Category: Stock Market

Key Points

• Bega Cheese shares have been downgraded to a hold rating by Morgans
• The food company’s recent trading update disappointed
• But that wasn’t the main reason for the downgrade

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The Bega Cheese Ltd (ASX: BGA) share price is finishing the week in the red.

In afternoon trade, the diversified food company’s shares are down 2% to $5.22.

Why is the Bega Cheese share price sliding?

The weakness in the Bega Cheese share price today appears to have been caused by a broker note out of Morgans.

According to the note, the broker has downgraded the company’s shares from an add rating to a hold rating.

This was driven partly by a trading update at the end of last year which fell short of Morgans’ expectations.

What did the broker say?

Morgans commented: “BGA has provided FY22 underlying EBITDA guidance of A$195-215m. This was 2-11% below Factset consensus of A$219.3m and Morgans previous forecast of A$217.0m.”

This weaker guidance reflects significant COVID costs, supply chain disruption, and a highly competitive milk procurement environment.

But it isn’t the guidance that has been the main driver of the broker’s downgrade. The biggest impact was the need for Bega Cheese to pay improved returns back to farmers. And until this changes, the broker doesn’t expect the Bega Cheese share price to rerate to higher multiples.

Morgans explained: “While we can look through short-term COVID impacts, we remain concerned about the industry structure which has resulted in the continual need to pay improved returns back to farmers at the expense of shareholders.”

“Until Australian processing capacity rationalises or the Australian milk pool materially grows, the competitive environment for milk is likely to remain fierce and result in dairy processors effectively overpaying for milk. This means that upside from favourable operating conditions is likely to be partially paid away to the dairy farmers as opposed to shareholders benefiting from the earnings upside. For this reason, despite its growing branded business (~80% of sales), BGA is likely to trade at a discount to its FMCG peers,” it concluded.

The post This needs to change before the Bega Cheese (ASX:BGA) share price rerates appeared first on The Motley Fool Australia.

More reading

• Why analysts slapped buy ratings on these ASX shares
• Would you like cheese with that? A look at some of Twiggy’s highest profile ASX investments of 2021
• These were the best performing ASX 200 shares last week
• ASX 200 falls on Friday but records 13% gain in 2021
• ASX 200 (ASX:XJO) midday update: Big four banks fall, Bega Cheese jumps again

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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Key points

• The Afterpay share price is falling more than 8% today
• Block shares fell nearly 6% in the United States overnight
• Bank of Spain approved Block’s takeover of Afterpay this week

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The Afterpay Holdings Ltd (ASX: AFY) share price is slumping today amid a tough time for tech shares in the United States.

Shares in the buy now, pay later (BNPL) share company are currently trading at $69.45, down 8.47%.

Let’s take a look at what might be impacting this ASX tech share today?

What’s happening to Afterpay?

The Afterpay share price is falling sharply today despite making gains earlier in the week on the back of news on its takeover by Block Inc (NYSE: SQ).

Block received approval from the Bank of Spain to buy Afterpay on Wednesday. Afterpay’s shares may be falling today as a result of Block’s shares falling in the United States.

In Thursday trading on the New York Stock Exchange, Block fell from $145.47 to $136.95, a 5.86% drop.

Meanwhile, the NASDAQ-100 Technology Sector Index (NASDAQ: NDXT) also fell 3.38% in the United States overnight. Investors were selling off technology shares due to inflation concerns, US News reported.

Amazon (NASDAQ: AMZN) dropped 2.42%, while Apple Inc (NASDAQ: AAPL) fell 1.90%.

Looking at Afterpay’s Australian competitors, Openpay Group Ltd (ASX: OPY) is also down 2.74% so far today while Zip Co Ltd (ASX:Z1P) is 3.33% in the red.

Afterpay shares will trade on the ASX for the last time on 19 January.

Afterpay share price snap shot

The Afterpay share price is down more than 42% in the past year and 23% in the last month.

In comparison, the S&P/ASX 200 Index (ASX: XJO) has returned more than 10% to investors in the past year.

The company commands a market capitalisation of roughly $20.6 billion based on the current share price.

The post Afterpay share price tumbles 8% in dire day for ASX tech shares appeared first on The Motley Fool Australia.

More reading

• The Telstra (ASX:TLS) share price has already hit multiple 52-week highs this year. What’s happening?
• Why Liontown (ASX:LTR) could be a lithium share to buy in 2022
• Why Brickworks (ASX:BKW) shares are an ASX dividend favourite
• Zenith Minerals (ASX:ZNC) share price rockets 24% on ‘major’ lithium deal
• Why is the Boss Energy (ASX:BOE) share price dumping 5% today?

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Afterpay Limited and Block, Inc. The Motley Fool Australia owns and has recommended Afterpay 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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Key points

• The Telstra share price has hit 3 52-week highs so far this year
• The stock is currently trading for 1.4% more than it was at the end of 2021
• Its gains have come despite its home sector’s struggles

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The Telstra Corporation Ltd (ASX: TLS) share price has had a strong start time to 2022.

Since the year began, it’s hit its 52-week high 3 times, pushing it higher on 2 occasions.

Excitingly, the Telstra share price reached a new 52-week high of $4.28 today.

Though, at the time of writing, it has slipped slightly lower to trade at $4.24, still representing a 0.47% gain.

For context, the S&P/ASX 200 Index (ASX: XJO) is down 0.92% right now.

What’s going on with the Telstra share price in 2022?

The Telstra share price is in the green for this year so far. Not to mention, its stock has been flying off the shelves.

Of the 8 trading sessions of the year so far – not including today’s –Telstra has featured in The Motley Fool Australia’s daily breakdown of the most traded ASX 200 shares 5 times.

On top of that, the telecommunication giant’s shares have been significantly outperforming its sector.

Since the final close of 2021, the S&P/ASX 200 Communication Index (ASX: XTJ) has slipped 2%. Its biggest weights include Domain Holdings Australia Ltd (ASX: DHG) and SEEK Limited (ASX: SEK).

Meanwhile, Telstra’s fellow ASX 200 telecommunication provider TPG Telecom Ltd (ASX: TPG) has seen its stock gain 9%. Though, that of its smaller peer Aussie Broadband Ltd (ASX: ABB) has tumbled 4%.

While there’s been no price-sensitive news from Telstra in January, brokers remain bullish on its share price.

As The Motley Fool Australia has previously reported, Ord Minnett and Morgans both believe the company is worth investing in. They’ve slapped it with price targets of $4.85 and $4.55 respectively.

The post The Telstra (ASX:TLS) share price has already hit multiple 52-week highs this year. What’s happening? appeared first on The Motley Fool Australia.

More reading

• Here are the 3 most heavily traded ASX 200 shares on Thursday
• Top brokers name 3 ASX shares to buy today
• Own Telstra (ASX:TLS) shares? Here’s what you need to know about next month’s earnings report
• Here are the 3 most heavily traded ASX 200 shares this Wednesday
• Is the Telstra (ASX:TLS) dividend going to grow in 2022?

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 Aussie Broadband Limited. The Motley Fool Australia owns and has recommended Telstra Corporation Limited. The Motley Fool Australia has recommended Aussie Broadband Limited, SEEK Limited, and TPG Telecom 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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The Liontown Resources Limited (ASX: LTR) share price has been an exceptional performer over the last 12 months.

During this time, the lithium developer’s shares have almost quadrupled in value.

Can the Liontown share price keep rising?

In light of the incredible rise in the Liontown share price since last year, some investors may be wondering if it’s too late to invest.

The good news is that one leading broker doesn’t believe it is. This week the team at Bell Potter retained its speculative buy rating and $2.15 price target on the company’s shares.

Based on the current Liontown share price of $1.70, this implies potential upside of over 26% for investors.

What did the broker say?

Bell Potter notes that Liontown has just signed a binding spodumene offtake term sheet with leading battery manufacturer LG Energy Solution (LGES).

This five-year agreement is for 150ktpa spodumene with a target specification of 6% Li2O (SC6) at prices linked to industry recognised price reporting indices for lithium hydroxide monohydrate. This represents almost one-third of its initial planned production when it commences in 2024.

Its analysts commented: “LGES is a tier-1 counterparty being one of the premier global lithium ion battery manufacturers. The contract’s linkage to lithium hydroxide price indices preserves LTR’s value leverage to strong lithium markets and also enables LTR to capture some of the margin traditionally held by spodumene to lithium hydroxide chemical converters.”

What else?

Outside this, the broker has previously spoken very positively about the company’s future. Particularly given how its Kathleen Valley Lithium Project is fully-funded.

Bell Potter said: “LTR is funded for Kathleen Valley’s initial development capital. A definitive feasibility study outlined 658ktpa SC6 production with potential for conversion into 86ktpa lithium hydroxide (75ktpa lithium carbonate equivalent, LCE). LTR is independent, debt free with significant uncommitted offtake; a strong strategic position in a market for lithium facing supply shortages. Key catalysts are awarding development contracts, procuring long lead-time equipment, signing offtake contracts and commencing development.”

In respect to lithium supply shortages, earlier this week Liontown’s CEO, Tony Ottaviano, refuted claims that high prices will lead to a supply surge. Particularly given how it takes between five to seven years to bring a mine from the exploration phase to production.

Mr Ottaviano was quoted in the Australian saying: “So all these people predicting tonnes from central Africa in 2023, there’s a classic line in the movie The Castle (‘tell ’em they’re dreaming’).”

The post Why Liontown (ASX:LTR) could be a lithium share to buy in 2022 appeared first on The Motley Fool Australia.

More reading

• Liontown (ASX:LTR) share price leaps again as boss dismisses lithium supply glut concerns
• Here are the 3 most heavily traded ASX 200 shares on Thursday
• Here are the 3 most heavily traded ASX 200 shares this Wednesday
• Why Afterpay, Appen, Liontown, and Nickel Mines shares are surging higher
• ASX 200 (ASX:XJO) midday update: Afterpay-Block deal approved, Fortescue downgraded

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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When it comes to investing in ASX dividend shares, Brickworks Limited (ASX: BKW) is a name that might come up.

Brickworks is one of the oldest listed businesses on the ASX. As such, it’s a company that you’ll probably find in many an ASX dividend investors’ portfolio. But why?

Let’s check out what this income share has to offer investors today.

Brickworks first opened its doors back in 1934. As its name implies, this company is a building supplies business. It manufactures and distributes bricks and other building products.

But that’s only part of the story of how Brickworks makes money. It also has a robust property portfolio, which it develops by repurposing land formerly used for the manufacturing of building supplies.

Further, the company also owns a large chunk (26.1%) of Washington H. Soul Pattinson and Co Ltd (ASX: SOL). These 2 supplementary facets of Brickworks’ business help the company balance out the cyclical cash flows inherent in the construction industry.

But let’s take a look at how all of that translates into dividends.

How does the Brickworks dividend stack up?

So Brickworks has paid a biannual dividend for more than 45 years. In that time, it has never cut its dividend — either maintaining or increasing its payouts. Brickworks dividends have been rising every year since 2014, including throughout the COVID-19 crisis years.

Not too many other ASX shares can boast of such a robust dividend record. And this is arguably 1 of the reasons why Brickworks remains a respected favourite of the ASX dividend investor.

The company’s last 2 dividend payments were 21 cents per share (interim) paid in April 2021, and 40 cents per share (final) doled out in November. Both dividend payments came fully franked, as is typical with Brickworks.

So on today’s pricing, that dividend record translates into a yield of 2.49%. That’s 3.55% grossed-up with the full franking credits included.

Not the highest raw yield you can get on the ASX, but perhaps one of the more reliable by going off the company’s impressive history.

The Brickworks share price has also had some strong appreciation in recent times. It’s up a healthy 31% over the past 12 months and a pleasing 87% over the past 5 years.

At the current Brickworks share price of $24.46, this ASX dividend share has a market capitalisation of $3.71 billion.

The post Why Brickworks (ASX:BKW) shares are an ASX dividend favourite appeared first on The Motley Fool Australia.

More reading

• What’s the outlook for the Brickworks (ASX:BKW) share price in 2022?
• Are these 2 excellent ASX dividend shares buys in January?
• Why Brickworks, Charter Hall, Magellan, and Rio Tinto shares are falling
• 2 great ASX dividend shares rated as buys for 2022: experts
• Here’s why the Brickworks (ASX:BKW) share price has lots of potential

Motley Fool contributor Sebastian Bowen owns Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns and has recommended Brickworks and Washington H. Soul Pattinson and Company 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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Key Points

• Zenith share price powers to all-time high of 41 cents

• Joint venture with Saudi battery chemicals and technology company

• Zenith plans to spinoff existing gold and base metals assets on ASX

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The Zenith Minerals Ltd (ASX: ZNC) share price is exploding to a record high today. This comes after the company announced a major new joint venture to unlock lithium potential at its wholly-owned assets.

At the time of writing, the lithium miner’s shares are swapping hands for 36 cents apiece, up 24.14%. It’s worth noting that during market open, the company’s shares moved into uncharted territory, reaching 41 cents.

Zenith eyes potential lithium gains

In its release, Zenith advised that it will partner up with EV Metals Group (EVM) to explore for lithium from its Western Australian projects. This relates to the company’s wholly-owned Waratah Well and Split Rocks assets.

Under the agreement, EVM will provide financial backing by spending a minimum of $7 million on exploration activities on the projects. This will run for a 24-month period, and either party is able to bring additional projects to the joint venture.

EVM may earn a 60% interest in the lithium rights by solely funding the feasibility study. Zenith would retain a 40% project share across the Waratah Well and Split Rocks projects.

As such, EVM will subscribe for 20 million ordinary Zenith shares at a price of 30 cents per share. This represents a premium of 20% above the volume-weighted average price for the last 10 business days.

The $6 million raised will be allocated to sourcing new lithium opportunities, and advancing Zenith’s gold and base metals assets. However, Zenith is planning to demerge these assets into one or more new listed entities on the ASX. This will allow the company to double down on its efforts in progressing its lithium pathway.

What did management say?

Zenith CEO, Michael Clifford commented:

I am delighted that Zenith has been able to team up with EVM to unlock the lithium potential of its Split Rocks and Waratah Well projects. The arrangement goes much deeper than just the joint venture on these two existing Zenith projects, Split Rocks and Waratah Well, with the parties also agreeing to jointly assess new lithium/ EV-metal opportunities throughout Australia where commercially appropriate to do so.

The new joint venture arrangement plays to the project generation strengths of the Zenith team, matching this up with the very strong commercial and engineering capability of the EVM group. The arrangement puts Zenith in a unique position to build a significant lithium business in conjunction with EVM”

Zenith share price summary

Over the last 12 months, the Zenith share price has leapt by more than 200% for shareholders. The company’s shares reached an all-time high today of 41 cents.

Based on today’s price, Zenith commands a market capitalisation of around $114.95 million with approximately 323.80 million shares on issue.

The post Zenith Minerals (ASX:ZNC) share price rockets 24% on ‘major’ lithium deal appeared first on The Motley Fool Australia.

More reading

• Why Brickworks (ASX:BKW) shares are an ASX dividend favourite
• Why is the Boss Energy (ASX:BOE) share price dumping 5% today?
• How did the VanEck Morningstar Wide Moat ETF (ASX:MOAT) more than double the ASX 200’s returns in 2021?
• The Michael Hill (ASX:MHJ) share price slips despite record Christmas trading results
• Why Scott Phillips says he will never sell this international share

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 Bruce Jackson.

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Key Points

• Boss Energy shares are sliding into the red during afternoon trading.
• There’s been no market sensitive info released by the company today.
• However, ASX energy shares are softening amid a sector-wide selloff on Friday.
• The broad indices are also down, indicating weakness across all sectors to close the week.

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Shares in Boss Energy Ltd (ASX: BOE) are sliding down at pace and now trade 5% in the red at $2.40 apiece.

It’s been a bumpy ride for Boss Energy shareholders these past few weeks with price dispersion saw-toothing up from a bottom of $2.08 in December.

Whilst there’s been no price-sensitive info out of the company’s camp today, investors are cycling back out of the name and shares are now trading back at a key support level. Let’s take a look.

Why is the Boss Energy share price sliding today?

In the absence of any market-moving news or information on the company today, it’s not abundantly clear if today’s loss is specific to Boss Energy or a part of a wider move in the broad market.

For instance, the S&P/ASX 200 Energy Index (XEJ) is also down more than 1% on the day as traders re-evaluate market conditions moving forwards.

Weakness in the broad energy sector today follows a period of upward momentum that’s been in situ since late December, amid a shifting rates regime out of the US and a rotation of capital in response to the same.

In the last month, the index has climbed almost 7%, alongside other defensible pockets of the market like financials and industrials.

However, gains are sparse across the ASX today as each of the major indices pare gains amid a market-wide selloff.

ASX financials, metals and mining players are each facing pressures today – and funds haven’t just been re-routed back into growth or tech names either, with the broad tech majors each extending losses from the open.

The S&P/ASX 200 Index (ASX: XJO) is also heading lower throughout today’s session, currently trading less than 1% down at 7,409.2 points.

Aside from that, the price of Uranium is heading sideways after its impressive rally in 2021. After a period of wide volatility, price action has since cooled off and price tensions in Kazakhstan, the world’s largest producer, sort through internal political tensions.

Despite the pullback, Boss Energy remains on track to touch Bell Potter’s valuation on the company of $3.47 per share. The broker likes Boss’ prospects in 2022 and notes the company’s “exploration upside” across its tenements.

Boss Energy share price summary

In the last 12 months, the Boss Energy share price has gained almost 173% after climbing another 3% in the past month.

It has started the year off well and has spiked 7% since January 1, well ahead of the benchmark index.

Over the last week of trading, however, Boss Energy has slipped almost 2% into the red.

The post Why is the Boss Energy (ASX:BOE) share price dumping 5% today? appeared first on The Motley Fool Australia.

More reading

• Here’s why ASX uranium shares could be in for a boost
• Here’s why Bell Potter is tipping 52% upside for the Boss Energy (ASX:BOE) share price

The author has no positions 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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Key Points

• The VanEck Morningstar Wide Moat ETF produced capital growth of more than double the ASX 200
• A focus on economic moats and attractive valuations has helped the performance
• The MOAT ETF has achieved a high level of performance over an extended period of time

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The VanEck Morningstar Wide Moat ETF (ASX: MOAT) managed to strongly outperform the S&P/ASX 200 Index (ASX: XJO) in 2021.

In 2021, the exchange-traded fund (ETF) produced a price return of 30.25% and a total net return of 31.5%. That compares to the ASX 200 price return of 13% in 2021 and 17% including the dividends.

What is the VanEck Morningstar Wide Moat ETF?

VenEck says that the MOAT ETF gives investors exposure to a diversified portfolio of attractively priced US companies with sustainable competitive advantages according to Morningstar’s equity research team.

Compared to the ASX 200 and the ETFs that track it, there are a few differences.

Holdings

The performance of indices and ETFs is dictated by the returns of the underlying businesses.

The ASX 200 is mainly influenced by a few major businesses: BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), CSL Limited (ASX: CSL), National Australia Bank Ltd (ASX: NAB), Australia and New Zealand Banking Group Ltd (ASX: ANZ), Westpac Banking Corp (ASX: WBC), Macquarie Group Ltd (ASX: MQG), Telstra Corporation Ltd (ASX: TLS) and Rio Tinto Limited (ASX: RIO).

However, the MOAT ETF positions change over time because the Morningstar analysts are regularly adjusting which US shares with strong economic moats they think are the best opportunities.

On 12 January 2022, VanEck Morningstar Wide Moat ETF had the following as its biggest holdings: Cheniere Energy, Wells Fargo, Berkshire Hathaway, Merck & Co and Constellation Brands.

The main two sectors represented in the ASX 200 are financials and resources. Whereas, at the moment, there are four sectors have at least a mid-teen representation in the MOAT ETF: IT (25.5%), healthcare (16.5%), industrials (15.2%) and consumer staples (14.1%).

How does the MOAT ETF choose the investments?

Morningstar analysts look for quality US businesses which are believed to possess sustainable competitive advantages, or “wide economic moats”. It’s not necessarily the size of the competitive advantage that is being looked at, it’s how long that economic moat can be maintained.

A business needs to be likely to possess its wide economic moat “with near certainty” at least 10 years from now. Also, excess normalised returns must, more likely than not, be positive 20 years from now according to Morningstar.

It’s only these wide economic moat businesses that can end up on the MOAT ETF watchlist.

VanEck says those businesses only make it into the VanEck Morningstar Wide Moat ETF portfolio if they’re trading at attractive prices relative to Morningstar’s estimate of fair value.

This active investment style has an annual cost of 0.49%.

Longer-term performance

Past performance is no guarantee of future performance.

However, the VanEck Morningstar Wide Moat ETF has achieved a high level of return over the longer-term. In the past five years, the MOAT ETF’s net return has been an average of 18.3% per annum. That was bigger return than the S&P 500’s net return per annum of 17.8%.

The post How did the VanEck Morningstar Wide Moat ETF (ASX:MOAT) more than double the ASX 200’s returns in 2021? appeared first on The Motley Fool Australia.

More reading

• ASX 200 (ASX:XJO) midday update: Qantas cuts capacity, Afterpay hits 52-week low
• 5 things to watch on the ASX 200 on Friday
• Here are the top 10 ASX shares today
• Here are the 3 most heavily traded ASX 200 shares on Thursday
• ASX 200 (ASX:XJO) midday update: Crown jumps, miners rally, Sonic sinks

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 Australia has recommended Macquarie Group Limited, VanEck Vectors Morningstar Wide Moat ETF, and Westpac Banking Corporation. 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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Key Points

• The jewellery retailer announced a record-breaking Christmas trading period today
• The Michael Hill share price dropped this morning despite the positive update
• Strong holiday trade saw the Michael Hill share price lift more than 20% between Christmas and New Year

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The Michael Hill International Ltd (ASX: MHJ) share price is slipping despite the jewellery retailer releasing a positive second-quarter trading update this morning.

In fact, it’s not just positive — it’s record-breaking.

So why did the Michael Hill share price plunge in opening trade before heading back to the starting blocks? At the time of writing, the company’s shares have slipped again, trading down 0.35% at $1.43 apiece. Let’s take a closer look…

2021 holiday period ‘best in history’

When it comes to the holidays, the old saying goes that ‘the best gifts are wrapped in the smallest boxes’. This was the case towards the end of 2021 for jewellery giant, Michael Hill.

In the weeks leading up to Christmas Day, the Michael Hill share price remained fairly stagnant, but its sales did not.

The company expects its earnings before interest and taxes (EBIT) for the second quarter of 2021 (the period ending Boxing Day) to be between $49 to $53 million.

For the same period in 2020, the company reported earnings of $44.6 million.

Despite lost trading days due to coronavirus-related lockdowns, the jeweller advised its in-store sales were up 9.8%, and its same store sales (meaning the difference in revenue brought in by existing outlets over the time frame) was up 9.6% from the previous year.

This accounts for its 285 stores across Australia, New Zealand and Canada. There were also no store openings or closures during this time.

More closely, same-store sales for Australia were up 5.2% and all store sales were up 2.2%.

Lockdowns didn’t slow digital sales

Accounting for those who couldn’t purchase shiny things in store in time for the holidays, the company’s digital sales were up almost 30% — representing 8.2% of total sales for the year to date.

The jeweller also reported a rise in the rate of profit made on its products during its second quarter — between 200-300 basis points “in all markets and channels” against the previous year.

The company attributed this revenue to its efforts in elevating its brand and increased focus on operations.

Finally, the company boasted a strongly maintained balance sheet — proudly reporting “disciplined inventory management, robust cost controls and strong sales”, leading to a “healthy cash position”.

Looking ahead, Michael Hill will continue to brainstorm new approaches for growth and capital management.

Comment from management

Managing director and CEO Daniel Bracken said:

The successful planning and execution of Christmas underpinned this outstanding result — I couldn’t be prouder of the entire team.

From the highly engaging and emotive marketing campaign, to the deployment of new digital initiatives, excellence in supply chain and inventory management and our Christmas recruitment strategy, all came together to deliver Michael Hill’s best Q2 in the company’s history.

Between Christmas Eve and New Year’s Eve, the Michael Hill share price jumped 21%.

Michael Hill share price snapshot

The Michael Hill share price has been a retail success story since the pandemic struck in early 2020. After plummeting as low as 24 cents in March 2020, it has steadily climbed, rebounding by almost 500%.

The jeweller saw its share price hit a 52-week-high at the end of 2021 when it released an early indication of its business performance for the half-year of FY22. This record was shot out of the water on 4 January when the price touched a new high of $1.57.

The jeweller currently has a market capitalisation of $555 million and a price-to-earnings ratio (P/E) of 11.96.

The post The Michael Hill (ASX:MHJ) share price slips despite record Christmas trading results appeared first on The Motley Fool Australia.

More reading

• These 3 ASX shares hit new 52-week highs today
• Michael Hill (ASX:MHJ) share price rockets 13% to a 52-week high. Here’s why

Motley Fool contributor Alice de Bruin 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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Investing for the long haul can be one of the greatest ways to take advantage of compounding. For some investors, this might mean holding onto a share indefinitely, with no plans to sell. Such is the case for one international share that The Motley Fool Australia’s chief investment officer, Scott Phillips, says he intends to hold forever.

It takes a special type of company to find a place as a potential ‘forever’ investment in any portfolio. Firstly, it needs to be a business with a proven track record of performance. Secondly, it needs the resources to weather the inevitable storms over the decades. Both of these factors allow shareholders to sleep well at night while holding for a long time.

With that being said, let’s pop the hood on this international stock that Phillips has tucked away for the long term.

Backing Buffett

The international company making a home in Phillips’ portfolio is Berkshire Hathaway Inc (NYSE: BRK.B). This multinational conglomerate has proven its ability to outperform the market time and time again over the years, with the great Warren Buffett at the helm.

For those unaware, Berkshire Hathaway wholly owns numerous businesses — including GEICO and Duracell. In addition, the Nebraska-based conglomerate holds a host of investments on its balance sheets. These include substantial stakes in Apple Inc (NASDAQ: AAPL), Coca-Cola Co (NYSE: KO), Bank of America Corp (NYSE: BAC), and American Express Company (NYSE: AXP).

This diversity provides a level of de-risking from individual industries. On top of that, Berkshire Hathaway is incredibly profitable. In the past financial year, the conglomerate made US$86 billion in earnings on US$268.7 billion of revenue.

The elephant in the room is what happens to Berkshire Hathaway (and its share price) when the legendary Buffett departs. Addressing the potential risk to this international stock, Phillips said:

Buffett will not be there at some point. Whether from natural causes or he chooses to leave the business, someone will take over. And yes, the share price might even be volatile when it happens. Buffett is a great asset, but when he leaves the scene, one way or the other, the business is going to retain all those shareholdings and all those operating businesses.

Furthermore, the conglomerate has plenty of financial ammo up its sleeve to navigate the future. At the end of September 2021, Berkshire Hathaway had US$149.2 billion worth of cash and cash equivalents on its balance sheet.

The Berkshire Hathaway share price closed at just over US$321 overnight on the New York Stock Exchange. Just 20 years ago in January 2002, it was trading at about $50.

Berkshire Hathaway as part of a portfolio

Phillips reveals Berkshire Hathaway as one of his ‘forever’ stocks during a podcast with National Australia Bank Ltd (ASX: NAB) director of self-managed super and investor behaviour, Gemma Dale. In this chat, Phillips describes the US conglomerate as having a ‘bedrock’ position in conjunction with other share investments.

Stepping away from international shares, the investment officer also named 5 ASX shares that look appealing this year.

The post Why Scott Phillips says he will never sell this international share appeared first on The Motley Fool Australia.

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American Express is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Mitchell Lawler owns Apple. 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 Apple and Berkshire Hathaway (B shares). The Motley Fool Australia’s chief investment officer, Scott Phillips holds shares in Berkshire Hathaway Inc. 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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