Looking for ASX 200 shares to buy? Then you might want to check out the two shares listed below that are currently on the coveted conviction list of Goldman Sachs.

These are the ASX 200 shares that Goldman rates incredibly highly and is tipping big returns from. Here’s why the brokers thinks they could be top options for investors right now:

Lifestyle Communities Limited (ASX: LIC)

The first ASX 200 share that Goldman Sachs is tipping as a conviction buy is Lifestyle Communities.

It builds, owns, and operates land lease communities which provide affordable housing options to Australians over 50.

Goldman Sachs is very positive on the company due to strengthening demand for land lease options, which is being driven by Australians increasingly looking to enhance retirement by releasing equity from the family home. It commented:

Lifestyle Communities (LIC) is a developer and manager of residential land lease communities in Australia. The long-term outlook for LIC is very positive — we believe outperformance of the stock will be driven by: (1) a step up in the pace of land acquisitions, with industry build rates below demand from an ageing population; (2) structural growth in demand for land lease as the sector increases its penetration among retirees; (3) fundamental valuation support for cap rates.

Goldman Sachs has a conviction buy rating and $26.00 price target on the company’s shares. This suggests potential upside of 33% for investors from current levels.

Xero Limited (ASX: XRO)

Another ASX 200 share that has been named as a conviction buy is Xero.

It is a provider of a cloud-based accounting solution used by millions of small businesses globally.

Although it has been growing strongly for years, Xero could still grow materially in the future. That’s because it only has 3.3 million subscribers out of a total addressable market of 100 million according to Goldman Sachs. This provides it with a huge growth runway over the next decade or two. Goldman commented:

We see Xero as very well-placed to take advantage of the digitisation of SMBs globally, driven by compelling efficiency benefits and regulatory tailwinds, with >100mn SMBs worldwide representing a >NZ$76bn TAM. Following the recent underperformance (absolute/relative), we see an attractive entry point into a compelling global growth story and our preferred large-cap technology name in ANZ, and are Buy rated (on CL).

Goldman Sachs has a conviction buy rating and $109.00 price target on its shares. This implies potential upside of almost 35% for investors based on the current Xero share price.

The post Conviction list: Goldman Sachs tips big returns from these ASX 200 shares appeared first on The Motley Fool Australia.

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More reading

• Sitting on cash? These 2 ASX shares are great buys today but won’t be forever
• Here are the top 10 ASX 200 shares today
• These could be the best ASX 200 growth shares to buy: analysts
• I’m listening to Warren Buffett and buying ASX shares on sale
• Why Centuria Office, Deep Yellow, Newcrest, and Xero shares are racing higher today

Motley Fool contributor James Mickleboro has positions in 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 has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Santos Ltd (ASX: STO) shares have been through plenty of ups and downs. While the Santos share price may be moving like a yo-yo, it’s a good idea to look at how much dividend the business could pay.

As an oil and gas ASX share, movements in energy prices can have a big impact on the profitability and how much the company is able to send to shareholders.

So, let’s first consider how much dividend income the business is actually expected to pay out this year.

Dividend projections

According to Commsec, Santos could pay an annual dividend per share of 35.2 cents.

If the company were to pay that amount, it would amount to a dividend yield of 5%, excluding any franking credits.

But, keep in mind that dividends are not guaranteed. Plus, dividends from ASX resource shares are unlikely to be consistent because of the volatile nature of commodity prices.

In FY24, the Santos annual dividend per share is projected to decrease to 26.5 cents per share and then fall to 21.2 cents per share in FY25. In other words, this could be the best that it gets in terms of dividend income for the next few years.

Is the Santos share price worth buying at this level?

Santos is down over the last year, six months, and in 2023 to date. Investors haven’t been excited by the ASX oil giant recently.

Interestingly, it does trade on a cheaper earnings multiple compared to Woodside Energy Group Ltd (ASX: WDS).

According to Commsec, Santos is valued at 7x FY23’s estimated earnings and 8x FY24’s estimated earnings.

Commsec numbers suggest that Woodside is valued at almost 10x FY23’s estimated earnings and close to 11x FY24’s estimated earnings.

There is widespread optimism by analysts on the prospects for Santos shares.

Of the analyst opinions that Commsec looks at, all 18 ratings are a buy, with no holds or sells.

What about recent results?

The company recently announced its update for the fourth quarter of 2022. It said that sales revenue was US$1.9 billion for the quarter, taking 2022 sales to US$7.8 billion – up 65% year over year.

It achieved an annual free cash flow of around US$3.6 billion, more than double the level of 2021. Fourth quarter free cash flow was US$930 million in the quarter. With some of its cash flow, it has been carrying out a share buyback.

With the Santos share price being close to a 52-week low, I think it’s worth considering. However, I’m not confident about its earnings growth prospects over the rest of the decade, so it’s not one on my watchlist at the moment.

The post Should I buy Santos shares right now for dividend income? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Monday
• Morgans names 2 high yield ASX dividend shares to buy this month
• 5 things to watch on the ASX 200 on Thursday
• 5 things to watch on the ASX 200 on Wednesday
• Worried about where ASX 200 oil stocks are heading? Read this

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 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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Looking for some ASX dividend share to add to your portfolio? Then take a look at the two listed below that Morgans rates as buys.

Here’s what the broker is saying about them:

HomeCo Daily Needs REIT (ASX: HDN)

The first ASX dividend share to look at is the HomeCo Daily Needs REIT.

It is a property company with a focus on convenience-based assets across the target sub-sectors of Neighbourhood Retail, Large Format Retail and Health & Services.

Morgans is a fan of the company due partly to its significant development pipeline. The broker highlights that this development pipeline is valued at over $500 million and should underpin solid future growth.

As for dividends, the broker is forecasting dividends per share of 8.3 cents in FY 2023 and 8.5 cents in FY 2024. Based on the current HomeCo Daily Needs share price of $1.33, this will mean dividend yields of 6.2% and 6.4%, respectively.

Morgans has an add rating and $1.52 price target on its shares.

Mineral Resources Ltd (ASX: MIN)

Another ASX dividend share that Morgans rates as a buy is Mineral Resources.

It believes the mining and mining services company’s exposure to lithium and iron ore is an ideal combination to benefit from the China re-opening.

It also expects this exposure to underpin some big dividend payments in the near term. Morgans is expecting fully franked dividends of $4.04 per share in FY 2023 and $6.21 per share in FY 2024. Based on the current Mineral Resources share price of $88.60, this will mean 4.55% and 7% dividend yields, respectively.

Morgans currently has an add rating and $99.40 price target on its shares.

The post 2 ASX dividend shares to buy with big yields: Morgans appeared first on The Motley Fool Australia.

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More reading

• 3 top ASX mining shares I’d dig into and buy in February
• Top ASX value shares to buy in February 2023
• These are the best ASX 200 mining shares to buy now: Morgans
• Should I buy ASX 200 lithium shares now or not?
• 3 ASX lithium shares to buy right now: experts

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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A light appears to be peeking through at the end of the tunnel for ASX shares and the broader market this year. The potential for interest rate rises to soon slow and stop has plenty of investors eager to dive back into the ‘riskier’ end of equities.

To illustrate, the tech-focused Nasdaq Composite Index (NASDAQ: .IXIC) and S&P/ASX All Technology Index (ASX: XTX) are up 15.6% and 14.8% respectively after a little more than a month. Meanwhile, the broader Aussie benchmark index has climbed a lesser 8.6% so far this year.

However, the early widespread strength might be somewhat deceptive according to one investment analyst. Instead, Dr Justin Koonin of Allan Gray Australia suggests a murkier future ahead as the heightened cost of capital canes the corporate world.

The changing environment renews the importance of what Koonin describes as a key factor for long-term outperformance.

Have you checked your weight (across ASX shares) lately?

There is a common misconception in investing that volatility is equivalent to risk. They believe the size and frequency of share price movements are where the ‘risk‘ is for investors. But that isn’t the case… remember we are investing in businesses, not tickers.

Here’s an example case to look at to understand ‘risk’ across two scenarios:

1. Company A is a profitable business with a history of growing earnings above 10% per annum with extensive cash reserves and no debt. The company is a microcap (~$100 million market capitalisation), has minimal market liquidity, and a share price that regularly moves 10% on the ASX in a single day.
2. Company B is an unprofitable business with declining revenues and a high rate of turnover in management. The company’s cash balance is dwindling while debts are rising. Company B has a large market capitalisation (~$2 billion) and is highly liquid with the share price relatively stable at around $3.

Although Company A might have a more volatile share price, the business itself is in a less ‘risky’ position than Company B.

Dr Koonin explains this further in a press release made earlier today, stating:

Most investors tend to think about risk in terms of volatility. But there will always be volatility, that’s part and parcel of investing. We instead view risk as the potential for permanent loss of capital.

Careful stock picking can help mitigate the risk of permanent loss of capital. Outperformance over the long term does not solely depend on the stocks picked but also significantly depends on the weight of the stocks in the portfolio.

The key consideration for investors is to ensure they’re appropriately weighted across their ASX shares based on this definition of risk. Essentially, a company you believe is ~80% likely to return 20% should hold a larger weighting than a company that you believe has a 5% chance of returning 100%.

Echoing Buffett in 2023

The commentary from Koonin on allocating capital based on the risk of permanent loss of capital is reminiscent of the great Warren Buffett.

The legendary investor and CEO of Berkshire Hathaway has long been quoted on his two key rules, “Rule number 1: Never lose money; rule number 2: Never forget rule number 1.”

As ASX shares begin to pick up steam again this lesson in risk and capital allocation might be a timely one. As Dr Justin Koonin puts it, “You can outperform with a low hit rate if the upside of the outperforming investment is large.”

The post The secret sauce to outperforming with ASX shares in 2023: expert appeared first on The Motley Fool Australia.

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More reading

• 2 ASX dividend shares to buy with big yields: Morgans
• Here are the top 10 ASX 200 shares today
• This ASX ETF just hit an all-time high. Is it too late to buy?
• Should ASX 200 investors buy Flight Centre shares ahead of this month’s earnings update?
• Here’s why analysts rate these blue chip ASX 200 shares as buys

Motley Fool contributor Mitchell Lawler 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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