Month: December 2022

These could be top ETFs for ASX investors to buy in January

ETF spelt out with a rising green arrow.

ETF spelt out with a rising green arrow.

With a new year very much on the horizon, now could be a good time to consider making some additions to your portfolio.

If you’re interested in exchange traded funds (ETFs), then you may want to take a look at the three highly rated ETFs listed below. Here’s what you need to know about them:

BetaShares Global Cybersecurity ETF (ASX: HACK)

The first ETF for investors to look at in 2023 is the BetaShares Global Cybersecurity ETF.

This ETF gives investors access to the leading companies in the growing global cybersecurity sector.

As we have seen this year, cyberattacks are becoming more and more frequent and destructive for businesses. As a result, demand for cybersecurity services is expected to rise strongly in the coming years, which is good news for the companies included in the ETF.

This includes industry leaders such as Accenture, Cisco, Cloudflare, Crowdstrike, Okta, Palo Alto Networks, and Splunk.

VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT)

Another ETF for investors to consider for 2023 is the VanEck Vectors Morningstar Wide Moat ETF.

This Warren Buffett inspired ETF gives investors access to a diversified portfolio of companies with sustainable competitive advantages and fair valuations. The MOAT ETF’s portfolio changes constituents periodically but usually includes approximately 50 US based stocks.

At present, its holdings include Amazon, Berkshire Hathaway, Intel, Microsoft, and Walt Disney.

Vanguard MSCI Index International Shares ETF (ASX: VGS)

A final ETF for investors to consider next year is the popular Vanguard MSCI Index International Shares ETF.

This ETF gives investors an easy way to diversify a portfolio. That’s because it provides investors with access to around 1,500 of the world’s largest listed companies. As well as diversity, it allows investors to take part in the long term growth potential of international economies.

Among the high quality shares that you’ll be owning a slice of are giants including Amazon, Apple, Nestle, Nvidia, Procter & Gamble, Tesla, and Visa.

The post These could be top ETFs for ASX investors to buy in January appeared first on The Motley Fool Australia.

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While ETFs allow you to diversify your asset base, many new investors don’t realise one important thing. Not all ETFs are the same — or as good as you might think.

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*Returns as of December 1 2022

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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 BetaShares Global Cybersecurity ETF and Vanguard Msci Index International Shares ETF. The Motley Fool Australia has positions in and has recommended BetaShares Global Cybersecurity ETF. The Motley Fool Australia has recommended VanEck Morningstar Wide Moat ETF and Vanguard Msci Index International Shares ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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What would it take for the Core Lithium share price to explode in 2023?  

A man is shocked about the explosion happening out of his brain.

A man is shocked about the explosion happening out of his brain.

Although the Core Lithium Ltd (ASX: CXO) share price was on fire in 2022, it could have been so much better.

As you can see below, the lithium developer’s shares finished the year with a 74% gain despite losing almost half their value after peaking at $1.88 in November.

Could the Core Lithium share price explode in 2023?

As covered here recently, Goldman Sachs believes the Core Lithium share price is trading at fair value now.

It recently initiated coverage on the company with a sell rating and $1.00 price target.

However, as part of its initiation, it listed a few items that could make it more positive. So, if these all fall into place, it’s quite possible that Goldman Sachs would adjust its recommendation for the better, which could give the company’s shares a very big boost.

What would make Goldman more positive?

The first thing that Goldman highlights is exploration at the Finniss lithium project. It said:

Expanding the existing resource base could support life extension/capacity increases at Finniss (particularly if relatively shallow), improving the earnings and valuation outlook for CXO.

In addition, while it seems unlikely in the current environment, Goldman concedes that an earlier than anticipated commencement of production and easing inflationary pressures could make it more positive. It explained:

Accelerated construction and commissioning could result in a bring-forward of revenues, lower operating costs or capex. Inflationary pressures could ease, limiting the escalation of operating costs with higher materials, freight, and labour rates, while lower-than-expected raw material prices would also lead to higher margins and earnings. Projects coming in ahead of budget on capex (/avoiding escalations) or at growth projects would also positively impact our valuation. Factors impacting operations and asset performance to the upside could also be positive to earnings and valuation.

Another big one is of course the price of lithium. Goldman is quite bearish on lithium prices. So, if its forecasts prove to be off the mark, it would impact its earnings estimates for the better. It said:

Changes in lithium demand/supply dynamics will impact lithium prices and our earnings, where stronger pricing would positively impact our earnings forecasts (though the development of alternative energy storage technologies could also pose a risk to lithium demand/pricing).

Finally, the broker would become more positive if Core looked at downstream processing. It adds:

The construction of a strategically located mid/downstream processing facility in Darwin could offer upside to earnings forecasts and valuation, while unallocated volume sales could be tolled through third converters to capture higher margins.

All in all, there’s certainly potential for the Core Lithium share price to outperform in 2023. Time will tell if it does.

The post What would it take for the Core Lithium share price to explode in 2023?   appeared first on The Motley Fool Australia.

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*Returns as of November 7 2022

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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 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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With hardly any savings at 40, I’d use the Warren Buffett method for generating passive income

Retired couple reclining on couch with eyes closedRetired couple reclining on couch with eyes closed

When ASX investors think of passive income, dividends likely come to mind. Indeed, it may be difficult to think of another form of consistent passive income that can be garnered from shares, without selling them that is. That’s where legendary investor Warren Buffett comes in.

The multi-billionaire company Berkshire Hathaway Inc (NYSE: BRK.A)(NYSE: BRK.B) famously doesn’t pay dividends. And yet, it’s provided shareholders with plenty of passive income opportunities.

How, may you ask? Share buybacks.

If I were 40 with just enough savings to support myself in case of emergency, I would aim to invest in companies I believe likely to undergo share buybacks so as to create a passive income stream. Here’s how that could work.

Buffett backs share buybacks over dividends

Buffett told investors in 2004 he believes the best use for a company’s spare cash is often repurchasing its own shares.

By buying back shares, a company increases shareholders’ ownership. That’s because each share represents a portion of a business. Thus, the fewer shares are out there, the more of that business each share represents.

Speaking on the topic, Buffett said:

I think the best use of cash, if you don’t have a good use for it in the business, if the stock is under-priced, is to repurchase it.

He backed up that sentiment in later years when Berkshire Hathaway began to undergo its own share buybacks.

How can buybacks generate passive income?

As share buybacks are a tool to increase shareholders’ ownership over a company, they can allow an investor to incrementally sell their holdings without reducing their own ownership.

Here’s an example.

If I were to own a 10% stake in a company, and that company buys back 5% of its shares, I would suddenly hold 5% more of the business – 10.5% – without forking out more cash.

That means I could offload the extra 5% on the market, thereby creating a passive income, without impacting my position.

Thus, if I were 40 with hardly any savings, I would use Buffett’s wisdom to buy shares in companies I believe are likely to undergo share buybacks so as to receive passive income.

Of course, it’s worth noting that no company can be guaranteed to announce or continue a share buyback.

Many ASX 200 shares turned to buybacks in 2022

A swathe of broader market happenings saw many S&P/ASX 200 Index (ASX: XJO) shares turn to buybacks in 2022.

The largest was likely that undergone by Whitehaven Coal Ltd (ASX: WHC) – which interestingly also posted huge dividends last year.

It bought back 10% of its stock between March and October before committing to buy back another 25% of its outstanding shares over the following 12 months.  

National Australia Bank Ltd (ASX: NAB) also completed a $2.5 billion buyback in March before going again, announcing another of the same magnitude.

Other ASX 200 companies announcing share buybacks in 2022 included Qantas Airways Limited (ASX: QAN) and Santos Ltd (ASX: STO). The former kicked off a $400 million buyback while the latter announced US$700 million worth last year.

The post With hardly any savings at 40, I’d use the Warren Buffett method for generating passive income appeared first on The Motley Fool Australia.

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*Returns as of December 1 2022

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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 positions in and has recommended Berkshire Hathaway. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway, short January 2023 $200 puts on Berkshire Hathaway, and short January 2023 $265 calls on Berkshire Hathaway. The Motley Fool Australia has recommended Berkshire Hathaway. 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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Should I buy ASX 200 lithium shares for my portfolio in 2023?

A group of four people pose behind a graphic image of a green car, holding various symbols of clean electric, lithium powered energy including energy symbols and a green plant representing the rising Vulcan Energy share price

A group of four people pose behind a graphic image of a green car, holding various symbols of clean electric, lithium powered energy including energy symbols and a green plant representing the rising Vulcan Energy share price

The lithium industry was a great place to invest in 2022 despite an end of year pullback.

A good number of ASX 200 lithium shares have recorded strong gains this year in a volatile stock market.

The big question now, though, is whether it is too late to invest in the industry? Let’s take a look:

Should I buy ASX 200 lithium shares in 2023?

Buying ASX 200 lithium shares or not in 2023 is perhaps not as easy a choice to make as it was a year ago.

The recent online auction held by Pilbara Minerals Ltd (ASX: PLS) revealed a spot of weakness in pricing month on month. This has sparked fears that prices could soon collapse in line with Goldman Sachs’ bearish estimates. As a reminder, it is forecasting:

  • Spodumene 6%
    • 2022 US$4,233
    • 2023 US$4,330
    • 2024 US$800
    • 2025 US$800

These forecasts compare unfavourably to the latest Pilbara Minerals’ auction price of US$8,299 per dry metric tonne. In fact, these estimates imply a whopping 90% decline in spodumene prices by 2024.

As a result of this, it will come as no surprise to learn that Goldman Sachs has a preference for producers rather than developers or explorers right now.

After all, lithium developers such as AVZ Minerals Ltd (ASX: AVZ) and Liontown Resources (ASX: LTR) could miss the boat on the high prices and commence production when prices have collapsed.

For this reason, Goldman Sachs is recommending ASX 200 lithium miner Allkem Ltd (ASX: AKE) as a buy with a price target of $15.20.

Any other buys?

This month the team at Morgans initiated coverage on Pilbara Minerals with a hold rating. However, with its shares being hammered on that day, the broker upgraded the lithium miner’s shares to an add rating with a $4.70 price target the very next day. It commented:

Given the steep drop in the share price today, we see more opportunity than we did when we published our initiation yesterday. […] Sentiment towards the sector could weaken further in the very short term but we expect that strong 2Q cash flows and the potential for capital management may change investors’ minds.

Morgans also recently initiated coverage on Mineral Resources Ltd (ASX: MIN) shares with an add rating and $94.00 price target. It described the company as a “formidable resource player with lithium clout.” The broker adds:

MIN is a business that is transforming from being primarily leveraged to high-cost / short-life iron ore operations to low-cost / long-life iron ore and lithium assets. This transition accelerated in the September quarter 2022 post Wodgina’s restart. We expect the growth planned for all segments will see MIN remain supported.

All in all, there’s still plenty of support for select ASX 200 lithium shares in 2023 in the broker community. Time will tell if they have made the right call.

The post Should I buy ASX 200 lithium shares for my portfolio in 2023? appeared first on The Motley Fool Australia.

FREE Guide for New Investors

Despite what some people may say – we believe investing in shares doesn’t have to be overwhelming or complicated…

For over a decade, we’ve been helping everyday Aussies get started on their journey.

And to help even more people cut through some of the confusion “experts’” seem to want to perpetuate – we’ve created a brand-new “how to” guide.

Yes, Claim my FREE copy!
*Returns as of November 7 2022

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Motley Fool contributor James Mickleboro has positions in Allkem. 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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