Author: openjargon

In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to record a small decline. At the time of writing, the benchmark index is down slightly to 7,828 points.

Four ASX shares that are falling more than most today are listed below. Here’s why they are dropping:

Boss Energy Ltd (ASX: BOE)

The Boss Energy share price is down 4.5% to $3.88. This appears to have been driven by a broker note out of Macquarie this morning. Although the broker remains positive on the uranium producer, it has cut its price target by almost 17% from $6.00 to $5.00. Elsewhere, another note out Morgan Stanley reveals that it has held firm with its equal weight rating and trimmed its price target to $4.55. This is due to production ramp up and cost concerns.

DroneShield Ltd (ASX: DRO)

The DroneShield share price is down 3.5% to $1.94. This may have been driven by profit taking from some investors after this counter drone technology company’s shares delivered incredible returns in recent months. In fact, even after today’s weakness, the DroneShield share price is up approximately 400% since the start of the year. This has been driven by impressive sales growth and its very positive outlook thanks to new contracts and industry tailwinds.

Jumbo Interactive Ltd (ASX: JIN)

The Jumbo Interactive share price is down 3% to $16.59. This morning, analysts at Citi initiated coverage on the online lottery ticket seller with a bearish view. According to the note, the broker has slapped a sell rating on the company’s shares with a price target of $15.00. This implies potential downside of approximately 10% from current levels. It believes the market is too optimistic on Jumbo’s earnings and suspects that it could fall short of expectations in FY 2025. Looking further out, it also highlights key renewals that create significant earnings risks in the coming years.

RAIZ Invest Ltd (ASX: RZI)

The RAIZ Invest share price is down over 2.5% to 36.5 cents. This morning, this micro-investing platform provider announced that it would be exiting the Malaysia market. Following the completion of a strategic review, it has agreed with its joint venture partner to close the business. Raiz CEO, Brendan Malone, said: “The decision to close the Malaysian Operations will enable Raiz to focus on strengthening and expanding its Australian business. With our continued product innovation and our marketing campaign, we are confident the Raiz Australian business will continue to grow and deliver a strong economic performance for shareholders.”

The post Why Boss Energy, DroneShield, Jumbo, and Raiz shares are falling today appeared first on The Motley Fool Australia.

More reading

• ‘Geopolitical risk is unlikely to subside’: Should you pile into ASX defence shares right now?
• 5 ASX All Ords shares that rose 250% to 700% in FY24
• DroneShield share price roars to yet another all-time high in 2024 surge
• ASX 200 uranium stock storms higher on first shipment
• Here are the top 10 ASX 200 shares today

Citigroup is an advertising partner of The Ascent, a Motley Fool company. 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, Jumbo Interactive, and Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool Australia has recommended Jumbo Interactive. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Investing in ASX Real Estate Investment Trusts (REITs) is a popular strategy for those looking to gain exposure to the property market without the complexities of direct ownership.

The Australian markets are home to a basket of long-standing REITs that have rewarded shareholders with dividends and long-term capital gains.

Although FY24 was a challenging year for the sector, commercial real estate valuations have been marked down, and some ASX REITs saw large share price declines last year.

Not all incurred the same fate, though. Three were standouts. Let’s examine the top-performing ASX REITs of FY24.

Scentre Group (ASX: SCG)

In third place on the list is Scentre Group, which owns and operates Westfield shopping centres in Australia and New Zealand. Its shareholders saw impressive gains coming into the new year.

The ASX REIT hit 52-week closing lows of $2.39 apiece in October. Investors then drove it higher before it peaked at $3.39 on 22 March.

In total, Scentre Group has rallied more than 21% in the last year, a more than 12% advantage over the S&P/ASX 200 Index (ASX: XJO).

In its latest update, Scentre noted that customer visits to its 42 Westfield destinations totalled 175 million in the first nine months of 2024.

Tenant sales reached $6.5 billion in Q1 2024, and its portfolio occupancy is almost full.

Scentre Group anticipates Funds From Operations (FFO) to grow by up to 5.4% in 2024, with distributions expected to increase by at least 3.6%. Distributions are to REITs what dividends are to individual stocks

If correct, this could make the ASX REIT an attractive choice for income-focused investors.

HMC Capital Ltd (ASX: HMC)

The second-best REIT for FY24 was HMC Capital, an alternative asset manager focused predominantly on real estate. It is not structured as an ASX REIT per se but operates two REITs.

HMC completed the acquisition of Payton Capital this month, a private credit fund manager in the commercial real estate space.

This move is the first in HMC’s efforts to establish a $5 billion “diversified private credit asset management platform over the medium-term”.

Macquarie recently upgraded HMC to a buy, setting a price target of $7.97. Meanwhile, consensus rates the ASX REIT a hold, per CommSec.

Goodman Group (ASX: GMG)

In first place as the top-performing REIT for FY24 was Goodman Group.

Goodman’s value grew the most in FY24, with its share price soaring by 73% over the last 12 months.

This global integrated property group focuses on industrial and commercial properties, including warehouses and, more recently, data centres.

According to my colleague James, data centres are in high demand due to the rise of e-commerce and digitalisation – a positive for Goodman shares.

Based on this, Citi rates the ASX REIT a buy with a price target of $40.00 per share.

Barrenjoey recently downgraded Goodman to an underweight rating, citing caution “on the market’s lofty expectations”, according to The Australian Financial Review.

Meanwhile, according to CommSec, consensus rates Goodman a buy. However, the decision is split. Five rate it a buy, 4 a hold, and 2 a sell.

If Citi’s valuation is correct, it signifies an upside potential of more than 13% at the current Goodman price.

Goodman had a market capitalisation of around 66 billion at the end of FY24.

ASX REIT’s continue

Goodman Group, Scentre Group, and HMC Capital represent some of the best ASX REITs of FY24, each offering unique strengths and growth prospects.

Time will tell if these current trends will continue. As always, remember to conduct your own due diligence.

The post Here are the best ASX REITS of FY24 (a $66 billion company grew the most) appeared first on The Motley Fool Australia.

More reading

• Shares vs. property: Which delivered the best growth in FY24?
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• 3 super strong blue chip ASX 200 shares to buy in July
• 3 ASX shares that could create lasting generational wealth

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goodman Group and Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool Australia has recommended Goodman Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Top ASX defence shares have delivered some absolutely eye-watering gains over the past year.

What kinds of gains are we talking about?

Well, over the past 12 months, the All Ordinaries Index (ASX: XAO) has gained a healthy 8%.

Now, here’s how these leading ASX defence shares have performed over that same period:

• Electro Optic Systems Holdings Ltd (ASX: EOS) shares are up 99%
• Codan Ltd (ASX: CDA) shares are up 54%
• AML3D Ltd (ASX: AL3) shares are up 280%
• Droneshield Ltd (ASX: DRO) shares are up 704%

Now those are the kinds of returns you want to see in your portfolio!

What do these companies do?

You may be familiar with these ASX defence shares already.

If not, here’s a quick snapshot of what they do.

Electro Optic Systems has two business divisions: Defence Systems and Space Systems. The company’s products include remote weapon systems and counter-drone technology. Electro Optic Systems recently inked a defence contract with a Western European nation.

Codan develops rugged electronics solutions for government, corporate, and consumer markets worldwide and has contracts with both the military and law enforcement. Among the favourable market fundamentals that the ASX defence share cited in its half-year reports was “increasing global military and defence spend in the Five Eyes Intelligence community.”

AML3D designs and constructs 3D parts using metal additive manufacturing technology. The company recently signed new contracts with the United States Navy.

And Droneshield provides drone detection and disruption solutions to the defence sectors, commercial airports, prisons, and other critical infrastructure. Droneshield has multiple government defence contracts, including with the US.

Can ASX defence shares keep on delivering?

The conundrum with investing in ASX defence shares is that they tend to perform much better during times of high or rising global tensions.

While we ardently hope for world peace to break out, an event that would likely see ASX defence shares sold down, that’s unfortunately not the most likely scenario.

Indeed, in addressing the mid-2024 outlook, Ronald Temple, chief market strategist at Lazard, says bluntly, “Geopolitical risk is unlikely to subside.”

According to Temple:

The war in Ukraine looks nowhere near resolution and … a Trump presidency may inject even more volatility into the geopolitical landscape given uncertainty over his support for European and Asian allies and his plan to broadly raise US tariffs.

Then there’s the potential powder keg in the Middle East as Israel’s battle against Hamas drags on.

Temple notes that, “The risk of expansion of the current hostilities to include an expanded confrontation with Hezbollah has increased meaningfully.”

But the most worrisome conflict the world faces is a potential shooting war between the US and China.

Temple says:

The most consequential geopolitical risk is a confrontation between China and the United States. Ongoing skirmishes in the South China Sea between China and the Philippines appear to be the most likely source of potential near-term conflict.

We fervently hope wiser, calmer heads will prevail and step away from the brink.

Until then, these top ASX defence shares could well continue to deliver market-beating returns.

The post ‘Geopolitical risk is unlikely to subside’: Should you pile into ASX defence shares right now? appeared first on The Motley Fool Australia.

More reading

• 5 ASX All Ords shares that rose 250% to 700% in FY24
• DroneShield share price roars to yet another all-time high in 2024 surge
• AML3D share price surges another 38% today! What’s going on?
• Move over DroneShield: This ASX defence stock is up 67% in a month!
• Leaders and laggards of the ASX market sectors in FY24

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 DroneShield and Electro Optic Systems. 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 ASX small-cap share end of the market could be an attractive area to invest in according to one fund manager.

All of the great, large businesses of today were small businesses at one point. Of course, not every small business is going to become a big company.

The good, smaller stocks could deliver good returns if they’re able to scale up effectively. Additionally, smaller companies are typically under-researched compared to their larger peers, which can lead to discounted valuations.

Ronald Temple, Lazard‘s chief market strategist, has made a number of interesting observations about where he thinks value is at the moment and what he believes could happen next with markets.

Opportunity for ASX small-cap shares

Temple believes non-US markets are trading on “much less demanding valuation multiples”. Some markets may benefit from accelerating growth while US growth “decelerates”.

He also suggested non-US companies are typically more exposed to floating-rate debt – where the interest rate changes as central bank rates change – which “should benefit them disproportionately” as rate cuts happen outside of the US.

The market strategist also suggested that non-US companies could “enjoy a more significant recovery in revenue and earnings from current levels as their economies were less resilient after the pandemic than the US economy, which benefited from much larger fiscal and monetary stimulus.”

Temple suggests the outlook is shifting, and short-term interest rates are going to head lower, which could lead to reduced earnings for cash, which could be bad news for people over-allocated to cash. He acknowledged some people may be reluctant to invest at, or near, record highs for share markets. What’s the answer? The expert said:

My view is that the best approach is to allocate capital away from cash to riskier assets while identifying those “risky” assets that are less correlated to the most expensive parts of the global equity market (e.g., tech and AI leaders) and instead invest in areas of the market that have more unrecognized upside going forward. These include emerging markets, Japan, small-cap, and infrastructure-related equities.

This could spell good news for ASX small-cap shares.

Expectations for the rest of 2024

Temple outlined a number of thoughts about macroeconomic events that could occur in the second half of 2024. Some of these events could cause volatility for ASX small-cap shares.

He expects US growth and inflation to decelerate, allowing the US Federal Reserve to cut rates in the second half of 2024. A “razor’s-edge” US election could have “significant economic and market implications”.

The market strategist expects China’s housing challenges to persist but with the cumulative effects of stimulus lifting growth. However, the West’s efforts to defend their industries against Chinese competition are expected “to stiffen, adding to elevated tensions over China’s support for Russian aggression in Ukraine.”

Japan’s inflation “normalisation” is expected to persist, leading households to reassess their asset allocation. Finally, slowing inflation in Europe is expected to enable a material easing of interest rates, adding “additional momentum to already-accelerating growth”.

While the prospects look promising for ASX small-cap shares, the market segment is not guaranteed to outperform. But, it’s certainly worthwhile keeping an eye out for exciting ASX small-cap shares, in my opinion.

The post Is it time to jump back into ASX small-cap shares? appeared first on The Motley Fool Australia.

More reading

• ‘Geopolitical risk is unlikely to subside’: Should you pile into ASX defence shares right now?
• Why are BHP shares trudging lower on Friday?
• Top brokers agree that Lynas shares are ‘undervalued’
• 3 reasons to buy this ASX 200 share like there’s no tomorrow
• Why is this ASX 300 healthcare stock surging 12% today?

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.

BHP Group Ltd (ASX: BHP) shares are tracking lower from the open on Friday despite no market-sensitive news from the company.

At the time of writing, shares in the diversified mining giant are fetching $44.49 per share, 0.41% lower from the open.

This continues a more than 11% slide into the red this year to date.

With the company’s trailing dividend yield at 5.3% and iron ore prices showing volatility, let’s explore the reasons behind this dip in BHP shares and what it might mean for investors.

Citi’s caution on iron ore prices

BHP shares faced headwinds in FY24 due to a large retracement in iron ore and copper prices.

In particular, iron ore, BHP’s primary breadwinner, fell from US$117 per tonne at the end of May to US$106 per tonne in June, driven by weakness in China’s economy and rising inventories.

Having peaked at US$144/tonne on 3 January, it now sells at US$113/tonne at the time of writing. Copper – the company’s second-largest revenue earner – is also down from its highs in 2024.

Analysts at Citi have issued a warning that iron ore prices are likely to remain volatile ahead of China’s Third Plenum meeting. The firm predicts prices could fall below US$100 per tonne in the coming months, according to The Australian.

The investment bank sees iron ore prices “fading [in] strength…over the summer,” maintaining a price target of US$95/tonne.

Despite iron ore futures rallying the past month, analyst Shreyas Madabushi said that onshore steel demand in China remained flat.

China is the world’s largest iron ore importer, buying around three-quarters of all global seaborne iron ore.

Madabushi also notes that construction and infrastructure activity is slowing due to inclement weather and the typical summer slowdown. This echos my colleague Tristan’s findings that China has shown a decline in industrial and housing demand.

Citi said that China’s steel inventories are increasing, while port inventories of iron ore remain high, which could reduce output from steel mills.

Meanwhile, the consensus view at the Iron Ore Forum in Singapore was that Chinese iron ore impacts may have already peaked, according to Reuters.

What’s in store for BHP shares?

Despite the recent price decline, BHP remains in favour with the broker crowd.

Analysts at Morgans recently highlighted BHP’s ability to generate substantial free cash flow, supporting significant dividend payments. It has a buy rating with a $48.30 price target on BHP shares.

According to my colleague James, it forecasts fully franked dividends of approximately $2.42 per share for FY24 and $2.17 per share for FY25.

This equates to yields of 5.4% and 4.9% at the current share price, respectively.

BHP is also dealing with legal action from the Mining and Energy Union (MEU), which has filed applications with the Fair Work Commission seeking pay rises for 1,700 labour-hire workers at BHP’s Peak Downs, Saraji, and Goonyella Riverside coal mines.

We will have to wait and see the outcome of this situation.

Foolish takeaway

While the recent decline in BHP shares might concern some investors, the company’s strong dividend yield and robust cash flow generation remain compelling factors.

However, investors should be mindful of the volatility in commodity prices, especially given Citi’s views. It’s essential to weigh these factors carefully before making any investment decisions. Always seek professional financial advice when able.

The post Why are BHP shares trudging lower on Friday? appeared first on The Motley Fool Australia.

More reading

• Buy BHP and these ASX dividend shares
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• I’d buy BHP shares to generate $1,000 of monthly passive income
• 5 things to watch on the ASX 200 on Wednesday

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

Lynas Rare Earths Ltd (ASX: LYC) shares could have market-beating potential.

That’s the view of analysts at Ord Minnett, which believe the rare earths producer’s shares are being undervalued by the market.

What is the broker saying about Lynas shares?

According to a note, the broker has described the mining company as “the safe way to play the sector ” for investors.

This is largely because rare earths prices are currently at depressed levels. And as history shows, it is often best to buy miners at the bottom the cycle.

In addition, Ord Minnett highlights its position as the only significant producer of rare earths outside China. This makes it the “blue-chip” of the rare earths producers. It commented:

Lynas Rare Earths is an integrated source of rare earths from mine to customer. Lynas has a portfolio of aligned assets to explore, develop, mine and process rare earth minerals. These are the Mt Weld project and the Lynas Advanced Materials Plant (LAMP). The main asset of Lynas is the Mt Weld rare earths deposit in Western Australia. REO prices are depressed, which makes it the right time to buy in cheaply.

Most REO companies are still explorers and would-be developers. There is only one significant producer in Australia and the world ex-China – Lynas, at its LAMP in Malaysia. ‍ Lynas is the blue-chip stock of rare earths companies. It defied years of low prices by getting costs even lower and raising product quality. Now it is the non-Chinese producer of critical REOs for the energy transition. The Lynas multiples are punchy but deserved. It is the safe way to play the sector. ‍

Big returns

The note reveals that Ord Minnett currently has a buy rating and $8.00 price target on Lynas shares.

Based on its current share price of $6.55, this implies potential upside of 22% for investors over the next 12 months.

To put that into context, a $10,000 investment would become approximately $12,200 if the broker is on the money with its recommendation.

It is also worth noting that Ord Minnett is not alone with its bullish view on the stock.

For example, last week, Bell Potter put a buy rating and $7.80 price target on its shares. It notes that “with risks mounting to the upside for rare earths we retain our Buy outlook.”

Elsewhere, Goldman Sachs has a buy rating and $7.50 price target on its shares. Earlier this week, the broker declared its shares as “undervalued” based on its long run rare earths price forecast.

The post Top brokers agree that Lynas shares are ‘undervalued’ 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 positions in and has recommended Goldman Sachs Group. 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 S&P/ASX 200 Index (ASX: XJO) share Brickworks Limited (ASX: BKW) has several appealing factors that make it a great investment opportunity right now.

The company is facing several headwinds at the moment, including high interest rates, inflation, and higher manufacturing costs.

But there are a number of reasons why I think Brickworks shares can deliver strong returns over the long term at the current price, particularly once interest rates start coming down.

Here’s why I’m bullish about Brickworks shares and thinking about buying more for my portfolio.

Population growth

Brickworks’ operating businesses produce building products in Australia and the United States. It’s the biggest brickmaker in Australia and the northeastern US. In Australia, it also produces roofing, masonry, timber battens, cement, and specialised building systems.

The populations of both the US and Australia continue to climb, requiring more dwellings. And larger populations will no doubt add to the long-term demand for products from Brickworks’ businesses.

Construction can be a cyclical industry, so I think now is a good time to consider the business while sentiment is weaker. If interest rates have materially reduced in a couple of years, conditions for the ASX 200 share could be much stronger then.

Ongoing underlying growth

Brickworks owns around a quarter of investment conglomerate Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) and half of an industrial property trust alongside Goodman Group (ASX: GMG).

Both of these assets are seeing longer-term growth in their operational profits, cash flows, and payments to Brickworks, which is driving up their value.

As the values of Soul Patts and the industrial property trust increase, Brickworks’ underlying value lifts, too.

If Brickworks’ balance sheet‘s value goes up over time, this can help increase how much the market is willing to pay for Brickworks shares.

Big asset discount

I love being able to buy businesses that are at a big discount to their underlying assets.

This ASX 200 share has significant asset backing across its building products manufacturing, the land it owns, the industrial and manufacturing property trusts, and the Soul Patts shares, though it also has a (relatively small) level of debt.

Every six months, Brickworks tells the market its underlying (inferred) asset backing. At 31 January 2024, the business had $36.68 of inferred assets per share. The Brickworks share price is at a 27% discount to the January 2024 figure, though the Soul Patts share price regularly changes to alter this discount.

In my opinion, it’s a very appealing valuation discount.

The post 3 reasons to buy this ASX 200 share like there’s no tomorrow appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks, Goodman Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Goodman Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.