Day: 11 May 2023

Examining which ASX shares the legendary Warren Buffett might invest in today is not an easy task. After all, Buffett is one of the greatest investors of all time, so trying to get into his head is a very humbling experience, to say the least. But since we at the Fool try to educate others about how to invest, it’s a worthwhile pursuit.

We are very fortunate to be able to get a comprehensive look at Warren Buffett’s investments every three months. That’s because his investment house, Berkshire Hathaway Inc (NYSE: BRK.A)(NYSE: BRK.B) is a publically traded company that has to disclose its investments every quarter.

So to kick things off, let’s take a look at the current top ten investments of Berkshire Hathaway, according to CNBC’s Buffett portfolio tracker:

1. Apple Inc (NASDAQ: AAPL), at 47% of Berkshire’s portfolio
2. Bank of America Corp (NYSE: BAC) at 8.3%
3. Coca-Cola Co (NYSE: KO) at 7.5%
4. American Express Company (NYSE: AXP) at 6.7%
5. Chevron Corporation (NYSE: CVX) at 6.2%
6. Kraft Heinz Co (NASDAQ: KHC) at 3.9%
7. Occidental Petroleum Corporation (NYSE: OXY) at 3.6%
8. Moody’s Corp (NYSE: MCO) at 2.3%
9. Activision Blizzard Inc (NASDAQ: AVTI) at 1.2%
10. HP Inc (NYSE: HPQ) at 1.1%

So a rather interesting and somewhat eclectic collection of investments there.

How to invest, Berkshire Hathaway style

What immediately stands out is Berkshire’s massive stake in Apple. At 47% of Berkshire’s entire portfolio, it’s clear that Buffett has chosen this company as its ride-or-die stock. And it’s not hard to see why. Apple indisputably possesses one of the best brands on the planet. The company and its management are of the highest calibre and have shown a consistent ability to generate monstrous profits for decades now.

The other investments are worth analysing on their own merits though. Bank of America, American Express, and Moody’s are all financial stocks. Chevron and Occidental are both oil shares. Coca-Cola needs no explanation and nor does food behemoth, Kraft Heinz. Activision Blizzard is a gaming giant behind names like Call of Duty and World of Warcraft. And HP Inc is the office supplies company most of us would be familiar with.

So how would Buffett invest $5,000 in ASX shares today if he could? It’s difficult to compare the ASX and US markets, seeing as we simply don’t house the same kinds of world-dominating companies that America does.

But let’s give it a go anyway.

If I were to deploy $5,000 into ASX shares to try to replicate a Buffett portfolio, here’s what I would do.

Building a $5,000 ASX share portfolio like Buffett

I would start with $1,000 in Commonwealth Bank of Australia (ASX: CBA) shares. CBA is Australia’s largest bank and shares many of the same characteristics as Bank of America. CBA also provides popular credit products, a la American Express, and provides other financial services for ASX bankers and investors, although not quite in the same manner as Moody’s.

But I, and many other analysts, regard CBA as the ASX’s best-run bank, and I think that it would be Buffett’s pick on the ASX.

Another $1,000 would go into Woodside Energy Group Ltd (ASX: WDS) shares. Woodside is the ASX’s largest oil and gas producer, and shares similarities with Occidental and Chevron in this regard. Buffett is clearly bullish on energy right now, and I think Woodside would be a strong contender for energy exposure on the ASX.

Bega Cheese Ltd (ASX: BGA) could be a nice local substitute for Kraft Heinz. Bega’s dairy products and nut spreads are popular here in Australia, and provide similar exposure to the kinds of defensive consumer sales products as Kraft Heinz. So there’s another $1,000 gone.

With the final $2000, I would invest in the iShares S&P 500 ETF (ASX: IVV). For one, Buffett has often touted the benefits of investing in a low-cost S&P 500 index fund, which the IVV ETF most certainly is.

However, the primary reason I have chosen this ETF is that it gives us ASX investors an easy way to invest in many of those top Buffett holdings ourselves. Buffett’s top investment, Apple, is also the largest holding in the iShares S%P 500 ETF with a 7.4% weighting. Berkshire Hathaway itself is number six, while Chevron, Coca-Cola, and Bank of America are also weighted towards the top of the pile.

Foolish takeaway

That’s how I think Warren Buffett would build a $5,000 ASX share portfolio here on the ASX today. I don’t claim to speak for the great man, of course. But I think this is the closest way that ASX shares can reflect the intentions of what Buffett has done with his own holdings.

The post How to invest $5,000 in ASX shares today like Warren Buffett might appeared first on The Motley Fool Australia.

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More reading

• Why is the Commbank share price smashing the banking sector today?
• How to make volatility your friend when investing in ASX shares
• Is the CBA share price running out of steam?
• 5 things to watch on the ASX 200 on Wednesday
• Why did Warren Buffett sell this global tech giant after only a few months?

American Express is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Sebastian Bowen has positions in American Express, Apple, Berkshire Hathaway, Coca-Cola, and Kraft Heinz. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Activision Blizzard, Apple, Bank of America, Berkshire Hathaway, HP, and Moody’s. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Kraft Heinz and has recommended the following options: long January 2024 $47.50 calls on Coca-Cola. The Motley Fool Australia has recommended Activision Blizzard, Apple, Berkshire Hathaway, and iShares S&P 500 ETF. 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 Budget?

I’m glad you asked.

Oh, you didn’t? You might be the only one. I’ve been asked (and asked and asked) over the last day and a half.

And… I have some thoughts.

But first, I want to get to the ongoing argument about inflation.

Will this Budget be inflationary?

Before I answer, though, I want to make a point I’ve heard very few people actually make.

See, they let the questioner define the parameters of the answer.

So, we have people twisting themselves in knots.

Instead, the question from an impartial, genuinely curious interlocutor should be split in two:

1. Is this budget likely to be inflationary; and, if so…

2. Is the risk worth it, given the policy outcomes.

See, I’ve heard almost no-one, including the Treasurer, address the latter.

He, and his supporters, have chosen to simply argue the toss on Question 1.

So, let’s engage with that question.

We have a Budget that has a small surplus (i.e. tax receipts were greater than government expenses), driven mostly by commodity price gains (and most of those gains have come from exports).

Without that unexpected boost, it would have been a deficit Budget, with expenses outstripping revenues.

So… when a Budget remains essentially in deficit (deficits are predicted for each of the next four years, too), it’s stimulatory. And a stimulatory Budget boosts demand. In the absence of a commensurate increase in supply, that — by definition (or, more prosaically, as we learned in Year 8 Commerce) — will put upward pressure on prices.

Now, the government then decided to spend a chunk of the unexpected boost to revenues. That’s also adding demand, relative to what would have happened, had they not unveiled new spending measures. And that also puts upward pressure on prices.

Those things are, other than among the political partisans, pretty unquestionable, on the logic (which, unusually among public debate, is what I like to try to base my arguments on).

I think the Treasurer actually does himself a disservice trying to tie himself in knots denying it.

Sure, if he said ‘Yep, it does risk inflationary pressures’ he’d be attacked by his opponents.

But then if he followed it up with ‘… but we think that’s a very reasonable risk to take because our policies are fair, decent and necessary’ (or whatever rationale he wanted to bring to the table), it’d improve the quality of our public debate, and move the simplistic questioning past one single metric.

Don’t get me wrong: inflation is very important right now. If it continues, it’ll overwhelm even the new spending initiatives when it comes to the impact on all Australians’ standard of living.

But, again, that’s the conversation we should be having… not just whether it might, possibly, risk making inflation a bit worse.

We definitely should have an honest conversation about inflation… just not only inflation.

The same, by the way, applies to the overall Budget balance. My greatest relief, economically speaking, is that the Treasurer resisted the urge to splurge even more of the unexpected gains. My greatest frustration – again, economically-speaking – is that he did essentially nothing to fix the structural imbalance… and worse, left policies in place that will make that imbalance worse over time.

But that’s probably the greatest characterisation of this Budget. I’ve called it a ‘potholes’ Budget – it’s like the Treasurer (constrained, no doubt by our economic challenges) realised that, with a couple of exceptions, it wasn’t a time for big, new projects, but a time to fill in the potholes that he felt the previous government had left behind.

Money for health, a good move. Some money to offset higher energy prices and welfare improvements (also, in my view, justified) and a couple of other ‘bits and pieces’. Important bits and pieces for those who will benefit, to be sure, but nothing grand or ‘signature’ about this one.

I’ve written before about what I think the government needs to do, to both take pressure off the RBA and to fix the fundamental problems of a budget that is skewed too far into deficit. So I won’t redo them here. But those things haven’t been addressed.

Bottom line? Probably a B+. Not as much as I would have liked, but more restraint than he might have shown. The latter bumping the rating up a notch or two.

(And for the partisans on both sides, the last government left the structural deficit behind, so they don’t have much of a basis to complain, either. He was left with a Budget in poor shape, and did too little to fix that. Blame on both sides.)

My biggest gripe, other than the fiscal balance? I don’t have an issue with sin taxes, per se – there’s sound logic in taxing things you want less of. But the decision to put up the tobacco excise by 5% per year – plus inflation – over the next three years is getting close to cruel. If you can’t give up the cancer sticks at current prices, I’m not sure you’ll be able to at any price. And so it kinda goes from ‘sin tax’ to ‘extortion’ at some point. (I’m not a smoker, by the way. And, such is the falling rate these days, I don’t know any, either. It just seems pretty rugged.)

As for investors, this was the least impactful Budget I can remember in a very long time. There was almost nothing that would meaningfully change the outlook for any company on the ASX.

Which, given everything else going on in the economic world right now, is probably more a relief than anything. And it’s very much in keeping with what’s a ‘don’t scare the horses’ Budget.

The biggest impact for investors, then, is the long term outlook. Which, frankly, it always is, even though the attention is paid to the short-term and company specific impacts when announcements are made.

As much as some people fret about company tax rates, or changes to rules and regulations, I think that misses the point. The greatest impact on our long term wealth creation, at an economy-wide level, is going to be the health and growth of the economy, not fiddling with taxes, or minimum wages, or (almost) anything else.

To be sure, some companies are impacted more than others by those little changes, but over time, the sheer impact of compounding will dwarf them all. It’s why, as much as we’d all like to pay less tax, I’m far more focused on how policies will impact the opportunity for the economy to grow, healthily, over the long term.

Because that, I’m convinced, is how the real money is most likely to be made. In a big way.

(Oh, and please read today’s PS!)

Fool on!

The post My budget verdict appeared first on The Motley Fool Australia.

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More reading

• Santos shares are down 10% in a year. Have the dividends been worth it?
• ASX lithium shares rocket higher amid Allkem merger news
• Why is the Commbank share price smashing the banking sector today?
• 3 ASX All Ordinaries shares rocketing over 14% on Thursday
• Flight Centre shares are trading around 52-week highs. Too late to buy?

Motley Fool contributor Scott Phillips 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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Santos Ltd (ASX: STO) shares are slipping into the red on Thursday giving back some modest early morning gains.

Shares in the S&P/ASX 200 Index (ASX: XJO) oil and gas stock are currently trading for $7.185 apiece, down 0.21%.

Twelve months ago, Santos shares closed the day trading for $7.97 apiece.

As you can see on the chart below, that puts the one-year loss at 9.8%.

Why have Santos shares dropped over the year?

A big retrace in the oil price, and gas prices, has been one of the factors pressuring Santos shares over the year.

Twelve months ago, Brent crude oil was trading for US$103 a barrel. After topping out above US$123 a barrel in early September, Brent is currently fetching US$77 a barrel. That’s down more than 25% in a year.

ASX 200 energy investors may also be a bit jittery about Santos’ growth plans.

Specifically, the outlook for the company’s $5.8 billion Barossa gas project, located in the Timor Sea.

Santos appears determined to press ahead. But tighter government environmental restrictions on new gas projects could hit Barossa hard, as it’s reported to have an exceptionally high carbon dioxide content.

Have the dividends been worth it?

Which brings us back to Santos shares and dividends.

Investors who’ve held the stock for a full year will have seen the company’s share price fall by 9.8%. However, they’ll also have received both of the past 12 months unfranked dividends.

Santos board declared an interim dividend of 10.9 cents per share. That will have landed in shareholders’ bank accounts on 22 September.

Santos shares delivered a final dividend of 22.4 cents per share. That was paid out on 29 March.

All told the ASX 200 energy stock paid out a total of 33.3 cents per share in dividends over the year, which we’ll round off to 33 cents.

If we add that to the current share price rounded up to $7.19, we arrive at an accumulated value of $7.52 per share. And remember, the stock was trading for $7.97 a year ago.

So, while the company’s dividend payments have lowered the losses for shareholders, even with those payouts Santos shares’ accumulated value is down 5.6% over the year.

The post Santos shares are down 10% in a year. Have the dividends been worth it? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Thursday
• ASX 200 energy shares expected to jump after oil prices surge
• 5 things to watch on the ASX 200 on Monday
• Should you buy the dip in the Santos share price?
• 5 things to watch on the ASX 200 on Thursday

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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ASX lithium shares are in the green today following news Allkem plans to merge with a major United States lithium giant.

Lithium shares rising include:

• Allkem Ltd (ASX: AKE) shares are soaring 15%
• Core Lithium Ltd (ASX: CXO) shares are gaining 3%
• Pilbara Minerals Ltd (ASX: PLS) shares are lifting 5%
• Sayona Mining Ltd (ASX: SYA) shares are leaping 4%
• Lake Resources N.L. (ASX: LKE) shares are surging 13%
• Piedmont Lithium Inc (ASX: PLL) shares are jumping 4%
• Global Lithium Resources Ltd (ASX: GL1) shares are rising 8%

Let’s take a look at what’s weighing on ASX lithium shares today.

What’s going on?

Lithium sentiment appears strong on the market today following news out of Allkem.

Allkem and Livent Corp (NYSE: LTHM) are planning to merge into a US$10.6 billion global lithium company known as “New Co”.

This deal is due to be finalised by the end of the year, subject to approvals, and would see Allkem shareholders owning 56% of the company, compared to a 44% stake for Livent shareholders.

Allkem’s portfolio of lithium assets includes the Olaroz project in Argentina and Mt Cattlin in Western Australia.

Livent Corp shares rocketed 5% in the United States overnight and a further 0.39% in after-hours trade on the New York Stock Exchange.

Headquarters are planned for North America and the company would list on the New York Stock Exchange. A foreign exempt listing via Chess Depository Interests would also be maintained on the ASX.

Commenting on the news, Allkem CEO Martín Pérez de Solay said:

We are bringing together two highly complementary businesses to create a leading global lithium chemicals company, building on Allkem’s demonstrated track record of integration.

The vertically integrated NewCo will improve delivery of high-quality, value-added products to our diverse customer base and unlock material synergies. 

Lake Resources is among the ASX lithium shares storming higher today. Lake has four lithium brine projects in Argentina including the Olaroz and Kachi projects.

Meanwhile, the lithium price is also continuing to recover. Lithium carbonate (99.5% battery grade) has risen 6.65% on the Shanghai Metals Market to US$30,173.22.

Lithium hydroxide (56.5% battery grade) is also up 1.56% to US$28,219.56.

In the United States overnight, Sociedad Quimica y Minera de Chile (NYSE: SWM) shares jumped 1.29%, while Albermarle Corporation (NYSE: ALB) shares slipped 0.34%.

Share price snapshot

Allkem shares have risen 32% in the last year, while Lake shares have fallen 60%.

Pilbara Minerals has exploded 82% in the past year, while Core Lithium shares have slid 8% and Sayona Mining shares have lost 17%.

Piedmont Lithium shares have jumped 21% in the last year, while Global Lithium Resource shares have risen 2%.

The post ASX lithium shares rocket higher amid Allkem merger news appeared first on The Motley Fool Australia.

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More reading

• 3 ASX All Ordinaries shares rocketing over 14% on Thursday
• Here are 2 big reasons why the Core Lithium share price is surging today
• Why are Allkem shares rocketing 14% higher today?
• What might the Allkem mega merger mean for Pilbara Minerals shares?
• Own Lake Resources shares? Here’s when the lithium miner is forecast to become profitable

Motley Fool contributor Monica O’Shea 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 shaping up to be an underwhelming day for financial shares on the Australian share market. However, Commonwealth Bank of Australia (ASX: CBA) shares are among the few bucking the sector trend. The Commbank share price is in the green by 0.26%, hitting $98.10 per share in lunchtime trading.

For context, the financials sector is 0.31% worse off than yesterday. The decline is led by falls in the price of Westpac Banking Corp (ASX: WBC) and Block Inc (ASX: SQ2) shares.

Over the past six months, Australia’s largest bank has endured a 7.4% erosion of its market capitalisation. So, what could explain the more positive perspective?

More than a one-trick pony

Following mixed results from the other members of the big four, CBA shareholders were anxiously awaiting big yellow’s quarterly figures on Tuesday. Unfortunately, the first-quarter numbers for FY23 received a mixed reception.

As we previously covered, CBA’s net interest margin (NIM) weakened by 2% during the quarter. Impacted by competitive pressures, the reduced NIM counteracted the bank’s gains in volume growth.

It comes as no surprise that the mere mention of ‘competition’ coincided with a lacklustre performance in the Commbank share price on Tuesday. At the closing bell, shares had inched 0.23% ahead to $97.34.

For comparison, the share price movements of the remaining big four on earnings were as follows:

• ANZ Group Holdings Ltd (ASX: ANZ) up 1.45%
• Westpac up 1.83%; and
• National Australia Bank Ltd (ASX: NAB) down 6.41%

Today, CBA shareholders might be finding solace in the bank’s positioning in lending outside of mortgages. According to the company’s release, business banking accounts for roughly 40% of group cash net profit after tax (NPAT).

The exposure to other areas of lending may hold greater importance among investors amid painfully high interest rates.

Where to for the Commbank share price?

Historically, CBA shares have traded at a premium when compared to its peers. Although, the divergence in premia between the Commbank and the rest has not been this large in the past five years (aside from the anomaly around 2021), as shown in the chart below.

This might suggest investors are anticipating far greater returns from the biggest bank on the ASX. Or, it can turn out to be overvalued. Only the benefit of hindsight can provide the answer.

For now, the team at Citi believes Commonwealth Bank shares could be overvalued, placing a sell rating on the bank and an $80 price target. Meanwhile, UBS is more neutral on the future of the Commbank share price with a $100 price target.

The post Why is the Commbank share price smashing the banking sector today? appeared first on The Motley Fool Australia.

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More reading

• Is the CBA share price running out of steam?
• 5 things to watch on the ASX 200 on Wednesday
• CBA share price slips today despite $2.6 billion cash profit
• What’s the outlook for the CBA share price in May?
• Banking crisis continues: What’s up (and down) with ASX 200 bank shares today?

Motley Fool contributor Mitchell Lawler has positions in Block and Commonwealth Bank Of Australia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Block. The Motley Fool Australia has positions in and has recommended Block. The Motley Fool Australia has recommended Westpac Banking Corporation. 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 good day to be invested in these All Ordinaries Index (ASX: XAO) shares – they’re leaping as much as 17.5% at the time of writing.

And there appears to be a single driver of their gains. That is, a whopping plan to create a $15.7 billion lithium entity.

Right now, the All Ordinaries is down 0.2% at 7,434.3 points.

Let’s take a look at the news seemingly driving three ASX All Ordinaries shares sky-high on Thursday.

3 ASX All Ordinaries shares soaring more than 14% today

Allkem Ltd (ASX: AKE)

It’s a good day for ASX All Ordinaries lithium share Allkem ­– it’s leaping 15.8% right now to trade at $14.945. And for good reason.

The lithium favourite announced its plan to merge with Livent Corp (NYSE: LTHM) overnight.

After the all-scrip merger – expected to finalise later this year – the lithium producer born from their unification will be worth around $15.7 billion.

Allkem shareholders will retain around 56% of that company while Livent investors will walk away with a 44% interest.

Galan Lithium Ltd (ASX: GLN)

The news appears to be putting wind under the wings of many All Ordinaries lithium shares today.

Galan Lithium stock is currently the index’s best performer, having gained 17.5% to trade at $1.21 at the time of writing.

Such gains might suggest the market believes the company behind two projects in Argentina’s Hombre Muerto Salar and another in Western Australia could also be a target for merger and acquisition activity.

Lake Resources N.L. (ASX: LKE)

Meanwhile, the Lake Resources share price is in third position on the All Ordinaries right now, rising 14.7% to reach 58.5 cents.

Its gains are also likely a reflection of Allkem’s merger plan. However, the boost isn’t nearly enough to put the stock back into the longer-term green.

Shares in the company behind the Kachi Lithium Project have plummeted 24% since the start of 2023 and 60% over the last 12 months.

The post 3 ASX All Ordinaries shares rocketing over 14% on Thursday appeared first on The Motley Fool Australia.

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More reading

• Why are Allkem shares rocketing 14% higher today?
• Own Lake Resources shares? Here’s when the lithium miner is forecast to become profitable
• 5 things to watch on the ASX 200 on Thursday
• Allkem share price on watch amid $15.7b mega lithium merger with Livent
• Here are the top 10 ASX 200 shares today

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 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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Of all the shares on the S&P/ASX 200 Index (ASX: XJO), Flight Centre Travel Group Ltd (ASX: FLT) would have to be one of the top performers for 2023 so far. Since the start of the year, this ASX 200 travel share has risen from $14.39 a share to the $21.57 we are seeing today. That’s a gain worth a whopping 49.9%.

Compare that to the ASX 200’s gain of 4.34% over the same period and it’s clear we have a real winner here.

Flight Centre is back in the green today with its share price just a whisker away from its current 52-week high of $22.10. Flight Centre shares hit that mark just a couple of days ago too, back on 9 May.

Let’s put things into some more perspective though. Although Flight Centre is up almost 50% in 2023 so far, it can still only boast of rising around 7.9% over the past 12 months:

Even so, we can’t deny it’s been a trip of a lifetime for Flight Centre investors recently.

Earlier this week, my Fool colleague Brooke examined why Flight Centre shares have had such a smooth ride over the past few months. One of the biggest factors at play is probably Flight Centre’s total transaction value, which surpassed the company’s pre-COVID highs in March.

But that begs the question: is it too late to buy Flight Centre shares today after the company has increased its market capitalisation by almost half this year alone?

Are Flight Centre shares a buy at their new 52-week high?

Well, as it happens, several ASX brokers have given their verdict on the Flight Centre share price this month. And they all seem to be on a very similar page.

Let’s start with JPMorgan. As we covered last week, JPMorgan came out with an overweight rating on Flight Centre shares, with a 12-month share price target of $22.60. That would of course be another new 52-week high for Flight Centre shares if realised.

Fellow ASX broker Citi is even more optimistic. A Citi analyst recently gave the company a $23.80 share price target, and justified this by citing a “boost in passenger numbers, more corporate travel and greater supplier margins in FY24”.

Then we have Morgans to consider. This ASX broker lifted its neutral rating on Flight Centre shares to ‘add’ earlier this month, with a lofty share price target of $26.25. That’s a potential upside of around 22% if realised.

Morgans is estimating Flight Centre will be able to jack up its earnings significantly over the next few years, with an FY2025 earnings forecast of $295.5 million. This broker is also estimating Flight Centre will be in a position to return to paying dividends in FY2024.

All in all, most ASX brokers seem united in their love of Flight Centre shares right now. So, if these brokers are on the money, it is most certainly not too late to buy into this travel share today. But let’s wait and see what happens.

 

The post Flight Centre shares are trading around 52-week highs. Too late to buy? appeared first on The Motley Fool Australia.

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More reading

• Why I think the NAB share price is a buy right now
• 5 things to watch on the ASX 200 on Thursday
• Here are the top 10 ASX 200 shares today
• Why Appen, Bank of Queensland, Kogan, and Mayne Pharma shares are dropping
• Here are the 3 most heavily traded ASX 200 shares on Wednesday

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 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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The National Australia Bank Ltd (ASX: NAB) share price has dropped rapidly, down around 10% since 1 May 2023. It has significantly underperformed the S&P/ASX 200 Index (ASX: XJO) which is only down by 1% over the same time period.

Part of that may be due to its shares going ex-dividend, but that wouldn’t explain the majority of the decline because the dividend would only account for a few per cent.

In my opinion, NAB is one of the best ASX bank shares and I think it looks like a good time to buy it, for reasons that I will explain below.

However, just to be clear, it’s not one of my absolute favourite ASX 200 share ideas because, in my view, the big banks collectively don’t have a huge amount of growth ahead of them compared to some of the smaller businesses.

Yet, NAB now seems to be at a very good price and it would be my pick of the domestically-focused ASX bank shares.  

Cheap valuation

As we can see on the above chart, National Bank shares are down in May and down even further from February 2023. The fall of the NAB share price means that its price/earnings (P/E) ratio is now even more appealing, in my view.

The ASX bank share recently announced its FY23 half-year result, which showed that cash earnings had jumped 17% to $4.07 billion. That’s a strong profit growth number for most ASX blue-chip shares.

It’s true that lending competition is strong and has been strong over the past few years. Yet, bank lending profitability may not be as strong as it was in the 2010s. There are many smaller lenders these days that don’t need a branch network to compete with large banks.

In the FY23 first half, business and private banking saw cash earnings grow 19.9% to $1.7 billion, while corporate and institutional banking experienced a cash earnings increase of 16.6% to $940 million.

But even if NAB’s overall profit hardly grows in the next few years, I think it’s priced cheaply. Its dividend income could continue to be resilient and the ASX bank share might be able to keep growing profit with its business lending where it has a strong market share.

The NAB share price is valued at less than 11x FY23’s estimated earnings and less than 12x FY24’s estimated earnings. Yes, there is a danger that the NAB net interest margin (NIM) could fall in the coming periods, due to competition for loans and deposits, but I’d say the bank’s current lower valuation makes up for that uncertainty.

NAB dividend

At the current NAB share price, the bank could pay a grossed-up dividend yield of 9% in FY23 and FY24, according to Commsec numbers. That suggests solid cash returns, regardless of what the NAB share price does in the short term.

Dividend growth is then expected to return in FY25.

Focused leadership

The bank is doing well under the stewardship of CEO Ross McEwan in my opinion. The growth of cash earnings in the FY23 first half was particularly impressive to me. As well, it seems prudent for the bank to focus on its business customers, rather than the intense mortgage market.

In the FY23 first-half result, McEwan said that the bank is focused on “disciplined execution” of its strategy to drive sustainable growth in earnings and shareholder returns.

A “key” part of that focus has been “staying safe and maintaining prudent balance sheet settings”, positioning the bank “well” for the risks and volatility of much higher interest rates. I think this is important – a bank needs to be resilient through all circumstances, not just the boom times. This strategy can help ensure long-term success.

It also had a group common equity tier 1 (CET1) ratio of 12.2%, well above the required amount.

Foolish takeaway

NAB’s performance is impressive and this looks like an opportune time to consider the ASX bank share. At this much lower NAB share price, the valuation and dividend look attractive. Certainly, it would be the Australian-focused bank that I’d want to buy today.

The post Why I think the NAB share price is a buy right now appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Thursday
• Here are the top 10 ASX 200 shares today
• Why Appen, Bank of Queensland, Kogan, and Mayne Pharma shares are dropping
• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• Liontown share price cracks yet another all-time high on Wednesday

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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Fortescue Metals Group Ltd (ASX: FMG) looks well-placed to make hay from the $2 billion green hydrogen program tucked into the 2023 federal budget.

Commenting on the renewables cash splash on Tuesday, Energy Minister Chris Bowen said, “Renewable hydrogen is a critical enabler for future manufacturing of green metals and other products the world needs as the transformation to net-zero by 2050 gathers pace.”

FMG founder Andrew ‘Twiggy’ Forrest has positioned Fortescue as a frontrunner in green hydrogen production via the company’s green energy branch, Fortescue Future Industries (FFI).

And he’s eager to get the ball rolling.

What is green hydrogen?

Hydrogen is the most abundant element in the universe. On Earth, you’ll find some of it in gas form, while mammoth amounts are locked up in water. Or good old H2O.

Hydrogen can be separated from that oxygen by running electricity through the water. For it to be green hydrogen that electricity needs to come from renewable sources. That’s distinct from blue hydrogen, which is created using gas.

As part of its 2030 net zero carbon plans, Fortescue aims to use green hydrogen across its mining and shipping fleets including drill rigs. The S&P/ASX 200 Index (ASX: XJO) miner also aims to produce commercially viable green iron using this hydrogen energy.

Why is Fortescue urging immediate action?

Fortescue boss Twiggy Forrest is eyeing international competition among nations to be the first to successfully, and affordably produce commercial levels of green hydrogen.

“It’s a race to win this race. I recommend that they keep it simple, and they do it immediately,” he said (courtesy of The Australian Financial Review).

Forrest continued:

Remember, I’m an industrialist. I’ve done this before. I see the potential in our country of an industry at least the size of Aramco, a multi-trillion-dollar company that underpins the entire economy of Saudi Arabia and that high standard of living which 34 million people have in their country.

We have the potential of creating an industry at least that size, and having economic growth for decades, full employment for decades. That is the power of this opportunity. The $2 billion gets that ball rolling.

Bowen also indicated that the government is aiming for quick action.

“We are not mucking around. We’ve outlined the contours and there’ll be a round of consultation with the players about the detailed design,” he said.

The green hydrogen program is intended to be established this year and will most likely reward big companies, like Fortescue.

“We envisage that this is for big projects … which means you don’t need many. You need a few big ones,” Bowen said (quoted by the AFR).

Fortescue Future Industries already has five green hydrogen projects underway in various nations.

That includes the Gibson Island project, located in Queensland, which is the closest to production.

As reported by The Australian, FFI director Guy Debelle FFI is aiming to progress Gibson Island “as soon as possible”. Fortescue expects to make a final investment decision (FID) later this year.

Asked about the $2 billion in green hydrogen funding contained in the 2023 budget, Debelle said, “Is something like this highly relevant for the economics of Gibson Island? Yeah, absolutely.”

The post ‘Do it immediately’. Why Fortescue boss Twiggy Forrest says the federal budget’s green hydrogen plans can’t wait appeared first on The Motley Fool Australia.

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• ASX hydrogen shares surge on 2023 federal budget $2b cash splash
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• What’s the forecast for the Fortescue share price this month?
• 5 things to watch on the ASX 200 on Wednesday
• Fortescue’s Twiggy could wipe this ASX 300 share from the bourse. Here are the details

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 S&P/ASX 200 Index (ASX: XJO) is in the red this morning, but two stocks are bucking the trend. They’re boasting notable gains after both companies upgraded their earnings guidance.

Right now, the ASX 200 is down 0.1% at 7,248.6 points while the stocks are leaping as much as 7%.

So, without further ado, let’s dive into the updates bolstering these ASX 200 shares on Thursday.

2 ASX 200 stocks soaring on guidance upgrades

Graincorp Ltd (ASX: GNC)

Stock in ASX 200 agribusiness Graincorp is rocketing 7.04% to trade at $7.60 today.

It comes after the company increased its financial year 2023 earnings guidance on the release of its first-half results.

It’s now expected to post between $500 million and $560 million of earnings before interest, tax, depreciation, and amortisation (EBITDA) for the full year. That’s up from previous EBITDA guidance of $470 million to $530 million.

Meanwhile, its full-year net profit after tax (NPAT) is forecast to come in at $220 million to $260 million. Previously, the company expected to post $180 million to $220 million of NPAT this fiscal year.

Goodman Group (ASX: GMG)

Joining Graincorp stock in the green today is ASX 200 property group Goodman Group. Its share price is up 1.67% right now, trading at $20.12.

The market is responding positively to another guidance upgrade from the company.  It now expects to post operating earnings per security (OEPS) growth of 15% for financial year 2023.

It upgraded its OEPS growth forecast from 11% to 13.5% in February on the back of a strong first half. And that strength apparently continued in the March quarter.

CEO Greg Goodman commented on the company’s outlook:

The economic outlook remains uncertain … however, the group is in a strong position, with high occupancy, rental growth, and profitable developments largely mitigating the impact of higher capitalisation rates on valuations.

We have significant liquidity, low gearing, extensive hedging, and our partnerships remain in a strong financial position to leverage opportunities as they arise.

The post 2 ASX 200 stocks surging ahead following guidance upgrades appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Here are the top 10 ASX 200 shares today
• Brokers name 3 ASX 200 blue chip shares to buy
• Why Cleanaway, Graincorp, Healius, and PolyNovo shares are pushing higher today
• 5 things to watch on the ASX 200 on Tuesday

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 Goodman 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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