Day: January 8, 2023

How are ASX 200 energy shares tracking in the first week of trade?

A young man looks like he his thinking holding his hand to his chin and gazing off to the side amid a backdrop of hand drawn lightbulbs that are lit up on a chalkboard.A young man looks like he his thinking holding his hand to his chin and gazing off to the side amid a backdrop of hand drawn lightbulbs that are lit up on a chalkboard.

S&P/ASX 200 Index (ASX: XJO) energy shares counted amongst the top performers in 2022.

But the first week of trading in 2023 proved to be a difficult one for the big energy stocks.

In fact, none of the pure play ASX 200 energy shares finished the first week of 2023 trading in the green, while the benchmark index managed to notch up a 1.27% gain.

What headwinds did ASX 200 energy shares face in the first week of 2023?

Did someone say headwinds?

Yes, there’ve been a few.

First, investors in ASX 200 energy shares may be feeling a bit skittish over the Federal Government’s price gaps on domestic coal and gas sales. That legislation is due to last for 12 months. But there are no guarantees it might not be rolled over for an additional year. And analysts are still debating the potential impacts on the profitability of the big producers.

Second, windy conditions to drive wind turbines combined with unseasonably warm weather saw gas prices in Europe fall to levels not seen since before Russia’s invasion of Ukraine.

And the big oil and gas producers didn’t get any relief on the oil side either, with Brent crude oil finishing the week at US$80 per barrel. That’s more than 7% below the price where Brent crude was trading at the end of 2022.

So, which ASX 200 energy shares fared the best?

The best of the pack

The third-best performer in the first week of trading in 2023 was oil and gas giant Woodside Energy Group Ltd (ASX: WDS).

Woodside has a market cap of $64 billion and, at the current share price, pays a partly franked trailing dividend yield of 8.7%.

After gaining a stellar 62% in 2022 on the back of surging oil and gas prices, this ASX 200 energy share is down 2.1% in these early days of 2023, finishing the week at $34.61 per share.

Up next, we have oil and gas producer Santos Ltd (ASX: STO).

Santos has a market cap of $23.1 billion and, as of Friday’s closing price, pays an unfranked trailing dividend yield of 3.2%.

Having gained 13% in 2022, the Santos share price is down 1.3% in the new year, closing Friday at $7.02 per share.

Which brings us to the best of the pack over this first week, Origin Energy Ltd (ASX: ORG).

The diversified energy provider and producer has a market cap of $13.2 billion and pays a partly franked, trailing dividend yield of 3.8%.

Origin Energy shares gained 47% in 2022. In the first week of 2023, the ASX 200 energy share edged 0.1% lower, closing at $7.69 per share.

The post How are ASX 200 energy shares tracking in the first week of trade? appeared first on The Motley Fool Australia.

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*Returns as of January 5 2023

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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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Will 2023 get better for ASX 200 shares?

One businessman holds crystal ball while him and five others gather round to look into the future

One businessman holds crystal ball while him and five others gather round to look into the future

S&P/ASX 200 Index (ASX: XJO) shares had a rocky time last year. Will the ASX share market deliver positive returns this year?

A number of factors ravaged the ASX share market in 2022, including inflation, interest rates, conflict between Russia and Ukraine, and uncertainty in China.

We can see how the volatility hit the ASX with the exchange-traded fund (ETF) iShares Core S&P/ASX 200 ETF (ASX: IOZ).

But after the market has been jostled around, what might be in store for the ASX 200 this year?

Economic changes to start showing in results and trading updates

I think that a number of sectors are going to start showing changes in economic conditions.

For example, many bricks and mortar ASX retail shares may show strong year-over-year sales growth for the six months to 31 December 2022. That’s because the six months to 31 December 2021 saw lockdowns in a number of cities, with many stores shut or trading with restrictions. But, the trading update for the start of 2023 could start showing the impacts of inflation and higher interest rates.

Another area of change could be for ASX 200 bank shares like Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and ANZ Group Holdings Ltd (ASX: ANZ).

With interest rates rising, the banks are passing on the hikes to borrowers more quickly than savers. I expect that banks are going to report higher lending margins and profits in 2023. This could be a boost for share prices. But, FY24 and even the second half of FY23 could show bank arrears starting to increase with how rapidly interest rates have risen.

Because the banking sector is significant within the ASX 200, it will have a key influence on whether the ASX 200 climbs or not.

Unpredictable resources sector

Another important factor for ASX 200 shares is the large resources industry.

Numerous companies on the ASX are digging stuff out of the ground, such as BHP Group Ltd (ASX: BHP), Forrtescue Metals Group Limited (ASX: FMG), Rio Tinto Limited (ASX: RIO), Mineral Resources Ltd (ASX: MIN) and so on.

If everyone knew what would happen next with resource prices, then it would be much easier to know what profits resource companies are going to report each year.

I think that Chinese demand for iron ore will grow in 2023 compared to the last few months as the Asian superpower exits COVID-19 restrictions. This could mean that the iron ore price could rise even further. But, with the commodity’s price above US$110 per tonne, it’s possible it has rallied ahead of itself. Time will tell.

One area that I am optimistic about is profit-producing miners that are exposed to electrification commodities such as copper, nickel and lithium. I think that the trend towards decarbonisation is going to continue regardless of a dip in the global economy.

My thoughts on ASX 200 share opportunities

Overall, I think the ASX 200 can produce a small capital gain by the end of the year, plus dividends. There will probably be more uncertainty, but I don’t think things will always look this negative.

For me, I think ASX tech shares could be a good place to look for long-term opportunities, as they’re now at much cheaper prices after the heavy declines in 2022.

The post Will 2023 get better for ASX 200 shares? 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 January 5 2023

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Motley Fool contributor Tristan Harrison has positions in Fortescue Metals Group. 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 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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Can ASX tech shares rise from the ashes in 2023?

A man in business suit wearing old fashioned pilot's leather headgear, goggles and scarf bounces on a pogo stick in a dry, arid environment with nothing else around except distant hills in the background.

A man in business suit wearing old fashioned pilot's leather headgear, goggles and scarf bounces on a pogo stick in a dry, arid environment with nothing else around except distant hills in the background.

ASX tech shares had a terrible time in 2022 amid numerous interest rate rises. After such a bad run, can the sector regain investor confidence in 2023?

As an example of the heavy decline, the BetaShares S&P/ASX Australian Technology ETF (ASX: ATEC) fell by around 32% last year. This is an exchange-traded fund (ETF) that is invested in around 50 ASX tech shares, ranging from large players like Xero Limited (ASX: XRO), WiseTech Global Ltd (ASX: WTC) and REA Group Limited (ASX: REA), down to small technology companies like Frontier Digital Ventures Ltd (ASX: FDV) and FINEOS Corporation Holdings PLC (ASX: FCL).

Could 2023 go much better?

According to reporting by the Australian Financial Review, a survey of 11 of the country’s leading technology CEOs by the newspaper showed that most of them believe the sales cycle slowdown which is currently hurting Europe and the US could also hurt Australian companies as well, though the ‘business to business’ (B2B) market could do better than ones that focus on consumers.

WiseTech CEO and founder Richard White said:

Regardless of geography, tight economies force business leaders to focus on efficiency in order to be resilient and maintain margins.

The top performing ASX tech companies are mostly B2B players, so they are in a better position compared with other markets in which many of the top tech companies are consumer-facing businesses and so more vulnerable to consumer spending trends.

[This year] has reminded the tech sector we should all have an ongoing focus on efficiency and profitability as part of good financial discipline. We implemented an organisation-wide efficiency program a couple of years ago … it’s given us an annualised cost reduction of approximately $50 million, which was important for driving further operational leverage as our revenue continues to grow.

I suspect investors will be unlikely to quickly return to the days when growth was the chief metric of business health for a tech company. Growth at any cost is pretty much dead, and I expect a focus on growth and profitability is here to stay.

My take on ASX tech shares

The technology sector is a diverse group and, while they have largely been sold off indiscriminately, I think there could be a good rebound for some names.

Remember, a share price is meant to reflect the entire future value of a business, discounted back to a valuation for today.

I do not think that the underlying value of some businesses are worth 40% less, 50% less or an even bigger discount, compared to 12 months ago. However, I’d also say that some businesses were not worth as much as how high the market had pushed them.

If the market sees that some ASX tech shares’ financials are holding up better than others, this could lead to a boost for names like that. Remember, if something drops by 50% from $100 to $50, it only needs to go to $75 to make a 50% return.

I can see names like Megaport Ltd (ASX: MP1), Xero Limited (ASX: XRO) and Life360 Inc (ASX: 360) being candidates that could rebound because of how hard they’ve been hit, yet revenue has continued to grow.

Over the long term, some of the names in this sector could be the ones that develop the most, with strong operating margins. So, being able to buy these ASX tech shares at much cheaper prices seems like a great opportunity to me.

Even if technology businesses don’t rebound in 2023, over the next three to five years, I think they could be among the better performers.

The post Can ASX tech shares rise from the ashes in 2023? appeared first on The Motley Fool Australia.

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*Returns as of January 5 2023

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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 Frontier Digital Ventures, Life360, Megaport, WiseTech Global, and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended FINEOS Corporation. The Motley Fool Australia has positions in and has recommended WiseTech Global and Xero. The Motley Fool Australia has recommended FINEOS Corporation, Frontier Digital Ventures, Megaport, and REA 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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Top brokers name 3 ASX shares to buy next week

Broker written in white with a man drawing a yellow underline.

Broker written in white with a man drawing a yellow underline.

With most brokers taking a break over the holiday period, there haven’t been many notes hitting the wires.

But never fear! Summarised below are three recent recommendations that remain very relevant today. Here’s what brokers are saying about these ASX shares:

Allkem Ltd (ASX: AKE)

According to a note out of Citi, its analysts have a buy rating and $17.80 price target on this lithium miner’s shares. While the broker suspects that lithium prices may have peaked amid slowing electric vehicle demand in China, it doesn’t appear too concerned. This is due to Allkem locking in strong contracted prices. Combined with production growth, Citi remains positive on the company’s outlook. The Allkem share price ended the week at $11.91.

Corporate Travel Management Ltd (ASX: CTD)

A note out of Macquarie reveals that its analysts have an outperform rating and $19.95 price target on this corporate travel specialist’s shares. The broker acknowledges that industry data shows that corporate travel activity softened in the United States in November, putting Corporate Travel Management at risk of falling short of first half expectations. However, with its shares down heavily over the last 12 months and trading at an attractive level, the broker appears to believe this is more than priced in. The Corporate Travel Management share price was fetching $15.62 at Friday’s close.

Xero Limited (ASX: XRO)

Analysts at Bell Potter have a buy rating and $97.90 price target on this cloud accounting platform provider’s shares. According to the note, the broker has taken positives from the recent release of the first quarter update from rival Intuit (the owner of Quickbooks). Bell Potter notes that the update revealed softness in the Australian market for QuickBooks, which could bode well for Xero. In addition, it notes that Intuit commented that it believes that digitisation rather than macro remains the key driver for cloud accounting. This is likely to be a positive for Xero in the current economic environment. The Xero share price ended the week at $71.62.

The post Top brokers name 3 ASX shares to buy next week 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 January 5 2023

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Motley Fool contributor James Mickleboro has positions in Allkem and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool Australia has recommended Corporate Travel Management. 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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