Are you looking for dividend shares to add to your income portfolio? If you are, then the two listed below could be worth considering.

These dividend shares have been rated as buys and tipped to provide income investors with big yields.

Here’s what you need to know about them:

HomeCo Daily Needs REIT (ASX: HDN)

The first ASX dividend share for income investors to look at is the HomeCo Daily Needs REIT. It is a property company investing in neighbourhood retail, large format retail, and health and services.

Goldman Sachs is a fan of the company and has a buy rating and $1.70 price target on its shares. The broker believes it is well positioned to benefit from the shift to omni channel retailing.

Goldman commented:

We continue to believe HDN is undervalued at its current valuation given its diversified tenant base, and see it as well positioned to benefit from the shift to omni channel retailing, with additional external growth opportunities to drive earnings growth over the medium-term.

In respect to dividends, Goldman is forecasting dividends per share of 8 cents in FY 2022 and 9 cents in FY 2023. Based on the current HomeCo Daily Needs share price of $1.27, this will mean dividend yields of 6.3% and 7.1%, respectively.

South32 Ltd (ASX: S32)

Another ASX dividend share to look at is South32. It is diversified mining and metals company producing a range of commodities. This includes alumina, aluminium, bauxite, coal, copper, manganese, nickel, and silver across operations in Australia, Southern Africa and South America.

Citi is a big fan of the company. It currently has a buy rating and $5.50 price target on the miner’s shares. The broker believes the company’s shares are trading at an attractive level. It commented:

S32 held a strategy update today and there was little to change baseline forecasts save for higher FY23/24 capex. Costs pressures are evident – but are industry not company specific. S32 has production growth, trades at a discount to DCF and on low valuation multiples. What’s not to like compared to peers.

As for dividends, the broker is forecasting fully franked dividends per share of 38 cents in FY 2022 and 40 cents in FY 2023. Based on the current South32 share price of $4.16, this will mean yields of 9.1% and 9.6%, respectively.

The post Here are 2 ASX dividend shares experts say are buys appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most heavily traded ASX 200 shares on Friday
• Broker names 2 ASX 200 mining shares with big dividends to buy now
• Here are the 3 most traded ASX 200 shares on Wednesday
• 2 high yield ASX dividend shares to buy according to analysts
• Here are the 3 most traded ASX 200 shares on Friday

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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Investors that have seen $100 billion of their wealth evaporate this week can take solace in the fact that ASX shares could still be among the safest bets in this turbulent environment.

That’s the assessment of Crestone Wealth Management head of equities Todd Hoare. He’s urging investors to hide their capital in Australia, reported The Weekend Australian.

Hoare explained that:

From an equity perspective, Australia looks like a safer place to be. It is lower beta (that is, less volatile), valuations are optically more attractive, we’re a resource-led economy, and even though inflation is proving a bit stickier, we shouldn’t get the same level of entrenched inflation seen elsewhere in the world.

Why ASX shares could outperform other share markets

It’s the fear of runaway inflation and the potential overshoot in interest rates that’s triggering the latest market sell-off.

Central banks in the US to Australia are rushing to hike rates to curb high inflation. This increases the risk of a recession or stagflation.

Given the overrepresentation of ASX resources shares on our market, this should put us in a better position to outperform.

Diversification remains key

But Hoare warned that ASX investors with a substantial share portfolio will need to diversify. He means owning other asset classes and not just shares. He said:

It comes down to multi assets, with bonds offering a little bit more value than what they have done for a long period of time, and alternative asset classes in the mix. Even cash to some degree, even though in real terms inflation is eroding that. With very few places to hide right now, all you can do is try to lose less.

This is also where gold could shine. While the precious metal hasn’t rallied, it’s at least managed to hold its ground at above US$1,800 an ounce as the US share indices crashed into a bear market.

The types of ASX shares to watch

Coming back to ASX shares, the sectors that Hoare likes in a high inflationary environment include consumer staples, energy companies, and defensives, such as healthcare.

Meanwhile, Doug Turek of Minchin Moore Private Wealth Investors echoed a similar view, reported The Australian. He highlighted ASX energy, resources, and agriculture shares as places to shelter from inflation.

No need to chase shares higher

However, he warns that these shares do not look cheap as many have outperformed over the past two years.

Turek noted: “All those assets that might work better than others in times of inflation could be very pricey now. Rushing after them at this stage might not be the right move.”

Investors should take their time as inflation can be volatile, Turek added. This means investors might get a second chance to buy ASX commodity shares at a better price later.

The post Why ASX shares are ‘a safer place to be’: fundie appeared first on The Motley Fool Australia.

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More reading

• Here are 2 ASX dividend shares experts say are buys
• Top brokers name 3 ASX shares to buy next week
• Can Woodside shares deliver an attractive dividend yield AND 16% upside in 2022?
• Why I would invest $10,000 in these 3 ASX shares
• Is the Vanguard US Total Market Shares Index ETF now trading at bargain levels?

Motley Fool contributor Brendon Lau 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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Last week saw a number of broker notes hitting the wires once again. Three buy ratings that investors might want to be aware of are summarised below.

Here’s why brokers think investors ought to buy them next week:

Altium Limited (ASX: ALU)

According to a note out of Ord Minnett, its analysts have resumed coverage on this electronic design software company’s shares with a buy rating and $32.00 price target. Ord Minnett believes Altium will fall well short of its aspirational US$500 million FY 2026 revenue target and is forecasting revenue of US$387 million instead. Despite this, the broker remains bullish on Altium due to its leading position as a provider of an essential tool in electronic design. The Altium share price ended the week at $25.60.

Breville Group Ltd (ASX: BRG)

A note out of UBS reveals that its analysts have retained their buy rating but cut their price target on this appliance manufacturer’s shares to $25.00. Although UBS acknowledges that Breville is operating in a challenging environment at present, it doesn’t expect these headwinds to last for too long. Furthermore, it believes that management has the option to pull back on its research and development spending if necessary to support margins. The Breville share price was fetching at $17.00 at Friday’s close.

CSL Limited (ASX: CSL)

Analysts at Macquarie have retained their outperform rating but cut their price target on this biotherapeutics giant’s shares to $312.00. According to the note, Macquarie is confident that CSL can deliver solid earnings growth in the coming years. This is being underpinned by improving plasma collections, solid demand for immunoglobulins, the proposed acquisition of Vifor Pharma, and the introduction of the Rika platform. The latter has been developed to collect plasma quicker and more comfortably. The CSL share price ended the week at $255.99.

The post Top brokers name 3 ASX shares to buy next week appeared first on The Motley Fool Australia.

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More reading

• Why I would invest $10,000 in these 3 ASX shares
• Down 20% in a month, is the Breville share price a bargain buy or a falling knife?
• Brokers name 3 ASX shares to buy today
• Down 5% so far this week, is the CSL share price a buying opportunity?
• 2 ASX shares I want to buy more of for my portfolio

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 Altium and 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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The Woodside Energy Group Ltd (ASX: WDS) share price could have a bright future, according to brokers.

The dividend-paying energy stock has reportedly been tipped to gain more than 16% by a top broker.

At Friday’s close, the Woodside share price was $31.92, down 0.87% on the day.

For context, the S&P/ASX 200 Index (ASX: XJO) also finished in the red on Friday, sliding 1.76%. Meanwhile, the S&P/ASX 200 Energy Index (ASX: XEJ) was down 1.59%.

Let’s take a closer look at what the future might bring for the ASX 200 energy giant.

Could Woodside offer a 16% upside and 2.35% yield?

The Woodside share price could reach $37 in the relatively near future, a top broker has reportedly tipped.

The bullish prediction was tabled by JPMorgan, according to The Australian.

Excitingly, that would still leave the stock boasting a respectable dividend yield of 2.35%.

That takes into account the company’s previous two dividend payments — a 41.03 cent interim dividend paid in September and a $1.46 final dividend handed out in March.

However, Morgan Stanley is expecting the stock to trade with a dividend yield of 10% to 12% over the coming years following the company’s merger with BHP Group Ltd (ASX: BHP)’s petroleum assets. Though, it noted that prospect is reliant on energy prices remaining strong.

In fact, the broker reportedly expects Woodside to pay out US$20 billion of dividends over the coming decade.

Perhaps unsurprisingly, Morgan Stanley is said to be more bullish on Woodside, slapping it with a $40 price target.

Wilson Asset Management (WAM) also likes the newly merged company.

As my colleague Tristan Harrison recently reported, the fund believes that by merging Woodside and BHP’s petroleum business the former’s balance sheet has been “de-geared”, allowing it to push forward with major projects.

Woodside share price snapshot

Friday’s dip wasn’t enough to dint the Woodside share price’s impressive year-to-date performance.

Right now, the stock is trading for 40% more than it was at the start of 2022. It’s also 37% higher than it was this time last year.

The post Can Woodside shares deliver an attractive dividend yield AND 16% upside in 2022? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Friday
• 5 things to watch on the ASX 200 on Thursday
• Why is the Woodside share price in the red today?
• Why Block, Nanosonics, St Barbara, and Woodside shares are dropping
• This fund manager is optimistic on these 2 leading ASX 200 energy shares

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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While I think the market volatility could continue for a little while to come as investors wait to see if interest rate hikes cause the global economy to fall into a recession, it could still be a good time to start looking at the ASX shares you would want to own when the rebound inevitably comes.

Among the many options out there, three stocks stand out for me. These are the shares that I believe could generate strong returns for investors over a period of three to five years.

Here’s why I think they would be top options for a $10,000 investment when the market volatility eases:

CSL Limited (ASX: CSL)

The first ASX share I would invest $10,000 into is CSL. I believe it is Australia’s highest-quality company and a great long-term pick for investors.

This is due to the biotherapeutics giant’s world-class portfolio of plasma therapies and vaccines and its huge ongoing investment in research and development. Combined with the impending acquisition of Vifor Pharma, strong demand for immunoglobulins, and major improvements in plasma collections, CSL’s outlook appears very positive.

So with its shares trading below historical averages at 20x enterprise-value-to-EBITDA (earnings before interest, taxes, depreciation, and amortisation), it could be an opportune time to invest.

Goodman Group (ASX: GMG)

Another ASX share to consider buying when the market settles is Goodman.

It is one of the world’s leading integrated industrial property companies. Over the last three decades, Goodman has grown from one industrial building in South Sydney to 400 properties in 14 countries across the world.

Pleasingly, demand for its properties remains as strong as ever, thanks to structural drivers. This is supporting stellar rental growth and underpinning a huge development pipeline valued at $13.4 billion across 89 projects.

Given this positive outlook, I think Goodman’s shares look great value at 18x estimated FY 2023 earnings. Especially in comparison to its five-year forward average of approximately 24x earnings.

ResMed Inc (ASX: RMD)

A final option for that $10,000 investment could be ResMed. This ASX share is one of the world’s leading sleep treatment-focused medical device companies. This is a great side of the healthcare sector to be in, with studies estimating that there are likely to be almost one billion people suffering from sleep apnoea globally.

This means that ResMed’s industry-leading products have a huge market opportunity to grow into over the next decade and beyond as more and more sufferers are diagnosed and seek treatments.

And, as with the others, the ResMed share price is trading on below-average multiples at present. Its shares are changing hands for 28x estimated FY 2024 earnings, which is lower than its historical average of 32x forward +2 earnings.

The post Why I would invest $10,000 in these 3 ASX shares appeared first on The Motley Fool Australia.

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More reading

• Brokers name 3 ASX shares to buy today
• Down 5% so far this week, is the CSL share price a buying opportunity?
• ASX 200 midday update: ResMed’s US$1bn acquisition, tech shares continue to sink
• ResMed share price drops despite US$1bn Medifox Dan acquisition
• Buy these 2 quality ASX 200 shares: broker

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 CSL Ltd. 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 has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Investors of US shares have seen a painful drop in the last few weeks. This is reflected in the price of Vanguard US Total Market Shares Index ETF (ASX: VTS), down around 20% since the start of 2022 amid inflation and rising interest rates.

However, the last 12 months show less of a decline – it’s only down by around 8%. Interestingly, the VTS ETF is now back at the price that it was just before the COVID-19 crash.

But after such a hefty decline in 2022, could the Vanguard US Total Market Shares Index ETF price be good value? Some investors have been looking at the US share market and are starting to see opportunities.

The US share market could be nearing the bottom?

According to reporting by the Australian Financial Review, Warren Pies from 3Fourteen Research has suggested it could be time to look at the US share market and think about buying.

The call is based on looking at the forward price to earnings (P/E) ratio and interest rates. In his eyes, the US stock market is underlying by “about 10% at present”. He wrote:

Historically, bear market bottoms occur when this discount moves to between 15 and 20 per cent.

During a big sell-off, we find ourselves — like most investors — a bit paralysed. Pulling the trigger is difficult. It’s always darkest before the dawn, and every 20% sell-off feels like it could go another 20%.

In hindsight, it’s easy to see the signs of a low — cheap valuations, washed out sentiment and policy support define most bottoms. Yet, trading bear markets is easy in theory but difficult in practice.

He also said that energy remains a market hedge and that 3Fourteen Research are buyers of the dip.

What is Vanguard US Total Market Shares Index ETF?

For readers that haven’t heard of the VTS ETF before, it’s an exchange-traded fund (ETF) offered by Vanguard.

The idea is that it gives exposure to most of the US share market. It’s actually invested in more than 4,100 businesses.

However, it does give the biggest exposure to the largest businesses on the US share market. These include Apple, Microsoft, Alphabet, Amazon.com, Tesla, Berkshire Hathaway, UnitedHealth, Johnson & Johnson, Meta Platforms and Nvidia.

It comes with an annual management fee of 0.03% per annum, which is one of the lowest for ETFs in Australia.

In terms of sector diversification, Vanguard US Total Market Shares Index ETF has double-digit sector allocation to five industries: technology (26.4%), consumer discretionary (14.8%), healthcare (13.8%), industrials (12.8%) and financials (11.1%).

While past performance is no guarantee of future performance, the VTS ETF has produced an average return per annum of 12.6% per annum over the last three years.

The post Is the Vanguard US Total Market Shares Index ETF now trading at bargain levels? appeared first on The Motley Fool Australia.

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More reading

• Why I would invest $10,000 in these 3 ASX shares
• The best months of the year for share market gains
• Experts rate these ASX 200 blue chip shares as buys
• 3 things to look for with inflation-fighting stocks
• Have ASX 200 shares bottomed? Experts weigh in

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Berkshire Hathaway (B shares), Microsoft, Nvidia, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Johnson & Johnson and UnitedHealth Group and has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Berkshire Hathaway (B shares), 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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We’ve all heard of the Santa Rally and the dictum “sell in May and go away”.

But is it just a silly superstition that some months are better or worse for the share market?

While past performance is no guarantee of what will happen in the future, Schroders (LON: SDR) recently compiled the historical statistics to see just what the deal is.

The team crunched the numbers based on 31 years of performance on four major indices:

• MSCI World Index (.WORLD:MSCI)
• S&P 500 Index (SP: .INX)
• FTSE 100 Index (FTSE: UKX)
• EURO STOXX 50 (INDEXSTOXX: SX5E)

And these were the results, as published by Visual Capitalist:

Rank	Month	Years when shares went up	Percentage point diff from average
7	January	57.8%	(1.3)
8	February	57.0%	(2.1)
9	March	56.3%	(2.8)
2	April	74.3%	+15.2
5	May	58.6%	(0.5)
12	June	36.7%	(22.4)
4	July	61.7%	+2.6
11	August	49.3%	(9.8)
10	September	51.6%	(7.5)
3	October	68.6%	+9.5
6	November	58.4%	(0.7)
1	December	79.0%	+19.9
	Average	59.1%	0

Santa Rally and ‘sell in May and go away’

The best month for share price growth seems to be December, in a phenomenon affectionately known as the Santa Rally.

“One theory is that the holiday season has a psychological effect on investors, driving them to buy rather than sell,” said Visual Capitalist writer Marcus Lu.

“We can also hypothesise that many institutional investors are on vacation during this time. This could give bullish retail investors more sway over the direction of the market.”

April is also a strong month. In the US, this is when many citizens receive their tax refunds. 

In Australia, the numerous public and school holidays may have a similar festive effect to December.

On the other end of the ladder, June seems to be historically a poor month for stock prices.

In Australia, June is the final month of the financial year, causing retail investors to perform tax-loss selling and fund managers to tidy up their portfolios.

“The data does show a convincing pattern. It’s for this reason that the phrase ‘sell in May and go away’ has become popularised.”

Perhaps the most heart-warming part of the analysis is that overall 59.1% of the months see the share market winning than losing.

This indicates how long-term investing in shares can increase the chances of a portfolio expanding in value.

Have ASX shares in 2022 followed the pattern?

As for this year, a recent Market Matters report claimed the Australian share market has so far stuck to the script.

“The local market has followed its seasonality clock perfectly in 2022,” read the document.

“But we feel it’s likely to be harder to maintain over the next 6 months.”

The reason for the doubt for the second half of 2022 is it’s expected to be a turbulent time with the Reserve Bank raising rates dramatically.

“Seasonally June often forms a platform for a run up into Christmas, which does dovetail with our current bullish stance towards stocks,” read the report.

“Although it’s very hard to imagine risk assets losing the shackles of a rising interest rate environment in a meaningful manner anytime soon.”

The post The best months of the year for share market gains appeared first on The Motley Fool Australia.

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More reading

• Experts rate these ASX 200 blue chip shares as buys
• 3 things to look for with inflation-fighting stocks
• Have ASX 200 shares bottomed? Experts weigh in
• Analysts name 2 ASX dividend shares with attractive yields to buy next week
• Down 20% in a month, is the Breville share price a bargain buy or a falling knife?

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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The Australian share market is home to a large number of ASX 200 blue chip shares. But which ones are in the buy zone right now?

Two that have just been tipped as buys are listed below. Here’s what analysts are saying:

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

The first blue chip ASX 200 share that analysts are positive on is ANZ Bank. It is of course one of Australia’s big four banks.

It has been tipped as a buy by analysts at Macquarie. The broker currently has an overweight rating and $34.00 price target on the bank’s shares. This compares very favourably to the latest ANZ share price of $21.16, which suggests potential upside of 60% for investors.

Macquarie believes that the banks could get a boost to their margins from customers that don’t chase new term deposit rates. It explained:

While competition for ‘hot’ term deposits (TDs) is intensifying, banks’ ‘lazy’ customers (who are not chasing ‘special rates’ offered by banks) contribute to margin upside. We estimate that ‘lazy’ term deposits are currently one of the more profitable bank segments and should provide [approximately] 4-9bps [basis points] tailwind over the next twelve months.

Cochlear Limited (ASX: COH)

Another blue chip ASX 200 share that is rated as a buy is hearing solutions company Cochlear.

The team at Goldman Sachs are bullish and have a buy rating and $237.00 price target on its shares. This compares to the latest Cochlear share price of $188.98, which implies potential upside of 25% for investors.

The broker believes that Cochlear is well-placed to at least meet its guidance in FY 2022. It explained:

Whilst the recovery [from the pandemic] will still be mixed, we believe the steady declines in hospitalisation rates across key markets, supportive backlog volumes and improved margin trajectory support a much improved picture from here. [..] As such, we believe current targets for FY22 offer the best chance in several years for COH to deliver at/above the top-end of its guided range (GSe: A$297m).

The post Experts rate these ASX 200 blue chip shares as buys appeared first on The Motley Fool Australia.

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More reading

• Is the ANZ share price and dividend yield too good to ignore?
• 3 ASX 200 bank shares slide to 52-week lows on Friday
• ASX 200 bank shares languish on Thursday despite market lift
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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 Cochlear Ltd. The Motley Fool Australia has recommended Cochlear 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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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.

With the Core Consumer Price Index (CPI) rising by 8.6% over the past 12 months, inflation is the word of the year, and many portfolios aren’t fully ready for it. Rising costs give way to thinner margins, and growth-stage companies are getting hit by the market’s reaction particularly hard. 

But you aren’t powerless in the face of inflation. Understanding how to hunt down inflation-resistant stocks is half the battle, and they’re more common than you might think. Let’s take a look at three things to look for when you’re scouting for the stocks that’ll anchor your portfolio’s value during the ongoing inflationary storm. 

1. How necessary are the products for potential buyers?

The first thing to look for when you’re evaluating a stock’s ability to hold value through a patch of inflation is whether its products are something that buyers will be able to do without. For instance, CVS Health (NYSE: CVS) sells a huge number of consumer health items that people need no matter their cost, like contact lens fluid and antacids. That means even if prices rise, consumers will still be buying the products, though they may look for substitutes or cheaper alternatives than what CVS might carry.

Another good example of highly necessary products are many of the life-saving prescription medicines made by Pfizer (NYSE: PFE). In Pfizer’s case, its customers are pharmacies like CVS as well as healthcare systems, which in the U.S. are counterparties to insurers.

If Pfizer hikes the price of a drug that it sells to hospitals to keep pace with inflation, the hospitals can then pass the additional cost on to insurers. What this means is that the company’s primary customers aren’t about to balk at a higher price point for the medicines they need to treat patients, so its base of revenue is unlikely to budge by much.

2. Steady cash flows over time

Stable businesses can weather different economic environments without significant negative impacts to their cash flows. The best way to find a business with steady cash flows is to look at a company with a highly needed group of products and examine its financial performance over a very long period. Take a look at this chart. 

CVS Revenue (Annual) data by YCharts

As you can see, CVS’ revenue and free cash flow (FCF) smoothly and slowly increased over the last 30 years. There were a trio of recessions in that period, as indicated by the shading on the chart, and plenty of different economic forces (including inflation) affecting it over time — but none of that stopped the company’s upward march for very long. And all that needed to happen was executing on its business model of building out retail pharmacies and then selling consumer health goods to people who go there to get their prescriptions filled. 

3. Having a clever plan to deal with inflation

Companies that have an inflation strategy are better equipped to deal with rising input prices and potential softening of demand than those that don’t. For many, the strategy may simply be to “increase prices as much as our customers will tolerate,” but that could easily end up destroying demand and causing revenue to fall.

One innovative strategy used by Costco (NASDAQ: COST) is to keep certain prices, like the price of its hot dog and soda combo in its food court, at a fixed level that doesn’t change in response to inflation, but to let other prices float as needed. Since the 1980s, the combo costs only $1.50, and there are no plans to change that amount.

While it’s true that this means the business will have an ever-poorer margin on the combo, which still faces rising supplier costs, it helps to mitigate the sticker shock that customers experience when buying something familiar. And when competitors are unashamedly hiking prices by significant amounts, it makes those that don’t hike 100% of their prices look all the better — even if some products do end up being marked up. 

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

The post 3 things to look for with inflation-fighting stocks appeared first on The Motley Fool Australia.

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Alex Carchidi has positions in Costco Wholesale. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Costco Wholesale. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended CVS Health. 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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It’s been, frankly, a horror end to the trading week this Friday, in what has been in itself a horrible week to have been invested in ASX shares. At market close, the S&P/ASX 200 Index (ASX: XJO) lost another painful 1.77%. That puts the ASX 200’s falls for the past week at a depressing 7.76%.

But is this the bottom for ASX 200 shares? After all, the old saying goes that it is always darkest before the dawn. And it certainly feels dark on the ASX right now.

Well according to reporting in the Australian Financial Review (AFR) today, one analyst reckons we could indeed be near the bottom of this market correction. That’s Fundstrat Global technical strategist Mark Newton.

Is the ASX close to a bottom yet?

Newton reckons that last night’s (our time) sell-off on the US markets has brought share prices closer to a bottom. He also added the following:

Evidence of bearishness turning to capitulation has been growing, and I’m confident that markets are nearing a bottoming process which should be in place by the end of June… Cycles, counter-trend exhaustion tools, and very bearish sentiment are all coming together, suggesting markets can make a low in the near future, despite evidence of downward earnings revisions starting to just begin to ramp up…

While a choppy period over the next month might need to happen before a larger rally can happen, it looks right to position long into end of month, and initial lows could be in place by next Friday.

So this is certainly good news for ASX shares if Newton’s predictions turn out to be accurate. The US markets and the ASX are closely correlated, and it’s highly likely that if the US markets started to recover, the ASX would be close behind.

Inflation concerns continue to weigh on the share market

This sentiment is not universal though. The AFR also reported on another, less-bullish outlook, this time from AMP Ltd (ASX: AMP) chief economist Shane Oliver. Oliver reckons there is still a 50-50 chance of a global recession in the next 12 months thanks to the actions of central banks around the world in raising interest rates. “Either way it’s still too early to say that shares have bottomed,” he told the AFR. Here’s some more of what Oliver said:

Energy prices – particularly for oil – are yet to put in a decisive top and it’s hard to be confident that the worst is over for inflation until they decisively stop rising…

When combined with the surge in fixed mortgage rates, it would likely cause real problems for consumer spending, a big spike in mortgage stress and push property prices down by 20 to 30 per cent… which indicates it’s unlikely to happen as it would crash the economy and ultimately push inflation back well below the RBA’s target.

So some divergent outlooks on the ASX share market going forward. No doubt investors will be hoping it’s the former opinion that prevails over 2022 and into next year. But we shall have to wait and see what happens.

The post Have ASX 200 shares bottomed? Experts weigh in appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has 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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