Category: Stock Market

After rocketing up the last few years, ASX lithium shares have struggled over the past six months or so.

However, Liontown Resources Ltd (ASX: LTR) seems to be an outlier, rising by a phenomenal 120% year to date.

Liontown shares closed Thursday at $2.72 a piece after starting the year at $1.23 a share.

So is it too late to buy? Has it had its run or is there more to come?

Let’s take a look at what’s happening.

Suitor rejected twice, but could be back

The most significant driver behind the spectacular ascent of Liontown shares is the takeover interest from Albemarle Corporation (NYSE: ALB).

It was revealed in late March that the US company made several takeover approaches to Liontown, making bids for $2.20 and $2.35 per share in October and March respectively.

The Liontown board rejected the proposal both times, calling them “opportunistic”.

But the mere demand for the business sent the shares exploding 59% higher on 28 March.

Investors apparently think this story is not over yet and that there could be further bids from a frustrated Albemarle.

Even if the takeover doesn’t eventuate, the fact that another corporation was willing to buy Liontown at almost double the undisturbed share price indicates what sort of future it thinks the lithium miner has.

Long-term demand for lithium

So is it worth joining in this chorus of enthusiasm for Liontown?

The professional investment community is divided.

According to CMC Markets, three out of nine analysts currently covering the stock reckon it’s not just a buy, but a strong buy.

However, the remaining six analysts think it’s best to hold Liontown.

UBS is one team that’s bullish on the lithium stock. This week it raised its target share price to $2.80.

Despite the waning commodity price for the battery ingredient, eToro market analyst Josh Gilbert reckons the long-term thirst for lithium cannot be denied.

“Electric vehicle adoption has really only just begun and has a long runway, with lithium demand only set to increase in the years ahead,” he said earlier this month.

“According to Bloomberg, lithium-ion battery demand is expected to more than double in 2023 from 2020 levels, whilst EV sales look set to increase by more than 30% in 2023.”

The post After more than doubling this year, can the Liontown share price keep rising? appeared first on The Motley Fool Australia.

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More reading

• Why did Pilbara Minerals shares charge higher today?
• Here’s the latest forecast for ASX 200 lithium stocks from UBS
• Here are the top 10 ASX 200 shares today
• Up 80% in a month, Liontown share price smashes all-time high on Tuesday
• Morgans says the Pilbara Minerals share price can rise 40%

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 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 certainly has been a tough 12 months for Core Lithium Ltd (ASX: CXO) shares.

Despite the company graduating from lithium developer to miner, its shares have been hammered and are down 30% over the period. This can be seen on the chart below.

Is this a buying opportunity or will Core Lithium shares keep falling?

Opinion remains divided on where Core Lithium shares are going from here. This makes it a risky proposition for investors.

For example, over at Goldman Sachs, its analysts believe the Core Lithium share price could fall as low as 80 cents. So, with its shares currently fetching 98 cents, this implies potential downside of just over 18% for investors.

The broker believes its share price “remains ahead of fundamentals despite the recent resource increase, in our view, trading at 1.3x NAV or pricing ~US$1,470/t LT spodumene (peer average ~US$1,100/t).”

The team at Macquarie don’t agree with this view. In response to last week’s mineral resource upgrade, its analysts retained their outperform rating with an improved price target of $1.20. This suggests that Core Lithium shares could rise over 22% from current levels.

Finally, over at Morgans, its analysts are sitting on the fence and believe the lithium miner’s shares are fairly valued now. The broker has a hold rating and $1.00 price target, which is just a touch ahead of where they trade today.

In addition, its analysts recently looked into whether Core Lithium could be a takeover target along with Liontown Resources Ltd (ASX: LTR). However, it feels this is unlikely. The broker thinks “a takeover bid is less likely given the smaller resource size, higher EV / resource and likely higher cost operations.”

Time will tell which broker makes the right call on Core Lithium shares.

The post Should I buy the 30% dip on Core Lithium shares or have they got further to fall? appeared first on The Motley Fool Australia.

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More reading

• Why did Pilbara Minerals shares charge higher today?
• Here are the top 10 ASX 200 shares today
• Top brokers name 3 ASX shares to buy today
• Here’s the latest forecast for ASX 200 lithium stocks from UBS
• Here are the top 10 ASX 200 shares today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has 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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The Fortescue Metals Group Ltd (ASX: FMG) share price is ahead of the benchmark over the past year, but is it still worth buying?

Shares in the Australian iron ore miner are 4.3% better off than this time last year, as shown below. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is down roughly 3%. The return from the Andrew Forrest-led company is also healthier than similar ASX-listed peers.

After diverging from the market’s trajectory, is Fortescue primed to run further — or could it be time to look elsewhere for outperformance?

We took this question to two of our team to gather some perspective on both sides of the tape. Read on to find out where this instalment’s bull and bear agree and disagree on the path forward for Fortescue.

Carving out a spot in the portfolio for Fortescue shares

By Tristan Harrison: Fortescue shares have performed well over the last six months. Certainly, it would have been much better to buy half a year ago at a price under $18 compared to today’s valuation. Fortescue shares closed on Thursday at $22.42 a share.

However, I believe the business can perform better than expected from here.

Firstly, no one knows what iron ore prices are going to do next month or next year. If we went back 12 months and looked at where brokers thought the Fortescue share price would be or what the dividend payout ratio could fall to we’d see that some of those predictions haven’t eventuated.

Undoubtedly, Fortescue has been helped by the stronger iron ore price, which is currently sitting at around US$120 per tonne, displayed below.

The iron ore price could continue to be stronger than expected, partly helped by improving Australia-China relations. A better-than-expected iron ore price could mean stronger profits, stronger dividends, and enable more funding for Fortescue Future Industries (FFI).

Fortescue is also close to production for the Iron Bridge project. This could add millions of tonnes to its total output, which would boost earnings. In the longer term, it’s looking to diversify its production by expanding into African iron.

The ASX mining share is also looking to produce green hydrogen and green ammonia, which would be emission-free fuel for heavy machinery, boats, and perhaps planes.

It’s progressing a number of potential green energy projects around the world, with multiple projects expected to advance this year. FFI has already signed multiple agreements with prospective energy customers, with Europen energy giant E-ON being the biggest so far.

The price tag of its green energy efforts may be less intimidating when we take into account comments by FFI boss Mark Hutchinson to the Australian Financial Review. Hutchinson said that FFI could/”will” sell equity stakes in its green hydrogen projects, which would reduce the amount of capital Fortescue needs to set aside. I think this could enable a better-than-expected dividend payout ratio.

Fortescue boss Andrew Forrest has previously revealed investment banks have suggested that FFI could already be worth US$20 billion if it were listed, and that potential value isn’t recognised on Fortescue’s balance sheet. 

Motley Fool contributor Tristan Harrison owns shares in Fortescue Metals Group Ltd.

Why be a bear about it?

By Brooke Cooper: To begin, I agree with Tristan; Fortescue’s hydrogen and green energy efforts could lead to a dazzling future for the company. However, I believe its planned transformation could come at a high cost for both it and new investors.

While hydrogen and green energy offer mountains of potential, becoming a leader in the space also demands mountains of cash.

Fortescue has in place a $9 billion plan to decarbonise its Pilbara operations by 2030. Most of that investment is slated to be spent between financial year 2024 and financial year 2028. Key to the scheme is Fortescue Future Industries (FFI).

The operation can be allocated up to 10% of the iron ore miner’s net profit after tax (NPAT). It’s expected to demand between US$500 million and US$600 million of operating expenditure and US$230 million of capital expenditure this financial year.

What might this spending mean for investors? Well, such transformational growth will take time. Meanwhile, the company’s dividends could bear the brunt of its green ambitions.

Indeed, Goldman Sachs expects the ASX 200 iron ore miner to drop its dividend payout ratio and raise additional debt to fund its green ambitions.

Looking forward, the broker forecasts the company will hand out US$1.82 per share in dividends this fiscal year, US$1.10 next fiscal year, and 79 US cents in fiscal year 2025.

At that rate, Fortescue’s dividend yield could more than halve over the next two financial years, considering its current share price and today’s exchange rate.

But the company is, of course, an iron ore miner at heart. On that front, the broker recently found it’s more expensive on a price-to-net-asset-value (NAV) ratio than its major peers.

Take a look:

ASX 200 iron ore miner	Price to NAV
BHP Group Ltd (ASX: BHP)	0.95 times
Rio Tinto Ltd (ASX: RIO)	0.85 times
Fortescue Metals Group	1.44 times

All in all, I think Fortescue’s green ambitions have the potential to provide strong returns in the future. However, I don’t think the risk-to-reward ratio currently on offer is worthwhile.

Motley Fool contributor Brooke Cooper does not own shares in Fortescue Metals Group Ltd, BHP Group Ltd, or Rio Tinto Ltd.

The post Fortescue shares: Bull vs. Bear appeared first on The Motley Fool Australia.

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• ASX 200 mining shares sink as iron ore price nears 2023 low
• Why are ASX 200 mining shares like Fortescue smashing the index today?
• Here’s the forecast for popular ASX 200 mining shares from UBS
• 2 reasons I think Fortescue shares are still cheap
• Passive income in Australia: How I’d invest in ASX 200 shares to easily earn $20 per day

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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With share prices notoriously volatile and economic uncertainty striking fear into investors, it’s no surprise many people are seeking the comfort of dividend shares.

But with the ASX packed with dividend payers, which one to choose?

You won’t want to end up with a “dividend trap” that only has a high yield because of a falling share price, or a flailing business that could suddenly cut its distributions.

Here is one suggestion that could avoid all those pitfalls:

How does $350 monthly income sound?

New Zealand company Fletcher Building Ltd (ASX: FBU) is a construction materials provider that’s listed on the ASX.

The stock is currently paying out a handy dividend yield of 8.4%.

Not only that, the latest reporting season showed that the business seems to be heading in the right direction.

“The company reported revenue of $4.3 billion, up 5% on the pcp of 1H FY22,” said The Motley Fool’s Bronwyn Allen in February.

“Earnings before interest and tax before significant items totalled $360 million, up 8%, with an improved EBIT margin of 8.4%.”

Being a foreign company, no franking credits are given.

But even with an unfranked 8.4% yield, a $50,000 investment would provide shareholders with a $350 monthly income.

The outlook for construction stocks

Amid worries about rising interest rates impacting the construction industry, the Fletcher Building stock price has admittedly dropped 3.7% year to date.

However, Wilsons equity strategist Rob Crookston said last week the negative sentiment towards housing could make it a perfect contrarian play right now.

“The macro is starting to shift in the US and in Australia, with central banks looking close to the end of tightening cycles,” he said.

“There are strong structural tailwinds behind the US and Australian housing markets.”

There is even speculation that Fletcher could buy out Australian rival CSR Limited (ASX: CSR)

The Kiwi stock is a hit among professional investors at the moment.

Ten out of 14 analysts currently surveyed on CMC Markets rate Fletcher Building shares as a buy. Nine of those reckon it’s a strong buy.

CMC Markets is predicting that Fletcher Building will maintain its dividend yield above 8% for the next year or two at least.

The post This 8.4% ASX dividend stock is my top pick for immediate income appeared first on The Motley Fool Australia.

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• If house prices have bottomed, should I buy property-related ASX shares?
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• How I’d invest $20k in ASX 200 shares to earn a second income of $140 a month

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 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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Looking for an ASX 200 growth share or two to buy? Two that analysts rate as buys this month are listed below.

Here’s what the brokers are saying about them:

Lovisa Holdings Limited (ASX: LOV)

The first ASX 200 growth share that has been named as a buy is this rapidly growing fast fashion jewellery retailer.

When Lovisa released its half-year results in February, it blew the market away with its impressive performance. The company reported a 44.8% increase in revenue to $315.5 million and a 31.9% jump in net profit after tax to $253.2 million.

The good news is that the team at Morgans expects this strong form to continue in the coming years. As a result, the broker has its shares on its best ideas list with an add rating and $28.50 price target. It recently commented:

With ambitious and well-incentivised new leadership in place, we think now is the time LOV steps up to become a global force. [..] Investment will be needed to expand LOV’s network in the US and Europe and to take it into new markets, but the returns could be stellar. We think LOV’s products fill an underserved niche, offering fast fashion jewellery at prices that are attainable to a resilient target demographic.

ResMed Inc. (ASX: RMD)

Another ASX 200 growth share that has been tipped as a buy is ResMed. It is a medical device company with a focus on sleep treatment solutions.

Goldman Sachs is a fan of ResMed and has a buy rating and $38.00 price target on its shares.

Its analysts like ResMed due to its strong position in the sleep treatment market, its huge addressable market, and the benefits of a major competitor product recall. It commented:

The timing/nature of Philips’ re-entry into the market remains an important debate, but under most realistic scenarios we continue to expect an excess demand dynamic through end-2023. Whilst supply shortages and cost inflation mitigated the tailwind from these competitor challenges through FY22, we believe the benefits to RMD are significant, and could continue to accrue over many years. As operational pressures continue to ease we see margin/cost dynamics improving, supporting a favourable earnings trajectory through the long term. We currently model an EPS CAGR of +11% (FY23-26E), with potential upside depending on how competitive/regulatory dynamics develop.

The post These world-class ASX 200 growth shares are buys according to brokers appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• CSL shares dip despite new FDA approval
• ‘Resilient earnings’: Buy 3 ASX 200 shares to win through troubled times
• Which ASX 200 retail share is performing best during high inflation?
• Brokers say these defensive ASX 200 healthcare shares are buys

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 Lovisa and ResMed. The Motley Fool Australia has positions in and has recommended ResMed. The Motley Fool Australia has recommended Lovisa. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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There can’t be much argument that ASX technology shares are the ones to suffer the most from the market downturn over the past 18 months.

From its November 2021 peak to the start of this year, the S&P/ASX All Technology Index (ASX: XTX) painfully lost roughly 40%. Over in the US the Nasdaq Composite Index (NASDAQ: .IXIC) didn’t fare much better, falling about 35%.

However, 2023 has brought some light to the tunnel.

The ASX tech index is up 15% so far this year while the NASDAQ is 17% higher.

So does this mean it’s time to stop being shy about buying tech shares?

Betashares portfolio analytics associate Alex Parker this week had some thoughts:

What hurdles does tech face in launching a revival?

The first point to note when deciding whether to return to tech stocks is the recent events in the US.

“The recent weakness in the US banking sector is a cause for consternation,” Parker said on the Betashares blog.

“However, the larger companies in the tech sector appear unlikely to fall victim to the contagion. These companies typically have high cash balances and low leverage, which will make them resilient to any coming financial downturn.”

Ironically, any signs of a downturn could compel the central banks to cut interest rates earlier than what we currently expect, which the tech sector would absolutely love.

Considering this uncertainty, Parker suggests that anyone wanting to wade back into tech might prefer to go for ASX shares rather than US ones.

“The Australian technology sector offers unique characteristics that could potentially benefit investors,” he said.

“The first thing that stands out when looking at Aussie tech – compared to the large global technology sectors in the US and China – is the prevalence of business-to-business (B2B) revenue models.”

Parker took WiseTech Global Ltd (ASX: WTC), Xero Limited (ASX: XRO) and Altium Limited (ASX: ALU) as prime examples of the global success of B2B tech out of Australia and New Zealand.

The great advantage of B2B tech companies is that they have much more certainty over earnings than their consumer-facing counterparts.

“The revenue streams of these businesses tend to be stickier than those of consumer discretionary focused firms like some US tech giants, with long term contracts and the difficulty of businesses switching essential software likely to provide support in the event of an economic downturn.”

Australia vs the world

Parker also noted that the companies that make up the ASX All Tech index source the majority of their sales from overseas.

With economic clouds looming, this is another ace up the sleeve for Aussie tech stocks.

“In economic downturns, history suggests investors typically sell off Aussie dollars in favour of traditional safe haven currencies such as US dollars,” said Parker.

“As a result, the services that Aussie tech firms provide become more attractive to foreign customers in terms of their own currencies – or sales denominated in foreign currencies become worth more in AUD terms.”

Even in the longer run, the Australian tech scene seems to have more potential for growth than overseas.

“Aussie tech’s growth runway appears attractive for long term investors,” Parker said.

“The sector is less mature than the US tech industry — or for that matter the Australian banking and resources sectors that dominate the S&P/ASX 200 Index (ASX: XJO). And while not as headline grabbing as some of the global tech giants, Australian home grown technology players such as WiseTech and Xero have already become globally recognised players in their respective fields.”

The post Why ASX tech shares are so much more attractive than US stocks appeared first on The Motley Fool Australia.

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More reading

• Which stocks does Warren Buffett own (and what can ASX 200 investors learn from this)?
• 11 ASX shares to buy with 4 on-trend qualities right now
• Conviction list: Goldman Sachs says Xero share price can rise 37%
• Supercharge your portfolio with these 3 ASX growth shares: brokers
• This ASX 200 tech stock is up almost 40% in 2023 and has just hit an all-time high

Motley Fool contributor Tony Yoo has positions in Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Altium, WiseTech Global, and Xero. The Motley Fool Australia has positions in and has recommended WiseTech Global and Xero. 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 Rio Tinto Ltd (ASX: RIO) share price came under pressure on Thursday after the mining giant released its first-quarter update.

The miner’s shares fell 2.5% to end the day at $120.33.

Is the pullback in the Rio Tinto share price a buying opportunity?

While the market may have been a touch disappointed with Rio Tinto’s quarterly update, the team at Goldman Sachs has seen enough to remain positive.

According to the note, the broker has retained its conviction buy rating with an ever so slightly trimmed price target of $136.20.

Based on the current Rio Tinto share price, this implies potential upside of 13% for investors over the next 12 months.

Making things sweeter is the broker’s forecast for a fully franked US$5.40 (A$8.09) per share dividend in FY 2023. This equates to a generous 6.7% dividend yield for investors at current prices.

What did the broker say?

Goldman highlights that there were positives and negatives from Rio Tinto’s quarterly update. It said:

RIO reported a broadly strong start to 2023 with record 1Q Pilbara iron ore shipments of 82.5Mt (+3% vs. GSe) due to the ongoing ramp-up of the Gudai-Darri and Robe Valley mines, positioning RIO to hit the top end of the of 320-335Mt guidance range (GSe 335Mt).

Copper production increased 10% QoQ to 145kt but fell short of our 157kt estimate due to lower than expected head grades at Escondida in Chile and equipment outages at Kennecott (Bingham) in the US. As a result, RIO has reduced copper production guidance by 60kt to 590-640kt (GSe revised to 636kt).

The broker also highlights that there are a few uncertainties in regard to growth projects, but was pleased with the Oyu Tolgoi ramp up. It adds:

On a positive note, the ramp-up of the Oyu Tolgoi block cave is tracking well with the UG rates increasing to ~3Mtpa (8ktpd) and ahead of our estimate. Other growth projects have seen some delays with the schedule and budget for the Rincon lithium project in Argentina under review and no further details on capex or timing for Simandou iron ore in Guinea.

Overall, thanks to its “compelling relative valuation” and strong free cash flow and dividend yield, the broker remains positive and keeps the miner on its conviction list.

The post Goldman Sachs says the Rio Tinto share price is ‘compelling value’ after Q1 update appeared first on The Motley Fool Australia.

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More reading

• ASX 200 mining shares sink as iron ore price nears 2023 low
• Why 29Metals, Allkem, Alliance, and Rio Tinto shares are falling today
• Rio Tinto share price falls despite record iron ore exports
• 2 ASX 200 dividend shares to buy now: brokers
• The latest Rio Tinto dividend is being paid today. Here’s what you need to know

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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On Thursday, the S&P/ASX 200 Index (ASX: XJO) had a volatile day and ended it with the smallest of declines. The benchmark index was down 3.3 points to 7,362.2 points.

Will the market be able to bounce back from this on Friday? Here are five things to watch:

ASX 200 expected to fall

The Australian share market looks set to end the week in a disappointing fashion following a poor night on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open 34 points or 0.45% lower this morning. In the United States, the Dow Jones was down 0.3%, the S&P 500 fell 0.6%, and the NASDAQ dropped 0.8%.

Oil prices tumble

ASX 200 energy shares Beach Energy Ltd (ASX: BPT) and Woodside Energy Group Ltd (ASX: WDS) could have a tough finish to the week after oil prices tumbled overnight. According to Bloomberg, the WTI crude oil price is down 2.35% to US$77.29 a barrel and the Brent crude oil price is down 2.65% to US$80.91 a barrel. Recession fears and swelling US gasoline inventories put pressure on prices.

BHP quarterly update

The BHP Group Ltd (ASX: BHP) share price will be one to watch on Friday when the mining giant releases its third-quarter update. According to a note out of Goldman Sachs, its analysts expect iron ore shipments of 64.7Mt for the quarter. This compares to the consensus estimate of shipments of 67.9Mt.

Gold price rises

Gold shares Newcrest Mining Ltd (ASX: NCM) and St Barbara Ltd (ASX: SBM) could have a good finish to the week after the gold price pushed higher overnight. According to CNBC, the spot gold price is up 0.35% to US$2,014.3 an ounce. Gold rose following the release of US economic data.

Cochlear dealt blow

The Cochlear Limited (ASX: COH) share price will be in focus today. That’s because the hearing solutions company has just been dealt a blow in the UK in relation to its proposed acquisition of Oticon Medical. The UK Competition and Markets Authority has found that the acquisition could result in a substantial lessening of competition in the supply of bone conduction solutions. Cochlear disagrees with the competition regulator.

The post 5 things to watch on the ASX 200 on Friday appeared first on The Motley Fool Australia.

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If you’re looking for dividend shares to add to your income portfolio, then it could be a good idea to check out the two listed below.

These ASX 200 dividend shares have been rated as buys by analysts and tipped to provide 5%+ yields. Here’s what brokers are saying about them:

Aurizon Holdings Ltd (ASX: AZJ)

The first ASX 200 dividend share for income investors to consider buying is Aurizon.

Australia’s largest rail freight operator connects miners, primary producers, and industry with international and domestic markets through its extensive national rail and road network.

The team at Morgans is very positive on the company and has an add rating and $3.81 price target on its shares. Its analysts revealed that they “see value in the stock at current prices, supported by the far higher quality Network and Coal haulage businesses.”

As for dividends, Morgans is forecasting partially franked dividends of 17 cents per share in FY 2023 and then 19 cents per share in FY 2024. Based on the latest Aurizon share price of $3.41, this will mean yields of 5% and 5.6%, respectively.

National Australia Bank Ltd (ASX: NAB)

Another ASX 200 dividend share that has been rated as a buy is this banking giant.

Goldman Sachs is a fan and currently has a buy rating and $33.06 price target on its shares.

The broker remains positive on NAB in the current environment due to its strong capital position and exposure to commercial lending. Goldman expects the latter to perform better than home lending due to the housing market downturn.

Another positive is the work NAB has already done on productivity and cost management. It feels this “leaves it well positioned for an environment of elevated inflationary pressure.”

In respect to dividends, Goldman Sachs is expecting the bank to pay fully franked dividends of $1.68 per share in FY 2023 and FY 2024. Based on the current NAB share price of $29.10, this means yields of 5.8% in both years.

The post Buy these ASX 200 dividend shares with 5%+ yields: analysts appeared first on The Motley Fool Australia.

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• Which is the best ASX 200 bank share to buy today?
• Own NAB shares? Here’s why the bank’s CEO just personally emailed 4m customers
• How much I would need to invest in NAB shares to earn $150 a month in passive income?
• Investor or depositor? Warren Buffett sounds off on banking crisis
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Aurizon. 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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He’s called the Oracle of Omaha and is considered the world’s most successful investor, generating a personal fortune of US$107 billion over many decades of stock investing.

Luckily for us, his stock selections are public knowledge because the investment company he runs, Berkshire Hathaway Inc (NYSE: BRK.A) (NYSE: BRK.B), is listed. So, we get regular updates on his holdings.

Here are Buffett’s top 10 stocks by value, according to Berkshire Hathaway’s FY22 full-year results released in February.

Top 10 stocks that Warren Buffett owns

Stock	Number of shares	Value
Apple Inc. (NASDAQ: AAPL)	915,560,382	$139.7 billion
Bank of America Corp (NYSE: BAC)	1,032,852,006	$36.5 billion
Chevron Corporation (NYSE: CVX)	167,353,771	$27.3 billion
American Express Company (NYSE: AXP)	151,610,700	$26.9 billion
Coca-Cola Co (NYSE: KO)	400,000,000	$24 billion
Occidental Petroleum Corporation (NYSE: OXY)	278,210,498	$16.9 billion
Kraft Heinz Co (NASDAQ: KHC)	325,634,818	$13 billion
Moody’s Corp (NYSE: MCO)	24,669,778	$7.4 billion
Activision Blizzard Inc (NASDAQ: ATVI)	52,717,075	$4.1 billion
BYD Ord Shs H (OTCMKTS: BYDDF)	130,327,642	$3.8 billion

What are the lessons for investors buying ASX 200 stocks? 

Buy large-cap ASX 200 stocks

Buffett’s top 10 holdings are full of multi-billion-dollar global companies that own household-name brands.

Obviously, he’s extremely positive on Apple given the almost 40% allocation of his total portfolio!

He refers to Apple as Berkshire Hathaway’s “third-largest business” after its wholly-owned insurance and railroad companies. He reckons Apple is “probably the best business I know in the world”.

You could also say he’s in love with Bank of America, Chevron, and American Express, given they and Apple together comprise an astonishing 68% of the investment pie!

Large-cap companies are typically industry giants with large valuations (or market capitalisations). Their sheer size is a big factor enabling them to weather all types of economic conditions.

This means safety and stability for the investor.

As mature companies, their share price growth may be limited unless they are in rapidly growing and evolving industries, such as technology (like Apple), or have a global market for their products (also like Apple).

The trade-off in the limited share price growth is strong, reliable, and regular dividends. This makes them a favourite choice among income investors and those who want lower-risk investments.

Fun fact: Buffett’s Coca-Cola investment returns $704 million in annual dividends.

The three biggest large-cap ASX 200 stocks available to investors are BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), and CSL Limited (ASX: CSL). 

Buy and hold high-quality businesses for the long term

Buffett is a value investor, meaning he targets high-quality businesses and buys them when they are trading below their intrinsic worth or book value.

He also describes himself as a “business picker” rather than a “stock picker”.

That means he uses fundamental analysis to get a real understanding of the companies he is considering buying, and to keep tabs on the ones he already owns. He spends most days in his office reading.

Buffett buys long, which means he’s patient. He doesn’t get caught up in the day-to-day price movements of his investments based on announcements with short-term share price ramifications.

Buffett’s strategy means he has fun in both bear markets and bull markets. How smart is that?

Bear markets provide opportunities to buy below value, and bull markets power up those share prices.

A few examples of long-term holds within Buffett’s top 10 stocks are Bank of America, which he first purchased in 2011, American Express (1964), Moody’s (2000), and Coca-Cola (1988).

He bought Coca-Cola just months after the Black Monday 1987 market crash. He saw an opportunity to nab a high-quality business while the share price was down, and he went hard too — putting $1 billion into the stock. That’s a big number today, let alone back in 1988!

There’s also a lesson in moving with the times and adapting your investments in accordance with general business and societal trends, such as the rise of technology.

Buffett first bought Apple in 2016 and Activation Blizzard in 2021. Apple is the biggest US tech stock and Activation Blizzard is in the top 30.

The biggest ASX 200 information technology stocks are WiseTech Global Ltd (ASX: WTC) and Xero Limited (ASX: XRO). But they’re babies in size compared to the big US tech stocks.

Keep cash on hand for opportunities

As we covered last month, Buffett moved US$23.3 billion (A$35 billion) from the market into cash between 30 June and 31 December 2022.

Berkshire Hathaway went into 2023 with cash, cash equivalents, and treasury securities (bonds) worth US$128.7 billion.

In his annual newsletter released in February, Buffett explained:

As for the future, Berkshire will always hold a boatload of cash and U.S. Treasury bills along with a wide array of businesses.

We will also avoid behavior that could result in any uncomfortable cash needs at inconvenient times, including financial panics and unprecedented insurance losses.

Spare cash means you can enjoy some satisfying dollar-cost averaging on ASX 200 stocks when the market is down.

Let’s talk about diversification

In total, Buffett has 49 stocks in his portfolio, which sounds like a lot. But it’s not when you look at the enormity of the whole pie (about US$340 billion).

In short, he’s got huge sums invested in each of those 49 stocks. Using the top 10 as an example, if one of those companies goes bust, he’ll lose billions. That’s probably why they’re all large caps. The likelihood of a large cap going under is incredibly small, so perhaps that’s why Buffett feels safe to invest big.

Things look a little different when you’re an ordinary investor with, say, $50,000 in ASX 200 stocks. You can’t really afford to make mistakes and not having a diversified portfolio is a huge one for us.

We should point out that Buffett has good diversification across different industries.

Diversification is important because it gives you safety. The more ASX 200 stocks you hold and the more industries you are exposed to, the lesser your risk.

We don’t know what is around the corner. Imagine holding a portfolio full of travel stocks in early 2020.

A quick way of ensuring you have great diversification is not to bother trying to pick ASX 200 stocks at all. Instead, take Buffett’s advice and buy a low-cost S&P 500 index fund instead.

That’s his key recommendation for ordinary investors looking to set themselves up for retirement.

The S&P/ASX 200 Index (ASX: XJO) closed the session yesterday at 7,362.2 points, down 0.05%.

The post Which stocks does Warren Buffett own (and what can ASX 200 investors learn from this)? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Friday
• ASX 200 mining shares sink as iron ore price nears 2023 low
• Here are the top 10 ASX 200 shares today
• Are Star Casino shares finally cheap enough to buy?
• Here are the 3 most heavily traded ASX 200 shares on Thursday

Bank of America is an advertising partner of The Ascent, a Motley Fool company. American Express is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Bronwyn Allen has positions in BHP Group, CSL, and Commonwealth Bank Of Australia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Activision Blizzard, Apple, Bank of America, Berkshire Hathaway, CSL, Moody’s, WiseTech Global, and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Kraft Heinz and has recommended the following options: long January 2024 $47.50 calls on Coca-Cola. The Motley Fool Australia has positions in and has recommended WiseTech Global and Xero. The Motley Fool Australia has recommended Activision Blizzard, Apple, and 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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