Month: October 2022

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

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

We won’t officially be in a recession until the National Bureau of Economic Research says so. However, you can nearly throw a rock in any direction and find an economist who thinks a recession is probably on the way.

For example, Johns Hopkins economics professor Steve Hanke stated a month ago that he believes there’s at least an 80% chance of a recession. Non-profit research group The Conference Board recently pegged the probability at 96%. The latest Bloomberg economic model projects a 100% chance of a recession by October 2023. 

These forecasts don’t guarantee that a recession is coming. But it’s possible that the current bear market will continue for a while longer. That doesn’t mean that every stock will be a big loser, though. Which stocks are most likely to thrive in a recession? Here’s what history shows.

Some bad news

The SPDR Select Sector exchange-traded funds (ETFs) are good proxies for gauging how different sectors perform during recessions. One primary downside of using them is that most of these ETFs have only been around since the late 1990s. However, the U.S. has experienced three recessions during that period, so the SPDR Select Sector ETFs should be able to help in determining which stocks historically thrive in a recession.   

I’ve got some bad news, though. None of the SPDR Select Sector ETFs performed well in all three recessions that occurred over the past 25 years. 

The Consumer Staples Select Sector SPDR Fund (NYSEMKT: XLP) held up well during the recession of 2001. However, it still slid a little. The Materials Select Sector SPDR ETF (NYSEMKT: XLB) performed similarly during the first recession of this century. (The shaded area in the charts below indicates the period when the U.S. economy was in recession.)

XLP data by YCharts

However, both of these ETFs plunged during the Great Recession that began in late 2007 and went through mid-2009. So did every other sector ETF — including (perhaps surprisingly) the Utilities Select Sector SPDR Fund (NYSEMKT: XLU). 

XLP data by YCharts

All of the sector ETFs also tanked during the brief coronavirus-fueled recession of 2020. However, the Consumer Staples Select Sector SPDR Fund didn’t fall nearly as much as the others did.

Looking for exceptions

The cold, hard truth is that no category of stocks thrives in all recessions. But it’s clear from examining the past that consumer staples stocks tend to perform better than most. Your best bet, though, is to look for exceptions. I’m referring to stocks that have factors working to their advantage so much that investors want to buy them even when the overall economy stinks.

Johnson & Johnson (NYSE: JNJ) stood out as this kind of stock during the recession of 2001. The healthcare giant continued to deliver revenue and earnings growth throughout the period. It completed the $10.5 billion acquisition of ALZA Corporation. The blue-chip stock was also viewed as a safe haven for investors worried about the dot-com bubble bursting.

JNJ data by YCharts

Walmart (NYSE: WMT) performed exceptionally well during the Great Recession, especially considering how most stocks plunged. Investors realized that the serious economic downturn would mean that consumers would have to tighten their purse strings. That worked to the advantage of the big discount retailer.

WMT data by YCharts

Moderna‘s (NASDAQ: MRNA) share price skyrocketed during the quick recession of 2020. That’s not surprising. The company was one of the early leaders in developing coronavirus vaccines. Moderna was a natural choice for investors to flock to during the uncertain times at the beginning of the COVID-19 pandemic.

MRNA data by YCharts

Likely outliers in the next recession

Which stocks might be outliers in the next recession, assuming it isn’t too far off? I think we can learn from history. 

Walmart could again defy gravity if the U.S. economy enters into a recession. My view is that another discount retailer, Dollar General (NYSE: DG), should do so as well.

Dollar General is outperforming Walmart so far this year. The company continues to build new stores. It’s also expanding its frozen and refrigerated goods offerings. Dollar General should benefit as consumers increasingly try to stretch their dollars.

Just as Johnson & Johnson and Moderna performed well during two previous recessions, I suspect another drug stock will do so during the next recession — Vertex Pharmaceuticals (NASDAQ: VRTX). Vertex’s revenue and earnings will almost certainly grow robustly even amid an economic downturn. 

The big biotech also has a pipeline with multiple potential blockbusters likely on the way. Vertex expects to file for regulatory approvals for one of them (gene-editing therapy exa-cel) before year-end. With fears of a recession increasing, I think that Vertex is arguably the best stock to buy right now.  

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

The post Which stocks are most likely to thrive in a recession? Here’s what history shows appeared first on The Motley Fool Australia.

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• Afraid of a recession? Do these 4 things today
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Keith Speights has positions in Dollar General and Vertex Pharmaceuticals. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Vertex Pharmaceuticals and Walmart Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Johnson & Johnson and Moderna Inc. The Motley Fool Australia has recommended Vertex Pharmaceuticals. 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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With so many shares to choose from on the ASX, it can be hard to decide which ones to buy. The good news is that brokers across the country are doing a lot of the hard work for you.

Three top ASX shares leading brokers have named as buys this week are listed below. Here’s why they are bullish on them:

Adairs Ltd (ASX: ADH)

According to a note out of UBS, its analysts have retained their buy rating but cut their price target on this homewares and furniture retailer’s shares to $3.25. While the broker acknowledges that the company’s outlook could be challenging, it was pleased to see that Adairs is performing in line with its expectations so far in FY 2023. Overall, the broker believes the company’s shares offer a lot of value after pulling back materially this year. The Adairs share price is trading at $2.04 on Monday afternoon.

Allkem Ltd (ASX: AKE)

Analysts at Macquarie have retained their outperform rating but trimmed their price target on this lithium miner’s shares to $20.00. Although Allkem’s quarterly update was mixed and revealed that Olaroz Stage 2 commissioning is behind schedule, the broker remains positive enough to retain its buy rating. This is due to its bullish view on lithium prices and Allkem’s growing production. The Allkem share price is fetching $14.79 this afternoon.

Life360 Inc (ASX: 360)

A note out of Bell Potter reveals that its analysts have retained their buy rating and lifted their price target on this location technology company’s shares to $9.25. Bell Potter notes that Life360 is increasing prices for all monthly iOS subscribers in the US to the same level which now applies to new monthly iOS and Android subscribers. While this is expected to result in some subscriber churn, trials have been successful and showed lower than expected levels. Bell Potter sees this as a positive and has boosted its estimates and now expects Life360 to be EBITDA profitable in 2023. The Life360 share price is trading at $7.25 on Monday.

The post Leading brokers name 3 ASX shares to buy today appeared first on The Motley Fool Australia.

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More reading

• Broker says the Allkem share price can rise another 30%
• Brokers say these exciting ASX growth shares are buys
• Why Adairs, Life360, Siteminder, and Whitehaven Coal shares are racing higher
• Why Allkem, Bowen Coking Coal, Pantoro, and Redbubble are dropping today
• Brokers name 5 ASX lithium shares to buy now

Motley Fool contributor James Mickleboro has positions in Allkem Limited and Life360, Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ADAIRS FPO and Life360, Inc. The Motley Fool Australia has positions in and has recommended ADAIRS FPO. The Motley Fool Australia has recommended Baby Bunting. 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 Commonwealth Bank of Australia (ASX: CBA) share price is inching ahead on Monday. Meanwhile, shares in Telstra Corporation Ltd (ASX: TLS) are failing to get the same treatment.

You might point out: CBA and Telstra are two companies operating in two distinctly different markets — the former, banking and the latter, communications. However, a move made by Australia’s largest bank could be blurring those lines.

In light of news this morning, CBA shares have retaken their position trading above $100 apiece. At the time of writing, the CBA share price is 1.22% ahead at $100.49.

Is CBA trying to eat Telstra’s lunch?

In a media release this morning, CBA unveiled that it will now provide discounted 4G and 5G mobile SIM plans via a telecom partner.

According to the release, Australia’s major bank will buddy up with More, a national network services provider with its head office in South Melbourne. According to the company’s website, the telecom company appears to differentiate itself from other mobile virtual network operators (MVNOs), partly with its ESG focus.

The partnership between More and CBA will allow the bank’s customers to secure 30% off mobile SIM plans for the first 12 months. Additionally, continuing customers will maintain a 10% discount indefinitely after the first year.

Does this mean that CBA is waging war on Telstra’s turf? Well, not exactly, but inadvertently, sort of…

It appears the initiative is being used to further entice people to become CBA customers. Though, the network offering is not operated by ASX-listed CBA.

Furthermore, More is not a telecommunications company with its own infrastructure. Instead, it piggybacks on Telstra’s mobile network. That means Telstra has a degree of control over what More could offer to its customers.

Nevertheless, if CBA’s discounts incentivise people to choose More over Telstra, then — to an extent — it would make the two foes.

Why the move from an ASX bank share like CBA?

CBA’s decision to offer discount mobile plans follows research showing more Aussies are looking at ways to save money right now.

It probably doesn’t come as a surprise — during multi-decade high rates of inflation and rising interest rates — that 45% of Australians are seeking cheaper mobile plans. In addition, 60% of those surveyed by CBA would change their plan if they were able to get a better deal.

Ultimately, CBA is still an ASX-listed bank. Though, with a tightening property market, we could see more moves for customer acquisition.

The CBA share price is down 1.9% since the start of the year. Whereas, Telstra shares have tumbled 8.8% on the ASX over the same period.

The post Has CBA just become a new competitor to Telstra? appeared first on The Motley Fool Australia.

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More reading

• Own CBA shares? This expert says you ‘may want to consider cashing in some gains’
• Telstra shares: Buy, hold, or fold?
• Analysts say these top ASX dividend shares are buys right now
• Warren Buffett has been buying up big on dividend stocks. Should you?
• ASX dividend shares or distribution shares? Is there even a difference?

Motley Fool contributor Mitchell Lawler has positions in Commonwealth Bank of Australia. 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 has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Fortescue Metals Group Ltd (ASX: FMG) share price is in the green today.

The mining giant’s share price is up 2.35% and currently fetching $16.75. For perspective, the S&P/ASX 200 Index (ASX: XJO) is up 1.67% at the time of writing.

Let’s examine why the Fortescue share price is having such a good run today.

Iron ore prices lift

Fortescue is not the only ASX iron ore share rising today. BHP Group Ltd (ASX: BHP) shares is currently trading 2.78% higher today, while Rio Tinto Limited (ASX: RIO) shares are up 1.67%.

This follows the iron ore price climb in global markets on Friday. In a research note, ANZ head of economics David Plank said:

Iron ore futures edged higher on Friday, although this wasn’t enough to offset losses earlier in the week. Sentiment remains bearish as worries mount over the outlook for steel demand.

We expect steel demand in China to fall 3.5% this year, with only a marginal gain in 2023. This should keep iron ore prices under pressure.

The iron ore November futures contract is currently up 1.79% on the Singapore Exchange.

Meanwhile, Goldman Sachs analysts have recently reaffirmed a sell rating on Fortescue shares with a $13.40 price target. Analysts are predicting Fortescue’s capital expenditure to increase. Goldman said:

Overall, we forecast FMG’s capex to increase from ~US$3.2bn in FY23 to ~US$4bn by FY26 on mine and haul truck replacement and decarbonisation spend, but see upside risk to our estimate.

However, as my Foolish colleague Tristan noted recently, Fortescue is making progress on its green hydrogen projects. He predicts this could bode well for the Fortescue share price in the future.

Share price snapshot

Fortescue shares have risen 18% in the past 12 months, while they are down 12% year to date.

In comparison, the S&P/ASX 200 (ASX: XJO) has fallen 8% in the past year.

Fortescue has a market capitalisation of about $52 billion based on the current share price.

The post Why is the Fortescue share price surging today? appeared first on The Motley Fool Australia.

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More reading

• Why is the BHP share price leaping 4% on Monday?
• Why I’m not worried about Fortescue’s $9.6 billion decarbonisation plans smashing my dividends
• ASX dividend shares or distribution shares? Is there even a difference?
• Brokers name 3 ASX shares to buy today
• Broker says Rio Tinto share price is trading at a discount

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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This week has started out strong for ASX lithium fans, with some of the market’s favourite lithium stocks leaping higher.

Indeed, these four have gained more than 10% at the time of writing. And there’s been exciting news from many of the winners.

For comparison, the S&P/ASX 200 Index (ASX: XJO) is up 1.64% right now while the All Ordinaries Index (ASX: XAO) has lifted 1.66%.

So, what’s driving these ASX lithium shares to outperform on Monday? Keep reading to find out.

Why are these ASX lithium shares soaring more than 10%?

The first ASX lithium share to be posting a gain of more than 10% on Monday is Neometals Ltd (ASX: NMT).

The sustainability-focused battery mineral producer has developed a process to recover lithium from spent batteries. However, today’s news from the company regards its Vanadium Recovery Project.

Finland has granted the project an environmental permit. The permit will allow the company to produce around 9,000 tonnes of vanadium pentoxide per annum from steel making by-product, slag.

The Neometals share price is currently up 11.14% at $1.167.

It’s joined in the green by shares in Vulcan Energy Resources Ltd (ASX: VUL) – the company behind the Zero Carbon Lithium Project.

It revealed its sorption pilot plant has produced its highest-grade lithium hydroxide to date this morning, exceeding best-on-market battery grades. It also provided an optimistic update on its definitive feasibility study, due to be released next year.

The Vulcan Energy share price is up 11.92% right now, trading at $6.76.

The Galan Lithium Ltd (ASX: GLN) share price is also having a great day, surging 17.32% out of a trading halt to reach $1.49 at the time of writing.

The lithium explorer announced its Hombre Muerto West Project’s mineral resource estimate has exploded to 5.8 million tonnes of lithium carbonate equivalent at 866 milligrams per litre lithium.

Finally, the Piedmont Lithium Inc (ASX: PLL) share price is leaping 10% to 93.5 cents today.

That’s despite the company’s silence. Though, it follows a similar gain posted by its NASDAQ listing overnight.

The post 4 ASX lithium shares surging more than 10% today appeared first on The Motley Fool Australia.

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More reading

• Galan Lithium share price rockets 28% on ‘game changing’ update
• Vulcan share price rockets 12% on lithium update
• Which ASX All Ords shares avoided a sell-off during the last recession?
• Guess which ASX lithium company is the biggest holder of Sayona Mining shares?
• Why Challenger, Novonix, Piedmont Lithium, and Woodside shares are racing higher

Motley Fool contributor Brooke Cooper has positions in Vulcan Energy Resources 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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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.

Bitcoin (CRYPTO: BTC) as a payment option could be going mainstream faster than you may think. Speaking at Yahoo Finance’s All Markets Summit, Suresh Kumar, the global chief technology officer of Walmart (NYSE: WMT), discussed some of the ways the giant retailer is planning to make crypto a key part of its future payments strategy, both for physical and virtual goods. As Kumar noted, “Crypto will become an important part of how customers transact.” 

Bitcoin, as the most popular crypto for payments, would stand to benefit the most. If a huge retailer like Walmart is really going all-in on crypto, that would be a tremendous validation point and would certainly be a bullish indicator for Bitcoin.

The metaverse and crypto

So what’s driving this newfound support for crypto as a payment option? One major factor has been Walmart’s embrace of the metaverse. As Kumar pointed out, Walmart customers are getting inspired to buy and discover new products as a result of all the time they are spending in virtual worlds. Once they are part of these virtual worlds, they are looking to pay for virtual goods, such as new merchandise for an online avatar. And that’s where cryptocurrencies like Bitcoin enter the picture.

Walmart has been stepping up its support of the metaverse recently. In September, it introduced Walmart Land and Walmart’s Universe of Play on Roblox, a popular metaverse gaming platform. Walmart was obviously intrigued by all the time customers were spending on the platform. As of June 30, Roblox boasted 52.2 million daily active users, 11.3 billion engagement hours, 12 million creators, and 32 million different experiences. 

Social media and crypto

Walmart also suggested that the new ways people are using social media has forced the company to rethink the payment options it should offer customers. For example, Walmart livestream events on social media have turned out to be a great way for customers to learn about new products and see how they are used in real life. While you are watching these events, you might want to buy products featured in them, and crypto is being explored as a frictionless way for customers to pay for these goods online. Walmart has experimented with shoppable livestream events on several different platforms, including Twitter, TikTok, and YouTube.   

Social media is also blurring the line between e-commerce and crypto, especially when it comes to non-fungible tokens (NFTs). Customers who purchase NFTs via online marketplaces now want to showcase these NFTs on social media. In response to that need, Facebook and Instagram (from Meta Platforms) now make it possible to connect your virtual wallet holding these NFTs with your social media accounts. Again, your virtual wallet holding these NFTs may also hold cryptocurrencies, so as Kumar noted in his presentation, crypto is really in the middle of things that customers like to do.

Caveats about Walmart and crypto

Of course, the big caveat here is that Kumar only specifically mentioned the metaverse and social media. For now, Walmart seems to be in the learning phase of how to make crypto part of its metaverse and social media strategy. He mentioned that crypto could lead to a “disruption in payment options,” but did not suggest that Walmart stores would suddenly start accepting Bitcoin. So some of the headlines that you might be seeing across social media may be somewhat misleading.

For Bitcoin, obviously, the biggest validation would come if Walmart eventually made paying with Bitcoin a key part of both its online and in-store experience. Right now, though, Walmart does not accept payment in cryptocurrency. Walmart has been long-rumored to be looking at Bitcoin as a payment option, but nothing official has been announced.

Obviously, it’s exciting news that a major retail giant like Walmart is getting more involved with the metaverse and cryptocurrencies. People often like to point to Walmart’s patent filings for NFTs and crypto tokens, as well as the company’s recent embrace of in-store Bitcoin ATM machines, as proof that the company is close to getting really serious. If and when Walmart goes all-in on crypto, that could be a screaming buy signal for Bitcoin.  

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

The post If this US retail giant is serious about crypto, Bitcoin might soar appeared first on The Motley Fool Australia.

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More reading

• Why the Bitcoin price could soar in the coming years
• Could the next bull run be coming for the Bitcoin price?
• How has the Bitcoin price responded to the network’s latest hiccup?
• Crypto surges: Is now the time to buy Bitcoin and Ethereum?
• I’ve already made 158% on Bitcoin. Here’s why I keep holding

Dominic Basulto has positions in Bitcoin. 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. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin, Meta Platforms, Inc., Roblox Corporation, Twitter, and Walmart Inc. The Motley Fool Australia owns and has recommended Bitcoin. The Motley Fool Australia has recommended Meta Platforms, 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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The Allkem Ltd (ASX: AKE) share price has started the week in a positive fashion.

In afternoon trade, the lithium miner’s shares are up 2% to $14.97.

This means the Allkem share price is now up 34% since the start of the year.

Can the Allkem share price keep rising?

The good news for investors is that one leading broker believes the Allkem share price can keep rising.

According to a note out of Bell Potter, its analysts have retained their buy rating with a slightly trimmed price target of $19.45.

This implies potential upside of 30% for investors over the next 12 months from current levels.

Why is the broker bullish?

Bell Potter was relatively pleased with Allkem’s performance during the first quarter. And while it notes that the Olaroz Stage Two expansion is behind schedule, it has only resulted in a modest decrease to its earnings estimates.

Commenting on the quarterly performance, the broker said:

September 2022 quarter lithium carbonate production of 3.3kt (BP est. 3.3kt) and sales of 3.7kt (BP est. 3.3kt). Unit costs were US$4,563/t (BP est. US$4,782/t) and realised prices US$40,317/t (BP est. $46,900/t). AKE now expect first production from the Stage 2 expansion in Q2 2023 (previously Q4 2022) and that total capex will be US$425m (up 12%). AKE held 1H FY23 price guidance of $47,000/t for Olaroz lithium carbonate.

Overall, Bell Potter remains very positive on the company’s outlook and believes it is well-placed to generate significant free cash flow thanks to a combination of strong prices and production growth.

We expect AKE’s cash generation to lift substantially into 2023 with ongoing strength in lithium demand, commodity prices and production growth. AKE is aiming to maintain 10% share of supply in a global lithium market experiencing unprecedented growth; it has a portfolio of growth projects, balance sheet strength and cash flow from existing projects to achieve this target. AKE’s portfolio is also diversified across lithium commodity type, mode of production, asset location and end-user country.

The post Broker says the Allkem share price can rise another 30% appeared first on The Motley Fool Australia.

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More reading

• Why Allkem, Bowen Coking Coal, Pantoro, and Redbubble are dropping today
• Brokers name 5 ASX lithium shares to buy now
• Allkem share price tumbles on quarterly update
• 5 things to watch on the ASX 200 on Friday
• Here are the top 10 ASX 200 shares today

Motley Fool contributor James Mickleboro has positions in Allkem 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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Alongside the S&P/ASX 200 Index (ASX: XJO), the Commonwealth Bank of Australia (ASX: CBA) share price is having a cracker of a Monday so far this session. At present, CBA shares have gained a solid 1.28%, putting the largest ASX bank back over $100 a share.

That’s not quite as enthusiastic as the gains of the broader market at 1.7%. But it’s certainly not a move to turn one’s nose up at. CommBank shares are now up a robust 7.3% over the past month. However, CBA is pretty flat over the year to date, having notched up a loss of around 2% since the start of the year.

So what should investors do with their shares today, considering all of this?

Well, one expert reckons it might be time to do some pruning.

ASX expert says CBA is a sell

Jabin Hallihan, from ASX broker Morgans, recently penned some recommendations in an article for The Bull. He told investors that it might be time to consider doing some selling if they owned Commonwealth Bank shares.

CBA was amongst the ASX shares that Hallihan rated as a sell.

Here’s some of what he had to say on the banking giant:

On financial metrics, we believe the CBA is expensive compared to local and international peers. The share price was partially driven higher by an on-market buy-back. Our 12-month price target is $77. Investors may want to consider cashing in some gains.

Unfortunately for investors, many ASX brokers share similar sentiments. Perhaps the most positive right now is JP Morgan. As my Fool colleague Monica covered earlier this month, JP Morgan has a neutral rating on CBA shares. It commented that:

….we struggle to see CBA underperforming peers meaningfully as it offers the best leverage to rising rates and has the most defensive loan book, in our view.

However, it still views CBA as its least preferred major bank share.

Morgan Stanley is less excited again. It currently has a 12-month share price target of just $85.50.

Perhaps not what investors want to hear right now. But we shall see who’s right in time.

At present, the current CBA share price gives this ASX banking giant a market capitalisation of around $170 billion, with a dividend yield of 3.83%.

The post Own CBA shares? This expert says you ‘may want to consider cashing in some gains’ appeared first on The Motley Fool Australia.

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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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Ask A Fund Manager

The Motley Fool chats with the best in the industry so that you can get an insight into how the professionals think. In this edition, Alphinity Investment Management portfolio manager Elfreda Jonker reveals which ASX shares she’ll happily sleep on for years to come.

The ASX share for a comfortable night’s sleep

The Motley Fool: If the market closed tomorrow for four years, which stock would you want to hold?

Elfreda Jonker: I know the last time when we chatted, I think we talked about Goodman Group (ASX: GMG) being one and I guess that’s probably still one, but I’ll give you another one today.

And that’s Metcash Limited (ASX: MTS).

So that’s quite probably a little bit more controversial to hold for four years, but really it’s a consumer staple company. Predominantly they do grocery, liquor, and [a] hardware wholesale business. It’s in the consumer staples space, which is generally speaking the more defensive side of the market. 

Effectively, why we like it is they’ve got these three verticals. The largest one is the food business. So they’ve got a really big IGA network, really benefited from that through COVID, but have actually managed to maintain that market share post-COVID as well. So they really have spent a lot of money improving those stores. The next leg is really they’re the largest independent liquor supplier in Australia, which is quite a relatively defensive business and that continues to do well.

Then the third vertical leg, which is the one we’re actually the most excited about, is that hardware business — particularly a business called Total Tools that they bought, which is definitely exposed to the construction environment and can be a little bit more cyclical. 

But the way Metcash has structured the business is that I think they’ve been very clear in driving a number of different growth strategies. They will be spending a lot of money and, particularly in this environment, we think it is a business that they can leverage a lot from higher food inflation. They’ve got a relatively fixed cost base. So anything that they can do in order to boost that top line of theirs, either through price or volume, is really, really positive for them if they can manage to maintain those costs. 

We think, overall, it’s a solid company, high-quality business model, and a very strong management team. We really rate the new CEO Doug Jones. And if you look at the balance sheet, it’s strong enough to really help drive this big cap-ex spend that they really want to do now. 

At the same time, we don’t see it as being super, super expensive. It’s definitely not, it’s trading on a forward PE ratio of 13 times and the five-year average is around 14. So it’s pretty much in line with the long term average, but we do think that you can still see nice earnings upgrades coming through over the next number of years given the strategies that they’ve put in place. 

That’s one that we would hold for the next four years. Let’s hope that it doesn’t come to that!

The post The ‘controversial’ ASX 200 share to stash for 4 years: expert appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo 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 Metcash 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 Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price is underperforming on Monday.

In early afternoon trade, the banking giant’s shares are trading flat at $25.55.

This compares to a 1.75% gain by the ASX 200 index this afternoon.

It also means that the ANZ share price is underperforming the rest of the big four banks, which are all up around 1% on Monday.

Why is the ANZ share price underperforming?

The softness in the ANZ share price today has been driven by the release of an update on the bank’s full year results after the market close on Friday.

According to the release, the company is expecting its second half statutory and cash profit to be impacted by a number of large/notable items.

In total, these notable items will result in an after tax charge of $113 million, which is the equivalent to ~2 basis points of CET1 capital at level 2.

What are the charges?

Management advised that these charges include a customer remediation charge of $43 million after tax.

While ANZ highlights that its remediation program is approaching completion, the charge in the half relates to revisions to a small number of customer remediation provisions and remediation program costs.

There is also a restructuring charge of $37 million after tax and an after tax charge of $33 million comprising the impact of business divestments or closures during the period, lease modifications, and merger and acquisition related costs.

Investors won’t have long to see what these charges mean for its results. ANZ is scheduled to release its FY 2022 results later this week on Thursday morning.

The post Why is the ANZ share price underperforming other ASX 200 banks today? appeared first on The Motley Fool Australia.

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• Is the ANZ share price a buy ahead of next week’s full-year results?
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• Own ANZ shares? Here’s what to expect from the bank’s FY22 results next week
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• Top broker says ‘we struggle to see CBA underperforming peers’. Here’s why

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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