The tech sector has been a difficult place to invest over the last 12 months. With interest rates rising across the globe, tech valuations have been hit hard.

The good news is that analysts at Morgans believe the sector is now trading at an attractive level. When upgrading Megaport Ltd (ASX: MP1) shares last week, the broker commented:

In CY22 we had an underweight view on the technology sector. CY22 was brutal for technology and growth stocks. Inflation/interest rates were the main culprit. As we look into CY23 we think it’s improbable interest rate rises will be anywhere near as dramatic as CY23 so the macro backdrop looks better for tech.

Valuations for quality tech are now back to 20 year / long run averages (fair value). […] With the risk of multiple compression now hopefully behind us, fundamentals will once again matter. Quality tech can grow regardless of weak economic conditions. Profit growth should reignite interest in the tech sector once again and this profit growth should drive share price appreciation.

With that in mind, if you’re wanting to gain exposure to the tech sector, then you could consider doing so with exchange traded funds (ETFs).

Two highly rated tech-focused ETFs to consider are listed below. Here’s what you need to know about them:

BetaShares Global Cybersecurity ETF (ASX: HACK)

The first tech ETF to consider is the BetaShares Global Cybersecurity ETF. This fund gives investors access to the leading companies in the global cybersecurity sector. This is a sector that has been tipped to grow strongly over the next decade due to the growing threat of cybercrime.

Among the companies you’ll be investing in with this ETF are Accenture, Cisco, Cloudflare, Crowdstrike, Okta, and Palo Alto Networks.

VanEck Vectors Video Gaming and eSports ETF (ASX: ESPO)

Another tech ETF to consider is the VanEck Vectors Video Gaming and eSports ETF. This ETF gives investors access to a portfolio of the largest companies involved in the video game industry. This is huge and growing industry that is estimated to comprise almost 3 billion active gamers.

This includes industry leaders such as graphics processing units giant Nvidia and games developers Take-Two Interactive (GTA, Red Dead), Electronic Arts (FIFA, Sims, Apex Legends), and Roblox.

The post Time to return to tech? Here are 2 ASX tech ETFs to buy 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 BetaShares Global Cybersecurity ETF and Megaport. The Motley Fool Australia has positions in and has recommended BetaShares Global Cybersecurity ETF. The Motley Fool Australia has recommended VanEck Vectors Video Gaming And eSports ETF and Megaport. 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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It’s no secret that I’m a big fan of buy and hold investing. In fact, I believe it is the best way for investors to grow their wealth.

In light of this, every so often I like to demonstrate how successful this investment strategy can be by picking out a number of popular ASX shares to see how much a single $20,000 investment 10 years ago would be worth today.

And while you might think that you would need to unearth some rising stars to generate big returns, that’s not actually the case.

For example, listed below are three ASX shares that have comprehensively beaten the market and were no secret to investors back in 2013. Let’s see how investments in these shares fared:

Goodman Group (ASX: GMG)

This integrated industrial property company’s strategy of building sustainable properties that are close to consumers and provide essential infrastructure for the digital economy has been a huge success. Demand has been so strong, that Goodman has delivered stellar earnings growth over the last decade. This has ultimately led to this ASX share generating an average total return of 17.23% per annum since 2013. This would have seen a $20,000 investment turn into almost $100,000 over the period.

Macquarie Group Ltd (ASX: MQG)

This investment bank has been a strong performer for investors over the last decade. During this time, Macquarie’s shares have smashed the market with a total average return of 19.25% per annum. This would have turned a $20,000 investment 10 years ago into almost $120,000 today.

ResMed Inc. (ASX: RMD)

Thanks to the growing awareness of sleep disorders and this medical device company’s industry-leading solutions, it has reported consistently solid sales and earnings growth over the 2010s and now into the 2020s. This has led to this ASX share providing investors with an average total return of 22.26% per annum since 2013. This means that a $20,000 investment back then would have grown to be worth almost $150,000 now.

The post $20,000 invested in these ASX shares 10 years ago is worth how much now? 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 ResMed. The Motley Fool Australia has positions in and has recommended ResMed. 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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The A2 Milk Company Ltd (ASX: A2M) share price has been a strong performer over the last 12 months, rising by around 30%. That compares to a rise of around 10% for the S&P/ASX 200 Index (ASX: XJO).

But, many other ASX growth shares have suffered in the last year. For example, the Xero Limited (ASX: XRO) share price is down 28% and the Block Inc (ASX: SQ2) share price is down 25%.

A2 Milk shares went through a lot of pain once households stopped stocking their pantry during the COVID-19 pandemic. But, the business seems to be on a recovery path again.

Let’s remind ourselves about what the latest update from the infant formula company said.

Latest update

At the annual general meeting (AGM), in mid-November 2022, the company reminded investors that in FY22 it saw significant progress in implementing its refreshed strategy, which helped with “improved performance”.

A key part of this has been inventory management actions, which are “effective”. Channel inventory is at target levels, leading to product freshness and improved market pricing.

The business is seeing “new highs in brand health”, along with “record market shares and return to growth”.

A2 Milk said the outlook is positive, with continued revenue and earnings growth expected in FY23.

The company has also been buying back millions of A2 Milk shares, with an on-market share buyback of up to $150 million.

A2 Milk is working on its state administration for market regulation (SAMR) registration process, which is “progressing”. The approval is anticipated in the second half of FY23. The company also noted that the China State Farm exclusive import and distribution agreement has been renewed for five years from 1 October 2022.

The business also announced last year that it received US Food and Drug Administration (FDA) approval, with an enforcement discretion, to import infant milk formula into the US.

A2 Milk has a target of achieving $2 billion of revenue by FY26 and improving the earnings before interest, tax, depreciation, and amortisation (EBITDA) margin over time.

Is the A2 Milk share price going to sour from here?

A2 Milk’s earnings are expected to rise each year between FY23 to FY25, according to projections on Commsec.

The current estimates put the company at 37x FY23’s estimated earnings and 29x FY24’s estimated earnings.

After the strong performance by A2 Milk shares and expectations of profit growth, is it worth buying?

Looking at the analyst ratings collated by Commsec about the business, three rate A2 Milk shares as a buy, four rate it as a hold, and five rate it as a sell.

With the company seemingly on track for a recovery, it could be an effective investment – it’s still down around 65% from the high in July 2020.

However, I think A2 Milk will need to make progress in both China and the US for it to continue to excite investors this year.

The post A2 Milk shares are up 30% in a year, is this price sweet or sour? appeared first on The Motley Fool Australia.

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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 Block and Xero. The Motley Fool Australia has positions in and has recommended Block and Xero. The Motley Fool Australia has recommended A2 Milk. 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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Returns from investing in ASX shares typically come in two forms.

The first is the capital gains we all know and love. This one is pretty basic. If you buy a share and then sell it at a later date for a higher price than what you bought it for, you make a profit. This is where the old maxim ‘buy low, sell high’ comes from.

But, as most ASX investors would be aware, there is another way to make money with ASX shares – receiving dividends. A dividend is a cash payment made by companies to their investors.

On the ASX, dividend-paying shares tend to dole out said dividends every six months. But some ASX shares can pay dividends quarterly or even monthly.

Some investors think of dividends as just a payment on the side, made to reward investors for holding a company’s shares. But dividends are far more important than that.

In fact, when it comes to the S&P/ASX 200 Index (ASX: XJO), a greater proportion of investors’ overall returns have come from dividend income, as opposed to capital gains.

Treat your dividends well, and they will treat you

To illustrate, let’s take one of the oldest ASX 200-tracking exchange-traded funds (ETFs) on the market.

The SPDR S&P/ASX 200 Fund (ASX: STW) has been listed on the ASX since August 2001. Over the 22 (and a bit) years that this ETF has been listed, it has averaged an annual return of 7.74% per annum after fees.

Of that 7.74%, only 3.05% per annum on average came from capital growth. The remaining 4.7% per annum came from dividend returns.

If an investor is to be successful at their craft, then treating these dividends properly is of paramount importance. When some investors receive income from shares, they might use it as an excuse to hit the town, have a nice meal, or buy a new outfit.

While our decisions are all our own, going down this path could cost you dearly. Compound interest relies on the consistent and never-ceasing reinvestment of all returns along the way.

If you aren’t ploughing your dividends back into more and more shares, which will then pay out more and more dividends over time, your returns will be far worse.

How much worse?

Well, $10,000 invested at a rate of return of 7.74%, compounded semiannually, will turn into around $97,590 after 30 years.

But say you go out and blow your dividends every time you get paid. Then, you will only receive a rate of return of 3.05% per annum over these 30 years. That would leave you with just $24,796.

In George S. Classon’s personal finance classic The Richest Man in Babylon, spending the cash returns of an investment is described in the following way:

You do eat the children of your savings. Then how do you expect them to work for you? And how can they have children that will also work for you?

Dividends beget more dividends. So don’t kneecap your portfolio’s returns by underappreciating this important source of wealth.

The post Want to invest successfully? You need to do this with your dividends appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen 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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