It is fair to say that Accent Group Ltd (ASX: AX1) shares have had a brutal run.

The footwear and apparel retailer is now trading at just 93 cents, down 62% from its 52-week high of $2.46, and sentiment around the footwear retailer could hardly be worse.

But when a profitable, cash-generative business falls this far, the key question for investors becomes simple. Is this a value trap or a rare long-term buying opportunity hiding in plain sight?

What went wrong?

The company disappointed the market with a FY 2026 trading update last month that came in well below expectations.

For the first 20 weeks of the financial year, Accent reported group-owned sales tracking well below the market’s estimates. It also revealed that its gross margin had fallen 160 basis points year to date.

Management blamed this on challenging retail market conditions, including ongoing promotional activity.

As a result, its FY 2026 EBIT guidance was cut to between $85 million and $95 million, which was around 23% below market expectations at the time according to a note out of Bell Potter.

Attractive dividend yield

Despite its earnings downgrade, Accent remains profitable and cash generative.

Bell Potter is forecasting fully franked dividends of 5.3 cents per share in FY 2026, rising to 7 cents per share in FY 2027, and then 8.1 cents per share in FY 2028.

At today’s share price, this represents attractive dividend yields of 5.7%, 7.5%, and 8.7%, respectively.

For patient income investors, that kind of yield from a national retail leader is hard to ignore.

Cheap valuation

On Bell Potter’s numbers, Accent is trading on an FY 2026 price to earnings (P/E) ratio of roughly 13x. It then falls close to 10x on FY 2027 forecasts.

That multiple clearly reflects low confidence in near-term earnings, but it also assumes little value from any recovery in consumer spending or margin normalisation.

It also doesn’t appear to place much value on the roll out of the Sports Direct brand in Australia.

Accent has begun its roll out Sports Direct stores in Australia in partnership with Frasers Group, with the first store opening in November and at least three more planned in FY 2026.

Bell Potter notes a six-year target of around 50 stores, positioning Accent to increase exposure to a more resilient sportswear category.

While this initiative is unlikely to move the needle immediately, if executed well, it could reshape the earnings profile of the business over the next decade.

All in all, I think this could be a great time to make a patient investment in Accent shares while they are down in the dumps.

The post Down 60% with a 6% yield and P/E of 13x – are Accent shares a generational bargain? appeared first on The Motley Fool Australia.

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

The Vanguard Australian Shares Index ETF (ASX: VAS) is the most popular exchange-traded fund (ETF) for accessing ASX shares. The fund has around $22 billion of investor money allocated to it.  

But, being the biggest doesn’t necessarily mean it’s the best choice for Aussie investors.

Vanguard is one of the world’s best ETF providers, in my opinion. It wants to offer investors investment funds that give exposure to shares (and bonds) with very low fees.

There are a number of good reasons to want to invest in the VAS ETF, such as its low fees, the diversification on offer and a solid dividend yield. But, depending on why Aussies are picking the Vanguard offering, there are other options that could fit the bill even better.

Fees

Arguably, the most appealing aspect of the Vanguard Australian Shares Index ETF is that its annual management fee is just 0.07% per year. That’s close to nothing!

Low costs are great because it means more of the returns and fund value are left in the hands of the investor. There are no performance fees either.

While the VAS ETF is one of the cheapest options on the ASX, there is an even cheaper option: BetaShares Australia 200 ETF (ASX: A200). The BetaShares offering has an annual fee of just 0.04%, which is even closer to nothing.

Interestingly, at the time of writing, the A200 ETF’s return has slightly outperformed the VAS ETF over the last three years and five years. Of course, past outperformance doesn’t mean it’ll continue.

Diversification

Another positive characteristic of the VAS ETF is its diversification.

The Vanguard fund owns 300 businesses because it tracks the S&P/ASX 300 Index (ASX: XKO), an index of 300 of the largest companies on the ASX. That’s seemingly a good level of diversification.

It owns names like Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB), ANZ Group Holdings Ltd (ASX: ANZ), Wesfarmers Ltd (ASX: WES), CSL Ltd (ASX: CSL), Macquarie Group Ltd (ASX: MQG), Goodman Group (ASX: GMG) and Telstra Group Ltd (ASX: TLS).

However, the largest businesses have a very big weighting on the ASX, making it seem less diversified than it looks.

Those ten names I mentioned above account for around 44% of the VAS ETF portfolio and the other 290 names make up the other 56%.

Additionally, around 54% of VAS ETF is invested in just ASX financial shares and ASX mining shares. Ideally, it’d be useful if other sectors had a larger allocation.

VanEck Australian Equal Weight ETF (ASX: MVW), as the name of suggests, owns a portfolio of names that it aims to provide investors with an equal weighting to. It’s not strongly exposed to any single ASX share or sector.

The MVW is currently invested in 72 names such as Evolution Mining Ltd (ASX: EVN), Northern Star Resources Ltd (ASX: NST), South32 Ltd (ASX: S32), Whitehaven Coal Ltd (ASX: WHC), Reece Ltd (ASX: REH) and Orica Ltd (ASX: ORI).

The VAS ETF is not as diversified as it could be. I’m not suggesting to replace the VAS ETF with the MVW ETF, but they could work well together to reduce the exposure to a few large businesses.

Dividend yield

One advantage of ASX blue-chip shares over international shares is their typically higher dividend yield. According to Vanguard, the VAS ETF has a dividend yield of 3.1%, with franking credits a bonus on top of that yield.

But, there’s a Vanguard offering that tries to provide investors with an even higher dividend yield. The Vanguard Australian Shares High Yield ETF (ASX: VHY) invests in businesses that have higher forecast dividends compared to other ASX shares.

The VHY ETF has a dividend yield of 4.3% excluding franking credits and 5.8% including franking credits, which is noticeably stronger than the VAS ETF. So, the high-yield option could be a better idea for income-focused investors.

Overall, the VAS ETF is still a very effective option for Australians and has positive aspects. But, I think it’s useful to assess whether there’s an even more appealing option, depending on someone’s objectives.

The post Is the Vanguard Australian Shares Index ETF (VAS) the best way to invest in ASX shares? 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 CSL, Goodman Group, Macquarie Group, and Wesfarmers. The Motley Fool Australia has positions in and has recommended Macquarie Group and Telstra Group. The Motley Fool Australia has recommended BHP Group, CSL, Goodman Group, Vanguard Australian Shares High Yield ETF, and Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

There are a number of very attractive ASX shares that are growing revenue and earnings at a strong pace. We’re going to look at three names that are predicted to deliver double-digit returns.

I like to look at smaller businesses as potential opportunities because of how much earlier on in their growth journeys they are compared to a name like Commonwealth Bank of Australia (ASX: CBA) and BHP Group Ltd (ASX: BHP).

Let’s take a look at two of the most promising ASX share for 2026.

Judo Capital Holdings Ltd (ASX: JDO)

Broker UBS describes Judo as a fast-growing challenger that focuses exclusively on servicing small and medium enterprises (SMEs). It offers business loans, lines of credit, asset finance, bank guarantees and SME home loans, funded by a combination of term deposits and wholesale funding.

After seeing the company’s trading update at the AGM, UBS was optimistic with a buy recommendation and a price target of $2.20. That implies a possible rise of 26% over the next year, at the time of writing.

UBS said that Judo’s net interest margin (NIM – how much profit it makes on lending in percentage terms including the cost of funding) – guidance of more than 3% is helped by deposits, competition and funding mix improvements.

Judo is offering more term deposit durations, such as five, seven and eight-month terms that provide more stability and maturity opportunities.

UBS said new business origination “looks strong” and Judo is expected to have a strong end to 2025, which are usually seasonally-strong months. Agri and regional lending is “doing a lot of the heavy lifting” in terms of where growth is coming from.

The ASX share had an overall lending pipeline of around $1.9 billion at the time of the AGM, with Judo expecting between 80% to 90% of that to convert in the subsequent months.

UBS projects the company could generate $131 million of net profit in FY26 and reach $270 million of net profit by FY30.

Zip Co Ltd (ASX: ZIP)

Zip is one of the world’s larger buy now, pay later businesses with a presence in ANZ and the US.

UBS was very impressed by Zip’s FY26 first quarter update, with a buy recommendation and a price target of $5.40. That implies a possible rise of 75% over the next year, if that comes true.

The broker noted that US growth has accelerated in FY26, with first-quarter growth of 47% in US dollar total transaction value (TTV) terms.

UBS said Zip said is now expecting US TTV to grow by more than 40% in FY26.

The broker believes the progress in the first quarter of FY26 sets it up well for the important sector quarter, with “continued proof of engagement growth (spend per customer, higher AOV [average order value] and frequency)”, according to UBS.

While the ASX share is seeing strong US growth, it’s also seeing a trending-higher US loss rate, though this “makes sense given greater growth from new customers…and is still at a comfortable level balancing growth and profitability.”

The ANZ metrics are “strong”, though receivables growth “continues to lag stronger TTV growth” and the broker is forecasting a catch-up from here onwards.

UBS predicts that Zip could generate net profit of $86 million in FY26 and reach $385 million by FY30.

The post 2 great ASX shares to buy for 2026: experts 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 no position in any of the stocks mentioned. The Motley Fool Australia has recommended BHP Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

There’s no denying the appeal of Commonwealth Bank of Australia (ASX: CBA) shares. It is one of the most widely held shares in the country, pays reliable dividends, and has long been seen as a cornerstone investment for Australian portfolios.

But popularity doesn’t always equal superiority. At today’s valuations, investors may want to consider whether a diversified ETF approach could offer a better balance of growth, income, and risk than owning CBA shares alone.

Here’s why some ASX ETFs could stack up more favourably.

Valuation risks

CBA has often traded at a premium to its peers, and that premium reflects very high expectations. When a stock is priced for perfection, future returns can become constrained, even if the business continues to perform well.

ETFs, by contrast, spread valuation risk across dozens, or even hundreds, of stocks. For example, the Vanguard Australian Shares ETF (ASX: VAS) gives investors exposure to the entire local market, including banks, miners, healthcare leaders, and industrials. If one sector becomes overvalued, others can help offset that risk.

Rather than relying on a single bank to keep delivering, investors benefit from the broader earnings power of the Australian economy.

Better growth exposure outside banking

CBA is a mature business operating in a heavily regulated industry. While it can deliver steady profits, its long-term growth rate is naturally limited by credit growth, margins, and regulation.

ETFs such as the iShares S&P 500 ETF (ASX: IVV) provide exposure to some of the world’s fastest-growing global companies, including Apple Inc (NASDAQ: AAPL), Microsoft Corp (NASDAQ: MSFT), and Nvidia Corp (NASDAQ: NVDA). Over time, global innovation, productivity gains, and technology adoption have driven stronger growth than most domestic banks can realistically achieve.

For investors focused on wealth creation rather than just stability, this broader growth exposure can be a meaningful advantage.

Quality option

Some investors buy CBA because they want quality and reliability. The good news is that ETFs can deliver this too. Importantly, that is without tying your fortunes to one company.

The VanEck Morningstar Wide Moat ETF (ASX: MOAT) focuses on businesses with sustainable competitive advantages and fair valuations. This is a concept closely aligned with Warren Buffett’s investing philosophy.

Its holdings include stocks such as Adobe Inc (NASDAQ: ADBE), Nike Inc (NYSE: NKE), and Thermo Fisher Scientific Inc (NYSE: TMO), which benefit from strong brands, high switching costs, or scale advantages.

Instead of betting on one bank maintaining its dominance, investors gain access to a portfolio of global leaders with long-term pricing power.

The post Why these ASX ETFs could be better than buying CBA shares appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Nike and VanEck Morningstar Wide Moat ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Adobe, Apple, Microsoft, Nike, Nvidia, Thermo Fisher Scientific, and iShares S&P 500 ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft, long January 2028 $330 calls on Adobe, short January 2026 $405 calls on Microsoft, and short January 2028 $340 calls on Adobe. The Motley Fool Australia has recommended Adobe, Apple, Microsoft, Nike, Nvidia, VanEck Morningstar Wide Moat 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.

GrainCorp Ltd (ASX: GNC) shares suffered a horrible week last week. 

The company is an integrated grain and edible oils business. 

It is the largest grain storage and handling business in ECA and the number one edible oil processor and oilseed crusher in Australia and New Zealand.

On Wednesday, its stock price fell as much as 20%, before recovering to end the day down 12%. 

Its share price fell again on Thursday and Friday, to end the week down more than 16%. 

Why did the share price fall?

Shareholders were dumping GrainCorp shares last week after it announced the sale of non-core asset GrainsConnect Canada. 

According to the media release, GrainCorp and Zen-Noh Grain Corporation have agreed to sell their joint venture GrainsConnect to Parrish & Heimbecker for C$150 million on a cash-free, debt-free basis, following a strategic review prompted by challenging financial performance. 

GrainCorp expects to recognise a loss of approximately A$5–10 million, with no impact on its through-the-cycle EBITDA, and completion of the transaction is anticipated in the first half of 2026.

GrainCorp’s Managing Director and CEO, Robert Spurway, commented:

This transaction reflects GrainCorp’s ongoing commitment to portfolio optimisation and our readiness to rationalise assets where necessary to improve returns.

Divestment of GrainsConnect allows GrainCorp to focus on alternative value-creating opportunities that are in the best interests of our shareholders.

Following the sell-off, there could be an opportunity for investors to swoop in and snap these shares up at a discount. 

Here’s Morgans view. 

GrainCorp shares oversold

In a note out of Morgans on Thursday, the broker said grain receivals have been lower than expected and the grain trading margin environment has deteriorated. 

We have reduced our below consensus FY26 EBITDA forecast by 7%. With payments to the insurer no longer required in big crop years, GNC’s strong fixed cost leverage should return when crop production issues around the world ultimately eventuate.

The team said while GrainCorp is lacking near-term share price catalysts, it believes the stock has been oversold. 

Morgans maintains its accumulate recommendation with a new price target of A$8.05.

From Friday’s closing price of $7.04, this indicates an upside of 14.35%. 

Morgans isn’t the only broker suggesting GrainCorp shares could be a value. 

Macquarie has a price target of $8.30, suggesting roughly an 18% upside. 

The post What is Morgans’ view on GrainCorp shares after monster sell-off? 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.

I’m always on the lookout for high-quality ASX dividend shares for my portfolio. I like the combination of dividends and long-term capital growth.

When my finances allow, I like to invest some money into my portfolio each month.

I made my latest investments earlier this week so I thought I’d share which ASX stocks I decided to purchase.

I didn’t invest as much as $10,000. But, if I were given that amount to invest for passive income, I’d pick the same names and one more.

Let’s get into it.

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

Anyone that has read my articles for long enough will know that this investment conglomerate is one of my favourites for the long-term.

There are some sizeable uncertainties in the global economy right now, including the inflation outlook and AI (both the vast capital expenditure and the possible effects on the labour market). I’d say Soul Patts is one of the best S&P/ASX 200 Index (ASX: XJO) share options to ride out whatever happens next.

The business regularly adds to its portfolio and I think its investment strategy will help deliver pleasing compounding over time. Its exposure to nuclear energy through Nexgen Energy (Canada) CDI (ASX: NXG) looks like a smart move, while the acquisition of Brickworks added an excellent industrial property portfolio.

When I bought more of this ASX dividend share, the share price had dropped approximately 20% from September, making it look like a good opportunity to invest. This decline has pushed up the grossed-up dividend yield to 4.1%, including franking credits, at the time of writing.

The fact it has increased its annual dividend per share every year since 1998 is a very pleasing record of reliability.

MFF Capital Investments Ltd (ASX: MFF)

MFF is another investment business that features prominently in my portfolio because of the assets it owns and its dividend growth outlook.

The company’s key method of generating returns for investors is its high-quality portfolio of predominantly international shares. By looking across the global share market for opportunities, MFF is able to find quality compounders that can deliver excellent long-term returns.

There’s no guarantee the ASX dividend share will be able to deliver ongoing total shareholder returns in the mid-teens, as it has done over the last five years. But, I believe the portfolio has a very promising future.

If MFF is able to assist the recently-acquired funds management business Montaka to become a sizeable player in the investment world, then that would be a very pleasing bonus for the company.

The ASX dividend share has increased its annual ordinary payout each year over the last several years and its guidance for FY26 translates into a grossed-up dividend yield of 5.7%, including franking credits, at the time of writing.

Rural Funds Group (ASX: RFF)

A business I didn’t invest in this week was Rural Funds, but I think it’d be a great addition to an ASX dividend share portfolio if I were investing $10,000 across three names.

Rural Funds is a leading real estate investment trust (REIT) that owns farmland across Australia. I think it’s a good move to own a diversified portfolio when it comes to sources of income and leasing to agricultural tenants seems like a pleasing move.

The ASX dividend share is invested across cattle, almonds, macadamias, cropping and vineyards.

It pays a pleasingly consistent distribution every quarter, giving investors regular cash flow.

Rural Funds is benefiting from built-in rental indexation with its farms, which are either fixed annual increases or linked to inflation. This is a very useful tailwind for rental profits over time, in my opinion.

The business plans to pay an annual distribution of 11.73 cents per unit in FY26, translating into a forward distribution of 5.8%. After multiple RBA rate cuts this year, I think that’s a solid starting distribution yield. 

The post Where I’d invest $10,000 into ASX dividend shares right now appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Mff Capital Investments, Rural Funds Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Rural Funds Group and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Mff Capital Investments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Superannuation is one of those topics most Australians rarely discuss openly.

Many people assume they are about average, but without real context, that assumption can be misleading.

So how does your superannuation balance really compare with other Australians at different life stages, and what does normal actually look like?

The average superannuation balances

According to data from Association of Superannuation Funds of Australia (ASFA), as you would expect, super balances rise steadily with age.

In the early years, balances are understandably modest. Australians aged 18–24 hold average balances of $8,163 for women and $9,062 for men. Even by the late 20s, the average balance is still only $24,821 for women and $27,021 for men.

By ages 30–34, average super balances rise to $46,586 for women and $55,690 for men. This increases further in the late 30s, with balances hitting $76,020 for women and $96,122 for men at ages 35–39. This is typically the stage where compounding is only just beginning to take hold.

Australians aged 40–44 average $109,209 for women and $140,680 for men. By ages 45–49, balances lift to $147,146 and $193,501, respectively, as higher incomes and longer contribution histories start to come through.

In the early 50s, average balances rise again to $190,175 for women and $254,071 for men. By ages 55–59, Australians hold an average of $242,945 in super for women and $319,743 for men.

As retirement approaches, the averages for Australians aged 60–64 are $313,360 for women and $395,852 for men. And at ages 65–69, the averages are $392,274 and $448,518, respectively.

What does that mean for retirement?

This is where context really matters.

According to the ASFA, a comfortable retirement currently requires around $595,000 in superannuation for a single person, or approximately $690,000 combined for a couple who own their home outright.

ASFA defines a comfortable retirement as one that allows retirees to enjoy a good standard of living, including private health insurance, regular social and leisure activities, dining out, and occasional domestic and international travel.

By contrast, a modest retirement requires far less. ASFA estimates that both singles and couples require around $100,000 in super, assuming they also receive some level of age pension.

A modest retirement covers basic living costs and essentials, with limited discretionary spending and fewer lifestyle extras.

Based on ASFA’s numbers, most single Australians fall short of having enough superannuation for a comfortable retirement. But rest assured, the average couple is on track to achieve this goal.

Foolish takeaway

Knowing whether your superannuation balance is normal for your age is a useful starting point, but it shouldn’t be the end of the conversation.

The more important question is whether your balance, combined with the time you have left in the workforce, is on track to deliver the lifestyle you want. The earlier you understand the gap between average and comfortable, the more options you have to close it.

The post Is your superannuation balance normal for your age? Here’s how Australians really compare 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.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Artificial intelligence (AI) has been the driving force behind many of the stock market’s biggest winners over the last three years. Big companies like Microsoft (NASDAQ: MSFT) and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) have seen their share prices reach new all-time highs, driven by strong AI-related business results across both software and cloud computing. Both companies are pushing toward $4 trillion valuations. Meanwhile, Nvidia briefly touched a $5 trillion market cap this year as big tech companies continue to buy up its graphics processing units (GPUs) as fast as it can sell them.

But not every AI-related stock has zoomed higher this year. One company, in particular, has seen its stock stuck in neutral, climbing less than 5% this year while the S&P 500 is up more than 17%. But that could be a buying opportunity for long-term investors. In fact, the stock could produce very strong returns as soon as next year. Here’s why you’ll want to own Amazon (NASDAQ: AMZN) in 2026.

A dominant force across three major industries

Amazon may have started as a small online bookseller, but it has grown to be much more. Its marketplace offers nearly everything you can think of, and it can ship millions of items to U.S. customers within one to two days thanks to its massive fulfillment network. It has built a burgeoning advertising business that has expanded from retail media ads to video ads served through its Prime Video service and other streaming partners. And it’s the largest cloud computing platform in the world, operating Amazon Web Services (AWS).

All three businesses are experiencing rapid growth and demonstrating strong momentum.

The online retail business continues to produce high-single-digit revenue growth despite generating over $250 billion in annual sales. Its third-party seller services, which enable other businesses to sell through Amazon’s marketplace, are showing accelerating growth, up 11% in the most recent quarter. The entire ecosystem rests on Amazon’s Prime subscription service, which has steadily pushed subscription revenue 10% higher.

Amazon’s advertising business is accelerating, climbing 24% in the most recent quarter, reaching a $70 billion run rate. Prime Video is a key catalyst for that continued growth, as 80% of subscribers are on the ad-supported tier and Amazon adds more live sports content to the service. It has also partnered with several major streaming platforms through its demand-side ad-buying platform.

Overall, Amazon is seeing operating margin expansion in its North American and International reporting segments. A couple of factors are leading to higher margins. First, advertising sales have extremely high margins relative to product sales and even third-party services. The second is that Amazon’s improvements to its fulfillment center have reduced its shipping costs. Shipping costs have increased at a slower pace than paid units in each of the last eight quarters.

Amazon’s cloud computing business remains the company’s most important segment, accounting for most of the operating income and growing quickly. Management has successfully reaccelerated revenue growth for the segment, achieving 20% year-over-year growth last quarter, driven by strong triple-digit revenue from AI services. That rate is significantly slower than both Microsoft and Google, but AWS is also growing off a larger base.

CEO Andy Jassy expects sales to continue at the current pace for the foreseeable future. That’s supported by a growing backlog, which reached $200 billion by the end of the third quarter. Amazon also signed deals in October with commitments exceeding everything it booked in Q3, so there’s a lot of momentum behind the cloud computing segment to keep growing.

Amazon looks undervalued right now

Amazon is investing heavily to capitalize on the opportunities it sees in both cloud computing and e-commerce. It spent $90 billion through the first three months of the year on capital expenditures (capex), and management expects full-year cash capex to come in around $125 billion. That’s well above Alphabet’s planned $92 billion in capex for the year and slightly more than Microsoft (which spent $80 billion through the first nine months of the year).

That high spending has weighed heavily on Amazon’s free cash flow, which fell to $14.8 billion over the trailing-12-month period. That’s down from $47.7 billion in the previous 12-month period. Indeed, the high capex has hit Amazon’s cash flow much harder than capex has hit either Microsoft or Alphabet. That’s in part because its competitors have high-margin software businesses that continue to grow quickly, offsetting their spending, while Amazon’s retail business still has relatively low margins.

But Amazon has gone through multiple investment cycles throughout its history. Each time, it has emerged with much stronger cash flows than it had before the investment cycle. Considering the growing backlog of cloud computing contracts and the secular trend toward migrating to cloud computing services, investors should remain confident that the pattern will hold. While management expects to increase its capex further in 2026, free cash flow will eventually trough as capital intensity levels off. With strong operating cash-flow growth, Amazon should see a rapid recovery in free cash flow.

Amazon has historically traded around 50 times its free cash flow near its peaks. With its current market cap of $2.5 trillion, investors are merely expecting it to return to its peak free-cash-flow levels from a bit over a year ago. It seems very likely that Amazon will far exceed those levels over time, pushing its stock price significantly higher.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 1 unstoppable artificial intelligence (AI) stock you’ll want to own next year appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Adam Levy has positions in Alphabet, Amazon, and Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Warren Buffett has been leading holding company Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) since 1965. That’s 60 years of market trouncing.

As of the end of 2024, Berkshire Hathaway had gained 5,502,284% in per-share market value since Buffett took over, whereas the S&P 500 had gained 39,054% at the same time. When he leaves at the end of the year, it will be with an unmatched legacy and a trove of wisdom for investors.

Buffett may still weigh in about market dynamics and the right approach to investing from a different perch, but he will no longer be writing the company’s annual letters, chock-full of his nuggets of wisdom. Here are three of his gems to guide you as you continue your own investing journey.

“No matter how serene today may be, tomorrow is always uncertain.”

Buffett wrote this in his 2010 shareholder letter, not too long after the mortgage crisis and subsequent market implosion. He reminded investors that no one saw what was coming in 1987 or 2001, two other times in history when the market crashed.

Although that sounds like a dour take on the market, he actually meant it in a positive way. “Don’t let that reality spook you. Throughout my lifetime, politicians and pundits have constantly moaned about terrifying problems facing America,” a statement eerily reminiscent of today’s political scene. And that was precisely his point: “America’s best days lie ahead.”

We live in uncertain times, too. There could be an artificial intelligence (AI) bubble, or a cryptocurrency bubble, or a general stock market bubble — or not. But as Buffett pointed out 15 years ago, that’s par for the course. The short term is always uncertain, but the long-term arc has always been upward. Buffett will always bet on America, and don’t let the uncertainty keep you out of the markets.

“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

Buffett is known as a value investor, but he isn’t just searching for cheap stocks. Stocks are by definition only bargains if they’re valuable; otherwise, they’re value traps.

It’s the great companies that can withstand market volatility and create shareholder value. So while you don’t want to overpay, the more important part of choosing a stock is focusing on a wonderful company.

That doesn’t mean Buffett isn’t looking for the incredible opportunity of a great company at a cheap price. He demonstrated that when Berkshire Hathaway bought shares of UnitedHealth Group when they dropped a few months ago. The one trait he pointed out about incoming CEO Greg Abel in the most recent shareholder letter is his ability to act when opportunities present themselves.

“When investing, pessimism is your friend, euphoria the enemy.”

This is a crucial lesson for investors to keep in mind during strong bull markets — like today. The S&P 500 continues to rise, posting double-digit gains for the third year in a row, but the market appears to be driven by an AI-based euphoria.

Large hyperscalers are sinking billions of dollars into AI development, and the results have yet to be seen. Berkshire itself invested in Alphabet in the third quarter, so Buffett still sees value in some AI development. He also owns shares of Amazon.

He has warned investors about buying stocks when the market is at a high, noting that “Unfortunately…stocks can’t outperform businesses indefinitely.” The stock market is highly valued today, which might be why Berkshire Hathaway has been a net seller of stocks for the past 12 quarters and has built up record levels of cash and short-term Treasury bills.

Warren Buffett would counsel investors to stay in the market and keep buying the right stocks under the right circumstances, but be wary of euphoria and embrace pessimism. If you expect the market to rise over the long term, pessimistic markets can offer the greatest opportunities.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post As Warren Buffett steps down from the CEO role at Berkshire Hathaway, it’s the end of an era. 3 powerful pieces of his advice to remember. appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The stock market is witnessing a technological arms race playing out in real time. Companies are racing to build the data centers and other infrastructure to support artificial intelligence (AI), which experts believe could create trillions of dollars in economic value over the coming decades.

Inside these data centers are massive clusters of chips, which work together to train and operate AI models. The AI chip conversation begins with Nvidia (NASDAQ: NVDA), the company that has dominated this market from the jump.

However, tech giant Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG) has emerged as a potential competitor after successfully training its AI models with custom-built TPU chips it designed in-house.

Which AI chip stock is the better buy heading into 2026? 

Nvidia’s AI dominance creates a high ceiling, but a lower floor

Thus far, developing AI has required massive quantities of chips. Nvidia’s leadership in the AI chip market has translated to explosive revenue and profit growth for the company since early 2023. Some experts believe Nvidia’s market share in the data center GPU chip space is as high as 92%.

As long as hyperscalers continue to build out this infrastructure, it’s hard to see Nvidia’s business slowing down anytime soon. In fact, Nvidia announced that it has booked $500 billion in orders for its Blackwell chips and their looming successor, Rubin, through the end of next year, with $150 billion of that already delivered.

This data center boom has been highly lucrative. Nvidia now has deep pockets to develop and prepare for emerging AI opportunities outside of data centers, such as autonomous vehicles and humanoid robotics. That said, data center chip sales have become nearly the entirety of Nvidia’s business. If data center investments dry up, Nvidia would struggle to fill those holes, and the stock would likely collapse.

Alphabet’s AI ecosystem makes it the safer bet

For as much money pouring into AI data centers as there is, the group of companies cutting the checks, the AI hyperscalers, is relatively small. Among them is Google’s parent company, Alphabet. Rather than relying on Nvidia’s chips to power its AI models, Alphabet has worked diligently to develop its own custom-built tensor processing units, or TPUs, designed specifically for Google Cloud’s machine learning workloads.

Alphabet successfully trained its newest Gemini model on its TPUs. It went so well that the company is considering selling its TPUs to other AI hyperscalers, such as Meta Platforms. Alphabet probably won’t challenge Nvidia’s market leadership, but the TPU represents additional upside to Alphabet’s complete AI ecosystem. It’s icing on an already delicious cake.

The stock already has a high floor due to its lucrative advertising and cloud computing business segments. Even if Alphabet never sells its TPUs to another company, they still provide a crucial cost benefit, saving Alphabet from spending billions of dollars on third-party chips. At this point, it appears that Alphabet has a significantly higher floor than Nvidia.

The winner? It depends

Does that make Alphabet the better buy? Well, it sort of depends on the style of investor you are. If you want maximum upside, it’s hard to beat Nvidia, which has proven to possess the foresight needed to dominate the AI opportunity from the beginning. Even if other companies begin encroaching on the data center market, Nvidia will likely remain a key player in the AI field, including future applications.

However, if you’re looking for a business that is a bit more diversified and stable, Alphabet may be a better fit for you. The company has multiple established business units and still offers exposure to new industries, like autonomous driving and quantum computing, through its smaller divisions.

The good news? Both stocks trade at attractive valuations, based on the market’s expectations for their future earnings growth.

NVDA PE Ratio data by YCharts

A higher anticipated growth rate accompanies Nvidia’s higher price-to-earnings ratio, though things can change quickly if the AI investment cycle ends prematurely. 

Ultimately, it’s hard to go wrong with either company as a buy-and-hold AI investment for 2026 and beyond.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Which AI chip stock is the better buy for 2026: Nvidia or Alphabet? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Justin Pope has positions in Alphabet. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Meta Platforms, and Nvidia. The Motley Fool Australia has recommended Alphabet, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.