Day: 1 February 2023

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, Schroders portfolio manager Ray David urges investors to avoid the biggest mistake in investing.

The ASX share for a comfortable night’s sleep

The Motley Fool: If the market closed tomorrow for four years, which ASX share would you want to hold?

Ray David: I’d say Ramsay Health Care Ltd (ASX: RHC), just because we know in four years’ time, demand for elective surgeries will be higher. 

We know that demand for healthcare is only going to grow and the government’s very supportive of that private healthcare segment of the market because effectively it’s a tax subsidy for those that can afford it against those who can’t. 

And there’s a big freehold property infrastructure property network there. If we are in a different environment where rates are lower, the value of that property only goes up. 

So Ramsay would definitely fit that category if we were looking across the ASX because it’s recession-proof, it’s got growth, it’s got high [barrier to] entry and the valuation is pretty attractive.

Looking back

MF: Is there a move that you regret from the past? For example, a missed opportunity or buying a stock at the wrong timing or price.

RD: Our biggest headache we have is timing. Generally timing the top of a stock or the bottom, we can never get it right. 

I’ll give you an example. We shorted a company called City Chic Collective Ltd (ASX: CCX). We shorted the stock when it had a valuation over $1 billion and the market was really excited about the prospects of its online business that we saw as a commodity. 

So we end up making 50% on the short. So we covered it around about $1.90 per share, because we started to think, okay, the valuation was starting to look pretty supportive. But often as always, the market can overreact both on the upside and the downside. And as you know, City Chic started to update the market around its inventory positions and outlook, stock fell to as low as, I think it might have been, 48 cents.

So we never get the bottom on the shorts and we never get the top on the longs. But the way we think about our investment framework is, if you have a valuation framework, you stick to that framework. It’s a guide. If you remain disciplined to that process, you’ll still be able to add a fair bit of return to your clients. 

You’re never going to get the bottom of the top. And if you try and time the market, most likely you’re going to be wrong, because there’s so many psychological factors driving share prices in addition to fundamentals where stocks are going to be going much higher than what you thought as we saw in the tech boom.

Buy now, pay later is another example where a company like Zip Co Ltd (ASX: ZIP) got to north of $6 billion of market value and today it’s got a market value of less than $500 million. 

So the market can be irrational and timing’s very difficult, but the way to stay ahead of the market is for you to be rational and be disciplined and stick to your process. And our process is having a bit of valuation framework to help us make our decisions around when we enter and exit companies or stock positions.

The post Avoid my biggest mistake in investing: fund manager appeared first on The Motley Fool Australia.

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More reading

• ‘Incredibly cheap’: 2 ‘strong’ ASX shares expert would pounce on right now
• I think these 2 cheap ASX shares are buys for value investors
• The Zip share price: Has it bottomed out?
• Jun Bei Liu’s 2 ‘structural growth’ ASX shares to buy now
• Why Coronado Global, Mincor, OFX, and Zip shares are dropping today

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 Zip Co. 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 Mesoblast Ltd (ASX: MSB) share price is having a very strong start to the month.

At the time of writing, the biotechnology company’s shares are up almost 13% to $1.07.

Whys is this ASX All Ords biotech share rocketing higher?

Investors have been scrambling to buy the ASX biotech’s shares following the release of a positive regulatory update.

According to the release, the allogeneic cellular medicines developer has resubmitted to the U.S. Food and Drug Administration (FDA) its Biologics License Application (BLA) for approval of remestemcel-L in the treatment of children with steroid-refractory acute graft versus host disease (SR-aGVHD).

The company notes that the resubmission contains substantial new information as required by the FDA.

This includes new long-term survival data of children enrolled in the Phase 3 trial showing durability of treatment effect through at least four years and new data showing remestemcel-L’s treatment benefit in high-risk disease activity and on survival in propensity-matched studies of children in the Phase 3 trial.

It also highlights that new data shows that the validated potency assay has low variability and can adequately demonstrate manufacturing consistency and reproducibility. The lack of consistency was a key issue that the FDA had previously brought up.

All in all, management appears hopeful that this will be enough to get remestemcel-L approved by the FDA this time around.

Mesoblast’s chief executive, Dr. Silviu Itescu, commented:

There is an urgent need for a therapy that improves the dismal survival outcome in children with SRaGVHD. Our team has worked tirelessly over the past two years to provide a comprehensive response to the FDA. We are grateful for the agency’s active dialogue and constructive feedback that will ensure a high bar is met in terms of product consistency and predictability of clinical outcomes.

Pleasingly, shareholders won’t have too long to wait for a result. The resubmission will have a review period up to six months from filing upon acceptance by FDA.

The post Guess which ASX All Ords biotech share is rocketing 13% on FDA news appeared first on The Motley Fool Australia.

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More reading

• Why Brainchip, Core Lithium, Deterra Royalties, and Mesoblast shares are falling

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 Flight Centre Travel Group Ltd (ASX: FLT) share price is rocketing higher on Wednesday, up 14.84% in early trade.

The S&P/ASX 200 Index (ASX: XJO) travel stock closed on Monday trading for $15.83. The share price shot as high as $18.18 this morning and, at the time of writing, is $17.54, up 10.8%.

The company was placed in a trading halt at its request yesterday.

Why was the Flight Centre share price halted?

As The Motley Fool reported yesterday, Flight Centre shares entered a trading halt following the company’s announcement that it will acquire United Kingdom-based luxury travel brand Scott Dunn.

Commenting on the acquisition yesterday, Flight Centre CEO Graham Turner said, “High-net-worth, time poor customers highly value the services of Scott Dunn as shown by their customers’ loyalty.”

Flight Centre will shell out $211 million for Scott Dunn, comprising of $40 million in cash and a $180 million placement. That placement comprises of some 12.3 million new shares, issued for $14.60 apiece.

Additionally, Flight Centre will conduct a $40 million share purchase plan (SPP), offering existing stockholders shares at the same placement price.

What did the travel group report today?

The Flight Centre share price is out of the trading halt and roaring higher after the company reported that the $180 million share placement is complete.

The company said demand for the institutional placement – issued at a 7.8% discount to Monday’s closing price – exceeded the supply of 12.3 million shares.

“We are very pleased with the support shown by new and existing institutional investors for the placement,” Turner said. “The acquisition of Scott Dunn will enable us to grow our leisure presence in the attractive US and UK luxury markets, complementing our existing footprint.”

Investors who held shares at Monday’s close will have the opportunity to apply for up to $30,000 worth of Flight Centre shares for $14.60 apiece or 2% discount to the volume-weighted average share price over the five trading days up to, and including, the SPP closing date. (Whichever is lower.)

Flight Centre share price snapshot

The Flight Centre share price has been a strong performer so far in 2023, up 25% since the closing bell on 30 December. Over the past 12 months, as you can see below, shares are up 3%.

The post Flight Centre share price rockets 15% as ASX 200 travel stock resumes trading appeared first on The Motley Fool Australia.

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More reading

• Flight Centre share price frozen amid $211m ‘luxury’ acquisition
• These are the 10 most shorted ASX shares
• How much profit could Flight Centre shares make in 2023?
• Here are the 10 most shorted ASX shares
• Is 2023 Flight Centre’s year to return to profit?

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 recommended Flight Centre Travel 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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Somewhat surprisingly, the S&P/ASX 200 Index (ASX: XJO) is up more than 6% over the last year, while the S&P 500 Index (INDEXSP: .INX) is down by 11% over the last 12 months.

The ASX 200 has done so well that it’s close to its all-time high.

However, I’d largely put that down to the two sectors that make up a significant part of the index – banks and resources.

With higher interest rates and a higher iron ore price, it’s good times for names like BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO), Fortescue Metals Group Limited (ASX: FMG), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), Westpac Banking Corp (ASX: WBC) and ANZ Group Holdings Ltd (ASX: ANZ).

Still plenty of opportunities out there

While ASX’s biggest industries are doing well, the share prices of (at least) three other areas still look promising.

ASX tech shares were smashed in 2022, so I think those names that have been hit heavily represent much better buying. For example, compared to their peak prices, the Xero Limited (ASX: XRO) share price, the REA Group Limited (ASX: REA) share price and the SEEK Limited (ASX: SEK) share price are all down materially.

Fintechs are also down, despite elevated earnings on the cash they hold, such as Hub24 Ltd (ASX: HUB) and Netwealth Group Ltd (ASX: NWL).

Higher interest rates do reduce asset prices, in theory. But, they’re still the same businesses they were before. So, I think the much lower price we’re seeing with these names is giving us opportunities to invest at a cheaper price.

There are some areas within the ASX 200 that may see an earnings hit in 2023, but I believe the lower share prices make up for that, though some share prices have risen a fair bit.

Retail and building products could be interesting hunting grounds to look at. Over the next three to five years, I think ASX 200 shares like Brickworks Limited (ASX: BKW), James Hardie Industries plc (ASX: JHX), CSR Limited (ASX: CSR), Wesfarmers Ltd (ASX: WES), JB Hi-Fi Limited (ASX: JBH), Premier Investments Limited (ASX: PMV) and Metcash Ltd (ASX: MTS) could also perform well.

Ready to keep investing

I think that a number of these shares will surpass their former heights in the coming years as they grow their underlying operations.

While some industries do go through cycles, I think the lower point of the cycle is a good time to invest in retailers, building product businesses and ASX tech shares.

I’m going to be putting more money to work this year, which will hopefully accelerate my wealth-building efforts in the coming years. Buying at a lower price also means that I’m getting a higher dividend yield from my investments.

I will probably write an article about the next ASX 200 share that I buy, so keep an eye out for that.

The post The ASX 200 is still full of cheap shares despite this year’s surge and I’m ready to buy more appeared first on The Motley Fool Australia.

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More reading

• Top ASX shares to buy in February 2023
• ‘Attractive stock’: Fundie names one ASX share to buy, one to watch, one to avoid
• Should I buy ASX 200 tech shares in early 2023 or wait?
• How I’d invest $200 a month in ASX shares to make a $20,000 passive income for life
• Forget lithium! I’m using the Warren Buffett method to help find winning ASX shares in 2023

Motley Fool contributor Tristan Harrison has positions in Brickworks and Fortescue Metals Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks, Hub24, Netwealth Group, and Xero. The Motley Fool Australia has positions in and has recommended Brickworks, Hub24, Netwealth Group, Wesfarmers, and Xero. The Motley Fool Australia has recommended Jb Hi-Fi, Metcash, Premier Investments, REA Group, Seek, 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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Could this embattled S&P/ASX 200 Index (ASX: XJO) healthcare share be a buy right now? Fundies seemingly think so, tipping the glove manufacturer to do big things in the future.

It follows a rough couple of years for the Ansell Limited (ASX: ANN) share price. The stock tumbled 9.4% over 2021 before dumping another 10.4% last year. It currently trades at $28.17.

Comparatively, the ASX 200 gained 13% in 2021 and slipped 5.4% over 2022.

So, what has experts talking about the stock in 2023? Let’s take a look.

Is this ASX 200 healthcare share a 2023 buy?

Interestingly, while Ansell falls among healthcare shares, it could also be described as an industrial company. That’s because it mainly produces gloves and other personal protective equipment.

Perhaps unsurprisingly, then, the company’s earnings took off during the COVID-19 pandemic, driving the Ansell share price to a record high in June 2021.

And while its inflated financial year 2021 earnings didn’t stick around for financial year 2022, the market reacted positively to news its revenue reached US$1.9 billion last fiscal year, with Macquarie experts reportedly seeing “solid underlying trends”.

Indeed, many experts tip the ASX 200 healthcare share’s future to be bright. Allan Gray managing director and chief investment officer Simon Mawhinney believes it offers both defensive earnings and good value, saying:

Even though [Ansell] is somewhat exposed to economic cycles, for the most part, they are non-discretionary spends.

[I]mportantly, the share price that you pay today is low relative to earnings. We think you buy a company like Ansell for around 14 times earnings and those earnings, we think, will grow at low single digit percentages.

If you contrast that with the stock market perhaps if we’re lucky, a similar growth rate in earnings, but a good 30% or so more expensive.

The ASX 200 healthcare share also looks like a good opportunity on a technical basis, according to Fairmont Equities managing director and founder Michael Gable. He recently flagged the stock as a buy, saying via The Bull:

The share price has been trending higher since June 2022 and breached resistance at $28 in late October. The technical chart remains bullish … the stock is in a strong uptrend, with no signs of weakness.

The post Is this share the ASX 200’s best healthcare buy? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Wednesday
• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• Why is the AMP share price smashing the ASX 200 on Tuesday?
• Coles share price surges, brokers say more gains to come

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 recommended Ansell. 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, Megaport Ltd (ASX: MP1) shares were sold off following the release of the network services company’s quarterly update.

The company’s shares ended the day almost 25% lower at $5.78.

Why were Megaport shares sold off?

Although Megaport delivered a result that was largely in line with expectations, its operational trends rattled investors and sparked concerns over its future growth.

A note out of Goldman Sachs this morning explains:

Although this result was in-line to ahead of GSe (2Q23 sales +3% vs. GSe), the key disappointment was the weakness in the operational trends, most evident in the sequential decline in MVE/MCR (both of which we view as important drivers of MT growth). Although requiring further analysis, part of this appears to be driven by (1) broader macro concerns causing a deferral in decisions (as is occurring globally); and (2) ‘proof of concept’ customers pausing services before potentially re-engaging.

Is this a buying opportunity?

While it was disappointed with the quarter, Goldman Sachs remains positive and sees plenty of value in Megaport shares.

According to the note, the broker has retained its buy rating with a trimmed price target of $8.10. Based on the current Megaport share price, this implies potential upside of 40% for investors over the next 12 months.

What did Goldman say?

Although Goldman has reduced its revenue estimates, it has boosted its earnings estimates to reflect management’s focus on profitable growth. It also believes Megaport has sufficient cash to see it through to breakeven. The broker commented:

All in we revise FY23-25 revenues -1% to -15%. However from an earnings perspective, given a greater focus on profitable growth, MP1 has stepped up the cadence of its Jul-22 headcount reduction, and is now expecting $8-10mn cost reduction through FY24. Given the still strong revenue trends, this cost out has driven a step up in our near term (FY23-25) EBITDA of +35% to +4%.

Finally with the stronger near term EBITDA profile, specific guidance for capex to fall in 2H23/FY24, and the A$25mn debt facility, we still see ample headroom room for MP1 to achieve FCF breakeven by 2Q24.

All in all, the broker appears to believe that investors should be taking advantage of this share price weakness. Particularly given that its analysts “remain confident MP1 has a clear product advantage vs. peers and a decade-long runway for robust growth.”

The post Are Megaport shares mega cheap following Tuesday’s crash? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Wednesday
• Why Bubs, Core Lithium, Megaport, and Pointsbet shares are crashing today
• ASX 200 tech stock Megaport tumbles 20% following quarterly update
• ASX 200 jumps higher again, defying predictions the 2023 stock market rally could be about to come to a screaming halt
• These are the 10 most shorted ASX shares

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 Megaport. The Motley Fool Australia has recommended 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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The Challenger Ltd (ASX: CGF) share price has been doing well in recent months, I’m going to explain why I think that can continue.

Over the last year, the annuity provider has risen by more than 20%.

The company’s updates have been exciting investors with strong annuity sales growth numbers.

In the first quarter of FY23, total life sales increased by 33% to $2.8 billion, while annuity sales jumped 50% to $1.8 billion.

I think there are two key reasons why Challenger is now a much more compelling investment to consider.

Interest rates normalised

The idea behind Challenger’s offering of annuities is that it enables people to swap their capital for a guaranteed source of income.

When interest rates kept reducing, it made the yield on offer reduce and seem less appealing. For example, in 2021, its 3-year annuity return on offer was 1.85%.

But, now that interest rates have gone up, people can get much more appealing annuity rates. They’re able to lock in a much better return. I think this is promising for the Challenger share price.

When the company announced its FY23 first quarter, the Challenger managing director and CEO Nick Hamilton said:

Annuity sales are benefiting from the interest rate environment, which has improved the customer proposition. Our 3-year annuity rate reached 4.85% in October, the highest level in the last ten years. We are seeing a significant pick up in quote levels from advisers and we are attracting new customers.

Pleasingly, the higher interest rate environment is providing us the opportunity to remix our sales. Annuity sales greater than two years, including lifetime sales, are increasing, reflecting our focus on growing longer duration business.

We are well placed to continue our growth trajectory, with the interest rate environment supportive for the business and achieving our purpose of helping customers achieve financial security for retirement.

With those strong fund inflows, the business is expecting to achieve normalised net profit before tax of between $485 million to $535 million in FY23.

I think it’s also worth pointing out that the ageing demographics of Australia give the business strong tailwinds for the coming years as the baby boomer generation moves from the accumulation phase to the retirement phase with their money, though that’s not all going to play out in 2023.

Asset falls finished?

Challenger manages an enormous amount of assets. At the end of the FY23 first quarter, it had $96 billion of assets under management (AUM). The more this figure can grow from asset price growth, the better it is for Challenger and shareholders.

Rising interest rates have been rough on asset values over the past 12 months. But, I think that’s just a temporary setback.

Over the long term, assets like shares have risen in value. Once interest rates stop rising, I think this will be a real positive for Challenger’s asset base, while still benefiting from the improved environment for annuity demand.

Challenger share price valuation

According to the forecasts on Commsec, the business is currently valued at 15 times FY23’s estimated earnings.

The post Why I think the Challenger share price could be a top performer in 2023 appeared first on The Motley Fool Australia.

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More reading

• Why I think these 2 ASX dividend shares offer great buying right now
• The 3 ASX 200 bank shares that outperformed all others in 2022
• ASX financial shares lifted the ASX 200 today

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 recommended Challenger. 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 S&P/ASX 200 Index (ASX: XJO) has started the year in a very positive fashion. Last month, the benchmark index recorded a gain of 6.2%.

While this was undoubtedly strong, it wasn’t as strong as some of the gains made on the index. Here’s why these ASX 200 shares smashed the market:

Sayona Mining Ltd (ASX: SYA)

The Sayona Mining share price was the best performer on the ASX 200 last month with a gain of 36.8%. Investors were piling back into the lithium industry in January on the belief that prices of the battery making ingredient may stay higher for longer. In addition, Sayona announced positive progress with the restart of the North American Lithium project.

Pilbara Minerals Ltd (ASX: PLS)

The Pilbara Minerals share price was back on form and charged 27% higher in January. As well as lithium price optimism, a strong quarterly update gave this lithium giant’s shares a big boost in January. Pilbara Minerals’ production, sales volumes, lithium prices, and unit costs all improved quarter on quarter. It also reported an increase in its cash balance from $1.375 billion at the end of September to $2.226 billion at the end of December.

Corporate Travel Management Ltd (ASX: CTD)

The Corporate Travel Management share price was on form and rose 24.6% in January. This was despite there being no news out of the travel company. Though, it is worth noting that its shares were hammered in 2022 and brokers have been tipping its shares as a buy. Goldman Sachs, for example, has a buy rating and $20.30 price target on them.

ARB Corporation Limited (ASX: ARB)

The ARB share price was a strong performer and climbed 24% last month. While there was no news out of the 4×4 parts manufacturer, a solid update from Super Retail Group (ASX: SUL) may have given its shares a boost. Super Retail revealed that its Supercheap Auto business delivered sales growth of 18% during the first half of FY 2023. This appears to indicate that consumers are still spending on their cars despite the cost of living crisis.

The post These were the best performing ASX 200 shares in January appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Why was the Lynas share price hit so hard on Tuesday?
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• 3 of the very best ASX 200 travel shares to buy according to Goldman Sachs
• Forget lithium! I’m using the Warren Buffett method to help find winning ASX shares in 2023

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 ARB Corporation and Super Retail Group. The Motley Fool Australia has positions in and has recommended Super Retail Group. The Motley Fool Australia has recommended ARB Corporation and 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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The S&P/ASX 200 Index (ASX: XJO) was in fine form in January, starting the year with a monthly gain of approximately 6.2%.

Unfortunately, not all ASX 200 shares were able to follow the market’s lead. Here’s why these shares were smashed last month:

Brainchip Holdings Ltd (ASX: BRN)

The Brainchip share price was the worst performer on the ASX 200 index by some distance with a 15.5% decline. Investors were selling this semiconductor company’s shares after it raised capital and released yet another poor quarterly update. Investors finally appear to be questioning whether the meme stock is deserving of a $1.1 billion market capitalisation given its performance and the incredible competition it faces.

Whitehaven Coal Ltd (ASX: WHC)

The Whitehaven Coal share price was out of form and dropped 10.8% last month. Easing thermal coal prices appear to be the reason for the weakness in this coal miner’s shares in January. This offset the release of a solid quarterly production update. Longer term shareholders won’t be too disappointed, though. The Whitehaven Coal share price is still up 200% since this time last year despite this decline.

Computershare Limited (ASX: CPU)

The Computershare share price wasn’t far behind with a 9.4% decline in January. This was despite there being no news out of the administration services company during the month. However, it is worth noting that easing inflation led to the market revising its interest rate expectations lower. Computershare looks set to benefit greatly from higher rates.

Incitec Pivot Ltd (ASX: IPL)

The Incitec Pivot share price had a disappointing month and dropped 8.5% over the period. While there were no announcements out of Incitec Pivot in January, softening ammonia prices may have been the reason for the weakness in the industrial chemicals company’s shares.

The post These ASX 200 shares were smashed in January appeared first on The Motley Fool Australia.

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More reading

• Why Brainchip, IAG, Metcash, and ResMed shares are sinking today
• Here’s why the Brainchip share price is being sold down again today
• Here are the 3 most heavily traded ASX 200 shares on Friday
• Why is the Whitehaven Coal share price tanking 6% today?
• Why Accent, Mineral Resources, Newcrest, and Whitehaven Coal 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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Do you want a passive income boost? If you do, then the ASX dividend shares listed below that Citi rates as a buy could be the way to do it.

Here’s why these could be passive income shares to buy now:

Transurban Group (ASX: TCL)

The first ASX share that could provide investors with a passive income boost is Transurban.

Citi believes the toll road operator could be a great option in the current environment due to its positive exposure to inflation. It commented:

With concerns around inflation being more sticky and higher for longer, we believe investors are likely to remain attracted to companies providing protection to rising inflation. We see TCL as being particularly attractive given ~70% of toll revenue is linked to inflation, downside protection to traffic even if we enter a recessionary period (given exposure to urban roads), and inorganic upside from the current and future development pipeline.

As for dividends, the broker is forecasting dividends per share of 53 cents in FY 2023 and then 56 cents in FY 2024. Based on the current Transurban share price of $13.81, this will mean yields of 3.8% and 4.1%, respectively.

Citi has a buy rating and $15.70 price target on its shares.

South32 Ltd (ASX: S32)

Another ASX dividend share that could give your passive income a lift is mining giant South32.

Citi is positive on the company and believes it could provide investors with big dividends in the near term. Particularly given favourable commodity prices. It recently said:

S32 DecQ prodn was a significant improvement on SepQ (although lower than Citi expectations) with FY23 prodn guidance maintained and FY23 unit cost expected to be in-line with or lower than guidance for most ops. With Citi’s commodity team raising near term Cu/Al/Zn/HCC pricing, we’ve raised FY23/24 EPS and lifted TP to A$5.00 and stayed Buy rated.

In respect to dividends, the broker is forecasting fully franked dividends of 27 cents per share in FY 2023 and 31 cents per share in FY 2024. Based on the current South32 share price of $4.54, this will mean yields of 6% and 6.8%, respectively.

Citi has a buy rating and $5.00 price target on South32’s shares.

The post Buy these ASX passive income shares now: experts appeared first on The Motley Fool Australia.

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More reading

• Top ASX shares to buy in February 2023
• Fundie sells South32 to buy this other ASX 200 mining share. Here’s why
• Forget lithium! I’m using the Warren Buffett method to help find winning ASX shares in 2023
• Income investors rejoice! Analysts say these quality ASX dividend shares are buys
• Here are the top 10 ASX 200 shares today

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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