Month: October 2022

Experts tip when inflation will peak, and it could be soon
The latest monthly inflation data in Australia showed the consumer price index (CPI) gained 6.8% from July to August, down from 7% the previous month.

The Reserve Bank of Australia’s decision on Tuesday to lift the cash rate by 25 basis points instead of the expected 50 has been a key benefactor to ASX shares this week.

Markets have responded well, with the benchmark S&P/ASX 200 Index (ASX: XJO) climbing nearly 5% since the interest rate announcement two days ago.

But the question that’s likely on everyone’s minds is when to expect pricing pressure to ease.

While it’s a contentious topic, many experts have weighed in with their opinions.

Inflation to peak soon?

Unfortunately, forecasting inflation has proven to be something of an inexact science over the past two years.

Even RBA governor Phillip Lowe acknowledged the central bank’s failings in accurately predicting the enormous spike in inflation in a recent speech.

Federal treasurer Jim Chalmers told a media conference at Parliament House on Tuesday the RBA is very clear “they think there is more work to be done by tightening the interest rate”.

Chalmers said:

Clearly, we’ve still got an inflation problem in this economy…[plus] the effect of rising interest rates is often not immediate. Clearly, the [RBA] needs to take that into consideration.

Our own Treasury forecasts expect inflation will get worse before it gets better, but it will get better and it will moderate during the course of next year.

This aligns with Lowe’s remarks in the latest RBA policy statement that said the central bank will “increase interest rates further over the months ahead”.

In a note to clients, ANZ chief economist David Plank also believes the RBA will need to lift rates further to see a reversal in inflation.

This would mean a “move into clearly restrictive territory of more than 3% to ensure inflation does return to target [of 2-3%]”, Plank said.

Meanwhile, SPI Asset Management says the RBA’s decision to lift the cash rate by 25 basis points and not 50 was based on market volatility rather than a sign of inflation cooling.

The wealth management company said in a note:

While inflation has yet to peak in Australia, the RBA’s more cautious hiking pace indicates that it is prepared to wait for the effects of monetary policy tightening already enacted to emerge more fully.

Given the fact the RBA was slow to act on inflation in the first place, this could weigh in as well.

As seen in the chart below, when inflation numbers began to spike past multi-year highs in 2021, the RBA didn’t act on interest rates until May 2022. The graph shows inflation prints [yellow and blue lines] versus the cash rate in the bottom pane.

In contrast, Betashares economists noted the RBA might be more focused on keeping the economy from entering into recession.

“[M]ore of our currently high rate of inflation appears to reflect global factors, rather than local demand imbalances,” they said, cited by The Australian.

Betashares experts agree the RBA is likely to continue its hiking cycle until mid-2023.

Whether this will coincide with the peak of inflation, we will have to wait and see.

The post Experts tip when inflation will peak, and it could be soon appeared first on The Motley Fool Australia.

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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 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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6 October 2022
What can crypto investors expect from the Bitcoin price in October?
The Bitcoin (CRYPTO: BTC) price is up 1% overnight, currently trading for US$20,310 (AU$31,134).

That puts BTC up 8.6% already in October, with the crypto closing out September at US$18,694. (This figure will vary some depending on your time zone.)

As we reported here, September was a rather remarkable month for Bitcoin. While the token didn’t shoot the lights out, it only lost 2% over the month. That compares to a 10.5% drop on the tech-heavy NASDAQ-100 Index (NASDAQ: NDX).

With the Bitcoin price having tracked risk assets all year – though with rather magnified moves – September was the first month to see some break in that correlation.

Well, that’s the month gone by.

Now, what can crypto investors expect in October?

What’s impacting the Bitcoin price in October?

For some expert insight into that question, we turn to Josh Gilbert, market analyst at eToro.

Gilbert noted that September was indeed a volatile month for most other asset classes. But the Bitcoin price remained relatively resilient, trading in a tight range.

“There could be an argument that Bitcoin’s resilience comes after increased demand for Bitcoin, with significant volatility and uncertainty in foreign exchange markets,” like the British pound, he told The Motley Fool. Adding that this “was previously seen with the ruble during the Ukraine conflict”.

As for the month ahead, Gilbert told us:

Bitcoin’s price resilience in September paints a positive picture moving into October. Next week, CPI data out of the US will be another key test for Bitcoin. This will provide another insight into the macro environment, and a decline in inflation could boost crypto assets broadly.

In addition, the market is starting to believe that the Fed will not hike as much as expected or will stop early, helping the current market.

Cryptos have been hammered this year alongside risk assets like high growth tech stocks as the Federal Reserve and other global central banks, including the RBA, have aggressively hiked interest rates.

With the cost of future earnings rising, the NASDAQ-100 has plummeted 30% this year, while the Bitcoin price is down 57%.

If the Fed and other central banks scale back the rate increases, it should prove good news for tech shares and cryptos alike.

But invest with due care.

As Gilbert notes, “We still have a few more big hikes to come, and the Fed isn’t ready to turn dovish like the RBA just yet.”

The post What can crypto investors expect from the Bitcoin price in October? appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben 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 Bitcoin. The Motley Fool Australia has positions in and has recommended Bitcoin. 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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6 October 2022
3 altcoins to buy right now
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.

People keep talking about a “crypto winter” being here. But that doesn’t mean all cryptos face hostile market conditions these days. Some altcoins are doing surprisingly well right now and have posted double-digit returns over the past 30 days, attracting a lot of buzz across social media. They are being talked up as tokens that could explode in value over the next 12 months.

However, not all of these gainers are worth investing in because they are simply too speculative for the average investor. But there are three altcoins that have steadily appreciated over the past month that are worth a closer look: XRP (CRYPTO: XRP), Chainlink (CRYPTO: LINK), and Algorand (CRYPTO: ALGO). To be fair, all three are down between 55% and 85% over the past 12 months. However, all three have characteristics that set them up for greater utility in the days to come. All three rank among the top 30 cryptos in the world by market capitalization. If you’re thinking about juicing up your portfolio returns for 2022, these could be fantastic buys right now.

Algorand

Algorand, up 12% over the past 30 days, is a proof-of-stake Layer 1 blockchain founded by award-winning MIT professor Silvio Micali. Algorand has won kudos for its top performance metrics and has been regularly recognized as one of the greenest blockchains in the world. In addition, the Algorand blockchain got a speed and performance upgrade in September, boosting transaction processing speed from 1,200 to 6,000 transactions per second. Algorand also recently attracted attention in the crypto world for its new quantum cryptography efforts.

But what really has people excited about Algorand is its official partnership with the 2022 FIFA World Cup. In coordination with FIFA, for example, Algorand just launched an NFT marketplace for soccer NFTs. Look for Algorand to attract even more attention as the start of the World Cup nears in November. Right now, Algorand is a relatively little-known Layer 1 blockchain. After a massive worldwide audience tunes in to the World Cup, that could change. Moreover, the new soccer NFTs should boost overall activity on the Algorand blockchain and potentially attract new users and developers. In many ways, Algorand is an undervalued gem just waiting to be discovered.

Chainlink

Chainlink, up 8% over the past 30 days, is a decentralized blockchain oracle network that feeds off-chain data, such as asset prices, to on-chain smart contracts. In layperson’s terms, it means that Chainlink takes data from the real world and shares it safely and securely with other blockchains. While its official launch dates back to 2017, Chainlink has been experiencing a renaissance of late. For example, Chainlink recently partnered with Coinbase to offer pricing feeds for NFT collections. This opens the door for offerings like real-time NFT indexes and new NFT lending protocols that use NFTs as collateral for loans.

Taking a bigger-picture view of where Chainlink is headed in the future, Chainlink founder Sergey Nazarov recently said that his vision is for Chainlink to become “the AWS of Web3.” To make this vision a reality, Chainlink is now working with ex-Google CEO Eric Schmidt as a strategic advisor. At a recent conference in New York City, Schmidt and Nazarov discussed how real-time data could be turned into a premium product and monetized. All blockchains need off-chain data to execute smart contracts, and that’s exactly the gap that Chainlink is trying to fill. The next time you see those fun, football-themed Amazon Web Services commercials featuring real-time data feeds, just think of a future in which those commercials are coming from Chainlink instead.

XRP

XRP, up 45% over the past 30 days, is the token of the Ripple payment and settlement network. Ripple has won kudos for its ability to send remittances cross-border with near-zero transaction costs. Think of it as a crypto version of Western Union. Until recently, the problem with XRP was that it was facing a massive lawsuit from the SEC over whether XRP was a “crypto” or a “security.” The lawsuit has been hanging over XRP since 2020, which essentially put an artificial cap on the future price of this crypto.

But recent developments now suggest that a final settlement of the case is coming by year’s end, which has made crypto investors euphoric. XRP has been used for years to facilitate cross-border payments. Sending remittances all over the world is big business in a globalized world, and XRP has already worked with some big-name financial partners in the past to make this as frictionless as possible. There is now serious talk that XRP could double or triple in value once the lawsuit is behind it, based on its ability to continue business as usual. However, just keep in mind that this is a very speculative investment, similar to investing in a distressed company getting a sudden lifeline. There is a reason why XRP was trading for mere pennies until recently: There is still a chance that XRP could go to zero.

Is it finally altcoin season?

Altcoin season typically starts when a few altcoins start to decouple from Bitcoin, which has historically been the crypto market benchmark. If Bitcoin goes up, altcoins usually follow right behind. If Bitcoin goes down, altcoins also go down with the ship. But in altcoin season, a few coins start to buck the trend. They go up way more than Bitcoin. Or they go up even if Bitcoin goes down.

The three altcoins mentioned here have properties that differentiate them from Bitcoin. Algorand is a Layer 1 blockchain network that can host smart contracts and decentralized applications, similar to Ethereun. Chainlink is a provider of real-time off-chain data feeds, which is not available via Bitcoin. And XRP is a payment and settlement network. There are clear use cases for all of them, and the market is recognizing that.

All of these altcoins are a buy right now. However, just keep in mind that altcoins carry significantly more risk than the largest cryptos in the market. That’s why I’ve focused on three altcoins with market capitalizations among the top 30, and all of which have been around since at least 2017. That should give you a certain margin of safety. So, sit back, sip your pumpkin spice latte, and enjoy the return of altcoin season.

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

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- Why Bitcoin and Ethereum are rising today
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, 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 Amazon, Bitcoin, ChainLink, and Coinbase Global, Inc. The Motley Fool Australia owns and has recommended Bitcoin. 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.

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

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6 October 2022
Pilbara Minerals share price soars 7% to new highs
The Pilbara Minerals Ltd (ASX: PLS) share price is outperforming its ASX lithium peers today.

Pilbara shares are surging 7.1% and are currently trading at $5.47 each. Earlier in the day, they hit a new all-time high of $5.61 before partially retreating.

For comparison, the S&P/ASX 200 Index (ASX: XJO) is edging 0.06% higher at the time of writing.

Let’s take a look at what is going on with the Pilbara Minerals share price.

Storming ahead

Pilbara is not the only ASX lithium share in the green today, however, it is soaring higher than its peers. For example, the Sayona Mining Ltd (ASX: SYA) share price is 5.1% in the green today, while Allkem Ltd (ASX: AKE) shares are up 3.1%. Core Lithium Ltd (ASX: CXO) shares are climbing 1.1%.

Pilbara advised today Brian Lynn has decided to step down as chief financial officer of the company to spend more time with family. CEO Dale Henderson highlighted Pilbara is “well placed for the future”. He said:

We are incredibly well placed for the future, and this is in no small part due to Brian’s hard work and very significant contribution. We thank him for this and wish him well for the future

Lynn, who will remain in the role until a suitable replacement is found, added:

Pilbara Minerals has been at the vanguard of a new industry, and it has been incredible to be part of the Company’s journey from the ‘Tin Shed’ in North Fremantle to the ASX-100 company we are today, with a clear growth path into the future.

Earlier this week, the Federal Industry Department predicted lithium exports will soar 180% in the 2023 financial year to $13.8 billion.

Analysts at Macquarie have recently placed an outperform rating on the Pilbara Minerals share price. Analysts were impressed with the company’s latest battery material exchange (BMX) auction. At this auction, Pilbara accepted a bid of US$6,988 per dry metric tonne for Pilbara’s 5.5% lithia.

Pilbara produces lithium from the Pilgangoora Project, based in the Pilbara region of Western Australia.

Meanwhile, Wilsons analysts forecast demand for lithium will increase six to eight fold by the end of this decade. Wilsons said:

We don’t believe lithium supply can keep up with this level of demand growth. Lead times for lithium mines (from discovery to production) can take 5+ years, so there is no quick fix.

Pilbara Minerals share price snapshot

The Pilbara share price has risen 194% in the past year, while it has gained 72% this year to date.

Pilbara has a market capitalisation of more than $16.6 billion based on the current share price.

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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 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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6 October 2022
Morgans names 2 more of the best ASX shares to buy in October
The team at Morgans has been busy again picking out its best ASX share ideas for the month of October.

These are the shares that the broker thinks offer the highest risk-adjusted returns over a 12-month timeframe and are supported by a higher-than-average level of confidence.

The first two shares we looked at can be found here. Read on for the next two:

Domino’s Pizza Enterprises Ltd (ASX: DMP)

The first ASX share that Morgans rates as a strong buy this month is Domino’s. It is a growing pizza chain operator with operations across the ANZ, Asian, and European markets. Morgans highlights that the company has performed positively previously when inflation was high or economic growth was slow. In addition, the broker likes Domino’s due to its long term growth plans. It commented:

DMP is the largest Domino’s franchisee outside the US and one of the largest quick-service restaurant companies in the world. It is an affordable option that has performed well historically even in times of inflation or slower economic growth. The engine of DMP’s growth is its ability to roll out new stores all over the world. It added 438 stores to its global network in the year to June 2022, a pace of expansion that we forecast to accelerate to nearly 600 in FY23. This will take the total to almost 4,000 stores, up fourfold over a ten-year period. Over the next ten years, DMP expects to grow organically to 7,250 stores in the 13 countries in which it currently operates. This means DMP expects to more than double in size again by 2033, not including any future acquisitions.

Morgans has an add rating and $90.00 price target on the company’s shares.

Telstra Corporation Ltd (ASX: TLS)

A new addition to the best ideas list this month has been Telstra. Its analysts are positive on the telco giant for a number of reasons. This includes its belief that the market is undervaluing the company on a sum of the parts basis. It also expects the Optus data leak to be a boost to Telstra’s business in the next 12 months. Morgans explained:

After a major turnaround, TLS has emerged in good shape with strong earnings momentum and a strong balance sheet. In late CY22 shareholders vote on Telstra’s legal restructure, which opens the door for value to be released. TLS currently trades on ~7x EV/EBITDA. However some of TLS’s high quality long life assets like InfraCo are worth substantially more, in our view. We don’t think this is in the price so see it as value generating for TLS shareholders. This, free option, combined with likely reputational damage to its closest peer, following a major cybersecurity incident, means TLS looks well placed for the year ahead.

Morgans has an add rating and $4.60 price target on Telstra’s shares.

The post Morgans names 2 more of the best ASX shares to buy in October appeared first on The Motley Fool Australia.

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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 Telstra Corporation Limited. 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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6 October 2022
Could the Coles share price be in for a better month in October?
The Coles Group Ltd (ASX: COL) share price struggled through September, dumping 6.4% over the month.

But with broker sentiment appearing positive on the stock, could October bring better days?

At the time of writing, the Coles share price is $16.41, 0.97% lower than its previous close.

Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is down 0.1%. The index also slumped 7.3% in September, which is generally the market’s worst month.

Let’s take a look at what the future might hold for the ASX 200 supermarket favourite.

What might the future hold for the Coles share price?

The near future of the Coles share price looks bright, according to some experts.

Morgans, for one, is tipping a 21.7% upside on the supermarket stock, slapping Coles shares with an add rating and a $20 price target, as my Fool colleague James reports.

The broker likes the company’s recently announced plan to sell Coles Express for $300 million.

It says the move will “free up significant balance sheet capacity” and allow the company to focus on its supermarkets and liquor businesses, continuing:

[W]e think [this] is the right strategy as competition is likely to remain intense on the back of higher inflation, rising interest rates, and increasing cost-of-living pressures for customers.

Of course, the company is an S&P/ASX 200 Consumer Staples Index (ASX: XSJ) constituent. Meaning, it’s regarded as better off than most amid tough times as consumers can’t simply stop spending on food.

However, new data shows Australians did, indeed, slow their supermarket spending last month.

The Beforepay Group Ltd (ASX: B4P) Cost of Living Index, which summarises the spending of more than 300,000 Aussies, found daily spending on groceries dropped 19% month on month to $15.20 a day in September.

If such trends continue, it could weigh on the supermarket operator’s bottom line.

However, Seneca investment advisor Arthur Garipoli, who is neither bullish nor bearish on Coles shares, believes tightening purse strings won’t prove too large an obstacle for the company, telling The Bull:

In a higher interest rate environment, Coles can be sufficiently agile to appeal to shoppers by ensuring affordable prices.

The post Could the Coles share price be in for a better month in October? appeared first on The Motley Fool Australia.

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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 COLESGROUP DEF SET. 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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6 October 2022
Could the RBA’s latest interest rate decision signal a turning point for ASX 200 shares?
S&P/ASX 200 Index (ASX: XJO) shares are slightly lower in afternoon trading, down 0.21% to 6,801 points.

This week so far, the benchmark index is up 4.4%. This is almost exclusively due to the Reserve Bank of Australia (RBA)’s interest rate decision on Tuesday.

The RBA decided to raise the official cash rate by 0.25%. This surprised the market, as analysts were expecting a fifth consecutive month of 0.5% rises.

The response? Well, the market threw a party.

On the day of the RBA announcement, the ASX 200 closed 3.75% higher at 6,699.3 points. That was the best performance in more than two years.

The party continued yesterday, with another 1.74% gain to 6,815.7 points at the close.

So, could this be a turning point for ASX 200 shares, after a dismal year so far? (The index is down 10% year to date.)

Is this a turning point for ASX 200 shares?

In short, it could be.

The RBA boss indicated in a statement that the board might be happy to slow rate rises down from here.

RBA Governor Philip Lowe said:

The cash rate has been increased substantially in a short period of time. Reflecting this, the Board decided to increase the cash rate by 25 basis points this month as it assesses the outlook for inflation and economic growth in Australia.

Slowing rate rises down could mean two things that the market is likely to love, potentially leading to a turnaround in ASX 200 shares.

The first is that the RBA might be thinking they’ve raised rates enough to put the brakes on rising inflation in a meaningful way to this point.

The cash rate is up 2.5% over just six months, and that’s aggressive in anyone’s language.

What do the experts think?

As we reported yesterday, James Nicolaou of Shaw & Partners said the RBA’s decision might signal that rate increases are “starting to have the desired effect”.

And that’s “positive for the markets and economy”, he told The Australian.

Lowe made it clear in his statement that more rate rises are likely. But if they’re in smaller increments, that will help people cope better with the rising cost of mortgage interest. That bodes well for the economy.

Also in The Australian, top broker Macquarie said a “bear market rally” may have already started as a result. It said this was due to the “dovish” RBA increase and weak US ISM Manufacturing data.

The broker has nominated 10 ASX 200 shares that are “more likely to outperform” in such a rally.

LGT Crestone deputy chief investment officer Kevin Wan Lum from LGT Crestone weighed in on Livewire:

From a relative value perspective, we favour Australia over offshore equity markets.

Overall, we believe the domestic economy remains in relatively good health supported by low unemployment levels, reasonable valuations relative to longer pre-COVID averages, and a less severe path of inflationary pressures.

Additionally, Australia has robust terms of trades, driven by hard commodities and energy, which we expect to at least continue in the short to medium term.

We view the US dollar as currently stretched, and expect the Australian dollar to rebound, favouring our domestic equity positioning.

Also on Livewire, Oreana Financial Services chief investment officer, Isaac Poole, said Oreana was biased toward Australian equities and quality companies.

Poole said:

While we think equity beta will perform OK over the next 12 months, the challenge will be for companies to hit their earnings targets in the near-term, and that will probably favour higher quality companies.

(Fun fact: ‘Beta’ is a measure of how reactive an ASX share is to market movements. For example, an ASX 200 share with a beta of one generally moves in line with the market. Lower than one means lower volatility, higher than one means higher volatility.)

The post Could the RBA’s latest interest rate decision signal a turning point for ASX 200 shares? appeared first on The Motley Fool Australia.

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Motley Fool contributor Bronwyn Allen has positions in Macquarie Group 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 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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6 October 2022
Why Appen, De Grey Mining, Magellan, and Zip shares are dropping today
In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) has followed the lead of US markets and dropped into the red. At the time of writing, the benchmark index is down 0.1% to 6,805.4 points.

Four ASX shares that are falling more than most today are listed below. Here’s why they are dropping:

Appen Ltd (ASX: APX)

The Appen share price is down 14% to $2.86. Investors have been selling this artificial intelligence data services company’s shares following the release of another dismal update. Appen revealed that it expects FY 2022 revenue in the range of US$375 million to US$395 million and constant currency EBITDA of US$13 million to US$18 million. The latter will be down 77.2% to 83.5% over the prior corresponding period.

De Grey Mining Limited (ASX: DEG)

The De Grey Mining share price is down almost 4% to $1.05. This follows the completion of the gold developer’s institutional placement. De Grey Mining has received firm commitments for the placement of 130 million shares at $1.00 per share to raise $130 million before costs. This issue price represents an 8.3% discount to its last closing share price.

Magellan Financial Group Ltd (ASX: MFG)

The Magellan share price is down 8.5% to $10.75. The catalyst for this decline has been the release of yet another terrible funds under management (FUM) update from the struggling fund manager. In September, Magellan experienced net outflows of $3.6 billion. This comprised net retail outflows of $0.4 billion and net institutional outflows of $3.2 billion. This and unfavourable market movements led to Magellan’s FUM falling almost 12% month on month to $50.9 billion.

Zip Co Ltd (ASX: ZIP)

The Zip share price is down over 5% to 70.5 cents. Investors have been selling this buy now pay later (BNPL) provider’s shares despite there being no news out of it. This appears to have been driven by weakness in the tech sector and a poor night for BNPL rival Affirm on Wall Street.

The post Why Appen, De Grey Mining, Magellan, and Zip shares are dropping today appeared first on The Motley Fool Australia.

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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 Appen Ltd and ZIPCOLTD FPO. 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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6 October 2022
This top Warren Buffett stock has enormous overlooked upside potential
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.

Warren Buffett has been buying shares of oil giant Occidental Petroleum (NYSE: OXY) hand over fist these days. His company, Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B), recently bought another 5.99 million shares, boosting its stake to 20.9%. Buffett took advantage of the recent slide in oil prices and Occidental Petroleum’s stock to increase Berkshire’s position in one of its top 10 holdings in late September.

While oil is the primary focus of Buffett’s bold bet on Occidental Petroleum, it’s likely not the only thing he sees in the company. Most investors have overlooked that Occidental is a leader in carbon capture and sequestration (CCS), a process that captures carbon dioxide and sequesters the greenhouse gas underground. Occidental sees it as a $3 trillion to $5 trillion future global market opportunity. It could one day supply the company with as much earnings and cash flow as its current oil and gas business.

That potentially massive market opportunity is leading the company to continue taking strides to capitalize on the upside it sees ahead. This strategy could give the oil stock the fuel to deliver big-time returns for Buffett in the coming years.

Securing another potential partnership

Occidental Petroleum has been securing partners to pursue a wide array of CCS opportunities. Its latest one is with Western Midstream Partners (NYSE: WES), a master limited partnership (MLP) it used to control. The partners signed a letter of intent to pursue opportunities to produce and deliver low-carbon intensity oil and gas products.

Occidental will explore installing carbon capture facilities on its upstream oil and gas activities in the Texas Delaware and Colorado DJ Basins. Meanwhile, Western Midstream will explore installing carbon capture facilities on its natural gas plants and other major gathering and treating facilities. Western would also explore providing carbon dioxide transportation services from those capture facilities to Occidental’s carbon dioxide delivery facilities. The companies intend to consider providing carbon management services to other emitters interested in reducing their emissions.

This partnership can potentially reduce the emissions of Occidental Petroleum’s oil and gas production in the Delaware and DJ Basins, enabling it to market net-zero output. Meanwhile, it could supply Western Midstream with a stable source of cash flow as it transports carbon dioxide to Occidental’s facilities.

Building out a robust solution

That partnership is the latest in a string of agreements Occidental has signed this year to build its CCS business. It’s creating an end-to-end solution that can manage the entire lifecycle of carbon.

In late August, the company started construction on the world’s largest direct air capture (DAC) plant in Texas’ Permian Basin. Once operational in 2024, the plant can capture up to 500,000 metric tons of carbon dioxide per year, with the potential to scale up to 1 million metric tons in the future. That’s one of 70 DAC facilities the company intends to deploy worldwide by 2035.

Occidental has already signed commercial contracts to support that first facility. Aerospace leader Airbus has agreed to purchase 400,000 tons of carbon removal credits over four years with an option to secure more volume in the future. Meanwhile, SK Trading will buy up to 200,000 barrels of net-zero oil for five years, supported by the carbon dioxide removed from the atmosphere in Occidental’s first DAC.

The company has also secured several other midstream partners to help it transport captured carbon to sequestration and utilization sites. It signed a deal with Enterprise Products Partners (NYSE: EPD) to explore a potential carbon dioxide transportation and sequestration solution for the Texas Gulf Coast. Enterprise would use a combination of new and existing pipelines to support the project. Meanwhile, Occidental signed a similar agreement with EnLink Midstream (NYSE: ENLC), focusing on the Mississippi River corridor from Waggaman to Baton Rouge, Louisiana. EnLink would also use new and existing pipelines to transport the captured carbon.

Finally, the company has been locking up underground pore space suitable to sequester carbon. It has leased more than 30,000 acres of subsurface pore space from leading timberland REIT Weyerhaeuser (NYSE: WY) in Louisiana. Weyerhaeuser will continue to manage the forest while receiving fees for leasing the pore space to Occidental. The company signed a similar deal with Manulife Investment Management to lease 27,000 acres of timberland in Western Louisiana for a potential carbon sequestration hub.

The overlooked upside potential of Buffett’s top oil pick

Most investors see Buffett’s continued buying of Occidental Petroleum stock as a bet on oil prices. While that’s certainly the case, investors shouldn’t overlook the enormous upside potential of the company’s emerging CCS business. It could provide a big boost for Buffett’s investment in the coming years if the market develops as Occidental anticipates.

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

The post This top Warren Buffett stock has enormous overlooked upside potential appeared first on The Motley Fool Australia.

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Matthew DiLallo has positions in Berkshire Hathaway (B shares), Enterprise Products Partners, and Weyerhaeuser and has the following options: short October 2022 $40 calls on Weyerhaeuser. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Enterprise Products Partners. 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.

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

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6 October 2022
Why are ASX 200 energy shares smashing the benchmark on Thursday?
ASX 200 energy shares are enjoying another strong day today.

In afternoon trading, the S&P/ASX 200 Index (ASX: XJO) is down 0.11%, having recovered from some steeper earlier losses.

The S&P/ASX 200 Energy Index (ASX: XEJ), on the other hand, has been trading solidly in the green, currently up 2.13% for the day.

Leading ASX 200 energy share Santos Ltd (ASX: STO) is up 1.64%, while shares in competitor Woodside Energy Group Ltd (ASX: WDS) are up 2.58%.

What’s driving investor interest in these ASX 200 energy shares?

Woodside and Santos both look to be benefiting from a boost in oil prices.

The Brent crude oil price is up 1.8% over the past day to US$93.60 a barrel. Brent hit six-month lows of US$84.06 on 26 September amid fears of a global slowdown impacting demand.

But it seems the rebounding oil price has little to do with resurgent demand. Rather it comes following the latest output decision from the Organization of Petroleum Exporting Countries and its allies (OPEC+).

What did OPEC+ decide?

If you own ASX 200 energy shares, you may wish to tip your hat to the OPEC+ members.

Though not everyone is happy with the cartel’s decision.

Yesterday (overnight Aussie time), the group agreed to reduce their combined oil production by two million barrels per day, commencing in November. That represents their biggest supply cut in two years.

As Bloomberg reports, Saudi energy minister Prince Abdulaziz Bin Salman said the reduced output levels will remain through the end of 2023, unless there are material changes in the market.

Nigerian minister of state for petroleum resources Timipre Sylva said falling oil prices would destabilise some of the members’ economies. He added, “OPEC wants prices around $90.”

While that price offers ASX 200 energy shares like Santos and Woodside a healthy profit margin, the United States government was quick to voice its displeasure.

The White House stated:

The president is disappointed by the short-sighted decision by OPEC+ to cut production quotas while the global economy is dealing with the continued negative impact of Putin’s invasion of Ukraine.

Brent crude prices topped US$120 per barrel in June this year, sending ASX 200 energy shares like Santos and Woodside sharply higher.

Year to date, the Santos share price is up 22.6% while Woodside shares have soared 58% higher.

The post Why are ASX 200 energy shares smashing the benchmark on Thursday? appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben 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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6 October 2022