The NextDc Ltd (ASX: NXT) share price is frozen today at $11.78 at the company’s request.

The S&P/ASX 200 Index (ASX: XJO) tech share has been a strong outperformer in 2023. As you can see in the chart below, the NextDC share price is up 31% year to date.

The NextDC share price freeze will lift on Monday after management announces the outcome of the institutional component of an accelerated entitlement offer.

What’s all that about?

Read on.

Why is the ASX 200 tech company raising $618 million?

This morning NextDC reported it will develop two new data centres as part of its regional expansion strategy.

The centres will be constructed on recently acquired commercial property sites in Kuala Lumpur, Malaysia and Auckland, New Zealand.

The new projects, alongside an accelerated fit out at its S3 centre, will be funded by a $618 million fully underwritten 1 for 8 pro-rata accelerated non-renounceable entitlement offer.

The offer prices of $10.80 per share represents a discount of just over 8% from the current NextDC share price.

This led NextDC to also update its FY23 guidance. The new forecast is for:

• Data centre services revenue in the range of $350 million to $360 million (previously the upper end of the $340 million to $355 million range)
• Underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) in the range of $192 million to $196 million (previous range: $190 million to $198 million)
• Capital expenditure in the range of $670 million to $720 million (previous range: $620 million to $670 million)

Commenting on the new developments that could offer the NextDC share price some tailwinds in the year ahead, CEO Craig Scroggie said, “Building upon the success we have achieved in Australia over the past decade, we aim to replicate our proven business model in these new markets.”

Hinting at further growth plans, Scroggie added, “New Zealand and Malaysia are just the first greenfield geographic expansion opportunities outside of Australia.”

NextDC share price snapshot

The NextDC share price is up 15% over the past full year. Longer-term the ASX 200 tech share has gained 57% over five years.

The post NextDC share price halted amid $618 million cap raise appeared first on The Motley Fool Australia.

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• Brokers name 3 ASX shares to buy now

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

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Allkem Ltd (ASX: AKE) shares are shooting higher on Thursday morning.

At the time of writing, the lithium miner’s shares are up 14% to $14.76.

This means the Allkem share price is now up 30% since this time last year, as you can see on the chart below.

Why is the Allkem share price shooting higher?

Investors have been scrambling to buy Allkem shares today after it announced an agreement to merge with lithium giant Livent Corp (NYSE: LTHM).

Allkem, which is no stranger to mergers, will combine with Livent in an all-stock merger of equals. This will create a US$10.6 billion (A$15.7 billion) leading global lithium chemicals producer.

And while there are still quite a few hurdles to jump through, if all goes to plan, the company expects the transaction to close by the end of 2023.

If it does, it will see “NewCo” listed on the NYSE with a secondary listing on the ASX. Allkem shareholders will own approximately 56% and Livent shareholders will own the balance.

Reaction

Wall Street responded positively overnight, driving the Livent share price over 5% higher to US$25.50.

This equates to A$36.95 at current exchange rates. So, with an agreed exchange ratio of 2.406 NewCo shares per Livent share (and Allkem shareholders getting one NewCo share per share), this values the Allkem share price at A$15.63. Which explains why Allkem shares are shooting higher today.

Investors appear excited by the prospect of the two companies joining forces for a number of reasons. This includes its proposed vertically integrated business model with the scale and expertise to meet the rapidly growing demand for lithium chemical products.

In addition, NewCo’s run-rate operating cost synergies are estimated to be approximately US$125 million (pre-tax) per annum. It also expects to realise approximately US$200 million in one-time capital expenditure savings. That’s US$325 million in value creation just there!

All in all, the way Allkem shares are performing today appears to indicate that the market agrees with the company’s CEO, Martín Pérez de Solay, when he says:

I believe Allkem shareholders will realize significant benefits from the Transaction as the business transforms into a truly global player with listings in the US and Australia.

The post Why are Allkem shares rocketing 14% higher today? appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Thursday
• Allkem share price on watch amid $15.7b mega lithium merger with Livent
• Here are the top 10 ASX 200 shares today
• What’s with ASX 200 lithium stocks today?
• Add these ASX growth stocks to your portfolio today: analysts

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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The Westpac Banking Corp (ASX: WBC) share price is taking another tumble on Thursday morning.

At the time of writing, the banking giant’s shares are down 3.5% to $20.92.

This means the Westpac share price is now down 7% since the start of the month.

However, this decline is a bit different to the others. This decline is, in many respects, actually something positive for shareholders.

Why is the Westpac share price falling?

The weakness in the Westpac share price on Thursday is due to the bank’s shares going ex-dividend for its upcoming dividend payment.

Earlier this week, Australia’s oldest bank released its half-year results and reported a 22% increase in profit to $4 billion. This was underpinned by a combination of solid net interest income growth and lower expenses.

In response to this profit growth, the Westpac board elected to declare a 70 cents per share fully franked interim dividend. This was a sizeable 15% increase year over year, much to the delight of shareholders.

Well, at yesterday’s market close the rights to that dividend payment were locked in. This means that anyone buying Westpac shares today won’t be entitled to receive this payout. The rights will instead stay with the seller.

And given how the cash funding the dividend is part of the valuation of a company, a company’s share price will usually drop in line with the payout to reflect this. After all, new buyers don’t want to pay for something that they won’t receive.

What’s next?

Firstly, eligible shareholders can look forward to receiving this fully franked 70 cents per share dividend towards the end of next month on 27 June.

After which, if Goldman Sachs is on the money with its estimates, they can also look forward to another fully franked 70 cents per share dividend with its full-year results later this year.

This will mean a full-year dividend of $1.40 per share, which based on the Westpac share price at yesterday’s close, equates to a generous fully franked 6.45% yield.

The post Why is the Westpac share price sinking today? appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Thursday
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• Hoping to bag the boosted Westpac dividend? You’ll need to buy shares today
• The Westpac share price could offer a 20% return: Goldman Sachs
• 5 things to watch on the ASX 200 on Tuesday

Motley Fool contributor James Mickleboro has positions in Westpac Banking Corporation. 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 Westpac Banking Corporation. 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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I’m a big fan of growth shares and feel lucky to have so many at my disposal on the ASX.

But with so many to choose from, it can be hard to decide which ones to buy over others.

The good news is that brokers have done the hard work, so we don’t have to. For example, two ASX 200 growth shares that have been given the thumbs up recently are listed below.

Here’s why brokers think we should be snapping them up right now:

Cochlear Limited (ASX: COH)

The first ASX 200 growth share that has been named as a buy is hearing solutions company, Cochlear.

Goldman Sachs is the broker that is bullish on the company. Its analysts currently have a buy rating and $265.00 price target on its shares.

The broker is recommending Cochlear shares as a buy due to its belief that improving trading conditions could see Cochlear outperform its guidance in FY 2023. It commented:

We believe Cochlear screens well on these fundamental factors, and largely avoids the margin uncertainties prevalent across other verticals. We expect a sequential improvement in momentum through 2H23 (further elective volume improvement and new processor launch momentum, potentially tempered by some moderation in Acoustics). We forecast above guidance in FY23E (GSe: $306m vs. $290-305m) and believe shares will now be further supported by a newly announced multi-year buyback program (GSe: $75m/year).

Treasury Wine Estates Ltd (ASX: TWE)

Another ASX 200 growth share that has been named as a buy is Treasury Wine. It is the wine giant behind popular brands including 19 Crimes and Penfolds.

Morgans is a big fan of the company and has an add rating and $15.05 price target on its shares.

Its analysts are tipping Treasury Wine to deliver strong earnings growth in the coming years. This is expected to be underpinned by its strong management team and popular brands. In addition, Morgans believes its shares are cheap compared to global peers. It explains:

TWE owns much loved iconic wine brands, the jewel in the crown being Penfolds. We rate its management team highly. The foundations are now in place for TWE to deliver strong earnings growth […] over the next few years. Trading at a material discount to our valuation and other luxury brand owners, TWE is a key pick for us.

The post Here are 2 outstanding ASX 200 growth shares brokers rate as buys appeared first on The Motley Fool Australia.

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If you’re on the lookout for a passive income boost, then you may want to check out the ASX dividend stocks listed below.

Analysts have named these dividend stocks as buys and tipped them to provide very large yields in the near term. Here’s what you need to know:

Harvey Norman Holdings Limited (ASX: HVN)

Harvey Norman could be an ASX dividend stock to buy according to analysts at Goldman Sachs.

The broker remains positive on the retailer due to its belief that it is in a strong position to fight off online competition. This is due to its exposure to regional markets and its older customer base.

Goldman highlights that “Harvey Norman holds a unique position within the electronics and appliances retail industry as a result of its franchise model of operations in Australia, property portfolio and regional exposure.”

Its analysts are expecting this to allow Harvey Norman to pay fully franked dividends per share of 36 cents in FY 2023, then 30 cents in FY 2024, before a return to 36 cents in FY 2025. Based on the current Harvey Norman share price of $3.66, this will mean massive yields of 9.8%, 8.2%, and 9.8%, respectively.

Goldman has a buy rating and $4.70 price target on its shares.

Healthco Healthcare and Wellness REIT (ASX: HCW)

Another ASX dividend stock that could be a buy for income investors is the Healthco Healthcare and Wellness REIT.

This real estate investment trust invests in properties such as hospitals, aged care, childcare, government, life sciences and research, and primary care and wellness properties. These are all relatively defensive assets and should be in demand whatever is happening in the economy.

Morgans is a fan of the company and believes it is well-placed to increase its dividend. It is forecasting dividends per share of 7.5 cents in FY 2023 and 7.8 cents FY 2024. Based on the current Healthco Healthcare and Wellness REIT unit price of $1.35, this will mean yields of 5.5% and 5.8%, respectively.

Morgans also sees plenty of upside for its shares. It has an add rating and $2.06 price target on them.

The post Analysts say buy these top ASX dividend stocks with 5%+ yields 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.

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Engineering companies are not often discussed among ASX investors, but there are a couple at the moment that look like excellent buys.

That’s according to Shaw and Partners portfolio manager James Gerrish, who said in his Market Matters newsletter that Worley Ltd (ASX: WOR) and Austin Engineering Ltd (ASX: ANG) had recently “caught our eye”.

‘Double-digit sustainable earnings growth’

Gerrish’s team is “long and bullish” on engineering company Worley after an investor day this week showed an impressive outlook.

“[Management] articulated its growth strategy, which they believe will drive double-digit sustainable earnings growth over the medium term – something that has eluded them in the past,” said Gerrish.

“Worley is ramping up its capabilities towards battery metals, carbon capture, utilisation & storage & low carbon hydrogen.”

The market is already taking notice, rocketing the Worley share price up 11.8% over the past week.

The business will be a beneficiary of a worldwide transition.

“An expected four-fold increase in global energy investment and decarbonisation projects provides a great backdrop to generate revenue,” said Gerrish.

“However, it will be their ability to expand the currently thin margins that will provide the real kicker to profits.”

Worley has admittedly been a disappointment for past investors, with the stock flat over the last five years.

Gerrish said this week’s presentation “was a step in the right direction for this cyclical business”.

“Trust has also been a missing ingredient, with the market having been disappointed in the past as targets have fallen by the wayside.”

Punished too harshly, and ready to bounce back

The Austin Engineering Ltd (ASX: ANG) share price has crashed 27% since 2 May after a profit guidance downgrade.

According to Gerrish, there was a single source for the change in numbers. 

“The downgrade stemmed from their Perth business unit which was expecting to deliver on a contract before year-end before the order was delayed,” he said. 

“As a result, much of the fixed costs associated with the contract will be booked this year, while the revenue won’t land until 1Q24.”

Even with that nose dive, the stock is 18.75% higher than it was a year ago, which is an enviable performance considering the rest of the market.

The reality is that the rest of Austin Engineering is sound.

“The other business units are progressing well with revenue growth coming through and margins improving as a result.”

Thus Gerrish’s team is “bullish” on Austin Engineering shares.

“We see Austin Engineering as oversold, given the share price decline was harsh relative to the downgrade.”

The post 2 obscure ASX shares to go ‘long and bullish’ on right now appeared first on The Motley Fool Australia.

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• Here are the top 10 ASX 200 shares today
• Why Arafura Rare Earths, Imugene, Pilbara Minerals, and Worley are charging higher
• 2 ASX All Ords shares defying Tuesday’s slump to crack multi-year highs

Motley Fool contributor Tony Yoo 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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Ironically, ASX-listed investment companies have been out of favour with ASX investors in recent years.

The depressed sentiment in share markets over the past 18 months hasn’t helped, with many customers pulling their money out to “safer” assets such as cash.

But now with many wealth manager stocks trading at a heavy discount, it could be the time to pick them up for cheap.

Here’s a couple of suggestions from the S&P/ASX 200 Index (ASX: XJO):

Is the nightmare over now for Magellan?

The most infamous of the investment management stocks, Magellan Financial Group Ltd (ASX: MFG), has fallen a horrifying 83% since July 2021.

The drop in valuation has left its dividend yield at an enormous 13.44%.

Underperformance of its products and the very public exit of celebrity co-founder Hamish Douglass has devastated the company to an extent that even professionals are shocked.

Shaw and Partners portfolio manager James Gerrish certainly didn’t see it coming.

“Like many investors, we underestimated the enormity of the implosion caused by their once dominant chief investment officer Hamish Douglass,” he said in a Market Matters memo.

“A big fall from grace with Magellan now managing around one-third the amount of money they had at the peak of their powers, but are things finally on the improve?”

The answer is a “yes” from Gerrish’s team.

“We are warming to Magellan, believing the worst is now behind them,” said Gerrish.

“Over the last 3 months, performance has improved meaningfully in its flagship global fund, which has resulted in investment returns of +15.5% calendar year to date, outperforming the benchmark by around 3%.”

This turnaround in product performance would have “positive ramifications” on stemming the outflow and alleviating pressure to cut fees.

“You’d have to think that those who were leaving would have already left by now, which implies that the FUM [funds under management] they now have (~$42.7 billion) is sticky.”

Gerrish calculated that if you deduct the value of Magellan’s non-fund assets such as Barrenjoey and Finclear, the funds management business is worth about $4 per share in the current market.

“Someone could easily come in, sell off the principal investments, take the FUM and address the performance & perception issues surrounding Magellan,” he said.

“Or they can fix performance and flows internally, which seems to have already started, and the result will be a positive one from currently depressed levels.”

Regal thought Perpetual was cheap, and it still is

Meanwhile, Perpetual Limited (ASX: PPT) has been busy on the corporate dance floor.

“In November last year, a consortium led by the Regal Partners Ltd (ASX: RPL) launched a takeover bid for Perpetual, who themselves were attempting a takeover of Pendal.”

Although Regal failed in its acquisition attempt, its bid gave an insight into what the investment industry thinks the value of Perpetual is. 

“The consortium bid $1.7 billion for Perpetual which equated to $30 per share. Perpetual said it materially undervalued them despite being a 23% premium to their 30-day average.”

During the to-ing and fro-ing, Perpetual prepared for a sale of its corporate trust business for $1.4 billion.

“Clearly, Regal thought Perpetual was cheap before they took out Pendal, and we think that’s still the case now,” said Gerrish.

“In Market Matters’ view, Perpetual is worth well north of $30, or 15% to 20% higher.”

Perpetual shares pay out an outstanding dividend yield of 7.4%. The stock price is 22.7% down over the past 12 months.

The post ‘Worst is now behind them’: 2 unloved ASX 200 shares paying FAT dividends appeared first on The Motley Fool Australia.

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• Here are the top 10 ASX 200 shares today

Motley Fool contributor Tony Yoo 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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The rise of the exchange-traded fund (ETF) is not a new trend on the ASX. ETFs, particularly index funds, have been booming in popularity for two decades now. Today, the ASX is home to dozens and dozens of ETFs.

There are your index funds, of course. The most popular of these are ASX ETFs, proving our local preference for Australian shares. But there are also index ETFs covering US shares, international markets, and emerging markets too.

Other ETFs, such as those covering specific sectors, trends, or commodities have also flourished. These days, you can invest in funds that track everything from global cybersecurity companies to oil futures, and gold or silver.

But which ETFs will continue to grow the most over the next few years?

ETF expert points to ethical and responsible investing

ETF provider BetaShares has some ideas about that. BetaShares is one of the ASX’s most prolific purveyors of exchange-traded funds.

BetaShares’ boss Alex Vynokur was asked about the future of the ETF sector in a report in The Australian this week.

Vynokur identified the ethical and responsible investing sector as the one he reckons will experience the largest growth rates over the next few years. Vynokur estimates that ethical and responsible ETFs are set to explode by $50 billion by late 2028, and even thinks they could hit $100 billion by the end of the decade.

As of 31 March, these ETFs reportedly accounted for $10.1 billion in funds under management (up from $3.5 billion in 2021).

That’s despite the best-performing ETFs in recent months and years being those that focus on sectors like resources and energy.

Here’s some of what Vynokur said:

There’s no doubt the last 12 to 18 months have been volatile for investors… The reality is that investors increasingly recognise there is no need to sacrifice their investment objectives over the long term to build a portfolio that aligns with their values…

While younger investors are perhaps considered the poster child for adoption of ethical and responsible ETFs, we’re now seeing increasing adoption from a broad range of Australian investors, including self-managed super funds.

Why are ASX investors flooding into ethical ETFs?

Vynokur identified three reasons for his optimism for ethical and responsible ETFs. He named the growing number of investors who wanted to “align their portfolio with their values while also meeting their investment objectives” for one.

Secondly, he pointed to “the cost-effectiveness” of using ETFs in order to pursue a responsible and values-aligned portfolio.

Thirdly, Vynokur argued that the “growing range of asset classes” that an ETF can provide investors access to is also driving interest in exchange-traded funds in pursuing ethical and responsible investing.

BetaShares currently offers eight ethical/responsible ETFs, including the BetaShares Global Sustainability Leaders ETF (ASX: ETHI) and the Ethical Diversified Growth ETF (ASX: DGGF).

Other ASX options in this space include the Vanguard Ethically Conscious Australian Shares ETF (ASX: VETH) and the iShares S&P/ASX Dividend Opportunities ESG Screened ETF (ASX: IHD).

So it will be interesting to plot the rise of ethical and responsible ETFs over the next few years to see if their growth conforms to Vynokur’s strong predictions.

The post Betashares forecasts this ASX ETF sector to boom x5 by 2028 appeared first on The Motley Fool Australia.

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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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The Appen Ltd (ASX: APX) share price was absolutely smashed on Wednesday.

The artificial intelligence (AI) data services company’s shares sank 28% to $2.29.

Investors were hitting the sell button in a panic after management warned that its revenue and profits would be down “materially” in FY 2023.

This means the Appen share price is now down a massive 65% since this time last year.

Is the Appen share price weakness a buying opportunity?

Often when bad news hits like this, a company’s share price can end up being oversold, creating a buying opportunity for investors.

However, as far as analysts at Bell Potter are concerned, the Appen share price has not been oversold and could still fall further from here.

According to a note out this morning, the broker has reiterated its sell rating with a lowered price target of $2.05.

This implies potential downside of 10.5% from current levels over the next 12 months. Though, it may not take that long to get there based on recent selling!

What did the broker say?

Bell Potter was understandably very disappointed with Appen’s update and has been forced to take an axe to its earnings estimates. It commented:

We have downgraded our 2023, 2024 and 2025 revenue forecasts by 17%, 18% and 18%. We now forecast an underlying EBITDA loss of US$(23.2)m in 2023 – previously we forecast positive US$14.3m – and have downgraded our underlying EBITDA forecasts in 2024 and 2025 by 49% and 30%. We now forecast Appen utilises some of its A$20m debt facility in 2H2023 and assume there is some increase in the size of the facility when the company refinances later this year. This should avoid any need of a capital raising and we have not assumed any in our forecasts.

The broker also explained why it thinks its shares are still not good value despite the crash. It said:

We have updated each valuation used in the determination of our price target for the earnings changes as well as market movements and time creep. We have also rolled forward our EV/EBITDA valuation – largely because underlying EBITDA will be negative this year – and have modestly increased the multiple we apply from 11x to 12x due to the positive cost out story but only relatively modest level of profit. We have also reduced the TGR we apply in the DCF from 4.0% to 3.5%. The net result is a 9% decrease in our PT to $2.05 and we maintain our SELL recommendation.

The post Broker gives its verdict on the Appen share price crash appeared first on The Motley Fool Australia.

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More reading

• 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
• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• Are Appen shares finally cheap enough to buy following today’s nosedive?
• Appen share price crashes 22% amid ‘materially’ declining revenue

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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It’s fair to say one of the most prominent reasons why more people don’t invest in ASX shares is volatility. Whether someone invests or not, they probably know the share market can indeed be a volatile place. Every time there is a share market crash, or even a big sell-off, it makes headline news. Australians are told of the ‘billions’ wiped off the markets.

Additionally, we are told of the wild success stories of investing, as well as the abject failures. Everyone has heard a story about the person who invested $1,000 into a pharmaceutical or biotech share and pulled $100 million out. Or else of the unlucky soul who lost everything on a would-be gold miner.

Stories like these lead to the misplaced reputation of the share market, in some quarters, as a kind of wild-west casino.

However, the realities of stock market investing couldn’t be further from this perception. Sure, if you want to gamble, you can certainly do so on the stock market. But most investors, at least the successful ones, don’t gamble. They use the share market to invest their money in successful businesses and make money over long periods of time.

But there is no escaping the fact that shares can be, and often are, volatile. We humans like control, especially when it comes to our money. It certainly feels nicer to have your savings in a bank – the capital protected, with the only changes being the steady stream of interest every month.

Why you should embrace volatility when investing in ASX shares

So why even bother with shares then? Well, it’s simple – shares consistently offer far higher rates of return than cash does. That’s a fact that we’ve talked about here at the Fool on countless occasions. Volatility is the price we pay for those higher returns.

Yet volatility, while scary, can be your friend, if you let it be. But why listen to me, when you can earn from legendary investor Warren Buffett?

Back in 1993, Buffett told his fellow shareholders of Berkshire Hathaway the following:

The true investor welcomes volatility. A wildly fluctuating market means that irrationally low prices will periodically be attached to solid businesses. It is impossible to see how the availability of such prices can be thought of as increasing the hazards for an investor who is totally free to either ignore the market or exploit its folly.

Thus, volatility gives all investors the chance to buy their favourite companies for a price that is irrationally lucrative.

I’ll give a personal example. I invest in Apple Inc (NASDAQ: AAPL). The company is part of my portoflio because I believe Apple is one of the best companies in the world, with a phenomenal brand, attractive products, and top-notch management. I fully expect Apple to be around in ten years’ time, as an even larger and more successful company than it is today.

Because of this conviction, I would be delighted if my Apple shares fell by 50% tomorrow. It would give me a rare chance to buy up far more shares than I currently own which, if my thesis proves correct, would boost my wealth considerably in coming years.

It can certainly be terrifying to see the values of our investments decline on paper. But once an investor realises that volatility is an inherent and unavoidable part of investing, they can learn to use it to their advantage.

Remember, shares go up far more often than they go down. That’s why the markets hit new all-time highs every few years.

The post How to make volatility your friend when investing in ASX shares appeared first on The Motley Fool Australia.

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More reading

• Why did Warren Buffett sell this global tech giant after only a few months?
• Invest like Warren Buffett with this ASX share to grow your wealth enormously
• On my ASX watchlist: Is ResMed borrowing Apple’s multi-billion-dollar playbook?
• Worried about a recession? Here’s why these investors are backing Warren Buffett
• 3 things ASX investors should watch this week

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

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