Day: January 2, 2023

How I’d invest $1,000 in ASX 200 shares for rising inflation

A businessman keeps calm in the face of inflation

A businessman keeps calm in the face of inflation

It’s no secret that inflation was one of the biggest concerns for investors over the 2022 investing year.

Rising inflation, as well as the higher interest rates that come with it, have shaken markets over the past 12 months and are probably almost single-handedly responsible for the sluggish performance we saw on the stock markets last year.

That was true for both here on the ASX and overseas on the US markets.

And while inflation might ease this year, it’s likely that it won’t be getting down to the passive levels that were ubiquitous for the decade preceding 2022.

So how does an investor put $1,000 to work if they are concerned about rising inflation?

Investing $1,000 in a high-inflation world

Well, there are a few things to keep in mind. Inflation is the process of currency debasement. In other words, high inflation rates make our dollar weaker. This increases the cost of pretty much everything. And if wages don’t keep up (which they haven’t been), it results in a falling standard of living for most Australians.

So what does this mean for ASX shares? Well, it means that the bar for providing real returns is higher. If inflation is running at 6% per annum, and an ASX share gives an investor a 2% dividend yield alongside a 3% capital appreciation, then it is still going backwards.

That’s because although its nominal rate of return is 5%, its actual rate of return (accounting for inflation ) is -1%.

So with this in mind, I would aim for ASX 200 shares that have the potential to provide both a mix of capital growth and dividend returns. Preferably with franking credits too, which boost returns even further. Potential candidates for these criteria could include Brickworks Ltd (ASX: BKW) or Washington H. Soul Pattinson and Co Ltd (ASX: SOL).

Shares that can thrive with rising prices

But I would also look to companies that have a structural advantage in times of high inflation. One option is ASX 200 bank shares like Westpac Banking Corp (ASX: WBC). Banks can quite quickly adapt to higher inflation because they can simply raise their loan rates alongside rising interest rates.

Higher customer rates on term deposits and savings accounts that stem from higher interest rates can boost the capital that banks have at their disposal too.

Another sector that tends to prosper during high inflation periods is ASX 200 resources shares. Commodities like iron ore, coal, gold and oil tend to keep up with, or even exceed, the rate of inflation.

Thus, miners like BHP Group Ltd (ASX: BHP) and drillers like Woodside Energy Group Ltd (ASX: WDS) could also be potential inflation winners. Just look at the share prices of BHP or Woodside over 2022 if you want proof that these companies can thrive when prices are rising.

Finally, consumer staples shares are in another sector with a reputation for being an effective inflation hedge. Higher inflation can reduce consumer spending.

But we all have to spend money on food, drinks and household essentials, pretty much regardless of how expensive they are. So another potential path for our $1,000 is in ASX 200 consumer staples shares like Coles Group Ltd (ASX: COL) or Metcash Ltd (ASX: MTS).

The post How I’d invest $1,000 in ASX 200 shares for rising inflation appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has positions in Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Brickworks, Coles Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Metcash and Westpac Banking. 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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Here’s what I think could impact the Core Lithium share price in 2023

A young man in a blue suit sits on his desk cross-legged with his phone in his hand looking slightly crazed.A young man in a blue suit sits on his desk cross-legged with his phone in his hand looking slightly crazed.

The Core Lithium Ltd (ASX: CXO) share price has soared in 2022, but will it keep climbing higher in 2023?

Core Lithium shares have surged 75% in the year to date. In today’s trade, Core Lithium shares are surging 6%.

So what will impact the Core Lithium share price next year?

Finniss Project

Core Lithium is exploring the Finniss Lithium Project in the Northern Territory. A key factor that could impact the Core Lithium share price is production from this project. The Mineral Resource Estimate for the Finniss project lifted by 28% to 18.9 Mt at 1.32% lithium oxide in 2022. The company says first spodumene concentrate production is on track for the first half of 2023. Core Lithium plans to commence lithium concentrate sales in H1 2023.

If Core Lithium can deliver on its production targets, this may be a positive for the company’s cash flow and the Core Lithium share price. The team at Macquarie is tipping Core Lithium to deliver sold free cash flow in FY24 and FY25. Any new offtake agreements could also be a positive for Core Lithium.

Price of lithium

Lithium prices and electric vehicle (EV) demand could also weigh on Core Lithium shares. Lithium is an essential component of EV batteries. The price of lithium can impact investor sentiment about the company’s ability to generate profit from lithium at the mine.

A recent Industry Department report is tipping spodumene prices to rise from an average of US$2,700 a tonne in 2022 to US$4,010 in 2023 before pulling back to US$3,130 in 2024. The report states world demand for lithium demand is “forecast to rise by over 40%” in the next two years to reach 1,091,000 tonnes by 2024. The report adds:

Despite the spread of new battery manufacturing capacity into Europe and the US, Asia remains the major source of demand for lithium.

Core Lithium share price snapshot

Core Lithium shares have soared 78% in the last year. However, Core Lithium shares have descended 21% in the last month

For perspective, the ASX 200 has lost 6% in the last year.

The post Here’s what I think could impact the Core Lithium share price in 2023 appeared first on The Motley Fool Australia.

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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 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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23 ASX shares to buy in 2023 – brokers

Three people in a corporate office pour over a tablet, ready to invest.

Three people in a corporate office pour over a tablet, ready to invest.

With the ASX 200 index falling 5.5% over the last 12 months, it’s fair to say that 2022 was a difficult year for investors. The good news is that this has left many ASX shares trading at very attractive levels in 2023.

Ahead of the market reopening on Tuesday, I thought I would look at which ASX shares are being tipped as buys for the year ahead.

Listed below are 23 ASX shares that have been named as buys by brokers for 2023:

Accent Group Ltd (ASX: AX1)

Goldman Sachs has a buy rating and $2.20 price target on this footwear and fashion retailer’s shares. It likes the company due to its exposure to younger consumers.

Adairs Ltd (ASX: ADH)

This furniture and homewares retailer could be an ASX share to buy according to Goldman Sachs. The broker believes its business model is more resilient than the market appreciates. The broker has a buy rating and $2.85 price target on its shares.

Allkem Ltd (ASX: AKE)

Goldman Sachs is also a fan of this lithium miner and has a buy rating and $15.20 price target on its shares. It points out that Allkem has the “strongest 5-yr lithium production growth [and trades] at a discount to peers.”

Arafura Rare Earths Ltd (ASX: ARU)

Bell Potter has a speculative buy rating and 64 cents price target on this rare earths developer’s shares. It notes that the company’s Nolans project is “anticipated to feed potentially 8% of global supply directly into the permanent magnet market servicing expansion of electric vehicles and wind turbines.”

Aristocrat Leisure Limited (ASX: ALL)

Citi has a buy rating and $41.20 price target on this gaming technology company’s shares. Its analysts see the “land-based business as well positioned and remain optimistic on the RMG opportunity.”

BHP Group Ltd (ASX: BHP)

Macquarie is positive on this mining giant and has an outperform rating and $50.00 price target on its shares. The broker expects the Big Australian to benefit greatly from favourable commodity prices.

CSL Limited (ASX: CSL)

Another ASX share to consider is CSL. Analysts at Citi have a buy rating and $340.00 price target on the biotherapeutics giant’s shares. It is forecasting earnings per share growth greater than 20% in both FY 2023 and FY 2024.

Domino’s Pizza Enterprises Ltd (ASX: DMP)

Morgans has an add rating and $90.00 price target on this pizza chain operator’s shares. The broker believes that “now is the best time to consider an investment in a quality business like DMP that is facing headwinds that will reverse in time.”

Goodman Group (ASX: GMG)

Citi has a buy rating and $23.50 price target on this industrial property company’s shares. “[We] continue to favour industrial exposure, and remain attracted to GMG’s best-in-class balance sheet. We continue to see potential for upside to guidance.”

IDP Education Ltd (ASX: IEL)

The team at Morgan Stanley has an overweight rating and $36.80 price target on this language testing and student placement company’s shares. It believes China’s reopening from COVID-19 could be a big boost to its business.

Life360 Inc (ASX: 360)

Analysts at Bell Potter are bullish on this location technology company and have a buy rating and $9.00 price target on its shares. It expects that “recent price rises in the core business [are] likely to drive strong top line growth” in FY 2023.

Mineral Resources Ltd (ASX: MIN)

Morgans has an add rating and $94.00 price target on this mining and mining services company’s shares. It is a fan due to its transformation “from being primarily leveraged to high-cost/short-life iron ore operations to low-cost/long-life iron ore and lithium assets.”

National Australia Bank Ltd (ASX: NAB)

Analysts at Goldman Sachs are positive on this big four bank. The broker has a buy rating and $35.41 price target on its shares. Goldman’s analysts “see volume momentum over the next 12 months as favouring commercial volumes over housing volumes and NAB provides the best exposure to this thematic.”

Newcrest Mining Ltd (ASX: NCM)

Morgan Stanley is bullish on this gold miner and has an overweight rating and $23.40 price target on its shares. It feels the current environment is positive for the gold price.

Novonix Ltd (ASX: NVX)

Morgans has a speculative buy rating and $3.11 price target on this battery technology company’s shares. It notes that “NVX offers ASX investors an opportunity to get direct exposure to the North American battery market.”

Nufarm Ltd (ASX: NUF)

Bell Potter is positive on this ASX share. It currently has a buy rating and $7.50 price target on the agricultural chemicals company’s shares. It expects a strong result in FY 2023 thanks to “crop protection demand in the US and Europe and a growing contribution from new revenue streams in Omega-3.”

Pilbara Minerals Ltd (ASX: PLS)

Morgans currently has an add rating and $4.70 price target on this lithium miner’s shares. It believes recent share price weakness has created a buying opportunity.

Qantas Airways Limited (ASX: QAN)

This airline operator could be a buy according to Goldman Sachs. Its analysts have a conviction buy rating and $8.20 price target on its shares. The broker said: “Against the backdrop of substantially improved earnings capacity, we believe the stock is not even priced for a generic recovery.”

Telstra Group Ltd (ASX: TLS)

Morgan Stanley has an overweight rating and $4.75 price target on this telco giant’s shares. It believes the potential offloading of infrastructure assets could unlock value for shareholders.

Webjet Limited (ASX: WEB)

Analysts at Morgans are positive on this online travel agent and have an add rating and $7.20 price target on its shares. It feels that “WEB hasn’t wasted a crisis and will come out of COVID with a materially lower cost base, consolidated systems and a large business in the US.”

Westpac Banking Corp (ASX: WBC)

Goldman Sachs is very bullish on Australia’s oldest bank. It has a conviction buy rating and $27.60 price target on its shares. The broker believes “double digit total shareholder returns remains achievable over the next three years.”

Whitehaven Coal Ltd (ASX: WHC)

Strong coal prices make this an ASX share to buy according to Macquarie. It has an outperform rating and $12.50 price target on coal miner’s shares.

Xero Limited (ASX: XRO)

Finally, Citi sees a lot of value in this cloud accounting platform provider’s shares and has a buy rating and $97.90 price target on them. It expects “digitisation to be a bigger driver than macro for online accounting.”

The post 23 ASX shares to buy in 2023 – brokers appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the ‘five best ASX stocks’ for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now…

See The 5 Stocks
*Returns as of December 1 2022

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Motley Fool contributor James Mickleboro has positions in Allkem, CSL, Domino’s Pizza Enterprises, Life360, Westpac Banking, and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Adairs, CSL, Idp Education, Life360, and Xero. The Motley Fool Australia has positions in and has recommended Adairs, Telstra Group, and Xero. The Motley Fool Australia has recommended Accent Group, Domino’s Pizza Enterprises, and Westpac Banking. 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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