It’s proving a tough day so far for ASX iron ore shares. This comes after a broker offered a bearish view on the iron ore price.

The S&P/ASX 200 Materials Index (ASX: XMJ) is currently the worst-performing sector index on Thursday, with a 3.04% loss.

Some of the largest ASX iron ore producers are also having a rough start to the day. Here’s how they’re holding up:

• Fortescue Metals Group Limited (ASX: FMG) down 3.37%
• BHP Group Ltd (ASX: BHP) down 2.91%
• Rio Tinto Limited (ASX: RIO) down 2.54%

Looking at the bigger picture, the S&P/ASX 200 Index (ASX: XJO) is struggling today and is currently descending 2.04%.

Liberum gives a bearish outlook for iron ore

Liberum Capital gave a bleak short-term outlook for the iron ore price in a note published by The Australian Financial Review this morning.

The broker’s bearish position on iron ore was influenced by what’s been happening recently in Chinese markets. This could be bad news for ASX iron ore producers as China is collectively their largest export destination.

China’s steel-intensive property sector was stated to be “subdued”, and the steel industry could be heading into a weak trading period.

Other factors included reduced ore-buying rates and destocking by steel companies in China, as well as an increase in maintenance programs by local businesses. These factors come amid the margins for companies in the steel industry collapsing.

One reason to be bullish

However, amid the bad news, Liberum notes that while steel production and demand are weak in China right now, the industry typically reports a significant increase in activity after the winter season. This is expected to happen in the first quarter of 2023.

Liberum concluded by giving its analysis of the current iron ore price in China.

Flagship signal, 62 per cent Fe fine, North China (31-Oct; physical), is now $US82/t, -31 per cent YTD; half of Apr-22’s peak; spot is now 9 per cent below our 4Q22 & 2023 average forecast of $US90/t; 26 per cent above our long-term nominal price of $US65/t cfr North China.

The post What’s the forecast for the iron ore price right now? appeared first on The Motley Fool Australia.

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• I think right now is the time to buy these 2 ASX dividend shares
• Why Atlantic Lithium, Coronado Global, Lake Resources, and Rio Tinto are charging higher
• Why is the BHP share price racing ahead of the ASX 200 today?
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• Which ASX 200 mining shares managed to dig up gains in October?

Motley Fool contributor Matthew Farley 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.

Big technology companies, such as Meta Platforms and Microsoft, are having a horrid time on the stock market this earnings season thanks to the macroeconomic slowdown, but Apple (NASDAQ: AAPL) dodged a bullet and avoided a big sell-off when on Oct. 27 it released its fiscal 2022 fourth-quarter results (for the three months ended Sept. 24).

The technology giant’s revenue and earnings beat Wall Street’s estimates despite what Apple’s CFO termed  “a challenging and volatile macroeconomic backdrop.” The company’s revenue was up 8% year over year to $90.1 billion, while adjusted earnings increased 4% to $1.29 per share. Analysts would have settled for $1.27 per share in earnings on $88.7 billion in revenue, but the healthy demand for iPhones, MacBooks, and wearable devices, along with the growth in Apple’s services business, helped it post stronger results.

The iPhone moved the needle in a big way for Apple last quarter, and the device is the biggest reason why this tech giant looks worth buying at a time when other big names have fallen by the wayside. Let’s see why.

Apple thrives on strong iPhone sales

The iPhone was the driving force behind Apple’s growth last quarter. The device produced 47% of the company’s revenue and recorded nearly 10% year-over-year growth in revenue to $42.6 billion. That’s impressive, considering that the broader smartphone market declined yet again last quarter.

According to Strategy Analytics, global smartphone shipments were down 9% year over year in the third quarter to 297 million units. Apple, however, bucked the trend and sold 49 million iPhones during the quarter, an increase of 6% over the prior-year period. The company’s share of the global smartphone market increased to 16.3% as a result.

It is worth noting that Apple’s sales increased at a time when its key competitors saw their shipments decline. Samsung‘s shipments were down 7% year over year. Chinese smartphone OEMs (original equipment manufacturers) such as Xiaomi, Oppo, and Vivo saw their shipments drop 8%, 20.1%, and 20.5%, respectively.

More importantly, Apple enjoyed healthy pricing power last quarter despite inflation and concerns about a potential recession next year. Dividing Apple’s total iPhone revenue in fiscal Q4 by Strategy Analytics’ shipment estimate points toward an average selling price (ASP) of nearly $879. That’s more than double the overall smartphone market’s estimated ASP of $413 for 2022, according to IDC.  

Apple’s solid pricing power isn’t surprising. The ASP of 5G smartphones in 2022 is expected to land at $616, so customers are spending more on phones supporting the latest wireless standard. What’s more, shipments of 5G smartphones could jump nearly 24% over 2021 to 688 million units and account for 54% of overall shipments, which tells us why Apple is enjoying a mix of healthy pricing and volumes.

The 5G market can supercharge Apple’s long-term growth

Apple was the leading 5G smartphone OEM last year with a 31% market share. A similar share in 2022 means that Apple could end up shipping just over 213 million smartphones, based on this year’s estimated 5G smartphone shipment forecast of 688 million. As Apple is expected to build 220 million iPhones this year, it could hit that mark as it has a comprehensive 5G smartphone lineup, including the entry-level iPhone SE.

Additionally, customers are willing to pay a premium for Apple’s 5G devices, as the company’s iPhone ASP indicates. What’s more, the stronger demand for Apple’s more expensive Pro models is another indication of the company’s pricing power at a time when inflation is pulling the overall market down. As such, it won’t be surprising to see Apple sustain its dominant position in 5G smartphones.

The good part is that the 5G smartphone market still has a lot of room for growth. IDC estimates that 79% of the smartphones sold in 2026 will support 5G. Based on IDC’s forecast of 1.46 billion overall smartphone sales in 2026, annual 5G smartphone shipments could hit 1.15 billion units after four years. If Apple continues to control 30% of the 5G smartphone space in 2026 — which it could in light of customers’ preference for its devices even in the face of macroeconomic headwinds — its annual iPhone shipments could reach 350 million units.

Multiplying that by an estimated ASP of $850 (assuming Apple needs to lower prices to keep the competition at bay), its annual iPhone revenue could approach $300 billion. That would be a big increase over Apple’s iPhone revenue of $205 billion in fiscal 2022, indicating that the company’s biggest source of revenue is set to get bigger in the long run.

With Apple trading at 25 times trailing earnings and 6 times sales right now, buying the stock looks like a good idea as these multiples suggest a discount to last year’s earnings multiple of 31 and sales multiple of 8. The robust demand for the company’s iPhones and its foray into emerging areas such as headsets and even self-driving cars could make Apple a top tech stock in the long run, which is why investors may want to capitalize on its 12% decline in 2022.   

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

The post Is Apple stock a buy now? appeared first on The Motley Fool Australia.

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Harsh Chauhan has no position in any of the stocks mentioned. 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. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Meta Platforms, Inc., and Microsoft. 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 Apple and Meta Platforms, Inc. 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 Woolworths Group Ltd (ASX: WOW) share price is having a difficult session.

In morning trade, the retail giant’s shares are down 4% to $31.81.

Why is the Woolworths share price sinking today?

Investors have been hitting the sell button this morning for a couple of reasons.

One is the broad market selloff after the US Federal Reserve delivered a 0.75% interest rate hike and warned of more pain to come.

The other reason for the weakness in the Woolworths share price today is the release of the company’s first quarter sales update, which has fallen short of expectations.

How did Woolworths perform in the first quarter?

For the quarter ended 2 October, Woolworths delivered a 1.8% increase in group sales to $16,363 million.

This was driven by better than expected performances from its Big W and Australian B2B businesses, which offset softer performances from the Australian Food and New Zealand food businesses.

The key Australian Food business reported a 0.5% decline in sales to $12,204 million, which equates to a 1.1% comparable store sales decline. This was due largely to its online channel, which reported a meaningful pullback in sales after benefiting from lockdowns a year earlier

It also means that Woolworths is underperforming Coles Group Ltd (ASX: COL). Late last month, its rival reported a 2.1% increase in comparable store sales for the same period.

Broker reaction

Analysts at Goldman Sachs highlight that while the overall sales result was in line with its estimates, its Australian and New Zealand Food businesses disappointed. The broker commented:

Group sales of A$16.4B came in largely in line with expectations though the AU and NZ Foods businesses were slightly weaker, offset by slightly stronger AU B2B and Big W.

Sales of A$12.2B and growth of -0.5% was a continuation of the trends for first 8 weeks in FY23. 1Q23 comp sales of -1.1% is below peer COL of +2.1% and is largely driven by a decline in comp item growth of -8.6%, offset by inflation of +7.3% (COL +7.1%). This decline in item growth is primarily coming from a reversal of e-Commerce, which fell 10.8% YoY and saw sales penetration reduce from 11.4% 1Q22 to 10.2% in 1Q23 (GSe: 10.3%).

Goldman also revealed what it will be looking out for in the second quarter of FY 2022. It said:

We look for further clarity on the October exit rate for the Australian and NZ food businesses and look to understand whether positive mix will return as personalised offers begin to take effect. As Covid effected comps roll off we look for details on second quarter sales volume, mix and pricing as well as the strategy heading into Christmas with details on how consumers shift to value will be approached. Additionally, we look forward to more colour on the strategies to address the slowdown in New Zealand.

The post Why is the Woolworths share price sinking 4% today? appeared first on The Motley Fool Australia.

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• Woolworths share price on watch following soft Q1 update
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• Amazon stock just tanked. Could this be a canary in the coal mine for ASX 200 retail shares?

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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Although it is turning out to be a pretty disappointing day for ASX shares today, we mustn’t forget that the S&P/ASX 200 Index (ASX: XJO) had a top month last month. Over October, the ASX 200 gained a healthy 6%. But sadly, the same can’t be said for Coles Group Ltd (ASX: COL) shares.

Coles had a fairly miserable month of October. The ASX 200 grocery giant started the month at $16.43 a share. But the Coles share price ended up at $16.33 by the end. That’s a slide of 0.61%, and an unhappy underperformance of the markets of 5.39%.

So why were Coles shares so shunned over October? The supermarket operator seemed to miss out on all of that goodwill from investors.

Well, one of the primary catalysts appeared to be the first quarter update that Coles delivered late into the month.

The company reported a 1.3% increase in group sales over the three months to September 30. Supermarket sales rose by 1.6% and express sales by 8.4%. However, liquor sales declined by 4.3%.

As we covered at the time, some investors were expecting more, so the markets seemed disappointed with these numbers.

Coles’ management also flagged that the company is “not immune to the inflationary cost pressures”, so that probably didn’t help investors’ confidence either. That was despite the company banking price inflation of 7.1% compared to 4.3% in the previous quarter.

The release of this update saw the Coles share price drop around 3% on the day, ensuring that Coles shares stayed in the red for October.

So what now for Coles shares?

After this disappointing month, many investors might be wondering what’s next for the Coles share price?

Well, at least one expert is still bullish on the company.

As my Fool colleague James reported last week, ASX broker Morgans is one expert eyeing off Coles at the current levels. The broker has recently put out an add rating on the company, complete with a 12-month share price target of $19.50.

If realised, that would give investors an upside of more than 20% from the current level. Here’s some of what Morgans had to say:

Trading on 20.6x FY23F PE [price-to-earnings ratio) and 4.0% yield, we continue to see COL as offering good value with the company’s solid balance sheet and defensive characteristics putting it in a good position to navigate through a weaker economic environment. The unwinding of local shopping should also help further market share gains.

Morgans is also expecting the company to keep raising its dividend. It anticipates dividend payments of 64 cents per share for FY 2023 and 66 cents per share for FY 2024.

No doubt investors will be overjoyed to hear this optimistic tone from this ASX broker. But we’ll have to wait and see what the next 12 months have in store for Coles shares.

The post Coles shares underperformed the market last month. What’s next? appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended COLESGROUP DEF SET. 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 Block Inc (ASX: SQ2) share price is taking a tumble today, down 6.9% in late morning trade.

Shares in the ASX buy now, pay later (BNPL) company closed yesterday trading for $92.76 and are currently swapping hands for $86.38 apiece.

It’s not just the Block share price under pressure today.

The S&P/ASX 200 Index (ASX: XJO) is down 2.2% at this same time.

What’s going on?

The Block share price is down sharply today after an overnight sell-off in US stock markets. By the time the dust cleared, the Nasdaq Composite Index (INDEXNASDAQ: .IXIC) ended the day down 3.4%.

Block, which acquired Afterpay in January this year, is dual-listed on both the ASX and NYSE. And Block shares closed down 7.4% on the NYSE overnight.

The broader market sold off following the US Federal Reserve’s announcement of another 0.75% interest rate rise. The central bank’s fourth consecutive hike brings the official US rate to the 3.75% to 4% range.

While that move was largely expected, the post announcement media address by Fed chair Jerome Powell was decidedly more hawkish than investors had hoped for.

“The level of rates that we estimated in September, the incoming data suggests that’s actually going to be higher. There is no sense that inflation is coming down,” Powell said. “We’re exactly where we were a year ago.”

And if that wasn’t enough to spook investors, Powell added, “We think we have a ways to go before we get to that level of interest rates that we think is sufficiently restrictive.”

The Block share price is especially sensitive to outsized rate hikes. That’s partly because the stock has been priced with future earnings in mind. And as rates continue to ratchet higher, the present cost of investing in those future earnings goes down.

Higher rates also could portend an increase in bad debts from Block’s BNPL customers, many of whom will already be struggling with the impacts of soaring inflation.

Block share price snapshot

It’s been a tough ride for the Block share price. Since listing on the ASX on 20 January, shares are down 51%. For context, over that same period, the ASX 200 is down 7%.

The post Why did the Block share price just tumble 7%? 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 positions in and has recommended Block, Inc. The Motley Fool Australia has positions in and has recommended Block, Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The S&P/ASX 200 Index (ASX: XJO) is under pressure today, down 2.14% in morning trade.

This comes following a rapid sell-off in United States stock markets yesterday on the heels of the Federal Reserve’s latest interest rate hike and Fed chair Jerome Powell’s media address that followed.

The S&P 500 Index (SP: .INX) was up 1.2% at 2:36pm New York City time, shortly after the Fed’s announcement. In the 84 minutes following, the S&P 500 plunged 3.5% to close the day down by 2.5%.

The ASX 200 is skipping that initial surge and has gone straight to the plunge.

What happened with the Federal Reserve to send the ASX 200 lower?

The ASX 200 is quite sensitive to moves in US stock markets. And US stock markets are highly responsive to the interest rate settings and outlook for future moves from the Fed, the world’s most influential central bank.

Markets had widely anticipated and priced in the Fed’s decision to lift the official interest rate by another 0.75%. The fourth consecutive hike brings the US rate in the range of 3.75% to 4.00%.

With the rate rise largely baked in and the Fed stating yesterday that any further decisions to increase interest rates would take into account “the lags with which monetary policy affects economic activity and inflation,” investors were initially bullish.

But Powell was quick to pull the plug on the share market party in a post-announcement news conference.

“We think we have a ways to go,” he said, “before we get to that level of interest rates that we think is sufficiently restrictive.”

If that wasn’t enough to send US equities lower yesterday, and the ASX 200 today, Powell added:

The level of rates that we estimated in September, the incoming data suggests that’s actually going to be higher. There is no sense that inflation is coming down…. We’re exactly where we were a year ago.

And ASX 200 investors buoyed by speculations that the Fed may be poised to take a breather from its aggressive rate hikes will be deflated by Powell’s assertion that, “I would also say that it’s premature to discuss a pause. It’s not something that we’re thinking about. That’s not a conversation to be had. We have a ways to go.”

What are the experts saying?

With the S&P 500 down 2.5% overnight and the ASX 200 down 2.5% in morning trade, Federated Hermes senior portfolio manager Steve Chiavarone may have it right when he calls the message from the Fed a “devil’s bargain” (courtesy of Bloomberg).

“This is a devil’s bargain. Size of rate hikes will likely fall, but terminal rate is likely higher. The implication is a greater number of smaller rate hikes. That is not dovish,” he said.

According to Almeida (quoted by the Australian Financial Review):

What’s clear is that central banks must continue raising the cost of capital. That will be done not only through hiking policy rates but also by balance sheet reduction. Aggregate demand is too high and can only be reduced by squeezing out the market inefficiencies built up over the last decade.

But all is not doom and gloom for ASX 200 investors.

“In the process, weak companies will be exposed and above-average profit margins will no longer be abundant, but scarce,” Almeida added. “We think that scarcity will inflate the value compounders and reward the skilled and patient investor.”

The post ASX 200 dives on hawkish Federal Reserve interest rate policies 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 Mesoblast Limited (ASX: MSB) share price is up 6.25% since the start of the week.

Shares of the regenerative medicine company opened at 88 cents each on Monday and are currently trading for 93.5 cents.

Gains for the company are outperforming the S&P/ASX 200 Health Care Index (ASX: XHJ), which has seen an increase of 1.23% since the start of the week.

So what could be contributing to Mesoblast’s success this week?

Mesoblast share price rises on quarterly update

The ASX healthcare share released its quarterly activities and cashflow report for the quarter ended September 30 on Monday morning.

The Mesoblast share price gained 4.52% the day the report was released, and another 1.62% the following day.

Let’s take a look at the highlights of the report.

• Net cash used in operating activities: $14.28 million
• Net cash used in investing activities: $0.20 million
• Net cash from financing activities: $40.29 million
• Cash and cash equivalents at end of period: $85.50 million
• Estimated quarters of funding available: 8.8

There’s evidence that Mesoblast could have become more efficient in cutting costs in its operations. The company used US$14.3 million for operating activities, down US$3.9 million (22%) on the same quarter last year. It was also US$8 million (47%) less than what was used two years ago.

Another financial highlight is that Mesoblast had US$85.5 million at the end of the quarter and raised US$45 million in August 2022. They can draw down an additional US$40 million from existing financing facilities if they meet certain milestones.

Product pipeline update

Mesoblast made headway in its submissions to the US Food and Drug Administration (FDA) to use remestemcel-L for the treatment of children with a condition called steroid-refractory graft versus host disease, or SR-aGVHD.

Mesoblast submitted new information on clinical and potency assay items to the Investigational New Drug (IND) file for remestemcel-L in the treatment of children with SR-aGVHD, as guided by FDA. The FDA has given it Fast Track Designation, which means the process of studying and approving the drug will be faster than usual.

It also worked with the FDA to potentially use rexlemestrocel-L for the treatment of chronic back pain caused by degenerative disc disease. This drug has been tested in a small group of people and was shown to reduce pain significantly.

Mesoblast plans to have clearance from the FDA by year-end 2022 for the pivotal trial of this drug.

The company is also continuing to investigate using rexlemestrocel-L for the treatment of chronic heart failure.

Mesoblast share price snapshot

Despite its gains this week, the Mesoblast share price is down 33% year to date. It is also down 44% since this time last year.

Meanwhile, the All Ordinaries Index (ASX: XAO) is down almost 10% in 2022 and 9% over the past 12 months.

The company’s market capitalisation is around $692.89 million.

The post Why has the Mesoblast share price gained 6% so far this week? appeared first on The Motley Fool Australia.

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Motley Fool contributor Matthew Farley 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 A2 Milk Company Ltd (ASX: A2M) share price is charging higher on Thursday morning despite the market selloff.

At the time of writing, the infant formula company’s shares are up 9% to $5.77.

This compares favourably to the performance of the S&P/ASX 200 Index (ASX: XJO), which is down 2% this morning.

Why is the A2 Milk share price charging higher?

Investors have been bidding the A2 Milk share price higher today after the company’s US operations were given a major boost by the United States Food and Drug Administration (FDA).

According to an announcement, the FDA has approved the import, sale, and distribution of a2 Platinum infant formula products (Stages 1 and 2) from New Zealand through to 3 January 2023. This can be extended through to October 2025 at the FDA’s discretion.

A2 Milk was given the thumbs up after making changes to the product design. While the product supplied to the United States will have the same formulation as a2 Platinum, it will have different scoops, mixing instructions, and labelling requirements.

Management estimates that it will ship 1 million cans of its infant formula during the second half of FY 2023. Though, it believes it has the capacity to supply upwards of 9 million cans in the future if required.

One small negative, is that the gross margin on these products is expected to be lower than average. This is due to higher distribution and rework costs, as well as incremental marketing and trade investment to enter the category. As a result, the impact to its earnings is unclear at this stage.

Nevertheless, A2 Milk Company’s managing director and CEO, David Bortolussi, was very pleased with the news. He commented:

We are pleased to be able to assist parents and caregivers in the US by providing access to significant volumes of high quality, a2 Platinum infant and toddler milk formula manufactured in New Zealand during this challenging period.

We are increasing our supply to respond to this situation, while importantly ensuring that we continue to meet the needs of our other IMF consumers and trade partners in China and other markets. If the US requires further support over an extended period, we have the proven ability to scale up significantly.

Following today’s gain, the A2 Milk share price is now up 33% over the last six months.

The post Why is the A2 Milk share price is defying the selloff and jumping 9%? 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 A2 Milk. 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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Some of the ASX’s leading exchange-traded funds (ETFs) look like buying opportunities to me. After all of the volatility, valuations have dropped and the value on offer has increased, in my opinion.

Sometimes there are problems for individual companies or a particular industry. But, when almost the whole market drops, I think it can mean the investment opportunity is more attractive.

However, while investors are trying to get to grips with what higher interest rates mean for valuations, there’s also the potential impact of what may happen with the United States, Australian and global economies.

With that in mind, I think these two ASX ETFs look like good options to buy for growth, particularly amid current uncertainty.

VanEck MSCI International Quality ETF (ASX: QUAL)

The idea behind this investment is that it represents a portfolio of global shares that rank well on multiple quality metrics. It’s invested in a portfolio of around 300 businesses across a range of geographies, sectors and economies.

To make it into the portfolio, companies have to rank highly on return on equity (ROE), earnings stability, and low financial leverage.

Its investments include recognisable names like Apple, Microsoft, Johnson & Johnson, UnitedHealth, Alphabet, Visa and Nvidia. While all of the biggest holdings may be from the US, there are other countries with sizeable weightings. Such countries include Switzerland, Japan, the United Kingdom, the Netherlands and Denmark.

Over the five years to 30 September 2022, the ETF had returned an average return per annum of 12.5%. This compares to an average return per annum of the MSCI World ex Australia Index. But, past performance is not a guarantee of future outperformance.

VanEck Morningstar Wide Moat ETF (ASX: MOAT)

This is another quality-based ASX ETF from VanEck.

This one is about finding companies in the US that have strong competitive advantages that it expects will endure for at least a decade and probably two decades. Advantages can come in many different forms including costs, intellectual property, brand power, and so on.

However, Morningstar analysts will only add an investment to the portfolio if the business is trading at an “attractive price” relative to Morningstar’s estimate of fair value.

On 1 November it had 48 holdings. Only one position had a weighting of less than 1%, which was 0.95%, so the position sizes are reasonably similar. Nonetheless, these were the biggest weightings: Biogen, Gilead Sciences, MercadoLibre, Wells Fargo, and Emerson Electric.

In terms of performance, the VanEck Morningstar Wide Moat ETF had returned an average of 14% per annum over the five years to 30 September 2022. That compares to a 13.2% per annum return for the S&P 500 Index (SP: .INX). Again, past performance is not a guarantee of future returns.

The post I think these 2 ASX ETFs are unmissable buys in this sell-off appeared first on The Motley Fool Australia.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Apple, Emerson Electric Co., Gilead Sciences, MercadoLibre, Microsoft, and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Biogen, Emerson Electric, Johnson & Johnson, and UnitedHealth Group and 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), Apple, and VanEck Vectors Morningstar Wide Moat 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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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‘s (NASDAQ: AMZN) third-quarter report sent its stock tumbling on Thursday, October 27,  after the company posted weak fourth-quarter guidance. The quarter itself was not too bad. Revenue increased 15% year over year, a strong showing in this economy, and smack in the middle of its guidance for 13% to 17%. Operating income of $2.5 billion came in on the high side of expectations, which were $0 to $3.5 billion. Amazon Web Services’ (AWS) growth began to decelerate after many quarters of steady growth, which is a natural outgrowth of clients decreasing spending.

Management is guiding for revenue to increase by 2% to 8% in the fourth quarter. The fourth quarter includes the all-important holiday spending season, and analysts were expecting more, so this was disappointing. 

But management isn’t sweating. It has many plans in place to drive sales this season, and it’s focused on the customer experience. Let’s see why this is a Buffett stock and how that’s playing out right now.

What makes Amazon a Buffett company?

Warren Buffett has given many, many sage pieces of advice over the years about how to invest wisely. There is no magic formula that he uses to buy stocks or acquire companies for his holding company Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B), but we can get a picture of what he thinks are key features of an investment-worthy candidate.

One of those features is its moat. A moat is a competitive advantage, or basically anything about the business that allows it to stand out from its competitors and protect its business. He qualifies that with an extra detail: “Long-term competitive advantage in a stable industry is what we seek in a business.” 

With a whopping 38% of all e-commerce sales, a number that has mostly held steady over the past few years despite an onslaught of new companies with an e-commerce presence, Amazon dominates e-commerce. Its more than 200 million Prime members, who pay $139 annually, rely on it for a massive amount of needs, and other companies that have tried to challenge it have so far come nowhere near real competition. Walmart, for example, has launched its own annual service and makes up 6.3% of the e-commerce market share. Buffett, or likely one of his investment managers, bought Amazon shares in 2019. Since the “stable business” is part of the equation, Buffett may not have considered Amazon a buy before e-commerce proved its business value.

Amazon continued to plow investments into the customer experience in the third quarter, and while it may struggle in the coming months, these investments are what help its moat stay wide. As CFO Brian Olsavsky put it on the third-quarter conference call, “We remain heads-down focused on driving a fantastic customer experience, and we believe putting customers first is the only reliable way to create lasting value for shareholders.”

But there’s more.

New ways to make even more money

Buffett has expanded his own company for decades. Investors talk about what stocks he buys for Berkshire Hathaway, but what Buffett really likes to do is acquire whole businesses if he thinks they’re great. Did you know that Berkshire Hathaway owns 65 companies? That’s more than the stocks it owns, which are around 40. Some of the companies you might recognize are the Duracell battery company and Benjamin Moore paints.

This is what Buffett says about expanding a business:

There’s no rule that you have to invest money where you’ve earned it. Indeed, it’s often a mistake to do so. Truly great businesses, earning huge returns on tangible assets, can’t, for any extended period, reinvest a large portion of their earnings internally at high rates of return.

Amazon follows this model very closely. It uses its huge e-commerce business to fund other businesses, which are often more profitable than its core business. AWS is the most obvious example. AWS has been providing most of the company’s operating income for a while. 

The company has also made many whole acquisitions, such as the pending purchase of iRobot. Some of these acquisitions are integrated into the Amazon platform, such as MGM studios, whose film library has been added to the Prime library. iRobot is an example of a whole company Amazon will leave to run on its own.

Can Amazon keep growing?

Buffett invests in companies that he believes offer high potential for long-term gains. He has said that his favorite holding period is “forever.” Amazon’s moat and ability to expand into new areas can give investors confidence that it has plans to grow for the foreseeable future. Amazon stock is down 44% this year, and investors can see the drop as an opportunity to buy shares. 

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

The post Amazon is proving why it’s a Buffett stock appeared first on The Motley Fool Australia.

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More reading

• Is Amazon stock a buy now?
• Why Amazon is plunging today
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• Amazon stock just tanked. Could this be a canary in the coal mine for ASX 200 retail shares?
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Jennifer Saibil has no position in any of the stocks mentioned. 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 Walmart Inc. 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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