The CSL Limited (ASX: CSL) share price is down 1.5% at $260 per share in afternoon trade on Wednesday. It has slipped 5% this week, having fallen from $271 at Friday’s market close price.

Meanwhile, the S&P/ASX 200 Health Care Index (ASX: XHJ) has fallen 3% in the same time. The correlation between the two is seen below.

CSL standout healthcare pick: fund manager

CSL’s management in particular impresses Sage Capital fund manager Sean Fenton. He said that whilst there are plenty of great Aussie healthcare companies available, CSL is his pick.

“Healthcare is really tough, in the sense that there’s actually a whole bunch of really great Australian companies that have been very successful in healthcare,” he said, speaking to Livewire’s Buy Hold Sell.

“[I]t’s hard to go past the biggest one, CSL, who have grown, exceptionally, in their area,” he told Livewire.

The fund manager went on to comment on several of CSL’s feats over the years. He noted its business strategy successfully diversified away from IVIG and haemophilia products into niche categories.

That’s led to “a lot of value add” to the CSL share price he said.

And they continue to do that. Continue to reinvest, grow their market. Yeah. Their recent acquisition hasn’t completed, Vifor, I think, will also prove to be quite an effective one. So, yeah. Really hard to go past them.

Analysts appear constructive too according to the data. Around 87% of brokers say it’s a buy, with the remaining 13% presently saying it’s a hold, according to Bloomberg data.

In the last 12 months, the CSL share price has slipped 13% into the red, or 10% this year to date.

The post Down 5% so far this week, is the CSL share price a buying opportunity? appeared first on The Motley Fool Australia.

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• Should you buy these top blue chip ASX 200 shares after the market selloff?
• Why is the CSL share price defying today’s sell-off?
• Top brokers name 3 ASX shares to buy today
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• The CSL share price has at least 20% upside: top brokers

Motley Fool contributor Zach Bristow 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. 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 Bubs Australia Ltd (ASX: BUB) share price has risen by around 20% since the company announced that it was working with the United States government to lessen the infant formula crisis in the US.

Bubs is one of the largest infant formula businesses in Australia with a current market capitalisation of $358 million according to the ASX.

It now sells a variety of different products including goat milk infant formula, cow milk infant formula, goat milk products for adults, and organic snacks for toddlers.

US win

For readers who aren’t aware, Bubs Australia has committed to sending at least 1.25 million infant formula tins to the US.

The USA Food and Drug Administration (FDA) said that it would exercise its discretion for the immediate import, sale, and distribution of all six ranges of Bubs infant formula products in the US.

Last week, Bubs announced that it had expanded its US bricks-and-mortar footprint with The Kroger Co and Albertsons companies. This means Bubs infant formula and toddler products will be ranged in more than 4,000 stores across 35 states.

The first shipment of Bubs infant formula under the US infant formula plan has been purchased by Kroger and Co and Albertsons. The products are expected on the shelf starting 20 June 2022.

Bubs said it’s continuing to work with Australian and global distribution partners to ensure reliable supply for all families.

Recently, The Age reported on the positives of the move, as outlined by Wilsons Advisory analyst James Ferrier and Sam Teeger from Citi.

Optimism about the Bubs share price

Talking about the benefits of Bubs’ presence in the US market, Ferrier said that this could accelerate Bubs’ brand awareness in the US. The company was already looking to expand in the US before this initiative.

The deal would add $20 million in sales, though noted that this transaction was technically a one-off. However, the potential brand awareness boost could accelerate the trajectory of sales in the US for Bubs.

Citi rates the Bubs share price as a buy and thinks that the US is a “promising” market for the ASX share. The US government’s assistance could be “helpful for the company’s marketing efforts” and the broker believes it helps position the brand as a safe and reliable manufacturer.

Negatives to be aware of

The Age also referenced some thoughts about Bubs that could be a downside.

Jonathan Snape from Bell Potter thinks that while the US initiative is a benefit that could lead to $30 million of sales, it’s only a one-off. Indeed, the FDA’s fast-tracking process ends in November 2022. That’s why Bell Potter thinks the boost is largely temporary.

Some other potential negatives include general share market volatility and the need for capital to deliver on its strategy and growth. Snape also raised possible supply chain impacts, regulation and licence requirements, key management position risk, and competition.

After the jump in the Bubs share price, Snape downgraded Bubs to a “hold, speculative risk”.

The post Is there still money to be made from Bubs shares? appeared first on The Motley Fool Australia.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. 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 recommended BUBS AUST 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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As the world frets over oversized interest rate hikes, one high-profile fund manager thinks such a move would be good for share markets.

The comment from Pershing Square founder Bill Ackman stands at odds with investor sentiment. The fear is that large rate hikes will tip the US economy into a recession, which will drag on ASX shares.

But Ackman is calling on the US Federal Reserve to lift rates by 100 basis points (bps) “tomorrow, in July and thereafter”, as reported by Bloomberg.

Are bigger rate hikes better?

The call is larger than the 50bps to 75bps increase that most economists are expecting as the Fed struggles to get on top of runaway inflation.

But, in Ackman’s opinion, the 100-point spike to the Fed Funds Rate will help restore market confidence. He said the central bank had allowed inflation “to get out of control” and called for “aggressive action” that would help restore market confidence.

The hope is that the ongoing hike risk that’s rocking share markets, including the ASX, can be more quickly passed through the system. It’s akin to ripping off the Band-Aid as quickly as possible to get the pain over with.

A crisis in confidence

Certainly, confidence is a commodity in short supply at the moment. Several market experts have voiced similar concerns to Ackman that the Fed has lost credibility given its inflation forecasts have been consistently wrong.

The thinking is only aggressive hikes will help the Fed get on top of inflation and show the market it’s serious about controlling the risk.

But as interest rates are an imprecise mechanism to control inflation, there is likely to be collateral damage to the wider economy.

Recession red flags on aggressive rate hikes

As it stands, Wall Street’s favourite recession indicator is flashing red. The bond yield curve has inverted where the short-term US government bond yield is higher than its longer-term counterparts.

Why investors are spooked is because such inversions have preceded every US recession in the past 60 years.

RBA tainted by the same brush

But it isn’t only the US Fed being criticised for being behind the eight ball when it comes to rate hikes. Several experts in Australia have levelled similar accusations at the Reserve Bank of Australia (RBA).

This could put additional pressure on the RBA to adopt an even tougher interest rate stance as some experts accuse it of being too slow to respond to surging inflation.

The new federal Labor government has promised to undertake a review of the RBA. Several prominent economists are urging it to appoint independent overseas experts for the task.

Given how rare such reviews are for the venerable institution, this is a space ASX investors should be paying close attention to.

The post Why this iconic investor believes bigger rate hikes could ‘restore’ the market, not ruin it appeared first on The Motley Fool Australia.

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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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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.

When looking for long-term stock holdings, following multi-billionaire Warren Buffett’s investments is a good place to start. He’s certainly built a long-term track record, but he’s also known for his patient approach. One of his sayings is, “Our favorite holding period is forever.”

It’s tempting to follow Buffett’s stock picks blindly, but you still should do your own homework. After all, he’s not infallible. These two stocks have been a part of Berkshire Hathaway‘s portfolio for some time. While their prices are down for the year, both offer excellent long-term growth prospects, presenting a wealth-creating opportunity.

1. Amazon

Amazon‘s (NASDAQ: AMZN) stock investors have become a little skittish this year. The stock has dropped by more than 37% since the start of 2022, making this a good time to evaluate the company’s long-term growth prospects. Fortunately, these look solid.

Looking at Amazon’s first-quarter results, sales grew 9% to $116.4 billion, excluding foreign currency exchange translations, but operating income was down by over 58% to $3.7 billion. While this isn’t great, it looks likely that Amazon will get back to growing profits down the road. That’s because higher costs weighed on profitability as management increased staffing and capacity to meet surging demand, but management has pledged to focus on higher productivity and efficiency.

Even better, its fast-growing, high-margin Amazon Web Services (AWS) business still has bright prospects. In the latest period, AWS’ sales increased by 36.6% to $18.4 billion, driving operating income 56.6% higher to $6.5 billion. It was the only segment to report a profit in the latest period.

With an over 35% operating margin, this dwarfs the North American and International segments, which are typically single-digit figures. AWS, the leader in the fast-growing cloud computing business with a 33% market share, faces little competition. Its main rivals are Microsoft‘s Azure and Alphabet. Better still, the business has significant barriers to entry due to the high cost and space needed for data centers.

The price-to-earnings ratio (P/E) of 50.4 is well below the 80 times it was selling for in April. While Amazon’s P/E is higher than the S&P 500‘s 20 times, as Warren Buffett has stated, “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

2. Moody’s

Moody’s (NYSE: MCO) stock may have fallen by about 31% this year, but the company’s long-term competitive position remains strong. So this looks like an opportune time to purchase shares. 

The company has become known for providing ratings on debt instruments issued by corporations and countries, among other entities. Along with S&P Global, it has a dominant share of the market, with Fitch Ratings coming in a distant third place. Last year, this business produced revenue of $3.8 billion, accounting for over 61% of the total.

There’s also its analytics business, which represented the balance of Moody’s revenue. While the rating business’ results can fluctuate, depending on the economic cycle and debt issuance, this business is steadier since it charges subscription fees for items like data and information.

Moody’s first-quarter revenue fell by 4.9% to $1.5 billion. However, the period showed the benefit of having the fee-based analytics business. While the rating business’ revenue declined by 20% to $827 million, analytics increased by 9% after excluding the impact of acquired businesses.

The stock currently has a 26 P/E multiple, much lower than the roughly 32 times when 2022 began. With a strong ratings business that will certainly rebound when the markets recover and a growing analytics segment, the stock looks like a bargain for long-term stock investors.

Two stocks to celebrate down the road

Amazon has a strong brand in retailing, but it’s become so much more than an online seller. It generates considerable revenue and profits from its AWS business, which looks like it can continue growing quickly for a considerable period. Moody’s franchise includes ratings, which debt issuers pay for and many people rely on, plus a steadily growing analytics business.

When you add in that these two stocks currently sell at a much lower valuation than earlier in the year, long-term investors who purchase them likely will have a lot to celebrate when looking back to this moment. 

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

The post 2 Warren Buffett stocks to buy and hold forever appeared first on The Motley Fool Australia.

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Lawrence Rothman, CFA has no position in any of the stocks mentioned. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Berkshire Hathaway (B shares), Microsoft, and Moody’s. 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 Alphabet (A shares), Alphabet (C shares), Amazon, and Berkshire Hathaway (B shares). 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 ResMed Inc (ASX: RMD) share price is falling on Wednesday.

At the time of writing, the sleep treatment company’s shares are down 2% to $29.12.

This is despite the release of an acquisition announcement this morning.

What did ResMed announce?

Overnight, ResMed announced an agreement to acquire Medifox Dan for US$1 billion from leading software and services investor, Hg.

The company notes that Medifox Dan is a German leader in out-of-hospital software solutions for providers in major settings across the care continuum.

The release highlights that Medifox Dan’s German customer base is complementary to the customers of ResMed’s US-based software as a service (SaaS) business. In addition, it builds on ResMed’s existing business in Germany as a leading provider of innovative cloud-connected medical devices that transform care for patients with sleep apnoea and other respiratory conditions.

Management commentary

ResMed’s CEO, Mick Farrell, was very pleased with the deal. He believes it will strengthen the company’s position as a global leader in healthcare software solutions. Farrell said:

With the acquisition of Medifox Dan, a fast-growing and innovative German healthcare software leader, we will expand ResMed’s SaaS business portfolio outside our current base in the U.S. market and strengthen our position as the global leader in healthcare software solutions for lower-cost and lower-acuity care.

Medifox Dan has a strong track record of innovation, fully aligned with our teams at Brightree, MatrixCare, and beyond. Medifox Dan’s customer centricity has built strong and ongoing, growing demand for its software solutions across Germany, and we expect that momentum to continue and strengthen as we become one global team.

Is the ResMed share price good value?

Analysts at Citi have responded to the news by reiterating their buy rating and $35.50 price target on the company’s shares.

Based on the current ResMed share price, this implies potential upside of 22% for investors.

Citi commented:

RMD announced that it will acquire Medifox Dan, a German SaaS solutions provider, for US$1bn or 29x EBITDA pro-forma CY21. This is RMD’s third big acquisition in SaaS space after Brightree (Apr 2016) and MatrixCare (Nov 2018). With this acquisition, RMD will be able to expand its SaaS business footprint outside U.S. RMD said, the acquisition will be EPS accretive in FY23. We make no changes to our forecasts pending closure of transaction (expected in 2Q FY23 end i.e. Dec’22). At current price, RMD is trading at a PE of 29x FY24E, below historical avg of 32x.

The post ResMed share price drops despite US$1bn Medifox Dan acquisition appeared first on The Motley Fool Australia.

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• Broker tips ResMed share price to jump 19%
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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 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 Ampol Ltd (ASX: ALD) share price is slipping in morning trade, down 1.4%.

Ampol shares closed yesterday trading for $34.44 and are currently trading for $33.96.

The S&P/ASX 200 Index (ASX: XJO) is also in the red this morning, down 0.7% as investors eye tonight’s interest rate decision by the US Federal Reserve.

Below, we look at Ampol’s latest financing round, announced before market open this morning.

$150 million sustainable financing initiative

The Ampol share price is slipping after the company reported it will raise $150 million via a fully underwritten wholesale offering of subordinated notes. With a 60-year timeline, those come due in 2082.

The first optional redemption date comes in 2028. These are not interchangeable with Ampol’s existing $500 million of subordinated notes, issued in December.

The company plans to use the capital for general corporate purposes.

The subordinated notes are linked to the company’s sustainability ambitions.

When notes are redeemed, Ampol’s repayment will be directly linked to key elements of its Future Energy and Decarbonisation Strategy. That includes its goal to cut carbon emissions from its Fuels & Infrastructure and Convenience Retail businesses by 2025. Ampol also aims to operate or control at least 500 AmpCharge or equivalent EV charge points by 2027.

Commenting on the new notes, Greg Barnes, Ampol’s chief financial officer, said:

We’re delighted to announce this new sustainability-linked hybrid issue, which we understand is the first of its kind in global markets. The transaction supports our capital management strategy and reinforces our commitment to Ampol’s Future Energy and Decarbonisation Strategy. The issue provides further funding diversification and incremental balance sheet capacity.

Ampol expects its notes to receive a 50% equity credit from Moody’s Investors Service, which will support Ampol’s credit rating.

Ampol share price snapshot

The Ampol share price has been a strong performer in 2022, up 14%. That compares to a year-to-date loss of 13% posted by the ASX 200.

Ampol shares pay a 2.6% trailing dividend yield, fully franked.

The post Ampol share price slips amid $150 million sustainable financing initiative appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben 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 Regional Express Holdings Ltd (ASX: REX) share price is shrugging off the continued sell-off on the ASX today.

This comes after the company announced an increase in services across major regional centres on its network.

At the time of writing, the regional airline operator’s shares are swapping hands at $1.10, up 2.8%.

For context, the All Ordinaries Index (ASX: XAO) is trading at 6,830 points, down 0.74%.

Regional Express expands popular services on its network

The Regional Express share price is on the move today as investors digest the company’s latest update.

According to its announcement, Regional Express advised that 11 regional cities will see up to a 67% increase in weekday return services. This includes popular traveller destinations in New South Wales, Victoria, and South Australia.

In total, nine of the services will run from Sydney to other regional cities within the state. They are: Albury, Broken Hill, Coffs Harbour, Dubbo, Orange, Griffith, Merimbula/Moruya, Port Macquarie, and Wagga Wagga.

In addition, Melbourne will add a service to and from Mildura, and Adelaide will run a return service to Port Lincoln.

These services will start on 4 July and, to promote the offering, the new additional services are on sale.

However, the company noted that from June 27, it will be withdrawing from the Sydney to Cooma route. This is due to the lack of demand for the service which has recorded less than 2,000 passengers in the past year.

Regional Express chair John Sharp touched on the update, saying:

Rex sees strong recovery in these regional centres and is dedicating considerable resources to meet this demand. These improved schedules will see us operating more flights on our regional network than pre-COVID and mark a significant turning point for the airline as we return to profitability.

We are confident that FY23 will see a great improvement in the financial performance of our regional operations since Rex will only operate on densely patronized regional routes where the load factors and yields will be much more favourable.

Regional Express share price snapshot

Over the past 12 months, the Regional Express share price has fallen 10% on the back weakened investor sentiment.

When looking at year-to-date, its shares have continued to tread lower to post a loss of 20%.

Based on today’s price, Regional Express commands a market capitalisation of roughly $121 million.

The post Why is this ASX travel share flying higher today? appeared first on The Motley Fool Australia.

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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 Bank of Queensland Limited (ASX: BOQ) share price is outperforming on Wednesday.

In morning trade, the regional bank’s shares are up 2% to $6.68.

This compares favourably to a 0.6% decline by the ASX 200 index.

Why is the Bank of Queensland share price rising?

The Bank of Queensland share price was given a boost this morning by news that an insider has been buying the bank’s shares.

According to a change of director’s interest notice, Bank of Queensland’s chairman, Patrick Allaway, has taken advantage of recent market weakness to top up his holding.

The release reveals that Allaway picked up 15,000 shares via an on-market trade on 9 June.

The bank’s chairman paid a total of $104,068.50 for the parcel of shares, which equates to an average price of $6.94 per share.

This almost 4% higher than the current Bank of Queensland share price, which means investors can still buy shares at a lower price to what Allaway paid.

Should you buy Bank of Queensland shares?

One leading broker that sees a lot of value in the Bank of Queensland share price is Goldman Sachs.

It currently has a buy rating and $9.01 price target on the company’s shares. This implies potential upside of almost 35% for investors over the next 12 months.

In addition, the broker is expecting dividend yields of over 6.5% per annum through to FY 2024.

Goldman commented:

Our Buy rating on BOQ is predicated on i) BOQ’s cost performance and its continued delivery of ME Bank synergies, which have been accelerated and increased, ii) continued strong above system volume growth, supplemented by its transition to digital platforms and its associated process improvements, iii) BOQ’s 12-month forward PER (ex-dividend adjusted) is trading at a 30% discount to the sector versus a 15-year average discount of 2%.

The post Why is the Bank of Queensland share price outperforming today? appeared first on The Motley Fool Australia.

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• Why did the Bank of Queensland share price fall 7% in May?
• What’s dragging on ASX 200 bank shares like NAB on Thursday?

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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It’s been an ugly time for ASX financial shares like Macquarie Group Ltd (ASX: MQG). But the investment bank could be about to get more than half a billion dollars of buying interest.

Never mind that the buying support is self-generated. The Australian Financial Review reports that Macquarie just started or is about to buy shares to fulfil executive bonuses.

Beggars can’t be choosers. In this market, any support would be welcomed given the battering the sector is taking.

Macquarie share price recovers some lost ground

I am not saying the news is supporting the Macquarie share price, but it’s worth noting it’s up 1.74% to $166.19 at the time of writing. This, however, won’t save it from bear market territory as the Macquarie share price has shed around 21.4% since the start of this calendar year. A bear market is defined as a peak to trough fall of 20% or more.

Macquarie isn’t alone either. The Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price and Westpac Banking Corp (ASX: WBC) share price have also fallen more than 20% from their peaks.

The Commonwealth Bank (ASX: CBA) share price and National Australia Bank Ltd. (ASX: NAB) share price have only just managed to escape the bear market.

Why ASX bank shares are out of favour

The sector has been hit by worries of a recession that could be triggered by big interest rate hikes. The faltering residential market is also dragging on sentiment.

Against this gloomy backdrop, speculation that Macquarie could be about to cough up around $570 million to buy its own shares on market will be welcome news to shareholders.

Bonus support for Macquarie’s share price

This annual event is linked to the Macquarie Group Employee Retained Equity Plan (MEREP). Thanks to the bank’s record full-year results for the period ended 31 March, it requires $870 million of its shares to pay for MEREP, according to the AFR.

To meet this target, it can buy shares from employees looking to cash in and buy the balance on-market.

It’s believed the deadline for staff to sell shares to Macquarie passed last week. It’s reported the bank only managed to secure less than $300 million worth of its shares.

How long can the buying support last?

This reportedly leaves more than two-thirds of the MEREP share requirement unfilled. This is prompting Macquarie to purchase its own shares on the ASX. At least management is getting its shares at a reasonably low price.

But don’t get too excited as $570 million doesn’t go very far when it comes to the Macquarie share price. The average daily volume for the shares is just over one million. Depending on the share price, the extra demand for MEREP won’t last more than four days.

The post Why Macquarie shares could be set for a $570m tailwind appeared first on The Motley Fool Australia.

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More reading

• ASX 200 bank shares tumble: Citi says time to buy
• Macquarie shares are beating the other ASX 200 banks again today. What’s going on?
• Why is Macquarie the only ASX 200 bank share in the green today?
• 2 ASX 200 financials shares named as buys
• The Macquarie share price has lost 10% in a month. So what’s the dividend yield now?

Motley Fool contributor Brendon Lau has positions in Australia & New Zealand Banking Group Limited, Commonwealth Bank of Australia, Macquarie Group Limited, National Australia Bank Limited, and Westpac Banking Corporation. 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 and 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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Volatility on the ASX share market can open up opportunities to buy some good businesses, according to the experts.

Leading broker Morgan Stanley rates some leading S&P/ASX 200 Index (ASX: XJO) shares as buys, with compelling upside.

Many businesses on the ASX have seen their share prices drop in recent days and weeks. While there is much fear in the market about the effects of inflation and interest rates, investors may also be able to find some long-term opportunities.

Brokers can give a helpful hint about which ASX 200 shares could be worth owning at these prices, so let’s look at two of the buy-rated picks.

Goodman Group (ASX: GMG)

Goodman is one of the largest property businesses on the ASX. It has a global portfolio of properties and projects in the industrial real estate sector.

Morgan Stanley currently rates it as a buy ( or ‘overweight’) with a price target of $25.98. That implies a potential rise of more than 40% over the next year. One of the key factors that the broker likes about Goodman is its growing rent, which has been increasing at a pleasing pace over the last several years.

As an example, in the company’s FY22 third-quarter update, Goodman revealed a 12-month rolling like-for-like net property income (NPI) growth of 3.7%. It also had a five-year weighted average lease expiry (WALE), giving the business income visibility.

Another thing that Morgan Stanley likes is the ASX 200 share’s property development pipeline. It said that the concentration of its workbook in desirable locations has allowed it to increase its development work in progress (WIP) to $13.4 billion. Completions for the nine months to 31 March 2022 were $4.7 billion, with $6 billion in total expected for FY22.

Sonic Healthcare Ltd (ASX: SHL)

Sonic Healthcare is a large pathology healthcare business. It has operations in a number of countries including Australia, the US, and Germany.

It’s currently rated as a buy (‘overweight’) by Morgan Stanley. The price target is $40, implying a possible rise of around 20%. The broker points to COVID-19 testing as a positive for earnings in FY22.

The company’s COVID-19 testing operations are expected to give FY22 earnings a boost, as they did in FY21. However, the broker is expecting Sonic’s earnings to return to a more normal level in FY23. With that in mind, the Sonic Healthcare share price is valued at 10 times FY22’s estimated earnings and 16 times FY23’s estimated earnings.

The company said within its FY22 half-year result release that it’s expecting a “sustainable level of COVID-19 testing into the future, including routine COVID testing, screening programs, variant testing, whole genome sequencing and antibody tests”.

However, Sonic’s base business revenue is also rising. HY22 base revenue was up 4.3% year on year and up 2.5% compared to HY20 (which was before COVID-19).

A bonus is that Morgan Stanley is expecting the company to keep increasing its dividend over the next couple of years, which matches Sonic’s ‘progressive dividend policy’.

The post Buy these 2 quality ASX 200 shares: broker appeared first on The Motley Fool Australia.

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More reading

• Market selloff: Broker says the Goodman share price now has 65% upside potential
• ‘Attractive, stable’: 2 ASX shares other companies rely on
• Experts name 2 excellent blue chip ASX 200 shares to buy
• Why I think the Sonic Healthcare share price is a buy
• Goldman Sachs rates these ASX shares as buys

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

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