Author: openjargon

The BHP Group Ltd (ASX: BHP) share price just closed out a surprisingly strong month.

Shares in the S&P/ASX 200 Index (ASX: XJO) mining giant finished off April trading for $43.03. When the closing bell rang on Friday 31 May, shares were changing hands for $44.51 apiece.

That saw the BHP share price up 3.4% in May, racing ahead of the 0.5% monthly gain posted by the ASX 200.

Here’s what happened in the month just gone.

What moved the BHP share price in May?

Setting aside the elephant in the room for the moment, the BHP share price received some support in May from a fairly resilient iron ore market, with the steel-making metal trading in the US$116 to US$118 per tonne range for most of the month.

And copper, BHP’s second biggest revenue earner after iron ore, continued to outshine in May. After hitting all-time highs on 20 May, the copper price ended the month up 3% at US$10,040 per tonne.

The demand outlook for both industrial metals received a boost mid-month as the Chinese government announced fresh moves to stimulate the nation’s sluggish economy and struggling, steel-hungry property markets. Those included the sale of 1 trillion yuan of bonds intended to increase infrastructure spending.

Which brings us back to the elephant in the room, BHP’s three failed bids to acquire global miner Anglo American (LSE: AAL).

Investors shrug off takeover rejection

The BHP share price alternately moved higher or lower amid fresh news over the month on the ASX 200 miner’s takeover efforts of Anglo American.

BHP’s acquisition of some of Anglo’s prized assets, most notably its copper mines, would likely have lifted its fortunes over the medium to longer-term. But over the shorter-term many investors were concerned over the hefty price tag, along with BHP’s plans to divest a number of Anglo’s South African platinum and iron assets.

As it turns out, those concerns were unwarranted, and BHP’s efforts eventually came to naught.

As you’re likely aware, BHP made its first bid for Anglo American on 26 April. That was swiftly rejected by Anglo’s board.

In May, BHP twice sweetened its offer, which reached approximately $74 billion on the third bid.

But those too were rejected by Anglo’s board, which remained concerned over the complicated structure of the deal and maintained the offer undervalued Anglo American’s long-term growth prospects.

On 30 May, following Anglo’s rejection of that third bid, BHP CEO Mike Henry closed the door on any further negotiations. At least for now.

“BHP will not be making a firm offer for Anglo American,” he said.

As for June, the BHP share price is starting the new month off with a bang, up 1.3% at $45.08 a share.

The post The BHP share price crushed the benchmark in May. Here’s how appeared first on The Motley Fool Australia.

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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 Telix Pharmaceuticals Ltd (ASX: TLX) share price has bounced back into the green today.

Shares in the S&P/ASX 200 Index (ASX: XJO) biopharmaceutical company closed up 15.3% on Friday trading for $18.15 apiece. At the time of writing, in morning trade on Monday, shares are changing hands for $18.21 apiece, up 0.3%.

For some context, the ASX 200 is up 0.9% at this same time.

Friday’s big share price leap came after Telix Pharmaceuticals announced positive results from its ProstACT SELECT clinical cancer trial.

Today the company reported on progress on approval for its kidney cancer imaging agent with the United States Food and Drug Administration (FDA).

Here’s what investors are considering on Monday.

Telix Pharmaceuticals share price wobbles

Investors are bidding up the Telix Pharmaceuticals share price after the company said it has completed the submission of a Biologics License Application (BLA) to the FDA.

The BLA involves Telix’s investigational radiodiagnostic PET agent, TLX250-CDx for the characterisation of renal masses as clear cell renal cell carcinoma (ccRCC). The clear cell variant of renal cancer is the most common and aggressive sub-type of kidney cancer.

The BLA submission was based on Telix’s successful global Phase III ZIRCON study in ccRCC.

According to the ASX 200 biotech company, its ZIRCON study met all co-primary and secondary endpoints, demonstrating a sensitivity of 86%, specificity of 87% and a positive predictive value of 93% for ccRCC. That includes patients with small, difficult to detect lesions.

Commenting on the submission helping lift the Telix Pharmaceuticals share price today, chief development officer James Stonecypher said:

Completing the BLA submission for TLX250-CDx represents a significant milestone for Telix as we bring our breakthrough investigational kidney cancer imaging agent closer to market as a non-invasive diagnostic for patients.

We believe TLX250-CDx is a natural follow-on product to Illuccix as it is targeted at the same clinical stakeholders, the urologist and urologic oncologist, and leverages the proven commercial and distribution infrastructure developed through the launch of Illuccix.

The company has also requested a priority review from the FDA as part of its BLA submission process under the eligibility criteria of the Breakthrough Therapy designation.

Management noted that if the FDA grants priority review status, it would potentially support an expedited review time and could further build on the biotech company’s successful urology imaging franchise.

If approved, TLX250-CDx will be the first commercially available targeted radiopharmaceutical imaging agent specifically for kidney cancer in the US.

With today’s intraday gains factored in, the Telix Pharmaceuticals share price is now up 80% in 2024.

The post Up 80% in 2024, here’s why the Telix Pharmaceuticals share price is marching higher again on Monday appeared first on The Motley Fool Australia.

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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 positions in and has recommended Telix Pharmaceuticals. The Motley Fool Australia has recommended Telix Pharmaceuticals. 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 high-performing exchange-traded fund (ETF) for the past 15 years. The unit price has climbed approximately 580% in the last decade and a half, as shown in the chart below.

The IVV ETF is invested in a group of 500 of the largest and most profitable businesses listed in the United States.

Over the years, some companies have fallen out of the S&P 500 Index (SP: .INX), and other major operators have joined. For example, Meta Platforms (formerly known as Facebook) wasn’t even a listed business 15 years ago.

After such a strong run by the US share market, is this a good time to invest in the ETF? I’m going to consider three aspects.

High-quality ETF

There’s a reason the IVV ETF has performed so well — the companies in its portfolio are very high quality.

Think global powerhouses like Microsoft, Apple, Alphabet, Amazon, Nvidia, and Meta Platforms, whose products and services are used around the world. They all have extremely strong economic moats and still invest in their core products to grow further. Many are also now investing in artificial intelligence (AI), which could be the next big growth step for them.

The US tech giants I named make up more than a quarter of the IVV ETF portfolio.

When companies earn a high return on equity (ROE) and also reinvest a substantial amount of their profits back into the business, I think they have a great chance of success in generating good shareholder returns.

The ETF’s portfolio also includes several other non-tech, high-quality names, such as Berkshire Hathaway¸ Broadcom, JPMorgan Chase, UnitedHealth, Visa, Proctor & Gamble, Mastercard, Costco, and Home Depot.

Strong diversification

No one can accurately predict which industries and stocks will perform well or poorly in the future, so diversification is one of the best ways to ensure investors don’t face the risk of overconcentration. This means the overall portfolio is able to withstand a hit in one sector.

While IT does have a high weighting inside the IVV ETF portfolio (30.7% at 30 May 2024), I think that’s a positive because of the profit margins and growth that technology businesses are capable of delivering.

Other industries with an allocation of more than 5% include financials (12.8%), healthcare (11.9%), consumer discretionary (9.9%), communication (9.3%), industrials (8.5%) and consumer staples (6%).

Valuation

It’s clear that the IVV ETF is a quality proposition, but no investment is worth buying at any price. Overpaying can be a risk in itself, so we want to make sure we’re buying at a reasonably good value.

According to Blackrock, iShares S&P 500 ETF has a price/earnings (P/E) ratio of 25. While that’s quite high for an index fund, I don’t think it’s too crazy because of the quality and growth potential of its larger holdings. It can often make sense to buy a wonderful investment at a fair price.

It’s not cheap, but at the current level, I think it’s still worth a long-term buy because of the underlying companies’ growth prospects in the years ahead. Profit growth usually drives share prices over time.

The post Is the iShares S&P 500 ETF (IVV) a good buy right now? appeared first on The Motley Fool Australia.

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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. 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, Apple, Berkshire Hathaway, Costco Wholesale, Home Depot, JPMorgan Chase, Mastercard, Meta Platforms, Microsoft, Nvidia, Visa, and iShares S&P 500 ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Broadcom and UnitedHealth Group and has recommended the following options: long January 2025 $370 calls on Mastercard, long January 2026 $395 calls on Microsoft, short January 2025 $380 calls on Mastercard, and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet, Amazon, Apple, Berkshire Hathaway, Mastercard, 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.

REA Group Limited (ASX: REA) has been an incredible ASX investment over the long term. In the last five years, the online real estate advertising company has delivered total shareholder returns (TSR) of an average of 17% per annum, as shown in the chart below.

The company has built an impressive collection of real estate-related businesses including realestate.com.au, realcommercial.com.au, PropTrack, Mortgage Choice, Property.com.au, Campaign Agent, Realtair, Managed Platforms, Simpology and Arealytics.

Let’s explore three crucial factors that I think make it a great business and then examine the valuation.

Market-leading position

REA Group has developed its property website realestate.com.au into the market leader in Australia. According to the ASX company, an average of 11.2 million people visit realestate.com.au each month, with 52% forgoing competitors to utilise the company’s portal exclusively.

Realestate.com.au receives 130 million average monthly visits, which is 4.1 times more visits than the nearest competitor.

Having the strongest market position allows the company to implement impressive price rises with little detrimental effect.

For example, REA Group expects its residential ‘buy yield’ to grow between 18% and 19% in FY24. In FY25, the buy yield is expected to be “primarily driven by an average 10% increase” in its highest penetrated product, Premiere+.

Excellent financial growth

The solid revenue growth REA Group has delivered over the years, from both price rises and vendors paying for more advanced listing tools, has translated into robust profit growth.

REA Group can deliver rising profit margins on stronger revenue/volume as a digital business. It has already developed the technology and infrastructure, so additional revenue is beneficial for the bottom line and powering the ASX investment.

For example, the business recently reported its performance for the nine months to 31 March 2024. Revenue was up 20% to $1.06 billion, earnings before interest, tax, depreciation and amortisation (EBITDA) was up 23% to $594 million, and free cash flow jumped 39% to $322 million. The company expects listings growth of between 5% to 7% for FY24.

Bigger profits can help support a higher REA Group share price because that’s what investors typically focus on.

India potential

REA Group has an important presence in India with its controlling interest in REA India, which owns Housing.com and PropTiger.com.

According to the World Bank, India has a population of more than 1.4 billion. That’s a huge potential market. REA India’s Housing.com is India’s number one property portal, with 1.2 times more web traffic than the closest competitor.

In the FY24 first-half result, REA saw Indian revenue growth of 21% (to $44 million) thanks to price rises, multiple tiers now in the market, and continued customer growth.

As more people in India turn to the internet for property searching and selling, REA India has the potential for an incredible future.

REA Group share price valuation

REA Group is a highly successful business, and its valuation matches that. According to Commsec, the REA Group share price is valued at 54x FY24’s estimated earnings.

It’s not at a bargain price, but it’s forecast to grow earnings per share (EPS) by 46% between FY24 and FY26, putting it at 37x FY26’s estimated earnings.

I’d be happy to invest in a small amount of shares today and buy more on any material weakness for the ASX investment in the future.

The post Up 17% per annum: Is this index-beating ASX investment too good to turn down? appeared first on The Motley Fool Australia.

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

The ASX dividend stock APA Group (ASX: APA) has experienced significant pain in the last couple of years. As the chart below shows, the APA share price is down 30% from its peak in mid-2022.  

When a passive income-paying business drops in value, it can unlock a much higher level of dividends for prospective investors.

For example, if a business with a 4% dividend yield suffers a 10% share price drop then yield becomes 4.4%, a fall of 20% becomes 4.8% and so on. APA has suffered an even greater decline.

There are two key reasons why APA shares look like a compelling pick to me.

Excellent asset base in high demand

APA is one of the largest owners of energy assets in Australia and as energy is essential in the Australian economy, I’d suggest it provides defensive earnings.

Its gas infrastructure includes more than 15,000km of transmission pipeline, 12,000 tonnes of LNG and 18 PJ of gas storage, and 29,500km of gas mains and pipelines to more than 1.5 million gas customers. It transports more than half of the nation’s usage.

The ASX dividend stock owns a significant amount of power generation, including 342MW of wind, 311MW of solar, 39MW of battery energy storage and 884MW of gas-fired generation.

Electricity transmission is the final asset group for APA – it has more than 800km of high-voltage electricity transmission and 290km of deep-sea electricity cables.

APA continues to invest in these three areas — gas transmission, renewable energy generation, and electricity transmission — unlocking further cash flow.

The Australian federal government has recently confirmed gas is expected to play a part in Australia’s energy mix to 2050 and beyond, which highlights the importance of APA’s gas asset, in my opinion.

Another reason to be bullish about long-term energy demand is that new data centres may require significantly more energy in the coming years.

The ASX dividend stock’s excellent record

APA has grown its distribution every year over the past two decades. Growth is not guaranteed, but APA has delivered the right balance with its cash flow between rewarding shareholders and investing for growth.

The company’s growing cash flow is funding the growing payments. Pleasingly, APA says that over 90% of its revenue is linked to inflation. APA’s revenue has grown during this inflationary period, and with inflation continuing to remain high, its shorter-term revenue outlook is promising.

APA expects to grow its FY24 annual distribution by 1.8% to 56 cents, which is a forward distribution yield of 6.8%. I think that’s a very pleasing starting yield from the ASX dividend stock, with a high chance of further growth in the foreseeable future.  

The post 1 ASX dividend stock down 30% to buy right now appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Apa Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

If you’re wanting to build an income portfolio in June but don’t have sufficient funds to maintain a diverse portfolio, don’t worry.

That’s because there are exchange-traded funds (ETFs) out there that could potentially help you achieve this goal.

For example, the three ASX ETFs listed below offer investors exposure to a large collection of dividend-paying shares in one fell swoop. This can provide diversification for a portfolio.

Here’s what you need to know about these ETFs:

BetaShares S&P 500 Yield Maximiser (ASX: UMAX)

The first ASX ETF for income investors to consider buying this month is the BetaShares S&P 500 Yield Maximiser.

This actively managed fund provides investors with access to the top 500 companies listed on Wall Street. However, through its clever covered call strategy it is able to target quarterly income that is significantly greater than the dividend yield you would expect to receive from the underlying share portfolio.

For example, at present it trades with a trailing 4.6% distribution yield.

Vanguard Australian Shares Index ETF (ASX: VAS)

Another top ASX ETF for income investors to look this month is the Vanguard Australian Shares Index ETF.

It is an index based ETF that aims to track the local ASX 300 index. This means that you will be buying a slice of Australia’s leading 300 listed companies with a single click of the button. Among this diverse group of shares are giants like BHP Group Ltd (ASX: BHP) and smaller names including National Storage REIT (ASX: NSR) and Inghams Group Ltd (ASX: ING).

At present, it provides investors with a dividend yield of 3.7%.

Vanguard Australian Shares Index ETF (ASX: VHY)

A final ASX ETF that could be a good option for income investors in June is the Vanguard Australian Shares High Yield ETF.

It offers investors low-cost exposure to a portfolio of 70+ ASX shares that have higher forecast dividends relative to the market average based on broker research.

Vanguard highlights that security diversification is achieved by restricting the proportion invested in any one industry to 40% of the total ETF and 10% for any one company. In addition, Australian Real Estate Investment Trusts (A-REITS) are excluded from it.

This means you will be owning a portfolio of generous dividend-paying shares such as giants like BHP Group and Commonwealth Bank of Australia (ASX: CBA). In addition, there are plenty of smaller dividend-paying companies like Centuria Capital Group (ASX: CNI) and Dicker Data Ltd (ASX: DDR).

The ETF currently trades with a trailing dividend yield of 4.9%.

The post Buy these ASX ETFs for income in June 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 positions in and has recommended BetaShares S&P 500 Yield Maximiser Fund and Dicker Data. The Motley Fool Australia has recommended Vanguard Australian Shares High Yield ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The listed investment company (LIC) Australian Foundation Investment Co Ltd (ASX: AFI) (AFIC) is one of the biggest investment businesses in Australia. It has been operating since 1928 and there are several positive aspects about AFIC shares.

AFIC focuses its investments on a portfolio of ASX blue-chip shares, which have the potential to deliver a growing stream of fully franked dividends and enhance capital invested over the medium to long term.

Over the last five years, the AFIC net asset per share growth, plus dividends (including franking), has delivered an average return per annum of 9.8%. That compares to a 9.4% average return per annum for the S&P/ASX 200 Accumulation Index (ASX: XJOA), including franking, over the prior five years.

Let’s look at three positives about the business, including an attractive discount with the LIC’s shares.

Asset discount

LIC share prices can trade at a premium or discount to their underlying net tangible assets (NTA). To illustrate, if a LIC representing a basket of shares worth an NTA of $1 was trading at 90 cents, that would be a 10% discount. Likewise, a share price of $1.10 would represent a 10% premium.

Discounts are more appealing than premiums.

During the first two years of COVID-19, AFIC shares were often trading at a premium of more than 5% to the NTA and sometimes at a premium of more than 10%.

However, that premium has now turned into a discount. The last two monthly updates from AFIC showed it trading at a discount of more than 5%.

The current AFIC share price is at a 7% discount to the reported pre-tax NTA on 30 April 2024. This is close to the biggest discount it has traded at over the past decade.

Consistent dividends

No dividends are guaranteed, but AFIC has impressively maintained (or grown) its annual ordinary dividend every year over the past 20 years.

Owners of AFIC shares have experienced a high level of stability with their passive income.

Pleasingly, Transurban has increased its interim dividend in the last two financial years. In FY23, the half-year dividend was hiked by 10% to 11 cents per share. The recent FY24 half-year result saw the interim dividend increase by 4.5%.

Using the last two declared dividends, AFIC shares offer a fully franked dividend yield of 3.5% and a grossed-up dividend yield of 5.1%. Combined with the sizeable NTA discount, investors may be attracted to the LIC’s yield.

Large profit reserve

AFIC pays for its dividends from the profit it makes in that year or from the profit reserve it has built up from investment returns in previous financial years.

In the FY24 first-half result, AFIC reported its revaluation reserve was $3.27 billion, its realised capital gains reserve was $485.6 million and retained profits were $1.03 billion, compared to total equity of $7.98 billion.

In other words, well over half of the shareholder equity is made up of prior profits, meaning the business could continue paying the current dividend for many years before it runs out of profit, in accounting terms at least.

This also demonstrates that AFIC has a history of growing shareholder value and being conservative with its payouts.

The post What you need to know about AFIC shares in June appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.