“Meme-stock speculators” selling out of Bitcoin (CRYPTO: BTC), while driving the valuation lower, is the best thing for the cryptocurrency market in the long run.

That’s according to DeVere Group chief Nigel Green, who said it will allow serious investors to buy in without unnecessary inflation of prices.

“This army of get-rich-quick speculators who were all about price frenzies, rather than the actual inherent value of digital, borderless, decentralised money, are now disappearing as crypto prices have lowered.”

The Bitcoin price has lost more than 34% so far this year in Australian dollar terms, and an ugly 21% over the past fortnight.

The flagship crypto has more than halved since early November.

Why this bear market is different from the last one

The last time crypto entered such a bear market was in 2018, marking the start of a long two-year “winter” for digital assets.

But eToro crypto analyst Simon Peters notes the world in 2022 is very different from that time.

“Institutional investors now make up a much bigger proportion of the market, which has already had an observable impact upon not just prices, but the way the market moves,” he said.

“In a positive sign for long-term investors in the crypto space, Goldman Sachs Group Inc (NYSE: GS) and Barclays PLC (LON: BARC) have just tied up a deal to invest US$500 million in Elwood Technologies — an institutional crypto investment platform.”

Green agrees, saying the exit of speculators and “memers” leaves behind a more serious community of crypto investors.

“This is evidenced by the ever-increasing global level of institutional and sovereign investment into the world’s largest cryptocurrency,” he said.

“For these investors, who bring with them enormous capital and clout, the robust fundamentals of it being a digital, global, viable, decentralised, tamper-proof, unconfiscatable monetary system remain – and, in fact, are becoming more valuable as time goes on.”

Bitcoin still the ‘best-performing asset class of the decade’

Despite the large drop in value over the past six months, Green pointed out that Bitcoin is still above its 2020 and 2021 lows.

“Financial markets are going through a period of readjustment as monetary policies are normalised,” he said.

“But as the sugar-rush of free money eases, we can see the real value of assets.”

Bitcoin remained the “best-performing asset class of the decade”, Green added.

And now with the speculators gone, the big investors will be more attracted to crypto, providing stability.

“Without heat and hype affecting prices, we can expect further significant waves of institutional investment into crypto.”

The post Good riddance to meme speculators ditching Bitcoin: expert appeared first on The Motley Fool Australia.

More reading

• Can regulators prevent another US$45 billion crypto stablecoin meltdown?
• Is the Bitcoin price heading all the way back down to US$20,000?
• How is the Bitcoin ETF (EBTC) performing compared to the ASX on Friday?
• Could the next crypto collapse flow through to ASX shares?
• Crypto crash: Why Bitcoin, Ethereum, and Dogecoin are struggling again

Motley Fool contributor Tony Yoo has positions in Bitcoin. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin. The Motley Fool Australia has positions in and has recommended Bitcoin. 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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Looking for dividends shares for you income portfolio? If you are, you may want to check out the two listed below.

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

Coles Group Ltd (ASX: COL)

The first ASX dividend share to consider is this supermarket giant. Coles could be a great option for income investors due to its defensive qualities, strong market position, and solid long term growth prospects.

The latter is being underpinned by its Refresh Strategy, which is leading to significant investments in its online business, distribution, and automation.

The team at Morgans is positive on the company and has an add rating and $20.65 price target on its shares. The broker is also forecasting fully franked dividends of 61 cents per share in FY 2022 and then 64 cents per share in FY 2023.

Based on the latest Coles share price of $18.61, this will mean yields of 3.3% and 3.4%, respectively, over the next two years.

Harvey Norman Holdings Limited (ASX: HVN)

Another ASX dividend share that could be in the buy zone is retail giant Harvey Norman.

The team at Goldman Sachs is very positive on the retail giant and has a buy rating and $5.80 price target on its shares. Its analysts believe Harvey Norman is better value than JB Hi-Fi Limited (ASX: JBH) and has stronger prospects.

It commented: “[W]e prefer HVN due to more protection from online competition given higher regional and boomer exposure as well as lower valuation vs JBH which we believe has been under-investing in the face of softening sector growth and intensifying competition.”

Goldman also expects big dividends in the coming years. It is forecasting fully franked dividends of 43.3 cents per share in FY 2022 and 39.6 cents per share in FY 2023. Based on the current Harvey Norman share price of $4.50, this will mean yields of 9.6% and 8.8%, respectively.

The post 2 top ASX dividend shares analysts are tipping as buys this month appeared first on The Motley Fool Australia.

More reading

• 4 ASX shares of the most trusted brands in Australia
• Own ASX 200 retail shares? Here’s how the majors are tackling climate change
• Do Coles shares offer a dividend reinvestment plan?
• Is the Coles share price an inflation hedge?
• Analysts name 2 ASX dividend shares to buy with growing yields

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 Harvey Norman Holdings Ltd. The Motley Fool Australia has positions in and has recommended COLESGROUP DEF SET and Harvey Norman 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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It’s been a disappointing 30 days for the Rio Tinto Limited (ASX: RIO) share price.

Before market open today, Rio Tinto shares are $104.40 apiece, 14.19% lower than this time last month.

For comparison, the S&P/ASX 200 Index (ASX: XJO) has tumbled 6.24% in that time.

So, what’s driven the iron ore giant to underperform the market recently? Let’s take a look.

What’s been going wrong for Rio Tinto stock?

There are two major happenings that have likely been weighing on the Rio Tinto share price lately.

The release of the company’s production results for the first quarter of 2022 was the first.

Its production of iron ore and aluminium slumped over the three months ended 31 March, while its copper production recorded an increase.

Still, the company didn’t drop its financial year 2022 production guidance on the back of the disappointing quarter.

But that wasn’t enough to sate the market. The Rio Tinto share price slid 2.7% following the update on April 20.

Secondly, the price of iron ore is currently sitting at around US$125 a tonne, down from around US$150 a tonne this time last month, according to Trading Economics.

Much of the steel-making ingredient’s slump was seemingly due to rising COVID-19 cases in China and resulting continuing lockdowns.

The price of aluminium and copper also tumbled over the period.

Rio Tinto share price snapshot

Rio Tinto’s stock is recording a mixed performance over the long term.

It is currently 4.7% higher than it was at the start of 2022. That means it’s outperformed the ASX 200 by around 11% this year so far.

However, it has tumbled 17% over the past 12 months. Meanwhile, the index has gained 1%.

The post Why has the Rio Tinto share price dumped 14% in a month? appeared first on The Motley Fool Australia.

More reading

• Which ASX 200 mining share has the highest dividend yield in May?
• How big will the Rio Tinto dividend be in 2022?
• Why are ASX 200 mining shares in the green today?
• Why are ASX 200 mining share prices slipping today?
• The Rio Tinto share price has dumped 8% in a week. Is it now cheap?

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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ASX dividend shares could be the answer for generating investment income.

Interest rates are still very low at this stage. After the recent ASX share market volatility, some businesses have seen price declines. This has also had the impact of pushing up potential dividend yields.

Here are two businesses that could be attractive for dividends:

Adairs Ltd (ASX: ADH)

Adairs is a business that sells homewares and furniture. The company has three different brands – Adairs, Mocka, and Focus on Furniture.

In terms of the expected dividend, Adairs is predicted to pay an annual dividend of 19 cents per share in 2022, 26 cents per share in FY23, and 30 cents per share in FY24. This translates into forward grossed-up dividend yields of 10.7% in FY22, 14.7% in FY23, and 16.9% in FY24. Even if the dividend yields aren’t quite that high in the next few years, they are still likely to be pretty high.

The ASX dividend share is setting the growth foundations in a number of ways. In the first half of FY22, it opened two new homemaker centres and upsized four stores. It grew its store floor space by 3.8% in HY22. It increased its membership base by 10% over the prior 12 months, with ‘Linen Lovers’ approaching one million members.

Online sales represent 43% of total group sales and online sales continue to grow across all brands.

A new national distribution centre has been opened and the company’s supply chain consolidation project will be complete by June 2022. This is expected to save a few million dollars in costs annually once fully operational.

The company plans to keep increasing its total retail floor space, expand the range, and grow the Focus on Furniture business (which was recently acquired).

I think the Adairs share price is looking cheap right now, at under 7x FY23’s estimated earnings, according to Commsec.

GQG Partners Inc (ASX: GQG)

GQG is a fund manager that has a variety of investment strategies. Its investment performance is continuing to attract inflows of funds under management (FUM).

In the quarter for the three months to March 2022, it experienced net inflows of US$3.4 billion, despite “an extremely challenging macro environment”.

I think the fund manager has an attractive future if it can continue to win net inflows at the pace that it has been.

In my opinion, the 20% drop in the GQG Partners share price in 2022 makes the projected dividend much more attractive for investors. The ASX dividend share has committed to paying a high dividend payout ratio of its earnings each year.

According to Commsec, GQG is predicted to pay a dividend yield of 9.3% in FY23 and 10.4% in FY24.

I believe the business is setting itself up for long-term growth by offering its investment strategies in other markets outside of the US, such as Australia and Canada. FUM growth could be useful for the GQG profit and dividends because of the operating leverage of the fund’s management model. It doesn’t cost GQG much to manage another $1 billion of FUM.

The post 2 ASX dividend shares with yields above 5% appeared first on The Motley Fool Australia.

More reading

• Top ASX dividend shares to buy in May 2022
• 2 ASX dividend shares that brokers are tipping as buys right now
• 2 ASX dividend shares to buy this month: experts
• Are these 2 ASX dividend shares buys in May 2022?
• Analysts name 2 inflation-beating ASX dividend shares to buy

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 ADAIRS FPO. The Motley Fool Australia has positions in and has recommended ADAIRS 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 Newcrest Mining Ltd (ASX: NCM) share price has tumbled in the past month as investors head for the exits.

On 19 April, the gold miner’s shares hit a year-to-date high of $28.96, before crashing more than 14%.

At Monday’s market close, Newcrest shares clawed back some ground to finish 0.81% higher at $24.78.

Let’s take a look at what’s driving the recent slump.

What’s triggering the Newcrest share price to sink?

The deceleration in the price of gold has possibly weakened investor sentiment and prompted a sell in the Newcrest shares.

Macroenvironmental factors such as China’s COVID-19 crisis, the Russian war in Ukraine, inflation movements, and rate hikes are also causing panic.

The International Monetary Fund said it expects global economic growth to slow significantly for the remainder of the year.

Current projections expect the world’s economy to expand by 3.6% in 2022, down from 6.1% last year.

In addition, the price of gold has been on a steady decline over the last 30 days to trade at US$1,822.65 per ounce. This represents a decline of around 10% over the above timeframe.

On 18 April, the precious metal almost touched the psychological US$2,000 barrier, before falling wayside.

The drop in the gold price is likely impacting Newcrest’s earnings, which could be driving investors to look elsewhere.

What do the brokers think?

A number of brokers rated the Newcrest share price with different price points following the company’s third-quarter results, announced on April 28.

The team at UBS cut its 12-month price target on Newcrest shares by 2.2% to $26.50. Based on the current share price, this implies a potential upside of 6.9% for investors.

On the other hand, Macquarie analysts reduced their rating by 2.9% but had a bullish price of $33.00. Its analysts believe the company’s shares still have some room to bounce higher. This implies a potential upside of 33.2% from the current price.

The post Why has the Newcrest share price fallen 14% in a month? appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Monday
• ASX 200 midday update: Block and Xero rebound, gold miners fall
• 5 things to watch on the ASX 200 on Friday
• If gold is regarded as a ‘safe-haven’ asset, why is the Newcrest share price still tumbling?
• 5 things to watch on the ASX 200 on Monday

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 recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Woolworths Group Ltd (ASX: WOW) share price arguably has many positives. Woolies is one of the most famous and established businesses in Australia with a commanding lead in its industry’s market share. Woolworths is also one of the largest businesses on the ASX. It’s currently the 10th-largest company on the S&P/ASX 200 Index (ASX: XJO) by market capitalisation.

But one area that Woolworths shares might not shine too brightly is dividends. The ASX 200 is known for its dividend prowess. Most of the top shares on the index pay out large dividends, exemplified by shares such as Westpac Banking Corp (ASX: WBC) and BHP Group Ltd (ASX: BHP). Today, Westpac shares offer a trailing dividend yield of 4.96%. BHP is even more impressive with its 10.58% trailing yield.

But the Woolworths dividend? It’s currently sitting at 2.51%.

Woolworths dividend: Why so low?

Now 2.51% is nothing to turn one’s nose up at. But it’s arguably rather small fry when compared to some other ASX shares. There are the heavy hitters, such as Westpac and BHP, of course. But consider this – at the current time, Woolworths’ arch-rival Coles Group Ltd (ASX: COL) is smashing Woolies with its own dividend yield of 3.28% right now. Woolies’ other major ASX-listed rival is Metcash Limited (ASX: MTS). Metcash is the company behind the IGA-branded supermarket chain. And it currently has a dividend yield of 4.32%.

When it comes to dividends in the supermarket space, Woolies is the clear loser. So why is this the case?

Well, it’s mostly a function of the Woolworths share price. See, Woolies currently trades at quite a premium compared to its rivals. Woolworths shares’ current price-to-earnings (P/E) ratio of 42.92 tells us that investors are willing to pay $42.92 for every $1 of earnings Woolworths makes. In contrast, investors are only willing to pay $24.69 for every dollar of earnings Coles brings in. And just $19.76 for every $1 of Metcash earnings.

If investors decided to give Woolies shares the same valuation as Coles currently enjoys, it would result in a large share price reduction for Woolworths. And thus, a big increase in Woolworths’ dividend yield. But that is not the case today. For whatever reason, investors are pricing Woolies shares at a premium to its competitors. And that comes with a lower dividend yield as a result.

At the current Woolworths share price, this ASX 200 grocery giant has a market capitalisation of $45.69 billion.

The post Why are the dividends from Woolworths shares still so small? appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• Here are the top 10 ASX shares today
• Here’s why the CBA share price could soon be in for some pain
• Brokers: 2 ASX 200 shares that could be top buys for growth
• Here are the 3 most heavily traded ASX 200 shares on Monday

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended COLESGROUP DEF SET. The Motley Fool 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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If you’re looking for exposure to the mining sector, then you may want to check out the two ASX 200 mining shares listed below.

Here’s why brokers rate them as buys:

Iluka Resources Limited (ASX: ILU)

The first ASX 200 mining share for investors to look at is Iluka. It is a mineral sands and rare earths producer with a number of quality operations across South Australia, Western Australia, and Sierra Leone.

Analysts at Goldman Sachs are very positive on the company. The broker highlights the company’s attractive valuation, the favourable outlook for mineral sands, and its exposure to rare earths.

Goldman commented:

“We are Buy rated on mineral sands/rare earth producer ILU (on CL) on attractive valuation and compelling Zircon and TiO2 price upside and Rare Earth growth potential. ILU is trading at a >50% discount to RE peers and >10% discount to min sands/pigment peers on an EV/EBITDA basis.

The broker currently has a conviction buy rating and $13.90 price target on Iluka’s shares.

Santos Ltd (ASX: STO)

The Santos share price has been soaring in 2022 thanks to strong oil prices. But don’t worry, one leading broker doesn’t believe it is too late to invest in this ASX 200 share. In fact, it sees material upside ahead for investors.

According to a recent note out of Morgans, its analysts have retained their add rating with a slightly trimmed price target of $10.00 on the company’s shares. This compares to the current Santos share price of $8.09.

Morgans commented:

We expect the resilience of STO’s growth profile and diversified earnings base see it best placed to outperform against a backdrop of a broader sector recovery. While pre-FEED, we see Dorado as likely to provide attractive growth for STO, while its recent acquisition increasing its stake in Darwin LNG has increased our confidence in Barossa’s development. PNG growth meanwhile remains a riskier proposition, with the government adamant it will keep a larger share of economic rents while operator Exxon has significantly deferred growth plans across its global portfolio.

The post Brokers name 2 ASX 200 mining shares to buy appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• Woodside share price lifts despite Twiggy’s latest ‘greenwashing’ accusations
• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 on Thursday
• What’s happening with ASX 200 energy shares this week?

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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I think the current ASX share market could prove to be a long-term buying opportunity. Volatility is elevated and lots of ASX shares have seen their share prices fall.

Looking at compelling businesses right now could make a lot of sense because of the uncertainty that exists in the market. Lower prices could be better value for investors.

With that in mind, I think these two ASX shares could be compelling ideas if I were investing $1,000:

Lovisa Holdings Ltd (ASX: LOV)

Lovisa is one of the more exciting opportunities in the ASX retail sector, in my opinion. It has a global store network that sells affordable jewellery, focused on younger shoppers.

The company earns a good amount of profit from each new store it opens. Lovisa is steadily opening more locations in the countries it’s operating in, and it’s also considering opening in new markets.

Lovisa’s number of stores in Australia grew from 153 in FY21 to 158 in HY22. The number of US stores increased from 63 to 81. Middle East stores went up from 36 to 44. The ASX share is also working on its digital offering, which it thinks is in its “infancy stage”.

In HY22, revenue grew by 48.3% to $217.8 million. Net profit after tax (NPAT) jumped 70.3%, demonstrating the operating leverage of the business.

The ASX share continues to see more growth, which can help drive profit higher. Trading in the first eight weeks of the second half of FY22 saw comparable store growth of 12.1%, with total sales up 61.7%.

I think the business can keep growing its store network, particularly in untapped markets. It’s also paying a nice dividend. In HY22 it grew its dividend to 37 cents per share, up from 20 cents per share. Lovisa offers a trailing partially franked dividend yield of 3.5%.

VanEck Morningstar Wide Moat ETF (ASX: MOAT)

This is an exchange-traded fund (ETF) that is designed to own a portfolio of high-quality businesses that are valued at attractive prices.

What’s the ASX share about? The idea of a ‘wide moat’ is referring to a business’ competitive advantages. The stronger the competitive advantage, the wider the economic moat is. The moat analogy is about how difficult it is for a competitor to ‘invade’.

For Morningstar analysts, which are the people that decide the businesses that go into the MOAT ETF, they are looking for businesses where the economic moat is very likely to persist for at least the next decade and has a good chance of lasting at least two decades.

Once Morningstar has identified those businesses with strong, long-term economic moats, shares are only bought for the MOAT ETF if they are trading at attractive prices relative to Morningstar’s estimate of fair value.

At the latest disclosure from 13 May 2022, these are the investments that have a weighting of at least 2.5% in the ASX share’s portfolio: Campbell Soup, Merck & Co, Kellogg, Philip Morris, Constellation Brands, Polaris, Medtronic, Western Union, Gilead Sciences and Zimmer Biomet.

The VanEck Morningstar Wide Moat ETF has an annual management fee of around 0.49%, which I think is reasonable for what it does.

The post 2 ASX shares I’d buy with $1,000 appeared first on The Motley Fool Australia.

More reading

• Experts name 2 beaten down ASX growth shares to buy after the market meltdown
• Here are 2 fantastic ETFs for ASX investors to buy in May
• Are these 2 top ASX growth shares buys right now?
• Here are 2 ETFs delivering breakneck ASX performance
• Top brokers name 3 ASX shares to buy next week

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 recommended Gilead Sciences. The Motley Fool Australia has recommended Lovisa Holdings Ltd and VanEck Vectors Morningstar Wide Moat ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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ASX companies that supply commodities for the electric car industry have done pretty well the past couple of years, as the world moves to a low-carbon future.

But believe it or not, some stocks have dipped the past few weeks, giving hungry investors a potential entry point.

Here are 2 such examples that experts are rating as buy right now:

This is the new lithium

The Syrah Resources Ltd (ASX: SYR) share price has dropped almost 16% since 28 April.

Marcus Today analyst Thomas Wegner told The Bull he sees no reason to shy away from it though.

“The graphite producer has been supported by increasing sales of electric vehicles.”

Although it hasn’t had the hype that lithium has enjoyed recently, graphite is another essential ingredient of high-end batteries.

Credit Suisse research analyst Phineas Glover said last month that the commodity will be in high demand in years to come.

“It looks a lot more like lithium three to five years ago,” he told the Sydney Morning Herald.

“In five years’ time, suddenly graphite pricing will have gone up in my view quite significantly, and it will bring a huge incentive to bring all these projects on board.”

Although there are rival graphite producers on the ASX, Wegner is encouraged by Syrah’s recent deals.

“It secured a loan from the US Department of Energy to support the growing electric vehicle industry in the US and to shore up supply chains of critical minerals,” he said.

“Signing an offtake agreement with Tesla in December also adds to its appeal.”

Who wants to be a millionaire?

Lithium producers are somewhat off the boil now too.

Pilbara Minerals Ltd (ASX: PLS) shares have lost more than 29% since 4 April, which Ord Minnett senior investment adviser Tony Paterno blamed on “softer volumes in the March quarter”.

But that just makes it a bargain stock now.

“Costs were lower than our forecasts and we expect them to fall into the June quarter,” he told The Bull.

“Another positive pricing result at the latest Battery Metal Exchange auction provides confidence that [lithium] prices should remain high in the near term.”

Looking at the long term is a wise attitude to take for shares like Pilbara.

The Motley Fool’s Aaron Teboneras calculated last week how wealthy you would be after investing $10,000 in two-cent Pilbara shares a decade ago.

“Those 500,000 shares would be now worth a staggering $1.28 million,” he said.

“When factoring in percentage terms, this implies an incredible gain of 12,600% or an average yearly return of 62.45%.”

For Paterno, Pilbara is the pick of lithium producers at the moment.

“Pilbara shows deep valuation support and dominates the near term earnings metrics of our lithium coverage.”

The post 2 sold-off ASX shares essential for electric cars appeared first on The Motley Fool Australia.

More reading

• Own ASX lithium shares? Here’s a global expert’s outlook on lithium demand (and supply)
• Do any ASX lithium stocks pay dividends?
• Here are the 3 most heavily traded ASX 200 shares on Monday
• Why are ASX lithium shares off to such a flying start this week?
• Here are the 3 most heavily traded ASX 200 shares on Friday

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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Ask A Fund Manager

The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In this edition, Glenmore Asset Management portfolio manager Robert Gregory describes the philosophy behind his fund’s industry-topping outperformance.

Investment style

The Motley Fool: How would you describe your fund to a potential client?

Robert Gregory: Glenmore Fund, it’s market cap agnostic, so it can invest in any market cap — small, mid-cap, large. And it’s only on Australian equities. And within the ASX, it’s got a focus on small to mid-cap space… probably $200 [million] up to $2, $3 billion. That’s where most of the outperformance has been identified.

I’m really a buy-and-hold type investor looking to buy stocks that I can see [are] undervalued, and then hopefully hold them for quite a few years, if possible.

In terms of the reasons why I see a stock as being undervalued, that can often just be the market underestimating that company’s earnings potential. Or it might be the market’s [underreaction] to an improving earnings outlook, or an acquisition that’s been particularly positive. Or it might just be that stock is going through a temporary difficult period for its earnings, but I think it’s temporary and not long-term. 

It’s still neutral — so it’s not really growth nor value. It probably has a slight bias towards what I’d call quality businesses, where I’m not really interested in early-stage development-type businesses. I’m really much focused on established businesses that have been profitable for a long period of time. Hence, you can have more confidence that they can sustain themselves through challenging economic periods.

The vast proportion of the fund would pay dividends, for example. So they’re quite established businesses and companies that I’ve got to know over a long period of time and got to know the management over a long period of time as well. A lot of the companies know that they’re in my fund, I’ve dealt with the CEOs and CFOs for many years now.

MF: Mercer ranked Glenmore as the best-performing fund in Australia for the year ending 31 March, with a 50.8% return. Congratulations, and can you tell us if there were any star performers that carried you to that amazing result? 

RG: It was probably four to five stocks that created a fair amount of the outperformance, but it was reasonably well spread even below that top five. 

But some of the top performers were Uniti Group Ltd (ASX: UWL), MA Financial Group Ltd (ASX: MAF), Bowen Coking Coal Ltd (ASX: BCB), and also Whitehaven Coal Ltd (ASX: WHC).

MA Financial and Uniti were really situations where they delivered very strong earnings and saw their stock prices and earnings multiples rebate accordingly.

Whitehaven… was coming from a very depressed period of coal prices and its valuation was very depressed. And then, as seen, the thermal coal price rallied quite significantly and, as such, it’s earning some cash flow generation [and has] recovered very strongly.

At the small cap end, Bowen Coking Coal, which is a stock that I identified probably 18 months ago back when it had a very small market cap, was run by a management team that I had a lot of confidence in.

I saw their strategy of acquiring at very cheap, at very low cost and satellite deposits to get up and running and get into production, and build cash flow. And at that point in time, particularly when I first started buying BCB, the stock price was sort of 6, 7, 8 cents. It just looked [like] a very asymmetric situation where not much was in the stock price at all at the market cap, but I felt if they could opportunistically acquire some coal assets, then it would be worth significantly more than that market cap. 

So it’s come from a range. Certainly, coal was definitely helpful, but there’s also been a number of other stocks that have performed very strongly as well.

The post My fund just went up 51%: This is how I did it 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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