavily traded ASX 200 shares on Monday

Motley Fool contributor Tristan Harrison has positions in Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Washington H. Soul Pattinson and Company 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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S&P/ASX 200 Index (ASX: XJO) bank shares have driven the S&P/ASX 200 Financials Index (ASX: XFL) higher over the last 30 days.

The financials sector has lifted close to 7% since this time last month compared to the 4.7% jump in the broader ASX 200 index. And ASX 20 bank shares have been among its biggest gainers.

Indeed, the Bank of Queensland Ltd (ASX: BOQ) share price has soared 14.7% in that time while that of Westpac Banking Corp (ASX: WBC) has lifted 13%.

Other top performers include Australia and New Zealand Banking Corp Ltd (ASX: ANZ), up 11.5%, Bendigo and Adelaide Bank Ltd (ASX: BEN), up 10.6%, and National Australia Bank Ltd (ASX: NAB), up 8.1%.

Finally, the share price of Commonwealth Bank of Australia (ASX: CBA) is lagging its peers, having risen 7.5% over the last 30 days.

But the party might be coming to an end for ASX 200 bank shares, Barrenjoey analyst Jon Mott reportedly warns. Let’s take a look at why the expert is bearish on the Aussie financials giants.

Why is this expert bearish on ASX 200 bank shares?

The Bank of Queensland share price has outperformed its ASX 200 peers over the last month amid the release of the bank’s full-year earnings, detailing a strong final quarter for its net interest margin (NIM).

The measure – which, simply put, reflects the profit a bank takes from interest offered and charged to its customers – reached 1.81% in the final quarter of financial year 2022 on the back of consecutive rate hikes.

That could bode well for other ASX 200 banks, many of which are due to report in the coming weeks.

On the other hand, Mott believes a near-term increase in NIMs is increasingly priced into bank shares. He continued, courtesy of The Australian:

However, the impact of higher rates on over-leveraged consumers is not being reflected in prices.

The analyst also reportedly thinks NIMs will likely spike in the near future before easing sooner than expected. He tipped them to peak before the start of financial year 2024. In the meantime, the market could shift its focus to the risks rate hikes might pose to banks.

Notably, higher rates could see more homeowners defaulting on their mortgages while other Australians may choose not to enter the housing market.

Beyond that, Mott reportedly said the big four could struggle to justify record NIMs while many Australians are in financial stress. Additionally, he is said to have warned an Optus-style cyberattack would pose a greater threat to a financial institution, according to The Australian.

Perhaps unsurprisingly, Barrenjoey is underweight on the banking sector.

The post ASX 200 bank shares have had a stellar month. Here’s why this expert is now worried appeared first on The Motley Fool Australia.

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More reading

• 3 ASX mining shares going nuts on new discoveries
• Here are the 3 most heavily traded ASX 200 shares on Monday
• Could chasing high yields mean missing out on potentially top-notch ASX dividend shares?
• Has CBA just become a new competitor to Telstra?
• Own CBA shares? This expert says you ‘may want to consider cashing in some gains’

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 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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The S&P/ASX 200 Materials Index is up 2.62% in late afternoon trading, amid several ASX mining shares charging far higher today.

The sector is outperforming the broader S&P/ASX 200 Index (ASX: XJO), currently sitting 1.58% higher at more than 6780 points.

Let’s take a look at three mineral explorers having a stellar day on the market.

Gascoyne Resources Ltd (ASX: GCY)

Gascoyne shares are up 12.2% today. Diamond drilling at the Never Never gold deposit in Western Australia intersected with visible gold mineralisation. Results included 12 metres at 34.5 grams per tonne (g/t) gold and 26m at 10.27 g/t gold. Gascoyne managing director Simon Lawson described Never Never as “one of the most remarkable gold deposits” he has ever seen. He added:

Our geologists are super excited as we drill each hole and, with such amazing intercepts being delivered with each successive step-out, it is becoming increasingly clear that this is one of the most significant new gold discoveries anywhere in Australia.

Dreadnought Resources Ltd (ASX: DRE)

Dreadnought shares are 10% higher today. Assay results from drilling at the Yin discovery showed thick, high-grade rare earth element (REE) mineralisation. This includes 54 metres at 2.07% Total Rare Earth Oxides (TREO) from 24 metres. The project is located within the company’s 100% owned Mangaroon project in Western Australia.

Commenting on the news, managing director Dean Tuck said:

Yin continues to deliver exceptional REE results. With 91 of 120 holes reported, we remain on schedule to deliver our initial JORC resource at Yin in the December 2022 quarter.

Azure Minerals Ltd (ASX: AZS)

Finally, Azure shares are 10.71% higher in late afternoon trading after rocketing almost 20% higher during the session. The company discovered high-grade nickel and copper on new tenements at the Andover project in Western Australia. This project is a joint venture between Azure (60%) and Creasy Group (40%). Assay results showed up to 25.4% copper, 3.75% nickel, and up to 210 parts per billion (ppb) of palladium.

Commenting on the news, managing director Tony Rovira said:

Our regional exploration program on Andover continues to deliver outstanding outcomes.

The post 3 ASX mining shares going nuts on new discoveries appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most heavily traded ASX 200 shares on Monday
• Own CBA shares? This expert says you ‘may want to consider cashing in some gains’
• Telstra shares: Buy, hold, or fold?
• Why is the BHP share price leaping 4% on Monday?
• Galan Lithium share price rockets 28% on ‘game changing’ update

Motley Fool contributor Monica O’Shea 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 S&P/ASX 200 Index (ASX: XJO) is on track to start the week with a strong gain. In afternoon trade, the benchmark index is up 1.6% to 6,781.8 points.

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

Life360 Inc (ASX: 360)

The Life360 share price is up over 12% to $7.10. This appears to have been driven by a positive reaction to its price increases from brokers. One of those was Bell Potter, which has retained its buy rating and lifted its price target to $9.25. The broker believes that Life360’s price increases could lead to it becoming EBITDA profitable a year earlier than expected in 2023.

Novonix Ltd (ASX: NVX)

The Novonix share price is up a massive 27% to $2.81. The catalyst for this could have been a broker note out of Morgans this morning. According to the note, the broker has upgraded the battery materials and technology company’s shares to a speculative buy rating with an improved price target of $3.11. This follows the announcement of major US government funding last week.

Pilbara Minerals Ltd (ASX: PLS)

The Pilbara Minerals share price is up over 6% to $5.39. This morning the lithium miner revealed that it has sold another 5000 tonnes cargo of spodumene. The good news is that Pilbara Minerals received a price even higher than what it commanded last week from its latest BMX auction.

Vulcan Energy Resources Ltd (ASX: VUL)

The Vulcan Energy share price is up over 13% to $6.85. Investors have been buying this lithium developer’s shares after it produced the highest grade, lowest impurity lithium hydroxide to date from its pilot plant. Management notes that the latest material produced graded 57.1% LiOH, which exceeds the best-on-the-market battery grade specification of 56.5% LiOH required from offtake customers.

The post Why Life360, Novonix, Pilbara Minerals, and Vulcan shares are storming higher today appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most heavily traded ASX 200 shares on Monday
• Leading brokers name 3 ASX shares to buy today
• 4 ASX lithium shares surging more than 10% today
• Why is the Novonix share price surging 16% higher today?
• Here’s why the Pilbara Minerals share price is charging higher on Monday

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 Life360, Inc. 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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What a cracking start it has been for the S&P/ASX 200 Index (ASX: XJO) so far this Monday. After the sour note the markets left investors with last week, the ASX 200 has decided to flip and give us a strong start to this one.

At the time of writing, the ASX 200 has gained a healthy 1.52% so far and is back over 6,770 points.

But let’s now delve a little deeper into these moves and check out the shares at the top of the share market’s trading volume charts, according to investing.com.

The 3 most traded ASX 200 shares by volume this Monday

South32 Ltd (ASX: S32)

ASX 200 mining giant South32 is our first ASX share worth taking a gander at today. So far, a notable 16.09 million South32 shares have been thrown around the ASX boards. This has probably been spurred by the company’s fresh quarterly update released this morning. As we went through at the time, this update was a bit of a mixed bag for the miner.

Investors initially reacted positively, sending the company’s shares as high as $3.84 apiece. But after lunchtime, a case of cold feet seems to have taken hold, with the company now down an abrupt 2.15% at $3.64 a share. No doubt this bouncing around has resulted in the volumes we are seeing.

Pilbara Minerals Ltd (ASX: PLS)

Next up is another ASX 200 miner, but this one is a lithium seeker. Pilbara Minerals has had a sizeable 22.3 million of its shares exchanged on the ASX thus far today. Again, we seem to have a company update to thank for this volume we are witnessing.

As we covered this morning, Pilbara has just announced another contract of sale for a further 5,000 dry metric tonnes of lithium spodumene at a price of US$7,255 per tonne. Investors are rejoicing at this news, with the Pilbara share price up a pleasing 6.11% so far at $5.38 a share.

Core Lithium Ltd (ASX: CXO)

Our third and final share today is another ASX 200 lithium producer in Core Lithium. This session has seen a hefty 25.07 million Core shares swap hands as it currently stands. But this has not been accompanied by any new news from the company.

We have seen some volatility in the Core share price though. The company’s shares initially spiked to $1.44 apiece this morning but have been quite bouncy all day. At present, Core Lithium shares are asking $1.392 each, up 1.24% for the day so far. It could be this volatility that is enticing so many shares onto the market.

The post Here are the 3 most heavily traded ASX 200 shares on Monday appeared first on The Motley Fool Australia.

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More reading

• Why Austal, New Hope, Playside, and South32 shares are dropping
• Own CBA shares? This expert says you ‘may want to consider cashing in some gains’
• Telstra shares: Buy, hold, or fold?
• Why is the BHP share price leaping 4% on Monday?
• Galan Lithium share price rockets 28% on ‘game changing’ update

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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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.

This year has served an unpleasant but necessary reminder that the stock market doesn’t move up in a straight line. Since the beginning of 1950, there have been more than three dozen double-digit percentage corrections in the broader market. Of course, few have been as painful as the bear market we’re experiencing now.

However, pain historically brings with it opportunity on Wall Street. When given enough time, every stock market correction and bear market throughout history has been wiped away. That makes bear markets an especially intriguing time to do some shopping.

Arguably one of the best places to begin your search for stocks to buy is the Dow Jones Industrial Average (DJINDICES: ^DJI). The Dow Jones is a 126-year-old index comprised of 30 historically profitable, time-tested, multinational businesses. In other words, these are mature companies that have proved their worth over decades (or more than a century), and they could make smart buys during the bear market decline.

What follows are three attractively priced Dow stocks that have the capacity to turn an initial investment of $400,000 into $1 million by 2028.

Salesforce

The first Dow Jones Industrial Average stock with the tools needed to turn a $400,000 investment into a cool $1 million over the next six years is cloud-based customer relationship management (CRM) software solutions provider Salesforce (NYSE: CRM).

The biggest headwind Salesforce is contending with is the growing likelihood the US or global economy will enter a recession. It’s not uncommon for growth stocks to see their valuation multiples contract during recessions as investors become more focused on traditional metrics (e.g., price-to-earnings ratios). Thankfully, Salesforce has a clear-cut edge in the CRM software space that commands a premium valuation.

For those wondering, CRM software is what allows businesses to enrich existing relationships with their customers to generate more revenue. It can cover simple tasks, such as resolving product or service issues, as well as handle more complex chores, like running predictive sales analyses to determine which customers would be likely to buy a new product or service. Keep in mind that while CRM software is perfectly designed for service-oriented companies, it’s gaining plenty of traction in the healthcare, industrial, and financial arenas.

What makes Salesforce special is its absolute dominance of the CRM software space. It’s been ranked as the No. 1 CRM solutions provider for nine consecutive years, according to IDC, and accounted for close to 24% of worldwide CRM spend in 2021. While Salesforce’s share of the CRM market has grown every year since 2017, its top four competitors have shrunk to a combined 19.6% market share.  In short, Salesforce won’t be knocked off its pedestal in this double-digit annual growth category anytime soon.

As noted previously, co-founder and co-CEO Marc Benioff has done a phenomenal job of using bolt-on acquisitions as a source of growth. A steady diet of deals has broadened the company’s service ecosystem and provided additional cross-selling opportunities.

If Benioff’s forecast of $50 billion in annual sales by the end of fiscal 2026 proves accurate — this would mark just shy of 100% growth from fiscal 2022 — Salesforce would have a very good chance to generate 150% returns over the next six years. 

Boeing

A second Dow Jones stock that has the ability to turn a $400,000 initial investment into $1 million by 2028 is commercial airline and military aircraft manufacturer Boeing (NYSE: BA).

If there’s a Dow stock that perfectly embodies the battle of short-term risk versus long-term reward, it’s Boeing. Although the COVID-19 pandemic ravaged the airline industry for a period of about two years, many of the company’s issues have been self-inflicted. This includes having its lauded 737 MAX cumulatively grounded for two years due to mechanical and electrical issues, as well as dealing with a roughly 15-month stretch (May 2021-August 2022) where 787 Dreamliner deliveries were halted. 

The key point here is that it’s a lot easier to fix internal shortcomings than it would be to deal with persistent demand issues. With 787 deliveries back on track and the company expected to boost 737 MAX output from 27 planes monthly at the beginning of this year to 47 per month by the end of 2023, operating cash flow could really begin to ascend over the next 12 months. 

Something else investors should take into account is that Boeing’s backlog remains robust. Through the first half of 2022, Boeing had $372 billion in orders on backlog, including more than 4,200 commercial planes.  Considering that the global energy supply chain is somewhat broken following the pandemic and Russia’s invasion of Ukraine, crude oil, and therefore jet fuel prices, are liable to remain high. This could be the spark to encourage commercial airlines to order more fuel-efficient aircraft.

Boeing’s defense, space, and security division is another positive for long-term investors. Since most government contracts span multiple years, revenue and operating cash flow for this segment tend to be highly predictable from one year to the next. 

Owning Boeing stock will require patience. But if the company can use the next six years to right the ship and simply get back to where it was on an operating basis prior to the pandemic, it should be able to deliver a 150% return to its shareholders from its current level.

Visa

The third Dow stock that can turn $400,000 into $1 million by 2028 is payment processor Visa (NYSE: V).

One of the most interesting things about Visa is that its biggest headwind at the moment is also one of its greatest catalysts. Visa is a cyclical business, which means that it fires on all cylinders when the US and global economy are expanding, and it struggles when recessions arise and consumers/enterprises spend less. With a number of pundits expecting a US recession, it’s no wonder we’ve witnessed weakness in shares of Visa.

But here’s the thing about being cyclical: It strongly favors the patient. Virtually every period of expansion lasts substantially longer than contractions or recessions. This is what allows Visa to grow in lockstep with the US and global economy over time.

Visa finds itself well-positioned for high-single-digit or low-double-digit growth domestically and internationally. In the US, Visa held a 54% share of credit card network purchase volume, as of 2020.  Among the four major processors in the US, none gobbled up more share following the Great Recession than Visa. Meanwhile, it has a multidecade opportunity to expand into emerging market regions considering that most overseas transactions are still being conducted in cash.

A generally conservative management team is a feather in Visa’s cap, too. While it could easily enter the lending arena and generate interest income, Visa chooses to focus on payment processing. This choice means the company isn’t directly affected by rising loan delinquencies or credit losses during a recession. Not having to put cash aside to cover losses is what allows Visa to emerge from inevitable economic downturns in such great shape.

It’s rare that a nearly $395 billion company can sustain a 10%+ growth rate over a long period, but that’s exactly what long-term investors are getting with Visa.

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

The post 3 Dow Jones stocks that could turn $400,000 into $1 million by 2028 appeared first on The Motley Fool Australia.

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Sean Williams has positions in Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Salesforce, Inc. and Visa. The Motley Fool Australia has recommended Salesforce, Inc. 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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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to start the week with a strong gain. At the time of writing, the benchmark index is up 1.5% to 6,778.4 points.

Four ASX shares that have failed to follow the market higher today are listed below. Here’s why they are dropping:

Austal Ltd (ASX: ASB)

The Austal share price is down 6% to $2.26. This is despite there being no news out of the shipbuilder on Monday. However, in recent news, last week, the company was ordered to pay a $0.65 million penalty for a disclosure breach.

New Hope Corporation Limited (ASX: NHC)

The New Hope share price is down 5% to $7.06. The catalyst for this has been the coal miner’s shares trading ex-dividend this morning for its latest dividend. Thanks to sky high coal prices, last month the company was able to declare a mammoth fully franked final dividend of 56 cents per share. This was the equivalent of a fully franked 7.3% dividend yield at Friday’s close price. Eligible shareholders can look forward to receiving this dividend on 8 November.

Playside Studios Ltd (ASX: PLY)

The Playside share price is down 2.5% to 60 cents. This morning the video game developer released its first quarter update and revealed a modest 6.5% quarter on quarter increase in revenue to $6.5 million. This wasn’t enough to cover its operating costs, leading to an operating cash outflow of $0.85 million.

South32 Ltd (ASX: S32)

The South32 share price is down 2% to $3.64. This follows the release of a mixed quarterly update from the mining giant this morning. South32’s production during the quarter was a little hit and miss. One of the disappointments was its met coal production, which fell short of expectations and has forced a reduction in its full year production guidance.

The post Why Austal, New Hope, Playside, and South32 shares are dropping appeared first on The Motley Fool Australia.

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More reading

• Why is the BHP share price leaping 4% on Monday?
• Here are 3 ASX All Ords shares turning ex-dividend this week
• The ASX 200 is roaring higher so why is the New Hope share price sinking 7%?
• South32 share price higher despite met coal downgrade
• 5 things to watch on the ASX 200 on Monday

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 Austal Limited. 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 ASX share market goes through volatility sometimes. Ups and downs are common although, like a rollercoaster, it can feel uncomfortable to live through.

It can be very unsettling to see the value of one’s portfolio drop heavily in a relatively short time.

There’s a saying about the share market: It goes up like a staircase and falls like an elevator.

How can investors stay calm and carefree during these volatile times or the next crash? I think there are a few things to keep in mind.

Have an emergency fund

Emergencies are unexpected. We don’t know when they’re going to hit.

In a financial emergency, someone may need enough money to buy a new fridge, replace a written-off car, or even have enough cash to live off for months in case of job loss.

Regardless of investing, I do think it’s a good idea for every adult Aussie to have an emergency fund large enough to protect them from the worst (realistic) financial problem. For a family, that could be the main breadwinner losing their income, so having between three to six months of living expenses saved up could be a good move.

I also think having an emergency fund is a good idea so that investors don’t have to sell their ASX shares at precisely the wrong time to raise cash. Selling shares during a downturn – when share prices are down – wouldn’t be ideal.

Bad news sells

Newspapers (and their websites) want to try to generate as much reader intrigue as possible.

Having a title like “ASX share market loses $50 billion in one day” can certainly stir up emotions, and make us want to read about it so that we feel more ‘informed’.

I think it’s human nature to want to try to protect ourselves from harm. However, we’re not being chased by a lion. Instead, it’s just the stock market going through volatility. Personally, I think it’s better to avoid reading scaremongering news so that we can focus on the long term and steer clear of making fear-based decisions (such as selling shares, or not investing) during these times.

Invest in resilient businesses

Sometimes a downturn will be painful for a company, perhaps bad enough to force that business to close down.

I try to avoid businesses that have questionable business models, are dangerously indebted on their balance sheets, or are loss-making with no possibility of profit in sight.

Picking businesses that could display good resilience during a downturn allows us to sleep better at night and ensures there are no casualties in our portfolios.

There are a good number of candidates that could be called resilient. As examples, I’ll name businesses like Coles Group Ltd (ASX: COL), Woolworths Group Ltd (ASX: WOW), and Telstra Corporation Ltd (ASX: TLS) as blue chips that could continue to see solid demand during a downturn.

See it as an opportunity

As an investor, I would like to invest in the ASX shares I pick at the lowest possible price.

I think that recessions and market downturns can present the best time to buy shares.

While Australia isn’t in recession, there is plenty of investor pessimism with a number of sectors seeing declines, such as ASX retail shares. For example, in 2022 to date, the Wesfarmers Ltd (ASX: WES) share price is down 26% while the JB Hi-Fi Limited (ASX: JBH) share price is down 16%.

When share prices fall, I think investors should try to see it as an opportunity. Legendary investor Warren Buffett once said the following about share market declines:

To refer to a personal taste of mine, I’m going to buy hamburgers the rest of my life. When hamburgers go down in price, we sing the ‘Hallelujah Chorus’ in the Buffett household. When hamburgers go up in price, we weep. For most people, it’s the same with everything in life they will be buying — except stocks. When stocks go down and you can get more for your money, people don’t like them anymore.

Remember history

It’s worth remembering past performance is not a guarantee of how future performance will go.

But, I think it’s useful to remember that the (ASX) share market has gone through plenty of volatility before. The COVID-19 crash in early 2020 and the GFC were two of the latest heavy declines.

The pain we’ve seen in 2022 is just the latest in a long list of difficult times for investors. But the share market has typically recovered in the past, eventually. Of course, it could take months or years.

While the past may suggest that recovery eventually happens, we don’t know how long it will take or what will drive it. This may not help in the short term, but I think it can give investors some strength to hold on for the potential recovery.

The post 5 ways to be carefree during the next ASX share market downturn appeared first on The Motley Fool Australia.

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More reading

• Could chasing high yields mean missing out on potentially top-notch ASX dividend shares?
• Has CBA just become a new competitor to Telstra?
• Telstra shares: Buy, hold, or fold?
• Analysts say these top ASX dividend shares are buys right now
• Don’t miss out on these buy-rated ASX dividend shares: analysts

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 no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended COLESGROUP DEF SET, Telstra Corporation Limited, and Wesfarmers Limited. The Motley Fool Australia has recommended JB Hi-Fi 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 Macquarie Group Ltd (ASX: MQG) share price is pushing higher on Monday.

In afternoon trade, the investment bank’s shares are up 2.5% to $161.74.

While this has been driven largely by a rebounding ASX 200 index, there could also be some pre-results buying from investors.

Is the Macquarie share price a buy before the bank’s results?

While it is always risky to buy shares ahead of the release of results, it hasn’t stopped investors from loading up today.

But is this a good idea?

Ahead of the release of the Macquarie half-year result on Friday, here’s what brokers are saying about the bank.

What are brokers saying about Macquarie?

The team at Citi is sitting on the fence with Macquarie’s shares right now and has a neutral rating and $172.00 price target on them.

It highlights that there are a lot of unknowns with the company’s upcoming results and isn’t recommending investors buy shares before the release. It explained:

Consensus earnings expectations have been little changed over the year, despite material moves across a number of asset classes and FX. While the falling AUD should ordinarily be a material tailwind for MQG given its offshore earnings, we find that these could be mitigated by lower AUM as equities and fixed income AUM will be lower on a mark-to-market.

As a result, the key earnings drivers for MQG remain gains on sale and commodities. These two pillars of earnings will need to keep delivering for MQG to cycle material results in FY22. While commodities could be supported by energy market dislocation, deal-linked revenue is susceptible to the material tightening in financial conditions. We stay Neutral given the pullback in the stock. Commodity volatility is likely to extend beyond investors’ expectations, but the risk is that consensus will have revisit the outlook ex-commodities in the coming months.

Whereas over at Morgans, its analysts named the investment bank as one of its best ideas for the month.

The broker has an add rating and $214.96 price target on its shares. It said:

We continue to like MQG’s exposure to long-term structural growth areas such as infrastructure and renewables. The company also stands to benefit from recent market volatility through its trading businesses, while it continues to gain market share in Australian mortgages.

Around this time on Friday we’ll know which broker has made the right call on the Macquarie share price.

The post Is the Macquarie share price a buy ahead of the bank’s results on Friday? appeared first on The Motley Fool Australia.

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More reading

• Own Macquarie shares? Here’s what to expect from the bank’s half-year results
• Broker says these ASX dividend shares are buys this month
• Down 7% in a month, is the Macquarie share price an ASX 200 bargain buy?
• What’s the outlook for ASX 200 bank shares in Q2?
• A mortgage ‘battleground’ is coming. UBS names ASX 200 bank shares best placed to win

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended 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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For many ASX dividend investors, high yields and top-notch dividend shares are one and the same. And it could be said to be fairly true, if indeed the only goal of an investor was maximising raw dividend cash flow. But if an investor was chasing overall returns rather than just pure cash, then we might start to have a problem with this thesis.

It’s obvious that a high dividend yield does not equate to overall performance. One only has to look at the historical returns of some of the most famous ASX dividend shares to see this in action. Take Telstra Corporation Ltd (ASX: TLS). Telstra has long been an ASX dividend investor favourite.

Yet the Telstra share price has failed to give investors any kind of long-term capital appreciation. Indeed, its all-time high of close to $9 a share occurred in the 20th century. It has not even come close to its high watermark in the 21st thus far.

High yield ASX dividend shares aren’t always winners

Or Westpac Banking Corp (ASX: WBC). As an ASX big four bank, Westpac is also a favourite of the ASX dividend investor. Yet Westpac shares are today going for the same price as the bank was back in 2006. That’s a long time to wait for no capital gains.

And we won’t even mention AGL Energy Limited (ASX: AGL).

So what is the best way to choose a top-notch ASX dividend share, to sort the wheat from the chaff, if not from yield? Well, let’s see what an ASX expert reckons.

Rob Crookston is an equity strategist with ASX broker Wilsons. He recently penned an article on how he selects top-notch ASX dividend shares.

This is where he starts:

We think selecting a dividend strategy by its initial yield is a poor choice because the growth of the dividend over time ultimately determines the income payouts in future years…

We look for dividend-paying companies that can deliver growth year over year, continuously compounding cash flows each year. This is the template for companies we consider when thinking about income investing.

These companies typically increase the dividends they pay to shareholders due to their cash flow growth.

An example

To illustrate, Crookston compares the performances of two ASX dividend shares over the past ten years: APA Group (ASX: APA) and GPT Group (ASX: GPT). He points out that back in 2012, APA and GPT both had comparative dividend yields of around 5.3%. That would generate dividend income of $5,300 a year if an investor was to invest $100,000 into either share a decade ago

However, Crookston points out that $100,000 investment in APA would today be yielding around $11,200 in annual dividend income, or an 11.2% yield on the original capital. That’s thanks largely to APA’s consistent dividend increases.

In contrast, GPT hasn’t been able to keep up with that kind of growth. Its shares would only be netting that same investor $6,900 in annual income today.

As Crookston explains it:

The actual market yields of APA or GPT have not diverged significantly over the last 10 years; both stocks are expected to generate a ~5-6% yield if you invested today.

However, the share price of APA has appreciated in line with the income growth and this has led to a significantly higher total return than GPT. The key here is to take a long-term approach when it comes to dividend investing.

The higher the yield, the higher the risk?

So as you can see, a company’s dividend yield is just one of many factors an investor needs to consider to find really top-notch ASX dividend shares. To go one step further, the higher a company’s dividened yield is, the more investors should be cautious.

The market loves a good dividend just as much as we do. And if a share has been priced with a large yield, it usually indicates that it is coming with risks attached.

So make sure you look behind that raw yield figure when trying to find your next dividend winner. Your cash flow ten years from now will thank you for it!

The post Could chasing high yields mean missing out on potentially top-notch ASX dividend shares? appeared first on The Motley Fool Australia.

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More reading

• Has CBA just become a new competitor to Telstra?
• Telstra shares: Buy, hold, or fold?
• Analysts say these top ASX dividend shares are buys right now
• Is there something strange going on with Telstra shares today?
• Broker upgrade: Westpac share price tipped to keep rising

Motley Fool contributor Sebastian Bowen has positions in Telstra Corporation 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 positions in and has recommended APA Group and Telstra Corporation 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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