The Commonwealth Bank of Australia (ASX: CBA) share price could get a boost over the long term from ongoing growth in its business banking division.

There are many banks in Australia. Some are huge like CBA, National Australia Bank Ltd (ASX: NAB), Westpac Banking Corp (ASX: WBC), and Australia and New Zealand Banking Group Ltd (ASX: ANZ).

Whereas others are a bit smaller, but still pretty big, like Bank of Queensland Limited (ASX: BOQ), Bendigo and Adelaide Bank Ltd (ASX: BEN), and MyState Limited (ASX: MYS).

Just how big are the biggest banks? According to the ASX:

CBA has a market capitalisation of around $160 billion.

NAB has a market capitalisation of $92.75 billion.

Westpac has a market capitalisation of $73 billion.

ANZ has a market capitalisation of $66.6 billion.

As you can see, CBA is by far the biggest bank and it has plans to become even bigger.

Focused on business banking growth

In its FY22 result, CBA reported that it achieved home lending growth of 7.4% and 13.2% growth in household deposits.

But, in percentage terms, the business segment of its operations grew even quicker. Business lending rose by 13.6% (or $15.4 billion in dollar terms) and business deposits increased by 15.1% (or $23.9 billion).

In its annual report, CBA said that its goal is to build Australia’s leading business bank. It’s focused on continuing to differentiate its transaction and merchant banking propositions, and digitising its business banking experience.

It wants to be the main bank of choice for business customers by partnering with them, proactively meeting more of their needs, and delivering a superior customer experience.

New leadership team member

CBA announced earlier this week the appointment of independent non-executive director Lyn Cobley, starting 1 October 2022.

Cobley has more than 30 years of experience in financial services. Notably, she’s the former CEO of Westpac’s institutional banking business and chair of Westpac’s Asia advisory board, as well as group treasurer of CBA.

CBA Chair Paul O’Malley said:

On behalf of the board, I am delighted to announce Lyn’s appointment, and to welcome her breadth of financial services experience in her role as a non-executive director of CBA.

What to make of this

CBA is already growing at a good pace in its business banking, but Cobley may be able to provide some valuable expertise for the board and the business. Business banking growth could also be good for the CBA share price.

Motley Fool Australia chief investment officer Scott Phillips spoke on Nine’s Late News on Tuesday night about this appointment. He said:

This is fascinating…because CBA’s done a really good job over the past year or two of really diving deeply into the business market.

It’s always been the king of the kids when it comes to the mortgage market, the property market, but business lending and business relationships in general are more the remit of NAB and Westpac in-particular. Institutional banking is a really important part of the Commonwealth Bank growth strategy and this does bolster their activities and their expertise in this area.

CBA share price snapshot

Over the last month, CBA shares have dropped by 8%.

The post Could this help give the CBA share price an even bigger jump on its ASX counterparts? appeared first on The Motley Fool Australia.

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More reading

• Why is the NAB share price diving more than the other big 4 ASX banks today?
• Why rising rates are a ‘sugar hit’ for ASX 200 bank shares: Macquarie
• Rates go up, and CBA beefs up its business cred. Scott Phillips on Nine’s Late News
• Own CBA shares? Here’s the bank’s warning on rapid RBA rate hikes
• How might falling house prices impact the CBA share price?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Bendigo and Adelaide Bank Limited. The Motley Fool Australia has recommended Westpac Banking Corporation. 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.

What happened

Many investors have become notably more bearish on Netflix (NASDAQ: NFLX) lately, but you wouldn’t know that by looking at the stock’s performance on Wednesday. It surged nearly 5% higher on the day, thanks to an article in a top financial news outlet highlighting some potentially beneficial moves it’s making, and an analyst recommendation upgrade. 

So what

The article was published Wednesday morning in the finance world’s newspaper of record, The Wall Street Journal. Citing “people familiar with the matter,” the report states that Netflix is actively reviewing its operations for areas in which it can cut costs. Among other activities currently being assessed are its real estate holdings and cloud computing expenses.

In the personnel sphere, the article’s sources say the company has actively been hiring more junior staff, presumably because such individuals require lower salaries.

All told, Netflix’s operating expenses were $23.5 billion in 2021, which was up 15% from the 2020 level. Meanwhile, the streaming video king’s subscriber count has been falling lately. The company has already said that it will cut spending on both content and non-content costs.

Netflix has not yet officially commented on the Journal article.

Now what

Meanwhile, Macquarie analyst and longtime Netflix tracker Tim Nollen lifted his recommendation on the stock. He now feels it’s worthy of a neutral rating, rather than his previous tag of underperform (sell). He’s also lifting his price target substantially, boosting it to $230 per share from the preceding $170.

Nollen is basing this on Netflix’s plan to introduce an ad-supported subscription tier. He wrote in a new note that the company could draw $3.6 billion in revenue from this, although that tally shakes down to $1.1 billion when factoring in the almost certain lower subscription prices for such a tier.

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

The post Why Netflix was a star stock today appeared first on The Motley Fool Australia.

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More reading

• What makes ‘Dividend Aristocrats’ a great investment for you?
• 3 great foreign companies to invest in right now
• Did Bill Ackman give up on Netflix too soon?

Eric Volkman 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.

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

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If you’re a fan of investing in growth shares, then you may want to look at the ASX shares named below that have been tipped as buys by analysts at Morgans.

Here’s why the broker thinks these are some of the best growth shares on the Australian share market right now:

Lovisa Holdings Ltd (ASX: LOV)

Morgans is a big fan of this fashion jewellery retailer and believes it has a material global growth opportunity. The broker also highlights that its highly experienced CEO has been there and done this before with other brands. The broker commented:

LOV has a substantial multi-year global rollout opportunity across four continents. This opportunity has been materially boosted by the acquisition last year of beeline, which took LOV into several new European markets (notably Germany) and accelerated its expansion in France. We think LOV’s products fill an underserved niche, offering good quality fashion jewellery at prices that are attainable to the target demographic. The recent appointment of Victor Herrero as CEO, replacing Shane Fallscheer, provides a clue as to the extent of LOV’s global ambition, and its impatience to realise that ambition. The next few years will be worth watching.

Its analysts have an add rating and $24.50 price target on the company’s shares.

Pro Medicus Limited (ASX: PME)

Another ASX growth share that Morgans believes is destined for big things is Pro Medicus. It is a provider of industry leading health imaging technology. The broker highlights that the company is exposed to favourable long-term industry tailwinds and has contracts with some of the biggest and brightest healthcare companies. It said:

Pro Medicus is a leading healthcare end-to-end imaging software and service provider, servicing a number of the world’s largest imaging centres and health care groups. We like the space, with high single digit organic volume growth and long-term industry tailwinds. Profitability in the business is backed up by long-term contracted revenues with some of the world’s largest hospital systems and growing pipeline of tenders which we view will provide continued growth over the medium to long term. We view the business as best-in-class as it heads into CY22 with a step-change in billable contracts following the significant volume and value of contracts signed over the last 12-18 months. The recent market weakness in high growth tech names has provided an opportunity for reasonable entry points.

Morgans has an add rating and $58.18 price target on Pro Medicus’ shares.

The post Morgans names 2 of the best ASX growth shares to buy appeared first on The Motley Fool Australia.

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More reading

• Analysts say these exciting ASX growth shares have at least 20% upside
• 3 ASX All Ords shares smashing new highs on Monday
• Why Allkem, Capricorn Metals, Lovisa, and Pilbara Minerals shares are rising today
• Here’s why the Lovisa share price leapt 8% on Monday
• Why these 3 ASX shares could be in for a massive boost this month

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 Pro Medicus Ltd. The Motley Fool Australia has positions in and has recommended Pro Medicus Ltd. The Motley Fool Australia has recommended Lovisa Holdings Ltd. 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 looking for ASX dividend shares to buy, then you may want to check out the two listed below.

Both of these ASX dividend shares have recently been named as buys by analysts. Here’s why they could be worth considering today:

Baby Bunting Group Ltd (ASX: BBN)

The first ASX dividend share for income investors to consider is leading baby products retailer Baby Bunting.

It has a dominant position in a less discretionary side of the retail industry, which bodes well for its growth in the current environment.

Analysts at Citi are positive on the company and currently have a buy rating and $5.62 price target on its shares. The broker was pleased with its expansion into higher margin areas and the new national distribution centre.

Looking ahead, the broker appears to believe the company is well-placed for growth over the long term and is forecasting fully franked dividends per share of 18 cents in FY 2023 and then 22 cents in FY 2024. Based on the current Baby Bunting share price of $4.15, this will mean yields of 4.3% and 5.3%, respectively.

Centuria Industrial REIT (ASX: CIP)

Another ASX dividend share to look at is Centuria Industrial. It is the largest domestic pure play industrial REIT on the Australian share market.

This has been a great part of the property market to be, with demand for industrial space growing strongly in recent years. In fact, last month when Centuria Industrial released its full year results, it revealed that its occupancy rate increased to ~99% with a weighted average lease expiry of 8.3 years. This supported a 22% increase in funds from operations to $111.7 million.

Macquarie is bullish on Centuria Industrial and currently has an outperform rating and $3.69 price target on its shares.

As for dividends, the broker is expecting dividends per share of approximately 16 cents in FY 2023 and FY 2024. Based on the current Centuria Industrial share price of $3.02, this will mean yields of 5.3% for investors.

The post Experts say these ASX dividend shares are buys today appeared first on The Motley Fool Australia.

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• 3 ASX All Ordinaries shares going ex-dividend today
• Experts name 2 top ASX dividend shares to buy with 4%+ yields
• After seeing their reports, I think these 2 ASX 300 shares are buys
• Leading brokers name 3 ASX shares to buy today
• Why Baby Bunting, PointsBet, ResMed, and Suncorp shares are dropping today

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 Baby Bunting. 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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ASX dividend shares that pay bigger dividends in 2023 could be really interesting to some investors.

It might be hard for some companies to grow their profit and dividends in this period of rising inflation as higher costs like wages, rent and supply chains weigh on businesses.

But, growing dividends may be exactly what investors are looking for. With so many products and services becoming more expensive due to inflation, higher investment income could be the best way to combat that.

There are plenty of businesses that would like to grow their dividends. But there are a few dividend beasts that have committed to paying bigger payouts to shareholders.

Rural Funds Group (ASX: RFF)

Rural Funds is a real estate investment trust (REIT) that owns a diversified portfolio of farms across a range of industries. They include cattle, cropping (cotton and sugar), macadamias, almonds and vineyards.

The ASX dividend share aims to grow its distribution by 4% per annum.

It has forecast that the total distribution in FY23 will be 12.2 cents, which includes 47 cents of franking credits.

Three different factors contribute to this distribution growth.

The first is organic rental growth thanks to rental growth built into the contracts with tenants. Some of the increases are linked to CPI inflation, some are fixed (with a 2.5% annual increase) and some have infrequent market reviews.

The second strategy is investing in its farms. Sometimes that’s just some sort of investment like adding water access or something of that nature. Other times it involves changing a farm to a more profitable use or planting crops. For example, it is currently working on a $165 million development for macadamias.

Finally, the REIT can make the occasional value-adding acquisition to the portfolio.

Including franking credits, the projected Rural Funds distribution yield for FY23 is 4.9%.

Duxton Water Ltd (ASX: D2O)

This ASX dividend share is another that’s linked to the agricultural sector. But, like Rural Funds, its success isn’t directly linked to food prices.

It’s a business that owns water entitlements and can be leased to farmers for long-term leases or for short periods of time.

Duxton thinks that water entitlement values could remain supported and perhaps grow as more water-hungry permanent crops are planted, like almonds.

It’s expecting to grow its dividend to 7.1 cents per share in FY23. At the current Duxton Water share price, its expected this ASX dividend share will pay a grossed-up dividend yield of 6%.

Sonic Healthcare Limited (ASX: SHL)

Sonic is a leading ASX healthcare share that has a “progressive dividend policy”.

In FY22 the business grew its total dividend by 10% to $1. Sonic Healthcare also launched a share buyback.

It’s benefitting from steady revenue growth (and operating leverage) of its base business which is predominately pathology. The ASX dividend share has a presence in multiple countries including the United States, Germany and Australia.

I also like that the business has used the cash flow boost from COVID testing over the last couple of years. It has made acquisitions and locked in more earnings for future years, rather than treating it as a one-off boost.

The company’s link-up with artificial intelligence business Harrison.ai could develop into a very interesting partnership in the coming years.

While it hasn’t provided specific dividend guidance, it’s worth noting that the FY22 dividend would equate to a grossed-up dividend yield of 4.4% in FY23. But Sonic said that its “progressive dividend strategy [is] expected to continue in FY23 and beyond”.

The post Dividend beasts: 3 ASX shares forecasting higher dividends in 2023 appeared first on The Motley Fool Australia.

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• 3 ASX shares I’ll be buying and holding for years to come
• Batteries and water: Experts name 2 ASX shares you can’t ignore
• How I’d invest $50,000 in ASX dividend shares for retirement, if I had to start from scratch
• 5 ASX 200 shares turning ex-dividend tomorrow
• Analysts name 2 blue chip ASX 200 shares to buy now

Motley Fool contributor Tristan Harrison has positions in DUXTON FPO and RURALFUNDS STAPLED. 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 RURALFUNDS STAPLED. 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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So far this month, we’ve seen a swarm of companies in the S&P/ASX 200 Index (ASX: XJO) turn ex-dividend.

Compared to other days this week, tomorrow will be a rather quiet affair with only two ASX 200 shares going ex-dividend. 

In other words, as of tomorrow, these shares will no longer be trading with entitlements to their respective upcoming dividend payments.

Let’s check them out.

Nine Entertainment Co Holdings Ltd (ASX: NEC)

Today will be the last day to snap up Nine Entertainment’s fully franked final dividend of 7 cents. It will be paid on 20 October.

FY22 was another year of growth for Nine. Starting at the top line of the income statement, double-digit growth in each of its divisions contributed to 15% revenue growth, which came in at $2.7 billion.

Stan was Nine’s fastest-growing business, with growth in active subscribers and average revenue per user (ARPU) leading to a 22% jump in revenue, which reached $381 million. However, Stan’s earnings before interest, tax, depreciation and amortisation (EBITDA) fell by 28% to $29 million, primarily reflecting increased investment in Stan Sport.

Across the group, EBITDA climbed 24% to $701 million as the all-important broadcast division delivered EBITDA of $401 million, up 21% from the prior year.

Notably, Nine’s digital earnings grew by 47% in FY22 and now account for more than half of the group’s EBITDA.

This earnings growth helped Nine to declare record total dividends of 14 cents in FY22, up 33% from the prior year.

Nine shares are currently sporting a trailing dividend yield of 6.4%, which grosses up to 9.2% including franking credits.

Speaking of sport, Nine made a play for the AFL broadcasting rights that were up for grabs from 2025 onwards. But ultimately, the AFL decided to stick with current partners Seven West Media Ltd (ASX: SWM), Foxtel, and Telstra Corporation Ltd (ASX: TLS); signing a seven-year deal worth $4.5 billion.

WiseTech Global Ltd (ASX: WTC)

WiseTech is the other ASX 200 share turning ex-dividend tomorrow.

Unlike Nine, WiseTech is more of an ASX growth share that offers shareholders token dividends.

The company recently announced a fully franked final dividend of 6.4 cents, which is dwarfed by WiseTech’s current share price of $57.53.

WiseTech posted revenue of $632 million in FY22, up 25% on the prior year and at the top end of guidance.

Revenue from the company’s flagship CargoWise solution grew by 35% to $448 million. This was underpinned by large global freight forwarder rollouts, new customer wins, and increased usage from existing customers.

Impressively, the ASX 200 tech share improved its EBITDA margin by nine percentage points to 50%. The company said this reflected enhanced operating leverage, the benefits of exceeding its cost reduction program targets, and pricing offsetting inflation.

As a result, EBITDA jumped by 54% to $319 million while underlying net profit after tax (NPAT) surged 72% to $182 million.

The company expects this momentum to roll into FY23. It’s guiding for revenue growth in the range of 20% to 23% and EBITDA growth in the range of 21% to 30%.

In terms of dividends, WiseTech declared total dividends of 11.15 cents in FY22, up 72% from the prior year. 

This represents a dividend payout ratio of 20% of underlying NPAT and puts WiseTech shares on a meagre trailing dividend yield of 0.2%.

The post 2 ASX 200 shares turning ex-dividend tomorrow appeared first on The Motley Fool Australia.

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• ASX 200 tech shares are getting hammered on Monday. Here’s why
• Here are the top 10 ASX 200 shares today
• Nine Entertainment hikes full-year dividend by 33% as profits surge higher
• Nine Entertainment share price takes off after 71% profit boost and ‘record’ dividend
• ‘Bright outlook’: Expert picks 2 ASX shares that touch Aussies everyday

Motley Fool contributor Cathryn Goh 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 WiseTech Global. The Motley Fool Australia has positions in and has recommended Telstra Corporation Limited and WiseTech Global. 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 can be difficult to know which ASX shares to make your first investment in. But, I know which investment I’d want to start with as a beginner.

I often like to write about ASX share Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) when considering choices for a portfolio. However, if I were a beginner starting with $1,000, there are a few things I’d want to keep in mind.

Investing in ASX shares can be a really good way to build long-term wealth. But diversification is an important part of helping us lower risk while still achieving long-term returns.

If someone were to invest in just one business with their first $1,000, then their entire portfolio would be just one business. That’s not diversified at all.

That’s why I think the ASX share I’m about to name would be a smart starting investment.

BetaShares Global Sustainability Leaders ETF (ASX: ETHI)

Firstly, let’s consider the diversification aspect of this investment.

It is an exchange-traded fund (ETF), meaning that it is invested in a portfolio of shares. That instantly provides diversification. Indeed, this ETF is invested in around 200 positions. That’s a lot of diversification straight away, with just one investment.

These names come from across the world including the United States, Japan, Switzerland, the Netherlands, the United Kingdom, Germany and France. In my opinion, it ticks the box for global diversification as well.

I think the businesses in this ASX share’s portfolio are among the best at what they do around the world. I like that almost 40% of the portfolio is invested in information technology businesses, because the technology sector is normally where it’s possible to find growth businesses with good margins.

Some of the names I’m referring to are Apple, Visa, Home Depot, Mastercard, Toyota, United Health, Nvidia, Cisco Systems, Adobe and ASML.

In my opinion, it has a good list of holdings. The quality of the businesses has shone through with the net returns – since its inception in January 2017, the BetaShares Global Sustainability Leaders ETF has returned an average of 16% per annum. But remember, past performance is no guarantee of future results.  

Another good reason to like this ETF

Not only is it a global ETF with quality holdings and impressive historical returns, but it has reasonable management costs (0.59% per annum) and a strong ethical screening process.

Some investors may not mind owning gambling shares, alcohol or coal shares, but plenty of other investors may want to exclude those areas from their investing.

To get into the portfolio, companies need to be in the top one third of performers in terms of carbon efficiency for their industry, or engaged in activities that can help reduce carbon use by other industries.

I think this ASX share ticks all the boxes as a beginner investment, which is why I’d be happy to put my first $1,000 into it.

The post How I’d invest my very first $1,000 in ASX shares right now appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ASML Holding, Adobe Inc., Apple, Nvidia, Visa, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2024 $420 calls on Adobe Inc., long March 2023 $120 calls on Apple, short January 2024 $430 calls on Adobe Inc., and short March 2023 $130 calls on Apple. The Motley Fool Australia has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended ASML Holding, Adobe Inc., Apple, and Nvidia. 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 fundamental idea behind investing is that great reward usually can’t come without commensurate risk. 

After all, who in the world is just going to hand you free money? You have to earn it.

If you’re a regular The Motley Fool reader and already have a portfolio of ASX shares, you already know and accept this.

You’ve chosen to invest in equities knowing that it is more risky than term deposits or bonds — but the long-term returns are likely to be more satisfying.

With this attitude in mind, Shaw and Partners portfolio manager James Gerrish recently sifted through some stocks that have been unloved this year. 

“We think a basket of the underperforming stocks from August could deliver solid returns into Christmas, assuming we can buy them into fresh 2022 lows.”

He found two that could be excellent risk-reward propositions:

Conservative outlook could be a chance to buy in

Credit Corp Group Limited (ASX: CCP) is an old-school finance company that buys debts from other businesses to chase and collect them itself.

Its share price has, unfortunately, almost halved since the start of the year.

Going into reporting season, Gerrish’s team was “mildly bullish” — but the annual result did not flatter the company.

“Their profit result equated to a 14% increase on FY21 which was a solid outcome, however, their guidance for FY23 was the issue – they are guiding to a lower net income of $90 to $97 million,” Gerrish said in his Market Matters newsletter.

“Weak guidance has been the largest weight on the ASX through August reporting season as management has been conservative in their outlook.”

Having said this, Gerrish likes the potential returns if the stock can dip to the $18 mark. Credit Corp closed Wednesday at $18.59 a share.

“On 13.7x FY23 earnings Credit Corp is still around fair value in Market Matter’s view but… we can easily see ~30% upside – note the stock traded ex-dividend 36c fully franked,” he said.

“We like the risk-reward towards CCP into fresh 2022 lows.”

‘Worst of the headwinds could be behind the business’

Chicken producer Inghams Group Ltd (ASX: ING) has really had a tough time of late with supply chain issues, COVID-19 staff absence, La Nina, and input cost inflation.

According to Gerrish, the misfortunes were borne out in the August results.

“Profit fell almost 60% to $35 million, well below the consensus of $43 million, despite volumes increasing more than 4%,” he said.

“Painfully the company said consensus expectations were too high for FY23 and we should expect downgrades of up to 10%!”

Unsurprisingly, the Ingham share price has lost more than 20% since 12 August. It’s lost about a third since the start of the year.

Gerrish feels like this could be a discount worth investing in.

“On a valuation of 16.2x FY23 (depressed) earnings, the risk-reward is improving especially as we believe the worst of the headwinds could be behind the business.”

He added a nice entry point would be below $2.50. Ingham closed Wednesday at $2.48 a share.

The post 2 ASX shares to buy as risk-reward plays after reporting season: expert appeared first on The Motley Fool Australia.

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

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A famous Warren Buffett saying goes “The stock market is a device for transferring money from the impatient to the patient”.

But it’s fair to say 2022 has tested the nerves of investors in technology stocks.

The S&P/ASX All Technology Index (ASX: XTX) has now lost almost 35% over the past 12 months, and there is not much relief in sight with the Reserve Bank continuing to increase interest rates.

“With the benefit of hindsight, high-growth tech businesses proved to be the proverbial canary in the coalmine,” said Forager Funds portfolio manager Alex Shevelev and senior analyst Gaston Amoros.

“The canary went very quiet during most of 2021 and then suffered a catastrophic heart attack in 2022.”

Rock-bottom share prices don’t match the fundamentals

If you’re willing to be patient, though, there are some bargains to be snapped up right now.

“For some of these companies… the low share prices belie the trajectory of the fundamentals.”

Shevelev and Amoros took PDF and e-signature tools provider Nitro Software Ltd (ASX: NTO) as a prime example.

“After raising capital at $3.43 a share in late 2021 to fund a European acquisition, [it] saw its share price trade down to almost $1 and has now received a takeover offer from private equity funds at $1.58 a share,” they said.

“The company was quick in rejecting the offer as opportunistic and significantly undervaluing the business. We tend to agree with them.”

Many tech companies have reined in their spending

The Forager team noted that the new environment of higher interest rates and scrutiny on growth shares has led to many tech companies to change their ways. 

“Software vendors, in particular, keep growing fast and are now displaying a newfound zeal in cost cutting that has pulled cash flow forecasts forward,” they said. 

“It is not a coincidence that we are getting opportunistic take-private bids in this space.”

Nitro’s shares are up almost 50% since the rejected takeover offer, although they are still about a third down since the start of this year.

According to Shevelev and Amoros, Nitro is not the only one tightening its belt and looking ripe for investors willing to ride for the long term.

“There are other good software businesses out there that offer a similar risk-reward profile to the patient investor,” they said.

“In our portfolio, we are very happy with our holdings in software vendors Whispir Ltd (ASX: WSP), Bigtincan Holdings Ltd (ASX: BTH), and RPMGlobal Holdings Ltd (ASX: RUL).”

The Whispir share price is down 60.5% for the year so far, while Bigtincan is 42.4% lower and RPM Global has lost 29.1%.

The post 4 ASX tech shares for the ‘patient investor’: expert appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo has positions in Nitro Software Limited, RPMGlobal Holdings, and Whispir Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended BIGTINCAN FPO, RPMGlobal Holdings, and Whispir Ltd. The Motley Fool Australia has positions in and has recommended BIGTINCAN FPO. The Motley Fool Australia has recommended Nitro Software Limited, RPMGlobal Holdings, and Whispir Ltd. 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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Ask A Fund Manager

The Motley Fool chats with the best in the industry so that you can get an insight into how the professionals think. In this edition, SG Hiscock portfolio manager Hamish Tadgell names not one, but two, ASX shares that he’d buy and hold for the long run.

The ASX share for a comfortable night’s sleep

The Motley Fool: If the market closed tomorrow for four years, which stock would you want to hold?

Hamish Tadgell: I’m sure a lot of people say CSL Limited (ASX: CSL) to you when you ask this question. 

I think that is, you can say that it’s a late cycle recovery play and it’s an incredibly good business spending $1 billion a year on R&D, and got so many growth options in it. Yeah, you could definitely say that, but I’ll give you another one — NextDC Ltd (ASX: NXT).

It’s a stock that is really a long term investment play in our view. It does, from time to time, prove a little bit volatile around half-yearly updates as to whether they’re ahead or behind on where the market’s trying to forecast in terms of connections and interconnections and the like. But when we look at it, if you look at the thematic backdrop first in terms of continuing growth and consumption of data, which has just exploded, I think [it] is only going to continue to go one way. 

There is an increasing need for these types of assets, data centre assets. We also see that the barriers to entry around these increasing, due to privacy data security and particularly data sovereignty legislation. The Australian government has passed certain legislation that unless you’ve got certain accreditation and a domestic company, the Australian government won’t have a contract with you.

So it puts domestic players in an incredibly strong position and they need to meet very high quality standards in terms of the infrastructure and investment they’re making. 

The data centre is like a property play at the end of the day. You build the centres, have long term contracts with certain providers and then your major shopping centre retailers, your Woolworths Group Ltd (ASX: WOW), your David Jones, and the like. And then you have a whole lot of small and medium enterprise businesses that take out space in your data centre. It’s a bit like the specialty retail shops, if you like.

It’s the combination of those that provides an attractive yield and growing return on capital over time. 

The other thing, there’s been a lot of focus recently on rising energy costs and data centres are big users of energy. They are increasingly trying to put in more sustainable sources, solar and alternative sources of renewable energy, but they also have pretty strong pass-through in terms of passing those energy costs onto customers. So that provides a reasonably high level of insurance in a rising inflation environment, which again is what you’re looking for — companies with pricing power. 

MF: You mentioned the NextDC share price can be a little bit volatile. But in 2022 it hasn’t been as volatile as most other tech stocks. It’s been more steady, like an infrastructure stock, hasn’t it?

HT: Yeah. Well, it is. It’s got infrastructure characteristics about it. You got to build the infrastructure first. 

A lot of people get a little concerned when companies [like] NextDC announces that it’s going to spend more money on new data centres. We actually get excited by that because it highlights that there’s growing demand for their product. And historically the company is not built on-spec. It’s only really built where it’s got effectively offtake agreements or commitments from customers that underpin those developments.

The post Fundie reveals the 2 ASX shares he’d buy and hold for 4 years appeared first on The Motley Fool Australia.

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More reading

• Morgans names 3 more of the best ASX shares to buy in September
• Should all ASX investors be buying defensive shares right now?
• Why is the CSL share price on the slide today?
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• Leading brokers name 3 ASX shares to buy today

Motley Fool contributor Tony Yoo has positions in CSL Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL Ltd. 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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