Author: openjargon

Pro Medicus Ltd (ASX: PME) shares are down more than 40% over the past 12 months, and in the next couple of weeks, the price might come under more pressure.

Index changes loom

That’s because S&P Dow Jones has just issued its quarterly rebalancing of the various indices, and Pro Medicus is set to be dropped from the S&P/ASX 50 Index (ASX: XFL), with minerals analysis company ALS Ltd (ASX: ALQ) to join.

The removal of Pro Medicus comes despite the company recently announcing several contract wins, including a five-year, $28 million contract renewal with Allegheny Health Network in the US.

Removal from an index can trigger the selling of a stock, as funds that track indices sell out of dropped stocks and buy into added ones.

With regard to the S&P/ASX 100 Index (ASX: XTO), uranium company Paladin Energy Ltd (ASX: PDN) will join the index, while grocery company Metcash Ltd (ASX: MTS) will be dropped.

Paladin shares are currently up 43.9% over a 12-month period, with Macquarie recently issuing a price target of $13.25 for Paladin shares compared to $9.52 currently.

Macquarie said Paladin had successfully ramped up production at its Langer Heinrich mine in Namibia and was also making “real progress” on its Patterson Lake South approvals in Canada.

Paladin recently reported that for the March quarter it had produced 1.29 million pounds of uranium at Langer Heinrich, up 5% from the previous quarter, “driven by strong processing plant performance”.

The Patterson Lake South Project had also had its environmental impact statement approved.

In the S&P/ASX 200 Index (ASX: XJO), there will be nine changes in all, with Elevra Lithium Ltd (ASX: ELV), Electro Optic Systems Ltd (EOS), Firefly Metals Ltd (ASX: FFM), and Kingsgate Consolidated Ltd (ASX: KCN) being added.

The companies being removed are Minerals 260 Ltd (ASX: MI6), Guzman Y Gomez Ltd (ASX: GYG), IDP Education Ltd (ASX: IEL), SiteMinder Ltd (ASX: SDR), Temple & Webster Group Ltd (ASX: TPW), and Web Travel Group Ltd (ASX: WEB).

Elevra shares are up an impressive 310.4% over the past year; however, the stock has come off a bit recently.

The company raised $275 million in an institutional placement in mid-May at $12.20 per share; however, the shares are now changing hands for $10.46.

Another large capital raise

Electro Optic Systems meanwhile is in the midst of a capital raise, having raised $150 million at $8 a share.

Shareholders in the company were also able to subscribe for up to $30,000 worth of shares at the same price, with that process ongoing this week.

EOS shares are currently changing hands for $9.98, meaning the raise is well in the money at the moment. Shareholders will find out on Friday how many shares they have been allocated.

The index rebalances will take effect from 22 June.

The post Why might Pro Medicus shares soon be under pressure? appeared first on The Motley Fool Australia.

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Motley Fool contributor Cameron England has positions in Electro Optic Systems and Pro Medicus. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Electro Optic Systems, SiteMinder, and Temple & Webster Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Pro Medicus. The Motley Fool Australia has positions in and has recommended SiteMinder. The Motley Fool Australia has recommended Pro Medicus and Temple & Webster Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

I have owned Wesfarmers Ltd (ASX: WES) shares for many years now. I love the company, and its shares are a proud pillar of my personal ASX share portfolio.

The Wesfarmers shares that I purchased years ago have done very well for me, delivering both healthy capital growth and a treasured source of passive dividend income.

Wesfarmers brings many benefits to my portfolio. For one, it is an inherently diversified business. Most investors know Wesfarmers for its retail crown jewels – Kmart, OfficeWorks, Target, and last but not least, Bunnings. But Wesfarmers is much more than these four names. It also owns the Priceline pharmacy chain, chemicals and fertiliser manufacturing businesses, industrial safety operations, and many more facets.

For another, those crown jewel retailers are some of the most successful businesses in the country. Most of us are familiar with the Bunnings success story. But Wesfarmers has also managed Kmart, OfficeWorks and Target with aplomb. Kmart’s success with its Anko brand is a notable achievement for Wesfarmers in recent years.

Wesfarmers has proven itself to be an astute manager of capital over many decades. It has delivered for shareholders, in both the growth and income arenas.

Yet, I haven’t added to my Wesfarmers position for a very long time. I have no plans on doing so.

Why?

Well, it all comes down to price and value. As Warren Buffett once famously said, “price is what you pay, value is what you get”.

Wesfarmers shares: Price and value

At the current Wesfarmers share price, I simply don’t see much value.

At the present price of $82.22, you are buying a company worth about $93.3 billion, trading on an earnings multiple of 30.45.

For this, you are getting a company that generated $45.7 billion in revenue over FY2025 and an underlying net profit after tax of $2.65 billion. That latter metric represented a 3.8% rise over what Wesfarmers rang up over FY2024.

This all looks pretty expensive. To illustrate, companies that are growing at far faster rates than Wesfarmers are currently trading at far lower prices. Google-owner Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL) and Facebook-owner Meta Platforms Inc (NASDAQ: META) grew profits by a lot more than 3.8% over their most recent financial years. And both currently ask well under an earnings multiple of 30.45. As of recent pricing, Alphabet is at 27.8, while Meta is at 21.2.

Of course, that is not an overly useful comparison, as Wesfarmers is a metaphorical apple and US tech titans are oranges. But, to labour the point, I think this shows just how pricey Wesfarmers shares are at their current ask.

One only has to look at CSL Ltd (ASX: CSL) and Commonwealth Bank of Australia (ASX: CBA) shares to see what happens when valuations get stretched. This is another apples-to-oranges comparison, but again, I think it is an apt point to highlight.

So, long story short, I won’t be buying any more Wesfarmers shares at the current valuation. I would love to increase my exposure to this stellar ASX blue-chip stock. But at the current price we are being asked to pay, I don’t see much value we might get.

The post I love Wesfarmers shares. Here’s why I’m not buying more appeared first on The Motley Fool Australia.

More reading

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Motley Fool contributor Sebastian Bowen has positions in Alphabet, CSL, Meta Platforms, and Wesfarmers. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, CSL, Meta Platforms, and Wesfarmers. The Motley Fool Australia has recommended Alphabet, CSL, Meta Platforms, and Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

James Hardie Industries plc (ASX: JHX) shares have climbed higher into the green in Wednesday’s trade.

At the time of writing, the shares are up around 5% for the day, and changing hands at $32.74 a piece.

Today’s increase means the cement manufacturer’s shares have now rebounded around 26% from a six-month dip in mid-May. The shares have also recouped any losses shed after a dip yesterday.

James Hardie shares are now just over 6% higher year to date, but are still 20% lower than 12 months ago.

Why are James Hardie shares rebounding?

James Hardie’s share price dipped to just $26.02 on the 18th of May as dwindling investor sentiment caused many to shy away from the stock.

But the following week, the global fibre cement manufacturer’s shares started climbing higher after it posted its fourth-quarter FY26 results.

The result was mixed but came in ahead of expectations and some previous guidance figures. 

The company posted a 25% year-on-year increase in net sales driven by additional sales from its acquisition of AZEK, a US-based outdoor building products company.

Excluding that acquisition, organic net sales declined by 2% from FY25. And on the bottom line, the company reported a 75% year-on-year decline in NPAT.

Meanwhile, adjusted EBITDA was up 17% year on year, coming in above previous guidance figures.

It looks like the stabilised earnings result reignited investor confidence.

Why are the shares climbing higher today?

The share price has rebounded again after a temporary dip on Tuesday. 

In a statement to the ASX yesterday, James Hardie said it has been served with a group proceeding filed in the Supreme Court of Victoria.

The company said the proceeding includes allegations that it breached the Corporations Act, the ASIC Act, and the Australian Consumer Law. The claim also includes allegations relating to continuous disclosure obligations and statements made about expected financial performance.

But James Hardie pushed back against the allegations. It said it considers that it has complied with its disclosure obligations at all times, that it denies any liability, and will “vigorously defend” the proceedings.

After a brief sell-off, it seems that investors have concluded that James Hardie shares are still a good buy at the current trading price.

The question now is, how much further can the shares climb?

What do analysts tip for James Hardie shares over the next 12 months?

Brokers are very bullish on the outlook for James Hardie shares and some tip a large upside ahead.

TradingView data shows that 17 out of 22 analysts have a buy or strong buy rating on the stock. The average $36.61 target price implies a potential upside of around 12% at the time of writing. Meanwhile, the $43.16 maximum target price suggests the shares could increase by around another 32% over the next 12 months.

Morgans currently has a buy rating and $29 target price on the shares. The broker said it still sees the shares as undervalued at current levels. Morgans added that FY26 could be “chalked up” as a transformational but financially dilutive year. 

The post James Hardie shares rebound 26% from a dip last month: Buy, sell or hold? appeared first on The Motley Fool Australia.

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Motley Fool contributor Samantha Menzies 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.

Northern Star Resources Ltd (ASX: NST) shares are having another rough session on Wednesday.

At the time of writing, the Northern Star share price is down 2.97% to $18.65.

The latest decline puts more pressure on a stock that has already had a difficult run. Northern Star shares are now down around 12% over the past month and more than 30% in 2026.

That’s a heavy fall for one of Australia’s largest gold miners, especially while gold prices remain elevated.

Here’s what has investors watching the stock today.

Northern Star pushes back on sale talk

The latest focus is on activist investor Elliott Investment Management.

Elliott has built a stake in Northern Star and has been pushing the company to consider bigger changes, including a potential sale or strategic review.

But Northern Star’s board has now made clear it does not believe this is the right time to run a sale process.

According to The Australian, Chairman Michael Chaney told investors the board is happy to engage with Elliott and consider constructive suggestions.

However, he also said the company remains focused on its own plans, including the search for a new Chief Executive.

Northern Star is looking for a replacement for outgoing boss Stuart Tonkin.

The board is also looking to add a new Director with deeper gold mining experience, while Chaney is due to retire in November.

Why investors are selling

It appears that some investors may have been hoping for a bigger response from the company.

A formal sale process could have opened the door to a takeover premium, especially after such a heavy fall in the share price.

Instead, Northern Star appears to be taking a slower path. The company wants to sort out its leadership transition before making any major call on a sale.

The board has said it remains open to serious outside approaches. It has also held talks about potential combinations with other companies in the past, although those discussions did not lead to a deal.

Northern Star has also looked at possible asset spin-offs, but the board appears comfortable keeping the current portfolio under review.

Ultimately, this seems to have disappointed investors who were looking for a faster fix.

Is the sell-off creating value?

After a 30% fall this year, Northern Star is starting to look cheaper than it did a few months ago.

The company still has a large gold portfolio, a market capitalisation of about $26.6 billion, and a dividend yield close to 3%.

That may catch some bargain hunters, but the discount comes with a few unanswered questions.

Investors still need to see who takes over as CEO, how the board responds to Elliott, and whether the portfolio review leads to any meaningful changes.

Until there’s more clarity, many would be happy to watch from the sidelines.

The post Northern Star shares tumble as takeover hopes fade appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras 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.

Elon Musk’s SpaceX (NASDAQ: SPCX) IPO is almost here, with retail investors expected to play a bigger part in the offer than usual.

The company is expected to begin trading on the Nasdaq this week under the ticker SPCX, with the IPO price reportedly set at US$135 per share.

That would value SpaceX at about US$1.77 trillion, making it one of the largest companies on the US market from day one.

But the size of the float isn’t the only reason this listing is getting attention.

SpaceX is giving everyday investors a bigger piece of the pie than they normally get in a float of this size.

Retail investors are getting a bigger slice

According to The Wall Street Journal, Musk is expected to reserve a large portion of the SpaceX IPO for individual investors.

The report said retail buyers could receive around 20% or more of the offer, compared with the 5% to 7% often seen in major floats.

That gives us smaller investors a rare chance to buy into a company that has been private for more than two decades.

SpaceX is already a household name by IPO standards.

Its reusable rockets, Starlink satellite internet business, NASA work, defence contracts, and longer-term space ambitions have made it one of the best-known private companies in the world.

So, there will be plenty of investors who want exposure to the SpaceX brand before looking too closely at the numbers.

This is why the retail allocation deserves a closer look.

Getting access to a popular IPO can feel like a win. But investors are still being asked to buy into SpaceX at one of the highest valuations ever attached to a market debut.

And while the stock may still list strongly, investors should not mistake the size of the allocation for a bargain.

A quick Nasdaq-100 path

The other part to watch is what happens after SpaceX starts trading.

Nasdaq has reportedly given the company a quicker route into the NASDAQ-100 Index (NASDAQ: NDX), with SpaceX potentially eligible after just 15 trading days.

If SpaceX is added to the index, funds that track the Nasdaq-100 would likely need to buy the stock. That could add more demand soon after the IPO, especially if only a small number of shares are available to trade at first.

It also means some investors may end up owning SpaceX indirectly through ETFs or super funds, even if they decide not to buy the shares themselves.

However, the S&P 500 Index (SP: .INX) is a different story.

Reports suggest S&P has rejected a fast entry for SpaceX because companies usually need to be profitable before joining the index.

SpaceX reportedly lost US$4.9 billion last year, which makes the S&P 500 decision less surprising.

Foolish Takeaway

Without doubt, SpaceX is a remarkable company, and the IPO will probably attract huge demand.

A famous founder, a huge brand, a limited supply of shares, and forced index buying could all help support the stock early on.

But at nearly US$1.8 trillion, SpaceX is coming to market with a lot of future growth already built into the price.

That leaves very little room for disappointment if profits take longer to arrive, or if investors start looking past the SpaceX excitement.

The post Elon Musk wants everyday investors in the SpaceX IPO. Is that a red flag? appeared first on The Motley Fool Australia.

More reading

• Why might Pro Medicus shares soon be under pressure?
• I love Wesfarmers shares. Here’s why I’m not buying more
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• How high could Wesfarmers shares go?

Motley Fool contributor Aaron Teboneras 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.

Wesfarmers Ltd (ASX: WES) shares have climbed into the green again in Wednesday’s trade. 

At the time of writing, the Australian conglomerate’s share price is up around 3% and trading at $82.04 per share.

Today’s price increase follows a run of gains over the past three weeks. Since bottoming at a 52-week low in mid-May, Wesfarmers shares have rebounded over 15%.

Now the question is, can they keep going?

What happened to Wesfarmers shares this year?

Global volatility, concerns about inflation, and the rising cost of living smashed the retail giant’s shares in early 2026. 

Wesfarmers reported a solid half-year profit earlier this year, with NPAT up 9.3%, but investors focused on weaker-than-expected trading in the early weeks of the second half. On paper, the result looked good, but investors weren’t impressed, and many quickly sold up their shares.

The downturn was exacerbated by an overall shift in the market from retail-heavy stocks, such as Wesfarmers, to energy assets during periods of peak volatility.

After initially climbing around 9% through the first six weeks of the year, Wesfarmers shares crashed over 20% to a low in mid-May.

But it looked like investors then concluded the Wesfarmer share sell-off had become excessive.

Why did sentiment turn?

Over the past month, markets have become more optimistic about the potential for future interest rate cuts, and investors have started buying back shares in high-quality stocks in the dip.

A couple of good-news announcements also helped rally investors.

Earlier this month, Wesfarmers announced a major business restructuring, stating that the Industrial and Safety businesses, Blackwoods and Workwear Group, will transition into Wesfarmers-owned Bunnings Group on the 1st of July.

Wesfarmers shares are pushing higher again today after the company posted its 2026 Strategy Briefing Day presentation. The company said it is accelerating its growth and productivity agenda, has a portfolio of high-quality businesses with a mix of growth and resilience, and retains a strong balance sheet with the flexibility to invest. 

Can the conglomerate’s shares keep climbing higher in 2026?

It looks unlikely.

In fact, it seems that analysts now consider Wesfarmers shares to be trading above fair value, with many tipping a downside ahead.

Market Index data shows the majority of brokers rate Wesfarmers shares as a hold. The $78.05 target price implies a potential downside of around 2.5% at the time of writing.

TradingView data also shows that the majority (seven out of 12 have a hold rating on the stock). However, the average target price of $74.36 implies Wesfarmers shares could drop around 10% from the current trading price.

John Athanasiou from Red Leaf Securities has a hold rating on Wesfarmers shares. He said that while Wesfarmers is able to generate steady returns across cycles, near-term growth is likely to remain subdued. 

Meanwhile, Philippe Bui from Medallion Financial Group is a little more bearish. He put a sell rating on this ASX 200 consumer discretionary share earlier this month. The broker said that while Wesfarmers is a high-quality business, the outlook is softening. 

The post How high could Wesfarmers shares go? appeared first on The Motley Fool Australia.

More reading

• I love Wesfarmers shares. Here’s why I’m not buying more
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Motley Fool contributor Samantha Menzies 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 Wesfarmers. The Motley Fool Australia has recommended Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Coles Group Ltd (ASX: COL) shares are charging higher today.

Shares in the S&P/ASX 200 Index (ASX: XJO) supermarket giant closed yesterday trading for $22.61. During the Wednesday lunch hour, shares are changing hands for $23.09 apiece, up 2.1%.

For some context, the ASX 200 is up 0.3% at this same time.

Taking a step back, Coles shares have also strongly outpaced the benchmark index so far in 2026.

While the ASX 200 has dropped 1.1% year to date, Coles stock is up 8.3%.

And that doesn’t include the fully-franked 41 cents per share dividend the company paid eligible stockholders on 30 March.

Adding in the 32 cents final dividend, paid on 22 September, and Coles trades on a 3.2% fully-franked trailing dividend yield.

And looking ahead, Morgans’ Damien Nguyen believes Coles is well-placed to keep outperforming over the coming months (courtesy of The Bull).

Here’s why.

Should I buy Coles shares today?

“The supermarket operator offers a resilient, non-discretionary earnings base,” Nguyen said.

“Demand for consumer staples remains stable through economic cycles, and Coles benefits from pricing discipline across a duopolistic market structure,” he added, citing the first reason he has a buy rating on Coles shares.

And, despite outperforming the ASX 200, Coles stock remains down more than 4% from last September’s highs.

“Recent share price weakness, driven partly by broader cost-of-living and regulatory scrutiny concerns, has created a more attractive entry point for long term investors,” Nguyen said.

Which brings us to the third reason you might want to buy the ASX 200 supermarket giant today.

Namely, passive income.

“The company also offers a solid dividend yield and improving operational leverage,” Nguyen concluded.

What’s been happening with the ASX 200 supermarket?

Coles shares closed up 3.7% on 1 May after the company reported its third-quarter (Q3 FY 2026) results, covering the 12 weeks from 5 January to 29 March.

Highlights from the quarter included a 3.1% year-on-year increase in revenue to $10.70 billion.

Coles’ eCommerce division showed particularly strong growth, with eCommerce sales up 24.8% year on year to $1.33 billion.

“We delivered another strong sales result reflecting the strength of our customer offer and disciplined execution against our strategic priorities,” CEO Leah Weckert said.

Weckert noted:

Achieving consistent sales momentum for the period over multiple years demonstrates our commitment to remaining focused on long term outcomes whilst successfully navigating short term volatility in market conditions and supply chains.

Looking at what could impact Coles shares in the months ahead, the company said it expects to maintain supermarket sales growth into the fourth quarter (Q4 FY 2026).

The post 3 compelling reasons to buy the rebound in Coles shares today 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.

BHP Group Ltd (ASX: BHP) shares are marching higher today.

Shares in the S&P/ASX 200 Index (ASX: XJO) mining giant closed yesterday trading for $60.80. At the time of writing, shares are changing hands for $60.92 apiece, up 1.4%.

For some context, the ASX 200 is up 0.6% at this time.

Today’s outperformance is par for the course for Australia’s biggest miner and biggest stock on the ASX by market cap.

Indeed, BHP shares have rocketed 58.3% over the past 12 months, smashing the 0.8% one-year gains posted by the ASX 200.

And that’s not including the two fully-franked dividends the miner paid to eligible stockholders over this period. BHP stock currently trades on a fully-franked 3.2% trailing dividend yield.

Part of that outperformance has been driven by BHP’s own mining successes. And part of it has been fuelled by a resilient iron ore price alongside surging copper prices. Trading for US$13,615 today, the copper price is up 39% in a year.

Which brings us back to our headline question.

With those outsized gains already in the bag, is the ASX mining stock still a good buy today?

BHP shares: Buy, hold, or sell?

Morgans’ Damien Nguyen recently ran his slide rule over BHP (courtesy of The Bull).

“The global miner offers broad diversification across iron ore, copper and potash, underpinned by a fortress balance sheet and a disciplined approach to capital returns,” he said.

“Copper provides meaningful long-term exposure to the global electrification and energy transition theme, while iron ore remains the dominant near term earnings driver,” Nguyen added.

Explaining his hold recommendation on BHP shares, Nguyen concluded:

However, the macro backdrop remains uncertain, with Chinese steel demand facing structural headwinds and global growth indicators sending mixed signals. The valuation at current levels appears broadly fair, with commodity price assumptions already reflecting a reasonable medium-term outlook.

BHP remains a core holding for resource-oriented portfolios, but with limited near-term re-rating catalysts, we retain a hold recommendation.

A more bearish take on the Aussie mining giant

Alto Capital’s Tony Locantro also dug into the outlook for BHP shares this week on The Bull.

“BHP is Australia’s largest diversified mining company, with significant exposure to iron ore, copper and metallurgical coal,” he said.

Commenting on the growing importance of copper for BHP’s earnings, Locantro noted:

The company delivered a strong first half result in fiscal year 2026, reporting underlying EBITDA [earnings before interest, taxes, depreciation and amortisation] of $US15.5 billion, up 25% on the prior corresponding period. A major milestone was copper contributing 51% of group EBITDA for the first time.

But with the BHP share price having leapt more than 58% in a year, not including dividends, Locantro issued a sell recommendation for the ASX 200 miner.

He noted:

While the long-term outlook for copper remains attractive, investor enthusiasm surrounding electrification and AI-related demand has contributed to a strong share price performance.

In our view, the strong operational result, elevated expectations and risk-reward balance support taking some profits.

The post Up 58% in a year, are BHP shares still a good buy today? 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 recommended BHP Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

With looming changes to the capital gains tax treatment for investment in housing, Citi Research has downgraded its outlook for the housing market, and by extension, the big four banks.

In a research report published this week, Citi says it has downgraded its credit growth assumptions to 4% system growth by FY27, with business at 5%, and mortgage credit at 3.5%.

Bank earnings to come under pressure

Citi said re the banks:

This drives modest earnings downgrades for the majors on our numbers. The policy impact adds to the already unfavourable stagflation outlook for the Australian banks, with close to peak rates, slowing growth and rising credit risk.

Citi said there was “prior precedent” that could help investors understand the impact of regulatory intervention in the housing market.

Given Australia’s fascination with property, this is not the first attempt to bring investor animal spirits in check. The mid-2010s saw a vast slowdown in investor credit as APRA applied a speed limit to investor credit growth, strengthened serviceability and other changes were made to borrowing power and risk weights. The net result was a slowdown in investor credit from ~11% to ~2% over 15 months. Similar tightening took place across the Royal Commission period as tightening of serviceability by the banks saw investor credit fall from ~4% to 0% over an 18-month period. Investor lending commitments were down ~30-40% in both instances.

Citi said that with fewer investors in the market, the question was whether there would be an offset from more owner-occupiers, including first-home buyers.

They said:

Back in the mid-2010s, despite investor credit decelerating from ~11% to ~2%, we saw overall housing credit only experience a ~1% slowdown because less investor credit was offset by owner occupier credit accelerating from ~5% to ~9%. With a clearer playing field, the owner occupiers effectively stepped into the gap, a move that was aided by falling rates which improved borrowing capacity.

ANZ leading the pack

In terms of the banks, Citi’s order of preference is ANZ Group Holdings Ltd (ASX: ANZ) with a buy rating, National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corporation (ASX: WBC) both with a neutral rating, and Commonwealth Bank of Australia (ASX: CBA) with a sell rating.

Citi said:

We think CBA’s multiple holds greatest risk to a slowdown in the housing market given its stretched starting point, and hence we reiterate our Sell Rating.

Citi has price targets of $39.25 for ANZ, $135 for Commonwealth Bank, $36.75 for NAB, and $39 for Westpac.

The post What are the big 4 banks worth as the housing market falters? appeared first on The Motley Fool Australia.

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• Sell alert! Why this expert is calling time on Westpac and CBA shares
• Top brokers name 3 ASX shares to buy now
• Payday superannuation starting 1 July could change how every Australian thinks about their retirement
• The next RBA interest rates move will be down, NAB says
• Buy, hold, sell: Resmed, Goodman Group, Westpac shares

Citigroup is an advertising partner of Motley Fool Money. Motley Fool contributor Cameron England 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.

$5,000 to invest but unsure which ASX 200 shares to buy?

Well, the three shares in this article could be looking cheap after significant pullbacks.

Here’s what you need to know about them:

Collins Foods Ltd (ASX: CKF)

The first ASX 200 share to look at is Collins Foods.

The KFC restaurant operator’s shares are down approximately 20% this year, which has left it looking much cheaper than it did not long ago.

Collins Foods is not the kind of business that grabs attention like a high-growth technology stock. It operates in quick-service restaurants, where convenience, brand strength, and repeat customer behaviour are important.

Its core KFC operations give it exposure to one of the most recognised food brands in the world. That can be valuable during tougher economic periods, when consumers may still want affordable takeaway options but become more selective about bigger discretionary purchases.

Bell Potter is bullish on Collins Foods and has a buy rating and $10.80 price target on it.

Lovisa Holdings Ltd (ASX: LOV)

Another ASX 200 share that looks cheap after a selloff is Lovisa.

Its shares are down approximately 37% over the past 12 months, which is a sharp fall for a company that has delivered extraordinary growth over the long term.

Lovisa’s story is not just about selling affordable jewellery. It is about a retail model that can be rolled out across many countries with relatively small-format stores, fast product rotation, and a brand that appeals to fashion-conscious shoppers.

That gives the company a very different growth profile from many local retailers. Its opportunity is global, and management has already shown it can open stores across multiple regions.

Morgans thinks the company has a bright future. It recently put a buy rating and $32.50 price target on its shares.

ResMed Inc. (ASX: RMD)

A third ASX 200 share to consider is ResMed.

The sleep treatment company’s shares are down almost 30% over the past 12 months, which is a notable pullback for a global healthcare leader.

ResMed’s products sit in an area of healthcare that is still underpenetrated. Sleep apnoea remains widely undiagnosed, despite its links to fatigue, cardiovascular risk, and broader health outcomes.

That gives the company a long-term demand driver that is not tied to the economic cycle in the same way as retail or housing. People may delay some purchases when money is tight, but healthcare needs do not disappear.

Ord Minnett is a big fan of the company. Last week, it put a buy rating and $38.35 price target on its shares

The post 3 cheap ASX 200 shares to buy with $5,000 appeared first on The Motley Fool Australia.

More reading

• Do experts rate BHP, Cochlear, and ResMed shares as buys, holds, or sells?
• Buy, hold, sell: Resmed, Goodman Group, Westpac shares
• Down 28% in a year, should I buy the dip on Resmed shares right now?
• How to invest in ASX shares when you don’t know what to buy
• Where to invest $2,000 in ASX 200 shares in June

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