S&P/ASX 200 Index (ASX: XJO) shares haven’t had the best of years so far.

On the back of fast-rising inflation and the resulting steep interest rate hikes, the ASX 200 is currently down 4% in 2022.

That’s after the benchmark index posted a very impressive 13% gain in 2021.

So, will 2023 see the ASX return to positive momentum, or can investors expect another tough slog ahead?

While there are many, many pieces to that puzzle, part of the answer might be found in the current level of rather bearish investor sentiment.

Why bearish investor sentiment may be good news for the ASX 200

Investor sentiment, as you’d expect, tends to ramp up (like a bull) when markets are running higher and turn bearish when markets are losing ground.

While the ASX 200 is down 4% this year, markets in the United States have fared far worse.

As of last night’s close, the S&P 500 Index (SP: .INX) is down 18% year to date. There is a range of factors why the S&P 500 has fallen more than four times as hard as the ASX 200. Part of that sits with the relative performance of the two indexes the prior year.

US equities broadly exploded in 2021, which saw the S&P 500 finish the year up 27%, more than double the gains posted by the ASX 200. Meaning it had a good bit more ground to yield this year.

With that said, you can see why US investor sentiment remains in the doldrums.

According to eToro’s proprietary composite sentiment indicator, 42% of US retail investors are still bearish, despite the market’s strong performance in November.

The eToro sentiment indicator is made up of:

• Equity mutual fund and ETF flows
• The long-running American Association of Individual Investors sentiment survey
• VIX index of expected S&P 500 volatility
• S&P 500 put/call ratio, measuring the proportion of put buying (option to sell in future) versus calls (to buy in future)

Of these, only the VIX indicates less bearish investor sentiment. But that appears to be the exception.

“The rebounded VIX captures attention, but it’s the outlier, with other sentiment indicators remaining very low,” said Ben Laidler, global markets strategist at eToro.

Laidler continued:

Bad investor sentiment has been a contrarian help to the recent rally and it remains a key support. If everyone is bearish, there are few left to sell, and many could buy. It means a little ‘less-bad’ news goes a long way.

Sentiment is off its lows but still depressed and it’s only been this low a handful of times.

Now, we’re talking about US stock markets here.

But looking back at the charts, time and again, when US stock markets rebound, the ASX 200 historically enjoys a healthy boost as well.

Meaning 2023 may just surprise to the upside.

The post Why ‘depressed investor sentiment’ could be good news for the ASX 200 in 2023 appeared first on The Motley Fool Australia.

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More reading

• Guess which ASX All Ords company founder just bought up 127,000 new shares in their company
• Goldman Sachs names 2 ASX 200 blue chip shares to buy
• What’s weighing on the Core Lithium share price today?
• Founder selling $60m of shares in this ASX All Ords company not a concern … yet: fundie
• Why Arafura, Megaport, Nitro, and Sayona Mining shares are storming higher today

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

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It’s always ASX news when a founder of an All Ordinaries Index (ASX: XAO) share buys up stock of their own company. For one, All Ords investors love to know these kinds of things. When a founder buys shares in the company they started and run, it is an implicit vote of confidence in the company’s future.

Investors appreciate when the people running the companies they own have skin in the game. Increasing said skin improves the alignment of shareholders with management. When investors feel that their own financial fortunes rise and fall alongside the people in charge, it’s simply good for morale.

So let’s talk about Humm Group Ltd (ASX: HUM). Because we just got some news from Humm along these lines.

Humm is of course one of the All Ords’ remaining buy now, pay later (BNPL) shares. It’s also one of the oldest BNPL shares on the share market, even predating the old BNPL pioneer Afterpay, which is now part of Block Inc (ASX: SQ2).

Like most All Ords BNPL shares that remain on the ASX, 2022 has been a very rough year for Humm. Since the start of the year, Humm shares have gone from 92 cents each to the 56 cents we see today. That’s a drop worth a nasty 39.7%.

Since Humm’s last all-time high, which saw the company approach $2.50 a share, back in 2019, Humm shares are now down around 78%, as you can see below:

So shareholders could really use some good news right about now. Well, they might just have it.

Humm directors are buying up shares hand over fist

According to an ASX filing this morning, Andrew Abercrombie has just picked up 127,685 new shares in Humm in an on-market purchase. This purchase, which occurred on 8 December, cost Abercrombie close to $70,000 and takes his total holdings in Humm Group to just over 118 million shares.

Abercrombie is a founding director of Humm, and today serves as the company’s chair. He has been involved with Humm since its founding in 1991.

This isn’t the only purchase he has made of Humm shares in recent times either. Abercrombie also picked up an additional 101,352 shares on 7 December – a parcel worth just over $55,000. Another director, Robert Hines, picked up 100,000 shares of his own on 21 November last month.

So Humm’s directors seem to think that their own company’s shares are too cheap to ignore at the current price. No doubt Humm investors will be delighted with this news. Perhaps this is why the Humm share price has risen a healthy 1.83% so far this Monday to 56 cents a share.

 

The post Guess which ASX All Ords company founder just bought up 127,000 new shares in their company appeared first on The Motley Fool Australia.

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More reading

• Guess which ASX All Ords share is leaping 22% on ‘significant progress towards profitability’

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 positions in and has recommended Block. The Motley Fool Australia has positions in and has recommended Block. The Motley Fool Australia has recommended Humm 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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If you are looking to strengthen your portfolio with some blue chip ASX 200 shares, you may want to look at the two listed below that have been named as buys by Goldman Sachs.

Here’s why these blue chip shares are highly rated by its analysts right now:

REA Group Limited (ASX: REA)

The first ASX 200 blue chip share to buy according to Goldman Sachs is REA Group. It is the digital advertising company that operates Australia’s leading property website, realestate.com.au. In addition, REA operates a number of complementary businesses in the Australian market and internationally.

While the housing market downturn is expected to weigh on listing volumes in the near term, Goldman Sachs remains positive on its outlook. It said:

Listings remain a headwind for REA through FY23 with 2Q weekly listings remaining soft – although 2H23 remains uncertain, we now forecast -8% total listings declines in FY23E, driving small downward revisions to REA/DHG (-2% EBITDA in FY23E), but we expect [this] will ultimately be recovered, with +13% upside to our estimated mid-cycle listings volumes.

The broker has a buy rating and $159.00 price target on its shares.

Woolworths Limited (ASX: WOW)

Another blue chip ASX 200 share that Goldman Sachs rates highly is Woolworths. It is the retail conglomerate behind businesses including Woolworths, Countdown, Everyday Rewards, and Big W.

The broker believes its shares are trading at an attractive level after recent weakness. Particularly given its positive outlook through to FY 2025.

It recently commented:

Despite a noisy and softer 1Q23, we remain confident that WOW is the superior operator within AU supermarkets with a clear growth pathway to deliver ~3% sales and ~9% NPAT FY22-25e CAGR. WOW is trading at 22.1x FY24E P/E vs our TP implied 27.8x and historical average of 23.2x, providing a value entry point to a quality player in our view. Reiterate Buy (on CL).

Goldman Sachs has a conviction buy rating and $41.70 price target on the company’s shares.

The post Goldman Sachs names 2 ASX 200 blue chip shares to buy appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Monday
• What’s impacting the Woolworths share price on Thursday?
• Top brokers name 3 ASX shares to buy today
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• 5 popular ASX 200 stocks I’m avoiding, plus one that still looks dirt cheap

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA 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 Core Lithium Ltd (ASX: CXO) share price is slightly in the red today.

Core Lithium shares are down 0.43% and are currently trading at $1.17. For perspective, the S&P/ASX 200 (ASX: XJO) is down 0.52% today.

Let’s take a look at what is going on at Core Lithium.

What’s going on?

Lithium explorers are having a mixed day on the market today. The Lake Resources N.L. (ASX: LKE) share price is falling 2.93%. However, Pilbara Minerals Ltd (ASX: PLS) shares are up 2.35% and Sayona Mining Ltd (ASX: SYA) shares are rising 3.49%.

Morgan Stanley has cut the lithium sector to “underweight”, The Australian reported today.

Core Lithium is exploring the Finniss Lithium Project in the Northern Territory. Core Lithium shares have fallen 10% since market close on 7 December.

A broker note out of Goldman Sachs appeared to impact the Core Lithium share price late last week.

Goldman placed a “sell” rating on Core Lithium shares with a $1 price target. Analysts highlighted Core Lithium will be Australia’s “next lithium producer”. However, analysts raised concerns about production cost risks and the potential for lithium prices to decline in the future. Analysts said:

Core Lithium’s Finniss project will be Australia’s next lithium producer, with spodumene production scheduled for 1H CY23, where we factor in an average ~175ktpa production over a ~12-year M&I resource life.

However, while resource upside looks likely, the required magnitude to support the capacity expansion/life extension/future downstream that is currently priced into the stock looks significant, in our view, particularly given the upside case is unlikely to be achieved before lithium prices decline (GSe from 2H CY23).

With production/cost risks as the project moves between mining configurations, and the stock trading well above peers at 1.5x NAV (~US$2,400/t LT spodumene) on the lowest average operating FCF/t LCE, we initiate on CXO with a relative Sell rating and a 12-month PT of A$1.00/sh, implying 23% downside.

In an AGM presentation in late November, Core Lithium highlighted it is trucking direct shipping lithium ore to Darwin Port. The company said it would “commence shipping to China in coming weeks”.

Construction at Core Lithium’s DMS processing plant is on track for commissioning in the first quarter of 2023, with first concentrate scheduled for the first half of 2023.

Core Lithium share price snapshot

Core Lithium shares have soared 134% in the last year. In the year to date, Core Lithium shares have jumped 98%.

Core Lithium has a market capitalisation of about $2.15 billion based on the current share price.

The post What’s weighing on the Core Lithium share price 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 Friday
• Why Bigtincan, Core Lithium, Pinnacle, and Warrego shares are dropping today
• Why are ASX 200 lithium shares taking another beating on Friday?
• Has the Core Lithium share price ‘run ahead of fundamentals’?
• Here are the 3 most heavily traded ASX 200 shares on Thursday

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 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 share price of All Ordinaries Index (ASX: XAO) online luxury retailer Cettire Ltd (ASX: CTT) has tumbled since the company announced its founder and CEO had offloaded $60 million worth of its stock.

But one fundie is unbothered, nay, encouraged by the sale … for now.

The Cettire share price is $1.51 today. That’s 10.7% lower than it was before the company’s boss Dean Mintz sold 41 million shares for $1.46 apiece under a block trade last month.

For comparison, the All Ords has gained 0.24% over the period.

Let’s take a closer look at why EGP Capital chief investment officer Tony Hansen is giving Mintz a pass on his most recent sale.

Insider selling of All Ords share not worrying, yet: fundie

While Cettire remains among the top holdings in the EGP Concentrated Value Fund as of the end of November, Hansen is unbothered by Mintz’s decision to sell a whopping 10.8% stake in the company.

The fundie commented in the fund’s November update, saying:

[I]t is not unreasonable for a founder who finds perhaps 99% or more of their net worth tied up in a single business … to wish to crystallise some of that wealth …

Investors more broadly clearly feel … that the sale indicates a lack of faith in the longer-term prospects of the business.

I am willing to give the benefit of the doubt for now, in his position I feel I would have done something similar.

Hansen pointed to Nathan Tinkler as an example of what can happen when an insider fails to comply with “personal risk management.”

Tinkler famously became a self-made billionaire in the 2010s after successful forays in coal.

He ultimately sold a hefty chunk of Whitehaven Coal Ltd (ASX: WHC) shares in 2013 in a bid to pay off debt, seeing him tumbling from rich-lister fame.

The former billionaire’s holding in Whitehaven “would still be worth in the region of $1 billion had he not been forced to sell to repay debts,” Hansen wrote, continuing:

The fact that Dean Mintz is clearly more conservative than someone like Nathan Tinkler is incredibly pleasing to me, it shows a streak of prudence I hope all our CEO’s possess.

But the fundie mightn’t be so forgiving in future

Looking forward, however, the fundie doesn’t see a reason Mintz would need to sell any more shares in the All Ords retailer.

The founder has now liquidated more than $100 million worth of shares this year – $60 million last month and $47 million in March.

Hansen noted that while “taxes have surely eaten a hole in that figure” he believes “our CEO should now have more liquid wealth than he is ever likely to need”.

Additionally, the fundie pointed out that Cettire is now delivering profitable growth. It posted adjusted earnings before interest, tax, depreciation, and amortisation (EBTIDA) of $5.5 million on a delivered margin of over 20% last quarter.  

Thus, Mintz, with a 45.9% stake in the All Ords company’s shares, could benefit from dividends. Hansen tips that even a payout ratio of 30% to 40% could “generate a significant annual income”.

The post Founder selling $60m of shares in this ASX All Ords company not a concern … yet: fundie appeared first on The Motley Fool Australia.

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• Why Best & Less, Cettire, Life360, and Paradigm shares are sinking today
• Why A2 Milk, Cettire, Coronado, and Perpetual shares are dropping
• Guess which All Ords insider is selling a whopping $60m worth of their company’s shares
• 3 ASX All Ordinaries shares having a cracker session on Thursday

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Cettire. 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) are on course to start the week with a decline. In afternoon trade, the benchmark index is down 0.6% to 7,170.6 points.

Four ASX shares that have not let that hold them back are listed below. Here’s why they are racing higher:

Arafura Rare Earths Ltd (ASX: ARU)

The Arafura share price is up 4.5% to 45 cents. Investors have been loading up on this rare earths producer’s shares once the dust settled on its recent institutional placement. Arafura received firm commitments for $121 million from institutional investors at 37 cents per new share. These funds will be used to help accelerate the development schedule of the Nolans Project.

Megaport Ltd (ASX: MP1)

The Megaport share price is up 4.5% to $6.76. This is despite there being no news out of the network as a service provider. However, with its shares down almost 70% year to date prior to today’s session, some investors may believe they had been oversold.

Nitro Software Ltd (ASX: NTO)

The Nitro share price is up almost 4% to $2.21. This morning the document productivity software provider revealed that Alludo has increased its takeover proposal by 15 cents per share to $2.15 per share. Investors appear to be betting that fellow suitor Potentia will lift its $2.00 per share offer. Though, it is worth noting that Nitro is recommending Alludo’s latest offer to shareholders.

Sayona Mining Ltd (ASX: SYA)

The Sayona Mining share price is up 3.5% to 22.25 cents. Investors have been buying this lithium developer’s shares after it released an update on the North American Lithium (NAL) project. That update reveals that the company has been awarded the final permit for NAL’s restart ahead of the planned recommencement of production in the first quarter of 2023. Management believes this has effectively de‐risked its NAL operation.

The post Why Arafura, Megaport, Nitro, and Sayona Mining shares are storming higher today appeared first on The Motley Fool Australia.

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• Sayona Mining share price higher on North American Lithium news
• Here are the 10 most shorted ASX shares
• Here are the top 10 ASX 200 shares today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Megaport. The Motley Fool Australia has recommended 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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There are many different ways for investors to invest on the ASX. Some people consider ASX exchange-traded funds (ETFs), while others may decide to invest in individual shares.

Investing in ASX dividend shares is one investment style, for example, while buying ASX growth shares is another.

But, choosing ASX ETFs may be the simplest way to invest.

While there are some compelling ETFs that are focused on individual sectors, like Betashares Global Cybersecurity ETF (ASX: HACK) and VanEck Video Gaming and Esports ETF (ASX: ESPO), there is one name that might be the most laid-back investing option of them all.

Vanguard MSCI Index International Shares ETF (ASX: VGS)

This investment option is offered by Vanguard, a leading investment manager that aims to offer its investment products as cheaply as possible.

The idea behind this ETF is that it looks to track an index called the MSCI World ex-Australia Index. It invests in many of the world’s largest companies listed in “major developed countries”.

The top 10 holdings include some of the biggest global businesses listed in the United States:

• Apple
• Microsoft
• Alphabet
• Amazon.com
• Tesla
• UnitedHealth
• Exxon Mobil
• Johnson & Johnson
• Berkshire Hathaway
• JPMorgan Chase

Unsurprisingly, just over 70% of the portfolio is invested in US-listed businesses. The US is the biggest economy and where many of the world’s largest companies are headquartered.

But, many other countries are represented in the Vanguard MSCI Index International Shares ETF portfolio. There are plenty of countries with a market allocation of more than 0.5% within the ASX ETF: Japan, the UK, Canada, France, Switzerland, Germany, the Netherlands, Sweden, Spain, Hong Kong, Italy and Denmark.

One of the great things about this investment option is that it owns almost 1,500 holdings. This means that there is excellent underlying diversification across many companies and sectors.

It’s invested across numerous industries with the following allocations (as of October 2022): IT (21.5%), healthcare (14.4%), financials (13.3%), consumer discretionary (10.8%), industrials (10.4%), consumer staples (7.7%), communication services (6.7%), energy (5.8%), materials (3.8%), utilities (3%) and real estate (2.6%).

Why it’s an easy investment to potentially make $1 million

The ASX ETF has such a large and diverse portfolio that if things go wrong for a particular investment, such as Meta Platforms, it’s not a major setback for the whole portfolio.

Its holdings are regularly changing, so investors won’t need to worry about adjusting the portfolio themselves. This is one of the things that make it an effective low-effort investment. As businesses become bigger or smaller, they will naturally move up or down the portfolio’s holding list.

The Vanguard MSCI Index International Shares ETF has returned an average of 10.5% per annum, after fees, over the last five years. Past performance is not a guarantee of future performance, though. That includes a decline of more than 10% in 2022. It has an annual management fee of just 0.18%.

According to the compound interest calculator from Moneysmart, investing $1,000 a month and it generating a return of 10% per annum will turn into $1.06 million over 24 years. With a global share portfolio, investors may not need to consider investing in other international share ETFs.

However, volatility is likely in the coming years, and the 10% average return is an average. In one year, it could rise 15%, and in another, it could fall 5%.

The post One ASX ETF that could make you a stock market millionaire with little to no effort appeared first on The Motley Fool Australia.

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• These ETFs allow ASX investors to buy thousands of global shares
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• It took me years to realise I’m no investing genius like Warren Buffett
• Are Vanguard International Shares ETF dividends fully franked?
• 3 top ETFs for ASX investors to buy and hold for a decade

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, 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, Berkshire Hathaway, BetaShares Global Cybersecurity ETF, JPMorgan Chase, Microsoft, Tesla, and Vanguard Msci Index International Shares ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Johnson & Johnson and UnitedHealth Group and has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway, long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway, short January 2023 $265 calls on Berkshire Hathaway, and short March 2023 $130 calls on Apple. The Motley Fool Australia has positions in and has recommended BetaShares Global Cybersecurity ETF. The Motley Fool Australia has recommended VanEck Vectors Video Gaming And eSports ETF, Alphabet, Amazon.com, Apple, Berkshire Hathaway, and Vanguard Msci Index International Shares 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 S&P/ASX 200 Index (ASX: XJO) is having a tough start to the week. In afternoon trade, the benchmark index is down 0.7% to 7,162.3 points.

Four ASX shares that are falling more than most today are listed below. Here’s why they are sinking:

Bigtincan Holdings Ltd (ASX: BTH)

The Bigtincan share price is down a further 6% to 53 cents. This sales enablement platform provider’s shares have been smashed in recent sessions after the company’s strange decision to raise capital while it is the subject of a takeover approach. Bigtincan raised $30 million at 60 cents per share despite having received an 80 cents per share takeover offer.

Nanosonics Ltd (ASX: NAN)

The Nanosonics share price is down 13% to $4.22. This is despite there being no news out of the heavily shorted infection prevention company. Though, it is worth noting that a major shareholder revealed that it has been selling down its stake. State Street sold over 3.5 million shares last week.

Origin Energy Ltd (ASX: ORG)

The Origin share price is down almost 8% to $7.20. Investors have been selling Origin and other utilities shares in response to news that Prime Minister Anthony Albanese is planning a price cap on domestic coal and gas sales. Energy Minister Chris Bowen said: “It’s Australian gas, under Australian soil and Australians should not be paying elevated war prices for that gas.”

Tyro Payments Ltd (ASX: TYR)

The Tyro share price is down over 17% to $1.23. This morning Tyro concluded takeover talks with Potentia and Westpac Banking Corp (ASX: WBC) after failing to receive an acceptable offer from either party. Potentia had increased its offer to $1.60 per share, but this was swiftly rejected. Westpac never actually tabled an offer, potentially after realising that its idea of fair value was well short of what Tyro expected.

The post Why Bigtincan, Nanosonics, Origin, and Tyro shares are sinking today appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Westpac Banking. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bigtincan, Nanosonics, and Tyro Payments. The Motley Fool Australia has positions in and has recommended Bigtincan and Nanosonics. The Motley Fool Australia has recommended Tyro Payments and 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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1) The stock market continues to dance to the tune of interest rates, with the S&P 500 falling 0.7% on Friday night as investors bet on central banks staying “higher for longer” as they continue to battle stubbornly higher inflation.

“We think the markets are too sanguine on rates after the first quarter,” said Cliff Hodge, chief investment officer for Cornerstone Wealth on AFR.

The Federal Reserve meets this week, and is widely expected to hike US interest rates by another 50 basis points. Such a move would lift rates to a 4.25% to 4.5% target range, the highest level since 2007. Good news for savers. Bad news for the economy and share market investors, although much of the coming downturn is arguably already priced into many individual stocks.

2) The market will turn higher in anticipation of better economic news, be that lower inflation and/or central banks pivoting to hold or even cut interest rates in the latter half of next year.

I do not profess to having any great insights or opinion as to what may happen and when, other than to say – stating the obvious – we’re much closer to the end of this rate hiking cycle than the start.

Writing in its November monthly update, New Zealand based Pie Funds are “fairly optimistic about the outlook for 2023,” partly because they believe inflation and interest rates have peaked, but mostly because “after such a terrible year history shows poor-performing periods are usually followed by strong returns if you look out 12 months.”

I love the simplicity of the thinking. No macro. No talk of soft landing versus deep recession. And it comes despite Pie Funds saying a widely expected general economic slowdown or recession “will impact corporate profits, on average, anywhere from 10-40%.”

“Based on 15 years of managing client money, I know that investors won’t start to return to stocks until at least six months after the bottom. So that means investor sentiment will remain cautious until at least April,” said Mike Taylor, founder and chief investment officer.

3) One of Pie’s holdings is little-known IPD Group (ASX:IPG), a national distributor and service provider to the Australian electrical market.

It is one of the few recent IPOs that is trading strongly above its float price, the IPD share price having risen from $1.20 to its current $2.93 in the 12 months since it hit the ASX boards.

“IPD Group held its AGM during the month and confirmed that strong double-digit growth has continued into 1H23 while margins have been maintained. IPD Group exemplifies the style of defensive growth business we look for with structural tailwinds in electrification, market share opportunities as they expand their portfolio of ABB products, and high levels of ownership by management,” wrote Pie’s Australiasian Growth Fund portfolio manager Michael Goltsman. 

4) There have been many COVID winners turned losers, most obviously in the tech sector. 

You can take your pick as the poster child for the huge round trip some of these stocks have endured, and just how much their share prices have fallen over the past 12 months…

Zip Co (ASX: ZIP) share price down 86%

PointsBet (ASX:PBH) share price down 75%

Megaport (ASX:MP1) share price down 69%

Airtasker (ASX: ART) share price down 62%

Kogan.com (ASX:KGN) share price down 61%

The share prices of all those companies got well ahead of itself, not to mention being aided by healthy doses of irrational exuberance from locked-down and bored retail investors.

Reality has hit, and hit hard, due to slowing or declining growth, excessive valuations and a market no longer willing to fund losses ad-infinitum. 

One sector riding a genuine post-COVID boom is travel, with demand and prices riding high. The Qantas (ASX:QAN) share price is flying high, up 160% from its March 2020 low as continued strength in travel demand has resulted in profit upgrades.

So you’d expect the Flight Centre (ASX:FLT) share price to also be riding high… except it’s down more than a third in the past 14 months. Fellow travel agents Corporate Travel Group (ASX:CTD) and Helloworld Travel (ASX:HLO) are also on the nose, their share prices down 45% and 50% over a similar period.

Dragging them lower appears to be lower profit margins as airlines, most notably Qantas, announced during the pandemic they would cut commissions paid to travel agents. 

Adding to sector woes are the prospect of a coming economic slowdown, something that traditionally sees consumers cut discretionary spending on luxury items like travel, and less corporate travel as companies cut costs and continue to use Zoom and Teams for their meetings.

In a trading update in late October, Corporate Travel said FY23 is expected to “remain choppy” but is expecting a “full recovery” in FY24, and underlying EBITDA of $265 million. Compared to today’s market capitalisation of around $2 billion, that looks neither cheap nor expensive, but about right, especially given much can change over the next two years.

The post Why this one top fund manager is optimistic about 2023, and one little-known IPO that has hit it out of the park appeared first on The Motley Fool Australia.

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• Brokers name 3 ASX shares to buy today

Motley Fool contributor Bruce Jackson 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 Helloworld Travel, Kogan.com, Megaport, PointsBet, and Zip Co. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Airtasker. The Motley Fool Australia has positions in and has recommended Helloworld Travel and Kogan.com. The Motley Fool Australia has recommended Corporate Travel Management, Flight Centre Travel Group, Ipd Group, Megaport, and PointsBet. 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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Is ASX 200 tech share and former market darling Xero Limited (ASX: XRO) a ‘safe’ ASX share?

Well, it certainly hasn’t been for investors over the past year or two. The Xero share price last hit an all-time high back in November 2021. But since then, investors have been burned… badly burned, by Xero shares.

Since Xero clocked a share price of around $155 back in November last year, this cloud-based accounting software provider has fallen by a painful 55% or so. It’s going for under $70 a share today, less than half of what the company was worth a year ago.

The company is also down by more than 52% in the 2022 year to date:

So Xero shares certainly haven’t been a safe place to have had your capital invested. But, by most definitions, no share is truly ‘safe’.

If you are looking for somewhere to park your dollars that will never fall in value and steadily rise over time, no ASX share fits this description.

In fact, the only asset class that truly does is a government-guaranteed savings account or term deposit at a bank.

How ‘safe’ can an ASX 200 share like Xero be?

A company can be the most consistently profitable business in the world. But as the legendary investor Benjamin Graham once said, the share market is a voting machine in the short term. Day to day, the only thing that sways share prices is investor sentiment.

Looking at Xero shares over the past few years, this company does look like a safe place to have invested cash. Since 2012, the Xero share price has risen by an impressive 1,406%. Sound safe?

If it does, consider this as well. Even though Xero has given its investors these kinds of stunning returns, it has also severely clipped their capital several times.

Between March and October 2014, Xero shares went from around $40 to under $20. In 2018, the company fell from over $50 a share to under $38. In early 2020, the company crashed from $87 a share to $61. And now in 2022, investors have endured more than a 52% drop.

So Xero shares have never been safe. But then again, what is?

What we do know is that Xero has given investors a return of 1,406% since 2014.

The post Is Xero a ‘safe’ ASX share? appeared first on The Motley Fool Australia.

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More reading

• One ASX 200 share I’m buying for passive income before 2022 is over
• A bull market is coming: 3 ways Warren Buffett is preparing
• Could this help ANZ close the gap on its ASX 200 competitors?
• Is it safe to invest in ASX shares now? Take advice from Warren Buffett
• Telstra share price on watch following latest telco data breach

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 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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