Category: Stock Market

It’s a big week for ASX dividend investors as BHP Group Ltd (ASX: BHP) gears up to pay a whopping US$8.9 billion in fully franked dividends to eligible shareholders tomorrow.  

BHP shares have already past their ex-dividend date, so these dividends are no longer on the table.

But there are other companies in the S&P/ASX All Ordinaries Index (ASX: XAO) that are yet to turn ex-dividend.

In particular, two ASX All Ords shares will be going ex-dividend on Friday. Since the ASX is closed tomorrow, today will be the final day to pick up the latest dividends from these ASX All Ords shares.

Both of these ASX All Ords shares are flashing sizeable trailing dividend yields. So, don’t be surprised to see their share prices in the red on Friday as the value of their respective dividends leaves their share prices.

Latitude Group Holdings Ltd (ASX: LFS)

First up, consumer finance business Latitude will be trading on Friday without a fully franked interim dividend of 7.85 cents per share.

Investors on the company’s share registry when the market closes today should receive this payment on 26 October.

Alternatively, shareholders have the option to forgo this cash payment in favour of participating in the company’s dividend reinvestment plan (DRP). Those who wish to participate must elect to do so by 27 September.

The market doesn’t appear pleased with Latitude’s first-half 2022 results, with shares down 9% in the last month.

Volumes came in at $3.7 billion, up 2% from the prior corresponding period (pcp) of 1H21, led by the personal and auto loans divisions.

Risk-adjusted income fell by 70 basis points from the pcp to 9.46%, weighed down by lower product pricing and higher funding costs. 

Given that Latitude makes the bulk of its revenue from interest on its products, other challenges during the half included excess consumer savings and elevated repayment rates.

Overall, the company’s cash net profit after tax (NPAT) dropped by 11% on the pcp to $93 million. On a statutory basis, which includes non-cash items such as amortisation and impairments, NPAT tumbled 66% to $31 million.

Despite the reduction in profits, Latitude held its interim dividend steady at 7.85 cents. This is in line with the company’s last two (and only) dividend payments since listing in mid-2021.

This means that Latitude shares are currently spinning up a sizeable trailing dividend yield of 11.5%. Including franking credits, this yield cranks up to 16.4%.

However, broker Macquarie believes Latitude could slash its dividends in the future, forecasting FY23 dividends of 8 cents per share. Based on current prices, this equates to a prospective forward dividend yield of 5.8%.

BSP Financial Group Ltd (ASX: BFL)

Also going ex-dividend on Friday is BSP Financial, the leading bank in the South Pacific.

Like Latitude, BSP recently released its first-half 2022 results. The group cut its unfranked interim dividend by 13% to 34 Papua New Guinean Kina (K).

ASX investors will receive this dividend in Aussie dollars on 14 October. 

The exchange rate will be finalised next week. But based on current spot prices, this dividend could land at around 14 Australian cents. 

Economic conditions in BSP’s markets improved in 1H22, leading to a 13% lift in net operating income to K1,144 million. More specifically, this was driven by increased lending activities in Papua New Guinea and Fiji, and higher transactional volumes now that borders have re-opened.

On the bottom line, BSP delivered 30% growth in underlying NPAT, which reached K586 million. However, the company was slugged with an additional company tax of K190 million as part of new legislation that came into effect earlier this year. 

BSP has filed an application to the Supreme Court to declare the additional company tax unconstitutional and invalid.

Circling back to dividends, we’ll have to wait for the confirmed exchange rate next week. But BSP Financial shares could be trading on a trailing 12-month dividend yield of around 13% at current levels.  

That said, between fluctuating exchange rates, foreign operations, and a different regulatory environment, BSP shares could be more complicated than your ordinary ASX investment.

The post 2 high-yielding ASX All Ords shares trading ex-dividend on Friday appeared first on The Motley Fool Australia.

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Motley Fool contributor Cathryn Goh 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 Coles Group Ltd (ASX: COL) share price will be monitored by keen investors on Wednesday morning after the company sold off a massive part of its operations.

Prior to the ASX opening, the supermarket giant announced that it has entered into a binding agreement to sell its Coles Express petrol station network to Viva Energy Group Ltd (ASX: VEA).

The 710 sites were sold off for $300 million, with Viva also taking $816 million of lease liabilities off Coles’ balance sheet.

The newly acquired Coles Express locations will be rebadged over the next two years to Viva’s Shell branding.

Coles to focus on supermarket and liquor outlets

Coles chief executive Steven Cain said the deal is “positive” for both sides and their shareholders. 

“Viva is well-placed to make the most of opportunities to grow the Express business into the future, while we will strengthen our focus on our omnichannel supermarket and liquor businesses.”

Shell and Coles Express already had a co-operative agreement over the past two decades through co-branding, the Flybuys loyalty program and four-cent fuel discounts from supermarket receipts.

This partnership will continue beyond the acquisition through a new “multi-year” agreement.

The completion of the Coles Express takeover will occur in the first half of 2023, subject to conditions such as approval from the Australian Competition and Consumer Commission.

Coles shares are down 6.4% so far this year, while paying out a 3.76% dividend yield. The Viva share price is up 12.4% year to date, and is paying out a whopping 6.4% dividend yield.

How Coles Express is performing

Coles revealed that, for the 2022 financial year, Coles Express reported sales of $1.13 billion and earnings before interest and taxation of $42 million.

That means Viva managed to buy the petrol stations at a price-to-earnings ratio of about 7, which compares to Coles’ overall multiple of 21. But Viva does take on real estate lease liabilities of more than $800 million.

The supermarket giant stated the $300 million sale will mean it will have made a “small gain”. It will assist Viva for the next two years to ensure continuity of operations.

Viva Energy chief Scott Wyatt welcomed 6,000 Coles Express staff to his company.

“The acquisition means we will be able to accelerate our plans to grow the integrated fuel and convenience business while our customers continue to enjoy the excellent customer service provided by the dedicated Express team.”

The post Coles shares on watch after massive $300 million selloff to Viva Energy 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 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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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.

If you invested $10,000 in Tesla‘s (NASDAQ: TSLA) public debut back in June of 2010, you’d be sitting on a cool $1.94 million today. By comparison, the same amount invested in an index fund would have yielded a far more modest total return on capital ranging from $30,000 to $42,000, depending on which benchmark the fund was designed to track.   

As a result of this jaw-dropping performance over the past 12 years, Tesla has earned an exceptionally loyal following from its shareholders. Because of this, the electric car and renewable energy giant has been one of the few tech-heavy outfits to generate positive returns for investors over the past 12 months.

Thanks to a flurry of headwinds such as rising interest rates, soaring inflation, supply chain woes, and geopolitical turmoil, tech giants Amazon.com, Inc.(NASDAQ: AMZN) and Microsoft Corporation (NASDAQ: MSFT) have lost 27.9% and 17.7% of their value, respectively, since September of 2021. Meanwhile, Tesla, which is largely subject to these exact same macroeconomic pressures, has netted shareholders a respectable 22% gain over this same period.  

Can Tesla’s stock continue to defy the broader market? Let’s take a look at both sides of the argument to find out.

Tesla’s value proposition: A Wall Street battleground

If you browse the surfeit of analyst research reports on Tesla stock, you’ll definitely walk away with the impression that Wall Street is divided on the company’s outlook.

On the bear side of the ledger, for instance, Tesla’s fair-value estimate of $255 per share, per Morningstar, reflects the uncertainty inherent in the growth prospects of the electric vehicle market at large, along with the company’s continued ability to maintain an elite brand cachet in a space that is widely expected to attract multiple new competitors in the years to come. This lowball valuation also doesn’t assign much in the way of net present value for Tesla’s renewable energy business or its growing aspirations in the field of robotics. 

On the bull side, Tesla’s 12-month forward-looking price target of $374 per share, from the research firm Argus, is steeped in the idea that the company will likely continue to dominate the emerging electric vehicle market for the remainder of the decade, successfully diversifying into other high-growth areas, such as robotics, along the way. 

This belief is founded on the fact that Tesla currently plows an eye-catching 19% of gross profits into research and development, which is one of the highest spends on R&D (as a function of gross profits) within its peer group. bulls, in short, appear confident in Tesla’s ability to maintain a competitive edge, thanks to this elevated level of investment in R&D. 

Is this growth stock immune to recessionary pressures?

Now, Tesla’s stock hasn’t completely escaped the ravages of the 2022 bear market. The company’s shares are currently down by a little over 12% year to date. That said, Tesla stock has performed admirably in 2022 overall.

What’s important to understand is that this unrelenting bear market has taken a hatchet to nearly every tech-oriented stock with a premium valuation in 2022. Tesla’s shares, though, have largely evaded this marketwide pullback across this particular asset class — despite the company’s shares trading at over 51 times 2023 estimated earnings right now. Underscoring this point, the electric vehicle giant’s shares have outperformed approximately two-thirds of its large-cap peers in consumer cyclicals this year.  

What’s the secret to Tesla’s resilience in the middle of a raging bear market? Put simply, Tesla’s loyal shareholder base, enormous long-term opportunities in electric vehicles, renewable sources of energy, and robotics aspirations have kept its stock safe from the worst of the 2022 bear market.

That’s an intriguing sign for bulls. The long and short of it is that even this dour market isn’t buying the bear view that Tesla’s competitive edge will gradually evaporate or that it will fail to innovate in ancillary markets such as renewable energy and/or robotics. 

So if you’re looking for a stock that can shrug off the market’s laser-like focus on a possible recession, Tesla ought to be at the top of your list. 

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

The post Is Tesla stock recession-proof? appeared first on The Motley Fool Australia.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. George Budwell 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 Amazon, Microsoft, and Tesla. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

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The Fortescue Metals Group Limited (ASX: FMG) share price has been seeing red in September. Since the end of August, it has dropped 6%.

The ASX has experienced a lot of volatility in recent months as investors get used to strong inflation and higher interest rates.

Not only can Fortescue be affected by general ASX share market volatility, but it’s also exposed to the ups and downs of the iron ore price.

Plus, it just announced its plan for decarbonisation.

Why would the iron ore price matter?

Fortescue is one of the biggest commodity companies on the ASX.

Changes in the commodity price can have a big effect on the profit. It costs businesses virtually the same amount to mine 1 million tonnes (mt) of iron ore. So, a higher iron ore price translates into higher revenue. But it would particularly translate into extra profit, aside from paying more to the government.

With Fortescue committing to a high dividend payout ratio, the higher profit is largely turned into higher cash returned to investors as well.

But, the opposite is true when iron ore prices fall — lower revenue, much lower profit and smaller dividends. This is what we saw in the FY22 result, revenue dropped 22%, the net profit after tax (NPAT) fell 40%, free cash flow fell 60% and the total dividend dropped 42% to $2.07 per share.

The iron ore price has been drifting lower over the last few weeks and months, dropping to around US$99 per tonne.

Ex-dividend

Another thing that has happened this month is that Fortescue shares went ex-dividend. This means that new investors are no longer entitled to the FY22 final dividend of $1.21 per share. That dividend alone equates to a grossed-up dividend yield of 10%.

Fortescue pays such a large dividend that losing access to its recent dividend is a material loss for investors. Indeed, the cash element of the dividend (excluding the franking credits) could explain most of the decline.

This expert is still positive on Australian miners

There are concerns about China’s economy, which could have an important influence on the iron ore price and the Fortescue share price considering how much iron ore it buys.

Wealth manager Ken Fisher wrote this in The Australian:

So how might you calibrate a slow, low-growth China? With Chinese GDP of $23 trillion – behind only America – it now grows off a huge base, contributing more to global economic activity than smaller, faster-growing China did in decades past. So 2007’s 14.2% growth added notably less to GDP in yuan-denominated activity than 2019’s 5.9%.

China growth fears are a subset of the 2022 worldwide sentiment swoon rendering expectations unrealistically bleak. Sentix’s global economic expectations gauge is at its lowest since January 2009 – the GFC’s depths. Headlines trumpet recession fears. Yet global economies are muddling through with mixed data. Very little suggests a deep downturn.

Inflated China fears have stalked Australian stocks for years. But remember: False fears are bullish, always and everywhere. So is depressed sentiment. Don’t let today’s gloomy headlines scare you from the coming recovery.

The post Why has the Fortescue share price been having such a rough trot lately? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Fortescue Metals Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has 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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It’s wonderful when everything comes together.

After doing the research, you buy a stock because you love the business and where it’s going but feel like the market hasn’t woken up yet.

Then soon afterwards external forces come along that supercharge the investment.

That’s exactly what happened with an ASX share that Australian Eagle Asset Management bought a few years ago.

Australian Eagle chief investment officer Sean Sequeira explained this week how it unfolded.

Lowest of lows for iron ore producer

Sequeira revealed recently that Fortescue Metals Group Limited (ASX: FMG) was “one of the most satisfying investments” ever made for his clients.

Back in 2015, the Fortescue share price was languishing below $2 but the Australian Eagle team noticed the business was “changing significantly”. 

“Their management of the difficult situation they found themselves in resulted in the improvement of the overall quality and risk profile of the business,” Sequeira said in an interview on the Montgomery blog.

“In January of 2016, their production report highlighted a cash cost below that of BHP Group Ltd (ASX: BHP) and a continued priority to pay down debt.”

Iron ore prices were at decade lows during this time too, but Sequeira saw that Fortescue had successfully executed its reforms.

“Despite the extremely low prevailing iron ore prices, Fortescue’s improved cost structure meant that they could pay off their debt in well under four years and the danger of the company going under had already passed.”

Nothing more satisfying than ‘I told you so’

Then as 2016 arrived, iron ore prices started to rocket upwards to further push the stock to new heights. But Sequeira readily admits this type of external boost is not for anyone to claim credit.

“As no one could have forecast the subsequent change in iron ore prices, the investment decision was not based upon a favourable iron ore forecast but rather a change in the business that reduced risk and allowed for the opportunity of significant upside should the pricing environment change.”

The Australian Eagle team bought into Fortescue shares at below $1.60 in the dark days of 2015. It has been as high as $22.99 over the past 12 months, which made it a 14-bagger without counting dividends.

It closed Tuesday at $17.32.

Over that time the stock has also paid out more than $9 per share in fully franked dividends, according to Sequeria.

But the massive financial gains were not the sole source of elation for the fund manager.

“The satisfaction comes more from the fact that when we told people of this at the time, not one person agreed with us.”

The post This is how I found a 15-bagger ASX share: fund manager appeared first on The Motley Fool Australia.

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• Why China’s slowdown isn’t as bad as it looks for ASX 200 mining shares

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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The Woodside Energy Group Ltd (ASX: WDS) share price closed Tuesday’s session up 1.94% to $33.06. Over the year to date, shares in the ASX oil & gas behemoth have risen by more than 45%.

Woodside is among the world’s top 10 LNG players following its merger with the petroleum business of BHP Group Ltd (ASX: BHP) in June.

The company released its FY22 half-year earnings on 30 August. It commented that the outlook for gas is “strong and sustained”.

This is despite growing momentum in the shift to renewables, which is a clear challenge for all ASX fossil fuel producers.

The BHP merger resulted in Woodside acquiring several new assets in Australian and international locations. This has widened the company’s customer base and positioned it well to capitalise on changing worldwide demand for gas over the next two decades.

Europe’s shift away from Russia

Woodside said LNG markets are “incentivising new global LNG projects as Europe replaces Russian gas”.

Since the Ukraine invasion, there has been growing European sentiment to diversify away from Russia.

Russia supplied the EU with 40% of its natural gas in 2021, according to bbc.com.

About 70% of Woodside’s assets are involved in gas production. A global supply/demand imbalance could present new client opportunities for Woodside. Plus it’s already pushing up commodity prices, which means Woodside can make more money.

In a briefing to investors on 30 August, Woodside CEO Meg O’Neill said:

There is no doubt that energy security has become a fundamental issue for world energy markets in the wake of Russia’s invasion of Ukraine and we are seeing that translate into commodity prices.

The average realised price across the portfolio more than doubled compared to the first half of 2021. Our exposure to gas hub pricing for the half was approximately 18% of produced LNG and we are tracking for the full year to be in our target range of 20 to 25%.

The merger with BHP meant Woodside now owns interests in a bunch of extra international projects. They include the Atlantis, Shenzi and Mad Dog oil and gas fields in the United States Gulf of Mexico. There’s also Greater Angostura incorporating two offshore oil and gas fields near Trinidad and Tobago.

Despite a larger portfolio of assets, O’Neill said Woodside would be unable to keep up with demand.

Europe to become a ‘major demand centre’

O’Neill said:

Looking forward to how the market could evolve in the future … analysts expect to see increasing demand for our core product, LNG, in the decade ahead. Existing LNG projects and those under construction are not expected to keep up with growing demand.

The LNG story is now more than just Asia with Europe emerging as a major demand centre as western Europe seeks to reduce reliance on Russian pipeline gas. Woodside is ideally placed to supply both Asian and European markets from our portfolio of assets in OECD nations.

Asian demand peak still 20 years away

Woodside’s half-year report stated that “gaseous fuels remain critical to the energy transition with low-risk and reliable sources advantaged”.

The company said demand from Asia for natural gas is “not expected to peak before mid-2040s”.

O’Neill said:

The upheavals in global and Australian energy markets witnessed over the course of the past six months have shone a spotlight on the importance of gas in the world’s energy mix and underscores our confidence in the longer-term demand outlook for gas …

Safe and reliable supplies of gas are not only critical to global energy security but will play a key role as our customers seek to decarbonise, alongside new energy sources such as hydrogen and ammonia that Woodside is investing in.

International demand won’t be limited to gas

As the world transitions to renewables, Woodside intends to expand its product offering to include things like hydrogen and ammonia. The company has set a target to invest US$5 billion in new energy products and lower carbon services by 2030.

O’Neill said:

Our strategy to thrive through the energy transition as a low-cost, lower-carbon energy provider continues to progress through recently announced initiatives across hydrogen refuelling, carbon capture and storage and carbon to products technologies.

The post Could international demand keep boosting Woodside shares for the next 20 years? appeared first on The Motley Fool Australia.

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Motley Fool contributor Bronwyn Allen has positions in BHP Billiton Limited and Woodside Petroleum Ltd. 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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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.

What happened

Shares of leading large-cap growth tech stocks Nvidia (NASDAQ: NVDA), Amazon (NASDAQ: AMZN), and Salesforce.com (NYSE: CRM) all fell today, with each down nearly 3% in intraday trading, before recovering to losses between 1% and 2% as of 3:50 PM EDT.  

Technology growth stocks that trade at relatively high multiples have been some of the worst-hit names this year, as the Federal Reserve raises interest rates in a bid to tame inflation. That’s leading to a double whammy for high-growth stocks, as higher rates compress these companies’ price-to-earnings valuations, while investors also fear rising interest rates will slow growth going forward.

Tech stocks have been nearly the mirror image of bond yields this year, as tech stocks have cratered while bond yields have risen dramatically in a short amount of time.

On Tuesday, this theme played out yet again. Even exciting announcements out of Salesforce’s Dreamforce conference today weren’t enough to overcome this bonds-versus-stocks tug-of-war.

So what

As the Federal Reserve has raised interest rates, short-term yields have gone up. In September, the Fed’s tightening posture accelerated, as it began to allow even more Treasury bonds and mortgage-backed securities to roll off its balance sheet, in what is referred to as quantitative tightening.

Since the Federal Reserve won’t be buying bonds anymore, that leaves the rest of the investing world to do so, and that world will likely demand a fair market price amid high inflation. Today, the 10-year Treasury Bond yield actually rose past the previous high set in June, hitting 3.6% briefly, before retreating to around 3.57% as of this writing.

Higher bond yields are competition for stocks, and that goes double for high-growth stocks that trade at high price-to-earnings ratios, such as these three. If bond yields rise, stock investors will demand a lower price and a higher earnings yield than they otherwise would have, all things being equal.

In addition, rapidly rising interest rates have dramatically slowed down growth in certain sectors of the economy, especially those that boomed during the pandemic. This includes gaming and crypto mining, which is hurting Nvidia in a big way right now.  On the last earnings call, management forecast revenue and earnings to decline in the upcoming quarter, largely driven by plummeting gaming and PC demand.

Amazon is also seeing dramatically slower growth in its e-commerce business, as consumers are now venturing out of their houses to shop more and more, while also buying fewer goods overall amid higher inflation for necessities.

While Salesforce’s enterprise software franchise may be the “stickier” of the products among these three, with recurring subscription revenue, management also gave weaker-than-expected growth guidance last quarter, noting lengthening sales cycles among more cautious customers.

Salesforce held its annual Dreamforce conference today, in which it announced several exciting new innovations. These include a new real-time customer relationship management platform called “Genie,” that gives up-to-the minute data and insights, as well as a new carbon credit trading platform for businesses.

Despite the excitement, Salesforce was trading in-line with other large-cap growth stocks, as even interesting company-specific announcements are currently being overwhelmed by the market’s fixation on interest rates and tomorrow’s Fed meeting.

Now what

With tech stocks down significantly and the mood incredibly pessimistic, long-term investors may want to look for opportunities in certain types of tech stocks.

While some would say to look for those that have sold off the most — those being unprofitable and newly public software and electric vehicle stocks — I would tend to be more cautious, and gravitate toward higher-quality names like these three. 

That’s because while the post-2008 environment has generally seen very low interest rates, it’s possible we could be adjusting to a new, higher-rate regime. In that light, large-cap technology stocks that don’t need to go out and raise money would be safer bets, especially if the economy goes into a recession.

Even better are profitable large-cap technology stocks that can generate enough cash even in a downturn to repurchase their shares at these discounted prices. Fortunately, all three of these companies have implemented share repurchase programs this year.

Amazon announced a $10 billion repurchase plan in March, marking its first repurchase plan since 2012. Nvidia has bought back stock in recent years, but announced in May that it was increasing its buyback plan to $15 billion. Meanwhile, even Salesforce announced its first ever share repurchase plan in August, suggesting management sees value in its beaten-down share price as its growth investments slow.

While the near term may be rough going, the Fed will eventually get a handle on inflation. It may take a slowing economy or even a recession to get there, but all three of these companies have survived recessions before. With management teams now buying back heavily discounted shares, these three stocks are looking more and more attractive for long-term investors after a brutal 2022 decline, despite today’s dip.

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

The post Why Amazon and these other leading tech stocks fell today appeared first on The Motley Fool Australia.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Billy Duberstein has positions in Amazon. His clients may own shares of the companies mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon, Nvidia, and Salesforce, Inc. The Motley Fool Australia has recommended Amazon, Nvidia, and Salesforce, Inc. 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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While there are many successful companies on the ASX that solely serve Australian consumers, there are huge markets to be conquered beyond the seas that girt this land.

Expanding internationally is difficult to execute but the end result of massive addressable markets can be rewarding.

With this mindset, the Firetrail small companies team revealed in a memo to clients that it’s overweight on “globally exposed” growth stocks.

The three particular holdings it named are:

• Megaport Ltd (ASX: MP1)
• Aroa Biosurgery Ltd (ASX: ARX)
• Telix Pharmaceuticals Ltd (ASX: TLX)

All three companies earn a significant amount of their revenue from outside of Australia. In Telix’s case, its flagship cancer product Illucix is currently only available to the public in the United States.

The share price for the trio each went on an epic rally in July — Megaport gained 77.8%, Telix stocks rocketed 63% and Aroa was up 30.3%. 

Then, frustratingly, they’ve all sunk since. 

Helix has lost 30% since mid-August, Aroa is down 10% and Megaport is 22.4% lower now than at the end of July.

How good is it when customers stick around for 9 years

Despite this rollercoaster, Firetrail analysts are keeping the faith in the three ASX shares.

Megaport’s dip is mystifying to the team as the business revealed some stunning statistics about customer behaviour during reporting season.

“This data shows that a Megaport customer typically stays with the company for over nine years and during this time returns ~7x the initial investment,” read the memo.

“On average, each customer increases spend by ~40% per annum!”

The Motley Fool’s James Mickleboro reported this month that Goldman Sachs is also a fan of Megaport.

“The broker believes Megaport is well-placed for strong long term growth thanks to its product leadership in the rapidly growing network as a service/SD-WAN addressable markets.”

The investment house has a price target of $10.30 on Megaport shares, which is a tidy 32% premium on current levels.

US sales ‘ahead of market expectations’

For Telix, the Firetrail team thought the market might have been scared off from the company’s reporting season update.

“Commercial sales of Illucix, Telix’s prostate cancer imaging drug, in the US continue to ramp ahead of market expectations,” read the memo.

“However, the investment Telix is making in its clinical trial pipeline, as well as sales and marketing to support the launch of Illucix, surprised to the downside.”

Earlier this month BW Equities equities salesperson Tom Bleakley also named Telix shares as a buy.

“Initial sales of Illuccix have been strong since the first commercial dose was administered on April 14, 2022,” he said.

“Telix is progressing nuclear medicine trials for therapy of late stage prostate cancers.”

The post 3 hot small-cap ASX growth shares Firetrail’s backing right now appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo has positions in MEGAPORT FPO and TELIXPHARM DEF SET. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Bank of Queensland Limited (ASX: BOQ) share price has been falling in recent weeks. It’s down almost 10% since August 2022 and this year it has dropped by 17%.

As one of S&P/ASX 200 Index‘s (ASX: XJO) bank shares, readers may be wondering why BOQ shares are falling when interest rates are rising. Aren’t banks meant to earn more profit in a rising interest rate environment?

It’s true that bank profitability has been falling as interest rates hit record lows. The competition was and perhaps is, fierce in the sector. This was hurting the net interest margins (NIM) of the banks.

What’s a NIM? It’s a profitability measure to show the difference between the interest rate that banks are lending out money for, compared to the interest rate cost of funding those loans (funding can come from sources like savings accounts).

NIMs may well rise in the coming reporting periods for banks like BOQ, however, investors may have been initially taken off guard by how quickly central banks were planning to increase interest rates.

Some investors may be worried about how Australian households are going to manage significantly higher mortgage payments.

Is this bad news for the BOQ share price?

Tim Haselum from Catapult Wealth doesn’t think so, in-fact he rated BOQ as a buy on The Bull. Why? Haselum said:

We believe the banks are facing reducing loan volumes, but we aren’t concerned about impairments, as households appear to be in sound financial shape. We like the ME Bank recovery story and see further synergies ahead. Potential net interest margin improvements amid the company’s undemanding price/earnings multiple presents a buying opportunity.

So, in his opinion, investors have become too fearful about the financial consequences of rising interest rates.

What is the valuation?

Haselum mentioned that the company has an “undemanding’ price/earnings (P/E) ratio.

According to the estimates on CMC Markets, the bank is expected to generate earnings per share (EPS) of 74 cents in FY22 and 73.1 cents in FY23.

So, based on those numbers, the BOQ share price is valued at 9.3 times FY22’s estimated earnings and 9.4 times FY23’s estimated earnings.

Don’t forget about the BOQ dividend

Banks like to pay attractive dividends to shareholders, so let’s have a look at what BOQ is expected to pay over the next couple of financial years.

According to CMC Markets, BOQ is expected to pay a grossed-up dividend yield of 9.5% in FY22 and 10.1% in FY23.

The post Down 17% so far this year, is the Bank of Queensland share price a cheap buy? 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 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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Ask a Fund Manager

The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In part two of this edition, we’re joined by Jesse Curtis, fund manager of the $4.1 billion Centuria Industrial REIT (ASX: CIP), Australia’s largest domestic pure-play industrial real estate investment trust. Today, Curtis looks at the threats and opportunities ahead for investors in listed industrial property.

The Motley Fool: In the first part of our interview, you mentioned property can act as an inflation hedge. And that 20% of the Centuria Industrial REIT’s portfolio is linked to CPI rent reviews. How do you see interest rates playing out over the next 12 to 24 months?  

Jesse Curtis: We acknowledge that inflation has changed the interest rate environment and created a level of uncertainty right across the market. What we’re assuming in our FY23 funds from operation [FFO] guidance is an average interest rate of 3% over the course of FY23. Whilst we might see short-term volatility, we expect that we’ll see interest rates normalise towards the back end of next year.

It’s also important to note that our gearing currently sits at 33% at an average interest coverage ratio of 5.4%. Both provide significant headroom to our debt covenants.

MF: In FY23, CIP expects to pay a dividend yield of 16 cents per share (cps). That would mark another year with a yield above 5%. Are you adjusting your investment and leasing strategies in the logistics markets to achieve this with higher rates and inflation in mind?  

JC: We’ve maintained a consistent strategy since taking over management of the industrial fund five years ago. And that’s to own a high-quality portfolio of urban industrial infill assets where we see the highest tenant demand and the lowest amount of supply that can be added. And that’s enabled us to deliver income and capital growth to our investors.

But in the higher inflation environment with limited vacancy across industrial markets, what we’re finding is the opportunity to extract higher rental growth across the portfolio. That can be done via re-leasing or by executing on our value add strategies. With near zero vacancy in our portfolio, we’re finding we can really stretch that rental growth theme.

MF: Have you noticed an increase in tenants struggling to meet their rental obligations?

JC: We’ve focused on building a portfolio with very strong customers paying the rent. The likes of Woolworths Group Ltd (ASX: WOW), Telstra Corp Ltd (ASX: TLS), Australia Post and Arnott’s. We have blue-chip customers paying the rent.

As part of our strategy, we’ve sought to add short WALE [weighted average lease expiry] urban infill assets in the portfolio that give our investors the opportunity to capture that rental growth.

So, we have a nice balance of secure income and also the opportunity to capitalise on our near-term expiring leases to capture strong rental growth in the market.

Overall, we have occupancy of over 99% and a WALE of more than eight years providing good income certainty.

MF: Can you share some of your other successful strategies?

JC: What’s been a really successful strategy for us has been consolidating landholdings in these urban infill markets. We now have 10 examples across the portfolio where we’ve consolidated either neighbouring or precinct assets.

This provides our investors with a number of opportunities. On one side, it allows us to leverage our network, in effect, by being able to move tenants within the portfolio and within markets by having diversity in both size and asset type. This strategy reduces downtime and increases our tenant retention.

On the other side, it also provides our investors with long-term development opportunities. By consolidating sites of scale, not only does this provide the opportunity to develop more modern industrial facilities but also maintains holding income on the existing buildings, providing us with great flexibility.

MF: What’s the biggest threat for investors in listed industrial assets in the year ahead?

JC: No one can hide from higher interest rates. The biggest risk is if the RBA doesn’t provide a soft landing and if we start to see inflation tick up.

MF: And what’s the biggest opportunity?

 JC: The market for industrial remains extremely strong.

We’ve got structural tailwinds, such as e-commerce, that will continue to drive tenant demand. There’s no greater correlation than increased e-commerce spend and the need for warehousing to store products. We’re going to continue to see that demand coming through the market.

We’ve also seen a trend of onshoring or re-shoring of both manufacturing and storage operations. Every tenant we speak to needs more space to store more inventory on hand and prevent supply chain disruptions.

We’re seeing very large e-commerce brands, as well as local brands, making next day or second-day delivery promises within their product range. They need warehousing space close to a population in order to be able to deliver on those promises. That’s resulted in a lot more storage happening in infill industrial markets, where CIP has focused its portfolio, due to proximity to a large population within a short drive time.

These are all long-standing trends that will provide the environment for strong industrial rental growth.

**

If you missed part one of our interview series with Jesse Curtis, you can find that here.

(You can find out more about the Centuria Industrial REIT here.)

The post The biggest threats and opportunities for ASX industrial REITs revealed: fund manager appeared first on The Motley Fool Australia.

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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 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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