Author: openjargon

Fortescue Metals Group Ltd (ASX: FMG) shares are trading 1.5% higher today at $24.43 apiece.

The gain comes today despite allegations of intellectual property theft involving its green iron technology. The ASX miner has accused two former executives of misusing confidential information to benefit a rival company, Element Zero.

Investors aren’t deterred by the news by lunchtime Friday. Let’s take a closer look.

Why are Fortescue shares in focus?

Fortescue claims a former chief scientist and senior executive took proprietary information when they left the company in late 2021.

According to reporting from The Australian, the mining giant executed secret raids on the homes and offices of these individuals under court-approved search orders.

Fortescue alleges the former executives used this information to start Element Zero, a competitor in green iron technology. This was an “industrial pilot plant for an electrochemical reduction process”, according to Federal Court Judge John Logan.

These actions represented an “industrial-scale misuse” of its intellectual property, particularly concerning its electrochemical reduction process for carbon-free iron, according to reporting in the Sydney Morning Herald.

Element Zero’s response

Element Zero has denied the allegations, calling them “spurious” and “entirely without merit”. The company plans to apply to set aside the original search orders.

“As Element Zero will demonstrate, its green metals technology was developed independently of and is very different from anything that Fortescue is doing or has done in this space”, the company responded in SMH.

The company continues to advance its technology and plans to build a $3.2 billion green iron ore processing plant in the Pilbara.

Justice Logan noted no final determinations. As to what this means for Fortescue shares long term, only time will tell.

Fortescue’s strategic moves

Despite the legal battle, Fortescue is pushing forward with its green initiatives. In May, the company started its first negotiations to supply 100 million tonnes of green iron to China from its assets in the Pilbara.

This follows a $50 million investment in a pilot plant that, according to The Australian, would produce 1,500 tonnes of green iron annually by 2025.

“Dr Forrest has spruiked his ambitious goal of producing 200 million tonnes a year of carbon-free iron ore for export to the company’s customers”, the reporting said.

Fortescue shares summary

Fortescue shares have had a difficult time in 2024, trading more than 16% in the red since January. However, they have held onto a 21% gain over the 12 months. At the time of writing, they trade on a price-to-earnings (P/E) ratio of 8.6.

The post Fortescue shares rally amid claims of green tech theft appeared first on The Motley Fool Australia.

More reading

• Should you buy the 3 highest-yielding dividend shares in the ASX 200?
• Down 6% in a week. Are Fortescue shares carrying an iron anchor?
• 5 things to watch on the ASX 200 on Tuesday
• Forget Fortescue and buy this ASX mining stock now
• Buy, hold, or sell: What is Bell Potter saying about Fortescue shares?

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 with another gain. At the time of writing, the benchmark index is up 0.3% to 7,847.2 points.

Four ASX shares that have failed to follow the market higher today are listed below. Here’s why they are falling:

Beach Energy Ltd (ASX: BPT)

The Beach Energy share price is down almost 2% to $1.60. This appears to have been driven by the release of a bearish broker note this morning out of Citi. According to the note, the broker has downgraded the energy producer’s shares to a neutral rating (from buy) and cut its price target to $1.60 (from $1.70). Citi appears a touch nervous ahead of the announcement of the company’s strategic review later this month.

Life360 Inc (ASX: 360)

The Life360 share price is down almost 6% to $13.85. This follows the completion of its Nasdaq IPO and its debut on Wall Street overnight. The location technology company’s shares had a lukewarm debut and finished the session flat. And then in after hours trade its NASDAQ listed shares dropped 1.3% to $26.65. Investors may have been hoping for an explosive start to life on Wall Street and have been left underwhelmed by day one. Management stated that it views the listing and “increased exposure to U.S. investors as a natural next-step in its growth.”

Viva Leisure Ltd (ASX: VVA)

The Viva Leisure share price is down 2% to $1.53. This morning, this health club owner announced the successful completion of its fully underwritten institutional placement. Viva Leisure raised $16 million at a 7.1% discount of $1.45 per new share. Management advised that the placement had strong demand, reflecting support from both existing and new investors. Proceeds will be used to finance the strategic acquisitions of eight health club locations in Western Australia, reimbursement of recent capital expenditure, rebranding, working capital, offer costs, and other strategic initiatives.

Wildcat Resources Ltd (ASX: WC8)

The Wildcat Resources share price is up 5% to 35.5 cents. This is despite there being no news out of the lithium explorer today. However, it is worth noting that a number of ASX lithium stocks are in the red today. For example, lithium giant Pilbara Minerals Ltd (ASX: PLS) is down 1.5% this afternoon. The market appears to believe that lithium prices are not going to be going meaningfully higher any time soon due to a surplus.

The post Why Beach Energy, Life360, Viva Leisure, and Wildcat shares are dropping today appeared first on The Motley Fool Australia.

More reading

• Life360 shares tumbles after Wall Street debut
• 5 things to watch on the ASX 200 on Friday
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• 5 things to watch on the ASX 200 on Thursday
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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 Qantas Airways Limited (ASX: QAN) share price is once again back in focus. This follows a difficult few years for the company, starting with the COVID-19 pandemic in 2020 and ending with a series of headlines that coincided with former CEO Alan Joyce’s departure.

But 2024 has been a different year for the airline. Since January, the Qantas share price has rallied nearly 16% into the green, bouncing from lows of $5.01 on 6 March to trade at $6.22 apiece before the open on Friday.

Based on market dynamics and analysts’ insights, I believe Qantas could trade above $8.00 per share by the end of FY 2025. Let me explain.

Why Qantas shares could be a buy

After an earnings slump spearheaded by the pandemic, Qantas looks well-primed to grow over the coming years.

Goldman Sachs recently added the Qantas share price to its “Asia-Pacific conviction list” for June.

It notes the airline could produce earnings per share (EPS) of 85 cents and 96 cents per share in FY 2024 and FY 2025, respectively. This is “materially ahead” of the 57 cents per share booked in 2019.

The broker also says Qantas looks undervalued compared to its peers. At the time of writing, it trades at a price-to-earnings ratio (P/E) of 6.7 times versus an average of 9.1 times for its regional and US competitors.

According to Goldman analyst Niraj Shah, this, and exceptional forecasted earnings growth, place Qantas on the runway for liftoff.

“Despite a higher fuel price and ongoing customer experience investment, Niraj forecasts [profit before tax] to be 51% above pre-COVID in FY24E and 61% higher in FY25E”, the broker says.

This uplift reflects the group’s A$1bn+ cost out program (rather than simply elevated yields/unit revenues that are arguably more cyclical). FY25E unit revenue assumptions reflect growth of only 3.0% p.a. vs pre-COVID, based on capacity setting that is largely consistent with pre-COVID levels.

Goldman has set a target of $8.05 apiece on the Qantas share price, implying a potential upside of 29% from today’s value.

According to CommSec, 13 out of the 16 brokers covering the airline rate it as a buy, three as a hold, and 11 rate it as a “strong buy.”

Catalysts for Qantas share price

I cannot ignore Goldman’s 61% projected growth in pre-tax earnings for the company. But there are other catalysts worth mentioning.

The broker also suggests three potential tailwinds for the Qantas share price. First, “positive trading updates on operational performance” could be a factor. This reflects things like customer satisfaction, running times, and so forth.

This year’s annual financial results could also add a thrust of buying power into the stock. Goldman reckons the numbers will show “sustainably” better earnings.

Finally, it suggests that investors should listen to management’s commentary on FY 2025 and look for any positive takeouts, especially regarding dividends.

In fact, Qantas has announced an increase in its on-market share buyback by up to $400 million. Over FY 2025-2027, Goldman expects total capital returns of $1.6 billion — including $1.2 billion in dividends. This is a fourth catalyst for its share price, in my view.

Why Qantas shares are still cheap

Despite the broader market’s rise, Qantas shares remain attractively valued. Currently trading at a P/E ratio of 6.7, they are significantly cheaper compared to the iShares S&P/ASX 200 Index ETF (ASX: IOZ)’s P/E of 18.

This tells us investors are paying much less for each dollar of Qantas’ earnings.

If Qantas hits the projected EPS of 96 cents in FY 2025 and the P/E remains unchanged at 6.7, this implies a price target of $6.80/share (6.7 x 0.96 = $6.80).

But Goldman believes this multiple will converge to the peer average of 9.1 times, as Qantas delivers “earnings that are sustainably above pre-COVID levels” and potentially returns capital to shareholders. I can’t say I disagree.

If it does increase to the 9-times multiple and Qantas hits EPS of 96 cents, this implies a value of $8.64 per share (9 x 0.96 = $8.64). I believe the Qantas share price could push to this mark by the end of FY 2025. 

Promising future for Qantas

Given the combination of operational efficiency, strong earnings forecasts, and dividend potential, I think Qantas share price has a bright future. Broker estimates support that the Qantas share price could end FY 2025 above $8.00 per share.

As always – consider your own personal financial circumstances.

The post Here’s where I see the Qantas share price ending in FY 2025 appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
• Why Qantas could be one the best shares to buy in the Asia-Pacific
• Top brokers name 3 ASX shares to buy next week
• ASX 200 shares are still cheap! Here’s one to consider buying now
• Top ASX shares to buy in June 2024

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.

Commonwealth Bank of Australia (ASX: CBA) shares have long been a favourite among passive income investors.

That’s because the S&P/ASX 200 Index (ASX: XJO) bank has a stellar record of paying out two fully franked dividends a year. For more than 10 years now.

With the exception of the final dividend in 2020, which was cut roughly in half in the wake of the global pandemic market meltdown, the dividends delivered by CBA shares have also remained remarkably stable around the $2.00 a share range.

In 2018 for example, CBA paid an interim dividend of $2.00 a share and a final dividend of $2.31 a share. That equates to a 12-month payout of $4.31 a share.

Most recently, CBA has paid out a final dividend of $2.40 a share and an interim dividend of $2.15 a share. That equates to a 12-month payout of $4.15 a share.

Again, with the exception of the pandemic year, you’ll find a similar pattern going back more than a decade.

Which goes a long way to explain CommBank’s passive income appeal.

But are CBA shares losing their passive income credentials?

Tapping CBA shares for passive income

As we looked at up top, CBA’s dividend payouts remain quite solid.

In fact, the final dividend of $2.40 per share, which landed in eligible shareholders’ accounts on 28 September, represented a record-high payout.

But here’s the thing.

While CommBank’s passive income stream has remained relatively stable over the past 10 years, the CBA share price has not.

Going back to our 2018 example, the ASX 200 bank stock hit lows of less than $68 a share that year.

Investors who bought the stock at that level will have earned a fully franked dividend yield of 6.3% that year. And shares bought at that price would have returned a yield of 6.1% this year.

But with the CBA share price defying bearish forecasts and instead rocketing to new record highs this week, the passive income stream is looking far more muted.

At time of writing today, CommBank stock has retraced a touch from those record highs to be trading for $124.21 a share.

That sees the stock trading on a fully franked trailing yield of 3.3%.

Of course, it’s not all bad news.

While investors may be earning a significantly lower dividend yield, they have enjoyed some market-beating share price gains.

The CBA share price has surged 30% over the past 12 months. And that’s not including the $4.15 a share in dividends the ASX 200 bank stock delivered.

The post Are CBA shares losing their passive income credentials? appeared first on The Motley Fool Australia.

More reading

• Unstoppable! CBA share price smashes yet another record high
• Why you should sell CBA, Westpac, and Bank of Queensland shares in June
• Are ASX 200 bank shares a good investment right now?
• How the CBA share price defied the bears to surge in May
• 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.

Nvidia Corp (NASDAQ: NVDA) shares have been on fire over the last 12 months.

The graphics processing units (GPU) developer’s shares have risen over 200% during this time.

This means that you would’ve tripled your money if you had invested this time last year.

Unfortunately, there isn’t a listing for Nvidia shares on the ASX, so if you want to invest you need to invest through a broker that allows you to buy US stocks.

But there is a way to gain exposure to Nvidia indirectly. That is through exchange-traded funds (ETFs).

But which ASX ETFs allow you to invest in this tech giant? Let’s take a look at three.

BetaShares NASDAQ 100 ETF (ASX: NDQ)

The hugely popular BetaShares NASDAQ 100 ETF is the most obvious choice for Nvidia exposure.

It provides investors with easy access to the 100 largest (non-financial) stocks on Wall Street’s famous NASDAQ index.

At present, Nvidia equates to 8.1% of the ETF. This is a touch behind Microsoft at 8.6% and level with Apple.

There are also a host of other world class companies included in this ASX ETF. Which helps to explain why it has risen 28% over the last 12 months.

Global X Semiconductor ETF (ASX: SEMI)

Another ASX ETF that allows you to invest indirectly into Nvidia is the Global X Semiconductor ETF.

This fund seeks to invest in companies that stand to potentially benefit from the broader adoption of tech-enabled devices that require semiconductors. This includes the development and manufacturing of semiconductors.

Global X notes that the world’s next generation of innovative technology will require semiconductors to power it, putting the 30 companies in this ETF in a strong position for the future.

Nvidia is far and away the largest holding in the fund with a 13.01% weighting. Taiwan Semiconductor Manufacturng Co Ltd (NYSE: TSM) is next in line with a weighting of 10.4%.

This ETF has outperformed with a 58% gain over the last 12 month.

Betashares Metaverse ETF (ASX: MTAV)

A final ASX ETF that provides access to Nvidia shares is the Betashares Metaverse ETF.

It aims to track the performance of an index that provides exposure to a portfolio of leading global companies involved in building, developing and operating the Metaverse.

Betashares notes that the Metaverse has been described as the next iteration of the internet that seamlessly combines our digital and physical lives.

Nvidia is the largest holding in the fund with a weighting of 9.5%. Next in line are Meta Platform at 5.6% and Nintendo at 5.4%.

This ETF is up 36% since this time last year.

The post 3 popular ASX ETFs that own Nvidia shares appeared first on The Motley Fool Australia.

More reading

• Why Nvidia stock blasted to a $3 trillion market cap on Wednesday
• What is the dividend payout for Nvidia stock?
• Is Nvidia stock going to $1,500?
• Which ASX stock I’d rather buy than Nvidia at $1,148 per share
• Nvidia stock: 4 reasons to buy, 4 reasons to sell

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 James Mickleboro has positions in BetaShares Nasdaq 100 ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, BetaShares Nasdaq 100 ETF, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Nintendo and 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 positions in and has recommended BetaShares Nasdaq 100 ETF. The Motley Fool Australia has recommended Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Goldman Sachs has just taken Dicker Data Ltd (ASX: DDR) off its “sell list”, upgrading the ASX tech share to a neutral rating.

The upgrade highlights Dicker Data’s defensive revenues and strong balance sheet, among other points. At the time of writing, shares in the ASX tech player are swapping hands at $9.44 apiece.

Let’s take a look at why the broker has made its decision.

Why Goldman upgraded this ASX tech share

The broker decided to upgraded the ASX tech share from its bearish view to a more neutral stance for three main reasons.

One, Goldman’s analysis indicates the company’s significant backlog headwinds are expected to ease. It sees this with a potential for a PC market recovery in the second half of 2024.

Secondly, despite softer revenue, Dicker Data is growing operating margins. The earnings before interest, tax, depreciation and amortisation (EBITDA) margin increased from 4.4% to 4.8% this year. This is thanks to strategic acquisitions, Goldman says.

It says the ASX tech share “has executed well” on improving margins in the “volatile revenue environment across 2020-24”. This could help grow earnings per share (EPS) moving forward.

DDR’s high margins relative to peers, strong balance sheet and tight inventory management place
the company in a position to capitalise on market share opportunities as they arise.

Finally, the broker says Dicker Data is now fairly valued relative to distributor peers. It currently trades at a price-to-earnings (P/E) ratio of 20 times. At this valuation, Goldman says the risk-to-reward is “now balanced” for the company.

Since adding DDR to the Sell list on Jan 28, 2024, [Dicker Data] is down 23% vs ASX300 +1%, with the shares looking fairly valued vs distributor peers at ~19x NTM P/E vs ~23x at the time of downgrade.

The broker has a price target of $9.85 per share on the ASX tech player, around 4% upside at the time of writing.

What’s next for Dicker Data?

Goldman Sachs acknowledges Dicker Data’s challenging near-term revenue environment. The broker adjusted its revenue forecasts downwards for FY 2024/25/26 as “a more realistic assessment” of this.

The ASX tech share reported FY 2023 sales growth of 5.6% to $3.3 billion. It pulled this to net profit after tax (NPAT) of $82 million, up 12.5% year over year.

Dicker Data is “tracking flat” on this result, Goldman says, but there could be a tailwind if it sells through inventories this year.

“As supply chain challenges have resolved, DDR may be able to run down its inventory balance and generate higher free cash flow than expected, taking pressure off the balance sheet”, the firm said.

The ASX tech share has been heavily sold this year. It’s more than 20% in the red since January. Over the last 12 months, it has held onto a 12% gain.

The post ‘Better outlook’: Goldman just upgraded this ASX tech share appeared first on The Motley Fool Australia.

More reading

• Why Beach Energy, Life360, Viva Leisure, and Wildcat shares are dropping today
• Here’s where I see the Qantas share price ending in FY 2025
• Are CBA shares losing their passive income credentials?
• 3 popular ASX ETFs that own Nvidia shares
• 3 ASX shares with high insider ownership

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

As a long-time investor, I consider many factors when analysing ASX shares. I try to understand business models and industries, analyse financial health and valuation, and think about growth potential, competitors, and more.

Another crucial factor for minority shareholders is high insider ownership. When insiders, such as executives and directors, own a chunk of the company’s shares, their interests align closely with those of smaller shareholders.

Their personal financial stake in the company’s success often leads to decisions that aim to increase shareholder value.

With this in mind, here are three ASX companies with significant insider ownership that I recommend considering today.

Reece Ltd (ASX: REH)

If you’ve recently undertaken bathroom renovations, you may already be familiar with Reece. As a leading Australian distributor of plumbing, waterworks, and bathroom products, Reece has established itself as a go-to source for quality renovation supplies.

Established in 1920 by H.J. Reece, Reece has grown to become a dominant player in the Australian and New Zealand markets, with a significant presence in the US through its acquisition of MORSCO in 2018.

In 1969, the Wilson family became majority shareholders in Reece and currently owns at least 359 million shares, representing 55% of the company according to the FY23 annual report.

Reece’s business model focuses on maintaining a broad product range, efficient supply chain management, and investing in digital transformation to enhance customer experience.

The company’s revenues have grown from $5.5 billion in FY19 to $8.8 billion in FY23, while net profits after tax (NPAT) have doubled from $202 million to $388 million during the same period.

Reece is a consistent dividend payer, distributing approximately 38% of its FY23 profits to its shareholders, or 25 cents per share. This is equivalent to a dividend yield of 1% at the current share price.

Supply Network Ltd (ASX: SNL)

Supply Network distributes aftermarket parts for commercial vehicles. The company operates through its two main brands: Multispares, which serves Australia, and Globac, which serves New Zealand.

Supply Network provides a wide range of products, including brake, suspension, and engine components, primarily for the truck and bus industries.

It boasts a tight-knit, long-serving board, all with significant shareholdings. According to its FY23 annual report, the company’s directors and senior managers own nearly 18 million shares, representing 42% of the company.

The founder, Greg Forsyth, holds a relevant interest in over 12 million shares, or 28% of the company. He has served as the chairman of the Board since 2010. Managing director and CEO Geoff Stewart has been at the helm since 1999. With an engineering background and more than 30 years of industry experience, he holds around 1.4 million shares.

With strong backing from insiders, the company’s growth has been impressive. Between FY19 and FY23, its revenue doubled from $123.9 million to $252.3 million, as net profits after tax more than tripled from $8.7 million to $27.4 million. The return on average total equity has been high and growing, reaching 40% in FY23.

The Supply Network share price is traded on a price-to-earnings (P/E) ratio of 32x based on its trailing earnings over the 12 months to December 2023.

Pro Medicus Limited (ASX: PME)

Last but not least, Pro Medicus. This is a leading provider of radiology information systems (RIS), picture archiving and communication systems (PACS), and advanced visualisation solutions across the globe.

The company excels in the United States, the largest medical imaging market in the world. Between FY18 and FY23, its revenues quadrupled from $34 million to $127 million, driven by successful market penetration in both Australia and the US.

For instance, the North American region accounted for nearly 80% of its FY23 revenue. Thanks to this remarkable success, its net profits after tax soared from $10 million to $61 million during the same period.

There are many reasons behind this success story. Pro Medicus capitalised on the medical imaging industry’s shift to digital with its innovative and efficient product offerings, positioning itself as a leader in the market.

Above all, however, I think having a solid management team with substantial share ownership was one of the important factors.

As noted in the FY23 annual report, executive key management personnel collectively hold 52.4 million shares, representing 52% of the company. Co-founders Dr Sam Hupert and Anthony Hall maintain a strong influence, each owning 24% of the company.

Dr Hupert co-founded Pro Medicus in 1983 as he recognised the potential for computers in medicine early on. He served as CEO from the company’s inception until 2007, became an executive director, and resumed his role as CEO in 2010.

I must admit its current valuation is eye-watering, with a P/E ratio of 184x based on trailing earnings. However, the good news is that the company’s earnings have been growing at an annual rate of 30% to 40% since FY21. If this growth continues, its future P/E ratio will become more reasonable.

The post 3 ASX shares with high insider ownership appeared first on The Motley Fool Australia.

More reading

• Peter Lynch says to avoid these 3 investing mistakes
• 2 excellent ASX shares to buy and hold for a decade
• Here are the top 10 ASX 200 shares today
• Top brokers name 3 ASX shares to buy next week
• Guess which 3 ASX 200 shares are leading the charge higher this week

Motley Fool contributor Kate Lee 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 Pro Medicus and Supply Network. The Motley Fool Australia has recommended Pro Medicus and Supply Network. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.