The National Australia Bank Ltd (ASX: NAB) share price will be in focus on Thursday.

This follows the release of the banking giant’s unaudited first quarter trading update this morning.

NAB share price on watch

• Cash earnings up 18.7% to $2.15 billion
• Statutory net profit of $2.05 billion
• CET1 ratio of 11.3%
• Net interest margin (NIM) up 12 basis points to 1.79%

What happened during the quarter?

For the three months ended 31 December, NAB reported a 15% increase in revenue thanks to higher margins, stronger Markets & Treasury income, and volume growth. Excluding Markets & Treasury, NAB’s revenue rose 12%.

The bank’s NIM rose 12 basis points to 1.79%. Excluding Markets & Treasury and the impact of liquids, NIM rose 15 bps to 1.82%. This reflects the benefits of the rising interest rate environment partly offset by home lending competition.

NAB advised that its expenses rose significantly slower than its revenue at 4%, or 3% excluding the Citi consumer business. This was driven by higher staff-related costs, partly offset by productivity and lower remediation charges.

Finally, the bank’s asset quality remains very strong. While NAB reported a $158 million credit impairment charge due partly to lower house prices, its 90+ days past due and gross impaired assets to gross loans and acceptances ratio fell 4 basis points to 0.62%. The latter reflects continued improvement across the Australian home loan portfolio, along with a continued low level of impaired assets in the business lending portfolio.

Management commentary

NAB’s CEO, Ross McEwan, was pleased with the bank’s start to FY 2023. He said:

We have started FY23 with a strong financial performance and our strategy is continuing to drive targeted growth across our business. Lending and deposits both increased by 1% over the December quarter including above system growth in Australian SME business lending.

1Q23 cash earnings rose 18% compared with the 2H22 quarterly average. The higher interest rate environment, resulting from central bank actions to curb inflation, has benefitted our revenue this period. But this is also causing economic growth and house prices to soften, and loan repayments to increase.

Outlook

McEwan believes the bank is well-placed for the remainder of FY 2023. He added:

Our business is in good shape for this environment. Capital and provisioning remain strong and we are well advanced on our FY23 term wholesale funding task with $20 billion issued by 10 February. We are investing to deliver simpler, more digital experiences for customers and colleagues and continue to target productivity benefits of approximately $400 million in FY23.

Executing our strategy remains our key priority. We are focused on getting the basics right, maintaining cost discipline, managing our bank safely and improving customer and colleague outcomes to deliver sustainable growth and improved shareholder returns.

The post NAB share price in focus following Q1 $2.15b cash profit appeared first on The Motley Fool Australia.

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More reading

• Earnings preview: Here are the ASX shares reporting on Thursday
• 5 things to watch on the ASX 200 on Thursday
• Buy NAB and this ASX 200 dividend share for passive income: brokers
• If you invested $5,000 in NAB shares 5 years ago, here’s how much dividend income you’d have pocketed
• Buy NAB and this ASX 200 blue chip share: brokers

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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China, as the second largest economy in the world, has a huge influence on the fortunes of many ASX shares.

On top of this, the country has also been very topical among investors to start 2023 as it has recently made many significant policy changes.

Towards the end of last year, the ruling Chinese Communist Party backed down from its strict zero-COVID stance. While spurring a surge in coronavirus cases in the short term, the move is expected to be economically beneficial in the longer run.

The analysts at Firetrail, in a memo to clients, also noted other announcements following that reopening.

“President Xi wants the population ‘to consume based on a stable income, dare to consume without worries, and have a good consumption environment with a strong sense of gain and strong willingness to consume’, which could benefit Australian companies selling [products] into China.”

50% fewer Chinese students in Australia now than pre-pandemic

The thawing of diplomatic relations between Australia and China will also potentially restore exports of items like lobsters and wine. 

But one export channel that has already opened up is education, thanks to a massive ruling out of Beijing.

“China will no longer recognise academic degrees and diplomas achieved through online study, which could increase the flow of students to Australian universities,” read the Firetrail memo.

According to Shaw and Partners portfolio manager James Gerrish, there is one particular stock that could see a windfall from this development.

“We like IDP Education Ltd (ASX: IEL), this global student placement business, moving into 2023 as the world moves on from COVID and Chinese students return to Australian classes,” he said in a Market Matters Q&A.

The IDP share price has already risen around 17% since 20 December.

But Gerrish believes there is still plenty of upside to be fulfilled.

“There are 50% fewer Chinese students in Australia than in 2019, illustrating the huge room for improvement.”

The stock closed Wednesday at $31.07. Gerrish favours buying at this price.

“We like the risk-reward on IDP Education below $32 targeting a move back towards $40, or 25% higher.”

The post Double the customers in 2023? The ASX share one expert would pounce on now appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Buy these 2 ASX 200 shares growing earnings as we speak: expert
• 3 ASX shares to cash in on China’s reopening to the world: Jun Bei Liu

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 positions in and has recommended IDP Education. The Motley Fool Australia has recommended IDP Education. 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 Telstra Group Ltd (ASX: TLS) share price will be one to watch this morning.

That’s because the telco giant has just released its half year results.

Telstra share price on watch

• Total income up 6.4% to $11.6 billion
• Earnings before interest, tax, depreciation and amortisation (EBITDA) up 11.4% to $3.9 billion
• Net profit after tax up 25.7% to $0.9 billion
• Earnings per share up 27.1% to 7.5 cents per share
• Free cash flow after lease payments (FCFaL) of $1 billion
• Fully franked interim dividend up 6.3% to 8.5 cents per share

What happened during the half?

For the six months ended 31 December, Telstra reported a 6.4% increase in total income to $11.6 billion. This was driven by momentum from its mobiles business and support from the acquisition of Digicel Pacific.

The star of the show was Telstra’s mobile business, which reported continued growth in revenue, average revenue per users (ARPU), services in operation (SIO), and earnings. Mobile services revenue was up 9.3%, assisted by the return of international roaming. Postpaid handheld ARPU was up 4.5% and SIOs up a net 68,000. Prepaid handheld revenue was up 28.7% with unique users up 137,000.

This was supported by growth in the Fixed Consumer and Small Businesses, InfraCo Fixed, and International businesses, and partially offset by weakness in the Fixed Enterprise business due to impacts from ongoing disruption from technology change and competition.

And although inflation is having an impact on Telstra’s operations, it has been using cost mitigants and revenue levers to offset this.

On the bottom line, Telstra reported a 25.7% increase in net profit after tax to $0.9 billion. This allowed the company’s board to increase its dividend by 6.3% to 8.5 cents per share. This will be paid to shareholders on 31 March.

Management commentary

Telstra’s new CEO, Vicki Brady, was pleased with the half. She said:

We are a growing business with a lot to be excited about in our future, and our T25 strategy provides a clear roadmap to get us there. On the back of our continued growth, the Board resolved to pay a fully franked interim dividend of 8.5 cents per share representing a 6.3 percent increase on the prior corresponding period, and in line with the second half of last financial year. The interim dividend is consistent with our policy to maximise the fully franked dividend and seek to grow it over time.

Outlook

Telstra has reaffirmed its guidance for FY 2023 across all measures.

However, it now expects its income to be at the bottom end of guidance due to mobile hardware and fixed product revenues being lower than expected.

Telstra’s guidance is for:

• Total income of $23 billion to $25 billion
• Underlying EBITDA of $7.8 billion to $8 billion
• Capex $3.5 billion to $3.7 billion
• FCFaL of $2.6 billion to $3.1 billion

Looking further ahead, management has reiterated its commitment to its $500 million FY 2025 cost out ambition.

The post Telstra share price on watch amid strong half-year profit growth appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Thursday
• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• If I invest $2,000 in Telstra shares now, what could my return be in 2023?
• Here are the 3 most heavily traded ASX 200 shares on Monday
• Macquarie has these ASX 200 dividend shares in its income portfolio

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended 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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The fund manager Wilson Asset Management (WAM) has recently identified some S&P/ASX 200 Index (ASX: XJO) shares that it owns (or owned) in one of its main portfolios.

WAM operates several listed investment companies (LICs), including WAM Capital Limited (ASX: WAM) and WAM Research Limited (ASX: WAX).

There’s also one called WAM Leaders Ltd (ASX: WLE) that looks at the larger businesses on the ASX, often referred to as ASX blue-chip shares.

WAM says WAM Leaders actively invests in the highest quality Australian companies. But does WAM have a good reputation for picking stocks?

The WAM Leaders portfolio has delivered gross returns (before fees, expenses, and taxes) of 15.2% per annum since its inception in May 2016. This compares to the S&P/ASX 200 Accumulation Index average return of 9.2% over the same period.

The fund manager commented that infrastructure is a key theme in the WAM Leaders’ investment portfolio given the “high-quality names” with defensive, inflation-linked cash flows sheltered from the full severity of the economic downturn.

It also said that infrastructure names are yield sensitive and will benefit from central banks pausing rate hikes. The fund manager said, “This is the economic environment we believe we are facing over the coming years.”

WAM outlined these ASX 200 shares in its recent monthly update.

Transurban Group (ASX: TCL) and Atlas Arteria Group (ASX: ALX)

Both of these businesses are toll road companies, which are involved with developing, operating, and maintaining toll road networks.

Transurban is mostly Australian-based, with roads such as CityLink in Melbourne and WestConnex in Sydney.

Meanwhile, Atlas Arteria operates in France, Germany, and the US. The most recent Atlas investment is the Chicago Skyway, a 12.5km transport link in the US’s third largest metropolitan area, with a concession life of more than 80 years.

WAM said that the investment team believes both ASX 200 shares will offer “strong earnings growth over the coming years as well as significant dividend yields“.

APA Group (ASX: APA)

The fund manager described APA as an energy infrastructure business playing a “key role” in Australia’s energy transition. This includes a range of opportunities from “expanding the East Coast Grid to bring gas to southern markets ahead of forecast shortfalls as well as building new renewable energy solutions”.

The investment team at WAM Leaders explained:

We remain positive on this business with 85% of its revenue guaranteed through its take-or-pay revenue agreement, positive inflation exposure and 100% interest cost hedging over the next six years.

The post 3 ASX 200 shares that could drive strong returns in an inflationary world: expert appeared first on The Motley Fool Australia.

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• 2 excellent ASX shares to buy for a retirement portfolio: experts
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• 2 ASX shares with a dividend boost coming
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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 positions in and has recommended APA 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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Most ASX technology shares have admittedly suffered in recent times, but it’s been next-level painful to own Appen Ltd (ASX: APX).

Not even long-term buy-and-hold investors have avoided the anguish. Over the past five years, the share price for the artificial intelligence service provider has crashed almost 70%.

The COVID-19 pandemic, loss of clientele, and financial downgrades have not helped the cause.

However, there’s been a ray of hope the last eight weeks, as the stock has rallied 16.2% since 20 December.

Last week alone Appen shares climbed 29% at one stage, before settling back down on Monday.

So what’s going on?

No news is good news

Shaw and Partners portfolio manager James Gerrish, on a Market Matters Q&A, had a theory as to why investors are piling onto Appen.

“There is no specific news but the unveiling of ChatGPT has put AI back in the spotlight with Appen providing the data which underpins the [industry’s] evolution.”

ChatGPT is the generative artificial intelligence chatbot that’s been grabbing headlines. The startup behind the technology is heavily backed by Microsoft Corp (NASDAQ: MSFT).

The AI engine outputs results of sufficient quality that schools and universities have sought to ban it for fear of plagiarism.

According to Reuters, ChatGPT reached 100 million monthly active users in January, which was only two months after its public release.

The rapid popularity is unprecedented. TikTok took nine months to reach 100 million users, while Instagram had to wait 2.5 years.

Appen provides human training for artificial intelligence engines, so the hype around the industry could be having a halo effect on its share price.

A secondary impact, according to Gerrish, is that the short sellers have been forced to sell to cover their positions.

“I can certainly imagine that nobody wants to short anymore after the stock’s dramatic fall from grace.”

Despite the newfound popularity among investors, the professionals are far from convinced about Appen.

According to CMC Markets, two of the five analysts covering the stock rate it as a strong sell. The remaining three only consider it a hold.

The post This ASX tech share’s rallied 16% in 2 months. Here’s why appeared first on The Motley Fool Australia.

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More reading

• Dash for trash fades as earnings cliff looms for ASX shares, with the market shooting first and asking questions later
• Appen shares dive again. Are they cheap enough to buy?
• Why Appen, Lendlease, Nuix, and Star shares are sinking today
• Could 2023 be the year these ASX AI stocks come roaring back?
• Why is the Appen share price diving 10% on Monday?

Motley Fool contributor Tony Yoo has positions in Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Appen and Microsoft. 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 will be another busy day of the February ASX earnings season today. Many ASX shares from various sectors are ready to bare all in their latest half-yearly reports.

Will their shareholders be impressed or distressed?

Here’s a summary of which companies are releasing results to get you prepared for the day ahead.

ASX shares lined up to report today

Ranked in order of market capitalisation (largest to smallest)

National Australia Bank Ltd (ASX: NAB), $95.2 billion

Telstra Ltd (ASX: TLS), $47.8 billion

Goodman Group (ASX: GMG), $37.3 billion

Newcrest Mining Ltd (ASX: NCM), $21.7 billion

South32 Ltd (ASX: S32), $21.1 billion

Sonic Healthcare Limited (ASX: SHL), $14.0 billion

ASX Ltd (ASX: ASX), $13.6 billion

Origin Energy Ltd (ASX: ORG), $12.3 billion

Whitehaven Coal Ltd (ASX: WHC), $7.3 billion

Incitec Pivot Ltd (ASX: IPL), $6.8 billion

Evolution Mining Ltd (ASX: EVN), $5.6 billion

AMP Ltd (ASX: AMP), $4.0 billion

Super Retail Group Ltd (ASX: SUL), $2.7 billion

Abacus Property Group (ASX: ABP), $2.6 billion

Charter Hall Retail REIT (ASX: CQR), $2.4 billion

Bapcor Ltd (ASX: BAP), $2.1 billion

Domain Holdings Australia Ltd (ASX: DHG), $1.9 billion

Magellan Financial Group Ltd (ASX: MFG), $1.7 billion

Hotel Property Investments Ltd (ASX: HPI), $699.5 million

Beacon Lighting Group Ltd (ASX: BLX), $453.3 million

Southern Cross Media Group Ltd (ASX: SXL), $270.0 million

To view the complete agenda for the reporting season, check out our calendar here.

What can we expect to see?

There’s a good chance NAB’s half-year results will draw a crowd today following the severe reaction to the earnings of the Commonwealth Bank of Australia (ASX: CBA) yesterday. The NAB share price fell 4.1% in tandem with the other major banks, but will it deliver a pleasant surprise today?

Investors will be looking for strength in the bank’s net interest margin and a positive outlook on the containment of bad debts. Additionally, a decent bump up in dividends wouldn’t go astray after CBA increased its interim payment by 20%.

Another ASX share that will be under interrogation today is Australian fund manager Magellan Financial Group. The company’s share price has been slaughtered since February 2020, falling 85% as funds flew out the door.

Today, onlookers will be hoping for some further affirmation that things are beginning to turn around. In January, funds under management improved — but that was due to the value of the assets rising, rather than additional inflows.

According to Bloomberg estimates, Magellan could report $105.7 million in net profit after tax (NPAT) today. If this were to be the case, it would represent a 58% decrease from the prior corresponding period.

The post Earnings preview: Here are the ASX shares reporting on Thursday appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Thursday
• Here are the top 10 ASX 200 shares today
• Will ASX 200 shares crash in 2023?
• ASX 200 in freefall as CBA’s prediction of a soft landing might have just been torpedoed by huge interest rate call
• Why CBA, Corporate Travel Management, Treasury Wine, and Westpac shares are dropping

Motley Fool contributor Mitchell Lawler has positions in Commonwealth Bank Of Australia and Sonic Healthcare. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Super Retail Group. The Motley Fool Australia has positions in and has recommended Hotel Property Investments, Super Retail Group, and Telstra Group. The Motley Fool Australia has recommended Bapcor, Goodman Group, and Sonic Healthcare. 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 Fortescue Metals Group Limited (ASX: FMG) share price dropped 0.8% yesterday after reporting its FY23 half-year result.

With such a muted response, it seems the result wasn’t much of a surprise. We had already seen some of the numbers with the miner’s quarterly update for the three months to 31 December 2022.

Earnings recap

Let’s remind ourselves about the half-year highlights.

There was a slight reduction in revenue; it dropped 4% to US$7.8 billion. Underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) dropped 9% to US$4.35 billion, with an EBITDA margin of 56% (down from 59%).

Net profit after tax (NPAT) fell by 15% to US$2.37 billion, which led to the interim dividend being cut by 13%, though the dividend payout ratio was also reduced to 65% (down from 70%).

Fortescue’s total debt was almost unchanged, but the net debt increased by $1.2 billion after a decrease in the cash balance.

The ASX 200 miner also noted a number of areas of progress for Fortescue Future Industries (FFI), including advancing the Holmaneset project in Norway, which could unlock a 300MW green hydrogen and green ammonia facility and support infrastructure.

What to make of this result?

Yesterday, The Australian reported on comments by Moody’s Investors Service analyst David Xu, who said:

Although lower than the prior year, earnings were still solid, underpinned by good operational performance and elevated realized iron ore prices.

Similar to industry peers, Fortescue’s operating costs have risen on inflationary pressures. However, Fortescue’s cost position remains low for the sector, providing a good buffer against further downside risk to iron ore prices.

Although net debt increased, Fortescue’s balance sheet remains solid with good liquidity and low financial leverage, providing the company with capacity to fund its upcoming capital expenditure.

While not exactly a ringing endorsement, it seems like the result was solid enough for the Fortescue share price to hang onto its gains from the last few months.

Is the Fortescue share price a buy?

The business has benefited from the higher iron ore price thanks to optimism about China’s reopening after COVID-19 lockdowns.

Time will tell whether the iron ore price can help drive Fortescue shares higher, or lower.

But, with the things that the business can control, it’s doing well. In the FY23 first half, the amount of iron ore shipped increased by 4% to 96.9 mt.

I’m particularly excited by the company’s potential with its green energy and green products.

The company noted that Fortescue Future Industries (FFI) achieved a “significant breakthrough” in the pursuit of green iron ore by successfully processing 150kg of iron ore to make metallic iron that could pave the way for the production of green iron at scale.

It has also entered an agreement with Baker Hughes to jointly explore opportunities for the scale-up and adoption of technology solutions for green hydrogen, green ammonia, and geothermal products. The company has also made an investment in Fabrum, a company that’s developing “world-leading” applications for hard-to-abate sectors like mining, heavy transport, and aviation.

While I wouldn’t say that Fortescue is fantastic value, nor do I think the Fortescue share price would be the best choice today, I still think the future is positive for the company.

The post Should I buy Fortescue shares following the ASX 200 miner’s latest results? appeared first on The Motley Fool Australia.

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More reading

• Here’s what you need to know about the latest Fortescue dividend
• Fortescue share price sinks amid 13% dividend cut
• Earnings preview: Here are the ASX shares reporting on Wednesday
• Here’s the iron ore price forecast for 2023: CBA
• Better buy: Fortescue vs BHP shares

Motley Fool contributor Tristan Harrison has positions in Fortescue Metals 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 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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Russia’s invasion of Ukraine last year brought home the stark reality of how brittle energy security is.

With Europe scrambling to replace their gas and petroleum import channel from Russia, energy prices went through the roof.

This accelerated the development of renewable energy projects around the globe. But those efforts take years before meaningful contributions are brought to the energy pool.

Therefore, after years of being out of favour, old sources like nuclear and coal were forced to be deployed to make up for the shortfall.

And this trend doesn’t look like it will end anytime soon.

“We think the outlook for energy stocks is attractive because there’s just not a lot of supply coming in,” Schroders portfolio manager Ray David told The Motley Fool last month.

“No one really wants to invest in fossil fuels or LNG or gas without the high prices to justify the returns, because everyone’s quite worried about renewables and the ESG factors.”

This means that existing producers can cash in big time.

If you’re interested in investing in this area, Glenmore Asset Management portfolio manager Robert Gregory named three ASX shares that he’s backing:

3 stocks to buy in a buoyant energy sector

The Stanmore Resources Ltd (ASX: SMR) share price lifted a whopping 15.9% last month.

But for Gregory, the stock still presents value.

“There was no news released. However, the company was likely assisted by a ~12% increase in the hard coking coal price,” he said in a memo to clients.

“The stock continues to look attractive based on its free cash flow generation, cheap valuation metrics and low cost of production.”

Stanmore shares have rocketed up 250% over the past 12 months.

Bowen Coking Coal Ltd (ASX: BCB) saw opposite fortunes in January, with the stock dropping 12.1%.

“Wet weather in Queensland, where Bowen Coking’s mines are located, caused some production issues and also at the Dalrymple Bay Coal Terminal (DBCT) where BCB exports coal through.”

The effect is expected to be temporary, though, according to Gregory.

“Whilst the rain had caused some operational issues, the impact was not overly severe and that mining has recommenced at Broadmeadow East and Bluff, the latter which has been assisted by water management initiatives.”

The Bowen Coking stock price is currently 42.5% higher than it was a year ago.

Perhaps the best known out of Gregory’s coal picks, Whitehaven Coal Ltd (ASX: WHC) saw its shares tumble 10.8% to start the year.

That drop in valuation was largely tied to commodity prices.

“The main driver in the month for the stock price was the -35.2% fall in the thermal coal price, albeit from very elevated levels.”

The December quarter result was “in line with market expectations”, said Gregory. 

“With the report, Whitehaven Coal said it expects 1H23 EBITDA of $2.6 billion, versus $0.6 billion in the prior comparable period.”

The post ‘Looks attractive’: Fund names 3 ASX shares to buy for the energy crisis appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Here are the top 10 ASX 200 shares today
• Why are ASX 200 energy stocks like Woodside having such a stellar start to the week?
• Here are the 3 most heavily traded ASX 200 shares on Friday
• New Hope share price dives 9% as ASX 200 coal stocks get hit hard

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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True long-term investment means buying ASX shares of businesses that have excellent business prospects, regardless of recent stock price movements.

This philosophy is, as they say, simple but not easy.

It’s especially difficult for amateur and professional investors alike when the stock price is haemorrhaging in the short term.

And that’s fair enough. It’s only human nature not to want to put money into losing assets.

But if you can act completely rationally, those could be the best buying opportunities ever.

The team at ECP Growth Companies Fund this week named two of its S&P/ASX 200 Index (ASX: XJO) holdings that are exactly in that position:

Don’t be distracted by the current troubles

Nothing personifies recent strugglers more than technology company Megaport Ltd (ASX: MP1).

As a cash-burning growth business, the share price has taken an absolute battering.

Over the past 12 months, the stock has more than halved its value. Going back to November 2021, Megaport shares have lost an agonising 72%.

The stock price for the network-as-a-service provider again struggled in January.

ECP analysts, in a memo to clients, attributed this to a “mixed” quarterly update.

“Underlying port growth, a leading indicator for services, grew 30% quarter on quarter, though net ports only grew 2%,” read the memo.

“Customers have started consolidating ports to larger ports (10GB to 100GB), giving them the ability to add more services to less ports.”

This trend is painful for the immediate balance sheet, admitted the ECP fund managers, but a “net positive” in the long term.

Ultimately the business is heading towards spending less cash than it earns.

“The company has maintained their EBITDA positive run rate and expects this to extend to the full year,” read the memo.

“Price increases and reduced costs also [bring] forward free cash flow positivity in our estimation.”

‘One of the highest quality travel companies in the world’

Although the Corporate Travel Management Ltd (ASX: CTD) share price gained almost 25% in January, it is still down 25% over the past year.

The simple fact is that the ECP team is happy to have this one in the portfolio, regardless of what the stock price has done in recent times.

“Corporate Travel Management remains one of the highest quality travel companies in the world,” read its memo.

“And [it] is well positioned to benefit from a continued recovery in underlying travel volumes and expansion into new markets and regions.”

The analysts admitted there is some short-term risk, but the longer-term trajectory is heading in the right direction.

“While there is still uncertainty related to the outlook for US and European travel volumes, the market in Australia — and to a lesser [extent] Asia — is still growing strongly, with domestic travel volumes leading the way.”

Other professionals generally agree.

According to CMC Markets, seven out of 11 analysts currently covering Corporate Travel recommend it as a strong buy.

The post Buy these 2 struggling ASX 200 shares now while they’re cheap: fund appeared first on The Motley Fool Australia.

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More reading

• ASX 200 in freefall as CBA’s prediction of a soft landing might have just been torpedoed by huge interest rate call
• Why CBA, Corporate Travel Management, Treasury Wine, and Westpac shares are dropping
• Corporate Travel share price tumbles despite record earnings forecast
• Here are the top 10 ASX 200 shares today
• Here are the 10 most shorted ASX shares

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

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If you’re looking for ASX 200 dividend shares to power up your passive income, then you may want to look at the two listed below.

Here’s why analysts at Morgans rate these high yield ASX 200 dividend shares highly:

Santos Ltd (ASX: STO)

The first ASX 200 dividend share that could be a buy is Santos.

It is one of the region’s largest energy producers and the owner of a collection of high quality operations that delivered production of 103 million barrels of oil equivalent (mmboe) in 2022.

The team at Morgans is positive on the company due to its growth prospects and diversified earnings base. It believes this leaves Santos “positioned to flex its cash dividends and buybacks.”

The broker currently has an add rating and $8.75 price target on them.

In respect to dividends, Morgans is expecting fully franked dividends per share of 28 US cents (40.6 Australian cents) in FY 2023 and 30 US cents (43.5 Australian cents) in FY 2024. Based on the current Santos share price of $7.06, this will mean yields of 5.75% and 6.2%, respectively.

QBE Insurance Group Ltd (ASX: QBE)

Another ASX 200 dividend share that Morgans is tipping as a buy is insurance giant QBE.

The broker is feeling positive about the company’s outlook thanks to “strong rate increases still flowing through QBE’s insurance book, and further cost-out benefits to come.” Overall, its analysts expect the company’s “earnings profile to improve strongly over the next few years.”

Morgans also believes its shares are “relatively inexpensive” and has an add rating and $15.05 price target on them.

As for dividends, Morgans is forecasting a 76 cents per share dividend in FY 2023 and then an 85 cents per share dividend in FY 2024. Based on the latest QBE share price of $13.27, this equates to yields of 5.7% and 6.4%, respectively.

The post Power up your passive income with these high yield ASX dividend shares: expert appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Thursday
• 5 things to watch on the ASX 200 on Wednesday
• Why is the Santos share price lifting on Tuesday?
• 5 things to watch on the ASX 200 on Tuesday
• Even Joe Biden sees a lengthy future for ASX 200 oil stocks

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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