Category: Stock Market

S&P/ASX 200 Index (ASX: XJO) shares are slightly lower in afternoon trading, down 0.21% to 6,801 points.

This week so far, the benchmark index is up 4.4%. This is almost exclusively due to the Reserve Bank of Australia (RBA)’s interest rate decision on Tuesday.

The RBA decided to raise the official cash rate by 0.25%. This surprised the market, as analysts were expecting a fifth consecutive month of 0.5% rises.

The response? Well, the market threw a party.

On the day of the RBA announcement, the ASX 200 closed 3.75% higher at 6,699.3 points. That was the best performance in more than two years.

The party continued yesterday, with another 1.74% gain to 6,815.7 points at the close.

So, could this be a turning point for ASX 200 shares, after a dismal year so far? (The index is down 10% year to date.)

Is this a turning point for ASX 200 shares?

In short, it could be.

The RBA boss indicated in a statement that the board might be happy to slow rate rises down from here.

RBA Governor Philip Lowe said:

The cash rate has been increased substantially in a short period of time. Reflecting this, the Board decided to increase the cash rate by 25 basis points this month as it assesses the outlook for inflation and economic growth in Australia.

Slowing rate rises down could mean two things that the market is likely to love, potentially leading to a turnaround in ASX 200 shares.

The first is that the RBA might be thinking they’ve raised rates enough to put the brakes on rising inflation in a meaningful way to this point.

The cash rate is up 2.5% over just six months, and that’s aggressive in anyone’s language.

What do the experts think?

As we reported yesterday, James Nicolaou of Shaw & Partners said the RBA’s decision might signal that rate increases are “starting to have the desired effect”.

And that’s “positive for the markets and economy”, he told The Australian.

Lowe made it clear in his statement that more rate rises are likely. But if they’re in smaller increments, that will help people cope better with the rising cost of mortgage interest. That bodes well for the economy.

Also in The Australian, top broker Macquarie said a “bear market rally” may have already started as a result. It said this was due to the “dovish” RBA increase and weak US ISM Manufacturing data.

The broker has nominated 10 ASX 200 shares that are “more likely to outperform” in such a rally.

LGT Crestone deputy chief investment officer Kevin Wan Lum from LGT Crestone weighed in on Livewire:

From a relative value perspective, we favour Australia over offshore equity markets.

Overall, we believe the domestic economy remains in relatively good health supported by low unemployment levels, reasonable valuations relative to longer pre-COVID averages, and a less severe path of inflationary pressures.

Additionally, Australia has robust terms of trades, driven by hard commodities and energy, which we expect to at least continue in the short to medium term.

We view the US dollar as currently stretched, and expect the Australian dollar to rebound, favouring our domestic equity positioning.

Also on Livewire, Oreana Financial Services chief investment officer, Isaac Poole, said Oreana was biased toward Australian equities and quality companies.

Poole said:

While we think equity beta will perform OK over the next 12 months, the challenge will be for companies to hit their earnings targets in the near-term, and that will probably favour higher quality companies.

(Fun fact: ‘Beta’ is a measure of how reactive an ASX share is to market movements. For example, an ASX 200 share with a beta of one generally moves in line with the market. Lower than one means lower volatility, higher than one means higher volatility.)

The post Could the RBA’s latest interest rate decision signal a turning point for ASX 200 shares? appeared first on The Motley Fool Australia.

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More reading

• Why are ASX 200 energy shares smashing the benchmark on Thursday?
• 3 ASX 200 shares smashing all-time highs on Thursday
• ANZ share price best-value buy of the ASX 200 big four banks right now: expert
• The Fortescue share price has just capped off a disappointing quarter. What now?
• If I’d invested $1,000 in Sayona Mining shares at the start of 2022, here’s what I’d have now

Motley Fool contributor Bronwyn Allen has positions in Macquarie 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 recommended 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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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) has followed the lead of US markets and dropped into the red. At the time of writing, the benchmark index is down 0.1% to 6,805.4 points.

Four ASX shares that are falling more than most today are listed below. Here’s why they are dropping:

Appen Ltd (ASX: APX)

The Appen share price is down 14% to $2.86. Investors have been selling this artificial intelligence data services company’s shares following the release of another dismal update. Appen revealed that it expects FY 2022 revenue in the range of US$375 million to US$395 million and constant currency EBITDA of US$13 million to US$18 million. The latter will be down 77.2% to 83.5% over the prior corresponding period.

De Grey Mining Limited (ASX: DEG)

The De Grey Mining share price is down almost 4% to $1.05. This follows the completion of the gold developer’s institutional placement. De Grey Mining has received firm commitments for the placement of 130 million shares at $1.00 per share to raise $130 million before costs. This issue price represents an 8.3% discount to its last closing share price.

Magellan Financial Group Ltd (ASX: MFG)

The Magellan share price is down 8.5% to $10.75. The catalyst for this decline has been the release of yet another terrible funds under management (FUM) update from the struggling fund manager. In September, Magellan experienced net outflows of $3.6 billion. This comprised net retail outflows of $0.4 billion and net institutional outflows of $3.2 billion. This and unfavourable market movements led to Magellan’s FUM falling almost 12% month on month to $50.9 billion.

Zip Co Ltd (ASX: ZIP)

The Zip share price is down over 5% to 70.5 cents. Investors have been selling this buy now pay later (BNPL) provider’s shares despite there being no news out of it. This appears to have been driven by weakness in the tech sector and a poor night for BNPL rival Affirm on Wall Street.

The post Why Appen, De Grey Mining, Magellan, and Zip shares are dropping today appeared first on The Motley Fool Australia.

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More reading

• Why is the Magellan share price sinking like a stone today?
• Appen share price crashes 18% on ‘ongoing uncertainty’ update
• Raising funds outside the ASX comes at a cost for Zip
• The Zip share price had another horror month. How much did it fall?
• Why 5E Advanced Materials, Appen, Core Lithium, and Infomedia shares are dropping

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Appen Ltd and ZIPCOLTD FPO. 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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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.

Warren Buffett has been buying shares of oil giant Occidental Petroleum (NYSE: OXY) hand over fist these days. His company, Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B), recently bought another 5.99 million shares, boosting its stake to 20.9%. Buffett took advantage of the recent slide in oil prices and Occidental Petroleum’s stock to increase Berkshire’s position in one of its top 10 holdings in late September.  

While oil is the primary focus of Buffett’s bold bet on Occidental Petroleum, it’s likely not the only thing he sees in the company. Most investors have overlooked that Occidental is a leader in carbon capture and sequestration (CCS), a process that captures carbon dioxide and sequesters the greenhouse gas underground. Occidental sees it as a $3 trillion to $5 trillion future global market opportunity. It could one day supply the company with as much earnings and cash flow as its current oil and gas business.   

That potentially massive market opportunity is leading the company to continue taking strides to capitalize on the upside it sees ahead. This strategy could give the oil stock the fuel to deliver big-time returns for Buffett in the coming years.  

Securing another potential partnership

Occidental Petroleum has been securing partners to pursue a wide array of CCS opportunities. Its latest one is with Western Midstream Partners (NYSE: WES), a master limited partnership (MLP) it used to control. The partners signed a letter of intent to pursue opportunities to produce and deliver low-carbon intensity oil and gas products. 

Occidental will explore installing carbon capture facilities on its upstream oil and gas activities in the Texas Delaware and Colorado DJ Basins. Meanwhile, Western Midstream will explore installing carbon capture facilities on its natural gas plants and other major gathering and treating facilities. Western would also explore providing carbon dioxide transportation services from those capture facilities to Occidental’s carbon dioxide delivery facilities. The companies intend to consider providing carbon management services to other emitters interested in reducing their emissions.

This partnership can potentially reduce the emissions of Occidental Petroleum’s oil and gas production in the Delaware and DJ Basins, enabling it to market net-zero output. Meanwhile, it could supply Western Midstream with a stable source of cash flow as it transports carbon dioxide to Occidental’s facilities.   

Building out a robust solution

That partnership is the latest in a string of agreements Occidental has signed this year to build its CCS business. It’s creating an end-to-end solution that can manage the entire lifecycle of carbon.

In late August, the company started construction on the world’s largest direct air capture (DAC) plant in Texas’ Permian Basin. Once operational in 2024, the plant can capture up to 500,000 metric tons of carbon dioxide per year, with the potential to scale up to 1 million metric tons in the future. That’s one of 70 DAC facilities the company intends to deploy worldwide by 2035. 

Occidental has already signed commercial contracts to support that first facility. Aerospace leader Airbus has agreed to purchase 400,000 tons of carbon removal credits over four years with an option to secure more volume in the future. Meanwhile, SK Trading will buy up to 200,000 barrels of net-zero oil for five years, supported by the carbon dioxide removed from the atmosphere in Occidental’s first DAC. 

The company has also secured several other midstream partners to help it transport captured carbon to sequestration and utilization sites. It signed a deal with Enterprise Products Partners (NYSE: EPD) to explore a potential carbon dioxide transportation and sequestration solution for the Texas Gulf Coast. Enterprise would use a combination of new and existing pipelines to support the project. Meanwhile, Occidental signed a similar agreement with EnLink Midstream (NYSE: ENLC), focusing on the Mississippi River corridor from Waggaman to Baton Rouge, Louisiana. EnLink would also use new and existing pipelines to transport the captured carbon. 

Finally, the company has been locking up underground pore space suitable to sequester carbon. It has leased more than 30,000 acres of subsurface pore space from leading timberland REIT Weyerhaeuser (NYSE: WY) in Louisiana. Weyerhaeuser will continue to manage the forest while receiving fees for leasing the pore space to Occidental. The company signed a similar deal with Manulife Investment Management to lease 27,000 acres of timberland in Western Louisiana for a potential carbon sequestration hub. 

The overlooked upside potential of Buffett’s top oil pick

Most investors see Buffett’s continued buying of Occidental Petroleum stock as a bet on oil prices. While that’s certainly the case, investors shouldn’t overlook the enormous upside potential of the company’s emerging CCS business. It could provide a big boost for Buffett’s investment in the coming years if the market develops as Occidental anticipates.   

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

The post This top Warren Buffett stock has enormous overlooked upside potential appeared first on The Motley Fool Australia.

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More reading

• Could the RBA’s latest interest rate decision signal a turning point for ASX 200 shares?
• Why Appen, De Grey Mining, Magellan, and Zip shares are dropping today
• Why are ASX 200 energy shares smashing the benchmark on Thursday?
• Why Lake, Pilbara Minerals, PointsBet, and PolyNovo shares are charging higher
• Down 9% in a month, could the Woolworths share price turn around in October?

Matthew DiLallo has positions in Berkshire Hathaway (B shares), Enterprise Products Partners, and Weyerhaeuser and has the following options: short October 2022 $40 calls on Weyerhaeuser. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Enterprise Products Partners. 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.  

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

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ASX 200 energy shares are enjoying another strong day today.

In afternoon trading, the S&P/ASX 200 Index (ASX: XJO) is down 0.11%, having recovered from some steeper earlier losses.

The S&P/ASX 200 Energy Index (ASX: XEJ), on the other hand, has been trading solidly in the green, currently up 2.13% for the day.

Leading ASX 200 energy share Santos Ltd (ASX: STO) is up 1.64%, while shares in competitor Woodside Energy Group Ltd (ASX: WDS) are up 2.58%.

What’s driving investor interest in these ASX 200 energy shares?

Woodside and Santos both look to be benefiting from a boost in oil prices.

The Brent crude oil price is up 1.8% over the past day to US$93.60 a barrel. Brent hit six-month lows of US$84.06 on 26 September amid fears of a global slowdown impacting demand.

But it seems the rebounding oil price has little to do with resurgent demand. Rather it comes following the latest output decision from the Organization of Petroleum Exporting Countries and its allies (OPEC+).

What did OPEC+ decide?

If you own ASX 200 energy shares, you may wish to tip your hat to the OPEC+ members.

Though not everyone is happy with the cartel’s decision.

Yesterday (overnight Aussie time), the group agreed to reduce their combined oil production by two million barrels per day, commencing in November. That represents their biggest supply cut in two years.

As Bloomberg reports, Saudi energy minister Prince Abdulaziz Bin Salman said the reduced output levels will remain through the end of 2023, unless there are material changes in the market.

Nigerian minister of state for petroleum resources Timipre Sylva said falling oil prices would destabilise some of the members’ economies. He added, “OPEC wants prices around $90.”

While that price offers ASX 200 energy shares like Santos and Woodside a healthy profit margin, the United States government was quick to voice its displeasure.

The White House stated:

The president is disappointed by the short-sighted decision by OPEC+ to cut production quotas while the global economy is dealing with the continued negative impact of Putin’s invasion of Ukraine.

Brent crude prices topped US$120 per barrel in June this year, sending ASX 200 energy shares like Santos and Woodside sharply higher.

Year to date, the Santos share price is up 22.6% while Woodside shares have soared 58% higher.

The post Why are ASX 200 energy shares smashing the benchmark on Thursday? appeared first on The Motley Fool Australia.

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More reading

• Could the RBA’s latest interest rate decision signal a turning point for ASX 200 shares?
• 3 ASX 200 shares smashing all-time highs on Thursday
• What’s the outlook for ASX 200 mining shares in Q2?
• ANZ share price best-value buy of the ASX 200 big four banks right now: expert
• The Fortescue share price has just capped off a disappointing quarter. What now?

Motley Fool contributor Bernd Struben 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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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) looks set to end its winning streak. At the time of writing, the benchmark index is down 0.15% to 6,806.2 points.

Four ASX shares that have not let that hold them back today are listed below. Here’s why they are charging higher:

Lake Resources N.L. (ASX: LKE)

The Lake Resources share price is up almost 5% to $1.05. Investors have been buying this lithium developer’s shares after it announced a strategic investment and offtake agreement with WMC Energy. The offtake agreement is for up to 25,000 mtpa of battery grade lithium or 50% of the Kachi Project’s production.

Pilbara Minerals Ltd (ASX: PLS)

The Pilbara Minerals share price is up 8% to $5.52. This is despite the company announcing the departure of its chief financial officer, Brian Lynn, this morning. Lynn has been with the company for over six years and has chosen to step down in order to spend more time with his family. Pilbara Minerals has commenced a global search for a replacement.

PointsBet Holdings Ltd (ASX: PBH)

The PointsBet share price is up 6% to $2.16. This morning this sports betting company announced an agreement with 1/ST Technology to deliver a fully integrated, white-label advance-deposit wagering horse racing betting experience to PointsBet customers across the United States. Management called this “a pivotal moment” for the company’s US expansion.

Polynovo Ltd (ASX: PNV)

The PolyNovo share price is up 14% to $1.67. Investors have been buying this medical device company’s shares after it released a trading update. That update revealed that PolyNovo had a record first quarter, with sales growth of 73.3% to $12.5 million. This was driven by strong sales growth in the US and favourable currency movements.

The post Why Lake, Pilbara Minerals, PointsBet, and PolyNovo shares are charging higher appeared first on The Motley Fool Australia.

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More reading

• PolyNovo share price surges 13% on record quarter
• Why is the PointsBet share price smashing the ASX All Ords on Thursday?
• Lake Resources share price leaps 9% on new lithium deal
• Here’s why the PointsBet share price is jumping 10% today
• Why Cronos Australia, Pilbara Minerals, Sayona Mining, and Strike Energy are dropping

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended POLYNOVO FPO and Pointsbet Holdings Ltd. The Motley Fool Australia has recommended Pointsbet Holdings Ltd. 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 Woolworths Group Ltd (ASX: WOW) share price struggled in September, but could there be better days ahead?

Woolworths shares have fallen 9.49% since market close on 6 September and are currently trading at $33.35 apiece. For perspective, the S&P/ASX 200 Index (ASX: XJO) has lost 0.18% over the same time frame.

Let’s check the outlook for the Woolworths share price.

Could the Woolworths share price rise?

Woolworths is not the only ASX consumer share to fall in the past month. The Coles Group Ltd (ASX: COL) share price has descended nearly 7% since market close on 6 September, while Wesfarmers Ltd (ASX: WES) has lost nearly 2%.

Amid higher interest rates, average daily spending on groceries fell by 19% in September, The Age reported. However, Jarden believes Woolworths can weather the storm. In comments cited by the publication, Jarden said:

The value shopper is returning and Aldi is forecast to be the second-fastest growing retailer over the next 12 months, with Woolworths number one.

We remain cautious on the outlook for the consumer and believe staples and fast-moving consumer goods should perform well against this backdrop

In the 2022 financial year, Woolworths’ net profit after tax (NPAT) increased by 0.7% to $1,514 million while group sales lifted 9.2%. Woolworths paid a final dividend of 53 cents per share.

Meanwhile, analysts at Goldman Sachs are positive on the outlook for the Woolworths share price. Goldman has placed a $44.10 price target on the company’s shares. This represents a 32% upside on the current share price. The broker thinks Woolworths shares are trading at an attractive level after their recent falls.

However, Alto Capital investment manager Tony Locantro has recently placed a sell rating on Woolworths. He said in comments published on The Bull:

While cost pressures have eased, we’re concerned about the impact from broad cost of living increases on its customers moving forward.

Share price snapshot

The Woolworths share price has fallen nearly 15% in the past year, while it has lost more than 12% in 2022 so far.

For perspective, the ASX 200 has shed more than 6% in the past year.

Woolworths has a market capitalisation of nearly $40.5 billion based on the current share price.

The post Down 9% in a month, could the Woolworths share price turn around in October? appeared first on The Motley Fool Australia.

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More reading

• Own Wesfarmers shares? Here’s some good news on your dividends
• Why dividends matter
• 5 things to watch on the ASX 200 on Thursday
• Why did the Wesfarmers share price get hammered so hard in September?
• Here’s why experts rate these blue chip ASX 200 shares as buys

Motley Fool contributor Monica O’Shea 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 and 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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September was a dire month for both the Novonix Ltd (ASX: NVX) share price and the broader S&P/ASX 200 Index (ASX: XJO).

Interestingly, however, there was no news from the battery technology and materials giant last month.

But that didn’t stop the market from selling it off. After closing August at $2.42, the Novonix share price plummeted to end September at $1.76 – marking a 27.27% drop.

Meanwhile, the ASX 200 dumped 7.34% and the S&P/ASX 200 Information Technology Index (ASX: XJI) slumped 10.67%.

So, what might have gone wrong for the ASX 200 tech stock last month? Let’s take a look.

What weighed on the Novonix share price in September?

While there was no news from Novonix in September, there were plenty of factors that could have dragged on its share price.

Notably, interest rate hikes. The Reserve Bank of Australia and the United States Federal Reserve both hiked rates in a bid to tackle inflation in September, bolstering concerns that a recession could be nigh.

Such concerns, of course, likely weighed on the broader market too, but rising rates spell particularly bad news for tech stocks.

That’s because many that are also growth shares and plenty, like Novonix, are yet to turn a profit. Higher rates make borrowing cash more expensive while inflation can diminish the value of future earnings.

On that note, within the company’s annual report – posted late in August –  its auditors flagged that it’s now “dependant” on capital raising activities to finance its growth, my Fool colleague Zach reports.

The auditor also noted “material uncertainty” surrounds the company’s future. That likely sounds alarms for risk-averse investors, particularly in economic times such as those we find ourselves.

With all that in mind, it’s probably not surprising that the Novonix share price trailed the broader market last month. Though, the stock is well versed in trading in the red.

The Novonix share price is currently 82% lower than it was at the start of 2022. It has also fallen 62% since this time last year.

For comparison, the ASX 200 has fallen 10% year to date and 6% over the last 12 months.

The post Why did the Novonix share price crash 27% in September? appeared first on The Motley Fool Australia.

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More reading

• Novonix share price shakes off losing streak to post second day of gains
• The Novonix share price sank to another 52-week low today. What’s been going so wrong?
• Here’s how ASX tech shares fared in September
• Novonix share price dips lower amid interest rate hike fears
• Novonix share price sinks to new 52-week low on Wednesday

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 the tech sector has rebounded this month, it is still down materially year to date.

This could make it worth considering an investment in the sector if you believe the rebound will continue.

But which ASX tech shares should you buy? Two that Goldman Sachs is tipping as buys are listed below. Here’s why it rates them highly:

Life360 Inc (ASX: 360)

The first ASX tech share that has been tipped as a buy by Goldman Sachs is Life360.

It is a technology company that operates in the digital consumer subscription services market. The key product in its portfolio is the Life360 app, which has 40 million active users. It offers families features such as communications, driver safety, and location sharing.

Goldman is very bullish on the company due to its massive market opportunity. Earlier this week, it commented: “We estimate Life360 is exposed to a US$12bn global TAM with a large opportunity to expand its product suite, grow average revenue per paying circle (ARPPC), increase payer conversion, and lift penetration rates outside of the US.”

The broker currently has a buy rating and $7.50 price target on the company’s shares.

Readytech Holdings Ltd (ASX: RDY)

Another ASX tech share that Goldman is bullish on is Readytech.

It is a technology company that owns a portfolio of enterprise software businesses across several market verticals such as higher education and local government.

Goldman notes that these businesses operate in market niches that are under-served by both large and small enterprise software competitors. In light of this, its growing levels of recurring revenue, and ultra low churn levels, the broker is expecting Readytech to “continue to grow mid-teens organically while making accretive acquisitions.”

Goldman Sachs currently has a buy rating and $4.60 price target on its shares.

The post Goldman Sachs names the ASX tech shares to buy now appeared first on The Motley Fool Australia.

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More reading

• Why CBA, Flight Centre, Life360, and Link shares are storming higher
• Why the Life360 share price is up 17% in two days and could keep rising
• Leading brokers name 3 ASX shares to buy today
• Experts name 2 ASX growth shares to buy in October
• Experts reveal 2 ASX shares primed for growth despite a slowing economy

Motley Fool contributor James Mickleboro has positions in Life360, Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Life360, Inc. and Readytech Holdings Ltd. The Motley Fool Australia has recommended Readytech Holdings Ltd. 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 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.

Bear markets are a part of investing, especially in crypto. While the stock market was on a bull run for the most part until late last year, ever since the Great Recession, there have been a handful of periods when cryptocurrencies have gone through their own bear markets.  

When this happens, it’s called a crypto winter, and it isn’t uncommon for the cryptocurrency market class to collectively fall by more than 60%. In fact, in the last crypto winter of 2018, the cryptocurrency asset class was decimated and lost more than 80% of its value. 

Yet despite this extreme drop, the market recovered over the next three years and rose to new highs in 2021. From its 2018 bottom, the cryptocurrency market cap increased by more than 2,500% and notched a collective value of just under $3 billion.

One crypto CEO is hopeful that another similar situation might unfold. But a few things have to happen first. 

Been there, done that

Ryan Selkis founded Messari, a cryptocurrency research and data analysis company, in 2013 when the asset class was in its infancy. The idea to create an easily accessible and intuitive platform for users to explore cryptocurrency charts and trends has helped the CEO become one of the industry’s prominent figures. 

As a seasoned veteran, Selkis has been through his fair share of crypto winters and bear markets. He believes this one is similar to others since it came after a period of rapid growth — too much growth that happened too quickly. 

Selkis thinks that a bit of turbulence in the market is healthy and necessary to spur the next bull market. When bear markets arrive, companies and blockchains that struggle to provide true utility inevitably go out of business. To ensure they can remain competitive, blockchains must either strategize anew or further develop their ultimate visions so they don’t become obsolete. 

As Selkis put it, the arrival of crypto winters helps “wash away all the dead wood” and create room for new competitors. He further elaborated that “bear markets are good for getting the right people in the room” so that they can help lead another wave of growth and innovation.

If the current crypto winter is similar to those of the past, investors should plan on a few things. 

Lessons to be learned

First, not every cryptocurrency around today will make it to the next bull market — should one arrive. When looking at the top 10 cryptocurrencies by market cap from June 2018, arguably the middle of the last crypto winter, only four are still in the top 10 today.

The natural process of succession eliminates blockchains that fail to evolve and provide necessary utility. Investors should prioritize holding cryptocurrencies such as Bitcoin (CRYPTO: BTC) or Ethereum (CRYPTO: ETH), which are built for the long haul, have a proven track record, and aren’t part of some short-lived trend. 

In addition, if past bear markets can tell us anything, recoveries are a drawn-out process. It took nearly three years for the cryptocurrency market to peak from its dismal low in December 2018. We aren’t even a year into the current crypto winter, but that shouldn’t be cause for concern. 

Instead, investors should use this time to build up their positions and remain consistent in their allocations. If the past is any indication of the future, then a bull market should return. Of course, nothing can be accounted for with certainty. Still, the growing trend of blockchains and cryptocurrencies permeating into business models of companies and people’s daily lives is difficult to ignore. 

While the technology continues to evolve, an investment in specific cryptocurrencies fostering innovation could be of immense value if the market starts to recover. Keep the big picture in focus and stay consistent. Prioritizing your investments in blockchains that provide true utility is the best way to position your portfolio for success should this crypto winter thaw. 

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

The post Here’s why one crypto CEO thinks bear markets are actually good appeared first on The Motley Fool Australia.

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More reading

• Goldman Sachs names the ASX tech shares to buy now
• Why is the Magellan share price sinking like a stone today?
• If I’d invested $1,000 in BHP shares at the start of 2022, here’s what I’d have now
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The Magellan Financial Group Ltd (ASX: MFG) share price is slumping 8.6% to $10.73 — an eight-year low — following an update from the wealth manager.

According to Magellan’s latest monthly funds under management (FUM) statement, there has been yet another net outflow as nervous investors continue to pull their money out.

In September, investors withdrew a net $3.6 billion. About $3.2 billion of this was institutional money and $400 million was retail investors’ money. Total FUM is now $50.9 billion.

Magellan share price smashed after big FUM outflow

The September outflow is well above that of August when a $1.3 billion outflow reduced the total FUM to $60.2 billion.

Magellan has an explanation for part of the outflow last month.

As per the statement:

Approximately half of the institutional outflows relate to the liquidity requirements of a client impacted by global market volatility in late September.

The king is back

Magellan co-founder Hamish Douglass returned to work this week in a new consultancy role.

Earlier this year, Douglass was serving as the Chair and chief investment officer (essentially, the primary stock picker) at Magellan before taking a medical leave of absence in February.

The company later announced he would return as a consultant and a new CEO would be appointed.

That new CEO is David George, formerly the deputy chief investment officer for public markets for Australia’s Future Fund. He commenced as CEO in August.

Douglass has been credited as the key to Magellan’s long-term success since it began operations in 2006.

How’s the share buyback going?

One might say Magellan is doing what every investor should do when the market is fearful. As the great Warren Buffett says, that’s the time to be “greedy”. To wit: Magellan is currently undertaking an on-market share buyback of up to 10 million shares.

And why wouldn’t they? This time last year the Magellan share price was close to $29. That’s almost three times higher than today’s share price. Two years ago, it was about $55.

According to today’s buyback update, Magellan has bought back 2,233,203 shares since announcing the program in April.

Over this period, Magellan has paid a maximum share price of $13.30 and a minimum of $10.93.

The buyback is scheduled to conclude in April 2023.

The post Why is the Magellan share price sinking like a stone today? appeared first on The Motley Fool Australia.

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• Why is the Magellan share price underperforming the ASX 200 this week?
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• Magellan share price drops 5% amid broader sell-off

Motley Fool contributor Bronwyn Allen has positions in Magellan Financial Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has 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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