Category: Stock Market

Later today, the Reserve Bank of Australia is meeting to decide on the cash rate again.

And much likes its previous meetings, the market is expecting the central bank to act decisively to combat inflation.

What is the market expecting the RBA to do?

According to the latest cash rate futures, the market has priced in an 83% probability of a 50 basis points increase in the cash rate to 2.35%.

If this forecast proves accurate, it will be the fourth consecutive meeting that the Reserve Bank has increased the cash rate by this margin.

The economics team at Westpac Banking Corp (ASX: WBC) agree with the market. According to the latest Westpac Weekly economic report, its team are expecting the central bank to raise the cash rate to 2.35% today.

Chief Economist, Bill Evans, commented: “We are confident that the Board will decide to raise the cash rate by a further 50 basis points to 2.35%.”

When will the RBA stop raising rates?

If you’re a borrower, you’ll no doubt be hoping that the Reserve Bank stops raising rates and making your repayments higher. When will this happen?

Unfortunately, I don’t have good news for you. While Westpac believes that this is likely to be the last 50 basis points increase, it doesn’t expect Philip Lowe and his team to stop at 2.35%.

Evans is expecting rates to keep rising in smaller increments in the coming months, taking the cash rate up to 3.35% by February. He explained:

Having quickly moved policy into that neutral zone (225 basis points in four months – five meetings) we expect the Board will decide to slow the pace of increases to 25 basis points from the October meeting. This second stage of the tightening process, with consecutive 25 basis point increments, is expected to extend out to February next year with the rate peaking at 3.35%.

While a lot can of course change between now and then, Evans believes that it would be unwise to take rates any higher than that. He commented:

At that point [in February] we expect that it will become evident that the Australian economy is clearly slowing with clear evidence of continuing deterioration as the series of rate hikes and high inflation weigh on households and businesses.

Furthermore, although both headline and underlying inflation will be rising on an annual basis, the quarterly increase in underlying inflation will have slowed from 1.5% (September quarter) to 1.2% (December quarter) with the prospect of a further slowing to 0.8% in the March quarter.

Time will tell if this prediction come true.

The post When will the RBA stop raising rates? Here’s what Westpac thinks appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Tuesday
• Why ASX bank shares are more likely to slowly grind lower than crash, despite famed Wall Street bear saying it’s time to short them
• Are Westpac shares the answer for investors wanting dividend income?
• Goldman Sachs says these ASX dividend shares are buys
• Is this why the Macquarie share price was ‘steaming ahead’ on Friday?

Motley Fool contributor James Mickleboro has positions in Westpac Banking Corporation. 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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On Monday, the S&P/ASX 200 Index (ASX: XJO) started the week in a positive fashion. The benchmark index rose 0.35% to 6,852.2 points.

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

ASX 200 expected to rise

The Australian share market is expected to open the day higher on Tuesday despite a poor start to the week in Europe. According to the latest SPI futures, the ASX 200 is poised to open the day 18 points or 0.25% higher. Wall Street was closed for the Labor Day public holiday, but the Dax fell 2.2%, the CAC dropped 1.2%, and the FTSE rose 0.1% after the UK named its new prime minister.

Reserve Bank meeting

The Reserve Bank is meeting again later today to decide on the cash rate. According to the latest Westpac Banking Corp (ASX: WBC) Weekly economic report, its analysts are expecting the central bank to raise the cash rate by 50 basis points to 2.35% today. Westpac notes that “raising the cash rate by 50 basis points will move the cash rate into the neutral zone.” Given how much exposure Westpac has to rising rates, its shares could be given a boost by today’s meeting.

Oil prices charge higher

It could be a great day for energy producers such as Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) after oil prices charged higher overnight. According to Bloomberg, the WTI crude oil price is up 2.2% to US$88.82 a barrel and the Brent crude oil price has risen 2.4% to US$95.23 a barrel. This followed confirmation that OPEC will cut production targets by about 100,000 barrels per day from October.

Telstra given neutral rating

Goldman Sachs has been looking at telco giant Telstra Corporation Ltd (ASX: TLS) but hasn’t yet seen enough to upgrade its shares. This morning the broker has retained its neutral rating and $4.40 price target on the Telstra’s shares. Goldman warned that its forecasts assume “industry rationality persists through to T25, which is clearly not guaranteed given the risk of TPG targeting market share & Optus responding, or competition increasing as the 5G cycle matures.”

Gold price edges lower

Gold miners such as Evolution Mining Ltd (ASX: EVN) and Regis Resources Limited (ASX: RRL) will be on watch after the gold price edged lower overnight. According to CNBC, the spot gold price is down 0.1% to US$1,721.20 an ounce. Traders were selling gold ahead of potential rate hikes from the US Federal Reserve.

The post 5 things to watch on the ASX 200 on Tuesday appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Why is the Santos share price off to a flying start this week?
• Why ASX bank shares are more likely to slowly grind lower than crash, despite famed Wall Street bear saying it’s time to short them
• These are the 10 most shorted ASX shares
• Are Westpac shares the answer for investors wanting dividend income?

Motley Fool contributor James Mickleboro has positions in Westpac Banking Corporation. 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 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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If you are looking to boost your income with some dividend shares, then two listed below could be worth a closer look.

Both of these dividend shares are expected to provide investors with great yields in the near term. Here’s what you need to know about them:

DEXUS Property Group (ASX: DXS)

The first ASX dividend share to look at is Dexus. It is one of Australia’s leading fully integrated real estate groups, managing a high-quality Australian property portfolio that is currently valued at $44.3 billion.

The company also has a $17.7 billion development pipeline, which management believes provides it with the opportunity to grow its portfolios and enhance future returns.

Macquarie is a fan of the company. Last month, the broker responded to Dexus’ full year results by retaining its outperform rating and lifting its price target on the company’s shares to $10.79.

As for dividends, the broker is forecasting dividends per share of 53 cents in FY 2023 and 52 cents in FY 2024. Based on the latest Dexus share price of $8.43, this will mean yields of 6.3% and 6.15%, respectively.

National Storage REIT (ASX: NSR)

Another ASX dividend share for income investors to look at is National Storage.

It is one of the ANZ region’s leading self-storage operators with over 225 centres that provide tailored storage solutions to 90,000+ residential and commercial customers.

National Storage was in fine form in FY 2022, reporting a 46% increase in underlying earnings to $126.5 million. This was driven by a 28% increase in total revenue, which reflects a 20.9% increase in revenue per available metre (REVPAM), an 18.8% increase in its group rate, and a 2.8% increase in its occupancy rate.

Ord Minnett was pleased with this result, noting that it came in a little ahead of its expectations. In response, the broker reiterated its buy rating and $2.70 price target.

In respect to dividends, its analysts are forecasting dividends per share of 11 cents in FY 2023 and FY 2024. Based on the current National Storage share price of $2.42, this equates to yields of 4.5%.

The post Analysts name 2 top ASX dividend shares to buy with great yields appeared first on The Motley Fool Australia.

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More reading

• Why Dexus, Dusk, Macquarie, and Qantas shares are pushing higher
• Dexus share price wobbles amid strong FY22 results and reduced FY23 dividend guidance

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 RURALFUNDS STAPLED. 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.

Stock prices have taken a tumble again, ending the bear market rally that investors have seen over the last month. Currently, the S&P 500 is down more than 18% from its peak in early January, and some investors worry the market still has further to fall.

To be clear, nobody — not even the experts — knows what exactly to expect over the coming months. The stock market can be unpredictable, so it’s tough to say whether stock prices will continue falling or how severe that drop might be if they do.

All that uncertainty can be daunting, and that’s normal. But just how worried about the stock market should you be? And should you still invest right now? Here’s what you need to know.

What will happen with the stock market?

Again, nobody knows for certain how stocks will perform in the near term. However, the market itself has a long history of rebounding from downturns and going on to see positive average returns over time.

In other words, no matter what happens in the coming weeks or months, the market will recover eventually. The best you can do, then, is try to keep a long-term outlook and avoid getting caught up in the market’s daily fluctuations.

This doesn’t necessarily mean you shouldn’t stay informed about market news. But try your best to avoid letting your emotions guide your decisions. Downturns can be nerve-wracking, but the market has experienced dozens of crashes, corrections, recessions, and bear markets over the years. And it’s recovered from every single one of them.

^SPX data by YCharts.

Keep in mind, too, that as long as you stay invested, you’re unlikely to lose money. If you pull your money out of the market after stock prices have fallen, you’ll lock in those losses. But if you simply hold your investments until the market inevitably recovers, you can make it through unscathed.

Is now a good time to buy stocks?

It’s often challenging to invest when the stock market is shaky, but it can actually help you make more money over time.

When the market is in a slump, stock prices are lower. While that may not seem like a positive thing, it means you can load up on high-quality stocks for a fraction of the price. Some stocks are down 40%, 50%, 60%, or more from their peaks, making right now a fantastic time to invest at a discount.

Once the market eventually recovers, most stocks should increase in value once again. When that happens, you could potentially see significant gains.

The key is to ensure you’re choosing the right investments. Not all stocks can recover from a downturn, but strong companies are the most likely to pull through. By filling your portfolio with healthy companies and holding those stocks for the long term, it’s much more likely your investments will survive whatever may happen with the stock market.

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

The post Should you be worried about investing in the stock market right now? appeared first on The Motley Fool Australia.

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More reading

• Analysts name 2 top ASX dividend shares to buy with great yields
• 3 ASX mining shares that rocketed more than 15% on Monday
• Why analysts rate these ASX growth machines as buys
• Experts say investors should buy these ASX 200 shares
• Is there hope for the gold price in 2022?

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.

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

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ASX mining shares Southern Palladium Ltd (ASX: SPD), Arafura Resources Ltd (ASX: ARU) and Flinders Mines Limited (ASX: FMS) had a massive day today, soaring between 17% and 42% higher.

For perspective, the S&P/ASX 200 Materials Index (ASX: XMJ) rose 1.94%.

Let’s take a look at what may have caused these three ASX mining shares to reach for the stars.

Southern Palladium

The Southern Palladium share price exploded 21% higher, closing on Monday at $1.15. The monster trading day came after the company updated the market on drilling progress at its Bengwenyama PGM project.

Southern Palladium has a 70% stake in the palladium and rhodium-rich project located at the Bushveld Complex in South Africa.

The explorer advised that drillhole E062 had intersected the first UG2 reef at 31.2m below the surface. Commenting on the news, managing director Johan Odendaal said:

Confirmation of the UG2 Reef intersection is an important early barometer for the company as it advances the Phase 1a drill program.

Arafura Resources

The Arafura Resources Ltd (ASX: ARU) share price also shot the lights out today, surging 17.24% to close at 34 cents.

Arafura has been added to the ASX 300 Index as part of a quarterly rebalance. S&P Dow Jones Indices advised of the changes to multiple S&P/ASX indices after market close on Friday.

Arafura is developing the Nolans Rare Earths Project in the Northern Territory. The mineral explorer aims to supply 5% of the world’s neodymium and praseodymium (NDPr) 99% pure oxide from the Nolan’s project.

Flinders Mines

Finally, the Flinders Mines share price soared a whopping 41.51% today to 75 cents at the close.

Flinders advised the market this morning that BBIG Group Pty Ltd had terminated a farm-in agreement with it. This meant Flinders would be able to negotiate a staged development of its Pilbara Iron Ore Project in Western Australia.

The company’s chair Cheryl Edwardes said the move would provide Flinders with a “more certain pathway to near term cash flow“.

The post 3 ASX mining shares that rocketed more than 15% on Monday appeared first on The Motley Fool Australia.

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More reading

• These 6 ASX mining shares are now in the ASX 300
• Guess which ASX iron ore share rocketed 40% on Monday
• Why is the Arafura share price surging 10% on Monday?
• Why is the Arafura share price leaping 5% today?
• 3 ASX mining shares primed for an ‘exponential’ energy transition: expert

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 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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Are you wanting to add some new ASX shares to your portfolio this month? If you are, read on.

Two ASX growth shares that could be worth considering are listed below. Here’s what you need to know about them:

Altium Limited (ASX: ALU)

The first ASX growth share to look at is electronic design software provider Altium.

Due to the leadership position it has carved out for itself in an enormous and growing market, Altium has been growing its earnings at a solid rate for many years.

This continued in FY 2022, with the company recently reporting a 23% increase in revenue to US$220.8 million and a 57% jump in net profit after tax to US$55.5 million

Analysts at Bell Potter were very impressed. They commented:

FY22 EBITDA grew 33% to US$79.8m which was 6% above our forecast of US$75.4m. The beat was driven by higher revenue than forecast (US$220.8m vs BPe US$218.5m and guidance towards top end of US$209-217m) and a better EBITDA margin than forecast (36.2% vs BPe 34.5% and guidance towards low end of 34-36%). Note there were no positive one-offs which drove the beat and the result was even negatively impacted by one-off costs of US$1.3m from relocating staff

Pleasingly, the future remains as bright as ever, with management continuing to target the more than double of its revenue to US$500 million by 2026.

Bell Potter currently has a buy rating and $37.50 price target on its shares.

Readytech Holdings Ltd (ASX: RDY)

Another ASX growth share that could be in the buy zone in September is enterprise software provider Readytech.

Like Altium, last month, Readytech released its full year results and impressed analysts. The company revealed a 16.8% year over year increase in revenue to $78.3 million and a 45.5% jump in underlying EBITDA to $27.5 million.

In response, the team at Goldman Sachs commented:

Strong organic growth execution builds confidence in medium-term earnings outlook. […] RDY remains materially undervalued relative to profitable SaaS peers (we estimate >50% discount on growth-adjusted FY24E EV/EBITDA) and is building an impressive track record of organic growth execution which in our view will drive a re-rating over time.

Also like Altium, management is confident in its outlook. It expects organic revenue growth in the mid-teens in FY 2023. This will be boosted by an additional $2 million of incremental revenue from FY 2022 acquisitions. But it won’t stop there, the company has upgraded its FY 2026 revenue target from $140 million to $160 million. This will be double FY 2022’s numbers.

Goldman Sachs has a buy rating and $4.30 price target on its shares.

The post Why analysts rate these ASX growth machines as buys appeared first on The Motley Fool Australia.

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More reading

• Why did the Altium share price lag the ASX 200 today?
• Up 15% in a month, is ASX 200 tech share Altium on the comeback trail?
• These ASX 200 shares are going ex-dividend on Monday
• Experts name 3 ASX growth shares to buy in September
• ASX 200 reporting season weekly wrap: Top risers and fallers

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 Altium 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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Are you wanting to add some new ASX 200 shares to your portfolio this month? If you are, read on.

Two ASX 200 shares that have been tipped as buys are listed below. Here’s what you need to know about them:

NextDC Ltd (ASX: NXT)

The first ASX 200 share to look at is data centre operator NextDC.

Citi is very positive on the company and currently has a buy rating and $12.90 price target on its shares. Based on the current NextDC share price of $9.85, this implies potential upside of 31% for investors.

The broker was pleased with the company’s performance in FY 2022 and remains positive on its outlook. Particularly given its Asian opportunity. It commented:

We see the pick-up in Enterprise/Retail bookings as positive for both yield and the potential for higher power costs to accelerate the shift to co-location datacenters. Further, while NXT has not quantified it, the increase in hyperscale options backlog underpins our medium-term earnings. However, with customer deployments being impacted by supply chain issues, we lower FY24e EBITDA by -3% and target price by -8% to $12.90 to reflect slower billing ramp.

Update on the Asian expansion represents the next catalyst, with NXT pointing to an organic build as its preferred option. With ~$1.9 billion in liquidity, we see NXT as having ample capacity to fund an organic DC build in Asia.

TechnologyOne Ltd (ASX: TNE)

Another ASX 200 share that has been tipped as a buy is enterprise software provider TechnologyOne.

A recent note out of Bell Potter reveals that its analysts have retained their buy rating and lifted their price target on the company’s shares to $14.25. With the TechnologyOne share price currently fetching $11.40, this implies potential upside of 25% for investors.

Bell Potter has suggested that TechnologyOne could lift its growth targets in the near future thanks to its strong performance and the success of its SaaS transition. It commented:

We continue to believe there is the potential for the company to lift its annual PBT growth target from 10-15% to 15-20% from next year and our forecasts are consistent with this uplift. But we also believe there is some conservatism in our FY23 and FY24 forecasts as we only forecast PBT margin improvement of c.100bps in both periods whereas we believe there is potential for the margin increase to be closer to 150bps.

The post Experts say investors should buy these ASX 200 shares appeared first on The Motley Fool Australia.

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More reading

• Leading brokers name 3 ASX shares to buy today
• 2 profitable ASX tech shares analysts say are buys with 20%+ upside
• Goldman Sachs tips NextDC share price to rise 40%
• Experts name 3 ASX growth shares to buy in September
• Why Aussie Broadband, Grange, NextDC, and PolyNovo shares are being hammered

Motley Fool contributor James Mickleboro has positions in NEXTDC 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 TechnologyOne 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 gold price continues its descent and now trades at its lowest mark in more than 52 weeks.

At the time of writing, gold is priced at US$1,710 per ounce, having dropped from a relatively short-lived relief rally on 12 August.

Returns for the precious metal for the last 12 months of trade are plotted on the chart below.

Can gold make a comeback?

Those invested in gold bullion have seen a volatile 12 months, watching their positions soar above US$2,000 per ounce in March only to contract heavily to today’s prices.

Key to the volatility has been a combination of inflation data and shifting interest rates. Both have stemmed from a combination of COVID-19, central bank policies, and global supply chain headwinds.

Spurring the downturn has largely been a nasty combination of rising interest rates and a strong US dollar.

Both are seen as negatives for gold, as the yellow metal pays no interest or dividends (therefore, it comes with an opportunity cost) whereas the US dollar serves as the benchmark for pricing it.

Moreover, precious metals are often seen as a way to protect inflation-adjusted returns as one of the potential inflation hedges. Although, there’s much debate on this topic.

Nevertheless, presuming this is the case, analysts at ICICI Bank Global Markets make a good point regarding this relationship.

“Given that gold is often used as an inflation hedge, the commitment from global central banks to rein in inflation is reducing the appeal for gold as an investment tool,” they said.

Meaning lower inflation equals less utility for gold in investment portfolios.

Meanwhile, portfolio managers at investment bank Citi are equally as cautious on the outlook for the metal. According to an update in August:

Gold may also come under downward pressure as the Fed raises policy rates further, inflation decelerates, and the US dollar remains a beneficiary of global safe-haven flows.

However, gold may benefit if and when the Fed pivots to [quantitative] easing.

While this may take many months, the first signs of a US employment contraction could boost expectations of such a shift, benefiting safer bonds and gold.

Based on the prevailing commentary, it looks as if the outlook for gold is a rates-driven one. Although there are, of course, other factors weighing in.

For the time being, though, the slide in market pricing continues and traders have yet to show signs of major reversal.

The gold price is down 6% over the past 12 months, slightly ahead of the S&P/ASX 200 Index (ASX: XJO)’s loss of around 9%.

The post Is there hope for the gold price in 2022? appeared first on The Motley Fool Australia.

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More reading

• Experts say investors should buy these ASX 200 shares
• How might falling house prices impact the CBA share price?
• Are AFIC shares outperforming the ASX 200 this year?
• Investing in the stock market could turn your $10,000 into $100,000. Here’s how
• These 6 ASX mining shares are now in the ASX 300

Motley Fool contributor Zach Bristow 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 Commonwealth Bank of Australia (ASX: CBA) share price could be facing a tough FY23 after a Wall Street guru singled out ASX big bank shares are one group to short.

The doom and gloom forecast comes from Bank of America strategist Michael Hartnett. He pointed to the steep drop in Australian house prices for his prediction.

House prices here have fallen in August at the fastest pace in four decades, according to CoreLogic. Given that the CBA has the biggest exposure to mortgages, its shares could come under pressure over the coming months.

Why are house prices on the nose?

Aussie home prices are on the decline as borrowers were caught off guard by the rise in interest rates. The Reserve Bank of Australia’s cash rate jumped from record lows of 0.1% to 1.85% in just four months.

What’s worse is that the RBA is likely to lift rates again by 50 basis points tomorrow. If that happens, it will take the cash rate to its highest level since December 2014.

Experts think house prices have further to fall as our central bank is unlikely to stop hiking rates anytime soon.

Michael Hartnett said:

There’s certainly some appealing logic in the idea that where house prices go, the Australian banks – stacked to the gills with mortgages as they are – will follow.

Loss of market share also hanging over the CBA share price

What’s more, the loss of mortgage market share is also pressuring the CBA share price. The home loan market is fiercely competitive and growth in new loans is slowing. Our largest lender is forecasting growth of just 3.5% in 2023, which is below the industry’s growth rate.

Other big ASX bank shares are also likely to be losing ground compared with smaller non-bank lenders.

CBA share price catching short sellers’ attention

But traders may not be waiting for Harnett’s advice to short the likes of the CBA share price. The bank seems to have already caught the attention of short-sellers.

The percentage of CBA’s shares that have been shorted stands at 1.18% as of 30 August 2022. That is the latest figures from ASIC, which is always a week behind.

You will be right if you thought that doesn’t sound like much. After all, the most shorted ASX share is Flight Centre Travel Group Ltd (ASX: FLT) at 15.5%. A short sale is a bet by traders that the share price of the security will fall.

But CBA’s 1.18% figure represents a near 200% increase in shorts since the start of this calendar year.

Most shorted ASX big bank share

Further, the CBA share price is the most shorted among the big four ASX banks. While Westpac Banking Corp (ASX: WBC) is only a touch behind at 1.17%, short positions have only inched up 7% in contrast.

The percentage of shorts against National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking Group Ltd (ASX: ANZ) only stand at 0.91% and 0.33%, respectively.

CBA share price not a one-way bet

However, before you jump on the short-selling bandwagon, be warned that this may not necessarily be a profitable trade.

Falling house prices may crimp growth for ASX banks, but credit quality and net interest margins are also important drivers for the sector.

On that front, credit quality remains strong due to the robust jobs market and rising rates will bolster margins.

The post How might falling house prices impact the CBA share price? appeared first on The Motley Fool Australia.

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More reading

• Why ASX bank shares are more likely to slowly grind lower than crash, despite famed Wall Street bear saying it’s time to short them
• Is this why the Macquarie share price was ‘steaming ahead’ on Friday?
• Why did the CBA share price go backwards in August?
• What’s the outlook for ASX 200 bank shares in September?
• What is the highest CBA shares have ever been?

Motley Fool contributor Brendon Lau has positions in Australia & New Zealand Banking Group Limited, Commonwealth Bank of Australia, National Australia Bank Limited, and Westpac Banking Corporation. 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 Australian Foundation Investment Company Ltd (ASX: AFI) share price has been dropping lower in September.

AFIC is a listed investment company (LIC) that aims to provide shareholders with “attractive investment returns through access to a growing stream of fully franked dividends and enhancement of capital invested over the medium to long-term”.

One of the main benefits of LICs is that they do the investing on behalf of investors. AFIC’s investment team will pick out a portfolio of shares that are thought to be able to achieve the targeted investment objectives.

Let’s have a look at how AFIC’s share price has been performing in recent times compared to the S&P/ASX 200 Index (ASX: XJO).

AFIC performance

Over the last month, the AFIC share price has dropped by 7% and in 2022 to date it has declined by around 11%.

In the last month, the ASX 200 has only fallen by 2.6%. In 2022, the ASX 200 has fallen by around 10%.

The AFIC share price has underperformed over both periods.

However, one thing to be aware of with LICs is that they can trade at premiums or discounts to the net tangible assets (NTA) per share. Changes in the premium can impact the share price.

But, AFIC does regularly tell investors about its portfolio performance compared to the S&P/ASX 200 Index Accumulation Index (ASX: XJOA).

In the 12 months to 31 August 2022, AFIC’s net asset per share growth plus dividends (including franking) had fallen by 6%, compared to just a 2.1% fall for the ASX 200 Accumulation Index.

There has been underperformance in the shorter term.

But, over the past three years, AFIC has delivered stronger returns. The LIC reported that its portfolio delivered an average net return per annum of 8.1%, beating the 6.8% return per annum of the ASX 200 Accumulation Index, including franking.

The question for investors is whether the AFIC share price premium is worth it. At the end of August 2022, it was at a premium of more than 10% to the NTA. In the prior decade, it has only been at a higher premium a few times, which was during the COVID period. Before COVID, it didn’t trade at as high a premium.

Portfolio holdings

AFIC’s portfolio return will be dictated by its investment returns. The biggest positions will have the largest weightings.

At the end of August, these were the positions that had a weighting of at least 4%: Commonwealth Bank of Australia (ASX: CBA), CSL Limited (ASX: CSL), BHP Group Ltd (ASX: BHP), Transurban Group (ASX: TCL), Macquarie Group Ltd (ASX: MQG), Wesfarmers Ltd (ASX: WES) and National Australia Bank Ltd (ASX: NAB)

It’s these holdings that could have the biggest indirect influence on the AFIC share price.

The post Are AFIC shares outperforming the ASX 200 this year? appeared first on The Motley Fool Australia.

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More reading

• How has the AFIC ASX share portfolio changed over FY22?
• Why is the AFIC share price sliding today?
• The CBA share price looks downright expensive
• Why I prefer AFIC shares to an ASX 200 index fund today
• Keen to bag the next AFIC dividend? Read this

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 CSL Ltd. The Motley Fool Australia has positions in and has recommended Wesfarmers Limited. 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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