Category: Stock Market

The BHP Group Ltd (ASX: BHP) share price is trading lower on Tuesday morning.

In morning trade, the mining giant’s shares are down 3% to $47.11.

Why is the BHP share price falling?

Investors have been hitting the sell button in response to the Big Australian’s half year results.

According to the release, BHP reported a 16% decline in revenue to US$25,713 million, a 28% decline in underlying EBITDA to US$13,230 million, and a 32% decline in profit after tax to US$6,457 million.

Management advised that this was driven by lower average realised prices for iron ore, copper, and hard coking coal. This was partially offset by higher prices for weak coking coal, thermal coal, and nickel.

In light of this sizeable profit decline, BHP elected to cut its dividend by an even larger 40% to 90 US cents per share. This will be paid to eligible shareholders at the end of next month on 30 March.

Earnings miss

While a decline in revenue, earnings, and dividends was in fact expected by the market, the extent of the decline appears to have taken many by surprise. This is what has put pressure on the BHP share price today.

For example, Goldman Sachs was expecting underlying EBITDA of US$13.7 billion and the market was forecasting US$14.3 billion.

Whereas BHP reported underlying EBITDA of US$13.23 billion, which is 7.5% lower than consensus estimates.

In addition, the market was forecasting a fully franked interim dividend of 98 US cents per share. This means that BHP’s 90 US cents per share dividend is 8.2% lower than expectations.

Following this decline, the BHP share price is now trading 12% below its recent demerger-adjusted record high.

The post Why is the BHP share price tumbling today? appeared first on The Motley Fool Australia.

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More reading

• Goldman tips 20% surge in iron ore price. Should I buy ASX 200 mining shares?
• BHP share price on watch after first-half earnings miss
• Earnings preview: Here are the ASX shares reporting on Tuesday
• 5 things to watch on the ASX 200 on Tuesday
• Should you dig into BHP shares before the ASX 200 miner reports next week?

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 Magnis Energy Technologies Ltd (ASX: MNS) share price is soaring on news it has signed a three-year offtake deal with Tesla Inc (NASDAQ: TSLA).

The ASX lithium share opened at 49 cents, up 22.5% on Friday’s closing price, and is now at 47.5 cents.

The lithium-ion battery technology and materials company requested a trading halt before the market open yesterday pending the announcement.

Small-cap ASX lithium share gets a big customer

Magnis has entered into a binding offtake agreement with Tesla for the supply of anode active materials (AAM) from February 2025.

Tesla has committed to purchasing a minimum 17,500 tonnes per annum (tpa) with the option to buy up to 35,000 tpa for a minimum three-year term at a fixed price.

The deal was signed over the weekend. It is conditional on Magnis securing a location for its commercial AAM facility by 30 June. It also has to start production at a pilot plant by 31 March 2024.

Production at the commercial facility needs to be underway by February 2025. The agreement is also subject to customer qualification.

This is big news for the ASX small-cap, with the company describing it as a “material transaction”.

Magnis Chair Frank Poullas commented:

We are really excited to bring our high performing AAM to market that requires no chemical or thermal purification throughout the whole process, which differentiates this sustainable material in the market and provides great value to all parties.”

What’s next for the Magnis share price?

The Magnis share price has been rising, up 25% in the year to date following today’s news. This compares to a 5.5% bump in the S&P/ASX All Ordinaries Index (ASX: XAO).

Magnis has commenced large-scale development of its pilot plants for both AAM and graphite concentrate from its Nachu mine in Tanzania. The company has ordered equipment and hired staff.

Next, it has to choose a location in the United States for the AAM commercial facility.

Meanwhile, the company needs to get its lithium materials certified by the United Nations for transport.

Last Friday, Magnis told investors there would be a delay in the certification due to a bad cell result.

Magnis has a 61% interest in the plant, which commenced commercial lithium cell production in August 2022. It began the process of securing independent certification from the UN late last year.

The independent certification process ensures that the batteries are safe to transport in large quantities by air, sea, rail, or road. The certification is based on international safety standards, including Standard UN38.3.

Certification will allow Magnis to ramp up the size of its sales.

In its statement, Magnis said all 10 cells submitted for UN certification had to pass and one cell failed.

The company said:

In one of the last tests performed, a cell reported an irregular result which has resulted in the process starting again with a new batch of cells.

In order to compress the timeline to achieve certification, additional accredited independent certifiers have been appointed. 

The Magnis share price tumbled by 8% to 40 cents on the news.

The post Magnis share price rockets 23% on Tesla deal appeared first on The Motley Fool Australia.

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More reading

• Why is ASX lithium share Magnis in a trading halt?
• Boom! Why has Tesla stock rocketed 68% so far in 2023?
• ‘Lifetime lows’: Expert reckons these shares are ‘screaming buys’ right now

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 positions in and has recommended Tesla. 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 dividend shares can quickly unlock cash flow. But, how much is needed for an individual to decide they can live off dividends for the rest of their lives and retire?

It could be a tricky question to answer – every household’s finances are different. Some people may have a big mortgage, others may own their own home debt-free. One household may have a fancy sports car, with an equally eye-catching car loan.

Each household may also have different lifestyle goals in retirement. How much we need to pay for the essentials is one thing, but funding an annual cruise would add a lot more to the cost.

Estimates for comfortable retirement

Research by the Association of Superannuation Funds of Australia shows that if a couple who own their own home wants to have a comfortable retirement, they will need an annual income of $67,000. A single person would need an annual income of over $47,000.

That spending includes a reasonable allowance for leisure, holidays, health services, and so on.

But for an individual, or household, who doesn’t own their own home, the rent or mortgage could mean an extra $10,000, $20,000, $30,000 — or even more — is needed in additional investment income from ASX dividend shares.

How much do we need invested in ASX dividend shares

Once the investor has roughly figured out how much they’re going to spend per year in retirement, then we can figure out the investment income needs. Certainly, a financial planner would be very helpful here for working out what the specific goals and objectives are.

But, in simple terms, it’s a combination of the dividend yield and the size of the portfolio.

A $1 million portfolio could have a 2% dividend yield and pay $20,000 per year in dividends.

A $300,000 portfolio might have a dividend yield of 10% and pay $30,000 per year in dividends.

Of course, in general terms, the higher the dividend yield, the riskier it might be and the higher chance there could be a dividend cut in the short-to-medium term.

For quality ASX dividend shares, I prefer to look at names that have dividend yields of between 3% to 9% and have a record of growing dividends over time.

If we use the mid-point of the range I just said – 6% – and target $67,000 of annual dividend income, then it suggests the portfolio would need to be over $1.1 million in size.

The 6% figure is just an average though. As an example, there are some names that could pay a dividend yield of around 6% in 2023 such as Telstra Group Ltd (ASX: TLS) and Charter Hall Long WALE REIT (ASX: CLW).

There are others with lower current yields, such as Wesfarmers Ltd (ASX: WES) and Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), but they have an objective of growing shareholder payouts.

Then there are ASX dividend shares that have very high dividend yields, like Shaver Shop Group Ltd (ASX: SSG) and Metcash Limited (ASX: MTS).

If an investor wants to choose businesses that are seen as defensive ASX shares but still reach that passive income goal, then they’d need to keep saving and growing their wealth until they get to the target dividend amount.

Foolish takeaway

ASX dividend shares could be the key to unlocking a life of pleasing dividends and easy cash flow. But, it could take a portfolio of around $1 million to achieve the targeted amount. Yet, of course, there are still investment risks, as well as volatility, to keep in mind.

The post How much do you need in ASX shares to give up work and live only off dividend income? appeared first on The Motley Fool Australia.

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More reading

• Why I’d buy Wesfarmers shares today and hold until 2030
• Passive income boost! 2 excellent high yield ASX dividend shares to buy: experts
• Why is the Wesfarmers share price dipping on Monday?
• Why I think the Telstra share price is now an unmissable buy
• 3 ASX shares that could create lasting generational wealth

Motley Fool contributor Tristan Harrison has positions in Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Telstra Group, Washington H. Soul Pattinson and Company Limited, and Wesfarmers. The Motley Fool Australia has recommended Metcash. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Altium Limited (ASX: ALU) share price is on the slide on Tuesday.

In morning trade, the electronic design software company’s shares are down 6% to $37.43.

Why is the Altium share price sinking?

Investors have been selling down the Altium share price today following the release of the company’s half year results after the market close on Monday.

In case you missed it, Altium reported a 17% increase in revenue to US$119.5 million and a 30% jump in net profit after tax to US$29.6 million.

The company’s top line growth was driven largely by a 16% increase in Design Software revenue to US$91.6 million and a 22% increase in Octopart revenue to US$27 million.

Whereas its bottom line growth reflects the benefits of operating leverage, which boosted its EBITDA margin up 2.1 percentage points to 36.2%.

This allowed Altium to declare an interim dividend of 25 Australian cents per share, which is up 19% on the prior corresponding period.

Finally, the company has reaffirmed its full year guidance for total revenue of US$255 million to US$265 million, which represents 15% to 20% annual growth. Altium also continues to expect an underlying EBITDA margin of 35% to 37%.

Broker reaction

The team at Bell Potter was relatively pleased with Altium’s result. However, it notes that the company missed on the top line but beat on the bottom line.

The broker commented:

1HFY23 revenue grew 17% to US$119.5m but was 2% below our forecast of US$121.6m. The miss was driven by a mix of currency and lower than expected revenue in Russia and China.

EBITDA grew 24% to US$43.3m and was 4% ahead of our forecast of US$41.7m. The beat was driven by lower expenses than forecast (US$77.3m vs BPe US$80.4m) which resulted in a higher than forecast EBITDA margin (36.2% vs BPe 34.3%). Cash flow was strong with operating cash flow exceeding NPAT and this was despite a hike in tax paid (US$9.6m vs US$3.4m in the pcp). The interim dividend increased 19% to A25.0c 40% franked which was ahead of our forecast of A23.0c unfranked.

In response to the result, Bell Potter has retained its hold rating with an improved price target of $42.50.

Over at Goldman Sachs, its analysts echoed Bell Potter’s view. It commented:

ALU reported 1H23 Sales/EBITDA that was -1%/+1% vs. GSe, with weaker Octopart and License revenues offset by solid B&S pricing and cost control.

The broker also notes that “subscriber performance was marginally weaker than expected,” which could be what is putting a bit of pressure on the Altium share price today.

Goldman has retained its neutral rating and $42.00 price target.

The post Why is the Altium share price sinking 6% today? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Tuesday
• Altium share price on watch following strong first half growth
• 4 ASX 200 stocks smashing new 52-week highs on Wednesday
• Why I think this ASX 200 tech share could turn into a global superstar
• If I had a spare $1,000, here’s where I’d invest in the stock market now

Motley Fool contributor James Mickleboro has positions in Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Altium. 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 Pilbara Minerals Ltd (ASX: PLS) share price is down 13% in just one week. With the ASX lithium share’s FY23 half-year result coming up this week, is it time to buy shares?

It has been a very fruitful time to be producing lithium over the last 12 months with how high the lithium price has gone.

Pilbara Minerals is expected to report that it made a lot of net profit after tax (NPAT) in the first six months of FY23.

How much profit is Pilbara Minerals expected to make?

The ASX lithium share is expected to report that it made an NPAT of over $1 billion.

Commsec has reported on estimates derived from Bloomberg regarding analyst expectations.

How much profit the miner reports could influence the Pilbara Minerals share price.

The current estimate suggests that the lithium miner may have made $1.28 billion in profit.

For only six months, that’s a large amount of money for a miner that only has a market capitalisation of $13.3 billion, according to the ASX.

Pilbara Minerals has essentially already indicated that it has made a boatload of cash with its quarterly updates.

For example, in the three months to December 2022, it said that its cash balance had increased by $851.1 million to $2.23 billion. The miner also revealed that it shipped 148,627 dry metric tonnes (dmt) of spodumene concentrate, while the average realised spodumene concentrate sales price increased 33% quarter over quarter to US$5,668 per dmt.

Will a dividend be declared?

Pilbara Minerals has indicated that in FY23 it would start paying a dividend.

The target dividend payout ratio has been established at 20% to 30% of free cash flow. The mid-point of that guidance would translate to the ASX lithium share paying around a quarter of its cash flow as a dividend.

Commsec’s disclosure of Bloomberg’s figure shows that Pilbara Minerals could pay a half-year dividend of 3.5 cents per share.

Pilbara Minerals indicated that it will start paying income tax in February 2023, so the dividend is expected to be fully franked.

At the current Pilbara Minerals share price, the projected half-year dividend could be a grossed-up dividend yield of 1.2%.

Is the Pilbara Minerals share price a buy?

Considering the company is still up more than 40% compared to 12 months ago, it certainly isn’t ‘cheap’.

I think it really depends on what the lithium price does over the next few years, or at least the next 12 months. But, my crystal ball isn’t working at the moment.

I do like the miner’s plans to be involved in more of the lithium value chain, which should unlock more earnings for the business. The recent update about using a chemical converter to benefit from lithium hydroxide sales is very intriguing as well.

For the above reasons, I think it’s a long-term buy, but there could be better prices ahead.

The post Should I dig in and buy Pilbara Minerals shares before the ASX 200 lithium miner reports on Thursday? appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most heavily traded ASX 200 shares on Monday
• Why A2 Milk, BlueScope, NIB, and Pilbara Minerals shares are dropping today
• Why are ASX lithium shares being hammered on Monday?
• Why is the Pilbara Minerals share price crashing 7% today?
• Why Baby Bunting, Integral Diagnostics, Pilbara Minerals, and Zip shares are falling

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

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The Coles Group Ltd (ASX: COL) share price could be in for a big day after the supermarket operator posted its earnings for the first half of financial year 2023 and announced its new CEO.

Shares in the S&P/ASX 200 Index (ASX: XJO) consumer staples giant last traded at $18.30.

Coles share price in focus on higher profits and dividend

• $643 million net profit after tax (NPAT) – a 17.1% jump on that of the prior comparable period (pcp)
• $20.8 billion of sales revenue from continuing operations – a 3.9% improvement
• $1 billion of earnings before interest and tax (EBIT) from continuing operations – a 9.9% jump
• Basic earnings per share (EPS) from continuing operations lifted 17.2% to 48.3 cents
• Declared a 36 cent per share interim dividend – a 9.1% improvement

Coles supermarkets brought the company $18.9 billion of revenue last half – a 4.6% year-on-year improvement, while its EBIT reached $991 million – a 10.6% jump.

The segment saw 7.7% price inflation last quarter and 7.1% inflation in the first quarter.

Coles’ liquor segment’s revenue, meanwhile, came in 2.4% lower at $2 billion and its EBIT fell 19.2% to $80 million.

Of course, the big news from the ASX 200 supermarket operator last half was of the planned sale of Coles Express. The fuel and convenience business is expected to be acquired by Viva Energy Group Ltd (ASX: VEA) for $300 million.

Coles announces new CEO

The Coles share price might also be driven by news of a leadership change today.

The company announced current CEO and managing director Steven Cain will be stepping down in May, with Leah Weckert to take on the top job.

Weckert has been with the company since 2011, holding positions including chief financial officer and chief executive of commercial and express.

What did management say?

Cain commented on the supermarket operator’s first half results, saying:

The good news is that supplier cost inflation is starting to ease in the third quarter, particularly in produce.

Many of our suppliers are however still facing increasing cost pressures and shortages of pallets, raw materials, and labour. This has been coupled with increased severe flooding impacting our road and rail networks, particularly for Western Australia and Far North Queensland. We are working together with our suppliers, and both State and Federal governments, to improve food supply chain resilience for all Australians.

What’s next?

Coles tips inflation to begin easing this year but expects Australians will tighten their belts amid higher interest rates and cost of living pressures.

Though, the company notes it’s well-positioned for such changes. It believes improving availability, population growth, and a decrease in out-of-home dining will have a positive impact.

Coles expects its capital expenditure to come in at between $1.2 billion and $1.4 billion in financial year 2023.

Coles share price snapshot

The Coles share price has been outperforming lately.

The stock has gained 11% since the start of 2023. It’s also trading 9% higher than it was this time last year.

For comparison, the ASX 200 has gained 6% year to date and 2% over the last 12 months.

The post Coles share price in focus as dividend lifted and new CEO announced appeared first on The Motley Fool Australia.

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More reading

• Earnings preview: Here are the ASX shares reporting on Tuesday
• Own Coles shares? Here’s what the market is expecting from its half year results
• These are the growing ASX dividend shares to buy now: analysts
• Can Coles shares deliver 8% upside AND tasty dividends in 2023?
• Get an income boost with these ASX dividend shares: broker

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

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The BHP Group Ltd (ASX: BHP) share price will be on watch on Tuesday.

This follows the release of the mining giant’s half-year results this morning.

BHP share price on watch amid earnings miss

• Revenue down 16% to US$25,713 million
• Underlying EBITDA down 28% to US$13,230 million
• Profit after tax down 32% to US$6,457 million
• Interim dividend down 40% to 90 US cents

What happened during the first half?

For the six months ended 31 December, BHP reported a 16% decline in revenue to US$25,713 million. This reflects lower average realised prices for iron ore, copper, and hard coking coal, partially offset by higher prices for weak coking coal, thermal coal, and nickel.

In respect to earnings, BHP posted a 28% decline in underlying EBITDA to US$13,230 million. The main drag on the miner’s earnings was the aforementioned copper and iron ore price weakness.

This led to the company’s iron ore underlying EBITDA falling 31.4% to US$7,641 million. It was a similar story for BHP’s next largest segment, copper, which posted a 34.1% decline in underlying EBITDA to US$2,814 million.

In light of its softer earnings, the BHP board determined to pay an interim dividend of 90 US cents per share. This equates to a total return of US$4.6 billion and is the equivalent to a 69% payout ratio.

How does this compare to expectations?

According to a note out of Goldman Sachs, its analysts were expecting “underlying EBITDA US$13.7bn vs. cons US$14.3bn.”

So with the Big Australian reporting an underlying EBITDA of US$13,230 million, it has missed on both estimates.

And while BHP has beaten Goldman’s dividend estimate of 88 US cents per share, it has fallen short of the consensus estimate of 98 US cents per share.

This could be bad news for the BHP share price this morning.

Management commentary

BHP’s CEO, Mike Henry, was pleased with the half. He commented:

BHP has today announced a strong first half dividend of 90 US cents per share, on the back of solid operating performance. During the half, we delivered well on the production front, with Western Australia Iron Ore posting another record half. BHP remains the lowest cost major iron ore producer globally. We continued to make strong progress on executing our strategy, including the development of growth options.

Significant wet weather in our coal assets impacted production and unit costs, as did challenges in securing sufficient labour. Inventory movements during the half contributed to costs, including the planned draw-down at Olympic Dam after inventory built up during the smelter refurbishment last year. We expect these factors to abate in the second half and for unit costs to fall, in line with revised guidance.

Outlook

The good news is that BHP’s production guidance remains unchanged for the full year.

In addition, Henry is feeling positive about BHP’s prospects in the second half thanks largely to the reopening of China. He adds:

We are positive about the demand outlook in the second half of FY23 and into FY24, with strengthening activity in China on the back of recent policy decisions the major driver. We expect domestic demand in China and India to provide stabilising counterweights to the ongoing slowdown in global trade and in the economies of the US, Japan and Europe. The long-term outlook for our commodities remains strong given population growth, rising living standards and the metals intensity of the energy transition, including for steel making raw materials.

The post BHP share price on watch after first-half earnings miss appeared first on The Motley Fool Australia.

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More reading

• Earnings preview: Here are the ASX shares reporting on Tuesday
• 5 things to watch on the ASX 200 on Tuesday
• Should you dig into BHP shares before the ASX 200 miner reports next week?
• Will ASX 200 shares crash in 2023?
• What are experts saying about the BHP share price?

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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Plenty of action is in store for us on Tuesday as a number of popular ASX shares hand down their latest results.

It should be an insightful day for investors thanks to the breadth of companies set to report. The agenda includes companies spanning mining, retailing, tech, real estate, and more — providing a solid cross-section of Australian corporations.

Before your day begins, here is a quick summary to get you up to speed.

These ASX shares are pulling back the curtain today

Ranked in order of market capitalisation (largest to smallest)

BHP Group Ltd (ASX: BHP), $245.5 billion

Coles Group Ltd (ASX: COL), $24.5 billion

Stockland Corporation Ltd (ASX: SGP), $9.3 billion

Seek Ltd (ASX: SEK), $8.6 billion

Alumina Limited (ASX: AWC), $4.4 billion

ARB Corporation Limited (ASX: ARB), $2.6 billion

Tabcorp Holdings Limited (ASX: TAH), $2.3 billion

Hub24 Ltd (ASX: HUB), $2.2 billion

Ingenia Communities Group (ASX: INA), $1.9 billion

Monadelphous Group Ltd (ASX: MND), $1.3 billion

Macquarie Telecom Group Ltd (ASX: MAQ), $1.2 billion

G8 Education Ltd (ASX: GEM), $1.1 billion

Monash IVF Group Ltd (ASX: MVF), $418.9 million

HT&E Ltd (ASX: HT1), $379.0 million

AMA Group Ltd (ASX: AMA), $230.9 million

See our complete calendar of the ASX reporting season here.

What can we expect to see?

One household name that investors will be paying some attention to today is supermarket operator Coles Group.

A month ago, news hit the headlines of inflation adding some sting to the prices of food and groceries. Analysts from UBS noted that Woolworths Group Ltd (ASX: WOW) had produced larger price increases than its major competitor.

Furthermore, UBS suggested the lower increases from Coles were a strategic move to take more market share. Today, shareholders will be wanting to see whether the strategy paid off and what it meant for margins.

Heading into today, the consensus estimate for Coles’ net profit after tax (NPAT) was $582 million. This would represent a year-on-year increase of 6% if achieved.

An even larger ASX share is set to report its half-year results on Tuesday. Australia’s BHP Group could report net profits of US$8.7 billion today. While the number might sound impressive, it would actually represent an 8% decline from the prior corresponding period.

Unfortunately, both iron ore and copper prices were significantly lower during the second half of 2022. The extent to which this impacted BHP’s revenue and profits will be squarely in focus today.

According to Bloomberg, the Aussie miner could announce a dividend of 90 cents per share.

Don’t forget to check back in throughout the day for our earnings coverage.

The post Earnings preview: Here are the ASX shares reporting on Tuesday appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Tuesday
• Own Coles shares? Here’s what the market is expecting from its half year results
• Should you dig into BHP shares before the ASX 200 miner reports next week?
• Will ASX 200 shares crash in 2023?
• What are experts saying about the BHP share price?

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ARB Corporation and Hub24. The Motley Fool Australia has positions in and has recommended Coles Group and Hub24. The Motley Fool Australia has recommended ARB Corporation and Seek. 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 much uncertainty about interest rates, the economy, and geopolitics still weighing on investors, it makes sense to focus on reliable and stable ASX shares.

Smaller and more speculative stocks can flop very quickly on further bad news, which is known as high-beta among the professionals.

So for a true long-term investor, sound businesses with undeniable growth drivers could be the go for the coming period.

Baker Young managed portfolio analyst Toby Grimm this week named two S&P/ASX 200 Index (ASX: XJO) shares that have seen vastly different fortunes over the past year.

But he recommended buying both, as they have irresistible tailwinds in the long run:

That’s enough punishment

Over the past 12 months, James Hardie Industries plc (ASX: JHX) has, despite backing from many fund managers, seen its share price plummet almost 30%.

“This building products company recently announced a second full year 2023 profit downgrade to between US$600 million and US$620 million,” Grimm told The Bull.

“It was 8.1% below market consensus.”

The stock has struggled from both the perception and reality that steeply rising interest rates are killing the US housing market.

But Grimm is convinced the slaughter is now done and that James Hardie shares can only move up from here.

“With US interest rates likely to peak during the first half of calendar year 2023, we see potential for a share price recovery later this year,” he said.

“In our view, the shares offer long-term value at current levels.”

Grimm’s peers generally agree with him. 

According to CMC Markets, 11 out of 16 analysts currently recommend James Hardie as a buy. Ten of those professionals say it is a strong buy.

‘Confidence in improving profitability’

After going sideways for much of the COVID-19 pandemic, the last year has been more fruitful for CSL Limited (ASX: CSL) shareholders.

The share price has gained a tidy 13.6%.

And its trading conditions are only improving as we speak.

“Plasma collection levels and revenues across all divisions were ahead of expectations in the first half of fiscal year 2023.”

The recovery in this business is already delivering real results for investors.

“Although operating costs remain elevated, this blood products group still delivered a better than anticipated interim dividend of US$1.07 a share,” said Grimm.

“In our view, this signals confidence in improving profitability moving forward.”

CSL is a darling among professional investors at the moment. An incredible 16 out of 19 analysts currently surveyed on CMC Markets would buy.

The post ‘Long-term value’: Expert names 2 ASX 200 shares to buy for years to come appeared first on The Motley Fool Australia.

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More reading

• Top brokers name 3 ASX shares to buy next week
• Brokers name 3 ASX shares to buy now
• Top broker says CSL shares will hit $350, buy now
• Top brokers name 3 ASX shares to buy today
• Are CSL shares a buy following the ASX 200 giant’s latest results?

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

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ASX small-cap shares may not be household names. They might not get the same media attention as the big S&P/ASX 200 Index (ASX: XJO) banks and miners.

However, some pint-sized ASX companies could turn out to be the big-cap stocks of the future. And wouldn’t it be great to invest in a few during the relatively early stages of their growth stories?

But with so many tiny ASX fish in the sea, how can investors sort the future big catches from the minnows destined to forever remain small fry?

For their thoughts, we decided to open a can of worms and ask our Foolish writers which ASX small-cap shares they reckon are worth reeling in right now. Here is what they said:

6 best ASX small-cap shares for 2023 (smallest to largest)

City Chic Collective Ltd (ASX: CCX), $127.56 million

Healthia Ltd (ASX: HLA), $191.79 million

Adairs Ltd (ASX: ADH), $414.87 million

Arafura Rare Earths Ltd (ASX: ARU), $1.28 billion

Platinum Asset Management Ltd (ASX: PTM), $1.35 billion

GUD Holdings Limited (ASX: GUD), $1.40 billion

(Market capitalisations as at market close on 20 February 2023)

Why our Foolish writers love these ASX small-cap stocks

City Chic Collective Ltd

What it does: City Chic is an Australian-born, plus-sized fashion retailer. It boasts 200 locations around the globe as well as multiple online channels.

By Brooke Cooper: The last 12 months have been rough on the City Chic share price. It’s dumped almost 90% since this time last year amid inventory concerns and balance sheet pressure.

But I believe most of the bad news could now be behind the company. City Chic recently revealed its inventory levels are expected to come in below guidance for the first half, while its recently-amended debt facility should support the company’s financial position.

Goldman Sachs is neutral on the stock due to concerns around continuously-compressed margins and a promotion-focused customer base.

However, I’m not averse to risk so think the current City Chic share price could represent a buying opportunity right now.

Motley Fool contributor Brooke Cooper does not own shares in City Chic Collective Ltd.

Healthia Ltd

What it does: With over 300 clinics across Australia and New Zealand, Healthia describes itself as a leading, diversified allied healthcare provider.

The company operates networks of optometry, podiatry, and physiotherapy clinics and also owns iOrthotics, a leading manufacturer of custom-made and 3D-printed foot orthotic devices for podiatrists.

By Tristan Harrison: The Healthia share price has fallen by around 40% since the start of 2022, making it great value, in my opinion.

I think the business is exposed to a number of helpful tailwinds, including an ageing population and a growing potential market (helped by the resumption of immigration).

This small-cap ASX share is also relying on an acquisition strategy to boost its scale. It’s also working on improving the performance and efficiency of its existing clinic network. Healthia is planning to spend at least $20 million on acquisitions in FY23.

FY23 half-year revenue is expected to grow by between 31.7% to 37.1%, with like-for-like revenue growth of 5.4%. January 2023 showed “positive momentum” as well.

Motley Fool contributor Tristan Harrison does not own shares in Healthia Ltd.

Adairs Ltd

What it does: Adairs is an ASX retailer that sells homewares like linens, furniture, and decor items. It operates 170 stores across Australia and New Zealand as well as a growing online channel.

By Sebastian Bowen: This is one ASX small-cap share I think could have a big future.

The Adairs share price has had a bit of a rough trot over the past year or two, having fallen by around 50% from its pandemic highs. But this could well present a buying opportunity.

The company is still growing healthily, posting record revenues for the first half of FY2023, which were up 34.1% over 1H22’s numbers. Its online channels have also been booming, with roughly 26.5% of all sales over the half done over the internet.

Perhaps best of all, Adairs currently has a fully-franked trailing dividend yield of around 7.5% on the table today.

Considering all of this, Adairs could well be a small-cap ASX retailer to consider right now.

Motley Fool contributor Sebastian Bowen owns shares in Adairs Ltd.

Arafura Rare Earths Ltd

What it does: Arafura Rare Earths is the rare earths developer behind the globally significant Nolans Project in the Northern Territory.

By James Mickleboro: I think Arafura Rare Earths could be an ASX small-cap share to buy right now. This is because of the potential for the Nolans Project to supply a significant proportion of the world’s neodymium and praseodymium (NdPr) demand in the future.

These are critical minerals in the production of high-performance neodymium magnets, which are used in everything from mobile phones and electric vehicles to wind turbines and military weapons.

And with the company expecting demand to more than double from 2020 to 2030, and supply to remain constrained, I believe Arafura looks well-positioned to benefit from strong prices once it commences production.

Motley Fool contributor James Mickleboro does not own shares in Arafura Rare Earths Ltd.

Platinum Asset Management Ltd

What it does: Platinum Asset Management is an Australian-based niche investment manager focused on international shares.

By Bernd Struben: After a tough 18-month stretch, the Platinum Asset Management share price has seen a big turnaround in 2023, up by almost 30% year to date. I like buying into strength and believe the company can deliver more gains in the year ahead.

Adam Lund, head of trading at Spheria Asset Management, recently tipped Platinum to outperform. He told Motley Fool, “When you buy Platinum shares, you are investing in a very experienced investment team that manages $18 billion across strategies that have outperformed their direct competitors over most periods.”

Atop potential share price gains, Platinum pays a 7.8% trailing dividend yield, fully franked.

Motley Fool contributor Bernd Struben does not own shares in Platinum Asset Management Ltd.

GUD Holdings Limited

What it does: GUD Holdings is an Australian-based company that manufactures and distributes a diverse range of products in the automotive aftermarket and water industries. With a history spanning 65 years, GUD has raised a slate of trusted brands including Ryco Filters, DBA brakes, CSM, Cruisemaster, and Davey.

By Mitchell Lawler: GUD Holdings is not a flashy company touting futuristic software. However, it does meet a valuable need by providing a host of aftermarket car parts.

A growing berth of brands continues to fortify GUD’s pricing power, reputability, and top-line growth. In the company’s latest half-year results, revenue increased a significant 56% to $517 million.

What I find particularly attractive about this company is its exposure to non-discretionary spending. Around 80% of GUD’s automotive revenue is derived from wear-and-tear/replacement parts. I believe this bodes well for the company, in conjunction with a large number of registered cars in Australia and the rising average vehicle age.

I personally think GUD’s assets and growth potential are currently undervalued. At present, the company trades at around 11 times estimated FY2025 earnings.

Motley Fool contributor Mitchell Lawler does not own shares in GUD Holdings Limited.

The post Top ASX small-cap shares to buy in 2023 appeared first on The Motley Fool Australia.

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More reading

• 2 exciting ASX shares that are on course for ‘robust growth’: expert
• How a stock market crash could turbocharge my ASX share portfolio
• Adairs share price falls amid strong first half growth but guidance downgrade
• 8 ASX 200 shares trading ex-dividend this week
• Here are the top 10 ASX 200 shares today

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Adairs and Healthia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Adore Beauty Group. The Motley Fool Australia has positions in and has recommended Adairs. The Motley Fool Australia has recommended Adore Beauty Group and Healthia. 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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