Category: Stock Market

ASX-listed exchange-traded funds (ETFs) can be an effective investment choice for retirement.

An ETF essentially gives us the ability to buy a basket of different shares in just one investment, creating good diversification. You don’t need to worry about which individual stocks to pick for your portfolio.

If I were investing in ASX ETFs for retirement, there are two different investment strategies I’d consider to create good annual cash flow.

ASX ETFs that pay dividends

Plenty of retirees are attracted to individual ASX dividend shares for the dividend yield.

In contrast, many ASX ETFs invest in good businesses that don’t necessarily pay large dividends (or any dividends at all). Blue chip international shares, for example, don’t typically offer a strong dividend yield because they have a lower dividend payout ratio compared to ASX shares.

This is why the Vanguard Australian Shares Index ETF (ASX: VAS) – which invests in 300 of the biggest businesses on the ASX – could be a decent option for dividends. It has a sizeable allocation to names like BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA) and Fortescue Ltd (ASX: FMG), all of which produce good dividend yields.

According to Vanguard, the VAS ETF has a dividend yield of 3.8% (excluding franking credits).

Vanguard Australian Shares High Yield ETF (ASX: VHY) takes investing in high-yield stocks to another level. It only invests in high-yield ASX shares. It has 72 holdings, with companies like BHP, CBA, National Australia Bank Ltd (ASX: NAB) and Wesfarmers Ltd (ASX: WES) being the biggest allocations. And it has a dividend yield of 4.9% (excluding franking credits), according to Vanguard.

The one non-ASX-focused ETF I’ll mention is Betashares FTSE 100 ETF (ASX: F100). It invests in 100 of the biggest businesses in the United Kindom’s share market. In this portfolio, we’ve got names like Shell, HSBC, Unilever and GSK. The F100 ETF has a 12-month distribution yield of 3.1%.

What about growth ETFs?

Dividends aren’t the only way to create cash flow.

If someone is in retirement (or thinking about it), I expect they have a sizeable portfolio balance.

Imagine if an investor had $100,000 invested in a growth-focused ASX ETF. If the value of that ETF went up 10%, it’d grow to $110,000 in value. If they sold $5,000, they’d generate a 5% ‘yield’ on that initial $100,000 and be left with $105,000.

In year two, if it rose by 10% again, it’d reach $115,500 – and if we aim for a 5% yield (of $105,000), it would deliver a cash flow of $5,250 and a remaining balance of $110,250.

Of course, no investment is guaranteed to go up over a year or any particular length of time. However, I think a few ASX ETFs have a better chance of delivering strong capital growth than many ASX share-focused ETFs.

If the capital value of the ETF falls one year, that is likely to be okay. It could rebound afterwards in the following year. We regularly see this happen after a bear market. That’s why, in my opinion, it’s good to stick to a sustainable withdrawal ‘yield’ of, say, 4% (or 5% for a strong-performing ASX ETF).

Keep in mind that past performance is not a guarantee of future performance.

Big hitters

Vaneck Morningstar Wide Moat ETF (ASX: MOAT) focuses on United States companies with strong, durable competitive advantages, and those businesses are currently valued at an attractive price (according to Morningstar). Since its inception in June 2015, the MOAT ETF has achieved an average return per annum of 15.5%.

VanEck MSCI International Quality ETF (ASX: QUAL) invests in global shares that have a high return on equity (ROE), low negative earnings variability and low levels of debt. Since the ETF’s inception in October 2014, it has delivered an average return of 15.1% per annum.

These two are the sorts of growth ETFs I’d look at to create cash flow for my own retirement. They offer diversification, a strong investment framework and have a solid track record of long-term success.

The post How I’d create investment cash flow in retirement from ASX ETFs appeared first on The Motley Fool Australia.

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More reading

• Forget term deposits and get rich with ASX shares the Warren Buffett way
• Should ASX growth investors buy the Vanguard Australian Shares Index ETF (VAS)?
• ASX 200 shares: A once-a-decade opportunity to get rich?
• Targeting a $53,000 second income starting with just $1,000 of savings?
• Got $500 to invest in stocks? I’d put it in this ASX ETF

HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Tristan Harrison has positions in Fortescue. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Wesfarmers. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended GSK, HSBC Holdings, and Unilever Plc. The Motley Fool Australia has positions in and has recommended Wesfarmers. The Motley Fool Australia has recommended VanEck Morningstar Wide Moat ETF and Vanguard Australian Shares High Yield ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Liontown Resources Ltd (ASX: LTR) shares are having another day to forget on Monday.

In morning trade, the lithium developer’s shares are down 26% to a 52-week low of 88.5 cents.

This means its shares are now down 70% since the start of October.

Why are Liontown shares crashing again?

The catalyst for today’s weakness has been the release of an update on the Kathleen Valley Lithium Project.

Let’s start with the positives. The company revealed that the Kathleen Valley Lithium Project remains on-track for first production in the middle of this calendar year. Management also advised that it remains focused on delivering to that schedule and on budget.

Now let’s see what is putting pressure on Liontown shares today.

According to the release, the material decline in spodumene prices has triggered significant reductions in short and medium-term lithium price forecasts.

As a result, the company has commenced a review of the planned expansion and associated ramp-up of Kathleen Valley to preserve capital and reduce the near-term funding requirements of the Project. It explains:

The Project Review includes examining options to defer the timing of the previously announced 4 million tonne per annum underground development work, sequencing adjustments to the mine plan, and scope for additional cost optimisations. There is no change to the 3 million tonne per annum plant capacity design which the Company is currently constructing.

Funding blow

Also putting pressure on Liontown shares is news that a recently announced $760 million debt funding package has been terminated due to lithium price weakness.

The company explains:

The finalisation of the debt package has been impacted by recent reductions in the independent forecast pricing for spodumene upon which the lenders’ credit approvals were based. Accordingly, the Company has now commenced discussions on a revised, smaller debt facility that will reflect the Project Review. As a result, the commitment letter announced on 19 October 2023 will terminate.

Liontown had approximately $515 million cash at the end of December, having fully drawn the $300 million project funding package secured from Ford (NYSE: F). This is expected to fund construction activities required for first production in the middle of 2024.

Management expects to make an announcement on its debt funding within the first quarter. It also concluded by reiterating that it “remains confident in the long-term outlook of the lithium market and Kathleen Valley’s status as a Tier 1 long-life producer.”

The post Why are Liontown shares crashing 26% on Monday? appeared first on The Motley Fool Australia.

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More reading

• These are the 10 most shorted ASX shares
• Why Ampol, APM, Liontown, and Wildcat shares are dropping today
• Why are Liontown shares crashing 12% today?
• 5 things to watch on the ASX 200 on Thursday
• Copper and lithium: Broker says these ASX mining shares can double in value

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.

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Zip Co Ltd (ASX: ZIP) shares are starting the week with a bang.

In morning trade, the buy now pay later provider’s shares are up 16% to 73.5 cents.

Why are Zip shares jumping?

Investors have been buying the company’s shares this morning after responding positively to the release of a quarterly and half year update.

According to the release, for the second quarter, Zip delivered an 8.5% lift in transaction value over the prior corresponding period to $2.8 billion.

And thanks to a material improvement in its revenue margin to 8.2% (from 7.1%), Zip’s revenue was up 26.1% to $225.6 million for the quarter. This was driven by strong performances across both the Americas and ANZ markets, which reported revenue growth of 35.5% and 20.4%, respectively.

This ultimately supported “outstanding” cash EBTDA during the quarter according to management. Zip’s Group CEO and Managing Director, Cynthia Scott, said:

Zip delivered an outstanding Group cash EBTDA result for the second quarter, underpinned by a particularly strong seasonal performance in US TTV, the resilience of the ANZ business, improved margins and continued cost discipline.

As a result, the company’s group cash EBTDA for the first half of FY 2024 is expected to be between $29 million and $33 million. This compares favourably to a cash EBTDA loss of $33.2 million during the first half of FY 2023.

Another positive potentially given Zip’s shares a boost was its bad debts. It advised that US bad debts continued to perform well with monthly cohort loss rates approximately 1.3% – 1.4% of total transaction value. This is below the target range of 1.5% -to 2.0%. In Australia, net bad debts improved by 54bps quarter on quarter to 3.64% of receivables.

Self-sustaining business

Scott believes that this result demonstrates that Zip is now a self-sustaining business. She adds:

Today’s result reinforces that Zip is delivering as a self-sustaining business. Group revenue grew by 26.1% and revenue margins were 8.2%, up 110bps versus 2Q23. Cash transaction margin improved 70bps versus 2Q23 to 3.5%, demonstrating the strength of the business model in a challenging external environment.

At the end of the period, Zip had $81.3 million in available cash and liquidity, which is an increase from $53.2 million on 30 September 2023.

The post Zip shares rocket 17% on ‘outstanding’ quarter appeared first on The Motley Fool Australia.

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More reading

• Why Atlantic Lithium, Charter Hall, Droneshield, and Zip shares are pushing higher
• Why Arcadium Lithium, IAG, PYC Therapeutics, and Zip shares are falling 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 Zip Co. 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.

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TPG Telecom Ltd (ASX: TPG) shares are down 40% from July 2020 and have dropped 22% from August 2022. Are investors underlying this ASX telco share?

This company is responsible for a number of brands including TPG, Vodafone, iiNet, AAPT and others. All these businesses came together after a merger between TPG and Vodafone Australia.

There are a few good factors about the business to keep in mind.

A growing dividend

TPG has grown its annual dividend each year since 2021 when the merged company started paying cash to shareholders.

We can’t control what the TPG share price does, but receiving a growing dividend can offset some of that market uncertainty and share price volatility.

The last 12 months of dividends amount to 18 cents per share, which is a grossed-up dividend yield of around 5%.

TPG’s annual dividend per share in 2024 could be 18.8 cents, which would be a grossed-up dividend yield of 5.2%, according to Commsec. The annual dividend per share could then grow to 20 cents per share in FY25 and 21.4 cents per share in FY26.

For investors that focus on dividends, it looks like an appealing option.

Rising prices and subscribers to help profitability?

Vodafone has recently increased prices, though it reportedly only applies to new customers.

In the first half of FY23, TPG reported that its postpaid average revenue per user (ARPU) rose to $44.6 – this was an increase of 6.2% year over year and a rise of 4.4% half over year. However, the prepaid ARPU dropped to $18.9, which was a year-over-year decline of 2.5% and a drop of 1.6% half-on-half.

Subscriber numbers continue to increase, which I believe helps its underlying profitability. Postpaid subscribers rose 5,000 in the six months of the FY23 first half to 3.23 million, and an increase of 2.2% year over year.

Total prepaid subscribers rose 35,000 half over half, and went up 167,000 year over year, to 2.07 million.

TPG’s fixed costs are essentially, you guessed it, fixed. So, an increase of revenue can help increase the underlying profitability of the business. In HY23, service revenue rose 4.5% to $2.3 billion and the earnings before interest, tax, depreciation and amortisation (EBITDA) grew quicker, going up 12.4% to $941 million. Stronger profit is supportive for the TPG share price.

Profitability can also rise from the company’s ‘simplification’ efforts, which it’s expecting to achieve $140 million per annum of cash benefits.

Investing for growth

The business is putting a lot of money towards capital expenditure, which will hopefully unlock additional earnings in the coming years. Growing the capabilities of its 5G network is a key focus.

With 5G, TPG’s brands (particularly Vodafone) can offer Aussies a 5G-powered wireless home broadband option. NBN currently takes a lot of the broadband margin, but Vodafone customers using 5G wireless broadband would mean TPG gets a lot more margin.

Investing in 5G is important because it will make sure TPG and Vodafone are keeping up with competition.

Foolish takeaway

Things are looking promising for TPG, but it’s not exactly delivering growth that’s shooting the lights out. I think it could be a solid ASX dividend share, but it’s not cheap.

According to Commsec, the TPG share price is valued at 31x FY24’s estimated earnings and 27x FY25’s estimated earnings.

The post Are TPG shares an unloved buying opportunity? appeared first on The Motley Fool Australia.

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More reading

• Zip shares rocket 17% on ‘outstanding’ quarter
• Appen shares crash 37% on huge Google blow
• How I invest and make money from ASX mining shares
• Downgraded: Why Lake Resources shares just lost a bull
• 3 ASX small-cap shares I’d buy for the long-term

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 recommended Tpg Telecom. 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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Unfortunately, it goes from bad to worse for Appen Ltd (ASX: APX) and its shares on Monday.

The embattled artificial intelligence (AI) data services company has been dealt an almighty blow this morning.

This has led to the Appen share price X.

What’s going on with Appen shares?

Investors have been hitting the sell button today after the company was rocked with the loss of a major customer, Alphabet (NASDAQ: GOOG) subsidiary, Google.

According to the release, as part of a strategic review process, Google will be terminating its global inbound services contract with Appen. This will result in the end of all projects with Appen by 19 March 2024.

Appen stresses that it had no prior knowledge of Google’s decision to terminate the contract.

How big a blow is this?

The release notes that in FY 2023, Appen’s revenue from Google was US$82.8 million at a gross margin of 26%.

As a comparison, the company’s unaudited results for FY 2023, which have been released today, reveals revenue of US$273 million for the year.

This means that Google’s global inbound services contract represents approximately a third of its current revenue. The company commented:

The news is unexpected and disappointing, particularly considering the progress made against Appen’s transformation and performance in November and December 2023.

FY 2023 performance

As mentioned above, Appen released unaudited figures for FY 2023. It expects to report:

• Revenue of US$273 million
• Underlying EBITDA loss of US$20.4 million

Though, as it also alluded to above, management had made some good progress on its earnings during November and December.

For these months, underlying EBITDA was positive at US$3.2 million and US$2.3 million, respectively.

But that progress is somewhat meaningless now that Appen has lost an US$80 million+ contract. Somehow, it will have to find a way to cut costs further to offset this loss and hope that other big customers don’t follow Google to the exits.

If they do, the days of Appen shares remaining on the ASX boards could be numbered.

The post Appen shares crash 37% on huge Google blow appeared first on The Motley Fool Australia.

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More reading

• How I invest and make money from ASX mining shares
• Downgraded: Why Lake Resources shares just lost a bull
• 3 ASX small-cap shares I’d buy for the long-term
• Here’s why these ASX 200 growth shares could be top buys
• The iron ore price is falling, is now a good time to buy Rio Tinto shares?

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. 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 Alphabet and Appen. The Motley Fool Australia has recommended Alphabet. 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 mining sector is a fascinating industry full of compelling companies. I think it’s possible to invest in ASX mining shares and make good money. But I’m using a particular investment method to do it.

There are many different mining companies on the stock market, including those producing iron ore, lithium and gold, to name just a few.

Some of the ASX’s best-known companies are miners, such as BHP Group Ltd (ASX: BHP), Rio Tinto Ltd (ASX: RIO), Fortescue Ltd (ASX: FMG), Pilbara Minerals Ltd (ASX: PLS), Northern Star Resources Ltd (ASX: NST) and Newmont Corporation (ASX: NEM).

However, bear in mind that the share prices of mining companies can be highly volatile, particularly when commodity prices move around quite substantially.

Volatility can create an opportunity

When the whole ASX share market drops during a bear market, there are loads of opportunities to find oversold stocks.

Sometimes ASX mining shares can go through a painful decline, even when the overall market is stable.

No one can forecast with certainty when a commodity price will fall, which is why the profit and share prices of mining companies can be so unpredictable.

The investment advice of “buy low, sell high” is essentially how I approach my investments in ASX mining shares.

I buy when the market sentiment is weak, and the outlook is worrying. I haven’t sold any of my resource shares yet, but if I were looking to sell, I’d endeavour to do it when the commodity price is relatively strong.

The types of investments I like

For example, I’ve invested in Fortescue shares quite a few times when the iron ore price was below US$100 per tonne, and there were worries about the Chinese real estate and construction sector. Buying at that low level unlocked a large dividend yield, and I’m (currently) sitting on good capital gains.

Just over a year ago, when copper prices were weaker, I was looking at Sandfire Resources Ltd (ASX: SFR) as a clear opportunity because of its heavy share price decline (at the time) and exposure to the long-term decarbonisation tailwind.

I’ve been wrong plenty of times about ASX mining shares, and I may end up being wrong about my investment in Pilbara Minerals.

But, it seems to me that if investors can be brave and choose good miners at a time when the outlook for the commodity price is weak for the foreseeable future, that may be the most opportunistic time to buy.

I’m most optimistic about copper miners because of the decarbonisation tailwind.

I’d be interested in BHP and Rio Tinto because of their growing copper exposure, but iron ore prices remain high, so I am willing to be patient.

Lynas Rare Earths Ltd (ASX: LYC) is an interesting one to me because of its share price decline, but its commodities are still integral to the global economy.

ASX lithium shares are a mixed bag. The lithium price has sunk, yet lithium demand is expected to keep rising. I chose Pilbara Minerals in the sector because it’s already producing lithium, it has big plans for growth, and its balance sheet is strong.

I believe volatility can be our friend as long as we’re willing to be brave to buy and don’t get too greedy when it comes to selling at a certain price.

The post How I invest and make money from ASX mining shares appeared first on The Motley Fool Australia.

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More reading

• The iron ore price is falling, is now a good time to buy Rio Tinto shares?
• These are the 10 most shorted ASX shares
• Top brokers name 3 ASX shares to buy next week
• Why the BHP share price has a nickel thorn in its side
• Are Pilbara Minerals shares a buy for that 7% dividend yield?

Motley Fool contributor Tristan Harrison has positions in Fortescue and Pilbara Minerals. 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.

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It has been a very tough 12 months for Lake Resources N.L. (ASX: LKE) shares.

Since this time in 2023, the lithium developer’s shares have lost 88% of their value.

Is this a buying opportunity? Let’s see what analysts at Bell Potter are saying about the company following a review of the lithium industry.

Are Lake Resources shares a buy?

Unfortunately for shareholders, after having a speculative buy rating on its shares for some time, the broker has now downgraded them and taken an axe to its valuation.

According to the note, its analysts have downgraded Lake Resources shares to a speculative hold rating with a 12 cents price target (from 25 cents previously).

While this still implies reasonably large upside potential of 20%, the broker doesn’t appear to believe it is sufficient to warrant a more positive rating.

The broker revealed that the downgrade was made largely on the back of lower lithium price expectations. It said:

Our lower long term lithium carbonate price outlook has materially reduced our LKE valuation to $0.12/sh (previously $0.25/sh). […] For 2024, we estimate spodumene concentrate (SC6) prices averaging US$1,100/t (previously US$2,500/t) and lithium carbonate prices US$16,250/t (previously US$30,000/t).

It is worth noting that the broker still sees a lot of potential in the lithium developer. It also appears to see the company as a good M&A target due to the Kachi project’s large scale. It adds:

Key to LKE’s success over 2024 will be maintaining tension with respect to financing and offtake, amid a weak lithium market. In parallel, FEED and permitting will continue. The Kachi project’s large scale and DLE technology selection does potentially make LKE a strategically important company over the long term in terms of technology selection and new supply. DLE brings ESG benefits including less land disturbance and water consumption.

The post Downgraded: Why Lake Resources shares just lost a bull appeared first on The Motley Fool Australia.

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More reading

• Could the Lake Resources share price double in 2024?
• Lake Resources shares sank 84% in 2023: Will this year be better?

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ASX small-cap shares typically have a lot of growth potential, which can deliver over the long term. It’s easier for a small company to double in size than a large business, for example.

While the S&P/ASX 200 Index (ASX: XJO) has a strong focus on ASX bank and mining shares, small-cap shares can provide diversification to different industries that are not necessarily in blue-chip territory.

A small business isn’t guaranteed to do well, but I do like the prospects for the three names below.

Lindsay Australia Ltd (ASX: LAU)

Lindsay has a market capitalisation of $332 million, according to the ASX.

It describes itself as an integrated transport, logistics and rural supply company and a “leading national service provider” to the agriculture, horticulture and food-related industries.

A key part of the offering is that it can help farmers grow, package, transport and distribute their produce throughout Australia and the world.

The Commsec forecast suggests the business could grow its earnings per share (EPS) in FY24, FY25 and FY26. Those numbers put the current Lindsay share price at under 8x FY24’s estimated earnings.

Lindsay’s revenue has steadily grown since FY18, and it’s investing in a number of projects that could help future profitability. These include new software services, property upgrades and expansions underway in Melbourne and plans being finalised for Adelaide and Perth.

The mid-point of the company’s guidance of $105 million for FY24 would represent an increase of 16% compared to FY16.

Duxton Water Ltd (ASX: D2O)

Duxton Water is a company that owns a portfolio of Australian water entitlements which are leased to farmers on long-term and short-term leases. It has a market cap of around $230 million, according to the ASX.

The value of water entitlements has increased over the long term. We all need to eat food, and water is a key part of that food production. I think this ASX small-cap share is a good way to indirectly gain exposure to agriculture.

Duxton Water generates a pleasing amount of lease income each year, and this enables it to pay a steadily growing dividend.

The company is benefiting from the growing amount of water-hungry crops that are being planted, such as almonds.

I think the right time to invest is when there is a lot of rain because water entitlement values may go down (or at least see slower growth).

The Duxton Water share price is currently at a 52-week low, and I think this is the right time to invest.

Baby Bunting Group Ltd (ASX: BBN)

Baby Bunting is the leading retailer of baby and toddler-related products. Think of things like prams, car seats, clothes, toys, furniture, blankets and so on. It has a market cap of roughly $245 million, according to the ASX.

The Baby Bunting share price has sunk 30% in the last year, and it’s down 70% since April 2021.

I think this much lower valuation is attractive, considering it still has a large and expanding Australian store network and a growing presence in New Zealand. The ASX small-cap share is also working on its digital sales, including its new marketplace offering.

As at 8 October 2023, total sales in FY24 had fallen 3.3%. The FY24 first quarter gross profit increased by 70 basis points year over year, and its administration costs were reduced by $1.7 million year over year.

According to the projection on Commsec, the Baby Bunting share price is valued at 10x FY25’s estimated earnings with a possible grossed-up dividend yield of 10% for that year.

If it can get back to sales growth, I believe the business can kickstart a recovery in earnings and market confidence.

The post 3 ASX small-cap shares I’d buy for the long-term appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Duxton Water. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Lindsay Australia. The Motley Fool Australia has recommended Lindsay Australia. 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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Looking for some new portfolio additions and have a penchant for ASX 200 growth shares?

If you are, then it could be worth checking out the two shares listed below that have recently been named as buys.

Here’s what you need to know about these highly-rated ASX growth shares:

Breville Group Ltd (ASX: BRG)

Breville could be an ASX 200 growth share to buy right now.

It is the leading appliance manufacturer behind brands such as Breville, Sage, Kambrook, and Baratza. These products are found in countless kitchens across Australia and the world.

The team at Morgan Stanley thinks investors should be snapping up its shares right now. Particularly given that it believes the company could have had a strong first half based on industry updates. In addition, it highlights potential margin tailwinds that will be supportive of growth.

Morgan Stanley has an overweight rating and $29.00 price target on Breville’s shares.

Life360 Inc (ASX: 360)

Another ASX 200 growth share that could be a buy this month according to analysts is Life360.

It is a Silicon Valley based technology company with a focus on products and services for digitally native families. The key product is the increasingly popular Life360 app, which has almost 60 million active users. It offers families features such as communications, driver safety, and location sharing.

Goldman Sachs is a big fan of the company and sees huge revenue growth ahead.

It analysts highlight that “Life360 is exposed to a US$12bn global TAM with a large opportunity to expand its product suite, grow average revenue per paying circle (ARPPC), increase payer conversion, and lift penetration rates outside of the US.”

Goldman Sachs currently has a buy rating and $10.50 price target on its shares.

The post Here’s why these ASX 200 growth shares could be top buys appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Life360. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Life360. 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.

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Rio Tinto Ltd (ASX: RIO) shares have dropped quite sharply in 2024 to date, falling by around 6% and reversing some of the gains the ASX mining share has experienced over the last few months, as we can see on the chart below.

What’s going on?

The culprit of Rio Tinto’s slip appears to be a fall in the iron ore price. Rapid changes in the iron ore price can quickly send the Rio Tinto share price higher or lower, depending on which direction the commodity value is headed.

According to Trading Economics, the iron ore price fell back below US$130 per tonne after recently being above US$140 per tonne. But, we should keep in mind that in August the iron ore price was below US$110 per tonne, so it is still up substantially in the last few months.

Trading Economics analysis suggested the decline of the iron ore price was due to “signs of low demand”. The Chinese economy grew by 5.2% in 2023, which was less than the market expectations of 5.3%.

As explained on the website:

New home prices sank at the sharpest pace since 2015, stretching the declining momentum to the sixth month and underscoring the slump in property demand in the country.

Persistent macroeconomic headwinds for China and uncertainty over demand for construction materials in the year ahead tempered iron ore demand from steel mills and countered added buying activity in their usual restocking season.

Market players noted that robust portside iron ore inventories limited new purchasing demand from steel mills as the sector struggles with decreasing margins, contributing to the downturn.

Is this a good time to invest in Rio Tinto shares?

I think it’s always better to invest in a cyclical business like an ASX mining share after a decline rather than when the iron ore price and Rio Tinto share price are running hot.

No one can predict with certainty when the iron ore price will move substantially up or down or by how much. But, it does keep going through positive and negative periods as supply and demand conditions change.

Now is certainly a better time to invest in Rio Tinto shares than compared to the start of 2024. However, it’s still up by more than 10% over the last three months.

I think it’s a much better idea to buy ASX iron ore shares when the iron ore share is below US$110 per tonne and preferably below US$100 per tonne.

But, I like the moves the company is making to diversify and grow its operations.

It has made major plans to grow its exposure to copper, with the ASX mining share increasing its stake in the giant copper mine Oyu Tolgai in Mongolia.

According to Rio Tinto, global demand for copper is set to grow by between 1.5% to 2.5% per year. Decarbonisation is a strong tailwind for this resource.

Using the forecasts on Commsec, it’s valued at 10x FY24’s estimated earnings with a possible grossed-up dividend yield of 8.6%.

The post The iron ore price is falling, is now a good time to buy Rio Tinto shares? appeared first on The Motley Fool Australia.

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

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