Category: Stock Market

The fund manager L1 has told investors about three ASX shares that it owns which it thinks are exciting.

Often, investors like to look at technology businesses as ones that can outperform. But, there are other sectors that can also help our portfolios beat the market. Without a crystal ball, we can’t know for sure which stocks are going to do great. But, L1 thinks the below names are compelling ideas.

Newmont Corporation CDI (ASX: NEM)

L1 noted that Newmont shares had fallen recently because of expectations that the ASX gold share‘s 2024 production volumes dropped due to a number of operational downgrades across the portfolio.

The most recent downgrade was with the Telfer and Brucejack mines being temporarily suspended due to environmental and operating safety issues.

That’s not exactly a positive picture, is it?

L1 expects much of this near-term operating weakness will be “transitory and supportive of Newmont’s strategy to focus on execution at its large, low-cost and high free cash flow generative assets, while divesting smaller operations to simplify the portfolio.”

After the acquisition of Newcrest, Newmont is the largest gold producer in the world. L1 points out the ASX gold share has an extensive portfolio of tier one mines with several development-ready growth assets that can support production growth in the next few years.

As an added bonus, the ASX mining share has “strong exposure” to copper, with annual copper production of around 150kt.

Nexgen Energy (Canada) CDI (ASX: NXG)

Nexgen is a Canadian uranium miner which is benefiting from a strengthening price.

According to L1, the uranium price recently reached a 15-year high as medium-term demand tailwinds indicated the possibility of “material, potential supply deficits by the end of this decade.”

The fund manager noted this sentiment was further amplified because the world’s largest uranium producer called Kazatomprom (which supplies a fifth of global supply) revealed a downgrade to its 2024 production expectations. L1 says this shows the “fragility of current supply”.

NextGen is working on plans to develop the world’s largest uranium deposit, called Arrow, which is located in Saskatchewan in Canada.

L1 then said it “would be a major, new, strategic Western source to address the anticipated market deficit. At the current uranium spot prices, Arrow, once developed, has the potential to generate more than C$2 billion of cash flow per annum.”

Resmed CDI (ASX: RMD)

Resmed has certainly been one of the ASX shares that have received a lot of investor attention over the last several months. Incredibly, Resmed shares are up around 4% over the past six months, despite the uncertainty surrounding the ASX healthcare share.

This company is a large manufacturer of continuous positive airway pressure (CPAP) machines and masks to treat sleep apnea.

The fund manager noted that the company recently reported its FY24 second quarter that included a gross profit margin which saw improvement that was better than expected. This update reportedly “allayed fears over the impact of GLP-1 weight loss drugs.”

L1 decided to buy shares in September 2023 after talking with more than 20 sleep physicians and distributors. The fund manager decided that weight loss drugs are “manageable” and the stock was “oversold”.

The investment team attended the JP Morgan conference in San Francisco, where Resmed presented its own analysis of the GLP-1 sleep impact, which confirmed L1’s views.

While the Resmed share price has climbed, it is/was trading at a discount of more than 20% to the ASX share’s historic average forward price/earnings (P/E) ratio.

The post 3 ASX shares this fund manager thinks are compelling buys right now appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Monday
• Here’s how the ASX 200 market sectors stacked up this week
• Morgans says these ASX 50 shares are strong buys
• 5 ASX shares I think you can confidently invest $500 in right now
• 5 things to watch on the ASX 200 on Thursday

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

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The JB Hi-Fi Limited (ASX: JBH) share price is having a strong start to the week.

In morning trade, the retail giant’s shares are up 5% to $59.57.

Investors have been buying the company’s shares following the release of its half-year results.

JB Hi-Fi share price jumps on half-year results

For the six months ended 31 December, JB Hi-Fi reported:

• Total sales down 2.3% to $5.16 billion
• Earnings before interest and tax (EBIT) down 20% to $386.7 million
• Net profit after tax down 20% to $264.3 million
• Earnings per share of 241.8 cents
• Interim dividend down 20% to 158 cents per share

What happened during the half?

During the first half, JB Hi-Fi reported a modest 2.3% decline in total sales to $5.16 billion.

This was driven by a 9.9% decrease in The Good Guys sales to $1.39 billion, which offset a 0.7% increase in JB Hi-Fi Australia sales and a 5.1% lift in JB Hi-Fi New Zealand sales.

In respect to The Good Guys business, its dominant Home Appliance categories remained resilient, but the Consumer Electronics categories were softer as they cycled elevated demand in the prior corresponding period.

Over at the key JB Hi-Fi Australia business, its modest sales growth reflects continued customer demand for technology and consumer electronics products, supported by well-executed Black Friday and Boxing Day promotional periods.

On the bottom line, JB Hi-Fi’s net profit after tax was down 20% to $264.3 million for the half. This was driven largely by margin weakness due to inflationary cost pressures.

How does this compare to expectations?

While the company may have posted a sharp decline in profits, it was still well ahead of expectations. This explains why the JB Hi-Fi share price is charging higher today.

Commenting before the results, Morgans was spot on with its suggestion that the company could surprise to the upside. It said:

We think there’s a good chance JB Hi-Fi could surprise positively in its 1H24 result. We forecast EBIT of $371.0m, 4% above consensus of $358.2m.

Management commentary

JB Hi-Fi’s Group CEO, Terry Smart, was pleased with the company’s performance. He said:

We are pleased with our performance as we cycled the elevated customer demand in the prior year. As expected, we saw the trading environment become more challenging, marked by heightened competitive activity and increased on-floor discounting. Our focus remained on maximising customer demand through delivering consistently high levels of customer service and driving best value for our customers.

Outlook

No guidance has been given but management has provided a trading update.

During January, JB Hi-Fi Australia sales were up 2.5% with comparable sales growth of 1.7%, JB Hi-Fi New Zealand sales were up 8.2% but comparable sales were down -4.1%, and The Good Guys sales down 2.2% with comparable sales down 2.2%.

Terry Smart adds:

In a challenging retail environment, we continue to adapt and innovate to maximise the opportunities it gives us. Our unwavering focus on delivering value for our customers by leveraging our established and proven low-price market position and providing exceptional customer service continues to ensure we remain top of mind for shoppers. This strategy not only ensures our continued relevance to our loyal existing customers but also drives the expansion of our market share.

The JB Hi-Fi share price is up 33% since this time last year.

The post JB Hi-Fi share price jumps 5% after smashing first-half earnings estimates appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Monday
• History shows 2024 could be a big year for ASX 200 shares. Here are 3 to look at now
• Buying ASX retail shares? You’ll want to see these numbers
• 3 ASX 200 dividend shares I think you could safely hold for decades
• Here are the top 10 ASX 200 shares 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 no position in any of the stocks mentioned. The Motley Fool Australia has recommended Jb Hi-Fi. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The CAR Group Limited (ASX: CAR) share price is edging lower on Monday morning.

In early trade, the auto listings company’s shares are down 0.5% to $33.31.

This follows the release of the company’s half-year results.

CAR Group share price falls on results

Here’s a summary of how the company performed during the first half compared to the prior corresponding period:

• Adjusted revenue up 60% to $531 million
• Adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA) up 56% to $277 million
• Adjusted net profit after tax up 34% to $163 million
• Reported net profit down 72% to $117 million
• Partially franked interim dividend up 21% to 34.5 cents

What happened during the half?

For the six months ended 31 December, Car Group reported a 60% jump in revenue to $531 million. This was driven by double-digit revenue growth in all key markets through strong execution of its strategy.

In addition, the company’s results were boosted by transformative acquisitions in the US and Brazil made in the last financial year.

And given the more complex macroeconomic environment the company was operating in, management believes it demonstrates the strength and resilience of the group’s diversified business model and the value it provides to its customers.

It also believes it highlights the significant long term growth opportunity in the group’s large and under penetrated markets.

On the bottom line, Car Group’s adjusted net profit after tax was up 34% to $163 million and its reported net profit was down 72% to $117 million. The latter reflects the recognition of a $333 million gain on acquisition of Trader Interactive in the previous year.

How does this compare to expectations?

While strong on paper, Car Group’s results was largely in line with expectations and likely already priced in. This may explain why its share price is having a subdued session.

Goldman Sachs commented:

CAR reported a 1H24 result in-line with GSe with 1H24 Sales/EBITDA/NPAT growing +60%/+56%/+34% (incl. acquisitions) vs. pcp to A$531mn/A$277mn/A$163mn, which was +2%/+0%/+0% vs. GSe, with strength in Australia (particularly media) and Korea.

Management commentary

CAR Group’s CEO, Cameron McIntyre, was pleased with the half. He commented:

CAR Group has had an excellent first half of the financial year. With the completion of the acquisitions of Trader Interactive and webmotors last year, we have accelerated our growth strategy and are executing on key strategic priorities across the group. Our Brazilian business, webmotors delivered exceptional revenue and earnings growth in the first full six months of majority ownership.

Our financial results reflect the significant progress that has been made in delivering on our key strategic priorities and the resilience of our business through economic cycles. We have achieved double digit revenue and earnings growth in all of our key markets, demonstrating the strength of our business model as customers continue to prioritise our premium advertising products in a more challenging macro environment.

Outlook

While no firm guidance was given for the full year, management has laid out its expectations.

On a pro forma basis, it expects “to deliver good growth in Revenue and EBITDA in FY24.”

Whereas on an actual basis, it is expecting “very strong growth in Revenue and Adjusted EBITDA and strong growth in Adjusted NPAT in FY24.”

Positively, it also expects “to see expansion in the CAR Group EBITDA margin on a proforma basis in FY24.”

The Car Group share price is up 48% over the last 12 months.

The post Car Group share price falls despite 32% first-half earnings jump appeared first on The Motley Fool Australia.

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More reading

• CSL share price sinks 6% on major trial failure
• Are Wesfarmers shares a good long-term buy?
• These are the 10 most shorted ASX shares
• 1 ASX dividend stock down 60% to buy right now
• I think this ONE factor gives ASX shares a huge chance to make big returns

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

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The CSL Ltd (ASX: CSL) share price is under pressure on Monday.

In morning trade, the biotechnology company’s shares are down 6% to $286.14.

Why is the CSL share price falling?

Investors have been hitting the sell button this morning after CSL released disappointing trial results for its highly anticipated CSL112 product.

The company has been undertaking the Phase 3 AEGIS-II trial evaluating the efficacy and safety of CSL112 compared to placebo in reducing the risk of major adverse cardiovascular events (MACE) in patients following an acute myocardial infarction (AMI).

According to the release, while there were no major safety or tolerability concerns with CSL112, unfortunately, the study did not meet its primary efficacy endpoint of MACE reduction at 90 days.

As a result, CSL revealed that there are no plans for a near-term regulatory filing. Which is a big blow given how analysts have previously estimated that CSL112 could pull in peak sales of US$3 billion per year.

This isn’t goodbye

While CSL isn’t pushing ahead with a near term regulatory filing, it isn’t necessarily saying goodbye to CSL112 just yet.

The company’s Head of R&D, Dr Bill Mezzanotte, commented:

Substantial work remains to fully analyse and understand the complete data and then to determine any development path ahead for this asset. We thank all the patients, families, caregivers, and investigators for their support and participation in the AEGIS program.

AEGIS-II is the most ambitious study in our company’s history and we are proud of the quality of the study we delivered and the enhanced capabilities we developed to do so. We plan to apply these capabilities as well as our plasma protein platform to future unmet medical need in cardiovascular and metabolic conditions as well as those in our other strategic therapeutic areas.

The post CSL share price sinks 6% on major trial failure appeared first on The Motley Fool Australia.

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More reading

• 3 things ASX investors should watch this week
• Own CSL shares? What to expect from its half-year results
• Here’s how the ASX 200 market sectors stacked up this week
• Morgans says these ASX 50 shares are strong buys
• Up 28% since October, why are CSL shares attracting regulator scrutiny?

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

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The Wesfarmers Ltd (ASX: WES) share price has been a solid performer in the last few months, despite challenging economic conditions. It’s up more than 14% in the past six months.

The company is one of my blue-chip favourites. It usually offers an appealing mix of earnings growth and a decent dividend yield.  

What does this business do?

Wesfarmers is the parent company of a number of different well-known brands including Bunnings, Kmart, Officeworks, Target, Catch and Priceline.

It has a chemicals, energy and fertilisers business called WesCEF, and it also owns a few other industrial businesses, including Blackwoods and Coregas.

The company recently made acquisitive moves in the healthcare sector with deals to buy Silk Laser Australia and Instantscripts. These were logical bolt-on acquisitions for the Australian Pharmaceutical Industries/healthcare division, which includes Priceline and Clear Skincare Clinics.

Are Wesfarmers shares a good long-term buy?

There are two main elements that make me believe it’s a star ASX blue-chip stock.

First, the strength and diversification of its businesses are impressive to me.

Bunnings, Kmart and Officeworks are what I’d consider market leaders. And owning the best brands can come with a number of advantages, in my opinion.

A major strength of Wesfarmers is its ability and flexibility to buy different businesses in various industries. This allows it to find the best opportunities anywhere in the economy and apply its expertise and scale.

The other positive I want to point to is the company’s impressive financials.

What I particularly like is the return on equity (ROE) and return on capital (ROC). It shows it’s very profitable for the money it retains, and bodes well for medium-term growth (and Wesfarmers shares) if it can keep making those sorts of internal returns.

In FY23, Wesfarmers as a whole generated a ROE of 31.4%, which is a fantastic level of profitability. The company does pay attractive dividends, but I’d point out that it makes such good money on retained profit it would be vindicated to retain and invest more.

The company’s biggest and most profitable divisions – Kmart and Bunnings – earn excellent returns. Bunnings reported a ROC of 65.4% in FY23, and Kmart Group reported a ROC of 47%.

To me, those numbers justify the business trading on the price/earnings (P/E) ratio that it does. According to Commsec, Wesfarmers shares are currently valued at 27x FY24’s estimated earnings.

The post Are Wesfarmers shares a good long-term buy? appeared first on The Motley Fool Australia.

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More reading

• 2 ASX stocks that could explode in February
• Own Wesfarmers shares? Here’s your half-year results preview
• Would I be crazy to buy Wesfarmers shares at $58?
• Beginner investors: 5 top Aussie stocks I’d buy for 2024
• Where I’d invest $2,000 in ASX 20 shares 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 positions in and has recommended Wesfarmers. The Motley Fool Australia has positions in and has recommended Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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At the start of each week, I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Pilbara Minerals Ltd (ASX: PLS) is still the most shorted ASX share with short interest of 20.6%, which is up slightly week on week. Short sellers continue to target the lithium miner due to weak battery materials prices.
• Syrah Resources Ltd (ASX: SYR) has short interest of 18.5%, which is up week on week again. Weak graphite prices have weighed heavily on its operations and balance sheet.
• Core Lithium Ltd (ASX: CXO) has short interest of 12.7%, which is down slightly week on week. This lithium miner’s shares are down over 80% since this time last year, much to the delight of short sellers.
• Sayona Mining Ltd (ASX: SYA) has 11.7% of its shares held short, which is up week on week again. Short sellers have been loading up on this lithium miner’s shares after it revealed costs that were significantly higher than the price it was receiving for its product.
• IDP Education Ltd (ASX: IEL) has 9.9% of its shares held short, which is down week on week. Short sellers appear to be betting that the loss of its monopoly in Canada and student visa changes will mean IDP Education underperforms expectations.
• Deep Yellow Limited (ASX: DYL) has seen its short interest rise to 9.3%. Short sellers don’t appear to believe that uranium prices will remain as strong as the market expects.
• Genesis Minerals Ltd (ASX: GMD) has seen its short interest rise to 9.3%. This seems to be because of concerns over integration risks from recent acquisitions.
• Chalice Mining Ltd (ASX: CHN) has short interest of 9.1%, which is up strongly week on week. Short sellers appear to believe that capital raisings will be required in the near term.
• Weebit Nano Ltd (ASX: WBT) has short interest of 8.7%, which is up week on week again. This semiconductor company recently reported quarterly revenue of less than $0.5 million. It ended last week with a market capitalisation of $700 million.
• Flight Centre Travel Group Ltd (ASX: FLT) has 8.4% of its shares held short, which is flat week on week. Short sellers may believe the market is too optimistic on the travel agent’s growth and revenue margin assumptions.

The post These are the 10 most shorted ASX shares appeared first on The Motley Fool Australia.

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More reading

• These top ASX growth shares can rise 30% to 40%
• Shares vs. property: Beginner investors choosing Aussie shares, ASX ETFs and rentvesting
• 6 oversold ASX shares to buy in February 2024
• Why are ASX uranium shares getting thumped on Friday?
• Is Flight Centre about to regain ASX dividend share status?

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 Idp Education. The Motley Fool Australia has recommended Flight Centre Travel Group and Idp Education. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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ASX dividend stock KMD Brands Ltd (ASX: KMD) has suffered heavily. It’s down 13% this year, 36% in the last year and 60% from October 2021.

That’s painful for the ASX retail share. It’s interesting to me that this retail company is down so much when various others have risen strongly in the last few weeks or months like Wesfarmers Ltd (ASX: WES), JB Hi-fi Limited (ASX: JBH), Lovisa Holdings Ltd (ASX: LOV), Myer Holdings Ltd (ASX: MYR), Premier Investments Limited (ASX: PMV) and Temple & Webster Group Ltd (ASX: TPW).

Still, I think KMD Brands could pay significant passive income in a year or two.

KMD Brands is the business behind the businesses of Kathmandu, Rip Curl and Oboz. In other words, its products are for the outdoors when it’s cold, the outdoors when it’s hot and for hiking.

What’s going wrong?

KMD Brands reported in December 2023 a trading update that group sales were down 12.5% year over year, reflecting “ongoing weakness in consumer sentiment”.

The ASX dividend stock has had trouble beating its comparable sales after record sales in FY23. Wholesale sales for Rip Curl and Oboz have declined, with retailers reducing inventory holdings in the short term.

At the time of the update, the company said its group underlying earnings before interest, tax, depreciation and amortisation (EBITDA) for FY24 to date was $16 million lower than last year.

One of the positives from that update was that the overall gross profit margin improved, with “operating costs well controlled and actively managed”.

It also advised that its group working capital had decreased 10.2% year over year – it’s making progress towards its target of 18% of sales for the full year, which the company is expecting to drive strong cash flow generation in the second half.

How big could the dividends be?

When the share price of an ASX dividend stock falls, it boosts the prospective dividend yield. For example, when an ASX share with a 5% dividend yield falls 10%, the yield becomes 5.5%. A company can avoid this becoming a potential dividend trap as long as its fundamentals are sound.

I think KMD’s earnings can rebound in FY25 and beyond when retail conditions hopefully improve, particularly if interest rates fall. Demand for KMD’s products may not be as consistent as food demand at Woolworths Group Ltd (ASX: WOW), but I think KMD Brands can still make a decent profit in FY24 and then recover in the subsequent years.

Commsec forecast numbers suggest it can make earnings per share (EPS) of 6.5 cents in FY25 and 8.3 cents in FY26, putting it at 9.5x FY25’s estimated earnings and 7.5x FY26’s estimated earnings.

The low price/earnings (P/E) ratio means the future payouts could be huge. At the current KMD share price, it could pay dividend yields of 7.6% in FY25 and 9% in FY26, according to Commsec.

If the company’s earnings can rebound (in the next couple of years) I think there’s a good chance the ASX dividend stock could deliver strong outperformance at these levels.

The post 1 ASX dividend stock down 60% to buy right now appeared first on The Motley Fool Australia.

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More reading

• 6 oversold ASX shares to buy in February 2024

Motley Fool contributor Tristan Harrison has positions in Lovisa and Temple & Webster Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Lovisa, Temple & Webster Group, and Wesfarmers. The Motley Fool Australia has positions in and has recommended Wesfarmers. The Motley Fool Australia has recommended Jb Hi-Fi, Lovisa, Premier Investments, 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.

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I love investing in ASX shares that have lots of growth potential. Of course, we’d love all of our investments to be big winners. There’s one factor that I think can really help.

When I look at some of the better performers in the S&P/ASX 100 (ASX: XTO) over the last decade, I’m thinking about names like CSL Ltd (ASX: CSL), Macquarie Group Ltd (ASX: MQG), Aristocrat Leisure Limited (ASX: ALL), WiseTech Global Ltd (ASX: WTC), Cochlear Limited (ASX: COH), Xero Ltd (ASX: XRO), Goodman Group (ASX: GMG) and Altium Limited (ASX: ALU).

There’s one element they all have in common.

International growth

The one thing that ties all of those businesses together is that they have significant international growth earnings and can grow a lot more globally.

Australia and New Zealand are great countries, but we’re talking about a total population of around 32 million. There are billions more potential customers in other countries, or lots of other businesses and governments, for ASX shares to tap into.

Xero would probably be a lot smaller without its northern hemisphere subscribers and the possibility of more growth there.

Macquarie would likely be a much smaller investment bank without its operations in other regions.

WiseTech would probably be a smaller software business if it only dealt with the Australian and New Zealand divisions of the global logistics businesses.

Goodman would probably be smaller without the ability to build warehouses beyond the domestic markets it’s in here.

Businesses that have a good product or service, and can successfully take that overseas, give themselves a much bigger growth runway because of the larger total addressable market.

Look for the next ASX share winners

The market is very aware of the growth story of the ASX 100 share names that I’ve already talked about. They can continue to do well, but they’re certainly priced for the success they’re expected to achieve in the short term.

I think some of the next big winners will be ones that have smaller market capitalisations but the ability to become much larger thanks to their addressable market and the trajectory they’re headed in.

That’s why I like names like Lovisa Holdings Ltd (ASX: LOV), Johns Lyng Group Ltd (ASX: JLG), Frontier Digital Ventures Ltd (ASX: FDV), Airtasker Ltd (ASX: ART), Siteminder Ltd (ASX: SDR) and Close The Loop Ltd (ASX: CLG).

But there are plenty of others that could deliver on their international growth potential.

The post I think this ONE factor gives ASX shares a huge chance to make big returns appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Altium, Close The Loop, Johns Lyng Group, and Lovisa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Altium, CSL, Cochlear, Frontier Digital Ventures, Goodman Group, Johns Lyng Group, Lovisa, Macquarie Group, SiteMinder, WiseTech Global, and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Airtasker. The Motley Fool Australia has positions in and has recommended Macquarie Group, SiteMinder, WiseTech Global, and Xero. The Motley Fool Australia has recommended CSL, Close The Loop, Cochlear, Frontier Digital Ventures, Goodman Group, Johns Lyng Group, and Lovisa. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Pinnacle Investment Management Group Ltd (ASX: PNI) share price has climbed more than 40% from 27 October 2023.

Happily, I invested at around that time and have shared in this sizeable 40% return from the S&P/ASX 200 Index (ASX: XJO) stock.

I’ll admit that part of me – the part that wants to avoid potential losses (loss aversion) – has been wondering whether to take profits off the table. Locking in 40% in three months is an excellent annualised return.

But I think the company has a lot more long-term growth potential. Plus, there’s no need to pay capital gains tax prematurely.

For readers unfamiliar with this ASX 200 stock, it helps quality fund managers start their own funds management businesses.

Pinnacle takes a stake in a new funds business (affiliate) and then helps with a variety of services, including seed funds under management (FUM) and working capital, distribution and client services, middle office and fund administration, compliance, finance, legal, technology and more.

What’s left for the fund managers to do? The most important thing: investing for clients.

The company’s recent FY24 first-half result highlighted a number of reasons why I’m staying invested and why I think it’s a buy.

Continuing outperformance

Pinnacle says that 81% of affiliate 5-year strategies had outperformed their respective benchmarks as at 31 December 2023, which is underpinning ongoing performance fee contributions. That shows the quality of the underlying managers.

In the HY24 result, performance fees contributed $12.3 million of Pinnacle’s net profit (up from $0.9 million in the FY23 first half).

Ongoing dividend strength

The ASX 200 stock has increased its dividend payouts almost every year since 2016, apart from COVID-impacted 2020, when it maintained its dividend.

Pinnacle also it maintained its dividend payout in its HY24 results, though I expect dividend growth in the annual result if it continues the level of performance it’s achieving.

FUM growth

Aggregate affiliate FUM rose 9% to $100.1 billion over the six months to 31 December 2023, which was an increase of $8.2 billion in dollar terms.

In HY24, it experienced net inflows of $4.5 billion (compared to outflows of $1.5 billion in HY23), with $1.8 billion of retail inflows.

As FUM rises, it can lead to growing management fees, which are more consistent than performance fees.

Growth initiatives

The ASX 200 stock is seeing ongoing international expansion in both affiliates and distribution. Newer affiliates in both the United Kingdom and North America are experiencing “early success”.

Adding new affiliates, existing affiliates starting new funds, and growing its distribution presence into new areas – these activities expand the growth runway and increase the FUM potential.

When I add all of that together, I think Pinnacle shares can keep growing from here over the longer term.

The post I’ve made 40% in 3 months on this ASX 200 stock, I still think it’s a buy appeared first on The Motley Fool Australia.

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• Here are the top 10 ASX 200 shares today

Motley Fool contributor Tristan Harrison has positions in 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.

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There are a lot of ASX-listed exchange-traded funds (ETFs) that investors can choose from. iShares Global 100 ETF (ASX: IOO) is one way to gain diversification and own global winners.

I think Aussies need a certain amount of international exposure in their portfolios. The Australian share market is great, but there are a lot of other great businesses out there.

Some ASX ETFs provide enormous diversification, owning more than 1000 holdings. We don’t necessarily need to own a huge amount — just enough for good diversification but not to reduce the potential return performance.

100 leaders

The iShares Global 100 ETF invests in 100 of the biggest companies in the world. I think 100 businesses is a good number for strong diversification.

We’re talking about businesses like Microsoft, Apple, Nvidia, Amazon.com, Alphabet, Eli Lilly, Mastercard, ASML, Samsung, Toyota, Walmart, LVMH, Caterpillar, BHP Group Ltd (ASX: BHP), HSBC, Siemens and Unilever.

Many are the best in the world, or among the best, at what they do.

Pleasingly, the ETF’s biggest allocation is to the IT sector, which I think has the strongest potential for returns due to margins and no physical limitations to software.

Geographic diversification

It’s good to see some geographic spread of holdings beyond the United States in the iShares Global 100. Countries with a weighting of more than 2% include the United Kingdom, Switzerland, France, Japan and Germany.

Of course, there’s more to it than just where the business is listed. The underlying companies within this ASX ETF don’t just generate revenue in one country, such as the US. They make money globally, which means they offer global earnings diversification.

For example, Apple and Microsoft are company giants that generate revenue in almost every country.

Strong returns

The iShares Global 100 ETF has performed very strongly over the longer term, though past performance is no guarantee of future returns.

The IOO ETF has returned an average of 16.7% per annum over the past five years, which is a very pleasing rate of wealth-building.

The names within the portfolio are likely to keep changing over time, but as a group, I think they can keep doing well. These are the biggest businesses in the world making the biggest profits. I believe can keep making returns from their economic moats and large scale.

Ultimately, investing is about making returns, and this is a good option, in my opinion.

The post Want to invest in global winners? I’d buy this ASX ETF appeared first on The Motley Fool Australia.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ASML, Alphabet, Amazon, Apple, Mastercard, Microsoft, Nvidia, and Walmart. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended HSBC Holdings and Unilever Plc and has recommended the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool Australia has recommended ASML, Alphabet, Amazon, Apple, Mastercard, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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