Stock Pick – Page 2703 – Curated Stock Market News

Why has the iron ore price taken a hit this week?
The iron ore price is dropping and this is hitting the valuation of miners. For example, over the last two trading sessions, the Fortescue Metals Group Limited (ASX: FMG) share price is down 8%. BHP Group Ltd (ASX: BHP) shares are down 1.3%, and the Rio Tinto Limited (ASX: RIO) share price is down 2.5%.

One thing to remember with commodity businesses is that they are heavily reliant on the commodity price for short-term profitability and investor sentiment.

Why the iron ore price matters

Think about this – if it costs a miner US$20 to produce one tonne of iron ore and it can sell that iron for US$100 per tonne, then that’s a good amount of operating profit for the miner. If the iron ore price rose to US$110 per tonne, but it still costs US$20 to produce one tonne, then that extra US$10 is mostly extra profit for the business, aside from paying more to the government.

But, the same is true when the commodity falls in value. A reduction of US$10 per tonne would largely cut into net profit.

What’s happening?

According to reporting by Bloomberg, on Tuesday the iron ore price in Singapore dropped 2.8% lower to US$94.25 per tonne.

The news outlet noted that the start of China’s peak construction for infrastructure and steel-related demand is usually in September and October. But, the resurgence of the iron ore price hasn’t occurred.

Bloomberg reported that the Chinese economy is dealing with a downturn in housing as well as COVID-19 lockdowns. Real estate developers reportedly saw new home sales decline by a quarter in September.

Steel mills are apparently only buying what they need, rather than restocking, according to reporting by Bloomberg.

Analyst Kamal Ailani at Dow Jones business McCloskey by OPIS suggested that the iron ore price could fall further from here. However, it’s still “well supported around $85 a tonne”. If it were to drop below that price, smaller iron ore miners may need to reduce production because of higher costs.

Are the ASX iron ore mining shares an opportunity?

I think it’s a good idea to consider the cyclical nature of the iron ore price, and most commodities.

It’s impossible to say when a commodity price will see a downturn. Or an upswing.

But, I do think that declines can prove to be buying opportunities with resource businesses. Iron ore is an important part of steelmaking. Steel has many uses, though its demand isn’t going to be consistent every single month.

If the iron ore price goes below US$90 per tonne, I think this could cause iron ore miners to drop in value as well. Even at a lower price, I think Fortescue shares, BHP shares and Rio Tinto shares are all capable of producing decent dividends for shareholders at a lower iron ore price while investors wait for another upswing.

I’m a shareholder in Fortescue because of its green energy efforts, namely green hydrogen.

I think BHP is attractive because of its diversified portfolio, which includes copper, nickel, potash and coal. However, it did just lose a High Court appeal. The appeal was to “block shareholders who are not Australian residents from participating in a class action against the company,” according to reporting by the ABC.

Rio Tinto shares could be an opportunity as well, as the miner increases its participation in decarbonisation-linked commodities with copper and lithium exposure.

The post Why has the iron ore price taken a hit this week? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Fortescue Metals Group Limited. 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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13 October 2022
The 1 cryptocurrency that’s on fire today
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.

What happened

The broader cryptocurrency market has been seeing rather low levels of volatility of late. Whether that’s investors believing that much of the macro news that’s already impacted markets has been priced in or not remains to be seen. However, with most tokens hovering around flat today, and the overall market down only 0.3% at the time of writing, many are focusing on tokens that are making unusual moves.

One such token that fits this criteria today is Hedera Hashgraph (CRYPTO: HBAR). The world’s 36th-largest token by market capitalization, Hedera has surged 6.2% higher over the last 24 hours as of 1:30 p.m. ET. This is the largest upside move of any token today.

Recent reports that Hedera has seen developer interest in its enterprise-grade network surge may be behind this move. According to recent data from Sentiment, Hedera is currently in third place in terms of development activity, behind Polkadot and Cardano.

So what

The race for developer talent to build out decentralized applications on Layer 1 networks like Hedera is on. The fact that so many are choosing this lesser-known (but significant) blockchain is something worth diving into. I intend to do a deep dive on this blockchain project at some point moving forward. My interest has been piqued by this move.

The idea behind Hedera is relatively simple. Via an open-source network, Hedera allows developers to compete for the ability to deploy decentralized applications, with the same competition applying to users vying for transactions on this network. Some level of competition can spur interest among a certain personality type, making this network intriguing, to say the least.

Now what

On days like today, when broadly bearish sentiment continues to rein over any indications that bullish catalysts can be on the horizon, upside moves such as the one seen in Hedera are worth noting. This is a crypto project I’ve yet to explore deeply, but I intend to do so, on the basis of what appears to be relatively strong demand for these tokens.

When times get tough, projects that stand out tend to get even more attention. Such appears to be the case with Hedera today.

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

The post The 1 cryptocurrency that’s on fire today appeared first on The Motley Fool Australia.

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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.

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

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13 October 2022
Why are Flight Centre shares still the most popular among ASX short-sellers?
Shares in Flight Centre Travel Group Ltd (ASX: FLT) have come in as the market’s most shorted every week of 2022 so far.

As of The Motley Fool Australia’s latest weekly shorting breakdown, the S&P/ASX 200 Index (ASX: XJO) travel giant had a short position of 14.6%. That’s around 10% higher than it was prior to the pandemic.

Meanwhile, the Flight Centre share price has dumped 20% since the start of the year to trade at $14.88 at Wednesday’s close. Comparatively, the ASX 200 has fallen 12% so far this year.

So, with that tumble under its belt, why are short-sellers seemingly expecting the travel agent’s stock to continue falling? Let’s take a look.

What attracts short-sellers to Flight Centre shares?

Flight Centre shares have been a magnet for short-sellers this year, with its short position peaking at a whopping 18.5% in April.

And the company’s latest earnings release might have the answer. The company didn’t provide financial year 2023 guidance when it dropped its full-year results in August.

Instead, it said a lack of capacity is impacting airfare pricing while cancellations, delays, and high demand are fuelling a “renaissance of the expert travel advisor”.

Meanwhile, Morgans senior analyst Belinda Moore said such reduced capacity sees Flight Centre with less bargaining power with airlines.

Additionally, Moore said “cyclical factors”, such as high airfares, business mix changes, and lower commissions, will weigh on the company’s margins in the near term.

Morgans has a hold rating on Flight Centre shares, dropping its price target to $18.25 following the company’s earnings, my Fool colleague James reports.

And there are more reasons investors might be sceptical of the stock’s future.

Monash Investors director and co-founder Simon Shields appears bearish. Monash is among those shorting Flight Centre shares, the fundie said, courtesy of Livewire.

Shields noted the fund’s shorting of the stock comes down to “structural reasons”.

While the travel industry is recovering, Flight Centre is struggling against lower commissions from airlines and inflationary pressures on its brick-and-mortar retail model, the fundie said.

However, not all are so doubtful. Goldman Sachs has tipped the stock to rise to $19.60. Though, the top broker hasn’t gone so far as to recommend Flight Centre as a buy, instead maintaining its neutral rating.

The post Why are Flight Centre shares still the most popular among ASX short-sellers? 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 Flight Centre Travel 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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13 October 2022
Qantas share price soars 12% on stellar market update
The Qantas Airways Limited (ASX: QAN) share price is taking off on Thursday morning.

At the time of writing, the airline operator’s shares are up 12% to $5.78.

Why is the Qantas share price soaring?

Investors have been bidding the Qantas share price higher today after the company released an impressive market update.

According to the release, strong travel demand is accelerating Qantas’ recovery from the COVID crisis, which allowing the company to keep investing for customers and its people while also strengthening its balance sheet.

Based on forward bookings, current fuel prices, and latest assumptions about the second quarter, the company expects underlying profit before tax of between $1.2 billion and $1.3 billion for the first half of FY 2023.

This follows five consecutive halves of heavy losses due to the pandemic and cumulative statutory losses of $7 billion.

Another positive is that Qantas expects its net debt to fall to between $3.2 billion and $3.4 billion at 31 December, which is below the bottom of the target range of $3.9 billion.

The release also reveals that the Qantas Loyalty business is expected to post record earnings for the first half. This puts the business on track to reach its FY 2023 EBIT target of $425 million to $450 million.

Market conditions

Qantas also provided investors with an idea of what is happening in the travel market right now.

It advised that domestic travel demand remains strong across all categories. Revenue intakes for business purposes are over 100% of pre-COVID levels and leisure intakes have further strengthened to over 130%. Qantas’ yields from international markets are also very strong but are expected to moderate as Qantas and other carriers steadily increase capacity.

Group International capacity is now expected to increase from 61% of pre-COVID levels in first half of FY 2023 to 77% in the second half. This is largely determined by the ability to return additional A380s from storage and required maintenance, as well as the delivery of new aircraft.

Group Domestic capacity will be 94% of pre-COVID levels for the first half, growing to around 100% for the second half. This is six percentage points below previous capacity guidance, which is due to management’s plan to protect the sustained improvement in operational performance as the broader industry recovers.

Speaking of which, Qantas’ on time performance and cancellations have continued to improve. October’s on time performance is currently 75% and cancellations are at just 1.7%. The latter is market leading and better than pre-COVID levels. Mishandled bags remain low at 6 per 1000 passengers in September and into October.

And while things haven’t been quite as positive for the Jetstar business, the release notes that its performance has improved greatly this month.

Management commentary

Qantas CEO, Alan Joyce, commented:

It’s been a really challenging time for the national carrier but today’s announcement shows how far we’ve come. Since August, we’ve seen a big improvement in our operational performance and an acceleration in our financial performance.

It’s clear that maintaining our pre-COVID service levels requires a lot more operational buffer than it used to, especially when you consider the sick leave spikes and supply chain delays that the whole industry is dealing with. That means having more crew and more aircraft on standby and adjusting our flying schedule to help make that possible, until we’re confident that extra support is no longer needed.

Qantas’ operations are largely back to the standards people expect, and Jetstar’s performance has improved significantly in the past few weeks and will keep getting better with the extra investments we’re making.

The post Qantas share price soars 12% on stellar market update 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 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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13 October 2022
Broker says Lake Resources share price can double in 12 months
The Lake Resources N.L. (ASX: LKE) share price is dropping on Thursday.

In morning trade, the lithium developer’s shares are down 2% to 99 cents.

Where next for the Lake Resources share price?

Today’s decline by the Lake Resources share price could be short-lived according to a broker note out of Bell Potter this morning.

The note reveals that the broker remains very positive on the lithium developer following the announcement of a new offtake agreement and equity investment.

This has seen Bell Potter retain its speculative buy rating with a slightly trimmed price target of $2.52.

Based on the current Lake Resources share price, this suggests that investors could more than double their money over the next 12 months.

Though, Bell Potter warns that its speculative risk rating recognises a higher level of risk and volatility of returns.

What did the broker say?

Bell Potter highlights that Lake Resources has signed a conditional 25ktpa offtake and 10% equity agreement with SK On. This follows a recent deal with WMC Energy, which is also conditional, for the same offtake and equity.

It was pleased with the agreements and is now waiting for a successful demonstration of the DLE technology to de-risk matters.

It commented:

LKE’s Kachi lithium project in Argentina is strategic in terms of scale, applied technology and uncommitted product offtake. Demonstrating the feasibility of ion exchange lithium extraction is key to de-risking the project; with success likely to disrupt traditional brine lithium production. The technology also brings significant ESG benefits including less land disturbance and water consumption. Key near term value catalysts include Kachi demonstration plant performance and a definitive feasibility study by the end of 2022, then progressing through to product qualification, binding offtake and financing from early 2023 for a subsequent final investment decision.

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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 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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13 October 2022
If I’d invested $5,000 in Vanguard’s VAS ETF at the start of 2022, here’s what I’d have now
The Vanguard Australian Shares Index ETF (ASX: VAS) has seen plenty of volatility this year, along with the global share market.

For readers who don’t know, this exchange-traded fund (ETF) is an investment that tracks the S&P/ASX 300 Index (ASX: XKO). This means it aims to track the combined return of 300 of the biggest businesses in Australia.

It gives investors exposure to names like BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), CSL Limited (ASX: CSL) and National Australia Bank Ltd (ASX: NAB).

The ASX has not been immune to declines

While some share markets have seen more pain this year, the ASX has experienced its fair share of a drop. The United States share market has fallen even further because of the high weighting toward technology names. Tech valuations have typically been hit harder because of inflation and rising interest rates.

But, getting back to the Vanguard Australian Shares Index ETF, since the start of 2022 it has actually dropped by 15% in value.

That means that $5,000 would have fallen by $750 to $4,250. Ouch.

But, remember that short-term movements are not necessarily important. Hopefully, many investors have chosen to put their money to work in the share market for longer than 10 months. What happens in 2022 isn’t really important if an investor’s timeframe is thinking ahead to 2040 or even 2030.

It is common for the ASX share market to go through periods of volatility, we just don’t know when they’re going to happen. But, it may be possible to find attractive investment opportunities at times like this.

Don’t forget about the investment income

Australian companies like to pay dividends to investors, partly so they can unlock the tax-effective franking credits.

As an ETF, the Vanguard Australian Shares Index ETF should pass through to investors the dividends and distributions that it receives. So, while the unit price of Vanguard Australian Shares Index ETF has dropped 15%, the distributions mean the total return has been less painful.

There have been three distributions announced in 2022. Including the quarterly payment due on 18 October 2022, this amounts to approximately $5.61 per unit. This equates to another 5.85% of return (not including franking credits).

That would give a cash return of just over $290, meaning investors would have $4,542.50 at the time of writing.

What’s next for the Vanguard Australian Shares Index ETF?

ETFs track the returns of the underlying investments. So, this ETF’s upcoming performance will be entirely decided by the returns generated by the ASX’s blue chips.

There will be a couple of big factors that affect the shorter-term returns.

For the big miners, it could depend on what direction the iron ore price goes.

With the ASX bank shares, rising interest rates could be the most important thing. On the one hand, higher rates may increase lending margins, but in the longer term it may lead to higher loan arrears. Will the positive or negative side impact the banks (and investor sentiment) more?

Due to the sector make-up of the ASX, I don’t think the Vanguard Australian Shares Index ETF is going to fall as much as the Betashares Nasdaq 100 ETF (ASX: NDQ), which is largely tech. The Betashares Nasdaq 100 ETF is down by 27% this year.

The post If I’d invested $5,000 in Vanguard’s VAS ETF at the start of 2022, here’s what I’d have 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 BETANASDAQ ETF UNITS and CSL Ltd. The Motley Fool Australia has positions in and has recommended BETANASDAQ ETF UNITS. 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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13 October 2022
Building a share portfolio as a young investor? Here’s where I’d start
Starting to invest in ASX shares as a beginner can seem daunting. There is a lot of information out there. Hopefully, by the end of this article, things will seem a little clearer.

I think a better way of thinking about shares is actually to call them businesses – when we talk about the share market, we’re really just talking about the business market.

Shares are not just gambling chips that move around in price for no reason over the years. We’re talking about, and are able to buy, small pieces of businesses.

Long-term returns have been good

Past performance is not a reliable indicator of future returns. However, over the ultra-long-term, ASX shares have typically returned an average of 10% per annum. Of course, that’s just an average. One year might see a 10% fall and another year could see a 20% rise.

Readers can play around with this tool from Vanguard which shows how well different asset classes have performed over time.

Compounding is a very powerful tool when it comes to building wealth. Compounding simply means when interest earns interest. Over many years, it can build into very large numbers. Moneysmart has a useful compound calculator that people can use.

For example, $1,000 turns into almost $2,600 after a decade of returns of an average of 10% per year. After 20 years it’s over $6,700. In 30 years, it could reach $17,449. After 40 years it could grow to more than $45,000.

What to invest in?

That’s a key question. There are thousands of different potential investments on the ASX.

Operating companies, listed investment companies (LICs) and exchange-traded funds (ETFs) are all options.

By operating companies, I simply mean a business that tries to make a profit by offering a product or service. Readers may have heard of names like Telstra Corporation Ltd (ASX: TLS), National Australia Bank Ltd (ASX: NAB) or BHP Group Ltd (ASX: BHP).

One way of starting investing is by going with a business that an investor has heard of, and perhaps uses. Names like Temple & Webster Group Ltd (ASX: TPW), Bunnings (owned by Wesfarmers Ltd (ASX: WES)) and Adore Beauty Group Ltd (ASX: ABY) may all be familiar.

But, when investing in individual names, I think it’s important for young investors, and all investors, to think long term. Read up on what the business plans are. Listening to investor podcasts or reading websites, like this one, can be useful in learning about companies and generally learning about investing.

Keep in mind the idea of diversification – don’t put all your eggs in one basket. Also, volatility is normal, prices of individual shares can move significantly each week. We can view volatility simply – it’s the price the market is willing to buy our shares from us, we don’t have to accept or worry about that price if we’re not looking to sell.

Try to pick businesses that are exposed to different risks, different tailwinds and so on. That way, if something goes wrong for a sector, it’s not the whole portfolio that goes down. For example, an investor shouldn’t make their entire portfolio banks, buy now, pay later providers, or iron ore miners.

Exchange-traded funds (ETFs)

ETFs can be a good place to get started with investing because they’re funds that allow us to buy a whole group of businesses/shares at once, giving instant diversification. Some ETFs are focused on the global share market, such as Vanguard MSCI Index International Shares ETF (ASX: VGS) and VanEck Morningstar Wide Moat ETF (ASX: MOAT).

Others can give us access to ASX shares such as Vanguard Australian Shares Index ETF (ASX: VAS).

Foolish takeaway

Remember that investing is a long-term activity, we should invest with years in mind.

I’ll mention a couple of things I try to keep in mind when picking an investment. One is, don’t put money into things I don’t understand. That way, it’s easier to judge the updates that happen.

Another thing I keep in mind is – pick shares that I would want to buy more of if they fell. Don’t let price movements decide for you whether an investment is good. I get excited when shares in my portfolio drop in price, because I believe it’s better value. If a small biotech, company X which I didn’t understand, were to drop 30%, then I’d have less confidence about whether it’s worth buying.

Good luck to all new/young investors. Some (easy-to-understand) ASX shares have fallen hard recently because of higher interest rates and inflation, so I think now is a good time to start.

The post Building a share portfolio as a young investor? Here’s where I’d start 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 Temple & Webster Group Ltd and Vanguard MSCI Index International Shares ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Adore Beauty Group Limited. The Motley Fool Australia has positions in and has recommended Telstra Corporation Limited and Wesfarmers Limited. The Motley Fool Australia has recommended Adore Beauty Group Limited, Temple & Webster Group Ltd, VanEck Vectors Morningstar Wide Moat ETF, 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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13 October 2022
Experts name 2 ASX dividend shares to buy now
Are you looking for dividends shares to buy? If you are, then take a look at the two listed below which are rated as buys.

Here’s what you need to know about these growing dividend shares:

Janus Henderson Group (ASX: JHG)

The first ASX dividend share to look at is fund manager Janus Henderson.

Although Janus Henderson has been facing a number of challenges, the team at Bell Potter believes that now could be the time to buy before the tide turns.

Bell Potter said:

Falls in investment markets have reduced AUM and profitability. The appearance of an activist investor has not led to corporate activity which may have disappointed some investors. The change of CEO means a new strategy and that will take time to deliver tangible results.

But now might be a good time to revisit: markets should start to recover; the company has a new direction and there is still the prospect of M&A (we feel JHG could easily be swallowed by a larger group).

The broker has a buy rating and $43.50 price target on the company’s shares.

As for dividends, Bell Potter is forecasting dividends per share of 190 cents in FY 2022 and 172 cents in FY 2023. Based on the current Janus Henderson share price of $31.54, this will mean yields of 6% and 5.45% respectively.

Medibank Private Ltd (ASX: MPL)

Another ASX dividend share that has been tipped as a buy is private health insurer Medibank.

Analysts at Citi were pleased with Medibank’s full year results in August. It expects this strong form to continue thanks to the Medibank Health business, which is targeting a profit growth rate of at least 15%, and higher interest rates.

Citi commented:

Medibank’s PHI business is performing well and we forecast an outlook of largely stable margins paired with reasonable top line growth. Medibank Health is also targeted to grow profit at a rate of at least 15% and higher interest rates should provide a reasonable tailwind for investment income. This keeps us attracted to the Medibank story despite value being reasonable rather than cheap.

The broker has a buy rating and $4.00 price target on the company’s shares.

Pleasingly, Citi is also expecting Medibank’s shares to provide attractive dividend yields in the near term. Its analysts are forecasting fully franked dividends of 15.9 cents per share in FY 2023 and 16.3 cents per share in FY 2024. Based on the current Medibank share price of $3.52, this will mean yields of 4.5% and 4.6%, respectively.

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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 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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13 October 2022
ASX investors, STOP reading economic forecasts: economist
Three economists went target shooting. The first missed by a metre to the right. The second missed by a metre to the left.

The third exclaimed “we got it!”.

So goes an old joke told among economists themselves, according to AMP Ltd (ASX: AMP) chief economist Dr Shane Oliver.

The trouble with a year like 2022 is that ASX shares have been driven up and down by external economic concerns, such as inflation, interest rates, and oil prices.

Even though stocks represent ownership of companies, business performance seems to have taken a backseat to “macro” issues for impact on share prices.

If the market thinks the world is headed for a recession, ASX shares have plunged on those fears. If investors think interest rates might stop rising, stock prices have rallied on that hope.

But the point of the above joke is that economists know nothing… at least about the future, anyway.

Throw out the economic forecasts

Oliver, who is one of the most prominent economists in the country, therefore urges investors to ignore economic forecasts.

“In the quest to be right, the danger is that clinging to a forecast will end up losing money,” he said in a memo to AMP clients.

“As [prominent investment researcher] Ned Davis has pointed out, for investors the key is to make money, not to be right with some forecast.”

The trouble is, forecasters are human.

“Forecasters, like everyone, suffer from psychological biases: the tendency to assume the current state of the world will continue; the tendency to look mostly for confirming evidence; the tendency to only slowly adjust forecasts to new information; and excessive confidence in their ability to forecast accurately.”

Moreover, point forecasts, such as that the S&P/ASX 200 Index (ASX: XJO) will be 7000 points by the end of the year, don’t provide any information about risks.

“They are conditional upon information available when the forecast is made. As new information appears, the forecast should change,” said Oliver.

“Setting an investment strategy for the year based on forecasts at the start of the year and not adjusting for new information is a great way to lose money.”

Why do we crave forecasts though?

So if economic and market forecasts are such baloney, why do investors see so much of it?

This also goes back to human urges.

“Fundamentally, people hate uncertainty and will try to remove it. So, precise quantified forecasts seem to provide a degree of certainty in an otherwise uncertain world,” said Oliver.

“And if we don’t have the expertise, the experts must know.”

Another behavioural tendency that gives so much credence to forecasters is loss aversion. This is where humans feel the pain of loss so much more than the joy of an equal amount of gain.

“This leaves us more risk averse, and it also leaves us more predisposed to bad news stories as opposed to good,” said Oliver.

“Flowing from this, prognosticators of gloom are more likely to be revered as ‘deep thinkers’.”

Investors should do this instead of reading forecasts

So rather than read macroeconomic predictions, Oliver suggested sticking to an investment strategy with discipline is far better.

Investing for the long term was an obvious way to ride out short-term economic bumps.

Oliver quoted US investment professional Charles Ellis, who observed in the 1970s that, for most investors, investing is a “loser’s game”.

A loser’s game is where whoever makes fewer mistakes wins.

“Amateur tennis is an example where the trick is to avoid stupid mistakes and win by not losing,” said Oliver.

“The best way for most investors to avoid losing at investments is to invest for the long term. Get a long-term plan that suits your level of wealth, age, tolerance of volatility, etc. — and stick to it.”

The post ASX investors, STOP reading economic forecasts: economist 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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13 October 2022
‘High quality’: Fund names 2 obscure ASX tech shares to buy now
What a difference a year makes.

Twelve months ago, technology shares were riding high, bathing in all the love from the market. It’s the future! How can you go wrong?

But now the S&P/ASX All Technology Index (ASX: XTX) has crashed 36% year to date and high-growth tech stocks have been abandoned like a sinking ship.

But does this mean there are some bargains to be nabbed?

Here are two ASX shares that Celeste Funds Management reckon are ripe for investing at the moment:

‘Ballast in the portfolio’ during uncertain times

As a services provider, Data#3 Limited (ASX: DTL) is rarely mentioned among the more glamorous tech stocks.

But for the Celeste team, it’s a reliable investment in tough times for the market and the economy.

“Data #3 [shares] rose 3.5% over the month of September in what was one of the most challenging months in ASX history,” its memo to clients read.

“While there were no new announcements of note in September, the strong August result saw Data #3 deliver sales of $2,193 million (+12.2% vs pcp) and NPAT of $30 million (+19.1% vs pcp).”

While most tech shares plunged, the Data #3 share price has actually risen 4.6% so far this year.

The business has a $6 million backlog of work and showed “no signs of weakening demand”, which investors loved during a time of great economic anxiety.

“Looking ahead, while cognisant on valuation, we remain positively disposed to Data #3 as it is a high-quality business with a strong balance sheet that should provide ballast in the portfolio during a period of economic volatility.”

‘Well placed to grow’

Infomedia Limited (ASX: IFM) is another name not often seen among the higher-profile tech stocks. The business provides software for the automotive parts supply and service industry.

The share price took a significant hit last month.

“Infomedia declined by 16.4% over the month after the company closed the data room to several prospective private equity bidders post 15 weeks of due diligence.”

The Celeste team backed the company’s rejection of the acquisition proposal.

“This bid was typical of recent form of most private equity bids in Australia which have amounted to little more than time-wasting fishing trips.”

The analysts retain full faith in Infomedia’s long-term prospects.

“Infomedia has solid software, solves a problem for the corporate user, and remains well placed to grow under the new CEO,” read the memo.

“We expect targeted investment in sales and marketing over the next 12 months will boost execution capability in the USA and Europe.”

Infomedia shares have dropped 21.9% since the start of the year, but it does pay out a 4.7% dividend yield.

The post ‘High quality’: Fund names 2 obscure ASX tech shares to buy now 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. 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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13 October 2022