The Appen Ltd (ASX: APX) share price has returned from its trading halt and is crashing deep into the red again.

At the time of writing, the struggling artificial intelligence (AI) data service provider’s shares are down 17% to $1.91.

This means the Appen share price is now down 71% since this time last year.

Why is the Appen share price crashing again?

Investors have been selling down the Appen share price today after the company announced the completion of the institutional component of its fully underwritten ~$60 million equity raising. This comprises a $38 million 1 for 6 pro rata accelerated non-renounceable entitlement offer and a ~$21 million institutional placement.

According to the release, the company raised $21.2 million through the institutional placement and $8.8 million via the institutional entitlement offer. These funds were raised at $1.85 per new share, which represents a sizeable 19.6% discount to its last close price. It is also a 42% discount to where the Appen share price was trading just a little over a week ago, prior to the release of its disastrous trading update.

Appen’s CEO, Armughan Ahmad, was pleased with the news. He said:

Appen is delighted with the successful outcome of the Institutional Component of the Equity Raising and the support received from both existing and new institutional shareholders. We look forward to executing on the vision we have communicated to the market and delivering results for our shareholders.

The company will now seek to raise the balance via a retail entitlement offer at the same price.

Why is Appen raising funds?

The release explains that the proceeds of the equity raising will be used to fund one-off costs associated with its previously announced cost reduction program, provide balance sheet flexibility, and general working capital to support Appen’s return to profitability.

Management appears to believe the latter will be supported by the emergence of generative AI, which is the type of AI used by ChatGPT.

It notes that the generative AI market is estimated to grow from $8 billion in 2021 to more than $110 billion by 2030. And as high performing generative AI models rely heavily on human feedback, Appen believes it is well positioned to participate and gain share in the generative AI services market thanks to the launch of a new set of Large Language Model (LLM) fine tuning and assurance products.

Though, it is worth remembering that Appen is not alone in this market and there’s no guarantee that its products will be in demand by end users. And judging by the recent performance of the Appen share price, the market has yet to be convinced.

The post Deja vu! Why is the Appen share price crashing 17% today? appeared first on The Motley Fool Australia.

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More reading

• Why is the Appen share price in a trading halt?
• Macquarie forecasts Appen shares to crash a further 47%
• Broker gives its verdict on the Appen share price crash
• Better ASX tech share to buy now that the Nasdaq bear market is over: Altium or Appen?
• Why Appen, Bank of Queensland, Kogan, and Mayne Pharma shares are dropping

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 Appen. 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.

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Building a portfolio of ASX shares capable of providing enough dividend income to allow an investor to quit their job might sound like a hard ask. But by investing strategically and consistently, I think I could end up raking in passive income.

Here’s how I’d aim to build a passive income stream large enough to replace my salary by buying ASX dividend shares.

Breaking it down

Stripping it back to bare basics, investing in ASX shares is as simple as buying a slither of a business. If that business has more cash than it needs to grow, it hands the unused portion back to its owners – or investors, in this case – in the form of dividends.

Thus, it’s possible to create a reliable income from dividends on the ASX. Though, I doubt building a portfolio large enough to provide me with a salary-sized revenue will be an overnight endeavour.

How much dividend income do I need to live?

Now, we get to the key question. How much a person needs to live will vary.

For instance, one wishing for a quiet countryside lifestyle will likely require less cash than another who hopes to boast an inner-city penthouse and regular international holidays.

Let’s say $70,000 a year would be enough to get me by. If I were able to realise a relatively average 5% dividend yield, I would need a portfolio worth $1.4 million.

On the other hand, if I were able to sustain an above average, but not unheard of, 7% dividend yield, my ASX portfolio would need to be worth just $1 million to bring in $70,000 of dividend income annually.

So, without a million dollars or more in my piggy bank, how will I build such a portfolio? Well, it might not be the feat it appears.

Building my ASX dividend income portfolio

If a $1 million passive income portfolio was my goal, I would start by assessing how much I could afford to invest each month.

Let’s say I were to set aside $700 a month. I might invest that in ASX shares capable of paying a 7% dividend yield on average, and reinvest all the payments I receive, thereby compounding my returns.

At that rate, it would take me around 33 years to build my targeted portfolio, assuming my shares don’t realise any capital gains. Though, historically, the bourse has always moved higher.

Of course, no investment is guaranteed to provide returns, and past performance isn’t an indicator of future performance.

But what if 33 years’ time was a little too far away for my liking?

Well, if I had a chunk of cash to begin with, or could fork out more than $700 a month, I could grow my ASX dividend income portfolio faster.

For instance, if followed my initial plan, but began by investing a $100,000 lump sum, I could boast a million-dollar portfolio in just 25 years.

The post How much should I invest in ASX shares to quit work and live only off dividend income appeared first on The Motley Fool Australia.

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More reading

• Deja vu! Why is the Appen share price crashing 17% today?
• I’d invest $3,000 each in these ASX dividend shares for almost $1,000 in annual income
• Could ASX shares turn a $10,000 investment into $2,000,000?
• Are ASX 200 lithium shares approaching a ‘tipping point’ for ripper revenues?
• Own Allkem shares? Are you getting a good deal or is Livent the big winner from the merger?

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ASX dividend shares with fairly high dividend yields can unlock a lot of passive income for investors.

By mixing a group of different businesses, we can achieve diversification and an excellent stream of cash flow.

But I wouldn’t just go for any business, I’d aim for companies with an improving dividend record and plans for future operational growth.

With that in mind, these are some of the ASX dividend shares I’d call on to build good dividend annual income by investing $3,000 into each of them to make around $1,000 of dividends by FY25.

Universal Store Holdings Ltd (ASX: UNI)

The business says that it owns a portfolio of “premium youth fashion brands and omni-channel retail and wholesale businesses”. The main brands are Universal Store and THRILLS, and it’s currently trialling a Perfect Stranger brand as a standalone retail concept. It has over 90 stores.

It’s benefiting from growing sales as well as improving underlying profit margins. Improving scale can help this business deliver much more earnings for investors. The company is hoping to have between 101 stores to 103 stores by 30 June 2023.

In FY25, the ASX dividend share is projected to pay an annual dividend per share of 35 cents, which would be a grossed-up dividend yield of 10.5%, according to the estimates on Commsec.

The business could be trading very cheaply based on the profit projection for FY25, with it valued at just 8 times FY25’s estimated earnings.

A $3,000 investment would pay a total of $315 of annual dividend income in FY25.

Metcash Ltd (ASX: MTS)

Metcash is a diversified retailer and wholesaler. It supplies IGA supermarkets around Australia. The business also supplies liquor brands including IGA Liquor, Bottle-O, Cellarbrations, Thirsty Camel and Porters Liquor. It also owns a number of hardware brands including Mitre 10, Total Tools and Home Timber & Hardware.

The ASX dividend share has benefited from increased demand for local neighbourhood shopping. It has also seen strong earnings growth from its hardware division, which has benefited from the acquisition of Total Tools.

Australia’s rising population and the company’s growing benefits of scale can help maintain and grow the earnings and dividend.

In FY25, the ASX dividend share is projected to pay an annual dividend per share of 22.2 cents according to Commsec. This would be a grossed-up dividend yield of 8.2%.

Commsec estimates put the Metcash share price at 11 times FY25’s estimated earnings.

A $3,000 investment would pay $246 of annual dividend income in FY25.

Adairs Ltd (ASX: ADH)

This ASX retail share sells homewares through Adairs, while its other businesses of Mocka and Focus on Furniture are best known as furniture retailers.

Its earnings can be cyclical as household demand for homewares and furniture isn’t typically at a constant rate through the economic cycle. However, times of weakness can be an opportunistic time to invest.

Adairs is looking to grow its profit through store network expansion, upsizing some locations to larger stores (which are more profitable), range expansion and growing its loyalty member numbers.

In FY25, the ASX dividend share is projected to pay an annual dividend per share of 22 cents according to Commsec, which equates to a grossed-up dividend yield of 14.3%.

The Adairs share price is priced at just 6 times FY25’s estimated earnings, which seems very cheap.

A $3,000 investment would pay $429 of annual dividend income in FY25.

Foolish takeaway

The three of these investments, totalling $9,000, could unlock $990 of annual dividend income. I think all of them have very promising futures, combined with strong projected dividends in the coming years.

The post I’d invest $3,000 each in these ASX dividend shares for almost $1,000 in annual income appeared first on The Motley Fool Australia.

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More reading

• Goldman Sachs says these ASX dividend stocks with big yields are buys
• How I’d try to turn a $20k ASX share portfolio into a second income of $6,000 a year
• I think these 2 ASX small cap shares could make big returns
• Morgans names 2 of the best small cap ASX shares to buy
• Why these ASX 300 retail shares could be immune to rising interest rates

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

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The ASX share market has done incredibly well at growing household wealth over the long term. In this article, I’m going to outline some of the factors that could create excellent wealth.

Is $2 million achievable with $10,000?

There have been some very successful investors in the past who have generated astonishing returns. For example, iconic investor Peter Lynch achieved an average return per annum of 29.2% between 1977 to 1990 with the Fidelity Magellan Fund.

I’m not sure if anyone would be able to replicate Lynch’s investment track record these days of almost 30% per annum for over a decade. Certainly, there are lots of well-equipped (financially and technologically) investors looking for opportunities.

And the good news is most people have more than 13 years to grow their wealth.

Indeed, compounding can grow our finances very quickly. It’s a combination of the (average) return per year and how many years it is left to grow.

The ASX share market has returned an average of around 10% per annum over the long term though, of course, past performance is not a reliable indicator of future returns.

But at that rate, if I invested $10,000 into the ASX share market and it returned 10% per annum, I’d get to $2 million in under 54 years.

How I’d try to grow my wealth quicker

There are a small group of ASX shares that have delivered huge returns over the long term.

If we’d invested in the 2010s in businesses like Altium Limited (ASX: ALU), Pro Medicus Ltd (ASX: PME), WiseTech Global Ltd (ASX: WTC), Aristocrat Leisure Limited (ASX: ALL), Xero Limited (ASX: XRO), REA Group Ltd (ASX: REA), ResMed (ASX: RMD), and TechnologyOne Ltd (ASX: TNE) then we’d be sitting on gains of at least 1,000%.

Certainly, I think there are a lot of factors these businesses have in common.

Firstly, they were a lot smaller than they are today. It’s typically much easier for a business to double in size from $100 million to $200 million than to go from $1 billion to $2 billion.

Another factor is that most of them have large total addressable markets. When a company expands beyond Australia’s shores, it gives them a much larger potential customer base. That longer growth runway with clients means companies can potentially see more profit growth, enabling (hopefully) strong returns for a long time.

Next, I’d want to find businesses that are involved in technology in some way. Technology is very cheap to reproduce for new customers (meaning high gross profit margins) and those businesses can expand very quickly. I think that’s why many of the best-performing businesses over the last 15 years revolve around technology, even if they’re not specifically from the IT sector.

Finally, I’d suggest that businesses involved in digitising the world have a strong tailwind. The world is increasingly going digital and moving online.

No one can know what ASX shares are next going to deliver returns of 1,000%. But I think some of the smaller businesses that have some of the elements I’ve just outlined are: cancer screening and risk assessment business Volpara Health Technologies Ltd (ASX: VHT), online marketplace for local services business Airtasker Ltd (ASX: ART), emerging market classifieds investor Frontier Digital Ventures Ltd (ASX: FDV), and online furniture and homewares retailer Temple & Webster Group Ltd (ASX: TPW).

And I’m also backing affordable jewellery retailer Lovisa Holdings Ltd (ASX: LOV) to do well with its global store expansion plan, even though it’s not involved in technology.

The post Could ASX shares turn a $10,000 investment into $2,000,000? appeared first on The Motley Fool Australia.

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• These ASX growth shares are highly rated by analysts for a reason
• Why I’d buy companies with pricing power to comfortably beat the ASX index
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• 3 things ASX investors should watch this week
• Morgans names the best ASX 200 growth shares to buy in May

Motley Fool contributor Tristan Harrison has positions in Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Altium, Frontier Digital Ventures, Lovisa, Pro Medicus, ResMed, Technology One, Temple & Webster Group, Volpara Health Technologies, WiseTech Global, and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Airtasker. The Motley Fool Australia has positions in and has recommended ResMed, Volpara Health Technologies, WiseTech Global, and Xero. The Motley Fool Australia has recommended Frontier Digital Ventures, Lovisa, Pro Medicus, REA Group, Technology One, and Temple & Webster Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Many S&P/ASX 200 Index (ASX: XJO) investors are crazy for lithium shares. And for good reason. As Global X ETFs head of investment strategy, Blair Hannon notes: “they’ve made a buttload of cash out of lithium”.

The asset management company is behind the Global X Battery Tech & Lithium ETF (ASX: ACDC), as well as other thematic exchange-traded funds (ETFs). Units in the ACDC ETF have nearly doubled in value since floating in 2018.

Among its holdings are shares in ASX 200 lithium producers Pilbara Minerals Ltd (ASX: PLS), Allkem Ltd (ASX: AKE), and Mineral Resources Ltd (ASX: MIN). It also holds stakes in companies involved in the entire lifecycle of lithium, including lithium refiners and battery makers.

It’s perhaps unsurprising then, that Hannon is bullish on the future of lithium. Indeed, he told a recent media event that it’s still “very much early days” for the white metal, continuing:

We haven’t hit the tipping point globally. We’re not even close to it.

So, what might drive revenues of companies involved in the battery-making metal, perhaps including those of the ASX 200 companies producing it? Electric vehicle (EV) adoption is likely to be a major factor.

Are ASX 200 lithium shares at a ‘tipping point’ for revenue growth?

As Hannon points out, Australia has a “box seat” position for lithium supply, thanks to a swath of resources in Western Australia.

That’s reflected on the ASX 200, with many lithium shares calling the index home.

In addition to the three major ASX 200 stocks included in the Global X Battery Tech & Lithium ETF, there are newly-crowned producers Lake Resources N.L. (ASX: LKE), Sayona Mining Ltd (ASX: SYA), and Core Lithium Ltd (ASX: CXO), as well as up-and-coming takeover target Liontown Resources Ltd (ASX: LTR), to name a few.

But Hannon argues that lithium is just part of the solution to the problem. The problem being decarbonisation – a key emerging investing thematic.  

Fortunately for those mining lithium, the metal is an irreplaceable ingredient in battery-powered vehicles. And the globe is moving further and further towards a tipping point in electric vehicle (EV) adoption, according to Hannon.

Global EV sales are forecasted to grow at a compound annual growth rate (CAGR) of 14% between 2022 and 2035 as consumer demand takes off.

As per the rule of supply and demand, ASX 200 lithium shares, as well as stocks involved with other critical materials, could be on track to see their revenue soar in the coming years.

But when might we see it? Well, Hannon reckons a ‘tipping point’ for EV adoption could be when battery-powered vehicles represent 5% of all new car sales.

He points out that EVs reached 5% of car sales in China in 2020. The following year, they surged to represent 16% of sales. A similar pattern was said to have played out in Norway – now the leading nation in EV adoption.

Interestingly, 3.2% of new cars sold in Australia in 2022 were battery-powered. That’s according to data from the Federal Chamber of Automotive Industries.

The post Are ASX 200 lithium shares approaching a ‘tipping point’ for ripper revenues? appeared first on The Motley Fool Australia.

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More reading

• Own Allkem shares? Are you getting a good deal or is Livent the big winner from the merger?
• Brokers expect big gains and huge dividends from these ASX 200 mining shares
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• ASX 200 lithium shares: ‘A great opportunity to buy into weakness’?
• Could Core Lithium shares make the merger menu next?

Motley Fool contributor Brooke Cooper 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.

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It certainly has been a great month for Allkem Ltd (ASX: AKE) shares.

Since this time in April, the lithium miner’s shares have hurtled 28% higher to close yesterday’s session at $14.79.

This has been driven largely by news that the company plans to merge with fellow lithium giant Livent Corp (NYSE: LTHM).

Where next for Allkem shares?

The good news is that one leading broker believes there are more gains to come for investors. That’s despite its analysts suggesting that Allkem shareholders might not be getting the better end of the deal.

According to a note out of Bell Potter, its analysts have retained their buy rating with a $19.20 price target. This implies potential upside of 30% for Allkem shares over the next 12 months from current levels.

What did the broker say?

As I mentioned above, the broker feels that Livent shareholders are the big winners from the merger agreement. It said:

Longer term, we don’t believe AKE shareholder’s ownership of NewCo (56%) reflects the company’s stronger earnings profile and dominant upstream position. While we don’t see it as a bad deal for AKE, it looks like a great deal for LTHM through strengthening its upstream capabilities, retaining key executive positions and receiving what we view as a disproportionately large share of NewCo.

Nevertheless, Bell Potter remains positive enough to maintain its buy rating. Particularly given how the US listing is likely to result in a valuation re-rating. It concludes:

AKE is now in-play; we think it is likely the LTHM merger will proceed and are not confident that an interloper will emerge. On a stand-alone basis the company has a strong production and earnings growth profile into what we expect to be an exceptionally strong market for lithium. Combining with LTHM and the NYSE listing could see an earnings multiple uplift. AKE is trading at a slight discount to the implied deal value, which we expect will close if deal certainty improves.

The post Own Allkem shares? Are you getting a good deal or is Livent the big winner from the merger? appeared first on The Motley Fool Australia.

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More reading

• Are ASX 200 lithium shares approaching a ‘tipping point’ for ripper revenues?
• ASX 200 lithium shares: ‘A great opportunity to buy into weakness’?
• Is a slice of Livent worth holding onto Allkem shares?
• 5 things to watch on the ASX 200 on Tuesday
• Brokers name 3 ASX shares to buy now

Motley Fool contributor James Mickleboro has positions in Allkem. 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.

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While there are plenty of established lithium producers on the ASX, real windfalls can sometimes come from smaller miners.

That’s because the smaller players can currently be in an exploratory stage, when they’re searching for a viable mineral deposit. The share price can be very cheap at this phase because the business is not actually selling any lithium.

Then if they start producing at one of its sites, the stock price can rocket.

Of course, the risk is that the exploration might come to nought.

However, the analysts at Macquarie Group Ltd (ASX: MQG), for one, reckons careful selection of the best junior miners can increase your chances of success.

Production expected in ‘coming months’

The Macquarie team is, at the moment, rather fond of lithium explorer Argosy Minerals Limited (ASX: AGY).

The Motley Fool reported a couple of weeks ago that the analysts put an outperform rating on the lithium miner with an 80 cent share price target.

That’s a mouthwatering 60% upside potential from the Tuesday price of 50 cents.

“Macquarie has been pleased with the progress the company is making with its Rincon lithium project in Argentina,” said The Motley Fool’s James Mickleboro.

“It highlights that the steady run-rate production is expected to be achieved in the coming months.”

As well as the prospect of production starting this year at the Argentinian site, the company has an exploratory project ongoing in Nevada in the US.

Great long-term prospects for lithium 

Over March and April, the Argosy share price endured a 40% fall. But according to The Motley Fool’s Bronwyn Allen, there was no tangible adversity announced from the business that would cause such a plunge.

Thus the current window might present an excellent buying opportunity.

Although lithium prices have cooled off considerably over the past six months, multiple experts tip that the mineral will enjoy hot demand for years to come.

According to Shaw and Partners portfolio manager James Gerrish, lithium batteries have been around for decades, but one particular modern-day phenomenon is driving the current boom.

“It’s the growth in electric vehicles that is driving the demand for this lightweight, high-energy-density input,” he said on Market Matters last week.

“While we cannot see lithium prices re-scaling the 2022 highs for many years, there is still plenty of opportunity.”

The post 60% upside! Macquarie says buy Argosy shares now appeared first on The Motley Fool Australia.

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More reading

• Brokers name 3 ASX shares to buy now
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Motley Fool contributor Tony Yoo has positions in Macquarie 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 positions in and has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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These S&P/ASX 300 Index (ASX: XKO) shares are attractive ideas for dividend income right now and could be attractive for many years to come in my opinion.

I think there’s a lot more to determine how good an ASX dividend share is than simply its current dividend yield.

In times of economic uncertainty, it could be even more important that the dividend income keeps flowing because other forms of (investment) income may have come under pressure. Life expenses don’t stop just because the economy is weakening.

The two ASX 300 shares I’m about to tell you about could display very defensive characteristics over the long term.

Rural Funds Group (ASX: RFF)

Rural Funds is a real estate investment trust (REIT) that owns a variety of farmland across sectors like almonds, macadamias, cattle, vineyards, cotton and sugar.

Food is obviously needed by everyone, so I believe that farmland will be an ultra-long-term asset, as it has been for centuries.

The business aims to increase its distribution each year by 4%, which is stronger than inflation in most years.

There aren’t too many ASX 300 shares that have grown their dividend income each year since 2014, but Rural Funds is one of them.

I think that its built-in rental increases and productivity investments will enable ongoing distribution growth for years to come. It’s currently investing over $20 million in planting macadamia orchards, which is putting the land to a higher and better use (according to Rural Funds).

Its FY23 distribution is forecast to be a total payment of 12.2 cents per unit, which translates into a distribution yield of 6.3%.

I think the business has a very promising future for dividend income to 2030 and beyond.

APA Group (ASX: APA)

APA says that it owns and/or manages and operates a $22 billion portfolio of gas, electricity, solar and wind assets. It has a huge network of gas pipelines around the country, delivering half of the country’s gas usage and connecting various states.

The business continues to invest in expanding its gas assets, which helps unlock more cash flow that can fund higher distributions.

APA believes that gas will play a key role in providing firming for renewables in Australia, though coal currently has a major share in Eastern Australia of around two thirds, according to APA.

A large majority of the ASX 300 share’s revenue is indexed to inflation, so APA is seeing revenue growth thanks to stronger inflation while boosting earnings and cash flow.

It has used the growing profit to pay a distribution which has increased every year for almost 20 years. It’s a pleasing combination for shareholders that APA has been able to invest in more assets and keep growing its dividend income. I think it will still be supplying energy to Australians a few decades from now.

In FY23 it’s expected to pay a distribution of 55 cents per security, which translates into a distribution yield of 5.4%.

The post 2 ASX 300 shares I’d buy for long-term dividend income appeared first on The Motley Fool Australia.

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More reading

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

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If one has been investing in ASX 200 shares for long enough, one might come across the phrase ‘sell in May and go away’.

This idiom is built upon the assumption that the months that follow May are typically ones that don’t bode well for ASX shares and the share market. Thus, it’s best to ‘sell in May’, ride out the annual winter storm, and buy back in at a later date. Perhaps this was the inspiration behind Green Day’s ‘Wake me up when September ends’.

Well, as most of us should be aware of, it happens to be right smack bang in the middle of May right now. So should investors take the hint and sell on masse today?

This idiom has been around for a long time. So let’s test it out and see if it measures up by looking at what has happened with the S&P/ASX 200 Index (ASX: XJO) after the month of May in years gone by. Perhaps we can definitely prove if May is indeed the correct time to ‘go to cash’ for a while.

Should ASX 200 investors just ‘sell in May and go away’?

Since May is allegedly the time to sell, we’ll analyse the ASX 200‘s historical performance between 31 May and 30 September. That last date comes from the full expression – ‘sell in May and go away, come back on St. Leger’s Day’. St. Leger’s Day refers to a famous horse race in England, which usually occurs at the end of every September. 

Let’s kick things off. In 2022, the ASX 200 closed at 7,211.2 points on 31 May and recorded a value of 6,474.2 points on 30 September. That certainly would have been a good period to heed the creed. 

On 31 May 2021, the ASX 200 finished up at 7,161.6 points at the end of May. By the end of September, the index was at 7,332.2 points. Not quite as rewarding for the ‘sell in May’ crowd.

2020 saw the ASX 200 round out May at 5,755.7 points, only to rise to 5,815.9 points by 30 September. Again, not a good year to cash out of ASX 200 shares in Autumn.

Pre-COVID 2019 saw a similar result, with the ASX 200 rising from 6,396.9 points to 6,688.3 points between May and September.

Finally, let’s check out 2018. So five years ago, the ASX 200 concluded May at 6,011.9 points, only to rise to 6,207.6 points by the end of September.

So we have just one May out of the past five where it was worth ‘going away’, and four where the adage did not live up to its promise. The results are summarised below:

Year	ASX 200 on 31 May	ASX 200 on 30 September	Gain/Loss
2022	7,211.2	6,474.2	(10.22%)
2021	7,161.6	7,332.2	2.38%
2020	5,755.7	5,815.9	1.05%
2019	6,396.9	6,688.3	4.56%
2018	6,011.9	6,207.6	3.26%

Foolish takeaway

Looking at the data, we can clearly see that the ‘sell in May and go away’ idiom is, to put it scientifically, a load of hot garbage. At least for ASX shares. The reality is that any investor who followed this ‘wisdom’ would have been worse off for four out of the past five years. It just goes to show that there are no easy fixes or ‘get rich quick’ hacks on the share market.

It will be interesting to see what this year’s May to September period throws up for ASX 200 shares. But I certainly won’t be selling anything on 31 May 2023.

The post Should ASX 200 investors sell in May and go away? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Wednesday
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• 5 things to watch on the ASX 200 on Tuesday
• Here are the top 10 ASX 200 shares today

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.

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Now could be the time to pounce on Qantas Airways Limited (ASX: QAN) shares before they take off.

That’s the view of analysts at Morgans, which see significant potential upside ahead for the airline operator’s shares.

So much so, the broker has the company on its best ideas list and has named it as its preferred pick in the travel sector.

What is Morgans saying about Qantas shares?

According to a recent note, the broker has an add rating and $8.35 price target on the flag carrier airline’s shares.

Based on the current Qantas share price of $6.30, this implies potential upside of almost 33% for investors over the next 12 months.

Why is the broker bullish?

Morgans is bullish on Qantas due to its belief that the company has significant near-term earnings momentum. It explains:

QAN is now our preferred pick of our travel stocks under coverage given it has the most near-term earnings momentum. Looking across travel companies globally, airlines are now in the sweet spot given demand is massively exceeding supply.

In addition, the broker highlights that Qantas shares are trading at a meaningful discount to pre-COVID levels despite being a much stronger business now. It adds:

QAN is trading at a material discount compared to pre-COVID multiples, despite having structurally higher earnings, a much stronger balance sheet, a better domestic market position, a higher returning International business and more diversification (stronger Loyalty/Freight earnings).

A final reason Morgans is bullish is the company’s positive outlook. It concludes:

The strong pent-up demand to travel post-COVID should result in a healthy demand environment for some time, underpinning further EBITDA growth over FY24/25. QAN’s balance sheet strength positions it extremely well for its upcoming EBITaccretive fleet reinvestment and further capital management initiatives (recently announced a A$500m on-market share buyback at its 1H23 result). There is also likely upside to our forecasts and consensus if QAN achieves its FY24 strategic targets.

The post Why Qantas shares are Morgans’ top pick in the travel sector appeared first on The Motley Fool Australia.

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More reading

• Buyback bender: These ASX All Ords shares can’t get enough of their own stock
• Qantas shares: High-flying potential or grounded expectations?
• Rio Tinto and this ASX 200 share are strong buys: analysts
• Morgans names the best ASX 200 blue chip shares to buy in May
• Is the Qantas share price at risk over the airline’s $12 billion renewal plans?

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.

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