Author: openjargon

This could be an excellent time to consider overlooked ASX shares that the market is underestimating. Good investing is usually about finding assets that are underpriced for their long-term potential.

The ASX share market regularly experiences bull and bear markets, during which investors may be too optimistic or pessimistic.

Sometimes, the most compelling investments could be the most unloved ones.

At times like this, I like to refer back to several excellent pearls of wisdom from legendary investor Warren Buffett. Buffett’s ability to make the right investments at the right time has helped Berkshire Hathaway become one of the world’s largest companies.

Warren Buffett’s wise advice

In 2001, Buffett compared beaten-up stocks to hamburgers:

To refer to a personal taste of mine, I’m going to buy hamburgers the rest of my life. When hamburgers go down in price, we sing the ‘Hallelujah Chorus’ in the Buffett household. When hamburgers go up in price, we weep. For most people, it’s the same with everything in life they will be buying — except stocks. When stocks go down and you can get more for your money, people don’t like them anymore.

One of Buffett’s most quoted pieces of advice could be helpful to keep in mind:

Be fearful when others are greedy, and be greedy when others are fearful.

This could be applicable to beaten-up stocks and sectors.

Which ASX shares are overlooked?

Each investor may have a different opinion on what ASX shares are being undervalued.

I think it’d be fair to judge ASX bank shares, like Commonwealth Bank of Australia (ASX: CBA), as being fully priced at close to 52-week highs. Plenty of ASX tech shares, like WiseTech Global Ltd (ASX: WTC) and REA Group Limited (ASX: REA), are also close to 52-week highs.

In terms of people being fearful and avoiding discounted hamburgers, I’d suggest ASX retail shares could be a fruitful place to look for contrarian investing regarding overlooked ASX shares. Households are struggling amid a high cost of living, but I don’t believe the difficult retailing conditions will last forever. A recovery by 2026 could boost share prices of retailers.

For example, the Accent Group Ltd (ASX: AX1) share price is down 18% since its 2024 peak in February and it’s down around 25% from April 2023, as shown on the chart below. The shoe retailer is responsible for various shoe brands in Australia, including The Athlete’s Foot, Skechers, Vans and Ugg. I think its earnings growth could bounce back within a couple of years, particularly if it keeps growing its store network in the medium term.

Another example of a compelling overlooked ASX share may be homewares and furniture retailer Adairs Ltd (ASX: ADH). The Adairs share price has fallen 36% since March 2024 and has fallen 65% since June 2021. I think revenue and profit will be challenged in the short term. Still, profitability could recover noticeably by FY26 if economic conditions improve (such as the start of interest rate reductions to a more neutral level). The ASX retail share is working on upsizing some Adairs stores (making them significantly more profitable) and growing its Focus on Furniture store network.

Other compelling, currently somewhat unpopular ASX shares to consider could be AGL Energy Ltd (ASX: AGL) and Collins Foods Ltd (ASX: CKF), which I covered here and here.

The post Now could be an opportunity to snap up overlooked ASX shares appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Accent Group and Collins Foods. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Adairs, Berkshire Hathaway, REA Group, and WiseTech Global. The Motley Fool Australia has positions in and has recommended Adairs and WiseTech Global. The Motley Fool Australia has recommended Accent Group, Berkshire Hathaway, Collins Foods, and REA Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

PharmAust Limited (ASX: PAA) shares are catching the eye with a strong gain on Wednesday.

At the time of writing, the ASX healthcare stock is up almost 20% to 24.5 cents.

Why is this ASX healthcare stock rocketing?

Investors have been bidding the clinical-stage biotechnology company’s shares higher following the release of an announcement this morning.

According to the release, the company’s Open-Label Extension (OLE) study has delivered some very promising results.

The OLE study is investigating the long-term safety, tolerability, and efficacy of monepantel (MPL) in patients with Motor Neurone Disease (MND)/Amyotrophic Lateral Sclerosis (ALS).

The study involves two sites in Australia, Calvary Health Care Bethlehem, led by Associate Professor Susan Mathers, and Macquarie University, led by Professor Dominic Rowe.

MPL is a potent and safe inhibitor of the mTOR pathway. The company notes that this pathway plays a central role in the growth and proliferation of cancer cells and degenerating neurons. It regulates the cellular cleaning process, where toxic proteins are broken down into macromolecules to be reused. This autophagic process is disrupted in most neurodegenerative diseases, including ALS.

What’s the latest?

The ASX healthcare stock revealed that its updated data analysis conducted by Berry Consultants shows a statistically significant survival benefit for MPL compared to untreated matched-controls from the Pooled Resource Open-Access ALS Clinical Trials (PRO-ACT) database for patients with MND/ALS.

It notes that treatment with MPL significantly reduced the risk of death by 91% when compared to PRO-ACT matched controls.

In addition, management highlights that the updated analysis of the rate of decline in ALSFRS-R is to include the compassionate use program and continued to show that MPL reduces the rate of disease progression.

Enrolment on to the OLE Study is now complete with 10 of the 12 patients from the Phase 1 MEND Study rolling over.

What’s next?

The ASX healthcare stock’s managing director, Dr Michael Thurn, believes this is a significant milestone for the company.

He also notes that it sets the company up well ahead of the expected commencement of the Phase 2/3 STRIKE study later this year. Dr Thurn commented:

I’m very pleased that we have completed enrolment in the OLE study as this is a significant milestone for PharmAust. The updated survival analysis conducted by Berry Consultants is extremely encouraging, as is the updated efficacy analysis that indicates MPL continued to slow the rate of disease progression in patients with MND/ALS. These results provide an exciting backdrop ahead of the anticipated commencement of the pivotal adaptive Phase 2/3 STRIKE study in H2 2024.

The post Guess which ASX healthcare stock just rocketed 20% on a ‘significant milestone’ appeared first on The Motley Fool Australia.

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• How the latest GDP data could bring ASX 200 investors interest rate relief
• Why Generation Development, Graincorp, Seek, and Treasury Wine shares are storming higher
• Now could be an opportunity to snap up overlooked ASX shares
• Down 17% in 3 months, is it time to buy this ASX 200 dividend superstar?

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.

The Brickworks Limited (ASX: BKW) share price has fallen around 17% in the last three months after reaching an all-time high of $31 on 8 March this year. 

This decline brings its share price back to $26, the same level it was a year ago, as we can see in the chart below. In contrast, the S&P/ASX 200 Index (ASX: XJO) has surged 7.2% during the same period.

Income-focused investors might be wondering if this is a good time to buy into this consistent dividend payer.

Undervalued relative to its asset value 

Bell Potter certainly thinks so, as my colleague James covers in this recent article.

According to Bell Potter, the stock could be undervalued as it offers a discount on its net tangible asset (NTA) value, which includes a 26.1% shareholding in Washington H Soul Pattinson & Company Ltd (ASX: SOL). Bell Potter highlighted:

We believe that an attractive look-through opportunity has recently presented in BKW, with our mark to market valuation of SOL indicating that the stock is currently trading at a 3.6% discount to pre-tax NTA.

This compares to an average pre-tax premium to NTA of 3.9% (post the MLT merger) and represents the widest valuation gap since July ’22.

Shortage in industrial properties continues

Another key component of Brickworks’ NTA is its prime industrial land holdings across Australia and the United States, most notably in Western Sydney. The area is experiencing soaring demand for industrial properties as consumer demand for online shopping remains high.

In a market update in May, the company explained:

These structural trends, along with land supply issues, have driven up rent for prime industrial property in Wetsern Sydney by 55% in the past two years. We estimate that the current passing rent within the Industrial JV Trust [of Brickworks] of $147/m2 is now 35% below average market rent of $225/m2.

Valuation comment 

Following its recent drop, the Brickworks share price is trading at a price-to-book ratio (PBR) of 1.14x. 

Over the past 10 years, shares in Brickworks have rarely traded below the company’s book value, except during the COVID-19 pandemic when the PBR dropped to 0.84x.

The book value, different from NTA, is based on the value of its asset holdings as of 31 December 2023, without accounting for potential upside from future land development.

Foolish takeaway

The Brickworks share price is trading at an attractive valuation relative to its asset value, which is supported by industrial land shortages in prime locations, in my opinion.  

This could present a buying opportunity for some dividend investors.

The post Down 17% in 3 months, is it time to buy this ASX 200 dividend superstar? appeared first on The Motley Fool Australia.

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• Leading brokers name 3 ASX shares to buy today
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Motley Fool contributor Kate Lee has positions in Brickworks. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks. The Motley Fool Australia has positions in and has recommended Brickworks. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

S&P/ASX 200 Index (ASX: XJO) energy shares are sinking for the second consecutive day today.

In late morning trade the ASX 200 is up 0.2%.

But ASX 200 energy shares aren’t helping out with the lifting. Here’s how the big three oil and gas stocks are tracking at this same time:

• Woodside Energy Group Ltd (ASX: WDS) shares are down 0.9%
• Santos Ltd (ASX: STO) shares are down 0.9%
• Beach Energy Ltd (ASX: BPT) shares are down 1.8%

Investors look to be favouring their sell buttons here following another overnight retrace in the oil price.

Here’s what’s happening.

Why is the oil price slipping?

International benchmark Brent crude oil dipped another 0.1% overnight to US$77.47. That brings the weekly Brent crude oil price decline to almost 8%, with the oil price down more than 15% since 5 April, when that same barrel was fetching US$91.17.

West Texas Intermediate crude oil also declined 0.2% overnight to US$73.12 per barrel.

The oil price and ASX 200 energy shares continue to be pressured on the heels of this weekend’s Organization of the Petroleum Exporting Countries and its allies (OPEC+) meeting.

While the cartel agreed to extend its existing production cuts through the coming quarter, it surprised the markets by saying production would begin to lift in October, with cuts phased out by June 2025.

This is likely to see OPEC produce an additional half a million barrels per day by the end of 2024, with production expected to increase by 1.8 million barrels per day by next June.

In what would prove good news for ASX 200 energy shares like Woodside, OPEC has a rather bullish outlook for global energy demand, forecasting that this demand growth will keep prices in balance amid the additional supply.

Headwinds brewing for ASX 200 energy shares?

Many analysts believe that OPEC’s growth forecasts are overly optimistic.

That would mean the extra supplies coming to market could keep a lid on the oil price and the profit margins for ASX 200 energy shares.

According to Robert Rennie, head of commodity and carbon strategy at Westpac Banking Corp (ASX: WBC), quoted by The Australian Financial Review:

With global inventory rising, fuel inventory surging and more supply coming onstream through the fourth quarter, it’s hard not to see a push-back into the US$75 to US$80 range that contained us for much of the first quarter this year.

Rennie is talking about Brent prices here.

Fundstrat Global technical analyst Mark Newton has an even more bearish take, expecting the oil price to fall further from here.

According to Newton:

WTI crude could very well revisit last December’s lows in the high US$60’s, as a minimum downside target, and should make energy a difficult sector to overweight in the short run.

It seems that traders viewed the lack of an output cut extension through year-end as bearish.

While that would likely throw up some shorter-term headwinds for ASX 200 energy shares, this could provide an opportune longer-term entry point in this highly cyclical market.

The post Are headwinds brewing for ASX 200 energy shares? appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Wednesday
• Why is the Woodside share price tumbling on Tuesday?
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• Here’s the average wealth of Aussies who manage their own superannuation

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.

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

There’s no denying the impact of artificial intelligence (AI) on the tech world since early last year, and Nvidia (NASDAQ: NVDA) has been among the primary beneficiaries. The company’s graphics processing units (GPUs) supply the computational horsepower that underpins AI, pushing the stock to greater heights, resulting in a high-profile stock split.

In a keynote address this past weekend ahead of the Computex trade show in Taiwan, CEO Jensen Huang laid out Nvidia’s game plan for the next couple of years, which made one Wall Street analyst even more bullish.

You can’t spell gains without AI

Bank of America analyst Vivek Arya called Nvidia a “top pick,” reiterating his buy rating on the stock and raising his price target to $1,500. That represents potential gains for investors of 37% over the coming year compared to the stock’s closing price on Friday.

“Our company has a one-year rhythm,” Huang said. “Our basic philosophy is very simple: Build the entire data center scale, disaggregate and sell to you parts on a one-year rhythm, and push everything to technology limits.”

The analyst noted that with this statement, Nvidia is essentially accelerating its product upgrade cycle from two years to one year. This will “continue to bolster Nvidia’s AI leadership position,” according to Arya.

The evidence suggests the analyst is on to something. During his keynote, Huang said Nvidia planned to unveil a Blackwell Ultra processor in 2025, with its next-generation Rubin platform slated for release in 2026. The first Blackwell processors are slated for delivery beginning later this year, replacing the wildly popular Hopper generative AI chips.

This relentless pace of innovation keeps Nvidia ahead of the competition. In its fiscal 2024 (ended Jan. 28), the company spent nearly $8.68 billion — more than 14% of its total revenue — on research and development. This has helped Nvidia maintain its sizable technological lead on its rivals, which shouldn’t be changing anytime soon.

Nvidia stock is selling for 42 times forward earnings, a premium that’s supported its triple-digit revenue growth, making the stock a buy. 

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

The post Is Nvidia stock going to $1,500? appeared first on The Motley Fool Australia.

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Danny Vena has positions in Nvidia. Bank of America is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bank of America and Nvidia. 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.

The BHP Group Ltd (ASX: BHP) share price is taking a tumble today.

Shares in the S&P/ASX 200 Index (ASX: XJO) mining giant closed down 1.2% yesterday at $44.28. At the time of writing on Wednesday morning, shares are swapping hands for $43.71 apiece, down 1.3%.

For some context the ASX 200 is up 0.2% at this same time.

It’s not just the BHP share price underperforming today.

Shares in rival ASX 200 iron ore miner Fortescue Metals Group Ltd (ASX: FMG) are down 0.8%, while the Rio Tinto Ltd (ASX: RIO) share price is down 1.3%.

Here’s what’s happening.

What’s pressuring the BHP share price?

BHP’s share price moves on the ASX today are following a similar sell-down in the miner’s international listings.

Overnight, BHP shares closed down 2.2% in the United States, where the company is listed on the New York Stock Exchange (NYSE).

Most of the selling pressure looks to be coming from a sizeable retrace in metals prices.

The copper price dropped another 2.0% overnight to US$9,945 per tonne. While that’s still near historic highs, the copper price has now retraced by almost 9% since 20 May.

Copper counts as BHP’s second biggest revenue earner after iron ore.

Speaking of, the iron ore price tumbled 2.1% overnight to US$107.65 per tonne.

On 7 May the critical steel making metal was fetching just under US$120 per tonne, having fallen from US$143 per tonne in early January.

What’s happening with the iron ore price?

The iron ore price gained for most of April and into early May amid hopes that China’s renewed stimulus efforts would boost the nation’s floundering property sector, providing some helpful tailwinds for the BHP share price.

(Although BHP’s bid to acquire global miner Anglo American (LSE: AAL) weighed on shares late in April.)

But those hopes appear to be fading in recent weeks, as analysts are increasingly sceptical that the measures will be enough to revamp China’s steel-hungry property markets.

According to Daniel Hynes, senior commodity strategist at ANZ Group Holdings Ltd (ASX: ANZ) (quoted by The Australian Financial Review):

Recent property support measures in China failed to ignite much hope of stronger demand. Further [iron ore] price gains will likely be capped by persistent concerns over the state of the Chinese property market.

Robert Rennie, head of commodity and carbon strategy at Westpac Banking Corp (ASX: WBC), also believes iron ore prices are unlikely to top US$120 per tonne again anytime soon, noting that iron ore inventories are rising in China at a time they’d usually be falling.

“It feels as if it’s just a matter of time before we start to see a more meaningful correction below $US110 and eventually $US100, brought on by rising supply out of Africa,” Rennie said.

With today’s intraday moves factored in, the BHP share price is down 13% in 2024.

The post Why is the BHP share price tumbling on Wednesday? appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Tuesday
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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.

The Treasury Wine Estates Ltd (ASX: TWE) share price is racing higher this morning.

At the time of writing, the wine giant’s shares are up 5% to $11.97.

Why is the Treasury Wine share price jumping?

Investors have been buying the company’s shares this morning in response to the release of an update after the market close on Tuesday.

Overnight, the company held an investor and analyst event from its recently acquired DAOU Vineyards property in Paso Robles, United States.

At the event, management spoke positively about Treasury Wine’s opportunity in North America. It also provided an update on its guidance for FY 2024.

In respect to the former, the company believes its DAOU acquisition has unlocked a significant long term growth opportunity for Treasury Americas.

It notes that it has created the number one luxury wine business in the US and filled a significant Treasury Americas portfolio gap at the US$20 to US$40 per bottle range. It has also complemented its existing luxury portfolio above the US$40 per bottle price tag.

Other positives that management highlighted are the significant value creation opportunity leveraging Treasury Americas and DAOU’s unique strengths. It has also provided the scale to consider the creation of a standalone Treasury Americas Luxury division alongside Penfolds.

FY 2024 guidance update

Also boosting the Treasury Wine share price on Wednesday was management reaffirming its guidance for FY 2024.

At a group level, it continues to expect mid-high single digit EBITS growth for the year. This excludes the EBITS contribution from DAOU in the second half.

For Treasury Americas, it expects FY 2024 EBITS in the range of $223 million to $228 million. This reflects luxury portfolio growth, supported by increased availability, with premium portfolio revenue broadly in line with the prior corresponding period.

DAOU EBITS is expected to be approximately US$24 million, which is in line with expectations.

Outlook

Looking ahead, management’s expectations for DAOU are unchanged. The acquisition is expected to be earnings per share accretive (pre-synergies) and mid to high single-digit earnings per share accretive for the first full year of ownership. Over the medium term, average annual low double-digit NSR growth is expected.

Finally, work to assess the future operating model for the company’s global portfolio of Premium brands is continuing. An update will be provided in August.

The Treasury Wine share price is up 6% over the last 12 months.

The post Treasury Wine share price jumps on US opportunity and FY24 guidance update appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Wednesday
• 4 high-quality ASX 200 growth shares to buy in June
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• 4 super ASX 200 blue chip shares to buy

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

The Xero Ltd (ASX: XRO) share price is paused from trade on Wednesday morning.

Why is the Xero share price paused?

The company’s shares are paused at present after Xero announced a major convertible notes offering.

According to the release, Xero has launched an offering of US$850 million (~A$1.3 billion) fixed coupon guaranteed senior unsecured convertible notes due in 2031. These are to be issued by its wholly owned subsidiary, Xero Investments, and guaranteed by Xero.

The company intends for the notes to be listed on the official list of the Singapore Exchange Securities Trading. After which, conversion of the notes will be cash settled unless the issuer elects to physically settle the conversion by having Xero issue ordinary shares to the relevant noteholders.

Why is it raising funds?

After deductions for commissions, professional fees, other administrative expenses, and funding the costs of the call option transactions, the net proceeds from the offering will be used for several purposes.

Xero advised that this includes to repurchase its existing notes, for potential acquisitions and strategic investments, and for general corporate purposes.

In respect to the repurchase of existing notes from the US$700 million zero coupon guaranteed convertible notes that are due in 2025, Xero advised that it is carrying out a reverse bookbuilding process. This is being undertaken to receive indications of interest from holders of the existing notes that are willing to sell in return for cash. In addition, Xero may, at its discretion, continue to buyback on-market any remaining existing notes.

As for its potential acquisitions and strategic investments, Xero has not advised of any deals in the works. Instead, it appears to be ensuring that it is positioned to take advantage of opportunities if and when they arise.

Commenting on the convertible notes offering, Xero’s chief financial officer, Kirsty Godfrey-Billy, said:

We’re pleased with how we are managing our strong balance sheet and the optionality this provides. The announced offering will provide us with financial flexibility as we continue to execute our strategic priorities.

The Xero share price is up 20% since this time last year.

Should you buy its shares?

One leading broker that sees a lot of value in the Xero share price is Macquarie.

Earlier this week, its analysts put an outperform rating and $180.70 price target on its shares.

Based on yesterday’s close price, this implies potential upside of 37% for investors over the next 12 months.

The post Xero share price on watch amid $1.3 billion convertible notes offering appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group and Xero. The Motley Fool Australia has positions in and has recommended Macquarie Group and Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.