The Lake Resources N.L. (ASX: LKE) share price closed out the month of February down 24% to 63 cents.

In the first hour of trading on Wednesday, the ASX lithium stock is down 2.88% to 61 cents.

Let’s take a look at the factors putting a drag on the Lake Resources share price.

Why did the Lake Resources share price tumble so hard?

The primary issue is softening spot prices for lithium spodumene, carbonate, and hydroxide.

As my Fool colleague James points out, investors are probably worried that Lake Resources will miss out on what are still historically high prices by the time it actually starts producing lithium.

Lake Resources’ flagship Kachi Project is slated to start producing lithium in 2024.

The trouble with lithium prices is you could probably line up five brokers on one side who will tell you prices are going to fall, and five on the other side who will tell you they’re going to remain high.

Let’s compare the pair.

Goldman Sachs has a bearish outlook for lithium prices. Here are Goldman’s forecasts compared to today’s lithium commodity spot prices:

• Lithium carbonate (per tonne)
  • Spot: US$55,167
  • 2023: US$53,300
  • 2024: US$11,000
  • 2025: US$11,000
• Lithium hydroxide (per tonne)
  • Spot: US$75,400
  • 2023: US$58,650
  • 2024: US$12,500
  • 2025: US$12,500
• Lithium spodumene (per tonne)
  • Spot: US$5,800
  • 2023: US$4,330
  • 2024: US$800
  • 2025: US$800

Now compare to the forecasts of fellow top broker Macquarie, which says lithium prices will remain “higher for longer“.

As my Fool colleague Monica reports, Macquarie analysts think restricted supply due to development delays and capex upgrades could support lithium prices at today’s comparatively high levels.

Ongoing short-seller attack

Lake Resources remains one of the most shorted ASX shares with 6.9% of its capital shorted by the pros.

Short-selling is where investors try to profit from a fall in the share price. They borrow the shares, then sell them, with the intention of buying them back later when they fall in value to make a profit.

It’s generally a strategy only available to professional traders.

US short-selling activist group J Capital is targeting Lake Resources because they don’t think Lake Resources can deliver what it says it can.

Specifically, they have doubts about the company’s technology and project funding.

The attack began in July last year. Lake Resources says J Capital “puts forth incorrect information on technical matters and inaccurate assertions … “.

J Capital released its latest investor report on Lake Resources in December.

The post Why did the Lake Resource share price sink 24% in February? appeared first on The Motley Fool Australia.

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More reading

• These ASX 200 shares were crushed in February
• Here are the top ten ASX 200 shares today
• Here are the 10 most shorted ASX shares this week
• $20k invested in these ASX shares 10 years ago is now worth over $100k
• These ASX 200 dividend shares are top of Macquarie’s income portfolio

Motley Fool contributor Bronwyn Allen has positions in Allkem and Core Lithium. 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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With the market pulling back last month, now could be an opportune time to invest in ASX shares.

If I were sitting on $10,000, I would consider investing these funds in the ASX shares listed below. Here’s why I rate them highly:

CSL Limited (ASX: CSL)

I continue to believe that CSL could be a great ASX share for investors to buy. It is one of the world’s leading biotherapeutics companies with a portfolio of life-saving, world-class therapies and vaccines. These products include treatments for immunodeficiencies, bleeding disorders, hereditary angioedema, iron deficiency, nephrology, and neurological disorders.

But management isn’t resting on its laurels. Far from it! Each year, CSL reinvests 10% to 12% of its sales into research and development (R&D) activities. This means that the company is currently investing over US$1 billion annually on the treatments of the future, which ensures that it has a pipeline of potentially lucrative products to support its growth and defend its leadership position.

Another positive is that plasma collections have rebounded strongly from the pandemic. Combined with its new collection technology, which is expected to yield stronger results and boost margins, this bodes well for its margins in the coming years. Plasma is a key ingredient in many of its biggest products, so when collection costs reduce, its profits increase.

In light of the above, I believe CSL is well-placed for growth in the coming years and feel its shares are great value at current levels. Particularly given that the CSL share price is still down over 12% from its pre-pandemic high.

Universal Store Holdings Ltd (ASX: UNI)

Another ASX share that I think could be a great option for investors this month is youth fashion retailer Universal Store.

As well as owning the eponymous Universal Store brand, it has the Perfect Stranger and Thrills brands in its portfolio.

The popularity of these brands was on display for all to see during the first half of FY 2023. Last month, Universal Store reported a 34.5% increase in sales to $145.7 million and a 31.7% jump in net profit after tax (NPAT) to $17.8 million.

I remain confident that the company is well-placed to build on this in the second half and beyond. This is thanks to store expansion plans and its target market being younger consumers, who are expected to continue spending in 2023 because of minimum wage increases and their lack of exposure to rising interest rates.

Another reason I would buy this ASX share is its attractive valuation and generous yield. I currently estimate that Universal Store’s shares are trading at 14 times forward earnings and offer a forward fully franked yield of 5%. The former is below the market average and the latter is well ahead of both term deposits and the market’s average yield.

The post I would invest $10,000 into these ASX shares in March appeared first on The Motley Fool Australia.

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• Why did the CSL share price outperform the ASX 200 in February?
• Goldman Sachs says these high yield ASX dividend shares are buys
• 6 ASX shares to pounce on from a boom reporting season: Morgans
• Brokers name 3 ASX shares to buy now
• 2 ASX retail shares surging over 6% on strong earnings announcements

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

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It might sound like an astounding statement, but it’s been proven to be true. Most ASX shares ultimately turn out to be bad investments.

It’s been found that just 4% of listed companies were behind the US stock market’s gains over the 90 years to 2016. Such research has since been replicated using Aussie stocks with similar findings.

Luckily there’s a simple trick that can help fans of ASX shares invest in future winners. And it’s backed by a top expert.

Most ASX shares found to lose money

Most ASX shares underperform US Treasury bills, according to Arizona State University finance professor Hendrik Bessembinder.

His widely cited 2018 paper, published in the Journal of Financial Economics, found the most common outcome for an investor buying a random US-listed stock is a near-100% loss.

The research has since been updated to include shares housed on the ASX, concluding with broadly the same findings.

Thus, the returns we’ve grown to know and love from markets have been provided by a few top-performing outliers.

Fortunately, Bessembinder, who is in Australia speaking at forums hosted by MFS, Baillie Gifford, and Orbis this week, has some golden advice for investors wishing to get on board market winners.

Shoot for the moon or scoop up the stars

Bessembinder’s research seemingly kicked off the ‘moonshot investing’ craze. It sent many off to buy shares in companies they believe have the potential to post dazzling returns.

Of course, that’s easier said than done. Few, if any, ASX shares have ever been obvious outperformers from the get-go.

So, is diversification the key to realising massive stock market returns?

By scooping up a diverse portfolio of stocks across various sectors, an investor is far more likely to hold a future star. Bessembinder says, courtesy of The Australian:

The textbooks lay out all the reasons why people should have a broadly diversified, low cost, portfolios.

My study backs that up. You’re just picking stocks at random and the odds are worse than 50-50 in order to outperform the benchmarks.

Thus, diversification can be both a risk management strategy and provide greater exposure to the 4% of ASX shares that are likely winners.  

The post Most ASX shares lose money. Here’s how to overcome the odds: expert appeared first on The Motley Fool Australia.

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More reading

• What would Warren Buffett do?
• Why is the Telstra share price sliding lower on Wednesday?
• Which ASX 200 company just put aside $150 million for fines and penalties?
• Why is the AMP share price sinking today?
• Broker says buy ASX 200 lithium share Allkem for 34% upside

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So, you might have heard of Warren Buffett.

He’s kind of a big deal.

Because he’s rich. And successful.

But not just that.

The now-92 year old has been investing for more than 80 years, but notably for the last 58 years as the CEO and Chair of a conglomerate called Berkshire Hathaway (I own Berkshire shares, for the record. But the cheap ones, not the US$463,000 ones!).

There is no-one who has managed to get even close to Buffett’s success over that sort of timeframe.

And just how successful?

Get this:

In the 58 years since he assumed control of the company, Berkshire’s share price has gained an average of 19.8% per year.

Which is… impressive.

The US benchmark index, the S&P 500, has gained 9.9% per year.

So Buffett has doubled that return.

Except, because of the magic of compounding, you don’t end up with just twice as much money.

Over the last 58 years, the US market’s almost-10% annual gain has resulted in a total gain of 24,708%.

That’s excellent.

And a 19.8% annual gain?

Not 48,000%.

Not 100,000%

Not even 1,000,000%

19.8%, over 58 years, turns into a total gain of 3,787,464%.

That’s… astonishing.

Which is all to say that Buffett isn’t just incredibly smart, though he is. He’s also been outrageously successful.

And that makes him both credible and worth listening to.

The good news?

He’s been very, very generous, for years, in sharing his expertise with anyone who cares to read what he’s written, or listen to what he has to say.

Which brings me to his latest annual letter to Berkshire Hathaway shareholders, which was released over the weekend.

Please do me – and yourself – a favour and read the whole thing.

But, if you don’t want to, or you just want me to highlight what I think were the most important parts, read on!

Buy businesses, not stocks

“Our goal … is to make meaningful investments in businesses with both long-lasting favorable economic characteristics and trustworthy managers. Please note particularly that we own publicly-traded stocks based on our expectations about their long-term business performance, not because we view them as vehicles for adroit purchases and sales. That point is crucial: Charlie and I are not stock-pickers; we are business-pickers.”

Take a ‘portfolio’ approach, and expect variable results…

“[O]ur extensive collection of businesses currently consists of a few enterprises that have truly extraordinary economics, many that enjoy very good economic characteristics, and a large group that are marginal. Along the way, other businesses in which I have invested have died, their products unwanted by the public.”

… and keep a long-term perspective

“Our satisfactory results have been the product of about a dozen truly good decisions – that would be about one every five years”

And:

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

The value of buybacks

“The math isn’t complicated: When the share count goes down, your interest in our many businesses goes up. Every small bit helps if repurchases are made at value-accretive prices. Just as surely, when a company overpays for repurchases, the continuing shareholders lose. At such times, gains flow only to the selling shareholders and to the friendly, but expensive, investment banker who recommended the foolish purchases.”

Don’t believe the anti-buyback crowd

“When you are told that all repurchases are harmful to shareholders or to the country, or particularly beneficial to CEOs, you are listening to either an economic illiterate or a silver-tongued demagogue (characters that are not mutually exclusive).”

The disgrace of ‘managing earnings’ to ‘beat expectations’

“Finally, an important warning: Even the operating earnings figure that we favor can easily be manipulated by managers who wish to do so. Such tampering is often thought of as sophisticated by CEOs, directors and their advisors. Reporters and analysts embrace its existence as well. Beating “expectations” is heralded as a managerial triumph.”

“That activity is disgusting. It requires no talent to manipulate numbers: Only a deep desire to deceive is required. “Bold imaginative accounting,” as a CEO once described his deception to me, has become one of the shames of capitalism.”

Paying more in tax means you made more money… and is a moral responsibility

“At Berkshire we hope and expect to pay much more in taxes during the next decade. We owe the country no less”

And a bonus quote from his business partner, and Berkshire vice-Chairman, the 99-year old Charlie Munger:

“There is no such thing as a 100% sure thing when investing. Thus, the use of leverage is dangerous. A string of wonderful numbers times zero will always equal zero. Don’t count on getting rich twice.”

That’s just a hand-picked list of highlights. Please read the letter yourself – you’ll be smarter and a better investor for doing so.

And that, I guess, is the key point here.

Life is too short to learn all of life’s lessons for yourself – you’re much better served learning from the successes and mistakes of others.

And that goes doubly when the ‘others’ you choose to follow have the intellect, common sense, investing track record and, yes, moral compass, of Warren Buffett and Charlie Munger.

Just think about it for a second: you can try to make your own way in the investing world, coming up with your own brand new way of making a motza.

Hell, you might even find one.

But the odds are long.

Or, we can put our egos away for a second, and hitch a (free!) ride on the wisdom and experience of two of the all-time greats.

It’s true that my investing style isn’t a carbon copy of Buffett’s. It doesn’t need to be.

But I would wager a decent amount of money that almost every person’s investing returns could be meaningfully improved by, when faced with a conundrum, asking a very simple question:

“What would Warren do?”

Fool on!

The post What would Warren Buffett do? appeared first on The Motley Fool Australia.

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More reading

• Why is the Telstra share price sliding lower on Wednesday?
• Which ASX 200 company just put aside $150 million for fines and penalties?
• Why is the AMP share price sinking today?
• Broker says buy ASX 200 lithium share Allkem for 34% upside
• Why it’s ok to make bad investment decisions: Warren Buffett

Motley Fool contributor Scott Phillips 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 S&P/ASX 200 Index (ASX: XJO) has opened sharply lower so far this Wednesday. At the time of writing, the ASX 200 seems to have gotten out of the wrong side of the bed, with the flagship ASX index down a rather depressing 0.53% to just above 7,220 points. But let’s talk about the Telstra Group Ltd (ASX: TLS) share price.

Telstra shares are seemingly faring even worse than the broader market. This ASX 200 blue-chip share closed at $4.16 a share yesterday.

But this morning, Telstra shares opened at just $4.05 each, and are currently going for $4.055. That’s a nasty 2.52% drop from yesterday’s closing price.

So what’s going on with Telstra shares this Wednesday that would elicit such a dramatic underperformance of the broader market today?

Why is the Telstra share price getting smashed by the ASX 200 today?

Well, investors shouldn’t get themselves into too much of a twist over this drop. That’s because Telstra shares are falling today for what might just be the best possible reason to have your shares drop in value. Telstra has just traded ex-dividend for its latest shareholder payment.

Yes, the Telstra share price has just gone ex-dividend. Last month, the company reported its latest earnings, covering the six months to 31 December 2022.

As we covered at the time, this saw the telco announce an 11.4% rise in earnings before interest, tax, depreciation and amortisation (EBITDA) to $3.9 billion, as well as a healthy 25.7% increase in net profit after tax (NPAT) up to $900 million.

That enabled Telstra’s earnings per share (EPS) to surge 27.1% to 7.5 cents per share, which in turn allowed the telco to announce an increase to its next interim dividend.

Investors will receive Telstra’s upcoming interim dividend of 8.5 cents per share, fully franked, on 31 March later this month. That’s up from the company’s last interim dividend of 8 cents per share.

This is the second earnings report in a row that Telstra has raised its dividend after the telco hiked its final dividend last year by the same amount. It’s also the first time in seven years that investors have enjoyed two consecutive dividend increases from Telstra. So 31 March will be a happy day indeed.

But only for investors who already hold Telstra shares. The company has traded ex-dividend today, which means that anyone who buys Telstra shares from today onwards will miss out on this latest dividend.

Why is there a drop before a dividend is paid?

As we warned yesterday, when a company trades ex-dividend, it cuts off any new investors from receiving said dividend payment. So investors who bought Telstra yesterday are entitled to this next dividend. Those who buy today are not.

This is why we are seeing a big drop in the value of Telstra shares right now. It reflects the reality that Telstra is now nominally less valuable to investors since they are now ineligible to receive the company’s next payment.

This is a very normal situation when a company goes ‘ex-div’, particularly for a dividend heavyweight like Telstra.

At $4.055 a share, the Telstra share price is currently up by 2.65% year to date: 

At this share price, the ASX 200 telco now has a dividend yield of 4.19%

The post Why is the Telstra share price sliding lower on Wednesday? appeared first on The Motley Fool Australia.

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• These ASX 200 shares were crushed in February
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• Top ASX shares to buy in March 2023
• Here are the top ten ASX 200 shares today

Motley Fool contributor Sebastian Bowen has positions in Telstra Group. 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 Telstra 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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To say casino operator Star Entertainment Group Ltd (ASX: SGR) is having a difficult time of late is an understatement.

Multiple government enquiries in the past year have accused the company of allowing money laundering at its venues. Those reviews raised doubts about Star Entertainment’s fitness to hold casino licences in New South Wales and Queensland.

The share price has rightly more than halved over the past 12 months and a new chief executive has been installed.

As if that wasn’t enough, this week the corporate regulator revealed it has been in Star’s ear about its concerns.

Massive provision, massive loss

The Australian Securities and Investments Commission on Wednesday morning took credit for Star’s revelation in its financial reporting that it had set aside $150 million for potential fines and penalties.

“Following a review of The Star’s financial report for the year ended 30 June 2022, ASIC raised concerns that no provision had been recorded for likely fines and penalties — despite some uncertainties as to their amount — for non-compliance by The Star with Anti-Money Laundering and Counter-Terrorism Financing laws,” stated the watchdog.

So that’s $150 million that Star Entertainment now cannot touch, to ensure it has funds to cop whatever punishment arises out of the ongoing AUSTRAC investigation.

Star Entertainment reported a whopping $1.26 billion loss for the half-year ending 31 December.

According to ASIC, it warned the company as a part of its “financial reporting surveillance program”. 

“ASIC’s financial reporting surveillance program aims to improve the quality of financial reporting and to ensure financial reports have been prepared in accordance with the law, supporting investor confidence and the integrity of Australia’s capital markets.”

There’s a lot going on with Star shares

To add to its woes, a Hong Kong company with alleged associations to criminal gangs was revealed to have participated as an investor in the Star’s $1 billion capital raising last week.

The Australian Financial Review aired the claim last weekend, calling it “a mark of desperation” or “shortsightedness”.

The same publication revealed Tuesday night that Ord Minnett’s part-owner Bruce Mathieson has been rapidly buying up the discounted shares in recent times.

“Mathieson’s understood to have climbed to nearly 10% of Star’s shares on issue, which is the most any investor can buy without clearance from casino regulators,” reported the AFR.

“Ords did 70% of the Star volume on Tuesday – or nearly 10 times any other broker – and more than 50% on Monday.”

The post Which ASX 200 company just put aside $150 million for fines and penalties? appeared first on The Motley Fool Australia.

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• Star Entertainment shares return to trade after raising $595 million. What’s next?
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• Why is the Star Entertainment share price on ice today?
• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Wednesday

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

from The Motley Fool Australia https://www.fool.com.au/2023/03/01/which-asx-200-company-just-put-aside-150-million-for-fines-and-penalties/

The AMP Ltd (ASX: AMP) share price is down 0.8% at the time of writing, having opened down 2.5%.

The diversified ASX financial share closed yesterday trading for $1.035. Shares are currently changing hands for $1.027 after dipping to $1.01 in earlier trade, down 2.5 cents.

So, why is the AMP share price in the red today?

AMP dividend returns from hiatus

In announcing its full-year financial results on 16 February, the AMP board declared a dividend payout for the first time since 2020.

Despite statutory net profit after tax (NPAT) coming in at $387 million – after posting a $252 million loss the prior year – the AMP share price closed the day down 13% on the results.

That fall was likely spurred by a 13% decline in the company’s assets under management over the year (AUM), which dropped to $124.2 billion.

But income investors were rewarded with a dividend of 2.5 cents per share, 20% franked.

Which brings us back to why the AMP share price is sinking.

The stock trades ex-dividend today. Meaning investors buying shares this morning will no longer be entitled to the 2.5 cents per share payout.

It’s common for stocks to fall by a fairly similar amount to their dividend on the day they trade without that payment.

Investors who did hold shares at yesterday’s close can expect payment on 3 April.

AMP also offers a dividend reinvestment (DRP) plan for interested investors. That’s open to any shareholders who are residents of Australia or New Zealand and have a registered address there.

The AMP dividend will be paid in Aussie dollars regardless of where you live.

AMP share price snapshot

As you can see in the chart below, the AMP share price is down 20% in 2023 but remains up 6% over the past 12 months.

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

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• These ASX 200 shares were crushed in February
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• 7 ASX 200 shares with ex-dividend dates next week
• Here are the 3 most heavily traded ASX 200 shares on Thursday
• Are AMP shares finally cheap enough to buy following Thursday’s 13% crash?

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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The Allkem Ltd (ASX: AKE) share price is edging higher on Wednesday.

In morning trade, the ASX 200 lithium miner’s shares are up 1% to $11.47.

This may have been driven by bargain hunters swooping in after Allkem’s shares sank almost 13% in February.

One broker that is likely to approve of investors buying the company’s shares today is Goldman Sachs. It has just released a note that tips the ASX 200 lithium giant’s shares to rise materially from current levels.

Allkem share price tipped to rocket

According to the note, the broker has responded to the company’s half-year results release by reiterating its buy rating with a $15.40 price target.

Based on the latest Allkem share price, this implies potential upside of 34% for investors over the next 12 months.

What did the broker say?

Goldman was pleased with the company’s performance in the first half. It commented:

AKE reported underlying EBITDA/NPAT of US$433mn/US$210mn (excl. eliminations/ incl. NCIs) was +3%/-1% vs. our US$421mn/US$213mn estimates and +3%/-10% vs. Visible Alpha Consensus Data of US$422mn/US$234mn, with operating assets in line with expectations.

The broker also highlights that Allkem is expecting lithium prices to remain strong for the current quarter despite recent weakness in spot prices. It adds:

AKE reiterated their 3Q pricing guidance of ~US$53,000/t for third party Olaroz sales and 5% increase in realised spodumene pricing. On recent pricing movements, AKE pointed to regional indices convergence, geographic exposure, and pricing lags as potentially shielding them this half from recent Chinese chemicals price declines, highlighting their portfolio is mostly contracted sales (~80%/20% contracted/spot) with volumes mostly to China and Japan/Korea, with some spot volumes to Europe and North America.

Why buy Allkem shares if lithium prices will decline?

While Goldman’s analysts “continue to expect lithium prices to decline from 2H23” they still believe Allkem shares represent a great option for investors in the industry.

This is because of the company’s production growth potential and downstream opportunity, which it expects to support Allkem’s earnings when prices decline. It explained:

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. This drives our forecast for the company’s equity LCE production growth of >4x by FY27E, supporting earnings rebounding to near current record levels despite the declining lithium price environment.

The post Broker says buy ASX 200 lithium share Allkem for 34% 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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If you haven’t already, there is a good chance you’ll make a bad investment at some point. Even the most well-considered stakes can come undone due to unforeseen circumstances. Rather than see this as a sign of a poor investor, the legendary purveyor of value investing — Warren Buffett — considers this to be part and parcel of the process.

The impartment of profound, yet simple, investing insights aligns with the publishing of an annual letter to shareholders from the Berkshire Hathaway Inc (NYSE: BRK.A) (NYSE: BRK.B) chair.

In true Buffett fashion, the Oracle from Omaha instilled more pertinent lessons in as little as nine pages than what can be found in entire books. Not the least of which is the ability of long-term investors to achieve incredible success in spite of several bad investment decisions.

Time can balance a portfolio

Maybe it’s preventing you from getting started, getting back on the horse, or making your next move. The potential for a money-losing investment can be paralysing. But the truth is, even the best investors are left with egg on their faces from time to time.

In his 2022 annual shareholder letter, Buffett quipped he’s no stranger to an investment gone haywire over his 58 years at the helm of Berkshire. In fact, despite being worth more than $100 billion, Buffett describes his capital-allocation decisions during his time as “no better than so-so”.

Indeed, the vehement success of Berkshire Hathaway has little to do with achieving a high ‘hit rate’ of good investments, according to Warren Buffett. Instead, the vast wealth creation has been a product of a handful of ‘truly good decisions’ — averaging out to roughly one every five years.

The other secret ingredient is: wait for it… time.

What Buffett explained in his letter is that time can be forgiving. This is because of the self-balancing that takes place in a portfolio over a long period of time. The exceptional companies grow to become a large portion, while the ‘mistakes’ dwindle into irrelevance.

This was well summarised with the 92-year-old’s lesson for investors, “The weeds wither away in significance as the flowers bloom.”

What Warren Buffett doesn’t advise

Now, it’s clear that bad investments are to be expected — and the market has a built-in mechanism for correcting those errors over time. However, that doesn’t mean in investing you’re bound to make money regardless of the decisions made.

The mistake that can not be fixed is a lesson that is never learned.

Even 100 years of compounding in a fantastic investment won’t overpower the bad decisions if they are repeated. Think of it like repeatedly watering the weeds… they will eventually overshadow the most brilliant of flowers when praised for their invasiveness.

An important tenet of investing is to always be learning and not repeat mistakes of the past. Be quick to cut the nourishment flowing to the weeds, to borrow Warren Buffett’s metaphor.

The post Why it’s ok to make bad investment decisions: Warren Buffett appeared first on The Motley Fool Australia.

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More reading

• Broker says buy ASX 200 lithium share Allkem for 34% upside
• Why did the Coles share price smash the ASX 200 in February?
• Westpac predicts 7 interest rate cuts from 2024, but…
• Why did the Vanguard Australian Shares Index ETF (VAS) get hammered in February?
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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Berkshire Hathaway. The Motley Fool Australia has recommended Berkshire Hathaway. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Well, the shortest month of the year has just wrapped up, and the changing of the guard, so to speak, gives us investors a good chance to reflect upon the month that was. So today, let’s examine the Coles Group Ltd (ASX: COL) share price. 

February ended up being a fairly rough month for ASX 200 shares and the S&P/ASX 200 Index (ASX: XJO). Between the end of January and yesterday’s market close, the ASX 200 lost 2.9% of its value, falling from 7,476.7 points down to 7,258.4 points. 

But let’s talk about the Coles share price. So it was an entirely different story when it came to Coles shares over February. The ASX 200 supermarket blue chip started last month at $17.76 a share.

But by the end of yesterday’s trading session, Coles was going for $18.18 a share. That means that the Coles share price rose by 2.36% over February. That’s more than a 5% beat of the broader market.

So what went so right for Coles shares last month?

Up, up: Why did the Coles share price dunk the ASX 200 in February?

Well, investors can thank the well-received earnings report that Coles delivered back on 21 February for one.

As we covered at the time, these earnings, covering the six months to 31 December 2022, contained almost no bad news for investors.

Total sales revenue from continuing operations was up 3.9% to $20.8 billion. Net profit after tax (NPAT) rose by 17.1% to $643 million, while basic earnings per share (EPS) lifted by a healthy 17.2% to 48.3 cents per share.

All of this allowed Coles to jack up its interim dividend again to 36 cents per share, fully franked. That’s a 9.1% rise over 2022’s interim dividend. Coles has continued its pattern of increasing both its interim dividend and final dividend in every earnings report since it first floated in 2018.

So it seems that these earnings contributed to the company’s impressive share price performance over February.

But Coles shares have been firing on all cylinders for most of the year. As of yesterday’s close, the company is up a pleasing 10.45% in 2022 thus far:

But it’s also possible investors just see Coles as a strong, sturdy investment in these times of high inflation, rising interest rates and an uncertain economic future.

Coles is viewed by many investors as a very defensive place to park cash. Its business of providing food, drinks, household goods and other life essentials is highly inelastic and it is well placed to weather most economic conditions, as the pandemic proved in 2020 and 2021.

Thus, we can’t discount this kind of goodwill from investors either.

So no doubt Coles investors would be chuffed with the month their company has just enjoyed. Let’s now see how the Coles share price fares in March.

The post Why did the Coles share price smash the ASX 200 in February? appeared first on The Motley Fool Australia.

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More reading

• Hoping to pocket the biggest-ever Coles dividend? Here’s what you need to do
• Top brokers name 3 ASX shares to buy next week
• 7 ASX 200 shares with ex-dividend dates next week
• Is Wesfarmers looking to sell off its remaining Coles shares?
• Own Woolworths shares? Supermarket giant moves to team up with Coles on recycling blitz

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Coles 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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