S&P/ASX 200 Index (ASX: XJO) share ResMed Inc (ASX: RMD) is currently benefitting from the situation in its sector.

The ResMed share price has been on quite a journey during 2022. It fell by more than 20% from the start of the year to May 2022. However, since the May lows, it has gone up 20%. It’s currently down around 7% in the calendar year.

While some businesses are struggling in the current environment with rising interest rates and elevated inflation, ResMed is one company that is still doing well. Part of that is down to a competitor having to recall its products.

In a recent profit update, the ASX healthcare share advised investors that for the three months to June 2022, its revenue increased by 4% and (net) income from operations increased by 6%.

The end of the fourth quarter meant that the business could tell investors about its full-year result for the 12 months to June 2022. Revenue increased by 12% to $3.6 billion and income from operations grew 11%.

After seeing that, one fund manager is bullish about the ASX share.

Jun Bei Liu, fund manager from Tribeca Alpha Plus Fund, spoke to Livewire about her thoughts on the business.

Expert’s views on ResMed shares

Liu said the business’ result was in line with expectations in terms of the earnings before interest and tax (EBIT), while operating profit was 4% better than expected.

One of the key highlights for Tribeca was that United States device sales were “incredibly strong” (with 11% growth) even though it’s cycling against strong growth in the prior year.

Jun Bei Liu said that gross profit was “okay” from the ASX 200 share and in line with expectations, while cash flow was “just a tad weaker”. She explained the positive reason for that to Livewire:

It’s mainly because they do need to build some inventory. The demand has been so strong they’re just selling everything they build. They had to build a little bit of inventory just to sell through different channels.

What is the outlook for ASX healthcare share?

The fund manager likes ResMed shares and the wider healthcare sector because it’s “very defensive” and has structural growth. She doesn’t think that earnings will be hurt by economic uncertainty.

Tribeca thinks that ResMed’s outlook is “very bullish”. She pointed out that, on an earnings call, management talked about increasing production quarter on quarter, which she called “very strong”, partly due to the issues faced by Phillips, its competitor. ResMed management reportedly indicated that Phillips “won’t come back into the market for at least another 12 months”. She said that’s really good for ResMed.

Liu also pointed out that ResMed has strong pricing power, which it can use to offset the inflation on the costs side of the business.

Is the ResMed share price an opportunity?

The fund manager said to Livewire:

I would buy this stock, particularly when it has a dip on a result that is very strong, and it is giving a very bullish outlook for the next 12 months as well.

She also said that the 5% fall for the company on the day of the report was an “overreaction”.

The post The ASX 200 company selling everything it makes due to its major competitor being out of the market: fundie appeared first on The Motley Fool Australia.

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• Carsales share price on watch as full-year profit jumps 23%
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended 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 has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Fortescue Metals Group Limited (ASX: FMG) share price has travelled lower since the company last reported its results.

This comes as the pure-play iron ore producer tries to navigate its way through the current challenging market environment.

At Friday’s market close, Fortescue shares finished the day down 0.73% to $18.94.

This means its shares are down 12% from when the company delivered its H1 FY22 financial scorecard on 16 February.

Below, we take a closer look to see if investors can learn anything from the company’s last earnings season.

What happened in the first half of FY22?

On the day the company dropped its half-year results to the market, investors sold off the Fortescue share price by 2%.

While this wasn’t by any means a significant fall despite the company recording double-digit losses across key financial metrics, the share price continued to decline.

In fact, over the period from 16 February to 15 March, Fortescue shares sank 20%.

This appeared to be in relation to several brokers weighing in on their thoughts for the mining giant.

While Fortescue shares staged a mini revival in the following weeks, it was short-lived as market confidence deteriorated.

External factors such as a weakened demand on the iron ore outlook mixed with the Chinese property crisis attributed to the cause.

Consequently, Fortescue shares tumbled to a year-to-date low of $16.24 on 15 July before ticking up a notch.

Since this time, the share has gained ground by more than 16% as the broader market begins to recover.

What should investors look out for?

With Fortescue due to report its full year results on 29 August, investors should have a good understanding of what to expect.

This follows the company’s fourth quarter production report which highlighted record iron ore shipments and higher average revenue realisation.

Management summed up the year’s performance with FY22 shipments of 189 million tonnes, exceeding the top end of guidance.

Average revenue of US$99.80/dry metric tonne (dmt) represented revenue realisation of 72% of the average Platts 62% CFR Index of US$137.99/dmt.

However, FY22 C1 cost of US$15.91/wet metric tonne (wmt) was 14% higher than the US$13.93 achieved in the previous year.

Fortescue achieved a net debt position of US$0.9 billion at 30 June 2022, compared with net debt of US$2.4 billion at 31 March 2022.

Fortescue share price snapshot

In 2022, the Fortescue share price is relatively flat on the back of mixed investor sentiment across the resources sector.

For context, the S&P/ASX 200 Resources Index (ASX: XJR) is up 2% over the same time frame.

Fortescue has a price-to-earnings (P/E) ratio of 4.49 and commands a market capitalisation of roughly $58.75 billion.

The post How did the Fortescue share price respond last earnings season? appeared first on The Motley Fool Australia.

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• Can the iron ore price regain its March highs in 2022?
• Still down in 2022, is the Fortescue share price now on the road to recovery?
• Are Fortescue shares a buy for income or are they a dividend trap?
• AGL share price down amid Fortescue Future Industries hydrogen hub news
• What’s driving the Fortescue share price to an 8-week high today?

Motley Fool contributor Aaron Teboneras 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 Rio Tinto Limited (ASX: RIO) share price looks like an opportunity worth digging into, in my opinion.

This massive mining business has seen much volatility over the last six months. Certainly, resource businesses are known to be cyclical as resource prices move up and down regularly. When the price of a commodity changes, it heavily impacts the current profitability of the business.

Remember, it costs roughly the same to produce one mt of iron ore whether the iron ore price is at US$100 per mt or US$150 mt. That’s aside from higher payments to the government at higher prices. A higher commodity price can largely fall to the net profit after tax (NPAT) line of a miner’s financials.

But, the same is true when resource prices fall – it significantly hurts the potential profit making of the miner.

We don’t know when resource prices are going to rise or fall. But I believe that it can be an opportunity to consider the shares of that miner when both the resource price and share price fall. Bear in mind though that a company isn’t necessarily a ‘buy’ just because its share price has fallen. However, if an investor is interested in owning shares, I think it makes sense to buy when the price is lower and sentiment is weaker.

I think the Rio Tinto share price is looking attractive

Over the past six months, the Rio Tinto share price has sunk around 20%. For such a big business, that’s a hefty fall.

It probably won’t be surprising to know that iron ore and copper prices have both fallen in the ballpark of a 20% (ish) drop as well, over the same time period.

Will those commodities keep falling? Possibly.

But, the Rio Tinto share price and iron ore price may not move in tandem throughout the rest of this cycle. Share markets are forward-looking, so some investors may make predictions of where they believe the iron ore price will settle and where the Rio Tinto share price should be right now based on that prediction.

Increased exposure to decarbonisation

I’m not saying Rio Tinto shares are worth buying just because the iron ore price has dropped, though that seems helpful for investors looking to invest.

I like the moves that Rio Tinto has been making which should help it generate good cash flow long into the future.

For example, it has been growing its exposure to lithium. It has completed its acquisition of the Rincon lithium project in Argentina. It has signed a non-binding memorandum of understanding (MoU) with Ford for a “significant” off-take agreement to support Ford’s production of electric vehicles.

It has commenced underground mining at the Oyu Tolgoi copper-gold mine in Mongolia, one of the world’s largest new copper-gold mines. It has also launched a bid of C$34 per share to buy the rest of Turquoise Hill Resources that it doesn’t already own. The Mongolian government owns 34% of the project and Turquoise Hill Resources owns 66% of Oyu Tolgoi.

I think that having exposure to copper and lithium will help the Rio Tinto share price over the long term, which is a key reason why I think it looks like a long-term opportunity today.

The post Here’s why I dig the Rio Tinto share price right now appeared first on The Motley Fool Australia.

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• Can the iron ore price regain its March highs in 2022?
• Why AMP, OFX, Rio Tinto, and Telstra shares are dropping
• Do any ASX lithium shares pay dividends?
• Why is the Rio Tinto share price sinking today?
• Time is running out to secure the Rio Tinto dividend. Here’s what you need to do

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 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 looking for ASX 200 dividend shares to buy, then you may want to check out the two listed below.

Both have recently been named as buys by analysts. Here’s why they rate them highly this month:

Australia and New Zealand Banking Group Ltd (ASX: ANZ)

The first ASX 200 dividend share that analysts are positive on is ANZ Bank.

The big four bank was recently tipped as a buy by analysts at Citi. The broker currently has a buy rating and $29.00 price target on the bank’s shares

Citi appears to believe the acquisition of the banking operations of Suncorp Group Ltd (ASX: SUN) could be a boost if everything goes to plan.

If integrated successfully, we believe the deal looks to represent fair value, with the acquisition PE of 13.8x offset by substantial cost synergies (~35% of SUN Bank cost base), funding cost benefits (due to ANZ’s AA rating) and lower capital intensity (a move to AIRB accreditation) over time.

As for dividends, the broker is forecasting fully franked dividends of $1.42 per share in FY 2022 and $1.65 per share in FY 2023. Based on the current ANZ share price of $24.02, this will mean yields of 5.9% and 6.9%, respectively.

BHP Group Ltd (ASX: BHP)

Another ASX 200 dividend share to look at is mining giant BHP.

The Big Australian could be a top option for income investors thanks to the high levels of free cash flow it is generating from its world class and diverse operations.

Morgans certainly thinks this is the case. It has an add rating and $48.40 price target on its shares.

The broker commented:

We view BHP as relatively low risk given its superior diversification relative to its major global mining peers. The spread of BHP’s operations also supplies some defence against direct Covid-19 impact on earnings contributors. While there are more leveraged plays sensitive to a global recovery scenario, we see BHP as holding an attractive combination of upside sensitivity, balance sheet strength and resilient dividend profile.

In respect to dividends, the broker is expecting a $3.97 per share dividend in FY 2022 and then a $3.88 per share dividend in FY 2023. Based on the latest BHP share price of $38.83, this equates to massive fully franked yields of 10.2% and 10%, respectively.

The post 2 ASX 200 dividend shares analysts rate as buys appeared first on The Motley Fool Australia.

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More reading

• Looking to buy BHP shares? Here’s what to watch when the mining giant reports this week
• Here are 3 ASX blue-chip shares reporting this week
• Could the ANZ share price really offer more than 20% upside?
• Down 20% in 6 months, what’s next for the BHP share price?
• 3 rising ASX shares to buy that have passed the bottom: expert

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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The Santos Ltd (ASX: STO) share price has had a rough time over the last couple of months. Since 8 June 2022, Santos has fallen by almost 20%.

The oil price has taken a dive over that same time period. So it probably makes sense that Santos shares have gone down as well.

Businesses that generate their revenue, net profit after tax (NPAT) and cash flow based on commodity prices can see quick and large swings in investor sentiment.

Considering the cyclical nature of resources and the respective share prices, does this decline mean that Santos is now an opportunity?

Analysts at Macquarie have given that question some thought after the large oil business went for another acquisition.

What has Santos acquired?

On 11 August 2022, Santos announced that it had acquired Hunter Gas Pipeline Pty Ltd. Hunter Gas Pipeline owns an approved underground gas pipeline route from Wallumbilla in Queensland to Newcastle in New South Wales.

Santos said the underground pipeline route passes close to Santos’ Narrabri gas project. Its goal is to work with infrastructure developers and owners to construct the pipeline and deliver “much-needed” gas to east coast domestic markets in the shortest timeframe possible.

The pipeline will also be designed to transport hydrogen as customer demand evolves during the energy transition.

Santos noted that once fully operational, Narrabri has the potential to deliver more than half of NSW’s gas demand. Subject to receiving the remaining government approvals, construction of the pipeline is expected to commence in early 2024.

So, how might this impact Santos shares?

Macquarie’s thoughts on the Santos share price

As reported by The Australian, the investment by Santos represents a “lost investment opportunity” by APA Group (ASX: APA). Santos will be increasing competition with APA. In doing so, it deprives APA of the chance of being part of the “key” hydrogen pipeline development.

Macquarie noted that the Hunter Gas Pipeline offers hydrogen development, which would mean it could extend the asset life “well beyond” 20 years, which would offset the higher steel and distance costs.

If Santos’ pipeline can be fully utilised, gas to Newcastle would be “in the order of about $1.92 per gigajoule over 20 years,” according to Macquarie.

Extending the Hunter Gas Pipeline’s life to 40 years by providing alternative usage (namely hydrogen) would lower the average cost to around $1.50 per gigajoule. This could be potentially cheaper than the Western Slopes Pipeline proposed by APA.

How would APA respond to this threat? It could lower prices, but that would lower the returns on the APA pipeline.

Macquarie currently rates Santos as outperform, with a price target of $10. That implies a possible rise of almost 40%. At the current Santos share price, Macquarie’s estimates put Santos shares at under 7x the FY22 projected earnings.

The post Is the Santos share price a buy following the energy giant’s latest acquisition? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Monday
• Own Santos shares? Here’s what the company just announced
• 5 things to watch on the ASX 200 on Thursday
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 energy shares mixed amid bearish oil price outlook

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 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.

At the time of writing, Apple, Microsoft, Alphabet, and Amazon are the only four U.S. companies with a market capitalization of $1 trillion or greater. Tesla is not far behind, with a market cap of $907 million.

These are elite businesses that have earned shareholders tremendous gains. It goes without saying that these companies all had much smaller market caps not too long ago. Amazon’s market cap was $105 billion exactly 10 years ago. 

Generally, a good place to look for the next home-run stocks are growing companies with a market cap between $100 billion to $500 billion. But in this case, let’s first look at Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), which has a higher market cap but could be a timely buy right now.

For higher return prospects, you’ll want to consider Advanced Micro Devices (NASDAQ: AMD) and Salesforce (NYSE: CRM). These are solid growth stories that still have years to play out.

1. Berkshire Hathaway

Berkshire Hathaway is one of the safest stocks you can hold for the long term. After rising 50% over the last five years, it carries a market cap of $653 billion. That puts it within shooting distance of the $1 trillion milestone. There are a few reasons Berkshire will keep growing in value.

Berkshire has a sterling balance sheet with $122 billion of cash and fixed securities. The company has a large stock portfolio worth $327 billion at the end of the second quarter. Buffett’s investment vehicle holds large stakes in Apple, Bank of America, and Coca-Cola, among other stocks. Buffett has most recently been adding to large stakes in Chevron, Occidental Petroleum, and leading PC brand HP (formerly Hewlett-Packard). 

Another piece of Berkshire’s intrinsic value is its dozens of privately held businesses. The company’s subsidiaries span everything from candy to railroads. It also owns several insurance companies that provide $147 billion in float, or money that Berkshire collects from insurance premiums that it can reinvest in stocks, bonds, or acquisitions. Many of these Berkshire-held businesses tend to be immune from the changes in technology, which adds a degree of predictability to their long-term performance — something Buffett no doubt considered.

One of Buffett’s best stock ideas lately has been Berkshire Hathaway itself. Through the first half of 2022, he bought $4 billion worth of the company’s shares — a sign that Buffett sees the stock as undervalued. The stock’s price has tripled over the last decade and could repeat that return, which would push Berkshire’s market cap over $1 trillion by 2032.

2. Advanced Micro Devices

Owning companies that serve megatrends in technology, such as spending on data centers, cloud computing, and other advanced computing needs could pay off big. Advanced Micro Devices has emerged as a key supplier of high-performance chips in these markets.

There is a reason why AMD CEO Lisa Su is considered one of the top business leaders right now. Su has done a marvelous job guiding this underdog to industry leadership, and its best days are still ahead.

AMD currently sports a low forward price-to-earnings ratio of 23, based on 2022 earnings estimates, and has a market cap of $159 billion. To reach $1 trillion in 10 years, the share price needs to climb at a compound annual rate of 20%. That is achievable for this fast-growing chipmaker.

For a long time, AMD was the underdog in the semiconductor industry. It’s always played the role of a low-cost alternative to leaders like Intel and Nvidia, but not anymore.

While AMD is still way behind Intel in central processing units (CPUs) and Nvidia in graphics processing units (GPUs), it is winning over customers with its renewed focus on designing high-performance chips. Data center operators are now looking at AMD’s Epyc server chips as a viable alternative to Intel. In the last quarter, AMD again gained market share over its CPU rival. Revenue grew 70% year over year in the second quarter, driven by strong growth in data center chips and consumer chips for notebooks and gaming.

The data center accelerator market, which includes spending on CPUs and GPUs, is expected to grow at a compound annual rate of 34% through 2027, reaching $75 billion. AMD just completed the acquisition of Xilinx, a leading supplier of field-programmable gate array (FPGA) chips, which fills out its product lineup to tackle this enormous opportunity. The strong tailwind in the data center market, along with AMD’s modest valuation, could deliver market-beating returns to investors over the long term.

3. Salesforce

The name Salesforce doesn’t sound like a growth tech stock that is worthy of the elite club of $1 trillion companies, but every investor should know about this amazing business.

Former Oracle executive Marc Benioff co-founded Salesforce in 1999 and currently serves as the company’s chairman and co-CEO. Salesforce pioneered the software-as-a-service business model. Companies save money by subscribing to Salesforce’s cloud-based software, which lowers in-house expenses by maintaining, installing, and keeping systems updated.

Salesforce has grown tremendously and has been ranked the No. 1 customer relationship management (CRM) software provider for nine years. Its flagship product is the artificial intelligence (AI)-powered Customer 360 platform, which offers a suite of software that helps companies manage sales, marketing, and e-commerce, and it continues to expand into new categories.

It has reinvested its growing profitability into strategic acquisitions that expand its offering and competitive lead in the market. Last year, it acquired Slack Technologies, which offers a communication platform for employees, for $27 billion. 

What’s most remarkable about Salesforce is its consistency, which speaks volumes about the size of its long-term growth opportunity. After two decades of high revenue growth, Salesforce is still growing quarterly revenue over 20% year over year. 

It generated $27 billion in revenue over the last four quarters, but the total addressable market for the company’s services is expected to reach $284 billion by 2026, according to Gartner Research. It can grow for a long time. However, if Salesforce continues its record of strategic acquisitions, its addressable market could widen even more as it expands its product offering.

With a market cap of $189 billion, Salesforce is well on its way toward $1 trillion. It has the industry leadership and massive market opportunity to deliver market-beating returns to investors.

Now is the perfect time to buy shares. At a price-to-sales ratio of 6.8, the stock is near its cheapest valuation in the last 10 years. 

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

The post 3 US stocks that could be worth $1 trillion by 2032 appeared first on The Motley Fool Australia.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Bank of America is an advertising partner of The Ascent, a Motley Fool company. John Ballard has positions in Amazon, Nvidia, and Salesforce, Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Advanced Micro Devices, Berkshire Hathaway (B shares), and Salesforce, Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Berkshire Hathaway (B shares) and Salesforce, 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 Carsales.com Ltd (ASX: CAR) share price is in focus on Monday after the automotive classified company released its full-year earnings.

The Carsales share price closed Friday’s trade at $21.65.

Carsales share price in focus amid full-year earnings

Here are the highlights of the company’s FY22 results:

• $609 million of look-through revenue ­– a 36% jump on that of the prior corresponding period (pcp)
• $509 million of reported revenue – a 19% improvement
• Reported earnings before interest, tax, depreciation, and amortisation (EBITDA) came to $270 million – up 12%
• Reported after-tax profit of $161 million – a 23% improvement
• Earnings per share (EPS) of 56.9 cents – up 8%
• 24.5 cent fully franked final dividend ­ – 9% more than that of the pcp

The company’s revenue lifted amid a strong domestic performance from its private and media segments, its Korean Encar business, and revenue from the TyreConnect business (acquired in July 2021).

Its Australian adjusted revenue lifted 18% last financial year while its adjusted EBITDA rose 10%, excluding wage subsidies. Overseas, it delivered double-digit revenue and EBITDA growth.

The company’s revenue and EBITDA lifted 11% and 16% respectively in the US, while those same metrics rose 17% and 16% respectively in South Korea.

Brazil posted the best increase, however. Carsales’ revenue gained 26% in the South American nation while its EBITDA lifted 23%.

What else happened in financial year 2022?

The major news from Carsales last financial year was its acquisition of the remaining 51% stake in Trader Interactive. It underwent a capital raise to snap up the stake for approximately $1.17 billion.

The Carsales share price crashed 12% on the back of the news, released in late June.

The company also launched its Australian online buying service carsales SELECT in August 2021.

What did management say?

Carsales CEO Cameron McIntyre commented on the company’s full-year earnings, saying:

Our team have worked hard to deliver an excellent operational and financial performance while continuing to deliver our strategy and invest in future growth opportunities including progressing the acquisition of the remaining 51% of Trader Interactive in the US.

We continue to see robust levels of demand in all our key markets, reflecting the strength of our market position and the resilience of marketplace businesses through economic cycles.

What’s next?

Carsales didn’t provide any additional guidance today. Though, it did outline its expectations for financial year 2023.

The company expects to deliver “very strong growth” in adjusted revenue and EBITDA on an actual basis this financial year.

That will likely be driven by strong underlying automotive conditions in both dealer and private markets, as well as growth in its media and investments segments.

Carsales share price snapshot

While Carsales’ earnings have been on the up and up lately, its share price has struggled.

The stock is currently trading 13% lower than it was at the start of 2022. It has also fallen 5% over the last 12 months.

Meanwhile, the S&P/ASX 200 Index (ASX: XJO) has slipped 7% year to date and 7% since this time last year.

The post Carsales share price on watch as full-year profit jumps 23% appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended carsales.com 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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Once a week I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Flight Centre Travel Group Ltd (ASX: FLT) remains the most shorted share with 14.9% of its shares held short. There are concerns that cost of living pressures could weigh on the travel market recovery.
• Betmakers Technology Group Ltd (ASX: BET) has seen its short interest ease to 12.2%. This could be due to weak investor sentiment in the betting industry.
• Block Inc (ASX: SQ2) has short interest of 11.3%, which is down slightly week on week again. Much to the dismay of short sellers, this payments company’s shares have rallied 40% in a month.
• Lake Resources N.L. (ASX: LKE) has short interest of 10.8%, which is up week on week. As with Block, short sellers may be regretting that they didn’t close their positions sooner. This lithium developer’s shares rocketed over 40% last week.
• Nanosonics Ltd (ASX: NAN) has short interest of 10.8%, which is down week on week again. Concerns over changes to this infection prevention company’s sales model in the US have been weighing on its shares.
• Zip Co Ltd (ASX: ZIP) has seen its short interest ease to 9.1%. This buy now pay later provider’s shares are down 83% over the last 12 months. Short sellers don’t appear to believe the declines are over.
• Regis Resources Limited (ASX: RRL) has short interest of 9%, which is down week on week. This gold miner’s shares have come under pressure over the last 12 months due to production issues.
• Mesoblast limited (ASX: MSB) has short interest of 8.3%, which is flat week on week. Last week this biotech company’s shares tumbled lower after it raised equity once again.
• Inghams Group Ltd (ASX: ING) has returned to the top ten with short interest of 8%. Concerns over margin pressure from higher input costs has been weighing on sentiment.
• Megaport Ltd (ASX: MP1) has seen its short interest drop to 7.9%. Unfortunately for short sellers, this network as a service provider’s shares have rallied strongly over the last month amid optimism that it could soon be profitable.

The post These are the 10 most shorted ASX shares 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 positions in and has recommended Betmakers Technology Group Ltd, Block, Inc., MEGAPORT FPO, Nanosonics Limited, and ZIPCOLTD FPO. The Motley Fool Australia has positions in and has recommended Block, Inc. and Nanosonics Limited. The Motley Fool Australia has recommended Betmakers Technology Group Ltd, Flight Centre Travel Group Limited, and 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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The Wesfarmers Ltd (ASX: WES) share price could become increasingly influenced by lithium as the company builds exposure to the resource.

Wesfarmers is best known for being a leading retailer. It has some of the largest retail businesses within its portfolio including Bunnings, Officeworks, Target, and Kmart. The e-commerce business Catch is another name in its portfolio.

However, Wesfarmers is not only a retailer. It has a portfolio of businesses, including industrial businesses and a chemicals, energy, and fertiliser division called WesCEF.

So how does lithium fit in?

Mt Holland

In May 2019, Wesfarmers launched a successful bid to acquire Kidman Resources which was an ASX share at the time.

Kidman’s major asset was a 50% interest in the Mt Holland project based in Western Australia, which it owns jointly with Sociedad Quimica y Minera de Chile, one of the world’s largest producers and marketers of lithium products. It included the construction of a mine and co-located concentrator at Mt Holland as well as a lithium hydroxide refinery in Kwinana. Wesfarmers pointed out that lithium hydroxide is key to the electric vehicle value chain.

Why did Wesfarmers buy this business?

Not only does Wesfarmers see attractive long-term growth trends for lithium (thanks to electric vehicles), but the company can also utilise the WesCEF business’ ability to “design, construct, commission and operate complex plants”.

The Wesfarmers managing director Rob Scott said:

The acquisition of Kidman provides an opportunity to invest and develop a large-scale, long-life and high-grade lithium hydroxide project in Western Australia. It also creates a unique partnership with SQM, a global leader in the lithium industry with a long operating history and deep market knowledge.

Wesfarmers said that the increasing global uptake of electric vehicles in the longer term will be driven by “significant reductions in manufacturing costs, lower operating costs relative to traditional vehicles, increasing battery range and the transition of major auto manufacturers to electric drivetrains”.

In July 2021, the Mt Holland project received ministerial approval which was the last critical approval. Construction and project development started last year.

Progress on Mt Holland

Wesfarmers said that first production from the refinery is expected in the second half of the 2024 calendar. The life of the project is expected to be around 50 years. The production capacity is expected to be 50kt per annum. Wesfarmers’ share of the capital expenditure is around $950 million.

In terms of progress on the site, the Mt Holland village and aerodrome construction has been completed.

Construction of the concentrator and refinery are underway. Pre-strip mining has commenced.

Despite the impact of inflation, Covalent (which is the name of the lithium business) said it’s currently containing the impacts of this challenging environment to remain in line with the original guidance.

Further growth opportunities

Wesfarmers outlined in a recent presentation that it is investigating expansion opportunities for the mine and refinery to improve investment returns.

It’s also evaluating “adjacent step-out opportunities and downstream investments” within the battery minerals theme.

Wesfarmers said that it is considering options for the sale of spodumene concentrate.

Foolish takeaway

So, there you have it, Wesfarmers could be a sizeable lithium miner later this decade. Investors can already get exposure to the progress that Wesfarmers is making with its lithium plans.

The Wesfarmers share price has gone up around 4% over the last month.

The post Did you know you’re investing in lithium when you buy Wesfarmers shares? appeared first on The Motley Fool Australia.

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

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The Telstra Corporation Ltd (ASX: TLS) share price has been slowly but steadily rising over the last few weeks.

It comes during a period of rising inflation but it seems the telco giant may be able to shield itself from some of these impacts.

Certainly, the last few years have been tricky for Telstra’s bottom line and profit margins.

A shift by households to the NBN has meant that Telstra no longer owns the infrastructure being used. This, in turn, means lower operating margins as the company has to compete on the same terms as every other telco that offers NBN services.

The telco industry has also had to get used to intense competition in the mobile space. However, that seems to be lessening after a series of acquisitions have reduced the number of players in the telco space. Inflation has also changed the situation to some extent.

Perhaps things may not be as bad as they seemed for Telstra.

Telstra is largely untroubled by inflation

The telco recently acknowledged that there is much uncertainty right now. But, Telstra believes there are some “natural hedges” against inflation in the business and that it is “better placed than many”.

One example is Telstra’s recurring infrastructure revenue from the NBN, which grew by 3.3% in FY22 to $930 million. This revenue is indexed to CPI inflation for the remaining average contracted period of 25 years.

However, in its infrastructure segment, Telstra acknowledged it has seen cost inflation for construction and fibre supply. However, it expects to remain within its strategic capital expenditure spending for FY23 of $350 million (including Viasat). However, “given the cost inflation and the customer demand profile”, its estimated FY26 earnings before interest, tax, depreciation and amortisation (EBITDA) will be “significantly lower than previously indicated”.

But, I believe it’s important to keep in mind that it is the ‘mobile’ division that generates the most revenue and may be the key influencer on the Telstra share price.

Within its costs, labour is one of the key expenses. It has some “protection” against inflation from a newly-reached enterprise agreement with agreed wage increases for the next two years.

There are contracts in place for some other costs that offer “some protection”.

On interest costs, hedges are in place with around 65% of its debt at fixed rates.

Price rises

Perhaps one of the most important things to note is that Telstra recently increased its prices for many customers in line with CPI inflation for its ‘in-market branded postpaid’ mobile plans and also introduced an ‘option’ to review prices annually against CPI inflation.

That results in increased prices for around 65% of postpaid mobile customers and will flow through from September. There are “different dynamics” in the other 35% of postpaid customers, and it continues to review pricing across the portfolio.

Telstra also said that with international travel back on the agenda, roaming is also expected to support growth, though “it is unclear if it will completely return to pre-COVID levels”.

In FY22, roaming EBTIDA was around 20% of the around $250 million of the pre-COVID level. For June, it was around 45%.

Telstra share price snapshot

Since the beginning of 2022, the Telstra share price has dropped around 4.3%.

The post Own Telstra shares? How the telco is tackling inflation pressures appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Corporation 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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