Month: October 2022

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 shows us her strategy for buying three devastated ASX shares.

Cut or keep?

The Motley Fool: We’ll now examine three ASX shares that have plunged recently, to get your thoughts on whether they’re a bargain or if you’d stay well away.

The first one is Goodman Group (ASX: GMG), which has fallen about 40% year to date. What do you reckon?

Elfreda Jonker: Well, it’s a stock that we currently own. We do still have an overweight position in it currently, but it is a stock that we’ve also owned for 10 years. So it’s probably one of those that, in our view, is a stock that is going to be a long-term winner. 

Modern logistics is a theme of the future — fantastic business, fantastic management team, and it’s a very strong capital position. But there are certain times in the cycle — and we’re currently in one of them — when yields continue to rise, any real estate company will, generally speaking, be under pressure because they’re seen as bond proxies. So what you’ve seen in this 40% [fall in share price] that you’re referring to is really very much driven by the fact that yields have continued to increase. For example, in the US, the bond yield that’s gone from 1.5% at the start of the year when it reached the peak to almost 4% currently.

So that has really been the key issue with Goodmans. Underlying business fundamentals are still very, very strong in our view. We think there’s been a lot of fear around [major customer] Amazon.com Inc (NASDAQ: AMZN) slowing and that’s going to spill over into Goodman. Amazon has only really given up [a] marginal amount of space and the demand from other customers has still remained really strong. We still see good earnings growth coming through and a strong balance sheet… We think this is a business that you can hold for the long term.

That being said, we do think that it’s a bit early to add more at this point in time until you get to the point where you feel that the interest rate hikes have run their course. The market’s priced in that higher yield, the market’s always forward-looking, but we think there are more interest rate hikes coming. The Fed’s been very obvious about it and here at the RBA probably as well, just to a lesser extent. In that environment, you need to be careful to really bolster your real estate’s exposure too much. So we’ll wait, but we definitely will be adding once we’re in a better interest rate cycle.

MF: The next one is semi-related as it plays in the housing sector. James Hardie Industries plc (ASX: JHX) has also fallen about 40% this year?

EJ: James Hardie is a company that we used to own, but we actually sold out on the back of all the pressures that are currently happening in the US housing markets. 

As you know, they manufacture building products for new home construction as well as remodelling of existing homes, and that’s a 35/65 split. Currently what we’ve seen is that we still see ongoing pressure in that space. 

The stock is quite cheap, but we are concerned around what’s going to happen to the earnings into 2023, 2024. So at the moment, if you look at it, the US housing starts — the new builds — that’s continuing to reduce, mortgage rates are still going up. It’s now 7.2% versus 3% a year ago. And there’s still a lot of evidence in the leading indicators that that market continues to soften. 

The recent update in the US — our portfolio manager was actually there just after their results — was in August. They talked a pretty good story from a medium-term target’s perspective, but shorter term they continued to downgrade revenue targets as well as margins on the back of increased costs. Then, also obviously, the overall demand has continued to decline. 

So for us, we think it’s too early to buy. We think it’s good to just wait a little bit longer until you see some indicators on the mortgage rates or the housing starts need to improve — and we need to see signs of that staying there and improving for a while before we would be willing to get in. 

As I’ve mentioned at the start, we invest in companies in an earnings upgrade cycle and currently James Hardie is still in an earnings downgrade cycle. So a bit too early for us, but overall another fantastic business that we wouldn’t mind owning again in the future.

MF: The last ASX share pays a pretty decent 7.4% dividend yield, but it’s in the retail space with some clouds over the economy. What are your thoughts on Super Retail Group Ltd (ASX: SUL), down about a quarter year to date?

EJ: Super Retail, we currently do have a small overweight position. Our view at the moment is that Super Retail is probably a little bit more shielded to a very big consumer meltdown. 

We don’t expect that, but we certainly are in an environment where the economy is softening and consumer spend has remained strong despite rates going up. You haven’t really seen the impact of higher mortgages and high inflation really hitting the consumer massively in Australia just yet. So we are definitely a bit concerned that you can still see that coming through. 

That being said, we think a business, particularly Supercheap Auto on the auto side, Macpac, Rebel, BCF, these are all businesses where we think from an inventory point of view, it’s easier to manage these inventories that you can buy and hold in a warehouse, it’s not necessarily super high fashion that you have to churn consistently.

In the past, one of the things that really stood out for us in Super Retail Group is the fact that they manage their inventory incredibly well. Even at the last update we had from them is that they have increased their inventory, but they’re not too concerned. They wanted to do that given the supply chain constraints. 

At this point in time for us, we would probably hold our position currently and wait to see how the consumer really plays out. From our perspective, we’d rather hold Super Retail Group and many of its peers just given that we think it’s definitely on the more defensive side of the consumer space. But we think it’s also a bit early to add too much at this point in time until we see what the real impact is. 

We’ll keep an eye on it, happy to hold it and could potentially add later on when we get more clarity.

The post 3 ASX 200 shares I’d pounce on when the clouds clear: expert appeared first on The Motley Fool Australia.

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More reading

• Analysts say these beaten down blue chip ASX 200 shares can rise 50%
• Goodman share price hits two-year low: Time to buy?
• 3 beaten-up ASX shares this fund manager thinks are ‘compelling’ buys
• 2 high quality blue chip ASX 200 shares that experts rate as buys
• Here are the top 10 ASX 200 shares today

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tony Yoo has positions in Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon and Super Retail Group Limited. The Motley Fool Australia has positions in and has recommended Super Retail Group Limited. The Motley Fool Australia has recommended Amazon. 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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On Friday, the S&P/ASX 200 Index (ASX: XJO) finished the week deep in the red. The benchmark index fell 0.8% to 6,676.8points.

Will the market be able to bounce back from this on Monday? Here are five things to watch:

ASX 200 expected to jump

The Australian share market looks set to rebound strongly on Monday after a very positive end to the week on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 95 points or 1.4% higher this morning. On Wall Street, the Dow Jones was up 2.5%, the S&P 500 rose 2.4%, and the NASDAQ stormed 2.3% higher.

Oil prices rise

Energy shares such as Santos Ltd (ASX: STO) and Woodside Energy Group Ltd (ASX: WDS) could have a good start to the week after oil prices pushed higher on Friday night. According to Bloomberg, the WTI crude oil price was up 0.65% to US$85.05 a barrel and the Brent crude oil price rose 1.2% to US$93.50 a barrel. Optimism over Chinese demand offset recession fears.

South32 update

The South32 Ltd (ASX: S32) share price will be one to watch on Monday when the mining giant releases its quarterly update. According to a note out of Goldman Sachs, its analysts are expecting the miner to report alumina production of 1,345kt, aluminium production of 271kt, and met coal production of 1,650kt.

New Hope goes ex-dividend

The New Hope Corporation Limited (ASX: NHC) share price is likely to drop deep into the red on Monday. That’s because the coal miner’s shares are due to trade ex-dividend for its latest dividend. Thanks to sky high coal prices, last month New Hope was able to declare a mammoth fully franked final dividend of 56 cents per share. This will be paid to eligible shareholders on 8 November.

Gold price rebounds

Gold miners including Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) could have a good start to the week after the gold price rebounded on Friday. According to CNBC, the spot gold price was up 1.2% to US$1,656.3 an ounce during the session. This was driven by hopes that rate hikes will happen at a slower pace in the US.

The post 5 things to watch on the ASX 200 on Monday appeared first on The Motley Fool Australia.

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More reading

• Expert reveals why these ASX All Ords shares are drumming up a ‘growing international appetite’ right now
• Demolished ASX 200 materials shares: Why this fundie is buying the 30% dip
• Why did ASX 200 coal shares have such a cracking Friday?
• Here are the top 10 ASX 200 shares today
• Why did the IAG share price get smashed today?

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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Are you interested in adding some ASX growth shares to your portfolio? If you are, you may want to look at the two listed below.

Here’s what you need to know about these growth shares:

Domino’s Pizza Enterprises Ltd (ASX: DMP)

The first ASX growth share that has been tipped as a buy is this pizza chain operator.

While the company has been facing a number of challenges this year and its performance is likely to underwhelm compared to previous years, its longer term outlook remains as positive as ever.

This is thanks to its strong brand, investment in technology, and bold expansion plans. The latter includes the company aiming to more than double its network by 2033 excluding acquisitions.

Morgans remains very positive on the company’s future and sees recent weakness as a buying opportunity. The broker currently has an add rating and $90.00 price target on its shares. 

Life360 Inc (ASX: 360)

A second ASX growth share for investors to look at next week when the market reopens is Life360.

This rapidly growing location technology company is responsible for the Life360 mobile app. This freemium app is hugely popular and currently boasts over 40 million active users.

The company also added to its arsenal with recent acquisitions of wearables company Jiobit and items tracking company Tile, which are opening the door to cross and upselling opportunities.

In addition, Life360 has the potential to leverage its large and growing user base to enter new markets and disrupt legacy incumbents. It has already done this with roadside assistance through its Driver Protect product.

Bell Potter is a big fan of Life360. At the end of last week, the broker reiterated its buy rating and lifted its price by a dollar to $9.25.

The post Brokers say these exciting ASX growth shares are buys appeared first on The Motley Fool Australia.

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More reading

• Why Adairs, Life360, Siteminder, and Whitehaven Coal shares are racing higher
• 2 beaten down ASX shares with plenty of upside potential: analysts
• 4 ASX tech shares with ‘long runways for growth at valuations rarely seen’: expert
• Leading brokers name 3 ASX shares to buy today
• These are the 10 most shorted ASX shares

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 recommended Dominos Pizza Enterprises 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 Bendigo and Adelaide Bank Ltd (ASX: BEN) share price finished flat on Friday at $8.66 apiece.

After a tremendously volatile year on the charts, share price distribution has whipsawed to highs of $10.78 and lows of $7.79 just last month.

As seen in the chart below, the Bendigo Bank share price is down almost 5% this year to date.

Bendigo Bank share price versus peers

Comparatively, Bendigo has performed on par with the other ASX banking majors over the 12 months to date.

As seen in the chart below, there’s been a gradual decline in the entire basket, resulting in heavy losses in all but National Australia Bank Ltd (ASX: NAB).

In terms of financials, the bank has some interesting points to comment on. For example, its net income margin is below the banking major’s median score, as seen below. The same is true for return on equity (ROE), which is also below the median score for its peers.

However, it is valued at a discount to peers in trading at a price-to-earnings (P/E) ratio of 11.6 times, and a price-to-book (P/Book) ratio of 0.73 times (compared to 14.5 and 1.18 times respectively).

As such, Bendigo’s performance with respect to financials is balanced.

Company Name	P/E	ROE %	Debt to Equity	P/Book	Net income margin
Bendigo and Adelaide Bank Ltd (ASX: BEN)	11.16	7.5%	196.9%	0.73	30.0%
Bank of Queensland Limited (ASX: BOQ)	13.21	6.6%	274.3%	0.74	25.9%
Australia and New Zealand Banking Group Ltd (ASX: ANZ)	11.59	10.9%	207.9%	1.18	35.2%
Commonwealth Bank of Australia (ASX: CBA)	18.61	12.8%	250.8%	2.35	41.5%
National Australia Bank Ltd (ASX: NAB)	15.93	11.1%	310.2%	1.68	40.2%
Westpac Banking Corp (ASX: WBC)	17.46	7.4%	279.8%	1.19	26.1%
Median	14.57	0.09	2.63	1.18	0.33

What about in terms of analyst coverage? According to Refinitiv Eikon data, a total of 4 out of 14 analysts rate it a buy right now.

The amount of buy calls is actually up from just 1 back in August. Whereas the consensus Bendigo Bank price target from this list is $9.50, a small portion of upside from the current market price.

There are certain headwinds that are unavoidable for all of the banking majors on a forward-looking basis.

Chief to these remains surging interest rates and the pull-through effect from these onto a bank’s net interest income and net interest margin.

All the banks are set to feel the pinch. This is due to the concentrated state of the Australian mortgage market, and fierce competition between lenders keeping a clamp on borrowing rates.

This has been reflected in the shares of the banking majors for 2022. For Bendigo, despite an early rally from January–May, its share price is still in deep drawdown and has ways to go before reaching its previous high.

Over the past 12 months, the Bendigo Bank share price is down 8%.

The post How does the Bendigo Bank share price stack up against its ASX 200 peers? appeared first on The Motley Fool Australia.

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More reading

• Looking to buy Bendigo Bank shares? Here’s how the bank compares with peers on one key metric
• 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
• What’s the outlook for ASX dividend shares for the rest of 2022?
• Down 27% in 2 months, this ASX 200 bank share is a ‘buying opportunity’: expert

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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I own a few ASX exchange-traded funds (ETFs). But, like a guilty parent, I confess to having one clear favourite. I have written about it before, and probably will again. It is none other than the VanEck Vectors Wide Moat ETF (ASX: MOAT).

The VanEck Wide Moat ETF is an actively managed fund. This means that, unlike a passive index fund, it follows an active share selection methodology.

In this case, the ETF, according to its provider, intends to offer exposure to “attractively priced companies with sustainable competitive advantages”. These are selected and periodically reviewed and rebalanced by Morningstar’s equity research team.

An economic moat is a term coined by the legendary investor Warren Buffett. It refers to a company’s intrinsic competitive advantage. An example would be the undisputed brand power of companies like Apple or Coca-Cola. Or the unavoidability of one of Transurban Group (ASX: TCL)’s toll roads.

So the Wide Moat ETF aims to select US shares with these kinds of characteristics. As of the fund’s most recent update, some of its top holdings included Microsoft, Disney, Amazon and Adobe. All companies that I think most investors would agree with are high-quality shares.

Why the Wide Moat ETF is a winner

I like this idea in theory. But a fund also has to display some compelling performance figures to persuade me to part with my cash.

The Wide Moat ETF does indeed have some impressive numbers on the board. It was first launched back in June 2015 on the ASX. Since that day, it has delivered an average performance of 13.55% per annum.

By contrast, the US S&P 500 Index (SP: .INX) has delivered 11.75% per annum over that same period. The Wide Moat ETF has also outperformed the S&P 500 over the past five years as well, not an easy task. It’s delivered an average of 14.05% per annum against the index’s 13.16%.

So it’s for this reason that the VanEck Vectors Wide Moat ETF is my favourite ETF investment, as well as being one of my favourite investments in my entire share portfolio. It’s been a winner for me, and I don’t see any reason why it won’t keep on winning.

The post Of all my ASX ETFs, this is my favourite. Here’s why appeared first on The Motley Fool Australia.

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More reading

• 3 superb ETFs for ASX investors to buy now
• 2 top ETFs for ASX investors to buy in October
• Why this ASX ETF might help investors sleep better at night

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Sebastian Bowen has positions in Adobe Inc., Amazon, Apple, Coca-Cola, Microsoft, VanEck Vectors Morningstar Wide Moat ETF, and Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Adobe Inc., Amazon, Apple, Microsoft, and Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2024 $145 calls on Walt Disney, long January 2024 $420 calls on Adobe Inc., long January 2024 $47.50 calls on Coca-Cola, long March 2023 $120 calls on Apple, short January 2024 $155 calls on Walt Disney, short January 2024 $430 calls on Adobe Inc., and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Adobe Inc., Amazon, Apple, VanEck Vectors Morningstar Wide Moat ETF, and Walt Disney. 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 cost of building a home is rising at its fastest pace since the GST was introduced in 2000. Interest rates are going up and housing values are going down. Construction companies are going bust due to labour shortages, lack of access to building materials, and the rising cost of these materials. And fewer people are choosing to build new houses, with approvals down 14.4% over the past 12 months.

Yet fund manager Allan Gray says it’s a great time to buy this ASX 200 share in the construction game. That share is Fletcher Building Limited (ASX: FBU).

Allan Gray managing director and chief investment officer, Simon Mawhinney says Fletcher Building is trading “at a discount to fair value”:

Most investors shy away from buying companies that are likely to exhibit a decline in earnings in the short term, regardless of the price at which the company trades. This creates the opportunity for us to
invest in companies at a discount to fair value. Fletcher Building Limited is one such company.

Why is this ASX 200 share falling?

The Fletcher Building share price is down 0.7% to $4.38 in late afternoon trading on Friday. The ASX 200 share has fallen 37.4% in 2022 so far and 36.5% over the past 12 months.

Allan Gray analyst Sudhir Kissun says:

While we can’t be sure exactly why Fletcher Building’s share price has been falling for the past year, the prospect of a downturn in building activity is a likely explanation.

Even though it might be tempting to sit on the sidelines and wait for the cycle to hit rock bottom, it is important to remember that sharemarkets are forward looking.

Share prices usually hit the bottom well before the cycle is at its lowest. In the case of Fletcher Building, its share price may already factor in the impact of a modest economic downturn.

A ‘compelling opportunity’

Allan Gray outlines the case to buy this ASX 200 share in its September 2022 quarterly commentary.

Firstly, Kissun reckons the business metrics look good. By the way, these numbers are in New Zealand currency because Fletcher is headquartered in New Zealand.

Kissun explains:

With a share price at the time of writing in late-September of NZ$5.16 per share, Fletcher Building has a market value of NZ$4.0b. Added to its very manageable net debt of NZ$0.9b, its enterprise value is NZ$4.9b.

… we estimate that its lowest EBIT in the past 15 years was around NZ$420m (this is after adjusting for businesses that Fletcher Building has disposed of and therefore will not contribute to earnings in the future). The market is valuing the company at a little less than 12 times this depressed level of EBIT.

Not only is this meaningfully below the broader sharemarket multiple today, but it is also likely that earnings from this depressed level would grow significantly faster than the market (and therefore
warrant a higher multiple than the market).

In our experience, this type of situation, in which the market is offering us a company at a lower-than-market multiple of depressed earnings, has the makings of a compelling investment opportunity.

Is the Fletcher Building share price a buy?

Kissun says:

When we value cyclical companies, we try to gauge what the company might earn on average through the cycle, across good times and bad. We believe a sustainable mid-cycle EBIT for Fletcher Building should be in the region of NZ$600m, which is almost 30% below management’s guided EBIT for FY23 of NZ$820m.

Mid-cycle EBIT of NZ$600m would result in net earnings after interest and tax of approximately NZ$400m. It might not be unreasonable to ascribe a price-to-earnings (P/E) multiple of 16 times to these mid-cycle earnings, which would equate to a market value of NZ$6.4b or approximately NZ$8.15 per share. Compared to the share price of NZ$5.16, this represents potential upside of over 50%.

The Allan Gray Australia Equity Fund holds $61.7 million worth of Fletcher Building shares.

The ASX 200 share represents 3% of the fund’s value as at 30 September.

The post Too cheap to ignore this ASX 200 share with a ‘compelling’ valuation: fundie appeared first on The Motley Fool Australia.

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More reading

• 2 high risk, high reward ETFs for ASX investors to buy
• Top brokers name 3 ASX shares to buy next week
• Expert reveals why these ASX All Ords shares are drumming up a ‘growing international appetite’ right now
• Don’t miss out on these buy-rated ASX dividend shares: analysts
• Analysts say these beaten down blue chip ASX 200 shares can rise 50%

Motley Fool contributor Bronwyn Allen 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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Are you on the lookout for some exchange traded funds (ETFs) to buy? If you are and you have a high tolerance for risk, then it could be worth looking at the exciting ETFs that are listed below.

Here’s what you need to know about these high risk, high reward ETFs:

BetaShares Crypto Innovators ETF (ASX: CRYP)

There’s arguably no higher risk asset class to invest in than cryptocurrencies.

And while the BetaShares Crypto Innovators ETF doesn’t actually invest directly in coins, the companies included in the fund are well and truly part of the crypto ecosystem. They are the miners, the equipment providers, the trading platforms. So, if cryptocurrencies are booming, they are likely to roar alongside them.

But, as we have seen this year, cryptocurrencies aren’t always booming. Far from it. Furthermore, there’s nothing to say that they will ever return to their former glories. The crypto bubble could even burst further and eventually fade into insignificance.

However, if you’re a crypto bull and believe the industry is here to stay and thrive, then this ETF could be the one for you. The shares you’ll be owning through the fund include Canaan, Coinbase, Riot Blockchain, and Silvergate.

BetaShares Global Cybersecurity ETF (ASX: HACK)

Another ETF for investors to consider is the BetaShares Global Cybersecurity ETF.

While this ETF is nowhere near as risky as the BetaShares Crypto Innovators ETF, it still carries a higher than normal risk due to its overweight exposure to fledgling tech shares.

But with recent cyberattacks in Australia showing just how important cybersecurity services are in this day and age, the companies included in this fund appear well-placed for long term growth as demand increases. This could mean they now have a compelling risk/reward after falling heavily with the tech this year.

Among the companies included in the BetaShares Global Cybersecurity ETF are Accenture, Cisco, Cloudflare, Crowdstrike, Fortinet, Okta, and Splunk.

The post 2 high risk, high reward ETFs for ASX investors to buy appeared first on The Motley Fool Australia.

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More reading

• 2 top ETFs for ASX investors to buy in October
• 3 high quality ETFs for ASX investors to buy next week
• 3 top-performing ASX ETFs in the first quarter of FY23
• How has the BetaShares Global Cybersecurity ETF performed since the Optus hack?
• Don’t miss out on these very exciting ASX ETFs

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 BETA CYBER ETF UNITS and Betashares Crypto Innovators ETF. The Motley Fool Australia has positions in and has recommended BETA CYBER ETF UNITS. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

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

Costa Group Holdings Ltd (ASX: CGC)

According to a note out of Morgans, its analysts have retained their add rating but cut their price target on this horticulture company’s shares to $2.90. This follows the release of a disappointing update last week which revealed that worse than expected adverse weather is impacting its operations. As a result, its profits are now only expected to be marginally higher year on year in FY 2022. While disappointed, Morgans continues to believe that Costa is a buy for patient investors. This is due to its belief that its shares are undervalued based on more normalised earnings and its growth projects. The Costa share price ended the week at $2.23.

Metcash Limited (ASX: MTS)

A note out of UBS reveals that its analysts have retained their buy rating and $5.00 price target on this wholesale distributor’s shares. This follows the company’s investor day event last week which revealed strong growth from its hardware pillar and positive commentary on its new distribution centre. The former is benefiting from housing starts and the renovation market. The Metcash share price was fetching $3.90 at Friday’s close.

Pilbara Minerals Ltd (ASX: PLS)

Analysts at Macquarie have retained their outperform rating and $5.70 price target on this lithium miner’s shares. According to the note, the broker was pleased with the results of the company’s latest digital auction. Macquarie notes that Pilbara Minerals accepted a pre-auction bid that was once again higher month on month. Looking ahead, the broker is expecting more regular sales on the platform in the near future thanks to the ramp up of the Ngungaju project. The Pilbara Minerals share price ended the week at $5.07.

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

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More reading

• Here are the 3 most heavily traded ASX 200 shares on Friday
• Brokers name 5 ASX lithium shares to buy now
• If I’d bought $5,000 of Pilbara Minerals shares at the end of June, here’s how much I could bank right now
• 5 big ASX announcements making news this week
• Here are the top 10 ASX 200 shares today

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 COSTA GRP FPO and 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 Russia-Ukraine war has motivated private and institutional investors, as well as superannuation funds, to reinvest in ASX All Ords defence shares and energy shares, according to a new study.

Investors began shunning these two sectors a while back due to “a growing focus on environmental, social, and corporate governance (ESG) factors in investment decisions”, according to Deakin University, which conducted the study.

They’re now happy to reinvest in defence and energy because big businesses in these sectors are now proactively mitigating their greenhouse gas emissions and formally reporting on sustainability goals.

Why are investors returning to defence and energy?

The ‘growing international appetite’ for international and ASX All Ords shares in these sectors is primarily due to the strong prospects for investment returns, according to the research.

However, investors are also feeling more ethically comfortable investing in these sectors again.

Of defence stocks, Deakin Business School Associate Professor and researcher, Harminder Singh said:

… the Russia-Ukraine war has meant many countries are moving to invest in their sovereign defence capabilities. Countries want to be able to defend themselves in case there are wider ramifications from the conflict.

This makes stocks in the defence sector more appealing for investors. With more government money pouring in, there are more investment opportunities and the potential to earn greater stock returns.

Investing in defence stocks can now be reframed in the more acceptable context of national security and community safety.

Published in the journal Finance Research Letters, the research is based on a sample of global investment data. The numbers cover a three-year period from April 2019 to May 2022.

Singh added his thoughts on energy shares:

Russia is one of the world’s major oil exporters, so the conflict and subsequent sanctions has left a gap in the market that needs to be met. This means other countries are developing their own alternative energy projects, offering the opportunity for greater investment and stock returns.

Like defence, the energy sector has faced ESG concerns. But we’re seeing that view can change, as global pressures change.

Associate Professor Singh said the trend toward defence and energy shares might remain “for at least a couple of years, depending, as time tells, whether it is the financially fruitful move that investors hope”.

Examples of ASX All Ords shares in defence

The ASX defence sector is fairly small with most stocks not in the ASX 200. But a few ASX All Ords shares in the sector have been going gangbusters in 2022 compared to the broader market.

In 2022 so far, the S&P/ASX All Ordinaries Index (ASX: XAO) has lost 13% in value. By comparison, defence shipbuilding company Austal Ltd (ASX: ASB) is up 21% in the year to date at $2.40 per share.

Some ASX defence shares are down.

ASX All Ords share Codan Limited (ASX: CDA) is down 49% in 2022.

Outside the ASX All Ords, military aircraft components manufacturer Quickstep Holdings Limited (ASX: QHL) is down 10% in 2022. DroneShield Ltd (ASX: DRO) is up 8% in the year to date at 20 cents per share.

Examples of ASX All Ords shares in energy

The stalwarts of the ASX energy sector include Woodside Energy Group Ltd (ASX: WDS), up 56% in 2022. There’s also Santos Ltd (ASX: STO), up 15% in 2022, and Beach Energy Ltd (ASX: BPT), up 21%.

The post Expert reveals why these ASX All Ords shares are drumming up a ‘growing international appetite’ right now appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• 5 things to watch on the ASX 200 on Friday
• Here are the top 10 ASX 200 shares today
• Why Challenger, Novonix, Piedmont Lithium, and Woodside shares are racing higher
• Winner and Sinner: Woodside stock looks dirt cheap, whilst Megaport shares could have even further to fall

Motley Fool contributor Bronwyn Allen has positions in Woodside Petroleum Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Austal Limited, DroneShield Ltd, and Electro Optic Systems Holdings Limited. The Motley Fool Australia has recommended DroneShield Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Australian share market index is home to a large number of companies that reward their shareholders with dividends each year.

Two highly rated dividend shares that offer investors good yields right now are listed below. Here’s why they have been tipped as buys:

Rural Funds Group (ASX: RFF)

The first ASX dividend share to look at is Rural Funds. It is an Australian agricultural property company with a portfolio of high quality assets.

Thanks to long leases and periodic rental increases, the company has been increasing its dividend at a solid rate for many years. This saw Rural Funds lift its distribution by its annual target rate of 4% in FY 2022 to 11.73 cents per share.

This and recent share price weakness has caught the eye of analysts at Bell Potter. The broker recently upgraded its shares to a buy rating with a $2.75 price target on valuation grounds. It notes that “the current discount to adjusted NAV reflects what historically would be considered an attractive entry point.”

Another reason for the broker’s positive view is its belief that Rural Funds will continue to pay generous dividends in the coming years. For example, it is forecasting an 11.7 cents per share dividend in FY 2023 and then a 12.7 cents per share dividend in FY 2024. Based on the current Rural Funds share price of $2.46, this represents yields of 4.8% and 5.15%, respectively.

Wesfarmers Ltd (ASX: WES)

Another ASX dividend that has been tipped as a buy is Wesfarmers.

It is the conglomerate behind a growing portfolio of high quality businesses. These include Coregas, Covant Lithium, Kmart, Officework, Priceline, and, the jewel in the crown, Bunnings.

The team at Morgans is very positive on its outlook thanks to its “quality retail portfolio” and “highly regarded management team.” As a result, the broker has put an add rating and $55.60 price target on its shares.

As for dividends, Morgans is forecasting fully franked dividends per share of $1.82 in FY 2023 and $1.89 in FY 2024. Based on the current Wesfarmers share price of $43.29, this will mean yields of 4.2% and 4.4%, respectively.

The post Don’t miss out on these buy-rated ASX dividend shares: analysts appeared first on The Motley Fool Australia.

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More reading

• Is the Wesfarmers share price due to make a comeback in FY23?
• Wesfarmers shares could be one of the best options on the ASX 200: Morgans
• When it comes to ASX 200 dividend shares, is there any such thing as truly passive income?
• These ASX 200 dividend shares have been named as buys by analysts
• Which ASX All Ords shares could perform well in a recession?

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 positions in and has recommended RURALFUNDS STAPLED and Wesfarmers 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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