Category: Stock Market

As we near the halfway point of 2024, many investors may be wondering if now is a good time to buy ASX shares. But where to start?

Checking where the experts are positioned is a good place.

The Perennial Natural Resources Trust has delivered impressive returns of 30% per annum over the last three years. It believes ASX resources stocks could offer compelling value in the future.

With stocks such as BHP Group Ltd (ASX: BHP) and Rio Tinto Ltd (ASX: RIO) often the first Australian resource companies that come to mind, some might forget there is a whole universe of commodity stocks on the ASX.

Here’s a look at the ASX shares the fund is bullish on and whether they are suitable ASX shares to buy.

Undercovered commodity shares

Perennial’s resources fund, headed up by Sam Berridge, has returned 32.3% in the year to May 31, with notable gains from commodities like gold, lithium, uranium, rare earths, and bauxite.

According to the Australian Financial Review, the fund has shown a keen interest in Brazilian Rare Earths Ltd (ASX: BRE).

“We’ve had solid runs from gold, lithium, uranium, rare earths, and bauxite at different points over the last four years”, Berridge said.

He says one of these “big winners” included Brazilian Rare Earths. The company is Australian-based but has exploration sites for rare earths and critical minerals in Brazil and operates the Rocha da Rocha Critical Minerals project there.

This diversification away from traditional resources such as iron ore is critical to the fund’s strategy, which involves buying ASX shares in the commodity space.

The commodity sector is becoming more diverse, with new boutique metals periodically rising to prominence due to some energy-related change in demand.

As such, players like Brazilian Rare Earths with exposure to critical minerals fit this bill well. Regarding the company’s prospects, Berridge notes that it has “plenty more to give.”

Should you buy these ASX shares?

The fund is also bullish on Capricorn Metals Ltd (ASX: CMM), an ASX-listed gold miner. Berridge said the ASX share has been a major contributor to its total 2024 return.

But he said that investors could capitalise on the AI theme in commodities through DUG Technology Ltd (ASX: DUG). Regarding the thesis to buy the ASX share, he said:

I think the most interesting direct exposure is DUG Technology. DUG makes most of its money by processing vast quantities of seismic data for oil and gas companies, but the compute it uses for this has ubiquitous applications.

Its key advantage is the use of immersion cooling, in which the hard drives sit in gently circulating baths of oil. This is more energy-efficient and cheaper than air-conditioning whole rooms full of computers. Elsewhere, the energy demands for AI and data centres require immense amounts of power. It must be cheap 24/7 power so, in the short term, that means US gas.

Leading brokers are also bullish on Capricorn Metals. Analysts at Bell Potter recently maintained a buy rating on the ASX share with a price target of $6.50 per share. According to my colleague James, the broker said the company deserved to be traded at a premium.

Foolish takeaway

According to the Perennial Resources Fund, investors looking to buy ASX shares may find potential in Capricorn Metals and Brazilian Rare Earths.

The Brazilian Rare Earths share price is trading 70% higher year to date, while shares in Capricorn Metals are down 5.3% over the same period. Dug Technology shares are up 34.7% since January this year.

As always, remember to conduct your own due diligence before investing.

The post This fund returned 30% per annum for 3 years. Here are the ASX shares it’s buying now. appeared first on The Motley Fool Australia.

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• Why ASX, Brazilian Rare Earths, Liontown, and Sigma shares are sinking today
• Leading brokers name 3 ASX shares to buy today
• Is this the very best ASX 200 gold stock to buy now?
• Here are the top 10 ASX 200 shares today

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

We’re now well into the month of June. That means many things… cold weather, short days, and end-of-financial-year sales. Maybe even a late payout from one of your ASX dividend shares. But it also means it’s nearly tax time.

Yep, from 1 July, you can lodge your tax return for the 2024 financial year. Getting your taxes in line is a task that most of us probably don’t exactly look forward to.

Hopefully, most readers will have a big refund coming their way. In the spirit of this time of year, it’s a great opportunity to think about some ASX shares you can buy if you wish to beef up your franking credit balance.

As most dividend investors would know, franking credits are a major tax perk of owning ASX shares. They enable us to claim a tax deduction for the corporate taxes our companies have already paid on the dividends they dole out to us.

Because of this transfer effect, these ‘tax-busting’ franking credits can make a significant impact on both our tax returns and overall wealth.

So, with that in mind, there are five ASX dividend shares that I would happily buy over the coming 2025 financial year that all tend to pay healthy and fully franked dividends.

5 fully-franked ASX dividend shares I’d buy to bust my taxes

Telstra Group Ltd (ASX: TLS)

First up is ASX 200 telco Telstra. Telstra has a long and well-known history of paying large, fully-franked dividend payments to its shareholders. This has continued over the past few years, with Telstra raising its most recent dividends pretty consistently.

This is a strong company with a solid financial foundation, thanks to Telstra’s dominance of both the mobile and fixed-line internet market in Australia. And that makes for a good investment from a dividend perspective.

Today, investors can expect a hefty dividend yield of around 5% if they buy Telstra stock at recent pricing.

Woolworths Group Ltd (ASX: WOW)

I have historically favoured Coles Group Ltd (ASX: COL) shares over arch-rival Woolworths when it comes to dividend income. However, the tables have turned a little in 2024, thanks to a significant drop in the Woolworths share price over the past 12 months.

I like Woolies as a dividend investment for similar reasons to Telstra: a mature business model, and a defensive earnings base.

Because Woolworths sells us goods that we need — rather than want — to buy, the company has a boosted capacity to pay out passive income in all forms of economic weather.

At recent pricing, you could nab a fully-franked dividend yield of 3.22% from Woolworths shares.

Westpac Banking Corp (ASX: WBC)

It wouldn’t be a ‘best dividend shares’ list without at least one ASX bank stock. Our big four banks enjoy some unique benefits from an investing standpoint, including government support and a loyal customer base.

Normally, my pick of the banks right now would be National Australia Bank Ltd (ASX: NAB). However, if one was prioritising dividend income, Westpac might be a better option to consider today.

This bank is currently trading on a chunky dividend yield of 5.49%. Unlike ANZ Group Holdings Ltd (ASX: ANZ) stock, Westpac’s dividends still come with full franking credits attached too.

BHP Group Ltd (ASX: BHP)

Like the ASX banks and Telstra, BHP is a renowned source of dividends on the ASX. The ‘Big Australian’ has been paying out hefty, fully franked dividends for generations.

Unlike most resources stocks, BHP has a rather diversified earning base, with the company having significant operations in iron ore, copper, potash and nickel.

Although most resources stocks tend to pay cyclical dividends, this diversified earnings base gives BHP significant wiggle room compared to some of its rivals.

BHP stock was recently trading on a fully franked dividend yield of 5.45%.

Woodside Energy Group Ltd (ASX: WDS)

ASX 200 oil and energy stock Woodside is our final dividend share to discuss. Woodside is the largest oil stock on the ASX, and a global giant. It has some of the lowest oil and gas production cost bases on the Australian markets.

Since it only deals in energy commodities, Woodside doesn’t have that diversified earnings base that lends stability to its dividend.

Even so, I think it’s a great option for income-hungry investors, because when oil and gas prices are high, Woodside tends to shower its investors with dividend cash.

At last pricing, Woodside was trading with a fully franked dividend yield of 7.92%.

The post Tax-busters: 5 fully-franked ASX dividend shares I’d buy for FY25 appeared first on The Motley Fool Australia.

More reading

• 3 reasons to be positive on ASX 200 shares in FY25 (and 3 to be wary)
• Where Aussies are spending their money, and the ASX shares that could benefit
• 2 outstanding ASX 200 shares to buy and hold for a decade
• Is there any chance of an interest rate cut in Australia next week?
• Brokers name 3 ASX shares to buy now

Motley Fool contributor Sebastian Bowen has positions in National Austalia Bank and Telstra Group. 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 positions in and has recommended Coles Group and Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Commonwealth Bank of Australia (ASX: CBA) share price has risen by close to 30% in the past year, as shown on the chart below. After such a strong year, investors may be wondering whether the ASX bank share can go on another run.

The focus on inflation and interest rates has dominated discussions regarding banks in the last couple of years. The performance of CBA’s net interest margin (NIM) and loan arrears could be key moving forward into the 2025 financial year.

Keep in mind that CBA’s FY25 first half involves the last six months of the 2024 calendar year.

First, we’ll examine how the bank sees the outlook.

Challenges are building

When CBA released its FY24 third quarter update, the CEO Matt Comyn said:

We have continued to focus on supporting our customers and communities, investing for the future and providing strength and stability for the broader economy. We know that many Australians are feeling under pressure due to a higher cost of living, and we are here to support those customers that need our help.

We have continued to strengthen our balance sheet to ensure we remain well positioned to support our customers, communities, and economy. All Australians benefit from strong and stable banks.

The fundamentals of the Australian remain sound. Unemployment remains low, supported by business and government investment and elevated terms of trade. We recognise that all households are feeling the impact of higher inflation and higher rates, however immigration is providing a structural tailwind for the economy.

So, while the overall picture is still solid, there are pockets of weakness, though CBA is confident it can navigate any difficulties. which could mean good news for CBA shares.

Arrears do seem to be building at the bank – the ratio of home loans that were at least 90 days overdue was 0.43% at December 2022, 0.47% at June 2023, 0.52% at December 2023, and 0.61% at March 2024.

In the third quarter update, CBA said it expects to see “further increases in arrears in the months ahead given continued pressure on real household disposable incomes”.

In terms of the NIM, CBA reported an 11 basis point decline to 1.99% in the HY24 result because of continued competitive pressures and higher funding costs.

Analyst views on CBA shares

The broker UBS recently noted CBA may see a softer fourth quarter on the revenue front, with CBA showing “good cost disciplined and management”, though there has been a “visible deterioration” in asset quality metrics.

UBS notes CBA is leaning on its own distribution channels to defend and drive volume growth in mortgages, a strategy that has seen CBA grow at 0.7 times the rate of Australia’s loan system.

The broker believes defending its ‘back book’ profitability remains a “key imperative” for management.

UBS has made a number of forecasts for CBA shares in FY25.

The broker has forecast CBA can generate $27.2 billion of revenue, $13.6 billion of pre-tax profit and $9.8 billion of net profit after tax (NPAT).

In terms of the dividend, UBS thinks CBA shares will have a fully franked dividend yield of 3.5%.

UBS has a price target on CBA shares of $105, implying the bank could drop by well over 10% in the next 12 months.

The post What is the outlook for CBA shares in FY25? appeared first on The Motley Fool Australia.

More reading

• 3 reasons to be positive on ASX 200 shares in FY25 (and 3 to be wary)
• Where Aussies are spending their money, and the ASX shares that could benefit
• Is there any chance of an interest rate cut in Australia next week?
• Here’s how much I’d have if I’d bought 500 CBA shares 10 years ago
• Big bank bargain: Are this week’s tumbling ASX 200 bank shares a good buy?

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 Scott Phillips.

Vinay Ranjan from Airlie Funds Management says investors should ignore industry predictions for where ASX 200 shares might go in the new financial year and instead simply focus on buying quality companies.

Ranjan says attempting to profit from the market’s short-term ups and downs “is likely to detract from returns rather than add to them”.

He points out that despite all the challenges for the S&P/ASX 200 Index (ASX: XJO) over the past five years, the market has had an upward trajectory, albeit not in a straight line.

First came the pandemic, then the war in Ukraine, then a surge in worldwide inflation, the fastest interest rate hiking cycle in Australia’s history, and now the Middle East conflict.

Through all of that, global equity markets have risen, Ranjan says.

The S&P/ASX 200 Accumulation Index (which includes dividends) has delivered a total return of 47%, or 8% per annum over the five years to 3 May. 

Indeed, some ASX 200 shares have shot the lights out over the past five years.

They include Boss Energy Ltd (ASX: BOE), up 8,180% and Neuren Pharmaceuticals Ltd (ASX: NEU), up 1,581%.

There’s also Pro Medicus Limited (ASX: PME), up 450%, and Pilbara Minerals Ltd (ASX: PLS), up 391%.

Several ASX 200 stalwarts have done well, too. Fortescue Ltd (ASX: FMG) shares are up by 164%, and Macquarie Group Ltd (ASX: MQG) and Commonwealth Bank of Australia (ASX: CBA) are up by 56% and 57%, respectively.

In the United States, the S&P 500 Index (SP: .INX) has risen by more than 88% over five years. The stand-out stocks include Nvidia Corp at 3,480%, Tesla Inc at 1,173%, and Apple Inc at 345%.

In a blog published on asx.com.au, Ranjan says:

In Airlie’s view, the past five years have shown that buying and selling stocks based on a view of the market’s impending movements is a fool’s game.

… we believe investing in companies with strong balance sheets, and that are market leaders with pricing power, may help drive returns over the long term. 

So, instead of offering predictions as to how many points the ASX 200 may gain or lose next year, Ranjan offers three reasons to be bullish and three reasons to be bearish on ASX 200 shares in FY25.

Bull case for ASX 200 shares in FY25

Corporate balance sheets in good shape

Airlie’s view is that the balance sheets of ASX 200 shares generally look “healthy”.

Ranjan says the leverage ratio of industrial companies today vs. previous economic cycles is less than 1.0x Net Debt/EBITDA.

He comments:

Airlie considers this suggests that Australia’s largest companies could be well placed to handle any adverse bumps the economic cycle, competitors or internal issues may throw at them. 

Oligopolies among ASX 200 shares

Several industry oligopolies with substantial barriers to entry are among the ASX 200 shares. Australia’s smaller population means industry profit pools often cannot support a third or fourth entrant.

Examples include Woolworths Group Ltd (ASX: WOW), Coles Group Ltd (ASX: COL), Qantas Airways Limited (ASX: QAN), and the big four ASX 200 bank shares.

Ranjan commented: “Historically these businesses tend to have a track record of stable returns and market-share gains versus their smaller rivals.”  

Australia’s place in the world is only getting better

Ranjan says Australia continues to attract people and capital, both of which provide long-term tailwinds for the economy.

Bearish factors for ASX 200 shares in FY25

Valuations have re-rated higher

In Airlie’s view, higher company valuations reduce the prospect of near-term upside for investors.

Ranjan says ASX 200 shares are unlikely to go much higher until it’s clear that interest rates have peaked.

ASX 200 shares are currently trading at a price-to-earnings (P/E) ratio of 16.7x. This is well above the median long-term average of 14.6x.

High cost of living is gaining political attention 

Airlie views the recent inquiries into supermarket grocery prices as potentially just the start of things to come for the oligopolies among ASX 200 shares.

Ranjan says:

Airlie would not be surprised if the government turned its attention to other concentrated sectors, so as to be seen to be tackling the cost-of-living crisis.

Even if there is no immediate change to regulation of these sectors, Airlie has seen this kind of political pressure hurt returns as companies respond by pulling back on pricing power. 

Sticky inflation

Airlie thinks the optimism embedded in the valuations of ASX 200 shares assumes we’re at the peak with interest rates.

If inflation proves stickier than expected, this “may lead investors to reprice securities lower to reflect a higher cost of capital”, Ranjan said.

To date, the Australian economy has been strong with elevated migration and record-low unemployment supporting demand. And on the supply side, the cost of the energy transition and the restructuring of global trade (away from China) could continue to act as inflationary forces that may well be structural. 

The post 3 reasons to be positive on ASX 200 shares in FY25 (and 3 to be wary) appeared first on The Motley Fool Australia.

More reading

• Where Aussies are spending their money, and the ASX shares that could benefit
• These ASX shares could rise 25% to ~50%
• Top ASX AI stocks to buy in June 2024
• Here are the top 10 ASX 200 shares today
• 3 ASX 200 shares going gangbusters in June

Motley Fool contributor Bronwyn Allen has positions in Commonwealth Bank Of Australia and Macquarie Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Macquarie Group, Nvidia, Pro Medicus, and Tesla. The Motley Fool Australia has positions in and has recommended Coles Group and Macquarie Group. The Motley Fool Australia has recommended Apple, Nvidia, and Pro Medicus. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Australian households are driving certain areas of the economy, with some sectors seeing growth, according to Commonwealth Bank of Australia (ASX: CBA). It’s not confirmed, but some ASX shares could be benefiting.

CBA has released its monthly household spending insights for May, which showed a 1.1% increase in spending after a 1% fall in April. The monthly average has only gained 0.1% since January, which suggests a “weak consumer environment” according to CBA. As a comparison, the first four months of 2023 saw a growth rate of 0.8%.

Strong performing sectors

CBA revealed nine of the 12 spending categories rose in May.

There was a 2.3% increase for household goods, 1.8% for food and beverage goods, 1.7% for hospitality and 1.3% for transport. These sectors were “weak” in April, according to CBA.

Communication and digital saw a 1% monthly rise, recreation saw a 0.7% increase, insurance 0.6%, household services 0.5%, and health 0.5%.

In terms of household goods, food and beverage, there are a few ASX shares that come to mind that may be benefitting, including JB Hi-Fi Ltd (ASX: JBH), Harvey Norman Holdings Limited (ASX: HVN), Wesfarmers Ltd (ASX: WES), Coles Group Ltd (ASX: COL), Woolworths Group Ltd (ASX: WOW) and Metcash Ltd (ASX: MTS).

Looking at some of the other spending categories that have seen growth, I’d point to names like Qantas Airways Limited (ASX: QAN), Transurban Group (ASX: TCL), Telstra Group Ltd (ASX: TLS), Insurance Australia Group Ltd (ASX: IAG) and Suncorp Group Ltd (ASX: SUN) that could have experienced a solid May.

Weak sectors

There were three sectors that suffered a decline in CBA’s monthly spending insights.

Motor vehicles suffered a 0.6% monthly decline, utilities saw a 1% drop, and education suffered a 1.8% decline.

It’s possible for ASX shares to deliver a stronger performance within their business than the wider sector because they’re usually the biggest and strongest in the industry, giving them an economic moat. They could also have better brand power and win market share in a decline.

Some of the ASX shares that may be facing headwinds include car dealership business Eagers Automotive Ltd (ASX: APE) and utility businesses AGL Energy Limited (ASX: AGL) and Origin Energy Ltd (ASX: ORG), at least in the short-term.

Where could spending go next?

CBA senior economist Belinda Allen noted that the consumer environment remains soft despite the spending rise in May. She said:

When looking at spending trends since January however, we can see that the consumer spending environment remains muted, having risen by just 0.1 per cent per month on average since January and driven in large part by spending on essential categories like insurance, utilities and transport. This suggests that consumers are still needing to make spending choices and are prioritising essential purchases.            

It is unlikely tax cuts commencing in the third quarter of 2024 will have a material impact on consumer spending and we are expecting households to save rather than spend their tax cut. Looking forward, the key for consumption will be growth in real household income, and the first quarter 2024 National Accounts data indicated this remains weak.

The post Where Aussies are spending their money, and the ASX shares that could benefit appeared first on The Motley Fool Australia.

More reading

• These ASX shares could rise 25% to ~50%
• Brokers name 3 ASX dividend shares to buy
• Top ASX AI stocks to buy in June 2024
• What’s put the wind up AGL shares on Friday?
• 3 ASX 200 shares going gangbusters in June

Motley Fool contributor Tristan Harrison has positions in Metcash. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Transurban Group and Wesfarmers. The Motley Fool Australia has positions in and has recommended Coles Group, Harvey Norman, Telstra Group, and Wesfarmers. The Motley Fool Australia has recommended Eagers Automotive Ltd, Jb Hi-Fi, and Metcash. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Nobody wants to get to retirement age only to realise they don’t have enough funds to live as comfortably as they had dreamed.

The good news is that this living nightmare doesn’t have to happen to you. By planning ahead and investing wisely in ASX shares, you could put yourself in a position to have a rich retirement.

Let’s take a look at three steps you could take to try and make this dream a reality.

Step one: Start as early as you can

Time is an investor’s best friend. The longer you have to allow compounding to do its thing, the less capital you need to deploy into ASX shares.

For example, if you have an investment time horizon of 30 years, then by investing $500 a month, you would grow your investment portfolio to a sizeable $1 million if you can generate an average total return of 10% per annum.

And while future returns are not guaranteed, this return is in line with historical averages. As a result, I feel it is reasonable to aim for this in the future.

Now imagine you only have 10 years to invest until retirement. Instead of making $500 monthly investments into ASX shares, you would need to put in $5,000 a month to get to $1 million if you achieve an average 10% per annum return.

Step two: Buy quality ASX shares for your retirement portfolio

If you’re wanting a rich retirement, then you ought to consider buying only the highest quality ASX shares for a balanced portfolio.

Traits to look for are strong business models, experienced and talented management teams, sustainable competitive advantage, and positive long-term growth outlooks.

These are the qualities that Warren Buffett looks for when he makes his investments. And given that he has doubled the market return since the 1960s, it’s fair to say that his investment strategy is tried and tested.

Companies like CSL Ltd (ASX: CSL) and Goodman Group (ASX: GMG) could tick these boxes and be worth further investigation.

Step three: Reinvest dividends

While getting a pay check every six months from your ASX shares is undoubtedly very nice, unless you absolutely need these dividends, you should consider reinvesting them into the market.

That’s because if you take them out, you’re stopping them from compounding each year along with the rest of your funds. This will slow down your wealth creation and could leave you with less in your retirement portfolio than you were hoping to have come retirement time.

Let’s imagine that you have a 2% dividend yield across your investment portfolio. If you take those dividends out, your investment portfolio would only grow by 8% per annum (if you achieve a 10% total return).

Going back to our $500 a month investment example, this new growth rate would mean you end up with a portfolio valued at $710,000 after 30 years. That’s almost $300,000 that you have sacrificed by pulling out the dividends.

Overall, by following these three steps, investors have a good chance of retiring rich.

The post 3 steps to take for a rich retirement with ASX shares appeared first on The Motley Fool Australia.

More reading

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• 3 high-quality ASX 200 shares to buy forever
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• 4 top ASX 200 stocks to buy now for the AI revolution
• 3 ASX 300 healthcare stocks ‘well positioned to outperform’

Motley Fool contributor James Mickleboro has positions in CSL. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL and Goodman Group. The Motley Fool Australia has recommended CSL and Goodman Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Artificial Intelligence (AI) is revolutionising industries globally, and ASX AI stocks are reaping the benefits.

Savvy investors are increasingly looking beyond the tech giants directly involved in AI to companies providing essential infrastructure and services.

According to TAMIM Asset Management, these companies are often referred to as the ‘picks and shovels’ play, a nod to the entrepreneurial types who sold shovels to miners during the gold rushes.

Let’s explore two ASX stocks well-positioned to benefit from the AI boom: Southern Cross Electrical Engineering Ltd (ASX: SXE) and IPD Group Ltd (ASX: IPG).

ASX AI stocks in favour

Southern Cross Electrical Engineering is a prominent player in the Australian electrical contracting sector. It operates across the resources, commercial, and infrastructure markets.

While not directly involved in AI, it is well-placed to capitalise on the growing demand for data centres, as noted by TAMIM. Data centres are crucial for AI operations and require substantial electrical infrastructure.

The global data centre market is estimated to grow at a compound annual growth rate of 9.6% during the period 2023-2030, driven by the increasing adoption of cloud computing and AI technologies.

The market has recognised this potential. Southern Cross’s share price surged nearly 140% in the past year, reflecting strong market demand for its services. It is “riding a wave of AI momentum,” TAMIM notes.

Moreover, the company is expanding its business. Following its acquisition of MDE Group in June, management upgraded the ASX AI stock’s FY24 EBITDA guidance to $53 million.

Data centres are electrically dense, with electrical work comprising the largest component of construction costs,” according to TAMIM. The group has announced thirteen data centre awards totalling over $120 million in the last four years.

The company expects this growth to be sustainable, with further earnings growth anticipated in FY26 and beyond.

Beyond TAMIM, other experts are bullish on Southern Cross Electrical Engineering. It is rated as a strong buy according to the consensus of broker estimates on CommSec.

IPD is capitalising on AI infrastructure demand

IPD Group is an Australian distributor of electrical products and solutions. It plays a crucial role in energy management and automation.

As AI and data centres expand, IPG’s services are becoming increasingly critical, putting it at the forefront of TAMIM’s picks and shovels strategy. This, it says, could make it a potentially attractive ASX AI stock.

The company supplies essential electrical infrastructure products to the market. As noted by TAMIM, “IPD Group has demonstrated its capabilities in the data centre space by successfully completing projects such as supplying low-voltage switchgear for the Stack data centre.”

IPG expects robust earnings growth, with FY24 EBITDA projected between $39 million and $39.5 million. According to my colleague Kate,  the company could benefit from power shortages caused by AI-related demand.

The company has already completed several large data centre projects. TAMIM says this could be a tailwind as demand for cloud computing increases.

[IDP’s FY 2024] guidance reflects the company’s strong performance and the positive impact of its recent acquisitions, including EX Engineering and CMI Operations, which have strengthened its electric vehicle infrastructure team and expanded its customer reach.

In addition to TAMIM, Bell Potter analysts have a buy rating on IPD Group, with a $5.60 price target. According to CommSec, the consensus broker rating is a strong buy.

ASX AI stocks come in many shapes and sizes

Investing in ‘picks and shovels’ ASX AI stocks could be a sound strategy. Stocks like Southern Cross Electrical Engineering and IPD Group provide essential electrical infrastructure and services, positioning them as indirect beneficiaries of the AI revolution.

As always, consider your own personal financial circumstances before investing.

The post 2 ‘pick and shovel’ ASX stocks to cash in on the AI megatrend appeared first on The Motley Fool Australia.

More reading

• Top ASX AI stocks to buy in June 2024
• 3 under the radar ASX shares to buy this month
• Is this ASX small-cap stock an overlooked beneficiary of the AI boom?
• Why Alligator Energy, Data#3, Fisher & Paykel, and IPD shares are storming higher
• 2 of the best ASX growth shares to buy right now

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

Goldman Sachs is one of the most highly respected investment banks out there.

Its analysts scour the globe for investment opportunities and then recommend them to investors.

While the broker has buy ratings on a number of ASX shares, it has a coveted list that is only for the crème de la crème.

That list is Goldman’s conviction list. In the Asia-Pacific region it currently contains 29 companies, with only four coming from the Australian share market.

One of those is cloud accounting platform provider Xero Ltd (ASX: XRO).

Why are Xero shares among the best in the Asia-Pacific region?

Goldman is feeling positive on the company due partly to its strong performance in FY 2024. The broker said:

Xero reported FY24 Sales/EBITDA +0.3%/+10% vs. GSe, while FY25 operating expense to revenue is expected to be 73% in FY25, in-line with GSe prior 72.6%. Rule of 40 exceeded (41%) and record EBIT margins delivered (2H24 of 21% vs. 10% in 1H24, 8% 2H23) as XRO benefits from strong revenue growth, cost controls and much lower than expected capex.

But the real reason to be positive is the company’s long-term outlook and huge market opportunity. Goldman highlights that with 4.16 million subscribers, Xero is only really scratching at the surface of its addressable market. This gives it a multi-decade runway for growth at a time when small businesses are digitising. It explains:

Xero is a Global Cloud Accounting SaaS player, with existing focuses in ANZ, UK, North American and SE Asian markets. We see Xero as very well-placed to take advantage of the digitisation of SMBs globally, driven by compelling efficiency benefits and regulatory tailwinds, with >100mn SMBs worldwide representing a >NZ$100bn TAM. Given the company’s pivot to profitable growth and corresponding faster earnings ramp, we see an attractive entry point into a global growth story with Xero our preferred large-cap technology name in ANZ – the stock is Buy rated.

Big return potential

According to the note, the broker currently has a conviction buy rating and $164.00 price target on Xero’s shares.

Based on its current share price of $130.94, this implies potential upside of 25.5% for investors over the next 12 months.

To put that in context, a $10,000 investment would turn into approximately $12,500 if Goldman is on the money with its recommendation.

All in all, it believes this makes Xero one of the best investment options in the whole Asia-Pacific region.

The post Why Xero could be one the best shares to buy in the Asia-Pacific appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Given the cost of living crisis, it’s probable that many readers don’t have as much in their savings accounts as they would like.

But don’t worry if that’s the case because history shows that it’s possible to build a meaningful nest egg by following in the footsteps of Warren Buffett. Even when starting from zero.

Especially if you follow the Oracle of Omaha’s “golden rule” of investing.

What is Warren Buffett’s golden rule?

The legendary investor’s golden rule is very simple. The Berkshire Hathaway (NYSE: BRK.B) leader famously remarked:

Rule No. 1: Never lose money.

And to highlight just how important this rule is for investing, Buffett then adds:

Rule No. 2: Never forget Rule No. 1.

You might now be thinking that this golden rule isn’t very helpful because it’s so obvious and simple. But there’s actually more to it that first meets the eye.

That’s because when investing in ASX shares, it can be very tempting to chase big gains by investing in companies that people on message boards or Reddit (NYSE: RDDT) groups are touting as the next big thing and a way to get rich quickly.

Time and time again investors get sucked into these types of investments. And time and time again they will destroy significant wealth buying these highly speculative ASX shares.

You only need to look at companies like Brainchip Holdings Ltd (ASX: BRN) and Weebit Nano Ltd (ASX: WBT) to see this. Both of these semiconductor companies are attempting to compete with giants such as US$3 trillion Nvidia (NASDAQ: NVDA) in the chip market with comparatively minuscule budgets.

And so far, based on their insignificant revenue generation, they look unlikely to deliver on the grandiose goals that stock spruikers are saying is possible.

This has led to their shares losing approximately 50% and 65% of their value, respectively, over the last 12 months (and significantly more from their highs).

Why it’s important not to lose money

If you lose money, you have an uphill battle to get even again and then to compound your way to significant wealth.

For example, let’s imagine you make a single $20,000 investment into a balance portfolio of high quality ASX shares. If you can generate an average annual return of 10% for the next 30 years, you would end up with a portfolio valued at approximately $350,000.

Now imagine that you start with a $20,000 investment but lose 65% during your first year. At the beginning of year two you will have $7,000. If you now compound this amount for 29 years at 10% per annum, you would end up with an investment portfolio valued at approximately $111,000.

This means that the one gamble you took on a speculative ASX share in the first year has cost you $239,000.

How to grow your wealth

Instead of putting all your money on a speculative ASX share, investors might want to consider putting what they can into a balanced portfolio of high quality shares that have strong business models and sustainable competitive advantages.

This approach has served Buffett well over the years and there’s nothing to say that it won’t serve you equally well.

If you can do this with $500 a month, even starting from zero you would have a nest egg of $1 million in 30 years if you achieve a 10% per annum return. That return is of course not guaranteed but is in line with historical averages. So, it certainly is something to aim for.

Final thoughts

Overall, I think this shows the importance of not losing money recklessly with ASX shares.

Instead, investors ought to consider investing in quality, profitable companies that have sustainable competitive advantages and positive outlooks.

Resist temptation and grow your wealth slowly like Warren Buffett.

The post With nothing in my savings account, I’d use Warren Buffett’s golden rule to build wealth appeared first on The Motley Fool Australia.

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• Nvidia stock is still a great buy — but when should investors sell shares?
• Prediction: This will be Nvidia’s next big move
• Is Nvidia stock a buy after the 10-for-1 stock split?
• Will Apple stock be worth more than Nvidia by 2025?

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

New research shows 54% of Australians have little or no understanding of the tax concessions available within superannuation. This means they may be missing out on thousands of dollars in tax savings.

Women and Gen Zs are particularly affected, according to financial advisory firm Findex.

Its data reveals that 65% of women and 65% of Gen Zs have little to no understanding of tax concessions.

The research also shows that 28% of Australians have never added extra money to their superannuation.

The first thing to learn is that personal superannuation contributions (up to a cap) are taxed at just 15%.

This is far lower than the marginal tax rate that most Australian workers pay. This means that you can save significant money by clicking a few buttons online. Let’s find out more.

You’ll save on tax by adding money to superannuation

Daniel Slabicki, a senior manager at Findex, explains that individuals can make personal concessional (pre-tax) superannuation contributions up to a cap of $27,500 for the 2024 financial year (FY24).

These contributions include the compulsory Superannuation Guarantee payments made by your employer, any salary sacrifice amounts you have arranged, and any extra money you choose to add.

Say you contribute $8,000 of extra funds into superannuation. That money is then taxed at 15% within the fund. This leaves $6,800 to be invested by the fund according to your selected strategy.

When you fill in your tax return, you then claim a tax deduction for the $8,000.

Alex Duonis, a tax advisory partner at Findex, explains the impact:

A high earning taxpayer may obtain a tax deduction at a rate of up to 47.5% in respect of such super contributions but may only pay contributions tax at the fund level of 15%, thus generating a potential immediate tax arbitrage benefit of 32.5%.

It’s important to remember that after depositing your funds, you must fill in a Notice of Intent to Claim or Vary a Deduction for Personal Super Contributions form and send it to your superannuation fund.

The deadline to do this is the earlier of the date you lodge your income tax return and the last day of the income year after the income year in which you made the contributions (typically the following 30 June).

A few things to be aware of…

Slabicki says workers on high incomes should be mindful of the Division 293 tax.

He explains:

An additional 15% tax on concessional superannuation contributions applies to individuals who earn more than $250,000 per annum. High income earners should consider this when contemplating whether to make additional personal superannuation contributions this year.

Slabicki also points out that unused concessional caps from the past five years may be carried forward. This means you may be able to make additional concessional contributions above the $27,500 cap for FY24.

However, the total value of your superannuation must have been less than $500,000 on 30 June of the previous year to use the carry-forward benefit.

Matthew Swieconek, Findex Head of Investment Relations, says superannuation tax concessions allow workers to save more for their retirement in less time.

If you want to give your superannuation a boost, here are more ways to get money into your fund.

The post Saving tax through superannuation: What you need to know appeared first on The Motley Fool Australia.

More reading

• With nothing in my savings account, I’d use Warren Buffett’s golden rule to build wealth
• These ASX shares could rise 25% to ~50%
• 2 outstanding ASX 200 shares to buy and hold for a decade
• Brokers name 3 ASX dividend shares to buy
• What will happen to CSR shares next week?

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