The last 10 years have been rough on the Westpac Banking Corp (ASX: WBC) share price. Fortunately, the banking favourite has been offering investors dividends over the period. But have they been enough to offset the stock’s tumble?

If an investor were to have bought $1,000 of Westpac shares in December 2012, they likely would have walked away with 38 shares, paying $25.98 apiece, and around $12 change.

Today, the stock in Australia’s oldest bank is trading at $23.44 – marking a 9.77% fall over the last 10 years. That leaves out a figurative parcel with a value of $890.72.

For comparison, the S&P/ASX 200 Index (ASX: XJO) has gained around 57% in that time.

So, have Westpac’s dividends made up for its share price’s poor performance over the decade? Let’s take a look.

How much have Westpac shares paid in dividends in 10 years?

Here are all the dividends Westpac has offered shareholders over the last 10 years:

Westpac dividends’ pay date	Type	Dividend amount
December 2022	Final	64 cents
June 2022	Interim	61 cents
December 2021	Final	60 cents
June 2021	Interim	58 cents
December 2020	Final	31 cents
December 2019	Final	80 cents
June 2019	Interim	94 cents
December 2018	Final	94 cents
July 2018	Interim	94 cents
December 2017	Final	94 cents
July 2017	Interim	94 cents
December 2016	Final	94 cents
July 2016	Interim	94 cents
December 2015	Final	94 cents
July 2015	Interim	93 cents
December 2014	Final	92 cents
July 2014	Interim	90 cents
December 2013	Final	88 cents
December 2013	Special	10 cents
July 2013	Interim	86 cents
July 2013	Special	10 cents
December 2012	Final	84 cents
Total:		$16.59

All up, Westpac has provided $16.59 of dividends per share over the last 10 years.

That means a $1,000 investment in December 2012 would have yielded $630.42 of passive income in the years since.

Considering the bank’s share price’s 9.77% fall alongside its biannual offerings, our imagined parcel would have returned around 54% over its life.

Of course, that return might have been amplified with the use of a dividend reinvestment plan (DRP), allowing an investor to compound their returns.

Additionally, all dividends handed out by Westpac since 2000 have been fully franked. That means they may have brought extra benefits at tax time.

Thus, Westpac’s dividends have offset its share price’s poor performance over the last 10 years. On top of that, the payouts see the stock’s performance nearly on par with that of the ASX 200 over that period.

The big bank currently trades with a 5.3% dividend yield.  

The post Bought $1,000 of Westpac shares 10 years ago? Here’s how much dividend income you’ve received appeared first on The Motley Fool Australia.

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

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I think one of the world’s greatest investors is Warren Buffett who has led Berkshire Hathaway to become one of the largest global businesses. He certainly has delivered great advice over the years that can be very applicable to today’s situation with ASX shares.

A number of the ASX’s leading names have seen their share prices take a bath in recent times. For example, the Xero Limited (ASX: XRO) share price has dropped more than 50% in the year to date.

Whether the sell-off is justified for Xero and many other ASX growth shares is debatable. But the question now is whether these declines represent an opportunity, or whether higher interest rates mean these lower prices are about right.

Warren Buffett’s wise advice

I don’t think every business is worth buying just because its share price has dropped, but when almost the entire market is sold down, such as during the COVID crash, I think indiscriminate selling presents a great hunting ground.

One of the most quoted Warren Buffett sayings is this:

Be fearful when others are greedy and greedy when others are fearful.

In other words, the best time to buy ASX shares may be when there is widespread uncertainty because this is when share prices are lower.

But, there are also likely to be times when investors are euphoric. I think 2021 was an example of this when almost everything displaying growth was loved by investors. We should be cautious around those times.

Buffett also has this gem of advice from 2001:

To refer to a personal taste of mine, I’m going to buy hamburgers the rest of my life. When hamburgers go down in price, we sing the ‘Hallelujah Chorus’ in the Buffett household. When hamburgers go up in price, we weep. For most people, it’s the same with everything in life they will be buying — except stocks. When stocks go down and you can get more for your money, people don’t like them anymore.

In his 1997 annual letter, Buffett said:

If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period?

Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall.

Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.

Foolish takeaway

Warren Buffett doesn’t try to predict where share prices are going to go in the short term. If he sees a wonderful business at a fair price, then he’s willing to invest. For example, Taiwan Semiconductor Manufacturing recently entered the Berkshire Hathaway portfolio after Warren Buffett’s business invested US$4 billion. He’s still investing during this period and I think we can find some good ASX shares at the current prices.

If we waited until things seemed completely ‘safe’, share prices would probably have gone much higher. Plus, there always seems to something going on in the news, so it may be wise to ignore that noise.

The post Is it safe to invest in ASX shares now? Take advice from Warren Buffett appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Berkshire Hathaway, Taiwan Semiconductor Manufacturing, and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway, short January 2023 $200 puts on Berkshire Hathaway, and short January 2023 $265 calls on Berkshire Hathaway. The Motley Fool Australia has positions in and has recommended Xero. 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 Telstra Group Ltd (ASX: TLS) share price is one to watch on Monday.

That’s in the wake of a reported data breach, which has seen the data of around 130,000 of the S&P/ASX 200 Index (ASX: XJO) telco’s customers released publicly.

This comes just two months after insurance giant Medibank Private Ltd (ASX: MPL) revealed significant amounts of medical-related data from its customers had been compromised.

Here’s what Telstra investors learned regarding the latest mass data breach over the weekend while the ASX was closed.

What happened with the data breach?

The Telstra share price is on watch after news hit the wires that the names, phone numbers, and addresses of approximately 130,000 customers – who were meant to be unlisted – were accidentally published online on the telco’s directory assistance site.

As Bloomberg reports, Telstra said the data breach was not due to malicious outside hackers, as was the case with Medibank. Instead, Telstra indicated the issue was due to a “misalignment of databases”.

Commenting on the error that could put the Telstra share price under pressure today, chief financial officer Michael Ackland said (quoted by Bloomberg):

We recently discovered there had been a misalignment of the databases used to provide these services, which resulted in some customers’ names, numbers and addresses being listed when they should not have been. This was a result of a misalignment of databases — no cyber activity was involved.

Ackland went on to apologise to the customers impacted by the internal error:

Protecting our customers’ privacy is absolutely paramount, and for the customers impacted we understand this is an unacceptable breach of your trust. We’re sorry it occurred, and we know we have let you down.

Telstra said it is working to remove the customers’ details from its publicly accessible online directory assistance. The ASX 200 telco will launch an internal investigation.

Telstra share price snapshot

As at Friday’s close, the Telstra share price is down 1% over the past 12 months. That compares to a full year loss of 2% posted by the ASX 200.

As you can see in the price chart below, Telstra shares have enjoyed a much better second half, gaining 7% over the past six months.

The post Telstra share price on watch following latest telco data breach appeared first on The Motley Fool Australia.

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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 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 ASX share market has been shaken around in 2022 amid high inflation and rising interest rates. It’s left some ASX dividend shares looking like bargains.

When share prices fall, it means that dividend yields are increased for potential investors. For example, if a business has a 6% dividend yield and its share price drops 10%, the yield turns into 6.6% if the same dividend is paid.

While it’s hard to say what share prices are going to do next, it’s comforting knowing that ASX dividend shares can keep sending the dividend cash to shareholders.

So which names are worth looking at? Here are three that could be in the bargain basket.

Jumbo Interactive Ltd (ASX: JIN)

Jumbo describes itself as Australia’s leading dedicated digital lottery company. It offers its proprietary lottery software platform and lottery management experience to government and charity lottery sectors in Australia and globally. It also retails lottery tickets in Australia and the South Pacific.

The Jumbo share price has plunged 26% in 2022 to date. FY22 was solid with underlying earnings per share (EPS) increasing by 13% to 51.5 cents per share.

The ASX dividend share is expecting a lower profit margin in FY23, but Commsec numbers suggest it could grow its profit and the dividend in FY23. The Jumbo share price is valued at 27 times FY23’s estimated earnings with a grossed-up dividend yield of 4.5%.

PeopleIn Ltd (ASX: PPE)

PeopleIn says that it “provides clients with complete talent solutions, from workforce resourcing and project management, through to staffing and upskilling solutions”.

The ASX dividend share recently reaffirmed its FY23 earnings guidance, with normalised earnings before interest, tax, depreciation and amortisation (EBITDA) of between $62 million to $66 million.

It gave a market update that said “operating conditions continue to be highly positive, given the strength of the employment market and extensive demand” from clients. The company said its healthcare and community vertical is “well-placed to address the critical shortages within its sector, as delays in visa processing and travel costs improve”.

Despite the positive outlook, the PeopleIn share price has fallen just over 30% in 2022.

According to Commsec, the PeopleIn business is priced at nine times FY23’s estimated earnings with a potential grossed-up dividend yield of 7%.

TPG Telecom Ltd (ASX: TPG)

TPG is one of the largest telecommunication businesses in Australia. It has the brands of TPG, iiNet, and Vodafone Australia.

The business is rolling out its 5G network and has also signed up to a major regional network sharing agreement with Telstra Group Ltd (ASX: TLS) which will improve its offering to customers.

Its latest result, the FY22 half-year report, shows a 135,000 net increase in mobile subscribers. The ASX dividend share is also working on growing its number of fixed wireless subscribers. This is home internet powered by the mobile network, which can generate much stronger profit margins for the business.

The merger between Vodafone Australia and TPG is on track to deliver the synergies target of between $125 million to $150 million in FY22.

The FY22 interim dividend grew 12.5% to nine cents per share. After a 25% fall in the TPG share price since mid-August, it’s expected to pay a grossed-up dividend yield of 5.6% in FY23.

The post 3 ASX dividend shares to buy on sale right now appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Jumbo Interactive and Peoplein. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool Australia has recommended Jumbo Interactive, Peoplein, and Tpg Telecom. 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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At the start of each week, I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Flight Centre Travel Group Ltd (ASX: FLT) has returned to the top spot with short interest of 14.3%. Short sellers appear to be targeting the travel agent giant amid concerns over the travel market recovery due to the cost of living crisis.
• Betmakers Technology Group Ltd (ASX: BET) has dropped from the top spot after its short interest dropped 12.9%. With this betting technology company’s shares down over 60% since the start of the year, some short sellers may believe they have bottomed now and are closing positions.
• Perpetual Limited (ASX: PPT) has seen its short interest rise to 11.6%. Short sellers have been loading up on this fund manager’s shares after it was pressured into completing its acquisition of Pendal Group Ltd (ASX: PDL).
• Megaport Ltd (ASX: MP1) has seen its short interest remain flat 10.5%. Weakness in the tech sector and a soft start to FY 2023 appear to be why short sellers are targeting this network as a service operator’s shares.
• Sayona Mining Ltd (ASX: SYA) has 9.6% of its shares held short, which is down week on week. Short sellers appear to have concerns over the valuation of this lithium developer given recent forecasts for declining lithium prices.
• Lake Resources N.L. (ASX: LKE) has short interest of 8.7%, which is up week on week. Short sellers believe Lake could be having issues producing battery grade lithium at scale from its Kachi operation.
• Nanosonics Ltd (ASX: NAN) has short interest of 8.5%, which is flat week on week. There are concerns over this medical device company’s margins due to a major sales model change in the US.
• Zip Co Ltd (ASX: ZIP) has returned to the top ten with short interest of 8.2%. Short sellers appear to believe that the buy now pay later provider will struggle to achieve profitability as targeted.
• Breville Group Ltd (ASX: BRG) has seen its short interest slide again to 8.1%. Short sellers continue to close positions following the recent release of the appliance manufacturer’s first quarter update.
• Domino’s Pizza Enterprises Ltd (ASX: DMP) has short interest of 7.1%, which is down materially week on week. Short sellers may be closing positions on the belief that headwinds are now easing for the pizza chain operator.

The post Here are the 10 most shorted ASX shares appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Domino’s Pizza Enterprises. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Betmakers Technology Group, Megaport, Nanosonics, and Zip Co. The Motley Fool Australia has positions in and has recommended Nanosonics. The Motley Fool Australia has recommended Betmakers Technology Group, Domino’s Pizza Enterprises, Flight Centre Travel Group, 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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Even though gold has traditionally been a “safe” investment asset during troubled times, it hadn’t lived up to that reputation for much of 2022.

It’s yet another strange occurrence in a strange year when shares and bonds, which normally perform opposite to one another, both did poorly.

But the last month has seen the gold price finally rally.

It’s now reached break-even point from the start of the year, with more than one expert predicting it will zoom ahead in 2023 as the world plunges into recession.

The analysts at Celeste Funds Management are some of the many professionals tipping ASX gold shares at the moment.

These are two that the team mentioned in a memo to clients this week:

‘Low-cost gold exposure’

The Celeste team holds a pair of ASX gold shares that performed outstandingly in November.

“A weakening US dollar saw a rebound in the gold price, as miners Silver Lake Resources Limited (ASX: SLR) and Gold Road Resources Ltd (ASX: GOR) rallied 9.0% and 29.2% respectively over the month.”

According to the memo, both stocks provide investors with “low-cost gold exposure”. 

Both are reputable companies that “operate in tier-1 mining jurisdictions and are led by experienced management teams”.

The Gold Road share price is almost 10% higher than where it started this year, now boasting a $1.86 billion market capitalisation.

In contrast, Silver Lake shares are 25.7% lower year to date, which gives the ASX gold share a current market cap of $1.22 billion. 

Already productive but with growth potential

The Celeste team believes Silver Lake has both already-productive assets and a site with future potential.

“We are attracted to the production growth out of Silver Lake’s Mount Monger and Deflector assets while their recently acquired Sugar Zone mine provides strong upside.”

Gold Road also has a similar two-pronged advantage.

“Gold Road presents an attractive growth profile through increasing grade at Gruyere, and their investment in De Grey Mining Limited (ASX: DEG) offers significant growth optionality.”

According to CMC Markets, seven out of 10 analysts that cover Gold Road currently rate the stock as a strong buy.

Silver Lake has five professionals urging a strong buy out of a field of seven.

The post ‘Strong upside’: Fund names 2 ASX gold shares set to take off appeared first on The Motley Fool Australia.

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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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It’s only human nature to be buoyed by ASX shares that have risen and scared of those that have fallen.

But stocks themselves don’t have any memory.

They don’t care whether they have been soaring or plunging. All that matters is where it will go from now.

Santa might only bring presents to nice girls and boys, but naughty shares can still be handsomely rewarded if the underlying business performs well.

With this in mind, the team at Celeste Funds Management this week named two stocks it holds that gained spectacularly in November and one that bitterly disappointed.

But all three, the analysts hope, are set to reach lofty heights.

‘Asset quality remains solid’

Small business bank Judo Capital Holdings Ltd (ASX: JDO) saw its share price climb a tidy 18.4% in November.

The Celeste team, in a memo to clients, attributed this to “strong” briefing at its annual general meeting in late October.

“The update confirmed Judo appear[s] to be on track to reach their at-scale metrics, with the loan book growing to $6.8 billion.”

Despite an excellent November, the Judo share price is still more than 39% down year to date.

The prospect of an economic slowdown or a recession does not concern Celeste analysts.

“Judo’s asset quality remains solid with no material uptick in arrears and the company remains well-capitalised with a 19.5% CET1 ratio, well in excess of the major banks benchmark of circa 10.5%.”

The bank also revealed new appointments to the deputy executive officer and chief financial officer positions.

Opening new stores

Furniture merchant Nick Scali Limited (ASX: NCK) enjoyed a 12.2% rise in value last month.

Again, Celeste analysts tracked this back to an AGM update, which apparently “alleviated market concerns around short-term consumer demand”.

“Group revenue for the four months to October was 74% above the prior year while written sales orders were 55% above the prior year,” the memo read.

“Ongoing Plush synergy capture saw group gross margins expand to 61.3% from 59.5% in June 2022, resulting in expected 1H23 net profit of between $56 million and $59 million, [which is] a 57% to 66% increase on the prior year.”

Similar to Judo, one good month still leaves Nick Scali shares a long way from breaking even in 2022. The stock is more than 29% lower than where it started the year.

The Celeste team sees a viable growth plan in the Nick Scali business.

“Management intends to continue their store rollout strategy, aiming to open at least six new stores across the group in FY23.”

Focus on the long-term growth

Infomedia Limited (ASX: IFM) makes software for the vehicle parts and services sector.

Unfortunately, its share price plummeted a painful 10.2% over November.

Again, the AGM was to blame, with the company downgrading its revenue guidance at the event.

“Infomedia noted that the range would be $127 million to $132 million, down from previous expectations of $131 to $139 million,” read the Celeste memo.

“The slippage has been driven by a slowdown in ecommerce transactions, in part, an unwind of the previous year’s covid driven spike.”

But the Celeste analysts were not worried about that. They were focused on what the future would bring.

“More relevant was the announcement that Infomedia data offerings continue to see double-digit revenue growth,” read the memo.

“The new CEO is seeking to address the legacy cost base while at the same time driving the sales discussion and negotiations towards the higher level management at the major global auto players.”

The Infomedia share price is down 28.8% year to date.

The post Naughty or nice? Buy 3 ASX shares heading in opposite directions, says fund appeared first on The Motley Fool Australia.

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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 Infomedia and Judo Capital. The Motley Fool Australia has recommended Infomedia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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On Friday, the S&P/ASX 200 Index (ASX: XJO) finished the week with a solid gain. The benchmark index rose 0.5% to 7,213.2 points.

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

ASX 200 expected to fall

The Australian share market looks set to give back Friday’s gains on Monday following a poor finish to the week on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 35 points or 0.45% lower this morning. On Wall Street, the Dow Jones was down 0.9%, the S&P 500 fell 0.7%, and the NASDAQ dropped 0.7%.

Oil prices drop

ASX 200 energy shares Santos Ltd (ASX: STO) and Woodside Energy Group Ltd (ASX: WDS) could have a soft start to the week after oil prices dropped again on Friday night. According to Bloomberg, the WTI crude oil price was down 0.6% to US$71.02 a barrel and the Brent crude oil price fell 0.1% to US$76.10 a barrel. Oil prices tumbled 11% last week amid concerns over demand.

Woolworths to acquire Petstock?

The Woolworths Group Ltd (ASX: WOW) share price will be one to watch this morning amid speculation the retail conglomerate is on the verge of making a major new acquisition. According to the AFR, Woolworths is close to signing an agreement to acquire pet accessories and food retailer Petstock. No acquisition price was provided but it is likely to come with a sizeable price tag given Petstock reportedly achieved sales of almost $700 million and profit before tax of $54 million in FY 2022.

HMC rated as a buy

The HMC Capital Ltd (ASX: HMC) share price could be great value according to analysts at Morgans. This morning, the broker has retained its add rating with a $5.85 price target. This implies almost 30% upside for the property development company’s shares. It said: “The share price has been impacted by the overall REIT sector underperformance this year, however with a capital light business model and a track record for executing on complex deals we back management to deliver on its targets.”

Gold price rises

Gold miners such as Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) could have a decent start to the week after the gold price pushed higher on Friday. According to CNBC, the spot gold price was up 0.5% to US$1,810.7 an ounce during the session. The gold price rose on hopes the US Federal Reserve could still slow its rate hikes.

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

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More reading

• Here’s how I’d invest $20,000 in ASX 200 shares for a 7% dividend yield
• The difference between uncertainty and risk’: 5 ASX shares this fundie is backing for 2023
• Here are the top 10 ASX 200 shares today
• What’s driving ASX 200 gold shares to outperform this week?
• Here are the 3 most heavily traded ASX 200 shares on Friday

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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Last week saw a number of broker notes hitting the wires once again. Three buy ratings that investors might want to be aware of are summarised below.

Here’s why brokers think investors ought to buy them next week:

Corporate Travel Management Ltd (ASX: CTD)

According to a note out of Macquarie, its analysts have retained their outperform rating but trimmed their price target on this corporate travel specialist’s shares to $19.95. Macquarie notes that industry data shows that corporate travel activity softened in the United States in November. While the broker suspects that this could mean the company falls short of its expectations during the first half, it retains its buy rating due to its attractive valuation. The Corporate Travel Management share price ended the week at $14.09.

Maas Group Holdings Ltd (ASX: MGH)

A note out of Goldman Sachs reveals that its analysts have initiated coverage on this property, construction, and infrastructure solutions provider’s shares with a buy rating and $4.20 price target. Goldman believes that Maas is in a transition phase and will see higher quality real estate income become the largest source of earnings in the next three years. And with its shares trading at 10x forward earnings, it believes there’s a lot of value on offer here. The Maas share price was fetching $2.51 at Friday’s close.

Telstra Group Ltd (ASX: TLS)

Analysts at Morgan Stanley have retained their overweight rating on this telco giant’s shares with an improved price target of $4.75. According to the note, the broker believes Telstra’s outlook is positive thanks to the recent shareholder approval of a restructure. The broker highlights that this means the company has the opportunity to unlock value by selling some of its infrastructure assets. If this happens, Morgan Stanley suspects that a major share buyback could be undertaken. The Telstra share price ended the week at $4.00.

The post Top brokers name 3 ASX shares to buy next week appeared first on The Motley Fool Australia.

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More reading

• I’d aim for $1 million, buying just 10 cheap ASX shares
• 2 safe and reliable ASX dividend shares to buy for 2023: analysts
• 10 ASX shares to buy in 2023
• Why Domino’s, New Hope, PolyNovo, and Telstra shares are pushing higher today
• Where will Telstra shares be in 5 years?

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 Australia has recommended Corporate Travel Management. 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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Both the Vanguard Australian Shares Index ETF (ASX: VAS) unit price and BHP Group Ltd (ASX: BHP) share price look well-placed to end 2022 with a bang.

Since the end of September 2022, the Vanguard Australia shares Index ETF has lifted around 10%. Over the same time period, BHP shares have surged more than 20%.

It has been a strong period of time for Australia’s biggest business, which has a commodity portfolio across iron ore, copper, nickel, coal and potash.

It’s an interesting question to consider whether the exchange-traded fund (ETF) or the resources giant will do better. Keep in mind that BHP holds the biggest position in the Vanguard Australian Shares Index ETF portfolio – at the end of October 2022, it comprised 9% of the portfolio.

The case for the BHP share price

It’s important to note that 2022 hasn’t finished yet, so if BHP shares keep rising from here, it could be harder for the company to outperform the ASX share market in 2023.

The company’s success is heavily linked to commodity prices. Whether the price of iron ore is US$50 per tonne or US$150 per tonne, BHP still needs to pay for the people, machinery, trucks, trains and boats needed to get the resources out of the ground and to its industrial customers.

When the iron ore price goes up, it largely adds straight onto the company’s cash flow and net profit after tax (NPAT), after paying more to the government. Of course, a lower resource price can wipe off the profit.

According to reporting by the Australian Financial Review, the broker Citi has suggested that the iron ore price could go as high as US$150 per tonne by June 2023 as China relaxes its COVID-19 restrictions.

This means people in Shanghai, for example, no longer need a negative COVID test to enter “most public places”. And a negative test is no longer required for people to enter a Beijing-based supermarket or commercial building.

There is also work being done by Chinese officials to help Chinese property developers that are in financial trouble, according to the AFR.

The broker Morgans thinks that the BHP share price has already priced in much of the China recovery potential, which is why it only rates it as a hold, with a price target of $44.80. That implies a drop of around 5%.

On Morgans numbers, the BHP share price is valued at under 10x FY23’s estimated earnings with a potential grossed-up dividend yield of 8.8%.

The case for the Vanguard Australian Shares Index ETF

There are some major iron ore miners within the S&P/ASX 300 Index (ASX: XKO) – the index that the ETF tracks – like BHP, Fortescue Metals Group Limited (ASX: FMG) and Rio Tinto Limited (ASX: RIO).

The big question for the non-iron ore miners is how the Australian economy performs in 2023.

A big part of the weighting of the ASX 300 is to banks like Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), Australia and New Zealand Banking Group Ltd (ASX: ANZ), Westpac Banking Corp (ASX: WBC), Bank of Queensland Limited (ASX: BOQ) and Bendigo and Adelaide Bank Ltd (ASX: BEN).

Interest rates have jumped. In some ways, this can help banking profitability because loan rates are rising quickly, faster than savings rates. But there’s also the problem of potentially higher arrears if borrowers can’t handle the higher repayments.

Some banks are now saying that a big improvement in lending margins has already occurred. Higher interest rates may not lead to much of an improvement in lending margins from here.

There’s also the question of how retailers like Wesfarmers Ltd (ASX: WES) will perform if consumers have less money to spend because of inflation and higher interest rates.

My verdict

From here, I think the capital growth performance could be quite similar between the two by the end of 2023. If the interest rate is only increased by 25 basis points in 2023, I think the Vanguard Australian Shares Index ETF will outperform because the underlying businesses may see fewer negative headwinds, such as higher borrower arrears.

But, in terms of total returns, I think BHP could produce stronger returns because of the large dividend yield that it pays. This could provide a useful boost for shareholders.

The post Could the VAS ETF outperform the BHP share price in 2023? appeared first on The Motley Fool Australia.

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More reading

• Look out below! Broker tips Fortescue share price to fall 32%
• I’d buy 6 shares a week of this ASX stock for $1800 a year in passive income
• Here’s how I’d invest $20,000 in ASX 200 shares for a 7% dividend yield
• Earn passive income with these strong ASX 200 dividend shares: brokers
• Why did ASX 200 iron ore shares like BHP have such a cracking Friday

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 positions in and has recommended Bendigo And Adelaide Bank and Wesfarmers. The Motley Fool Australia has recommended Westpac Banking. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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