The Costa Group Holdings Ltd (ASX: CGC) share price has come under pressure on Monday morning.

In early trade, the horticulture company’s shares are down 14% to $1.98.

Why is the Costa share price sinking?

Investors have been selling down the Costa share price on Monday after the company released an update on its earnings guidance.

According to the release, Costa is expecting its full year earnings for the Citrus category to be considerably lower than previously forecast.

The release notes that lower quality levels across all citrus regions have continued, which has resulted in considerably lower packouts, as well as reduced volumes of first grade fruit for export. This has been driven by adverse weather conditions, including both higher rainfall and cooler temperatures.

One positive, though, is that market demand and pricing in its export destinations remain very strong which bodes well for the 2023 season.

In addition, the company notes that the effort to produce the crop in challenging conditions has also caused an increase in labour expenditure, as well as higher spraying costs in relation to pest and disease control.

What does this mean for its full-year profits?

Costa advised that it currently expect full year group EBITDA-S to be marginally ahead of last year’s results.

This will be a sharp slowdown on its first half performance, when it delivered EBITDA-S growth of 12.6%.

Management also warned that while it does not expect any additional material impact from recent heavy rainfalls experienced across the country, further downside risk is possible if the extreme adverse weather continues.

Finally, Costa also confirmed that despite its EBITDA-S being lower than previously forecast, debt levels and related ratios remain comfortably manageable for the company.

The post Why the Costa share price is crashing 14% to a 52-week low appeared first on The Motley Fool Australia.

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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 COSTA GRP FPO. 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Amazon (NASDAQ: AMZN) isn’t my favorite e-commerce stock (I prefer Shopify‘s mission to put the power of commerce back in the hands of smaller merchants). Nevertheless, I’ve been buying Amazon because I think it’s too cheap to ignore — especially when considering the company’s main breadwinner, public cloud computing pioneer AWS (Amazon Web Services).

After yet another dip for the stock in the last month or so, I recently went shopping for Amazon stock again, because I think the e-commerce segment is essentially a “freebie” at this point. Here’s why Amazon is a top stock to buy for the long term right now.

Valuing different business segments can be hard

As has always been the case with giant and complex businesses, Wall Street has a difficult time getting a handle on how to value Amazon. It’s a particularly hard case due to how the company attributes its revenue and operating income (or in the case of 2022, operating losses — more on that in a minute). 

Broadly speaking, sales and operating profit are broken down into “North America” and “International” (which are further segmented into online and physical store sales, third-party seller services, advertising, and subscriptions), and also “AWS.” 

The problem is these operating segments couldn’t be more different. North America and International are largely consumer-facing e-commerce businesses, with some lucrative services like digital ads riding sidecar. As impressive as these businesses are, Amazon’s e-commerce empire doesn’t really pay the bills for shareholders these days. That’s the job of AWS, the high-tech cloud titan that’s still booming and ridiculously profitable. 

Amazon Segment	Trailing 12-Month Revenue Q2 2022	Trailing 12-Month Revenue Q2 2021	YoY Change
North America	$291.6 billion	$266.6 billion	9.4%
International	$122.2 billion	$124.0 billion	(1.4%)
AWS	$72.1 billion	$52.7 billion	36.9%
Total	$485.9 billion	$443.3 billion	9.6%

Data source: Amazon. 

Amazon Segment	Trailing 12-Month Operating Income (Loss) Q2 2022	Trailing 12-Month Operating Income (Loss) Q2 2021	YoY Change
North America	($1.5 billion)	$11.8 billion	N/A
International	($5.6 billion)	$2.4 billion	N/A
AWS	$22.4 billon	$15.5 billion	45.0%
Total	$15.3 billion	$29.6 billion	(48.4%)

Data source: Amazon. 

In the first half of 2021, AWS generated over half of Amazon’s overall operating profit, even though it accounted for just 12% of total revenue. Things have changed dramatically this year as e-commerce has slowed, and Amazon has begun investing heavily to promote its next run of growth. Thanks to continued rapid growth in AWS, the cloud segment now makes up nearly 15% of revenue and is the only segment generating positive operating income.

Nevertheless, operating profit overall has been cut in half over the last year because of North America and International slipping back into the red. The market seems to be following this headline number and has punished Amazon stock accordingly, while overlooking the fast-and-steady advance of AWS. Shares are down over 40% from their all-time high as of this writing. 

Buy one AWS, get an e-commerce empire free

After enduring market punishment, Amazon has an enterprise value of $1.14 trillion. But here’s where things get interesting: If AWS were a stand-alone stock right now and still valued at $1.14 trillion, it would currently trade for 51 times trailing 12-month operating profit (based on AWS operating income of $22.4 billion). An expensive price tag? Sure. But not an unthinkable one considering this is a massive computing technologist that still grew its operating income at a 45% pace over the last year. Quality generally fetches a premium. 

What seems off to me is the current valuation seems overly focused on operating losses in the North America and International e-commerce segments. Sure, as stand-alone e-commerce businesses, they are no AWS. Even in mid-2021 when e-commerce was still going full-force during the pandemic, North America and International generated trailing 12-month operating income margins of just 4.4% and 1.9%, respectively (compared to an operating margin of 29.4% for AWS). Nevertheless, even at these slim margins, Amazon’s e-commerce (and related services) juggernaut can generate significant cash given the hundreds of billions in sales it does every year.

What I’m saying here is that AWS is the workhorse that’s driving Amazon’s financials, but Wall Street seems hyperfocused on the e-commerce segments that have temporarily fallen into loss-generating territory. If you believe the e-commerce segments’ red ink will be temporary, this stock looks mighty cheap. That’s especially true if AWS continues to grow and churn out a high level of profits along the way. Buy the stock now for the cloud computing business, and get Amazon’s e-commerce ecosystem as a “free” bonus.  

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Buy Amazon stock for AWS, get the e-commerce business for ‘free’ appeared first on The Motley Fool Australia.

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Nicholas Rossolillo and his clients have positions in Amazon and Shopify. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon and Shopify. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Are you looking for dividend shares to buy? If you are, then you may want to look at the ASX dividend shares listed below that have recently been named as buys by the team at Morgans.

Here’s why these ASX dividend shares could be worth considering right now:

GQG Partners Inc (ASX: GQG)

The first ASX dividend share that Morgans rates as a buy is beaten down fund manager GQG Partners.

The broker believes that its shares have fallen to a very attractive level, particularly given its strong relative investment performance. It commented:

GQG’s strong relative investment outperformance through the current market weakness should solidify the near-term flows outflow. GQG has diversified earnings (by strategy and clients); solid performance track-record; and ongoing growth prospects. In our view, the current ~10x PE (versus a sector medium-term average of ~16x) is attractive.

Morgans has an add rating and $1.93 price target on the fund manager’s shares.

As for dividends, the broker is expecting fully franked dividends per share of 7.5 cents in FY 2022 and 7.4 cents in FY 2023. Based on the current GQG share price of $1.44, this implies yields of 5.2% and 5.1%, respectively.

Telstra Corporation Ltd (ASX: TLS)

Another ASX dividend share that Morgans rates highly is telco giant Telstra. The broker likes the company due to its positive outlook and attractive valuation. It commented:

TLS currently trades on ~7x EV/EBITDA. However some of TLS’s high quality long life assets like InfraCo are worth substantially more, in our view. We don’t think this is in the price so see it as value generating for TLS shareholders. This, free option, combined with likely reputational damage to its closest peer, following a major cybersecurity incident, means TLS looks well placed for the year ahead.

Morgans has an add rating and $4.60 price target on Telstra’s shares.

In respect to dividends, its analysts are expecting fully franked 16.5 cents per share dividends in FY 2023 and FY 2024. Based on the latest Telstra share price of $3.84, this will mean yields of 4.3%.

The post Morgans names 2 ASX dividend shares to buy right now appeared first on The Motley Fool Australia.

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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 Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The AMP Limited (ASX: AMP) share price has been a strong performer in 2022. In the calendar year to date, it has risen by 19%. By comparison, the S&P/ASX 200 Index (ASX: XJO) has fallen 11% in 2022 at the time of writing.

The diversified financial business has managed to beat the ASX share market by an impressive 30%. Of course, it’s still down by more than 70% over the past five years, but this short-term performance has been a welcome change for shareholders.

How is AMP generating value for shareholders?

The business has been working on realising value for investors. This is because the company believed that AMP’s market capitalisation was significantly smaller than the total value of all of its business segments.

AMP had told investors a while ago that it was going to return money to investors, before announcing its share buyback.

For example, on 28 April 2022, the business announced it was selling its Collimate Capital’s international infrastructure equity business for an upfront $462 million and a total value of up to $699 million.

Combined with the $430 million from the sale of the domestic infrastructure equity and real estate business announced on 27 April 2022 and the $578 million from the sale of the infrastructure debt platform completed in February 2022, that valued the total Collimate Capital business at up to $2.04 billion, including the value of retained assets.

In that April announcement, AMP said that it “intends to return the majority of net cash proceeds from the recent transactions to shareholders”. It also said it would use some of the proceeds to pay down corporate debt.

Since 27 April 2022, the day before the announcement, the AMP share price has risen 16.7%.

Share buyback

In August, when AMP announced its share buyback, it said it was going to return a total of $1.1 billion to shareholders, starting with a $350 million on-market share buyback which would “commence immediately”.

A further $750 million of capital returns are planned in FY23, subject to regulatory and shareholder approval. That $750 million return is expected to be a combination of capital return, special dividend, and further on-market share buyback.

The idea of a share buyback is that the business will buy shares back from investors and that reduces the amount of shares that are on issue. Assuming the underlying value of the business doesn’t change, it increases the value of each remaining share. In theory, that should help the AMP share price.

Think of it this way, imagine someone is splitting up pies or pizzas. If the number of slices (shares) is reduced, then each slice becomes bigger for the people who get a slice. The people that still own a slice see their value increase and that means they own more of the pie.

In its latest update on 14 October 2022, AMP revealed that it had bought back more than 130 million shares, so it has already made good progress on spending that $350 million.

The AMP share price is only up by 1.7% since the actual share buyback was announced, but some investors were likely already factoring that in.

The buyback is proposed to finish on 30 June 2023. Though I think it’s possible that it could finish sooner if the business spends all of the $350 million quickly.

What next for the AMP share price?

Don’t forget that another $750 million is expected to be coming in FY23, which is more than double the size of the first buyback. This could be supportive for the business in the future.

It will be interesting to see how the business’ underlying performance goes. Will the bank segment benefit from rising interest rates? Will AMP be able to stem the outflows from its asset management?

At least for now, investors seem to be backing AMP.

The post Is the company’s buyback helping boost the AMP share price? 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 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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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) continues to be the most shorted share on the ASX with short interest of 14.75%. This is a small week on week increase. Short sellers appear concerned over the travel market recovery amid rising living costs.
• Betmakers Technology Group Ltd (ASX: BET) has seen its short interest ease to 14.3%. This betting technology company’s shares trade on lofty multiples, which could have caught the eye of short sellers.
• Block Inc (ASX: SQ2) has seen its short interest rise to 11.4%. Investors appear worried that a global recession could have an impact on this payments company’s growth.
• Megaport Ltd (ASX: MP1) has seen its short interest remain flat at 10%. This appears to have been driven by valuation concerns and ongoing weakness in the tech sector.
• Lake Resources N.L. (ASX: LKE) has short interest of 9.9%, which is down week on week again. Short sellers have doubts over this lithium developer’s DLE technology.
• Domino’s Pizza Enterprises Ltd (ASX: DMP) has seen its short interest jump to 9.3%. There are concerns that cost inflation could be weighing on its performance.
• Perpetual Limited (ASX: PPT) has seen its short interest jump to 8.7%. Short sellers may not be overly keen on its proposed $2.5 billion acquisition of rival Pendal Group Ltd (ASX: PDL).
• Nanosonics Ltd (ASX: NAN) has short interest of 8.4%, which is up week on week again. There are concerns that this infection prevention company could underperform due to a disruptive business model change in the key US market. Delays to new product launches have also hit sentiment hard.
• Magellan Financial Group Ltd (ASX: MFG) has short interest of 8.3%, which is flat week on week. This fund manager’s shares have fallen heavily this year due to significant funds under management weakness. Short sellers don’t appear to believe the worst is over.
• Breville Group Ltd (ASX: BRG) has seen its short interest rise to 8%. Investors appear concerned that the uncertain economic backdrop could impact consumer spending on kitchen goods.

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

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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 Betmakers Technology Group Ltd, Block, Inc., MEGAPORT FPO, and Nanosonics Limited. The Motley Fool Australia has positions in and has recommended Block, Inc. and Nanosonics Limited. The Motley Fool Australia has recommended Betmakers Technology Group Ltd, Dominos Pizza Enterprises Limited, Flight Centre Travel Group Limited, and MEGAPORT FPO. 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 Qantas Airways Limited (ASX: QAN) share price was amongst the most battered during the initial COVID-19 fuelled panic selling.

Not that many stocks escaped the early carnage. But with international and Aussie state borders slamming closed in early 2020, the flying kangaroo found most of its fleet suddenly grounded.

As investors panicked, the Qantas share price crashed 63.8% from 21 February through to 20 March 2020.

From there it’s been a turbulent flight higher. Though higher it has gone.

After gaining 11.4% in last week’s trading, Qantas shares are up 146.6% from that low as of Friday’s close at $5.80 per share. The stock is now only down 11% from the $6.51 it was trading at before the pandemic panic selling commenced in February 2020.

Which begs the questions, has the Qantas share price finally left COVID in its contrail? And what can investors expect from the airline’s share performance next

Can the Qantas share price keep flying higher?

The Qantas share price finished 8.7% higher last Thursday following a much stronger than expected market update.

Among the highlights, the company forecast underlying profit before tax for the first half of the 2023 financial year to fall between $1.2 billion and $1.3 billion.

Net debt also came down faster than expectations, with net debt forecast to fall to a range of $3.2 billion to $3.4 billion by the close of 2022. That’s well below the low end of Qantas’ net debt target range of $3.9 billion.

And both domestic and international capacity is climbing fast.

The strong results saw Barrenjoey increase its target for the Qantas share price from $6.60 to $7.40.

According to the broker (courtesy of The Australian Financial Review):

The Qantas market cap increased less than the improvement in the net debt position ($1bn). This, along with feedback from our investor conversations, suggests that the market remains concerned about the impact of a slowdown in consumer spending in 2H23.

We have capacity at 80% of pre-COVID levels in FY23 while demand is closer to 100%. Time will tell but, in our view, this should give Qantas some leverage to absorb a potential slowdown and given the lead time coming into a slowdown, the company is better placed to deal with this slowdown than in prior periods.

If Barrenjoey has it right, the Qantas share price could be up for a further 27.6% upside from Friday’s close.

The post Has the Qantas share price finally left COVID in its contrail? 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 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 Whitehaven Coal Ltd (ASX: WHC) share price has been on the up and up lately, driven by soaring coal prices.

A near-direct line can be drawn between the commodity’s value and the company’s bottom line. Whitehaven posted a record $1.95 billion profit and a realised average coal price of $325 a tonne in financial year 2022. Most of its revenue came from thermal coal sales.

Meanwhile, the coal producer’s stock has jumped a blistering 292% since the start of 2022. The Whitehaven share price closed Friday’s session at $10.82.

For context, the S&P/ASX 200 Index (ASX: XJO) has posted an 11% fall in that time.

Does that mean the stock is nearing its ceiling? Let’s take a look at what experts think could be in store for the ASX 200 coal favourite.

Can the Whitehaven share price continue its surge?

The Whitehaven share price has been beyond energised this year, and some experts think it could go even higher.

Though, not all are bullish.

Medallion Financial managing director Michael Wayne recently said, courtesy of Livewire, that he wouldn’t be surprised if the stock offers short-term upside. However, looking further ahead, he tips it as a sell due to its cyclical nature and the risk a recession could bring to coal prices, saying “the long-term outlook for coal still remains clouded”.

That sentiment echoes a similar warning from Australia and New Zealand Banking Group Ltd (ASX: ANZ) analysts.

ANZ senior commodity strategist Daniel Hynes recently warned that, while European demand has put upwards pressure on coal prices, increasing production in China could weigh on the commodity ahead of winter’s peak.

But Hayborough Investment Partners’ partner and portfolio manager Ben Rundle doesn’t appear worried. He said, via Livewire:

The company is just absolutely making so much cash flow [and] … there’s no supply-side response coming in the coal market. So, I think that price stays a lot higher for a lot longer. 

The expert also noted the buyback currently underway at Whitehaven, saying it will likely support the company’s share price.

Additionally, the federal government expects this financial year to be a record one for coal exports. They’re expected to reach $120 billion, with thermal coal making up the majority.  

Brokers’ outlook

Turning to brokers, Macquarie expects big things from Whitehaven shares, slapping them with an outperform rating and a $12 price target, as my Fool colleague James reports. That represents a potential 10.9% upside.

The broker also believes the company could more than double its dividends this financial year, tipping it to offer $1.07 per share. That’s expected to rise once again to $1.25 per share in financial year 2024.

Though, Goldman Sachs placed a neutral rating and a $9.60 price target on the stock back in August. The broker said it believes its Whitehaven shares are fairly valued and expects coal prices to fall in 2023.

The post Whitehaven Coal shares: Buy, hold, or fold? 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 positions in and has recommended Goldman Sachs. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Tesla (NASDAQ: TSLA) stock is one of the most followed stocks in the market. That’s not surprising given shares of the electric-vehicle (EV) pioneer have performed phenomenally over the longer term. 

Shares have rocketed from their initial public offering (IPO) split-adjusted price of about $1.13 in June 2010 to $204.99 on Oct. 14, 2022. This performance has transformed an initial investment of $1,000 into about $181,407. By comparison, the S&P 500 index has turned a $1,000 investment into $4,250 over this period.

Before considering investing in Tesla, you should make sure you have a good handle on how it makes its money.  

Where is Tesla’s revenue coming from? 

The two charts that follow are derived from the company’s second-quarter results. In the quarter, total revenue jumped 42% year over year to $16.9 billion and adjusted net income surged 62% to $2.62 billion, which translated to earnings per share increasing 57% to $2.27.

Segment	Q2 2022 Revenue	Percentage of Total Q2 2022 Revenue*
Automotive	$14.60 billion	86%
Energy generation and storage	$866 million	5%
Services and other	$1.47 billion	9%
Total	$16.93 billion	100%

Data source: Tesla. *Calculated by author.

The auto category includes sales and leasing of new models of the company’s four EVs, the Model S sedan, the Model X SUV, the Model 3 sedan, and the Model Y crossover. These EVs are equipped with Tesla’s advanced driver-assistance system, Autopilot, whose capabilities are increased via over-the-air software updates. 

Tesla recently released its vehicle production numbers for the third quarter. In Q3, it produced 365,923 vehicles and delivered 343,830 vehicles. These numbers were up 54% and 42%, respectively, from the year-ago period.

The energy generation and storage business sells solar panels and solar roof tiles for homes, and energy-storage products for residential, commercial, and electric utility grid use. 

Tesla’s services and other segment includes a variety of items, the most notable being non-warranty after-sales vehicle services and sales of used vehicles.

Where is Tesla’s gross profit coming from?  

Segment/Category	Q2 2022 Gross Profit	Q2 2022 Gross Margin	Percentage of Total Q2 2022 Gross Profit*
Automotive	$4.08 billion	27.9%	96.4%
Energy generation and storage	$97 million	11.2%*	2.3%
Services and other	$56 million	3.8%*	1.3%
Total	$4.23 billion	25%	100%

Data source: Tesla. *Calculated by author. Gross margin = gross profit divided by revenue. Numbers based on generally accepted accounting principles (GAAP).

In the second quarter, Tesla’s auto segment accounted for 85% of its total revenue and an outsized 96% of its total gross profit. So, at this point, investors following the stock just need to pay attention to the auto business.

The energy generation and storage business has huge potential, thought its current contribution to the company’s profit is close to insignificant. 

What’s going on with services and other? Don’t be concerned about this seemingly laggard of a category. Tesla doesn’t aim to make money on some of the larger components of this category, notably on vehicle servicing. So, this category can be thought of as supporting the auto segment.

Tesla still has a long runway for growth

Tesla’s core electric car business still has massive growth potential. Consider that at the end of 2021, the percentage of the world’s light-duty vehicles on the road that are all-electric or plug-in hybrids was less than 2%.

Beyond its existing electric car and energy generation/storage businesses, Tesla has other avenues for growth. On the immediate horizon is the launch of its Semi Truck. On Oct. 6, CEO Elon Musk tweeted that Tesla is starting production of this electric Class 8 truck, which reportedly has a range of 500 miles. He said that PepsiCo will get its initial deliveries (quantity not specified) on Dec. 1. 

Investors will get material news soon: Tesla is slated to report its Q3 results after the market close on Wednesday, Oct. 19. An analyst conference call is scheduled for the same day at 5:30 p.m. ET. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post How does Tesla make money? appeared first on The Motley Fool Australia.

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Beth McKenna 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 Tesla. 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.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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With the volatility that the global share market has seen in 2022, I think it’s a good time to go looking for ASX opportunities. However, the Australian dollar has been falling. Does this mean it’s a good time to be looking at the Vanguard MSCI Index International Shares ETF (ASX: VGS)?

For readers who don’t know, this exchange-traded fund (ETF) looks to give investors exposure to the global share market, mostly to western markets such as the US, the UK, Canada, France, and Switzerland. It also has investments in Japan, Hong Kong, and Singapore.

What’s going on with the Vanguard MSCI Index International Shares ETF?

Since the beginning of the year, the fund’s unit price has dropped around 15%.

The performance of an ETF is dictated by its underlying holdings.

In this ETF, there are approximately 1,470 holdings offering plenty of diversification across countries and sectors.

I won’t write out a huge list of the holdings, but I’ll mention the fund’s largest holdings at 30 September 2022. They were Apple, Microsoft, Amazon.com, Tesla, Alphabet, UnitedHealth, Johnson & Johnson, Exxon Mobil, and Berkshire Hathaway.

Many share prices have dropped in value over 2022 as investors factor in higher interest rates when thinking about valuations. Why do interest rates have an effect on asset prices? Legendary investor Warren Buffett once said:

The value of every business, the value of a farm, the value of an apartment house, the value of any economic asset, is 100% sensitive to interest rates because all you are doing in investing is transferring some money to somebody now in exchange for what you expect the stream of money to be, to come in over a period of time, and the higher interest rates are the less that present value is going to be. So every business by its nature…its intrinsic valuation is 100% sensitive to interest rates.

What about the Australian dollar?

The Vanguard MSCI Index International Shares ETF has a weighting of around 70% to the US share market. That means the performance of the ETF’s US shares has a significant impact on the overall portfolio.

But the reduction of the Australian dollar against the US dollar has had the effect of cushioning the decline of the unit price.

I think this can be illustrated by comparing the S&P 500 Index (INDEXSP: .INX) to the iShares S&P 500 ETF (ASX: IVV), which is an ETF that aims to track the same index for Aussies.

In 2022, the S&P 500 Index dropped by 25%. This compares to the ASX-listed iShares S&P 500 ETF return of a drop of just 12.4%. This happened because, at the start of the year, the Australian dollar was worth US 72 cents but has now dropped to US 62 cents.

So, in Australian dollar terms, Aussies have seen less of a drop in their portfolio value.

Is it a good time to buy?

While a weaker Australian dollar has cushioned Aussie from bad returns, it now means that we’re not able to buy as many international shares, particularly US shares, as before.

If, or when, the Australian dollar strengthens against the US dollar, this would also be a headwind for returns for Aussies in Australian dollar terms. So, in that sense, the significantly-weaker Australian dollar has made it a bit more expensive to go shopping for overseas shares.

However, at the same time, it’s worth noting that US shares have dropped. Even with the weaker Aussie dollar, the Vanguard MSCI Index International Shares ETF has still dropped by 15%. As such, I think it’s materially better value than it was at the start of the year.

The post The AUD is sinking, so is this a good time to buy Vanguard International Shares (VGS) ETF? appeared first on The Motley Fool Australia.

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• This ASX ETF was my first investment, and I’ll be holding it for the long term

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Microsoft, Tesla, and Vanguard MSCI Index International Shares ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Vanguard MSCI Index International Shares ETF, and iShares Trust – iShares Core S&P 500 ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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There has been widespread volatility with All Ordinaries Index (ASX: XAO), or All Ords, shares since the beginning of 2022 amid concerns about inflation and higher interest rates. Indeed, there are fears that ongoing negative economic effects could lead to a recession.

Perhaps it was inevitable that some retailers weren’t going to keep posting record profits. And maybe demand for buying cars will reduce.

But, while share prices are hard to predict, is it possible to find businesses that could see their profits barely affected by a recession – perhaps even grow?

I think there are a few places we can look to.

Food

We all need to eat. I believe that businesses that sell food to consumers could continue to see decent results. Certainly, I think the demand will still be there.

In my opinion, food is one of those areas where people will keep spending, even if they have to change to cheaper alternatives. Supermarkets are an obvious suggestion here, such as Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW).

But, I also think that KFC and Taco Bell operator Collins Foods Ltd (ASX: CKF) could be another defensive idea.

Farmland real estate investment trust (REIT) Rural Funds Group (ASX: RFF) could be another defensive All Ords ASX share idea, thanks to its long-term rental contracts and the ongoing tenancy by leading farming businesses.

Energy

There doesn’t seem to be an end in sight to the Ukraine conflict and energy prices remain high. The world needs energy, even if demand were to drop a little. I think that Woodside Energy Group Ltd (ASX: WDS) could keep generating good earnings, particularly with the All Ord ASX share’s LNG division as Europe looks for alternative sources of energy away from Russia.

APA Group (ASX: APA), the owner of various energy assets including a large gas pipeline network, could also keep generating good cash flow as it transports half of Australia’s natural gas.

Telecommunications

People’s phones and home internet are very important bills to pay. Indeed, my work depends on it. Communication is vitally important. And so on. Nearly every business needs the internet for some reason.

I think Telstra Corporation Ltd (ASX: TLS), TPG Telecom Ltd (ASX: TPG), and Aussie Broadband Ltd (ASX: ABB) all could offer defensive earnings, particularly with the NBN transition now over.

Telstra is expecting to grow its earnings per share (EPS) over the next few years.

Healthcare

People don’t choose when to get sick, but I do think people (and the government) would keep paying to access healthcare services. All Ords ASX share names like CSL Limited (ASX: CSL) and Sonic Healthcare Ltd (ASX: SHL) (excluding COVID-19 testing) are two names that I think won’t see much change in demand.

Gambling

There is research that shows that “when people are experiencing financial difficulties during economic recessions, the possibility to improve their financial situation by winning large jackpots with low initial stakes becomes more enticing”.

The Lottery Corporation Ltd (ASX: TLC) is the business that operates Australia’s lotteries through The Lott.

Funerals

There are only two things certain in life – death and taxes, as the saying goes.

While it’s a bit morbid to think about owning All Ords ASX shares that are funeral operators, they could provide defensive earnings. Demand is based on deaths rather than economic factors.

Within this sector are names like InvoCare Limited (ASX: IVC) and Propel Funeral Partners Ltd (ASX: PFP).

Auto parts

Finally, Bapcor Ltd (ASX: BAP) is an interesting one in my opinion. It’s the biggest auto parts business in Australia and New Zealand with a number of brands like Burson and Autobarn.

I think that people are more likely to delay a new car purchase in leaner times. This means trying to make their current car last longer, which could mean buying replacement parts when needed. This, in turn, could be good for Bapcor’s earnings.

The post Which ASX All Ords shares could perform well in a recession? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in RURALFUNDS STAPLED. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Aussie Broadband Limited, CSL Ltd., and Collins Foods Limited. The Motley Fool Australia has positions in and has recommended APA Group, COLESGROUP DEF SET, RURALFUNDS STAPLED, and Telstra Corporation Limited. The Motley Fool Australia has recommended Aussie Broadband Limited, Bapcor, Collins Foods Limited, Propel Funeral Partners Ltd, Sonic Healthcare Limited, and TPG Telecom Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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