Category: Stock Market

The Vulcan Energy Resources Ltd (ASX: VUL) share price has been a positive performer on Tuesday.

In morning trade, the lithium developer’s shares are up 1% to $9.11.

Where next for the Vulcan share price?

Although the Vulcan share price has rocketed materially higher over the last 18 months, one broker doesn’t believe it is too late to invest.

In fact, this broker appears to believe that Vulcan could be the best value lithium share on the Australian share market.

According to a note out of Germany-based Alster Research, its analysts have put a buy rating and $25.00 price target on the company’s shares.

Based on the current Vulcan share price, this implies potential upside of ~175% over the next 12 months.

What did the broker say?

Alster Research highlights that Vulcan has finalised its agreement with LG Energy Solution (LGES), the world’s second-largest battery maker. This will see LGES purchase between 41,000 to 50,000 tonnes of battery grade lithium chemicals over an initial term of five years from 2025.

In addition, the broker notes that Vulcan shares will be trading on the Frankfurt Stock Exchange (FSE) later this month. It expects this to be a positive catalyst.

The broker explained: “By finalizing the deal with LGES, Vulcan has now five definitive agreements with high-profile customers. We consider this as a clear sign for the high demand for battery metals from the phasing out of the combustion engine.”

“At this point, Vulcan has marketed its initial production volumes for the first 5-6 years. We expect the upcoming definitive feasibility study (DFS) to create some leeway. In the near term, we expect the admission to FSE as a catalyst for the stock, as future capital increases will be accessible to a broader audience. Thus, liquidity and interest will most likely increase. We confirm our PT of AUD 25.00, equivalent to EUR 15.81, and reiterate our BUY recommendation,” it concluded.

The post Lithium boom! Broker says the Vulcan (ASX:VUL) share price has 175% upside appeared first on The Motley Fool Australia.

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• Here’s why the Vulcan Energy (ASX:VUL) share price is powering ahead today
• Why Vulcan (ASX:VUL) could be a lithium share with 120% upside
• Here’s why the Vulcan Energy (ASX:VUL) share price is climbing 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 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 Bruce Jackson.

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The Qantas Airways Limited (ASX: QAN) share price is rising again today. This comes after its CEO Alan Joyce welcomed Australia’s border reopening, declaring the country is “finally back open for business”.

At the time of writing, the airline’s shares are up 1.66% to $5.52. This follows a 4.6% jump on Monday when it was announced Australia would be opening up to fully vaccinated international tourists from 21 February.

Let’s take a look at this week’s news.

Restarting flights

Joyce has revealed the company is looking to restart flights from more overseas countries in the near future on the back of the border announcement.

In a report in the Australian Financial Review, Joyce was quoted as saying Australia is “finally back open for business”.

We know there are lots of international tourists who want to come to Australia.

There are also a lot of business travellers who will finally be able to be in the same room as their customers or local teams after almost two years apart. This means they can now book to come here with confidence.

We will be looking at our schedules to see if we can restart flights from more international destinations sooner or add capacity to those routes we are already flying. We have the flexibility to ramp up flights in response to demand.

As Motley Fool Australia reported Monday, the Qantas share price lifted at yesterday’s open amid news the reopening could be imminent.

Prime Minister Scott Morrison confirmed international visitors would be able to return after a cabinet national security meeting on Monday.

In a statement, the Government said:

Today’s announcement will give certainty to our vital tourism industry, and allow them to start planning, hiring and preparing for our reopening. 

In 2018-19, tourism generated more than $60 billion for the Australian economy, with more than 660,000 jobs dependent on the industry.

In other news, Qantas will soon fly to Broken Hill from Sydney for the first time. The airline will fly between the destinations with a 50 seat Q300 aircraft twice a week from April.

The company has also recently announced changes to its frequent flyer program. Fewer frequent flyer points will be required to book hotels or holiday packages. Qantas’ share price gained more than 4% after this news was announced on Friday.

Qantas share price snapshot

The Qantas share price is up almost 15% in the past year and around 9% year to date. In the past week, the company’s shares have soared 14%.

For perspective, the S&P/ASX 200 Index (ASX: XJO) has returned nearly 4% over the past year.

Qantas has a market capitalisation of about $10 billion based on today’s share price.

The post ‘Open for business’: Qantas (ASX:QAN) share price lifts amid CEO’s renewed optimism appeared first on The Motley Fool Australia.

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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 Bruce Jackson.

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ASX shares, with only the rarest of exceptions, were hammered during the early days of the COVID-19 pandemic.

Few ASX investors will forget the 33% fall in the All Ordinaries Index (ASX: XAO) from late February through to late March 2020.

Since then, many ASX shares have rocketed back, propelling the All Ords back above pre-COVID levels.

But with international borders having remained all but shuttered, ASX tourism shares have broadly lagged behind that recovery.

But that all may be changing.

Yesterday the government reported that Australia’s international borders will reopen to all fully vaccinated travellers commencing on 21 February.

Well positioned to finally benefit

Commenting on the lifting of border restrictions and the impact on ASX shares in the tourism sectors, Alex Shevelev, senior analyst at Forager Funds Management, said:

This move continues the reopening of Australian borders to the world. Tourism operators, large and small, will now have more confidence to begin preparing for international arrivals. While the recovery will be gradual, the industry will be hoping that the initial trickle of tourists will be followed by a torrent of arrivals.

Shevelev pointed to cost cutting measures undertaken by many of the companies in the sector as potentially boosting their profit margins.

“Importantly, many operators have lowered their cost bases and will be more profitable when arrivals approach pre-COVID levels,” he said.

So which ASX shares are looking set to benefit?

According to Shevelev:

Companies like skydive and Great Barrier Reef tour operator Experience Co Ltd (ASX: EXP) … and Apollo Tourism & Leisure Ltd (ASX: ATL) have struggled through the COVID travel decimation for 2 years while working to improve their businesses. When tourists return, they will be well positioned to finally benefit.

How have these 2 ASX shares been performing?

The Apollo Tourism share price is up 47% over the past 12 months, but has fallen 17% so far in the new year.

Experience shares have gained 89% over the last 12 months and are flat so far in 2022.

As international tourists return to Australia, both ASX shares, as Shevelev says, look well positioned.

The post 2 ASX shares primed for Australia’s reopening: fund manager appeared first on The Motley Fool Australia.

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• Suncorp (ASX:SUN) share price spikes after ‘strong underlying momentum’ in 2021
• ‘100 million tonnes’: Santos (ASX:STO) share price steady on world-first carbon storage deal
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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended EXPERNCECO FPO. The Motley Fool Australia owns and has recommended EXPERNCECO FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Many eyes will be on the Megaport Ltd (ASX: MP1) share price tomorrow as the company releases its earnings for the first half of financial year 2022.

It will be the first chance the market has had to see, in detail, how the company’s ‘Scale Up, Scale Out’ growth strategy is advancing.

At the time of writing, the Megaport share price is $13.27, 30% lower than it was at the start of 2022. That makes it the worst performing S&P/ASX 200 Index (ASX: XJO) tech share of the year so far.

So, what might the market expect to hear from the company tomorrow? Let’s take a look.

Here’s what to look out for when Megaport reports

Owners of Megaport shares are likely anticipating the company’s earnings for the first half of this financial year, set to drop tomorrow.

They’ll follow from its financial year 2021 results. The last financial year saw Megaport deliver major boosts to its performance.

Its revenue increased 35% to $78 million, it recorded a 33% increase to its ports, and its monthly reoccurring revenue (MRR) grew 32% to $7.5 million.

However, the company recorded a net loss of $55 million for financial year 2021.

At the time, CEO Vincent English looked to the future, saying:

The Megaport mission for the coming year is to ‘Scale Up, Scale Out’. This is a commitment by everyone at Megaport to accelerate our growth and our innovation cycle to increase our lead in the network-as-a-service (NaaS) space … We will invest in revenue growth by making investments in further market expansion, product, and service innovation, and most critically, the people responsible for making Megaport the transformational technology company that is changing the way IT services are built today and tomorrow.

Unfortunately, that’s the closest thing to guidance for financial year 2022 the market got from Megaport.

Still, the strategy might be one point Megaport shareholders look for in the company’s half-year earnings tomorrow.

Since the end of financial year 2021, 2 quarterly updates have been released by the company, each showing notable growth.

It recorded 8% revenue growth for both the September and December quarters – reaching $24.6 million and $26.6 million respectively.

Its MRR also grew 14% over the September quarter and 7% over the December quarter.

However, the latter quarter’s performance disappointed some brokers.

As The Motley Fool Australia’s James Mickleboro reported, numerous brokers expected the company to post a higher investment spend and dropped their price targets for the stock when such expectations didn’t eventuate.

Such investment spend could be another metric worth seeking out in tomorrow’s announcement.

Megaport share price snapshot

Unfortunately, the Megaport share price has a long way to climb to reach its previous level.

It’s now officially lost all its 2021 gains and is trading 1.2% lower than it was this time last year.

Though, long term investors are still well and truly in the green. The Megaport share price is currently 488% higher than it was 5 years ago.

The post Own Megaport (ASX: MP1) shares? Here’s what to watch when the company reports tomorrow appeared first on The Motley Fool Australia.

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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. owns and has recommended MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Altium Limited (ASX: ALU) share price has been a positive performer on Tuesday.

In morning trade, the electronic design software company’s shares are up over 2% to $35.26.

Why is the Altium share price rising today?

The catalyst for the rise in the Altium share price on Tuesday appears to be a broker note out of Bell Potter.

According to the note, the broker has upgraded the company’s shares to a buy rating with a trimmed price target of $40.00.

Based on the current Altium share price, this implies potential upside of over 13% for investors over the next 12 months.

What did the broker say?

Bell Potter is expecting a strong result from Altium in FY 2022. In fact, it believes the company could outperform its full year guidance.

The broker explained: “There is no change in our forecasts for Altium which we last updated in early November. We continue to forecast FY22 revenue and EBITDA of US$218m and US$80m which is at the top end or slightly higher than the guidance ranges of US$209-217m and US$72-80m.”

As for the first half, Bell Potter expects Altium to report revenue and EBITDA growth of 24% and 29%, respectively, later this month.

An attractive tech share

While tech shares have fallen out of favour with investors this year, Bell Potter believes Altium remains a quality pick.

It commented: “We are obviously aware of the recent sell-off in tech but in Altium’s favour is positive earnings, no capitalising of R&D, a strong growth outlook and an expected satisfying of the Rule of 50 over the short to medium term.”

All in all, this could make the Altium share price good value at the current level according to Bell Potter.

The post Why this broker just upgraded Altium (ASX:ALU) shares to a buy rating appeared first on The Motley Fool Australia.

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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. owns 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 Bruce Jackson.

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Shares in Suncorp Group Ltd (ASX: SUN) have started the new year well and are up more than 8% this year to date.

That’s a substantial gain over the benchmark S&P/ASX 200 Index (ASX: XJO), itself faltering over 4% in the red during that time.

Today Suncorp released its half yearly results for the six months ended 31 December 2021. Let’s take a closer look.

Suncorp earnings slump amid higher claims costs

The bank outlined several highlights for investors during the half, including:

• Group net profit after tax was down 20.8% year on year and reached just $388 million
• Cash earnings of $361 million decreased by 29.1% over the prior corresponding period
• Responded to 19 separate weather events and more than 50,000 natural hazard claims during the half
• Natural hazard claims costs of $695 million – $205 million more than expected for the first half
• Profit in the Bank increased to $200 million and accounted for 55% of Group cash earnings
• 1H 23 cents per share dividend fully franked interim dividend

What else happened this quarter for Suncorp?

During the half, bank home lending grew by 2.7%, reflecting “credit assessment efficiency, consistent competitive offerings and improved customer and broker experiences” according to the bank.

Customer deposits also grew by 7.8% to over $44 billion during the half, underscored by at-call transaction accounts. In line with broad market expectations, net interest margin (NIM) decreased 12 basis points from 2H FY21 to 1.97%.

Furthermore, the net impact of investment markets on the result was $61 million, and was down significantly with “volatility across yields, breakeven inflation, credit spreads and equity markets across the year”.

However, the group’s profits were down substantially for the half, falling 21% behind the result recorded at this time last year.

Not only that, but cash earnings were almost 30% lower than the year prior. Both of these results stemmed from Suncorp responding to 19 separate weather events and over 50,000 separate natural hazard claims during the half.

Naturally, hazard claims costs ballooned more than $200 million over original forecasts for the half at $695 million as a result of this.

Finally, Suncorp’s operating expenses were up $42 million on the prior corresponding period to $1.4 billion. The Group attributed this to “temporary increase in spending on strategic initiatives, and higher growth-related costs with increased commissions and marketing” and hence believes the jump is a one-off.

Management commentary

Speaking on the announcement, Suncorp Group CEO, Steve Johnston said:

While we have been challenged by the La Niña climate pattern and the operational impacts of COVID-19, we continue to deliver against our strategic priorities and have good momentum as we move into the second half of
FY22. I am particularly proud of how we have supported our customers and communities during this time. Despite the many challenges of COVID-19 our teams have mobilised quickly to get our customers back on their feet”.

What’s next for Suncorp?

The company aims to deliver a growing business with a sustainable return on equity (ROE) above its cost of equity over the coming 12 months.

For instance, Suncorp notes its General Insurance business is targeting an underlying insurance trading ratio (ITR) in FY23 of between 10–12%, and a Bank cost-to-income ratio of around 50%.

The bank also gave its hazard cost guidance an upward revision. It now expects the full year outlook for natural hazard costs to sit around $1.075 billion, up from $980 million on previous allowance.

“This year will be critical for the Group as we continue to deliver on our FY23 plan and strategic initiatives” Johnston added.

“Inefficient taxes and charges built into insurance premiums are in some cases adding more than 40% to the cost of home insurance. This unfairly impacts those in higher-risk locations, and it needs to be addressed as part of a wider reform of the tax system” he concluded.

Suncorp share price snapshot

In the last 12 months, the Suncorp share price has climbed more than 14% and is now up over 8% since January 1.

This past week, it has climbed 8% and has jumped well into the green for the month as well.

The post Suncorp (ASX:SUN) share price spikes after ‘strong underlying momentum’ in 2021 appeared first on The Motley Fool Australia.

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

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The Santos Ltd (ASX: STO) share price is even in early trading on Tuesday amid the energy giant hitting near 52-week highs after gathering strength over the past 6 weeks.

At the time of writing, the Santos share price is flat at $7.55, the same as yesterday’s close.

The S&P/ASX 200 Energy Index (XEJ) is up more than 13% this year to date whereas the benchmark S&P/ASX 200 Index (ASX: XJO) is down 4.5% over the same time.

Today investors are digesting a company announcement from Santos regarding a new CO2 storage capacity deal, which could be the first of its kind. Here are the details.

What did Santos announce?

The company advised it had secured a booking of 100 million tonnes of CO2 storage resource in the Cooper Basin in South Australia.

According to Santos, this number signifies “a subset of the total prospective storage resource in the Cooper Basin” and follows a final investment decision on the Moomba carbon capture and storage (CCS) project back in November.

Santos also understands this booking is the first in the world “in accordance with the CO2 Storage Resource Management System (SRMS) sponsored by the Society of Petroleum Engineers”.

Speaking on the announcement, Santos Managing Director and Chief Executive Officer Kevin Gallagher said:

CCS is a critical technology to achieve the world’s emission reduction goals and we only have to look at current carbon prices to see how valuable 100 million tonnes of storage is.

Santos sees CO2 storage capacity as a strategic competitive advantage in evolving cleaner energy, clean fuels and carbon markets. This globally significant carbon storage capacity booking is another tangible example of Santos leading the way in establishing the foundations to support the energy transition.

Today’s announcement also forms part of Santos’ Annual Reserves Statement. At the end of 2021, proved plus probable (2P) reserves increased by 80% to 1.16 billion barrels of oil equivalent (mmboe).

Santos attributes this gain to the final investment decision on the Barossa project and the Oil Search merger.

In fact, the merger with Oil Search added 416 mmboe of 2P reserves, 819 mmboe of 2C in Papua New Guinea, and 401 mmboe in Alaska. As well, the final investment decision on Barossa added a further 373 mmboe, according to the company.

The company also advised its binding Sale and Purchase Agreement to sell a 12.5% stake in Barossa to JERA is expected to complete in 1H 2022.

Santos share price snapshot

Over the last 12 months, the Santos share price has gained more than 7%. However, this year to date, shares have powered ahead almost 20%.

Each of these returns is far ahead of the performance of the benchmark index.

Santos has a market capitalisation of more than $25 billion.

The post ‘100 million tonnes’: Santos (ASX:STO) share price steady on world-first carbon storage deal appeared first on The Motley Fool Australia.

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

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The Shopping Centres Australasia Property Group (ASX: SCP) share price is marching higher, up 4.3% in early trade.

Shares closed yesterday at $2.80 and are currently trading for $2.92.

Below we take a look at the company’s financial results for the half year ending 31 December 2021 (1H FY22)

Shopping Centres Australasia share price lifts on strong guidance

• Net Profit After Tax (NPAT) of $432.4 million, up 320.2% from 1H FY211.
• Funds From Operations increased 30.4% year-on-year to $94.3 million
• Investment property portfolio value increased by $426.4 million during the half to $4.426 billion
• Dividend of 7.20 cents per share, up 26.3% from the corresponding half year

What else happened during the half year?

Shopping Centres Australasia attributed much of its half year NPAT surge to an increase in the fair value of its investment properties.

It also reported the boost to its investment property portfolio came from a $386.5 million valuation increase atop 7 acquisitions for $347.5 million (excluding transaction costs). This was partly offset by the transfer of properties to ‘held for sale’, valued at $307.6 million.

The company’s cost of debt stands at 2.4% per annum. Gearing lifted slightly during the half year, to 32.5% as at 31 December up from 31.3% on 30 June. It said this was mostly related to the new asset acquisitions during the half.

Portfolio occupancy also improved to 98.1% by gross leasable area (GLA) as at 31 December 2021. GLA stood at 97.4% on 30 June.

What did management say?

Commenting on the half year results, Shopping Centres Australasia’s CEO, Anthony Mellowes said:

Our convenience-based centres have remained resilient. Specialty tenant sales grew, while supermarket sales were flat compared to the elevated levels in the prior year. Leasing spreads and cash collection rates were impacted by lockdowns in New South Wales and Victoria but improved toward the end of the half year period.

Shopping Centres Australasia’s chief financial officer, Mark Fleming added:

Pleasingly, our earnings per unit forecast for FY22 is now above the pre-COVID level. This has been the result of solid operational performance in a challenging environment and a strong balance sheet enabling investment in acquisitions, developments and funds management.

Following the sale of assets to the SCA Metro Fund our gearing will be less than 29%, 70% of our debt will be fixed or hedged and we will have over $450 million of cash and undrawn facilities.

What’s next?

The company will launch a new fund with GIC (the SCA Metro Fund) in the second half of the financial year. It will sell 7 seed assets to the fund for $284.5 million, targeting an initial fund size of $750 million.

Shopping Centres Australasia’s share price also looks to be getting a boost from the company’s guidance for FY22, which is for Funds From Operations (FFO) per share of “at least” 17.5 cents per share. That’s up 18.6% from FY21. Adjusted Funds From Operations (AFFO) guidance was given at “at least” 15.2 cents per share, an increase of 20.5% year-on-year.

That’s all assuming “there are no further major outbreaks of COVID-19, no significant new government restrictions, and no further acquisitions”.

Shopping Centres Australasia share price snapshot

The Shopping Centres Australasia share price has marched 20% higher over the past 12 months, well outpacing the 4% gain posted by the S&P/ASX 200 Index (ASX: XJO) over that same time.

So far in 2022, Shopping Centres Australasia shares are down 8%.

The post Shopping Centres Australasia (ASX:SCP) share price lifts off on strong FY22 outlook appeared first on The Motley Fool Australia.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns and has recommended Shopping Centres Australasia Property Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Nanosonics Ltd (ASX: NAN) share price is under pressure on Tuesday morning.

In early trade, the infection prevention company’s shares are down 16% to a 52-week low of $4.21.

Why is the Nanosonics share price sinking today?

Investors have been selling down the Nanosonics share price today after it revealed big changes in the North American market.

According to the release, the current GE Healthcare sales model will be revised from 8 February 2022 until the expiry of the current agreement in June 2022. The release does not make clear which party is driving the change.

Under the revised North American sales model, GE Healthcare will consume inventory and transition to a passthrough sales model for its ongoing sales of trophon to be made exclusively through its ultrasound sales team.

What is the new model?

The new model will see Nanosonics manage all inventory, ship, install and train the new GE trophon customers, which will become Nanosonics’ customers for the ongoing provision of consumables.

In addition, GE will commence the transition of all existing GE trophon customers to Nanosonics for the ongoing provision of all consumables. During this transition, both companies will have a focus on ensuring a positive customer experience with no disruption in continuity of customer supply.

Positively, the company highlights that it has a well-established logistics operation based in Indianapolis. And with the planned expansion of these resources, it believes it will be well positioned to manage the transition and ensure the ongoing continuity of supply to customers.

Nanosonics’ Chief Executive Officer & President, Michael Kavanagh, commented: “The revision to the North American sales model represents another significant milestone in the ongoing growth of the organisation and is consistent with our evolution to an increasingly direct sales model and OEM capital reseller channel strategy over time.”

“Discussions are underway with GE Healthcare to commence a new capital reseller agreement at the expiry of the current agreement in June 2022 and we look forward to the opportunity to continue the successful relationship that we have had with GE over the last 10 years,” he added.

What financial impact will this have?

The transition is expected to have an overall one-off impact on revenue in FY 2022 in the range of $13 million to $16 million.

This reflects a proportion of the anticipated growth in the second half being deferred to FY 2023 as the transition to the new sales model is implemented.

In addition, the company is going to have to increase its direct sales operations by the end of the fourth quarter of FY 2022. These operations will be tasked with continuing market growth momentum, where management believes a significant opportunity remains for the trophon franchise across new installed base, upgrades and consumables.

The increase in operating expenses associated with the expansion of the North American teams is expected to be approximately $1 million in the second half.

For now, Nanosonics revealed that it expects to report first half sales of $60.6 million later this month. This will be a 41% increase over the prior corresponding period.

The post Why is the Nanosonics (ASX:NAN) share price crashing 16%? appeared first on The Motley Fool Australia.

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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. owns and has recommended Nanosonics Limited. The Motley Fool Australia owns and has recommended Nanosonics Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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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.

The stock market has been rocky lately, and that volatility can be concerning to investors. Coupled with the economic uncertainty we’re facing right now (including surging inflation and potential interest rate hikes this year), some investors worry a crash is looming.

To be clear, it’s impossible to say for sure whether a market crash is coming or not, as even the experts can’t predict exactly how the market will perform in the short term.

While nobody knows for sure what’s in store for the stock market, there are a couple of reasons you shouldn’t worry about a potential crash — as well as two instances when a downturn could be cause for concern.

Why you shouldn’t worry about a crash

1. The market will eventually rebound

Market crashes can be intimidating. Regardless of how long you’ve been investing, it’s nerve-wracking watching your portfolio sink in value.

The most important thing to remember during times like these, though, is that the market as a whole has a very long history of recovering from downturns. In fact, since 1928, the S&P 500 has fallen by more than 20% on 21 separate occasions. And each and every time, it eventually bounced back.

Of course, it can sometimes take months or years for the market to fully recover from a crash. But historically, it has always managed to rebound stronger than ever.

2. Timing the market is nearly impossible

In theory, the best investing strategy would be to pull your money out of the market right before prices fall, then reinvest when they’re at rock bottom. This is called timing the market, and it’s a strategy some short-term investors use to make a quick profit.

However, this tactic is nearly impossible to pull off successfully. Because the market is unpredictable, no one can say exactly when it will crash or when prices will bottom out. In many cases, the market will dip only to rebound a day or two later.

If you sell and prices quickly recover, you’ll miss out on those potential gains. Similarly, if you wait too long to sell and prices have already fallen substantially, you may end up selling at a loss.

A safer bet, then, is to simply hold your investments regardless of what the market is doing. If prices drop, try your best to wait it out until they eventually recover.

When a potential crash could be concerning

1. You’re investing too much money

Although market downturns are normal (and an inevitable part of the market’s journey), there are some instances where a dip could potentially hurt your finances.

It is possible to invest too much money in the stock market, especially if you’re investing cash you can’t afford to lose.

When the market takes a turn for the worse, stock prices may fall significantly. This makes downturns a particularly bad time to sell your investments. If all your cash is tied up in stocks and the market crashes, you could be in a tight place financially if you incur an unexpected expense.

For that reason, it’s wise to double-check that you have an emergency fund stocked with at least six months’ worth of savings. Not only will this protect your finances in the short term, but it will also make it easier to keep your money in the market — thus helping your investments grow more over the long run.

2. You’re not investing in the right places

The stock market itself has a long history of recovering from downturns, but that doesn’t necessarily mean that all individual stocks will be able to bounce back, too. Low-quality stocks may not be strong enough to weather severe volatility, and if you have a lot of these investments in your portfolio, your savings could be at risk.

Before a downturn hits, examine each investment in your portfolio and ask yourself whether its fundamentals are strong enough to survive volatility.

Of course, nobody can predict exactly how a stock will perform, but the healthiest investments have solid financials, a competent leadership team, and a competitive edge in their industry. With strengths like these, a company has a better chance of recovering from a market downturn.

Market dips can be daunting, regardless of whether you’re a new or longtime investor. By taking steps to prepare and maintaining a long-term outlook, however, your portfolio is more likely to thrive no matter what happens. 

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

The post 2 reasons you shouldn’t worry about a stock market crash — and 2 reasons you should appeared first on The Motley Fool Australia.

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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 Bruce Jackson.

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

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