The Woolworths Group Ltd (ASX: WOW) share price has continued to climb in recent times.

In fact, on Thursday’s market close, the conglomerate’s shares edged 0.58% higher to $38.48, closing in on its 2022 high.

On the other hand, Wesfarmers Ltd (ASX: WES) shares have struggled to hold ground. Its shares hit a 52-week low of $47.45 in late February and are travelling sideways since.

In contrast, Wesfarmers shares finished 0.10% lower to $48.33 at the end of Thursday’s trading session.

When looking at year to date, Woolworths shares are up almost 2%, while Wesfarmers shares are down more than 18%.

What’s the difference between the two conglomerate giants?

While COVID-19 created one of the most challenging six months for Woolworths, it ended the period with positive trading momentum.

Learning from the Delta outbreak, management swung its action plans in place dealing with isolating employees and supply chain issues.

As a result, group sales grew strongly in the first half by 8% to $31,894 million.

In contrast, Wesfarmers reported robust earnings for its Chemicals, Energy and Fertilisers business, as well as Bunnings. However, this was offset by slower sales across Officeworks and the Kmart group. The latter had been impacted by temporary store closures between July and October 2021.

Wesfarmers management noted that the entire group’s retail businesses experienced around 34,000 store trading days affected by trading restrictions. This represented almost 20% of total store trading days for the first half.

In addition, operating costs and stock availability were impacted by ongoing supply chain disruptions and elevated team member absenteeism.

Looking at the top line, Wesfarmers recorded a 0.1% loss to $17,758 million for the H1 FY22 period.

Is the Woolworths share price a buy?

Since the release of its half year results, a number of brokers have weighed in on the company’s shares.

Citi analysts upgraded their outlook on Woolworths shares to buy from neutral, with a price target of $40.30 per share.

Following suit, Jefferies also had a bullish outlook, adding 8.1% to $40.

Based on the current Woolworths share price of $38.48, this implies a slight upside of roughly 4%.

Woolworths has a price-to-earnings (P/E) ratio of 5.86, with a trailing dividend yield of 2.44%.

The post Why has the Woolworths share price outperformed Wesfarmers so far in 2022? appeared first on The Motley Fool Australia.

More reading

• Here are the ASX retail share winners and losers of the last quarter
• Should you buy the dip in the Wesfarmers share price?
• Woolworths shareholders get their dividends today. Here’s the lowdown
• What’s impacting the Woolworths share price on Tuesday?
• Here are 2 excellent ASX 200 shares analysts rate as buys

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 owns and has recommended Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Xero Limited (ASX: XRO) share price has been having a very tough year.

Weakness in the tech sector has led to the cloud accounting platform provider’s shares losing 30% of their value in 2022.

While this is disappointing, it could be a buying opportunity for investors according to analysts at Goldman Sachs.

This morning the broker spoke very positively about the company’s future and noted that it sees a lot of value in the current Xero share price.

What did the broker say about the Xero share price?

According to the note, Goldman Sachs has retained its buy rating with a slightly trimmed price target of $133.00.

Based on the current Xero share price of $102.78, this implies potential upside of almost 30% for investors over the next 12 months.

Goldman commented: “Following the recent underperformance (absolute/relative), we see an attractive entry point into what is a compelling global growth story and our preferred large cap technology name in ANZ.”

What else did the broker say?

Goldman has been speaking with accountants and it appears pleased with the feedback it was given.

The broker explained: “Our accountant channel checks provided positive feedback for Xero’s offering in APAC/UK, with room for improvement in the US/RoW, noting the software enables operating efficiency, new customer wins, fee uplift and increases retention (outperforming customer churn). However, on app store fees, accountant partners remain cautious that it may disrupt the open API ecosystem.“

In addition, its analysts highlight recent federal budget tailwinds (cloud accounting expensing) and high frequency data points.

In respect to the latter, Goldman said: “High frequency data points highlight (1) Xero has had positive app download momentum in USA/RoW during 2H22; (2) Xero vacancies have normalised into 2H22 post flagged investment at the FY21 result; (3) app integrations have slowed marginally since introducing fees in Aug-21; while (4) PH/HK/ZA have accelerated growth in accountant partners (UK/Aus remain the largest channels).”

All in all, the broker has seen nothing to dampen its bullish view on the Xero share price.

The post Broker tips Xero share price to rise 30% due to ‘compelling global growth story’ appeared first on The Motley Fool Australia.

More reading

• 2 top ASX growth shares leading brokers say ‘buy’
• 3 top ASX growth shares that experts say are buys
• Why are brokers talking about the Xero share price? Let’s take a look
• 5 things to watch on the ASX 200 on Tuesday
• Cloud zero: Xero share price is down 5% in 2 days

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. owns and has recommended Xero. The Motley Fool Australia owns and has recommended Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Bank of Queensland Limited (ASX: BOQ) share price was sold off last week.

This followed a negative reaction to the regional bank’s half year results release.

This latest decline means the Bank of Queensland share price is now down 14% over the last six months.

Is the Bank of Queensland share price good value now?

According to a note out of Goldman Sachs, its analysts believe the recent weakness in the Bank of Queensland share price has opened up a buying opportunity for investors.

In response to its half year results, the broker has retained its buy rating but trimmed its price target slightly to $9.34.

Based on the current Bank of Queensland share price of $7.99, this implies potential upside of approximately 17% for investors over the next 12 months.

Goldman is also expecting the bank’s shares to provide investors with a fully franked 5.6% dividend yield over the same period. If we add this into the equation, the total return stretches to over 22%.

What did Goldman say about the result?

The broker appeared to be reasonably happy with Bank of Queensland’s half year result. Though, while the bank smashed its earnings estimates, it notes that this was due almost entirely to lower bad debts.

Goldman explained: “BOQ’s 1H22 cash earnings were up 14% on pcp to A$268 mn, 17% above previous GSe, driven by a much better-than-expected performance on BDDs. As such, PPOP [pre-provisioning operating profit] was only 0.9% higher than our estimates, driven by better than expected expenses, partially offset by lower margins. BOQ announced an interim dividend of A22¢, which was in line with GSe (with a 2.5% discounted DRP), while CET1 was 9.7% (vs GSe 9.5%).”

Why are its shares good value?

Goldman notes that the Bank of Queensland share price is trading at a material discount to peers and historical averages.

It said: “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%.”

In addition, the broker highlighted: “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.”

The post Broker says Bank of Queensland share price is great value appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• Brokers name 3 ASX shares to buy today
• Why Bank of Queensland, Iluka, New Hope, and Zip shares are falling today
• Bank of Queensland share price sinks 6% on half-year update
• ASX 200 midday update: Bank of Queensland sinks, Allkem jumps

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 Bruce Jackson.

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Many investors might be looking forward to the next dividend payment from the Washington H Soul Pattinson and Co Ltd (ASX: SOL) share price. Not because this ASX conglomerate is about to pay out a monstrous dividend. But because 2022 will mark the 22nd year in a row that ‘Soul Patts’ shares will pay out a dividend that has been higher than the previous year’s payment. If all goes well, of course. Such a streak is unmatched on the ASX.

As it happens, Soul Patts’ first dividend of the year will hit investors’ bank accounts next month, on 13 May, to be precise. But if an investor wants to be in line to receive this payment, they had better be fast. That’s because Soul Patts trades ex-dividend tomorrow. That in effect means that any shareholder who owns Soul Patts shares as of today is eligible for this payment. But come tomorrow, new shareholders will miss out this time.

When a share trades ex-dividend, we normally see the value of the dividend leave the company’s share price for this reason. So don’t be surprised if we see a share price dip for Soul Patts in tomorrow’s trading.

Soul Patts shares primed to pay dividends

So what can shareholders expect? Well, this payment will be the company’s interim dividend for FY 2022. It will be worth 29 cents a share, and come with full franking credits. Twenty-nine cents a share is a healthy 11.5% increase on last year’s interim dividend of 26 cents per share. Shareholders will have to receive this dividend in cash seeing as Soul Patts doesn’t currently offer a dividend reinvestment plan (DRIP).

Soul Patts’ last dividend was the final payment for FY 2021, which came to 36 cents per share. Putting this payment with the one investors will receive next month would give Soul Patts shares a forward yield of 2.25% on the last Washington H Soul Pattinson share price.

The post Keen to bag the Washington H Soul Pattinson dividend? Read this appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• These were the worst performing ASX 200 shares last week
• These were the best performing ASX 200 shares last week
• Here are the top 10 ASX shares today
• These 3 shares are topping the ASX 200 volume charts on Thursday

Motley Fool contributor Sebastian Bowen owns Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The AMP Ltd (ASX: AMP) share price will be one to watch on Tuesday morning.

This follows the release of an announcement by the financial services company.

Why is the AMP share price on watch?

The AMP share price will be in focus today after the company confirmed speculation that it has been having discussions with “multiple” parties over a potential divestment.

According to the release, AMP is in discussions with these parties, which include DEXUS Property Group (ASX: DXS), in relation to the potential sale of the assets and businesses of Collimate Capital.

Collimate Capital is the new name of the company’s private markets business, which AMP is currently in the process of demerging. It is a global asset manager and a leader in real assets.

AMP chose the name Collimate as it speaks to its “vision, foresight, and expertise in long-term value creation for clients.” The word is a scientific term meaning “to make rays of light or particles parallel” and is used as a metaphor for alignment, clarity, and precision.

Potential sale

No details have been provided in respect to what Dexus or another suitor would be willing to pay for the business. Management has only stated that it will seek to maximise value for shareholders, whether that be through a sale or a demerger.

It commented: “AMP will continue these discussions with a focus on maximising the value for shareholders by getting the best outcome for clients and employees. While these discussions continue, AMP remains in a position to pursue either a sale or demerger of these businesses.”

Dexus has also responded to the speculation, confirming that it is in talks with AMP.

It said: “Dexus confirms that it has been engaged in discussions with AMP regarding a possible transaction. Dexus notes that it regularly reviews strategic opportunities that have the potential to enhance Security holder value and at this stage, there is no certainty that a transaction will result.”

Both AMP and Dexus intend to update the market as necessary in line with their continuous disclosure obligations.

The post AMP share price on watch amid Collimate Capital sale talks with Dexus and ‘multiple’ parties appeared first on The Motley Fool Australia.

More reading

• Own AMP shares? Here’s the latest on the company’s planned demerger
• Can the AMP share price finally turn the corner in April?
• E-commerce is booming. Which ASX shares have exposure to warehouses?
• AMP share price hits $1 mark for first time since February: analysis
• Own AMP shares? Here’s how this ASX company did in March

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 Bruce Jackson.

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It has been a tricky time for the iShares S&P 500 ETF (ASX: IVV). It has fallen by 10.3% in 2022 to date. But could it be time to invest in the exchange-traded fund (ETF)?

One of the useful things about an ETF is the diversification that it can provide in a single investment.

What’s so good about an S&P 500 fund?

Legendary investor Warren Buffett once said about S&P 500 funds: “I recommend the S&P 500 index fund and have for a long, long time to people.”

He has also said: “For most people, the best thing to do is to own the S&P 500 index fund.”

Let’s have a look at what is in the ETF.

Sector diversification

The ASX is dominated by two sectors: resources and financials.

But the iShares S&P 500 ETF has different weightings, with those exposures to sectors that generally demonstrate more long-term growth.

Looking at the weightings as of 13 April 2022: IT had a 26.9% weighting, healthcare had a 14.1% weighting, consumer discretionary had an 11.9% weighting, and financials had an 11% weighting. Those are the sectors that had a double-digit weighting.

iShares S&P 500 ETF holdings

As the name suggests, there are meant to be 500 different businesses in the portfolio.

All of them are listed in the US. However, there are plenty of them that have international sources of earnings.

For example, Alphabet (NASDAQ: GOOG), (NASDAQ: GOOGL)’s YouTube and Google are available in most countries worldwide. Microsoft (NASDAQ: MSFT)’s office tools and software are used across the world.

There are plenty of world leaders in the portfolio.

Aside from Alphabet and Microsoft, there are names like these in the portfolio: Apple (NASDAQ: AAPL), Amazon.com (NASDAQ: AMZN), Meta Platforms (NASDAQ: FB), Tesla (NASDAQ: TSLA), Nvidia Corporation (NASDAQ: NVDA), Berkshire Hathaway, Unitedhealth, Johnson & Johnson, JPMorgan Chase, Procter & Gamble, Exxon Mobil, Visa, Home Depot, Mastercard, Pfizer, Costco, Coca Cola, Broadcom, Walt Disney and McDonald’s.

Annual management fee

Another advantage the iShares S&P 500 ETF can provide is its extremely low management fee.

The lower the fees, the more of the returns that stay in the hands of the investor.

Blackrock provides this ETF with an annual management fee of 0.04%. This is one of the cheapest ETFs on the ASX.

The post Is it time to buy the iShares S&P 500 ETF? appeared first on The Motley Fool Australia.

More reading

• Here’s why the Vanguard Australian Shares Index ETF rose 7% in March
• 3 top ETFs for ASX investors in April

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, 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. owns and has recommended Alphabet (A shares), Amazon, Apple, Berkshire Hathaway (B shares), Costco Wholesale, Mastercard, Meta Platforms, Inc., Microsoft, Nvidia, Tesla, Visa, and Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Alphabet (C shares) and Johnson & Johnson and has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long January 2024 $145 calls on Walt Disney, 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), short January 2024 $155 calls on Walt Disney, 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), Mastercard, Meta Platforms, Inc., Nvidia, Walt Disney, and iShares Trust – iShares Core S&P 500 ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Once a week I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

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

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

• Flight Centre Travel Group Ltd (ASX: FLT) remains the most shorted ASX share with short interest of 18.1%. This was up slightly week on week. Unfortunately for those short sellers, the Flight Centre share price surged higher last week amid improving sentiment in the travel sector.
• Betmakers Technology Group Ltd (ASX: BET) has seen its short interest ease to 11.2%. This betting technology company’s shares have lost over 50% of their value since this time last year. Concerns over its valuation and cash burn appear to be behind this weakness.
• Nanosonics Ltd (ASX: NAN) has short interest of 10.4%, which is down week on week again. Short sellers have been going after this infection prevention medical device company after it surprised the market with a big and disruptive change to its sales and distribution model in the United States.
• EML Payments Ltd (ASX: EML) has seen its short interest rise slightly to 9.5%. Regulatory risks and valuation concerns may be why short sellers are targeting EML.
• Webjet Limited (ASX: WEB) has short interest of 8.8%, which is down sharply week on week. Short sellers may be closing positions on the belief that trading conditions are now improving.
• Polynovo Ltd (ASX: PNV) has seen its short interest ease to 8%. Short sellers appear to have closed position in this medical device company after the release of a solid trading update earlier this month.
• Zip Co Ltd (ASX: Z1P) has seen its short interest ease to 8%. Despite short sellers closing positions, it hasn’t stopped this buy now pay later provider’s shares from continuing to slide. Last week they dropped to a multi-year low.
• Mesoblast limited (ASX: MSB) has returned to the top ten with short interest of 7.8%. Disappointing trial results and significant cash burn have weighed heavily on this biotech’s shares.
• Kogan.com Ltd (ASX: KGN) has seen its short interest fall sharply to 7.6%. Short sellers may have been closing positions on the belief that this struggling online retailer’s shares have finally found a bottom.
• AMA Group Ltd (ASX: AMA) has 7.1% of its shares held short, which is down week on week. This crash repair company disappointed the market in February when it reported a half year loss of $46.3 million.

The post These are the 10 most shorted ASX shares appeared first on The Motley Fool Australia.

More reading

• These were the worst performing ASX 200 shares last week
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• ASX 200 travel shares had a super day. What’s happening?
• Here are the top 10 ASX shares today
• Why has the Zip share price sunk to new multi-year lows every day 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. owns and has recommended Betmakers Technology Group Ltd, EML Payments, Kogan.com ltd, Nanosonics Limited, POLYNOVO FPO, and ZIPCOLTD FPO. The Motley Fool Australia owns and has recommended EML Payments, Kogan.com ltd, and Nanosonics Limited. The Motley Fool Australia has recommended Betmakers Technology Group Ltd, Flight Centre Travel Group Limited, and Webjet Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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There are more than 2,100 companies listed on the ASX, so it’s impossible for any one human to keep track of them all.

So it should not surprise you that there are a few bargains that you may not have thought of yet.

Red Leaf Securities chief John Athanasiou suggested two such ASX shares that you may want to consider picking up:

Can this airport hit the jackpot like Sydney did?

Now that Sydney Airport shareholders have been paid out after its private buyout and delisting, Auckland International Airport Limited (ASX: AIA) has become the big aviation infrastructure play.

Athanasiou sees excellent upside for the airport in New Zealand’s biggest city.

“A positive for Auckland International Airport is the New Zealand Government bringing forward its plans to re-open the country’s borders to international travellers,” he told The Bull.

“The return of international travel may encourage AIA management to resume dividends.”

According to The Motley Fool website, the company has not paid out a dividend since 2009. However, CMC Markets forecasts a 5.8 cents per share payout in 2023 and a 15.3 cent yield in 2024.

The resumption of dividends would be a massive catalyst, said Athanasiou. Maybe it will even end up with the same fate as its Sydney cousin.

“If the company starts paying dividends, AIA is likely to attract interest from global funds seeking yield from quality infrastructure assets.”

Auckland Airport shares have dipped more than 4% for the year so far. The stock price hasn’t yet approached its pre-COVID peaks.

Cashed-up Aussies spend big on pets

Online marketplace Mad Paws Holdings Ltd (ASX: MPA) only listed 13 months ago, hoping to ride the huge interest in growth stocks.

The company claimed at the time the initial public offer was oversubscribed four times over.

The recent market rotation to cyclicals has unfortunately meant the stock price has merely gone sideways from its IPO price of 20 cents per share.

But Athanasiou is upbeat after his team visited the business in real life recently.

“The pet chemist business is potentially the most lucrative segment of the company’s operations, as it’s able to sell pet pharmaceutical products at an attractive premium to repeat customers,” he said.

“There’s plenty of room for growth for the pet chemist business, as it uses the Mad Paws platform to sell their products.”

Athanasiou told The Motley Fool in February that Australians are “not shy” of spending big on their fur (or feather) children.

“We all know tailwinds in the industry of increased levels of pet ownership. Everyone bought a pet during lockdown to have some company.”

The post 2 ASX shares to buy you haven’t thought of: expert appeared first on The Motley Fool Australia.

More reading

• These are the 10 most shorted ASX shares
• These are the 2 best small cap ASX shares to buy right now: fund manager
• 5 things to watch on the ASX 200 on Tuesday
• 2 ASX dividend shares with great yields to beat inflation
• 2 buy-rated ASX growth shares that analysts say can double

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 Bruce Jackson.

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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, Matthew Booker, portfolio manager and co-founder of Spheria Asset Management, shares 2 small cap ASX shares to buy right now.

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

Matthew Booker: The Spheria Australian Smaller Companies Fund provides clients with a sensible way to gain exposure to the significant growth upside that small companies can provide relative to large companies. It aims to outperform the S&P/ASX Small Ordinaries Accumulation Index over the medium to long term.

MF: Small cap ASX shares can come with more risk. What types of risk management do you employ?

MB: Our bottom-up investment process has a strong emphasis on risk management and works to identify robust businesses which have solid and predictable free cash flow generation and, very importantly, where there is valuation support.

We naturally avoid parts of the market trading on nonsensical valuations and those aspirational concept stocks that often lead to capital losses.

MF: What are the advantages of investing in small cap ASX shares?

MB: It’s well known that the small cap sector can provide strong returns. If you look at the journey of a listed company, it is often the time as a microcap or small cap where investors are exposed to the greatest growth in its life cycle, and therefore the greatest gains are to be had.

Many smaller companies have very little analyst coverage or are not covered well. This is an advantage for professional investment teams like Spheria, who are dedicated to fundamental research and have systems and processes designed for this environment.

When our investment process identifies a likely winner, more often than not, the broader market is yet to realise the potential. In many cases, we’re investing against the trend. In our experience, most money tends to be made when taking a view contrary to conventional wisdom.

MF: Is the lack of analyst coverage in the smaller end of the market an issue for you?

MB: We’re very numbers-driven and know the financial statements for our companies inside and out. And we have great access to management that allows us to overlay a view on their capabilities. It’s nearly impossible to get this type of management access in the large cap space.

Also, the impact of large cap managers tends to be less pronounced given the size of the companies they’re running. For example, a great manager of a small cap ASX share is always going to have more shareholder impact than a new CEO running, say, Telstra Corp Ltd (ASX: TLS).

MF: You mentioned your risk management protocols earlier. What’s the biggest risk for investors buying smaller ASX shares?

MB: The biggest risk is getting caught up in the exuberance that often makes its way into the small cap universe. There are many businesses that trade on high multiples simply because they tell a good story. But investors shouldn’t buy stories, they should buy fundamentals.

Buying narratives is a great way to see your capital evaporate in the small cap sector, in the long run.

MF: What are the two best small cap ASX shares to buy right now? 

MB: InvoCare Ltd (ASX: IVC) and Blackmores Ltd (ASX: BKL).

MF: Why do you like Blackmores?

MB: Blackmores is on the cusp of a return to greatness. We were ecstatic that the market sold it off after the last result as we believe the company has never been in better shape. Growth is exploding in its key markets in Asia, with Thailand and Indonesia growing at sales of 50% plus from a large base with overall group sales growing 15% in the half-year.

More than half the group’s sales now come from the Asia region, which is massively underpenetrated.

We also believe there’s a huge shift underway to natural therapies and supplements with awareness of the role these can play in improving general health and, more specifically, boosting the immune system. The Blackmore’s brand and reputation will see it harness this extraordinary growth in its key markets, which will invariably find its way to significant profit growth for the company in the short and long term.

MF: And why is InvoCare a top buy for your fund?

MB: InvoCare is the largest funeral and memorial services operator across Australia, New Zealand, and Singapore. The company is most of its way through a significant refurbishment program that will enable it to sustain or even increase market share.

Counterintuitively, excess deaths in Australia, relative to the average, have trended negatively for the last two years despite the pandemic. Unfortunately, as the economy returns to normal, we believe death levels will return to average. But this will benefit industry participants, including IVC.

Trends in excess death rates overseas lend support to this thesis.

MF: Atop recommending they acquire professional advice, what other guidance do you have for investors looking into small cap ASX shares?

MB: You need to swallow the fact that, when investing in the small cap sector, you are going to make mistakes and lose money on positions. You cannot get everything right, and that’s why you have a portfolio and risk controls. The key is recognising when the facts have irrevocably changed for a holding and then moving it on at a loss. This requires a high emotional intellect and experience.

MF: Has Russia’s invasion of Ukraine changed your investment approach? 

MB: No, we don’t get caught up in the latest news and current affairs.

We have companies that are benefiting from higher commodity prices due, in part, to the conflict. And we have other ASX shares that are adversely impacted through, for example, higher oil prices raising transport costs.

Whether these are short- or long-term impacts will depend on the duration of the conflict, which no one can accurately predict. We’re confident our portfolio of businesses will ride this out.

The market is constantly throwing up new drama fuelled narratives. The key is to focus on the sustainability of a company’s cash flows through the cycle and its valuation.

***

(You can find out more about the Spheria Australian Smaller Companies Fund here.)

The post These are the 2 best small cap ASX shares to buy right now: fund manager appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Friday
• Top brokers name 3 ASX shares to sell next week
• Why is the Blackmores (ASX:BKL) share price sliding today?
• 5 things to watch on the ASX 200 on Tuesday
• Own Blackmores (ASX:BKL) shares? Here’s how the company is aiming for 1 billion consumers

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns and has recommended Telstra Corporation Limited. The Motley Fool Australia has recommended Blackmores Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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On Thursday, the S&P/ASX 200 Index (ASX: XJO) finished the shortened week in style. The benchmark index rose 0.6% to 7,523.4 points.

Will the market be able to build on this on Tuesday? Here are five things to watch:

ASX 200 expected to edge higher

The Australian share market looks set to start the week with a small gain. According to the latest SPI futures, the ASX 200 is poised to open the day 10 points or 0.1% higher. On Wall Street on Monday night, the Dow Jones fell 0.1%, the S&P 500 was flat, and the Nasdaq dropped 0.15%.

Allkem shares rated a buy

The Allkem Ltd (ASX: AKE) share price could be good value according to the team at Bell Potter. In response to the lithium miner’s third quarter update, the broker has retained its buy rating but trimmed its price target slightly to $17.53. Bell Potter said: “We expect AKE’s near term cash generation to lift substantially into 2023 as strength in lithium commodity indices flows through to lagged realised prices.”

Oil prices rise

Energy producers such as Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) could have a decent day after oil prices pushed higher overnight. According to Bloomberg, the WTI crude oil price is up 0.9% to US$107.92 a barrel and the Brent crude oil price has risen 1.2% to US$113.06.94 a barrel. A Libyan outage added to supply concerns.

Gold price rises

Gold miners Evolution Mining Ltd (ASX: EVN) and Regis Resources Limited (ASX: RRL) could have a decent day after the gold price rose overnight. According to CNBC, the spot gold price is up 0.3% to US$1,981.20 an ounce. The precious metal hit a one-month high amid concerns over rising inflation.

Bank of Queensland rated as a buy

Investors may have responded negatively to the Bank of Queensland Limited (ASX: BOQ) half year results, but one leading broker is keeping the faith. According to a note out of Goldman Sachs, its analysts have retained their buy rating but trimmed their price target to $9.34. The broker highlights that “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 5 things to watch on the ASX 200 on Tuesday appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro owns Orocobre Limited. 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 Bruce Jackson.

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