Category: Stock Market

BHP Group Ltd (ASX: BHP) shares were out of form on Wednesday. The mining giant’s shares ended the day almost 1% lower at $42.70.

Investors were hitting the sell button following the release of its fourth quarter update. This was despite the Big Australian reporting record iron ore production and delivering impressive copper production.

With the company’s shares now down 16% from their 52-week high, investors may be wondering if it is time to buy. So, let’s see what analysts are saying.

What are analysts saying about BHP’s update?

According to a note out of Goldman Sachs, its analysts were pleased with BHP’s strong finish to the financial year. This was particularly the case with its copper operations, which is good news given the positive outlook for the base metal. It commented:

A strong finish to the year across all divisions. Copper production of 505kt exceeded expectations by 8%, delivering the strongest production result in 15 years. All assets performed well with realised pricing better than GSe on provisional pricing lower TC/RCs. Spence exceeded guidance as the recent concentrator upgrades translated to a notable uplift in recoveries that should improve further, and grades bounced back at Escondida that will remain at similar levels as group copper production is expected to increase ~4% in FY25 (1.85-2.05Mt, GSe 1.94Mt).

Pilbara [iron ore] shipments of 75.9Mt came in 2% ahead but realised pricing was marginally lower than GSe; FY25 guidance of 282-294Mt is as expected (GSe/VA 288Mt/291Mt) as efforts focus on rail tie-ins and port debottlenecking ahead of volumes creep target of 305Mtpa by FY28.

In light of the above, the broker believes that BHP is going to report a full year result largely in line with the market’s expectations next month. It said:

We forecast FY24 U/L EBITDA of US$28.8bn (VA US$28.8bn – before Q) and U/L NPAT of US$13bn (VA US$13.3bn). We model 2H’24 U/L EPS of USc128/sh (US$6.5bn) and a final DPS of USc70/sh (55% payout, FY DPS of USc142/sh vs VA at USc149/sh). We expect net debt (BHP disclosed) at US$9.8bn (VA US$10.7bn).

Should you buy BHP shares?

In response to the update, Goldman Sachs has retained its buy rating and $48.40 price target on BHP’s shares.

Based on its current share price, this implies potential upside of approximately 13.5% for investors over the next 12 months.

In addition, a dividend yield of ~4.7% is expected over the period, which stretches the total potential return to approximately 18%.

Goldman believes its premium valuation is justified. It commented:

BHP is currently trading at ~6.0x NTM EBITDA (25-yr average EV/EBITDA of 6.6x), a slight premium to RIO on ~5.5x; and at 0.9xNAV vs RIO at 0.8xNAV. Over the last 10 years, BHP has traded at a ~0.5x premium to global mining peers. We believe this premium can be partly maintained due to ongoing superior margins and operating performance (particularly in Pilbara iron ore where BHP maintains superior FCF/t vs. peers).

The post Could BHP shares provide an 18% return for investors? appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Thursday
• BHP share price on watch after record-breaking FY24 iron ore production
• 5 things to watch on the ASX 200 on Wednesday
• No savings? I’d use the Warren Buffett method to earn lifelong passive income with ASX shares
• Why are BHP and other ASX 200 mining shares getting hammered on Tuesday?

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 downtrend in BrainChip Holdings Ltd (ASX: BRN) shares shows no signs of exhaustion with the ASX artificial intelligence (AI) stock hitting three-month lows on Tuesday.

Winding back to 27 June, a little less than three weeks ago, shares in Brainchip were fetching 22.5 cents. Since then, investors have continued to sell shares at lower and lower prices.

They finished the session on Wednesday at 19.8 cents, down 15% from this mark.

With the continued selling pressure, one can’t help but wonder, what’s next for Brainchip shares?

Brainchip’s struggles in FY24

Brainchip shares underperformed by a wide margin in FY24, plunging by nearly 39%. The stock peaked at 49 cents per share in February but has since fallen dramatically.

A post-mortem analysis shows that there were a couple of factors behind this volatility. Here’s the lowdown:

1. AI stock mania driving BrainChip shares

BrainChip’s significant rise in February was likely influenced by the soaring stock of US-listed AI giant Nvidia Corp (NASDAQ: NVDA).

For anyone who missed it, Nvidia’s stock price went vertical from around US$475 on 3 January to more than US$1,000 per share by May. This speculative trading drove up BrainChip shares despite the company’s unproven financial performance.

But it wasn’t long before the market snapped back to economic reality. Unlike Nvidia, which grew earnings by more than 600% in Q1, BrainChip reported a net loss of US$28.9 million for FY23, with sales declining by 95% year over year.

2. Disappointing fundamentals

BrainChip specialises in neuromorphic computing, a niche area within AI that replicates the human brain’s processing power.

The company released the second generation of this technology, Akida, in FY24. But despite this innovation, BrainChip has yet to secure significant royalty agreements for its intellectual property.

In the wake of declining revenues, this may have been a fan to the flames already charring BrainChip shares. Investors were expecting more.

As my colleague James said in a separate analysis, Brainchip “has promised the world and delivered nothing in a market dominated by a US$3 trillion behemoth”. That behemoth is Nvidia.

At the recent AGM, BrainChip CEO Sean Hehir said the company was in licensing discussions that could lead to potential sales in the audio and microcontroller segments.

However, as my colleague Rhys noted, “Investors will need to see that translated into real sales” first to get behind the company.

3. Sentiment is flat in BrainChip shares

Analysts are hesitant, too. Peak Asset Management recently recommended selling BrainChip shares following the lacklustre financials.

At the end of Q1 CY24, the company’s cash reserves decreased from US$14.3 million to US$13 million, with rising operating cash outflows and lower cash inflows from customers.

“Cash inflows from customers were lower in the March quarter compared to the prior quarter”, Peak AM said, noting it “prefer[s] other stocks at this stage of the cycle”.

Foolish takeout: What does this mean for investors?

AI has become somewhat of a mania in 2024. BrainChip alone faces stiff competition from major players like Nvidia.

This increased competition and the company’s financials have added to investor concerns about BrainChip’s ability to compete in this rapidly evolving market.

I’d say that’s why BrainChip shares have had a volatile year, and why the road ahead remains uncertain. While the company’s innovative technology holds promise, it needs to deliver on its revenue potential to regain investor confidence.

Investors might want to weigh the potential rewards against the risks.

The post Down 15% in less than 3 weeks, what’s next for Brainchip shares? appeared first on The Motley Fool Australia.

More reading

• BrainChip shares struggle in FY24 – what’s ahead for FY25?
• Is it time to give up on BrainChip shares?
• Brainchip share price tumbles 40% in the past year. What’s next?

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 Nvidia. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Insurance Australia Group Ltd (ASX: IAG) share price performance has been very pleasing in 2024 to date. It has risen almost 30%, while the S&P/ASX 200 Index (ASX: XJO) has only risen around 6%.

We shouldn’t try to predict where the IAG share price will be in two months. But, we can evaluate whether the ASX share is a good longer-term opportunity today.

Several factors have helped the insurer in recent times, including elevated premium increases (amid higher inflation), stronger investment earnings (thanks to higher bond yields and strong equity markets), and relatively stable natural peril events.

Soon enough, we will see the company’s FY24 results during the August reporting season.

Recent developments

IAG announced last month that it had signed two five-year strategic agreements with global reinsurers to improve its “future financial stability”.

The ASX insurance share said the long-term natural perils volatility protection with Berkshire Hathaway and Canada Lie Reinsurance provides “greater certainty over natural perils costs for customers.” This provides up to $680 million of additional protection annually and up to $2.8 billion over the five-year period.

This will “effectively limit” IAG’s natural peril costs to $1.28 billion in FY25, a 17% increase on the FY24 figure.

It also said it had purchased adverse development cover (ADC), which provides $650 million of protection for IAG’s long-tail reserves of approximately $2.5 billion.

The company revealed it expects the FY24 reported insurance profit to be at the upper end of its $1.2 billion to $1.45 billion guidance range, compared to $803 million in FY23. The reported insurance margin is expected to be at the upper end of the 13.5% to 15.5% guidance range, taking into account the ADC cost.

FY24 gross written premium growth is expected to be consistent with its “low double-digit” guidance.

So, things are going well for the company, and it has made moves to reduce long-term volatility.

Is the IAG share price an opportunity?

The broker UBS suggested the reinsurance deals are “likely to improve investor perceptions of earnings quality.”

UBS thinks the insurance margin will “push up through 16%” during FY25 after double-digit repricing during FY24. The broker then said:

We continue to believe consensus is under estimating peak-cycle margins, albeit the reinsurance deals announced today likely present a near-term drag. We are modelling a margin overshoot over the next 12-18 months, relative to mid-cycle guidance.

…A profit commission is payable in the event of favourable perils, effectively skewing IAG’s exposure to the upside whilst protecting downside.

UBS then noted that the 10-year average for IAG shares’ price/earnings (P/E) ratio is 15.5x, compared to the current IAG share valuation of 16.5x UBS’ estimated earnings for FY25.

UBS concluded with comments on the valuation:

This looks somewhat demanding and we see better value in other GI [general insurance] names at present.

The broker has a $7.10 price target on IAG shares, which implies that shareholders will not see any capital growth in 12 months, considering the current share price is $7.11.

The post Are IAG shares a buy before reporting season? appeared first on The Motley Fool Australia.

More reading

• Up 26% this year, what’s the view on IAG Shares?
• How ASX shares vs. property performed in June
• Here’s a recap on IAG shares in FY24 – and their FY25 outlook
• Here are the top 10 ASX 200 shares today
• 9 ASX 200 shares finishing FY24 on a 52-week high

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 Berkshire Hathaway. The Motley Fool Australia has recommended Berkshire Hathaway. 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 back on form and charging higher. The benchmark index rose 0.7% to 8,057.9 points.

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

ASX 200 expected to fall

The Australian share market looks set to fall on Thursday following a poor night on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 41 points or 0.5% lower this morning. In the United States, the Dow Jones was up 0.6%, but the S&P 500 fell 1.4% and the Nasdaq dropped 2.8%.

Oil prices charge higher

ASX 200 energy shares such as Beach Energy Ltd (ASX: BPT) and Woodside Energy Group Ltd (ASX: WDS) could have a good session after oil prices charged higher overnight. According to Bloomberg, the WTI crude oil price is up 2.6% to US$82.89 a barrel and the Brent crude oil price is up 1.6% to US$85.09 a barrel. A large drop in US inventories boosted prices.

Buy BHP shares

Goldman Sachs thinks BHP Group Ltd (ASX: BHP) shares are good value at current levels. In response to the mining giant’s fourth quarter update, the broker has retained its buy rating and $48.40 price target on its shares. This implies potential upside of over 13% for investors from current levels. It said: “After reflecting the June Q and financial disclosures ahead of the result, there is little change to our EBITDA forecasts; FY26 EPS increases 2% on minor changes to D&A and net interest.”

Gold price eases

It could be a subdued session for ASX 200 gold shares Newmont Corporation (ASX: NEM) and Northern Star Resources Ltd (ASX: NST) after the gold price eased lower overnight. According to CNBC, the spot gold price is down 0.15% to US$2,464.3 an ounce. This appears to have been driven by profit taking after the gold price reached a record high a day earlier.

Fortescue job cuts

Fortescue Ltd (ASX: FMG) shares will be on watch today after the miner announced major job cuts. While the company “remains resolute in its commitment to be the world’s leading green technology, energy and metals company”, it revealed that “initiatives are being implemented to simplify its structure, remove duplication and deliver cost efficiencies.” In light of this and in order to deliver on its strategy and generate the maximum value for shareholders, approximately 700 people from across Fortescue’s global operations will be offered redundancies.

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

More reading

• I’d buy Woodside shares today to generate $1,000 of monthly passive income
• Here are the top 10 ASX 200 shares today
• Why Cettire, Core Lithium, Northern Star, and Step One shares are charging higher
• ASX 200 hits record high, UBS keeps end of year target steady
• ASX gold shares race higher after gold price hits record high

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 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.

Are you an income investor on the hunt for new ASX dividends stocks to buy?

If you are, then you may want to check out the two listed below that analysts are tipping as buys. Here’s what they are saying about them:

Cedar Woods Properties Limited (ASX: CWP)

A recent note out of Morgans reveals that its analysts are feeling positive about this property company and see it as an ASX dividend stock to buy.

In fact, the broker has put Cedar Woods’ shares on its best ideas list with an add rating and $5.60 price target.

Morgans thinks that the company’s shares are undervalued and deserve to trade on higher multiples. The broker explains:

CWP is a volume business and the demand for lots looks to be improving, with margins to invariably follow. CWP’s exposure to lower priced stock in higher growth markets sees further potential to drive earnings. On this basis, we see every reason for CWP to trade at NTA and potentially at a premium, were the housing cycle to gain steam through FY25/26.

In respect to dividends, Morgans is forecasting dividends per share of 18 cents in FY 2024 and then 20 cents in FY 2025. Based on the current Cedar Woods Properties share price of $4.80, this will mean dividend yields of 3.75% and 4.2%, respectively.

Suncorp Group Ltd (ASX: SUN)

Analysts at Goldman Sachs are tipping insurance giant Suncorp as an ASX dividend stock to buy right now.

The broker currently has a buy rating and $18.00 price target on the insurance giant’s shares.

Goldman is feeling positive about the company due to tailwinds in the general insurance market and potential capital returns. It said:

We are favourably disposed to Suncorp, noting in large part the tailwinds that exist in the general insurance market – i.e., very strong renewal premium rate increases and the benefit of higher investment yields. We think the strong rate momentum that SUN is getting should offset any volume pressures. SUN’s underlying margins are also expected to stay within 10-12% despite higher reinsurance costs, increased perils allowances and lower reserve release assumptions as SUN benefits from significant price increases. Further, we note that we could start to see more meaningful benefits to margin from underlying claims inflation abating. Separate to our thesis, we also see possible catalysts on the horizon for SUN including capital return post the bank sale, if completed.

As for income, Goldman expects this to support the payment of fully franked dividends per share of 79 cents in FY 2024 and then 85 cents in FY 2025. Based on the Suncorp share price of $17.03, this will mean yields of 4.6% and 5%, respectively.

The post Analysts say these ASX dividend stocks are top buys appeared first on The Motley Fool Australia.

More reading

• Buy Coles and these ASX 200 dividend stocks in July
• Leading brokers name 3 ASX shares to buy today
• 3 ASX 200 passive income stocks to buy in July
• Analysts say these ASX dividend shares are top picks in July
• 5 things to watch on the ASX 200 on Monday

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 share market is a great place to find great dividend stocks that offer an ASX dividend yield of at least 7%.

It’s pleasing to receive annual passive income without having to do any work.

An investor with $20,000 to invest in ASX dividend shares can unlock a pleasing level of cash flow. But, we shouldn’t expect to generate enough income to retire with $20,000 instantly.

Income-seeking investors want a generous ASX dividend yield from their investments – a 2% dividend yield isn’t going to cut it. However, trying to find stocks that yield above, say, 10%, can be dangerous because that may not be sustainable.

Finding the right balance

It’s important to understand why businesses have a high dividend yield before we buy them.

Does a stock have a high yield because the share price has been crunched, profit is falling, and the next dividends are going to be smaller?

Is the yield currently high, but the company is in a very cyclical industry, and therefore, the dividend is unreliable?

Or perhaps the stock is wrongly undervalued by the market and it can maintain that level of dividend payments for the foreseeable future?

One major factor to consider is the dividend payout ratio – how much of the company’s annual profit is paid as dividends. The higher the payout ratio, the higher the ASX dividend yield, but also the less that’s being retained in the company to reinvest for future growth.

Some businesses are capable of growing earnings and sustaining a very high dividend payout ratio, while others may need to keep some profit just to keep next year’s earnings at a similar level.

ASX dividend shares I’d choose for yield

I’d go for businesses that are expected to have a high ASX dividend yield for the foreseeable future and can deliver earnings growth.

Telstra Group Ltd (ASX: TLS) shares could provide a large dividend yield, supported by growing earnings amid rising mobile prices and subscriber growth. According to Commsec, the telco is expected to pay a grossed-up dividend yield of 7.1% in FY25, with further growth in FY26.

Metcash Ltd (ASX: MTS) supplies various independent food and liquor retailers, including IGA, IGA Liquor, Bottle-O, Cellarbrations and Porters Liquor. It also owns hardware businesses, including Mitre 10, Home Timber & Hardware and Total Tools. Population growth and a recovery of hardware earnings are potential future tailwinds. Commsec estimates imply a grossed-up dividend yield of 8% in FY25 and growth in FY26.

Medibank Private Ltd (ASX: MPL) is the largest private health insurer. It’s benefiting from rising premiums, strong investment returns on its assets and growing subscriber numbers. Commsec numbers suggest a grossed-up dividend yield of 6.6% in FY25, with further growth in FY26.

Universal Store Holdings Ltd (ASX: UNI) is a retailer of premium youth fashion. It has grown its dividend each year since 2021, when it started paying one. The business can benefit from an ongoing store rollout and an eventual recovery of household retail spending. Commsec numbers suggest a forecast grossed-up dividend yield of 7.7% in FY25 and an even bigger dividend in FY26.

I think that’s a good starting point for an ASX dividend portfolio. The forecast average grossed-up dividend yield for FY25 of the stocks I’ve mentioned is about 7.3%, so a $20,000 investment spread evenly between them would generate $1,460.

The post Here’s one way to invest $20k to target an average 7% ASX dividend yield appeared first on The Motley Fool Australia.

More reading

• Buy Telstra and these ASX dividend stocks this week
• Buy these ASX dividend shares with 5% to 7% yields
• Here is the earnings forecast out to FY28 for Telstra shares
• Why analysts rate these ASX dividend shares as buys
• If I were 60 I’d buy these ASX shares for dividends

Motley Fool contributor Tristan Harrison has positions in Metcash. 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 Telstra Group. The Motley Fool Australia has recommended Metcash. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Looking for a $1,000 monthly passive income to boost your retirement prospects?

Or maybe to spend on a few luxury extras well before you enter those retirement years, like a fancy vacation, that new living room ensemble, or perhaps even an upgraded car?

While there are a number of quality S&P/ASX 200 Index (ASX: XJO) dividend stocks that can help build that passive income stream, the one I’d buy today is oil and gas company Woodside Energy Group Ltd (ASX: WDS).

Woodside shares have been in an uptrend since 24 June, with the stock up 9% in that time. Still, at yesterday’s closing price of $29.40 a share, the ASX 200 dividend stock is down 18% over 12 months. Which, I believe, represents a potentially opportune long-term entry point.

Now the future, by definition, is uncertain.

But I believe that amid strong global energy demand, both oil and gas prices are more likely to rise over the next 12 months than they are to fall. And even at current Brent crude prices of close to US$86 per barrel, Woodside is well in profit range and likely to continue rewarding shareholders with outsized passive income.

We’ll get to that below.

But first, an important reminder.

Spread your risks

In this article, we look at only one ASX 200 dividend stock to garner our $1,000 in monthly passive income, or $12,000 a year.

Of course, if I only buy Woodside shares, then my entire income stream is reliant on this one company’s performance. That might work out swimmingly. But if the company runs into unexpected headwinds it could also see my income take a big, unexpected hit.

With that in mind, I’d eventually expand my passive income portfolio to a larger number of ASX dividend shares. There’s no magic number. But 10 is a decent target. Ideally, these will operate across a range of different sectors and locations, helping to lower my overall risks.

Also, bear in mind that the yields you generally see quoted are trailing yields. Future yields may be higher or lower depending on a range of company-specific and macroeconomic factors.

Drilling into Woodside shares for $1,000 a month in passive income

Now, let’s return to the one ASX dividend stock I’d buy today.

Over the past 12 months, Woodside paid a fully franked interim dividend of $1.244 a share on 28 September and a fully franked final dividend of 91.7 cents a share on 4 April.

That equates to a full-year passive income payout of $2.161 a share, with potential tax benefits from those franking credits.

At yesterday’s closing price of $29.40, this ASX 200 dividend stock has a market-beating trailing yield of 7.4%.

Now, to secure my $1,000 in monthly passive income, or $12,000 a year, I’d need to buy 5,553 shares today.

Granted, that’s a large quantity of stock to buy all in one go.

But as I’ve said before, investing is a long game.

If I can’t buy all those Woodside shares today, I can buy them in smaller allotments over time.

Eventually, I’ll achieve my passive income goal.

The post I’d buy Woodside shares today to generate $1,000 of monthly passive income appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Wednesday
• Would Warren Buffett buy Woodside shares?
• Top 10 most traded ASX shares and US stocks in June
• 5 things to watch on the ASX 200 on Monday
• Top 4 reasons why more Aussies are managing their own superannuation

Motley Fool contributor Bernd Struben 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.

Investing in ASX lithium shares certainly has not come without its fair share of risks.

Most lithium producers and explorers rocketed higher in 2022 and into 2023 as the price of the battery critical metal they dig from the ground hit all-time highs.

But with demand growth slowing and supply growth ramping up, that trend reversed resulting in an 85% collapse in global lithium prices from those record prices.

While prices have somewhat stabilised in 2023, many of the ASX lithium shares with higher costs have found themselves operating at a loss. Some have gone so far as to suspend production, awaiting the return of better market prices.

As for the risk of investing in the lithium miners in the past year, here’s how these top-name stocks have performed over 12 months:

• Pilbara Minerals Ltd (ASX: PLS) shares are down 40%
• Core Lithium Ltd (ASX: CXO) shares are down 87%
• IGO Ltd (ASX: IGO) shares are down 61%
• Liontown Resources Ltd (ASX: LTR) shares are down 66%
• Sayona Mining Ltd (ASX: SYA) shares are down 82%
• Lake Resources (ASX: LKE) shares are down 87%
• Latin Resources Ltd (ASX: LRS) are down 51%
• Patriot Battery Metals Inc (ASX: PMT) are down 67%
• Mineral Resources Ltd (ASX: MIN) are down 20%

I think those figures speak to the formidable risks on investing in ASX lithium shares.

At least for the year just past.

But what about the year ahead?

Are ASX lithium shares still very risky?

To be clear, every investment comes with its own unique risks.

As for the particular risk of investing in ASX lithium shares, we’ll defer to Blackwattle Investment Partners.

Here’s what the fund managers reported on Blackwattle’s own investments and outlook for the Aussie lithium miners.

In June, the Blackwattle Small Cap Quality Fund lost ground on its Latin Resources and Patriot Battery Metals holdings. Blackwattle noted that the lithium commodity price continued to follow a volatile trading pattern over the month.

As for those risks, the fund manager added:

Perversely, when considering investments in the resources sector, the risk is the lowest when commodity prices are falling toward the lower end of the cost curve for mining companies with tier-one assets.

At current spodumene lithium prices, few hard rock miners are generating much free cash flow today. As such, we continue to maintain modestly sized holdings in the lithium sector. In our view projects with superior economics like Latin Resources and Patriot Metals are well placed to ride out near-term volatility in the lithium price.

Noting that it will take some time for the supply and demand dynamics in lithium markets to balance, Blackwattle said, “At current prices, new projects, such as Pilbara Minerals’ P2000, don’t stack up.”

However, the fund managers are more optimistic about the outlook of Arcadium Lithium (ASX: LTM) after the ASX lithium share plunged 26% in June.

Arcadium, as you may know, started trading on the ASX in December, formed from the merger of the previously ASX-listed Allkem and US-listed Livent.

According to Blackwattle:

The merger has created a quality, vertically integrated global lithium chemicals producer with a significant synergy opportunity & production growth upside.

We see significant upside for LTM outside any moves from the lithium price, as the new business looks to maximise the merger potential through synergies, driving cost & capex reductions as well as improved pricing.

We view a potential rebound in lithium prices at some point as option value.

Foolish takeaway

So, is investing in ASX lithium shares right now risky?

You bet.

But could buying some of the beaten-down, low-cost producers also pay off handsomely over the longer run?

I certainly think it could.

Just don’t invest more than you’re prepared to lose.

The post How risky is buying ASX lithium shares right now? appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
• Who is buying 55,000 Liontown shares this week?
• Why Cettire, Core Lithium, Northern Star, and Step One shares are charging higher
• Core Lithium share price rockets 14% amid ‘positive achievements’
• Own Pilbara Minerals shares? Here’s what to expect from next week’s Q4 update

Motley Fool contributor Bernd Struben 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.

The post Here are the top 10 ASX 200 shares today appeared first on The Motley Fool Australia.

More reading

• ASX 200 hits record high, UBS keeps end of year target steady
• 5 things to watch on the ASX 200 on Wednesday
• Here are the top 10 ASX 200 shares today
• Here’s the lithium price forecast through to 2027
• 5 things to watch on the ASX 200 on Tuesday

Motley Fool contributor Sebastian Bowen 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 PolyNovo and Reliance Worldwide. The Motley Fool Australia has positions in and has recommended Smartgroup. The Motley Fool Australia has recommended PolyNovo. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The ANZ Group Holdings Ltd (ASX: ANZ) share price touched a new seven-year high of $30.10 this afternoon. As the chart below shows, it hasn’t been this high since 2017.

Many ASX bank shares hit new highs yesterday, continuing a very strong period for bank share prices.

In 2024 to date:

• The ANZ share price is up 16%
• The Commonwealth Bank of Australia (ASX: CBA) share price is up 18%
• The Westpac Banking Corp (ASX: WBC) share price is up 23%
• The National Australia Bank Ltd (ASX: NAB) share price is up 22%

After such a strong run, should investors consider ANZ shares as an opportunity? Let’s consider the situation.

Recent financial performance

The recent FY24 first-half result did not exactly deliver inspirational numbers. Compared to the second half of FY23, cash profit fell 1% to $3.55 billion and statutory net profit dropped by 4% to $3.4 billion. Earnings per share (EPS) declined by 1% to $1.183.

The result had a couple of positive aspects — it launched a $2 billion share buyback and grew the interim dividend per share to 83 cents. In terms of shareholder returns, it has been a rewarding time.

Property prices are rising in Australia, which lowers ANZ’s risk of bad debts. However, arrears are rising at the major banks as some households struggle to keep up with the elevated interest rates. Changes in market expectations about arrears can influence the ANZ share price.

The bank’s net interest margin (NIM) was 2.32% in the second quarter of FY24. This has dropped significantly from 2.47% in the first quarter of FY23. Indeed, the NIM has dropped every quarter since the post-COVID peak.

There is a lot of competition in the bank space for both loans and deposits, which is a headwind for margins. Competitors like Macquarie Group Ltd (ASX: MQG) have grown their market share.

It’s understandable why ANZ wants to acquire the Suncorp Group Ltd (ASX: SUN) banking operations because it can help grow its market position and improve geographic diversification with a bigger allocation to Queensland. The bigger scale comes with benefits in the banking world.

Is it too late to buy?

Over time, companies that grow their earnings typically see their share price rise.

The broker UBS suggests that ANZ’s net profit will fall in FY24, but it then sees profit growth in FY25, FY26, and FY27, partly due to the bank’s enlarged scale after the deal to buy Suncorp Bank.

ANZ shares are valued at 12x FY25’s estimated earnings and 11x FY27’s estimated earnings, according to UBS forecasts.

If the ASX bank share can deliver earnings growth in FY25 onwards, then the ANZ share price may continue to rise.

However, UBS has a price target of $30 for the business, which may suggest that the bank does not have much capital growth potential over the next 12 months. It may not be too late to buy ANZ shares for their long-term potential, but I wouldn’t expect double-digit capital growth over the next year.

The post ANZ shares strike 7-year high, is it too late to buy? appeared first on The Motley Fool Australia.

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