The Woodside Energy Group Ltd (ASX: WDS) share price is having a disappointing day on Tuesday.

In morning trade, the energy giant’s shares are down 5% to $35.12.

Why is the Woodside share price tumbling into the red?

The Woodside share price is being sold off today after the company completed a review of its 2023 corporate plan. This includes its costs, production, and sales forecasts for the year ahead, which has led to the release of the energy producer’s guidance for FY 2023 this morning.

Firstly, in respect to its capital expenditure, Woodside expects to spend US$6 billion to US$6.5 billion on capex in FY 2023. This assumes no change to current participating interests. Approximately half of this will be put towards the Scarborough operation.

Moving on, Woodside expects production of 180 – 190 million barrels of oil equivalent (MMboe) in FY 2023. This is the first full year of production since the BHP Group Ltd (ASX: BHP) petroleum transaction and compares to its FY 2022 production guidance of 153 – 157 MMboe.

However, it is worth noting that Woodside recently delivered third quarter production of 51.2 MMboe, which annualises to 204.8 MMboe. So, investors could be a touch underwhelmed with FY 2023’s production guidance, which may explain the weakness in the Woodside share price today.

This guidance comprises LNG production of 83-85MMboe, pipeline gas production of 40-42MMboe, crude and condensate production of 50-55MMboe, and natural gas liquids production of 7-8MMboe.

It is worth noting that it doesn’t include any production from the Sangomar Field Development Phase 1, which is targeting first oil in late 2023. In addition, management notes that Mad Dog Phase 2 is undergoing commissioning and Woodside assumes for production guidance purposes a start-up in mid-2023.

No production costs guidance was provided for FY 2023.

The post Woodside share price tumbles 5% on FY23 guidance appeared first on The Motley Fool Australia.

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• Why is the Woodside share price tanking today?
• Would this side of Woodside put you off buying its shares?
• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 on Friday
• Crude down, stocks up: Here’s what happened to Woodside shares the last time this occurred

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.

from The Motley Fool Australia https://www.fool.com.au/2022/11/29/woodside-share-price-tumbles-5-on-fy23-guidance/

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.

Imagine you could go back in time to November 2008. Amazon‘s (NASDAQ: AMZN) share price has dropped like a brick and is down well over 50% year to date. Would you buy the stock? You’d be crazy not to do so. Amazon went on to deliver a staggering 88x gain by the end of 2021.

Now let’s return to the present. Amazon’s share price has dropped like a brick yet again. It’s down the most since that huge sell-off 14 years ago. Should you back up the truck and load up on Amazon stock?

Behind Amazon’s plunge 

To answer that question, we need to first examine the factors behind Amazon’s steep plunge this year. Much of the blame can be placed on macroeconomic headwinds and uncertainty that have caused the overall stock market to fall.

Amazon’s revenue growth has been dampened by the strong U.S. dollar. In the third quarter alone, the company’s sales were around $900 million lower due to unfavorable foreign exchange rates. 

But Amazon’s growth is slowing even on a constant-currency basis. The company expects Q4 revenue will increase by only 2% to 8% year over year, with an impact of foreign exchange rates of around 460 basis points (or 4.6%). 

What’s Amazon’s main problem? Inflation. CFO Brian Olsavsky said in the company’s Q3 conference call, “The continuing impacts of broad-scale inflation, heightened fuel prices and rising energy costs have impacted our sales growth as consumers assess their purchasing power and organizations of all sizes evaluate their technology and advertising spend.” 

However, the top line isn’t Amazon’s only issue. The company’s earnings are also falling because of a significant increase in spending. This has contributed to Amazon’s free cash flow, arguably the most important measure of its financial health, sinking into negative territory.

Two important questions

One of the most important questions to ask when considering whether or not to buy Amazon stock now is: Are the company’s issues only temporary? I think the answer is clearly “yes.”

The two biggest challenges for Amazon right now — the strong U.S. dollar and high inflation — are intertwined. The dollar is strong in large part because of the Federal Reserve’s monetary policy. And the Fed’s policy, which is focused on aggressively raising interest rates, is in place to try to curb inflation.

Sooner or later, though, the Fed’s moves will cause inflation to moderate. We’re seeing a few signs that it could already be happening, such as the lower-than-expected producer price index announced earlier this month. When the Fed feels that inflation is in check, it will stop raising interest rates and will eventually lower them.

In the meantime, Amazon is wisely cutting costs to improve its bottom line and free cash flow. The company announced major layoffs recently. It’s also shutting down several businesses that have weighed on growth.

There’s also another important question that investors should consider: Does Amazon have strong growth prospects? Again, I think the answer to this question is a resounding “yes.”

E-commerce in the U.S. made up only 14.1% of total retail sales in the third quarter of 2022. Cloud hosting remains an attractive option for businesses, with Amazon Web Services still the No. 1 player in this market. Amazon also has other potential growth drivers, including its moves into digital advertising, healthcare, and streaming TV.

Back up the truck?

Probably the biggest knock against Amazon is its valuation. The stock trades at more than 46 times expected earnings. I suspect that most discounted cash flow models analyzing Amazon would indicate that the stock is overvalued despite its sharp decline this year.

However, Amazon has appeared to be overvalued throughout its entire history. That hasn’t prevented the stock from delivering massive returns. The reality is that Amazon is a business that’s difficult to value because its management team continually comes up with new ways to grow. That’s a good “problem” to have for investors.

Amazon isn’t likely to go on the huge surge going forward as it did after 2008. But I fully expect the stock will nonetheless return to its winning ways in the not-too-distant future. Should you back up the truck and load up on Amazon stock? I think so.

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

The post Should you back up the truck and load up on Amazon stock? appeared first on The Motley Fool Australia.

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• Will the Nasdaq or S&P 500 have a better 2023?
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• Is Amazon stock really a cheap buy? Here’s what the charts say
• Amazon stock is still a surefire buy despite growth plateau
• Why Amazon stock fell today

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Keith Speights has positions in Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon. 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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The Fortescue Metals Group Limited (ASX: FMG) share price has significantly outperformed the S&P/ASX 200 Index (ASX: XJO) over the past month. Fortescue shares have gone up by around 30% while the ASX 200 has only risen by 5%.

A significant part of that rise may be because the iron ore price has risen in recent weeks.

The commodity price is a key influencer on profitability because of how much leverage it gets out of changes in the resource price.

Fortescue’s costs don’t really change if the iron ore price changes, aside from paying more to the government. However, when the iron ore price goes higher, it predominately adds to the net profit after tax (NPAT). This can then boost the dividend as well.

But, despite the recent strong run, one expert thinks that there could be further to run for the iron ore miner.

Optimistic case for the Fortescue share price

John Athanasiou from Red Leaf Securities suggested on The Bull that the Fortescue share price has been “benefiting from speculation that China will ease COVID-19 restrictions.”

In Athanasiou’s opinion, an easing of COVID-19 restrictions could lead to the iron ore price being pushed up.

He also referenced the fact that the iron ore miner had a record-breaking first quarter of FY23 when it shipped 47.5 million tonnes of iron ore, which was an increase of 4% on the prior corresponding period.

What else was reported in the second quarter?

Fortescue revealed that it achieved an average revenue per dry metric tonne (dmt) of iron ore of US$87, while C1 costs were US$17.69 per wet metric tonne. There was a price escalation of key input costs, including diesel and labour rates, partly offset by a lower exchange rate.

At 30 September 2022, it had US$3.3 billion of cash and the net debt position was US$2.8 billion.

In terms of how it managed to achieve the strong production, Fortescue said that it reflected “strong operating performance across the supply chain and availability of inventory”.

The business also said that it is making progress with a number of its green energy plans. It noted that it has entered into a global strategic collaboration with energy infrastructure developer Tree Energy Solutions which aims to “accelerate the development of a world leading green hydrogen and green energy import facility in Germany.”

Fortescue share price snapshot

Over the past six months, the iron ore miner has fallen by around 4%.

The post Up 30% in a month, why the Fortescue share price could have further to run: fundie appeared first on The Motley Fool Australia.

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• Where will Fortescue shares be in 5 years?
• If you bought $20,000 worth of Fortescue shares this year, here’s how much dividend income you’d have
• Skin in the game: The ASX share in my portfolio I’m most excited about
• Does an investment in Fortescue shares provide the ‘healthiest’ ASX exposure to iron ore?
• 3 reasons this fundie is still bullish on ASX mining shares

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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It’s been a ripper year for the Whitehaven Coal Ltd (ASX: WHC) share price.

The market has been bidding the thermal coal giant’s stock higher amid soaring demand for the black rock, driving the company to post record financial year 2022 earnings.

Right now, the Whitehaven share price is trading at $9.43. That marks a whopping 242% return in 2022, before considering dividends.

The stock paid out 48 cents per share in that time – bringing its total return for the last 11 months to nearly 260%.  

For comparison, the S&P/ASX 200 Index (ASX: XJO) has dumped nearly 5% this year.

So, with all those gains under its belt, is now a good time for Whitehaven shareholders to cash out of the stock? That’s what one fundie thinks.

Fundie tips Whitehaven shares as a sell

While financial year 2022 was largely brilliant for Whitehaven, the new fiscal year has brought new challenges. Notably, flooding has seen the company reduce its run of mine (ROM) production guidance.

It now expects to declare between 19 million tonnes and 20.4 million tonnes of managed ROM production in financial year 2023 – down from previous guidance of between 20 million tonnes and 22 million tonnes.

Whiles its Narrabri mine’s expected output was lifted, that of its Maules Creek and Gunnedah mines were dropped.

That’s one reason Seneca investment advisor Arthur Garipoli tips the stock as a sell, as per The Bull.

Another reason behind Garipoli’s bearishness is the risk of softening coal prices amid a mild European winter. Garipoli continues:

The share price has risen from $2.76 on January 4 to trade at $8.895 on November 24. Investors may want to consider locking in some profits.

Garipoli isn’t the only expert seemingly cautious of the coal giant lately.

Though, QVG Capital portfolio manager Josh Clark is more hopeful, recently tipping Whitehaven shares to be a hold. He said, courtesy of Livewire:

[T]he thermal coal price … looks incredibly expensive on long-term forecasts or longer-term historic prices. And then it looks ridiculously cheap on spot thermal coal prices.

One thing we know is that thermal coal prices have got to come down at some point.

So, the game you’re trying to play is to get paid back on a really cheap multiple before that commodity price starts moving down.

Meanwhile, Katana Asset Management co-founder Romano Sala Tenna outlines a bullish view on coal prices, telling my Fool colleague Bernd Struben:

I definitely see coal being stronger for longer. Is it US$350 per tonne? Probably not. Is it US$250 or US$200 per tonne for thermal, possibly. But that’s still incredible prices for thermal coal. I think we’ve got some runway on some of the thermal coal plays.

No doubt all eyes will be on the Whitehaven share price in coming months and years after its meteoric 2022 rise.  

The post Up 240% in 2022, is it time to cash in the chips on Whitehaven shares? appeared first on The Motley Fool Australia.

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• Here are the top 10 ASX 200 shares today
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• 8%+ dividend yields! 3 ASX 200 shares I’d snap up to beat inflation

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 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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There are a number of S&P/ASX 200 Index (ASX: XJO) dividend shares that are known for paying large dividends. Investors may like to know about some of the ones that could offer both capital growth and dividend potential.

The dividend income from names like Commonwealth Bank of Australia (ASX: CBA) and BHP Group Ltd (ASX: BHP) can be large. But, given how big those companies are, it may be questionable how much bigger they can become.

However, there are a number of ASX 200 dividend shares that investors could build a portfolio around.

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

This is one of the largest investment companies in Australia. At more than a century old, it’s one of the oldest on the ASX. It has paid a dividend every year in its listed existence. The company has also grown its dividend each year since 2000, which is the longest growth streak on the ASX.

Soul Pattinson has a diversified portfolio across a number of sectors, such as resources, telecommunications, property, building products, agriculture, financial services, industrials, and so on.

Commsec numbers suggest that the business could pay an annual ordinary dividend of 77 cents per share in FY23, which would be a grossed-up dividend yield of around 4%.

APA Group (ASX: APA)

APA Group owns a portfolio of gas pipelines around Australia, transporting half of the country’s gas usage. It owns other gas-related energy infrastructure (including power generation and storage). The ASX 200 dividend share also owns a growing portfolio of renewable energy assets.

The business is seeing a steady rise in its distribution as its cash flow grows. It has grown its annual payout every year for more than a decade and a half. It’s exploring the potential of being able to transport hydrogen inside the pipelines, which would lengthen the useful life of the pipeline.

Commsec numbers indicate that it could pay an annual distribution of 55 cents in FY23, translating into a forward yield of 4.85%.

Sonic Healthcare Limited (ASX: SHL)

This company is one of the largest healthcare pathology businesses in the world. It also offers radiology services, plus it has been heavily involved with COVID testing (which continues).

The Sonic Healthcare share price has fallen more than 30% in 2022 to date, boosting the prospective dividend yield. It has a stated progressive dividend policy. In FY23 it is expected to pay an annual dividend per share of $1.01, according to Commsec, translating into a grossed-up dividend yield of 4.5%.

Telstra Group Ltd (ASX: TLS)

This is the largest ASX 200 dividend share on the list.

Australia’s biggest telecommunications business has long been seen as a dividend payer. But, it’s finally getting back to dividend growth. It grew its final FY22 dividend from 8 cents per share to 8.5 cents per share – an increase of 6.25%.

The business is cutting costs, rolling out 5G, growing Telstra Health and increasing prices in line with inflation.

According to Commsec, it’s expected to pay an annual dividend per share in FY23, which translates into a grossed-up dividend yield of 6%.

Brickworks Limited (ASX: BKW)

Brickworks is a diversified building products business. It owns half of an industrial property trust along with Goodman Group (ASX: GMG), as well as a sizeable chunk of Soul Pattinson shares.

The ASX 200 dividend share is the largest brickmaker in Australia and the northeast of the US. It also recently signed a deal to supply millions of bricks to the UK.

Brickworks hasn’t seen a dividend cut for more than 40 years, so there has been a lot of stability. It’s expected to pay a grossed-up dividend yield of 4.1% in FY23.

The post 5 ASX 200 dividend shares to build your portfolio around appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
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Motley Fool contributor Tristan Harrison has positions in Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended APA Group, Brickworks, Telstra Corporation Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Sonic Healthcare 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 New Hope Corporation Limited (ASX: NHC) share price has been on fire this year.

Since the start of the year, the coal miner’s shares have rocketed 145% higher.

Can the New Hope share price keep rising?

The good news for investors is that it may not be too late to snap up New Hope’s shares.

According to a note out of Morgans, its analysts have retained their add rating with a slightly trimmed price target of $6.80.

Based on the current New Hope share price of $5.68, this implies potential upside of approximately 20% for investors.

What did the broker say?

While Morgans was a touch disappointed with New Hope’s first quarter update, it remains positive and believes the market is undervaluing its shares. Particularly given that Acland 3 cash flows are not far away from being generated. The broker commented:

1Q (unaudited) EBITDA missed our forecast due mainly to a planned 3 week CHPP shutdown at Bengalla, reducing quality and price realisations temporarily. We think the market under-appreciates Acland 3 cash flows now only 12 months away.

Its analysts also like the company due to its dividends. In fact, Morgans believes a yield of 20% is possible based on current prices. It said:

We forecast accumulation of $1.4bn of net cash by end FY23 pre dividends and buybacks. If we exclude $250m as a balance sheet buffer then plausibly +$1.15bn ($1.22ps) is available for distribution via the announced buyback (up to $300m) and dividends. We think a forecast $1.00ps FY23 dividend forecast is fair, but of course will rely on actual earnings and the balance between actual pricing, NHC’s view on value and therefore percentage of the buy-back actually executed.

Based on its forecast for a $1.00 per share fully franked dividend in FY 2023, this equates a 17.6% yield. And if you’re able to put those franking credits to use, the gross yield lifts beyond 20%.

Morgans concluded:

We think that NHC can re-rate on: 1) abatement of abnormal selling post notes conversion; 2) recognition of approaching Acland 3 cashflow; 3) ongoing coal price resilience/ strength; and 4) clear capital management upside.

The post Broker says this ASX 200 share has 20% upside and a 20% dividend yield appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Tuesday
• Here are the top 10 ASX 200 shares today
• New Hope shares have soared 152% in 2022. Is it time to cash in?
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• What’s happening with ASX 200 coal shares this week?

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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In case you’ve not realised, interest rates are now 275 basis points higher than where they were seven months ago.

This hefty rise in mortgage repayments will really start to bite in the coming months. Australian consumers will start closing their wallets and there will be less revenue for businesses.

So with the economy well and truly in a slowing part of the cycle, it’s vital to be selective about the ASX shares you buy right now.

One way to minimise damage during slowdowns and recessions is to pick businesses that provide essential goods and services.

Here are a couple of expert suggestions:

‘A quality and well managed business’

When you talk staples, they don’t come much more essential than food.

Elders Ltd (ASX: ELD) is an agribusiness that provides goods and services to farmers around the nation.

Seneca investment advisor Arthur Garipoli was impressed with the company’s recent updates.

“The Australian agribusiness posted a strong fiscal year 2022 result,” Garipoli told The Bull.

“Underlying earnings before interest and tax were $232.1 million, up 39% on the corresponding period.”

However, the Elders share price has struggled in recent times. It plunged 23% in one day earlier this month.

Garipoli is not worried for the long term though.

“Severe rainfall in several rural regions has been weighing on the share price,” he said.

“However, we believe Elders is a quality and well managed business that should continue to outperform.”

‘Strong position and generating growth’

Nanosonics Ltd (ASX: NAN) is not a name synonymous with staple products, but it manufactures a critical medical product that many people would have been an unknowing beneficiary of.

The company makes disinfectors for ultrasound scanning probes.

Morgans investment advisor Jabin Hallihan rates the stock a buy.

“More than 25 million patients a year are protected from the risk of ultrasound probe cross-contamination by Nanosonic’s Trophon technology,” he said.

“The company is in a strong position and is generating growth.”

The healthcare industry is a sector known to enjoy resilient demand through tougher economic periods. And ultrasound scans are a very common diagnostic procedure in modern times.

Hallihan reckons Nanosonics is headed in the right direction financially.

“Total revenue of $52.6 million in the first four months to October 31, 2022 was up 42% on the prior corresponding period,” he said.

“A positive trading update suggests consensus forecasts will be comfortably achieved.”

The post Buy now: Experts name 2 ASX 200 companies essential to Aussie life appeared first on The Motley Fool Australia.

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• Here are the 10 most shorted ASX shares
• Skin in the game: The ASX share in my portfolio I’m most excited about
• Here are the top 10 ASX 200 shares today
• Why Nanosonics, Nick Scali, NRW, and Tyro shares are charging higher
• Don’t miss out on these top ASX dividend shares: analysts

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 Nanosonics Limited. The Motley Fool Australia has positions in and has recommended Nanosonics Limited. The Motley Fool Australia has recommended Elders 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 team at Morgans has recently named a number of its best ideas for investors.

Among those ideas are a couple of dividend shares that income investors may want to look closely at.

Here’s what the broker is saying about these ASX dividend shares:

Dexus Industria REIT (ASX: DXI)

Morgans is tipping this industrial and office property company as a dividend share to buy.

The broker is a fan of the company and believes that it is well-placed for growth in the current environment thanks to strong demand in the industrial market. It stated:

DXI’s key industrial markets remain robust with the outlook for solid rental growth backed by strong tenant demand. The development pipeline also provides near and medium term upside potential. A key focus will be the leasing up of the business park assets and a potential divestment could be a positive catalyst. While the portfolio remains well positioned we acknowledge there will be near-term uncertainty around interest rates.

The broker currently has an add rating and $3.25 price target on the company’s shares. As for dividends, it is forecasting dividends per share of 16.4 cents in FY 2023 and 16.9 cents in FY 2024. Based on the current Dexus Industria share price of $2.88, this will mean yields of 5.7% and 5.85%, respectively.

Santos Ltd (ASX: STO)

Another ASX dividend share that Morgans rates as a buy is Santos.

It is a leading energy producer and, thanks to its recent merger with Oil Search, the owner of a collection of high quality operations that are aiming to deliver production of 103-106 million barrels of oil equivalent this calendar year.

Morgans likes the company due to its production growth potential and diversified earnings base. It commented:

The resilience of STO’s growth profile and diversified earnings base see it well placed to outperform against a backdrop of a broader sector recovery. While pre-FEED, we see Dorado as likely to provide attractive growth for STO, while its recent acquisition increasing its stake in Darwin LNG has increased our confidence in Barossa’s development.

Morgans has an add rating and $9.00 price target on its shares. As for dividends, it is forecasting dividends per share of 22.8 cents in FY 2022 and 24.2 cents in FY 2023. Based on the current Santos share price of $7.25, this will mean yields of 3.1% and 3.35%, respectively.

The post 2 of the best ASX dividend shares to buy: Morgans 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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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.

As 2022 starts to close, it’s only natural for investors to start peeking toward 2023. So far in 2022, the indexes have fared pretty miserably, with the Nasdaq-100 down 29% and the S&P 500 down 17%. Which one will have a better 2023?

Let’s look at these indexes and their makeups and find out which is more likely to have a better 2023 ahead.

The indexes are highly concentrated on the top

At the top, the indexes have a lot of overlap.

Company	Makeup of S&P 500
Apple	6.86%
Microsoft	5.43%
Alphabet*	3.34%
Amazon	2.53%
Berkshire Hathaway	1.67%

Data source: Slickcharts. Data as of Nov. 19. *Note: Both Alphabet class shares combined.

Company	Makeup of Nasdaq-100
Apple	13.63%
Microsoft	10.15%
Alphabet*	6.74%
Amazon	5.44%
Tesla	3.20%

Data source: Slickcharts. Data as of Nov. 19. *Note: Both Alphabet class shares combined.

As you can see, Apple, Microsoft, Amazon, and Alphabet make up a considerable chunk of these indexes. In the S&P 500, they account for 19.83%. It’s basically double for the Nasdaq-100, with that group making up 39.16% of the index. It’s pretty straightforward: How these companies do will significantly steer how the overall index does.

While these three are tech-focused, they compete in different markets. Both Apple and Amazon are a good measure of the pulse of the consumer, as their sales are highly affected by consumer sentiment. If inflation cools, and consumers don’t need to worry about rising grocery prices or housing costs, they may treat themselves to the latest device.

Alphabet and Microsoft are business-focused, but for different reasons. Alphabet’s primary revenue stream is advertising, and many clients have pulled back their spending levels in 2022 due to the uncertain business environment. If the outlook improves, expect this revenue to return. Microsoft’s cloud business and Office product suite indicate how willing businesses are to spend on their infrastructure, but Microsoft’s consumer product division also indicates how individuals are doing. 

If the consumer gets stronger and business outlook improves, these four will boom. If that’s the case, then the Nasdaq-100 will likely have a better year because it is concentrated in companies that will benefit the most. But if 2023 brings an economic recession, the S&P 500’s diversity will help it to outperform the Nasdaq-100.

The companies outside the top five are very different

For the S&P 500, when you move out of the top five, the companies become much more diverse.

Company	Makeup of S&P 500
Tesla	1.47%
United Health Group	1.45%
ExxonMobil	1.42%
Johnson & Johnson	1.39%
Nvidia	1.18%

Data source: Slickcharts. Data as of Nov. 19.

Now, there are industrials, healthcare, and energy sectors represented, giving the index some much-needed balance. Looking at the top 20 reveals even more diversity, with financials, energy, and healthcare rounding the index out.

This is far from the case for the Nasdaq-100.

Company	Makeup of Nasdaq-100
Nvidia	3.09%
PepsiCo	2.32%
Costco Wholesale	2.16%
Meta Platforms	2.14%
Broadcom	1.94%

Data source: Slickcharts. Data as of November 19. Note: Both Alphabet class shares combined.

Besides Pepsi and Costco, these companies are more in the tech sector. But, unlike the S&P 500, it doesn’t get much better outside the top 10, with most of the top 20 consisting of chipmakers, communication companies, and software businesses. Now, this probably isn’t a surprise because the media often refers to this index as the “tech-heavy Nasdaq.”

Still, tech businesses don’t do well if the economy is struggling.

Does that mean you should write the Nasdaq-100 off? Absolutely not. Tech stocks tend to do very well in the recovery phases of a recession. Plus, the stock market is forward-looking, and stocks usually tend to do better during a recession than leading up to one.

That last tidbit of information should keep investors in the market, especially now with a recession, or at least an economic slowdown, imminent. However, if you’re trying to decide which index to buy, you need to utilize the 2023 outlook. If you think 2023 will be a repeat of 2022, then the S&P 500 is the better choice. On the other hand, if you believe the economy will begin to recover and the Federal Reserve eases its interest rate hikes, then the Nasdaq-100 is the place to be.

One last point: There’s nothing wrong with owning both indexes if you don’t know what 2023 will bring. Personally, I think this is an intelligent strategy, as it gives investors the upside of recovery and the safety of a balanced investment.

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

The post Will the Nasdaq or S&P 500 have a better 2023? appeared first on The Motley Fool Australia.

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Keithen Drury has positions in Alphabet (C shares), Amazon, Costco Wholesale, Nvidia, and Tesla. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. 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, Berkshire Hathaway (B shares), Costco Wholesale, Meta Platforms, Inc., Microsoft, Nvidia, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Broadcom Ltd, Johnson & Johnson, and UnitedHealth Group and has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Berkshire Hathaway (B shares), Meta Platforms, Inc., and Nvidia. 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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At a barbecue — or indeed on stock advice websites — investors hear all about the triumphant 10-baggers.

But we all know every portfolio has ASX shares that have broken the hearts of owners. It’s just no one talks about them.

It is perfectly understandable to be reluctant to trust a business again after it has burnt you or other investors badly. It’s just human nature.

However, investors need to remember that ASX shares have no memory. A stock doesn’t care that it was once $10 but now $2. 

The only thing that matters when considering equities to buy is what the future prospect of the business is at that point in time. History means nothing.

So if you take on this rational mindset, there is one technology stock that’s been an absolute dog the past couple of years that you may consider buying now:

‘We expect the share price to improve’

Appen Ltd (ASX: APX) used to be a darling of growth investors but has caused nothing but grey hairs since the COVID-19 pandemic hit.

The stock has lost an eye-watering 93% of its value since August 2020, and 75% year to date.

“The share price of this artificial intelligence data provider has fallen from $40.08 on August 17, 2020 to trade at $2.65 on November 24, 2022,” Red Leaf Securities chief John Athanasiou told The Bull.

However, Athanasiou feels like it’s time to now forgive Appen for past sins.

“We expect the share price to improve as money flows back to the domestic technology sector,” he said.

“The company expects fiscal year 2022 revenue to range between US$375 million and US$395 million.”

Discounted for a takeover?

The really exciting prospect for Athanasiou, though, is seeing other listed Australian tech companies like ELMO Software Ltd (ASX: ELO) and Nitro Software Ltd (ASX: NTO) receive tempting takeover bids from private investors.

“There’s been corporate activity in the domestic technology sector, as a weaker Australian dollar makes companies more attractive to international private equity firms,” he said.

“Appen, at this price, could be a target.”

Appen’s major clients are big US tech firms and after a torrid year, they themselves could be looking forward to better conditions next year.

And this could also provide a tailwind for Appen, reported The Motley Fool’s Bernd Struben last week.

The post It’s about time you buy this ASX tech share that’s beaten down 75% this year: expert appeared first on The Motley Fool Australia.

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More reading

• Down 75% in 2022, is it time for investors to give up the ghost on this ASX 300 tech share?
• Why is the Appen share price storming higher today?
• Could this imply light at the end of the tunnel for Appen shares?
• Appen share price sinks to another multi-year low despite new recruits
• 5 big ASX announcements making news this week

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 Appen Ltd and Elmo Software. 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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