Category: Stock Market

Investors with a high tolerance for risk might want to check out the ASX tech stock in this article.

That’s because if analysts at Bell Potter are on the money with their recommendation, it could double your money for you over the next 12 months.

Which ASX tech stock?

The tech stock in question is environmental technology company Calix Ltd (ASX: CXL).

It is focused on solving global challenges in industrial decarbonisation and sustainability. This includes CO2 mitigation, sustainable minerals processing, advanced batteries, biotechnology, and water treatment.

Bell Potter highlights that Calix is commercialising and developing a range of environmentally friendly solutions for industry. These solutions are derived from its patented minerals processing technology, the Calix Flash Calciner (CFC). It notes that the CFC is a patented reinvention of the calcination process that produces very high surface area nano-active materials, without the safety concerns or high production costs of nanoparticles.

In addition, Bell Potter points out that the technology can be used to separate and capture the CO2 by-product when decomposing carbonates into oxides, such as during the manufacture of cement and lime.

The broker notes that this CFC technology can be adapted for a broad range of applications based on a variety of minerals. However, the company has prioritised solutions for five target areas with a combined addressable market of $70 billion.

Big returns but high risk

Bell Potter is cautiously positive on the company’s long-term outlook and has reaffirmed its speculative buy rating with a $2.40 price target. Based on its current share price of $1.17, this implies potential upside of 105% for this ASX tech stock over the next 12 months.

To put that into context, a $10,000 investment in this stock today would turn into $20,500 if the broker is proven correct with its recommendation and valuation.

Though, it is worth highlighting that you could just as easily lose half your money (or more) from a speculative investment like this. So, this is really one for only those with a very high tolerance for risk.

Bell Potter concludes:

CXL’s growing suite of CFC applications target global challenges, including decarbonisation of hard-to-abate industrial processes (lime, cement and steel making), and improvement to supply chain efficiency (lithium concentrate value adding). CXL represents a valuable sustainable investing opportunity for ESG-focussed investors. CXL is a development company with prospective operations and cash flows only. Our Speculative risk rating recognises this higher level of risk and volatility of returns.

The post Guess which ASX tech stock could double in value appeared first on The Motley Fool Australia.

More reading

• If I buy 1,000 ANZ shares, how much passive income will I receive?
• Big bank bargain: Are this week’s tumbling ASX 200 bank shares a good buy?
• Buy and hold these ASX dividend shares until 2034
• Guess which ASX 200 stock just boosted its dividend payout ratio
• Why QBE shares could deliver huge returns for investors that buy them today

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

ASX 200 bank shares delivered mixed results in the first half of 2024, and views on the sector’s outlook are also divided.

The S&P/ASX 200 Banks Index (ASX: XBK) has had a notable year, up almost 13% year-to-date. Not yesterday, though. The banking basket slipped into the red by around 40 basis points at the close of trading on Wednesday.

The big four banks — National Australia Bank Ltd (ASX: NAB), Australia and New Zealand Banking Group Ltd (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), and Westpac Banking Corp (ASX: WBC) — were down less than 1% on Wednesday, but have trended lower generally these past three months.

With the pullback, are ASX 200 bank shares still a smart investment?

What’s happening with the big four ASX 200 bank shares?

All four banking majors trended lower yesterday amid a broader market selloff. The benchmark S&P/ASX 200 Index (ASX: XJO) drifted around 0.5% into the red at Wednesday’s close, similar to the banking index.

However, over the past year, investors who held ASX 200 bank shares have outperformed the broader market.

The benchmark index has lifted around 1.5% in the past year. Meanwhile, the banking sector is up 12.5% – an 11% advantage.

What are experts saying?

Despite these gains, some analysts are concerned about valuations in the sector. Goldman Sachs is one of those parties. It believes offshore banks might be more attractive to those interested in the space.

In 2015 for example, the average Australian bank’s return on equity (ROE) was among the highest globally, the broker notes.

However, from 2015 to 2023, the ROE and return on tangible equity (ROTE) have declined significantly. Now, they rank among the lowest globally.

Goldman Sachs states, “Australian banks now actually earn the lowest ROTE of global comparable banks.” This decline is due to compressed net interest margins and reduced low capital-intensive non-interest income.

Goldman Sachs rates Commonwealth Bank and Westpac as sell. It cites valuation concerns and risks in technology disruption for the view on these two ASX 200 bank shares. “We don’t think [Commonwealth Bank] justifies the extent of its valuation premium to peers,” it noted in its sector analysis.

It has a neutral rating on NAB due to the balance of solid fundamentals but challenging valuations. ANZ meanwhile gets a buy rating for its productivity benefits and improved profitability in its institutional business.

Meanwhile, Airlie Funds Management has reportedly trimmed its position in CBA, supposedly “the most underweight CBA in the history of [the] fund”, according to The Australian Financial Review.

This is despite shares in the banking giant climbing 28% in the last 12 months and last week nudging a 52-week closing high of $124.85.

Citi has some positive comments on CBA — despite rating it a sell. It said the bank’s exposure to, and performance in, retail banking may be enough to “justify continued outperformance versus its peer group”, the AFR reports.

Citi added ASX 200 banks look to be priced at a premium above “core earnings growth fundamentals”.

Valuation concerns

Despite poor ROE and ROTE performance, Australian banks’ price-to-book multiples remain high, making them some of the most expensive banks globally, Goldman Sachs explains.

Australian banks are currently trading at the 96th percentile versus history on a ROE vs. price-to-book multiples basis. The valuation discrepancy has expanded despite weaker relative profitability.

Here is the current list of consensus recommendations for each of the banking majors, with the respective number of buys making up that view:

• ANZ – Hold (7 buys)
• CBA – Sell (4 buys)
• WBC – Hold (4 buys)
• NAB – Hold (2 buys)
• (All recommendations per CommSec)

Notably, despite the consensus view, each of the ASX 200 banking shares still shows a drop in positivity.

Takeout on ASX 200 bank shares

ASX 200 bank shares have shown strong returns over the past year. However, investors are wise to be cautious, in my view. With concerns about overvaluation and economic headwinds, experts warn it’s essential to consider valuations and profitability in the sector.

As always, you should consider your own personal financial circumstances before any investment decisions.

The post Big bank bargain: Are this week’s tumbling ASX 200 bank shares a good buy? appeared first on The Motley Fool Australia.

More reading

• If I buy 1,000 ANZ shares, how much passive income will I receive?
• Will the US Fed finally cut interest rates this week?
• 2 ASX large-cap stocks that look cheap right now
• 1 popular ASX stock I’m steering clear of
• Forget Westpac shares and buy these ASX income stocks

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

If you want to make some buy and hold investments for your income portfolio, then it would be worth looking for ASX dividend shares with strong long-term outlooks.

But which shares could deliver the goods for investors over the next decade? Let’s take a look at three quality options:

APA Group (ASX: APA)

APA Group could be a great buy and hold option for investors. Just ask its long term shareholders.

They will tell you that the energy infrastructure company is on course to increase its dividend for the 20th consecutive year.

The good news is that analysts at Macquarie believe this ASX dividend share can then continue this trend for the foreseeable future.

The broker is forecasting dividends per share of 56 cents in FY 2024 and then 57.5 cents in FY 2025. Based on the current APA Group share price of $8.33, this equates to 6.7% and 6.9% dividend yields, respectively.

Macquarie has an outperform rating and $9.40 price target on its shares.

Coles Group Ltd (ASX: COL)

Another ASX dividend share that could be a good buy and hold investment option is Coles.

It is one of Australia’s big two supermarket operators. In addition, it has a significant liquor store network and a joint ownership in the Flybuys loyalty program.

Combined, these businesses appear well-placed to support solid earnings and dividend growth over the long term.

Morgans appears to believe this is the case and is forecasting fully franked dividends of 66 cents per share in FY 2024 and then 69 cents per share in FY 2025. Based on the current Coles share price of $16.97, this implies yields of approximately 3.9% and 4.1%, respectively.

The broker has an add rating and $18.95 price target on its shares.

Endeavour Group Ltd (ASX: EDV)

A third ASX dividend share that could be a great buy and hold option is Endeavour. It is the liquor giant behind store brands such as BWS and Dan Murphy’s, as well as a large network of hotels.

Goldman Sachs is very positive on the company due to its market leadership position and attractive valuation. It expects this to support the payment of fully franked dividends of approximately 21 cents per share in FY 2024 and then 22 cents per share in FY 2025. Based on the current Endeavour share price of $5.03, this will mean dividend yields of 4.2% and 4.4% yields, respectively.

The broker currently has a buy rating and $6.30 price target on its shares.

The post Buy and hold these ASX dividend shares until 2034 appeared first on The Motley Fool Australia.

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• Overinvested in BHP shares? Here are two alternative ASX dividend stocks
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Motley Fool contributor James Mickleboro has positions in Endeavour Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Macquarie Group. The Motley Fool Australia has positions in and has recommended Apa Group, Coles Group, and Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Who doesn’t enjoy a boost to their income? Dividends are a big reason why many choose to invest. That’s why passive income chasers pay attention when an ASX 200 stock lifts its dividend payout ratio — bigger payments could be ahead.

Yesterday, a $17 billion Australian company highlighted an increase in its payout ratio. The determination, shared in an investor briefing, follows an extended period of debt reduction by one of the country’s steadfast energy providers: Origin Energy Ltd (ASX: ORG).

So, what does it mean for the back pockets of its shareholders?

Dividends to take a bigger share of earnings pie

Operating a utility company can be extremely capital-intensive. Just take a look at the gross margins of Origin and AGL Energy Limited (ASX: AGL). We’re talking respective margins of 20.8% and 28% before removing operating expenses.

Nonetheless, utility companies can still offer a fountain of dividends. Nearly every household’s needs-based nature of electricity and gas provides a reliable income. For Origin Energy, it means investors can enjoy a dividend yield of 4.8% from this ASX 200 stock.

But what about the increased dividend payout ratio?

As per the investor briefing, Origin Energy will target a payout ratio of at least 50% of free cash flow.

This is slightly different from what a standard dividend payout ratio reflects. Typically, this figure is based on the percentage of net income or net profit after tax (NPAT) paid as a dividend. Free cash flow differs from NPAT, representing the company’s operating cash flow minus its capital expenditures.

Previously, Origin Energy’s targeted payout ratio was set between 30% and 50%.

Does it mean more dividends from this ASX 200 stock?

What really matters to most is whether it means more dollars hitting the account. Unfortunately, the answer to this is not as straightforward.

While Origin’s payout ratio now has a higher minimum, future free cash flows (FCF) will be the deciding factor.

As shown on the right-hand side of the image above, the energy company’s adjusted FCF have stagnated across the last three financial years. If Origin’s free cash flow were to fall in FY24, it could mean a bigger slice of a smaller pie.

The share price of this ASX 200 stock is up 17.8% year-to-date.

The post Guess which ASX 200 stock just boosted its dividend payout ratio appeared first on The Motley Fool Australia.

More reading

• Origin share price outpacing the ASX 200 on Eraring lifeline extension
• Which ASX shares could be set to benefit from the federal budget?
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Motley Fool contributor Mitchell Lawler 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.

QBE Insurance Group Ltd (ASX: QBE) shares have been in fine form over the last 12 months.

During this time, the insurance giant’s shares have stormed 22% higher.

This is almost triple the return of the ASX 200 index over the same period.

Can QBE shares keep rising?

The good news for investors is that it isn’t too late to invest according to analysts at Goldman Sachs.

According to a note, its analysts have retained their buy rating and $20.90 price target on the company’s shares.

Based on its current share price of $18.32, this implies potential upside of 14% for investors over the next 12 months.

In addition, the broker is forecasting dividend yields of 5%+ each year through to at least FY 2026. This boosts the total potential 12-month return to approximately 19%.

If this proves accurate, it would turn a $10,000 investment into approximately $11,900 if you reinvest the dividends.

Why is the broker bullish?

Goldman notes that the insurance giant has recently held a number of investor meetings. It was pleased with what management said, highlighting that it is confident in can deliver a combined operating ratio (COR) of 95% in North America by 2025. As a reminder, anything below 100% is profitable for insurers.

In light of this, the broker believes that there is upside risk to consensus COR estimates. It said:

In this context, we flag 1) Upside risk to FY25 consensus COR of 92.8% (VA) – we see <92.5% as possible reflecting improvement from North America non core + organic upside. 2) North America non core run off we think could support ~0.7% -1.2% improvement to Group COR alone. 3) Organic trends also suggest possible underlying COR expansion into FY25.

Goldman also highlights a number of other key items and reasons why it thinks QBE shares could re-rate higher from here. It adds:

Rate increases earning through FY25 versus moderating claims inflation expected to remain supportive into FY25 – 1Q24 Group rate was 7.3% versus inflation assumption of 5% for FY24. b) Reinsurance markets increasingly more positive with commentary from 1 June renewals suggest lower rates (particularly in upper layers) which are supportive of direct insurer margins and positive read into 2025. c) QBE’s 2024 perils allowance was rebased to an 80% probability of sufficiency (out of the last 10 years) perhaps suggesting less pressure into FY25 and perils growth more in line with book. Perils experience to date has been below expectations. d) All in, there appears to be strong COR tailwinds to offset moderating yield pressures which is supportive of ROE / Valuation into FY25. 4) Valuation comparison versus global peers also suggests upside for QBE across P/E and P/B particularly in context of strong ROE.

The post Why QBE shares could deliver huge returns for investors that buy them today 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. has positions in and has recommended Goldman Sachs Group. 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.

The Steadfast Group Ltd (ASX: SDF) share price has dropped 8.9% over the past 12 months to close at $5.41 on Wednesday. The insurance broker’s shares have underperformed the S&P/ASX 200 Index (ASX: XJO), which is up 8% over the past year.

The following chart shows that the Steadfast share price has exhibited little volatility. Over the last 10 years, the maximum drop from the high price to the low has been 16%, except in March 2020 during the height of the COVID-19 pandemic.

While past share price movements don’t predict future trends, the resilient performance of the Steadfast share price seems to be supported by its strong fundamentals, in my view.

So, is this a buying opportunity for this consistent dividend payer?

Strong business fundamentals

Steadfast Group is Australia’s largest general insurance broker network, providing businesses and individuals with a broad range of insurance products and services. The company operates through a network of brokerages, offering risk management solutions and support to its members. Steadfast also has interests in underwriting agencies, giving it a diversified presence in the insurance industry.

Steadfast reported a robust set of numbers in its 1H FY24 results. Underlying revenue rose 19.4% to $790.4 million, and underlying earnings before interest, tax, and amortisation (EBITA) soared by 21.4% to $229 million. While acquisitions supported the growth during the reporting period, the organic growth was also strong at 13.4%.

Its underlying net profit after tax (NPAT) increased by 17.5% to $106 million, while statutory NPAT rose similarly by 18.5% to $100 million. On a per-share basis, underlying diluted earnings rose 12.2% to 10.2 cents per share (cps).

Steadfast’s pricing power and volume growth underscored the strong results, while the company attributes its acquisition strategies as key to success. Managing director & CEO Robert Kelly explained:

Once again, our underlying earnings growth for the half year was driven by sustained organic growth from higher prices from insurers and volume increases in the Group’s insurance broking and underwriting agencies, and continued delivery of our acquisition strategy.

Consistent with our growth strategy, Steadfast Group acquired Sure Insurance, a business that is complementary to the existing portfolio. This acquisition, together with our Trapped Capital acquisitions made during the half year, further enhances Steadfast Group as the largest general insurance broker network and the largest group of insurance underwriting agencies in Australasia.

Additionally, we are progressing well with the implementation of our US expansion strategy with the acquisition of ISU Group with its established and trusted network and experienced management team.

For the full year in FY24, management guides for a 22% growth in its underlying EBITA and 18% in NPAT at the midpoint of its estimated range. Underlying diluted EPS growth is forecast to grow between 11% and 16%.

Consistent dividend payer

Among ASX investors, Steadfast is known for its steady increase in dividends.

Encouraged by a 12.2% growth in its underlying EPS in its half-year FY24 results, the company raised its fully-franked dividend by 12.5% to 6.75 cps.

Since its initial public offering in 2013, the company has consistently increased its dividend payments from 4.5 cps in FY14 to 15.75 cps in the last 12 months to March 2024. All these years, the company maintained 100% franking on its dividends, offering tax benefits to its shareholders. Its payout ratios have also increased over time, hovering around 60% to 75% in recent years.

At the current share price, Steadfast shares offer a dividend yield of 2.9%.

How expensive are Steadfast shares now?

Steadfast shares are trading at 20x FY24’s estimated earnings, which is near the midpoint of its historical trading range of 13 to 25 times.

Its smaller competitor, AUB Group Ltd (ASX: AUB), is trading at a similar multiple with a price-to-earnings ratio (PER) of 20 times based on FY24 earnings estimates provided by S&P Capital IQ.

For comparison, NIB Holdings Limited (ASX: NHF) is trading at a PER of 16 on FY24 earnings estimates, noting nib is an insurance company, which is different from insurance brokers.

Foolish takeaway

While the Steadfast share price has been moving sideways, I think its business fundamentals remain strong.

Based on its historical trading range and compared to its smaller peer, AUB Group, its shares appear to be inexpensive to me. I think it’s a good candidate for any portfolio seeking stable growth.

The post Down 9% in a year, is it time to buy this ASX 200 dividend stock? appeared first on The Motley Fool Australia.

More reading

• Buy and hold these ASX dividend shares until 2034
• Guess which ASX 200 stock just boosted its dividend payout ratio
• Why QBE shares could deliver huge returns for investors that buy them today
• Woodside shares hit a multi-year low this week, should you buy?
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor Kate Lee 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 positions in and has recommended Steadfast Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Woodside Energy Group Ltd (ASX: WDS) share price hit a 52-week low this week, dropping to $26.99 on Tuesday. It could be a contrarian buy when resource and cyclical businesses hit lows. The Woodside share price is down around 20% in the past year, as shown on the chart below.

It’s common for share prices of companies in sectors like iron ore or retail to be volatile over the years as investors react to what’s happening.

As reported by my colleague Bernd Struben, the Organization of the Petroleum Exporting Countries and its partners (OPEC+) will lift production in October, with current production cuts removed by June 2025. Higher supply could result in lower prices.

But, Struben also reported earlier this week that energy prices are rebounding, with the Brent crude oil price up to around US$82 per barrel (up from US$79.62 on Friday).  

Is the Woodside share price a buy?

Sometimes, the best time to buy a cyclical share is when there are numerous negatives which are expected to stick around the foreseeable future. It’s under those conditions where the share price can reach the most appealing low, making it the best time to invest.

The company is one of the region’s biggest oil and gas businesses, so its scale provides it with several benefits, including solid profit margins and a sturdy balance sheet.

I like the moves by the company to improve its balance sheet further. In the last few months, the company has completed the sale of a 10% stake in the Scarborough joint venture to LNG Japan for US$910 million, and it announced the sale of a 15.1% stake in the Scarborough joint venture to JERA for US$1.4 billion.

We can’t know what energy prices will do in the short term, but unlocking some of the value of its projects is wise, in my opinion. It gives the company more funding for existing projects such as Trion while also giving it a cash pile for future projects, acquisitions and/or shareholder returns.

Another recent positive for the business was that its Sangomar project achieved ‘first oil’, which will soon generate another stream of earnings for the company.

My verdict

With the lower Woodside share price, prospective investors can receive a larger dividend yield. The broker UBS currently projects that Woodside could pay an annual dividend per share of US$1.05, which translates into a grossed-up dividend yield of approximately 8%.

If investors are interested in Woodside shares, this could be a good time to consider investing because of its lower valuation, the high projected dividend yield and the first oil achievement at Sangomar. But, some investors may not like the company because of the fossil fuel element.

The post Woodside shares hit a multi-year low this week, should you buy? appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Thursday
• Here are the top 10 ASX 200 shares today
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• Why Bapcor, Botanix, Judo Capital, and Woodside shares are rising today
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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. 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.

On Wednesday, the S&P/ASX 200 Index (ASX: XJO) was out of form again and dropped into the red. The benchmark index fell 0.5% to 7,715.5 points.

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

ASX 200 expected to jump

The Australian share market looks set to jump on Thursday following a strong night on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 53 points or 0.7% higher this morning. In the United States, the Dow Jones was down 0.1%, but the S&P 500 rose 0.85% and the Nasdaq jumped 1.5%. The S&P 500 and Nasdaq indices both climbed to new record highs overnight.

Oil prices rise

ASX 200 energy shares including Beach Energy Ltd (ASX: BPT) and Woodside Energy Group Ltd (ASX: WDS) could have a good session after oil prices rebounded overnight. According to Bloomberg, the WTI crude oil price is up 0.85% to US$78.57 a barrel and the Brent crude oil price is up 0.8% to US$82.60 a barrel. Summer fuel demand optimism has given oil a boost this week.

US inflation report

Investors were celebrating on Wall Street overnight after US inflation came in softer than expected. According to CNBC, the consumer price index (CPI) showed no increase in May. This compares to expectations of a 0.1% increase according to economists surveyed by Dow Jones. Following the release of the CPI data, futures traders lifted the chances of the US Federal Reserve cutting interest rates in September. This would be the first move lower since the early days of the pandemic.

Gold price rises

It could be a positive session for ASX 200 gold miners such as Newmont Corporation (ASX: NEM) and Northern Star Resources Ltd (ASX: NST) today after the gold price pushed higher overnight. According to CNBC, the spot gold price is up 1.2% to US$2,353.9 an ounce. The precious metal rose after the US inflation report sparked hopes that interest rates could fall this year.

WiseTech rated as a hold

The WiseTech Global Ltd (ASX: WTC) share price could be almost fully valued according to analysts at Bell Potter. This morning, the broker has reaffirmed its hold rating on the logistics solutions company’s shares with an improved price target of $100.00. This implies just 3.2% upside from current levels. It said that the price target “is a modest premium to the share price so we maintain the HOLD. Potential catalysts for the stock include a beat in the FY24 result – most likely at EBITDA – and strong guidance for FY25 consistent with or ahead of consensus.”

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

More reading

• Woodside shares hit a multi-year low this week, should you buy?
• Here are the top 10 ASX 200 shares today
• Top brokers name 3 ASX shares to buy today
• Why Bapcor, Botanix, Judo Capital, and Woodside shares are rising today
• These 3 ASX 200 shares were just rerated by top brokers

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

The Japanese share market has generated significant returns over the past year. The Betashares Japan-Currency Hedged ETF (ASX: HJPN) is an exciting investment to consider.

On the Tokyo Stock Exchange, we can find some of the leading Asian companies, including Toyota, Sony, Mitsubishi, Hitachi, Nintendo, Honda, Daikin Industries, Canon and Bridgestone.

I think there are a few good reasons to consider the HJPN ETF beyond just its past performance.

Diversification

The Japanese share market can provide exposure to under-represented sectors in the ASX share market.

Looking at the sector allocation, five industries have a weighting of more than 10% in the HJPN ETF: consumer discretionary (24.3%), industrials (23.4%), IT (17.9%), financials (10.4%), and healthcare (10.1%). Meanwhile, around half of the S&P/ASX 200 Index (ASX: XJO) is weighted to just two sectors, ASX bank shares and ASX mining shares.

Plenty of the leading Japanese businesses generate a “substantial portion” of their revenue outside of Japan, according to BetaShares, which is good underlying diversification of their earnings. A lot of the profit generated by large ASX blue-chip shares is generated within Australia (and New Zealand).

It’s currently invested in around 150 businesses, which is ample diversification in terms of holdings, in my opinion.

Improving situation for Japanese stocks

In the 12 months to 31 May 2024, the HJPN ETF delivered a net return of 37.47% and I think it could keep performing solidly. Remember, past performance is not a reliable indicator of future performance with this ASX ETF.

New rules and disclosures by the Tokyo Stock Exchange are targeting companies with “poor capital efficiency, asking them to disclose plans for how they will realise corporate value for shareholders”, according to investment outfit Alliance Trust.

Japan may be breaking from the shackles of its deflationary situation, which has affected its economy for decades. ‘Real’ wage growth – where wages rise faster than inflation – could keep deflation at bay.

Japan’s biggest union recently agreed to its first “significant” pay rise for its workers in 33 years.

Alliance noted that WTW economists believe wage growth and easing inflation could increase domestic consumption, benefiting Japanese shares, particularly domestic-focused Japanese stocks.

Reasonable fee

It’s not the cheapest ASX ETF, with an annual management fee of 0.56%. There are plenty of cheaper ASX ETFs out there, but I think it’s a fair cost for the specific Japanese allocation it can give to an Aussie’s portfolio. Active managers would typically charge at least 1% to invest in Japanese shares.

This fund also has currency hedging for the Japanese yen exposure, reducing the effect of currency fluctuations on portfolio performance.

Foolish takeaway

I think it’s a compelling ASX ETF to consider with actions that are supporting the Japanese economy and stock market. I don’t know what the short-term returns will be, but I’m optimistic about the longer term as companies better utilise their capital for growth and/or improve shareholder returns.

The post This ASX ETF has soared almost 40% in a year! Should you buy? appeared first on The Motley Fool Australia.

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• Here are the top 10 ASX 200 shares today
• 2 ASX shares to buy that are at 52-week lows
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Motley Fool contributor Tristan Harrison has positions in Alliance Trust Plc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Nintendo. 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.

Leading internationally-focused ASX-listed exchange-traded funds (ETFs) have gone on a strong run in recent months. In 2024 alone, the iShares S&P 500 ETF (ASX: IVV) unit price has risen 16%.

Fearful investors may be wondering if they’ve missed out. We don’t know for sure what’s going to happen next; my crystal ball isn’t working at the moment.

But, it may create envy to see ASX ETFs like iShares Global 100 ETF (ASX: IOO) and Vanguard MSCI Index International Shares ETF (ASX: VGS) reaching new highs.

Have we missed out on all the gains? Not necessarily…

Profit growth drives share prices

As the chart below shows, the IVV ETF, the IOO ETF and the VGS ETF have all delivered strong long-term gains for investors.

This has been driven by the performance of the underlying holdings – capital growth of an ETF’s investments drives the net asset value (NAV) of the ASX ETF.

Global powerhouses like Nvidia, Alphabet, Microsoft, Amazon and Apple have all seen their share prices climb in recent months, helping the international ASX ETFs rise.

It’s true that these funds are at, or close to, all-time highs. But they have reached all-time prices many times over the years – it would have been a mistake to avoid investing at those other times.

Business profits at Nvidia, Microsoft, and others keep rising, increasing their underlying value. Yes, interest rates are still high, but those US giants are delivering earnings growth to justify higher share prices, even if the price/earnings (P/E) ratio doesn’t change.

Should we invest?

For investors who regularly plan to buy one (or more) of these international ETFs, I suggest they stick with their plan and continue buying on schedule. Share markets can be high sometimes and dip sometimes. Dollar-cost averaging will hit those different peaks and troughs.

As for investors that prefer to be selective about price with their investment decisions, the above chart doesn’t say ‘great value’ at the moment. However, I believe the long-term has shown the share market can climb over a ‘wall of worry’, such as wars, pandemics, economic downturns and so on.

I believe the IVV ETF, IOO ETF, and VGS ETF could all be materially higher in five years than they are today, with those strong underlying businesses driving ongoing success.

I’d be happy enough to buy some units today for the long term of any of the international ASX ETFs I’ve mentioned, but if I won the lottery, I wouldn’t invest it all in one go – I’d tactically want to spread out the investing over the next year or two.

The post Is it too late to buy these soaring international shares ASX ETFs? appeared first on The Motley Fool Australia.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. 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 positions in and has recommended Alphabet, Amazon, Apple, Microsoft, Nvidia, and iShares S&P 500 ETF. The Motley Fool Australia has recommended Alphabet, Amazon, Apple, Microsoft, Nvidia, Vanguard Msci Index International Shares ETF, and iShares S&P 500 ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.