Category: Stock Market

Do you have room in your portfolio for some new ASX shares?

If you do, then it could be worth checking out the two named below that Bell Potter has on its monthly preferred list.

Here’s why the broker thinks they are among the best buys on the local market right now:

GUD Holdings Limited (ASX: GUD)

The diversified products company could be an ASX share to buy in March. Bell Potter has been impressed with GUD’s performance recently and appears confident that more of the same is coming. Particularly given the resilience of its auto business. It said:

[Its strong result] was driven by the better-than-expected APG performance (the highest-quality business in GUD, in our view) and the improvement in gearing. We see GUD as well-placed to benefit from the ongoing improvement in OEM supply constraints into FY24. Overall, our Buy rating for GUD is predicated on the relative resilience of the legacy auto business and improving momentum in new car sales, which should be favourable for APG’s earnings.

Bell Potter has a buy rating and $12.80 price target on the company’s shares.

ResMed Inc. (ASX: RMD)

Another ASX share that Bell Potter is bullish on in March is sleep disorder treatment company ResMed. It believes the company still has a very long runway for growth, which could make it a great long term option for investors. It explains:

The market for OSA and chronic obstructive pulmonary disease (COPD) remains under penetrated, and we expect industry volume growth to continue in the 6-8% range for the foreseeable future. In this regard, the competitive dynamics are very much in favour of RMD due to the Philips recall and improving semiconductor availability. […] Furthermore, ResMed is well-positioned to build on its dominant share even after Philips returns to the global market, with the launch of its latest continuous positive airway pressure (CPAP) device, the Air Sense 11.

Bell Potter has a buy rating and $34.00 price target on this ASX share.

The post Bell Potter names the best ASX shares to buy in March appeared first on The Motley Fool Australia.

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More reading

• Up 37% from their low: Can ResMed shares keep rising?
• 3 reliable ASX shares you can buy at a discount
• Here are the top 10 ASX 200 shares today
• Morgans names more of the best ASX 200 shares to buy in March
• 2 classic ASX 200 shares you can buy for cheap now to hold for years

Motley Fool contributor James Mickleboro has positions in ResMed. 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.

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With just $500, anyone can make a good move for growing their wealth with ASX shares.

If I were starting to invest, I’d want to choose quality businesses that I am familiar with but also have the potential to deliver good returns.

The share market has returned an average of around 10% per annum, which is a good rate of compounding growth.

Many brokers in Australia require a minimum investment of $500 the first time we invest in an ASX share. So, let’s see what we can do with that.

Vanguard MSCI Index International Shares ETF (ASX: VGS)

It can be hard to choose one business to own when there are some many out there. So, why not (indirectly) own more than 1,400 in a single purchase? The VGS ETF held shares in 1,433 businesses in its portfolio at the end of January 2024. That’s a lot of diversification!

We can own many of the world’s leading technology businesses with an investment in this exchange-traded-fund (ETF), including Apple, Microsoft, Alphabet, Nvidia, Amazon.com, Meta Platforms and Tesla.

I believe this is the sort of investment that we can own forever because of how diversified it is, the quality of those businesses and the good returns it typically makes (though nothing is guaranteed). Over the years, the holdings are regularly updated, ensuring the ASX ETF is always invested in leading businesses.

It has an annual management fee of 0.18%, and it has achieved an average return per annum of 12.4% since it started in November 2014.

While US shares make up around 71% of the portfolio, there are numerous other countries with a noticeable weighting, including Japan, the United Kingdom, France, Canada, Switzerland, Germany and the Netherlands.

Wesfarmers Ltd (ASX: WES)

For investors wanting to own a specific ASX share, I think Wesfarmers Ltd (ASX: WES) is a great choice.

The ASX retail conglomerate operates Kmart, Bunnings, Officeworks, Priceline and many other businesses across the chemicals, energy, fertilisers, industrial and healthcare sectors.

The company has proven to be a solid performer. Bunnings and Kmart Group both earn strong returns on capital (ROC), while the overall business earns an impressive return on equity (ROE).

Wesfarmers aims to generate good total shareholder returns (TSR) for investors through a combination of capital growth and dividends.

According to CMC Markets, Wesfarmers shares have delivered an average TSR of 14% per annum over the past decade, though past performance is not a guarantee of future performance. Having said that, I think the ASX share is very capable of outperforming the S&P/ASX 200 Index (ASX: XJO) over the next five years.

The post With a spare $500, here’s how I’d start buying ASX shares this March appeared first on The Motley Fool Australia.

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More reading

• 4 ASX ETFs for smart investors
• Are you investing or gambling?
• 2 fantastic ASX ETFs to buy for global investing in March
• 3 things about Wesfarmers stock every smart ASX investor knows
• 5 ASX shares to buy for an effortless path to financial freedom

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. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Tesla, and Wesfarmers. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has positions in and has recommended Wesfarmers. The Motley Fool Australia has recommended Alphabet, Amazon, Apple, Meta Platforms, Nvidia, and Vanguard Msci Index International Shares ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The great news for income investors is that there are plenty of ASX All Ords dividend stocks to choose from on the Australian share market.

But which ones could be buys in March?

Let’s take a look at two that have been named as buys this month:

Dexus Convenience Retail REIT (ASX: DXC)

Dexus Convenience Retail REIT could be an ASX All Ords dividend stock to buy in March.

It is a real estate investment trust that owns high quality service stations and convenience retail assets.

The team at Bell Potter thinks the company is a buy. Its analysts highlight that they “see clear price discovery for DXC where there have been 53 petrol station transactions in CY23, proving up book value.”

The broker has a buy rating and $3.00 price target on its shares.

Bell Potter is forecasting dividends per share of 20.7 cents in FY 2024 and 21.7 cents in FY 2025. Based on its current share price of $2.70, this equates to yields of 7.7% and 8%, respectively.

Transurban Group (ASX: TCL)

Transurban could be another ASX All Ords dividend stock to buy now. It is the toll road operator behind roads such as CityLink and Cross City Tunnel.

Citi currently has a buy rating and $15.90 price target on Transurban’s shares.

In addition, its analysts “believe TCL’s FY24 DPS guidance of 62c is conservative.” Instead, the broker is forecasting dividends per share of 63 cents in FY 2024 and then 65 cents in FY 2025. Based on the current Transurban share price of $13.45, this will mean yields of 4.7% and 4.8%, respectively.

The post Analysts say these ASX All Ords dividend stocks are buys in March appeared first on The Motley Fool Australia.

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More reading

• Bell Potter says these ASX 200 stocks are strong buys for March
• 2 buy-rated ASX dividend stocks for income investors in March
• 2 ASX 200 dividend shares that could be strong buys this month
• 3 all-star ASX dividend stocks I’d own in retirement to combat falling interest rates
• 5 ASX 200 shares that boosted their dividends this earnings season

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 Transurban 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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The S&P/ASX 200 Index (ASX: XJO) has followed Wall Street’s lead and dropped deep into the red. At the time of writing, the benchmark index is down 1.4% to 7,736 points.

Four ASX shares that are not letting that hold them back today are listed below. Here’s why they are rising:

4DMedical Ltd (ASX: 4DX)

The 4DMedical share price is up 3% to 81 cents. This follows news that US President Biden has signed a six-bill, US$460 billion package on Saturday, approving full-year funding for the Department of Veterans Affairs among other offices. The new funding will include screening technologies, which 4DMedical could benefit from greatly.

Block Inc (ASX: SQ2)

The Block share price is up 4% to $121.58. This follows an equally strong night of trade for the payments company’s shares on Wall Street on Friday. Block’s shares have now doubled in value since the start of November.

Judo Capital Holdings Ltd (ASX: JDO)

The Judo Capital share price is up 4% to a 52-week high of $1.42. Investors have been buying this small business lender’s shares since the release of a broker note out of Goldman Sachs last week. Its analysts put a buy rating and $1.66 price target on the company’s shares. They said: “We think the market’s skepticism around the at-scale NIM focuses on the lending spread assumption of mid-4%, given the 1H24 spread was <4%.”

Mesoblast Ltd (ASX: MSB)

The Mesoblast share price is up 6.5% to 33.5 cents. This has been driven by news that the biotech company has been given a big boost from the US FDA. The federal agency revealed that it will support an accelerated approval pathway for rexlemestrocel-L under the existing Regenerative Medicine Advanced Therapy designation. It is Mesoblast’s allogeneic mesenchymal precursor cell product for patients with end-stage ischemic heart failure with reduced ejection fraction and a left ventricular assist device.

The post Why 4DMedical, Block, Judo, and Mesoblast shares are pushing higher today appeared first on The Motley Fool Australia.

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More reading

• Why is the Mesoblast share price jumping 16% on Monday?
• Why Judo, Paladin Energy, Virgin Money, and WA1 shares are racing higher
• Up 93% since October, why are Block shares marching ahead again on Friday?
• Why Cettire, GQG, Mesoblast, and Nine Entertainment shares are falling today
• Forget CBA and buy this ASX bank stock for big returns

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 Block and Judo Capital. The Motley Fool Australia has positions in and has recommended Block. 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 so many shares to choose from on the ASX, it can be difficult to decide which ones to buy. The good news is that brokers across the country are doing a lot of the hard work for you.

Three top ASX shares that leading brokers have named as buys this week are listed below. Here’s why they are bullish on them:

Flight Centre Travel Group Ltd (ASX: FLT)

According to a note out of Citi, its analysts have retained their buy rating and $24.15 price target on this travel agent’s shares. The broker has been reviewing the travel sector following earnings season. Flight Centre has come out of its review favourably, with the broker continuing to prefer it over its rivals. Particularly given probable corporate travel market share gains in the ANZ region. The Flight Centre share price is trading at $21.54 on Monday.

Goodman Group (ASX: GMG)

A note out of Macquarie reveals that its analysts have retained their outperform rating on this industrial property company’s shares with an improved price target of $34.89. This follows a post-earnings season review of the listed property sector. Macquarie was pleased with Goodman’s performance and highlighted the company as a top pick. Especially given its potential to deliver double-digit earnings growth over the coming years. The Goodman share price is fetching $30.47 today.

IDP Education Ltd (ASX: IEL)

Analysts at Goldman Sachs have retained their buy rating and $26.60 price target on this language testing and student placement company’s shares. Goldman acknowledges that IDP Education continues to be impacted by regulatory changes that are restricting the flow of international students. However, it points out that the company is well positioned to capitalise when conditions normalise given improving student placement market share and investments into its network and platforms. The IDP Education share price is trading at $18.85 today.

The post Leading brokers name 3 ASX shares to buy today appeared first on The Motley Fool Australia.

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More reading

• These are the 10 most shorted ASX shares
• Supercharge your portfolio with these buy-rated ASX growth shares
• 3 ASX 200 shares that could rise 20% to 50%
• Why is this ASX 200 share rising at nearly quadruple the rate of its peers?
• If you don’t own this ASX stalwart stock, you’re missing some serious stability

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, Goodman Group, and Idp Education. The Motley Fool Australia has recommended Flight Centre Travel Group, Goodman Group, and Idp Education. 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 CSL Ltd (ASX: CSL) share price is down 2% in early trading as the ASX healthcare share feels the effects of the ASX stock market sell-off. CSL shares also went ex-dividend today.

On Friday in the US market, there was a sizeable decline in a number of stocks. Nvidia fell 5.5%, Eli Lilly dropped 2.3%, Microsoft declined 0.7%, Tesla fell 1.8% and so on. The S&P/ASX 200 Index (ASX: XJO) is currently down by 1.3%.

Ex-dividend day

One of the factors that may be impacting CSL shares today is that it went ex-dividend.

An ex-dividend date tells the market when new investors buying shares will miss out on the upcoming dividend. There has to be a cut-off point for deciding who will and who won’t receive the dividend.

Anyone who buys today is missing out on the interim dividend payment. Investors who bought CSL shares last week are eligible to receive the dividend, assuming they’re still shareholders on the record date (tomorrow).

How much is being paid?

CSL is going to pay a dividend of US$1.19 to shareholders, which at the time of the FY24 first-half result translated into approximately A$1.81 per share (an increase of 12%).

At the current exchange rates, the upcoming payment equates to A$1.80 per share.

CSL is expecting to release information about exchange rates for Australian and New Zealand dollar payments on 14 March 2024.

The ASX healthcare share is planning to pay this dividend on 3 April 2024, which is only a few weeks away.

CSL was able to deliver a bigger dividend after growing net profit after tax (NPAT) by 17% to US$1.9 billion in its FY24 first-half result. It also reported underlying earnings per share (EPS) growth of 11% to US$4.18.

Profit expectations

The company is expecting to report underlying NPATA of between US$2.9 billion to US$3 billion, which would be growth of between 13% to 17%.

Management thinks the business is in a strong position to deliver annualised double-digit earnings growth over the medium term.

On Commsec, the estimates imply the CSL share price is currently valued at 30 times FY24’s estimated earnings. It could pay an annual dividend of A$4, according to Commsec, which puts the forecast forward dividend yield at 1.4%.

The post Why are CSL shares falling today? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Monday
• 3 ASX shares you can confidently invest $500 in right now
• 1 ASX stock that has created millionaires and will continue to make more
• 13 ASX 200 shares with ex-dividend dates next week
• Want to grab the CSL dividend? There’s not much time left!

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL, Microsoft, Nvidia, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended CSL and Nvidia. 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 market may be tumbling on Monday but the same cannot be said for the Mesoblast Ltd (ASX: MSB) share price.

In early trade, the biotechnology company’s shares jumped 16% to 36.5 cents.

Mesoblast’s shares have eased back a touch since then but remain up approximately 7% at the time of writing.

Why is the Mesoblast share price jumping?

Investors have been bidding the company’s shares higher this morning after it released an update on its rexlemestrocel-L therapy.

It is Mesoblast’s allogeneic mesenchymal precursor cell (MPC) product for patients with end-stage ischemic heart failure with reduced ejection fraction (HFrEF) and a left ventricular assist device (LVAD).

According to the release, following a meeting with the U.S. Food and Drug Administration (FDA) in February, it has been advised that the federal agency will support an accelerated approval pathway for rexlemestrocel-L under the existing Regenerative Medicine Advanced Therapy (RMAT) designation.

The company highlights that the FDA’s comments indicated that the presented results may support a reasonable likelihood of clinical benefit of MPCs against mortality in LVAD patients, consistent with the criteria for accelerated approval.

Mesoblast CEO, Dr. Silviu Itescu, commented:

We are very pleased with FDA’s feedback that the presented results from our pivotal study of rexlemestrocel-L in end-stage HFrEF patients with LVADs may support an accelerated approval. We intend to request a pre-Biologics License Application (BLA) meeting to discuss data presentation, timing and FDA expectations for an accelerated approval filing.

This certainly could be good news for both the company and sufferers. Mesoblast notes that every year in the United States over 100,000 patients progress to end-stage HFrEF. In these patients, more than 2,500 life-prolonging LVADs are implanted in the US annually, of whom approximately 80% undergo the procedure as destination or permanent therapy.

The Mesoblast share price is now up approximately 25% since this time last month. Though, it remains down by a sizeable 63% on a 12-month basis.

The post Why is the Mesoblast share price jumping 16% on Monday? appeared first on The Motley Fool Australia.

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More reading

• Why Cettire, GQG, Mesoblast, and Nine Entertainment shares are falling today
• Mesoblast share price tumbles on US$32.5m half-year loss
• Guess which ASX 300 healthcare stock is surging 13% on FDA news

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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If you’re not averse to investing in the mining sector and are on the lookout for big returns, then it could be worth taking a closer look at one ASX 300 mining share.

That mining share is Develop Global Ltd (ASX: DVP), which is an exploration, development, and underground mining services company.

It owns two advanced Copper-Zinc projects near Port Hedland in the Pilbara region of Western Australia – the Sulphur Springs project and the Whim Creek Project.

In addition, it owns the high-grade zinc-copper-lead-gold-silver Woodlawn project in New South Wales.

Why is it an ASX 300 mining share to buy?

Bell Potter was pleased with the company’s performance during the first half, noting that its revenue was ahead of expectations. It commented:

DVP reported revenue of $65.8m was 5% ahead of our $62.5m estimate and up 162% YoY, driven by increased underground development and mining activity at the Bellevue Gold mine. Underlying EBITDA of $6.6m was lower than our $11.2m forecast and higher than -$5.1m in the prior period. This miss was due to higher-than-expected share-based payments and overheads.

Looking ahead, the broker highlights that the ASX 300 mining share is positioned well thanks to growing mining services revenue and the upcoming Woodlawn restart. It adds:

The forthcoming restart of Woodlawn operations (we expect by early CY25) coincides with growing revenue generation from the company’s underground mining services business, underpinning a ramp up in earnings FY24-26. A strong balance sheet and funds expected to be raised from deep-in-the-money options de-risks project financing for Sulphur Springs and Pioneer Dome. These developments represent medium term earnings growth drivers.

Big returns

Bell Potter has a buy rating and $4.10 price target on the company’s shares.

Based on its current share price of $2.47, this implies potential upside of 66% for investors over the next 12 months.

The post This ASX 300 mining share could deliver a 60%+ return in 2024 appeared first on The Motley Fool Australia.

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More reading

• I think these ASX stocks are bargain buys after reporting season
• Want to make big returns? ASX small-cap shares are poised to outperform
• This ASX dividend share has soared 450% in a year! Is it still a buy?
• Goldman Sachs says these ASX tech stocks are top buys
• Buy this ASX 200 biotech stock for a 20%+ return

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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ASX reporting season was fascinating to me, with a number of businesses reporting financials that were stronger than previously thought. I’m going to write about two ASX stocks that seem like bargains to me.

The economy and households overall seem to have done better than expected, though there is pain in some places.

With retail spending holding up quite well and the economy strengthening in the coming years, I think a couple of these ASX retail shares look like good buys.

Universal Store Holdings Ltd (ASX: UNI)

The Universal Store share price is down 22% from February 2023 and it’s down 45% from November 2021. I think it looks great value considering its result and potential growth.

This business operates premium youth fashion brands, with the primary business being Universal Store. It operates the THRILLS and Worship brands within the CTC business, and it’s rolling out Perfect Stranger as a standalone retail store

Universal Store’s FY24 half-year result showed 8.5% overall sales growth to $158 million, with Universal Store sales down 1.4% to $133.2 million, Perfect Stranger sales up 59.7% to $6.6 million and CTC sales up 4.2% to $25.3 million.

It also reported an 80 basis point (0.80%) increase in the gross profit margin to 59.7%. Statutory net profit after tax (NPAT) grew by 16.7% to $20.7 million, while underlying earnings before interest and tax (EBIT) increased by 8.1% to $30.8 million, despite all of the spending on opening new stores.

It opened six new stores during the first half – the store opening program is one of the main reasons I think the company has a promising future as it increases scale.

The ASX stock impressively grew its interim dividend by 18% to 16.5 cents.

According to the projections on Commsec, the ASX retail share is valued at under 13 times FY24’s estimated earnings and 10 times FY26’s estimated earnings. It could pay a grossed-up dividend yield of 9.6% in FY26.

Accent Group Ltd (ASX: AX1)

Accent acts as the distributor of a number of global shoe brands including Skechers, Vans, Kappa, Hoka, Dr Martens and CAT. It’s also responsible for its own businesses including The Athlete’s Foot, Stylerunner, Glue Store and Nude Lucy.

The Accent share price is down 16% from 14 February 2024 and down 24% from 19 April 2023.

Keeping in mind that HY24 was a 26-week period and HY23 was a 27-week period, owned sales fell 2% to $733 million, gross profit increased 0.6% to $414.9 million, the ASX stock’s EBIT dropped 21% to $72.3 million and net profit after tax declined 27.6% to $42.2 million.

Sales and net profit declining is not exactly a positive. But, I believe it’s a cyclical decline that can turn around in FY25 onwards. It’s also opening up a compelling valuation to buy at. Total owned sales in the year to date at the end of January were up 1.6%.

It continues to open new stores that can boost sales in the short term and the longer term, which can help with total sales and operating leverage.

According to Commsec’s numbers, the Accent share price is valued at 14 times FY25’s estimated earnings and 12 times FY26’s estimated earnings. It could pay a grossed-up dividend yield of 10.3% in FY26.

The post I think these ASX stocks are bargain buys after reporting season appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Accent Group. 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 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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ASX small-cap shares have been battered and bruised over the last few years, but now might be the time to look at those businesses with smaller market capitalisations.

The broker Wilsons recently pointed out that ASX small-cap shares typically underperformed large caps in the lead-up to an economic slowdown, and this cycle had been “no exception”, with small-cap ASX shares underperforming “significantly” since 2021.

However, Wilsons said the growing economic data of resilience, combined with easing inflation pressures, could “provide the foundations for a strong comeback in small cap benchmarks in 2024 and 2025 as global and domestic economic growth picks up again.”

Here’s why the broker thinks investors should like (ASX) small-cap shares.

Cheaper valuations

Wilsons said small-caps were still trading at a “very wide and historically attractive discount relative” to large-cap stocks. Global small caps were supposedly trading at the “largest discount relative to large caps in over 20 years”.

In previous periods, when small caps have traded at large discounts, they have gone on to deliver strong returns over the next 12 months, particularly when economic conditions and the official policy backdrop turn supportive.

Economies to rebound?

Wilsons suggested (ASX) small-cap shares outperformed large caps in the early, or expansionary, stages of the economic cycle as growth picks up again.

The broker pointed to 2009 and 2020 as the last two times small caps were cheap, which then saw strong performance for the smaller businesses.

Interest rate cuts

What happens with interest rates can also have an essential influence on performance at the smaller end of the market.

Wilsons said small caps have historically outperformed large caps in the year after an interest rate peak as policy is eased.

On this topic, Wilsons wrote:

We are cognizant of the risk of the lagged impact of tighter monetary policy as well as the higher-for-longer rate scenario. However, in our view, there are encouraging signs of a soft-landing scenario for both the US and global economy. The Australian economy also appears on track for a soft landing in 2024 followed by a growth pick up next year in response to lower policy rates.

While it may not be a perfectly smooth ride, with valuations looking compelling, and the prospect of easier monetary policy encouraging a pick-up in growth over the next 12 to 18 months, we expect the small company asset class to perform well over the coming year and most likely beyond.

My thoughts on ASX small-cap shares

I agree with Wilsons, there are a number of attractive opportunities to be found on the ASX. I’m personally looking closely at names like Airtasker Ltd (ASX: ART) and Close The Loop Ltd (ASX: CLG) which are growing revenue, improving margins and have appealing growth potential.

Some small-cap names have already soared in the last few months, with a few taken over by buyers.

I think quality smaller companies are capable of outperforming bigger businesses over the long term because their growth runways are longer.

The post Want to make big returns? ASX small-cap shares are poised to outperform appeared first on The Motley Fool Australia.

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More reading

• 2 ASX stock picks with explosive potential
• Where I’d invest $5,000 into ASX small-cap shares aiming for big growth

Motley Fool contributor Tristan Harrison has positions in Close The Loop. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Close The Loop. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Airtasker. The Motley Fool Australia has recommended Close The Loop. 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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