Author: openjargon

It has been another busy week for many of Australia’s top brokers. This has led to the release of a number of broker notes.

Three broker buy ratings that you might want to know more about are summarised below. Here’s why brokers think these ASX shares are in the buy zone right now:

Bega Cheese Ltd (ASX: BGA)

According to a note out of Bell Potter, its analysts have retained their buy rating on this diversified food company’s shares with an improved price target of $5.35. The broker has been looking at recent movement in indicators for the branded and bulk business as well as farmgate milk prices. While this has resulted in an earnings downgrade for FY 2024, it has lifted its earnings estimates for the next two years. In light of this, the broker estimates that Bega Cheese is trading at around 10x FY 2025 EBITDA. It notes that this is a reasonable discount to its 10-year average of 12.3x forward EBITDA. And with the broker feeling confident about Bega Cheese’s five-year outlook, it thinks this has created a buying opportunity for investors. The Bega Cheese share price is trading at $4.41 on Friday afternoon.

BHP Group Ltd (ASX: BHP)

A note out of Citi reveals that its analysts have retained their buy rating and $48.50 price target on this mining giant’s shares. Citi notes that its global commodities team has lifted its copper forecast by 20% to US$12,000 per pound to reflect increased demand due to the decarbonisation megatrend. In light of this, the broker has lifted its earnings estimates for the coming years. In addition, Citi is now forecasting an attractive 6%+ dividend yield from the Big Australian’s shares in FY 2025, boosting the total potential return further. The BHP share price is fetching $43.14 at the time of writing.

Life360 Inc (ASX: 360)

Analysts at Morgan Stanley have retained their overweight rating and $17.50 price target on this location technology company’s shares. According to the note, the broker has been looking into the potential of Life360’s recently announced advertising business. It highlights that Lyft Inc (NASDAQ: LYFT) has also announced similar ambitions. And given how ride sharing and location technology have similarities, it believes Lyft’s targets can be a guide to see what is possible for Life360. The good news is that the broker believes that Life360 can generate significant revenue from its advertising business even if it penetrates a much smaller portion of its massive user base compared to Lyft. The Life360 share price is trading at $15.02 today.

The post Brokers name 3 ASX shares to buy now appeared first on The Motley Fool Australia.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. 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.

The VanEck Morningstar Wide Moat ETF (ASX: MOAT) has achieved some eye-watering returns for its investors over the past few years.

To illustrate, this exchange-traded fund (ETF)‘s latest update informs us that, as of 31 May, investors have banked an average return of 16.16% per annum over the past five years. MOAT unitholders have also received an average of 15.34% per annum since this ETF’s ASX inception back in 2015.

That beats the pants off what most ASX ETFs have returned over that time frame. For example, the Vanguard Australian Shares Index ETF (ASX: VAS), which is currently the most popular ETF on the ASX, has returned an average of 7.81% per annum over the five years to 31 May 2024.

So how has this high-flying ASX ETF pulled off such a consistently high return over so long? What is the secret sauce that enables these returns?

What’s the VanEck Wide Moat ETF’s secret ASX sauce?

To answer this question, let’s dive into how this ETF works. Unlike most popular ETFs, MOAT is not an index fund. Rather, it is an actively managed ETF that contains a curated and concentrated portfolio of around 70 stocks.

These stocks are selected from the US markets based on an assessment of their possession of what’s known as a ‘wide economic moat‘.

A ‘moat’ is a term coined by Warren Buffett that refers to an intrinsic competitive advantage that a company can possess over its competitors.

It might be a strong brand or providing a product that consumers find difficult not to use or switch away from. It could also be a company’s cost advantage over competitors.

Learning from Warren Buffett

Buffett has made no secret about his love of a company with a strong moat. In fact, he usually only buys companies that have at least some form of moat. It clearly works for Buffett, given Berkshire Hathaway‘s incredible growth over the past 60 or so years.

This is the secret sauce that the VanEck Wide Moat ETF attempts to harvest within its portfolio.

As such, it’s no surprise to see names like Alphabet, Adobe, Disney, Altria, Pfizer, Nike, Microsoft, Amazon and Starbucks in MOAT’s current portfolio. All of these companies have a clear moat that they can use to keep competition at bay and profits growing.

Just think of Disney’s intellectual property portfolio. Or Amazon’s ability to provide products at rock-bottom prices and have them at your door within a day or two. Or the reach of Microsoft’s Office and Windows software and the power of the Starbucks and Nike brands.

Buffett told us that the best companies in the world usually have some kind of MOAT. The VanEck Wide MOAT ETF has taken this concept and run with it, which explains why this ETF is able to bang out such compelling returns.

The post 16% per annum: What is the VanEck Wide Moat ETF’s secret sauce? appeared first on The Motley Fool Australia.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Sebastian Bowen has positions in Adobe, Alphabet, Altria Group, Amazon, Berkshire Hathaway, Microsoft, Nike, Starbucks, VanEck Morningstar Wide Moat ETF, Vanguard Australian Shares Index ETF, and Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Adobe, Alphabet, Amazon, Berkshire Hathaway, Microsoft, Nike, Pfizer, Starbucks, and Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2025 $47.50 calls on Nike, long January 2026 $395 calls on Microsoft, and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Adobe, Alphabet, Amazon, Berkshire Hathaway, Microsoft, Nike, Starbucks, VanEck Morningstar Wide Moat ETF, and Walt Disney. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Few ASX shares on the All Ordinaries (ASX: XAO) Index have delivered the kind of returns that DroneShield Ltd (ASX DRO) stock has over the past few months.

Today, the Droneshield share price is trading at $1.44, down 1.03% for the day thus far. But even so, this share price still leaves Droneshield stock with a jaw-dropping year-to-date gain of 277.6% over 2024 so far. Over the past 12 months, this defence share has risen by an even more impressive 524%.

So needless to say, Droneshield investors would be a pretty happy bunch right about now. Check out Droneshield’s incredible stock price trajectory for yourself below:

This monstrous rise in value hasn’t come unprovoked. Droneshield is a stock that has been growing at breakneck speed. Back in April, the company released a quarterly cash flow report, which revealed Droneshield’s revenues for the quarter ending 31 March came in at $16.4 million. That was up a stupendous 925% from the $1.6 million the company reported for the same quarter last year.

So given Droneshield’s stunning recent success, many investors might be wondering whether this company pays out a dividend, perhaps even a fully franked one. So today, let’s dive into what kind of dividends Droneshield stock pays, or at least, has paid, out.

Will you get dividend income from Droneshield stock?

Well, this won’t take long.

Droneshield stock has never paid out a dividend. And it doesn’t look like it will, at least on a short-term horizon.

Most companies only start paying dividends when they are comfortably profitable, and with a business model that has reached some sort of maturity. Remember, every dollar that a company forks out in dividend payments is a dollar it can’t reinvest into its business.

It was only in the 2023 financial year that Droneshield achieved profitability for the first time. The company reported a net profit of $9.3 million for FY2023, up from a net loss of $900,000 for FY2022.

Right now, the company is clearly prioritising growth, with a $15 million capital raising program recently completed.

If Droneshield continues to grow at this stunning rate, I still wouldn’t expect a dividend until it has scaled up to its full potential and is sitting on a comfortable stream of free cash flow with net profits consistently high.

Even so, Droneshield stock owners arguably shouldn’t complain too loudly about this lack of dividend income, considering their lucrative capital gains over just the past six months alone.

The post Does DroneShield stock pay dividends? appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended DroneShield. 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.

The S&P/ASX 200 Index (ASX: XJO) is having a subdued finish to the week. In afternoon trade, the benchmark index is down 0.3% to 7,728.6 points.

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

Core Lithium Ltd (ASX: CXO)

The Core Lithium share price is down 4% to 9 cents. This is despite there being no news out of the lithium miner today. However, it is worth noting that most lithium shares are falling again on Friday following yet another red session for their peers on Wall Street. This latest decline means that Core Lithium’s shares are now down over 90% since this time last year. They have also hit a new multi-year low on Friday.

Deterra Royalties Ltd (ASX: DRR)

The Deterra Royalties share price is down 7% to $4.14. While this mining royalties company has announced a major acquisition, this has been overshadowed by a second announcement. The latter announcement reveals that Deterra Royalties is making a major change to its dividend policy. At present, it pays out 100% of net profit after tax. However, from FY 2025, the company will change its target payout ratio to a minimum of 50% of its profits.

Northern Star Resources Ltd (ASX: NST)

The Northern Star Resources share price is down 3% to $13.30. This follows a reasonably sharp pullback in the gold price overnight which is weighing on the industry today. This has seen the S&P/ASX All Ordinaries Gold index fall by 2% this afternoon. Traders appear to have been selling gold to take profit after a decent run.

Opthea Ltd (ASX: OPT)

The Opthea share price is down 23% to 37.5 cents. This follows news that the retinal disease focused clinical-stage biopharmaceutical company has successfully completed the institutional component of its capital raising. Optea’s institutional entitlement offer raised approximately $161.5 million at a discount of 40 cents per new share. Eligible institutional shareholders took up approximately 61.4% of their entitlements, with the shortfall placed to both new and existing institutional shareholders and to the underwriter. The proceeds from the capital raising will be used to fund the company through the anticipated Phase 3 topline data readouts. CEO Frederic Guerard said: “We appreciate the strong support from our shareholders, and from new investors, who share our belief that sozinibercept has the potential to transform patient outcomes with superior vision gains, which continues to be a significant unmet need in wet AMD.”

The post Why Core Lithium, Deterra Royalties, Northern Star, and Opthea shares are dropping appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has 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.

As the S&P/ASX 200 Index (ASX: XJO) slips around 0.3% into the red on Friday, one ASX 200 stock has copped a hammering.

Deterra Royalties Ltd (ASX: DRR) shares took a significant hit at the open and were down 10% in early trade. However, the mining royalty company’s shares have since regained some ground and are trading at $4.18, with a trailing dividend yield of 7.14%.

This morning’s sharp decline followed the company’s announcement of a substantial acquisition and a major change to its dividend policy.

Why is this ASX 200 stock under pressure?

The slide in Deterra Royalties’ stock price came after it announced its new move into the lithium domain. It has made an all-cash offer to acquire UK-based Trident Royalties Plc for $276 million (144 million pounds).

According to the announcement, Trident is a “growth-focused diversified mining royalty and streaming company”, boasting a portfolio of “royalties and offtakes”.

Its portfolio includes 21 royalties and offtake contracts, giving the ASX 200 stock exposure to lithium, gold, silver, copper, zinc, and more. As such, the acquisition marks a pivot towards green metals and away from its traditional iron ore royalties, including those with BHP Group Ltd (ASX: BHP).

Deterra’s offer for Trident is set at 49 pence per share, equal to AUD 93.4 cents per share at the current exchange rate. This represents a premium of 22.5% over Trident’s latest closing price of 40 pence (AUD 76.3 cents).

Trident’s board has unanimously recommended shareholders vote in favour of the acquisition. Key shareholders â€“ representing about 28.7% of Trident’s share capital – have also voted in favour.

If successful, the acquisition will be completed via a UK scheme of arrangement

The market has reacted negatively to ASX 200 stock’s announcements, as seen in the price action today. East 72 fund manager Andrew Brown wasn’t keen on the deal either, suggesting it diluted the value of Deterra’s existing BHP royalties.

He expressed scepticism about the move into lithium, implying it might turn a “brilliant asset into a terrible company”, according to the Australian Financial Review.

“Have somebody cash the cheque and buy back stock. If the royalty is worth buying, Franco Nevada will buy it first”, he added. “I don’t hold Deterra, but wish I could and hope an activist [investor] comes along”.

Dividend policy changes and market reaction

In addition to the acquisition news, Deterra announced changes to its dividend policy. Previously, the company had a 100% net profit after tax (NPAT) payout ratio.

The FY 2024 final dividend will remain the same. However, moving forward, Deterra aims for a minimum payout ratio of 50% of NPAT. This change aims to balance capital growth with income returns.

It will also implement a dividend reinvestment plan (DRP). The DRP will allow its investors to automatically invest dividends received without incurring brokerage fees.

Deterra managing director Julian Andrews had this to say:

While consistent with our well established and overarching capital management strategy, today’s adjustment to our dividend policy is designed to better align it with Deterra’s targeted longer-term balance between capital growth and income returns.

Importantly, our discipline to return capital when not required for investment or balance sheet management remains unchanged.

Deterra has returned more than $480 million to shareholders as dividends since its listing towards the end of 2020.

The post ASX 200 stock nosedives 10% on new lithium play appeared first on The Motley Fool Australia.

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Motley Fool contributor Zach Bristow 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.

In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to end the week in the red. At the time of writing, the benchmark index is down 0.3% to 7,726.9 points.

Four ASX shares that are not letting that hold them back today are listed below. Here’s why they are rising:

Boss Energy Ltd (ASX: BOE)

The Boss Energy share price is up 3% to $4.21. This morning, this uranium miner announced that production has started at its US-based Alta Mesa In-Situ Recovery (ISR) Central Processing Uranium Plant and Wellfields. Boss Energy’s managing director, Duncan Craib, said: “The start of production at the Alta Mesa Project is another key milestone in the implementation of our strategy to be a global uranium supplier with a diversified production base in tier-one locations.”

Judo Capital Holdings Ltd (ASX: JDO)

The Judo Capital share price is up 4% to $1.36. Investors have been buying this small business lender’s shares this week after S&P Dow Jones Indices announced that it will be added to the ASX 200 index next week. Judo Capital will replace building materials company CSR Ltd (ASX: CSR) when it is removed from the index. Though, this remains subject to shareholder and final court approval of the scheme of arrangement which will see CSR acquired by Compagnie de Saint-Gobain.

Life360 Inc (ASX: 360)

The Life360 share price is up 5% to $15.01. This follows a strong night of trade for the location technology company’s Nasdaq listed shares. After a reasonably lukewarm start to life on Wall Street, the company’s shares finally took off overnight and rose by 6%. The good news is that there could still be plenty more gains to come. Earlier this week, Bell Potter put a buy rating and $17.00 price target on its shares. This implies potential upside of 13% for investors from current levels.

Paladin Energy Ltd (ASX: PDN)

The Paladin Energy share price is up over 1% to $14.30. This appears to have been driven by the release of a broker note out of Citi. According to the note, the broker feels that recent share price weakness due to a pullback in uranium prices has created an attractive entry point for investors. As a result, its analysts have reaffirmed their buy rating and $17.00 price target on the uranium miner’s shares. This suggests that Paladin Energy’s shares could rise by approximately 19% over the next 12 months.

The post Why Boss Energy, Judo Capital, Life360, and Paladin Energy shares are pushing higher appeared first on The Motley Fool Australia.

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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.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Broadcom (NASDAQ: AVGO) stock has been riding the tech wave higher all year. But shares broke out this week after the company released fiscal 2024 second-quarter results. The stock has surged this week by about 20% as of Thursday afternoon trading, according to data provided by S&P Global Market Intelligence.

That has led to a more than 50% gain in Broadcom stock so far this year. Shareholders can thank both the artificial intelligence (AI) boom as well as Broadcom’s nearly $70 billion acquisition of VMware that closed late last year.

AI infrastructure winner

Even prior to Broadcom’s earnings announcement, the stock had pushed more than 6% higher this week. That’s because investors are beginning to grasp just how broad spending has become for AI-related products.

As data center construction explodes to harness the compute power needed for the many AI use cases, Broadcom is increasingly benefiting from the related infrastructure needs. That includes switching solutions for high-performance connectivity, server storage products, and other wired and wireless connectivity needs.

Last year, as OpenAI’s ChatGPT launch exemplified how broad the use of generative AI can become, Broadcom senior vice president and general manager Ram Velaga said, “It is clear that artificial intelligence, machine learning, and automation have been growing exponentially in use — across almost everything from smart consumer devices to robotics to cybersecurity to semiconductors.”

Broadcom’s latest quarterly results show how that is playing out. The company reported record revenue from AI products of more than $3 billion. Total revenue of $12.5 billion increased by 43% year over year. Also contributing was growing adoption of VMware cloud software stack solutions.

Management boosted its full fiscal year revenue expectations by 2% to $51 billion, and also sees higher profitability from that revenue. As Nvidia did last month, the company also announced a 10-for-1 stock split that will be implemented next month. While that doesn’t affect the valuation of the company, it does show management has confidence that Broadcom’s strong business results are likely to continue. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Which ‘other’ US AI stock is soaring this week? appeared first on The Motley Fool Australia.

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Howard Smith has positions in Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Broadcom. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

It won’t be long until we see Guzman y Gomez stock trading on the ASX boards.

As we covered here earlier this week, the company is preparing for an initial public offering (IPO).

The quick service restaurant (QSR) operator is aiming to raise around $242.5 million by offering 11.1 million shares priced at $22.00 each. This will ultimately give the company a $2.2 billion valuation at listing.

But is this excessive? Does it make Guzman y Gomez stock too expensive? Let’s find out.

Is Guzman y Gomez stock too expensive?

Tamim, an Australian Share Fund managed by Ron Shamgar, has been running the rule over the IPO.

The fund manager highlights that the company has taken its lead from popular Mexican QSRs like Chipotle (NYSE: CMG) in the United States, but attempts to differentiate itself by using fresh ingredients and its diverse range of restaurant formats and ordering channels.

However, Tamim has called the company’s proposed $2.2 billion valuation as “eye-watering” and notes the significant premium that Guzman y Gomez stock will trade at compared to Collins Foods Ltd (ASX: CKF) and Domino’s Pizza Enterprises Ltd (ASX: DMP). It commented:

The IPO values GYG at an enterprise value to operating earnings multiple of 32.5 times, significantly higher than Domino’s Pizza at around 18 times and Collins Foods Limited at just over 14 times. This rich valuation has raised concerns, especially when compared to the global fast-casual Mexican chain Chipotle, which trades at a multiple of 45 times despite its stronger growth and brand recognition.

But there’s more to this valuation than meets the eye, highlights Tamim. This relates to how Guzman y Gomez treats its lease liabilities. It adds:

However, a controversy has emerged around GYG’s treatment of lease liabilities in its valuation. Critics argue that by excluding $210 million in lease costs from its operating earnings calculation, GYG can present a much higher estimate of 2025 operating earnings in an attempt to justify a richer valuation multiple. Properly accounting for leases could result in GYG being valued significantly higher on an earnings before interest and tax (EBIT) or a price to earnings ratio.

Should you invest?

In light of the above, the fund manager appears to believe investors should keep their powder dry and wait for a better entry point once the IPO excitement dies down. It concludes:

While GYG’s growth ambitions are impressive, investors would be wise to approach this IPO with caution. The rich valuation in comparison to other QSR players raises questions about whether the hype surrounding the offering is justified. The controversy around GYG’s treatment of lease liabilities, which could significantly understate its true leverage if properly accounted for, adds further uncertainty.

History has shown that many high-profile IPOs struggle to live up to their lofty expectations once the initial excitement fades. Rather than getting caught up in the frenzy, prudent investors may be better served by waiting on the sidelines to see how GYG’s growth story unfolds as a public company. Only then can the true merits of the business be evaluated without the distortions of IPO pricing and promotions. A cautious “wait-and-see” approach could pay dividends for those seeking to invest in GYG for the long haul.

The post Is Guzman y Gomez stock too expensive? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Collins Foods and Domino’s Pizza Enterprises. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Chipotle Mexican Grill and Domino’s Pizza Enterprises. The Motley Fool Australia has recommended Chipotle Mexican Grill, Collins Foods, and Domino’s Pizza Enterprises. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.