Author: openjargon

Liontown Resources Ltd (ASX: LTR) shares are on course to end the week in a positive note.

In morning trade, the lithium developer’s shares are up 1.5% to $1.42.

Why are Liontown shares charging higher?

Investors have been buying the company’s shares this morning in response to a project update.

According to the release, Liontown has signed an agreement with GR Engineering Services Ltd (ASX: GNG) for the Engineering, Procurement and Construction (EPC) contract at the Kathleen Valley Lithium Project.

This is for the delivery and commissioning of the Paste Plant facility to support the underground mining operations at Kathleen Valley.

The release notes that the Paste Plant will include two trains capable of producing up to 160m3 of paste per hour and has been designed to accommodate future expansion of mining operations to 4Mtpa.

Management highlights that the delivery of cemented paste fill is an integral part of the underground mining cycle at Kathleen Valley. That’s because it maximises recovery of the underground orebody and planned production rates, as well as reduces the size of the surface tailings dam that would otherwise be required.

The Paste Plant has also been designed to facilitate dry stacking and water recovery. This further increases the amount of recycled water the site utilises.

What is the cost?

The EPC is valued at approximately $71 million according to the company.

The good news is that this forms part of planned and budgeted next stage of growth capital costs post first production and funding is covered by the recently announced $550 million financing facility.

And with everything else running on time, investors will be pleased to learn that GR Engineering Services has progressed the design, procurement and initial site works under an early works agreement. This is to ensure timely delivery of the Paste Plant.

Commenting on the agreement with GR Engineering Services, Liontown Resources’ managing director and CEO, Tony Ottaviano, said:

We are pleased to award the contract for the design and construction of the Paste Plant which will support and further de-risk the planned underground production rates at Kathleen Valley. GRES has designed and constructed multiple paste plant facilities throughout Western Australia and the GRES team has mobilised and commenced initial works at Kathleen Valley.

It isn’t just Liontown shares rising today. The GR Engineering Services share price has risen in morning trade on the back of this news. Its shares are now up by 23% since this time last year.

The post Liontown shares charge higher on lithium project update appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
• Here are the top 10 ASX 200 shares today
• Are Liontown shares worth buying right now?
• These are the 10 most shorted ASX shares
• Why did Liontown Resources shares smash the market in April?

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 recommended Gr Engineering Services. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The iShares S&P 500 ETF (ASX: IVV) has been a top-performing exchange-traded fund (ETF) since the start of 2024, as we can see on the chart below. In this article, we’re going to look at how much money an investor with $5,000 might have made if that money was invested in the IVV ETF at the start of the year.  

What has happened?

It has been a great time to own a piece of the US share market. Some of the biggest global tech companies have been top performers. The iShares S&P 500 ETF owns 500 of the largest and most profitable businesses that are listed in the US.

Since the start of 2024:

The Microsoft share price has risen 10.7%

The Alphabet share price has gone up 22.6%

The Amazon share price has soared 25.4%.

The Meta Platforms share price has shot higher by 36.5%.

The Nvidia share price has jumped 87.7%.

These are among the biggest businesses in the IVV ETF holdings, so they have had the biggest influence on the IVV ETF’s overall returns. An ASX ETF’s return is dictated by the performance of the underlying holdings. This portfolio has 500 holdings.

Since the start of 2024, the IVV ETF has risen by 12.7% in Australian dollar terms. If we look at the S&P 500 Index (SP: .INX), which measures the S&P 500 in American dollar terms, it experienced a rise of 9.4%.

How much $5,000 invested would be worth now

With a 12.7% capital gain, $5,000 would be worth roughly $5,635. That’s a pretty good gain in just four months and nine days.

The IVV ETF has also paid distributions amounting to approximately 30 cents per unit, which translates into a distribution return of around 0.64% based on the ASX ETF’s unit price at the start of 2024. That’s a cash return of around $32 since the start of the year.

So, in total, an investor’s wealth would have increased by $667, with most of that return being capital growth (on paper). Volatility could be just around the corner and send the IVV ETF unit price even higher, or lower.

Past performance is not a guarantee of future performance, but the IVV ETF has done very well over the years, rising by an average of 16.2% per annum in the last decade thanks to the strength of the underlying businesses.

The post If I’d put $5,000 in iShares S&P 500 ETF (IVV) at the start of 2024, here’s what I’d have now appeared first on The Motley Fool Australia.

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More reading

• 3 reasons the iShares S&P 500 ETF (IVV) is a great long-term investment
• 4 quality ASX ETFs to buy after the market sell-off

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. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. 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 positions in and has recommended Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, and iShares S&P 500 ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, 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.

Comparing two popular ASX 200 blue-chip shares from the same sector can be a great exercise for any Australian investor. Not only can you get a good look under the hood of two dominant businesses, but you can also see exactly how the market is valuing two sets of cash flows coming out of the same industry.

It’s hard to compare the dividends and earnings of a bank, for example, against a tech stock and come to a coherent valuation case for both. But when two companies are both deriving their earnings from the same base, things get a lot more interesting.

So today, let’s put this into action by comparing the valuations of the two largest supermarket operators and grocers in Australia – Woolworths Group Ltd (ASX: WOW) and Coles Group Ltd (ASX: COL).

Woolworths and Coles are great companies to compare, as they are direct competitors in the grocery space. Although both companies have auxiliary earnings streams – Coles’ bottle shops and Woolies’ Big W chain – both derive the lion’s share of their earnings from their supermarket businesses.

Normally, it would be easy to compare these two companies’ valuations by looking at their price-to-earnings (P/E) ratios on an annualised basis.

Woolies vs. Coles

But thanks to some unusual disruptions in Woolies’ recent earnings, this isn’t very useful right now. At of yesterday’s close, Woolies seems to trade on a ridiculous P/E ratio of 1,965.5, whilst Coles is on a far more normal 20.87.

So instead, what we will do is take both companies’ earnings per share from their recently-announced half-year results covering the six months to 31 December, and see how they compare.

For those six months, Woolies revealed a basic earnings per share (EPS) of 76.2 cents, which was up 2% from the same period in 2021.

At the last Woolworths share price of $30.78, this would give the company a P/E ratio of 40.49, or 20.2 on an annualised basis.

In Coles’ case, the company reported a basic EPS of 44.5 cents for the half year, which was down 8.5% on the prior corresponding period.

At the last Coles share price of $16.28, this would give the company a P/E ratio of 36.58, or 18.29 on an annualised basis.

So, on a like-for-like basis, Coles shares are currently cheaper than Woolworths shares. Put another way, investors are being asked to pay more for $1 in Woolworths earnings than $1 in Coles earnings.

That’s despite Woolworths shares having an awful year compared to its arch-rival. 2024 to date has seen the Coles share price rise 0.74%. In contrast, Woolies stock has collapsed by 17.94%.

We can see this reflected in both companies’ dividend yields. Right now, Woolworths is trading on a dividend yield of 3.41%, but Coles offers a lot more with its 4.05% yield.

So Coles shares are cheaper. But does that make them a better ASX 200 buy today?

Which ASX 200 stock to buy?

Normally, investors would feel justified in paying a higher share price relative to earnings for a higher-quality business. Until this year, it was obvious that Woolworths was the better ASX 200 blue-chip share compared with Coles, thanks to its higher market share.

But recent updates from both companies have muddied the waters of that assumption.

Earlier this month, Woolworths reported a 2.8% rise in total sales to $16.8 billion over the quarter ending 31 March. For the first three months of 2024, Woolies enjoyed a 1.5% rise in Australian food sales and a 1.4% uptick in New Zealand food sales. The company’s B2B business stood out though, banking a 3.2% spike in sales.

However, Coles put up some far more impressive figures over the same period. Coles revealed that its sales revenue for the quarter rose 6.4% over the previous year’s equivalent quarter to $10.03 billion.

Supermarket sales were up 5.1%, whilst liquor sales fell 1.9%.

Foolish takeaway

If I were deciding between these two blue-chip ASX 200 shares today for an investment, I would probably want to wait until I saw the next quarter’s numbers before making a final decision. I would want to see Coles’ superior quarter as part of a long-term trend, not just a one-off fluke. If this is the case, Coles could be the pick of the two today, given its lower P/E ratio and higher dividend yield.

However, if I had to make the decision today, I would probably go for Woolworths shares. The company is trading at its lowest share price in years today, and yet remains the dominant grocer in the Australian market. The difference in earnings multiples between the two companies has rarely been as close as it currently is, at least going off the figures we used earlier.

So, although Coles’ recent numbers almost make it more appealing than Woolworths, I would still have to wait for a clear trend to emerge before taking the plunge with Coles today.

The post Which of these ASX 200 shares is the better bargain in May? appeared first on The Motley Fool Australia.

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More reading

• 4 ASX retirement shares to buy in May
• Looking for ASX All Ords shares to buy? Top broker reveals 4 best ideas this month
• Buy Rio Tinto and these ASX 200 dividend stocks for a passive income boost
• Here’s the current ASX dividend yield on Woolworths shares
• 3 safe ASX dividend shares to own for the next 10 years

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 positions in and has recommended Coles Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Superannuation is the primary vehicle for retirement savings for most Australian workers, but new research shows a generational divide in its perceived importance.

A survey by financial advisory and accounting company Findex reveals 40% of baby boomers consider superannuation a key wealth-building investment compared to 22% of Millennials and 13% of Gen Z.

The youngsters see bank savings as a more compelling investment, with 38% of Gen Z and 20% of Millennials ranking savings as the most important type of investment for lifetime wealth-building.

In a statement, Findex commented:

While it is fair to say that this is a natural reflection of differing life stages, as a long-term investment, even small early-top ups to superannuation are more likely to deliver greater benefits in retirement.

 Ultimately, this gap underscores the varying approaches to long-term financial planning and the need for heightened awareness among younger Australians.

Millennials and Gen Z have a super advantage

The survey findings are particularly interesting given Millennials and Gen Zs are the first generations that will have received superannuation contributions from their employers over their entire working lives.

This means they enjoy a default advantage over the older generations, as they will have received more superannuation monies by the time their retirement age of 67 years rolls around.

The baby boomers were born between 1946 and 1965 and Gen X was born between 1966 and 1980. Millennials were born between 1981 and 1995 and Gen Z was born between 1996 and 2010.

Superannuation was introduced in Australia in 1992. The mandatory contribution rate for employers has risen from 3% in 1992 (or 4% for employers with an annual payroll above $1 million) to 11% today.

Most superannuation funds are primarily invested in ASX shares and international equities.

In 2023, Chant West figures show that the standard ‘growth’ superannuation fund comprised of 61% to 80% growth assets, like shares, delivered a median return of 9.9%.

Time on their side to build retirement savings

Time is considered a key component to investing success, especially when simple strategies like compounding are adopted.

The trick is to start investing as early as possible in life and invest more money as often as you can.

Findex co-CEO Tony Roussos said:

The current level of superannuation literacy presents a clear opportunity for Australians to proactively take charge of their financial future – especially Millennials and Gen Zs who will have had super contributions throughout their careers and also have the benefit of a longer runway towards retirement.

Roussos encouraged Millennials and Gen Z Australians to, “Take advantage of the time you have on hand by exploring ways to build your balance so that your super works hard for you in retirement.”

Key actions to ensure a secure retirement

Findex recommends the following key investment actions for Millennials and Gen Z Australians to take now to ensure a good retirement in the future.

Millennials  

Findex recommends the following actions for Millennials to retire well:

Balancing homeownership and super savings

Investigate ‘rentvesting’ as an alternative to traditional homeownership, allowing you to invest in property while maintaining flexibility and your superannuation contributions.

Career progression and super contributions

As income increases, take advantage of growth strategies, and periodically review and increase superannuation contributions to ensure they align with your retirement goals.

Family planning and superannuation

Plan for potential career breaks for family reasons. Consider strategies like spousal contributions or government co-contributions to maintain super growth during these periods. 

Gen Z  

Findex recommends the following actions for Gen Zs to retire well:

Assess your risk appetite and investment diversification

Exploring options within superannuation that align with a longer investment timeline can enhance growth. Superannuation typically defaults to ‘balanced’ options, so younger generations might benefit from ‘growth’ strategies, aiming to optimise fund performance over time. 

Early engagement with superannuation to build retirement savings

Start contributing to super as early as possible. Even modest contributions can grow significantly over time due to the power of compounding interest. 

Financial literacy and digital tools

Leverage digital platforms like Young Money from the Findex Community Fund for financial education, and apps to help with budgeting and investment tracking. Understanding the basics of superannuation, investment strategies, and tax advantages is crucial. 

The post Key actions for Millennials and Gen Z to take now for a good retirement appeared first on The Motley Fool Australia.

More reading

• 4 ASX retirement shares to buy in May
• The little known ASX uranium stock that could rise 35%
• Does the VanEck Wide Moat ETF pay a decent ASX dividend?
• Forget Pilbara Minerals and buy this ASX 200 lithium stock instead
• Guess how many Australians know their superannuation balance?

Motley Fool contributor Bronwyn Allen 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.

When building a retirement portfolio, many investors will look for ASX shares with defensive qualities, attractive dividend yields, and strong business models.

The good news is that there are plenty of these trading on the Australian share market, making life easier for retirees.

But which ASX retirement shares are analysts tipping as buys right now? Let’s take a look at four:

APA Group (ASX: APA)

This energy infrastructure company could be a great ASX retirement share to buy. Especially given its defensive earnings, long track record of growth, and big dividend yield.

In respect to the latter, Macquarie is forecasting dividends of 56 cents per share in FY 2024 and 57.5 cents per share in FY 2025. Based on the current APA Group share price of $8.69, this equates to 6.4% and 6.6% dividend yields, respectively.

Macquarie has an outperform rating and $9.40 price target on its shares.

Coles Group Ltd (ASX: COL)

Supermarkets are another generator of defensive earnings. As providers of our daily essentials, consumers fill their trolleys each week no matter how much they raise their prices.

Morgans believes the company’s growth can continue and is forecasting fully franked dividends of 66 cents per share in FY 2024 and then 69 cents per share in FY 2025. Based on the current Coles share price of $16.28, this implies dividend yields of 4% and 4.2%, respectively.

Morgans has an add rating and $18.95 price target on its shares.

Telstra Corporation Ltd (ASX: TLS)

We can’t go without food and, for many of us, we can’t go without our phone or internet. This makes Telstra another very defensive ASX share that could be worth considering for a retirement portfolio.

Especially with its shares falling heavily recently, making its valuation and dividend yields even more attractive. In respect to the latter, Goldman Sachs is forecasting fully franked dividends of 18 cents per share in FY 2024 and then 19 cents per share in FY 2025. Based on the current Telstra share price of $3.64, this equates to yields of 4.9% and 5.2%, respectively.

Goldman has a buy rating and $4.55 price target on Telstra’s shares.

Woolworths Limited (ASX: WOW)

Finally, investors might want to consider another supermarket operator, Woolworths. For the same reasons as Coles, it could be a great option for an ASX retirement portfolio.

Goldman Sachs certainly believes this is the case. Much like with Telstra, Woolworths shares have pulled back meaningfully recently, which the broker believes has created a compelling buying opportunity. Particularly given that its analysts “forecast WOW 2-yr sales CAGR FY24-26e of +3.2% and EBIT growth of +4.8%.”

It expects this to support fully franked dividends of $1.08 per share in FY 2024 and $1.14 per share in FY 2025. Based on the current Woolworths share price of $30.78, this implies yields of 3.5% and 3.7%, respectively.

Goldman has a buy rating and $39.40 price target on its shares.

The post 4 ASX retirement shares to buy in May appeared first on The Motley Fool Australia.

More reading

• Are Telstra shares a top buy for dividend income?
• Looking for ASX All Ords shares to buy? Top broker reveals 4 best ideas this month
• Buy Rio Tinto and these ASX 200 dividend stocks for a passive income boost
• Here’s the current ASX dividend yield on Woolworths shares
• Top brokers name 3 ASX shares to buy today

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 positions in and has recommended Goldman Sachs Group and Macquarie Group. The Motley Fool Australia has positions in and has recommended Apa Group, Coles Group, Macquarie Group, and Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Investors have been flooding into the uranium industry in large numbers over the last 12 months.

You only need to look at the performance of the ASX uranium stocks such as Boss Energy Ltd (ASX: BOE) and Deep Yellow Limited (ASX: DYL) to see this.

Over the period, these uranium stocks are up a remarkable 155% and 94%, respectively.

But if you thought the gains were over, think again.

One little known ASX uranium stock has just been named as a buy and tipped to rise strongly from current levels.

Which ASX uranium stock is a buy?

According to a note out of Bell Potter, its analysts think that Lotus Resources Ltd (ASX: LOT) could be a top option right now.

It owns an 85% interest in the Kayelekera Uranium Project in Malawi, Africa, and a 100% interest in the Letlhakane Uranium Project in Botswana, Africa.

The broker was pleased with the recent mineral resource estimate (MRE) update for the the Letlhakane project. It commented:

The updated MRE stands at 155.3Mt at 345ppm U3O8 for a total contained 118.2Mlbs U3O8, inclusive of 34.4Mlbs in Indicated Resources, which is a reduction on the original ACB [previous owner] MRE (2015) of 190Mlbs at 321ppm U3O8. The main difference between the two estimates is the hypothesised operations, which infer the economic cut-off grade. Under ACB, LM was a large-scale, low-grade two stage heap leach operation. In our February initiation on LOT, we didn’t see this as the path forward for the project. Our initial interpretation was that LOT would look to focus on the highgrade portions of the deposit and utilise ore-sorting to increase the milled grade over +600ppm. With a starting point of +400ppm, a conservative estimate of 40% mass rejection could achieve this we hypothesised. Today’s announcement is a step towards proving that thesis.

Big returns

In response to the news, the broker has reaffirmed its speculative buy rating on the ASX uranium stock with an improved price target of 60 cents.

Based on its current share price of 44.5 cents, this implies potential upside of 35% for investors over the next 12 months.

Commenting on its recommendation, the broker said:

We maintain a Speculative Buy recommendation and our valuation lifts to $0.60/sh (previously $0.50/sh). Our valuation lift comes from an extension of potential operations at LM beyond our initial forecast (initial LOM production of 61Mlbs). We see positive catalysts at KM including 1) MDA finalisation, 2) FID and 3) offtake negotiations. Successful navigation of these hurdles will place LOT in the best position to advance project funding for KM, all whilst LM advances in the background.

Though, it is worth highlighting the broker’s speculative rating. This means it would only be suitable for investors with a high risk tolerance.

The post The little known ASX uranium stock that could rise 35% appeared first on The Motley Fool Australia.

More reading

• How to invest in uranium on the ASX
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• Why are ASX uranium shares going gangbusters today?

The VanEck Morningstar Wide Moat ETF (ASX: MOAT) is a popular exchange-traded fund (ETF) and investment on the ASX.

We have tracked this ETF for a while now, noting that it remains a strong choice for many Australian investors. This is arguably thanks in part to an enviable record of delivering market-beating returns.

A high-flying ASX ETF

To illustrate, the MOAT ETF has returned 17.59% over the 12 months to 30 April. It has also delivered an average of 14.83% per annum over the past five years, as well as 15.62% per annum since its ASX inception in 2015.

This ETF has been able to achieve such stellar results by investing in a concentrated portfolio of US shares that are all selected on their perceived possession of what is known as an economic moat.

A moat is a term first used by legendary investor Warren Buffett. It refers to a company’s inbuilt protections against competition. The wider this moat is, the more able a company is to maintain dominance in its field.

This moat could come in the form of a strong brand (Coca-Cola or Apple are classic examples), or else a low-cost advantage that a company possesses at the expense of its competitors (Amazon or Costco).

It could also take the shape of a good or service that consumers simply find too difficult to stop buying or using (Microsoft‘s Office or Adobe‘s Photoshop).

Companies with the widest and most durable moats often make for the best long-term investments, as Warren Buffett has proven. Buffett has spoken extensively about the importance of an investment possessing a moat.

We can see this strategy playing out in the current MOAT portfolio. At this ASX ETF’s most recent filing, its top holdings included the likes of Google-owner Alphabet, Campbell Soup, Nike, Pfizer, Disney and Buffett’s own Berkshire Hathaway.

So we’ve established that this ETF is a high flyer when it comes to returns. But let’s talk about dividends.

What kind of ASX dividend income does the Wide Moat ETF pay?

It’s fair to say that US shares are not known for their dividend firepower. Sure, there are many strong income payers on the US markets. But thanks to a number of factors, including the absence of a franking system, it’s not too common to find yields of 4% or 5% in the top echelons of the US markets, as it is on the ASX.

An ASX index fund typically offers a 3%-5% starting dividend yield. However, a US index fund will be closer to 1%-2%.

So what about the ASX’s MOAT ETF?

Well, an ETF can fund dividend distributions in two ways. The first is passing on any dividend income its underlying holdings payout. The second is distributing the profits from the regular rebalances that most ETFs conduct every quarter in order to reflect their underlying indexes.

The VanEck Wide Moat ETF does a little of both. This means that its annual dividends (yes, investors receive just one dividend distribution every year) can vary rather wildly from year to year.

To illustrate, MOAT units paid out a chunky $8.15 per unit in 2023.

However, in January 2022, investors bagged just 98.11 cents per unit. The year before that, the figure came in at $1.01, whilst in 2020, investors received 88.1 cents per unit.

So today, MOAT units are technically trading on a trailing dividend distribution yield of 6.48%.

But given this ASX ETF’s volatile dividend distribution history, I wouldn’t be counting on this continuing over 2024.

The post Does the VanEck Wide Moat ETF pay a decent ASX dividend? appeared first on The Motley Fool Australia.

More reading

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• Here’s why the ASX’s VanEck Wide Moat ETF had such an awful April
• 3 ASX ETFs I’d buy to try to become a millionaire
• If you invested $10,000 in VanEck Wide Moat ETF (MOAT) nine years ago, here’s what it would be worth now
• Buy these ASX ETFs to supercharge your investment portfolio

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, Amazon, Apple, Berkshire Hathaway, Coca-Cola, Costco Wholesale, Microsoft, Nike, VanEck Morningstar Wide Moat ETF, and Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Adobe, Alphabet, Amazon, Apple, Berkshire Hathaway, Costco Wholesale, Microsoft, Nike, Pfizer, 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, Apple, Berkshire Hathaway, Microsoft, Nike, 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.

Pilbara Minerals Ltd (ASX: PLS) shares are a popular option for investors that are looking for exposure to lithium.

But just because the ASX 200 lithium stock is popular, doesn’t necessarily mean it is the best way to invest in lithium right now.

For example, the team at Bell Potter currently has a hold rating and $3.60 price target on Pilbara Minerals’ shares. This is notably lower than its current share price of $4.17.

But one ASX 200 lithium stock that the broker is bullish on and tipping to rise materially from current levels is Arcadium Lithium (ASX: LTM).

Why is it an ASX 200 lithium stock to buy?

Bell Potter was pleased with Arcadium Lithium’s first quarter update this week, noting that it delivered earnings ahead of its expectations but in line with consensus estimates. It said:

LTM reported Q1 2024 revenue of US$261m (BP est $268m) and Adjusted EBITDA of US$109m (BP est. $68m); overall the result was broadly in line with consensus.

It also notes that the company is forecasting more of the same over the remainder of FY 2024. Though, this will be dependent on realised lithium prices, which were strong during the first quarter. It adds:

The company has held full year 2024 scenarios for revenue (US$1.25-1.9b) and adjusted EBITDA (US$420-1,000m) based on market pricing ranges of US$15,000-25,000/t LCE. LTM achieved a Q1 2024 realised price of $20,500/t for carbonate and hydroxide products, materially higher than published indices due to fixed pricing and floors on a large proportion of hydroxide volumes.

Big returns

In response to the update, the broker has retained its buy rating with a trimmed price target of $9.50.

With the ASX 200 lithium stock currently trading at $7.07, this implies potential upside of 34% for investors over the next 12 months.

To put that into context, a $10,000 investment would be worth almost $13,500 by this time next year if Bell Potter is on the money with its recommendation.

Explaining its bullish view on the lithium miner, the broker concludes:

LTM provides the largest, most diversified exposure to lithium in terms of mode of upstream production, asset locations, downstream processing and customer markets. It is a key large-cap leverage to lithium prices and sentiment, which we expect to improve over the medium term. In supportive markets, LTM’s growth pipeline could see the company more than double production over the next three years.

The post Forget Pilbara Minerals and buy this ASX 200 lithium stock instead appeared first on The Motley Fool Australia.

• Why Pilbara Minerals shares are a buy for this lithium short seller
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• What would I have now if I’d invested $10,000 into Pilbara Minerals shares in April?

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.