ANZ Group Holdings Ltd (ASX: ANZ) CEO Shayne Elliott has warned investors that there could be more economic and bank pain to come.

Over the past year, there has been a large increase in interest rates in both the US and Australia. Other central banks globally have also increased their interest rates.

While there have been some specific problems for some banks, the rapid rise of interest rises has widespread ramifications. For Silicon Valley Bank (SVB) and Credit Suisse, it has been a disaster.

But ANZ’s boss thinks there could be more impacts to come and that it could hurt some areas of the economy.

ANZ’s warning about the banking sector

Elliott suggested that the current problems hitting the global financial system are similar to the 1980s in the US. It was also a time of strong inflation and higher interest rates, which exposed “a lot of poor businesses to that risk”, Elliott said, according to the Australian Financial Review.

The AFR quoted Elliott:

The GFC was fundamentally a crisis around the quality of assets and the loans that banks make, and that’s not what the risk is here. This is a different issue. This is really to do with the global war on inflation and how central banks are raising rates very quickly in order to combat that, and that has casualties.

According to Elliott, the size and speed of the increase in interest rates means that businesses and households are at risk “because that really has an impact on cost of living, taking money out of their pocket, and not everybody can adjust so quickly, and those that can’t typically fall over”.

He also warned there could be less credit available in the economy as banks “focus more on liquidity and the market emphasises capital adequacy”.

Elliott was also quoted talking about how ANZ is handling the situation:

The first thing we’re going to do is protect the bank, our balance sheet, make sure we can continue to operate, liquidity, capital, protect our people, look after our customers.

We have to adapt to this new world of capital markets.

There’s always a casualty in these events. Of course, the regulator and governments are trying to sort of limit the blast radius, if you will. They’re not intentionally trying to cause harm, but it’s inevitable, and they try to do the best to limit the damage so that lots of people have a small amount of pain, as opposed to a small number of people having lots.

Strong dividend expected

Even if ANZ is feeling cautious about the current situation, the large ASX bank share is expected to generate $2.39 of earnings per share (EPS) after the increase in interest rates, according to Commsec.

The ASX bank share is projected to pay an annual dividend per share of $1.58. This translates into a grossed-up dividend yield of 10%.

The post Banking crisis ‘clearly not over’: ANZ appeared first on The Motley Fool Australia.

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• Best ASX 200 bank share to buy now: ANZ vs Westpac
• ASX 200 bank shares lift despite Deutsche Bank stock tumble
• How I’d aim for $250 in monthly passive income from ANZ shares
• Want $10,000 of passive income? Check out these ASX shares
• Should ASX 200 banks pay more for this implicit government backstop?

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The ASX, as well as stock markets around the world, have had a rough time of it lately. Despite the bounce that we’ve seen today, the S&P/ASX 200 Index (ASX: JXO) remains down by around 3.5% over the past month and by a meaty 5.4% since 7 March.

It’s been a similar, albeit not quite so severe, experience for the S&P 500 Index (SP: .INX) in the United States.

So most of us would have seen our share portfolios take a bit of a battering over the past few weeks.

This is an uncomfortable situation for most investors to deal with. No one likes seeing the value of their investments tank. But times like these can often spook investors into making poor decisions. Selling out of your investments during times of market trauma can be tempting.

You might think that it’s better to ‘go to cash’ until the market starts going up again. But this is usually a bad decision, one driven by emotion, not logic.

So I think a better way to handle volatility in the share markets is by following the advice of legendary investor Warren Buffett.

Some investing wisdom from Warren Buffett

Buffett is famous for his astronomical returns over more than six decades of investing and the generous investing wisdom he periodically shares with investors.

When markets fall, Buffett’s advice is constant and unwavering. Put simply, he welcomes any market downturns, viewing them as a good chance to buy his favourite shares at a discounted price.

Our first quote illustrating this principle comes from Buffett’s 2008 letter to the shareholders of his company Berkshire Hathaway Inc. Here’s what Buffett said:

…the market value of the bonds and stocks that we continue to hold suffered a significant decline along with the general market. This does not bother Charlie and me.

Indeed, we enjoy such price declines if we have funds available to increase our positions. Long ago, Ben Graham taught me that “Price is what you pay; value is what you get.” Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.

So that gives you a great idea of how one of the best investors in the world deals with falling share markets. Once you have utter confidence in the companies you’ve selected for your share portfolio, it should be easy to accept the lower share prices that shaky markets bring with them.

Be greedy when others are fearful

To build out a better picture of Buffett’s ideas, let’s look to more wisdom from the great man. Buffett penned an op-ed for The New York Times back in the depths of the global financial crisis in 2008. It still makes for some pertinent reading today. Here’s a piece of it:

The financial world is a mess, both in the United States and abroad… In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary. So … I’ve been buying American stocks.

Why?

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions..

But most major companies will be setting new profit records 5, 10 and 20 years from now. Let me be clear on one point: I can’t predict the short-term movements of the stock market…

What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.

Foolish takeaway…

In my view, that is some of the best and most eloquent advice for dealing with share market fear any of us will ever get. So today is the time to keep this priceless wisdom front of mind.

If the share market gets even worse in the coming weeks and months, remember what Buffett says about investing during these times. This legendary investors portfolio has survived and thrived during some of the darkest days the markets have ever seen. Yours can, too, if you learn from the best.

The post As stock markets dive, here’s Warren Buffett’s advice appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Monday
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• I’m listening to Warren Buffett and loading up on cheap ASX shares
• Here are the top 10 ASX 200 shares today
• Is the AFIC share price a standout investment right now?

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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The ASX tech share Bailador Technology Investments Ltd (ASX: BTI) is one of the next investments that I want to buy.

It’s already in my portfolio, but I think the current 52-week low makes this one too good to miss out on.

For investors that haven’t heard of this one, it describes itself as a growth capital fund focused on the IT sector, with it being “actively managed” by an experienced team with “demonstrated sector expertise.”

Bailador says that it provides exposure to a portfolio of IT companies with global addressable markets. It invests in private tech businesses at the “expansion stage”.

There are three reasons why I think the business is attractive at the current level.

Valuation

I like being able to buy a business at a discounted price – whether that’s after a share price fall or a clear gap between the underlying value of the business and the current share price.

At the end of last week, the Bailador share price dropped to $1.17. With its latest monthly update for February 2023, the business had a $1.61 pre-tax net tangible assets (NTA) value. That means the share price discount is currently 27.3% to the NTA.

That’s a huge discount considering over a third of the value is cash and approximately another third is the listed investments of Siteminder Ltd (ASX: SDR) and Straker Translations Ltd (ASX: STG).

While higher interest rates and inflation have damaged the valuation of ASX tech shares, I think the future is generally promising for tech businesses, so I think the NTA will grow over time.

Compelling businesses and cash position

Bailador says that it typically invests $5 million to $20 million in businesses in the target tech businesses that are seeking growth stage investment.

The companies that it invests in typically have a few characteristics: run by the founders, a proven business model with attractive unit economics, international revenue generation, a “huge” market opportunity, and the ability to generate repeat revenue.

There are a number of ‘verticals’ that it looks to invest in within the tech sector, including software as a service (SaaS) and other subscription-based internet businesses, online marketplaces, software, e-commerce, high value data, online education, telecommunication applications and services.

In terms of Bailador’s private tech investments, it’s currently invested in five other names: InstantScripts, Access Telehealth, Rezdy, Nosto and Mosh. The two biggest positions are digital healthcare businesses InstantScripts and Access Telehealth, worth around $40 million of the portfolio.

The ASX tech share’s investment team is on the lookout for other opportunities, which may be found during this uncertain economic period.

Dividend yield

Baildor has a dividend policy of paying 4% per annum of its pre-tax NTA. With the share price trading at a large discount to the NTA, the actual dividend yield that investors are getting is much higher than 4%.

A 4% yield on the NTA works out to be a 5.5% dividend yield on the Bailador share price, or 7.8% including franking credits.

If Bailador can combine a mixture of good dividends with valuation gains for its portfolio, then I believe it will be able to achieve pleasing shareholder returns. At the end of February 2023, the prior three years had produced an average shareholder return per annum of 12.7% for Bailador.

I’m not expecting this to make huge returns, but I think this low point could be a good entry price for 3-year, 5-year and longer investment timelines.

The post I’m planning to buy this heavily discounted ASX tech share next appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Bailador Technology Investments. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bailador Technology Investments and SiteMinder. The Motley Fool Australia has recommended Bailador Technology Investments and Straker Translations. 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 Synlait Milk Ltd (ASX: SM1) share price is having a tough start to the week.

In afternoon trade, the ASX All Ords dairy processor’s shares are down 6% to $2.10.

Why is the Synlait share price falling?

Investors have been selling this ASX All Ords stock on Monday after the company’s half-year results disappointed the market. Here’s a summary of its performance:

• Revenue down 3% to NZ$769.8 million
• Earnings before interest, tax, depreciation and amortisation (EBITDA) down 25% to NZ$51.5 million
• Net profit after tax down 83% to NZ$4.8 million
• Net debt up 32% to NZ$518.6 million

What happened during the half?

For the six months ended 31 January, Synlait reported a 3% decline in revenue to NZ$769.8 million and an 83% decline in net profit after tax to NZ$4.8 million.

Management advised that this reflects operational stability and cost challenges, which have impacted its performance. In addition, delayed shipments of ingredients resulted in lower sales volumes in the first four months of FY 2023, significantly impacting first half profitability.

The ASX All Ords stock’s CEO, Grant Watson, explained:

A range of challenges, several driven by COVID-19, have created impacts across Synlait, including a reduction in milk processed, raw material supply challenges, CO2 shortages, a tight labour market and extreme weather events. This is on top of high inflationary cost pressures across every part of our business.

Unfortunately, these challenges are expected to continue in the second half. He adds:

There are no signs of these challenges abating, and we are constantly reviewing how this impacts our broader set of Synlait stakeholders, particularly at the farm gate. Since our last result, we have revised our farm gate milk price forecast twice due to subdued global economic activity and a slower-than-expected recovery of Chinese demand following COVID-19.

Outlook

In light of the above, the ASX All Ords stock is expecting its full-year profits to be down year over year.

It is guiding to a full-year profit in the range of NZ$15 million to NZ$25 million. This compares to FY 2022’s net profit after tax of NZ$38.5 million.

The post Guess which ASX All Ords stock is plummeting following an 80% profit dive appeared first on The Motley Fool Australia.

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• Why Adairs, Liontown, Qantas, and Synlait shares are dropping today
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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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Recent weakness in the Allkem Ltd (ASX: AKE) share price could have created an extremely attractive buying opportunity for investors.

That’s the view of analysts at Bell Potter, which are predicting material gains ahead for the lithium miner’s shares.

What is the broker saying about Allkem shares?

According to the note, Bell Potter currently has a buy rating and $18.61 price target on the company’s shares.

This implies potential upside of approximately 84% for Allkem shares over the next 12 months from current levels.

And while Bell Potter isn’t expecting a dividend to be paid this year, it won’t be long until its maiden dividend makes an appearance.

Its analysts expect a 40 cents per share dividend in FY 2024, which represents an attractive 3.9% yield.

Why is it bullish?

Bell Potter is bullish on Allkem shares due to its strong production growth plans, balance sheet strength, and the diverse nature of its operations geographically, operationally, and end-product. It commented:

We expect AKE’s cash generation to lift substantially from 2023 with ongoing strength in lithium demand, commodity prices and production growth. AKE is aiming to maintain 10% share of supply in a global lithium market experiencing unprecedented growth; it has a portfolio of growth projects, balance sheet strength and cash flow from existing projects to achieve this target. AKE’s portfolio is also diversified across lithium commodity type, mode of production, asset location and end-user country.

Bell Potter also spoke about lithium prices, noting that Allkem expects another strong quarter ahead despite recent spot price weakness. It said:

AKE expect March 2023 quarter pricing to be consistent with the December 2022 quarter (US$53,000/t), and this was reiterated in the result today. The company also noted that stocks within the lithium supply chain remain low and should be supportive of prices, despite recent weakness in spot indices.

All in all, the broker appears to believe Allkem shares could offer a compelling risk/reward at current levels.

The post Bell Potter says buy Allkem shares now for 80% upside appeared first on The Motley Fool Australia.

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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 Treasury Wine Estates Ltd (ASX: TWE) share price is up 0.4% in late morning trade on Monday.

Shares in the S&P/ASX 200 Index (ASX: XJO) global wine company closed on Friday trading for $12.94. Shares are currently changing hands for $12.99 apiece.

This comes despite an unexpected increase in taxes on wine in the United Kingdom.

What new taxes is the UK imposing?

The Treasury Wine share price is shaking off concerns that the latest tax to hit the company’s UK wine exports could materially impact its second-largest international export market after the United States.

Treasury Wine is still recovering from Chinese tariffs of more than 200% slapped on Aussie wine imports in 2020. That came amid diplomatic disputes with the Australian government.

The new 10% tax increase in the UK applies to all wines. But it still could impact British demand for Australian vintages. And it comes atop a UK tax charged in accordance with alcohol content that comes into effect in August.

Britain’s Wine and Spirit Trade Association (WSTA) chief Miles Beale said the combined taxes would negate any price benefits delivered by the free-trade agreement (FTA) between Australia and the UK.

According to Beale (quoted by The Australian Financial Review), “The duty rise will completely overshadow any benefits of removing import tariffs, of between 6 and 9 pence a bottle, when the FTA takes effect later this year.”

Beale added that the latest tax “makes a mockery of the Department of International Trade’s promised big savings on Australian wine imports”.

Beale continued:

It is the largest increase in wine duty since 1975. These crippling inflationary tax hikes will be lumped on top of stealth tax rises for some alcoholic products, which the government has built into the move to taxing alcohol by strength.

Commenting on the potential impact on Aussie wine exporters, and by extension, the Treasury Wine share price, Australian Grape & Wine CEO Lee McLean said it would “make things much more difficult for Australian wine exporters to the UK, just as they are trying to diversify their exports”.

He said (quoted by the AFR), “the market will become less attractive” for many wine exporters, “although the UK will remain a significant market for the foreseeable future”.

Treasury Wine share price snapshot

As you can see in the chart below, the Treasury Wine share price has been a strong performer over the past 12 months, up 11%.

The ASX 200 is down 6% over that same period.

The post Treasury Wine share price lifts even as new UK tax ‘makes a mockery’ of free trade deal appeared first on The Motley Fool Australia.

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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 recommended Treasury Wine Estates. 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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Magellan Financial Group Ltd (ASX: MFG) shares have gone down a long way over the past year, but the dividend yield could still be very high, leading to impressive passive income.

It’s not so good for long-term holders which have seen significant destruction of the value of their shares. Magellan has cut its dividend significantly compared to a couple of years ago. But, for new investors, they can get the yield at this lower starting point.

But, keep in mind that the dividend isn’t everything. Investors should think about what the share price might do as well – there’s not much point getting a 5% dividend yield if the share price permanently falls over 10%.

We’ll consider the outlook after looking at the Magellan dividend forecast.

Magellan passive dividend income expectations

Magellan says that strong cash flows allow the business to have a dividend payout ratio of 90% to 95% of the fund’s management profit. In the FY23 half-year result, it generated $90.1 million of operating cash flow during the half-year. It also has no debt.

The fund manager generated adjusted earnings per share (EPS) of 53.6 cents per share and decided to declare an interim dividend of 46.9 cents per share. That payment represents a dividend yield of 5.7%, excluding the effect of franking credits.

Commsec estimates suggest that Magellan is going to pay an annual dividend per share of 81.3 cents. That represents a dividend yield of 9.9%, excluding franking credits. However, that does suggest that the final dividend is going to be smaller than the interim dividend.

In FY24 Magellan’s dividend could be 59.9 cents per share, according to Commsec, suggesting that a big dividend cut is expected in the next financial year. That would translate into a dividend yield of 7.3% before franking credits.

In FY25, the Magellan dividend is estimated to be 55.1 cents per share, which would be another reduction. This would translate into a dividend yield of 6.7% excluding franking credits. That’s still a fair amount of passive income.

Can the Magellan share price rebound?

Magellan has gone down a long way. Since 2 July 2021, it’s down over 80%. It would have to be an incredible turnaround to recover all that lost ground.

Just getting back to $10 would be a start. It’s certainly priced on a cheap price/earnings (P/E) ratio. Commsec numbers show it’s valued at around 10 times FY24’s estimated earnings.

But, if earnings keep going down, then Magellan’s share price is unlikely to rebound noticeably, in my opinion.

Magellan’s funds under management (FUM) keep falling as its investment funds haven’t yet delivered much outperformance to stop the outflows. Unless the earnings stop falling, the dividend may keep falling.

The company has a few points of how to regain momentum: stabilise and improve its core funds management performance, launch new products, add new and complementary capabilities with acquisitions, disciplined capital and cost management, and its people. But, it may be easier said than done.

Magellan also noted that it had $882.4 million in cash, financial assets and investments in associates at 31 December 2022.

Whilst it could turn things around, it wouldn’t be at the top of the list of low P/E ASX shares that I’d want to buy because of the headwinds that high-fee active managers are facing.

The post Here’s how much passive income Magellan shares could pay to 2025 appeared first on The Motley Fool Australia.

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• Here are the top 10 ASX 200 shares today
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• Bought $1,000 of Magellan shares in 2013? Here’s how much passive income you’ve received

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has 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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Shares in S&P/ASX 200 Index (ASX: XJO) banking giant Commonwealth Bank of Australia (ASX: CBA) have caught the attention of one insider in recent weeks.

Independent director Julie Galbo bolstered her stake in the national institution last Tuesday, indirectly snapping up 130 shares for $96.90 apiece. That equals a total investment of nearly $12,600.

Does that mean the CBA share price – currently trading at $96.01 – is cheap? Well, that depends on who you ask.

Are CBA shares a buy right now?

The CBA share price has tumbled 5% over the last 30 days to trade near its lowest point since October right now. And some brokers appear to think the banking major is trading at a decent price.

Morgans, for one, tipped the stock as one of its best ideas earlier this month. It has a hold rating and a $96.11 price target on the bank share, my Fool colleague James reports.

However, as the broker pointed out, CBA’s valuation is notably steep compared to its peers right now.

The biggest of the big four currently offers a price-to-earnings (P/E) ratio of 16.75 and a price-to-book (P/B) ratio of 2.24, according to CommSec data.

Not to mention, CBA’s dividend yield – 4.4% at the time of writing – is lower than nearly all its ASX 200 bank peers.

But that hasn’t deterred either Morgans or Fairmont Equities founder and managing director Michael Gable. The expert also has a hold rating on CBA shares, saying as per The Bull:

Although CBA is the most expensive bank, we believe the price premium is justified because of its quality. Over the longer term, it outperforms the other major banks.

Not everyone is so bullish, however. Goldman Sachs has a sell rating and a $90.39 price target on CBA shares, representing a potential 5.8% downside.

The broker said the bank’s latest earnings, released last month, signalled its net interest margin (NIM) has peaked, making its valuation hard to support.

The post A director is buying up CBA shares. Should you? appeared first on The Motley Fool Australia.

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• ASX 200 bank shares lift despite Deutsche Bank stock tumble
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• Goldman ‘remains confident in the health’ of ASX 200 bank shares and names its top pick

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 Goldman Sachs Group. 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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At the start of each week, I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Flight Centre Travel Group Ltd (ASX: FLT) continues to be the most shorted ASX share despite its short interest easing again to 11.1%. Short sellers appear to believe the company could fall short of expectations due to weaker revenue margins.
• Core Lithium Ltd (ASX: CXO) has short interest of 10%, which is up slightly week on week. This seems to have been driven by a bearish outlook for lithium prices.
• Zip Co Ltd (ASX: ZIP) has short interest of 10%, which is up marginally week on week. This may be down to concerns that the buy now pay later provider won’t be able to achieve its profit goals. Though, recent updates appear to demonstrate that Zip remains on course to do so.
• Megaport Ltd (ASX: MP1) has seen its short interest ease to 9.2%. The shock departure of its CEO and weaker operating trends may be behind this.
• Liontown Resources Ltd (ASX: LTR) has short interest of 8.7%, which is up week on week. Project cost blow outs and lithium price weakness appear to be behind this.
• Sayona Mining Ltd (ASX: SYA) has 8.7% of its shares held short, which is down week on week. Sayona Mining is yet another lithium share on the list amid falling prices.
• JB Hi-Fi Limited (ASX: JBH) has seen its short interest rise to 7.6%. This may be due to concerns over how consumer spending will fare in the coming quarters.
• Brainchip Holdings Ltd (ASX: BRN) has 7.3% of its shares held short. Short sellers will have been celebrating after this meme stock dropped to a 52-week low last week. It faces a near impossible task of competing against companies that spend billions on R&D each year.
• Betmakers Technology Group Ltd (ASX: BET) has seen its short interest ease to 7.3%. This betting technology company may have been targeted due to competition and cash burn concerns.
• Pointsbet Holdings Ltd (ASX: PBH) is back in the top ten with short interest of 7%. As with Betmakers, competition and cash burn concerns appear to be why short sellers are targeting this sport betting company.

The post Here are the 10 most shorted ASX shares this week appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Why Core Lithium, Estia Health, Kingsgate, and St Barbara shares are charging higher
• Here are the 3 most heavily traded ASX 200 shares on Thursday
• Investing in ASX 200 lithium shares? You’ll want to read this
• Why are ASX lithium shares sinking today?

Motley Fool contributor James Mickleboro has positions in Nextdc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Betmakers Technology Group, Megaport, and Zip Co. The Motley Fool Australia has recommended Betmakers Technology Group, Flight Centre Travel Group, Jb Hi-Fi, and Megaport. 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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Let’s talk about the large-cap portfolio of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) and the three S&P/ASX 200 Index (ASX: XJO) shares that make up its largest positions.

For readers unfamiliar with Soul Pattinson, the company is an investment business that owns other shares and assets as well as being an ASX 200 share itself.

It has a number of different investment portfolios, including the large-cap mentioned above. Others focus on small-cap and property investments; it has structured debt and private equity portfolios; and a strategic portfolio where it owns large stakes in businesses.

Soul Pattinson says it makes active asset allocation decisions, meaning it doesn’t invest to meet a benchmark or replicate an index.

The idea of the large-cap portfolio is that it’s actively managed to deliver capital growth, dividends and portfolio liquidity.

Soul Pattinson has deliberately reduced its portfolio size and focused on defensive stocks. It is ‘underweight’ on bank and mining shares while being ‘overweight’ on diversified financial, healthcare and consumer staple shares.

Having said that, here are the largest three holdings, which comprised more than 28% of the portfolio at the end of the company’s FY23 first half.

Macquarie Group Ltd (ASX: MQG)

Macquarie is the largest position in the portfolio with a 12.6% weighting.

The ASX bank has four different segments. Two of them are called ‘annuity style’ businesses – Macquarie Asset Management (MAM) and banking financial services (BFS). MAM had assets under management of A$797.8 billion, while the banking segment is rapidly growing.

The ASX 200 share also has two ‘market-facing’ businesses of commodities and global markets (CGM) and Macquarie Capital. Higher energy prices have helped boost profitability for the overall Macquarie business.

While downturns may not be helpful for Macquarie’s earnings, its long-term expansion plans have helped the business grow. In five years, the Macquarie share price is up more than 60%. Between FY18 and FY22, the company’s dividend grew by more than 20%.

CSL Limited (ASX: CSL)

CSL is the biggest ASX healthcare share in Australia. It is developing a number of treatments for patients. It provides protein-based treatments and is a leading provider of in-licensed vaccines. CSL recently acquired a business with expertise in iron deficiency and related anemia.

In the recent FY23 half-year result, the ASX 200 share showed ongoing progress, with its underlying net profit after tax (NPATA) growing by 10% to $1.82 billion in constant currency terms.

Over the past five years, CSL shares have surged by around 80%. Between FY18 and FY22, the CSL dividend has grown by around 40%.

BHP Group Ltd (ASX: BHP)

BHP is one of the world’s largest commodity businesses, with iron, copper and coal being three of its largest exposures.

The ASX 200 mining share is exposed to volatile resource prices, so investors can’t expect year-over-year growth every time. But, improvements in its efficiencies and operations can help it lower costs, and it’s expanding in some areas like copper and potash.

Despite the volatility, and the divestment of its petroleum business, the BHP share price is up around 50% over the past five years. The FY22 annual dividend per share was almost 40% bigger than the FY19 dividend.

The post Why these 3 ASX 200 shares could be leading picks for dividends and growth appeared first on The Motley Fool Australia.

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More reading

• Top brokers name 3 ASX shares to buy next week
• Want to boost your portfolio with ASX blue chips? Analysts say buy these shares
• Passive income beasts: 3 ASX dividend shares I’d buy for retirement
• Want $10,000 of passive income? Check out these ASX shares
• Own BHP shares? Here’s how the iron ore giant is cleaning up steelmaking’s act

Motley Fool contributor Tristan Harrison has positions in Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Macquarie Group and Washington H. Soul Pattinson and Company Limited. 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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