Category: Stock Market

Even amid inflation, we all have to buy food. So why is the Woolworths share price struggling?
The Woolworths Group Ltd (ASX: WOW) share price has been going backwards despite everything that’s happening with food inflation.

Since mid-August, the Woolworths share price has dropped by approximately 15%.

This comes at a time when food prices on the shelves have been going up. Shouldn’t that lead to higher revenue and net profit after tax (NPAT) for Woolworths? There may be more to it than that.

Expert suggests it was a problem with the outlook

Brad Potter, Tyndall AM’s Head of Australian Equities, said on a podcast published on Livewire that businesses in the consumer staples space like Woolworths, Coles Group Ltd (ASX: COL) and Endeavour Group Ltd (ASX: EDV) went into reporting season (in August) with high valuations.

While results “met expectations”, the problem was that their “outlook statements didn’t, and therefore they all fell significantly on result day and on the days subsequent”.

Potter pointed out that cost growth is hurting the industry. The implication was that this could then be having an impact on the Woolworths share price.

What did Woolworths say?

The company said the start of FY23 has been clouded by the cycling of the COVID outbreak at the beginning of FY22 in its Australian food business. This significantly impacted the most populous states of NSW and Victoria. Total food sales in the first eight weeks of FY23 were down 0.5% year over year.

Operating conditions in the New Zealand food division remain “challenging”. Total sales were down 1% on the prior year in the first eight weeks. New Zealand food’s earnings before interest and tax (EBIT) is expected to be “materially below” the prior year, with things like the supply chain and team absenteeism still being impacted.

Woolworths will spend significantly on areas such as its supply chain transformation, store renewals, e-commerce, and digital investments.

Summarising the situation, Woolworths CEO Brad Banducci said:

We expect the trading environment to remain volatile and challenging due to endemic COVID disruptions, ongoing supply chain challenges, higher costs across our business and cost-of-living pressures for our customers.

However, we are increasingly more agile and purposeful in responding to these challenges and are focused on improving our underlying operating performance across all aspects of our value chain after three years of disruption.

Is the Woolworths share price an opportunity or not?

Experts are mixed on whether the business is fully priced or worth buying.

Talking to Matthew Kidman on Livewire’s ‘buy hold sell’, First Sentier’s David Wilson called it a buy, suggesting that the company has regained its “mojo” and that it’s doing a number of positive things. Those improvements include reducing costs, growing market share and that it’s “really well placed from an online point of view”.

However, Michelle Lopez from abrdn called the Woolworths share price a hold. She said:

It’s a hold. This is a really well-run business. It’s defensive. We still feel food inflation is going to continue to play out, but it’s fully valued. And again, it’s one of those defensive names that is not a bad place to hide given what we’re about to come into. But the valuation is a hold.

The post Even amid inflation, we all have to buy food. So why is the Woolworths share price struggling? 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 no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended COLESGROUP DEF SET. 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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11 October 2022
What can we learn from how Warren Buffett invested through sky-high inflation?
Over a period spanning more than eight decades and amassing a net worth exceeding US$90 billion, few people have experienced more in the investing world than the iconic Warren Buffett.

During his time, the ‘Oracle of Omaha’ has diligently selected stocks throughout wars, countless corrections and crashes, and numerous crises. However, it is the timeframe known as ‘The Great Inflation’ in the 1970s, which draws an uncanny resemblance to the challenging environment investors are tasked with navigating right now.

Fortunately, we have the benefit of reflecting upon how Buffett journeyed through a time of outlandishly high inflation and interest rates all those years ago. Perhaps some of the lessons can be applied at a time when the inflation rate is at 6.1% in Australia.

So, how did Warren Buffett invest during a time not too dissimilar to now?

Awake to the reality

To pick the brain of one of the greatest capital allocators of our time, I reviewed the letter to shareholders on behalf of Berkshire Hathaway Inc (NYSE: BRK) between 1978 and 1980. This snippet lines up with a moment in time when US inflation rose from 7.6% to 13.6%.

The first Buffett-ism to arise in my reading was the frank acknowledgment of the situation. In 1980, when inflation peaked, the Berkshire chair extensively detailed the devastating effect of high inflation on real returns, writing:

At present inflation rates, we believe individual owners in medium or high tax brackets (as distinguished from tax-free entities such as pension funds, eleemosynary institutions, etc.) should expect no real long-term return from the average American corporation, even though these individuals reinvest the entire after-tax proceeds from all dividends they receive.

To insulate against such a fate, Buffett noted that companies needed their capital to be ‘truly indexed’. This is to say, the company’s earnings need to rise at a greater pace than inflation without any additional capital employed to produce said rise.

Surprisingly, Buffett admitted there were very few companies that could achieve such a feat — and Berkshire Hathaway was not one of them. This meant the ‘Oracle’ believed real returns were likely going to be negative throughout this inflationary timeline, yet still chose to invest — why?

Staying the course

Faced with a high rate of inflation, Warren Buffett — through Berkshire Hathaway — continued to accumulate portions of ownership in businesses he believed fit four all-important criteria.
1. Businesses we can understand
2. With favourable long-term prospects
3. Operated by honest and competent people; and
4. Priced very attractively.
Turning to Berkshire’s 1979 letter, Buffett highlighted his preference for equities over bonds as a way of realising greater returns. This has always been important for Berkshire Hathaway due to its involvement in the insurance industry, whereby premiums are invested to cover future potential claims (and, still return a profit).

To try and deliver on this goal, Berkshire invested heavily in the face of inflation. From 1978 to 1980, the company increased its equity outlay from US$134 million to US$325 million.

At the peak of US inflation in 1980, Warren Buffett and his team had built sizeable positions in relatively defensive companies, including:
- GEICO Corporation (insurance) — market value of US$105.3 million
- General Foods Inc, acquired by Kraft Heinz Co (NASDAQ: KHC) (consumer staples) — market value of US$59.9 million
- Handy & Harman (silver and gold refiner) — market value of US$58.4 million
- Safeco Corporation (insurance) — market value of US$45.2 million
Building wealth, Warren Buffett style

Finally, there are two essential tenets to how the famed investor operated during the last major bout of inflation — opportunism and measure.

In 1980, the Berkshire conglomerate raised US$60 million via the issuance of debt. Unlike other companies at the time, this was not out of necessity to improve its own operational liquidity. Instead, Warren Buffett explained:

[…] we borrowed because we think that, over a period far shorter than the life of the loan, we will have many opportunities to put the money to good use. The most attractive opportunities may present themselves at a time when credit is extremely expensive — or even unavailable.

At such a time we want to have plenty of financial firepower.

This isn’t to say the average investor should use debt to fund buying in the downturn. The point is: Buffett ensured there was capital available to go shopping while share prices were depressed.

However, Berkshire remained tactful during the widespread opportunity. As noted in the 1980 letter, Warren Buffett and the team set their sights on businesses that generated cash. Despite the appeal of taking on more debt, Berkshire Hathaway maintained a high level of liquidity.

Since 1982, the stock price of Berkshire Hathaway has grown by more than 65,000%. Evidently, the decision to invest through inflation has paid off in spades.

The post What can we learn from how Warren Buffett invested through sky-high inflation? appeared first on The Motley Fool Australia.

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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 recommended The Kraft Heinz Company. 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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11 October 2022
Broker names 2 ASX dividend shares to buy with 6%+ yields
If you’re searching for dividend shares to buy, then the two listed below could be worth looking at.

Both have been named as buys by analysts at Morgans and tipped to provide big yields. Here’s what you need to know:

Accent Group Ltd (ASX: AX1)

The first ASX dividend share that has been tipped as a buy by Morgans is footwear focused retailer Accent.

The broker currently has an add rating and $2.00 price target on its shares.

While FY 2022 was a difficult and disappointing year, the broker remains positive on the company’s medium to long term outlook. This is thanks to its strong brand portfolio and expansion strategy. Morgans explained:

AX1’s renewed focus on selling at full price will, in our view, support a recovery in the gross profit margin in FY23 back towards historical averages. We welcome AX1’s moderation of the pace of its store rollout in favour of a more selective expansion strategy focused on return on investment. We see AX1 as undervalued at the current share price.

As for dividends, the broker is forecasting fully franked dividends of 9 cents per share in FY 2023 and 11 cents per share in FY 2024. Based on the current Accent share price of $1.32, this will mean yields of 6.8% and 8.3%, respectively.

Dexus Industria REIT (ASX: DXI)

Another ASX dividend share that Morgans rates as a buy is Dexus Industria. It is an industrial and office property company.

Morgans currently has an add rating and $3.25 price target on the company’s shares. It commented:

DXI’s key industrial markets remain robust with the outlook for solid rental growth backed by strong tenant demand. The development pipeline also provides near and medium term upside potential. A key focus will be the leasing up of the business park assets and a potential divestment could be a positive catalyst. While the portfolio remains well positioned we acknowledge there will be near-term uncertainty around interest rates.

In respect to dividends, the broker is forecasting dividends per share of 16.4 cents in FY 2023 and 16.9 cents in FY 2024. Based on the current Dexus Industria share price of $2.50, this will mean yields of 6.6% and 6.8%, respectively.

The post Broker names 2 ASX dividend shares to buy with 6%+ yields 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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11 October 2022
What’s the outlook for A2 Milk shares in the second quarter?
The A2 Milk Company Ltd (ASX: A2M) share price has made some big movements this year, just like plenty of other ASX shares.

In the middle of the year, it dropped to around $4. It’s now back to well above $5.

After a significant decline from its peak – in revenue, profit, and share price terms – the infant formula company is now expecting to generate growth in the current financial year.

Remember, the share market is often forward-looking, so an improvement in the outlook for the company can improve investor sentiment. Let’s check how things are looking for the FY23 first half and the overall 2023 financial year.

What are FY23 expectations?

China label infant formula sales are expected to be up in FY23 with “significant growth” in sales in the first half of FY23 compared to the first half of FY22. But, at this stage, FY23 second-half sales growth is expected to be impacted by a transition to the company’s pending new infant formula registration.

Meantime, English label infant formula sales are expected to be up in FY23, with FY23 first-half sales expected to be broadly in line with the FY22 second half.

Australian liquid milk sales are also expected to remain “broadly in line” with FY22, with reduced in-home consumption. Conversely, USA liquid milk sales are expected to be up, with a “significant” improvement in earnings before interest, tax, depreciation and amortisation (EBITDA) losses.

A2 Milk is expecting to deliver high-single-digit revenue growth in FY23, with first-half revenue up significantly. It’s also expecting overall EBITDA growth in FY23.

The company has also launched an on-market share buyback of up to $150 million to return capital to investors. This could help the A2 Milk share price because the value of the business is being spread across fewer shares.

Trading update

A2 Milk gave a small update on 30 September 2022, saying it has made a positive start to the year. It reported FY23 first-quarter sales are expected to be “marginally ahead” of plan, primarily reflecting the benefit of favourable foreign exchange, driven by the lowering of the New Zealand dollar.

Due to the currency impact on the cost of sales and cost of doing business, not forgetting about the benefit to sales, FY23 first quarter EBITDA is expected to be “in line” with the company’s plan.

A new competitor?

According to reporting by Australian Financial Review, there is another infant formula business — Care A2 Plus — that is looking to list on the ASX with an initial public offering (IPO). Could another competitor in the space hurt the A2 Milk share price?

This business reportedly uses single-sourced milk from Australian grass-fed a2 cows in Victoria. It has also received approval from the US to supply a large quantity (up to 4.8 million tins) of infant formula to try to alleviate the shortage there. The company applied within 24 hours of news that US import laws would be changing.

More than 250,000 tins are due to ship to the US this month. Conversely, the ASX-listed A2 Milk didn’t manage to get approved.

The AFR sources suggested that “Care A2 Plus could have a valuation of $400 million”, but the “US win had forced the company to revisit its numbers and what it might mean for any public float”.

However, the newspaper also pointed out that this business made “negligible sales” last year. Care A2 Plus management pointed out that the company’s capacity is focused on the US, rather than Asia.

Broker rating on the A2 Milk share price

One of the latest ratings comes from Credit Suisse, which rates it as neutral. The price target is $5.25 – implying no capital growth over the next year.

The broker pointed to an increased marketing presence from A2 Milk and thinks that it can grow its market share during FY23.

Credit Suisse thinks that A2 Milk shares are valued at 30 times FY22’s estimated earnings.

The post What’s the outlook for A2 Milk shares in the second quarter? 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 no position in any of the stocks mentioned. The Motley Fool Australia has recommended A2 Milk. 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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11 October 2022
Buy this ASX 200 share in the aftermath of Optus hack: expert
The unauthorised access of personal data for millions of Optus customers has dominated headlines the past fortnight.

Australia’s second largest telecommunications provider currently has a full plate battling fierce criticism from its own customers, the government and cybersecurity experts.

While data hacks are devastating for the victims and the business, one stock analyst has suggested an opportunistic buy could be on the cards to cash in on Optus’ woes:

Already going places, but now assisted by Optus’ failure

Optus’ largest rival and the biggest telco in the country is Telstra Corporation Ltd (ASX: TLS).

While the Telstra share price has fallen more than 9% year to date, Marcus Today analyst Layton Membrey reckons there is a golden buy opportunity right now.

“This leading telecommunications provider is likely to generate new customers following a cyber attack at competitor Optus and the negative sentiment that followed towards Optus,” Membrey told The Bull.

But it’s not just external events contributing to Membrey’s conviction.

He likes the fundamentals of Telstra and where it’s heading in the long run.

“Telstra recently reaffirmed full-year total income guidance of between $23 billion and $25 billion in fiscal year 2023.”

Last week the team at Morgans also rated Telstra as a buy.

“After a major turnaround, Telstra has emerged in good shape with strong earnings momentum and a strong balance sheet,” read Morgans’ memo.

“In late CY22, shareholders vote on Telstra’s legal restructure, which opens the door for value to be released.”

According to Morgans analysts, Telstra’s current 7 times enterprise value to earnings ratio doesn’t fairly reflect some of its “high-quality long life assets” such as InfraCo.

“We don’t think this is in the price, so see it as value-generating for Telstra shareholders,” read the memo.

“This free option, combined with likely reputational damage to its closest peer, following a major cybersecurity incident, means Telstra looks well placed for the year ahead.”

Telstra shares are currently paying out a 3.5% dividend yield.

According to CMC Markets, 11 out of 16 analysts currently rate Telstra shares as a buy, with 10 of them recommending it as a strong buy.

The post Buy this ASX 200 share in the aftermath of Optus hack: expert appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Corporation 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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11 October 2022
Can you buy Bunnings Warehouse shares on the ASX?
Some investors may be wondering if they are able to buy shares of Bunnings Warehouse on the ASX.

It’s a good question. Although it’s not an ASX share in itself, Bunnings is part of one of the largest retail businesses in Australia. Let’s take a look.

How big is Bunnings?

Well, Bunnings boasts about being the leading retailer of home and lifestyle products for consumer and commercial customers in Australia and New Zealand. Its store network is made up of 282 large warehouse stores, 67 smaller format stores, and 32 trade centres and frame & truss sites.

But there’s more to Bunnings than just Bunnings Warehouses.

It acquired South Australian retailer Adelaide Tools (which is now called Tool Kit Depot), which has 11 stores. Bunnings then acquired Beaumont Tiles in November 2021, which has 115 stores.

At the last count, the business had around 53,000 team members.

How to gain exposure to Bunnings Warehouse on the ASX

Bunnings is part of the retail conglomerate Wesfarmers Ltd (ASX: WES).

Wesfarmers has owned the business for almost 30 years, taking full ownership in 1994.

It’s the crown jewel in Wesfarmers’ portfolio.

In FY22, Bunnings generated $2.2 billion of earnings before tax (EBT), outperforming all other brands in the Wesfarmers stable. Kmart and Target made $505 million of EBT, Officeworks made $181 million of EBT, Wesfarmers chemicals, energy and fertilisers (WesCEF) made $540 million of EBT, and other small divisions contributed smaller amounts.

Bunnings made $17.75 billion of revenue in FY22, which was an increase of 5.2%.

I think one of the most impressive things about Bunnings is its return on capital (ROC), which was 77.2% in FY22. That says that the business makes a lot of profit on the money invested in it.

What’s the outlook?

In Wesfarmers’ outlook comments about Bunnings, the company said:

Bunnings continues to be well positioned for a range of market conditions, and will benefit from the diversity of its business, focus on necessity products and strength of its offer across consumer DIY and commercial markets. The demand outlook across consumer and commercial is supported by a solid pipeline of renovation and building activity, as well as incremental DIY growth opportunities as customers continue to focus on maintaining and improving their homes.

Bunnings remains focused on driving long-term growth by building more connected experiences across all channels, deepening its relationship with commercial customers, and evolving its supply chain to support the continued growth of the business.

Another option: Invest in the buildings

Owning Wesfarmers shares is the way to gain access to the operating business.

However, there is an ASX property share that owns many of the warehouses that Bunnings operates from.

BWP Trust (ASX: BWP) is the name – it’s a real estate investment trust (REIT) that claims to be the largest owner of Bunnings Warehouse sites in Australia, with a portfolio of 65 stores. Seven of the properties have adjacent retail showrooms that the BWP owns and are leased to other tenants, according to the REIT.

At 30 June 2022, the portfolio had a value of $3 billion, generating $153.3 million of annual rent. The occupancy rate across its entire property was 97.5% due to three vacant properties. BWP’s portfolio had a portfolio weighted average lease expiry (WALE) of 3.9 years.

In my opinion, Wesfarmers shares are the better way to gain direct exposure to Bunnings and its success, particularly if it sells more things online. But, the BWP Trust is an interesting alternative investment.

The post Can you buy Bunnings Warehouse shares on the ASX? 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 no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Wesfarmers 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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11 October 2022
The ASX 200 share experts are urging to buy right now
In turbulent times like this year, it’s difficult to get consensus on anything.

Experts are all varied on how long rampant inflation might last, when interest rates might stop rising, how badly the economy will suffer, and where ASX shares are headed.

So when a couple of professionals simultaneously urge investors to buy the same stock, it pays to listen.

And that’s exactly what happened this week:

‘Outlook appears bright’

Marcus Today analyst Layton Membrey labelled retail conglomerate Premier Investments Limited (ASX: PMV) as a buy.

“The retail conglomerate delivered a strong fiscal year 2022 result,” Membrey told The Bull.

“Headline numbers beat consensus. A sales update was ahead of expectations.”

Premier Investments operates familiar retail chains such as Just Jeans, Peter Alexander, Portmans and Smiggle.

The shares have lost about a quarter of their value since the start of the year, but have ramped up more than 13% over the past fortnight.

The dividend yield currently stands at a very handy 3.98%, which pleased Membrey.

“The final fully franked ordinary dividend of 79 cents a share, which includes a special dividend of 25 cents, is most appealing,” he said.

“Premier Investments [previously] announced an on-market share buyback for up to $50 million.”

Securities Vault director Nathan Lodge agreed that Premier shares were a buy right now.

“The outlook appears bright,” he said.

“Total fully franked dividends in fiscal year 2022 were up 56.3% on the prior corresponding period.”

Lodge was also a fan of the $50 stock buyback.

Not everyone’s convinced though

The wider professional community is somewhat divided on Premier Investments.

According to CMC Markets, seven out of 15 analysts currently rate the stock as a buy. Seven label it a hold, while one expert is urging investors to sell.

The Motley Fool’s Tristan Harrison last week named Premier Investments as one of several retailer stocks that he thought had been oversold and “look interesting with a long-term view”.

“Prices are now a lot lower, and I believe that a big part of successful investing is buying at a good price,” he said.

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Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Premier Investments 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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11 October 2022
How to handle tough times to end with a smile on the other side: advisor
Ask A Fund Manager

The Motley Fool chats with the best in the industry so that you can get an insight into how the professionals think. In this edition, Medallion Financial managing director Michael Wayne explains how investors can navigate their ASX shares through the current anxiety.

Investment style

The Motley Fool: How would you describe your fund to a potential client?

Michael Wayne: My name’s Michael Wayne, I’m the managing director of Medallion Financial Group. We’re primarily a private wealth advisory firm. We assist a lot of investors, and a lot of self-managed super funds, invest in the share market. Our primary focus is the ASX 300. Although we do use a lot of ETFs and LICs to gain exposure to international markets, our area of expertise is the ASX 300.

We’re also about to launch a managed fund as well. Same sort of strategy that Medallion has been employing for clients for a number of years, however, this would just open up a funds structure which is appealing to different types of investors and different types of people.

MF: That’s pretty exciting. When do you expect the fund to go live?

MW: Well, we’ve got all the codes and we’ve signed off on all the paperwork, so it’s just a matter now of pulling the trigger, putting together that base load investment or the initial seed investment… But I imagine, fingers crossed, in the next month — maximum two months.

MF: It’s a great time to launch a fund when the market is bottoming.

MW: Yeah, fingers crossed. It certainly has been a tough year, but things could always get worse before they get better and there’s a lot of issues out there at the moment, whether it’s inflation, interest rates, the conflict in Ukraine causing havoc with grain prices and energy prices.

It’s a very tough environment, probably the toughest it’s been since the GFC. But we’ve had a very good five years leading into this period so just going to navigate it as best as we can. And in time, history suggests that things will improve and history has also suggested investing during periods of turbulence and turmoil actually sets you up for the best returns in the next two, three, four years.

MF: Where do you see the market going over the next year or so?

MW: Forecasts are very challenging. But look, again, referring to history is probably the only thing you can do — and history suggests that we’re probably halfway through the sell-off in terms of duration, not necessarily magnitude.

I would think that the majority of the falls, certainly looking at the US market, have been felt, but I can definitely foresee a situation where markets have another leg lower and go for another 10, 15%.

Look, it’s not uncommon for there to be many bear market rallies during the course of a bear market. The market, at the moment, is really hanging on every single data point, that’s why you’re getting these mild durations. I definitely think, looking at the next few months, we’ll continue to see volatility. There’ll be periods where [the] inflation number comes out, and it’s softer than the market is expecting, the market gets excited and then it needs to be followed up the following month with stronger-than-expected inflation.

I just expect the volatility to continue, but there are definitely a lot of high-quality stocks with good balance sheets that have come back a long way, where if investors are taking a three- to five-year view, should be able to do quite well. But you’ve got to have the stomach to withstand further falls, potentially, in the short term.

MF: Is your advice to clients at the moment to not worry about waiting because it’s going to be a long term investment?

MW: Not necessarily. I mean, a lot of our clients are holding a large amount of cash, probably between 20 and 30% in some cases. And for those clients that don’t really want to feel the volatility and don’t want to put too much risk on the table, we also have been looking and discussing hedging positions using the short Global X Ultra Short Nasdaq 100 Hedge Fund (ASX: SNAS) ETF for instance. And again, that might not be a full or entire hedge of your portfolio but it might be a partial hedge of your portfolio. That way, it can smooth out some of the wild swings that we’ve been seeing.

MF: Have you had a few phone calls this year to clients who are anxious, and you’ve had to re-emphasise the long-term nature of investing?

MW: Yeah, look, absolutely it’s been a challenging year, but it’s quite interesting because we get two types of clients. You get those clients who are desperate to put more cash into the market on the first sign of weakness and we’ve probably been trying to temper that enthusiasm a little bit. On the other hand, you get the clients that get spooked very easily but it’s never pleasant when portfolio values are dropping and people are losing money.

There’s no doubt about it — we’ve had clients who have come, say in the last 12 months, who unfortunately haven’t got off to the best start. That’s never a pleasant way to get a relationship off the ground but the environment that we’re dealing with and we’re trying to navigate it as best as possible.

[We] reduce the downside as much as we possibly can by investing in high-quality businesses that we think, over time, will stand the test of time. If anything, during these market downturns and potentially recessions, has the capacity to improve their market position and build their market share and often things, those sorts of companies emerge from these turbulent days in a much stronger position overall, which sets them up for a good period of future growth.

The post How to handle tough times to end with a smile on the other side: advisor appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has 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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11 October 2022
5 things to watch on the ASX 200 on Tuesday
On Monday, the S&P/ASX 200 Index (ASX: XJO) started the week deep in the red. The benchmark index fell 1.4% to 6,667.8 points.

Will the market be able to bounce back from this on Tuesday? Here are five things to watch:

ASX 200 expected to rise

The Australian share market could have a better day on Tuesday despite a poor start to the week on Wall Street. According to the latest SPI futures, the ASX 200 is poised to open the day 19 points or 0.3% higher. In late trade in the United States, the Dow Jones is down 0.1%, the S&P 500 is down 0.6%, and the NASDAQ has dropped 0.85%.

Oil prices fall

It could be a difficult day for energy shares including Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) after oil prices tumbled overnight. According to Bloomberg, the WTI crude oil price is down 1.9% to US$90.88 a barrel and the Brent crude oil price has fallen 2% to US$95.96 a barrel. Recession fears were weighing on sentiment.

Telstra’s AGM and scheme meeting

It is a big day for Telstra Corporation Ltd (ASX: TLS) on Tuesday. The telco giant is holding its annual general meeting (AGM) and scheme meeting today. The latter will see shareholders vote on a corporate restructure which could ultimately see Telstra demerge assets into a separate listing. A trading update could also be provided at its AGM.

Mineral Resources rated as a buy

The Mineral Resources Limited (ASX: MIN) share price could be heading higher according to analysts at Goldman Sachs. This morning the broker retained its buy rating with a $76.10 price target. Goldman commented: “We forecast a more than doubling of group EBITDA to over A$2.4bn in FY23 driven by higher lithium and low grade iron ore prices.”

Gold price tumbles

Gold miners such as Evolution Mining Ltd (ASX: EVN) and Regis Resources Limited (ASX: RRL) could have a tough day after the gold price tumbled overnight. According to CNBC, the spot gold price is down 2% to US$1,675.4 an ounce. The precious metal came under pressure by a strong US dollar and increasing rate hike bets.

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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 positions in and has recommended Telstra Corporation 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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11 October 2022
2 excellent ASX dividend shares that analysts love in October
Looking for dividend shares to buy this month? If you are, then you might want to look at the shares listed below.

Here’s why these ASX dividend shares are rated as buys:

Healthco Healthcare and Wellness REIT (ASX: HCW)

The first ASX dividend share to look at is the Healthco Healthcare and Wellness REIT.

As you might have guessed from its name, it is a real estate investment trust with a focus on healthcare and wellness assets such as hospitals, aged care, childcare, life sciences, and primary care properties.

Goldman Sachs is very positive on the company and has a conviction buy rating and $2.08 price target on its shares. It believes the company is one of the best options in the sector for several reasons. It explained:

[Healthco Healthcare and Wellness] remains one of our top picks in the sector given 1) its net cash position with over $450mn of liquidity, providing flexibility for near term opportunities, 2) its diversified mix of strong tenant covenants in sub-sectors that are majority government-backed across the care spectrum, mitigating potential tenant credit risks, 3) Healthcare and childcare assets valuations have remained resilient, 4) the expansive forecast future demand for assets across the care spectrum, underpinning development opportunities, and 5) inexpensive valuation.

The broker is also expecting some attractive dividend yields in the near term. Goldman is forecasting dividends per share of 7.5 cents in both FY 2023 and FY 2024. Based on the current Healthco Healthcare and Wellness REIT unit price of $1.43, this will mean yields of 5.35% for investors.

Transurban Group (ASX: TCL)

Another ASX dividend share that could be a top option for income investors is Transurban.

It is one of the world’s leading toll road operators with a portfolio of important roads and a lucrative pipeline of development projects.

Morgans is a fan of the company and has it on its best ideas list with a $13.85 price target. The broker likes Transurban due to regional population, employment growth, urbanisation, and positive exposure to inflation. It commented:

TCL owns a pure play portfolio of toll road concession assets located in Melbourne, Sydney, Brisbane, and North America. This provides exposure to regional population and employment growth and urbanisation. Given very high EBITDA margins, earnings are driven by traffic growth (with recovery from COVID) and toll escalation (roughly 70% by at least CPI and approximately one-quarter at a fixed c.4.25% pa). We think TCL will continue to be attractive to investors given its market cap weighting (important for passive index tracking flows), the high quality of its assets, management team, balance sheet, and growth prospects

As for dividends, Morgans expects dividends per share of 53.4 cents in FY 2023 and then 65.8 cents in FY 2024. Based on the current Transurban share price of $12.55, this implies yields of 4.25% and 5.25%, respectively.

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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 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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10 October 2022