Category: Stock Market

After a month of super-sized interest rate hikes in Australia and the United States, T Rowe Price Group Inc (NASDAQ: TROW) Australian equities head Randal Jenneke is nervous.

Nervous about the prospect that the shock of the rate rises will plunge the globe into a recession.

“Given our view that global monetary tightening will result in a cyclical recession in profits due to slowing activity, we retain the cautious stance in our portfolio first adopted over six months ago.”

Fortunately, Jenneke reckons ASX shares still look cheap compared to their international peers, and this means there are investments worth getting into.

“We believe Australian stocks look set for further relative outperformance in the second half of the year,” he said.

“Australia has created less excess local liquidity to distort domestic equity valuations, driving them to levels that were historically rich relative to fundamentals.”

Considering the outlook, Jenneke’s team is investing in a couple of different types of ASX shares:

Defensive growth with pricing power

The first type that the T Rowe Price team likes at the moment is “defensive growth”.

“We seek quality stocks that have good pricing power in the more defensive growth segments, such as Computershare Limited (ASX: CPU), a provider of stock registration and transfer services that has delivered good exposure to rising interest rates.”

Computershare’s share registry business benefits from higher interest rates because it holds a pool of dividends and distributions that are yet to be transferred to the investor.

That capital is invested and reaps better returns for the business when rates rise.

“Besides share registry, Computershare is a global provider of services for employee equity plans, corporate trusts, stakeholder communications, and corporate governance.”

Computershare shares have risen 35% over the past 12 months and the company hands out a tidy dividend yield of 2%.

Buying oversold growth shares for a later revival

The other category that Jenneke’s analysts are bullish on is “oversold” growth shares.

“Recently, we have taken the opportunity to add to growth companies that we believe [have] become oversold based on near-term inflation fears and higher projected interest rates,” said Jenneke. 

“In this category of oversold growth names, we include Carsales.com Ltd (ASX: CAR), the dominant automotive online classifieds business which in our view possesses a durable business model and good pricing power.”

Carsales shares have shed more than 30% of their value since 9 December.

After months of plunging valuations, Jenneke reckons that “quality growth” ASX shares would come roaring back later this year as rates stabilise.

This is why, despite selling out of many growth stocks last year, the T Rowe Price team is turning back to them now.

“In our view, this could help the portfolio to strive to perform well as markets move beyond their current inflation and interest rate fears to refocus on the issue of slowing growth.”

The post 2 ASX shares to buy to win the rest of 2022: expert appeared first on The Motley Fool Australia.

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More reading

• These were the best performing ASX 200 shares last week
• Why Computershare, Lithium Plus, Lynas, and ResApp shares are pushing higher
• 3 ASX 200 shares that avoided today’s sell-off
• Big chance to buy ASX share that benefits from rising interest rates: expert
• How to turn $20,000 into $180,000 in 10 years with ASX 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 recommended carsales.com 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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On Friday, the S&P/ASX 200 Index (ASX: XJO) finished a difficult week deep in the red. The benchmark index fell 1.75% to 6,474.8 points.

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

ASX 200 expected to fall

The Australian share market looks set to start the week in the red following a mixed night on Wall Street on Friday. According to the latest SPI futures, the ASX 200 is expected to open the day 19 points or 0.3% lower this morning. On Wall Street, the Dow Jones was down 0.1%, the S&P 500 was up 0.2%, and the Nasdaq jumped 1.4%.

Oil prices sink

Energy producers Santos Ltd (ASX: STO) and Woodside Energy Group Ltd (ASX: WDS) could have a very difficult start to the week after oil prices sank on Friday. According to Bloomberg, the WTI crude oil price dropped 6.8% to US$109.56 a barrel and the Brent crude oil price fell 5.6% to US$113.12 a barrel. This was driven by concerns that a potential global recession could weigh on demand.

ASX 200 rebalance takes effect

S&P Dow Jones Indices’ recently announced rebalance of the ASX 200 index will take effect today. Among the notable changes are Appen Ltd (ASX: APX) and PolyNovo Ltd (ASX: PNV) being kicked out of the index. Brainchip Holdings Ltd (ASX: BRN) and Core Lithium Ltd (ASX: CXO) are two of the new entrants to the benchmark index.

Gold price falls

Gold miners Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) could have a soft start to the week after the gold price dropped on Friday night. According to CNBC, the spot gold price is down 0.5% to US$1,840.6 an ounce. A stronger US dollar put pressure on the precious metal.

Allkem shares rated as a buy

The Allkem Ltd (ASX: AKE) share price could be great value after recent weakness according to Bell Potter. This morning the broker has retained its buy rating but trimmed its price target on the lithium producer’s shares to $17.53. This implies almost 80% upside for investors over the next 12 months. The broker said: “We expect AKE’s near term cash generation to lift substantially into 2023 as strength in lithium commodity indices flows through to lagged realised prices.”

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

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More reading

• Can Woodside shares deliver an attractive dividend yield AND 16% upside in 2022?
• Have ASX 200 shares bottomed? Experts weigh in
• The lithium and iron ore ASX shares that I like right now: expert
• These were the worst performing ASX 200 shares last week
• These were the best performing ASX 200 shares last week

Motley Fool contributor James Mickleboro has positions in Allkem Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Appen Ltd and POLYNOVO FPO. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Exchange traded funds (ETFs) can be great additions to a balanced portfolio. This is because they give investors easy access to a large and diverse group of different shares.

Due to their growing popularity, there are an increasing number of ETFs for investors to choose from.

To narrow things down, I have picked out two ETFs that are popular with investors right now. They are as follows:

BetaShares Asia Technology Tigers ETF (ASX: ASIA)

The BetaShares Asia Technology Tigers ETF tracks the performance of the ~50 largest technology and ecommerce companies that have their main area of business in Asia.

As these companies, or tigers, are among the fastest growing in the region and revolutionising the lives of billions of people, they have been tipped to generate strong returns for investors over the long term.

Among its holdings are the likes of Alibaba, Baidu, Samsung, and Tencent Holdings.

In respect to Tencent, it is a multinational technology conglomerate and one of the largest companies in the world. It is best known for its communication and social platforms, Weixin (WeChat) and QQ, which have over a billion users.

As for Baidu, it is a search engine giant and China’s answer to Google. It is dominating search in the lucrative market, with an estimated 80% share of the market.

BetaShares Global Cybersecurity ETF (ASX: HACK)

Another ETF to look at is the BetaShares Global Cybersecurity ETF. This ETF aims to track the performance of an index that provides investors with exposure to the leaders in the global cybersecurity sector.

BetaShares notes that the cybersecurity sector is heavily under-represented on the ASX. As such, this ETF ensures that Australian investors don’t miss out on this rapidly growing side of the tech industry.

Among the ETF’s holdings are cybersecurity giants and emerging players. This includes Accenture, Cisco, Cloudflare, Crowdstrike, Fortinet, Okta, and Palo Alto Networks.

In respect to the latter, Palo Alto Networks, it is the global leader in cybersecurity solutions. It offers advanced firewalls and cloud-based products that extend firewalls to cover other aspects of security. It has over 85,000 customers across over 150 countries. From these customers it generated US$4.3 billion of revenue in FY 2021, which was up 25% year on year.

The post 2 popular ETFs for ASX investors to buy next week appeared first on The Motley Fool Australia.

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More reading

• Here are 3 top ETFs for ASX investors to buy now
• 3 popular ETFs for ASX investors to buy now
• Get exposure to Asian shares with these 2 ETFs
• 3 ASX ETFs for investors to buy next week
• How has the HACK ETF averaged annual returns of 19%?

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 BETA CYBER ETF UNITS. The Motley Fool Australia has positions in and has recommended BETA CYBER ETF UNITS. The Motley Fool Australia has recommended BetaShares Asia Technology Tigers ETF. 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 have room for some new additions this month, then it could be worth considering the two ASX tech shares listed below.

Here’s what you need to know about these buy-rated ASX tech shares:

Aristocrat Leisure Limited (ASX: ALL)

The first ASX tech share that could be a buy is Aristocrat. It is a gaming technology company with a portfolio of leading pokie machines and digital games.

The team at Morgans is bullish on Aristocrat and recently added the company to its best ideas list. The broker has put an add rating and $43.00 price target on its shares.

It commented:

ALL is a global market leader in the rapidly growing land-based gaming and mobile gaming industries. It has delivered revenue growth of 17% pa over the past five years and 80% of revenue in FY21 was recurring. We expect ALL to continue to take market share in all its product segments. Demand for its gaming machines and digital games is resilient to economic cycles.

ALL’s 1-year forward P/E has derated to less than 20x from a high of 30x last September. With $3.3bn of currently available liquidity, ALL has significant funding capacity for growth, even after the buyback. It has a stated ambition to build a meaningful presence in the rapidly growing online real money gaming segment, which we believe may be achieved both through organic investment and inorganic acquisitions.

Xero Limited (ASX: XRO)

Another ASX tech that could be in the buy zone is Xero. It is a cloud-based accounting solution platform provider to small and medium sized businesses globally.

Goldman Sachs is very bullish on Xero and recently reiterated its buy rating and $118.00 price target on the company’s shares. This followed news that the company has increased subscription prices in the key ANZ and UK markets.

The broker commented:

W remain confident Xero will be able to execute on these increases while preserving its existing subscriber base, noting their strong track record in putting through increases while driving churn lower. We would also not be surprised if NA/ROW markets were also considered for a pricing increase, given they previously followed ANZ/UK by 2 months in Nov-21.

We are Buy-rated on XRO.AX, with a 12m TP of A$118.

The post 2 ASX tech shares brokers rate as buys this month appeared first on The Motley Fool Australia.

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More reading

• ASX 200 midday update: GUD crashes, tech shares tumble
• Why I think the Xero share price is now too compelling to ignore
• 3 ASX shares to buy for scary times: experts
• Analysts name 2 ASX growth shares to buy with huge upside potential
• Top brokers name 3 ASX shares to buy 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 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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Are you looking for dividend shares to add to your income portfolio? If you are, then the two listed below could be worth considering.

These dividend shares have been rated as buys and tipped to provide income investors with big yields.

Here’s what you need to know about them:

HomeCo Daily Needs REIT (ASX: HDN)

The first ASX dividend share for income investors to look at is the HomeCo Daily Needs REIT. It is a property company investing in neighbourhood retail, large format retail, and health and services.

Goldman Sachs is a fan of the company and has a buy rating and $1.70 price target on its shares. The broker believes it is well positioned to benefit from the shift to omni channel retailing.

Goldman commented:

We continue to believe HDN is undervalued at its current valuation given its diversified tenant base, and see it as well positioned to benefit from the shift to omni channel retailing, with additional external growth opportunities to drive earnings growth over the medium-term.

In respect to dividends, Goldman is forecasting dividends per share of 8 cents in FY 2022 and 9 cents in FY 2023. Based on the current HomeCo Daily Needs share price of $1.27, this will mean dividend yields of 6.3% and 7.1%, respectively.

South32 Ltd (ASX: S32)

Another ASX dividend share to look at is South32. It is diversified mining and metals company producing a range of commodities. This includes alumina, aluminium, bauxite, coal, copper, manganese, nickel, and silver across operations in Australia, Southern Africa and South America.

Citi is a big fan of the company. It currently has a buy rating and $5.50 price target on the miner’s shares. The broker believes the company’s shares are trading at an attractive level. It commented:

S32 held a strategy update today and there was little to change baseline forecasts save for higher FY23/24 capex. Costs pressures are evident – but are industry not company specific. S32 has production growth, trades at a discount to DCF and on low valuation multiples. What’s not to like compared to peers.

As for dividends, the broker is forecasting fully franked dividends per share of 38 cents in FY 2022 and 40 cents in FY 2023. Based on the current South32 share price of $4.16, this will mean yields of 9.1% and 9.6%, respectively.

The post Here are 2 ASX dividend shares experts say are buys appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most heavily traded ASX 200 shares on Friday
• Broker names 2 ASX 200 mining shares with big dividends to buy now
• Here are the 3 most traded ASX 200 shares on Wednesday
• 2 high yield ASX dividend shares to buy according to analysts
• Here are the 3 most traded ASX 200 shares 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 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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Investors that have seen $100 billion of their wealth evaporate this week can take solace in the fact that ASX shares could still be among the safest bets in this turbulent environment.

That’s the assessment of Crestone Wealth Management head of equities Todd Hoare. He’s urging investors to hide their capital in Australia, reported The Weekend Australian.

Hoare explained that:

From an equity perspective, Australia looks like a safer place to be. It is lower beta (that is, less volatile), valuations are optically more attractive, we’re a resource-led economy, and even though inflation is proving a bit stickier, we shouldn’t get the same level of entrenched inflation seen elsewhere in the world.

Why ASX shares could outperform other share markets

It’s the fear of runaway inflation and the potential overshoot in interest rates that’s triggering the latest market sell-off.

Central banks in the US to Australia are rushing to hike rates to curb high inflation. This increases the risk of a recession or stagflation.

Given the overrepresentation of ASX resources shares on our market, this should put us in a better position to outperform.

Diversification remains key

But Hoare warned that ASX investors with a substantial share portfolio will need to diversify. He means owning other asset classes and not just shares. He said:

It comes down to multi assets, with bonds offering a little bit more value than what they have done for a long period of time, and alternative asset classes in the mix. Even cash to some degree, even though in real terms inflation is eroding that. With very few places to hide right now, all you can do is try to lose less.

This is also where gold could shine. While the precious metal hasn’t rallied, it’s at least managed to hold its ground at above US$1,800 an ounce as the US share indices crashed into a bear market.

The types of ASX shares to watch

Coming back to ASX shares, the sectors that Hoare likes in a high inflationary environment include consumer staples, energy companies, and defensives, such as healthcare.

Meanwhile, Doug Turek of Minchin Moore Private Wealth Investors echoed a similar view, reported The Australian. He highlighted ASX energy, resources, and agriculture shares as places to shelter from inflation.

No need to chase shares higher

However, he warns that these shares do not look cheap as many have outperformed over the past two years.

Turek noted: “All those assets that might work better than others in times of inflation could be very pricey now. Rushing after them at this stage might not be the right move.”

Investors should take their time as inflation can be volatile, Turek added. This means investors might get a second chance to buy ASX commodity shares at a better price later.

The post Why ASX shares are ‘a safer place to be’: fundie appeared first on The Motley Fool Australia.

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More reading

• Here are 2 ASX dividend shares experts say are buys
• Top brokers name 3 ASX shares to buy next week
• Can Woodside shares deliver an attractive dividend yield AND 16% upside in 2022?
• Why I would invest $10,000 in these 3 ASX shares
• Is the Vanguard US Total Market Shares Index ETF now trading at bargain levels?

Motley Fool contributor Brendon Lau 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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Last week saw a number of broker notes hitting the wires once again. Three buy ratings that investors might want to be aware of are summarised below.

Here’s why brokers think investors ought to buy them next week:

Altium Limited (ASX: ALU)

According to a note out of Ord Minnett, its analysts have resumed coverage on this electronic design software company’s shares with a buy rating and $32.00 price target. Ord Minnett believes Altium will fall well short of its aspirational US$500 million FY 2026 revenue target and is forecasting revenue of US$387 million instead. Despite this, the broker remains bullish on Altium due to its leading position as a provider of an essential tool in electronic design. The Altium share price ended the week at $25.60.

Breville Group Ltd (ASX: BRG)

A note out of UBS reveals that its analysts have retained their buy rating but cut their price target on this appliance manufacturer’s shares to $25.00. Although UBS acknowledges that Breville is operating in a challenging environment at present, it doesn’t expect these headwinds to last for too long. Furthermore, it believes that management has the option to pull back on its research and development spending if necessary to support margins. The Breville share price was fetching at $17.00 at Friday’s close.

CSL Limited (ASX: CSL)

Analysts at Macquarie have retained their outperform rating but cut their price target on this biotherapeutics giant’s shares to $312.00. According to the note, Macquarie is confident that CSL can deliver solid earnings growth in the coming years. This is being underpinned by improving plasma collections, solid demand for immunoglobulins, the proposed acquisition of Vifor Pharma, and the introduction of the Rika platform. The latter has been developed to collect plasma quicker and more comfortably. The CSL share price ended the week at $255.99.

The post Top brokers name 3 ASX shares to buy next week appeared first on The Motley Fool Australia.

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More reading

• Why I would invest $10,000 in these 3 ASX shares
• Down 20% in a month, is the Breville share price a bargain buy or a falling knife?
• Brokers name 3 ASX shares to buy today
• Down 5% so far this week, is the CSL share price a buying opportunity?
• 2 ASX shares I want to buy more of for my portfolio

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 CSL Ltd. 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 could have a bright future, according to brokers.

The dividend-paying energy stock has reportedly been tipped to gain more than 16% by a top broker.

At Friday’s close, the Woodside share price was $31.92, down 0.87% on the day.

For context, the S&P/ASX 200 Index (ASX: XJO) also finished in the red on Friday, sliding 1.76%. Meanwhile, the S&P/ASX 200 Energy Index (ASX: XEJ) was down 1.59%.

Let’s take a closer look at what the future might bring for the ASX 200 energy giant.

Could Woodside offer a 16% upside and 2.35% yield?

The Woodside share price could reach $37 in the relatively near future, a top broker has reportedly tipped.

The bullish prediction was tabled by JPMorgan, according to The Australian.

Excitingly, that would still leave the stock boasting a respectable dividend yield of 2.35%.

That takes into account the company’s previous two dividend payments — a 41.03 cent interim dividend paid in September and a $1.46 final dividend handed out in March.

However, Morgan Stanley is expecting the stock to trade with a dividend yield of 10% to 12% over the coming years following the company’s merger with BHP Group Ltd (ASX: BHP)’s petroleum assets. Though, it noted that prospect is reliant on energy prices remaining strong.

In fact, the broker reportedly expects Woodside to pay out US$20 billion of dividends over the coming decade.

Perhaps unsurprisingly, Morgan Stanley is said to be more bullish on Woodside, slapping it with a $40 price target.

Wilson Asset Management (WAM) also likes the newly merged company.

As my colleague Tristan Harrison recently reported, the fund believes that by merging Woodside and BHP’s petroleum business the former’s balance sheet has been “de-geared”, allowing it to push forward with major projects.

Woodside share price snapshot

Friday’s dip wasn’t enough to dint the Woodside share price’s impressive year-to-date performance.

Right now, the stock is trading for 40% more than it was at the start of 2022. It’s also 37% higher than it was this time last year.

The post Can Woodside shares deliver an attractive dividend yield AND 16% upside in 2022? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Friday
• 5 things to watch on the ASX 200 on Thursday
• Why is the Woodside share price in the red today?
• Why Block, Nanosonics, St Barbara, and Woodside shares are dropping
• This fund manager is optimistic on these 2 leading ASX 200 energy shares

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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While I think the market volatility could continue for a little while to come as investors wait to see if interest rate hikes cause the global economy to fall into a recession, it could still be a good time to start looking at the ASX shares you would want to own when the rebound inevitably comes.

Among the many options out there, three stocks stand out for me. These are the shares that I believe could generate strong returns for investors over a period of three to five years.

Here’s why I think they would be top options for a $10,000 investment when the market volatility eases:

CSL Limited (ASX: CSL)

The first ASX share I would invest $10,000 into is CSL. I believe it is Australia’s highest-quality company and a great long-term pick for investors.

This is due to the biotherapeutics giant’s world-class portfolio of plasma therapies and vaccines and its huge ongoing investment in research and development. Combined with the impending acquisition of Vifor Pharma, strong demand for immunoglobulins, and major improvements in plasma collections, CSL’s outlook appears very positive.

So with its shares trading below historical averages at 20x enterprise-value-to-EBITDA (earnings before interest, taxes, depreciation, and amortisation), it could be an opportune time to invest.

Goodman Group (ASX: GMG)

Another ASX share to consider buying when the market settles is Goodman.

It is one of the world’s leading integrated industrial property companies. Over the last three decades, Goodman has grown from one industrial building in South Sydney to 400 properties in 14 countries across the world.

Pleasingly, demand for its properties remains as strong as ever, thanks to structural drivers. This is supporting stellar rental growth and underpinning a huge development pipeline valued at $13.4 billion across 89 projects.

Given this positive outlook, I think Goodman’s shares look great value at 18x estimated FY 2023 earnings. Especially in comparison to its five-year forward average of approximately 24x earnings.

ResMed Inc (ASX: RMD)

A final option for that $10,000 investment could be ResMed. This ASX share is one of the world’s leading sleep treatment-focused medical device companies. This is a great side of the healthcare sector to be in, with studies estimating that there are likely to be almost one billion people suffering from sleep apnoea globally.

This means that ResMed’s industry-leading products have a huge market opportunity to grow into over the next decade and beyond as more and more sufferers are diagnosed and seek treatments.

And, as with the others, the ResMed share price is trading on below-average multiples at present. Its shares are changing hands for 28x estimated FY 2024 earnings, which is lower than its historical average of 32x forward +2 earnings.

The post Why I would invest $10,000 in these 3 ASX shares appeared first on The Motley Fool Australia.

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More reading

• Brokers name 3 ASX shares to buy today
• Down 5% so far this week, is the CSL share price a buying opportunity?
• ASX 200 midday update: ResMed’s US$1bn acquisition, tech shares continue to sink
• ResMed share price drops despite US$1bn Medifox Dan acquisition
• Buy these 2 quality ASX 200 shares: broker

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 CSL Ltd. and ResMed Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended ResMed. The Motley Fool Australia has positions in and has recommended ResMed Inc. 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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Investors of US shares have seen a painful drop in the last few weeks. This is reflected in the price of Vanguard US Total Market Shares Index ETF (ASX: VTS), down around 20% since the start of 2022 amid inflation and rising interest rates.

However, the last 12 months show less of a decline – it’s only down by around 8%. Interestingly, the VTS ETF is now back at the price that it was just before the COVID-19 crash.

But after such a hefty decline in 2022, could the Vanguard US Total Market Shares Index ETF price be good value? Some investors have been looking at the US share market and are starting to see opportunities.

The US share market could be nearing the bottom?

According to reporting by the Australian Financial Review, Warren Pies from 3Fourteen Research has suggested it could be time to look at the US share market and think about buying.

The call is based on looking at the forward price to earnings (P/E) ratio and interest rates. In his eyes, the US stock market is underlying by “about 10% at present”. He wrote:

Historically, bear market bottoms occur when this discount moves to between 15 and 20 per cent.

During a big sell-off, we find ourselves — like most investors — a bit paralysed. Pulling the trigger is difficult. It’s always darkest before the dawn, and every 20% sell-off feels like it could go another 20%.

In hindsight, it’s easy to see the signs of a low — cheap valuations, washed out sentiment and policy support define most bottoms. Yet, trading bear markets is easy in theory but difficult in practice.

He also said that energy remains a market hedge and that 3Fourteen Research are buyers of the dip.

What is Vanguard US Total Market Shares Index ETF?

For readers that haven’t heard of the VTS ETF before, it’s an exchange-traded fund (ETF) offered by Vanguard.

The idea is that it gives exposure to most of the US share market. It’s actually invested in more than 4,100 businesses.

However, it does give the biggest exposure to the largest businesses on the US share market. These include Apple, Microsoft, Alphabet, Amazon.com, Tesla, Berkshire Hathaway, UnitedHealth, Johnson & Johnson, Meta Platforms and Nvidia.

It comes with an annual management fee of 0.03% per annum, which is one of the lowest for ETFs in Australia.

In terms of sector diversification, Vanguard US Total Market Shares Index ETF has double-digit sector allocation to five industries: technology (26.4%), consumer discretionary (14.8%), healthcare (13.8%), industrials (12.8%) and financials (11.1%).

While past performance is no guarantee of future performance, the VTS ETF has produced an average return per annum of 12.6% per annum over the last three years.

The post Is the Vanguard US Total Market Shares Index ETF now trading at bargain levels? appeared first on The Motley Fool Australia.

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More reading

• Why I would invest $10,000 in these 3 ASX shares
• The best months of the year for share market gains
• Experts rate these ASX 200 blue chip shares as buys
• 3 things to look for with inflation-fighting stocks
• Have ASX 200 shares bottomed? Experts weigh in

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. 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 Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Berkshire Hathaway (B shares), Microsoft, Nvidia, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Johnson & Johnson and UnitedHealth Group and has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Berkshire Hathaway (B shares), and Nvidia. 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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