The exchange-traded fund (ETF) iShares S&P 500 ETF (ASX: IVV) could be one of the best ETF choices on the ASX for a long-term investment.

There are some great reasons to consider the ETF at the moment, such as the fact that its share price is close to 10% lower than where it was in December 2021.

However, I don’t think I’d change my thoughts on whether it’s a buy if it were 10% higher or lower than where it is today. Valuation matters, but I don’t think investors need to be as selective when it comes to an ETF like this one.

With that in mind, there are three reasons to consider this investment as an appealing buy today.

Very low fees

One of the most important reasons why I think this is a strong investment contender is that investors can get exposure to the US share market, which includes many multinational businesses, for a very low fee.

High fees can really hurt net returns. It doesn’t matter whether we’re talking shares, property, or cryptocurrency – fees reduce the net return. A 10% return is cut to 9% with a 1% fee. This can make a big difference over the long term.

A $10,000 investment turns into $67,275 if it returns 10% per annum over 20 years. If the return is only 9% per year then it’s cut to $56,044 over 20 years.

Lower fees help net returns. The iShares S&P 500 ETF has an annual management fee of just 0.04%. That means almost all of the gross returns translate into net returns for the business.

But, the lowest fee won’t necessarily achieve the strongest net return.

Diversification and quality

Many of the world’s strongest and most dominant businesses are listed in the US.

While all 500 of the businesses in the S&P 500 are listed on an American stock exchange, many of them generate earnings from all over the world.

I’m talking about businesses like Apple, Microsoft, Alphabet (Google), Amazon.com, Visa, Mastercard, Nvidia, McDonald’s, and Costco.

I think there’s good industry diversification across the ETF, with sectors like IT, healthcare, financials, consumer discretionary, industrials, communication, and consumer staples all having weightings of more than 5%.

In my opinion, a lot of the businesses within this ETF are among the best at what they do. Those are the sorts of names I think can keep performing over the long term.

Long-term track record

Past performance is not a reliable indicator, particularly in the short term. But, I think the long-term returns of this evolving group of businesses show what the combination of quality and low costs can do.

Over the past five years, the iShares S&P 500 ETF has returned an average return per annum of 12.7%. I’m not sure what the next five years look like, but I think the ETF can produce double-digit returns.

One of the useful things about this ETF is that if there are any rising stars, they will become a larger part of the portfolio and help future returns.

The post 3 reasons why I rate the iShares S&P 500 ETF (IVV) as a buy today appeared first on The Motley Fool Australia.

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• 2 safe ETFs for ASX investors to buy amid the market volatility
• 3 reasons not investing at all could be riskier than trying to invest
• Will your investments outpace inflation? The answer is more likely to be ‘yes’ if you choose these assets
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. 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 Alphabet, Amazon.com, Apple, Costco Wholesale, Mastercard, Microsoft, Nvidia, and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2025 $370 calls on Mastercard, long March 2023 $120 calls on Apple, short January 2025 $380 calls on Mastercard, and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Alphabet, Amazon.com, Apple, Mastercard, Nvidia, and iShares S&p 500 ETF. 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 recent collapse of US banks and Credit Suisse was a sharp reminder to all investors of how rapidly events can unravel.

Wilsons equity strategist Rob Crookston said his team hasn’t changed the portfolio due to those bank failures, but it did teach everyone a critical lesson.

“The event highlights how important defensives are in a portfolio, especially in such uncertain times,” he said in a memo to clients.

“As we continue through this slowdown period, investors will have to navigate a period where economic and earnings growth could be vulnerable to downward revisions.”

But defensive, for the Wilsons team, doesn’t mean merely protection of capital to the detriment of growth.

Crookston’s analysts focus on what they call “growth defensives”.

The Wilsons staff hunt down businesses that produce defensive goods and services but still have excellent growth potential.

“The focus portfolio holds a selection of high-quality, high-margin, defensive businesses with strong competitive advantages, pricing power, and relatively attractive long-term growth prospects,” Crookston said.

“We believe these companies are likely to grow their earnings faster than the market over the medium term, which should translate to outperformance over time.”

Three stocks that could grow through tough times

Three of their favourites in this category are Lottery Corporation Ltd (ASX: TLC), Ramsay Health Care Ltd (ASX: RHC) and Treasury Wine Estates Ltd (ASX: TWE).

“Our top defensive pick is the Lottery Corp, which has predictable, infrastructure-like cash flows that are underpinned by its long-dated licences and the defensive nature of lottery demand which has historically been resilient through the cycle.”

With a price-to-earnings ratio hovering just under 35, Crookston admitted Lottery Corp shares could look expensive.

“However, we believe the consensus earnings are too pessimistic,” he said.

“The increasing penetration of digital channels should lead to higher margins than consensus… The Lottery Corp’s monopoly on lotteries in Australia further contributes to the higher multiple.”

Recovery in elective surgery activity will continue to boost Ramsay Health Care.

“We believe RHC will continue to see patient volumes recover in a post-COVID world,” said Crookston.

“Wilsons healthcare analysts forecast an earnings per share CAGR of 36% (versus consensus of 26%) between FY23E and FY25E, driven by a recovery in surgeries, strong underlying utilisation trends, raised prices for payers, dwindling COVID costs, and continued brownfield activity.”

On the other end of the health supply chain, Treasury Wine will enjoy unwavering demand for alcohol this year.

“Wine consumption is typically relatively resilient through economic cycles,” read the Wilsons memo.

“On the structural growth side of the equation, the business is poised to deliver meaningful earnings growth as it executes its premiumisation strategy, which is poised to drive material margin expansion over the medium-term.”

The resurgence of the Chinese economy and the removal of politically motivated tariffs might revive what was once a massive market for Treasury.

“Treasury Wine trades at a 12-month forward PE multiple of 22.4x, which offers compelling value considering its 3-year consensus EPS CAGR of 15%, where we see material upside if China loosens its restrictions on wine imports.”

The post 3 ‘defensive growth’ ASX shares perfect for the current climate: expert appeared first on The Motley Fool Australia.

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More reading

• Here are 2 high quality blue chip ASX 200 shares named as buys by analysts
• Where I would go hunting for defensive ASX 200 shares with upside
• 5 ASX 200 shares that inflation can’t touch: expert
• Big lesson from reporting season: STAY AWAY from these ASX shares, says expert
• Morgans names the best ASX 200 growth shares to buy in March

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 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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New Hope Corp Ltd (ASX: NHC) shares closed up 5.26% on Wednesday after gaining 8.6% on Tuesday.

At the closing bell yesterday, the S&P/ASX 200 Index (ASX: XJO) coal stock was trading for $5.60 a share.

Investors have been snapping up New Hope shares since the company reported its half-year results on Tuesday.

With profits having just more than doubled from the prior corresponding half year, fuelled by soaring coal prices, the board declared a record 40 cents per share interim dividend, fully franked.

That came in the form of a 30-cents per share ordinary dividend and a 10-cent per share special dividend.

So, how much of the stock will I need to buy to generate a handy $250 monthly income?

How many New Hope shares will I require?

Well, first off, with New Hope shares up 14.2% over the past two trading days, I’ll be paying a fair bit more for them than if I’d bought the ASX coal stock on Monday.

Though that won’t affect the number of shares I need to buy.

To receive the latest dividend, I’ll need to own those shares at market close on 17 April. That’s when the stock trades ex-dividend. I can then expect to be paid on 3 May.

Atop the 40 cents per share interim dividend, New Hope shares also delivered a final, fully franked dividend of 56 cents per share on 20 December.

That equates to a 96 cents per share full-year dividend, working out to a trailing yield of 17.2% at yesterday’s closing price.

To be clear, there is no guarantee that future payouts will match those made or declared over the past 12 months. They could be lower. Or they could be higher. Much of that will depend on the coal price.

So, working with the trailing yield figure, to generate $250 in monthly income (or a welcome $3,000 per year), I’d need to buy 3,125 New Hope shares today.

Happy income investing!

The post Here’s how much I’d need to invest in New Hope shares to generate a $250 monthly income appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Invested $1,000 in this ASX 200 share two years ago? Here’s how much passive income you’ve earned
• Why is the New Hope share price up 5% and leading the ASX 200 today?
• Top brokers name 3 ASX shares to buy today
• Why New Hope, Pilbara Minerals, Westpac, and Zip shares are pushing higher

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Even though ASX share prices are meant to reflect the worth of a company, over the past 18 months the market has been preoccupied by what’s happening externally.

While anxiety over inflation, interest rates, and wars is perfectly understandable, the team at Alphinity were glad to focus on something else last month.

“The February reporting season was a welcome break from the many macro factors that had been dominating individual share price performances,” read its memo to clients.

“The fund had a good month with most portfolio holdings which reported delivering strong results, positive outlook statements and, as a consequence, strong share price performance.”

Two companies that the Alphinity analysts were particularly impressed with were Woolworths Group Ltd (ASX: WOW) and Medibank Private Ltd (ASX: MPL).

“Common features were strong operational performance, the ability to manage cost pressure from higher input costs through a combination of operational efficiency and pricing power.”

So impressed, in fact, they bought both S&P/ASX 200 Index (ASX: XJO) shares.

“We added to our positions in both Woolworths and Medibank Private after their 1H results with increased confidence in their renewed operational momentum with diminishing challenges from COVID disruptions and November’s cyberattack respectively.”

Both ASX 200 shares have performed similarly in recent times.

Woolworths is 3.4% higher than it was a year ago while paying out a dividend yield of 2.7%. The Medibank Private share price is 3.55% up over 12 months and pays out a 4.2% dividend yield.

Plenty of choppy waters to come

Both are defensive picks, with Woolworths supplying essential groceries and Medibank providing health insurance to Australians.

The Alphinity team makes no apologies for that.

“We continue to see the risk of further negative earnings revisions as the most significant obstacle to strong equity market returns in 2023,” read the memo.

“This appears to be, to some extent at least, reflected in current market multiples with the Australian equity market trading at a price-earnings ratio slightly below long-term averages.”

But not all industries can deal with the coming economic conditions equally.

“Sector skews continue to be meaningful, with elevated commodity prices supporting short-term resource company valuation metrics and the longer duration sectors continuing to look expensive relative to history.”

The market-wide consensus earnings growth forecast for the current financial year is still around 2% to 3%, according to Alphinity analysts.

“With fewer than four months left of the financial year, this looks like a reasonable estimate,” read the memo.

“A similar growth rate is forecast for FY24. This might prove optimistic however, as the impact of higher interest rates over the last year is compounding, not easing.”

The post ‘Increased confidence’: Alphinity reveals 2 ASX 200 shares it just bought appeared first on The Motley Fool Australia.

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More reading

• Latitude shares are back on the ASX, but why are they falling 8% today?
• Experts name 2 high quality ASX 200 shares to buy for your retirement portfolio
• Where I would go hunting for defensive ASX 200 shares with upside
• 2 beaten-up ASX dividend shares I’d buy for long-term income
• Top brokers name 3 ASX shares to buy next week

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

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On Wednesday, the S&P/ASX 200 Index (ASX: XJO) was on form again and stormed higher. The benchmark index rose 0.9% to 7,015.6 points.

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

ASX 200 expected to edge lower

The Australian share market is expected to edge lower on Thursday. According to the latest SPI futures, the ASX 200 is expected to open the day 6 points or 0.1% lower this morning. In late trade in the United States, the Dow Jones is down 0.5%, the S&P 500 has fallen 0.3% and the NASDAQ is down 0.1%. The US share market dropped following the US Federal Reserve’s announcement on interest rates.

US Federal Reserve raises interest rates

Despite concerns that rising interest rates are causing a banking crisis, the US Federal Reserve elected to increase rates again overnight. The central bank has taken interest rates 0.25% higher to a target range between 4.75% and 5%. Positively, the Fed has hinted that the rate hike cycle could be nearing an end.

Oil prices push higher

ASX 200 energy shares Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) could have a decent session after oil prices rose on Wednesday night. According to Bloomberg, the WTI crude oil price is up 1.35% to US$70.63 a barrel and the Brent crude oil price is up 1.5% to US$76.47 a barrel. Oil prices rose in response to comments by the Fed.

Brickworks and Soul Patts to report

Brickworks Limited (ASX: BKW) and Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) will be releasing their half-year results this morning. In respect to the former, at its annual general meeting in November, Brickworks suggested that it expects to deliver a solid half-year result. However, it warned of increasing headwinds in the second half for its Building Products business.

Gold price rises

ASX 200 gold shares Evolution Mining Ltd (ASX: EVN) and Regis Resources Limited (ASX: RRL) could have a decent session after the gold price rose overnight. According to CNBC, the spot gold price is up 1.3% to US$1,966.5 an ounce. Gold rose in response to the Federal Reserve’s rate hike. Traders may believe it could cause more banking sector issues.

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

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More reading

• Here are the top 10 ASX 200 shares today
• Rising Flight Centre share price delivers 25% gains to SPP investors in a week
• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• Why is the New Hope share price up 5% and leading the ASX 200 today?
• Why are ASX 200 gold stocks on a rollercoaster lately?

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 Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Brickworks 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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ASX big four banks finished the day in the green, although there appeared to be an afternoon sell-off.

At the close of trade, Commonwealth Bank of Australia (ASX: CBA) shares were up 0.64% today, and National Australia Bank Ltd (ASX: NAB) shares closed 0.14% ahead. Westpac Banking Corp (ASX: WBC) shares were up just 0.04% at the close, while ANZ Group Holdings Ltd (ASX: ANZ) shares were 0.44% higher.

However, earlier in the day, CBA shares leapt 1.75%, NAB shares rose 1.42%, Westpac shares jumped 1.42%, and ANZ shares elevated 1.54%.

For perspective, the S&P/ASX 200 Index (ASX: XJO) climbed 0.87% today.

Let’s take a look at what may have impacted ASX big four bank shares today.

What’s happened?

ASX bank shares appeared to rise this morning following financial fears in global markets easing overnight.

Bank of America Corp (NYSE: BAC) shares rose 3% on the New York Stock Exchange (NYSE: BAC) lifted 3.03% on Tuesday in the USA, while Wells Fargo & Co (NYSE: WFC) shares lifted 2.67%.

The shares of First Republic Bank (NYSE: FRC) shares soared 29%, rebounding from major losses in the last couple of weeks.

However, some of these shares fell in after-hours trade in the United States. For example, First Republic Bank shares slid 9% in after-hours trade, while Bank of America shares fell 0.07% into the red.

This may have weighed on ASX banking shares in afternoon trade today.

Just ahead …

All eyes are on the US Fed Reserve ahead of a rates decision, due on Wednesday US-time.

Commenting on the upcoming decision, Standard Chartered head of G10 FX research Steve Englander told Reuters:

The banking sector’s near-death experience over the last two weeks is likely to make Fed officials more measured in their stance on the pace of hikes.

Meanwhile, Goldman Sachs analysts remained “confident” on the health of the ASX 200 bank shares, as my Foolish colleague James reported this morning.

Commenting on the big four, the broker said:

We remain confident in the health of the banking sector in Australia given:

i) a single, national regulator, with most of the Australian listed banks subject to the Liquidity Coverage Ratio (LCR); ii) balance sheet mix, which sees only a relatively small part of their balance sheets in a marked-to-market environment; iii) Australian bank regulatory capital positions are MTM for the impact of rate rises, and iv) strong capital positions, with fully-loaded CET1 ratios at close to 18%.

ASX 200 banking shares have been attracting a rise in investor interest recently following the banking turmoil and Europe and the United States.

As my Foolish colleague Bernd reported today, online trading of Westpac shares has lifted 350% week on week, while CBA share trading has risen 114%.

The post ASX big four bank shares close the day ahead as financial fears linger appeared first on The Motley Fool Australia.

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More reading

• Could owning NAB shares soon include a slice of Credit Suisse?
• Why New Hope, Pilbara Minerals, Westpac, and Zip shares are pushing higher
• Goldman ‘remains confident in the health’ of ASX 200 bank shares and names it top pick
• Online trading in these ASX 200 bank stocks is surging. Here’s why
• ANZ shares could offer a dividend yield of 10% in FY23, is it a buy?

Motley Fool contributor Monica O’Shea 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 Westpac Banking. 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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Lithium shares on the ASX were a mixed bag today, with several finishing the day in the green.

However, it wasn’t all rosy for lithium, with several lithium explorers sliding into the red.

Overall, Australian shares were moving in a positive direction today, with the S&P/ASX 200 Index (ASX: XJO) lifting 0.87%.

Let’s take a look at what weighed on ASX lithium shares today.

What happened to ASX lithium shares?

Lithium shares that finished in the green today included:

• Pilbara Minerals Ltd (ASX: PLS), leapt 2.27%
• Allkem Ltd (ASX: AKE), rose 1.56%
• Mineral Resources Ltd (ASX: MIN), jumped 1.99%
• Piedmont Lithium Inc (ASX: PLL), lifted 5.77%.

Lithium shares that fell included:

• Core Lithium Ltd (ASX: CXO) fell 3.66%
• Sayona Mining Ltd (ASX: SYA) slid 2.44%
• Lake Resources N.L. (ASX: LKE) fell 2.94%

Multiple ASX lithium shares appeared to follow the pattern of USA shares overnight. For example, Albemarle Corporation (NYSE: ALB) shares lifted 4.5%, while Livent Corp (NYSE: LTHM) rose 2.25% and Sociedad Quimica y Minera de Chile (NYSE: SQM) soared 5.7%.

Piedmont Lithium was a top performer among ASX shares today, and it also happens to have a NASDAQ listing.

Momentum in the USA may have been driven by an upbeat outlook from high-profile California governor Gavin Newsom. Speaking during a visit to the Lithium Valley, he said:

California is poised to become the world’s largest source of batteries, and it couldn’t come at a more crucial moment in our efforts to move away from fossil fuels. The future happens here first – and Lithium Valley is fast-tracking the world’s clean energy future.

However, not all news on the lithium sector was bright overnight. According to Asian Metal Inc data reported on Bloomberg overnight, lithium prices in China have halved in four months. This could be due to more global supply and China’s EV sector moderating, the publication noted.

That said, China’s lithium prices have still exploded more than 1,300% in the last two years, before retreating.

Meanwhile, Pilbara Minerals also benefited from a positive broker update from Macquarie this morning. Macquarie has maintained an outperform rating on Pilbara shares with a $7.50 price target. As my Foolish colleague James noted, Macquarie remains positive on the lithium industry.

Further, Goldman Sachs is also optimistic about Allkem shares. In a note to investors on Monday, Goldman kept a buy rating on Allkem shares with a $15.40 price target.

Commenting on Allkem, Goldman said:

Allkem has one of the best production outlooks in our lithium coverage, with broad-based growth optionality, second only to Mineral Resources on an LCE basis when including downstream hydroxide production on an equity basis.

The post What was with ASX lithium shares today? appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• Top brokers name 3 ASX shares to buy today
• Why New Hope, Pilbara Minerals, Westpac, and Zip shares are pushing higher
• Why is the Pilbara Minerals share price having such a top run today?
• Is the Core Lithium share price a buy at 84 cents?

Motley Fool contributor Monica O’Shea 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 Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The S&P/ASX 200 Index (ASX: XJO) spent a second consecutive day in the green on Wednesday, lifting 0.87% to close at 7,015.6 points.

It came as the market prepared to learn of the United States Federal Reserve’s next interest rate move. Meanwhile, investors around the globe appear to have regained some confidence following recent banking chaos, which continued this week with UBS’s planned acquisition of Credit Suisse.

Back home, the S&P/ASX 200 Energy Index (ASX: XEJ) outperformed today, gaining 4.2% amid rising oil prices. The price of the black liquid improved around 2% overnight.

The S&P/ASX 200 Information Technology Index (ASX: XIJ) also performed well, lifting 1.3% today.

But not all sectors were winners. The S&P/ASX 200 Real Estate Index (ASX: XRE) posted a 0.4% tumble and gold shares slumped alongside the yellow metal’s value amid improved confidence in the banking sector.

So, with all that covered, let’s take a look at which ASX 200 shares posted the biggest gain on Wednesday.

Top 10 ASX 200 shares countdown

For the second consecutive day, New Hope Corporation Limited (ASX: NHC) took out the index’s top spot. Its share price gained 5.3% today to close at $5.60.

The coal producer posted its first-half earnings yesterday, revealing its profits doubled over the period.

These shares made today’s biggest gains:

ASX-listed company	Share price	Price change
New Hope Corporation Limited (ASX: NHC)	$5.60	5.26%
Woodside Energy Group Ltd (ASX: WDS)	$32.80	5.2%
Beach Energy Ltd (ASX: BPT)	$1.35	4.65%
Domain Holdings Australia Ltd (ASX: DHG)	$3.40	4.29%
Magellan Financial Group Ltd (ASX: MFG)	$8.32	3.87%
AUB Group Ltd (ASX: AUB)	$25.75	3.58%
Webjet Limited (ASX: WEB)	$6.94	3.58%
Karoon Energy Ltd (ASX: KAR)	$2.04	3.55%
Costa Group Holdings Ltd (ASX: CGC)	$2.36	3.51%
Block Inc (ASX: SQ2)	$115.15	3.5%

Our top 10 shares countdown is a recurring end-of-day summary to let you know which companies were making big moves on the day. Check in at Fool.com.au after the weekday market closes to see which stocks make the countdown.

The post Here are the top 10 ASX 200 shares today appeared first on The Motley Fool Australia.

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• Why is the New Hope share price up 5% and leading the ASX 200 today?

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 Block. The Motley Fool Australia has positions in and has recommended Block. The Motley Fool Australia has recommended Aub Group and Costa 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 Sandfire Resources Ltd (ASX: SFR) share price was a positive performer on Wednesday.

The copper miner’s shares ended the day almost 3% higher at $5.77.

This compares favourably to the ASX 200 index, which closed the day almost 0.9% higher at 7,015.6 points.

Can the Sandfire share price keep rising?

One leading broker that believes this copper miner’s shares have plenty left in the tank is Morgans.

According to a note from the start of this month, the broker has put an add rating and $6.50 price target on its shares.

Based on the current Sandfire share price, this implies potential upside of almost 13% over the next 12 months.

Past the point of peak investor concern

While Morgans acknowledges that things have been tricky for Sandfire over the last 12 months, it believes the worst is now behind it. The broker commented:

SFR has been a complex proposition as it navigates major change to its production base/geographic exposure, balance sheet and share register. The halving in European power prices (from peak), strong execution at Motheo (mitigating ‘Africa risk’) and the shoring up of the balance sheet suggests SFR is well past the point of peak investor concern, reflected in recent strength.

Another positive, according to Morgans, is that the ASX 200 index will soon lose a fellow copper miner, OZ Minerals Limited (ASX: OZL). It is in the process of being acquired by BHP Group Ltd (ASX: BHP).

If this deal completes, it will leave Sandfire as the only major copper producer on the ASX 200 index. It suspects that this could lead to “the likely re-cycling of copper hungry funds out of OZL by mid-year – support ongoing interest/ price performance in SFR.”

A final positive is that with the broker forecasting an improvement in margins in the near future, it believes that dividends could be back on the menu soon. It adds:

We forecast growth in MATSA’s margins into FY24 and in group EBITDA through to FY25, supporting incremental de-gearing and the ability to re-consider dividends from FY24.

All in all, the broker appears to believe this makes the Sandfire share price good value at current levels.

The post Here’s what Morgans is saying about the Sandfire share price appeared first on The Motley Fool Australia.

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More reading

• 3 top ASX mining shares I’d buy right now
• Here are the top 10 ASX 200 shares today
• 3 ‘quality’ ASX shares to buy now before they rocket: experts
• Sandfire share price slides as profits turn to losses

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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The Xero Limited (ASX: XRO) share price has seen plenty of pain since inflation and interest rates went crazy. It’s still down more than 40% compared to its November 2021 price.

However, in the last 12 months, Xero shares are only down by 9%. The company’s share price has been rising in recent weeks as the business revealed its plans to become more profitable. That’s one of the main reasons why I think Xero shares can do better than the market this year, next year, and beyond.

Rising profit margins

One of the big things that many investors are typically hoping for is profit growth from their investments.

Xero has made very little profit since it listed on the ASX. For a long time, the ASX tech share hasn’t been bothered about trying to make a profit. It has focused on long-term growth and global expansion. And that has been a worthwhile activity.

But, while Xero has been achieving a strong gross profit margin for some time, it also wants to improve its operating profit margins as well.

Earlier in March, the company announced a plan to reduce costs and drive “disciplined growth”. This will involve reducing its job count by between 700 to 800 roles.

In FY23, it’s expecting its operating expenses as a percentage of operating revenue to be “towards the lower end of a range” between 80% to 85%. That excludes restructuring charges associated with the program of between $25 million to $35 million.

Management is targeting an operating expense-to-revenue ratio in FY24 of around 75%. With that in mind, FY24 could show a big improvement in profit.

I think that a demonstration of improving profitability will encourage investors and send the Xero share price even higher.

Strong revenue growth

I also think one of the biggest drivers of the Xero share price will be its ability to keep growing revenue.

Increasing scale can have such a positive effect on a business with a gross profit margin of around 87%.

In the FY23 first half, it saw operating revenue increase by 30% to $658.5 million. This was partly driven by a 16% increase in total subscribers to 3.5 million, while average revenue per user (ARPU) grew by 13% to $35.30.

It helps that the business has been able to increase subscription prices. In November 2022, it reported that its annualised monthly recurring revenue (AMRR) had grown 31% year over year to $1.48 billion. This suggests that some revenue growth is already locked in for the next result.

The global economy is a big place for the ASX tech share to expand into. Indeed, there are still many more businesses in Australia, the UK, South Africa, and so on that could go digital.

High levels of customer loyalty

However, I don’t think there’s much point in winning lots of subscribers if the business loses them quickly afterwards — that’s essentially a waste of marketing resources.

But, if a business has a high retention rate, then that bodes well. If a company had a retention rate of 80%, meaning it loses 20% of its customers in a year, it would need to replace the equivalent of its whole customer base after five years. A retention rate of 90% would mean losing 10% of its customer base, so it’d have to replace its customer base every 10 years.

In the FY23 half-year result, Xero said its retention rate was over 99%.

This high level of customer loyalty means Xero’s customers seem to love its software, and that Xero can implement profit-boosting price increases with little negative effect.

Xero share price snapshot

Since the start of the year, the Xero share price has risen by 28% and I think it can comfortably beat the market from here to the end of 2024 because of all the factors above.

The post 3 reasons why I think the Xero share price is a top buy today appeared first on The Motley Fool Australia.

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More reading

• Goldman Sachs names 5 of the best ASX tech shares to buy now
• Brokers name 3 ASX shares to buy now
• 3 ASX All Ords tech shares rebounding strongly from the SVB fallout (and 2 still tumbling)
• If I’d invested $5,000 in Xero shares a week ago, here’s how much I’d have now!
• Top ASX 200 tech shares to buy right now: Morgans

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 Xero. The Motley Fool Australia has positions in and has recommended Xero. 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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