Category: Stock Market

Endeavour Group Ltd (ASX: EDV) shares have underperformed the market over the last 12 months.

Since this time last year, the drinks giant’s shares have lost over 20% of their value.

And with the ASX 200 index rising 11% over the same period, it means that this ASX dividend stock has underperformed the market by a disappointing 31%.

The good news for income investors, though, is that this could have created a compelling opportunity to buy a market-leader at a discount.

Is this an ASX dividend stock to buy?

Goldman Sachs thinks that investors should be snapping up Endeavour shares while they’re down. Particularly given its defensive qualities, dominant market share, and attractive valuation. The broker commented:

Our Buy thesis on the stock is based on the following key drivers: 1) Market share gain (already 40% market share) in defensive alcohol retail from consumer data and loyalty advantages; 2) Organic reopening beneficiary with its hotels/pubs business back to pre-COVID sales/property. We believe EDV is trading at a relatively attractive valuation, with potential downside from EGM tax changes already fully priced in. We are Buy rated on EDV.

Goldman has a buy rating and $6.20 price target on the ASX dividend stock. This implies potential upside of 17% for investors over the next 12 months.

Attractive dividend yields

One positive from the weakness in the Endeavour share price is that the potential dividend yield on offer has increased.

For example, Goldman Sachs is forecasting fully franked dividends per share of 22 cents in FY 2024 and FY 2025, and then 24 cents in FY 2026.

Based on the current Endeavour share price of $5.30, this would mean yields of 4.15%, 4.15%, and 4.5%, respectively.

This stretches the total potential return to beyond 21% for investors buying the ASX dividend stock at current levels.

The post 1 ASX dividend stock down over 20% to buy right now appeared first on The Motley Fool Australia.

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More reading

• 3 ASX dividend shares to buy for a passive income boost
• 3 highly-rated ASX dividend shares for income investors to buy next week
• Buy Woolworths and these ASX dividend shares
• 34 ASX 200 shares with ex-dividend dates next week
• Average wage tops $100k, worries for inflation, e-commerce flies: Scott Phillips on Nine’s Late News

Motley Fool contributor James Mickleboro has positions in Endeavour Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has 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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BHP Group Ltd (ASX: BHP) shares have been under pressure in recent weeks.

Investors have been hitting the sell button in response to falling iron ore prices. This has led to the miner’s shares falling approximately 13% since the start of the year.

The question now, though, is whether this has created a buying opportunity for investors?

To find out, let’s see what a $10,000 investment in BHP’s shares could turn into in a year if you were to buy at today’s share price.

Investing $10,000 into BHP shares

Firstly, with the Big Australian’s shares currently fetching $44.15, you could pick up 227 units with an investment of $10,022.05.

What could these shares be worth in 12 months?

Well, a recent note out of Goldman Sachs reveals that its analysts have put a buy rating and $49.40 price target on the miner’s shares.

The broker highlighted four reasons why it thinks BHP shares are a buy at current levels.

We are Buy rated on: (1) Attractive valuation, but at a premium to RIO; (2) GS bullish copper and met coal; (3) Optionality with +US$20bn copper pipeline and improved production growth; (4) Robust FCF, but still below RIO. We continue to believe that BHP’s major opportunity is growing copper production in Chile at Escondida and Spence, and growing copper production and capturing synergies in South Australia between Olympic Dam and the previous OZL assets.

Big return potential

If the mining giant’s shares were to rise to Goldman’s price target, your 227 units would have a market value of $11,213.80. That’s a return of over $1,200 on your original investment.

But the returns won’t stop there. While it is too late to get hold of BHP’s recently declared interim dividend, over the next 12 months the miner will be paying out its final dividend of FY 2024 and its interim dividend of FY 2025.

Goldman is expecting dividend yields of 5% in FY 2024 and 4.4% in FY 2025. This should mean a yield of approximately 4.7% for investors between now and this time next year, which would mean dividend income of approximately $470 on your investment.

If this proves accurate, this boosts the total potential return on investment to approximately $11,680 or 16.5%.

All in all, this arguably makes BHP worth considering if you’re looking for exposure to the mining sector today.

The post How much could $10,000 invested in BHP shares be worth next year? appeared first on The Motley Fool Australia.

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More reading

• How I’d invest $20k to target $1,400 a year from ASX dividend shares
• Why are ASX 200 mining shares smashing the benchmark on Wednesday?
• Buying BHP shares? You’ll want to read this
• 3 ASX 200 mining shares to buy now with less than $1,000
• Buy Woodside shares and these ASX 200 dividend giants now

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has 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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Australian income investors are a lucky bunch. The local share market has a large amount of ASX dividend shares to choose from right now.

But which ones could be buys for investors this week?

Three that analysts are feeling positive on and are forecasting 5% dividend yields are listed below. Here’s what you can expect from them:

Accent Group Ltd (ASX: AX1)

Accent could be a good option for income investors. That’s the view of analysts at Bell Potter, which have a buy rating and $2.50 price target on the footwear focused retailer’s shares.

In addition, the broker is forecasting fully franked dividends of 13 cents per share in FY 2024 and then 14.6 cents in FY 2025. Based on its share price of $1.98, this equates to a yield of 6.5% and 7.4%, respectively.

Rio Tinto Ltd (ASX: RIO)

Another ASX dividend share that could offer above-average yields is Rio Tinto. It is of course one of the globe’s largest miners and the owner of a world-class operations across a number of commodities such as copper and iron ore.

Goldman Sachs is a fan of the miner and currently has a buy rating and $138.30 price target on its shares.

As for income, the broker is expecting fully franked dividends per share of US$4.39 (A$6.68) in FY 2024 and then US$4.61 (A$7.02) in FY 2025. Based on the latest Rio Tinto share price of $121.14, this will mean yields of approximately 5.5% and 5.8%, respectively.

Stockland Corporation Ltd (ASX: SGP)

Finally, Citi thinks that this residential and land lease developer and retail, logistics and office real estate property manager could be an ASX dividend share to buy right now.

The broker currently has a buy rating and $5.00 price target on its shares.

In respect to dividends, the broker expects a 26.2 cents per share dividend in FY 2024 and a 26.6 cents per share dividend FY 2025. Based on its current share price of $4.79, this represents 5.45% and 5.55% dividend yields.

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

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More reading

• $2.1 million! Who are the highest paid ASX 200 directors?
• Why are ASX 200 mining shares smashing the benchmark on Wednesday?
• Rio Tinto shares higher on $535 million lithium news
• Why these excellent ASX dividend shares have been named as buys
• 3 ASX dividend shares to buy for a passive income boost

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has recommended Accent Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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There’s an ASX 200 stock that (unless you’re a shareholder) you might think has had its fair share of upside. After all, this company has given investors a 7.76% gain over 2024 to date, as well as a 17.8% increase in share price over the past 12 months.

Over five years, those gains stretch to 85.2%, which doesn’t even include the substantial boost from dividends either.

The ASX 200 stock in question is none other than retail share Premier Investments Limited (ASX: PMV). If you don’t know Premier Investments, chances are you’d be familiar with at least one of this company’s many lucrative retail brands. They include Peter Alexander, Dotti, Jacqui E, Smiggle, Just Jeans and Jay Jays.

So we’ve already established that this company has been a real winner for ASX 200 stock market investors over a long period of time. But shareholders could be treated to even higher gains in the future, if a report is to be believed.

Could this ASX 200 stock be heading for a breakup?

According to The Australian, Jarden analysts believe that a current strategic review of the Premier Investments business structure will either lead to “no change in the current structure, a demerger of the Smiggle and/or Peter Alexander, or a demerger of its core fashion brands”.

The analysts went on to argue that “the sale or equity swap for the core apparel brands (which include
Smiggle and Peter Alexander) could deliver the most potential upside, particularly if synergies existed for an appropriate buyer”.

Jarden was coy on just how much this might be worth to investors. But the report also cited analysis from Unified Capital Partners from 2023. This also found that a demerger could unlock additional value for shareholders of this ASX 200 stock.

That’s based on the assumption that Smiggle could have a value of more than $1.1 billion on its own, with Peter Alexander being worth another $1.5 billion.

If these businesses were spun out, Unified Capital Partners estimated that combined, Premier and the demerged company would have a value of around $33.46 per share. Premier was trading at $30.43 at yesterday’s close, so this would imply a further upside of around 10%.

No doubt Premier shareholders will be salivating at that thought. But we’ll have to see what this ASX 200’s management team decides to do.

The post How a potential demerger could deliver a 10% upside for this ASX 200 stock appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Friday
• Here are the top 10 ASX 200 shares today
• 2 ASX 200 large-cap shares upgraded by brokers
• ASX 200 off to the races amid 2024 Fed rate cut hopes
• 5 things to watch on the ASX 200 on Thursday

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 recommended Premier Investments. 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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Geez, this chart looks ugly, doesn’t it?

This is the AMP Ltd (ASX: AMP) share price over the past 10 years.

To say it’s been a long road for AMP investors is an understatement. But as you can see from the chart lines, there has been a stabilisation of the share price for a few years now.

For the record, the AMP share price closed yesterday’s session at $1.12, up 1.36% for the day.

But down 77% since March 2014.

However, we have some good news for AMP share investors.

We’ve got dividend forecasts to share with you, and analysts are optimistic.

So, let’s check out what the analysts reckon AMP shares will pay in 2024, 2025, and 2026.

A short history of AMP dividends

To recap, AMP has only just resumed paying dividends in the past 12 months.

The company stopped paying dividends in 2019. It paid one final dividend of 4 cents per share that year, with 90% franking, and then nothing until April 2023. It resumed payments then with a final dividend of 2.5 cents per share with just 20% franking.

In September 2023, AMP paid 2.5 cents again for the interim dividend, also with 20% franking.

So, all up in 2023, 5 cents per share.

Then last month, the company announced a final dividend of 2 cents per share amid an earnings boost in FY23.

The wealth manager reported an underlying NPAT of $196 million, up 6.5% on FY22.

Forecast dividend in 2024

Looking ahead, the consensus forecast among analysts on CommSec is for AMP to pay a total annual dividend of 4.7 cents.

So, with 2 cents already declared last month, they’re betting on a 2.7-cent interim dividend later in the year.

Based on yesterday’s closing AMP share price of $1.12, a 4.7-cent total annual dividend equates to a yield of 4.2%.

That’s just above the average dividend yield for S&P/ASX 200 Index (ASX: XJO) stocks of 4%.

What about future AMP dividends?

In 2025, the consensus forecast is for the ASX financial share to pay a total annual dividend of 5.9 cents.

That moves the dividend yield up to 5.27%.

In 2026, the experts expect a total annual dividend of 6.2 cents, so now we’re talking a yield of 5.5%.

While that sounds strong, this yield is based on today’s share price.

If you bought AMP shares 10 years ago when they were trading above $6, a 5.9-cent dividend is barely a 1% yield.

But at least AMP dividends appear to be on an upward trajectory.

The post Here’s the AMP dividend forecast through to 2026 appeared first on The Motley Fool Australia.

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More reading

• Here’s when AMP says ASX investors can expect an interest rate cut
• Are you investing or gambling?
• Here are the top 10 ASX 200 shares today
• 25 ASX 200 shares with ex-dividend dates next week

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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Fortescue Ltd (ASX: FMG) shares are a popular option for investors that want iron ore exposure.

But that doesn’t necessarily mean they are the best way to invest in this side of the market.

In fact, for some time now, analysts have been warning that Fortescue shares are severely overvalued.

As a result, it won’t be a surprise for many to see that the mining giant’s shares have fallen 16% since the end of January.

However, what might be a surprise is that most analysts continue to believe that the miner’s shares remain very expensive despite this pullback.

For example, earlier this week, the team at Macquarie put an underperform rating and $14.00 price target on its shares, whereas Ord Minnett put a lighten rating and $17.30 price target on them.

These price targets suggest further downside of 44% and 31%, respectively, from current levels.

Forget Fortescue shares and buy this iron ore miner

The team at Goldman Sachs thinks investors should dump Fortescue and buy Champion Iron Ltd (ASX: CIA) shares instead.

Goldman, which has a sell rating and $19.60 price target on Fortescue, believes that big returns could be on offer from the Canadian iron ore miner.

According to a note this morning, the broker has retained its buy rating and $9.40 price target on its shares. This implies potential upside of 30% for investors over the next 12 months.

And with Goldman forecasting a 3.2% dividend yield in FY 2024 and a 4.5% dividend yield in FY 2025, this increases the total potential 12-month return beyond 33%.

The broker believes that its shares are cheap at the current level. It commented:

Supportive Valuation: the stock is trading at 0.8x NAV (A$8.7/sh) and ~4.0x EBITDA (NTM). Our NAV is based on a long run Fe price of ~US$105/t (real) for 65% Fe and ~US$75/t premium for DRPF above 62% Fe Index. For every ~US$10/t increase in our long run price, our CIA NAV would increase by ~A$1.5/sh.

Goldman also highlights that the Bloom Lake operation is performing strongly and looks set to generate significant cash flow next year. It adds:

Bloom Lake now running above nameplate 15Mtpa, strong OCF in FY25, with de-bottlenecking options to 18Mtpa: CIA has now ramped-up Bloom Lake Phase II to 15Mtpa nameplate, and we expect this to support +50% EBITDA growth and doubling of Operating Cash Flow (OCF) in FY25, which could fund de-bottlenecking of Bloom Lake to 18Mtpa (not included in GSe base case).

The post Forget Fortescue and buy this iron ore share for a 33% return appeared first on The Motley Fool Australia.

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More reading

• 2 top ASX 200 shares to buy now for $1,000 a month in passive income
• Why are ASX 200 mining shares smashing the benchmark on Wednesday?
• Here are the top 10 ASX 200 shares today
• Shares vs. property: Which Australian states and ASX stocks are delivering the best passive income?
• 3 ASX 200 mining shares to buy now with less than $1,000

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie 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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On Thursday, the S&P/ASX 200 Index (ASX: XJO) had a fantastic session. The benchmark index rose 1% to 7,782 points.

Will the market be able to build on this on Friday and end the week on a high? Here are five things to watch:

ASX 200 poised to fall

The Australian share market looks set to end the week in the red despite a good night on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open 14 points or 0.2% lower this morning. In late trade on Wall Street, the Dow Jones is up 0.8%, the S&P 500 is up 0.45%, and the NASDAQ is up 0.35%.

Oil prices soften

ASX 200 energy shares Beach Energy Ltd (ASX: BPT) and Karoon Energy Ltd (ASX: KAR) could have a subdued finish to the week after oil prices softened overnight. According to Bloomberg, the WTI crude oil price is down 0.3% to US$81.01 a barrel and the Brent crude oil price is down 0.3% to US$85.71 a barrel. Weaker than expected gasoline demand in the US put pressure on prices.

Brickworks downgraded

The Brickworks Limited (ASX: BKW) share price could be fully valued now according to analysts at Bell Potter. In response to the building products company’s half-year results, the broker has downgraded its shares to a hold rating with a $29.00 price target. Bell Potter said: “We remain attracted to BKW’s significant property development pipeline and ~50% short-WALE book in a supply constrained Western Sydney market. That said, with SOL’s premium to NTA having widened to ~8% (BPe) we mark BKW at close to fair value at this time.”

Gold price storms higher

ASX 200 gold shares including Evolution Mining Ltd (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) could have a poor session after the gold price dropped overnight. According to CNBC, the spot gold price is up 1.1% to US$2,185.1 an ounce. Rate cut optimism boosted the precious metal.

Virgin Money UK takeover deal

Virgin Money UK (ASX: VUK) shares will be on watch on Friday after the UK-based bank released an update on its takeover approach by Nationwide Building Society. According to the release, the two parties have agreed the terms of a recommended cash acquisition of Virgin Money by Nationwide. Under the terms of the acquisition, each Virgin Money shareholder will be entitled to receive 220 pence (~A$4.29) in cash per share.

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

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More reading

• Here are the top 10 ASX 200 shares today
• Why Australian Strategic Metals, Evolution, Sigma, and Webjet shares are storming higher
• Why AGL, Brickworks, IGO, and New Hope shares are dropping today
• 2 ASX 200 large-cap shares upgraded by brokers
• Why are ASX 200 gold stocks surging again on Thursday?

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 Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. 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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Are S&P/ASX 200 Index (ASX: XJO) board members paid too much?

It’s a debate that never stops.

On one hand, directorships are only part-time positions. You meet a few times a year, make some high-level decisions, have a glass of brandy, then go home.

Board members are usually not involved in the day-to-day running of the company, which is the job of the chief executive.

And many directors are on the boards of multiple ASX companies, collecting fees like they’re going out of fashion.

The opposite argument is that these (mostly) men make decisions that affect the welfare of thousands of employees and investors.

If your judgments affect so many livelihoods, you need to attract the smartest people as directors. Therefore, you need to pay a premium.

So, who are the ASX 200 directors with the largest pay packets?

Top 5 highest paid ASX 200 board members

The Australian Financial Review, using data from OpenDirector and YellowFolder, this week revealed the highest paid ASX 200 board members.

Here are the top five:

Director	Remuneration	Companies
John Mullen	$2.1 million	Treasury Wine Estates Ltd (ASX: TWE) Brambles Ltd (ASX: BXB) Qantas Airways Limited (ASX: QAN)*
Steven Gregg	$1.9 million	Westpac Banking Corp (ASX: WBC) Ampol Ltd (ASX: ALD) Lottery Corporation Ltd (ASX: TLC)**
Scott Perkins	$1.8 million	Origin Energy Ltd (ASX: ORG) Brambles Ltd  Woolworths Group Ltd (ASX: WOW)
Richard Goyder	$1.8 million	Woodside Energy Group Ltd (ASX: WDS) Qantas**
Dominic Barton	$1.5 million	Rio Tinto Ltd (ASX: RIO)

The remuneration is calculated just from the base fee for serving on the board, excluding any performance-related options and shares.

Despite some progress in installing women onto ASX boards, there are still no female directors earning above the $1 million mark.

The only woman director in the top 20 highest paid ladder is Dr Nora Scheinkestel, who is on the board of Westpac, Origin Energy and Brambles.

Paid a lot of money to do a job

On Thursday, Australian Securities and Investments Commission chair Joe Longo responded to complaints from some company directors that the regulatory burden was becoming too much to bear.

According to The Australian, he acknowledged the “challenges” involved in carrying out board member duties — but told directors that it’s not meant to be an easy job.

“If it were [easy], anyone could do it,” he said at a AICD event in Melbourne.

“Good directors run successful, profitable businesses. That’s not going to happen unless every director takes an active stance of curiosity and starts asking the right questions – to understand their business, and how that business makes money.”

The post $2.1 million! Who are the highest paid ASX 200 directors? appeared first on The Motley Fool Australia.

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More reading

• 4 ‘overheated’ ASX 200 shares to stay away from
• How has this ASX 200 energy stock just hit another new record high?
• Here’s the Woodside dividend forecast through to 2026
• 2 ASX 200 large-cap shares upgraded by brokers
• 2 things I’m waiting for before buying Coles shares

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 positions in and has recommended Lottery. The Motley Fool Australia has recommended Treasury Wine Estates. 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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Super Retail Group Ltd (ASX: SUL) shares could be a great option for investors right now.

That’s the view of analysts at Goldman Sachs, which believe the ASX retail giant is undervalued at current levels.

What is the broker saying about Super Retail shares?

Last month, Goldman reiterated its buy rating and $17.80 price target on the company’s shares.

So, with Super Retail shares currently changing hands for $15.69, this implies potential upside of 13.5% for investors over the next 12 months.

But the returns won’t stop there. Goldman is forecasting fully franked dividends per share of 67 cents in FY 2024 and then 73 cents in FY 2025.

This represents dividend yields of 4.3% and 4.65%, respectively, which boosts the total potential 12-month return to approximately 18%.

Why is the broker bullish?

Goldman’s bullish view is largely built on its belief that Super Retail is better placed than most in the current environment thanks to the loyalty of its customers.

In addition, the broker highlights that Super Retail shares are changing hands on multiples that are lower than long-term averages. It explains:

SUL is an Australian domestic retailer with 4 divisions – Super cheap Auto, Rebel Sport, BCF, and Macpac. We believe SUL will display resilience in a softer economic environment that is built upon its competitive advantage of high loyalty (~11.0m active members accounting for >75% of sales) and this will be further bolstered as the company launches the Rebel loyalty program and continues to build personalisation capabilities. Hence, we are Buy-rated on SUL. SUL is trading below its long run PE valuation average.

All in all, this could make Super Retail worth considering if you’re looking for exposure to the retail sector for your portfolio or want some new additions for an income portfolio.

The post Why Goldman Sachs expects market-beating returns from Super Retail shares appeared first on The Motley Fool Australia.

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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 positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has positions in and has recommended Super Retail 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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With the market optimistic about the economy and interest rates, there are plenty of excellent buys at the moment on the S&P/ASX 200 Index (ASX: XJO).

However, there are four specific stocks that one expert is warning investors to cross the street to avoid.

“The recent bank stock rally looks overdone,” Wilsons equity strategist Rob Crookston said in a memo to clients.

“Valuation multiples have risen significantly, and are now stretched relative to historical norms.”

Let’s explore the reasons why these ASX 200 shares seem so expensive now.

‘Valuations are disconnected from fundamentals’

Crookston said that the stock prices for the major banks are now out of sync with their business outlook.

“Current valuations are disconnected from fundamentals, given the tepid (+2%) earnings growth expected over the next 2 years.”

All four stocks have rocketed over the past six months:

• Westpac Banking Corp (ASX: WBC) share price up 26%
• National Australia Bank Ltd (ASX: NAB) up 20%
• Commonwealth Bank of Australia (ASX: CBA) up 17%
• ANZ Group Holdings Ltd (ASX: ANZ) up 15%

Crookston noted that the market seemed to be bidding these upwards because of an expectation that earnings will grow over the next 12 to 24 months.

But to him, that thesis just does not hold.

“Our analysis of historical trends and current consensus estimates suggests limited upside to forward earnings, even with the possibility of a soft landing and interest rate cuts in the next 12 to 18 months.”

Industry trends aren’t optimistic

All four ASX 200 shares are now flying above where they were just before the COVID-19 crash back in February 2020.

In a competitive market, Crookston is worried about the long-term trend for the banking industry.

“Over the past two decades, the return on equity (ROE) of major banks has declined substantially, largely explaining the decrease in the price-to-book ratios.”

Australian banks also look expensive compared to comparable foreign peers.

“While CBA has a lower ROE (13.3%) relative to JP Morgan Chase & Co (NYSE: JPM) (14.9%), it trades on a 58% premium on a price-to-book basis. 

“While the historically resilient Australian economy and the concentrated nature of the domestic banking sector deserves a premium, this is excessive.”

Crookston’s team has indeed put their money where their mouths are, recently selling their Westpac shares in order to buy into BHP Group Ltd (ASX: BHP).

“The recent pullback in the iron ore miners presents a good opportunity to lighten our sector underweight by adding to BHP.”

The post 4 ‘overheated’ ASX 200 shares to stay away from appeared first on The Motley Fool Australia.

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More reading

• If I’d put $5,000 in ANZ shares at the start of 2024, here’s what I’d have now
• ASX 200 shares vs term deposits: What $5,000 invested a year ago is worth now
• I wouldn’t touch CBA shares with a 10-foot bargepole!
• How I’d invest $20k to target $1,400 a year from ASX dividend shares
• 2 top ASX 200 shares to buy now for $1,000 a month in passive income

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. 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 positions in and has recommended JPMorgan Chase. 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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