Warren Buffett is the world’s most successful investor, amassing a $100 billion fortune over 80 years of investing. So, he’s worth listening to for investing advice, and thankfully, he keeps it very simple for us.

One of the biggest goals most Australians strive for is a happy, healthy, and financially secure retirement.

It’s a great goal to have because we’re living a lot longer these days, so we all need a personal plan as to how we’re going to fund two or three decades of retirement after our working lives are over.

Unless you’re willing to live on the age pension, which is currently $1,064 per fortnight for singles and $1,604 for couples, you’ll need to buy some assets that can deliver reliable passive income and growth.

One investment option is ASX shares.

And you can’t buy them soon enough. As Buffett says, time is the secret sauce to investing success.

What is Buffett’s best retirement investment strategy?

The chair of Berkshire Hathaway Inc provides really simple, specific advice that you can act upon today.

Here it is.

Buffett’s key investment strategy for retirement is to make consistent investments into an S&P 500 Index (SP: .INX) fund throughout your career.

The S&P 500 is the benchmark United States stock market index. It tracks the performance of the 500 largest listed companies by market capitalisation. It’s a real-time measure of the health of the US economy.

Owning shares in an index fund is like owning a little piece of every company within that index.

Buffett reckons consistently buying shares in a low-cost S&P 500 index fund regularly is the most practical long-term investment strategy for ordinary investors trying to secure a decent retirement for themselves.

It’s simple, it takes little time and effort, and it works.

What are the returns like?

The S&P 500 has averaged about a 10% annual return on investment (ROI) over the long term. There’s no guarantee that will continue, but there’s no reason to believe this will suddenly change, either.

A 10% annual return is pretty darn good, especially if you start early in your working life. A 20-year-old investor would have 40 years of 10% average gains ahead of them before retirement in their 60s.

Index funds are not as exciting as ASX shares that skyrocket 50% or 100% (or more) some years due to hot thematic investing trends like we saw in 2021 and 2022 with ASX lithium shares.

But if you believe in the tortoise over the hare, and you don’t have the time or interest to research ASX shares, select individual stocks, and monitor the health of each business over the long term, an index fund is a great option. You get the benefits of diversification, dividends, and low annual fees all in one.

Buffett considers investing in the S&P 500 as a proxy for investing in the United States economy.

In his annual newsletter released on 25 February, Buffett says:

I have been investing for 80 years– more than one-third of our country’s lifetime.

… I have yet to see a time when it made sense to make a long-term bet against America.

How to follow Buffett’s retirement strategy using ASX shares

If you want to follow Buffett’s advice, you have a few choices.

Firstly, you can invest directly in an S&P 500 index fund via a stockbroker or online trading platform.

For some assistance with this, take a look at our story on how to buy US shares in Australia.

Alternatively, you can buy an exchange-traded fund (ETF) on the ASX that tracks the S&P 500.

An example is the iShares S&P 500 (AUD Hedged) ETF (ASX: IHVV). 

The average annual return including distributions has been 9.46% since its inception in 2014. The hedging mitigates the effects of currency fluctuations between the Australian and US dollars.

The ETF has a management fee of 0.10%.

Or, you can apply Buffett’s theory with an Australian flavour, backing our economy over the US economy.

That means buying an S&P/ASX 200 (ASX: XJO) index fund, which exposes you to the top 200 ASX shares by market cap.

The ASX 200 is our benchmark index, similar to the S&P 500 in the US. We’re a smaller country, so our benchmark index has fewer companies.

An example is BetaShares Australia 200 ETF (ASX: A200). The average annual return including distributions has been 7.99% since its inception in 2018.

It has a management fee of 0.04%.

But as my Fool colleague Sebastian points out, the Vanguard Australian Shares Index ETF (ASX: VAS) is by far the most popular index fund on the ASX.

It tracks the performance of the S&P/ASX 300 Index (ASX: XKO).

The Vanguard Australian Shares ETF has returned an average of 9.1% per annum including dividends since its inception in 2009.

It has a management fee of 0.10%.

Don’t overlook ASX index fund fees

There’s very little work involved for the fund manager of an ASX shares index fund, which is why their fees are so much lower than actively managed funds.

Buffett is outspoken about the high fees active managers charge, given that many underperform the S&P 500’s average returns over the long run.

All index funds charge relatively low fees. The difference between them may seem negligible right now, but over a lifetime of investing, they can add up to a lot — like, five figures. That’s serious money!

What does consistent buying mean?

When Buffett says you need to invest consistently, he’s talking about dollar-cost averaging on autopilot.

To grow your wealth without giving your investments much time and attention, you must put your ASX shares investing habits on autopilot.

Your goal is to invest chunks of spare cash into your index fund regularly.

Here are three ways to go autopilot on your investments.

3 ways to put your ASX shares investments on autopilot

Pick a set time interval for investing. Once a month (watch those trading fees, though!), once per quarter, once per year, whatever you are comfortable with. Then don’t miss a single one of those intervals. Buy in bear markets, buy in bull markets. Buy no matter what, and let time and the magic of compounding work.

Be disciplined and trust that over time, you will achieve those perfectly healthy average returns and build a great nest egg for retirement.

Secondly, reinvest the dividends your ASX index fund or ETF pays by purchasing more shares automatically.

Most funds have dividend reinvestment plans (DRPs), whereby you tick a box or fill in a form, and the fund manager will organise the automatic purchase of more shares with those dividends for you.

Set and blissfully forget.

Thirdly, set up a salary sacrifice arrangement whereby your employer will automatically deposit part of your pay into your superannuation fund each month.

Many super funds offer index investment options, so talk to your fund manager about this.

The post Help safeguard your retirement with this key Warren Buffett investment strategy appeared first on The Motley Fool Australia.

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• Here are 3 ways to get passive income from ASX shares
• Is a dividend ETF really better than an ASX index fund for income?
• Want high income right now? These are the ASX dividend shares I would buy
• I bought these two ASX shares last week, here’s why
• How to generate $300 of monthly income from the Vanguard Australian Shares Index ETF

Motley Fool contributor Bronwyn Allen has positions in Vanguard Australian Shares Index ETF. 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 share price of All Ordinaries Index (ASX: XAO) healthcare company Race Oncology Ltd (ASX: RAC) is having a day to forget after exiting a trading halt with the news of a leadership shakeup.

The company’s executive director and chief scientific officer (CSO) Dr Daniel Tillett has stepped down from his roles citing “serious differences with some members of the Race board”.

Right now, the Race Oncology share price is $1.805, 9.52% lower than its previous close.

Let’s take a closer look at the news weighing on the ASX All Ords oncology company’s stock today.

What’s going wrong for this ASX All Ords share today?

The Race Oncology share price is tumbling on Friday after the company announced its star CSO and director is stepping away from the company.

Tilliett first became involved with the company in 2019 as a major investor before joining its board and, later, taking on the CSO role. He’s been credited as a key contributor to the discovery of the company’s cancer drug Zantrene’s cardiovascular protective properties.

Tillett commented on his departure, saying:

I have full faith that our CEO Damian [Clarke-Bruce] and the Race clinical and preclinical teams have the capability, skill, and drive to ensure Race’s success.

I am very grateful to have been able to work with so many talented scientists and clinicians during my time at Race, but serious differences with some members of the Race board have made my continued involvement untenable.

He gave a little more detail in an accompanying interview, continuing:

When you’re a director, it’s not an easy job. Many times you have to make decisions that maybe conflict with your own personal wishes and desires, versus the interests of the shareholders, and it’s always the shareholders that have to come first.

In this particular case I’ve put the shareholders’ interests ahead of my own personal interests.

Tillett also assured investors that he has no intent to sell his stock in the ASX All Ords company.

He held around 13.7 million Race Oncology shares as of last month – a roughly 8% stake – with another 2.3 million shares in voluntary escrow until November.

Professor Tim Hammond of the company’s partner Advonate Clinical will succeed Tillett as interim CSO until a replacement is found.

Race Oncology share price snapshot

Today’s tumble sees the Race Oncology share price in the longer-term red.

The stock has dumped 9% since the start of 2023. It’s also trading 35% lower than it was this time last year.

For comparison, the ASX All Ords is trading flat year to date. Looking further back, it has dropped 7% over the last 12 months.

The post Why is ASX All Ords healthcare share Race Oncology plummeting 10% today? appeared first on The Motley Fool Australia.

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

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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to end the week in the red. At the time of writing, the benchmark index is down 0.35% to 6,943.6 points.

Four ASX shares that are not letting that hold them back are listed below. Here’s why they are charging higher:

Core Lithium Ltd (ASX: CXO)

The Core Lithium share price is up 4% to 79 cents. This morning, analysts at Macquarie retained their outperform rating and $1.10 price target on this lithium miner’s shares. The broker was pleased with news that the company has signed an agreement to sell additional spodumene to Sichuan Yahua.

Estia Health Ltd (ASX: EHE)

The Estia Health share price is up 14% to $2.67. This has been driven by news that the aged care operator has received a takeover approach from Bain Capital. The private equity firm has tabled a non-binding $3.00 cash per share offer, which will be adjusted for any dividends paid. This represents a 28% premium to the Estia Health share price at yesterday’s close.

Kingsgate Consolidated Limited (ASX: KCN)

The Kingsgate share price is up 11% to $2.00. This morning, this gold miner announced that it has poured its first gold from the reopened Chatree mine in Thailand. Management advised that the Chatree Gold Room poured over 155,732kgs of materials in the first pour in more than 6 years. This will be now sent away for further refining.

St Barbara Ltd (ASX: SBM)

The St Barbara share price is up over 6% to 65.8 cents. This appears to have been driven by a rise in the gold price overnight. The price of the precious metal rose to almost US$2,000 an ounce amid hopes that interest rates won’t rise as much as feared. The S&P/ASX All Ordinaries Gold index is up 1.9% this afternoon.

The post Why Core Lithium, Estia Health, Kingsgate, and St Barbara shares are charging higher appeared first on The Motley Fool Australia.

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• Estia Health share price jumps 21% on takeover approach
• 5 things to watch on the ASX 200 on Friday
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• Why are ASX lithium shares sinking today?

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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New Hope Corp Ltd (ASX: NHC) shares are down 1.35% in early afternoon trading on Friday.

Shares in the S&P/ASX 200 Index (ASX: XJO) coal stock closed yesterday trading for $5.54. Shares are currently changing hands for $5.47 apiece.

Keep that price in mind, as it will enable us to address the question, do New Hope shares really pay a 17% dividend yield?

Does the ASX 200 coal miner really pay a 17.6% dividend yield?

The answer is yes.

And no.

Let me explain.

The ASX 200 coal miner reported some stellar half-year results on Tuesday, which saw New Hope shares close up 8.6% on the day.

On the back of record-high coal prices during the six-month period, the company saw its after-tax profits increase a remarkable 101% from the prior corresponding half-year period.

This encouraged the New Hope board to declare a 30 cents per share ordinary dividend and a 10 cents per share special dividend, both fully franked.

Now the stock doesn’t trade ex-dividend until 17 April.

Until that time, the official dividends over the last 12 months come from the final dividend of 56 cents per share (ex-dividend on 24 October). And the 30 cents per share interim dividend (ex-dividend on 14 April 2022).

With those numbers, New Hope shares pay a trailing yield of 15.8%.

Not bad. But a bit short of 17.6%.

However, if you hold the shares at market close on 17 April, you’ll then be holding a stock that’s paid out 96 cents per share over the prior 12 months rather than 86 cents per share. 

Buying in at today’s $5.45 per share, that works out to a yield of 17.6%.

The interim dividend will be paid on 3 May.

How have New Hope shares been performing?

As you can see on the chart below, New Hope shares have been strong outperformers over the past 12 months, up 60%.

For some context, the ASX 200 is down 6% over that same period.

The post Do New Hope shares really pay a 17.6% dividend yield? appeared first on The Motley Fool Australia.

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• Here’s how much I’d need to invest in New Hope shares to generate a $250 monthly income
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• Top brokers name 3 ASX shares to buy today

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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I think that strategically investing in ASX shares could help me build my passive income, compound my wealth, and retire early.

Here are the three steps I’d take to make the most of the opportunities afforded by the Australian stock market.

3 steps I’d take to grow my passive income and retire early

Put my money to work

Investing in the stock market ultimately brings higher risk than, say, keeping cash in a high-interest account or buying bonds. However, greater risks often herald greater rewards.

Right now, an exchange traded fund (ETF) tracking the S&P/ASX 200 Index (ASX: XJO) – SPDR S&P/ASX 200 (ASX: STW) – offers a 4.71% dividend yield.

That’s about on par with the yield offered by many savings accounts right now, according to RateCity, but it doesn’t consider any potential share price appreciation. Though, no investment is guaranteed to provide returns or downside protection.

It also doesn’t factor in the compounding that could occur if I consistently reinvest my dividends between now and when I retire.

Doing so could speed up the wealth-building process now, and when I retire, I could take those dividends as passive income.

Make the most of the market’s ups and downs

It can be nerve-wracking to jump into ASX shares during periods of volatility. However, such times are often when the best bargains can be found.

The market – and the broader economy – tends to move in cycles as investor sentiment ebbs and flows. And when the market falls, shares in quality ASX companies tend to drop too.

That creates plenty of opportunities to snap up such companies for less than their true worth – known as value investing.

After snapping up a few such stocks, value investors typically wait for the market to reprice their shares. That can, in turn, increase their wealth-building and passive income opportunities.

Focus on growing passive income

Look to the future, and what do you see? The answer may well provide valuable investing guidance.  

Unfortunately, I don’t have a crystal ball. But I think I could grow my wealth by taking the time to consider what sectors or industries might experience growth in the coming years and decades.

That could help me recognise ASX stocks I think are capable of increasing their dividends as the years go by, allowing me to snap them up for cheap now and reap the rewards later.

The post Passive income hack: 3 simple steps to help you get rich and retire early appeared first on The Motley Fool Australia.

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

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S&P/ASX 200 Index (ASX: XJO) investors banking on a pause in interest rate hikes are likely to be disappointed.

The Reserve Bank of Australia (RBA) makes its next rate announcement on Tuesday, 4 April.

What’s happening with the RBA tightening cycle?

At its meeting earlier this month, the RBA lifted interest rates by another 0.25%.

That marked the central bank’s tenth consecutive rate hike and brought Australia’s official cash rate to 3.60%.

With that move largely priced in by the markets, the ASX 200 gained 0.6% immediately following the announcement.

Among the good news delivered by RBA governor Philip Lowe, he noted, “The monthly CPI indicator suggests that inflation has peaked in Australia.”

As for the not-so-good news, Lowe said, “It will be some time before inflation is back to target rates.”

He added, “The board expects that further tightening of monetary policy will be needed to ensure that inflation returns to target and that this period of high inflation is only temporary.”

So why are futures markets now pricing in the likelihood of an April pause by the RBA?

Why ASX 200 investors should expect an April rate hike

The popular idea that the RBA might lift its finger off the rate hike button in April stems from the banking crisis that swept from the United States into Europe.

The Collapse of Silicon Valley Bank, the 18th largest in the US before its demise, rattled global markets and had many investors thinking the Federal Reserve would also pause its tightening cycle this week.

When the banking contagion spread to Credit Suisse, leading to the Swiss government’s engineered takeover of the fast-sinking Credit Suisse by UBS, many investors also thought European central banks would take a breather from further rate hikes.

And that same thinking is going on in regard to the RBA’s April meeting.

A pause by the RBA would most likely see a relief rally for ASX 200 shares. But investors shouldn’t expect one.

The US Fed, the European Central Bank, and the Bank of England all increased their nation’s cash rates at their most recent meetings. The Fed and BoE both hiked by 0.25% this week, while the ECB lifted rates by 0.50% last week.

And according to BIS Oxford Economics head of macroeconomic forecasting Sean Langcake, ASX 200 investors can expect similar action from the RBA.

“Central banks can walk and chew gum – they have other tools to deal with liquidity shortages, but reining in inflation still remains the primary goal,” Langcake said (quoted by The Australian Financial Review.)

Langcake added:

If the ECB and Fed have decided their markets can weather a rate hike, it would be very odd for the RBA to reach a different conclusion. Especially after the assurances they gave earlier this week on the strength of Australian banks.

Betashares chief economist David Bassanese is also forecasting another rate increase at the next meeting.

“My base case remains the RBA will raise rates once more in April and then signal a pause,” he said. “This depends on a still reasonably firm retail sales and monthly CPI report next Tuesday and Wednesday respectively.”

Now most ASX 200 shares are well-positioned to handle another 0.25% increase in borrowing costs.

But if the market is pricing in a pause, any rate increase could see the benchmark index take a tumble on the day of the announcement.

The post Investing in ASX 200 shares? Don’t bank on an RBA rate pause in April appeared first on The Motley Fool Australia.

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• UBS to acquire Credit Suisse. Here’s what you need to know
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• ASX 200 bank shares are deep in the red on Thursday. Here’s why

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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If you’re on the lookout for some blue chip ASX 200 shares to buy, then it could be worth looking at three that analysts at Citi are recommending as buys.

Here’s why these could be the ASX 200 shares to buy now:

Aristocrat Leisure Limited (ASX: ALL)

Citi’s analysts are bullish on this gaming technology company and have a buy rating and $42.80 price target on its shares. The broker believes that industry data is pointing to the company outperforming its peers. It recently commented:

Data up to December 2022 show continued strength in US casino revenues and those of Aristocrat’s land-based peers. Aristocrat has also extended its performance gap to peers, coinciding with further market share gains in the premium-leased segment. Dragon Link is leading the industry in units added and more recent releases are also growing their installed bases significantly.

Goodman Group (ASX: GMG)

Citi is also a fan of this integrated industrial property company. The broker has a buy rating and $24.00 price target on its shares. It was pleased with last month’s half-year results and believes that tailwinds for industrial property will continue and underpin strong earnings growth in the coming years. It said:

GMG’s 1H23 result highlighted the extent of tailwinds still existing for industrial property which make for a strong earnings growth outlook not just this year but into multiple years in the future. […] We believe GMG will continue to outperform given its high-quality exposure and strong earnings growth potential in an uncertain macro environment.

Suncorp Group Ltd (ASX: SUN)

Finally, the broker is bullish on this insurance and banking giant and has a buy rating and $14.30 price target on its shares. While it is facing a few headwinds, Citi still believes that Suncorp has a solid outlook. It explained:

Despite a tough, likely insurance loss making period for motor insurance, SUN’s margin trajectory still looks solid with potential for further expansion. The top line is also growing at a healthy rate even if it may not accelerate in 2H as much as the market may have previously thought. Reinsurance market pressure remains a likely headwind but SUN remains confident it can price for any increases. So overall we stay positive, albeit we note the dilutive nature of the impending bank sale which likely pushes up out year multiples.

The post Citi rates these 3 ASX 200 blue chip shares as buys 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 recommended Goodman Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The PolyNovo Ltd (ASX: PNV) share price has been having a tough week.

In morning trade, the medical device company’s shares were down as much as 6% to $1.71.

When the PolyNovo share price hit that level, it was down over 17% in the space of two days.

Why is the PolyNovo share price under pressure?

Investors have been hitting the sell button this week amid some major insider selling.

According to a change of director’s interest notice, the company’s chairman, David Williams, sold a large number of PolyNovo shares between 17 March to 22 March.

Williams sold a total of 4.75 million shares across this period for a total consideration of approximately $9.7 million. This equates to an average sale price of $2.04 per share.

Should you be concerned?

Insider selling rarely goes down well with the market. That’s because it is often regarded as a bearish indicator.

After all, if you were so confident that the PolyNovo share price was good value and destined to head higher, you wouldn’t be a seller.

But it is worth remembering that directors do have a life outside their company. And that is what has driven the sale of these shares.

PolyNovo explained that Williams needed the funds to support a US property purchase. It advised:

Chairman Mr David Williams has sold 4.75m shares, the proceeds of which will part settle a US property purchase.

The company also highlights that Williams still has a considerable holding following this sale and has no plans to offload any other shares in the near future. It adds:

Mr Williams still holds 21,384,432 fully paid ordinary shares and does not intend to sell more shares for the foreseeable future.

All in all, this appears to demonstrate that Williams’ interests remain firmly aligned with shareholders, making this selloff probably a bit of an overreaction.

The post PolyNovo share price falls 17% in two days after major insider selling 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 positions in and has recommended PolyNovo. 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 Estia Health Ltd (ASX: EHE) share price is having a sensational finish to the week.

In early trade, the aged care operator’s shares were up as much as 21% to $2.84.

The Estia Health share price has eased back a touch since then but remains up 16% at the time of writing.

Why is the Estia Health share price rocketing higher?

Investors have been scrambling to buy the company’s shares on Friday after it revealed the receipt of a takeover approach.

According to the release, the company has received a confidential, non-binding and indicative proposal from Bain Capital to acquire it by way of a scheme of arrangement.

Bain Capital has tabled a $3.00 cash per share offer, which will be adjusted for any dividends paid or payable. This represents a 28% premium to the Estia Health share price at yesterday’s close.

Management advised that the indicative proposal is subject to a number of conditions. This includes the satisfactory completion of due diligence on an exclusive basis, the execution of a binding scheme implementation agreement, and an unanimous recommendation from the Estia Health board.

It will also be subject to approval from Bain Capital’s Investment Committee and the Foreign Investment Review Board.

Bain Capital appears to be serious about the offer. While it has not yet been confirmed, there was a significant purchase of shares at the market close on Thursday.

For example, yesterday’s trading volume saw over 12 million shares change hands. Whereas the day before just 170,000 shares were traded. Given the timing, it seems quite likely that this was Bain.

What now?

Estia Health has advised that together with its financial and legal advisers, it is considering the indicative proposal to assess whether it is in the best interests of shareholders.

It has also warned that there is no certainty that the indicative proposal will result in a binding offer or that any transaction will eventuate. As a result, shareholders do not need to take any action in relation to the proposal.

The company intends to keep the market informed in accordance with its continuous disclosure obligations.

The Estia Health share price is now up 20% over the last 12 months.

The post Estia Health share price jumps 21% on takeover approach 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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I’m feeling optimistic about the valuations of some S&P/ASX 200 Index (ASX: XJO) shares. The lower the share prices go, the more attractive a good business looks.

It’s certainly true that the outlook doesn’t look as rosy as it did a year ago. Interest rates are much higher. Prices are now a lot higher after inflation. Things are uncertain, but I think that’s when the best opportunities are found.

I like the look of businesses that have been growing their operations over the long term, with further long-term growth planned. These are two of the ASX 200 shares I’m bullish about.

Cleanaway Waste Management Ltd (ASX: CWY)

Cleanaway describes itself as Australia’s “leading total waste management, industrial and environmental services company”. It has the “largest waste, recycling and liquids collections fleets on the road”, with a network of recycling facilities, transfer stations, engineered landfills, liquids treatment plants and refineries.

Since 21 April 2022, the Cleanaway share price has fallen around 25%, making it much cheaper. It has been hurt by a number of impacts including floods, higher costs and so on. But, I don’t think the negative environment is going to last forever.

Over the rest of FY23, the business is expecting underlying growth and ongoing execution of its 2030 initiatives. It’s expecting margins are going to recover in the second half of FY23, with an improvement in labour availability and efficiency. It’s expecting earnings before interest and tax (EBIT) to be around $300 million.

I think Cleanaway’s earnings can grow in the long term as the Australian population increases and more of a household’s waste is recycled.

Commsec numbers suggest that the FY24 earnings per share (EPS) could be 9 cents and in FY25 it could be 10.6 cents. This means the Cleanaway share price could be valued at 23 times FY25’s estimated earnings.

Premier Investments Limited (ASX: PMV)

Premier Investments is an ASX 200 retail share that owns a number of brands including Smiggle, Peter Alexander, Dotti, Just Jeans, Jay Jays and Portmans. It also has investments in Breville Group Ltd (ASX: BRG) and Myer Holdings Ltd (ASX: MYR).

The Premier Investments share price has fallen over 10% since 9 March 2023, despite the company’s positive updates. It recently said that Premier’s global retail sales for the first 17 weeks of the FY23 first half were up 23.6%. That’s impressive growth in my opinion.

It’s doing a great job of growing the Smiggle business, which sells children’s items like bags, stationery and so on with branding on them from the AFL, Harry Potter and Disney. The return to school has been a very helpful boost for the business.

Over the long term, the business is looking to grow its online sales, which are typically more profitable than what is sold in-store.

The ASX 200 share has been steadily increasing its ownership of Myer, which is interesting considering the long-term commentary about the demise of department stores. However, Myer has really turned things around – the Myer profit is soaring and the Myer share price is up around 70% in the last year.

I think that the potential of its global sales to increase (through names like Smiggle and Breville) gives it plenty of growth potential.

The post I’m bullish about these 2 beaten-up ASX 200 shares and I’ll tell you why appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Premier Investments. 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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