Endeavour Group Ltd (ASX: EDV) shares are falling on Wednesday morning.

At the time of writing, the ASX 200 share is down 4% to a 52-week low of $2.95.

This follows the release of an investor day update from the Dan Murphy’s and BWS owner.

Why is the ASX 200 share falling today?

Investors have responded negatively to Endeavour’s new strategy update, which aims to drive revenue growth, improve efficiency, and support long-term shareholder returns.

Following a strategic review led by CEO and managing director Jayne Hrdlicka, the ASX 200 share has identified three priority areas for growth.

These are resetting its multi-brand retail strategy, unlocking the growth potential in its hotels business, and simplifying operations to reduce costs.

Retail reset

A key focus of the strategy is restoring stronger momentum in Endeavour’s retail business.

This comprises 1,737 retail liquor stores nationally, approximately 9 million active members across its retail programs, and around 180 million retail customer touchpoints over the last 12 months.

The company plans to reinforce Dan Murphy’s price leadership and reposition both Dan Murphy’s and BWS to better serve different customer groups.

For Dan Murphy’s, the focus will be on restoring its position as the destination for value and range, supported by sharper pricing, a more customer-led range, and stronger use of its digital assets.

For BWS, management wants to build on the brand’s convenience position, improve the digital experience, localise ranges, and deliver more value through customer engagement platforms.

Hotels investment to increase

The ASX 200 share sees a significant opportunity in its hotels business.

The company owns Australia’s largest pub network, with 352 hotels and approximately 1.1 million pub+ registrations.

Management plans to lift investment in the network through light-touch renewals, refurbishments, and whole-of-venue repositionings.

The company is targeting a year-two return on investment of more than 15% from growth capital expenditure in hotels. It also expects to increase the number of hotel renewals to 50 to 60 per year over the next three years.

Cost savings and asset sales

Another major part of the update is its cost reduction target.

Endeavour is aiming for $300 million of cost savings by FY 2029, including approximately $100 million in FY 2027. This will be achieved through operational productivity, process simplification, site cost optimisation, and procurement and supply chain improvements.

The ASX 200 share is also simplifying its asset base.

Its Pinnacle Drinks business has been repositioned to support retail and focus on higher-return brands. As part of this, Endeavour plans to exit the majority of its winery and vineyard portfolio, including Chapel Hill, Oakridge, and Josef Chromy.

Dividends take a hit

The company’s plans will impact its dividends in the near term, which could be what is weighing on its shares today.

To maintain funding flexibility and prioritise growth investment, management has changed its targeted dividend payout ratio to between 50% and 75% of underlying net profit after tax.

Commenting on the plans, Hrdlicka said:

We examined the business through a number of lenses and have made the tough choices required to deliver the Group’s next phase of growth. With a disciplined focus on customer value, a targeted step-up in Hotel investment, a hard eye to cost and a simplified asset base, we have begun to execute our transformation.

There is significant untapped potential in Australia’s best Retail liquor brands and Hotels, and we now have the roadmap in place to ensure that potential is fully realised for our customers and our shareholders.

The post Which ASX 200 share is sinking to a 52-week low after cutting its dividend payouts? appeared first on The Motley Fool Australia.

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• Buy, hold, sell: Endeavour and these popular ASX shares
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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 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.

Building wealth does not usually come from one big decision. It’s the result of investing regularly, staying patient, and giving your money enough time to grow.

That’s the part many people underestimate. In the early years, the progress can look slow. But over time, the numbers can start to build quickly.

Why compounding is so powerful

Compound interest is what happens when your returns start earning returns of their own.

At the start, most of the growth comes from the money you put in. But over time, the balance gets larger, and the returns can start doing more of the work.

That’s why the later years matter so much. An 8% return on $20,000 adds about $1,600. The same return on a $500,000 portfolio adds roughly $40,000 in a year.

The percentage is the same, but the dollar impact is very different.

The numbers behind a $1 million goal

The biggest advantage is time. A 20-year-old does not need to invest anywhere near as much each month as someone starting at 50, because their money has far longer to grow.

Using the average annual return of 8%, a person starting at 20 would need to invest roughly $190 a month to build a $1 million portfolio by age 65.

Someone waiting until 30 would need closer to $436 a month. By 40, that jumps to about $1,050 a month.

The numbers get much harder later on. A 50-year-old would need to invest almost $2,900 every month to target the same result by 65.

Someone starting at 60 would need more than $13,000 a month.

One way to keep investing simple

For those who don’t want to pick individual shares, a high-growth ETF can be a simple way to start investing.

One example is the Vanguard Diversified High Growth Index ETF (ASX: VDHG). It gives investors exposure to a mix of Australian, international, and emerging-market shares, along with some defensive assets, in a single investment.

This can suit people who want long-term growth, but don’t want to spend every week researching individual companies.

The trade-off is that it still comes with risk. A high-growth ETF can fall when share markets are weak, and investors still need to be comfortable with volatility.

But over long periods, a diversified ETF can make investing easier to stick with. Instead of trying to pick winners, investors can focus on building their portfolio and letting time do the heavy lifting.

The real key to reaching $1 million

The point isn’t to get rich overnight. It is to make investing something you can keep doing through the good and bad times in the market.

Regular investing can also take some pressure off each decision. Instead of trying to pick the perfect entry point, investors can keep adding over time and let the market cycles play out.

Compound interest is not exciting day to day. But give it enough years, and it can turn steady investing into serious wealth.

The post How much do you need to invest each month to retire with $1 million? appeared first on The Motley Fool Australia.

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

Goodman Group (ASX: GMG) shares have traditionally been strong performers for investors.

But over the last 12 months, that hasn’t been the case, with the industrial property company’s shares down over 8%.

Does this make its shares undervalued? Let’s see what Bell Potter is saying about Goodman following its third-quarter update.

What is the broker saying?

Bell Potter was pleased with Goodman’s update. However, it believes investors will need to be patient when it comes to the company’s data centre operations.

Speaking about its update, the broker said:

GMG released its 3Q26 update with FY26 operating EPS growth of +9% y/y reiterated (BPe +9%, VA consensus +10%), “on track to deliver at least this level of performance.”

Powerbank – The data centre powerbank has increased by 7% to 6.4GW with additional contributions driven by Australia / New Zealand (+0.5GW to 2.1GW). […] The market continues to await leasing momentum, with Vernon (LAX01) now in the hands of Databank post recent JV, as major customer signings across the market have been announced by peers. GMG has a long and successful track record as a customer first business, and we think this reflects a combination of status of GMG projects, as well as extension and complexity of leasing and development timeliness. GMG and market anecdotes highlight the strength of current demand and in-place rental growth if and where supply is available.

Are Goodman shares undervalued?

According to the note, the broker has retained its buy rating on Goodman shares with a trimmed price target of $35.50 (from $36.45).

Based on its current share price of $30.01, this implies potential upside of 18% for investors over the next 12 months.

Commenting on its buy thesis, the broker highlights that the company’s shares are trading at a discount to medium-term average multiples. This could potentially make now a good time to pick up shares. Bell Potter concludes:

No change to our Buy recommendation. While we do have some question marks vis-a-vis leasing progress, extension of timelines and associated impact on earnings mix and booking of profits, the moat around the haves and have nots for scaled data centre players appears to be widening, recognising the scale and complexity of execution. Post pull back, GMG trades at a discount to its 5yr PE vs. ASX200 avg (28% prem. vs. 52% 5yr avg) with forward customer signings a key driver.

The post Are Goodman shares undervalued? Let’s find out appeared first on The Motley Fool Australia.

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

The share price of Temple & Webster Group Ltd (ASX:TPW) has been hit hard of late, dropping around 75% in the last 12 months.

So, what’s happening to this once buoyant ASX retail stock and most importantly, is it still a buy?

What’s happening in the homewares sector broadly?

In 2020/21, with almost all of us spending most of our time at home, homewares became a popular retail category. The pandemic essentially pulled years of demand forward.

Fast forward, and slower housing activity, rising interest rates, a consumer spending crunch and increasing shipping and energy costs have seen Temple & Webster’s share price tumble. Investors have turned away from this ASX retail stock in droves.

But a tough present doesn’t necessarily equate to a broken future. Structural growth remains, with the Australian furniture market predicted to grow steadily over the next decade, driven by renovation and lifestyle trends.

Short term pain, long-term gain for this ASX retail stock?

Despite some short-term pain, Temple & Webster offers solid fundamentals. But alongside current market headwinds, it is also facing a common business challenge – can it scale margins as it grows?

In February 2026, Temple & Webster reported H1 FY26 revenue of $375.9 million, up 19.8% on the prior corresponding period. However, it seems investors weren’t impressed with its profits, down 36%. Its gross margins also proved a sticking point, dropping to 30.5% from 32.4% in H1 FY25.

This margin decline is likely driven by a combination of factors. Rising customer acquisition costs, aggressive price competitiveness strategies and ambitious growth plans, including a recent expansion into New Zealand, are all in the mix.

Its focus has been on building market share quickly at the expense of short-term profit; a strategy outgoing CEO Mark Coulter has been very vocal about.

But investors responded resoundingly to its February earnings announcement. The ASX retail stock’s share price fell 25% in the aftermath.

In its May 2026 trading update, the company announced a rebalancing of profit and growth with a raft of pivots. These include new promotional activities, repricing across the catalogue and a slowing of fixed-cost growth.  

It seems the shift has proven effective so far, with Temple & Webster recording the most profitable April in its history.

With incoming CEO Susie Sugden (ex. Genesis Capital) set to take the helm in July, it is an interesting time for Temple & Webster. Coulter is set to stay on board as Executive Chair, and it seems likely that the current strategy will broadly continue to play out under new leadership.

Sugden’s marketing background and direct experience as a former Chief Marketing Officer at Temple & Webster should provide a steady hand.

So, is Temple & Webster a buy right now?

In my opinion, it’s an attractive entry point for patient investors. There is opportunity here for those who are prepared to weather significant volatility in the near term.

While discretionary spending is likely to continue to be slow throughout 2026, Temple & Webster is looking longer term. It has already shown it can execute on ambitious plans in an often challenging retail market. And if the current strategy is similarly executed, it will have a healthy market share to generate significant profits when consumer confidence returns.

The post Down 75%: Is this beaten down ASX retail stock a buy? appeared first on The Motley Fool Australia.

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Motley Fool contributor Melissa Maddison 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 Temple & Webster Group. The Motley Fool Australia has recommended Temple & Webster Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

ASX small-cap Aroa Biosurgery (ASX: ARX) is having a breakout year. 

Aroa is a commercial-stage medical device company operating in the complex wound care and soft tissue reconstruction sector. It provides biologic medical devices through its AROA-ECM (Extracellular Matrix) platform. 

The team at Bell Potter has been covering this ASX small-cap, and sees plenty of runway for growth thanks to strong FY26 results. 

What did the company report?

Yesterday, the ASX small-cap reported for FY 26: 

• NZ$104m in total revenue, exceeding guidance of NZ$92-$100m. It was 23% higher than FY25
• Normalised EBITDA of NZ$13m. This also exceeded guidance (NZ$5-$8m). 
• NZ$10.5m operating cash flow, which was up NZ$13.1m on FY25. 
• NZ$49.5 million in Myriad product revenue (54% growth on FY25).

Looking to FY27 guidance, the company expects total revenue of NZ$115-$125 million, representing 13-23% constant-currency growth. 

Direct sales are expected to grow 24-40%, led by continued Myriad momentum and supported by the launch of Symphony. 

Commenting on AROA’s outlook for FY27, Managing Director and CEO Brian Ward said: 

FY26 was a successful year for AROA. Revenue grew 23% to NZ$103.9 million, driven by 54% growth in the Myriad portfolio, which was achieved with the same number of salespeople as the previous year, demonstrating strong operating leverage in the business. 

We expect Myriad momentum to continue, supported by deeper account penetration and higher productivity across the US direct sales team. Symphony’s value proposition is well aligned with the changing reimbursement environment, and we believe it can become an important medium-term growth catalyst.

Bell Potter pleased with results 

Following these results, the team at Bell Potter provided updated guidance on this ASX small-cap. 

The broker said Aroa delivered a very strong FY26 result, mainly driven by rapid growth in Myriad sales, which they see as the core engine of the business. 

They believe this product can continue to grow at a solid double-digit rate because it is still at an early stage relative to a very large addressable market.

They also think the company is successfully shifting toward a more scalable business model by building out its direct sales force, which is reducing reliance on its US distribution partner and should support more consistent revenue growth going forward. 

In their view, this transition is likely to continue in FY27 as ARX expands sales capacity and re-launches its Symphony product.

However, Bell Potter also expects higher costs in the near term as the company invests more heavily in sales, marketing, and hiring to support growth. This leads them to slightly lower their profit (EBITDA) forecasts, even though they are not meaningfully changing their revenue expectations.

75% upside for this ASX small-cap 

Based on this guidance, the team at Bell Potter has placed an updated price target of $1.09 on this ASX small-cap. 

From yesterday’s closing price of 62 cents per share, this indicates an upside potential of over 75%. 

The post The exciting ASX small-cap with potential 75% upside that I think every investor should be watching appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Bell 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.

Life360 Inc (ASX: 360) shares have pulled back significantly from their highs this year.

While this is disappointing, it could have created a compelling buying opportunity for investors looking for some exposure to the tech sector.

Bell Potter certainly thinks that is the case. It believes the company’s shares could be materially undervalued at current levels.

What is the broker saying?

Bell Potter has been looking over the company’s first-quarter update.

It notes that while the market focused on one key negative, which was explainable, it thinks the attention should have been on the positives. It said:

The 1Q2026 result of Life360 was very good in our view but the market focused on the one key negative – relatively low global MAU growth. This was, however, largely explained (i.e. technical issues) and looks set to rebound strongly over the next three quarters. The market seemed to ignore most or all of the positives (e.g. guidance upgrade) and one in particular – very strong paying circle growth (201k vs BPe 99k).

The reason for the strong growth was perhaps not well explained but we believe was largely due to better quality MAUs and the company now using AI in A/B testing to help optimise marketing and subscription plans. Both of these helped drive much better conversion rates in Q1 and we believe this will continue in subsequent quarters though the rates may drop below Q1 as MAU growth rebounds and the quality drops. So, in short, we expect similarly strong paying circle growth in each of Q2, Q3 and Q4 and, given this is the key driver of revenue growth, we believe market focus will shift to this positive rather than the negative of any weakness in MAU growth.

Should you buy Life360 shares?

According to the note, Bell Potter believes Life360 shares could deliver big returns for investors over the next 12 months.

After reviewing its results, the broker has retained its buy rating with an improved price target of $33.00 (from $32.50).

Based on its current share price of $18.81, this implies potential upside of 75% for investors over the next 12 months.

Speaking about its investment thesis, Bell Potter said:

There are no changes in the key assumptions we apply in the two valuations we use to determine our price target – a 30x multiple in the EV/EBITDA and a 9.6% WACC in the DCF. The modest upgrades to our forecasts, however, have driven a 2% increase in our TP to $33.00 and we retain the BUY recommendation. Key focus for us is the Q2/H1 result in August and, firstly, a strong rebound in MAU growth but secondly, and more importantly, another quarter of strong paying circle growth where anything approaching or up around 200k again would be bullish in our view.

The post Why Life360 shares could be cheap and heading 75% higher appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Life360. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Life360. The Motley Fool Australia has positions in and has recommended Life360. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Endeavour Group Ltd (ASX: EDV) share price is in focus today after management unveiled a refreshed strategy aiming to unlock revenue growth and deliver $300 million in cost savings by FY29. The company will accelerate Hotel investments and reset retail brands Dan Murphy’s and BWS to sharpen customer focus.

What did Endeavour Group report?

• Targeting $300 million in cost savings by FY29 (including $100 million in FY27)
• Acceleration of capital investment in the Hotels network across renewals and refurbishments
• Resetting Dan Murphy’s and BWS strategies to drive revenue and strengthen price leadership
• Divestment of non-core assets, including most of its winery and vineyard portfolio
• Dividend payout ratio revised to a range of 50%–75% of group underlying NPAT

What else do investors need to know?

Endeavour Group’s strategy update follows a detailed review led by CEO Jayne Hrdlicka and the board. Management identified three main priorities: resetting the multi-brand retail approach, unlocking growth in its Hotels portfolio, and simplifying operations to reduce costs.

A sharper focus on digital, localised product range, and customer engagement is expected across both retail brands. In Hotels, the company will ramp up investments in venue renewals and use guest insights and data to elevate experiences and growth.

What’s next for Endeavour Group?

The group is entering an investment phase, with a clear plan to strengthen Dan Murphy’s price leadership, modernise BWS’s digital experience, and lift Hotel performance. Around $300 million in targeted cost-outs by FY29 and a disciplined capital allocation framework support these ambitions.

Management expects higher capital expenditure in the near term to fund Hotel upgrades and digital initiatives, balanced by active portfolio management and ongoing divestments of non-core assets.

Endeavour Group share price snapshot

Over the past 12 months, Endeavour Group shares have declined 24%, trailing the S&P/ASX 200 Index (ASX: XJO) which has risen 3% over the same period.

View Original Announcement

The post Endeavour Group unveils strategy update and $300m cost savings drive appeared first on The Motley Fool Australia.

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Motley Fool contributor Laura Stewart 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. This article was prepared with the assistance of Large Language Model (LLM) tools for the initial summary of the company announcement. Any content assisted by AI is subject to our robust human-in-the-loop quality control framework, involving thorough review, substantial editing, and fact-checking by our experienced writers and editors holding appropriate credentials. The Motley Fool Australia stands behind the work of our editorial team and takes ultimate responsibility for the content published by The Motley Fool Australia.

Are you looking for outsized returns? Well, Bell Potter has just named one rapidly growing ASX tech stock as a buy with major upside potential.

In fact, it thinks this stock could double in value in a year.

Which ASX tech stock?

The stock that Bell Potter is recommending to investors with a high tolerance for risk is Adveritas Ltd (ASX: AV1).

Adveritas is a technology company that develops software solutions for enterprise customers to help maximise the return on digital ad spend.

Its key product is TrafficGuard, which is a SaaS platform that detects and intercepts fraudulent traffic in real time. This enables advertisers to reduce wasted ad spend and optimise their budgets.

Bell Potter was pleased with the company’s trading update, which revealed another increase in annualised recurring revenue (ARR). It said:

Adveritas released a trading update and the key points were: 1. ARR has reached US$16.3m which is up 8% in c.2 months since end of March; 2. Most of the new ARR has been outside the traditional sports and gaming market and has been both from US-based partnerships and customers in the agency, e-commerce and retail verticals; 3. SME self-serve platform is rapidly scaling through organic growth with 652 signups, 250 account connections and 54 billable accounts; and 4. Growing use of AI is increasing demand for Adveritas’ solutions as AI-driven bot fraud expands the scale of the problem and so the addressable market.

In response to the update, the broker has upgraded its estimates for FY 2026. It explains:

We were forecasting ARR of $16.5m at the end of FY26 so the company is already almost at that mark and there is still just over a month to go in the financial year. We have, therefore, upgraded our ARR forecast by 3% to $17.0m at year end though still see potential for this to be exceeded.

Shares tipped to double

According to the note, the broker has retained its buy rating and 18 cents price target on the ASX tech stock.

Based on its current share price of 8.4 cents, this implies potential upside of approximately 115% for investors over the next 12 months.

Bell Potter thinks concerns that a capital raising will be needed are unnecessary given that the company is on the cusp of being cash flow positive. It concludes:

The next potential catalyst is the release of the Quarterly Activities Report in late July where we expect the year end ARR to be provided. Another potential catalyst is confirmation by the company that it expects to be EBITDA and/or cash flow in FY27. Admittedly there is perhaps some perception that the company is cum raise with cash of only $6m at the end of March but a cash flow positive outlook will potentially dispel or at least dilute that thinking.

The post Meet the rapidly growing ASX tech stock Bell Potter says can double in a year 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 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 superannuation system is a wonderful way for Australians to build wealth because of how returns are taxed much lower compared to normal individual tax rates.

Passive income received in superannuation during the retirement phase has a good chance of being tax-free. How great is that?

So, the question is, how much would it take to receive a sizeable amount of dividends each year? Let’s take a look.

$3,000 of passive income each month from superannuation

Receiving $3,000 equates to $36,000 per year. That’s not a gigantic amount, but it could be enough to be an essential part of a retiree’s finances.

How large the nest egg needs to be to receive $36,000 per year is largely related to what the portfolio yield is.

For example, if someone’s portfolio had an average dividend yield of 3.6%, then they’d need a $1 million portfolio to receive $36,000.

But, if the portfolio average dividend yield was actually 7.2%, then an investor would only need a $500,000 portfolio.

If the portfolio had a 4.8% dividend yield then an invest would need a portfolio value of $750,000.

There are plenty of options when it comes to aiming for these sorts of yields, so I’ll highlight a few names below. For my own portfolio, I have invested in a mix of names to create a strong dividend portfolio.

Which ASX dividend shares I’d buy

If an investor is targeting a relatively low (3.6%) passive income yield in superannuation, or outside of superannuation, then I’d consider names like investment conglomerate Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), Kmart and Bunnings owner Wesfarmers Ltd (ASX: WES), global jewellery business Lovisa Holdings Ltd (ASX: LOV) and funeral provider Propel Funeral Partners Ltd (ASX: PFP).

Among the mid-range yield (around 5%) names, I appreciate listed investment company (LIC) L1 Long Short Fund Ltd (ASX: LSF), industrial property owner Centuria Industrial REIT (ASX: CIP), farmland landlord Rural Funds Group (ASX: RFF), telco Telstra Group Ltd (ASX: TLS) and quality global shares-focused exchange-traded fund (ETF) WCM Quality Global Growth Fund (ASX: WCMQ).

Some of the higher-yield (more than 7%) names that I like include LICs WCM Global Growth Ltd (ASX: WQG), MFF Capital Investments Ltd (ASX: MFF), WAM Microcap Ltd (ASX: WMI), and diversified property landlord Charter Hall Long WALE REIT (ASX: CLW).  

The post How much is needed in superannuation to target a $3,000 monthly passive income? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in L1 Long Short Fund, Mff Capital Investments, Propel Funeral Partners, Rural Funds Group, Wam Microcap, Washington H. Soul Pattinson and Company Limited, Wcm Global Growth, and Wcm Quality Global Growth Fund. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Lovisa, Washington H. Soul Pattinson and Company Limited, and Wesfarmers. The Motley Fool Australia has positions in and has recommended Rural Funds Group, Telstra Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Lovisa, Mff Capital Investments, and Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Codan Ltd (ASX: CDA) has not been resting on its laurels.

The Adelaide-based electronics and communications company, which most Australians still associate with metal detectors, has transformed itself into one of the most interesting defence technology stories on the ASX.

Up almost 140% over the past twelve months and 40% in 2026 alone, Codan announced this week that its wholly owned US subsidiary, DTC Communications, has entered a binding agreement to acquire the intellectual property of Adaptive Dynamics.

Adaptive Dynamics is a US-based engineering company specialising in anti-jamming and electronic warfare resilience for mission-critical communications.

What Adaptive Dynamics actually does

Adaptive Dynamics has spent more than two decades developing algorithms and radio frequency technologies capable of handling intentional and unintentional interference, signal enhancement, and adaptive filtering across defence systems operating in land, maritime, and airborne environments.

In practical terms, this means Adaptive Dynamics’ technology enables military communications systems to keep functioning even when an adversary is actively jamming, spoofing, or disrupting them.

This is one of the most pressing operational challenges facing Western defence forces in modern contested environments.

The acquisition is valued at approximately $21 million in upfront and contingent consideration, plus a tiered royalty structure over five years following completion.

Completion is expected in the first half of FY2027.

Codan has indicated that the deal will be earnings neutral in its first year, with the focus on integration rather than immediate profit contribution.

Why this acquisition is bigger than its price tag suggests

At $21 million, the Adaptive Dynamics deal is small relative to Codan’s current market capitalisation of approximately $7.5 billion.

But what it adds to DTC Communications is disproportionately valuable.

As Western defence forces increasingly compete in what military planners call contested electromagnetic environments, the ability to communicate reliably under active jamming conditions has become a non-negotiable procurement requirement.

DTC’s existing customers are already demanding electronic warfare resilience and AI-enabled integration capabilities as standard features in new contracts.

This means that Adaptive Dynamics’ technology directly expands the set of US and allied defence programs Codan can compete for.

The broader Codan story

This acquisition does not happen in isolation.

Codan earlier in 2026 lifted its full-year EBIT and NPAT guidance by more than 60%, driven by outperformance in both its communications and metal detection divisions.

The communications business, anchored by DTC and Codan’s broader defence electronics portfolio, is growing at a materially faster pace than the metal detection business, and management has deliberately allocated capital to expand that capability through acquisitions like this one.

Codan’s FY2026 EBIT is now expected to land near $235 million.

This is a significant step up from prior years and demonstrates the premium valuation the market is now placing on the stock.

The company designs its own core products and maintains manufacturing facilities in Adelaide, Penang, and multiple other locations globally.

As a result, this gives it control over its supply chain in a way that many pure defence contractors cannot match.

The valuation question

After a 140% gain in twelve months, Codan is no longer cheap.

The stock trades on a meaningful premium to the broader ASX 200 on most valuation metrics.

Any disappointment with earnings delivery or contract wins would likely be met with a sharp market reaction.

Foolish takeaway

Codan’s acquisition of Adaptive Dynamics is a strategically astute move that adds genuine capability to its fastest-growing division at a price that will barely register on the balance sheet.

For long-term investors already holding Codan, the direction of travel looks as clear as ever.

For those yet to invest, the entry point is harder to justify after a 140% run, but the quality of the underlying business and the depth of the defence spending tailwind make it a stock that deserves to stay on any serious investor’s watchlist.

The post Codan just acquired a US defence specialist. What does this mean for investors? appeared first on The Motley Fool Australia.

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Motley Fool contributor Mark Verhoeven 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.