Day: 15 March 2023

In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) on course for a much-needed gain. At the time of writing, the benchmark index is up 0.3% to 7,029.4 points.

Four ASX shares that are climbing more than most today are listed below. Here’s why they are rising:

Atlantic Lithium Ltd (ASX: A11)

The Atlantic Lithium share price is up 11% to 45.5 cents. This may have been driven by short sellers closing positions or investors believing that the lithium developer’s shares have been unfairly punished following a short attack. Its shares are still down by over a third since the start of the year.

Life360 Inc (ASX: 360)

The Life360 share price is up 6% to $5.15. This morning, analysts at Goldman Sachs labelled the location technology company’s shares as “materially undervalued.” The broker has reaffirmed its buy rating and $7.90 price target, which implies material upside from current levels. Goldman highlights the resilience of Life360’s business model and strong growth outlook as reasons to buy.

Neuren Pharmaceuticals Ltd (ASX: NEU)

The Neuren Pharmaceuticals share price is climbing yet again and up over 15% to $11.53. Investors have been scrambling to buy this biotech share this week after its treatment for Rett’s Syndrome was granted US FDA approval. Bell Potter still sees decent upside ahead for its shares. This morning, it retained its speculative buy rating with an improved price target of $13.67.

Whitehaven Coal Ltd (ASX: WHC)

The Whitehaven Coal share price is up 3.5% to $6.99. This could also be down to a bullish broker note. This morning, analysts at Morgans retained their add rating with a $10.35 price target on the coal miner’s shares. It is also forecasting a fully franked 10% dividend yield on top of this.

The post Why Atlantic Lithium, Life360, Neuren, and Whitehaven Coal shares are charging higher appeared first on The Motley Fool Australia.

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More reading

• This ASX 200 tech share is ‘materially undervalued’: Goldman Sachs
• This ASX 300 healthcare stock is up 48% in 3 days. Broker says buy
• Analysts warn of future earnings downgrades for ASX 200 coal shares
• 3 ASX 200 coal shares to buy for big gains and huge yields: Morgans
• Why Kingsgate, Neuren, Newcrest, and Pushpay shares are rising today

Motley Fool contributor James Mickleboro has positions in Life360. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Life360. 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 Fortescue Metals Group Limited (ASX: FMG) share price is up 1.4% as we head into the lunch hour.

That’s in line with the broader rally we’re seeing with S&P/ASX 200 Index (ASX: XJO) iron ore stocks today.

The Fortescue share price closed yesterday at $21.45. Shares are currently changing hands for $21.75 apiece.

That’s Wednesday’s market action for you.

Now, here’s the latest development with Fortescue’s green hydrogen ambitions.

A $593 million green hydrogen plant

In an ambitious project that could potentially boost the Fortescue share price longer-term, South Australia is forging ahead with its plans to splash $593 million on a green hydrogen plant.

As The Australian Financial Review reports, the plant, located in Whyalla, is slated for completion by December 2025. The rapid pace of development is intended to give the state and its yet to be determined operator “first mover” advantage.

On completion, the project will deliver a 250-megawatt hydrogen production facility, a 200-megawatt hydrogen power plant as well as a hydrogen storage facility.

The project sounds almost tailor-made for Fortescue’s green arm, Fortescue Future Industries (FFI).

Indeed, FFI is believed to be -among several prospective companies to put in a bid to develop the project.

A spokesman for FFI did not confirm whether or not the company had submitted a bid.

However, they did say (quoted by the AFR):

FFI believes South Australia has a great opportunity to be a leader in renewable energy production. South Australia has an abundance of readily available natural resources for a renewable energy industry, including some of the best wind and solar resources in the country.

The spokesman added that South Australia’s government is “proactive in setting ambitious but achievable targets for a renewable and green hydrogen industry”.

Fortescue share price snapshot

As you can see in the chart below, the Fortescue share price has been a strong performer over the past 12 months, up 27%.

The post Fortescue share price marching higher as green hydrogen plans heat up appeared first on The Motley Fool Australia.

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More reading

• Are Fortescue shares back on the menu amid job cuts?
• Could buying Fortescue shares at under $22 make me rich?
• How can I hope to retire rich when the share market is falling?
• Will the Fortescue share price crash in 2023?
• Why Fortescue, Lynas, Myer, and New Hope shares are dropping today

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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While recent weakness in the tech sector has been disappointing, it could have created some excellent buying opportunities for investors.

With that in mind, one of the biggest bargains in the sector right now could be Life360 Inc (ASX: 360) shares.

The location technology company, which joins the ASX 200 index on Monday, has been labelled as ‘materially undervalued’ by analysts at Goldman Sachs this morning.

A dirt cheap ASX 200 tech share

Ahead of the release of the company’s quarterly update later this week, Goldman has reiterated its buy rating and $7.90 price target on the tech share.

Based on the current Life360 share price of $5.17, this implies potential upside of almost 53% for investors over the next 12 months.

Goldman believes its shares are undervalued based on the resilience of its business model and its strong growth outlook. It commented:

We continue to believe Life360 is being materially undervalued given its 1) resilient business model which has so far weathered the headwinds of price rises and macroeconomic turbulence; 2) upcoming shift from the pre-profit to profitable tech basket in 2Q23; 3) high growth profile, as implied by its +35% y/y revenue guidance and ongoing momentum from price increases; and 4) sound balance sheet and earnings outlook.

In addition, the broker notes that the way Life360 does its accounting differs from other ASX 200 tech shares. However, if you adjust for this, it would actually be profitable already and be looking extremely cheap compared to peers. It explains:

Life360 expenses all of its R&D; if the company capitalised 50% of R&D (same as TNE/XRO/WTC and other tech peers), we estimate the business would already be profitable in 2H22 and only trade on 10/15x FY24E EV/EBITDA (pre/post stock based comp), while growing the top-line at ~30% FY22-24E CAGR.

All in all, Goldman believes this makes Life360 an ASX 200 tech share to buy now.

The post This ASX 200 tech share is ‘materially undervalued’: Goldman Sachs appeared first on The Motley Fool Australia.

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More reading

• These ASX tech shares are buys: Goldman Sachs
• These ASX tech shares have exposure to the Silicon Valley Bank collapse
• Why Block, BrainChip, Core Lithium, and Life360 shares are racing higher
• This ASX tech share is leaping 13% today as it readies for an entrance into the ASX 200
• These ASX shares are being dumped from the ASX 200 index this month

Motley Fool contributor James Mickleboro has positions in Life360. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Life360. 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 oil price has been falling hard.

Brent crude oil is currently trading for US$77.45 per barrel. That’s down from US$86.18 per barrel on 6 March and the lowest price in more than three months.

It’s a similar story for West Texas Intermediate crude, currently going for US$71.91. On 6 March that same barrel was trading for US$80.46.

As you’d expect, that’s put some pressure on S&P/ASX 200 Index (ASX: XJO) oil and gas stocks like Santos Ltd (ASX: STO) and Woodside Energy Group Ltd (ASX: WDS).

Since 6 March the Santos share price is down 1% while Woodside shares have tumbled a painful 12%.

So, what’s going on with the oil price?

Bank failures and excess supply

The oil price is facing a few headwinds lately.

First, crude supplies in the US and much of the world appear to be more than sufficient to meet immediate demand, with the Organization of the Petroleum Exporting Countries (OPEC) forecasting a moderate surplus in the next quarter.

Second, the demand side strength for oil is in question as investors mull a possible US recession. Those fears were stoked by last week’s collapse of Silicon Valley Bank, reportedly the eighth-biggest bank in the US.

Those fears look to have trumped the nascent optimism of a potential surge in energy demand based on China’s reopening.

Commenting on the big pullback in the oil price, Ed Moya, a senior market analyst at Oanda said (quoted by Bloomberg), “Energy traders can’t find a reason to buy this dip until we get past the next round of inventory data. Rising stockpiles are expected and that could keep oil vulnerable over the next 24 hours.”

“If buyers don’t show up soon and support oil at US$70, we can see an air pocket lower to US$62,” Jc O’Hara, the chief technical strategist at Roth Mkm added.

That’s the shorter-term outlook for you.

But what can ASX 200 investors expect from the oil price for the rest of 2023?

What’s the forecast for the oil price in 2023?

For some insight into that million-dollar question, we defer to CBA mining and energy analyst Vivek Dhar.

According to Dhar (courtesy of The Australian Financial Review), “We see upside risks to our outlook driven by a sustained fall in Russia’s oil and diesel exports.”

Dhar also doesn’t expect the currently ample supply situation to last, putting upward pressure on the oil price.

“We see deficit risks rising in H2 2023, as global oil supply growth, driven mainly by US, Norway and Brazil, fails to keep up with global oil demand growth,” he said.

With Dhar forecasting an uptick in oil demand from India and China, the world’s two most populous nations, he forecasts Brent oil futures will increase from $US82 per barrel in the first half of 2023 to $US88 per barrel in the second half.

That would put the oil price up some 14% in the second half of 2023 compared to today’s prices. Which would certainly be welcome news to Santos and Woodside shareholders.

The post What’s the forecast for the oil price in 2023? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Wednesday
• Down 12% in a week, has the Woodside share price got further to fall?
• 5 things to watch on the ASX 200 on Monday
• Here are the 3 most heavily traded ASX 200 shares on Friday
• 5 things to watch on the ASX 200 on Friday

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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The Neuren Pharmaceuticals Ltd (ASX: NEU) share price is racing higher again on Wednesday.

In morning trade, the biotech company’s shares are up a further 14% to a multi-year high of $11.36.

This means the ASX 300 share has now risen a whopping 48% over the last three sessions.

As you can see below, this has driven the Neuren share price almost 200% higher since this time last year.

Why is this ASX 300 share rocketing this week?

Investors have been buying this ASX 300 share after its treatment for Rett’s Syndrome was granted US FDA approval.

This is the first and only approved treatment for Rett Syndrome, which is a rare genetic neurological and developmental disorder that affects the way the brain develops.

The company has a deal in place with its partner Acadia Pharmaceuticals (NASDAQ: ACAD) that could result in significant revenue generation.

This includes royalties of up to 15% of net sales above US$750 million and sales milestone payments of up to US$350 million on total sales above US$1 billion in a calendar year.

Can its shares keep rising?

The good news is that Bell Potter believes the Neuren share price can keep rising even after its stellar gains this week.

This morning, the broker has retained its speculative buy rating with an improved price target of $13.67. This suggests that the ASX 300 share could rise a further 20% from current levels.

Bell Potter commented:

This is a huge success for the company, and we now expect income from trofinetide to come in at up to A$104m plus royalties in 2023. The next potential milestone payment to Neuren would be US$40m (A$61m at an assumed exchange rate of 0.65), payable following the first commercial sale of trofinetide in the United States.

Subsequently, Neuren is eligible to receive double-digit percentage royalties on net sales of trofinetide in North America, plus milestone payments of up to US$350m (A$538m) on achievement of a series of four thresholds of total annual net sales.

The post This ASX 300 healthcare stock is up 48% in 3 days. Broker says buy appeared first on The Motley Fool Australia.

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More reading

• Why Kingsgate, Neuren, Newcrest, and Pushpay shares are rising today
• Why Neuren, Northern Star, Race Oncology, and Westgold shares are storming higher
• Guess which ASX All Ords stock is rocketing 27% on a new FDA approval

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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One of the more frustrating aspects of owning ASX dividend shares is the fact that the income that dividend shares generate is never guaranteed. Even if an ASX dividend share showers its shareholders with dividends one year, there could be a dividend drought the next.

That makes using dividend shares to fund a retirement or generate a passive income stream a difficult endeavour.

Fortunately, although no dividend share is ‘safe’ for investors seeking income, some are safer than others.

To illustrate, let’s talk about two ASX dividend shares where the dividends just don’t seem to stop arriving in investors’ bank accounts like clockwork.

2 ASX dividend shares that don’t stop paying their investors

Brickworks Limited (ASX: BKW)

Brickworks is an ASX 200 construction materials company. But it also invests in other assets like property and other ASX shares. As such, Brickworks is a company with a remarkably stable earnings base — and one it has been able to consistently nurture over decades.

That’s despite its primary business of manufacturing bricks and other building materials being highly cyclical in nature.

In fact, Brickworks has one of the best dividend histories on the ASX. This ASX 200 share hasn’t given its investors a dividend cut in more than four decades. It has also given investors an annual dividend pay rise almost every single year over this long history.

Brickworks’ current dividend yield of 2.7% might not look too special on the surface. But when you consider the impressive long-term performance of the Brickworks dividend, it starts looking very special indeed.

Washington H. Soul Pattinson and Co Ltd (ASX: SOL)

Soul Patts is another ASX 200 dividend share that has a very proud payout history. This income share doesn’t quite have a 40-year-plus track record of not cutting its dividend. But it does have the best ongoing streak of annual dividend rises on the ASX 200.

Soul Patts is an investing conglomerate at its heart. It invests in a large portfolio of assets, including other ASX shares, that it manages on behalf of its shareholders.

It has been able to do this so successfully that the company has given its investors an annual dividend pay rise every single year since 2000. Not even Brickworks can boast a streak that long.

This trend continued in 2022, with Soul Patts forking outs its largest annual dividend ever at 72 cents per share, fully franked.

Again, this company’s current dividend yield of 2.58% won’t catch too many eyes at first glance. But it hides Soul Patts’ impressive and unrivalled track record of providing passive income to its investors.

The post 2 ASX 200 shares where the dividends don’t stop appeared first on The Motley Fool Australia.

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More reading

• $1,000 in monthly passive income? Buy 18,462 shares of this ASX 200 stock
• I’d aim for $1 million, thanks to just a few ASX shares
• How I’d aim to replace an entire salary with passive income from ASX dividend shares
• 3 ASX shares I own for passive income
• Don’t be deceived by ASX dividends

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 and Washington H. Soul Pattinson and Company Limited. 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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With interest rates rising rapidly over the last 12 months, term deposits are back in favour with income investors.

Term deposits are financial instruments that let you invest for a set amount of time and receive a fixed interest rate.

Given that they are classed as risk-free, they are popular with investors with a lower than average risk appetite.

However, there are hidden risks that investors should be aware of before choosing term deposits over other investments, such as ASX shares.

Term deposits vs ASX shares

If you want peace of mind and capital preservation, it is hard to fault term deposits.

However, in the current environment, you’re not truly preserving capital because of inflation, which currently stands at 7.8% according to the Reserve Bank of Australia.

For example, if you were to invest $1,000 into anything, you would need to generate a 7.8% return just to break even because of inflation. Anything less and your purchasing power for that $1,000 will reduce accordingly.

So, with Commonwealth Bank of Australia (ASX: CBA) currently offering 3.85% interest rates on 12-month term deposits, inflation is still eating away at 3.95% of your wealth. This effectively means your $1,000 is now worth approximately $960 in real terms.

So, with ASX shares providing investors with a 9.55% per annum average annual return over the last 30 years, you arguably stand more of a chance of beating inflation and growing your wealth in the share market.

Though, unlike term deposits, it is worth remembering that there is no guarantee that ASX shares will deliver those returns again. But you do have history on your side.

Opportunity cost

In addition, taking inflation out of the equation, if you’re investing for a long period in term deposits, there is your opportunity cost to think about.

For example, if you invest $1,000 into a term deposit for 10 years at 3.85% per annum, you will grow your investment to just under $1,460. That’s a return of 46%.

However, if the share market delivers a 9.55% annual return over the same period, $1,000 invested in ASX shares would turn into just under $2,500. That’s a 150% return and more than triple what you would generate with a term deposit.

It’s all about risk and reward. Ultimately, investors should do what is right for their risk profile.

The post What are the risks of investing in term deposits instead of ASX shares? appeared first on The Motley Fool Australia.

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More reading

• Down 14% in a month, should I buy the dip on CBA shares?
• ASX 200 bank shares punished again on US bank fallout
• ASX 200 bank shares: Are they better prepared than Silicon Valley Bank?
• S&P 500 futures lift as regulators shore up SVB deposits
• 5 things to watch on the ASX 200 on Monday

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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It’s a bit of an understatement to say that the S&P/ASX 200 Index (ASX: XJO) has had a bit of a rough month. Since mid-February, the ASX 200 has lost just under 4.7% of its value. Commonwealth Bank of Australia (ASX: CBA) shares haven’t been spared either. 

Yesterday, CBA recovered from a nasty morning plunge to finish the day slightly higher at $95.28 a share. That was despite the CBA share price falling as low as $93.05 soon after lunchtime.

But even so, since the beginning of February, CBA shares have lost close to 15%. Yes, a month ago, CBA was going for more than $111 a share. But yesterday, this leading ASX 200 bank closed at $95.28.

That leaves the CBA share price down by 5.7% year to date:

As what many investors on the ASX regard as a high-quality share, it’s not too often that we see pullbacks like this in the CBA share price.

As such, many investors might be wondering if this dramatic pullback over the past month has left the Commonwealth Bank share price in the buy zone today.

Are CBA shares a buy-the-dip opportunity right now?

Well, one ASX broker who reckons CBA shares could be in the buy zone after these recent falls is Morgans. As my Fool colleague James covered earlier this month, Morgan currently rates CBA as one of its best buy ideas. That’s despite the broker only having a hold rating on the bank right now.

Even so, Morgans gives the CBA share price a 12-month target of $96.11 per share – slightly above where CBA closed at yesterday.

Here’s some of what the broker said in its recommendation:

We view CBA as the highest quality bank and a core portfolio holding for the long term, but the trade-off is it is the most expensive on key valuation metrics (including the lowest dividend yield). Amongst the major banks, CBA has the highest return on equity, lowest cost of equity (reflecting asset and funding mix), and strongest technology.

As such, Morgans might be even more bullish on CBA shares after their recent descent.

The broker is also forecasting a fully franked, final dividend of $2.40 per share later this year, which would be a nice boost to investor returns too if Morgans is on the money here.

So that’s how one ASX broker views the Commonwealth Bank share price right now. Take that how you will.

The post Down 14% in a month, should I buy the dip on CBA shares? appeared first on The Motley Fool Australia.

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More reading

• ASX 200 bank shares punished again on US bank fallout
• ASX 200 bank shares: Are they better prepared than Silicon Valley Bank?
• S&P 500 futures lift as regulators shore up SVB deposits
• 5 things to watch on the ASX 200 on Monday
• Here’s how I would secure monthly dividends in the 2024 financial year with these ASX stocks

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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The recent failures of several banks in the United States could counterintuitively be a boost for ASX shares, according to one expert.

Silicon Valley Bank, Signature Bank and Silvergate Capital have all closed over the last few days as they faced a classic bank run.

The US$175 billion collapse of Silicon Valley Bank was the second largest bank failure in that nation’s history, according to Visual Capitalist.

AMP Ltd (ASX: AMP) chief economist Dr Shane Oliver noted that the financial chaos has almost wiped out all the January gains in the US stock market and leaves Australian shares vulnerable too.

“These closures have led to concerns they may reflect the start of broader problems in US banks,” Oliver said on the AMP blog.

“This is quite possible as Fed rate hiking cycles, by tightening financial conditions, invariably trigger financial stresses — think the tech wreck and GFC.”

What’s going to happen now that these banks have failed?

However, a devastation of the US financial system looks unlikely, as regulators have stepped in quickly to stop the bank collapses becoming a “contagion”.

“US authorities have moved quickly to guarantee deposits (beyond the $US250,000 usually covered by deposit insurance) and the Fed has unveiled a Term Funding Facility that enables banks to borrow cheaply from the Fed in order to avoid selling their bonds at a loss,” said Oliver.

“This should help reduce the risk of runs on banks and avoid a fire sale of bonds.”

The support will minimise problems for businesses that were customers of these banks and save them from sacking staff or not paying their suppliers.

“However, it will take a while to determine the full impact and for the dust to settle,” Oliver added.

“And either way banks are likely to see a tougher environment ahead as growth slows and higher rates cause more financial stress for borrowers.”

Fortunately, the chances of such collapses in Australia are even more remote as banks here play under much stricter rules.

“All Australian banks are required, post GFC, to maintain much stronger capital buffers and have tougher restrictions in terms of what they can invest in,” said Oliver.

“They also have very diverse deposit bases so are less at risk of high deposit withdrawals than regional US banks… Australian bank deposits are implicitly (if not explicitly) protected.”

The big vulnerability for Australian banks is if the real estate market tanks, causing a flood of home loan defaults.

What does all this mean for ASX shares?

For the immediate future, there could be chaos, warned Oliver.

“Right now shares are at risk of more downside until some of the issues around the US financial system, inflation, recession and short-term interest rates are resolved.”

But in the longer run, the trauma from the US could prompt central banks to stop raising interest rates.

“It’s normal for problems like this after rapid rate hikes,” said Oliver.

“Given the now high risk of recession (which would curtail inflation) it makes sense for central banks (including the RBA) to pause rate hikes.”

So on a 12-month horizon, he’s bullish on ASX stocks.

“We see shares being stronger on a one-year view, as inflation falls taking pressure [off] central banks, hopefully enabling economies to avoid a deep recession.”

The post US bank collapses could actually be good news for ASX shares: economist appeared first on The Motley Fool Australia.

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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 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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After a promising start to the year, small-cap ASX shares have once again been hammered over the past month.

The S&P/ASX Small Ordinaries (INDEXASX: XSO) index is now more than 23% down from its peak in November 2021.

Cyan Investment Management portfolio managers Dean Fergie and Graeme Carson admitted there are still plenty of reasons for small caps to struggle.

“There are still headwinds in the market: a lack of corporate activity which has declined markedly from two years ago, diminished investor engagement and associated low volumes and, for the moment, higher interest rates,” their memo to clients read.

However, great news is that markets are cyclical.

“These are all negative factors that are occurring simultaneously, but cannot continue indefinitely,” read the Cyan memo.

“Of course, the timing of such turnarounds is difficult to predict, but our experience in the past has been when investor exasperation is at a peak, and most selling has impacted the market, this is often the time when the tables turn.”

Two rising small cap stocks to quickly latch onto

Among this small-cap wreckage, when particular stocks manage to rise it’s worth investors paying attention.

After all, they must be doing something right.

The Cyan analysts named two such gems in their portfolio that went gangbusters during reporting season: Silk Logistics Holdings Ltd (ASX: SLH) and Big River Industries Ltd (ASX: BRI).

They respectively rose 6.8% and 12% over February.

“Warehousing and logistics provided Silk Logistics produced yet another strong result with revenue up 39% and NPAT up 32%, along with a dividend of 5.3 cents per share.” 

The fund managers are shocked at how cheap the stock is, even after rallying 10.75% year to date.

“We’re surprised the stock isn’t pushing much higher given the recent results and its attractive valuation metrics,” read the memo.

“Silk Logistics is trading on a PE of just 11x and is paying a 5% fully franked yield — all with a net cash balance of $34 million on its balance sheet.”

Big River Industries also reported well last month.

“Building products supplier Big River Industries reported strong performance with revenue up 20% and NPAT rising 34% along with a dividend to shareholders of 8.6 cents per share,” the memo read.

“Big River’s customers are well diversified across Australia and industries with products supplied to residential development and commercial builders and a growing civil client base with the outlook strong across the board.”

The Cyan portfolio managers said that the “silver lining” with the current low liquidity environment with small caps is that “it can magnify share price movement on the upside as well as the down”.

“Some optimism can be taken from the most recent RBA rate decision on 7 March that indicated there may be a pause in further rises — a distinct change from prior commentary,” read their memo.

“That, combined with some extreme quantitative value in the marketplace, gives us some near-term optimism.”

The post 2 small-cap ASX shares to ride on their way up: expert appeared first on The Motley Fool Australia.

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More reading

• 2 ASX shares offering both growth and nice dividends: expert

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 no position in any of the stocks mentioned. The Motley Fool Australia has recommended Silk Logistics. 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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