Author: openjargon

Telstra Group Ltd (ASX: TLS) has built a reputation as a reliable, income-focused share.

But is the telco a good buy this month? I think it is.

Here are three reasons I would consider buying Telstra shares today.

The earnings base is becoming more consistent

Telstra’s core business continues to deliver. Its mobile division remains a key driver of growth, supported by customer additions and higher average revenue per user. That has flowed through to earnings, with the company reporting growth across multiple parts of the business in the first half of FY26.

What stands out to me is how this is being achieved. The company is seeing operating leverage come through, supported by cost control and efficiency gains. It reduced underlying operating expenses during the first half, which helped offset cost pressures and supported profit growth.

This combination of revenue growth and cost discipline is important. It points to a business that is becoming more predictable and easier to manage, which tends to support more stable earnings over time.

Capital returns

There is more to Telstra than the dividend alone.

The company lifted its interim dividend to 10.5 cents per share in February and continues to run a large buyback program, which has been increased to $1.25 billion.

That combination can have a meaningful impact on returns.

Dividends provide a steady income stream, while buybacks reduce the number of shares on issue and support earnings per share growth. Over time, that can help lift both earnings per share and dividends per share.

Telstra is also generating the cash to support this approach, which is what gives me confidence in its sustainability.

Its position in the market remains strong

Telstra’s role in Australia’s telecommunications network is well established.

Demand for connectivity continues to grow as more devices, services, and businesses rely on mobile and data networks. Telstra remains a key provider across mobile, fixed, and infrastructure, which supports a large base of recurring revenue.

The company is also continuing to invest in its network and technology. This includes expanding its fibre footprint and improving service quality, which helps retain customers and supports pricing.

Over time, that kind of investment tends to reinforce its position rather than weaken it, which is important for a business built around long-term infrastructure.

Foolish takeaway

Telstra offers steady earnings, strong cash flow, and consistent capital returns.

With those pieces in place, I see it as a reliable income-focused investment that can continue to deliver over time, supported by a business that is becoming more stable and predictable.

The post 3 reasons I’d buy Telstra shares today appeared first on The Motley Fool Australia.

More reading

• Where I’d invest $5,000 in ASX blue-chip shares
• Stagflation: How to position an ASX stock portfolio
• Why I don’t own Telstra shares (yet)
• How to build a second income from ASX shares without taking big risks
• Where I’d invest on the ASX for passive income right now

Motley Fool contributor Grace Alvino 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 Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Australian share market may be trading within sight of a record high, but not all shares have climbed with it.

A good number of ASX growth shares have been sold off over the past 12 months and still trade at a deep discount.

While this is disappointing for growth investors, it could have created a very attractive buying opportunity for those with capital to deploy.

With that in mind, here are three ASX growth shares that could be top picks right now:

Lovisa Holdings Ltd (ASX: LOV)

The first ASX growth share that could be a buy is Lovisa.

It is a fast-growing fashion jewellery retailer that is in the middle of an ambitious global expansion. At last count, the company was operating over 1,000 stores across more than 50 markets.

But management isn’t settling for that and continues to open new stores across the globe.

Morgans has named Lovisa as one of its top picks in the retail sector, highlighting the company’s scalable store model and strong brand appeal.

The broker currently has a buy rating and $36.80 price target on its shares. Based on its current share price, this implies potential upside of 50% over the next 12 months.

TechnologyOne Ltd (ASX: TNE)

Another ASX growth share that could be worth considering is TechnologyOne.

It is a leading developer of enterprise software for governments, universities, and large organisations. These customers tend to be sticky, long-term users, which gives the company a high level of revenue visibility.

Its shift to a software-as-a-service model has been a huge success, delivering consistent annual recurring revenue growth and strong cash generation. But if you thought its growth was coming to an end, think again. Management believes it can double the size of its business every five years.

And while its shares have recovered from their lows, UBS still sees plenty of upside. It currently has a buy rating and $38.70 price target on its shares, which implies potential upside of almost 30%.

WiseTech Global Ltd (ASX: WTC)

A final ASX growth share that could be a top buy is logistics solutions technology company WiseTech Global.

Its CargoWise platform sits at the core of global freight and logistics operations. It is deeply embedded in customers’ workflows, with high switching costs and recurring subscription revenue.

Its share price has been pressured by broader tech sector weakness and AI disruption concerns. However, this type of software is very complex and would be very hard for AI to disrupt.

It is for that reason that Bell Potter put a buy rating and $78.75 price target on its shares this week. This suggests that over 70% upside is possible from current levels.

The post 3 stellar ASX growth shares to buy now with 30% to 70% upside appeared first on The Motley Fool Australia.

More reading

• Top brokers name 3 ASX shares to buy today
• Buy, hold, sell: ANZ, NAB, and WiseTech shares
• Still down 40% over the past year, how high could WiseTech shares recover?
• 5 oversold ASX shares to buy before the end of April
• Why I don’t own Telstra shares (yet)

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

DroneShield Ltd (ASX: DRO) shares have been in the spotlight this week.

On Wednesday, the counter-drone technology company released its eagerly anticipated first-quarter update.

Was it a strong result? And should you be buying its shares today?

Let’s see what analysts at Bell Potter are saying about this popular ASX share.

What is the broker saying?

Bell Potter was pleased with the company’s quarterly update, highlighting that its revenue was up more than expected and its committed revenues continue to creep higher. It said:

Revenue: DRO reported $74m in revenue up 121% YoY which was a higher print than the April 8th trading update of $63m due to the timing of deliveries. Quarterly SaaS revenues were $5.1m vs $11.6m for the full year 2025, 6.9% of revenue.

Order intake: Committed revenues (incl. YTD revenue) for CY26 as at 20 April 2026 was $155m a $15m increase since 31 March 2026 reflecting a steady flow of smaller orders. Notably, DRO said it has received an order related to the FIFA World Cup. We expect more orders to flow from key USA events over the coming months. DRO has committed revenues comprising 42% of our upgraded CY26 revenue estimate of $365m (prev. $324m). Using November 30 as the cutoff for orders delivered in CY26, we are 39% of the way through the year, suggesting current contract activity is tracking ahead of our upgraded forecast.

Should you buy DroneShield shares?

According to the note, the broker has retained its buy rating and $4.80 price target on DroneShield’s shares.

Based on its current share price of $3.83, this would mean potential upside of 25% for investors over the next 12 months.

Bell Potter remains very positive on the company and believes it is well-placed to benefit from a wave of spending in the industry. Commenting on the company, the broker said:

We believe DRO has a market leading RF detect/defeat C-UAS offering and a strengthening competitive advantage owing to its years of battlefield experience and large and focused R&D team. We expect 2026 will be an inflection point for the global C-UAS industry with countries poised to unleash a wave of spending on RF detect and defeat solutions.

Consequently, we believe DRO should see material contracts flowing from its $2.3b potential sales pipeline over the next 3-6 months as defence budgets roll over to FY26e. At 43x CY26e EV / EBITDA, DRO trades at a discount to the global drone peer group. Further, we see upside risk to our revenue forecasts in CY26/27e, given the opportunities observed in the C-UAS industry.

The post Are DroneShield shares a buy after its latest update? appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Thursday
• 3 key takeaways from DroneShield’s latest results
• Why Northern Star, DroneShield and BHP shares are making waves on Wednesday
• DroneShield share price jumps after reporting 121% Q1 revenue increase
• DroneShield delivers record 1Q26 revenue and cash receipts

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 DroneShield. 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.

Wondering whether the banks are in the buy zone right now?

Well, the team at Morgans has done the work for you. It has been busy running the rule over ASX bank shares and has given its verdict on them.

Here’s what it is saying:

ANZ Group Holdings Ltd (ASX: ANZ)

Morgans currently thinks that ANZ shares are overvalued at current levels and has put a sell rating and $30.72 price target on them. Based on its current share price of $36.41, this implies potential downside of 15.6%. It recently said:

We revise our forecasts ahead of ANZ’s 1H26 result in May and reflecting on the recent updates provided by NAB and WBC. FY26-28F EPS downgraded by 6-7%. Target price reduced 6% to $30.72/sh. SELL retained given c.-15% downside at current prices, including 4.4% cash yield.

Bank of Queensland Ltd (ASX: BOQ)

This regional bank’s shares could be around fair value now according to the broker. As a result, earlier this week it downgraded Bank of Queensland’s shares to a hold rating with a $7.39 price target. Based on its current share price of $6.61, this implies potential upside of almost 12%. It explains:

We expect a material decline in 1H26 earnings, with recent share price strength driven by the expected capital return from the equipment finance whole-of-loan sale. Share price strength has compressed total return potential to c.5%. As such, we moderate our rating from ACCUMULATE to HOLD. Target price $7.39.

Commonwealth Bank of Australia (ASX: CBA)

Australia’s largest bank may be performing above expectations, but Morgans still isn’t a buyer. It currently has a sell rating and $124.26 price target on CBA shares. Based on its current share price of $175.04, this implies potential downside of 29% over the next 12 months. It said:

CBA delivered a meaningful beat of 1H26 earnings expectations. We have materially upgraded our EPS forecasts after factoring in continuation of higher loan growth and benign credit loss environments. We expect DPS growth won’t match EPS growth as we see approaching CET1 capital tightness. Target price lifted to $124.26. SELL retained, with potential TSR of -24% (including 3% cash yield) at current elevated prices and trading multiples.

National Australia Bank Ltd (ASX: NAB)

This big four bank’s shares may be down heavily from their 52-week high, but Morgans still thinks they are overvalued.

This week, the broker put a sell rating and $34.56 price target on NAB shares. Based on its current share price of $40.22, this suggests that 14% downside is possible.

NAB announced a $1.8bn DRP equity raising, increased loan provisioning, and acceleration of capital software amortisation. Material forecast downgrades as we adjust for today’s announcement and introduce increased conservatism into our modelling. SELL given potential TSR at current prices of -12% (including c.4.2% cash yield).

Westpac Banking Corp (ASX: WBC)

Morgans has downgraded Australia’s oldest bank’s shares to a sell rating with a $34.06 price target following the release of its trading update.

Based on the current Westpac share price of $39.40, this implies potential downside of 13.5% for investors over the next 12 months. It said:

WBC published a trading update ahead of its 1H26 result due for release on 5 May. Implied revenues were weaker, costs lower, and credit impairment charges higher than our and market expectations. We revise our rating from TRIM to SELL as total return expectations at current prices have fallen below the -10% trigger. We estimate c.18% price downside risk partly offset by c.3.8% forecast cash yield. Target price $34.06.

The post How does Morgans rate ANZ, BOQ, CBA, NAB, and Westpac shares? appeared first on The Motley Fool Australia.

More reading

• Why Bank of Queensland, Cochlear, Northern Star, and Paladin Energy shares are falling today
• Buy, hold, sell: ANZ, NAB, and WiseTech shares
• Why this ASX bank stock is tumbling today after earnings
• Bank of Queensland half-year 2026: profit falls, dividend steady as revenue rises
• Stagflation: How to position an ASX stock portfolio

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.

What more could an Australian investor want than both growth and dividends? Some ASX shares that are indeed offering that.

I like it when ASX shares pay dividends because it means our bank account is experiencing the improvement in the profit of that business – it’s not just ‘on paper’ returns. The more it grows, the bigger the dividend payments can be.

With that in mind, I’m going to talk about two ASX shares that I believe are likely to grow their underlying earnings and dividend significantly over the next several years.

Pinnacle Investment Management Group Ltd (ASX: PNI)

This business makes investments in high-quality funds management businesses (‘affiliates’) and helps them grow by offering a number of services including client distribution services, legal, finance, compliance, seed funds under management (FUM) and plenty of other areas.

This allows the fund manager to focus on delivering strong investment returns, which is the best way to help grow its FUM.

Pinnacle’s portfolio of fund managers, such as Coolabah, Solaris, Pacific Asset Management, Firetrail and Plato, has steadily grown Pinnacle’s total affiliate FUM and this helped increase the underlying profit.

Performance fees can be variable, so its statutory net profit won’t necessarily grow every single year. But, ongoing FUM inflows across the portfolio can help the core earnings and fund strong growth of its ‘base’ dividend.

The projection on Commsec suggests the ASX share’s forecast earnings per share (EPS) could grow by 68% between FY26 and FY28.

This would mean it’s currently trading at under 16x FY28’s estimated earnings, with a potential grossed-up dividend yield of around 7.7%, including franking credits for FY28, at the time of writing.

Guzman Y Gomez Ltd (ASX: GYG)

GYG is a Mexican restaurant business, with more than 200 locations in Australia, as well as a few in Singapore, Japan and the US.

The company is delivering good sales growth at its existing restaurants, which is helping drive good (and growing) restaurant margins. In the third quarter of FY26, the business reported comparable sales growth across Australia, Singapore and Japan of 6.6%.

The ASX share also has significant plans to expand its Australian restaurant network in the coming years, which can help drive total network sales and scale benefits. At 31 March 2026, it had 242 Australian locations (up 31 year-over-year) – it wants to reach 1,000 Australian locations within 20 years.

The company’s total network sales grew 19.5% to $345.9 million in the third quarter of FY26, demonstrating its compounding ability. I’m not counting on the US expansion efforts to add anything meaningful, but if it does then it could be a very useful bonus.

The projection on Commsec suggests EPS could rise by 127% between FY26 and FY28, putting the valuation at 42x FY28’s estimated earnings, at the time of writing.

GYG’s dividend is not expected to be huge, but it could rapidly rise in the coming years. The forecast amount for FY28 translates into a possible grossed-up dividend yield of 2.35%, including franking credits.

The post 2 ASX shares that I rate as buys today for both growth and dividends! appeared first on The Motley Fool Australia.

More reading

• 2 quality ASX 200 shares I’d buy if the market fell another 10%
• Buy, hold, sell: Collins Foods, Domino’s, and Guzman Y Gomez shares
• These are the 10 most shorted ASX shares
• 3 discounted ASX 200 shares to buy before they rebound 
• These are the 10 most shorted ASX shares

Motley Fool contributor Tristan Harrison has positions in Guzman Y Gomez and Pinnacle Investment Management Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Pinnacle Investment Management Group. The Motley Fool Australia has positions in and has recommended Pinnacle Investment Management Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

On Wednesday, the S&P/ASX 200 Index (ASX: XJO) was out of form and sank into the red. The benchmark index fell 1.2% to 8,843.6 points.

Will the market be able to bounce back from this on Thursday? Here are five things to watch:

ASX 200 set to fall

The Australian share market looks set for a subdued session on Thursday despite a good night on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 30 points or 0.35% lower this morning. In the United States, the Dow Jones was up 0.7%, the S&P 500 rose 1.05% and the Nasdaq charged 1.65% higher.

Fortescue update

Fortescue Ltd (ASX: FMG) shares will be on watch on Thursday when the iron ore giant releases its third-quarter update. The market is expecting the miner to report iron ore shipments of approximately 49Mt for the three months. In addition, all eyes will be on its costs after the surge in diesel prices following the war in the Middle East.

Oil prices rise

ASX 200 energy shares such as Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) could have a good session on Thursday after oil prices pushed higher. According to Bloomberg, the WTI crude oil price is up 3.1% to US$92.45 a barrel and the Brent crude oil price is up 2.9% to US$101.31 a barrel. This was driven by news that Iran has seized container ships in the Strait of Hormuz.

DroneShield shares rated as a buy

DroneShield Ltd (ASX: DRO) shares are in the buy zone according to analysts at Bell Potter. In response to the counter-drone technology company’s quarterly update, the broker has retained its buy rating and $4.80 price target on DroneShield’s shares. It said: “At 43x CY26e EV / EBITDA, DRO trades at a discount to the global drone peer group. Further, we see upside risk to our revenue forecasts in CY26/27e, given the opportunities observed in the C-UAS industry.”

Gold price rises

ASX 200 gold shares Newmont Corporation (ASX: NEM) and Northern Star Resources Ltd (ASX: NST) could have a good session on Thursday after the gold price pushed higher overnight. According to CNBC, the gold futures price is up 0.75% to US$4,754.8 an ounce. Traders were buying gold after a drop in Treasury yields.

The post 5 things to watch on the ASX 200 on Thursday appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
• 3 key takeaways from DroneShield’s latest results
• Why Bank of Queensland, Cochlear, Northern Star, and Paladin Energy shares are falling today
• Why Northern Star, DroneShield and BHP shares are making waves on Wednesday
• Why are Northern Star shares sinking 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 DroneShield. 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.

Investors in Pro Medicus Ltd (ASX: PME) shares have been on a wild ride.

The healthcare tech stock is down 6% over the past five days, yet still up 19% over the past month. Zoom out further, and it’s a different story, as shares have fallen more than 50% over the past six months. Hectic is one word for it.

So what’s really going on?

Landing new contracts

Start with the fundamentals. Pro Medicus remains a high-quality business. Its imaging software platform is widely used by hospitals and radiology groups, particularly in the US, and continues to win new contracts. The company benefits from a sticky customer base, high margins, and strong recurring revenue once systems are embedded.

The long-term growth story is still intact. Demand for advanced imaging solutions continues to rise, and Pro Medicus shares are well positioned to capture that trend. It’s also expanding within existing customers, which can drive incremental revenue without the need for entirely new deals.

Broad market de-rating

So why the share price volatility? The main culprit is sentiment, not operations.

High-growth healthcare and tech stocks have been hit by a broad market de-rating, and Pro Medicus has been caught in the crossfire. Even after the sell-off, the stock still trades on a price-to-earnings ratio above 60, leaving it sensitive to any shift in investor expectations.

That dynamic has flowed through to broker views. Morgans recently retained its buy rating but trimmed its price target to $210, which suggests a 50% upside at the time of writing. The broker adjusted its model to reflect more conservative growth assumptions, including slower implementation revenue and updated currency settings. Even so, it maintained that the underlying business remains strong and long-term demand is intact.

More broadly, analyst sentiment remains favourable. According to TradingView data, 11 out of 15 brokers rate the stock as a buy or strong buy. The average 12-month price target sits at $194.38, implying around 38% upside, while the most bullish forecasts suggest gains of up to 75%.

Valuation risk

Still, risks remain. Valuation is the big one. Even after a sharp pullback, Pro Medicus shares continue to trade at a premium to most ASX stocks. That leaves less margin for error if growth slows or expectations aren’t met.

Execution is also key. Investors are closely watching the pace of contract wins and how quickly those deals translate into revenue. Any delays or weaker-than-expected growth could weigh on sentiment further.

Foolish Takeaway

Pro Medicus remains a high-quality growth company, but it’s also a stock driven heavily by expectations. When sentiment is strong, it can rally quickly. When it shifts, the downside can be just as sharp.

For now, the business looks solid. The price of Pro Medicus shares, however, may continue to be anything but.

The post What on earth’s going on with Pro Medicus shares? appeared first on The Motley Fool Australia.

More reading

• Are Pro Medicus shares a buy right now?
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• Buy, hold, sell: Collins Foods, Netwealth, and Pro Medicus shares
• Want to double your money in 2026? This is what I’d buy
• Leading brokers name 3 ASX shares to buy today

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

NextDC Ltd (ASX: NXT) shares are in the spotlight this week after the ASX 200 data centre operator continued rebounding from a 12-month low.

At the close of the ASX on Wednesday afternoon, NextDC shares were 1.27% higher at $14.30 each. 

NextDC shares slumped to an annual low of just $11.26 on the 2nd of April, and have since rebounded 27%. 

The latest increase means the ASX tech shares are now 4% higher over the past week.

For the year-to-date, NextDC shares are up 14%. They’re also 36% higher than 12 months ago.

The latest rally comes off the back of a series of new announcements out of the company.

And it looks like investors are excited by the flurry of good-news updates.

What did NextDC report this week?

On Monday, NextDC reported a 60% increase in its contracted utilisation. It also confirmed a significant 83% boost of its forward order book and increased its FY26 capital expenditure guidance to between $2.7 billion and $3 billion. This is an increase from between $2.4 billion and $2.7 billion previously. 

Its FY26 guidance for net revenue and underlying EBITDA is unchanged.

NextDC said its recent customer contract wins are driving both increased utilisation and ambitious growth plans, especially at its S4 data centre.

NextDC shares were further pushed higher again on Wednesday when it confirmed it has raised around $1 billion after successfully completing its institutional entitlement offer.

The offer, which was $12.70 per new share and at a ratio of 1 for 5.4 pro-rata, saw a strong take-up by around 98% of eligible institutional shareholders. 

New shares issued under the offer will rank equally with existing shares. They are expected to commence trading on the 30th of April 2026.

The company plans to open a retail entitlement offer to eligible retail shareholders at the same price and ratio from 27th of April where it hopes to raise around $500 million.

NextDC said it plans to use the fresh capital, alongside other funding initiatives, to support its expansion and fulfil its strong pipeline of customer contracts.

Can NextDC shares keep climbing higher?

Analysts are incredibly bullish about the potential for NextDC shares over the next 12 months.

According to TradingView data, all 14 analysts have a buy consensus on the data operators shares.

The average $20.49 target price implies a potential 43% upside at the time of writing. But the maximum $32.29 target price suggests that NextDC shares have the potential to boom another 126%.

The post NextDC shares rocket 27% higher: Buy, hold or sell? appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
• Top brokers name 3 ASX shares to buy today
• Why are NextDC shares storming higher today?
• NEXTDC completes $1bn institutional entitlement offer to fund growth
• 3 reasons to buy NextDC shares today

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.

Markets don’t fall in a straight line. They lurch, recover, lurch again — and right now, with geopolitical tensions between Iran and the United States keeping energy prices volatile and inflation expectations unsettled, the S&P/ASX 200 Index (ASX: XJO) is doing exactly that.

For long-term investors, this kind of volatility isn’t a threat. It’s a calendar.

A 10% pullback from current ASX 200 levels wouldn’t be unusual by historical standards. 

What matters more is what you’d do with it. Rather than reaching for a broad ETF, I’d be looking at two specific companies that I think deserve a spot in a quality portfolio — and that would become even more compelling at lower prices.

The case for Soul Patts

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) is one of Australia’s oldest listed investment companies, but it operates more like a quietly compounding private holding company than a traditional fund manager.

Soul Patts gives investors exposure to a carefully managed mix of assets: resources, telecommunications, nationwide swimming schools, agriculture, water entitlements, electrification, and more. It recently completed its full merger with Brickworks and has been actively reshaping its portfolio — most notably, selling down its long-held stake in TPG Telecom Ltd (ASX: TPG) to free up capital for higher-growth opportunities.

That capital reallocation is the interesting part. Soul Patts isn’t sitting still. The proceeds from the TPG selldown give management fresh firepower to deploy into assets it believes will deliver stronger long-term growth. For a patient investor, that’s exactly what you want to see — disciplined capital allocation, not loyalty to underperforming positions.

At time of writing, the Soul Patts share price is currently around $42.30. A 10% market-wide pullback might push the share price even lower, but the underlying value and fundamentals of the Sol Patts’ underlying businesses wouldn’t change materially. That’s the gap a long-term buyer could exploit.

Why Pinnacle is worth watching

Pinnacle Investment Management Group Ltd (ASX: PNI) is a different kind of business but a similarly compelling structural story.

Pinnacle runs a network of affiliated fund managers, providing them with seed capital, distribution support, and operational infrastructure. It earns revenue from management fees and a share of affiliate profits — a model that scales well as funds under management grow.

In its most recent half-year results, Pinnacle reported record net inflows of $17.2 billion, with strong contributions across retail, institutional, and international channels. That’s a business attracting capital, not losing it.

The Pinnacle share price has pulled back sharply from its 52-week high of $25.33 to around $12.30, and the stock carries an analyst price target of around $24. That’s a meaningful gap between where the share price is and where analysts believe it could be.

A broader market sell-off would likely push Pinnacle lower in the near term. But for an investor with a long time horizon, that volatility is a feature, not a flaw.

The Foolish takeaway

Neither of these companies needs a market crash to be worth owning. Both are genuinely interesting at today’s prices. But the point of having a watchlist is knowing exactly what you’d do when prices move — and a further 10% dip in the ASX 200 could see individual stocks like Soul Patts and Pinnacle fall further still, putting them within reach of entry prices that are difficult to walk away from.

As always, share prices can fall further than expected, and volatility driven by macro events — energy prices, rate expectations, geopolitical uncertainty — can linger longer than most anticipate. However, quality doesn’t go on sale forever. 

When it does, it pays to be ready.

The post 2 quality ASX 200 shares I’d buy if the market fell another 10% appeared first on The Motley Fool Australia.

More reading

• Want to build a second income? I’d buy these ASX shares today
• Why Monash IVF, NAB, Viva Energy, and Worley shares are falling today
• 17,875 shares of this ASX dividend star pays an income equal to the Age Pension
• Why I’m even more bullish about Soul Patts shares from now on!
• ASX 200 shares rip with financials leading a remarkable recovery last week

Motley Fool contributor Leigh Gant 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 Pinnacle Investment Management Group and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Pinnacle Investment Management Group and Washington H. Soul Pattinson and Company Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

A new report from VanEck has discussed how investors should be positioning their portfolio with consideration to the Iran-US conflict.

According to the report, US consumer sentiment has plunged to a record low. At the same time, inflation expectations have spiked, and global growth forecasts are being revised down.

Despite this, equity markets continue to rally. 

Furthermore, the S&P 500 has climbed to reach an all-time high, despite oil prices remaining elevated above US$90/barrel (at the time of writing), the Strait of Hormuz remaining disrupted, and a US naval blockade on Iranian ports now in effect.

VanEck believes the market is underestimating the risks of a slowdown.

The ASX ETF provider has pointed to quality investing as a relevant strategy for investors to consider right now. 

What is quality investing?

Quality investing focuses on companies with strong financial health, characterised by high return on equity, manageable leverage levels, and consistent earnings stability over time to compound value and reduce risk.

According to VanEck, Quality companies have historically demonstrated outperformance during periods of economic slowdown and over the long term.

On the flip side, quality investments typically underperform when low interest rates and accommodative economic policy are dominant macroeconomic features. 

The case for quality right now

According to VanEck, history suggests that quality companies outperform during economic slowdowns, experiencing smaller declines during market downturns, and recovering more swiftly to previous levels. 

In our view, looking ahead, should risk sentiment roll back, or if the war continues for longer than expected it could spark economic growth concerns, increasing market volatility, and a ‘flight to quality’ could be triggered.”

Valuations-wise, while quality companies typically trade at a premium to the broader market due to their defensive characteristics, the valuation differential has narrowed toward the 10-year average. This makes for a potentially compelling entry point for quality companies, we think.

How to target quality 

There are several ASX ETFs available to investors that focus on these core quality principles. 

The first option to consider is the VanEck Vectors Msci World Ex Australia Quality ETF (ASX: QUAL). 

It provides investors with an international equity portfolio of 300 companies with fundamentals that satisfy principles of quality investing advocated by investment greats Benjamin Graham and Warren Buffett, namely:

• High ROE;
• Stable year-on-year earnings growth; and
• Low financial leverage.

Another option to consider is VanEck Msci International Quality (Hedged) ETF (ASX: QHAL). 

QHAL is an Australian dollar hedged version of QUAL so you can now also manage your desired currency exposure.

Another option for investors targeting quality investing is the Betashares Capital Ltd – Global Quality Leaders Etf (ASX: QLTY). 

It includes 150 of the highest quality global companies.

The post Why quality is king during economic downturns appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Bell 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.