Category: Stock Market

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

When Warren Buffett gets something right, he really gets it right. The legendary investor’s stock picks through the years have helped him become one of the wealthiest people on the planet.

But much of Buffett’s success has stemmed from decisions he made a long time ago. What are examples of his best picks more recently? Here are Buffett’s biggest winners over the past five years — and whether or not they can keep winning in the future.

1. Apple

In his 2021 letter to Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) shareholders, Buffett wrote that the conglomerate had “four giants.” Three of them were Berkshire subsidiaries: the company’s insurance businesses (including Geico and General Re), railroad operator BNSF, and energy provider Berkshire Hathaway Energy. But Berkshire doesn’t control one of those giants – Apple (NASDAQ: AAPL).

Currently, Berkshire owns only a 5.8% stake in Apple. However, the tech stock ranks as Berkshire’s top holding by far, representing 38.8% of the total portfolio. Buying such a huge position in Apple has proven to be one of Buffett’s smartest moves ever. The stock has skyrocketed around 240% over the past five years.

It’s no secret why Apple has delivered such a tremendous gain. The company’s iPhone remains highly popular, especially with the shift to high-speed 5G networks. Apple’s services business has also become a much bigger revenue driver in recent years.

2. Mastercard

Buffett has been a longtime fan of credit card stocks. Berkshire’s portfolio includes American Express and Visa. The former ranks as Berkshire’s No. 5 holding. But the biggest winner over the past five years has been Mastercard (NYSE: MA).

Mastercard’s gain of more than 125% is due in part to a broad-based shift away from cash. A sharp increase in e-commerce also provided a nice boost.

Despite Mastercard’s status as one of Buffett’s biggest winners in recent years, it’s still not one of his favorite stocks. Berkshire reduced its position in Mastercard in the fourth quarter of 2021. Mastercard now makes up only 0.4% of Berkshire’s total portfolio.

3. Moody’s

Buffett technically didn’t decide to invest in Moody’s (NYSE: MCO). Berkshire owned shares of Dun & Bradstreet in the past. It received shares of Moody’s when D&B spun off the credit rating business in 2000.

While Berkshire later sold its stake in D&B, it retained a position in Moody’s. That turned out to be a wise move. The stock more than doubled over the past five years and has delivered more than a 20x gain since the spin-off from D&B.

However, Buffett could have made even more money from his investment in Moody’s. He sold some of the stock in 2009. The Oracle of Omaha referred to this as a “billion-dollar mistake” less than two years later.

Can they win in the future?

None of these three stocks are performing very well so far in 2022. Only Mastercard is beating the S&P 500. But can these stocks win in the future? I think so.

Apple remains a great stock to buy for the same reasons it’s made Buffett so much money in the past. Demand should continue to be strong for iPhones for a long time to come. Apple has opportunities to extend its smartphone dominance by introducing augmented reality applications. 

Mastercard should benefit as digital payments replace cash in many cases. The company could especially profit as open banking (expanding interoperability between financial service providers) picks up momentum.

Moody’s has a strong moat with its credit rating business. It also has significant growth potential for its analytics unit.

My view is that Apple, Mastercard, and Moody’s should be big winners for Buffett over the next five years. And I think all three are good picks for investors who aren’t worth close to $100 billion, too. Warren Buffett doesn’t have to be the only person to really get it right.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post These 3 US stocks were Warren Buffett’s biggest winners over the past 5 years appeared first on The Motley Fool Australia.

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y. Keith Speights has positions in Apple, Berkshire Hathaway (B shares), and Mastercard. American Express is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Mastercard, Moody’s, and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Apple and Mastercard. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Elders Ltd (ASX: ELD) share price is having a day to forget.

In morning trade, the agribusiness company’s shares are down 17% to $11.02.

This makes the Elders share price the worst performer on the ASX 200 index by some distance.

Why is the Elders share price crashing?

Investors have been hitting the sell button today following the release of the company’s full year results.

Although Elders delivered strong top and bottom line growth in FY 2022, management’s outlook commentary and the announcement of the retirement of its CEO appear to have undone this and put significant pressure on its shares.

For the 12 months ended 30 September, Elders reported a 35% increase in sales revenue to $3,445.3 million and a 42% jump in underlying profit before tax to $223.5 million.

And while Elders’ operating cash flow was down 28.5% to $113.7 million, that didn’t stop the company growing its dividend. The Elders board declared total dividends of 56 cents per share for FY 2022, up 33% from 42 cents per share in FY 2021.

What drove Elders’ growth?

Elders revealed that the Rural Products business outperformed expectations, with gross profit growing 35% to $383.1 million. This was driven by the continued focus on the backward integration strategy, whilst capturing the benefits of strong seasonal conditions. Growth through strategic acquisitions continued in FY 2022, adding value and presence across the network.

The Agency services profit contribution grew due to strong livestock prices despite reduced volumes from limited domestic supply. It reported a gross profit of $147.0 million, up 4% on FY 2021.

Finally, Elders’ Real Estate Services gross profit was $61.6 million, up 21% on FY 2021. This reflects ongoing network expansion and very high demand for both residential and farmland assets despite a fourth quarter market easing.

Outlook

FY 2023 looks set to be a tough year for the company, which explains some of the weakness in the Elders share price on Monday. Management commented:

High demand for agricultural commodities is expected to create favourable trading conditions in the first half of FY23, however recent extreme rainfall events across the eastern states have created some uncertainty in affected cropping regions and concern about reaching full harvest potential for both summer and winter crops.

The Rural Products outlook remains positive, with high demand particularly for agricultural chemicals, fertiliser and seed. However, the agricultural industry will await assessment of the full impact of the extreme wet conditions and flood events to realign expectations for the FY23 season.

Cattle and sheep prices are expected to soften in the medium term, driven by falls in domestic re-stocker demand, with volumes also balancing out in the short term. The wool market is expected to remain strong, driven by increased demand in China and Europe, pending production conditions improving following recent wet conditions and flood events in Eastern Australia.

CEO retirement

Also putting pressure on the Elders share price is news that its CEO, Mark Allison, is retiring next year after 10 years with the company.

He will leave the company on or before 14 November 2023, following the completion of the third of three successful Eight Point Plans.

Mr Allison said: “The timing is right, and will allow for a smooth transition and leadership refresh for Elders’ next phase of growth.”

The post Why is this ASX 200 share crashing 17% today? appeared first on The Motley Fool Australia.

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More reading

• Why this broker sees ‘downside risks’ to the current Woolworths share price
• These 3 US stocks were Warren Buffett’s biggest winners over the past 5 years
• Are ASX share investors getting their mojo back?
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• Why I’d buy dirt-cheap ASX shares now and aim to hold them for a decade

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

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The ASX share market has been through a rollercoaster of a year in 2022. For plenty of ASX tech shares, it has been a year to forget.

Inflation and higher interest rates have punished the valuations of plenty of businesses that are expected to grow their operations over the coming years.

After all of the investor panic that we saw earlier in the year, there appear to be signs that investors are now returning to the market.

Is confidence returning?

According to the Sharesies Investing Insights report for October 2022, there was “steady buying by the majority of investors, with some choosing to buy and sell the market moves.”

For me, this was one of the most interesting takeaways from the report:

Twice as much buying as selling on the Sharesies platform this month. Buy orders outstripping sell orders is a consistent pattern on the platform over the last six months, regardless of market volatility.

Which ASX shares are people buying?

ASX mining shares were some of the most popular investments last month according to the report.

In terms of the total amount invested, in dollar terms, these were the top ten: Sayona Mining Ltd (ASX: SYA), New Hope Corporation Limited (ASX: NHC), Fortescue Metals Group Limited (ASX: FMG), Core Lithium Ltd (ASX: CXO), Pilbara Minerals Ltd (ASX: PLS), Qx Resources Ltd (ASX: QXR), Telstra Corporation Ltd (ASX: TLS), BHP Group Ltd (ASX: BHP), Qantas Airways Limited (ASX: QAN) and Flight Centre Travel Group Ltd (ASX: FLT).

However, the list was a little different when you look at which were the top 10 most bought ASX shares by the number of investors. Here is the list: BHP, Fortescue, Commonwealth Bank of Australia (ASX: CBA), Pilbara Minerals, Wesfarmers Ltd (ASX: WES), Core Lithium, Woolworths Group Ltd (ASX: WOW), Qantas, Coles Group Ltd (ASX: COL) and Macquarie Group Ltd (ASX: MQG).

Perhaps unsurprisingly, investors were drawn to a number of ASX’s blue chips.

Strong levels of ETF investing

According to the report, exchange-traded funds (ETFs) saw four times as much buying in dollar volume traded terms as selling in October.

Sharesies suggested that this was “likely driven by investors employing a dollar-cost averaging investment strategy”.

These were some of the ETFs getting investor attention last month:

Vanguard Australian Shares Index ETF (ASX: VAS)

VanEck Global Clean Energy ETF (ASX: CLNE)

BetaShares Climate Change Innovation ETF (ASX: ERTH)

iShares Core MSCI World Ex Aus ESG Leaders ETF (ASX: IWLD)

iShares Core MSCI Australia ESG Leaders ETF (ASX: IESG)

Foolish takeaway

While investors may be coming back to the market, it doesn’t mean that the market has reached a bottom yet. Only time will tell whether June was the month we saw the lowest prices for many ASX shares.

The post Are ASX share investors getting their mojo back? appeared first on The Motley Fool Australia.

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More reading

• Why this broker sees ‘downside risks’ to the current Woolworths share price
• Fortescue share price surges 9% amid Asian green steel plans
• Flight Centre share price tumbles on trading update
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Motley Fool contributor Tristan Harrison has positions in Fortescue Metals Group Limited. 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 COLESGROUP DEF SET, Telstra Corporation Limited, and Wesfarmers Limited. The Motley Fool Australia has recommended Flight Centre Travel Group Limited and Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Fortescue Metals Group Limited (ASX: FMG) share price is jumping 9% this morning, making it one of the top-performing S&P/ASX 200 Index (ASX: XJO) shares. It could be getting an extra boost from its plans to collaborate in Asia to make green steel.

Meanwhile, the S&P/ASX 200 Materials Index (ASX: XMJ) is also currently the best-performing sector. It’s up more than 3% following news China is easing some of its COVID-related restrictions.

Amid the news, ASX 200 iron ore majors BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (AS: RIO) are also soaring in early trade today, up 4.61% and 4.78%, respectively.

Asian green steel collaboration

Fortescue Future Industries (FFI) is the division of Fortescue that plans to produce green hydrogen and green ammonia.

FFI has agreed to immediately work with Indonesia’s largest private steelmaker to see if green hydrogen and green ammonia can be used in GRP’s steelmaking operations in the future, according to reporting by the Australian Financial Review.

Gunung Raja Paksi Tbk (GRP) is a member of Gunung Steel Group. Established in 1970 in North Sumatra, GRP is located in Cikarang Barat, West Java Province and covers more than 200 hectares.

In its website, GRP says it produces 2,200,000 tons of “high-quality” steel annually certified by local and international certification organisations. Its goal is to develop a better future.

The agreement with FFI was announced at the B20 summit in Bali, a business forum that precedes G20 meetings later in the week.

Are bigger plans in store?

Fortescue leader Andrew Forrest said that FFI was in “green steel discussions” in Europe that could be on a larger scale than the GRP collaboration. Could this have an even larger impact on the Fortescue share price?

Forrest said that the GRP deal was the company’s biggest play in Asia.

He also noted that China would be watching the collaboration “closely”. Forrest said:

The Chinese steel industry is many times the scale of Indonesia and has significant pollution issues.

If there is a way they can produce all the steel the country needs without destroying the local environment, that’s what they’ll do.

It wasn’t reported how exactly green hydrogen or green ammonia would be used in the steelmaking process.

Green iron ore

But, Fortescue has already announced that it will make a US$6.2 billion capital investment by 2030 to decarbonise its iron ore operations by 2030 and achieve “real zero terrestrial emissions”, referring to scope 1 and scope 2.

The company will avoid 3 million tonnes of carbon dioxide equivalent emissions per annum when fully achieved. It will also save net operating cost savings of US$818 million per annum from 2030, at prevailing market prices of diesel, gas and Australian carbon credit units

It said that there would be cumulative cost savings of US$3 billion by 2030, and capital payback would be achieved by 2034 at prevailing market prices.

Fortescue added that this move would establish a “significant new green growth opportunity by producing a carbon-free iron ore product and through the commercialisation of decarbonisation technologies”.

Fortescue share price snapshot

The Fortescue share price is up 9.09% at $19.38 at the time of writing. Over the last month, Fortescue shares have lifted more than 13% and are up a hefty 31% since the start of November.

The post Fortescue share price surges 9% amid Asian green steel plans appeared first on The Motley Fool Australia.

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More reading

• Why is the Fortescue share price launching 5% on Friday?
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• Amidst the ongoing tech stock wreck, value shares are everywhere. There’s just one catch…
• China’s property crash has decimated the iron ore price. So what’s the outlook for Rio Tinto shares?
• The Fortescue share price has leapt 17% in November. Here’s why it may not last

Motley Fool contributor Tristan Harrison has positions in Fortescue Metals Group Limited. 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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Recent volatility on the ASX has likely left many quality shares trading for dirt-cheap prices – and that’s good news for long-term investors.

Buying undervalued shares amidst market downturns means shareholders might have a greater chance of taking advantage of market cycles and capitalising on a future recovery.

Though, investors should be wary that not all troubled stocks will post a recovery.

Historically, however, the market has always returned to ­– and surpassed – its previous highs following a downturn. Plenty of cheap ASX shares might be gearing up to outperform over the coming decade.

Is now a good time to hunt for bargain stocks?

The ASX has struggled to gain traction amid soaring inflation, rising interest rates, and global turmoil in 2022.

Indeed, the S&P/ASX 200 Index (ASX: XJO) has fallen 6% year to date while the benchmark All Ordinaries Index (ASX: XAO) has dropped 7%.

That’s better than the pain felt on Wall Street. The Dow Jones Industrial Average Index (DJX: .DJI), the S&P 500 Index (SP: .INX), and the Nasdaq Composite Index (NASDAQ: .IXIC) all succumbed to bear markets this year.

Of course, plenty of ASX shares have fallen alongside global markets.

Many might have dumped a chunk of their value for good reason, such as structural or financial uncertainties. Others, however, might be unfairly undervalued due to the market’s own uncertainties. These are the stocks I’d be hunting right now.

How I’d find cheap ASX shares to hold for 10 years

It can be tricky to discern which ASX shares are trading cheaply for good reason, and which might be being overlooked by the market.

Personally, I would be seeking out cheap shares with a strong balance sheet, competitive advantages over their peers, and a history of coming out of tough times stronger. In my opinion, such stocks are more likely to outperform their peers over the coming decade.

I would also delve into a company’s reports to calculate metrics such as its price-to-book (P/B) ratio and price-to-earnings (P/E) ratio. Doing so might help gauge if an ASX share is, indeed, trading for a dirt-cheap price.

Finally, I would hunt for multiple shares across various sectors so to diversify my portfolio. Diversification can help manage some of the risks involved in investing.

The post Why I’d buy dirt-cheap ASX shares now and aim to hold them for a decade appeared first on The Motley Fool Australia.

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• Here’s why the ANZ share price could be a good value pick for dividends
• Flight Centre share price tumbles on trading update
• Could government intervention rain on the Core Lithium share price parade?
• Goldman Sachs names the ASX retail shares to buy in the current environment

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 Vulcan Energy Resources Ltd (ASX: VUL) share price is on the move on Monday morning.

At the time of writing, the lithium developer’s shares are up 4% to $8.10.

Why is the Vulcan share price charging higher?

Investors have been bidding the Vulcan share price higher today after the company released a positive announcement.

According to the release, Vulcan has successfully developed, tested, and demonstrated its own in-house lithium extraction sorbent, VULSORB, for sustainable lithium extraction from the Upper Rhine Valley Brine Field and the Zero Carbon Lithium Project.

The release notes that VULSORB has demonstrated higher performance and lower water consumption for lithium extraction in Vulcan’s pilot plant, compared with commercially available sorbents tested by the company.

The company also highlights that the manufacturing process for the lithium extraction sorbent has been shown to be environmentally benign and many of the reagents are recycled.

Another positive with the process is that it is much faster and more efficient, with a lower carbon footprint, than the legacy industry method of using large-scale evaporation and large quantities of chemical reagents to extract the lithium and process into lithium hydroxide.

In fact, the sorbent extraction happens in hours, rather than up to 18 months as is the case with legacy extraction routes. This will allow Vulcan to quickly respond to the needs of its customers.

In light of the above, Vulcan has selected VULSORB as its first choice of sorbent for lithium extraction in its planned Phase 1 commercial development, with first commercial production of lithium targeted for the fourth quarter of 2025. Though, it intends to continue testing other sorbents from commercial suppliers to provide further optionality.

‘Uniquely positioned’

Vulcan’s CEO, Dr. Francis Wedin, commented:

In contrast to other developers who are increasingly using sorption in their developments but often outsourcing to external technology providers, Vulcan is uniquely positioned as both a lithium extraction technology provider, as well as a lithium chemicals and renewable energy developer.

Until now, there have been no commercially available sorbents for lithium extraction manufactured in Europe, thus making the region dependent on foreign supply chains. VULSORB will enable Europe to extract lithium from its own brine fields, without being exposed to geopolitical risk.

Vulcan will assess the potential of VULSORB to be used in other lithium brines in Europe and globally, particularly renewably-heated brines that can be used to extract lithium with net zero carbon footprint and zero fossil fuels, in line with Vulcan’s strict mandate to be carbon neutral.

The post Vulcan share price storms higher on lithium extraction update appeared first on The Motley Fool Australia.

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More reading

• What’s going on with the Vulcan share price today?
• ‘Well positioned’: Why the Vulcan share price is climbing today
• 3 ASX 300 shares off to the races on Wednesday
• Why Life360, Novonix, Pilbara Minerals, and Vulcan shares are storming higher today
• 4 ASX lithium shares surging more than 10% today

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

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The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price could be at a good value to consider the ASX bank share for dividend income.

ANZ is one of the biggest banks on the ASX, along with Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and Commonwealth Bank of Australia (ASX: CBA).

ANZ wants to become even bigger by buying the banking division of Suncorp Group Ltd (ASX: SUN).

In terms of the dividend income, let’s have a look at what the bank may be able to achieve.

Dividend estimate for ANZ shares

According to Commsec, ANZ will pay an annual dividend per share of $1.54 in FY23. This would translate into a grossed-up dividend yield of 8.9%.

It’s estimated that ANZ may pay an annual dividend per share of $1.60 per share in FY24. If the ASX bank share were to pay this, then it would translate into a grossed-up dividend yield of 9.3%.

This compares well to the estimated yield CBA might pay in the next couple of years. In FY23, CBA could pay a grossed-up dividend yield of 5.7%, and then in FY24, the biggest bank could pay a grossed-up dividend yield of 6%.

Why ANZ could be a good pick for investment income

Things seem to be looking up for ANZ.

The FY22 result included attractive amounts of growth. Statutory net profit after tax (NPAT) increased by 16% to $7.1 billion, while continuing operations cash profit grew by 5% to $6.5 billion. The annual dividend per share increased by 3% to $1.46 per share.

FY22 gross loans and advances went up 7% to $676 billion, while customer deposits increased 5% to $620.4 billion.

ANZ also said that it had restored momentum in Australian home loans, with application approval times back in line with peers.

ANZ also told investors about how much profit it could make from higher interest rates.

Compared to FY22, ANZ expects FY23 to see an additional $1.5 billion net interest income earned. In FY25, the additional net interest income could amount to $3.2 billion. In my opinion, this could be very beneficial for the ANZ share price.

I think that the ASX bank share is interesting in this context of higher earnings.

I’m not sure how high the Reserve Bank of Australia (RBA) interest rate will go, but it’s proving to be a boost for the bank. As long as the interest rate doesn’t go too high, the loan book may not suffer too much from elevated arrears.

It looks quite cheap

Despite the potential for increasing profit, the ANZ share price is actually down by more than 10% in 2022.

Currently, it’s valued at 10x FY23’s estimated earnings and 10x FY24’s estimated earnings.

While the price/earnings (p/e) ratio isn’t everything, it allows us to compare it against other businesses.

According to CBA, it’s valued at 19x FY23’s and 18x FY24’s estimated earnings. I think that ANZ shares look cheap when considering CBA’s valuation.

The post Here’s why the ANZ share price could be a good value pick for dividends appeared first on The Motley Fool Australia.

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More reading

• ASX 200 bank shares: Buy, hold, or fold?
• Bendigo Bank share price climbs as chair slams ANZ-Suncorp deal as ‘sub-optimal’
• Are storm clouds gathering over ANZ’s Suncorp bid?
• Analysts say these ASX dividend shares are buys this week
• Are ASX 200 bank shares a no-brainer buy in an inflationary environment?

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 Westpac Banking Corporation. 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 Flight Centre Travel Group Ltd (ASX: FLT) share price is under pressure on Monday.

At the time of writing, the travel agent’s shares are down 4% to $16.30.

Why is the Flight Centre share price dropping into the red?

Investors have been selling down the Flight Centre share price on Monday following the release of a trading update at the company’s annual general meeting.

According to the release, during the first four months of FY 2023, Flight Centre’s total transaction value (TTV) increased 246% over the prior corresponding period to reached $6.8 billion.

And with its revenue margin remaining steady year-over-year at 9.8%, Flight Centre’s revenue grew at a similar rate of 248% to $667 million. This appears to have been slower than some in the market were expecting due to softer margins.

Revenue margin impacts

Management advised that Flight Centre’s revenue margin is being adversely impacted by reduced front-end commission payments from some airlines in Australia and New Zealand.

And while it is partially offsetting the impact through a combination of revenue margin improvement strategies and by securing better arrangements with some carriers, it estimates that these changes are adversely affecting overall leisure revenue margins by approximately 1% in Australia.

Management advised that while it believes the company’s “revenue margin will increase from its current level as the trading cycle normalises, it is expected to remain below pre-COVID levels in the near-term.”

One positive, though, is that Flight Centre revealed that its cost margin for the four months to October 31 was 10%, which is in line with the long-term target that it set pre-COVID. Pleasingly, it expects further improvements over the medium-term, which it believes will help to offset the impacts of its lower revenue margin on its profit.

Speaking of which, Flight Centre recorded an underlying $61 million EBITDA profit for the period. This is up from a $137 million underlying EBITDA loss during the same period last year.

And on the bottom line, the company broke-even on an underlying profit before tax basis.

Outlook

Management advised that it continues to work towards an aspirational 2% net margin target (profit before tax to TTV) and believes it is “achievable by 2025.”

In the immediate term, the company currently expects underlying EBITDA to be between $70 million and $90 million for the first half. That means an additional $9 million to $29 million of EBITDA is expected to be generated in the remaining two months of the half.

The post Flight Centre share price tumbles on trading update appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Monday
• Could this emerging trend dent the recovery for Flight Centre shares?
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• The Flight Centre share price soared 17% in October. Here’s why
• Why are Flight Centre shares still the most shorted on the ASX?

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

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This year has been an incredible one so far for ASX lithium shares, including the Core Lithium Ltd (ASX: CXO) share price, which is up by 165%.

Other lithium miners have also seen major gains.

The Pilbara Minerals Ltd (ASX: PLS) share price has risen by around 50%.

The Allkem Ltd (ASX: AKE) share price has soared up by 44%.

The Mineral Resources Limited (ASX: MIN) share price has leapt by 39%.

The Liontown Resources Limited (ASX: LTR) share price has gone up by around 18%.

It has been a very strong year for the sector, but asset management business Schroders has suggested that things could go wrong if governments try to get involved in accelerating decarbonisation.

A warning for the ‘pot of gold’ lithium sector

Martin Conlon, head of Australian equities from Schroders, recently wrote that the lithium industry is a “pot of gold” that “just keeps on giving”.

He pointed out that companies that are currently producing such as Pilbara Minerals, Mineral Resources and Allkem are now “very large companies”.

Conlon noted that it’s understandable that these businesses are now so large because it’s “reflective of very high long-run price expectations given the small number of mines involved and limited capital employed relative to market capitalisation.”

However, he also said that “prospective producers such as Liontown Resources and Core Lithium are multi-billion-dollar companies well in advance of producing anything.”

One of the main things that he pointed out was that while quality high iron ore with a 60% grade “lies fairly close to the surface” in places like the Pilbara, the lithium projects are closer to a 1% grade.

He said “massive quantities of ore need to be moved and processed using large quantities of reagents to deliver the high purity end products”. Therefore, the carbon footprint of electric vehicles is “not quite as low as most Tesla buyers would hope”.

Estimates of the climate footprint of electric vehicles compared to traditional vehicles suggest that climate neutrality is “only reached after more than 100,000km of driving”, according to Conlon.

For now, this doesn’t seem to have an effect on the Core Lithium share price.

Why government intervention could be a bad thing

The expert acknowledged that decarbonisation is important to pursue. However:

We believe policies which attempt to accelerate the take-up of electric vehicles and other solutions more quickly than the physical capability of mining and manufacturing can deliver, risk being significantly counter-productive.

Lithium prices are reflective of a mismatch in the ability of supply to respond to demand. These stratospheric prices are vastly higher than needed to incentivise new supply and are therefore difficult to rationalise on any fundamental basis.

Nevertheless, if governments insist on attempting to create additional (often artificial) demand assisted by subsidies to appease the voracious appetite for rapid climate action, there is an obvious possibility large amounts of global taxpayer money will be transferred to ‘green metal’ producers.

As is usually the case when large scale market intervention displaces free-markets, rational economics will not be overly useful in determining the outcome. The wager in purchasing lithium and many other battery material exposures at present is firmly in the hands of ongoing ill-considered government intervention.

Foolish takeaway

The Core Lithium share price has been a big winner this year, though Conlon raises some relevant points about how the lithium market could be impacted in the future.

The post Could government intervention rain on the Core Lithium share price parade? appeared first on The Motley Fool Australia.

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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 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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The retail sector has become a difficult place to invest this year due to concerns that rising interest rates and energy costs will put significant pressure on consumers.

The good news is that not all ASX retail shares are expected to underperform in the current environment.

In fact, the team at Goldman Sachs has just named two ASX retail shares that it believes are well-placed in this environment and could be great investment options today.

Which ASX retail shares should you buy now?

Goldman Sachs has picked out Accent Group Ltd (ASX: AX1) and Universal Store Holdings Ltd (ASX: UNI) as a couple of ASX retail shares to buy now. It commented:

We initiate on four discretionary retailers in the apparel, footwear and accessories space. Our top picks are Accent Group (AX1, Buy) and Universal Store Holdings (UNI, Buy) which we believe are best placed heading into a more challenging discretionary spending environment given a heavy sales skew towards a younger, Gen-Z consumer.

The broker highlights that younger consumers, especially those that still live at home, still have plenty of disposable income thanks to the increase in the minimum wage. This bodes well for these retail shares. It explained:

We believe the young Australian consumer, aged ~15-24 is uniquely well positioned. […] We estimate that the combined impact of a minimum wage uplift and limited inflationary/housing cost pressures has resulted in an additional ~A$570 to A$935 per person annual disposable income for those that work and live at home; at the midpoint this is an aggregated ~A$1bn in incremental spending power.

When coupled with this cohort’s prioritisation of ‘social’ spending on experiences and associated attire, we view UNI (with its core customer a Gen-Z consumer) and AX1 (~80-85% skew to younger age cohorts) as best positioned.

Goldman has initiated on Accent’s shares with a buy rating and $2.20 price target and on Universal Store’s shares with a buy rating and $7.20 price target.

The post Goldman Sachs names the ASX retail shares to buy in the current environment appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has 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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