Category: Stock Market

The share price of multifaceted materials giant Mineral Resources Ltd (ASX: MIN) is in the red this morning following the release of its latest quarterly report.

Additionally, the company’s takeover target, Norwest Energy NL (ASX: NWE) announced it will accept the material giant’s all-scrip bid after the market closed yesterday.  

The Mineral Resources share price is $93.225 at the time of writing. That’s 3.17% lower than its previous close.

Mineral Resources share price falls despite lithium wins

Here are the key takeaways from the S&P/ASX 200 Index (ASX: XJO) company’s December quarter compared to the prior quarter:

• Iron ore shipments fell 9% to 4.1 million wet metric tonnes (wmt)
• Average realised iron ore price rose 33% to US$97 per dry metric tonne (dmt)
• Spodumene concentrate shipments rose 18% to 97,000 dmt
• 7,418 tonnes of lithium hydroxide and lithium carbonate was converted last quarter
• 6,612 tonnes of which was sold – marking a 75% improvement
• Average realised lithium hydroxide and lithium carbonate revenue was US$65,996 a tonne, exclusive of China VAT

Production at the company’s Mt Marion lithium project lifted 12% last quarter. The project also shipped 59,000 dmt of spodumene concentrate – up 5% quarter-on-quarter for an average realised price of US$4,151 per dmt.

Meanwhile, the Wodgina lithium project shipped 38,000 dmt of spodumene concentrate – up 45% – with 9,000 dmt sold at US$5,131 per tonne.

What else happened last quarter?

The December quarter was a busy one for Mineral Resources and its share price. The stock jumped 17.4% over the three-month period.

However, it’s being weighed down today amid news of Mt Marion’s expansion. The expansion – set to increase the project’s production capacity to 900 kilotons annually – has been delayed by the slower-than-expected arrival of processing equipment and labour shortages. The upgrade is now tipped to kick off in April and reach full run-rate from July.

Meanwhile, the company extended the terms of the Mt Marion Tolling Agreement with Jiangxi Ganfeng Lithium to the end of 2023.

Finally, the ASX 200 giant posted a takeover bid for Norwest Energy in December, offering one share for every 1,367 shares in the smaller energy stock.

After initially rejecting the offer, Norwest announced it will accept a new bid after the market closed yesterday. The approved offer will see shareholders receiving one MinRes share for 1,300 Norwest stocks. That values Norwest shares at 7.41 cents apiece and the takeover target at $497 million.

What’s next?

Despite posting lower iron ore production, the company says it is on track to meet its financial year 2023 production and shipments guidance of between 17.2 million wmt and 18.8 million wmt.

However, delays at Mt Marion have forced the company to drop its shipped guidance for the project to between 250,000 dmt and 280,000 dmt. Of that, 40% is expected to be high grade. Mt Marion’s FOB cost guidance has also increased to between $540 a tonne and $590 a tonne.

Finally, Wodgina remains on track to achieve its shipped guidance of 190,000 dmt to 210,000 dmt.

Mineral Resources share price outperforms ASX 200

The Mineral Resources share price has gained a notable 24% so far this year. Meanwhile, the ASX 200 is up 8%.

The stock has also risen 63% over the last 12 months, beating the index’s 8% gain in that time.

The post Mineral Resources share price tumbles as lithium business takes off appeared first on The Motley Fool Australia.

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More reading

• Guess which four ASX 200 lithium shares charged higher today
• Here are the top 10 ASX 200 shares today
• I’d buy 100 shares of this ASX lithium stock for $700 a year in passive income
• Move over bank deposits! These ASX 200 mining shares are forecasting yields of over 5%
• 5 ASX 200 shares rocketing to new 52-week highs on Tuesday

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 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 Woodside Energy Group Ltd (ASX: WDS) share price is rising following the release of its fourth quarter and full year update.

At the time of writing, the energy producer’s shares are up 0.5% to $37.96.

Woodside share price higher on update

• Q4 production up 0.7% quarter on quarter to a record of 51.6 MMboe
• Full year production of 157,706 MMboe
• Q4 revenue down 12% quarter on quarter to US$5,160 million
• Record FY 2022 revenue of US16,851 million

What happened during the quarter?

For the three months ended 31 December, Woodside reported a 12% decline in quarterly revenue to US$5,160 million. This reflects an 8.5% decline in sales volumes to 52.2 MMboe and a 4% decline in its average realised price to US$98 per barrel of oil equivalent (boe).

This led to Woodside generating full year revenue of US$16,851 million, which was up 142% from US$6,973 million in FY 2021. The merger with the petroleum assets of BHP Group Ltd (ASX: BHP) played a key role in this increase.

In respect to production, Woodside delivered record production of 51.6 MMboe for the fourth quarter. This took its full year production to a record of 157,706 MMboe. Pleasingly, this was ahead of its guidance range of 153 MMboe to 157 MMboe.

How does this compare to expectations?

According to a note out of Morgans, its analysts were expecting full year production of 146MMboe and revenue of US$15,864 million.

This means that the company has smashed both estimates, which may explain why the Woodside share price is rising today despite oil prices sinking overnight.

Management commentary

Woodside’s CEO, Meg O’Neill, was pleased with the company’s strong finish to the year. She said:

The result lifted output for calendar 2022 to 157.7 million boe, surpassing guidance and marking the highest annual production in Woodside’s history. Consistent strong operational performance and favourable operating conditions across the combined portfolio was a key driver in achieving record quarterly and full-year production.

Revenue for the period was $5,160 million, down 12% from the third quarter on the back of lower international crude oil and LNG prices and reduced trading activity. Woodside’s average realised price was $98/boe, down from $102/boe in the preceding period.

Outlook

There has been no change to Woodside’s guidance for FY 2023.

It continues to target production of 180 million to 190 million barrels of oil equivalent.

The post Woodside share price rises on record FY22 production and revenue appeared first on The Motley Fool Australia.

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• Looking to energise returns with this pocket of undervalued ASX shares in 2023
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• Should I buy Woodside shares in 2023?

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 Vanguard Australian Shares Index ETF (ASX: VAS) is a rather unique exchange-traded fund (ETF) on the ASX. For one, it is the ASX’s most popular ETF, and by a mile too. More ASX investors trust this ETF with their money than any other on the market.

But something else makes this fund a unique one: its structure. Our share market is home to many different ASX-based index funds. But the vast majority of these track the ubiquitous S&P/ASX 200 Index (ASX: XJO).

There’s the iShares Core S&P/ASX 200 ETF (ASX: IOZ), the SPDR ASX 200 Fund (ASX: STW), and the BetaShares Australia 200 ETF (ASX: A200). All of these ETFs mirror the ASX 200 Index, and thus hold the largest 200 shares by market capitalisation in their underlying portfolios.

But not the Vanguard Australian Shares ETF.

Instead of the ASX 200, the Vanguard ETF tracks the S&P/ASX 300 Index (ASX: XKO). As you might guess, this index adds another 100 companies to the ASX 200, meaning that it follows the largest 300 shares on the ASX by market cap. The Vanguard Australian Shares ETF is the only ASX index fund that does this.

But it’s one thing to be unique and special. It’s another to do things differently and get your investors a better return doing so.

So does Vanguard’s unique approach pay off for investors?

ASX 200 vs. ASX 300

Well, there are certainly some benefits that are easy to identify. Vanguard’s ASX 300 ETF is inherently more diversified than an ASX 200 ETF, simply by virtue of its inclusion of ASX shares in its portfolio.

Investors in an ASX 200 ETF will find they have large weightings toward our biggest banks and miners. But an ASX 300 ETF would have slightly less weighting to its top, since it has to make room for those additional 200 companies at the bottom.

We can see this in action if we check out some ETF portfolios. As of 31 December 2022, the iShares Core ASX 200 ETF’s portfolio had BHP Group Ltd (ASX: BHP) as 11.4% of the fund’s total holdings. Commonwealth Bank of Australia (ASX: CBA) was next up with 8.3%.

In contrast, Vanguard’s Australian Shares ETF has BHP at 1.78% of its portfolio, with CBA at 8.11%. Those may seem like small differences, but they can have an impact on a portfolio’s performance over time.

But let’s stop beating around the bush and compare some hard numbers. That’s the only real way we can judge if Vanguard’s ASX 300 approach is a superior one.

Does the Vanguard Australian Shares ETF pay off?

So as of 31 December, the iShares ASX 200 ETF had returned -1.07% over the preceding 12 months. Over the three years to 31 December, it averaged a 5.5% per annum return. That rises to 7.01% per annum on average over five years, and 8.43% per annum over ten. These returns assume any dividend distributions are reinvested.

In the Vanguard ETF’s case, we have a return of -1.78% over the 12 months to 31 December. But over three years, this ETF has averaged 5.58% per annum. Over five, that’s 7.09%, rising to 8.54% over ten years:

So it appears that on every performance metric, aside from the past 12 months, Vanguard’s ASX 300 approach has delivered better returns for its investors than a typical ASX 200 ETF.

Case closed? Well, certainly over the past ten years, it was better to have owned the Vanguard Australian Shares ETF than an ASX 200 ETF. But past performance is no guarantee of future returns, so perhaps the ASX 200 ETFs will have their revenge over the next decade.

The post Does the Vanguard Australian Shares ETF’s unique structure deliver better returns than the ASX 200? appeared first on The Motley Fool Australia.

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More reading

• Did you buy $1,000 of Bank of Queensland shares 10 years ago? Here’s how much dividend income you’ve made
• 10 types of ASX companies that can grow even if the economy tanks
• 5 things to watch on the ASX 200 on Wednesday
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• Move over bank deposits! These ASX 200 mining shares are forecasting yields of over 5%

Motley Fool contributor Sebastian Bowen has positions in Vanguard Australian Shares Index ETF. 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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I have a goal to reach $30,000 in annual dividend income in the future. And passive income from ASX dividend shares is exactly what I need to reach my objective.

There are many different types of assets that can produce income such as property, savings accounts, term deposits and bonds. For me, ASX dividend shares are the way to go.

I’m not just trying to buy the ASX shares with the highest dividend yield. Nor am I sticking with ASX blue-chip shares for my dividend goal. I believe there are businesses that are a bit smaller which can provide plenty of capital growth and dividend growth over time.

How I’m building towards my passive income dividend goal

It would be great if I were handed $1 million tomorrow so that I could invest and instantly reach my goal.

My actual strategy is to invest a monthly amount, however much my household has saved that month, into the most compelling ASX dividend share at the time that I can see.

I have a watchlist of individual businesses on the ASX, as well as listed investment companies (LIC). Some of the businesses that are currently in my portfolio include Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), Brickworks Limited (ASX: BKW), Rural Funds Group (ASX: RFF), Fortescue Metals Group Limited (ASX: FMG), Duxton Water Ltd (ASX: D2O) and Bailador Technology Investments Ltd (ASX BTI).

Sometimes performance can be quite variable in the short term. Just look at the share prices of Fortescue and Bailador over the past year.

Each investment has a different dividend yield. But, let’s say that the investment I make each month comes with an average dividend yield of 5%. Investing $1,000 that month would add an extra $50 of annual income. Investing $2,000 in a month would add $100 of extra income.

If the business paying me $100 of annual income in year one grows its dividend by 10%, then in year two I’d get $110 of annual passive dividend income from that investment.

Investing month after month, year after year will help me reach my $30,000 goal of income.

How long it takes will depend on how much I invest and how well those investments grow. I can control how much I invest, but I view it as important to spend money on things that make my family and me happy. I’m not trying to save every last dollar.

If I’ve chosen a good investment, then I just need to be patient and let it grow over time, including through volatility. The less tinkering the better. Compounding is a very powerful force if it’s allowed to run its course.

Foolish takeaway

Receiving $30,000 of annual passive dividend income still seems like a long way off. But, I believe that if I just keep regularly investing I will get there, it’s just a matter of time. Regular readers may know that I sometimes cover the shares I buy, so I’ll be writing about where I’m seeing value for my own dividend-focused portfolio.

The post ASX passive income: My game plan to reach $30,000 per year appeared first on The Motley Fool Australia.

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More reading

• Which ASX dividend shares I’d buy now to target $50,000 of annual passive income
• Why a merger between Fortescue and this major-league miner could make sense: expert
• Why Fortescue shares could be facing a Meta-like problem
• Should I buy ASX mining shares now or not?
• ASX income stocks: A once-in-a-decade chance to get rich?

Motley Fool contributor Tristan Harrison has positions in Bailador Technology Investments, Brickworks, Duxton Water, Fortescue Metals Group, Rural Funds Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bailador Technology Investments, Brickworks, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Brickworks, Rural Funds Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Bailador Technology 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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I think that ASX stocks are a great way for investors to unlock passive income. Metcash Limited (ASX: MTS) shares could be one of the best options for dividends.

Metcash might not be a name that many investors are familiar with. However, it’s the company that supplies IGA supermarkets. It’s also the supplier of liquor to Cellarbrations, The Bottle-O, IGA Liquor, Thirsty Camel, Big Bargain Bottleshop, Duncans and Porters Liquor.

But, it also has a hardware division that is the second-largest player in the Australian hardware market. It has the Mitre 10 brand, Home Timber & Hardware and Total Tools. There are over 700 stores across metro and regional areas across the country.

Metcash passive dividend income expectations

A monthly passive income of $500 equates to $6,000 of annual passive dividend income.

According to data on Commsec, the company is projected to pay an annual dividend per share of 22 cents. If an investor had just over 27,000 Metcash shares then they’d get the $6,000 in cash dividends, plus all of the franking credits as well. The franking credits can be a boost to after-tax returns.

At the current Metcash share price, the 22 cents per share forecast equates to a grossed-up dividend yield of around 7.5%.

The dividend yield is quite high because the company aims to have a dividend payout ratio of around 70% of underlying earnings. This still leaves around 30% of annual underlying earnings within the business so that it can achieve more growth in the next year.

Why is the ASX stock compelling?

I think there has to be more to an ASX dividend share than its dividend yield to make it investable. I believe it needs to offer good signs of longer-term profit growth.

With Metcash, the company says that its operating leverage is helping with price competitiveness and high costs.

The ASX stock is focused on improving the network competitiveness of the food stores, with upgrades and refreshes. The supply chain is being improved with distribution capacity and capability expansion – a new distribution centre in Victoria is expected in 2024.

In liquor, there are investments in stores and cool room upgrades. It’s introducing more owned and exclusive brands to the portfolio to support supplier partnerships. Metcash is also working on improving the supply chain of the liquor division.

The hardware division now makes the most earnings before interest and tax (EBIT). The company is working on growing the store network, improving its offer for builders, as well as growing its presence in the DIY part of the market.

The second half of FY23 started well. In the first four weeks, Metcash reported food sales growth of 4%, hardware sales growth of 8% and liquor sales growth of 8.9%. This could drive the passive dividend income higher in FY23.

Foolish takeaway

I think Metcash’s operations offer a good mix of defensive earnings with food and liquor, as well as growth through the hardware division.

Its shares look good value to me, trading at just 13 times FY23’s estimated earnings according to Commsec.

The post Want $500 in monthly passive income? Buy 27,000 shares of this ASX stock in 2023 appeared first on The Motley Fool Australia.

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More reading

• 3 cheap ASX shares that can help me easily build a second income
• 4 best ASX dividend shares to buy right now: expert
• Here are the top 10 ASX 200 shares today
• Are ASX 200 retail shares on sale in 2023?
• Why ASX dividend shares are so ‘critical’ right now: fundie

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 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 Bank of Queensland Ltd (ASX: BOQ) share price has struggled to keep up with the S&P/ASX 200 Index (ASX: XJO) over the last decade.

$1,000 likely would have bought 123 Bank of Queensland shares in January 2013. Then, the bank’s stock was trading at around $8.10.

Today, the Bank of Queensland share price is around 14% lower at $6.93, leaving our figurative parcel valued at just $852.39.

For comparison, the ASX 200 has gained nearly 55% over the last decade.

But have the dividends on offer from Bank of Queensland made up for its share price’s sluggishness? Let’s take a look.

All the dividends offered by Bank of Queensland shares since 2013

Here are all the payments the Queensland-based bank has offered shareholders over the last 10 years:

BOQ dividends’ pay date	Type	Dividend amount
November 2022	Final	24 cents
May 2022	Interim	22 cents
November 2021	Final	22 cents
May 2021	Interim	17 cents
November 2020	Final	12 cents
November 2019	Final	31 cents
May 2019	Interim	34 cents
November 2018	Final	38 cents
May 2018	Interim	38 cents
November 2017	Final and special	46 cents and 8 cents
May 2017	Interim	38 cents
November 2016	Final	38 cents
May 2016	Interim	38 cents
November 2015	Final	38 cents
May 2015	Interim	36 cents
November 2014	Final	34 cents
May 2014	Interim	32 cents
December 2013	Final	30 cents
May 2013	Interim	28 cents
Total:		$6.04

As the chart above shows, those invested in the bank’s shares have likely received $6.04 per stock in dividends since early 2013.

That means our figurative parcel probably yielded $742.92 – enough to boost its returns back into the green. 

Considering both share price movements and dividends, the stock boasts a 10-year return on investment (ROI) of 60%.

And that’s before considering any additional benefits investors may have received from franking credits. All the bank’s offerings during that time were fully franked.

Bank of Queensland shares currently offer a notable 6.6% dividend yield.

The post Did you buy $1,000 of Bank of Queensland shares 10 years ago? Here’s how much dividend income you’ve made appeared first on The Motley Fool Australia.

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More reading

• 10 types of ASX companies that can grow even if the economy tanks
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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 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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Although they are trading well off their highs, Core Lithium Ltd (ASX: CXO) shares have still been a great place to invest over the last 12 months.

As you can see on the chart below, the lithium developer’s shares have risen 52% since this time last year.

This would have turned a $10,000 investment into $15,200.

But that was then, and this is now. What might a $10,000 investment today look like in a year?

What return could you get from Core Lithium shares

Opinion is divided on where Core Lithium shares are heading between now and this time next year.

In the bear corner you have Goldman Sachs, which thinks the company’s shares are overvalued. It has a sell rating and 95 cents price target on them. This compares to the current Core Lithium share price of $1.11.

If Goldman is on the money with its recommendation, a $10,000 investment would be worth approximately $8,500 at the end of the year. Not great!

The bull corner

In the bull corner you have Macquarie.

Its analysts recently upgraded the company’s shares to an outperform rating with a $1.30 price target. Based on its current share price, this implies potential upside of 17% for investors over the next 12 months.

This would turn a $10,000 investment into $11,700, which is much better!

Will the bulls or bears win?

It is impossible to know which broker will make the right call.

However, what may have a major say on things is the lithium price. With Goldman Sachs expecting lithium prices to start their significant decline later this year, sentiment could improve if prices stay strong.

Conversely, if they start to weaken as Goldman predicts, this could put a lot of pressure on the lithium industry and send Core Lithium shares tumbling towards the broker’s bearish price target.

Investors may want to keep a close eye on the monthly digital lithium auctions held by Pilbara Minerals Ltd (ASX: PLS). The prices it commands each month should provide investors with an idea of what is happening behind the scenes in the industry.

The post If I invest $10,000 in Core Lithium shares now, what could my return be this year? appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• Here are the top 10 ASX 200 shares today
• Down 41% since November, is the Core Lithium share price a bargain buy now?
• Here are the 10 most shorted ASX shares
• My top predictions for ASX lithium shares in 2023

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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With so many uncertainties in 2023, ‘structural growth’ seems to be the hot buzz term in investing at the moment.

Inflation is still raging, higher interest rates are bearing down on businesses and consumers, and many experts reckon the global economy is about to put the brakes on very soon. 

Those barracking for ‘structural growth’ ASX shares are taking the logic that those businesses will be more resistant to short-term calamities because they have long-term trends driving their earnings.

Pengana investment specialist Tim Richardson recently named ageing population as one of his drivers of structural growth.

“Ageing populations in developed economies and Asia will support spending on healthcare, including medical insurance, care facilities, and pharmaceutical development.”

Tribeca portfolio manager Jun Bei Liu agreed that healthcare is a theme worth backing at the moment.

“In this environment, you need to find some of the structural defensive growth leaders. We like the healthcare sector,” she said at a GFSM briefing in Sydney on Tuesday.

Don’t just buy any old healthcare stock though

It’s critical not to go all-in on a particular sector though. Bottom-up analysis is crucial in 2023 for stock picking, according to Liu.

“The challenge [for healthcare] is they do have that foreign US dollar sort of exposure. As the US dollar becomes weaker, the earnings will fall.”

Liu named two particular ASX shares in health that she loves at the moment: Ramsay Health Care Ltd (ASX: RHC) and CSL Limited (ASX: CSL).

Ramsay shares plunged last year after a private equity consortium led by KKR cancelled a takeover bid.

That just gives it a mouth-watering entry point, as far as Liu is concerned.

“I always say this company is something I put my mother’s money in — and I do. 

“It’s very defensive. It’s going into an earnings upgrade cycle with double its earnings because of hospitals reopening. It’s got assets — something like $1 billion — they can spend out to improve the balance sheet.”

If private equity comes sniffing again, then that’s icing on the cake.

She nominated CSL as a safe bet in the coming period.

“I know it’s boring but it’s very defensive. It’s going to grow double digits for the next three years and [the] share price hasn’t really rallied aggressively relative to others.”

Ramsay shares have risen 5.6% this year, while CSL is up 5.7%.

Liu’s recommendations concurred with the analysts at Firetrail, who released a memo this month explaining their overweight position in healthcare.

The Firetrail team, just like Liu, loves the look of Ramsay and CSL.

“Ramsay will likely deliver above-trend growth in 2023/24 as the surgery backlog is addressed,” read the memo.

“CSL is the ultimate defensive… CSL grew earnings per share by 60% during the global financial crisis, compared to a 20% fall in EPS for the S&P/ASX 200 Index (ASX: XJO).”

The post Jun Bei Liu’s 2 ‘structural growth’ ASX shares to buy now appeared first on The Motley Fool Australia.

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More reading

• 3 of the best ASX 200 shares to buy in 2023: Bell Potter
• 3 ASX shares to buy in the hottest sector for 2023: Firetrail
• If I invest $10,000 in CSL shares now, what could my return be this year?
• Top brokers name 3 ASX shares to buy next week
• How I’d invest $40k in ASX shares and aim for $1 million

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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Coles Group Ltd (ASX: COL) shares look like a solid S&P/ASX 200 Index (ASX: XJO) share in my opinion.

The Coles business has three different divisions – supermarkets, liquor and service stations. Some of the liquor brands include Liquorland, First Choice Liquor and Vintage Cellars.

Coles shares have seen a bit of pain, down around 10% over the past six months. With the defensive nature of supermarket earnings, I think it’s a good idea to look at Coles in the economic environment.

Resilient business model

We all need to eat, lots of people like to drink alcohol and a large amount of the population need to use a petrol station regularly. When you put that all together, it seems like Coles’ earnings could hold up, even if there’s a recession. Though, the business is looking to sell its petrol business to Viva Energy Group Ltd (ASX: VEA).

According to Commsec, in the 2023 financial year, the business is expected to generate 79.6 cents of earnings per share (EPS). Then, EPS could rise to 82 cents in FY24 according to Commsec.

In FY22, the company generated 78.8 cents of EPS, so the current projections show that earnings could rise slightly, despite all of the disruption to the economy with inflation and so on.

I think the update for the first quarter of FY23 showed this potential (slight) growth for FY23 in action, with total sales revenue growth of 1.3% to $9.89 billion.

Why I think the ASX 200 share looks like an opportunity

Despite the projection that the business is going to grow earnings over the next two years, the Coles share price is lower than earlier in the year, so investors can invest at a seemingly better value.

Using the estimates on Commsec, Coles is valued at 22x FY23’s projected earnings. Woolworths Group Ltd (ASX: WOW) shares are valued at 25x FY23’s projected earnings. Coles shares look a bit cheaper than its main competitor.

I think the ASX 200 share is doing a number of good things to grow profit in the future, including lowering its costs, launching more own brand products, investing in automated distribution warehouses and being a more sustainable business.

The dividend income could also provide a good boost to the total return in 2023 and beyond. It’s expected, according to Commsec, to pay a grossed-up dividend yield of 5.4%.

While it may not generate a lot of growth, I think the business can achieve slow-and-steady progress, which could be enough to produce outperform this year.

The post I think Coles shares are a top ASX 200 buy for 2023 appeared first on The Motley Fool Australia.

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More reading

• Coles shares: Here are the dividend forecasts for 2023 and 2024
• Here are the top 10 ASX 200 shares today
• Are ASX 200 retail shares on sale in 2023?
• Want 17% upside plus dividend income? Broker says buy Coles shares
• How I’d invest my very first $500 in ASX shares in 2023

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 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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Goldman Sachs has been busy running the rule over the insurance industry and named QBE Insurance Group Ltd (ASX: QBE) shares as its top pick.

This morning, the broker has initiated coverage on the company with a buy rating and $16.67 price target.

Based on its current share price of $13.60, this implies potential upside of over 22% for QBE shares over the next 12 months.

Goldman is also expecting a 5.3% dividend yield in FY 2023, boosting the total potential return beyond 27%.

Seven reasons to buy QBE shares

The broker has named seven reasons why it thinks investors should buy QBE shares right now.

The first couple of reasons relate to favourable industry tailwinds, which are expected to boost its near term performance. It explained:

We like QBE because: 1) It is most exposed to the strength in the commercial premium rate cycle which we think will continue, particularly in classes exposed to higher reinsurance costs and underlying claims inflation such as commercial property / motor. Comments from QBE have been clear that they are pricing ahead of loss cost inflation; 2) QBE is seeing organic volume growth on a constant currency basis ex-crop and price increases. We think the strong rate environment coupled with underlying volume growth provides flexibility for QBE to manage any trade-off between top line net earned premium (NEP) growth and margins. 3QYTD constant currency GWP growth was 16% v guidance of 10% constant currency for FY22 – which we think looks conservative.

Goldman also likes the company’s reserve strength and sees opportunities for further margin expansion thanks to stronger yields and changes in the property business. The broker commented:

3) We note that QBE continues to build reserve strength by assuming an extended inflationary environment across reserving / pricing; 4) Yields are supporting margins and could see further upside into FY23. QBE is most sensitive to a lift in global interest rates including the US; 5) We see continued opportunity for margin expansion through remediation of QBE’s property business in North America and increasing mix to Crop. Our FY23 underlying insurance margins are close to 12%, and above Visible Alpha consensus of 11.5%. This is about a 1% improvement from FY22E at 10.9% underlying on 94% COR.

Finally, the broker believes QBE shares are trading at an attractive level compared to historical levels, particularly given its strong capital position. It concludes:

6) Valuation not demanding at ~9x FY23E BBG consensus v recent historical trading range around ~12-15x. We think an ongoing build of reserve strength and catastrophe allowances through a strong premium rate environment should help QBE improve the predictability and consistency of its results supporting a valuation re-rate. 7) Strong capital position expected at FY22 – at the upper end of target range.

The post 7 reasons to buy QBE shares: Goldman Sachs appeared first on The Motley Fool Australia.

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More reading

• Broker names 2 high yield ASX 200 dividend shares to buy now
• Buy QBE and this ASX 200 blue chip share: broker
• Buy Telstra and this ASX 200 dividend share: Morgans
• Morgans names 2 ASX 200 dividend shares to buy now
• ASX financial shares lifted the ASX 200 today

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

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