Category: Stock Market

The Rio Tinto Ltd (ASX: RIO) share price has gone up slightly after the ASX mining share revealed an appealing acquisition in the scandium space.

In the last few years, Rio Tinto has been looking to grow its exposure to materials that are essential for the low-carbon transition. Copper and lithium have taken the headlines, but now it’s expanding with a different commodity.

Rio Tinto acquires Platina scandium project

The ASX mining share has spent $14 million to buy the Platina scandium project, based in New South Wales, from Platina Resources Limited (ASX: PGM).

The project is located near Condobolin in central New South Wales, which is a “long life, high-grade scalable resource that could produce up to 40 tonnes per annum of scandium oxide, for an estimated period of 30 years.”

This isn’t a complete new commodity for Rio Tinto – it currently produces scandium oxide from titanium dioxide production waste streams at Sorel-Tracy in Quebec. But, once the Platina project is operational, it would enable the business to more than double its annual scandium production.

What’s so good about scandium?

Rio Tinto explained that scandium is a “rare, versatile and use mineral” which is important for the ‘green’ economy and the energy transition. Countries like the US, Canada and Australia believe it’s a critical mineral.

Scandium is very effective at strengthening aluminium, while also improving “flexibility and resistance to heat and corrosion.” It is used in applications like aerospace, automotive, heat exchangers, sporting goods, 3D printing and energy transmission applications.

The mineral can also be used to improve the performance of solid oxide fuel cells which are used as a “green power source for buildings, medical facilities and data processing centres, as well as in niche products such as lasers and lighting.”

Rio Tinto pointed out that with its aluminium businesses, it’s “well-positioned to produce more high-performance aluminium-scandium alloys to meet global customers’ needs.”

Executive comments

Rio Tinto’s minerals CEO Sinead Kaufman said:

This acquisition supports our commitment to critical minerals and finding better ways to provide materials the world needs.

It will enable us to further develop and grow with the global scandium market, complementing our existing scandium production in Quebec, where we have the expertise, technology and capacity to produce pure, highly reliable scandium through sustainable methods.

Foolish takeaway

While this is an exciting development for Rio Tinto, it may not be surprising that the Rio Tinto share price hasn’t moved much considering it’s a $14 million acquisition by an ASX mining share worth many billions of dollars.

The post Rio Tinto share price rises amid rare earths acquisition appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#43B02A”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43B02A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Buy these ASX shares with big dividend yields: brokers
• Why Allkem, Blackmores, Helloworld, and St Barbara shares are charging higher
• Why has the Rio Tinto share price dived 9% in 5 days?
• Investing in ASX 200 mining stocks? Here’s Citi’s latest iron ore price forecast
• Want to buy ASX 200 mining shares? Goldman Sachs says these are top buys

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.

from The Motley Fool Australia https://ift.tt/obMmHLP

It’s been a fairly positive day for ASX shares and the share market so far this Friday. At present, the All Ordinaries Index (ASX: XAO) has risen by a healthy 0.39%, pulling it back over 7,500 points. But it’s a very different story when it comes to All Ords tech share BrainChip Holdings Ltd (ASX: BRN).

The BrainChip share price is having a shocker today. The company closed at 42 cents a share yesterday but opened at 38 cents this morning before falling as low as 35 cents a share (down 16.67%). That’s a new 52-week low for Brainchip. 

The shares have recovered somewhat at the time of writing, but are still trading at 38 cents each, down a nasty 8.43%.

So what on earth is going on with Brainchip today that would elicit such a dramatic slump in value?

Well, it seems the culprit is the quarterly cash flow announcement Brainchip has released to investors today.

Over the three months to 31 December 2022, Brainchip reported that it had experienced net cash outflow of US$1.9 million. But in the quarter ending 31 March 2023, this spiked to an outflow of US$6.3 million.

This wasn’t helped by the fact that cash inflows from customers were US$41.1 million for the December quarter, but just US$0.04 million (read US$40,000) for the March quarter.

Brainchip ended March with a cash balance of US$17.7 million, down from US$23.1 million on 31 December.

Brainchip share price snapshot

Just yesterday, we discussed what was then a new 52-week low for Brainchip. At the time, we noted the high short-seller interest in the Brainchip share price, and what it would take for the shares to either jump higher or lower.

Investors knew this cash flow report was due this week, so it seems many were taking a bet that it would be bad news. Well, the shorts have certainly been proven right here. Brainchip shares are now down 49% in 2023, and down by around 58.5% over the past 12 months:

The company has also lost a painful 80% or so of its value since the all-time highs of close to $2 a share we saw way back in early 2022.

At the current Brainchip share price, this All Ords tech share has a market capitalisation of $742.16 million.

The post Why did the BrainChip share price crash 16% today? appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Here are the top 10 ASX 200 shares today
• BrainChip share price sinks to multi-year low. What now?
• How ASX short sellers have been cashing in on BrainChip shares in 2023
• Why Brainchip, Domain, Star, and Tietto shares are dropping today
• Capital deities and destroyers: The best and worst at putting money to work among ASX 200 shares

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.

from The Motley Fool Australia https://ift.tt/0CkJdnh

It’s looking like the S&P/ASX 200 Index (ASX: XJO) and ASX shares are on track to end the trading week on a positive note so far this Friday.

At the time of writing, the ASX 200 has gained a rosy 0.45%, pulling the index back above 7,320 points. But some exchange-traded funds (ETFs) on the ASX today are doing even better than that.

In fact, three top ASX ETFs have just hit new 52-week highs today. Let’s discuss.

It’s Friyay for these 3 ASX ETFs at new 52-week highs

First up, we have the Vanguard MSCI Index International Shares ETF (ASX: VGS). This comprehensive ETF from Vanguard has climbed more than 1% today and is currently trading at $101.60 a unit. But earlier this morning, this ETF touched a new high of $101.85 a unit. Not only is that a new 52-week high, but the highest VGS units have traded at since February 2022.

Then we have the iShares S&P 500 ETF (ASX: IVV). The S&P 500 Index is the flagship index covering the US share market. The iShares S&P 500 ETF is also climbing today, currently up by 1.32% at $41.52 a unit. Earlier this morning, we saw this fund climb to a new 52-week high of $41.55. Again, we’d have to go back to early 2022 to find the last time this ASX ETF was at these kinds of levels.

Finally, we have the BetaShares NASDAQ 100 ETF (ASX: NDQ). Another US-focused ETF, this NASDAQ-tracking fund has lifted by 1.66% at present to $30.65 a unit. But NDQ units were slightly above this price earlier today, hitting a new 52-week high of $30.66 a unit this morning.

So all of these ETFs are having a top end to the trading week so far. But what do they all have in common? It can’t just be a coincidence that three ASX ETFs all hit new 52-week highs on the same day.

US tech stocks drive new highs

Well, these three ETFs all share one important trait – they are dominated by the US’s largest tech companies.

Looking at the Vanguard International Shares ETF, its current largest three holdings are Apple Inc (NASDAQ: AAPL), Microsoft Corporation (NASDAQ: MSFT) and Amazon.com Inc (NASDAQ: AMZN).

These three largest holdings are exactly mirrored (albeit with slightly different weightings) in the iShares S&P 500 ETF. In the BetaShares NASDAQ 100 ETF’s case, Apple and Microsoft’s positions have been swapped, but the song remains the same.

Each of these ETFs also features NVIDIA Corporation (NASDAQ: NVDA), Meta Platforms Inc (NASDAQ: META) and Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL) at the top of their respective holdings too.

Over on the US markets last night, most of these American tech giants had a stellar time. Apple stock was up a healthy 2.84%, while Microsoft rose by 3.2%. Amazon shares were up by 4.61%, while Meta (the owner of Facebook and Instagram) rocketed a whopping 13.93% and hit a new 52-week high of US$241.68. A well-received earnings report sparked this massive share price spike.

With these top holdings in our ETFs performing so impressively last night, it’s perhaps no surprise to see all three funds notch new 52-week highs this Friday.

 

The post 3 top ASX ETFs hitting new 52-week highs on Friday appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• 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
• I’m a dividend investor. Should I buy the iShares S&P 500 ETF (IVV)?
• 3 reasons why the Vanguard MSCI Index International Shares ETF (VGS) could be an excellent investment for beginners

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Motley Fool contributor Sebastian Bowen has positions in Alphabet, Amazon.com, Apple, Meta Platforms, and Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon.com, Apple, BetaShares Nasdaq 100 ETF, Meta Platforms, Microsoft, Nvidia, and Vanguard Msci Index International Shares ETF. The Motley Fool Australia has positions in and has recommended BetaShares Nasdaq 100 ETF. The Motley Fool Australia has recommended Alphabet, Amazon.com, Apple, Meta Platforms, Nvidia, Vanguard Msci Index International Shares ETF, and iShares S&p 500 ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/VfUEYdM

Blackmores Ltd (ASX: BKL) shares are trading in a fairly tight range today.

Shares in the vitamin and health supplement manufacturer are up 0.2% at the time of writing to $94.48.

That’s just below the $95 per share takeover offer lobbed by Japan’s Kirin Holdings Company yesterday. That offer values Blackmores at $1.85 billion.

Yesterday’s price action, as you may recall, was markedly different.

Following the takeover announcement, released before market open, Blackmores shares rocketed higher. The stock closed up 22.8% yesterday.

What’s happening with Blackmores shares?

Blackmores has officially entered into a scheme implementation deed with Kirin to acquire all of its shares.

That remains subject to the usual conditions, including approval from the Foreign Investment Board.

Blackmores’ board unanimously recommended shareholders support the scheme. If all goes to plan, management expects a court-convened shareholder meeting sometime in July.

Now, you may be wondering why a company best known for its beer is looking to acquire a vitamin company.

Kirin’s CEO Yoshinori Isozaki explained the benefits to his company of acquiring all of Blackmores shares.

“Blackmores presents an exciting opportunity to transform the scale and reach of our health science domain,” he said.

Isozaki said Kirin has been transforming itself from a brewing business “to the business model creating value across food & beverages and pharmaceuticals domains, based on the concept of creating shared value”.

Takeshi Minakata, director of Kirin’s board added:

We believe Blackmores will accelerate the transformation of our health science domain as both Kirin and Blackmores share a vision to improve people’s lives through our products as well as a commitment to quality, innovation and investment.

Kirin intends to maintain Blackmores’ headquarters and manufacturing operations in Australia.

What is the company’s largest shareholder saying?

Marcus Blackmore, the company’s largest shareholder, with some 18% of Blackmores shares, is a strong proponent of the scheme.

And he’s been less than pleased with the performance of the company that bears his name over the past few years.

Indeed, while last year’s performance ticked up, Blackmores shares are far below their $217.98 peak, reached on 31 December 2015.

According to Blackmore (quoted by The Australian):

We’ve certainly made some dramatic mistakes in the last four years where our earnings per share has gone from more than $4, and then at the AGM last year the board announced a ‘solid year and increased earnings per share to $1.25’.

Well, I accused the board of gilding the lily.

Blackmore said that kind of criticism had made him unwelcome at the company over the past two years.

As for why he supports the Kirin offer, he said, “I’ve had the opportunity of spending a lot of time with Kirin and I don’t have any doubt that they would be a good custodian of the brand.”

Blackmore added:

When people ask me why would I support a company like Kirin, that’s a beer company, I say, well, they’re trying to develop their health sciences division. They’ve already got the number one immunity product in Japan, they’ve got partial interest in other vitamin companies … so they’re not blind to the whole exercise and opportunity.

How have Blackmores shares been tracking?

While still far below their 2015 peak, Blackmores shares are now up 36% over the past year, aided by the big boost delivered from the Kirin takeover bid.

The post Here’s what’s happening with Blackmores shares following yesterday’s Kirin fuelled surge appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#43B02A”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43B02A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Here are the top 10 ASX 200 shares today
• 3 All Ords stocks rocketing over 10% on Thursday
• Why Allkem, Blackmores, Helloworld, and St Barbara shares are charging higher
• Blackmores share price rockets 22% on $1.9 billion takeover bid
• Here are the top 10 ASX 200 shares today

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

from The Motley Fool Australia https://ift.tt/pNJhfW0

Pilbara Minerals Ltd (ASX: PLS) shares are soaring today despite the company revealing tumbling lithium prices – and the downturn isn’t expected to ease for months.  

The S&P/ASX 200 Index (ASX: XJO) lithium giant updated the market on its quarterly performance yesterday evening, as The Motley Fool Australia reported earlier.

Shares in Pilbara Minerals are taking off right now, rising 4.67% to trade at $4.145.

Meanwhile, the ASX 200 is up 0.39%.

Let’s dive into the quarter just been, and what the company expects for the quarters to come.

Pilbara Minerals share price soars despite falling lithium prices

The Pilbara Minerals share price is in the green today. That’s despite the company’s realised spodumene concentrate sales price falling 15% quarter-on-quarter to around US$4,840 per dry metric tonne.

And that’s not expected to improve soon. The company believes pricing will continue to soften this quarter, before potentially strengthening in the second half of 2023.

Meanwhile, it lifted its full-year unit operating cost guidance to between $600 and $640 per dry metric tonne. That’s up from $580 to $610 a tonne.

However, looking longer-term, the company is still expecting big things from the battery-making material.

Speaking to shareholders and analysts this morning, Pilbara Minerals CEO and managing director Dale Henderson said the company remains “very positive on the structural deficit for lithium”.

There were two major trends bolstering its bullishness last quarter: Major investment in the space and electric vehicle uptake.

Pilbara Minerals ‘remains bullish’ on lithium long-term

Of course, ASX 200 lithium fans were likely overjoyed by a $2.50 per share takeover bid put to Liontown Resources Ltd (ASX: LTR) by giant Albemarle in March.

Other examples of cash being poured into lithium last quarter include General Motors’ US$650 million partnership with Lithium Americas and LG Energy Solution‘s multi-billion commitment to a battery manufacturing facility in North America.

Meanwhile, Henderson pointed to the long-term rise of EV sales in China and around the globe. He said it’s “the key consumption driver [of lithium] right now”.

However, a slump in adoption last quarter likely weighed on lithium prices. Chinese buyers seemingly turned away from EVs amid the end of government subsidies and heavy discounts on fossil fuel-powered vehicles ahead of the introduction of emission standards in the nation.

Still, the ASX 200 lithium producer is hopeful of long-term lithium pricing, with Henderson concluding:

Pilbara Minerals remains bullish on the at the long-term outlook for the market, and remains committed to our expansion and getting on with the job of developing this incredible tier 1 asset [the Pilgangoora Project] and enjoying, hopefully, strong margins from many quarters and many years to come.

How has the stock performed over the longer-term

Pilbara Minerals shares have outperformed the ASX 200 in recent months and years.

The stock has lifted 15% since the start of 2023. It’s also currently 55% higher than it was this time last year.

Meanwhile, the ASX 200 has gained 5% year to date and fallen 1% over the last 12 months.

The post Pilbara Minerals share price leaps 5% despite tumbling lithium prices appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Pilbara Minerals share price on watch following tough quarter
• 5 things to watch on the ASX 200 on Friday
• 5 things to watch on the ASX 200 on Thursday
• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• Here are the top 10 ASX 200 shares today

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 recommended General Motors and has recommended the following options: long January 2025 $25 calls on General Motors. 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.

from The Motley Fool Australia https://ift.tt/oYBCGbq

The Megaport Ltd (ASX: MP1) share price is off like a racehorse on Friday morning following the company’s third-quarter report.

Early into the trading day, shares in the software-defined network provider are fetching $5.59 – a staggering 40% above yesterday’s closing price. The move is a refreshing one for shareholders after enduring a debilitating 35% decline throughout this year prior to today, as shown below.

Fortunately, the market is rejoicing in the latest results. Let’s unpack the quarterly figures to understand why that might be.

Growing revenue and improving earnings

Before we dive into the thick of it, here are some of the high-level numbers posted by Megaport this morning:

• Total quarterly revenue up 38% year-on-year to $38.1 million
• Monthly recurring revenue (MRR) up 48% to $14.1 million
• Reported EBITDA swinging to a positive $7.2 million from a $12.1 million loss
• Total services added during the quarter of 607, down from 762 in the prior quarter
• Cash burn of $8.9 million from the third quarter with $48.6 million in cash remaining

Indicative of today’s response to the Megaport share price, it was a solid quarter for the on-demand cloud connector. Receipts from customers reached $40.9 million, marking an improvement of 14% compared to the prior quarter.

Furthermore, shareholders are possibly pleased to see Megaport’s management recognise and address issues that may have inhibited the company’s performance. For example, an operational review found the ‘Scale Up, Scale Out‘ did not produce the expected returns from the increased costs.

Following the review, management plans to implement strategy changes and reduce costs. As a result, management is now forecasting drastically improved EBITDA guidance for FY23 and FY24 compared to market consensus, bolstering the Megaport share price.

The updated forward guidance is as follows:

• FY23: Normalised EBITDA of $16 million to $18 million vs. $9 million consensus
• FY24: Normalised EBITDA of $41 million to $46 million vs. $30 million consensus

The improved earnings and cash flow mean management does not foresee the need to raise additional capital to further fund operations.

Why the rocket-like reaction to the Megaport share price?

It’s not every day a company leaps 40% or more — even on positive earnings — so why is the market responding in such extreme fashion to Megaport?

Well, as we covered on Monday, the technology company found itself on the most shorted ASX shares list once again this week. Racking up a mighty 11.2% short interest, Megaport was the second most-shorted share on the ASX heading into its quarterly report.

Likely many shorters are scampering to exit their positions and buy back shares to stem the bleeding today. In turn, the Megaport share price has behaved like a tightly compressed spring set free.

The post Megaport share price launches 40% higher amid rosy guidance appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• These are the 10 most shorted ASX shares this week
• Here are the top 10 ASX 200 shares today
• After steep falls, these ASX All Ords shares look dirt cheap to me
• These are the 10 most shorted ASX shares this week
• ‘Meaningful growth’: 2 ASX shares to buy for cheap after a terrible month

Motley Fool contributor Mitchell Lawler 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. The Motley Fool Australia has recommended Megaport. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/eXM0wUr

Have you ever eyed an absolute bargain at a clothing store? Marked down 60% off, too good to miss, right? At least that’s what you thought until it started falling apart after the first few wears. In hindsight, a higher quality product at a higher price might have made a better purchase.

The analogy sheds light on a common pitfall in investing. Somewhere along the line the term value investing was hijacked, leading many investors to think ASX shares with a low price-to-earnings (P/E) ratio were cheap and presented value.

Coveted British fund manager, CEO, and founder of Fundsmith, Terry Smith, discusses this grave misconception in his book Investing for Growth. The issue with buying shares (ASX or otherwise) based on a trailing earnings multiple is that it gives no credence to the future — whether good or bad.

When a bargain turns into a bin fire

Much like the above-mentioned clothing example, cheap does not equate to value in the investment arena. In his book, Smith puts it in this eloquent way:

A stock may have a low valuation but an even lower intrinsic value. Buying such a stock is not a recipe for investment success.

Typically, there is a good reason why a company is carrying a low earnings multiple. The market is forward-looking — so if there is an expectation of lower earnings in the future, the price will be discounted in anticipation of this.

To borrow a thoughtful table from Smith — and translate it with ‘cheap’ ASX shares — below is a collection of so-called value shares from late 2017:

ASX-listed company	LTM EPS Nov 2017	LTM EPS Nov 2022	% change	Trailing PE 1 Dec 2017	Trailing PE 1 Dec 2017 Price / Nov ’22 LTM EPS	5-year share price performance
G8 Education Ltd (ASX: GEM)	$0.19	$0.04	-79%	22	100	-39%
Sigma Healthcare Ltd (ASX: SIG)	$0.05	$0.00	-100%	15	N/A	-7%
Monash IVF Group Ltd (ASX: MVF)	$0.11	$0.04	-64%	12	30	7%
Westpac Banking Corp (ASX: WBC)	$2.33	$1.52	-35%	16	21	-22%

At the time, these companies may have appeared lowly valued. At 22 earnings, G8 Education operated in a steady industry and was throwing off cash — not a bad proposition.

Fast forward five years, and suddenly G8’s earnings per share (EPS) has plunged 79%. At today’s earnings, the price paid back on 1 December 2017 would equate to a 100 times multiple… now that looks expensive!

High-quality ASX shares don’t need to be cheap

You might now be wondering, ‘Well, what’s the alternative? What is a truly ‘cheap’ ASX share?’. As pointed out in Investing for Growth, the trick is to find those companies which could offer more value in the future than is being valued in the present.

Back to our shopping analogies — imagine a pair of boots that are marked at full price, going for around $500. At face value, that may seem expensive, considering other boots are available at a third of the price.

However, you do some research and find out the ‘expensive’ boots come with lifetime free repair and complimentary polish every two years. At that moment, you realise the more premium-valued pair offer a far better deal in the long run.

Searching for high-quality ASX shares is a similar experience.

How many times do you hear a company trading on an earnings multiple above 50 as ‘good value’… hardly ever. Yet, as shown in the table below, some of the best-performing ASX investments over the past five years were trading on such lofty valuations.

ASX-listed company	LTM EPS Nov 2017	LTM EPS Nov 2022	% change	Trailing PE then	Trailing PE 1 Dec 2017 Price / Nov 22 LTM EPS	5-year share price performance
REA Group Ltd (ASX: REA)	$0.39	$2.76	608%	222	29	75%
WiseTech Global Ltd (ASX: WTC)	$0.11	$0.69	527%	112	18	592%
Netwealth Group Ltd (ASX: NWL)	$0.06	$0.24	300%	72	22	83%
Pro Medicus Limited (ASX: PME)	$0.07	$0.49	600%	85	15	680%

As Smith states in his book, “The level of valuation which may represent good value at which to buy shares in a high-quality company may surprise you.”

The overarching lesson here is: A growing company can still be valuable at high prices, while a shrinking company can be expensive at nearly any price. Pick the better boots now and avoid the disappointment of cheap boots later.

The post Don’t get duped: Why cheap ASX shares can still rip you off appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Buy these ASX growth shares right now: Goldman Sachs
• Which is the best ASX 200 bank share to buy right now?
• First Republic Bank shares just crashed 50%. Here’s how ASX 200 bank stocks are responding
• Own Westpac shares? What to expect from its half-year results
• Pro Medicus shares: Bull vs. Bear

Motley Fool contributor Mitchell Lawler has positions in Pro Medicus. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Netwealth Group, Pro Medicus, and WiseTech Global. The Motley Fool Australia has positions in and has recommended Netwealth Group, Pro Medicus, and WiseTech Global. The Motley Fool Australia has recommended REA Group and Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/hTa9tRV

The Coles Group Ltd (ASX: COL) share price is seeking direction, flipping from small gains to small losses in early morning trade.

Shares in the S&P/ASX 200 Index (ASX: XJO) consumer staples retail giant closed yesterday trading for $18.46. Shares are currently changing hands for $18.43.

This comes following the release of the company’s third-quarter sales results, covering 2 January to 26 March (3Q23).

Read on for the highlights.

Coles share price wobbles despite strong sales growth

• Total group sales revenue of $9.67 billion, up 6.5% from 3Q22
• Supermarket sales revenue increased 7.0% to $8.60 billion
• Liquor revenue increased 2.6% year on year to $801 million
• 7% year-on-year eCommerce sales growth in supermarkets, 28.9% growth in liquor
• Own brand sales revenue growth of 11.4% exclusive to Coles

What else happened during the quarter?

Coles reported that total supermarket price inflation over the quarter came in at 6.2%. That was far higher than the 3.3% reported in 3Q22. But it came in below the 7.7% inflation recorded in the last quarter (2Q23).

In a nod to consumers pressured by that inflation, Coles doubled the size of its ‘Dropped & Locked’ value campaign. The price on more than 300 products has now been dropped and locked in. This helped drive the quarterly sales growth, which has yet to lift the Coles share price today.

Coles also continued with its tailored store format strategy, reporting 41 liquor store renewals.

And on 27 March, the retail giant achieved its first outbound delivery to store at its new Redbank, Queensland Automated Distribution Centre (ADC). That ADC officially opened yesterday.

Coles said progress is continuing with installation activities at its New South Wales ADS, in Kemps Creek.

During the quarter, Coles opened one new store and closed two stores. It currently has a total network of 841 supermarkets.

What did management say?

Commenting on the results that are seeing the Coles share price vacillate today, CEO, Steven Cain said:

At a time when cost of living pressures are mounting for many customers, the unique combination of Australia’s largest own brand range, hundreds of dropped and locked prices, thousands of weekly specials, free Masterchef cookware and Flybuys points has successfully driven sales and volume.

Pleasingly we saw some modest improvement in supply chain availability however there is still more to do.

On Monday Cain will hand the reins of the 109-year-old company over to incoming CEO, Leah Weckert.

“I know that the best is yet to come,” Cain said.

What’s next?

Looking at what might impact the Coles share price in the months ahead, the company expects supplier input cost inflation to keep easing in the fourth quarter. That’s mostly due to exceptionally high levels of inflation in the prior corresponding period.

Coles said it remains on track to deliver cumulative Smarter Selling benefits of $1 billion across the four-year program by the end of FY23. And the company also is on track to renew 40 supermarkets in FY23.

As for the sale of its Coles Express fuel and convenience business, Coles reported it has satisfied all closing conditions for the sale to Viva Energy. Management expects the transaction will be complete by the end of May.

Coles share price snapshot

The Coles share price has been a strong performer in 2023, up 12% year to date.

The post Coles share price wobbles despite 7% sales revenue growth appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#43B02A”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43B02A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• 5 things to watch on the ASX 200 on Friday
• How Coles shares could help ‘recession proof’ your portfolio
• 2 strong and defensive ASX 200 shares to buy: analysts
• 5 dividend shares I think are among the safest on the ASX
• 3 things ASX investors should watch this week

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

from The Motley Fool Australia https://ift.tt/zRZAcDM

The ResMed Inc. (ASX: RMD) share price is on course to end the week on a positive note.

In morning trade, the sleep treatment company’s shares are up 1% to $34.19.

Why is the ResMed share price rising?

Investors have been bidding the ResMed share price higher today after the company released its third-quarter update.

For the three months ended 31 March, ResMed reported a 29% (31% in constant currency) increase in revenue over the prior corresponding period to US$1,116.9 million.

And while its gross margin contracted by 150 basis points to 55.3%, this couldn’t stop the company from delivering a 28% increase in income from operations.

This ultimately led ResMed generating operating cash flow of US$282.6 million and diluted earnings per share of US$1.58.

What were the drivers of its growth?

Management revealed that it significantly ramped up production and delivery of its cloud-connected flow generator devices to meet ongoing high demand from customers during the quarter. This resulted in strong device sales growth across its global markets. ResMed CEO, Mick Farrell, commented:

We now have full global availability of our connected AirSense 10 platform, while we continue to ramp production and availability across more geographies of our AirSense 11 platform. The bottom line is this: We can now support global customer demand for CPAP and APAP devices to serve the entire sleep device market. This is great news for physicians, providers, and especially for patients.

Farrell also revealed that its mask and patient interfaces businesses performed well, as did its outside-hospital software-as-a-service business. He added:

We also saw very strong growth in our mask and patient interfaces businesses globally, demonstrating a sustainable focus on patient adherence and resupply. Our outside-hospital software-as-a-service business achieved high-single-digit growth organically and reached well into double-digit growth with a full quarter of contribution from our MEDIFOX DAN acquisition that we closed last November.

How does this compare to expectations?

Goldman Sachs has taken a quick look at the result and notes that the company’s revenue growth was comfortable ahead of expectations. This may explain why the ResMed share price is rising as it is today. The broker said:

3Q23 revenue of $1,117m was up +31% cc, an acceleration from +20% in 2Q and +9% in 1Q23, and a solid beat to consensus +23%.

Pleasingly, it was the same for the company’s earnings, with ResMed beating on the bottom line. Goldman adds:

Earnings beat +3% as revenue growth compensates for material gross margin contraction.

Goldman currently has a buy rating and $38.00 price target on ResMed shares.

The post ResMed share price higher on Q3 ‘solid beat’ appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#43B02A”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43B02A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Better ASX 200 healthcare share: CSL vs. Resmed
• 2 ‘undervalued’ ASX 200 shares to ‘beat market’ before everyone else wakes up
• Here are the top 10 ASX 200 shares today
• These world-class ASX 200 growth shares are buys according to brokers
• CSL shares dip despite new FDA approval

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 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.

from The Motley Fool Australia https://ift.tt/As5YRiO

The Betashares Nasdaq 100 ETF (ASX: NDQ) has underperformed the broader market over the last three years.

The exchange-traded fund (ETF), which aims to mirror the NASDAQ-100 Index (NASDAQ: NDX), has surged 32% in that time.

An investor sinking $5,000 into the NDQ ETF in April 2020 likely would have walked away with 218 units, paying $22.86 apiece.

Today, that parcel would be worth $6,572.70. The Betashares Nasdaq ETF last traded at $30.15.

Unfortunately, that leaves the NDQ ETF having underperformed the All Ordinaries Index (ASX: XAO). The benchmark index has risen 41% over the last three years.

But what about the dividends Betashares Nasdaq ETF investors have received in that time? Let’s take a look.

All dividends paid to those invested in NDQ ETF since 2020

Here are all the dividends paid to those invested in the NDQ ETF over the last three years, rounded to the nearest tenth of a cent:

NDQ dividends’ pay date	Dividend value
January 2023	3.1 cents
July 2022	84.2 cents
July 2021	$1.175
January 2021	2.6 cents
July 2020	64.9 cents
Total:	$2.723

As the chart shows, each Betashares Nasdaq 100 ETF unit has brought in $2.723 of passive income over the last three years. That means our figurative parcel could have provided $593.614 in dividends.

Considering that, and the ETF’s capital gains, an investor might have boasted a return on investment (ROI) of 44% _­­

Not to mention the compounding benefits an ASX investor might have realised had they reinvested their passive income, using it to buy more NDQ units.

However, unlike many ASX-listed shares and funds, dividends offered by the ETF don’t come with franking credits.

Considering its two most recent dividends, the Betashares Nasdaq 100 ETF currently trades with a respectable (but not quite mind-blowing) 2.89% dividend yield.

The post Sunk $5,000 into the Betashares Nasdaq 100 ETF (NDQ) in 2020? Here’s how much passive income your investment has provided appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• 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
• Buy and hold these 3 ASX ETFs for a decade
• Up 20% in 2023 so far, is it too late to buy Betashares Nasdaq 100 ETF (NDQ) units?
• 2 of the best ETFs for ASX investors to buy this month

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 BetaShares Nasdaq 100 ETF. The Motley Fool Australia has positions in and has recommended 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.

from The Motley Fool Australia https://ift.tt/ra5t4RZ