Category: Stock Market

To combat worries about an economic downturn, it can be productive to try to think of consumer activities that could stay steady through tough times.

One such industry could be gaming and gambling.

Yes, Australians will have less disposable income to spend on such pleasures after multiple monster interest rate hikes. But history shows consumers look for an escape when a struggling economy is getting them down, and some types of gaming don’t suffer.

Helpfully, Morgans senior analyst Alexander Mees this week gave his thoughts on the ASX shares in this industry and how they might fare in their August financials.

There were three in particular that his team rated as a buy.

Recession-proof gaming

The coming reporting season will be the first standalone for Lottery Corporation Ltd (ASX: TLC). That’s after its separation from ASX share Tabcorp Holdings Limited (ASX: TAH).

Mees, on a Morgans blog post, forecasts a “steady performance” with earnings before interest, taxation, depreciation and amortisation (EBITDA) up 13% to hit $691 million.

“The larger lotteries division is forecast to deliver all of the growth in earnings (EBITDA up 18%), with Keno EBITDA down 15% after a strong FY21.”

According to a Netherlands study, lottery businesses seem to be “recession-proof” compared to other forms of gaming. 

“[Lotteries consumption] is characterised by a vast and solid growth that appears to be independent of the business cycle and of temporary shocks to income,” said research authors Csilla Horváth and Richard Paap. 

“During recession the lottery consumption outperforms any other sector in terms of growth.”

Mees’ team has an add rating for Lottery Corporation shares.

“We forecast 5% growth in EBITDA into FY23.”

Another growing lotteries operator

ASX share Jumbo Interactive Ltd (ASX: JIN) is another lotteries provider that Morgans analysts favour at the moment.

Mees is expecting next month’s reporting season to show “another year of good growth” for the company.

“We have increased our EBITDA estimate by 3% to $55 million, up 13% y/y with most of the growth driven by the rapidly expanding SaaS [software-as-a-service] division,” he said.

“We forecast 24% growth in EBITDA into FY23.”

Jumbo Interactive shares have fallen about 17% year to date while paying out a dividend yield of 2.5%.

It seems other professionals agree with Mees. CMC Markets shows five out of seven analysts recommend Jumbo Interactive as a strong buy.

One ASX share for a long-term bet

BlueBet Holdings Ltd (ASX: BBT) is in the field of sports gambling. As such, it’s more vulnerable in the short term to an economic slowdown.

But Mees’ team finds it attractive for it for its “significant” long-term potential.

“BlueBet’s Australian business is forecast to achieve strong growth in turnover in FY22 (48%) as it increases marketing costs to drive customer acquisition,” Mees said.

“Those higher marketing costs are likely to reduce EBITDA in Australia to breakeven, with the investment in the US growth strategy pushing group EBITDA to a forecast loss of $1.2 million.”

While Morgans analysts have lowered the 2022 gross profit forecast by 4%, BlueBet just signed up its fourth US state.

This ASX share is currently going for a considerable discount compared to just a few months ago. The price has plummeted more than 63% year to date.

The post Players gonna play: 3 ASX shares set for a strong reporting season appeared first on The Motley Fool Australia.

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More reading

• How many global mega deals involved ASX 200 shares in the first half of 2022?
• Here are the top 10 ASX shares today
• Why BlueBet, Collins Foods, Northern Star, and Tassal shares are charging higher
• Why is the BlueBet share price rocketing 16% today?
• Morgans is urging investors to buy these 2 ASX 200 shares for this challenging environment

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 positions in and has recommended Jumbo Interactive Limited. The Motley Fool Australia has recommended BlueBet Holdings Ltd and Jumbo Interactive 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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It’s a tough time for stock picking at the moment.

There is much volatility in the markets. Every day we seem to see a sudden jerk upwards or downwards as investors try to reconcile their feelings about the latest economic news.

According to many experts, this has caused many otherwise healthy businesses to see their valuations plummet.

“Given the next leg of this bear market is likely to be a focus on earnings not multiples, we have been positioning the portfolio towards companies we believe have greater earnings certainty,” stated QVG Capital in a memo to clients.

“This ought to mitigate the impact on the portfolio of a recessionary or slowing growth environment, should it occur.”

The QVG team named two such ASX shares in its portfolio that it still has high hopes for:

Great time to put people in jobs

Recent labour shortages in Australia have been well-documented. Perhaps this is what makes staffing provider PeopleIn Ltd (ASX: PPE) an attractive proposition.

With international borders now opened up for the post-COVID era, the QVG team feels like a major deal last month was perfectly timed.

“Labour staffing business PeopleIn made a [sizable] acquisition of a business called Food Industry People, which helps provide workers from the Pacific Islands and Timor to Australian employers,” read the memo.

“The acquisition was 15% earnings accretive and PeopleIn reaffirmed earnings guidance for FY22 which puts it on 10x FY22 PE and 8x FY23 PE.”

The wider professional community is apparently in agreement with QVG Capital.

According to CMC Markets, all four analysts covering the stock recommend it as a strong buy.

Extreme weather events lead to work for this business

Insurance builder Johns Lyng Group Ltd (ASX: JLG) saw its share price lose more than 29% so far this year.

But with record-breaking rains causing havoc on the east coast of Australia once again, it might find itself with a hefty pipeline of work.

QVG analysts liked the latest trading update, which was an upgrade on its previous guidance.

“Johns Lyng now expect[s] to make $83 million EBITDA in FY22 – 5% ahead of their prior expectations.”

The outlook for the current financial year looks very positive too, the memo stated.

“Looking forward into FY23, Johns Lyng Group will benefit from a full year contribution of their US acquisition Reconstruction Experts and a full pipeline of ‘cat’ [catastrophe] work given the sequence of extreme weather events experienced over this financial year.”

It seems many investors are catching onto Johns Lyng’s potential. The share price has risen 10% just over the past week.

On CMC Markets, an astounding seven out of eight analysts currently rate the stock as a strong buy.

The post 2 ASX shares you never heard of ready to make hay appeared first on The Motley Fool Australia.

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More reading

• These 2 ASX shares are ‘compelling opportunities’: fund manager
• Why is the WAM Capital share price down 20% in June?

Motley Fool contributor Tony Yoo has positions in Johns Lyng Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Johns Lyng Group Limited and Peoplein. The Motley Fool Australia has recommended Johns Lyng Group Limited and Peoplein. 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 Wednesday, the S&P/ASX 200 Index (ASX: XJO) was out of form and dropped into the red. The benchmark index fell 0.5% to 6,594.5 points.

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

ASX 200 expected to rise

The Australian share market is expected to rebound on Thursday following a decent night on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 41 points or 0.6% higher this morning. On Wall Street, the Dow Jones was up 0.2%, the S&P 500 rose 0.35%, and the NASDAQ pushed 0.35% higher.

Oil prices fall again

It could be a poor day for energy shares including Santos Ltd (ASX: STO) and Woodside Energy Group Ltd (ASX: WDS) after oil prices dropped again overnight. According to Bloomberg, the WTI crude oil price is down 1.15% to US$98.41 a barrel and the Brent crude oil price is down 2.4% to US$100.32 a barrel. Concerns that there could be a global recession have taken oil prices to a 12-week low.

Gold price drops

Gold miners Evolution Mining Ltd (ASX: EVN) and Regis Resources Limited (ASX: RRL) could have a tough day after the gold price dropped again overnight. According to CNBC, the spot gold price is down 1.45% to US$1,738.5 an ounce. A stronger US dollar is reducing the appeal of the safe haven asset.

Atlas Arteria tipped to make acquisition

The Atlas Arteria Group (ASX: ALX) share price will be on watch today amid reports in the AFR that the toll road operator is interested in acquiring a stake in the Chicago Skyway toll road in the United States. This is despite the company being in talks with IFM Investors regarding a takeover at $8.10 per share.

Block shares fall

The Block Inc (ASX: SQ2) share price could have an off day after its US listed shares dropped into the red overnight. The payments company’s shares on the NYSE ended the day almost 3% lower, which doesn’t bode well for its ASX listed shares this morning.

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

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More reading

• The Woolworths share price outperformed the ASX 200 in FY22. Here’s why
• Here are the top 10 ASX shares today
• How did the Santos share price perform in FY22?
• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• Why is the Woodside Energy share price slumping 6% 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 Block, Inc. The Motley Fool Australia has positions in and has recommended Block, 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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If you’re wanting to invest in growth shares but aren’t sure which ones to buy, then you might want to consider exchange traded funds (ETFs).

There are a number of ETFs out there that allow investors to buy a slice of some high quality growth shares through a single investment. Two such ETFs that will allow you to achieve this are listed below:

BetaShares Asia Technology Tigers ETF (ASX: ASIA)

The first ETF for growth investors to look at is the BetaShares Asia Technology Tigers ETF. It gives investors exposure to approximately 50 of the most promising tech companies in the Asian market but excluding Japan. Among the fund’s top holdings you will find tigers such as Alibaba, Baidu, Infosys, JD.com, Kuaishou Technology, Meituan Dianping, Pinduoduo, Samsung, Tencent.

In respect to Pinduoduo, it is an ecommerce platform that offers a wide range of products. This includes everything from daily groceries to home appliances. Pinduoduo connects distributors with consumers directly through an interactive shopping experience and allows the latter to team up to buy items in bulk at lower prices. At the last count, the company had a massive 880 million active customers.

BetaShares Global Cybersecurity ETF (ASX: HACK)

Another ASX ETF for growth shares to consider is the BetaShares Global Cybersecurity ETF. As its name implies, this ETF gives investors exposure to the leading companies in the global cybersecurity sector.

Among the growth shares included in the fund are global cybersecurity giants and emerging players from a range of global locations. Both of which look well-positioned to benefit from the increasing demand for cybersecurity services as cyber attacks increase. Among the companies you’ll be buying a piece of are Accenture, Cisco, Cloudflare, Crowdstrike, Okta, and Splunk.

In respect to CrowdStrike, it is a provider of incident response and forensic analysis services via its Falcon platform. Its services are designed to help businesses understand whether a breach has occurred. It then allows the user to respond and recover from a breach with speed and precision to remediate the threat.

The post 2 top ETFs for ASX growth investors to buy in July appeared first on The Motley Fool Australia.

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More reading

• 3 excellent ETFs for ASX investors to buy in July
• Can the ASX-listed HACK ETF provide exposure to shares fighting what Warren Buffett calls the ‘number one problem with mankind’?
• 3 highly rated ETFs for ASX investors to buy now
• Down 23% since mid-April, is the HACK ETF a golden opportunity?
• 2 popular ETFs for ASX investors to buy next week

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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The Altium Limited (ASX: ALU) share price spiked more than 4% into the green on Wednesday to close at $28.67.

Investors rallied Altium shares higher on no news. However, in broader market moves, the S&P/ASX All Technology Index (ASX: XTX) powered 3.2% higher today.

Who owns Altium shares?

The software company has 131.5 million outstanding shares on issue and these are distributed among 31,572 shareholders, according to Bloomberg data.

The majority of these investors own a range of one to 1,000 shares, whereas just 47 parties own 100,000 or more shares.

However, the top 20 shareholders of the company hold more than 76% of all the shares on issue.

Of the nine directors listed, six have equity positions in Altium via direct and/or indirect share ownership, according to Bloomberg.

Collectively, these directors hold a 9.67% indirect stake in the company (as some holdings may yet to be realised in the form of deferred equity).

An entity related to CEO Aram Mirkazemi owns a collective 9.63 million shares. Additionally, recent on-market transactions from non-executive director Simon Kelly have settled each month from February to April 2022.

Kelly has bought 8,081 shares in 2022 and spent $257,537 in doing so. Certainly, the Altium non-executive director believes in the ASX tech company’s future prospects.

Altium share price snapshot

In the last 12 months, the Altium share price has slipped more than 20% into the red. It has fallen 36% this year to date.

At the current share price, Altium has a market capitalisation of $3.76 billion.

The post What percentage of Altium shares are owned by insiders? appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX shares today
• Why are ASX 200 tech shares sprinting higher today?
• Analysts name 2 ASX growth shares to buy this week
• Experts say these ASX 200 growth shares are buys with 20%+ upside
• Why is the Altium share price down 5% today?

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Altium. 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 Qantas Airways Limited (ASX: QAN) share price closed down slightly today as news of worker strikes emerged.

Qantas shares dropped 0.22% today to $4.48 at market close. For perspective, the S&P/ASX 200 Index (ASX: XJO) fell more than the airline today, slipping 0.53%. Flight Centre Travel Group (ASX: FLT) also slipped 0.29% but Webjet Limited (ASX: WEB) shares jumped 1.3%.

Let’s take a look at what is happening at Qantas.

Engineers could strike

Qantas aircraft engineers are considering strike action within weeks due to pay negotiations stalling, The Age reported.

A vote on potential strike action is earmarked for August if requests for a pay rise as high as 12% are not met, the publication reported. Australian Licensed Aircraft Engineers Association federal secretary Steve Purvinas said:

The airline has not taken negotiations seriously. There have been years of meetings and no progress.

However, in a statement, Qantas has expressed concern regarding planned action. The airline highlighted it has “contingency plans” to reduce disruptions. A Qantas Group spokesperson said:

With the industry still recovering from the impact of the pandemic, the last thing it needs is the threat of industrial action.

This action from the union is completely unnecessary.

Meanwhile, ASX travel shares have performed relatively well against the S&P/ASX 200 Index (ASX: XJO) benchmark today.

This comes amid new travel rules that apply from 6 July. A COVID-19 vaccine is no longer required for international tourists arriving in Australia. The digital passenger declaration form has also been ditched for now.

Commenting on the news, Health Minister Mark Butler said on Sunday:

The chief medical officer has advised it is no longer necessary for travellers to declare their vaccine status as part of our management of COVID

Share price snapshot

The Qantas share price has descended nearly 9% in the past year, while it is nearly 11% in the red year to date.

For perspective, the ASX 200 has shed nearly 9% in a year.

In the past five years, Qantas shares have lost 22%.

The post Qantas share price slides as engineers plan strike action appeared first on The Motley Fool Australia.

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More reading

• Why did the Qantas share price outperform the ASX 200 in FY22?
• How did ASX travel shares perform in June?
• ASX 200 travel shares leap as Australia scraps COVID-19 vaccine mandates for international arrivals
• Top brokers name 3 ASX shares to buy next week
• Why did the Qantas share price plunge 19% in June?

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 Race Oncology Ltd (ASX: RAC) share price had yet another stunning day, leaving the broader index well behind.

At close of trade, the specialty pharmaceutical company’s shares finished 15.74% ahead at $2.50 each. This means the company’s shares have now risen more than 38% in the past month.

For context, the All Ordinaries Index (ASX: XAO) closed 0.5% lower to 6,784.3 points today and is now down more than 9% for the month.

What’s driving Race Oncology shares forward?

Investors were rallying up the Race Oncology share price today amid the company’s latest string of announcements, along with positive sentiment.

Last month, the company advised it was conducting a share buyback to increase shareholder value.

The board approved the purchase of up to four million Race Oncology shares, which represents 2.5% of its issued capital.

When the news broke, this led shares in the company to finish 11.24% higher on the day.

Furthermore, Race Oncology released a statement highlighting two peer-reviewed abstracts published in the scientific journal, Cancer Research.

Both publications noted the company’s new preclinical data on the anti-cancer uses of its lead candidate Zantrene.

Again, when Race Oncology provided the update to the ASX, its shares soared 10% before market close.

After that, there was another rush on the company’s shares following successful results from its Zantrene trial.

The clinical data showed that the anti-cancer drug protected the hearts of mice from chemotherapy damage.

This is particularly significant as the company is seeking to capture the “large commercial opportunity” that’s present for Zantrene.

Lastly, helping the accent of Race Oncology shares is the S&P/ASX 200 Health Care (ASX: XHJ) sector advancing 1.97% today.

About the Race Oncology share price

Despite the strong gains made over the month, the Race Oncology share price is down 30% in 2022.

This is due to extreme market volatility impacting ASX shares amid rampant inflation, interest rate hikes, and a downbeat economic outlook.

Based on today’s price, Race commands a market capitalisation of around $398 million.

The post Up 38% in a month, what’s sparking the recent Race Oncology share price run-up? appeared first on The Motley Fool Australia.

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More reading

• ASX 200 healthcare shares provided some pain relief today. Here’s why
• Why is the Race Oncology share price soaring 13% today?
• Why did the Race Oncology share price rocket 10% today?
• Race Oncology share price soars 16% on buyback news

Motley Fool contributor Aaron Teboneras 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 enjoyed a solid day for the Woolworths Group Ltd (ASX: WOW) share price this Wednesday. At market close, Woolworths shares rose by a healthy 2.51% to $36.80. This move higher comes as the S&P/ASX 200 Index (ASX: XJO) recorded a day in the red. The ASX 200 finished Wednesday down by 0.53% at just under 6,600 points.

But despite the boost today, it has still been a tough time for Woolworths shares of late. The supermarket giant remains down by 3.18% in 2022 thus far, as well as by 1% over the past 12 months. Today, Woolies remains around the same share price it was back in the pre-COVID highs of February 2020.

So with such a sluggish performance in recent months and years, could it be a good time to consider buying Woolworths shares today?

Is the Woolworths share price a buy today?

One broker who thinks so is investment bank Goldman Sachs. As my Fool colleague James Mickleboro covered last week, Goldman is currently rating Woolworths shares as a buy with a 12-month share price target of $41.70. That would result in a potential upside of close to 13% on current pricing.

Goldman stated it was “encouraged by the resilience and superior operations” of Woolworths, and is anticipating higher sales and earnings between now and FY2024.

But Goldman isn’t the only broker with an opinion on Woolies today.

As reported in The Australian, fellow broker UBS has just upgraded its rating on Woolworths from sell to neutral. Here’s what UBS had to say:

The removal of our bearish stance on supermarkets, increased earnings per share estimates across COL [Coles Group Ltd (ASX: COL)] and WOW, and greater confidence on Woolworths growing sales and expanding gross & EBIT margins, support the WOW rating upgrade.

UBS has also raised its own 12-month share price target to $37.

So we’ll have to see if Woolies shares are indeed heading higher over the next 12 months, as Goldman predicts, or will stay at a similar level to today, as estimated by UBS.

At the current Woolworths share price, this ASX 200 grocer has a market capitalisation of $44.67 billion, with a dividend yield of 2.55%.

The post Why ‘superior operations’ puts Woolworths shares in this broker’s buy basket appeared first on The Motley Fool Australia.

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More reading

• The Woolworths share price outperformed the ASX 200 in FY22. Here’s why
• Why Domino’s, EML, Talga, and Woolworths shares are pushing higher
• Why experts rate these top ASX dividend shares as buys
• Here are 2 blue chip ASX shares analysts rate as buys
• How does the Woolworths dividend compare to Wesfarmers over the last 5 years?

Motley Fool contributor Sebastian Bowen 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 Goldman Sachs. 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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S&P/ASX 200 Index (ASX: XJO) shares feature rather prominently on the list of global mega deals in the first half of 2022.

That’s according to the latest report by financial market data provider Refinitiv, detailing global mergers and acquisitions (M&A) activities year-to-date.

The report noted that there were 58 mega deals – defined as being worth at least US$5 billion (AU$7.3 billion) – in the fist half the 2022. While that’s 23 fewer than this time last year, it’s the fourth highest level ever since Refinitiv began recording this data in 1980.

In total, global M&A activity has already reached US$2.1 trillion year-to-date. While that’s down 21% from last year worldwide, deal making among ASX 200 shares has helped drive a 25.4% increase in M&A activity in Australia so far this year. 

In fact, with US$103.5 billion of deals in the first half, this marks the highest H1 period for Aussie companies since 1980.

Which brings us to…

Which ASX 200 shares made the mega deal list?

There are seven Aussie companies with completed or pending M&A deals worth at least US$1.8 billion in H1.

But only two ASX 200 shares top the US$5 billion mega deal marker.

First, and largest, is Ramsay Health Care Ltd (ASX: RHC). In a still pending deal, the $20 billion takeover offer for the global healthcare company is the biggest healthcare deal ever in Australia.

News of the deal was confirmed on 20 April, sending the Ramsay Health Care share price rocketing.

The conditional, non-binding, indicative proposal was pitched by a consortium led by private equity giant KKR. The consortium offered $88 per share to acquire Ramsay, which was trading for $64.29 on the day that news broke.

The proposed takeover is still undergoing due diligence. Should it proceed, it will then be put up for a shareholder vote.

Moving on… 

Formed from a demerger

The second ASX 200 share making it onto the H1 US$5 billion-plus mega deal list is The Lottery Corp Ltd (ASX: TLC).

On 24 May, Lottery Corp commenced trading on the ASX for the first time after a demerger from Tabcorp Holdings Limited (ASX: TAH).

The completed transaction sees Lottery Corp take over Tabcorp’s Lotteries and Keno businesses. Management pressed ahead with the demerger with the intention of maximising shareholder value.

The newly minted ASX 200 share is down 2% since listing.

The post How many global mega deals involved ASX 200 shares in the first half of 2022? 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 recommended Ramsay Health Care 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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ASX 200 bank shares strengthened on Wednesday, outperforming the benchmark S&P/ASX 200 Index (ASX: XJO).

The Index closed 0.52% lower today while the ASX 200 Banks Index (ASX: XBK) finished 1.03% in the green.

The Macquarie Group Ltd (ASX: MQG) share price followed the trend, closing up 0.58% at $169.66.

The investment bank has posted a series of gains and losses these past 12 months but is currently trading down 17% this year to date, as illustrated below.

Macquarie looks attractive at current prices

The investment debate on ASX bank shares has been a contentious one in 2022. On the one hand, rising interest rates look to boost bank profits.

On the other, the industry is heavily tied to the mortgage sector, with higher interest rates increasing the risk of systemic default.

However, one expert likes what Macquarie shares have to offer. Equity strategist at Wilsons Rob Crookston said Macquarie now presents an “opportunity to buy a quality cyclical at a discounted price”.

He wrote on Livewire:

MQG is a quality business with the proven ability to position itself to take advantage of structural growth opportunities, resulting in compound earnings growth over the long-term.

Management’s ability to deploy capital into opportunities has the potential to underpin future years of growth. We think investors will continue to support this approach, given MQG’s track record.

Crookston said Macquarie can sustainably grow earnings given its focus on annuity income, its capital light model, and exposure to alternative investment classes.

He said that Macquarie manages 153 infrastructure assets across the world across all infrastructure asset classes. These range from roads to airports to digital infrastructure.

Macquarie’s current valuation is also attractive, he says, trading at a price-to-earnings ratio (P/E) of 13.6 times. This is “lower than it has been trading on post-2020 and close to its 5-year historical average”, according to Crookston.

“We think this valuation looks reasonable due to the strong long-term earnings growth potential for MQG and unique leverage to the energy transition.”

The post Why Macquarie shares could be a ‘quality cyclical at a discounted price’: expert appeared first on The Motley Fool Australia.

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More reading

• Why are ASX 200 bank shares responding positively to higher interest rates?
• How did the Macquarie share price perform in June?
• How did the Vanguard Australian Shares Index ETF perform in June?
• 3 more of Morgans’ best ASX share ideas for July
• June was a terrible month for ASX 200 bank shares. Here’s why

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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