Category: Stock Market

When it comes to making an investment, it is always best to understand why some investors are bullish on an ASX share and why others are bearish.

Failure to do this could leave you nursing a heavy loss because of something you had not even considered to be a risk.

To give you an example of this, let’s take a look at BHP Group Ltd (ASX: BHP) shares.

Bullish and bearish factors

Fortunately, in a recent note from Morgans, its analysts have laid out three bull points and three bear points for investors to consider.

Let’s start with its bull points. These include its exposure to China’s reopening, its production growth plans, and its relative safety. In respect to the former, it commented:

BHP’s quality and robust fundamentals positions it as a key way to play a recovery in China’s COVID-impacted growth. We also see this fueled by BHP’s basket of commodity exposures. This could also benefit from an improvement in ex-China world fears of a global recession.

As for production growth, the broker said:

BHP is alone amongst the major iron ore miners in planning meaningful production growth. We expect it will get the required approvals to expand to 330mtpa in the medium term. While Jansen (potash) continues to shape up as a solid fifth pillar.

Finally, another reason to be bullish on BHP shares is the broker’s view that the Big Australian is a safer than average option in the mining sector. It adds:

BHP’s operational performance has shown considerable resilience against current sector headwinds. While its balance sheet and dividend profiles are supportive.

Bearish points

A few bearish points for investors to consider before buying BHP shares include a potential turn in the mining cycle, M&A appetite, and cost pressures. On the first point, it commented:

Every cycle is different, and the changing of cycle phases is only usually obvious when it is in the rear vision mirror. A significant slowdown in China, combined with the risk of a global recession, should not be taken lightly, and could materially impact BHP’s earnings if metal prices weaken.

And while its point about M&A activity isn’t as relative now its acquisition of OZ Minerals is signed and sealed, it is food for thought for future deals. It said:

BHP may increase its offer for OZL, but there is a risk it continues to get more aggressive in layering in new growth into its business.

Finally, the broker feels investors should consider cost inflation and how that could impact its operations. It concludes:

Inflationary pressures across BHP’s global business have proven volatile over the last 6 months, and may not moderate the way we had hoped, impacting margins.

Should you buy?

Based on the sum of the above and the current valuation of BHP shares, Morgans believes the risk/reward is favourable for investors.

As a result, it has given BHP shares the equivalent of a buy rating with a $50.40 price target.

The post Bull and bear factors impacting BHP shares appeared first on The Motley Fool Australia.

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More reading

• Looking to buy ASX 200 iron ore shares? Here are 5 reasons not to
• Top brokers predict BHP shares to surge past $50 again in 2023
• Morgans says ‘attractive buying opportunity’ coming for BHP shares
• 3 ASX 200 stocks brokers just upgraded to ‘buy’
• Top brokers name 3 ASX shares to buy 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 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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Warren Buffett is one of the richest people on earth, commanding a net worth of nearly US$115 billion today, according to Forbes.

But that wasn’t always the case. Indeed, he famously amassed 99% of his wealth after his fiftieth birthday.

The billionaire behind Berkshire Hathaway made the most of his fortune by investing in the stock market – earning him the title ‘Oracle of Omaha’ and admiration from value investors everywhere.

That’s why I’d turn to Buffett wisdom if I had no savings and an ambition to build wealth.

First things first

If I had absolutely nothing in the bank and a desire to invest in the stock market, the first thing I’d do is assess my financial situation. That means making a budget.

From there, I’d commit to setting aside a certain amount each week or month, even if it doesn’t seem like much.

Initially, that cash would go towards paying off high-interest debt and building a safety net in case of emergency.

Only after that would I use my spare money to consistently invest in ASX shares capable of growing over the years and decades to come.

Warren Buffett looks to the horizon

You’ve likely heard the phrase ‘money doesn’t grow on trees’. Similarly, wealth is rarely built overnight.

It makes sense, then, that Buffett is famously a long-term investor. In fact, he’s held some of his best investments for two decades. He once said:

I buy on the assumption that they could close the market the next day and not reopen it for five years.

That means buying shares in companies you truly believe can outperform over the long term when they’re trading at attractive prices.

To follow in Buffett’s footsteps, I’d personally look for stocks that offer competitive advantages over their peers, boast a strong balance sheet, and have the potential to grow.

Diversification is key

But, since investing in just one such share brings some major risks, I’d also aim to build a portfolio of diverse ASX shares.

That way, if a single company or sector experiences a major downturn, it won’t drag my whole portfolio down with it.

It’s the same idea for the winners. By investing in a variety of shares, I stand more of a chance to find myself holding the market’s next big success story. As Buffett said earlier this year:

The weeds wither away in significance as the flowers bloom. Over time, it takes just a few winners to work wonders.

Finally, Warren Buffett takes advantage of compounding

Albert Einstein is widely quoted as having dubbed compound interest “the eighth wonder of the world” and Buffett has attributed his fortune, in part, to the phenomenon.

Compound interest (or compounding) is, to put it simply, realising gains on your gains.

By reinvesting your earnings – or dividends – back into the stock market, it’s possible to realise more returns without forking out additional cash.

It’s a powerful wealth-building tool that requires a decent degree of patience. Indeed, the final quote I’ll leave you with comes not from Buffett, but from Berkshire Hathaway vice chair Charlie Munger, who once said:

The first rule of compounding: Never interrupt it unnecessarily.

The post No savings? I’m using the Warren Buffett method to build wealth from scratch appeared first on The Motley Fool Australia.

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More reading

• 6 excellent ASX 200 dividend shares that aren’t banks or miners
• 3 top quality ETFs for ASX investors to buy and hold for 10 years
• These were the best-performing ASX 200 shares in April
• Dividend income beasts: 2 ASX 200 shares offering big yields
• Looking to buy ASX 200 iron ore shares? Here are 5 reasons not to

Motley Fool contributor Brooke Cooper 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 Berkshire Hathaway. The Motley Fool Australia has recommended Berkshire Hathaway. 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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Believe it or not, the S&P/ASX 200 Index (ASX: XJO) is not a very diverse universe of 200 businesses.

The finance (27.1%) and materials (25.6%) sectors together make up more than half of the index weight, according to S&P Global.

“According to Morgan Stanley, Australian retail investors own roughly 48% of the big four [banks]’s float as of late 2022,” the Global X Research team said on a blog post.

“Miners made up the majority of the top 10 most purchased shares on CommSec and CMC – the two largest retail brokerage platforms by market share – over the past 12 months. 

This means that if you already own shares in an exchange-traded fund (ETF) that tracks the ASX 200, you are already substantially invested in these industries.

So when it comes to picking specific dividend shares, it might be worth diversifying away from banks and miners.

Earnings sustainability leads to the ‘best income producers’

Shaw and Partners portfolio manager James Gerrish was recently asked what his favourite dividend stocks are outside of finance and resources.

Firstly, he warned high yields don’t always make the best investments.

“Important to recognise that we don’t simply look at the size of the dividend,” Gerrish said in a Market Matters Q&A.

“We focus more on the sustainability of the underlying earnings and that will generally translate into good income over time.”

With that caveat, he named these six stocks as the best income producers:

ASX 200 stock	Dividend yield
Telstra Group Ltd (ASX: TLS)	3.72%
Wesfarmers Ltd (ASX: WES)	3.59%
Metcash Limited (ASX: MTS)	5.63%
Centuria Capital Group (ASX: CNI)	6.49%
APA Group (ASX: APA)	5.1%
AGL Energy Limited (ASX: AGL)	2.1%

Gerrish’s team doesn’t currently own shares in APA Group or AGL, but would buy into them if a dip came along.

Both Telstra and Wesfarmers have already performed strongly this year, gaining 9.75% and 14.8%, respectively, year to date.

Grocery provider Metcash has risen 2.5% this month, while Centuria has rocketed 13.25%.

The post 6 excellent ASX 200 dividend shares that aren’t banks or miners appeared first on The Motley Fool Australia.

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More reading

• Why did the Wesfarmers share price perform so well in April?
• Bought Telstra shares last June? Guess what kind of dividend yield you’re earning today
• Brokers name 3 ASX shares to buy now
• Here are the 3 most heavily traded ASX 200 shares on Thursday
• ‘Well placed for strong growth’: 3 ASX 200 shares that hit the spot right now

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended APA Group, Telstra Group, and Wesfarmers. The Motley Fool Australia has recommended Metcash. 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 think that buy and hold investing is one of the best ways to take advantage of the magical power of compounding and grow your wealth over the long term.

However, not everyone has the time to research which ASX shares might be good buy and hold options.

But don’t worry if you fall into that category, because there is a solution – exchange traded funds (ETFs).

ETFs allow investors to buy large groups of shares from different indices, sectors, or countries in one fell swoop. This could make them a great choice for anyone that is short on time but wants to put their money to work in the share market.

With that in mind, listed below are three excellent ASX ETFs that could be top buy and hold options for investors. They are as follows:

BetaShares NASDAQ 100 ETF (ASX: NDQ)

The BetaShares NASDAQ 100 ETF could be a top buy and hold option for investors. You only need to look at the shares included in the fund to understand why. Among its 100 holdings are some of the highest quality companies in the world. This includes Google parent Alphabet, Amazon, Apple, Facebook owner Meta, Microsoft, and Tesla.

VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT)

Another ASX ETF that could be a top buy and hold option is the VanEck Vectors Morningstar Wide Moat ETF. It provides investors with easy access to a group of shares that have fair valuations and sustainable competitive advantages or moats (hence its name). The ETF generally comprises approximately 50 companies with these qualities. At present, this includes the likes of Adobe, Alphabet, Boeing, Kellogg Co, Meta, and Walt Disney.

Vanguard MSCI Index International Shares ETF (ASX: VGS)

Finally, the Vanguard MSCI Index International Shares ETF could be another great buy and hold option for investors. This popular ETF gives investors access to approximately 1,500 of the world’s largest listed companies, which provides significant diversity for a portfolio. There are a good number of global giants held by the ETF. This includes Amazon, Apple, Nestle, Procter & Gamble, Tesla, and Visa.

The post 3 top quality ETFs for ASX investors to buy and hold for 10 years appeared first on The Motley Fool Australia.

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More reading

• 3 top ASX ETFs hitting new 52-week highs on Friday
• Sunk $5,000 into the Betashares Nasdaq 100 ETF (NDQ) in 2020? Here’s how much passive income your investment has provided
• 3 highly rated ETFs for ASX investors to buy in May
• I think this underrated reason is key to why ETFs can be great investments
• 3 quality ASX ETFs for investors to buy for the long term

Motley Fool contributor James Mickleboro has positions in BetaShares Nasdaq 100 ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended BetaShares Global Cybersecurity ETF and BetaShares Nasdaq 100 ETF. The Motley Fool Australia has positions in and has recommended BetaShares Global Cybersecurity ETF and BetaShares Nasdaq 100 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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It was a volatile but positive month for the S&P/ASX 200 Index (ASX: XJO) in April. Over the period, the benchmark index recorded a decent 1.8% gain to finish at 7,309.2 points.

While a good number of ASX 200 shares climbed with the market, some recorded stronger gains than others.

For example, the shares listed below smashed the market after launching higher in April. Here’s why they were on fire:

Megaport Ltd (ASX: MP1)

The Megaport share price was the best performer on the ASX 200 index in April with a 37% gain. Interestingly, this network services company’s shares were on course to record a disappointing monthly decline until the final trading day of the month. However, the release of a surprisingly positive quarterly update appears to have caused a short squeeze and led to Megaport’s shares rocketing over 40% higher on Friday.

Blackmores Ltd (ASX: BKL)

The Blackmores share price wasn’t far behind with a gain of 35% in April. This was driven by news that Japan’s Kirin has tabled a $95 cash per share takeover offer for the health supplements company. Blackmores has accepted the offer and will now let shareholders vote on it at an upcoming meeting. The deal values Blackmores at $1.85 billion.

Pointsbet Holdings Ltd (ASX: PBH)

The Pointsbet share price was on form and charged 27% higher last month. Investors were buying this sports betting company’s shares amid speculation that it will soon offload some of its operations. The most recent speculation is that PointsBet could sell its US operations for US$500 million and keep hold of its Australian arm. This would be more than its current market capitalisation.

Corporate Travel Management Ltd (ASX: CTD)

The Corporate Travel Management share price was also a strong performer and rose 16% over the period. A key driver of this was the announcement of a major contract win. The corporate travel specialist won the Bridging Accommodation and Travel Services contract from the UK Home Office. Management estimates it to be worth nearly £1.6 billion in total transaction volume (TTV) over two years, which equates to approximately $3 billion Australian dollars.

The post These were the best-performing ASX 200 shares in April appeared first on The Motley Fool Australia.

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More reading

• Looking to buy ASX 200 iron ore shares? Here are 5 reasons not to
• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Friday
• Another ASX company to disappear
• Why Appen, Megaport, Mirvac, and Pilbara Minerals shares are pushing higher 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 Megaport and PointsBet. The Motley Fool Australia has recommended Blackmores, Corporate Travel Management, Megaport, and PointsBet. 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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Some S&P/ASX 200 Index (ASX: XJO) shares are real dividend income beasts in my opinion, with a history of paying good dividends and a desire to grow the payment to shareholders.

A business from any industry can make a profit, but what they decide to do with that profit can make a big difference to investors. Some of these names pay investors excellent dividend yields, making them attractive for passive income investors.

One of the most useful things about a fall in the share price is that it boosts the prospective dividend yield, which is exactly what’s happening with the below names.

Centuria Industrial REIT (ASX: CIP)

This is a real estate investment trust (REIT) that describes itself as Australia’s largest domestic pure-play industrial REIT.

The industrial properties are spread across metropolitan locations throughout Australia and are underpinned by a “quality and diverse tenant base”.

The ASX 200 share aims to provide investors with income and an opportunity for capital growth. At the end of the FY23 half-year period, it had 88 industrial assets worth $3.9 billion, according to Centuria.

Its leasing statistics are strong – it had a weighted average lease expiry (WALE) of 8.1 years, with a high portfolio occupancy of 98.7%. According to Centuria sources, the Australian industrial vacancy rates are among the lowest in the world, at just 0.6%. This can support “strong market rent growth”.

Increased interest rates could put pressure on its rental profits, but rental growth is helping offset this. Property values could fall, but the Centuria Industrial REIT share price is down around 20% in the last year, which could account for any future property valuation declines.

Its guided FY23 payout of 16 cents per unit amounts to a distribution yield of 5.1%, making it a dividend income beast in my eyes.

Pinnacle Investment Management Group Ltd (ASX: PNI)

Pinnacle identifies and works with high-performing fund managers to help them grow their own investment businesses.

The ASX 200 share takes a substantial stake and can help the fund manager with services like distribution and client services, compliance, finance, legal, technology, seed funds under management (FUM) and working capital, enabling the fund manager to focus more on the investing side of things.

The calendar year of 2022 was tough for the business and the underlying fund managers as asset markets declined. But, with interest rate rises seemingly (almost) coming to an end in the US and Australia, this could be a positive for FUM and investors willing to put more to work with one of Pinnacle’s partners.

The company has also been investing to help fund its next ‘horizon’ of growth. The benefits could be seen over the next few years.

Does it count as a dividend income beast? I think so, if we look ahead to FY25 with projections on Commsec – when the share market recovery may have well and truly started – Pinnacle shares could pay a grossed-up dividend yield of around 7%. It’s valued at just 16 times FY25’s estimated earnings.

The post Dividend income beasts: 2 ASX 200 shares offering big yields appeared first on The Motley Fool Australia.

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More reading

• Why I think it’s a great time to start buying ASX growth shares
• Here are the top 10 ASX 200 shares today
• Are these ASX All Ords shares ready to buy at fundamentally fire sale prices?
• For $750 in monthly passive income, buy 56,250 shares of this ASX 200 stock
• 3 big dividend-paying ASX shares for 2023

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 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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When it comes to ASX 200 investors, the big iron miners are some of the most popular shares around. ASX 200 iron ore shares like BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG) are also some of the largest public Australian companies.

What’s more, most of these iron ore shares have been stellar performers on the ASX over the past couple of years. Rio, BHP and Fortescue have all outperformed the S&P/ASX 200 Index (ASX: XJO) since the start of 2022, as you can see below:

Performance of ASX 200 iron ore shares against the ASX 200 since January 2022

But just because miners are large and popular investments, and have outperformed the market in the past, doesn’t mean they are automatically good buys today.

In fact, one expert reckons ASX investors should be avoiding ASX 200 iron ore shares right now.

Stay away from ASX 200 iron ore shares: Expert

According to reporting in the Australian Financial Review (AFR) this week, Liberium Capital has predicted weakness across the iron ore sector going forward.

In a note to investors, Liberium said there was more weakness in major iron ore consumer China’s ore-to-steel supply chain than at any time since 2012.

Liberium has identified five reasons why iron ore prices could remain under pressure going forward:

1. Weak industry demand
2. Inventory stocking in 2023 has concluded
3. Steel production caps in China
4. Efforts from Chinese authorities to ‘check’ price speculation
5. A supply recovery from miners themselves.

How low might prices go?

Libereum sees a combination of these factors pulling down the iron ore price to US$89 per tonne in 2024, then US$85 per tonne in 2025 and finally to US$71 per tonne in 2026.

Right now, the industrial metal is going for almost US$104 per tonne.

If these scenarios came to pass, it would be obviously bad news for the earnings of BHP, Rio and Fortescue – and, by extension, their dividends.

The monstrous and unprecedented dividends that investors have enjoyed from ASX 200 iron ore shares over the past two years or so were fuelled by iron ore rocketing above US$200 a tonne back in 2021.

An iron ore price of US$71 wouldn’t be a death knell for BHP, Rio or Fortescue, to be sure. These companies have had to deal with even lower iron prices in the past. But it would certainly dent their profits, dividends and (probably) share prices.

We’ll have to wait and see what the global economy does for iron ore prices going forward. Commodity prices are notoriously difficult to predict, after all. But these projections from Liberium Capital warrant some consideration from ASX 200 iron ore share investors nonetheless.

The post Looking to buy ASX 200 iron ore shares? Here are 5 reasons not to appeared first on The Motley Fool Australia.

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More reading

• These are the ASX 200 lithium shares to buy due to a new ‘game changing’ technology
• Did Fortescue really just buy 60,000 sheep?
• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Friday
• Rio Tinto share price rises amid rare earths acquisition

Motley Fool contributor Sebastian Bowen 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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There are a number of ways that readers can generate passive income. But of all the options, I continue to believe that the share market is the best place to do it.

It’s not just me that feels this way. For many, many years people around the world have been doing exactly this and there’s nothing to stop you from doing the same.

And while there are risks involved with the share market, you can mitigate them through careful research and planning, leaving you in a position to put your money to work for you, generating a steady stream of income that can help you achieve your long-term financial goals.

How to generate passive income

One way to generate passive income through the share market is to invest in high-yielding ASX dividend shares. These are companies that pay out a good portion of their earnings to shareholders in the form of dividends. By investing in these types of shares, you can receive regular payments without having to sell your shares.

Though, before you go jumping into any old high-yielding ASX dividend share, it’s important to do your research and choose the right ones to invest in. The last thing you want to do is fall into a dividend trap. That’s where investors get lured into buying shares in a troubled company on the belief that a big dividend is coming, only for that company to slash its dividend.

Investors ought to look for companies with a strong track record of paying dividends and a history of steady growth. You should also consider the company’s financial health, including its debt levels, cash flow, and profitability, to ensure that its dividends are sustainable.

What else should you know?

It is worth noting that you don’t always have to buy high-yield ASX dividend shares. Especially if you have time on your side. Buying lower yielding shares with the potential to grow their dividends materially over the long term can also be an effective way to grow your passive income.

For example, CSL Limited (ASX: CSL) shares offer new buyers a paltry dividend yield of just 1%. However, if you had bought its shares 20 years ago when they were changing hands for $15.00, CSL’s forecast dividend of $4.22 per share in FY 2024 would represent a yield on cost of 28%.

This means that if you had invested $20,000 into this ASX share two decades ago, you would receive $5,600 of passive income in the form of dividends next year. You also have the capital gains to cash in should you wish.

Overall, there are plenty of opportunities to generate passive income from the share market. You just need to come up with a plan and put it into action. Then sit back and wait for the pay checks to come rolling in.

The post This is how you can generate passive income in May appeared first on The Motley Fool Australia.

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More reading

• Why did the CSL share price smash the ASX 200 in April?
• Better ASX 200 healthcare share: CSL vs. Resmed
• Here’s why analysts rate these strong blue chip ASX 200 shares as buys
• The CSL share price is a sleeping dividend giant. Here’s why
• Which stocks does Warren Buffett own (and what can ASX 200 investors learn from this)?

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 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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A change is coming in the lithium industry due to the development of a new technology and a couple of ASX 200 lithium shares could benefit more than most.

That technology is direct lithium extraction (DLE) technology, which Goldman Sachs believes could be “game changing” for the industry.

In fact, the broker has suggested that the technology could do for lithium what shale did for oil. Goldman commented:

Much like shale did for oil, DLE has the potential to significantly increase the supply of lithium from brine projects, nearly doubling lithium production/yield (taking recoveries from 40-60% to 70-90%+) and improving project returns, though with the added bonus of offering sustainability benefits and ESG credentials for its implementors (land usage from lack of ponds declines >20x, water usage and metrics improve on potential brine reinjection), while also widening (rather than steepening) the lithium cost curve.

How do investors benefit with ASX 200 lithium shares?

As you might have realised by now, this technology is used on brine projects and not in lithium mines.

It is for this reason that Goldman Sachs prefers “briners over miners” right now and is recommending investors buy ASX 200 shares Allkem Ltd (ASX: AKE) and Rio Tinto Ltd (ASX: RIO) for exposure to lithium. It explained:

We prefer briners over miners in the lithium sector over the medium term, with DLE offering significant potential to increase lithium output on improved recoveries and lift project economics. We reiterate our Buy ratings on Allkem/RIO (on CL)/Qinghai.

In respect to Allkem, the broker believes that DLE could potentially add US$500 million or $1.20 per share to its valuation if successfully implemented. It explains:

Technologies are being reviewed that may see an increase in plant recovery from ~75% to ~95% at both Olaroz Stages 1 and 2 (total recovery ~60% including ponds), without the need for additional ponds or pumping of more brine. […]  While we don’t include the enhanced brine recovery in our base case (pending results of testing), our analysis suggests that increasing recoveries from 75% to 95% from FY26E at Olaroz would drive a >US$500mn increase in our Olaroz NAV or ~A$1.20/sh (on our long run pricing). Possible future expansions at Sal de Vida may also benefit from DLE technologies.

As for Rio Tinto, Goldman sees a lot of potential in the technology on its Rincon project in Argentina. It notes that the “pilot plant is currently operating at the Rincon site and further work will focus on continuing to optimise their proprietary DLE process and recoveries.”

Time will tell what happens, but these are interesting times for ASX 200 lithium shares and the industry as whole.

Incidentally, Goldman currently has a buy rating and $12.90 price target on Allkem shares and a conviction buy rating and $136.20 price target on Rio Tinto shares.

The post These are the ASX 200 lithium shares to buy due to a new ‘game changing’ technology appeared first on The Motley Fool Australia.

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• Here are the top 10 ASX 200 shares today

Motley Fool contributor James Mickleboro has positions in Allkem. 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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Two ASX lithium shares have attracted big buying activity from a United States institutional investor.

Substantial holding disclosures lodged with the ASX in recent days reveal State Street Corporation has bought large positions in Pilbara Minerals Ltd (ASX: PLS) and Lake Resources N.L. (ASX: LKE) shares.

It has also sold some positions in Liontown Resources Ltd (ASX: LTR) shares.

What does this say to ordinary investors? Let’s consider it together.

What’s behind these moves in ASX lithium shares?

Firstly, a quick word on how institutional, or ‘insto’, investors operate.

The first thing to know is that instos tend to duck and weave in and out of ASX shares constantly.

They spend all day, every day analysing stocks, and they make numerous trades to capitalise on their expectations of significant short-term movements in share prices — in either direction.

Because they are investing huge sums of money at any given time, just a few cents of upward movement in a particular ASX share can be enough to deliver a considerable profit.

As the instos duck and weave, they will occasionally breach the 5% shareholding mark. This turns them into a ‘substantial holder’, which has to be declared on the ASX for all other investors to see.

Once they’re a substantial holder, the ASX has to be informed of any changes in their holdings. So, we ordinary investors gain some insights into what the instos are thinking from their trading activity.

Generally speaking, institutional investor activity can give us an idea of whether a stock has good potential for growth or not. We can also glean at what price a given stock is a buy and a sell.

The insto we’re looking at for the purposes of this article is American investment management giant, State Street. A survey of ASX lithium shares shows activity by State Street on three particular stocks.

We can only guess as to why State Street is targeting them. But there are some fairly obvious possibilities.

Why is it selling Liontown shares?

State Street has been in and out of Liontown shares for a while, but its most recent trades were sales.

Why? Well, it could be a case of simple profit-taking.

The Liontown share price has skyrocketed by 80% since the mid-cap miner announced receipt of another takeover bid from US lithium giant Albemarle (NYSE: ALB) in late March.

This month, the ASX lithium share has reset its record-high price several times. It hit a peak of $2.84 last Wednesday.

In its latest moves on Liontown, State Street became a substantial holder with 117,923,115 shares to its name — a 5.36% stake — on 28 March.

Now that was an important day. Prior to the market open that day, Liontown announced it had received and rejected the Albemarle offer.

As my Fool colleague James reported on the day, the share price screamed about 60% higher and closed at $2.57. Clearly, at some point during the day, State Street thought there was more room for growth and it bought the stock. The disclosure does not say what price State Street paid.

State Street held its position in Liontown shares for about two weeks.

On 12 April, the Liontown share price opened at $2.66 and went as high as $2.74. State Street decided to sell enough of the ASX lithium share on this day to cease being a substantial holder. The disclosure does not say at what price State Street sold some of its holdings.

At the time of writing, State Street is no longer a substantial holder of Liontown shares. That doesn’t necessarily mean it has sold out completely. It just means it no longer holds 5% or more.

Incidentally, Liontown released its March quarter cash flow and activities report today.

Why is it buying Pilbara Minerals and Lake Resources shares?

State Street has also been ducking and weaving on these two ASX lithium shares.

Pilbara Minerals is an established Australian-based producer, while Lake Resources is still building its flagship project mine in Argentina called the Kachi Project.

Lake seeks to establish itself as a ‘clean’ producer of lithium through the use of DLE technology. The company hopes this will make it more appealing than the rest to ESG-focused customers and investors.

In State Street’s latest move, it became a substantial holder of Lake Resources shares on 19 April with a 5.01% stake.

It increased its stake to 6.03% on 24 April.

This is significant because it occurred three days after news of the Chilean Government’s decision to nationalise its lithium industry and take a controlling stake in all local producers.

This news rattled investors holding ASX lithium shares with operations in South America.

Lake Resources’ Kachi Project is in neighbouring Argentina. Investors were worried that perhaps Argentina might think Chile’s move is a great idea.

But State Street still went ahead and bought an additional 15 million shares, so that’s a good sign.

Perhaps it sees good promise in the company, which recently announced the “major milestone” of first production of 2,500 kilograms of lithium carbonate equivalents (LCE) at its demonstration plant.

Maybe State Street also thinks it’s an opportune time to buy after an 80% fall in the Lake Resources share price over the past 12 months.

By the way, Lake Resources also released its March quarter report today.

In relation to Pilbara Minerals shares, State Street’s latest moves have also been purchases.

State Street became a substantial holder with a 5.79% stake on 16 December. Pilbara Minerals shares opened at $3.95 that day and closed at $4.10.

State Street then upped its holding to 6.79% on 19 April. The movement in the Pilbara Minerals share price was almost exactly the same on this day, opening at $3.95 and closing at $4.09.

What’s the appeal of this particular ASX lithium share for State Street?

Well, Pilbara Minerals is a changed company after announcing its first profit ever in its full-year FY22 results in August last year.

It followed this up with further growth across all major financial metrics in its half-yearly FY23 results released in February.

This included the declaration of its maiden dividend of 11 cents per share, fully franked.

The company also released its March quarter report this week.

The post 2 ASX lithium shares this US institutional investor is buying up big (and one it’s selling) appeared first on The Motley Fool Australia.

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More reading

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• Here are the 3 most heavily traded ASX 200 shares on Friday
• Why Appen, Megaport, Mirvac, and Pilbara Minerals shares are pushing higher today
• Making it rain: Could this signal a boom for ASX 200 lithium stocks?
• Lake Resources share price spikes 5% on quarterly update

Motley Fool contributor Bronwyn Allen 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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