Category: Stock Market

The global population’s hunger for software and data shows no signs of abating, and the question on many an investor’s mind is, what does this mean for ASX 200 tech shares?

As recently penned by my colleague Mitch Lawler, the ASX tech sector traded at nosebleed valuations throughout April. In fact, many investors believe tech shares are not a safe place to park their money right now, given such high valuations.

Let’s also paint the current economic scene for a moment.

The Reserve Bank of Australia (RBA) expects economic growth to “remain low over the next year”, only picking back up well into 2025. It also predicts inflation won’t return to target levels until the second half of next year, potentially ruling out the chance of a rate cut in 2024.

Hardly conducive to growth.

However, returning to the subject of ASX tech shares, I’m of the opinion that tech companies with outstanding projected revenue growth in the face of economic uncertainty have a competitive advantage. That is why, when looking at ASX tech shares, it’s important to gauge what’s behind the optimism.

One theme that has recently supported surging tech stock prices is artificial intelligence (AI). This has given rise to new growth in data centres.

For instance, according to consulting giant McKinsey, global demand for data centres is forecast to grow by 10% per year until 2030, driven by advancements in computing and AI.

So, against this backdrop, here are three ASX 200 tech companies analysts think will hold up well in the current climate, despite high valuations in the sector.

TechnologyOne Ltd (ASX: TNE)

When I think “safety”, I think stability. For many ASX 200 tech stock investors, this means solid annual recurring revenue, or “ARR” for short.

Top broker Goldman Sachs also takes a keen interest in ARR, as evidenced by its recent note on enterprise software company TechnologyOne.

In case you weren’t aware, TechnologyOne is one of Australia’s largest public software players. It has operations in six countries. Its share price has grown from $2.52 apiece in May 2014 to $16.47 at Monday’s close, an average 20% return per year.

Analysts at Goldman believe the company could grow its ARR by $425 million this year, a 35% increase from last year.

But, it says this growth potential is “not being fully reflected at [TechnologyOne’s] valuation”.

The broker instead values this ASX 200 tech share at $18.10, around 10% upside potential at the time of writing.

TechnologyOne has also increased its dividend every year since 2005, and any growth in ARR could potentially support continued dividend hikes.

Xero Ltd (ASX: XRO)

After Xero announced it would introduce a number of price increases on its Australian subscription plans, Goldman Sachs flagged the accounting platform as a standout looking forward.

The announced changes will see an 8% to 14% average price increase across all plans, effective 1 July this year.

Following the update, Goldman immediately upgraded the company’s FY 2025/2026 revenue projections by 2% to 3%, “reflecting strong ANZ annual revenue per user”.

“We see Xero as very well-placed to take advantage of the digitisation of SMBs globally”, the broker added in its note.

Goldman analysts also estimate the ASX tech share’s total addressable market to be around $91 billion, and growing.

That’s currently around 4.7 times the size of Xero’s market capitalisation of $19.1 billion, illustrating the size of the opportunity.

As such, Goldman values Xero at $156 apiece, which is around 27% upside potential, as I write.

Nextdc Ltd (ASX: NXT)

Shares in regional data centre operator Nextdc have rallied around 27% into the green this year.

Following this, it’s little surprise to see analysts at Morgans chime in on the company, placing Nextdc in a prominent position on the data centre mantlepiece.

Morgans projects Nextdc could “comfortably” generate over $300 million in earnings before interest, tax, depreciation and amortisation (EBITDA) in the next 5 years.

That’s around 50 cents per Nextdc share or roughly 2.8% of the company’s market value.

Morgans rates Nextdc as a buy with a $19.00 valuation. But, as covered by my Foolish colleague James Mickleboro late last month, the broker is also eyeing a potential $40 price target by 2030.

Foolish takeaway

Even with a downturn in the economic cycle, as some are predicting, analysts have projected strong revenue growth for each of these ASX 200 tech shares.

I believe this should provide investors with a level of confidence moving forward and could even be seen as a competitive advantage.

The post What are 3 of the safest ASX 200 tech shares in Australia right now? appeared first on The Motley Fool Australia.

More reading

• $20,000 invested in these ASX 200 shares 10 years ago is worth…
• Brokers name 3 ASX shares to buy now
• Buy this ASX 200 tech stock now before it’s too late: Goldman Sachs
• Here are the top 10 ASX 200 shares today
• 5 ASX shares to buy following the market selloff

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 Goldman Sachs Group, Technology One, and Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool Australia has recommended Technology One. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Are you looking for ASX dividend stocks to buy? If you are, it could be worth looking at the ones in this article.

That’s because they have all recently been named as buys and tipped to offer attractive dividend yields. Here’s what you need to know about them:

Aurizon Holdings Ltd (ASX: AZJ)

The first ASX dividend stock that could be a buy next week is Aurizon.

Each year, it transports more than 250 million tonnes of Australian commodities, connecting miners, primary producers and industry with international and domestic markets. This includes providing customers with integrated freight and logistics solutions across an extensive national rail and road network that traverses Australia.

Ord Minnett is positive on the company’s outlook and has an accumulate rating and $4.70 price target on its shares.

As for dividends, its analysts are forecasting partially franked dividends of 17.8 cents per share in FY 2024 and then 24.3 cents per share in FY 2025. Based on the latest Aurizon share price of $3.78, this will mean yields of 4.7% and 6.4%, respectively.

Centuria Industrial REIT (ASX: CIP)

Another ASX dividend stock that could be a buy according to analysts this month is Centuria Industrial.

It offers investors the opportunity to invest in industrial property via a real estate investment trust. It is also Australia’s largest domestic pure play industrial property investment vehicle with a portfolio of 88 high-quality, fit-for-purpose industrial assets worth a collective $3.8 billion. These assets are situated in key in-fill locations and close to key infrastructure.

UBS currently rates the company’s shares as a buy and has a $3.71 price target on them.

As for income, the broker is expecting Centuria Industrial to pay dividends per share of 16 cents in both FY 2024 and in FY 2025. Based on the current Centuria Industrial share price of $3.25, this represents dividend yields of 4.9% for income investors in both years.

Telstra Corporation Ltd (ASX: TLS)

A final ASX dividend stock that could be a buy is Telstra.

Telstra is of course Australia’s leading telecommunications and technology company. It offers a full range of communications services and currently provides 22.5 million retail mobile services and 3.4 million retail bundle and data services in Australia.

Goldman Sachs thinks the telco giant would be a top buy right now. It has a buy rating and $4.55 price target on Telstra’s shares.

In respect to dividends, its analysts are forecasting fully franked dividends of 18 cents per share in FY 2024 and 19 cents per share in FY 2025. Based on the current Telstra share price of $3.67, this represents yields of 4.9% and 5.2%, respectively.

The post Buy Telstra and these ASX dividend stocks for income appeared first on The Motley Fool Australia.

More reading

• How to help recession-proof your ASX share portfolio in May 2024
• 3 easy ways to reduce your ASX share portfolio’s volatility right now
• How to choose ASX shares for passive income
• Why I’d buy high-yield ASX dividend shares for superannuation in retirement
• 4 excellent ASX 200 dividend shares to buy for your income portfolio

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

Many time-tested quality companies are within the top 50 ASX shares, known as the S&P/ASX 50 Index (ASX: XFL). On the flip side, I’d also argue there’s a fair number of mediocre to poor businesses within the mix that I’d rather not own.

Sure, I could buy the entire bunch through an exchange-traded fund (ETF) and call it a day. But I believe that a little fundamental analysis goes a long way. It doesn’t take a rocket scientist to work out that an extremely indebted business with declining revenue may not have as bright of a future as some of its peers.

I’ve flipped through the top 50 big dogs of Australian equities. After doing a little digging, two companies are a strong buy this month at the current prices, in my opinion.

Detecting for top value shares on the ASX

Being a stock picker is all about ‘finding value’ — discovering the companies with upside where others see none.

Uncovering a misunderstood business with solid fundamentals is the holy grail of stock picking. Investing in such a stock can grow a person’s wealth well beyond the market average.

I believe Aristocrat Leisure Limited (ASX: ALL) is one top ASX share that fits the bill this month.

A pioneer in gaming technology, Aristocrat knows the industry well. Yet, investors have shied away from this top ASX share amid softness in pokie machine sales. Concerns have pushed the Aristocrat Leisure price-to-earnings (P/E) ratio down to its lowest since 2020, during the pandemic, at around 18 times earnings.

A net cash position of $845 million, a net income margin of 21%, and an expanding presence in the United States haven’t won over the market. The chart below shows that shares in Aristocrat Leisure are flat versus a year ago.

In my opinion, Aristocrat Leisure has appealing fundamentals and a hard-to-ignore valuation.

Moving along, Origin Energy Ltd (ASX: ORG) is also catching my attention in May. The largest listed utility company on the Australian market might be up 18.8% over the last 12 months, but I still think there is value to be found.

First, Origin easily touts the healthiest balance sheet out of the three largest ASX utility companies. Debt-to-equity has been drastically reduced from 80% to 30% over the last decade. Whereas AGL Energy Ltd (ASX: AGL) has increased slightly (41% to 45%), and APA Group (ASX: APA) has ballooned (117% to 364%).

My two cents are that Origin Energy appears to be skillfully positioning itself for the energy transition. The combination of gas production, renewable energy assets, and its finger in smart grid technology via its Octopus Energy stake is a future-proof mix.

I think it’s an undervalued combination of assets, even at a market capitalisation of $17.1 billion.

Honourable mention goes to

I won’t be calling the bottom for Pilbara Minerals Ltd (ASX: PLS) just yet. Still, the most shorted stock on the ASX could be starting to show signs of value for anyone brave enough to face the ocean of short sellers.

Sitting on nearly $1.7 billion of net cash, the top ASX lithium share is positioned to ride out subdued lithium demand. Given the quality of its resources and low cost of production, Pilbara Minerals is one miner that can make it through the lull.

While I won’t be rushing out to buy shares in this lithium company, it’s certainly a top 50 ASX share I’ll watch closely.

The post Where to find value inside the top 50 ASX shares in May appeared first on The Motley Fool Australia.

More reading

• Why these ASX mining shares have ‘got some huge advantages’: Chalmers
• These are the 10 most shorted ASX shares
• An ASX dividend giant I’d buy over NAB shares for 2024
• Here’s how the ASX 200 market sectors stacked up last week
• Forget Pilbara Minerals and buy this ASX 200 lithium stock instead

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

Recessions can wreak havoc on your share portfolio. They are a sign that the economy is contracting, and business conditions are getting tougher. Unemployment is high, consumer confidence is low, and households are finding it harder to pay their bills. Some companies, particularly junior companies with high debt, might even go kaput. Share prices, on the whole, are in the toilet.

Sounds scary, right?

Well, don’t get too despondent. There are some quick and easy ways to recession-proof your ASX share portfolio. In this article, I’ll cover 3 of them.

Diversify

The quickest and easiest way for any investor to recession-proof their portfolio is simply through diversification. Spreading your investments out over a range of different companies, industries, and even asset classes is one of the easiest ways to ensure your portfolio can ride out a recession.

At heart, diversification relies on the fact that, depending on the nature of their business operations, different shares will respond differently to the same macroeconomic event. One share might increase in price, while another might fall. If you only own one, there’s a 50% chance you’ll lose money. But if you owned both, you’ll have a better chance of coming out even – or maybe even on top. Either way, being diversified has limited your downside risk.

For example, a higher global oil price is a risk for airlines because it increases fuel costs – bad news for you, too, if you’re a Qantas Airways Limited (ASX: QAN) shareholder. But if you also had some stock in an oil company like Woodside Energy Group Ltd (ASX: WDS), which will benefit from higher oil prices, you could potentially offset some (or maybe even all) of the losses on your Qantas shares.

The same holds true in a recession. Although a recession will likely cause share prices to fall pretty much right across the board – and may even result in a prolonged bear market – not all shares will be impacted equally. Some will fall a lot less than others, and a lucky few might even rise. This means that an investor with a diversified portfolio has a much better chance of limiting their downside losses and beating the market.

Buy some defensive shares

It’s all good to diversify, but if you want to recession-proof your portfolio, you need to diversify in the right places. And one of the best places to start is defensive shares.

Defensive shares are a group of shares that tend to outperform in an economic downturn. These are companies that people view as being essential, like consumer staples, healthcare, and utilities. Even when times are tough, households still spend money on them, which allows these companies to continue to be relatively profitable, even in a recession.

There are differing opinions about what makes an ideal defensive share, and you never quite know how a stock will really perform under pressure. But some common ASX examples include supermarket chain Woolworths Group Ltd (ASX: WOW), telco Telstra Group Ltd (ASX: TLS), and toll road operator Transurban Group (ASX: TCL).

Buy safe-haven assets

Investing a portion of your portfolio in safe-haven assets is probably the best way to protect your portfolio from a recession. Throughout history, safe-haven assets have proven themselves to be the most reliable stores of value. In other words, the prices of these assets don’t decline (in fact, they may even rise) during a financial crisis.

Safe haven assets include some major global currencies (like the Swiss franc or the US dollar – the jury’s still out on Bitcoin), government bonds, and precious metals. But the granddaddy of all safe-haven assets is gold.

Adding some gold exposure to your portfolio has never been easier – check out our useful guide for investing in gold if you want some tips. One great option for ASX investors to access gold is through an exchange-traded fund (ETF) like the Global X Physical Gold ETF (ASX: GOLD). And because the fund is backed by physical gold (as opposed to futures contracts), the Global X ETF returns should replicate those of gold quite closely.

The Foolish bottom line

There are some easy ways you can fortify your portfolio against the adverse effects of a recession. In this article, I’ve covered diversification, defensive shares, and safe-haven assets.

However, also keep in mind that you are giving up some growth opportunities by investing only in defensive shares and safe haven assets. These are low-risk, low-reward investments. So, although these assets are more likely to outperform in a recession, they are almost certain to underperform when the economy is booming.

A well-balanced portfolio that caters to your personal risk appetite and growth objectives is the optimal scenario. So, at the end of the day, don’t fixate too much on recession risks – you want a portfolio that can benefit when the economy is strong too!

The post How to help recession-proof your ASX share portfolio in May 2024 appeared first on The Motley Fool Australia.

More reading

• Should you buy ASX gold ETFs right now?
• 3 easy ways to reduce your ASX share portfolio’s volatility right now
• How to choose ASX shares for passive income
• Coles share price holds firm while Woolworths tumbles 18% in 2024. Time to buy?
• Why I’d buy high-yield ASX dividend shares for superannuation in retirement

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

The Vanguard U.S. Total Markets Shares Index ETF (ASX: VTS) is not among the most popular exchange-traded funds (ETFs) on the ASX.

This fund from provider Vanguard can boast of having $4.39 billion in assets under management. But that’s a far cry from the $14 billion-plus that the ASX’s most popular index fund – the Vanguard Australian Shares Index ETF (ASX: VAS) – can claim.

Even amongst other internationally-focused ETFs, VTS isn’t among the biggest hitters. The iShares S&P 500 ETF (ASX: IVV), the BetaShares Nasdaq 100 ETF (ASX: NDQ) and the Vanguard MSCI Index International Shares ETF (ASX: VGS) all have more funds under management than the Vanguard US Total Markets ETF.

And yet, the ASX’s VTS ETF offers a unique portfolio of investments that is unique on the Australian stock market. Let’s dive into the how and why.

What does the VTS ETF offer ASX investors?

Put simply, this VTS ETF offers a scope of exposure to the US markets that no other ASX fund can match.

Take the iShares S&P 500 ETF. This popular index fund tracks the S&P 500 Index (SP: .INX), which is a collection of the 500 largest companies listed on the American stock markets. As such, an investment in IVV units can be thought of as an investment in the largest 500 companies on the US market, weighted by market capitalisation of course.

Similarly, the BetaShares Nasdaq 100 ETF allows investors to gain exposure to the largest 100 companies on the Nasdaq Stock Exchange. The Nasdaq is one of the two major American stock exchanges. It is known for housing most of the tech giants, including Apple, Amazon and Alphabet, that now dominate the US markets.

So IVV, NDQ and VTS all give investors exposure to the likes of Apple, Amazon and Alphabet. As well as other well-known US shares like Netflix, Meta Platforms, Adobe and PayPal.

But what makes VTS unique? Well, this really means what it says on the tin regarding ‘total US markets’.

3,717 shares but one ASX ETF

Its portfolio consists of no fewer than 3,717 individual stocks (as of 31 March 2024 anyway).

Those 3,717 holdings are all US shares. That means that you are getting the largest of the large, as well as the smallest of the small, of all the United States of America has to offer.

As such, no other ASX ETF gives exposure to the US markets like VTS does. It’s the ETF that investors are most likely to choose if they wish for a complete and dedicated investment in the American economy.

Of course, it’s not quite as diverse as these numbers might suggest in practice. The VTS ETF has thousands of individual holdings. However, the fund still allocates close to a third of its portfolio towards the largest 10 American public companies.

This means that the bottom few hundred shares in this fund have an arguably near-tokenistic presence.

Even so, ASX ETF investors have enjoyed some solid returns from a VTS investment in recent years. As of 30 April, the Vanguard US Total Markets ETF has returned 24.47% over the preceding 12 months. As well as an average of 14.69% per annum over the past five years. Those figures are very similar to those of the IVV ETF.

The Vanguard US Total Markets ETF charges a management fee of 0.04% per annum, or $4 a year for every $10,000 invested.

The post Here’s what makes the Vanguard US Total Market ETF (VTS) stand out from other index funds appeared first on The Motley Fool Australia.

More reading

• How much money should I put in one ASX ETF?
• 5 ASX ETFs to invest $10,000 into next week

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. 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 Sebastian Bowen has positions in Adobe, Alphabet, Amazon, Apple, Meta Platforms, and Vanguard Australian Shares Index ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Adobe, Alphabet, Amazon, Apple, BetaShares Nasdaq 100 ETF, Meta Platforms, Netflix, PayPal, and iShares S&P 500 ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: short June 2024 $67.50 calls on PayPal. The Motley Fool Australia has positions in and has recommended BetaShares Nasdaq 100 ETF. The Motley Fool Australia has recommended Adobe, Alphabet, Amazon, Apple, Meta Platforms, Netflix, PayPal, 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.

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

More reading

• Why Bellevue Gold, IPH, Life360, and Ramelius Resources shares are racing higher
• 5 things to watch on the ASX 200 on Monday
• Are JB Hi-Fi shares still a buy as growth slows?
• I’d buy these ASX retail shares if economic fragility starts a fire sale
• 4 excellent ASX 200 dividend shares to buy for your income portfolio

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 no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Smartgroup and Super Retail Group. The Motley Fool Australia has recommended Bapcor, IPH, and Jb Hi-Fi. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Investing in gold and gold exchange-traded funds (ETFs) has been a trend clearly on the rise in 2024 to date. As we’ve documented here at the Fool extensively this year, new record highs for the price of gold have spurred many investors to take the plunge with a gold-backed investment.

But should investors still be buying ASX gold ETFs in May of 2024? That’s what we’ll be discussing today.

As we’ve just touched on, this year has been an extraordinary one for gold. The precious metal began the year at US$2,077 per ounce but has climbed up to roughly US$2,360 today. That comes after gold hit a new all-time high of around US$2,415 an ounce just last month.

Remember, it was only as recently as late 2018 that gold was asking under US$1,200 for that same ounce. 2022 also saw gold retreat to roughly US$1,600.

So the gold market is unequivocally enjoying a boom.

This, of course, has meant that gold-backed investments like gold miners and precious metal ETFs have also been rising in value.

To illustrate, the VanEck Gold Bullion ETF (ASX: NUGG) – a popular ASX vehicle for gold investment – has soared by almost 25% in value since October.

Other similarly structured ETFs, including the Global X Physical Gold ETF (ASX: GOLD) and the Perth Mint Gold ETF (ASX: PMGOLD), have performed commensurately.

But is there still steam left in this gold rush? Or is it too late to hop on the gold bandwagon?

Should investors still consider gold ETFs in May 2024?

Well, one commentator still preaches that gold is an asset class that investors ignore at their peril. ETF provider Global X (operator of the GOLD ETF listed above) is arguing that gold’s returns over the past ten years, together with its inverse correlation to other assets like shares, make it a great choice as part of a diversified portfolio.

In a discursive piece, Global X found that gold returned an average of 9% per annum over the ten years to April 2024, underperforming the US markets but outperforming ASX shares.

Over an even longer period of time, the report found that gold was advantageous to hold:

Adding gold has increased the annual returns of Australian portfolios for a given amount of risk for most levels of risk and return over the past 20 year…

Gold has had these effects because the gold price is uncorrelated with Australian risk assets (shares, property). Furthermore, and crucially, gold maintains these low correlations while performing relatively strongly over the longer-term. In sum: gold provides diversification that works.

The report also argues that one of gold’s main advantages for investors is the inverse correlation to other asset classes. This results in gold performing an ‘insurance’ role in a diversified portfolio:

In asset allocation, gold’s role is diversification. This makes it different from property, shares, and bonds – which provide income, capital growth and capital stability, respectively….

Insurance is the ultimate form of diversification. When the value of one’s car or house – or whatever else is insured – falls or disappears entirely, an insurance policy can pay out…

While not the same, gold’s role in asset allocation can be understood in similar terms. Gold tends to perform well when other assets struggle, thereby limiting losses. It does this due to its tendency to perform well during crises and its low correlations with other assets.

It should be noted that Global X isn’t exactly unbiased here, even though it runs one of the ASX’s most popular gold-backed ETFs. However, the report makes for some compelling reading for anyone interested in gold as an investment.

The post Should you buy ASX gold ETFs right now? appeared first on The Motley Fool Australia.

More reading

• 3 easy ways to reduce your ASX share portfolio’s volatility right now
• 5 ASX shares to buy for turbulent times
• 3 highly rated ASX gold ETFs to consider buying now
• Is it too late to buy gold as an investment in 2024?

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 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 have a very volatile share portfolio, it can be an emotional rollercoaster. Of course, some people love the thrill of rollercoasters – but the rest of us don’t want to feel that sense of anxious apprehension every time we check our share portfolios. We just want nice, slow, dependable wealth accumulation. Nothing fancy, just a few extra dollars in our pocket each week will do it.

Luckily for us, there are many quick and easy ways to reduce the volatility of our share portfolios. In this article, I take a look at three options: diversification, defensive shares, and dollar-cost averaging.

1. Diversification

One of the quickest and easiest ways to reduce your portfolio’s volatility is to diversify your investments. This essentially means buying many different shares or other investments and combining them into one portfolio.

The share prices of different companies will respond differently to different events. For example, news of an interest rate hike will hurt the share prices of growth companies with higher debt levels, as it increases their borrowing costs. However, it could boost the prices of bank and insurance shares, which tend to benefit from higher interest rates.

If you had a portfolio that only consisted of growth shares, you’d be hurt in this scenario. However, if you also owned some banking and finance shares, the gains in their share prices may have offset your other losses. And so, overall, you would have reduced your portfolio’s volatility, simply by being more diversified.

If you don’t have much money to invest but still want to diversify your portfolio quickly, exchange-traded funds (ETFs) are a great option. ETFs trade on the ASX much like ordinary shares but are actually investment funds.

Some are designed to track specific indices, like the iShares Core S&P/ASX200 ETF (ASX: IOZ). Others invest in commodities and other asset classes, like the Global X Physical Gold ETF (ASX: GOLD), which – as the name suggests – invests in gold.

2. Defensive shares

OK, so we’ve agreed that diversification is good if you want to reduce your portfolio’s volatility. But what if there was a particular type of share you could buy to help protect yourself if the rest of the market goes belly-up? As a matter of fact, there is: defensive shares.

Defensive shares belong to companies that tend to do well regardless of the state of the broader economy. They might be consumer staples shares like Coles Group Ltd (ASX: COL), healthcare companies like CSL Ltd (ASX: CSL), or telecommunications companies like Telstra Group Ltd (ASX: TLS). These companies all provide goods and services that people rely on daily, so their profitability is less affected by economic downturns.

Think of defensive shares almost as a type of insurance. When the prices of other stocks are tumbling, defensive shares tend to preserve their value. This means that adding a few of them to your portfolio can help it stay buoyant even when market conditions get choppy.

3. Dollar-cost averaging

Another great way to reduce your portfolio’s volatility is to follow a dollar-cost averaging (‘DCA’) investment strategy. Rather than investing one lump sum upfront, proponents of DCA will invest smaller amounts regularly over time, regardless of market conditions.

Sure, that might not sound that earth-shattering, but the magic of this strategy is best illustrated with a simple example.

Let’s say you wanted to invest $1,000 in Company A, and you could choose between investing your money as one lump sum now, or as five $200 investments each month for each of the next five months. Let’s assume that the current share price is $100, and the prices on the days you make your trades in the next 4 months will be $110, $90, $80, and $95.

If you invested all your money as one lump sum upfront, your shareholding over the next five months would look like this:

Lump Sum	Month 1	Month 2	Month 3	Month 4	Month 5
Shares Purchased	10	0	0	0	0
Total Shares	10	10	10	10	10
Market Price	$100	$110	$90	$80	$95
Value	$1,000	$1,100	$900	$800	$950

In this scenario, you used your $1,000 to purchase 10 shares (each priced at $100) in month 1. By month 5, the price of those shares had dropped by 5% to $95, which meant that the total value of your investment had also dropped by 5%, from $1,000 to $950. Pretty straightforward.

However, an interesting thing happens if you follow a DCA strategy.

DCA	Month 1	Month 2	Month 3	Month 4	Month 5
Shares Purchased	2.0	1.8	2.2	2.5	2.1
Total Shares	2.0	3.8	6.0	8.5	10.6
Market Price	$100	$110	$90	$80	$95
Value	$200	$420	$544	$683	$1,011

In this scenario, you break up your $1,000 into five $200 investments you make each month regardless of the share price. In month 1, you can buy 2 shares with your $200 ($200 investment divided by the $100 share price). In month 2, you can only buy 1.8 shares ($200/$110) because the share price has risen to $110. In month 3, you can buy 2.2 shares ($200/$90) because the share price has fallen to $90, and so on.

Because you can buy more shares when prices are lower, by the end of the 5 months, you would end up with 10.6 shares instead of just 10. This means that the value of your portfolio would be $1,011, a 1% increase on your total investment of $1,000.

In other words, even though the company’s stock price is now lower than 5 months ago, if you followed a DCA strategy you’d still be up! Pretty amazing, right?

The Foolish bottom line

In this article, I covered a few strategies you can adopt to reduce your portfolio’s volatility. You can diversify your portfolio to hedge against certain macroeconomic risks, you can invest more heavily in defensive shares to protect your portfolio against a downturn, and you can dollar-cost average so that you smooth your returns out over time.

However, the right strategy for you will depend on your risk tolerance and personal circumstances. Carefully consider your investing goals and objectives before investing or changing your portfolio strategy. If in doubt, speak to a financial advisor.

The post 3 easy ways to reduce your ASX share portfolio’s volatility right now appeared first on The Motley Fool Australia.

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Motley Fool contributor Rhys Brock 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 CSL. The Motley Fool Australia has positions in and has recommended Coles Group and Telstra Group. The Motley Fool Australia has recommended CSL. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Mesoblast Ltd (ASX: MSB) shares have been among the best performers on the Australian share market this year.

Since the start of the year, the allogeneic cellular medicines developer’s shares have risen an astonishing 230%.

This has been driven by optimism that its stem cell therapies may finally be granted approval by the US Food and Drug Administration (FDA) following years of knock backs, cash burn, and capital raisings.

Interestingly, despite more than tripling in value in 2024, one of the company’s insiders continues to snap up Mesoblast’s shares. This appears to be an indication that this board member believes its shares are still good value even after this rise.

Insider buys Mesoblast shares again

According to change of director’s interests notices, Mesoblast’s chief medical officer, Dr Eric Rose, has made two large purchases of shares in the last two weeks.

The first was made on 30 April and saw Dr Rose spend US$142,318.35 on the company’s NASDAQ listed shares. He picked up 21,428 American Depositary Shares (ADS) for an average of US$6.6417 per share.

The chief medical officer then followed that up with a US$151,207.83 purchase on 8 May. This saw Dr Rose snap up 19,734 ADS for an average of US$7.6623 per share.

Should you buy shares?

One leading broker that would approve of these purchases is Bell Potter.

Last month, its analysts retained their speculative buy rating on Mesoblast’s shares with a vastly improved price target of $1.40 (from 58 cents). This implies potential upside of approximately 36% for investors from current levels.

The broker is feeling positive about the company’s Remestemcel product and believes that approval could be around the corner for the treatment of children with steroid refractory acute graft versus host disease (SR a GvHD). Bell Potter explains:

Our best estimate for approval of Remestemcel is mid August 2024. The planned adult study in GvHD has for the moment been postponed pending the outcome of the resubmitted BLA. Valuation is increased from $0.58 to $1.40 eflecting significant changes to revenue forecasts bought about by renewed confidence for a prospective approval for Remestemcel in Paediatric GvHD later this year. A first approval may represent a gateway to a series of label expansions in the ensuing period as reflected in the share price movement in recent days.

Though, it is worth remembering that its speculative buy rating means that Mesoblast shares may only be suitable for investors with a high tolerance for risk.

The post Insider still buying Mesoblast shares despite 230% rise this year: Should you buy? appeared first on The Motley Fool Australia.

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• If you invested $8,000 in Mesoblast shares at the beginning of 2024, guess how much you’d have now!
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• If you invested $6,000 in Mesoblast shares a month ago you’d have $15,636 now!

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 copper stock Anax Metals Ltd (ASX: ANX) is off to the races on Monday.

Shares in the junior resource explorer closed on Friday trading for 4.4 cents apiece. The Anax Metals share price leapt to 6.3 cents in earlier trade today, putting the stock up a whopping 57%.

Following on some likely profit taking, shares in the ASX copper stock are currently swapping hands for 6.2 cents apiece, up 41%.

For some context, the All Ordinaries Index (ASX: XAO) is down 0.3% at this same time.

Here’s what’s stoking investor interest on Monday.

ASX copper stock rockets on project update

The Anax Metals share price is going ballistic after the company released a promising update on its joint venture Whim Creek Copper Project, located in the West Pilbara region of Western Australia.

Anax owns 80% of Whim Creek, while Develop Global Ltd (ASX: DVP) owns the other 20%.

The ASX copper stock said strengthening copper prices over the past year have added “significant momentum” to the project’s near-term development and recommencement of operations.

At the current US$10,004 per tonne, copper prices are up 21% over the past 12 months.

Anax said key outcomes from its Whim Creek Definitive Feasibility Study (DFS) and Heap Leach Study based on current metal prices and exchange rate inputs have enhanced the project’s economics by 32%.

The miner estimates that under the new prices and rates, the project will generate around $520 million in free cash over the planned eight-year mine life, with a pre-tax net present value (NPV) of $357 million, and an internal rate of return (IRR) of 74%.

That compares very favourably to its estimates in September 2023, with an NPV of $270 million and an IRR of 55%. Anax noted that the price assumptions used in open pit optimisations in the DFS were “markedly lower” than current commodity prices

The ASX copper stock could also be getting a boost, with management flagging the potential to increase the open pit mine life and cash flow through re-optimisation at higher commodity prices.

According to the release, the miner’s Evelyn and Salt Creek copper resource extension exploration will be prioritised, while studies for a regional processing hub strategy have already started.

What did management say?

Regarding the project update sending the ASX copper stock rocketing today, managing director Geoff Laing said, “The Whim Creek asset continues to shape up as a strategic processing hub for the Pilbara.”

Laing continued:

The recent increase in copper and other key metal prices has significantly enhanced project financial metrics. Anax is ideally positioned to benefit from the positive momentum building in copper demand on the back of its critical role in electrification and green technologies.

Laing said the project is “ready for near term production of key energy metals”.

The post ‘Ideally positioned’: Why this ASX copper stock just rocketed 57% appeared first on The Motley Fool Australia.

More reading

• Should you buy ASX gold ETFs right now?
• 3 easy ways to reduce your ASX share portfolio’s volatility right now
• Insider still buying Mesoblast shares despite 230% rise this year: Should you buy?
• Top fundie says this heavily shorted ASX 200 stock is ‘cheaper than it’s worth’
• Leading brokers name 3 ASX shares to buy today

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.