Category: Stock Market

The Insurance Australia Group Ltd (ASX: IAG) share price has shot up since delivering its FY22 half-year results last Friday.

At yesterday’s market close, IAG shares finished 0.42% higher at $4.74. That means its shares have gained almost 7% in the past week for investors.

In context, the S&P/ASX 200 Index (ASX: XJO) edged 0.51% lower to 7,206.9 points on Tuesday.

What’s the go with the IAG dividend?

In the half-year report for the 2022 financial year, IAG reported a mixed performance across key metrics.

In summary, gross written premium (GWP) lifted by 6.2% to $6,570 million over the previous corresponding period. This was primarily driven by new customer growth and strong retention across motor and home lines in the Australian business.

Insurance profit, however, tumbled by 57.7% to $282 million over H1 FY21. The sharp fall was attributed to significant natural peril costs largely from severe weather events in October.

Overall, net profit after tax (NPAT) rose to $173 million, compared to a loss of $460 million in the prior year.

Based on IAG’s cash earnings of $176 million, the IAG Board declared an unfranked interim dividend of 6 cents per share. This represents a 14.2% decline from the 7 cents declared in the prior comparable period.

Management noted that the latest dividend equates to a payout ratio of 84% of cash earnings.

The company’s dividend policy is to distribute 60%-80% of cash earnings in any full financial year.

When can IAG shareholders expect payment?

IAG will pay the interim dividend to eligible shareholders next month on 24 March.

However, to be eligible, you’ll need to own IAG shares before the ex-dividend date which is today, 16 February. This means if you want to secure the dividend, you will need to purchase IAG shares by today at the latest.

In addition, the company is offering a dividend reinvestment plan (DRP), with the election date falling on 18 February.

The issue price per share will be the average market price, with no discount for participants. Shares allocated under the DRP are likely to be purchased on-market.

The post Here’s everything you need to know about the IAG (ASX:IAG) dividend appeared first on The Motley Fool Australia.

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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 owns and has recommended Insurance Australia Group 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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Goldman Sachs has been busy running the rule over some recent results and has picked out a couple of ASX 200 shares it thinks investors should be buying.

Here are the two ASX 200 shares the broker rates very highly:

IDP Education Ltd (ASX: IEL)

Goldman Sachs is a fan of this language testing and student placement company. Following its better than expected half year result last week, the broker commented that IDP is “a structural grower with risks diminishing.”

Its analysts have upgraded their earnings estimates for the second half (and beyond) on the expectation of a recovery in the Australian student placements

Goldman said: “We expect a stronger than usual 2H for IDP driven by an emerging recovery in Australian Student Placements, continued strength in Multi-destination SP and greater than initially forecast synergies in the Indian IELTS operations. There were also some one-off costs in 1H22 that shouldn’t repeat, such as A$4m of make-good staff costs as compensation for cuts taken in the pcp. We have increased our FY22 EBIT 7.6% to A$150m. FY22/FY23/FY24 EPS estimates increase +6.3%/+1.3%/+1.2%.”

The broker retained its buy rating and lifted its price target to $35.00. This implies 28% upside based on the current IDP share price of $27.28.

Megaport Ltd (ASX: MP1)

This network as a service company’s shares are also in favour with the team at Goldman Sachs.

Following the release of its first half results, the broker reiterated its buy rating and confidence that its growth will accelerate in the second half.

The broker explained: “We believe incremental commentary today was broadly positive and supportive of our 2H22 revenue acceleration (+42%/+48% in 1H/2H), driven by MVE and Partner channel traction.”

“We note: (1) Revenue per MVE customer grew to $11k (vs. $5k at FY21), with the company expecting it to largely stabilize at these levels (some dilution from smaller customers expected, but the new Fortune 500 customer was > $15k and expected to grow meaningfully over time); (2) Strong volume growth is expected, noting the MVE pipeline grew to 202 (vs. 129 at FY21); (3) Data centre rollout to accelerate in 2H to c.+40 (incl. 4 in Mexico, vs. +6 in 1H22); (4) MCR trends were highlighted as a very positive development (+20% connection in 6 months); (5) APAC trends were positive across all markets; Europe was better than we expected, ahead of meaningful channel upside.”

Goldman has a buy rating and $19.90 price target on the company’s shares. This suggests there is 45% upside for investors based on the current Megaport share price of $13.69.

The post Goldman Sachs names 2 ASX 200 shares with major upside potential 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 Idp Education Pty Ltd and 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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With interest rates at such low levels, at least for now, income investors may want to look at the dividend shares listed below for a source of income.

Here’s why these two ASX 200 dividend shares have been rated as buys:

Coles Group Ltd (ASX: COL)

The first ASX dividend share for investors to consider is retail giant.

This supermarket giant could be a top option thanks to its favourable dividend policy, long track record of same store sales growth, strong market position, and its sprawling store network.

In respect to the latter, Coles has over 800 supermarkets, over 900 liquor retail stores, and over 700 Coles express stores. But management isn’t settling for that and continues to expand its network and invest in its online business. The latter includes the construction of new smart distribution centres with automation giant Ocado.

Citi is positive on Coles. The broker currently has a buy rating and $19.60 price target on its shares.

As for dividends, it is forecasting fully franked dividends of 65 cents per share in FY 2022 and 72 cents per share in FY 2023. Based on the current Coles share price of $16.55, this will mean yields of 3.9% and 4.35%, respectively.

Commonwealth Bank of Australia (ASX: CBA)

Another ASX 200 dividend share for investors to consider is Australia’s largest bank, CBA. While its shares have bounced back strongly from recent lows following a better than expected half year result, it may not be too late to invest,

That’s the view of the team at Bell Potter, which last week upgraded the banking giant’s shares to a buy rating with a $108.00 price target.

The broker commented: “Cash NPAT was nearly on par with 2H21, a great outcome. There was also investment in operational execution (in line with the bank’s strategic priorities) coupled with a return of excess capital to shareholders of $2bn.”

Thanks to its strategic strengths of scale, brand, and diversification, which are supported by an irreplaceable infrastructure comprising over 1,100 branches, 3,800 Australia Post agencies, and nearly 3,600 ATMs, Bell Potter appears confident on the future and is forecasting earnings and dividend growth over the coming years.

Bell Potter is forecasting fully franked dividends per share of $3.87 in FY 2022 and $4.07 in FY 2023. Based on the current CBA share price of $99.49, this will mean yields of 3.9% and 4.1%, respectively.

The post 2 ASX 200 dividend shares analysts love appeared first on The Motley Fool Australia.

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Technology stocks have been hit especially hard in the past couple of months as fears of rising interest rates paralyse the market.

The S&P/ASX All Technology Index (ASX: XTX) has lost more than 23% since November, with pretty much all the ASX shares in that sector getting a haircut.

So it can be confusing to know which tech stocks are worth retaining the faith in and which ones might be struggling for a while yet.

The team at Firetrail this month reported to its clients 2 tech shares that have been an absolute drag on its fund’s performance. 

But they’re sticking with them for the long haul:

We bought more of this ASX share that fell 40%

Megaport Ltd (ASX: MP1) shares have plummeted almost 40% since mid-November.

Just in January, the stock fell a painful 28%, dragging down the rest of the Firetrail Small Companies Fund.

“During the month Megaport released its quarterly result to the market. Whilst headline numbers were in-line, we were disappointed by the number of Megaport Virtual Edge (MVE) sales,” read the memo from Firetrail analysts. 

“Megaport reported 12 sales during the quarter relative to our expectations of 30.”

However, Firetrail has long-term faith in the virtual network provider and actually bought up more shares during this price weakness.

“Megaport remains a high conviction position and we increased our holdings during the month.”

Many other analysts agree with Firetrail, with 8 of 12 saying on CMC Markets that Megaport shares are a “strong buy”.

This tech company has halved its value

Nitro Software Ltd (ASX: NTO) shares have had an even worse time than Megaport, falling a stress-inducing 53% since November.

The software firm saw its stock price fall 25% just in the month of January.

“During the month the company reported an inline quarterly result and completed the acquisition of e-signature business, Connective,” stated the Firetrail team.

But similar to Megaport, the Firetrail Small Companies Fund is sticking with the document productivity software provider.

“Despite the weak share price performance following the acquisition, our recent due diligence has increased our conviction in the quality of the Connective business.”

It’s almost a consensus view among other analysts, with 7 out of 8 rating Nitro shares as a “strong buy”, according to CMC Markets. The 8th analyst says the stock is a “moderate buy”.

The post 2 ASX tech shares we’re backing through the turmoil: analysts appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo owns MEGAPORT FPO and Nitro Software Limited. 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 and Nitro Software 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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Brokers have identified some of the leading ASX growth shares that look like opportunities.

Share prices are always changing. But sometimes an improved business performance or a change in the valuation can make a stock look like a much more attractive opportunity.

With that in mind, these two ASX growth shares are highly rated by investment experts:

Idp Education Ltd (ASX: IDP)

IDP Education is currently rated as a buy by at least three brokers including UBS. The price target by UBS on the education business is $35.90. That implies a potential upside of around 30%.

The latest insights about IDP Education came after the FY22 half-year result. Total revenue grew by 47% to $396.8 million. This included 62% growth of English language testing to $256.7 million and 73% growth of multi-destination student placement growth to $79.6 million. English language testing volumes were up 79%.

Operating leverage helped IDP Education’s earnings before interest and tax (EBIT) grow by 61% to $77.9 million. The ASX growth share’s net profit after tax (NPAT) increased by 68% to $50.8 million.

Management believes that the strategic expansion and acquisition of the British Council’s English language testing operation in the high-growth market of India ensures it is poised for long-term growth in the world’s largest English language testing market.

IDP Education also said that it’s in a strong position for growth. Its investments are paying off, leading to increased demand for services.

UBS noted that strong performance by the Indian market, with synergies with the Indian acquisition projected to reach $20 million in FY23.

On the broker’s numbers, the IDP Education share price is valued at 42x FY23’s estimated earnings.

Megaport Ltd (ASX: MP1)

Megaport describes itself as a leading global provider of elastic interconnection services. Its platform enables customers to rapidly connect their network to other services across the Megaport network.

The ASX growth share connects more than 2,400 customers in over 760 enabled data centres globally. It works with partners like AWS (Amazon), Google, Microsoft Azure, Oracle, SAP, Salesforce and Cloudflare.

It’s rated as a buy by at least three different brokers, including Citi. The Megaport share price target from Citi is $20.20, suggesting capital growth potential of almost 50% over the next year.

Citi thinks that Megaport is going to be making positive cash flow by the last six months of FY23.

In the first half of FY22, Megaport reported that the monthly recurring revenue in the month of December 2021 was $9.2 million, 46% higher than December 2020. The profit after direct costs rose 69% to $30.9 million, with a nine percentage point increase to the profit after direct costs margin to 60%.

The business is still making a net loss, but it jumped 47% to $20.2 million, compared to a loss of $38.4 million a year ago.

The ASX growth share continues to expand into other areas, with the Mexico launch planned for March 2022 with a partnership with KIO Networks to enable software-defined cloud interconnection. KIO is an IT services leader in Latin America. The initial launch includes four data centres across Mexico City and Queretaro. It will have the full suite of Megaport networks as a service (NaaS) capabilities.

The post 2 top ASX growth shares that are worth buying: brokers appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Idp Education Pty Ltd and 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 CSL Limited (ASX: CSL) share price will be one to watch closely today.

This follows the release of the biotherapeutics giant’s eagerly anticipated half year results.

CSL share price on watch after solid half

• Total revenue up 5.3% to US$6,041 million
• Gross profit margin down 3.4 percentage points to 57.1%
• Net profit after tax down 2.8% to US$1,760 million
• Net profit in constant currency down 5% to US$1,722 million
• Interim dividend flat at US$1.04 per share
• R&D investment up 13% to US$486 million

What happened during the first half?

For the six months ended 31 December, CSL reported a 5.3% increase in revenue to US$6,041 million. This represents a 4% increase to US$5,993 million in constant currency.

Management advised that this was driven by a 2% decline in CSL Behring revenue to US$4,216 million and an 18% lift in Seqirus revenue to US$1,592 million.

This reflects strong growth in seasonal vaccines, market leading haemophilia B product Idelvion, and specialty products Kcentra and Haegarda, which were partially offset by softer immunoglobulins and albumin sales due to constrained plasma collections in FY 2021.

However, due to a 3.4 percentage points decrease in its gross margin, CSL’s profits were lower year on year. It reported a 5% constant currency decline in net profit after tax to US$1,722 million.

But despite its weaker earnings, the CSL board has elected to maintain its interim dividend at US$1.04 per share.

Management commentary

CSL’s CEO, Paul Perreault, commented: “CSL has delivered a result in line with our expectations in a challenging environment brought about by the ongoing impacts of the global COVID pandemic.”

Mr Perreault was quick to address the elephant in the room – plasma collections.

He said: “Our core franchise, the immunoglobulin portfolio, has been impacted by the industrywide constraints on collecting plasma in FY21 during the course of the global pandemic. We have responded by implementing multiple initiatives in our plasma collections network, which has given rise to significant improvement in plasma volumes collected. Given the long-term nature of our manufacturing cycle, this will underpin stronger Ig and albumin sales going forward.”

The CEO also highlights the strong rebound in HPV royalties and the impressive performance of its vaccines business, Seqirus.

Mr Perreault said: “HPV royalties were up 134%2 as sales rebounded strongly to pre-COVID levels following strong demand and increased supply. Our influenza vaccines business, Seqirus once again delivered a strong performance with revenue up 17% at CC. This was achieved by significant growth in seasonal influenza vaccines driven by record demand and Seqirus’ differentiated and high value product portfolio.”

Outlook

CSL has reaffirmed its guidance for FY 2022. This will mean a net profit after tax in the range of approximately US$2.15 billion to US$2.25 billion at constant currency.

Though, it is worth noting that this guidance now includes US$90 million to US$110 million in transaction costs related to the Vifor Pharma acquisition. These costs were not part of its original guidance, so this is a quasi-upgrade of sorts.

This guidance is expected to be underpinned by improvements in plasma collections and increased demand for flu vaccines.

Mr Perreault explained: “Following the initiatives we have implemented in our plasma collections network, collections have been improving and are expected to underpin stronger sales in our core plasma therapies. Seqirus continues to perform strongly as increased demand for influenza vaccines together with our differentiated product portfolio will see it deliver another profitable year. Consistent with the seasonal nature of the business we anticipate, however, a loss in the second half of the year.”

The post CSL (ASX:CSL) delivers US$1.7bn half year profit and tips plasma collection rebound 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 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 Bruce Jackson.

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Ask A Fund Manager

The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In this edition, Capital H Management founder and chief executive Harley Grosser reveals two small-cap ASX shares that are in the buy zone, and the ones that he missed that still haunt him.

Hottest ASX shares

The Motley Fool: What are the two best stock buys right now?

Harley Grosser: The first one is one that I think readers may have seen me mention before, but it’s just gotten to such attractive valuation levels that I think it’s a near-term buy — that’s Webcentral Ltd (ASX: WCG).

This is the telco, cloud services and domain management business. They’ve given $30 million of EBITDA guidance in FY23, which means it’s trading on a bit over four times EBITDA today, which is just way too cheap. 

They flag organic growth to kick in, and there’s definitely going to be M&A still to come — that’s the style of their management team. 

The stocks sold off heavily because of the merger they did with 5G Networks and a lot of shareholders that took scrip from 5G, we think, have just sold into a liquid market at the time the general markets are selling off.

We’d view that as an opportunity. And I think that at this price, it actually becomes an acquisition target itself for someone like web.com or one of the majors to just lob a bid, because to us it just looks too cheap. 

We think that’ll correct in time. But in the meantime, I’d probably say it’s a near-term buy opportunity.

MF: This is the company that’s also betting on existing domain owners to transfer to the new .au domains to accelerate its business?

HG: Yeah, that’s correct. That’s just one of the tailwinds behind this business. They’ve given us a brief update on how sales have gone in .au thus far. We expect more detail at the half-year results this month. We think that’ll be positive. It’s definitely going to be growing as a nice tailwind. 

One important point to note is that with domains, if you’re Webcentral, you receive the cash for, let’s say for a two- or three-year domain sale, upfront — but then you only book the revenue each month as it’s incurred. So what you’ll see is you won’t see revenue jump, but you’ll see a cash jump.

So I’d just flag that’s probably the metric to watch, but hopefully the company will give more detailed numbers around how that looks.

MF: And your second best buy at the moment?

HG: Well, the other one that we’ve been buying lately is ARC Funds Ltd (ASX: ARC) for the reasons that I outlined earlier. 

So last year when we joined the board, all of 2021 was just about pivoting the strategy, giving us a good sort of platform to launch off. I think we did that with the two managers that we secured in Magnum and Mario. They’re both now going well, Mario’s up and running and Magnum will launch their fund fairly soon. But this year, with the share price re-rated and with our shareholders happy and everything going in the right direction and a really nice pipeline, we think this year is all about growth. So we’ve been buying that of late. 

We expect it to, like I said before, it all comes down to execution. If we do our job, then I think we’ve got some upside there.

Looking back

MF: Is there a move that you regret from the past? For example, a missed opportunity or buying a stock at the wrong timing or price.

HG: In small caps we’ve got heaps of stocks wrong and you can’t avoid getting them wrong. It hurts when you lose money, but it’s just part of the game. 

At Capital H we try to pride ourselves on being a small-cap specialist, which means that we need to be across the entire market. It doesn’t annoy me if we get a stock wrong, it doesn’t annoy me if we take a view on a stock and then that view is wrong. But what does annoy me is if we don’t get around to making the effort to look at a stock and at least form a view, then they end up being multibag — that really frustrates me. 

So there’s been unfortunately plenty of those over the last sort of 10 years or so. Too long to list, but we try to use that frustration when we do miss one to get onto the next one. 

MF: Is there one painful one off the top of your head you could name?

HG: I remember years ago, Altium Limited (ASX: ALU). We missed that one, when we were much smaller.

I think probably one that was in our wheelhouse that we missed because it was a bit big for us was Pinnacle Investment Management Group Ltd (ASX: PNI). Pinnacle has the same business model as ARC Funds. That’s one that we probably should have been more across. 

But look, everyone missed Afterpay. We probably should have been more across the Afterpay story. That was one that I didn’t really understand from a product user perspective and therefore missed the stock.

The post 3 ASX shares I missed that haunt me to this day appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Afterpay Limited, Altium, and PINNACLE FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Webcentral Limited. The Motley Fool Australia owns and has recommended Afterpay Limited and PINNACLE 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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There are some ASX dividend shares that offer shareholders dividend yields of more than 4%.

Some businesses may have higher dividend yields, but the two businesses in this article have yields that may be both sustainable but also leave room for growth over time.

The below two ideas both have much higher yields than what can be found from a typical bank account:

Centuria Industrial REIT (ASX: CIP)

Centuria Industrial is a real estate investment trust (REIT). It is the largest Australian pure-play industrial REIT.

At the end of 31 December 2021, it had total assets of $3.9 billion spread across 80 properties, with net tangible assets (NTA) per unit of $4.21. The portfolio has a weighted average lease expiry (WALE) with a 99.2% portfolio occupancy. This gives the portfolio a high level of income visibility and security.

The ASX dividend share has been looking to increase its exposure to urban infill industrial markets that cater to last-mile e-commerce operators.

Centuria says that tenant demand is very strong thanks to customer shifts to e-commerce plus onshoring to maintain supply chain resilience, and with limited supply within urban infill markets. It’s expecting industrial rents to continue to rise.

It’s now expecting to generate FY22 funds from operations (FFO) guidance of no less than 18.2 cents per unit and re-iterates distribution guidance of 17.3 cents per unit. That represents a distribution yield of 4.6%.

It’s currently rated as a buy by the broker Ord Minnett with a price target of $4.30. The broker has pencilled in an estimated yield of 4.9% in FY23.

Coles Group Ltd (ASX: COL)

Coles is one of the largest supermarket operators in Australia, with only Woolworths Group Ltd (ASX: WOW) as the major competition.

It has seen its share price fall by approximately 7.5% since the start of 2022, which has had the benefit of increasing the possible dividend yield for prospective investors.

Coles is currently rated as a buy by the broker Citi. The estimated grossed-up dividend yield for FY22 is 5.5% and for FY23 it’s 6.2%.

The ASX dividend share will soon be telling investors how it performed for the first six months of FY22. Investors have already had a bit of a look into the performance with the first quarter of FY22.

In the 13 weeks to 26 September 2021, total sales were up 1.5% to $9.76 billion. Supermarket sales were up 1.8% to $8.62 billion. The other Coles divisions are liquor (which includes Liquorland) and Express.

That growth was achieved despite a high level of COVID-induced buying by customers in the first quarter of FY21. Over two years, the total Coles sales were up 12.2%.

Online sales continue to help drive the revenue higher. Supermarket e-commerce sales increased 48% in the first quarter, with sales penetration of 9%. Liquor sales rose 72% and had a sales penetration of 4.5%.

It’s not just sales that are helping grow the bottom line. Coles said that it’s on track to deliver ‘smarter selling’ benefits of more than $200 million in FY22. The company has invested in key efficiency and customer service transformation initiatives including the rollout of customer packing benches and trolley-assisted checkouts.

Coles was optimistic with the end of COVID restrictions, high household savings and launches of new product ranges.

Citi’s earnings estimates suggest the Coles share price is valued at 21x FY22’s estimated earnings.

The post 2 ASX dividend shares with yields above 4% appeared first on The Motley Fool Australia.

More reading

• Why UBS is warning of more pain for the Coles (ASX:COL) share price
• Why is the Woolworths (ASX:WOW) share price trailing Coles by 5% over the past month?
• 2 ASX dividend shares with big yields to buy
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• 2 buy-rated ASX dividend shares with attractive fully franked yields

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns 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 Bruce Jackson.

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The high-performing fund manager Wilson Asset Management (WAM) has recently identified some ASX blue-chip shares that it owns (or owned) in one of its leading portfolios.

WAM operates several listed investment companies (LICs). Two of those LICs are WAM Capital Limited (ASX: WAM) and WAM Research Limited (ASX: WAX).

There’s also one called WAM Leaders Ltd (ASX: WLE) which looks at the larger businesses on the ASX, which you can call ASX blue-chip shares.

WAM says WAM Leaders actively invests in the highest quality Australian companies.

The WAM Leaders portfolio has delivered gross returns (that’s before fees, expenses, and taxes) of 14.6% per annum since its inception in May 2016. That is superior to the S&P/ASX 200 Accumulation Index average return of 8.7%.

These are the blue-chip ASX shares that WAM outlined in its most recent monthly update:

BHP Group Ltd (ASX: BHP)

For readers that didn’t see it, BHP has released its FY22 half-year result for the six months to 31 December 2021. It included net operating cash flow growing by 42% to US$13.3 billion and attributable profit rising 144% to US$9.4 billion. It also declared an interim dividend of US$1.50 per share, which was 49% higher.

WAM made some comments about BHP and its prospects before seeing the result.

During January, WAM saw strengthening evidence that the slowdown in China had passed a trough. The People’s Bank of China began to signal monetary policy easing by cutting the one-year policy loan rate and added 200 billion yuan into the financial system in order to reduce borrowing costs and encourage credit growth. This helped increase iron ore prices, which led to BHP shares outperforming last month, according to WAM.

On 28 January 2022, BHP consolidated its London-listed company into its Australian-listed business, making it the largest corporation listed on the ASX with a market capitalisation of $237 billion, which equates to more than 11% of the total S&P/ASX 200 Index (ASX: XJO).

Santos Ltd (ASX: STO)

Santos is the other business that WAM Leaders referred to.

The fund manager noted that in January 2022, oil prices surged to the highest level since 2014, benefiting ASX shares like Santos.

WAM said that the rally was underpinned by a number of factors.

Those factors included strengthening demand following a decline in severity COVID-19 cases globally and mobility returning to pre-COVID levels. Stockpiles of oil are still low, with China at a bare minimum inventory level with the possibility of ‘price-agnostic’ restocking after the Chinese New Year.

Oil production has been interrupted due to a number of Organisation of the Petroleum Exporting Countries (OPEC+) members operating with spare capacity, limiting OPEC+’s ability to ramp up production meaningfully.

WAM also pointed to geopolitical tensions with Ukraine and Russia. Russia is responsible for supplying over 10% of global oil. There is a possibility of crippling sanctions against Russia.

The fund manager is expecting oil prices to stay high as these factors play out.

Santos is the preferred pick for rising oil prices because of the highly-rated management team and the expected realisation of synergies after the acquisition of the ASX share Oil Search.

WAM also said that the planned project equity sell downs over 2022 will provide the company with optionality to lift the dividend or accelerate the investment in the energy transition.

The post Top fundie says these blue chip ASX shares are a buy appeared first on The Motley Fool Australia.

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• Why did ASX 200 energy shares weigh on the index today?
• BHP (ASX:BHP) declares record interim dividend: What you need to know
• Record exploration: Are ASX 200 shares gearing up for the next mining boom?
• ASX 200 (ASX:XJO) midday update: BHP and SEEK impress, Beach sinks
• BHP (ASX:BHP) share price storms higher following ‘better than expected result’

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

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The CSL Limited (ASX: CSL) share price has dropped by around 24% since 24 November 2021. Considering how large CSL is, that is a sizeable drop in market capitalisation terms.

Is this a great time to buy shares of the biotechnology company? Or is it now fair value?

What does the company actually do?

You aren’t going to see the name CSL at the local shopping centre like you can with Commonwealth Bank of Australia (ASX: CBA), Woolworths Group Ltd (ASX: WOW) or Telstra Corporation Ltd (ASX: TLS).

CSL describes itself as a biotech leader. It operates in more than 35 countries and spends billions of dollars on research and development.

The company has more than 300 plasma collection centres across China, Europe and North America.

CSL’s purpose is to help the health of people who have a range of serious and chronic medical conditions. It develops innovative biotherapies and influenza vaccines that save lives, and help people with life-threatening medical conditions live full lives.

What’s happening to the CSL share price?

CSL shares are now lower than they were during the COVID-19 crash in 2020.

It has experienced a sizeable decline in the valuation as investor concerns rise regarding the rate of inflation and interest rates. Many other ASX growth shares have also seen sizeable declines including Xero Limited (ASX: XRO), WiseTech Global Ltd (ASX: WTC) and Altium Limited (ASX: ALU).

What is happening to CSL shares is not an isolated incident.

The broker Macquarie says that foot traffic is moderating for a sizeable portion of the plasma collection facilities. CSL said that US stimulus, stay-at-home orders and lockdowns caused FY21 plasma collection volume to be down by 20% compared to FY20. There are also increased collection costs.

The company opened 25 new centres in FY21. It was/is planning to open up to 40 new centres in FY22.

FY22 guidance

CSL is continuing to see demand for its main products, with expectations of strong demand for flu vaccines.

Plasma collection collections are expected to improve with CSL plasma initiatives and the COVID-19 vaccine roll-out.

The gross profit margin is expected to ease after increased plasma collection costs, partially offset by “modest” margin expansion due to growth in differentiated flu vaccines.

FY22 revenue is expected to grow by 2% to 5% at constant currency, whilst net profit after tax (NPAT) is expected to come between US$2.15 billion to US$2.25 billion at constant currency.

Is the CSL share price a buy idea?

Macquarie currently rates the healthcare ASX share as a buy, with a price target of $325. That implies a potential upside of more than 30%.

Based on the broker’s estimates, the CSL share price is valued at 38x FY22’s estimated earnings and 31x FY23’s estimated earnings.

The post Down by a quarter in less than three months, is the CSL (ASX:CSL) share price a buy? appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Wednesday
• What’s going on with the CSL (ASX:CSL) share price today?
• Healthy income… Is CSL (ASX:CSL) still an ASX 200 dividend growth share?
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended CSL Ltd. The Motley Fool Australia owns and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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