It is unfortunate that man-made climate change is starting to cause visible havoc around the world.

Experts have warned that extreme events like the bushfires in the summer of 2020 and the severe flooding this year will become more frequent, devastating people and animals alike.

This does mean, though, that someone has to do the rebuilding afterwards.

That’s why Wilson Asset Management senior equity analyst Sam Koch feels like Johns Lyng Group Ltd (ASX: JLG) is undervalued at the moment.

“We believe the combination of Johns Lyng Group’s defensive qualities and superior growth outlook supports a valuation higher than the market,” he said in a memo to clients.

“The resiliency of Johns Lyng Group’s earnings growth is an attractive quality for shareholders in the current volatile macro-economic environment.”

The share price has returned close to 510% over the past five years, but has dipped 14.3% in 2022.

Business not impacted by economic conditions

Johns Lyng provides construction services for the insurance industry. When a claim is made, the company is sent in to evaluate and repair damaged buildings.

According to Koch, this is an activity that hums along independent of any slowdowns in the wider economy.

“Johns Lyng Group’s Australian business provides building insurance and restoration services that are not influenced by the vagaries of the business cycle, whose growth is driven by relationships and service standards,” he said.

“A series of unfortunate natural disasters have recently bolstered activity within the sector which, in our view, Johns Lyng Group is well placed to support.”

The business has recently entered the strata management industry, which provides a new channel for cross-selling its building services.

Massive addressable market across the Pacific Ocean

However, Koch reckons the US market is where Johns Lyng’s “largest medium-term opportunity” lies.

“Following the acquisition of Reconstruction Experts in December 2021, which is a diversified building services provider operating in four states with over four times the population of Australia, Johns Lyng Group now has a platform to roll out its unique model,” he said.

“Whilst the opportunity in the US is significant, early results will be key to assess whether the model is replicable and scalable across the country.”

Wilson holds Johns Lyng shares in two of its funds — WAM Capital Limited (ASX: WAM) and WAM Research Limited (ASX: WAX).

Those funds are not the only fans of Johns Lyng shares. Eight out of nine analysts surveyed on CMC Markets currently recommend the stock as a strong buy.

According to Koch, the business model helps incentivise all the staff to move in one direction.

“Its unique partnership model with owner-operators drives a strong culture of alignment and excellence, which has been a significant contributor to its overall success.”

The post ‘Superior growth outlook’: ASX share raking it in from climate change appeared first on The Motley Fool Australia.

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• I just bought this ASX company enjoying ‘a constant upgrade cycle’: fundie
• 2 ASX shares you never heard of ready to make hay

Motley Fool contributor Tony Yoo has positions in Johns Lyng Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Johns Lyng Group Limited. The Motley Fool Australia has recommended Johns Lyng 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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A new month is just about here so what better time to look at your portfolio and make some new additions.

But which shares should you buy? Listed below are two ASX 200 shares that the team at Bell Potter believe are buys. Here’s what it is saying:

Costa Group Holdings Ltd (ASX: CGC)

This horticulture company could be an ASX 200 share to buy in August. Costa operates ~7,300 hectares of farming assets across five key categories and three regional hubs.

Bell Potter believes that it is well-placed for growth and sees it as a great inflation hedge. It commented:

CGC has deployed ~$540m of capital since CY19 through the acquisition of citrus properties, development of berry acreage in Morocco and China and investment in mushroom and tomato capacity. A return on this investment is expected to be the main driver of earnings through to CY23e. In addition we are seeing favourable YTD pricing trends across the majority of CGC’s product portfolio which provides insulation against inflationary cost pressures.

Bell Potter has a buy rating and $3.75 price target on the company’s shares. This compares favourably to the current Costa share price of $2.57.

TechnologyOne Ltd (ASX: TNE)

Another ASX 200 share that could be in the buy zone is TechnologyOne. Bell Potter likes the enterprise software provider due to its shift to a software as a service (SaaS) business model. Its analysts expect this to underpin stronger margins and equally strong earnings growth.

The broker explained:

The migration [to a fully integrated SaaS solution] is now around three quarters complete and Technology One is starting to reap the benefits of greater recurring revenue and a higher margin. This combination will in our view drive double digit earnings growth for years to come and, as the migration of customers approaches 100%, we expect the multiple to rerate to that of a pure SaaS company.

Bell Potter has a buy rating and $12.50 price target on the company’s shares. This compares to the latest TechnologyOne share price of $11.72.

The post Broker names 2 ASX 200 shares to buy in August appeared first on The Motley Fool Australia.

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• Analysts name 2 ASX growth shares to buy in August
• Top brokers name 3 ASX shares to buy next week
• 2 highly rated ASX dividend shares that brokers say are buys
• Here’s how much $20k invested in these ASX shares 10 years ago is worth today
• Analysts say these top ASX growth shares are buys

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended COSTA GRP FPO and TechnologyOne 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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If you’re a fan of Warren Buffet’s style of buy and hold investing, then you may want to look at the three ASX shares listed below.

These are shares that the team at Bell Potter believe are “champion stocks” and excellent buy and hold options for investors. Here’s what the broker is saying about them:

Goodman Group (ASX: GMG)

The first ASX share that could be a top buy and hold option is integrated industrial property company Goodman. Bell Potter believes Goodman is well-placed for long term growth thanks to its world class portfolio and the increasing demand for industrial property.

The broker commented:

One of the world’s largest integrated industrial property groups with operations centred around development, management and ownership throughout Australia, New Zealand, Asia, Europe, United Kingdom, North America, and Brazil. The long term outlook for industrial and logistics properties is favourable given the continuing growth in ecommerce (or on-line retail sales) and the growing middle class in developing countries.

Sonic Healthcare Limited (ASX: SHL)

Another ASX share that the broker expects to be a long term market beater is Sonic Healthcare. Its analysts rate the pathology provider highly due to their belief that it is well-placed for growth thanks to increasing demand for pathology services and its international expansion opportunities.

Bell Potter explained:

The world’s third largest pathology provider with significant operations in the USA, United Kingdom, Germany, Switzerland, Belgium, Australia and New Zealand. Against the backdrop of continuing growth in the demand for pathology services over the longer term, the group has further international expansion opportunities in both existing and new geographical markets.

Transurban Group (ASX: TCL)

A final ASX share that Bell Potter expects to be a long term market beater is toll road giant Transurban. Bell Potter is bullish due to the company’s strong portfolio and huge development opportunities. The latter is expected to support its growth in the coming decades.

The broker said:

Australia’s largest builder, owner and operator of urban toll road networks. The group also has toll road assets in North America. The group’s current pipeline of growth projects is $3.9 billion (TCL’s share of total project cost) and further huge development opportunities are expected over the next few decades supported by population and economic growth.

The post Broker names 3 ASX 200 shares to buy and hold appeared first on The Motley Fool Australia.

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• Here are the top 10 ASX 200 shares today
• When inflation = profit: Why this fundie is tipping the Transurban share price to outperform
• 2 ‘good value’ ASX 200 shares offering what investors want right now: expert
• Expert prediction: 3 ASX 200 shares that can ‘do well’ in volatile times
• Why these blue chip ASX 200 shares are rated as buys by experts

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 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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First Sentier’s Tim Canham reckons the commodities boom ain’t over yet.

He’s particularly bullish on ASX gold share Genesis Minerals Ltd (ASX: GMD) and mineral sands miner Iluka Resources Limited (ASX: ILU).

Canham is a senior portfolio manager within First Sentier’s emerging companies team.

In an interview with the Australian Financial Review (AFR), Canham revealed they have just bought a gold share.

Why buy Genesis Minerals?

Canham said:

Even though it’s not a sector in favour, we have a new position in a gold stock, Genesis Minerals. Former management team of Saracen Minerals, which merged with Northern Star.

The company recently conducted a $100 million capital raising. Genesis also announced a merger with troubled Dacian Gold. This gives the emerging company access to a relatively new processing facility in the region at below replacement value.

This merger and potential further transactions at a time when labour and capital cost pressure are intense, puts the company in an enviable position at a low point in the gold cycle.

The Genesis Minerals share price closed Friday’s session at $1.39, up 4.92%. The gold share is up 94% over the past 12 months but down 18% in the year to date.

Why buy a gold share when commodity prices are falling?

This might come as a surprise given commodity prices have been falling for a few months now. The price of gold has fallen from a recent high of around US$2,052 t.oz in March to US$1,760 t.oz today.

Canham says the environment for gold shares “is very tough given the increasing cost environment in terms of labour, fuel and other processing inputs”.

He adds:

An Achilles heel of the sector is that it has no pricing power, despite the relative cushion of a weaker Australian dollar. But I always like to own some gold, as when it’s in favour, the stocks can really do well. Usually, when you least expect it, you are thankful you own some.

What’s the outlook for commodities?

Canham is “quite bullish” on commodities:

When we look across a number of commodities like natural gas, oil, copper, zircon, and nickel – there has been very little supply response in any those key ingredients for global growth. The current high operating and capital costs make supply growth even more unlikely.

When I attempt to marry this up against these wonderful, smooth, upward-sloping demand charts of electric vehicle production, renewable energy and grid build-out, I do scratch my head. It makes me quite bullish in the medium term on the commodity complex.

Why buy Iluka Resources?

When asked to name an undervalued ASX share that he is most bullish on, Canham nominates Iluka Resources.

Yes, there are headwinds from global recession fears and Chinese housing issues, but the fundamental lack of supply in mineral sands products is very real.

Generally for me to get bullish about a commodity there must be a supply angle (i.e., a lack of it).

We think its rare earth refinery investment in WA is also misunderstood by the market and undervalued. As a manufacturing destination, WA looks attractive with some of the lowest gas prices in the world.

The Iluka Resources share price closed Friday’s session at $9.58, down 0.1%. Iluka shares are down around 4% over the past 12 months and 8% in the year to date.

The post The All Ordinaries gold share ‘in an enviable position’: fundie appeared first on The Motley Fool Australia.

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More reading

• ‘Misunderstood by the market’: Why this fundie says this ASX 200 mining share is undervalued right now
• Here’s why experts say these are the ASX mining shares to buy now
• Why Block, Iluka, Nitro, and Novonix shares are dropping today
• Why is the Iluka share price sinking today?
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor Bronwyn Allen 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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“If you’re going through hell, keep going.”

The above quote is often attributed to Winston Churchill. It sounds like something he might have said, although there is no evidence to suggest that it was, in fact, his.

As per Quote Investigator, it’s possible that it was adopted from a different source, such as “Christian Science Sentinel”, a religious journal, in 1943. There, the story went that a man was asked how he was, to which he replied: “I’m going through hell!”. His friend responded:

“Well, keep going. That is no place to stop!”

No place, indeed.

It’s been a rough ride, Fools. These past few months have tested the resolve of even the most experienced investors, and have no doubt seen many give in to the market’s pessimism.

But to do so now would, I believe, be consequential. 

The market is driven not by perfect information, but instead by incomplete information compounded by investor psychology. When panic sets in, people rush for the exits and leave behind those who are more focused on the underlying businesses and long-term wealth creation.

Bear markets, which can feel like hell for investors, are temporary. And while it mightn’t feel like it at the time, this is where the foundations are set for the next bull cycle. 

Companies like JB Hi-Fi Limited (ASX: JBH), an Australian discretionary retailer recently reported a record sales result. Meanwhile, many companies in the United States that have recently reported their second-quarter earnings results – Netflix (NASDAQ: NFLX) among them – have also surprised to the upside.

Investors who sell out now, or merely remain on the sidelines, might avoid any further pain, should the market fall further. But many will also miss out on the gains which I expect will come to those who remain patient.

I’m not trying to call the bottom of the market. I don’t know when that will be, nor if it has already been. But I will echo the words that Winston Churchill may or may not have said:

“If you’re going through hell, keep going.”

The post ‘If you’re going through hell, keep going’ appeared first on The Motley Fool Australia.

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• Here are 3 stellar ASX growth shares analysts are tipping as buys
• Is the Pilbara Minerals value-add lithium strategy worth its salt?
• Broker names 2 ASX dividend shares to buy next week
• 2 reasons to buy stock splits (and 1 reason not to)
• Is it safer to pull your money out of the stock market or keep investing for now?

Motley Fool contributor Ryan Newman 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 Netflix. The Motley Fool Australia has recommended Netflix. 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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If you’re a fan of growth shares, then you might want to look closely at the three shares listed below.

Here’s why these could be growth shares to buy:

Breville Group Ltd (ASX: BRG)

The first ASX growth share to look at is leading appliance manufacturer Breville. Thanks to acquisitions and its ongoing investment in product development, the company’s portfolio has been resonating well with consumers for many years. Together with its international expansion, this has underpinned solid sales and earnings growth over the last decade. Pleasingly, the team at Morgans expect this positive trend to continue. They are forecasting double-digit sales growth over the next few years.

Morgans currently has an add rating and $25.00 price target on its shares.

Megaport Ltd (ASX: MP1)

Another ASX growth share that could be a buy is Megaport. It is a leading cloud connectivity and networking solutions provider with operations across a large number of data centres globally. Goldman Sachs is tipping Megaport to grow rapidly in the coming years thanks to its first mover advantage in an industry benefiting from the long-term structural tailwinds of public cloud adoption (and multi-cloud usage) and the transition towards Networking as a Service (NaaS). The broker estimates that these tailwinds currently provide it with a $129 billion per annum opportunity across its current geographies.

Goldman has a buy rating and $9.60 price target on its shares. Elsewhere, it is worth highlighting that UBS has a buy rating and significantly higher price target of $17.60.

ResMed Inc. (ASX: RMD)

A final growth share to look at is ResMed. It is a sleep treatment focused medical device company which has been tipped to continue its strong growth long into the future. This is expected to be underpinned by ResMed’s world class products, significant and growing market opportunity, and its increasingly important digital platform. The latter has seen ResMed develop a patient-centric, connected-care digital platform which the team at Morgans notes is addressing the main pinch points across the healthcare value chain.

Morgans is very positive on the company’s future and has an add rating and $37.95 price target on its shares.

The post Here are 3 stellar ASX growth shares analysts are tipping as buys appeared first on The Motley Fool Australia.

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• These were the best performing ASX 200 shares in July
• Here are the top 10 ASX 200 shares today
• ASX 200 midday update: Rio Tinto drops, tech shares jump, Macquarie impresses
• Up 50% this month, is it too late to buy Megaport shares?
• 2 outstanding ASX growth shares brokers rate as buys

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended MEGAPORT FPO and ResMed Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended ResMed. The Motley Fool Australia has positions in and has recommended ResMed Inc. The Motley Fool Australia has recommended MEGAPORT FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Pilbara Minerals Ltd (ASX: PLS) outlined its strategy to profit from the entire lithium supply chain in an on-site presentation at its 100%-owned Pilgangoora Project in Western Australia on Friday.

In its presentation, Pilbara Minerals said it was “positioning to capture value throughout the entire lithium raw material and chemical supply chain”.

The company has a strategic plan to become a “fully integrated battery grade lithium hydroxide producer”.

Tesla Inc (NASDAQ: TSLA) CEO and electric vehicles pioneer Elon Musk recently described lithium processing as “a licence to print money” with “software margins”.

At market close, the Pilbara Minerals share price finished up 1.47% to $2.77 today.

What’s the plan?

Pilbara Minerals told investors today that it saw three components to the lithium supply chain.

The upstream component refers to the spodumene concentrate Pilbara already extracts from the ground. The current process is “carbon intensive”, with only 5% to 6% lithium oxide in the raw course material dug out of the dirt. More than 90% of the export mass shipped to customers contains aluminosilicates.

The proposed midstream component would reduce the carbon intensity and completely remove the aluminosilicates. The refining process would create lithium salts with 35%-plus lithium oxide. The aluminosilicates would remain on-site at the mine.

The proposed downstream component involves further refining to create lithium fine chemicals.

Developments send share price higher

Investors appear to be excited about Pilbara Minerals plans for expansion along the full lithium supply chain.

In the June quarter, Pilbara signed a binding memorandum of understanding with Australian technology company Calix Ltd (ASX: CXL) for a joint venture relating to the midstream process.

The JV involves the development of a demonstration plant and potential future commercialisation of Calix refining technology at Pilgangoora.

The Federal Government awarded a $20 million Modern Manufacturing Initiative Grant to help fund the project. Investors gave the Pilbara Minerals share price a 5% boost on the day of the announcement.

Pilbara Minerals is working on the downstream component through a joint venture with South Korean company POSCO.

In the June quarter, detailed engineering, procurement, site preparation and road works began on constructing a 43,000tpa LHM primary lithium hydroxide chemical processing facility in Gwangyang.

Investors reacted positively to the JV announcement on 26 October 2021. They sent Pilbara Minerals shares 8% northwards on the day.

In addition, the Pilbara Minerals share price surged 6% yesterday. This was on the back of a 50% boost to production, as outlined in the company’s June quarterly activities report.

Pilbara Minerals share price snapshot

Pilbara Minerals is a leading ASX lithium share whose share price has exploded 736% over two years.

Its Pilgangoora operation is the world’s largest independent hard-rock lithium mine. Two processing plants on-site — Pilgan and Ngungaju — produce spodumene and tantalite concentrate.

The post Is the Pilbara Minerals value-add lithium strategy worth its salt? appeared first on The Motley Fool Australia.

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• Here are the 3 most heavily traded ASX 200 shares on Friday
• Pilbara Minerals share price lifts amid 50% quarterly production boost
• Here are the 3 most traded ASX 200 shares on Thursday
• Broker gives its verdict on the Pilbara Minerals share price
• Here are the 3 most heavily traded ASX 200 shares on Tuesday

Motley Fool contributor Bronwyn Allen 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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If you’re wanting to boost your income with some dividend shares, then you might want to consider the two listed below that have been named as buys by Goldman Sachs.

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

Elders Ltd (ASX: ELD)

The first ASX dividend share that Goldman Sachs is bullish on is Elders. It is an agribusiness company that provides a range of services to rural and regional customers across the Australia/New Zealand region.

After going through a difficult period, Elders has bounced back strongly and delivered solid earnings growth in the last couple of years. This has continue in FY 2022, with the company reporting an 80% increase in first-half EBIT to $132.8 million.

In response to this, Goldman Sachs put a buy rating and $21.00 price target on its shares. It also likes Elders due to its “strong track record; good industry structure; potential for positive earnings surprise; and an attractive valuation.”

As for dividends, Goldman is forecasting dividends per share of 50 cents in FY 2022 and 53 cents in FY 2023. Based on the current Elders share price of $11.28, this implies attractive yields of 4.4% and 4.7%, respectively.

Woolworths Group Ltd (ASX: WOW)

Another ASX dividend share that Goldman rates highly is Woolworths. It is of course the retail giant behind the eponymous supermarket chain. In addition, it owns Big W, Countdown, and the Everyday Rewards loyalty program.

Combined, the broker believes that Woolworths is well-placed for solid sales and profit growth through to FY 2024. It recently commented:

We forecast [a sales] CAGR of 6.6% and underlying NPAT of 14.1% over FY22-24e, with key driver being market share gain of AU Foods business at comp sales growth of FY23/24 8.8% and 6.6% respectively driven by effective cost-price pass through and additional mix improvement with relatively stable volume growth.

In respect to dividends, Goldman Sachs is forecasting fully franked dividends per share of 96 cents in FY 2022 and $1.18 in FY 2023. Based on the current Woolworths share price of $37.52, this will mean yields of 2.6% and 3.2%, respectively.

Goldman has a buy rating and $40.50 price target on its shares.

The post Broker names 2 ASX dividend shares to buy next week appeared first on The Motley Fool Australia.

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• These were the worst performing ASX 200 shares in July
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• Why the Woolworths share price will be on watch today
• Top brokers name 3 ASX shares to buy next week
• Analysts rate these ASX 200 blue chip shares as buys

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 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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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.

Have you noticed that Apple‘s (NASDAQ: AAPL) stock is almost always priced somewhere between $100 and $500, and yet the company has consistently delivered tremendous returns for its shareholders over the years?

Why isn’t the stock price higher?

This is because Apple has repeatedly split its stock whenever the price ran up beyond a certain price. In a stock split, a company divides existing shares in order to lower the price per share. Imagine a pizza that has been cut into six slices. If you were to cut each slice in half to make 12 slices, the pizza itself wouldn’t get any bigger; you’d just have two smaller slices for each original slice. 

That’s how stock splits work.

The main reason a company would want to split its stock is to make the share price more affordable to everyday investors and, in turn, boost liquidity.  

But since we know the stock split itself doesn’t change the size of the pizza (i.e., the market capitalization of the company), should you consider buying companies after a recent split? 

Here are two reasons to buy stocks after a split and one reason not to.

1. You liked the company before the split was announced

The main reason to consider buying a stock after a split is announced is because you already liked the company prior to the split. A stock split is not an investment thesis.

It could, however, be perceived as an indication of a strong company since businesses don’t typically split their stock when the share price has been crashing.

But overall, the stock split itself should not be the motivation for the purchase because it doesn’t impact the intrinsic value of the company.

For example, if you’re considering buying Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) after its recent 20-for-1 stock split, the reasoning should be that the company has a nearly impenetrable moat due to its strong network effects and dominant brand recognition, or something similar.

You shouldn’t buy the stock because you believe the split will somehow make the company stronger in any material way.

There is data to suggest splits can move the stock price upward over the short term, but for long-term investors, this shouldn’t be viewed as a reason for buying.

2. You’ve done your research

The main issue with using stock splits as a catalyst for buying is it may lead you to buy a stock you’ve done little to no research on.

Stock research ought to be the foundation of your conviction, so if you’re considering buying a stock after a split announcement, be sure you’ve done your homework.

For example, investors may be tempted to buy GameStop (NYSE: GME) after its recent 4-for-1 split. But if you’re basing your purchase on the split alone, you’d be buying a wildly unprofitable company that has seen its stock completely disconnect from the underlying business due to its reputation as a meme stock.

In simpler terms, if you’re buying GameStop because of the recent stock split, you’d be buying an extremely risky asset that appears to be moving mostly on speculation rather than business execution.

The dividing up of shares does not magically improve the prospects of the business, so if you’re buying a stock split, make sure you’ve done adequate research, which has led you to believe the company is a quality business trading at a reasonable price.

Don’t buy the stock thinking the split will add long-term value

Let’s all say this together: Stock splits have zero impact on the underlying business.

Splits neither improve nor deteriorate the long-term potential returns of stocks. They might drive a short-term movement in the price, but they do not have any material influence over the long term.

Therefore, you should never buy a stock solely because the company announced a split. If you’re considering buying a stock before or after a split, make sure you’ve done your research and developed a solid thesis for why you believe the business will outperform. 

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

The post 2 reasons to buy stock splits (and 1 reason not to) appeared first on The Motley Fool Australia.

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Mark Blank has no position in any of the stocks mentioned. 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), and Apple. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Apple. 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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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.

If you’re uneasy about the stock market’s foreseeable future, you’re not alone. The rebound effort that’s been underway since mid-June has been tentative at best. And this week’s warning from Walmart about its second-quarter earnings, in addition to IBM‘s currency-prompted caution, could further rattle already-wobbly stocks. It’s an inauspicious start to earnings season.

But before bailing out of stocks in an effort to steer clear of any renewed bearishness, wait. As much downside risk as there seems to be ahead, there’s at least as much risk of missing out on important upside.

The little things add up

After tumbling a total of 24% between January’s high and last month’s low, the S&P 500 Index (SP: .INX)’s 7% rebound in the meantime feels like a gift: a chance to get out with smaller losses than most of us were nursing just a few weeks back. The chance of more downside feels palpable, too, particularly given that summer is usually a slow, bearish time of year for stocks. Rekindled worries of a full-blown recession only bolster the bearish case.

There’s a funny quirk you need to understand about the stock market, though: It’s not always backward-looking. Sometimes it’s forward-thinking, pricing in renewed economic growth that isn’t always easy to see, or perhaps hasn’t even materialized yet. And more than that, some of the biggest forward-thinking gains take shape when you least expect them to. The effort to steer clear of the market’s setbacks can often leave you out of those moves.

Mutual fund company Hartford dug through mountains of data to find some eye-opening truths about the stock market’s biggest daily gains. Over the past couple of decades, about half of them took shape in the midst of bear markets.

That doesn’t necessarily prevent you from suffering setbacks in the days immediately before and after those big winners. Given that nobody sees these rallies coming, though, it does show that trying to sidestep downside could end up costing you — particularly if you’re hopping in and out of stocks while on the way down.

And the cost can be higher than you might ever expect.

Numbers crunched by stock speculator Peter Tuchman — a trader on the floor of the NYSE who is one of its most-photographed participants — indicate that between 2000 and 2019, missing the market’s 10 biggest daily gains would have cut your annual returns by about half relative to simply remaining invested during that stretch. Missing out on the best 20 days would wind your returns back to almost nil.

There’s an upside to steering clear of the stock market’s worst daily performance, of course. Just avoiding the 20 worst days during that 20-year stretch would have more than doubled your returns from simply buying and holding. Again though, if you want to capture all of that upside while also avoiding the market’s major downside moves, your timing has to be perfect. And nobody’s is.

Research done by brokerage firm Edward Jones will help you use a stick-with-it, leave-it-alone approach. The company has found that of the past five transitions from a bear market to a bull market, the S&P 500 rallied an average of 25% in the first three months following the day the pivot, or bottom, was reached.

The moral of the story? Just stand pat, take your occasional lumps, and trust that in time your patience will pay off. If your market timing isn’t absolutely perfect all the time, the odds are still stacked dramatically against you.

The real danger is in missing out

In answer to the headline’s question, it’s safer to keep investing right now than it is to pull your money out of the stock market — but not for the reason you might think. Sticking with stocks is the safer play at this time because the real danger is missing out on gains nobody sees coming.

Have confidence that time (and not even that much time) will take care of your bottom line, even in the current environment where it feels like the misery might never end. Eventually, it always does.

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

The post Is it safer to pull your money out of the stock market or keep investing for now? appeared first on The Motley Fool Australia.

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More reading

• Here are 2 ASX ETFs I would buy for 2022 and beyond
• Why this ASX 200 giant ‘looks attractive’ right now: expert
• These were the best performing ASX 200 shares in July
• ‘Raises a whole lot of issues’: Which ASX 200 banks are still funding new fossil fuel projects?
• These were the worst performing ASX 200 shares in July

James Brumley 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 Walmart Inc. 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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