Day: 7 December 2022

In morning trade, the Santos Ltd (ASX: STO) share price is edging lower.

At the time of writing, the energy producer’s shares are down 0.7% to $7.20.

While disappointing, this compares favourably to other energy shares which are falling heavily after oil prices sank overnight.

Why is the Santos share price outperforming peers?

The Santos share price is faring better than peers such as Beach Energy Ltd (ASX: BPT) today thanks to the release of a positive announcement which has partially offset the oil price weakness.

According to the release, Santos has announced a simplified capital management framework targeting higher shareholder returns. This includes a minimum annual return of at least 40% of free cash flow.

Santos notes that its strategy is to maintain a disciplined, low-cost operating model that is designed to deliver strong cash flows through the commodity price cycle.

This revised capital management framework seeks to maintain an appropriate capital structure that enables Santos to balance the allocation of capital between investment in the business to develop backfill projects, decarbonisation projects, the development of strategic growth and clean fuels projects, and the provision of sustainable returns to shareholders based on the generation of free cash flow.

What is the capital management framework?

Santos’ capital management framework is as follows:

• A policy of at least 40% payout of free cash flow from operations (excluding major growth) generated per annum.
• Shareholder returns by way of cash dividends and/or share buybacks, subject to market conditions and board discretion.
• An unchanged target gearing range of 15% to 25%.

Share buyback boost

Also lending some support to the Santos share price today is news that the company is boosting its share buyback.

Santos has announced a further US$350 million increase in its on-market share buyback. This amount is in addition to the US$350 million announced in August 2022, which is approximately 98% complete, and brings the total on-market share buyback amount to US$700 million for 2022.

Santos’ Chair, Keith Spence, revealed that this may not be the end of shareholder returns and that 40% of free cash flow may not be its payout ratio minimum for long. He said:

In addition, the Board shall give consideration to additional shareholder returns from any net proceeds derived from asset divestments through portfolio optimisation once those divestments reach completion and proceeds have been received.

Once the Barossa and Pikka Phase 1 projects commence production, the Board’s intention is to consider increasing shareholder returns to at least 50 per cent of free cash flow generated per annum.

The post Santos share price falls despite some big news for shareholders appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Tuesday
• Why Imugene, Rio Tinto, Santos, and Warrego shares are pushing higher
• 5 things to watch on the ASX 200 on Monday
• Could our dividends now be too reliant on ASX 200 oil shares?
• 5 things to watch on the ASX 200 on Thursday

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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The CSL Limited (ASX: CSL) share price has been a very strong performer for investors over the last ten years.

For investors that don’t know, CSL is the biggest ASX healthcare share. CSL describes itself as one of the largest and fastest-growing protein-based biotechnology businesses and a leading provider of in-licensed vaccines.

CSL Plasma operates one of the world’s largest plasma collection networks, with over 300 collection centres worldwide.

It also recently acquired the Vifor business, which is now called CSL Vifor. This business is focused on iron deficiency and nephrology.

At the time of writing it has a market capitalisation of $145 billion. But, it wasn’t always the giant that it is now.

Strong growth

A decade ago the CSL share price closed at $54.77. That means the cost to buy 100 CSL shares would have been $5,477.

CSL has gone through a lot since then.

It was almost a decade ago that the current CSL CEO and managing director Paul Perreault was appointed as the CEO and managing director. He stepped up from the role of President of the CSL Behring division.

CSL announced the influenza vaccine business of Novartis for just US$275 million in October 2014, creating the vaccine division called Seqirus. The name comes from the term “securing health for all of us”.

It has made a number of other acquisitions including Vifor most recently.

The company also transitioned to an ‘own distributor’ model in China.

Throughout this time, the business has grown strongly organically and invested billions of dollars in research and development. In FY22 it spent $1.16 billion on R&D. This helps the business create new life-changing healthcare products and unlock new earnings streams.

In FY12, the business made A$983 million of net profit after tax (NPAT). In FY22 it generated US$2.375 billion of NPAT, or A$3.54 billion at the current exchange rate to compare apples to apples for that growth over a decade.

Growth of the CSL share price

The CSL share price is now valued at $300.79. That means that it has gone up 449%.

For an initial cost of $5,477, those same 100 shares would now be worth $30,079. That’s a big gain and doesn’t account for the dividends that it has paid either.

The FY22 full-year dividend was US$2.22 per share, which is approximately AU$3.33 per share at the current exchange rate, though it was A$3.11 at the time of announcement. That means the dividend yield on cost for those 100 shares equates to a dividend yield of 6%.

Can it keep rising?

Share prices tend to follow profits over time, so if CSL can keep growing then it can keep generating shareholder returns.

The broker Macquarie has a price target of $343, which implies a possible rise of 14% over the next 12 months.

Citi has a price target of $340 on the ASX healthcare share, which implies a possible rise of 13%.

The post If you bought 100 shares of CSL 10 years ago, this is how much you would have today appeared first on The Motley Fool Australia.

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More reading

• To retire early, I’d invest $100 each week in ASX 200 shares
• 5 popular ASX 200 stocks I’m avoiding, plus one that still looks dirt cheap
• Is Core Lithium the hottest stock on the ASX 200 right now?
• Is the CSL share price set to take off in December?
• Why CSL shares are this fundie’s top ASX 200 healthcare pick

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL. 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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Shares in Commonwealth Bank of Australia (ASX: CBA) have been an ASX dividend staple since 1991. The $180 billion bank share is also Australia’s second-largest listed company.

Right now, CBA shares are trading at $106.44, having smashed through the milestone $100 mark in May 2021. That sees the stock 3.8% higher than it was at the start of this year.

For comparison, the S&P/ASX 200 Index (ASX: XJO) has fallen 3.9% year to date.  

But if we were to rewind further back, 10 years to be exact, CBA shares were worth around $61.40 apiece. If an investor bought $1,000 worth of CBA stock back then, they likely would have walked away with 16 securities and $17 change.

The CBA share price has gained 73% since then, leaving our figurative parcel of shares valued at $1,703.04. And that’s before considering the dividends offered by the banking giant.

How much have CBA shares paid in dividends in 10 years?

Here are all the dividends handed out to those invested in CBA shares over the last decade:

CBA dividends’ pay date	Type	Dividend amount
September 2022	Final	$2.10
March 2022	Interim	$1.75
September 2021	Final	$2
March 2021	Interim	$1.50
September 2020	Final	98 cents
March 2020	Interim	$2
September 2019	Final	$2.31
March 2019	Interim	$2
September 2018	Final	$2.31
March 2018	Interim	$2
September 2017	Final	$2.30
April 2017	Interim	$1.99
September 2016	Final	$2.22
March 2016	Interim	$1.98
October 2015	Final	$2.22
April 2015	Interim	$1.98
October 2014	Final	$2.18
April 2014	Interim	$1.83
October 2013	Final	$2
April 2013	Interim	$1.64
Total:		$39.29

Anyone who invested in CBA stock in December 2012 and held tight over the years since may be happy to learn they’ve likely received $39.29 for every share they hold.

That means an assumed $1,000 initial investment 10 years ago has provided $628.64 in dividends. That’s nearly the same amount offered by BHP Group Ltd (ASX: BHP) shares in that time!

Considering both capital appreciation and dividends, $1,000 worth of CBA shares a decade ago could have doubled an investor’s money in the years since. Those 16 stocks could have returned $1,331.68 on top of the figurative initial investment.

And that’s all without using a dividend reinvestment plan (DRP) to compound CBA’s dividends.

Finally, all offerings from the bank in that time were fully franked. Thus, they might have provided additional value come tax time.

CBA shares currently offer a 3.6% dividend yield.

The post Bought $1,000 of CBA shares 10 years ago? Here’s how much dividend income you’ve received appeared first on The Motley Fool Australia.

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More reading

• 5 popular ASX 200 stocks I’m avoiding, plus one that still looks dirt cheap
• Is Core Lithium the hottest stock on the ASX 200 right now?
• Almost ready to retire? Why I’d buy undervalued ASX dividend shares right now
• Should CBA shares be in your ASX stocking in December?
• The 3 best-performing ASX 200 bank shares in November revealed

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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Wesfarmers Ltd (ASX: WES) share price has been through plenty of pain over 2022.

Since the beginning of 2022 it’s down around 20%. At one point in June, it was down by more than 30%.

But, with the company’s share price now getting close to $50. There is a question about whether the business is a buy with how much it has already recovered. Since that low in June, the Wesfarmers share price has gone up 17.5%.

Is it a buy at this level?

The broker Morgans certainly thinks so. It has an add rating on the company with a price target of $55.60. A price target is where the broker thinks the share price will be in 12 months from the rating. That Morgans price target implies a rise of around 15%.

Morgans notes that there continue to be strong retail trading conditions, and it thinks it’s a solid long-term investment.

The broker UBS puts the price target at $56, which implies a rise of 16%. It remains optimistic about the company’s prospects after its October AGM update.

However, not every broker is positive on the Wesfarmers share price. Citi rates it as a sell with a price target of $40. It questioned how profit margins may perform from here, while noting that other ASX retail shares could be better value.

Wesfarmers share price valuation

On Citi’s numbers, the company is valued at 23x FY23’s estimated earnings and 21x FY24’s estimated earnings.

But UBS has a more rosy view of the company’s profit generation. The broker puts Wesfarmers shares at 22x FY23’s estimated earnings and under 21x FY24’s estimated earnings.

Commentary about 2023

After the Reserve Bank of Australia’s (RBA) latest interest rate rise, UBS commented:

The Australian economy is continuing to grow solidly. Economic growth is expected to moderate over the year ahead as the global economy slows, the bounce-back in spending on services runs its course, and growth in household consumption slows due to tighter financial conditions. The Bank’s central forecast is for growth of around 1.5% in 2023 and 2024.

In other words, spending could remain strong and a recession isn’t expected.

The business outlined performance at the AGM for a number of its divisions. WesCEF (chemicals, energy and fertilisers) has “continued to benefit from strong customer demand and elevated commodity prices, and development of the Mt Holland lithium project is progressing well”.

Bunnings, the key profit generator, has seen “overall sales growth for the year-to-date remains resilient and continues to be supported by strong demand from commercial customers. While sales growth from DIY customers remains positive, it has moderated from the high levels experienced through COVID.” This performance could be the key driver for the Wesfarmers share price.

Sales growth for Kmart and Target through the year to date continue to be “pleasing”, with “strong trading results even when adjusted for the impact of lockdowns in prior periods”.

Kmart in particular could benefit in an environment where shoppers are “more focused on value”.

Results from the health division have been “pleasing”, with “strong growth in wholesale and improvements in performance in Priceline and Clear Skincare Clinics”.

Wesfarmers share price long-term performance

While past returns are not a reliable indicator of future performance, the Wesfarmers share price has gone up over 50% over the past five years and divested Coles Group Ltd (ASX: COL) out of the business.

The post Should I buy Wesfarmers shares near $50 for the recovery? appeared first on The Motley Fool Australia.

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More reading

• Why I think these are 3 of the safest high-yield dividend shares on the ASX right now
• Should Wesfarmers shares be under your Christmas tree in December?
• Is this a red flag for Wesfarmers shares?
• The Wesfarmers share price had a strong run in November
• Top brokers name 3 ASX shares to buy today

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Coles Group and Wesfarmers. 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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If you’re at the start of your investment journey and already dreaming of an early retirement, then you might be pleased to learn that it isn’t impossible to make it a reality even if you invest modestly.

The key is starting early so the magical power of compounding is able to grow your wealth.

Warren Buffett explained the power of compounding perfectly in the video below.

Is it possible to retire early by investing $100 a week?

I’m now going to show you how investing $100 a week in ASX 200 shares could allow you to retire early.

Over the last 30 years, the Australian share market has provided investors with a return of 9.58% per annum according to Fidelity.

And while past performance is certainly not a guarantee of future performance, this level of return is in line with what Wall Street has provided US investors with over the last century. So, I would be a little disappointed if the ASX 200 index doesn’t deliver a return of at least 9% per annum over the next three decades.

Especially given the quality of many ASX 200 shares such as CSL Limited (ASX: CSL), Goodman Group (ASX: GMG), and Macquarie Group Ltd (ASX: MQG), which look well-placed for long term growth.

If the ASX 200 does return 9% per annum over the next 30 years and your $100 a week investment matches this return, then you’ll have grown your wealth significantly by 2052.

$100 a week or $433 a month earning a 9% per annum total return would turn into approximately $742,000.

What if we postpone retirement slightly?

Let’s postpone those piña coladas on the beach slightly and let compounding really work its magic. After all, you’ve done the hard work now, so let’s see what happens if you let your investment just run.

If you stop adding to your investment and just let it compound, that $742,000 would turn into the following if it continued to earn the same return:

• 1 additional year – $808,000
• 2 additional years – $881,000
• 3 additional years – $960,000
• 4 additional years – $1.05 million
• 5 additional years – $1.14 million

Don’t forget the dividends!

But wait! There’s even more to consider. The ASX 200 index generally offers investors a dividend yield of 4% each year. If your investments are also earning this level of yield, then that $742,000 investment would be yielding a handy $37,000 in dividends at the 30-year mark.

Overall, I feel this demonstrates why investing in ASX 200 shares with a long term goal is a smart thing to do when you’re young.

The post To retire early, I’d invest $100 each week in ASX 200 shares appeared first on The Motley Fool Australia.

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More reading

• 5 popular ASX 200 stocks I’m avoiding, plus one that still looks dirt cheap
• Is Core Lithium the hottest stock on the ASX 200 right now?
• Is the CSL share price set to take off in December?
• How I’d invest $20k in ASX 200 shares in 2023 to capitalise on the stock market rally
• Here are 2 of the best ASX dividend shares to buy: Morgans

Motley Fool contributor James Mickleboro has positions in CSL. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL. The Motley Fool Australia has recommended Macquarie Group. 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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If you’re wanting to build a diverse portfolio but don’t have the funds or time to put one together, then you could consider the exchange traded funds (ETFs) listed below.

These ETFs allow investors to buy a slice of a significant number of shares through just a single investment. This arguably provides instant diversification for a portfolio.

Here’s what you need to know about these ETFs:

Vanguard MSCI Index International Shares ETF (ASX: VGS)

The first ETF to look at is the Vanguard MSCI Index International Shares ETF.

At present, this ETF gives investors exposure to 1,467 of the world’s largest listed companies from major developed countries. This allows investors to benefit from the long-term growth potential of the global economy.

Among the global giants you’ll be owning a slice of with this fund are Apple, HSBC, LVMH Moet Hennessy Louis Vuitton, Nestle, Procter & Gamble, Roche, Royal Bank of Canada, Shell, and Visa.

Vanguard U.S. Total Market Shares Index ETF (ASX: VTS)

Another ETF for investors to consider is the Vanguard Australian US Total Market Shares Index ETF.

This low-cost and diversified ETF provides investors with exposure to some of the world’s largest companies listed in the United States.

Vanguard highlights that it allows investors to participate in the long-term growth potential of US listed companies and sees it as a top option for buy and hold investors seeking long-term capital growth, some income, and international diversification.

Among the companies included in the ETF are the likes of Amazon, Boeing, JP Morgan, Starbucks, and Walmart.

The post These ETFs allow ASX investors to buy thousands of global shares appeared first on The Motley Fool Australia.

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More reading

• One ASX ETF that could turn $200 per month into $250,000 with next to no effort
• It took me years to realise I’m no investing genius like Warren Buffett
• Are Vanguard International Shares ETF dividends fully franked?
• 3 top ETFs for ASX investors to buy and hold for a decade
• Over half of millennials own shares. Here are 3 ASX share ideas to start your own portfolio

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 Vanguard Msci Index International Shares ETF. The Motley Fool Australia has recommended 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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With a new year on the horizon, now could be an opportune time for investors to look at making some portfolio additions.

But which ASX shares should you consider buying for 2023? Listed below are 10 ASX shares that have been tipped as buys:

Accent Group Ltd (ASX: AX1)

Accent is the company behind a network of retail stores including The Athlete’s Foot, Glue, Platypus, and Stylerunner. Given how these stores have exposure to younger consumers that are less impacted by rising interest rates, they have been tipped to perform positively in the current environment. This could make Accent a top option for 2023 according to Goldman Sachs, which has a buy rating and $2.20 price target on its shares.

Allkem Ltd (ASX: AKE)

If lithium prices remain strong in 2023, then this lithium miner could be an ASX share to buy. And if Macquarie is to be believed, its shares could smash the market next year. The broker currently has an outperform rating and lofty $21.00 price target on its shares.

Aristocrat Leisure Limited (ASX: ALL)

This gaming technology company’s shares have been named as a buy by analysts at Citi. The broker currently has a buy rating and $41.20 price target on its shares. Its analysts are forecasting earnings per share growth of 25.5% in FY 2023.

Domino’s Pizza Enterprises Ltd (ASX: DMP)

With its shares down materially in 2022 (see below), this pizza chain operator has been tipped to bounce back strongly in 2023. This is due to improving trading conditions and its attractive valuation. Morgans has recently reaffirmed its add rating with an $90.00 price target.

Life360 Inc (ASX: 360)

Bell Potter reckons that this location technology company’s shares could be strong performers over the next 12 months. The broker currently has a buy rating and $9.00 price target on its shares. Its analysts note that “Life360 has the potential to leverage its large and growing user base to enter new markets and disrupt the legacy incumbents.”

New Hope Corporation Limited (ASX: NHC)

With coal prices tipped to remain strong in 2023, New Hope could be an ASX share to buy. Especially given how Morgans is expecting a fully franked double-digit dividend yield over the next 12 months. Its analysts also see upside for New Hope’s shares with their an add rating and $6.80 price target.

Telstra Group Ltd (ASX: TLS)

Morgans is also a fan of the telco giant and believes its shares could be strong performers over the next 12 months. One of the reasons the broker likes Telstra is its recently approved restructure, which it expects to unlock value for shareholders. Morgans has an add rating and $4.60 price target on its shares.

Treasury Wine Estates Ltd (ASX: TWE)

This wine giant has been tipped as a buy by analysts at Goldman Sachs. The broker believes Treasury Wine is well-placed for growth with a more diverse and defensive business. It expects the company to “deliver ~16% NPAT 2022-25e CAGR.” Goldman has a buy rating and $14.70 price target on the company’s shares.

Woolworths Limited (ASX: WOW)

Another ASX share that Goldman is tipping as a buy is Woolworths. It believes the retail conglomerate is well-placed for growth thanks to its strong market position and digital leadership. Its analysts expect the latter to support further market share and margin gains. Goldman has a conviction buy rating and $41.70 price target on the company’s shares. This could make recent share price weakness a good buying opportunity.

Xero Limited (ASX: XRO)

Finally, this cloud accounting platform provider has been named as an ASX share to buy by analysts at Citi. The broker has a buy rating and $97.90 price target on its shares. Citi notes that digitisation of accounting rather than macro is expected to be the key driver of near term growth. This bodes well for Xero given the uncertain economic environment.

The post 10 ASX shares to buy in 2023 appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• 5 popular ASX 200 stocks I’m avoiding, plus one that still looks dirt cheap
• Why Domino’s, New Hope, PolyNovo, and Telstra shares are pushing higher today
• Why are ASX 200 lithium shares taking a lashing today?
• What’s in store for the Woolworths share price in December?

Motley Fool contributor James Mickleboro has positions in Allkem, Domino’s Pizza Enterprises, Life360, and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Life360 and Xero. The Motley Fool Australia has positions in and has recommended Telstra Group and Xero. The Motley Fool Australia has recommended Accent Group, Domino’s Pizza Enterprises, and Treasury Wine Estates. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Ask A Fund Manager

The Motley Fool chats with the best in the industry so that you can get an insight into how the professionals think. In this edition, Tribeca Investment Partners portfolio manager Simon Brown presents the three ASX shares he would buy right now.

Hottest ASX shares

The Motley Fool: What are the three best stock buys right now?

Simon Brown: Yeah, there’s a few names that we’ve been talking about recently. We’ve liked Champion Iron Ltd (ASX: CIA), which we felt is a green steel play. 

It’s had a little bit of press recently — we like the fact that the whole decarbonisation thematic is one that’s going to endure for a number of years. Green steel is a space that [isn’t] really talked about a great deal. There aren’t a huge amount of ways to play in that space. But steelmaking is a very carbon-intensive industry and, if we’re going to get to net zero, is going to need to be tackled. 

We feel like one way of doing that is by higher-grade iron ore and that’s what Champion has. It has 65% of its energy needs met by hydroelectric power, which we think is very good. It’s in its tier one jurisdiction in Canada. We think it’s very cheap, particularly given its trades in relation to some of the more mature and better-known iron ore players such as our Australian-based names in the Pilbara. We think it’s much faster growing than that. 

It has the environmental attributes that you want as we transition [to net zero] — there’ll be more demand for their product. 

You’ve got a play on the stimulation that’s going on in China with regards to infrastructure and property spend… [But] we like the stock on a fundamental basis, regardless of what China’s doing over the medium term. It’s obviously done well lately off the back of the headlines out of China.

MF: The Champion share price has rocketed almost 40% over the past month. That’s just because of those macro sentiments, is it?

SB: Yes, you’ve had the Chinese government come out with some measures to look to support the Chinese property market, which has been going through a very challenging period for 12, 18 months now. So they’ve released some measures to step in and support that sector. So it’s seen sentiment rebound and you’ve got infrastructure stimulus, which has been put in place to help guide the economy through their zero-COVID and lockdown period.

MF: It’s interesting to hear you talk about Champion Iron because we don’t hear very much about it. 

SB: No, it’s not particularly well covered by the market, despite being quite a large market cap. I think the market cap is over $3 billion.

MF: Yes, that’s right. What’s your second ASX share to buy?

SB: We really like PWR Holdings Ltd (ASX: PWH), which we’ve held for a long time, spoken about previously, and held since IPO. 

We really like the fact that this is an Australian-based company that developed a lot of IP in its area of advanced cooling solutions. They’ve displayed a really strong tendency to be able to leverage IP into new areas.

Historically they’ve had a very strong position in motorsport, from Formula One all the way down…, in terms of engine cooling technology. They’ve been able to take that now and go into aerospace and into the military side of things. That is fairly nascent at the moment but they do have a lot of potential customers they’re talking to and looking to provide solutions for. They’re proving capability to leverage this sort of IP and technology through the OEM [original equipment manufacturer] space.

They’ve got a reasonably strong aftermarket as well, which they’re looking to expand into more so in the US. They’ve got a reasonably strong business here in Australia for aftermarket sales but, obviously, a much larger US market there that they haven’t really started tapping yet. 

So it’s a growth company. It comes with those growth attributes in terms of premium valuations. Relative to some of the US stocks within the sectors it operates in, it does trade at a premium. But the return and margin metrics there we think fully justify the premium that it trades at to those other comparable names.

MF: The PWR share price has gone gangbusters in recent times, gaining 29% since the start of October.

And the last one?

SB: A more recent name that we’ve added to the portfolio has been NextDC Ltd (ASX: NXT). 

It’s a name that had fallen out of favour with the market and had a reasonably large pullback. [With] interest rates going up, cost of capital going up, and these long duration names within the tech space and seeing a reasonably large de-rate, that’s one that got caught up in that sell-off.

But we think it’s now down to a level below $10, where you can probably invest with more confidence, given that they have a relatively large installed base of capacity now. 

The cost of adding capacity in data centres has gone up quite materially. And these guys are invested well ahead of the curve and now have a fair bit of capacity able to be sold to their key clients at a [lower] cost base.

The market has been a bit impatient because they haven’t signed a great deal of new, large contracts recently, but we think that’s just the nature of the business. They can be quite lumpy with the large hyper-scale clients. That doesn’t mean that they haven’t been able to sign a lot of new clients in that government and corporate space. They don’t come with the same lengths or size of contracts, but they are quite lucrative. 

We expect these hyper scalers are going to need to come to market and sign deals for capacity and we expect at some stage NextDC to announce some of those. 

So we think [the share price]’s back to a level that’s reasonably good value, particularly in light of a lot of US names that have been historically taken private. We think the valuation stacks up pretty well against where some of those transactions have occurred.

MF: It’s a good industry to be in, isn’t it? Data centre demand is not something that’s going to wane anytime soon.

SB: No… There is potentially an element of data consumption that grew quite materially during lockdowns and during COVID. Even as you pull back to more normalised growth in data generation globally, there’s still a reasonably attractive level of growth and a good tailwind to have exposure to.

Read the first part of the interview with Tony here.

The post Buy these 3 ASX shares on the right side of global trends: fundie appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Pwr. The Motley Fool Australia has positions in and has recommended Pwr. 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 Tuesday, the S&P/ASX 200 Index (ASX: XJO) was out of form and dropped into the red. The benchmark index fell 0.5% to 7,291.3 points.

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

ASX 200 expected to fall again

The Australian share market looks set to fall again on Wednesday following another selloff on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 48 points or 0.65% lower this morning. In late trade on Wall Street, the Dow Jones is down 1.35%, the S&P 500 is down 1.8%, and the Nasdaq is down 2.3%.

Oil prices sink to 2022 low

It could be a tough day for energy producers Beach Energy Ltd (ASX: BPT) and Woodside Energy Group Ltd (ASX: WDS) after oil prices sank overnight. According to Bloomberg, the WTI crude oil price is down 3.9% to US$73.96 a barrel and the Brent crude oil price has fallen 4.3% to US$79.14 a barrel. Oil prices hit their lowest levels since December 2021 on increasing economic uncertainty.

Beach downgraded

The Beach Energy share price could also come under pressure after being hit with a broker downgrade this morning. According to a note out of Morgans, its analysts have downgraded the energy producer’s shares to a hold rating with a $1.91 price target. It commented: “Despite the ongoing tight conditions in energy markets we feel that with the recent strong share price run and issues in WA that the stock is fairly priced.”

Gold price edges higher

Gold miners Evolution Mining Ltd (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) will be on watch after the gold price edged higher overnight. According to CNBC, the spot gold price is up a fraction to US$1,782.2 an ounce. Investors appear to have been seeking safe haven options amid the market volatility.

Iron ore holds up

BHP Group Ltd (ASX: BHP) and Rio Tinto Ltd (ASX: RIO) could be relatively stable on Wednesday after the benchmark iron ore price creeped ever so slightly higher. The steel making ingredient is currently fetching US$109.70 a tonne. On Wall Street, BHP and Rio Tinto are trading flat.

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

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More reading

• If I bought $10,000 Woodside shares at the start of the year, how much would they be worth now?
• What’s the outlook for the iron ore price in 2023?
• Here’s why the Beach Energy share price is diving 6% on Tuesday
• 5 popular ASX 200 stocks I’m avoiding, plus one that still looks dirt cheap
• Why Beach, Block, Magellan, and St Barbara shares are dropping

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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