Warren Buffett. The man is the investing icon behind a US$105 billion fortune and what looks like an incredible track record of buying shares in winning businesses.

Indeed, shares in Buffett’s holding company Berkshire Hathaway roared 3,787,464% higher between 1964 and 2022 – a compounded annual gain of 19.8%.

Fortunately for us ASX investors, the billionaire is also incredibly generous with his advice.

He outlined two strategies that arguably underpinned his investing success in his recently released 2022 letter to Berkshire shareholders. And here they are.

Is this the key to Warren Buffett’s investing success?

Don’t buy shares, buy businesses

Buffett has time and time again reiterated that he and Berkshire Hathaway partner Charlie Munger “are not stock-pickers; we are business pickers”.

You likely won’t find the pair investing in the ‘trendy’ sectors that they don’t fully understand. In Buffett’s own words:

Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily-understandable business whose earnings are virtually certain to be materially higher five, 10, and 20 years from now.

Even so, Buffett doesn’t always win. In his 2022 letter to shareholders, he said Berkshire’s whopping results have come on the back of “about a dozen truly good decisions”.

Two of those decisions were made in the mid-90s. That’s when Berkshire finished buying shares in Coca-Cola and American Express – forking out US$1.3 billion for each.

By 2022, those investments provided US$704 million and US$302 million in dividends respectively. Interestingly, however, the billionaire said the dividend growth was “far from spectacular”.

Indeed, much of it came down to the stakes’ ballooning values – coming in at US$25 billion and US$22 billion at the end of last year.

Invest for the long-term

On that note, Buffett never buys shares with plans to sell in a few days, weeks, or even months. And that brings us to his second investing ‘rule’. I think Munger best summed it up, saying:

Warren and I don’t focus on the froth of the market. We seek out good long-term investments and stubbornly hold them for a long time.

By doing so, the pair have watched the value of their investments compound time and time again.

They’ve also seen many a market correction and crash – periods in which plenty of investors panic and sell their holdings.

Perhaps that’s a lesson in patience for us unprofessional ASX investors. And, boy, has it paid off for Buffett, Munger, and Berkshire.

I’ll leave you with some final words from the billionaire investing great’s latest letter:

The weeds wither away in significance as the flowers bloom. Over time, it takes just a few winners to work wonders. And, yes, it helps to start early and live into your 90s as well.

The post Warren Buffett attributes his investing success to these 2 things appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• How to build a $100,000 ASX share portfolio in 6 years
• As stock markets dive, here’s Warren Buffett’s advice
• I’m listening to Warren Buffett and loading up on cheap ASX shares
• Forget day trading! I’d use Warren Buffett’s ‘secret sauce’ to build wealth
• Is now the time to be bold and snap up cheap ASX 200 dividend shares?

American Express is an advertising partner of The Ascent, a Motley Fool company. 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 positions in and has recommended Berkshire Hathaway. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2024 $47.50 calls on Coca-Cola. 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.

from The Motley Fool Australia https://ift.tt/FzrUHOc

The Macquarie Group Ltd (ASX: MQG) share price is down over 13% since 7 March 2023. After such a quick fall in less than a month, it’s worth considering whether the ASX financial share is an opportunity today.

There have been some serious problems with some northern hemisphere banks after the collapse of Silicon Valley Bank (SVB). Credit Suisse is being taken over by UBS. Questions are being asked about Deutsche Bank.

I hope that we don’t hear news of any more banking collapses because that wouldn’t be good news for the global banking system, jobs or depositor money.

However, just fear alone can cause significant pain to share prices. It’s that fear and uncertainty we can use to our advantage to buy shares of great businesses.

Are Macquarie shares a great opportunity?

When we look at how Macquarie shares have performed over the past 12 months, I think we can see that today’s price is fairly close to the 52-week low. When attractive businesses hit a 52-week low, my interest is heightened.

I think it’s fair to say that Macquarie has done an excellent job of growing the business since the GFC. It has diversified its earnings and improved the quality of the company.

Macquarie now has four divisions – asset management, banking and financial services, commodities and global markets (CGM) and Macquarie Capital. Some of those divisions are proving to be effective at providing ongoing earnings through the cycle, while others are good at capitalising on opportunities whilst they are there.

I believe that Macquarie’s earnings are more resilient than other investment banks around the world. So it was no surprise to me that the company’s net profit after tax (NPAT) for the nine months to 31 December 2022 was “slightly up” on the nine months to 31 December 2021.

I think that the best time to buy Macquarie is during times of sizeable market dislocation. It’s understandable that (investment) bank share prices are heavily punished during this period of market worry. Investment banking activities can dry up during lean economic times. But, as I’ve said, I think Macquarie has diversified its portfolio enough to be defensively positioned.

With the Macquarie share price trading at close to its 52-week low, and its history of impressive expansion into new areas, I think the ASX financial share is a long-term opportunity. It’s also possible it could fall further this year. We just don’t know what’s going to happen next.

Valuation

According to Commsec, the Macquarie share price is valued at around 14 times FY24’s estimated earnings, where there is a forecast of lower earnings compared to FY23.

I think that’s a reasonable estimate of what earnings could be, and it seems appealing considering the long-term global growth outlook of the business, with a good dividend and balanced dividend payout ratio.

The post Should I use the banking crisis as an opportunity to pounce on Macquarie shares? appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#43B02A”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43B02A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Why these 3 ASX 200 shares could be leading picks for dividends and growth
• Should ASX 200 banks pay more for this implicit government backstop?
• Buy these ASX 200 dividend shares for a second income: analysts
• 5 ASX shares I’d buy if there is panic selling
• Here are the top 10 ASX 200 shares today

SVB Financial provides credit and banking services to The Motley Fool. 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 SVB Financial. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool Australia has recommended SVB Financial. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/guKv0eB

Everyone’s nervous at the moment.

Banks are nervous that the liquidity spotlight will turn to them, investors are nervous about further interest rate rises, and consumers are nervous about recession and unemployment.

It’s an anxious time for all concerned.

That’s why stock picking is now more fraught than ever. So it’s not a bad idea to avoid being too cute and buy ASX shares of businesses that are already exhibiting positive signs.

Here are two such examples from Medallion Financial Group director Philippe Bui:

‘Strong tailwinds heading into fiscal year 2024’

The XRF Scientific Limited (ASX: XRF) has already rocketed 18.6% year to date, but Bui feels like the climb isn’t finished yet.

“Recent half year results from this equipment and chemicals manufacturer were impressive,” Bui told The Bull.

“Sales revenue of $27.1 million was up 46% on the prior corresponding period. Net profit after tax of $3.7 million was up 34%.”

The industrial testing and chemical goods provider has a bright outlook.

“The capital equipment part of the business seems to have strong tailwinds heading into fiscal year 2024.”

Despite an almost 55% climb over the past year, Bui is not worried that XRF shares have already exhausted their run. 

“Despite share price strength, the business was recently trading on a reasonable price-earnings multiple of 18 times.”

Market yet to price in guidance upgrade

Insurance repairer Johns Lyng Group Ltd (ASX: JLG) seems to be popular among professional investors at the moment.

According to CMC Markets, incredibly all 10 analysts that follow the stock are currently rating it as a strong buy.

Bui is no different.

“First half 2023 group sales revenue of $635.6 million was up 71.2% on the prior corresponding period.”

He noted the company forecast an upgrade to its 2023 revenue by 11.2% for fiscal year 2023. 

“We believe the market is yet to fully price in the significant uptick to full year guidance,” said Bui.

“Work volumes in the next six months may surprise to the upside.”

Johns Lyng stock price has gained 5.8% so far this year. But it may still be a buying opportunity as it’s still more than 26.8% lower than where it was 12 months ago.

The post ‘Surprise to upside’: 2 ASX shares to buy now for future growth appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• 2 ‘recession-resistant’ ASX 200 shares to start a strong portfolio: expert
• 2 ASX 200 shares to rocket from same booming industry: expert
• We still hold this ASX 8-bagger because there’s more to come: QVG
• 3 small-cap ASX shares flying high after reporting season: Elvest

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

from The Motley Fool Australia https://ift.tt/EcWUrCz

What an extraordinary week the BrainChip Holdings Ltd (ASX: BRN) share price has had. It was only last Thursday that Brainchip shares touched a new 52-week low of 40.5 cents per share.

But thanks to Friday’s remarkable 7.3% surge, together with yesterday’s still-impressive rise of 4.6%, Brainchip shares last traded at 45.5 cents each. That means that the Brainchip share price has surged 12.35% in just two full trading days:

Of course, it’s not all sunshine and rainbows for Brainchip shares. This ASX artificial intelligence share remains down a painful 39.3% year to date. As well as by 50% over the past 12 months. And we are still about 75% below the all-time highs of over $1.75 a share that we saw back in early 2022.

But let’s not dwell too much on that. So why are Brainchip shares having such a top run over the past few days?

Why have Brainchip shares bounced 12% in two days?

Well, it’s not exactly clear, unfortunately. There have been no developments or news out of Branchip for a few weeks now. So the stellar performance of the last few days has got nothing to do with the company itself.

So perhaps investors just decided that the new lows we saw last week had gone too far. As we can tell from the company’s performance over the past year, investors seem to be disillusioned with Brainchip’s trajectory and have been drifting away from the company’s shares for a while.

But disillusionment like this sometimes pushes a share too low and gets to a point of potentially undervaluing the company. Perhaps investors have decided that this situation now applies to the Brainchip share price, and have revalued the company accordingly.

This seems likely, seeing as the company’s largest gains came last Friday – a day when most ASX shares were getting panned by the market. So it doesn’t seem like the Brainchip share price’s performance in recent days can be explained by the company just getting caught up in the good mood of the market.

Brainchip is also one of the most short-sold ASX shares on the market, as we reaffirmed yesterday. When a heavily shorted share rises in value, it can create what’s known as a short squeeze.

This forces some short sellers to close out their positions, which results in fresh buying activity. This then pushes up the price of the shorted company’s shares.

This could also be playing a role here.

So these factors are the most likely explanation as to why the Brainchip share price has had such a pleasing few days. Let’s see what the rest of the week brings for this ASX artificial intelligence share.

The post BrainChip share price bounces off 52-week low to surge 12% in 2 days appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Here are the top 10 ASX 200 shares today
• Here are the 10 most shorted ASX shares this week
• Here are the top 10 ASX 200 shares today
• Here are the 10 most shorted ASX shares this week
• Could buying BrainChip shares be a classic beginner’s error?

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.

from The Motley Fool Australia https://ift.tt/otV8vzT

The Origin Energy Ltd (ASX: ORG) share price will be on watch on Tuesday.

That’s because the energy giant has just provided an update on its recent takeover approach.

Origin share price on watch following takeover update

All eyes will be on the Origin share price today after the company revealed that it has accepted a revised takeover offer from the consortium comprising Brookfield Asset Management and MidOcean Energy.

According to the release, the parties have entered into a binding scheme implementation deed that will see Origin taken over for $5.78 per share and US$2.19 per share.

Based on an assumed AUD/USD exchange rate of 0.70, this implies a total consideration of $8.912 per share. This values Origin at $18.7 billion and represents a 9.1% premium to where the Origin share price currently trades.

Though, as always, the total consideration payable will be reduced by any dividends paid by Origin prior to implementation of the scheme. This includes the interim 16.5 cents per share fully franked dividend paid to shareholders on 24 March.

So, the true consideration for shareholders is $8.747 after taking that dividend into account.

This will be paid in Australian dollars, with the US dollar component converted to Australian dollars based on the prevailing exchange rate at the time of implementation of the scheme. Though, shareholders can elect to have the US dollar component paid in US dollars.

In addition, Origin has agreed with the consortium that a fully franked special dividend may be paid to shareholders. This will be subject to satisfaction of certain conditions and is to be considered by the board closer to the time.

What’s next?

The Origin board unanimously recommends that shareholders vote in favour of the scheme in the absence of a superior proposal, and subject to an independent expert concluding that it is in the best interests of shareholders.

Each Origin director intends to vote all shares they hold or control in favour of the scheme, subject to the same qualifications.

Origin’s chairman, Scott Perkins, said:

The Board is unanimous in its view that this transaction is in the best interests of shareholders. The transaction represents a significant premium to the share price prior to the original indicative proposal, and reflects the strategic nature of Origin’s platform, its growth prospects and anticipated earnings recovery.

We believe the Consortium will be responsible owners of Origin’s businesses. Our discussions with the Consortium confirm a high degree of alignment with Origin’s strategy and a desire to accelerate initiatives consistent with Origin’s critical role in Australia’s energy transition. This alignment validates the vision and hard work of Origin’s management team and employees.

The post Origin share price on watch amid takeover agreement appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• 5 things to watch on the ASX 200 on Tuesday
• Here are the top 10 ASX 200 shares today
• 5 things to watch on the ASX 200 on Friday
• Why APM, Macquarie Telecom, Northern Star, and Origin shares are rising today
• 2 ASX 200 shares smashing new multi-year highs on Wednesday

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.

from The Motley Fool Australia https://ift.tt/8LFijSd

S&P/ASX 200 Index (ASX: XJO) banks have long been favoured by investors looking for some handy passive income.

But with numerous banks in the United States and Europe under intense selling pressure, just how safe are the big ASX bank stocks?

And for investors hunting for reliable passive income, what’s the outlook for the ASX 200 banks’ fully franked dividend payouts?

Why are ASX 200 banks at risk?

As you’re likely aware, the ongoing global banking crisis was born in the United States with the collapse of Silicon Valley Bank and Signature Bank.

That liquidity crisis quickly spread to Europe, felling Credit Suisse. That bank is set to be taken over by UBS in a controversial deal engineered by the Swiss government. And now even Deutsche Bank has come under short-selling pressure.

With the situation still unfolding, Saxo Markets Australia market strategist Jessica Amir advises caution for investors eyeing ASX 200 bank shares.

“If we do have a banking collapse in the US in the lending part of their market, the fear and hysteria will probably hit our market too – when the US sneezes we catch a cold,” Amir said (quoted by The Australian).

“We are telling clients to be quite cautious at the moment,” she added. “Bank stocks are quite risky at the moment.”

What’s the dividend outlook for the big banks?

Shaw and Partners senior investment adviser Jed Richard pointed to the Hayne Royal Commission into the Aussie banking sector and prudent lending practices as helping put ASX 200 banks on safer ground than their international peers.

“There is talk that there is no growth in the banking sector – however, the dividend yield we believe is safe,” Richard said. “If you can ride it out for a little while and you get a good dividend yield – mission accomplished.”

Catapult Wealth portfolio manager Tim Haselum was cautious about the short-term outlook for ASX 200 banks. But he said their dividends will see them continue to have a spot in Australians’ portfolios over the longer term.

According to Haselum (quoted by The Australian):

We think bank profitability and hence the share prices will struggle in the short term, but we are not worried about liquidity or solvency in Australia. Longer-term, as long as Australians continue their love affair of property and investors continue to seek dividends, the big four banks will have a place in portfolios.

Here are the 100% franked dividend yields the big four ASX 200 banks currently trade at:

• Australia and New Zealand Banking Group Ltd (ASX: ANZ) 6.5%
• National Australia Bank Ltd (ASX: NAB) 5.6%
• Westpac Banking Corp (ASX: WBC) 5.9%
• Commonwealth Bank of Australia (ASX: CBA) 4.4%

You can see why passive income investors are likely to continue targeting these blue-chip stocks.

The post Investing in ASX 200 banks for dividends? Read this appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Will the turmoil among global banks trigger a stock market crash?
• Banking crisis ‘clearly not over’: ANZ
• A director is buying up CBA shares. Should you?
• Best ASX 200 bank share to buy now: ANZ vs Westpac
• ASX 200 bank shares lift despite Deutsche Bank stock tumble

SVB Financial provides credit and banking services to The Motley Fool. 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 recommended SVB Financial. The Motley Fool Australia has recommended SVB Financial and Westpac Banking. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/nOcNmBd

If you’re looking to lift your passive income, then you may want to check out the ASX dividend shares listed below.

Goldman Sachs has tipped these ASX shares to pay their shareholders big dividends this year and next. Here’s what you need to know about them:

Harvey Norman Holdings Limited (ASX: HVN)

Goldman Sachs remains very positive on this ASX dividend share.

It likes the retail giant due to its belief that it is well-placed to fend off online competition due to its exposure to regional markets and older customer base.

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. While we do not view HVN as the most advanced retailer on digitalization, we view HVN as a more defensive option that is under-valued in the home category.

The broker expects this to allow Harvey Norman to pay fully franked dividends per share of 36 cents in FY 2023 and then 30 cents in FY 2024. Based on the current Harvey Norman share price of $3.69, this will mean massive yields of 9.75% and 8.1%, respectively.

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

Rio Tinto Ltd (ASX: RIO)

Another ASX dividend share that Goldman Sachs is bullish on is mining giant Rio Tinto.

Its analysts see a lot of value in its shares and are expecting some very big yields in the coming years. Goldman commented:

We are Buy rated on RIO and add to the CL due to: (1) compelling relative valuation vs. peers (0.9xNAV vs. BHP 1.05xNAV and FMG 1.5xNAV), (2) strong FCF and Div yield with our bullish view on iron ore, aluminium and copper prices, (3) strong production growth from iron ore and copper (+8% Cu Eq terms in 2023E, +5% in 2024E), (4) the potential for FCF/t improvement in the Pilbara in 2023 with Guida-darri and over the medium to long run driven by Rhodes Ridge, and (5) World’s highest margin low emission aluminium business.

Its analysts are forecasting fully franked dividends per share of US$5.33 in FY 2023 and then US$5.98 in FY 2024. Based on current exchange rates and the latest Rio Tinto share price of $113.75, this will mean yields of 7% and 7.9%, respectively.

Goldman Sachs has a buy rating and $140.40 price target on its shares.

The post Goldman Sachs says these ASX dividend shares with 7%+ yields are buys appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• 8 ASX All Ords shares trading ex-dividend this week
• Invested $7,000 in Rio Tinto shares 5 years ago? Here’s how much passive income you’ve earned
• Buy these ASX 200 dividend shares for a second income: analysts
• Dividend devotee: I’d buy Rio Tinto shares for $2,000 of monthly passive income
• $72m and counting: ASX 200 director’s massive share buy-up continues

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

from The Motley Fool Australia https://ift.tt/a7wBTpX

Ask A Fund Manager

The Motley Fool chats with the best in the industry so that you can get an insight into how the professionals think. In this edition, Chester Asset Management portfolio manager Rob Tucker explains how his fund has outperformed over more than six years.

Investment style

The Motley Fool: How would you describe your fund to a potential client?

Rob Tucker: My name’s Rob Tucker. Anthony Kavanagh, Luke Howard, and myself founded Chester in 2017. 

We’ve been working together for 10 years. The strategy that we’re running had 3.5 years at a previous firm, and six years at Chester, so it’s now 9.5 years old. We run a 25 to 40 stock high-conviction Australian equities fund — on average 35 stocks. 

Over that 9.5 years, we’ve beaten the market by 7% per annum every year. We’ve done 15.1% per annum and the market’s done 8.1% per annum.

We have done that by being very benchmark unaware, and breaking the market into what we call three buckets. 60% to 65% of the fund is in the predictable bucket, which is allocating to sectors such as healthcare, consumer staples, infrastructure, or telcos, where the cash flows are predictable. Then we have to own some cyclicals, energy, or commodities, but they are volatile. 

Then what we do differently is have an exposure to cash and gold.

Gold equities are the least correlated [to] every other S&P/ASX 300 (INDEXASX: XKO) sector. [Over] 5, 10, 15, or 25 years, that tends to be the case. What gold tends to do is act as a ballast or a hedge, so when the market is inherently volatile, gold and gold equities tend to hold up better. 

With that framework — predictables, cyclicals, and some defensives, as we call them, gold and cash — the fund has been run with far lower volatility than the ASX 300. 

We’re very focused on the drawdown, meaning the best way to compound returns over a 10-year timeframe is to minimise the drawdown to your fund when the market is negative. In that context, we have outperformed the market 82% of the time when the market is negative. 

That’s really what we sell: alpha generation through stock picking with lower volatility.

MF: Sounds good. You’re getting better returns than the market and with lower volatility. It’s the dream double.

RT: That’s what you pay an active manager — to generate superior returns. But yeah, absolutely I think the focus on minimising drawdowns is a key part of our framework.

Broadly, if you want to label our fund, we would call ourselves growth at a reasonable price (GARP). But very focused on the “reasonable price” aspect of that.

And we are a mid-cap buyer’s fund. We don’t hold many stocks in the top 20, because I think over a 10-year time frame, we tend to find better ideas over the small and mid-caps, as they mature. That’s a sometimes more volatile part of the market, but certainly a more capital growth aspect to the fund.

MF: Where do you think the market is heading?

RT: I always get slightly reluctant to crystal ball gaze, because it’s impossible. Because crystal ball gazing depends on what monetary policy does and what interest rates expectations do, which is a function of inflation at the moment. Those three levers — inflation, interest rate settings, and fiscal policy — are driving the economic cycle.

What I’d say is I think we’re going to be in for a pretty choppy six to 12 months. I don’t want to get too technical here, but our base case is, over the next decade, central governments basically have to come to the conclusion that they can’t fight inflation forever with higher rates. Our base case is we’ll enter a period of financial repression, which means inflation will be far higher than the 10-year bond ultimately. The reason for that is that over 170 years, US debt-to-GDP has expanded three times — through the Civil War, the First World War, and the Second World War. Every time the only way it’s adjusted, or recalibrated down to a normalised level of debt-to-GDP ratio, has been through inflation.

Right now you’ve got debt-to-GDP in America as high as it’s ever been. The only way to solve that problem is through inflation being stickier for an extended period. I would say I think we’ll enter another bull market when the [US] Fed Reserve says, “We’re not going to try and get inflation back to 2%. We’ll let it run up 3 or 4%, but we’re going to cut rates anyway because the economy’s so weak.” 

That’s the set-up for a really strong market. Now, that might be six or 12 or 18 months away, but that’ll be the next leg of the bull market I suspect.

MF: Considering you’re reluctant to gaze at crystal balls, perhaps a better way of shaping that question is: How have you got your cyclicals positioned?

RT: That’s a good question. It’s a combination of battery materials exposure — so Mineral Resources Ltd (ASX: MIN) has been a core holding of ours for about six years — and we have some energy exposure, because we still think energy’s basically underfunded. 

While the energy transition occurs, there’s going to be a period of time where the oil companies make significant cash flows. Santos Ltd (ASX: STO), as an example, that’s on four times cash flow. We still think there’s really interesting opportunities within those old economy stocks, but the cash flow thesis will really accelerate.

Particularly with Santos, it has 30% production growth over the next three years as the Alaskan field comes into production in 2026. A lot of investing right now, but the free cash generation will accelerate over the next two or three years.

The post How to beat the stock market by 7% per year: fund manager appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• 5 things to watch on the ASX 200 on Monday
• Investing in ASX 200 lithium shares? You’ll want to read this
• Why are ASX lithium shares sinking today?
• 5 things to watch on the ASX 200 on Thursday
• What was with ASX lithium 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.

from The Motley Fool Australia https://ift.tt/0nFIDNK

On Monday, the S&P/ASX 200 Index (ASX: XJO) started the week on a positive note. The benchmark index rose 0.1% to 6,962 points.

Will the market be able to build on this on Tuesday? Here are five things to watch:

ASX 200 expected to rise

The Australian share market looks set to rise again on Tuesday following a solid start to the week on Wall Street. According to the latest SPI futures, the ASX 200 is poised to open the day 26 points or 0.4% higher. In late trade in the United States, the Dow Jones is up 0.8% and the S&P 500 is up 0.4%, but the NASDAQ is down 0.3%.

Oil prices jump

Energy shares Beach Energy Ltd (ASX: BPT) and Karoon Energy Ltd (ASX: KAR) could have a great day after oil prices jumped overnight. According to Bloomberg, the WTI crude oil price is up 5.2% to US$72.89 a barrel and the Brent crude oil price is up 4.1% to US$78.12 a barrel. Traders were buying oil amid a Kurdistan export halt and banking optimism.

Origin agrees takeover deal

The Origin Energy Ltd (ASX: ORG) share price will be on watch on Tuesday after the energy company accepted a takeover offer from a consortium comprising Brookfield Asset Management and MidOcean Energy. Origin has agreed to a revised deal of $5.78 per share and US$2.19 per share, which implies a total consideration of $8.912 per share. Elsewhere, United Malt Group Ltd (ASX: UMG) could return from a trading halt today with a takeover update of its own.

Gold price falls

It could be a poor day for gold miners Evolution Mining Ltd (ASX: EVN) and Regis Resources Limited (ASX: RRL) after the gold price dropped overnight. According to CNBC, the spot gold price is down 1.3% to US$1,958.1 an ounce. Improving risk sentiment appears to have softened demand for the safe haven asset.

Dividend payday

A number of popular ASX 200 dividend shares will be rewarding their shareholders with their latest dividend payments on Tuesday. This includes health supplements company Blackmores Ltd (ASX: BKL), steel producer BlueScope Steel Limited (ASX: BKL), and conglomerate Wesfarmers Ltd (ASX: WES). The latter is paying a fully franked 88 cents per share interim dividend.

The post 5 things to watch on the ASX 200 on Tuesday appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#43B02A”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43B02A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Here are the top 10 ASX 200 shares today
• These are the ASX gold shares I’d buy amid the banking squeeze
• Guess which ASX 200 stock is on ice following a takeover approach
• Here are the 3 most heavily traded ASX 200 shares on Monday
• Start building a lifelong passive income with just $5 a day

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

from The Motley Fool Australia https://ift.tt/iPBO2gx

Historically, the share market has been a great place to grow your wealth.

For example, the most recent Berkshire Hathaway (NYSE: BRK.B) letter to shareholders reveals that the S&P 500 index has generated an average 9.9% total return per annum since all the way back in 1965.

Importantly, this is largely in line with the returns that ASX shares have generated over the last 30 years.

And while we cannot say whether the same will happen over the next 58 years, I would be disappointed if the returns are not similar. We’re also going to base our calculations on this potential return.

Growing your portfolio to $100,000 in six years

Starting from zero and growing your wealth to $100,000 with ASX shares in six years may seem farfetched, but the maths says otherwise.

If you were to invest $1,000 into ASX shares each month for six years and two months and earned the market return, your portfolio would have grown to be worth our target amount.

At that point, investors have the option to use the funds for a purchase or keep the money invested and let compounding work its magic.

Unless it is absolutely necessary to withdraw the funds, I would sooner put them to work in the share market with the aim of growing my wealth further.

For example, if you left this $100,000 invested in ASX shares for a further six years, didn’t make any more contributions, and earned the market return, your portfolio would grow to be worth $175,000.

And if you can keep going for a further four years, it would see you crack the $250,000 mark.

That’s going from zero to $250,000 in just 16 years. Not bad!

The key is sticking with a plan, buying high quality ASX shares with strong long term outlooks, and letting compounding do the work for you.

The post How to build a $100,000 ASX share portfolio in 6 years appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• As stock markets dive, here’s Warren Buffett’s advice
• I’m listening to Warren Buffett and loading up on cheap ASX shares
• Forget day trading! I’d use Warren Buffett’s ‘secret sauce’ to build wealth
• Is now the time to be bold and snap up cheap ASX 200 dividend shares?
• Warren Buffett’s $35 billion warning to investors

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 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.

from The Motley Fool Australia https://ift.tt/JVBs9eU