Category: Stock Market

The Evolution Mining Ltd (ASX: EVN) share price is in the green today.

The company’s share price is up 3% and currently trading at $2.72. For perspective, the S&P/ASX 200 Index (ASX: XJO) is up 0.27% today.

Let’s take a look at what Evolution reported today.

More copper and gold

Evolution advised of a new mineral resource estimate at the company’s Ernest Henry operation in Queensland.

Copper has jumped 28% to 1.13 million tonnes, while gold has leapt by 24% to 2.07 million ounces.

The new estimate is based on 30,159 metres of drilling from 119 drill holes at the site.

Commenting on the news, executive chairman Jake Klein said:

We are very pleased with the significant increase in the reported mineral resource at Ernest Henry. The result reinforces Ernest Henry as a premier copper/gold asset that has generated exceptional shareholder returns.

This new mineral resource estimate highlights the exciting extension potential we see at the operation. As the mineral system remains open at depth there is potential for further resource additions with the completion of further drilling.

The mineral resource estimate will inform a mine extension pre-feasibility study. This is due for completion by the end of the year.

Evolution share price snapshot

The Evolution share price has lost 34% in the past year, while it has slid 32% year to date.

For perspective, the S&P/ASX 200 Index (ASX: XJO) has shed nearly 6% in a year.

Evolution has a market capitalisation of about $5 billion based on the current share price.

The post Evolution Mining share price higher on gold and copper resource boost appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• 5 things to watch on the ASX 200 on Thursday
• 5 things to watch on the ASX 200 on Wednesday
• 5 things to watch on the ASX 200 on Tuesday
• Here are the top 10 ASX 200 shares today

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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The Aussie Broadband Ltd (ASX: ABB) share price is falling hard, down 14.6% in early trade.

Aussie Broadband shares closed on Friday trading at $3.63 each and are currently trading for $3.10 apiece.

This comes following the release of the ASX telco’s quarterly results for the three months ending 30 June (Q4 FY22).

While posting some solid gains in its broadband service figures, the numbers aren’t helping lift the Aussie Broadband share price today. Here are the highlights:

What happened during Q4 FY22?

• Total broadband services increased by 7% during Q4 to 584,793
• Across the full 2022 financial year, total broadband services increased 46%
• Aussie Broadband expects FY22 earnings before interest, taxes, depreciation and amortisation (EBITDA) to come in at the high end of its guidance range of $38 million to $39 million
• In Q4, the telco was named ‘the most trusted telco brand in Australia’ by Roy Morgan

What else happened during the quarter?

Broadband services experienced a notable uptick across the sectors, with residential broadband services increasing 28% to 464,979 while business broadband services increased 68% to reach 59,488. That includes services provided by Over the Wire which Aussie Broadband acquired earlier this year.

The company also reported a “significant” boost in its wholesale and white label broadband services, which hit 60,326.

Excluding satellite, Aussie Broadband also increased its share of NBN services to 6.46% from 4.74% in 4Q FY21.

What did management say?

Commenting on the results, Aussie Broadband cofounder Phillip Britt said:

We are pleased with this result given the third quarter challenges we faced, and have been very focused on addressing over the past three months.

The acquisition of Over the Wire has bolstered Aussie Broadband’s business segment product and skills capability. It added 16,000 business, enterprise, government and wholesale customers. The integration is progressing as planned and we have already started generating revenue synergies from the combination of the two businesses, including two large regional health alliance and shire council deals recently signed.

Synergies relating to the migration of Aussie voice traffic onto the Over the Wire tier 1 voice network have yielded $2.9 million in annualised savings, higher than our original investment case. A further annualised $2.3 million in other run rate synergies have been achieved, taking the total cost synergies achieved to date to $5.2 million annualised.

The Aussie Broadband share price fell hard in early trade, despite Britt reporting that the company’s investment case of $8 million to $12 million of annualised cost synergies remains on track.

What’s next?

The company reported that its Aussie Fibre Project is now 90% complete and remains on budget. This is forecast to generate $13.5 million of year-on-year savings. The project was facing delays from adverse weather and is now scheduled to be finished in the current quarter (1Q FY23).

Aussie Broadband reports its full year results on 29 August.

Aussie Broadband share price snapshot

With the intraday losses factored in, the Aussie Broadband share price is down 34% since the opening bell on 4 January. That compares to a year-to-date loss of 9% posted by the All Ordinaries Index (ASX: XAO).

The post Aussie Broadband share price plunges 15% as quarterly results fail to impress appeared first on The Motley Fool Australia.

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More reading

• Own Aussie Broadband shares? Here’s the state of the company’s balance sheet

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 positions in and has recommended Aussie Broadband Limited. The Motley Fool Australia has recommended Aussie Broadband 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 Genex Power Ltd (ASX: GNX) share price is in the green after the company knocked back the $300 million takeover proposal put to it last week.

The renewable energy company’s board said the 23 cents per share offer – representing a 70% premium at the time of its announcement – undervalues the company. Though, it has left the door open for a revised proposal.

The Genex share price is 21.75 cents at the time of writing. That’s 1.16% higher than its previous close.

Let’s take a closer look at the latest news from the ASX-listed company.

Genex share price gains despite rejected bid

The Genex share price is lifting this morning. Its gain comes amid news the company won’t be granting due diligence following a $300 million takeover bid.

The unsolicited bid was put forward by a consortium made up of Atlassian co-founder and co-CEO Scott Farquhar’s Skip Capital and Stonepeak Partners last week.

The company’s board says it believes the bid undervalues the company and, thus, isn’t in shareholders’ best interests.

However, it will allow the consortium access to certain limited due diligence information. It hopes the extra information will help the party put together a revised acquisition proposal.

The Genex board also outlined reasons it believes the company has a bright future, even if it isn’t offered a higher bid.

They included the company’s renewable generation and storage assets, which are worth more than $1 billion.

It also noted Genex’s position as the ASX’s only renewable energy and storage pure play and the company’s 100 megawatts of solar projects – already benefitting from higher pricing.

Finally, it noted the company’s “significant” pipeline of renewable generation and storage projects.

The Genex share price surged 44% when the takeover bid was announced alongside the company’s quarterly report last week.

Today’s gain leaves Genex shares 7.5% higher than they were at the start of 2022. Though, they are 10% lower than this time last year.

The post No deal: Genex share price lifts as $300m takeover bid rejected appeared first on The Motley Fool Australia.

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More reading

• Genex share price rockets 50% on confirmed takeover bid
• Genex share price in focus amid Atlassian co-founder’s $300m takeover bid
• Here’s why ASX renewable shares slipped in June

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 positions in and has recommended Atlassian. 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 team at Morgans has been busy looking for the best large cap ASX shares to buy in August.

Three that make the list this month are listed below. Here’s why Morgans rates them highly:

Santos Ltd (ASX: STO)

Morgans rates this energy producer highly due to its positive growth outlook and diversified earnings base. This is being underpinned partly by its Dorado operation and the stake in Darwin LNG.

The broker explained:

We expect the resilience of STO’s growth profile and diversified earnings base see it best placed to outperform against a backdrop of a broader sector recovery. While pre-FEED, we see Dorado as likely to provide attractive growth for STO, while its recent acquisition increasing its stake in Darwin LNG has increased our confidence in Barossa’s development. PNG growth meanwhile remains a riskier proposition, with the government adamant it will keep a larger share of economic rents while operator Exxon has significantly deferred growth plans across its global portfolio.

Morgans has an add rating and $9.30 price target on Santos’ shares.

Treasury Wine Estates Ltd (ASX: TWE)

One of Morgans key picks among its best ideas is this wine giant. Its analysts believe the Treasury Wine share price is attractively priced given the company’s positive outlook. Morgans is expecting strong earnings growth over the coming years. It commented:

TWE owns much loved iconic wine brands, the jewel in the crown being Penfolds. We rate its management team highly. The foundations are now in place for TWE to deliver strong earnings growth from the 2H22 over the next few years. Trading at a material discount to our valuation and other luxury brand owners, TWE is a key pick for us.

Morgans currently has an add rating and $13.93 price target on Treasury Wine’s shares.

Wesfarmers Ltd (ASX: WES)

Another ASX share that Morgans rates highly is Wesfarmers. The broker is a fan of the conglomerate due to its high quality retail portfolio. It also feels that recent share price weakness has created a buying opportunity for patient investors. Its analysts explained:

WES possesses one of the highest quality retail portfolios in Australia with strong brands including Bunnings, Kmart and Officeworks. The company is run by a highly regarded management team and the balance sheet is healthy. While COVID-related staff shortages are proving to be a challenge, the core Bunnings division (>60% of group EBIT) remains a solid performer as consumers continue to invest in their homes. We see the pullback in the share price as a good entry point for longer term investors.

Morgans has an add rating and $58.40 price target on Wesfarmers’ shares.

The post Morgans name 3 of the best ASX shares to buy in August appeared first on The Motley Fool Australia.

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More reading

• ‘Recession-like levels’: Why ASX retail shares could still be in for a bumpy ride
• Top ASX shares to buy in August 2022
• 5 things to watch on the ASX 200 on Monday
• From Cotton On to Catch: Wesfarmers’ plans to put its acquisition back on track
• Why is the Santos share price beating the ASX 200 on Friday?

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 Wesfarmers Limited. The Motley Fool Australia has recommended Treasury Wine Estates Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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This 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.

Gold has underperformed the US stock market over the long term. However, the yellow stuff has a reputation for being a safe haven asset amid times of uncertainty. And many have even referred to gold as an inflation hedge.

For part of 2020 to 2022, the inflation hedge story rang true as gold passed $2,000 per ounce for the first time in history in 2020 and then reached an all-time high of $2,074.60 per ounce in March 2022.

But in the last four months, gold suffered an 18% drawdown from that high — meaning that gold is nearly in a bear market during a time when it should be holding its value. In this vein, gold seems to be failing as an inflation hedge. And in fact, there is data to suggest that gold’s reputation as an inflation hedge has been largely exaggerated, even by historical measures. 

Here’s what’s pressuring gold now — and why it may be a good buying opportunity despite not being an effective inflation hedge. 

1. A strong US dollar

A slowdown in economic growth and rising geopolitical issues tend to help the price of gold. However, a strong US dollar hurts the price of gold, because a strong US dollar relative to other currencies makes it more expensive for foreign buyers to purchase US dollar-denominated gold.

The US Dollar Index, which tracks the value of the dollar relative to the value of the euro, Swiss franc, Japanese yen, Canadian dollar, British pound, and Swedish krona, is at a 20-year high. Part of the ascent is due to the US Federal Reserve rapidly raising interest rates to combat inflation. High interest rates encourage foreign investment in US Treasury bonds. High interest rates also mean that holding gold has an opportunity cost, given it doesn’t pay interest like a US certificate of deposit.

In past US recessions, the Federal Reserve would lower interest rates and hopefully weaken the US dollar in an effort to encourage domestic consumption and make it less expensive to export US goods. However, because the Federal Reserve’s priority No. 1 is lowering inflation, not preventing a recession, the dollar could remain strong for the foreseeable future. A strong dollar is arguably the biggest headwind holding gold back right now.

Gold Price in US Dollars data by YCharts

2. The rise of digital gold

Over the last few years, there have been several polls that suggest millennials and Gen Z are more likely to view cryptocurrency as a preferred investment than gold. Granted, many of those polls were taken before the recent crypto crash. However, millennials are now the most active generation in the economy given that many Baby Boomers have retired. Less demand for gold as an investment in risk-averse or retirement portfolios could dampen demand.

3. Compelling alternatives

Many investors may feel that beaten-down stocks are a better buy now than gold. They are probably right. Gold may be down 18% from its high, but there are plenty of top stocks that are down well over 50%. Even several well-known Dow Jones Industrial Average components, such as Nike, Home Depot, and Salesforce are all down between 30% and 53% from their all-time highs. 

Legendary investorWarren Buffett has long said that gold is a bad investment because its growth prospects are limited to supply and demand, rather than a company that can grow with innovation and good management. By keeping cash on the sidelines or buying gold now, an investor essentially says investing in gold is a better use of capital than a different asset.

Why gold may be a good buy now

Despite all the cons discussed, now could be the perfect time to add a bit of gold to a diversified portfolio, especially if that portfolio is in need of lower-risk assets. Aside from the drawdown in price, gold could be the ideal investment for a prolonged recession, ongoing economic weakness, and could even rebound if the US dollar begins to weaken.

The Federal Reserve has made it clear that it is raising interest rates to combat inflation but that the rises would likely stop once inflation is in check. If unemployment rises, the job market weakens, and the US falls into a recession, inflation would likely ease due to lower consumer spending. That’s a terrible setup for most assets, but a decent one for gold.

While it may be tempting to buy shares in a gold mining stock that is down even more from its high, the simplest and safest way to buy gold is to go with an exchange-traded fund (ETF) such as the SPDR Gold Shares (NYSEMKT: GLD) ETF or the iShares Gold Trust (NYSEMKT: IAU). Both of these ETFs are at 52-week lows and are meant to track the price of gold by holding insured physical gold in a trust. The SPDR Gold Shares ETF has an expense ratio of just 0.4%, and the iShares Gold Trust offers an even lower 0.25% expense ratio — which is a much better and more liquid alternative than buying physical gold bars and paying a hefty premium above spot.

For investors looking for low-risk assets to buy now, opening a starter position in a gold ETF could be a reasonable move to make.

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

The post 3 reasons gold fell to a 52-week low but could be worth buying now appeared first on The Motley Fool Australia.

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More reading

• Aussie Broadband share price plunges 15% as quarterly results fail to impress
• No deal: Genex share price lifts as $300m takeover bid rejected
• Morgans name 3 of the best ASX shares to buy in August
• Here’s why I think these ASX shares are top ideas to buy right now
• 2 small-cap ASX shares this fund manager is ‘confident’ about

Daniel Foelber has positions in iShares COMEX Gold Trust and has the following options: short October 2022 $35 calls on iShares COMEX Gold Trust. The Motley Fool Australia’s parent company has positions in and recommends Home Depot, Nike, and Salesforce, Inc. The Motley Fool Australia has recommended Nike 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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I think there are a few ASX shares that have been hit hard during 2022 that may be long-term opportunities at these prices.

It’s certainly possible that a handful of businesses may have seen their share prices fall too hard.

When things are oversold, I think they could be attractive ideas, particularly if they have long-term potential.

No one can know what a share price is going to do next. But, I think these two ASX shares could be investments to think about because of the value they offer at this lower price.

Nick Scali Limited (ASX: NCK)

Nick Scali is an ASX retail share that sells furniture from a national network of stores. It also recently acquired the Plush-Think Sofas business.

At the time of writing, the Nick Scali share price has fallen by around 38% in 2022.

Although the company’s shares have recovered in recent weeks, the business still looks like good value for the long term, in my opinion.

Things are indeed looking a bit tough in the shorter term for retailers, but investing is about more than what happens in just the next 12 months.

I think after this period of high inflation and rising interest rates ends, the outlook for Nick Scali will improve, and therefore investor sentiment can recover somewhat.

FY22 was affected by store closures due to COVID lockdowns, as well as lockdowns in product sourcing locations and shipping container availability. FY23 will hopefully not have those negative impacts.

Besides that, there are other long-term positives. With the acquisition of Plush, there is the potential for store network expansion, enhanced group buying power, aligned distribution, and so on.

The ASX retail share can also add more Nick Scali stores to help grow its profit. Online sales growth could also help. Nick Scali online revenue was $13.7 million and it contributed $8 million of earnings before interest and tax (EBIT). With this good profit margin, it will help the company if and when more sales occur online.

Finally, Nick Scali usually pays a generous dividend yield. The dividend estimate on CMC Markets for FY23 suggests a grossed-up dividend yield of 9.6%.

Volpara Health Technologies Ltd (ASX: VHT)

ASX share Volpara Health Technologies offers a range of software relating to breast screening and risk analysis.

The Volpara share price has fallen by more than 40% since 25 October 2021.

I think the business has a very promising future by offering clients an increasingly valuable service by being able to analyse images and detect cancer as early as possible.

In my opinion, the business has several attractive features. It has a high gross profit margin of around 90%. In the FY23 first quarter, it saw good growth with subscription-based cash receipts up 36% to NZ$8.3 million. It has annual recurring revenue (ARR) of around NZ$27.1 million. Customer loss remains “low”.

Around 35% of women in the United States have a Volpara product applied on their images and data.

The company is looking to become cash flow breakeven by the end of FY24.

It has good foundations, in my opinion. If the company keeps growing quickly, scale will help it generate a good bottom line in the future.

The post Here’s why I think these ASX shares are top ideas to buy right now appeared first on The Motley Fool Australia.

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More reading

• ‘Recession-like levels’: Why ASX retail shares could still be in for a bumpy ride
• Volpara share price leaps 5% following record cash receipts
• Take a seat: What inflation data might mean for ASX retail shares
• Why I think these 2 ASX growth shares could keep marching upwards
• This ASX All Ordindaries healthcare share is ripping 17% higher amid a new contract win

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 VOLPARA FPO NZ. The Motley Fool Australia has positions in and has recommended VOLPARA FPO NZ. 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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Fund manager Wilson Asset Management (WAM) recently identified two top small-cap ASX shares in one of the portfolios it manages that look promising.

WAM operates several listed investment companies (LICs). Some focus on larger companies like WAM Leaders Ltd (ASX: WLE) and WAM Capital Limited (ASX: WAM).

There’s also one called WAM Microcap Limited (ASX: WMI) which focuses on small-cap ASX shares with a market capitalisation under $300 million at acquisition.

WAM says WAM Microcap targets “the most exciting undervalued growth opportunities in the Australian microcap market”.

These are the two small-cap ASX shares the fund manager outlined in its most recent monthly update:

Ridley Corporation Ltd (ASX: RIC)

Ridley is described as Australia’s largest commercial provider of high-performance animal nutrition solutions.

The fund manager said that in June, Ridley Corporation attracted attention from other companies looking to purchase its shares after speculation that AGR Partners, a substantial shareholder of the business, is looking to exit.

At the end of May, Ridley Corporation announced its FY23 to FY25 growth plan which supports the ongoing earnings momentum of the business.

WAM said the framework for Ridley Corporation’s capital allocation under its growth plan is expected to “allow the company to deliver a total shareholder return (TSR) of over 15% per annum” and an increase in the indicative dividend payment ratio from between 40% to 60%, to 50% to 70% of net profit after tax (NPAT).

The fund manager said that it remained “confident” in the outlook for Ridley Corporation and its CEO Quinton Hildebrand who, in WAM’s view, has “executed strongly” to date by divesting unprofitable business units and structurally lowering costs, helping organic growth.

It must be noted that WAM recently sold shares on 19 July 2022, but it has been regularly buying (and selling) shares of Ridley during 2022.

Close The Loop Inc (ASX: CLG)

This ASX small cap share is described as an end-to-end solutions provider from design and manufacturing through to the collection and recycling of waste products across a variety of markets.

WAM noted that the company provided a trading update ahead of its first investor day and presentation. In that trading update, the company upgraded its FY22 revenue forecast to $82 million and increased its earnings before interest, tax, depreciation and amortisation (EBITDA) forecast to $13.6 million.

What caused this upgrade? The fund manager explained it was due to “strong organic growth across all divisions”, particularly in the US and Europe packaging and recycling segment.

WAM pointed out that there is a “strong outlook” for the small-cap ASX share, with an annual revenue run-rate of over $100 million. Growth is expected to be further increased through add-on acquisitions. Non-binding term sheets had been signed for three acquisitions. The company recently announced the acquisition of Alliance Paper.

The fund manager said Close The Loop is “under-researched with no broker coverage and over time, this provides a catalyst to drive a further share price re-rating.”

The post 2 small-cap ASX shares this fund manager is ‘confident’ about appeared first on The Motley Fool Australia.

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More reading

• Here’s why I think these ASX shares are top ideas to buy right now
• Broker gives its verdict on the Xero share price following new product launch
• These are the 10 most shorted ASX shares
• ‘Recession-like levels’: Why ASX retail shares could still be in for a bumpy ride
• Why did the Zip share price rocket 159% in July?

Motley Fool contributor Tristan Harrison has positions in WAM MICRO FPO. 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 Xero Limited (ASX: XRO) share price was on form last week and pushed higher.

This appears to have been driven by a rebound in the tech sector and the launch of new offering from the cloud accounting platform provider.

In respect to the latter, Xero has announced the launch of Xero Go.

What is Xero Go?

Xero Go is a new freemium mobile app in the UK that has been designed to serve the increased number of sole traders over the last two decades.

Xero notes that there are approximately 2.6 million sole traders in the UK. Its new freemium app will make it easier for them to access accounting software, expanding Xero’s offering to provide a more cost-effective entry point into cloud accounting and digital record-keeping.

Xero’s chief product officer, Anna Curzon, explained:

This is a product that caters to the entry-level accounting needs of the self-employed – a growing area of demand. So we wanted to offer early access to a product that caters to the basic accounting needs of self-employed businesses in the UK, the number of which has increased over the last 20 years, and also those of their advisors.

Xero Go helps businesses streamline the manual, time-consuming elements of being self-employed, while also providing accountants with accurate, clean financial data they need to service these clients.

The company also notes that Xero Go will support the self-employed to get ready for one of the largest changes to the UK tax system — Making Tax Digital for Income Tax Self Assessment. That is due to commence in April 2024 and will require self-employed individuals earning above £10,000 to keep digital records of income and expenses on compatible software.

Broker reaction

The team at Citi has been looking at the launch and see both positives and risks from it. Citi commented:

A key question post the announcement of Xero’s new product aimed at sole traders, Xero Go, is whether it represents upside or downside to UK revenue forecasts given it is a lower ARPU offering.

Our analysis suggests that Xero Go represents upside to subscriber forecasts but is neutral from a revenue perspective when compared to current consensus forecasts due to the lower ARPU. However, there could be downside risk to long-term/terminal ARPU assumptions from a mix perspective but would depend on attach rates of add-ons.

Nevertheless, Citi remains bullish on the Xero share price. It has retained its buy rating and $108.00 price target.

This implies potential upside of ~16% for investors over the next 12 months.

The post Broker gives its verdict on the Xero share price following new product launch appeared first on The Motley Fool Australia.

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More reading

• 2 excellent ASX tech shares experts say are buys
• How are ASX 200 tech shares performing on Wednesday?
• Top broker rates Xero share price a buy with 20% upside
• Why are ASX 200 tech shares having such a lousy start to the week?
• Is the Xero share price heading back over $100?

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 Xero. The Motley Fool Australia has positions in and has recommended Xero. 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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Once a week I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Flight Centre Travel Group Ltd (ASX: FLT) stays as the most shorted ASX share with 15.5% of its shares held short. This was down slightly week on week. Flight Centre upgraded its guidance last week, much to the disappointment of short sellers.
• Betmakers Technology Group Ltd (ASX: BET) has seen its short interest rebound to 12%. Valuation concerns appear to be driving this high level of short interest.
• Nanosonics Ltd (ASX: NAN) has short interest of 11.6%, which is down slightly week on week once again. Last week, this infection prevention company’s shares tumbled following the release of a business update.
• Block Inc (ASX: SQ2) has short interest of 11.5%, which is up slightly week on week once again. This payments company’s shares have been hit hard this year as investors sell out of unprofitable tech stocks. Short sellers appear to believe they can fall further.
• Lake Resources N.L. (ASX: LKE) has short interest of 10.4%, which is up meaningfully week on week. Short interest appears to have been building since the sudden exit of its CEO and the short attack from J Capital.
• EML Payments Ltd (ASX: EML) has short interest of 9.5%, which is up week on week. Last week this payments company’s shares sank deep into the red following a disappointing update on regulatory issues facing its European operations.
• Regis Resources Limited (ASX: RRL) has short interest of 9%, which is down slightly week on week. Short sellers have been targeting this gold miner’s shares due to production issues.
• Zip Co Ltd (ASX: ZIP) has seen its short interest rise to 8.3%. Some of the newer short sellers may have regrets about targeting this buy now pay later provider. Its shares more than doubled during July.
• PolyNovo Ltd (ASX: PNV) has seen its short interest ease to 8.2%. This medical device company’s shares jumped at the end of last week after naming a new and experienced CEO.
• Kogan.com Ltd (ASX: KGN) has seen its short interest soften again to 8.2%. Short sellers will have been devastated to see this ecommerce company’s shares shoot ~50% higher on Thursday last week following the release of a trading update. That update may have even caused a short squeeze judging by the volume of trades.

The post These are the 10 most shorted ASX shares appeared first on The Motley Fool Australia.

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More reading

• ‘Recession-like levels’: Why ASX retail shares could still be in for a bumpy ride
• Why did the Zip share price rocket 159% in July?
• These were the best performing ASX 200 shares in July
• These were the worst performing ASX 200 shares in July
• Here are the top 10 ASX 200 shares today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Betmakers Technology Group Ltd, Block, Inc., EML Payments, Kogan.com ltd, Nanosonics Limited, POLYNOVO FPO, and ZIPCOLTD FPO. The Motley Fool Australia has positions in and has recommended Block, Inc., EML Payments, Kogan.com ltd, and Nanosonics Limited. The Motley Fool Australia has recommended Betmakers Technology Group Ltd and Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The ASX retail share sector is coming under increasing scrutiny as inflation ramps up and households start to feel the bite.

There are various diverse retailers on the ASX, such as Wesfarmers Ltd (ASX: WES), JB Hi-Fi Limited (ASX: JBH), Universal Store Holdings Ltd (ASX: UNI), Adairs Ltd (ASX: ADH), Nick Scali Limited (ASX: NCK), Temple & Webster Group Ltd (ASX: TPW), Kogan.com Ltd (ASX: KGN), Premier Investments Limited (ASX: PMV), and City Chic Collective Ltd (ASX: CCX).

However, all are exposed to how much Australian consumers are deciding to spend at their stores and on their websites.

Recent analysis from AMP Limited (ASX: AMP), looking at Australian Bureau of Statistics (ABS) data, shows Australian retail spending growth slowed in June to just 0.2% for the month. AMP’s expectations were for a 0.3% lift. The figure also missed consensus forecasts for growth of 0.5%.

However, AMP noted that annual growth in retail spending still remains high at 12%, though that reflects strong spending in previous months, especially in late 2021 and early 2022.

AMP said that annual retail spending is expected to slow from here as it weakens compared to high levels over 2021 and 2022. A pullback to the long-term trend growth rate was “inevitable”, it said, especially as interest rates increase.

Why is retail spending slowing?

AMP named five factors contributing to slowing growth that could impact many ASX retail shares.

First, interest rate hikes could be a factor. The June data reflects two interest rate hikes totalling 0.75% from the Reserve Bank of Australia — a 0.25% rise in May and a 0.5% increase in June.

Next, strong retail spending over the past two years brought forward demand.

Third, consumers are spending money on services rather than retail goods as the economy and borders have opened up.

AMP also noted “poor consumer sentiment”. According to a Westpac Banking Corp (ASX: WBC) and Melbourne Institute survey, consumer confidence is at “recession-like levels”.

Finally, a high level of inflation is leading to a fall in consumer purchasing power.

What next?

AMP suggests that the above factors will persist in the coming months. In turn, this means more potential downside for consumer spending, affecting ASX retail shares.

It said retail volumes “will start to decline as spending slows and inflation is high”. At last report, CPI inflation for June was 1.8%.

Recent share price performances

Movements in share prices have been mixed for businesses in recent times.

Since the beginning of 2022, many ASX retail shares have fallen heavily, yet they have recovered notable ground over the past month.

As an example, the Temple & Webster share price is down 50% this year, but up 59% in the past month (albeit from a low point).

Meantime, the Adairs share price is down 42% for the year, but up 26% in the last month.

Similarly, the Kogan share price is down almost 48% for 2022, yet up 66% over the last month.

Following the pattern, the Wesfarmers share price is down 22% this year, but it is up 11% over the past month.

Some numbers may seem dramatic, but if a share price falls from $100 to $10, it has dropped 90%. If it then goes from $10 to $15, that counts as a rise of 50%.

Investors who have been buying may be thinking the bottom of the decline was too pessimistic about the future for ASX retail shares.

The post ‘Recession-like levels’: Why ASX retail shares could still be in for a bumpy ride appeared first on The Motley Fool Australia.

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More reading

• Top ASX shares to buy in August 2022
• From Cotton On to Catch: Wesfarmers’ plans to put its acquisition back on track
• 3 ASX All Ords shares having a stellar end to the week
• Could ASX online retail shares be getting a boost out of inflation?
• 3 ASX 300 retail shares majorly cashing in on Thursday

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 ADAIRS FPO, Kogan.com ltd, and Temple & Webster Group Ltd. The Motley Fool Australia has positions in and has recommended ADAIRS FPO, Kogan.com ltd, and Wesfarmers Limited. The Motley Fool Australia has recommended Premier Investments Limited, Temple & Webster Group Ltd, and 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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