Those holding AGL Energy Limited (ASX: AGL) shares might want to keep an eye on the controversy surrounding the company’s Bayswater power station after it was found to house risky conditions capable of harming nearby residents.

An activist group uncovered an internal review on the state of the power station through Freedom of Information. The risks discovered by the review have been backed by an anonymous whistleblower, according to the group.

At the time of writing, the AGL share price is $5.40, 2.35% lower than it was at yesterday’s close.

For context, the S&P/ASX 200 Index (ASX: XJO) is currently up 0.71%.

Review of Bayswater failures uncovered

Healthy Futures, a group of activist healthcare workers, has uncovered an internal review of the Bayswater power station in New South Wales’ Hunter Valley. The review highlights 73 key risks scattered across nearly all parts of the station.

They include the failure of filter bags – designed to trap particle pollutants. According to Healthy Futures, the whistleblower has watched “clouds of ash being released” into the atmosphere.

The ash spill was apparently caused by the failure of a valve in one of the ash collection silos and “filter bags not actually filtering toxic pollutants due to cheap, poor quality materials used”.

The review also details damaged and deteriorating pipework, as well as contaminated liquid entering stormwater systems.

Finally, it uncovered more than a dozen improperly inspected or maintained plant parts.

AGL purchased the Bayswater power station from the New South Wales Government in 2014. Since then, it’s committed to spending around $42 million on environmental improvement programs.

A spokesperson for the company commented:

The outcomes of the review… will ensure that the site can continue to meet its environmental performance requirements until the end of its operating life.

AGL maintains comprehensive HSE policies, standards and training across its sites, and has at all times proactively complied with its obligation to inform the NSW EPA of any notifiable environmental incidents.

A risk to locals’ health

The activist group states ash released by the Bayswater power plant poses a serious health risk to residents.  

In 2009, Upper Hunter GP Dr Tuan Au found particle pollution from coal-burning increases the risk of asthma, respiratory diseases, and premature death in locals.

Tuan’s research found 1 in 6 children in the region had diminished lung capacity.

Additionally, research published in 2020 found PM2.5, a fine particle pollutant from coal and gas-fired power stations, shortens the collective lives of Greater Sydney residents by 620 years annually.

AGL share price snapshot

This year hasn’t been kind to the AGL share price.

Today’s dip included, the company’s shares are trading for 55% less than they were at the start of 2021.

They have also fallen around 2% over the last month.

The post Own AGL (ASX:AGL) shares? Report finds 73 environmental risks at power plant appeared first on The Motley Fool Australia.

More reading

• What happened to the AGL (ASX:AGL) share price in November?
• Here are the top 10 ASX shares today
• Why is the AGL (ASX:AGL) share price having such a stellar day?
• Own AGL (ASX:AGL) shares? Here’s how the company could be set to raise $500m
• Why is the Origin (ASX:ORG) share price outperforming AGL in November?

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 Bruce Jackson.

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The Origin Energy Ltd (ASX: ORG) share price has been a disappointing performer in 2021.

Since the start of the year, the energy company’s shares have gained just 1%.

Is the Origin share price good value?

While the underperformance of the Origin share price has been disappointing, one leading broker appears to see it as a buying opportunity.

According to a recent note out of Morgans, its analysts have an add rating and $5.96 price target on the company’s shares.

Based on the current Origin share price of $4.88, this implies potential upside of 22% over the next 12 months.

In addition, Morgans is forecasting a 13 cents per share dividend in FY 2022. This implies a 2.7% yield, bringing the total return on offer to approximately 25%.

Why is Morgans bullish?

Morgans notes that Origin has recently agreed to sell 27% of its stake in the APLNG business to EIG for $2.1 billion. Its analysts believe the deal points to expectations of a stronger for longer energy market.

The broker commented: “We estimate that the implied EV of APLNG is ~A$28.2bn or ~A$15/MMboe of 2P reserves. To get to that valuation we think a long term (post 2024) real price of oil of more than USD75/bbl is needed. Given that EIG will hold a minority stake and that the JV’s LNG is almost entirely sold under long term contract we presume that EIG’s view is for sustained strength in LNG markets.”

All in all, the broker feels this highlights a disconnect between the Origin share price and commodity prices. Something which it thinks investors should be looking to take advantage of.

Morgan concludes: “We still see a disconnect between commodity prices and the share prices of oil and gas stocks. We think there is value to be realised as the market regains confidence in the sector and in ORG in particular with a strengthened and stable balance sheet. We retain our ADD rating and see 14% [now 25%] potential 12-m TSR with upside beyond that should oil prices remain elevated.”

The post The Origin (ASX:ORG) share price has only gained 1% so far this year. Is it a buy? appeared first on The Motley Fool Australia.

More reading

• Is something big about to go down with Origin Energy (ASX:ORG) shares?
• Why is the Origin (ASX:ORG) share price outperforming AGL in November?
• Here’s why the Origin (ASX:ORG) share price has outperformed the ASX 200 over the last 3 months?
• These ASX 200 shares could be set to face fresh pressure over climate action
• Why is the AGL (ASX:AGL) share price underperforming Origin lately?

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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In a warning to Australians investing in cryptocurrencies, 2 separate local exchanges have collapsed, leaving customers without their money.

A notice on the Australian Securities and Investments Commission website shows the exchange myCryptoWallet falling into liquidation last Friday.

The Motley Fool has contacted SV Partners, who has been appointed as liquidator, for comment.

The company’s website is still live as of Tuesday morning, but its Android smartphone app is no longer available and its Twitter account has closed.

According to The Australian, past social media posts indicated customers were having trouble withdrawing money out of the exchange in recent months.

Even though myCryptoWallet announced in an April tweet that those issues were “finalised”, many users replied that they still did not have access to their funds.

myCryptoWallet users with missing funds are instructed to contact the liquidator.

The exchange was established in March 2017, and claimed to be “a user-friendly, customer-centric, all-inclusive digital currency service” that had “a high level of security and customer safety”.

Blockchain Global Limited crypto customers missing millions

Meanwhile, customers of another Australian cryptocurrency exchange, ACX, have reportedly launched legal action to recover their funds.

ACX was operated by Blockchain Global Limited, which was wound up in October, according to ASIC filings.

The Motley Fool has contacted Pitcher Partners, which was appointed as administrator, for comment.

Blockchain Global’s assets consisted of millions in Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH), reported The Sunday Age.

According to the administrator’s filings to the Supreme Court, the two directors, Allan Guo and Sam Lee, have fled overseas and “are difficult to contact”.

A group of 94 ACX customers is taking matters into its own hands, taking the company and the directors to court for reportedly more than $10 million.

One investor told The Sunday Age he had used the platform for 3 years without issues before withdrawals were blocked without notice.

“I had no suspicion that it was a scam or anything like that. I was buying and selling, everything was functioning the way I thought it should function,” he said.

“It’s become obvious since then that there’s been some sort of wrongdoing.”

The Supreme Court has now frozen 117 bitcoins, worth about $9.2 million, from Blockchain Global’s assets in an attempt to stop them from being sold or moved.

The post Crypto investors missing millions after 2 Aussie exchanges collapse appeared first on The Motley Fool Australia.

More reading

• Bitcoin (CRYPTO:BTC) price crash dashes crypto’s safe haven status
• You could’ve made $1 million investing less than $1,500 in these 3 cryptocurrencies
• Could interest-paying crypto accounts be coming to a CBA (ASX:CBA) branch near you?
• Here’s how these 4 top traded cryptos performed in November
• Here’s why Charlie Munger says crypto should have ‘never been invented’

Motley Fool contributor Tony Yoo owns Bitcoin and Ethereum. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Bitcoin and Ethereum. 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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The Magellan Financial Group Ltd (ASX: MFG) share price is tumbling lower again on Tuesday.

In morning trade, the struggling fund manager’s shares are down 3.5% to a 52-week low of $29.96.

Why is the Magellan share price falling?

Investors have been selling down the Magellan share price following the release of an announcement after the market close on Monday.

According to the release, the Board of Magellan has been informed by Dr Brett Cairns that he has resigned as Chief Executive Officer and will be leaving the company.

The release explains that Dr Cairns is leaving for personal reasons.

In response to the news, Magellan’s Executive Chairman, Hamish Douglass, commented: “Brett has been a long-standing and key member of our Magellan team. He commenced his journey with Magellan in 2007 as a Non-executive Director before transferring to our executive ranks in 2015, initially as Executive Chairman and then becoming CEO in 2019.”

“Brett was instrumental in the development of Magellan’s exchange traded products and in the development of Magellan’s retirement product, FuturePay. On behalf of the Company, I would like to thank Brett for his extensive contribution to Magellan since 2007 and wish him all the very best in his future endeavours,” he added.

What now?

Magellan will now be looking for a new permanent CEO, but in the meantime it has promoted its Chief Financial Officer, Ms Kirsten Morton, to the top job on an interim basis.

The company notes that Ms Morton has been the Chief Financial Officer of Magellan for over eight years and has a detailed understanding of the company and its operations.

Mr Douglass said: “Kirsten is ideally positioned to take on the responsibilities and drive Magellan forward. The Board and I are very pleased to be working with Kirsten.”

The Magellan share price is down ~44% in 2021.

The post Why the Magellan (ASX:MFG) share price is sinking to 52-week low appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• Why is the Magellan (ASX:MFG) share price slipping today?
• The Magellan (ASX:MFG) share price dropped in November 2021. Here’s what happened
• 2 ASX 200 shares with strong dividend income prospects
• 2 ASX shares I regret and 2 that I don’t: expert

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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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.

What happened

The price of Shiba Inu (CRYPTO: SHIB) had fallen more than 15% over the last 24 hours as of 10:37 a.m. ET today, in line with moves seen in the broader cryptocurrency market.

So what

Cryptocurrencies got hammered over the weekend, with the price of Bitcoin (CRYPTO: BTC) at one point plunging to around $42,000 briefly before coming back up to around $48,000. Large moves in Bitcoin tend to trigger the rest of the market.

But the interesting thing is that Bitcoin and most other cryptocurrencies seem to be struggling from the same concerns as traditional equities, such as the omicron variant, higher inflation, rate hikes coming sooner, and continued struggles in the Chinese real estate market.

“This crash in the market definitely shows us that bitcoin isn’t fully decoupled from the global markets,” Marcus Sotiriou, a trader at digital asset firm GlobalBlock, told CNN. “It hasn’t gotten to that stage yet where it’s big enough to hold its own.”

Sotiriou also said it looks like institutional crypto traders are booking profits before the end of the year, with the uncertainty over market conditions in 2022.

Now what

The price of Shiba Inu clearly seems to be moving with broader crypto prices at the moment, but I’ve never believed this cryptocurrency, in particular, is anything more than essentially meme investing.

There are no solid fundamentals behind the token, although given its popularity I am sure it will stay relevant in the near term. Overall, I would stay away, as investments lacking the fundamentals can really drop hard when market conditions get tougher. 

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

The post Why the Price of Shiba Inu is down today appeared first on The Motley Fool Australia.

More reading

• 3 cryptocurrencies that crushed Shiba Inu in November
• You could’ve made $1 million investing less than $1,500 in these 3 cryptocurrencies
• Shiba Inu soars and crashes, but it’s still holding up this week
• Here’s how these 4 top traded cryptos performed in November
• 2 reasons why Shiba Inu surged more than 30% today

Bram Berkowitz owns shares of Bitcoin. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Bitcoin. 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.

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

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The Insurance Australia Group Ltd (ASX: IAG) share price will be in focus this morning after it released its latest business update.

The group outlined its growth agenda and outlined its FY22 guidance on margin and gross written premium (GWP).

Shareholders will be hoping that the update will help the IAG share price find a floor after a dismal year.

IAG’s margin squeeze

Management is forecasting low single-digit growth in GWP, which is inline with its previous prediction. Reported margin is tipped to range between 10% and 12% for the current financial year.

That’s below the 13.5% and 15.5% target that it outlined in its FY21 results presentation. The shortfall is largely driven by a $280 million increase in its natural perils allowance to just over $1 billion.

That equates to a 350-basis point (3.5 percentage points) impact on its reported margin.

Silver-lining for the IAG share price

But perhaps that is a tat conservative as modest tailwinds from the impact of COVID-19 aren’t factored into the guidance.

The rolling lockdowns in Victoria and New South Wales mean fewer motor vehicle accident claims, although inflation will eat away at some of these gains.

Medium-term targets

“Over the past couple of years, as an industry and particularly as a company, we’ve had to face some serious challenges,” said IAG’s chief executive Nick Hawkins.

“We’ve appropriately provided for these and restored capital where required to address all the issues from a balance sheet point of view.

“We haven’t changed our value proposition since we presented it in February this year. Over the medium-term, we are aiming to deliver a targeted cash ROE of 12-13%, an insurance margin of 15-17%, and a growth profile. Our aspiration is to deliver these financial goals on a sustainable basis.”

Hunting for 1 million new customers

IAG’s goal of adding a million new customers over the next five years will also provide economies of scale. The group believes it can keep expenses flat in FY22 and it currently has 8.5 million customers.

It plans to get new customers by targeting new regions and market segments and using technology to increase efficiency and reach.

The insurer told investors it should have confidence in the group’s longer-term outlook. The turnaround in its Intermediated Insurance Australia business should add at least $250 million of insurance profit by FY24.

Meanwhile, its Direct Insurance Australia division and New Zealand business is rolling out an ambitious growth strategy.

IAG share price lagging its peers

Fingers crossed that management can deliver on its growth targets given the sorry performance of the IAG share price.

The ASX insurer has lost around 16% of its value over the past year. In contrast, the QBE Insurance Group Ltd (ASX: QBE) share price and Suncorp Group Ltd (ASX: SUN) share price have rallied 20% and 7%, respectively.

The post The IAG (ASX:IAG) share price on watch following its trading update appeared first on The Motley Fool Australia.

More reading

• Own QBE (ASX:QBE) shares? New CEO reveals insurer’s biggest challenges
• What happened to the IAG (ASX:IAG) share price last month?
• JP Morgan is bullish on the Suncorp (ASX:SUN) share price. Here’s why
• Own IAG (ASX: IAG) shares? Here’s why the company is facing a shareholder class action
• Suncorp (ASX:SUN) share price drops as insurance sale completes

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November was a quiet month for Woolworths Group Ltd (ASX: WOW), although its share price managed to clock up an extra 7.2%.

Over the course of the month, Woolworths’ stock grew from $38.08 at its final close of October to finish November trading at $40.82.

For context, the S&P/ASX 200 Index (ASX: XJO) slipped 0.92% over the same period.

There wasn’t a lick of price-sensitive news from the supermarket giant last month. However, there were a few factors that might have boosted its shares’ value.

A month of gains for the Woolworths share price

The first happening that likely impacted the Woolworths share price in November actually occurred in late October.

Then, the company released its earnings for the first quarter of financial year 2022.

Woolworths reported its supermarket leg had boomed during lockdowns affecting much of Australia and New Zealand over the 3 months ended 30 September.

Though, its Big W business saw sales tumble 18% year-on-year.

The company’s CEO Brad Banducci said the period was the most challenging COVID-19-impacted quarter so far for the company.

Over the 3 days following the release of its results on 27 October, the Woolworths share price tumbled 5.9%. Thus, it started November in a dip. That was probably favourable to the stock’s performance last month.

The supermarket also made a few moves towards becoming a ‘greener’ business in November.

It launched a BYO container program in all its Tasmanian stores and one Queensland store.

Customers of those stores can now bring their own storage solutions for products from Woolworths’ deli, meat, and seafood counters, avoiding the single-use plastic containers and wrappings dispensed by the supermarket.

The launch followed a single store trial in 2020 and more stores will follow suit in New South Wales and Victoria next year.

Woolworths also ditched single-use plastic cutlery, cups, bowls, and plates from its shelves last month.

As of the end of November, the Woolworths share price was 20.45% higher than it was at the start of 2021.

It has since dipped 0.5% amid its takeover bid for Australian Pharmaceutical Industries Ltd (ASX: API).

The post Why did the Woolworths (ASX:WOW) share price have such a great month in November? appeared first on The Motley Fool Australia.

More reading

• Drinking and gambling: 3 ASX shares to buy now
• Top brokers name 3 ASX shares to sell next week
• Could this be a fly in the ointment for Woolworths’ (ASX:WOW) push into healthcare?
• Can Wesfarmers (ASX:WES) win the battle to take over API?
• ASX 200 (ASX:XJO) midday update: Afterpay sinks, Woolworths bids for API

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 Bruce Jackson.

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The BHP Group Ltd (ASX: BHP) dividend might be amplified next year.

The world’s second largest miner has handsomely rewarded shareholders over the years with consistent payouts. However, the upcoming demerger of its petroleum and coal assets could lead to a bumper dividend.

At Monday’s market close, BHP shares finished the day down 1.59% to $39.59.

A quick refresher on the BHP dividend

After reporting its FY21 full-year results, the board declared a record fully-franked final dividend of US$2 (A$2.7152) per share. Coupled with its interim dividend of US$1.01 (A$1.31), this brings the total FY21 dividend to US$3.01, a 151% increase on FY20.

Based on the last closing BHP share price, this implies a trailing dividend yield of 10.17%.

Is a higher dividend payment on the cards?

Last month, BHP announced that it is selling its 80% interest in BHP Mitsui Coal (BMC). 

Stanmore Resources will acquire metallurgical coal mines, the South Walker Creek and Poitrel coal mines. 

The US$1.35 billion purchase price is made up of US$1.2 billion in cash and a potential follow-up payment of up to $150 million after two years linked to the performance of coal prices.

The transaction is said to be consistent with BHP’s decarbonisation strategy as it pulls away from fossil fuels.

In August, the company unveiled a deal with Woodside Petroleum Limited (ASX: WPL) to offload oil and gas operations in exchange for new shares.

In June, BHP agreed to the sale of the Cerrejon thermal coal mine to Glencore Plc for around $294 million.

A strong free cash flow coupled with BHP’s balance sheet could mean that shareholders are rewarded with an increased dividend. This is because of the reduced capital expenditure due to the divestments, and the company’s dividend policy. The latter states that a minimum of 50% of underlying earnings are returned to shareholders each year.

While BHP will be a smaller company in terms of revenue, the ample free cash flow could see its dividend payout ratio actually rise above 80%. This is subject to the price of iron ore remaining stable for the foreseeable future. 

It’s anyone’s guess how much BHP will give, but any increase is likely to be supplemented in the mid-2022 dividend.

About the BHP share price

Since the beginning of the year, the BHP share price has moved in circles following a volatile market environment. Its shares are slightly in the red, down 5% for the past 12 months.

This is a stark contrast from when its shares were tracking almost 30% higher for the year-to-date period during August.

Based on today’s price, BHP presides a market capitalisation of roughly $116.80 billion and has approximately 2.95 billion shares outstanding.

The post Could the BHP (ASX:BHP) dividend be set for a boost? appeared first on The Motley Fool Australia.

More reading

• BHP (ASX:BHP) share price struggled on Monday despite acquisition talks ‘progressing’
• These are the 10 most shorted ASX shares
• Evergrande admits it may not meet debt repayments
• These were the best performing ASX 200 shares last week
• ASX 200 (ASX:XJO) midday update: BHP higher on unification plans, TPG tumbles

Motley Fool contributor Aaron Teboneras owns shares of Woodside Petroleum Ltd. 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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All eyes will be on the Bank of Queensland Limited (ASX: BOQ) share price today.

Why is the Bank of Queensland share price on watch?

The Bank of Queensland share price will be on watch today after it released a trading update ahead of its annual general meeting.

According to the release, the regional bank has started FY 2022 in a positive fashion in respect to volume growth. It revealed that its growth momentum has continued throughout the first quarter, with strong application volumes across both the housing and business lending portfolios.

Furthermore, it advised that its housing portfolio across the Bank of Queensland and Virgin Money brands increased by ~$1 billion for the quarter, continuing above market growth. Whereas its ME Bank brand returned to growth for the month of November, with application volumes in the first quarter up 62% compared to the FY 2021 average.

Positively, management revealed that Business Banking lending grew by ~$200 million during the first quarter, with the asset finance business also performing well.

In addition, the company highlights that the growth in retail and business remains disciplined and high quality, with low levels of >90% LVR lending in mortgages and a focus on SMEs in the business bank.

Taking the shine off the update…

One slight disappointment, though not entirely unexpected, is that Bank of Queensland has not be immune to net interest margin (NIM) pressures from tougher trading conditions and increased home lending competition. As a result, its FY 2022 NIM is expected to be lower than previously guided.

But the good news is that management is aiming to offset this with a 1% reduction in expenses in FY 2022 through additional productivity benefits.

Management commentary

Bank of Queensland’s Managing Director and CEO, George Frazis, commented: “BOQ continues to execute on its strategy, digital transformation and the ME Bank integration. We remain firmly focused on delivering against our strategy to transform BOQ into a digital bank with a personal touch.”

Mr Frazis also revealed that the bank is reaffirming its FY 2022 guidance of at least 2% positive jaws (income growth exceeding expense growth).

The post Bank of Queensland (ASX:BOQ) share price on watch amid FY22 guidance update appeared first on The Motley Fool Australia.

More reading

• Why the Bank of Queensland (ASX:BOQ) share price hit reverse in November?
• Should Bank of Queensland (ASX:BOQ) shares be on your Christmas list? Here’s what top brokers think
• What’s JP Morgan saying about ASX 200 bank shares?
• Are Bank of Queensland (ASX:BOQ) shares really going to pay a 10% dividend yield?
• Here’s why Morgans tips 30% upside for the Bank of Queensland (ASX:BOQ) share price

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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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, Alphinity Investment Management client portfolio manager Alfreda Jonker tells of the 2 ASX shares set to cash in on long-term themes.

Investment style

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

Elfreda Jonker: Alphinity Investment Management is a boutique-sized active fund manager based in Sydney. We run 5 different equity strategies. We’ve got two Australian core funds, one global core fund, and then we also have an Australian sustainable fund and a global sustainable fund.

All these funds are managed using the same investment philosophy. We invest in quality companies, that are in an earning upgrade cycle, that we can buy at a reasonable valuation. So all our funds are pretty much concentrated, style-agnostic with a core focus on delivering consistent, strong, alpha through different market cycles.

MF: In the context of the ASX shares we’ll talk about today, they’re from one of the core Australian funds?

EJ: Yes. The Australian share fund, which is around 35 to 55 companies normally.

Biggest convictions

MF: What are your two biggest holdings?

EJ: If we exclude the really large caps like BHP Group Ltd (ASX: BHP) and the big banks, I think it’s probably more interesting to talk about our biggest active weights. And currently, two of those names would be Macquarie Group Ltd (ASX: MQG) and Medibank Private Ltd (ASX: MPL). 

Macquarie probably does not need a huge amount of an introduction, but effectively it’s a banking advisory investment and funds management business. It’s been one of our core holdings in our portfolio since 2012, which has just consistently been in an earnings upgrade cycle, and really is one of those companies that can stand a portfolio for a number of years. If you look at the current situation of Macquarie, it is definitely seeing very strong growth in assets under management, which is driving the fee growth. There’s lots of demand for infrastructure-style investments, which they clearly benefit from the high-interest rates.

Then, specifically at the moment, they’ve just continued positive asset realisation from a long-term period of equity investments coming across. They’ve got energy, transport, technology infrastructure — a lot of the investments that they’ve been making over the last number of years are all really coming to realisation now. 

They’re also really benefitting from the commodity business… benefitting from the energy crisis and volatility in commodities this year. Their banking business is deploying technology to take material market share in the retail banking space. 

Then of course the big thing is also their green energy assets. They’re, in our view, one of the leaders in that space and one of the world’s largest funders and developers. So they’re really perfectly positioned to benefit from this whole energy transition.

MF: Macquarie shares have done pretty well this year, haven’t they? Recently Macquarie became one of the big four banks.

EJ: Yeah, absolutely. It’s been a phenomenal rally. It’s up, I think, 168% since the COVID trough — and up around 43% in the last 12 months. So it has done very well. 

If you look at the valuation, it’s trading on a PE [ratio] of around 19 times, so that’s ahead of its long term average of around 16. But in our view, we do think that the way they are busy changing the business model and really just expanding the different business avenues that they’re in, we think this company can continue to generate really strong earning scores, particularly over the next number of years. 

We do see the potential to also expand that multiple even further potentially. So even after the last big run-up that we’ve had, we very much view it as a longer-term quality holding in our portfolio overall.

MF: How about Medibank?

EJ: Medibank, that’s effectively a health insurance business. They offer private health insurance coverage for hospital and ancillary services. They also offer a wide range of health insurance products like health, travel, [and] pet insurance. 

One of the big things that they are doing is that they are now really transforming the business, focusing on health support and wellbeing. So rather than just being an insurance company, they’re also trying to really drive to be a health company. And that’s really the exciting thing for us is that they are really transforming this business model as well. 

If you think about the 2 sides of the business on the insurance side, they are definitely benefitting from lower claims [volume] in the last 2 years through COVID and all the shutdowns.

Also, they’re returning some benefits to customers through lower pricing so that they’re cementing that recent brand improvement and the return to customer growth. We are seeing that insurance side of the business really benefitting from some of the larger trends that we’ve seen in the insurance space. 

But also, specifically to them, I think they’ve done a lot to really focus on their brand and also using a lot of the provisioning to smooth over the results in the next 2 years. Also, I think the focus on the health side, health support and wellbeing, is this really big growth spot of the market. Specifically, growth and in-home care businesses is where we think they’re specifically underestimated by the market. They’ve got very big plans to grow that part of the market.

At the moment, the market is probably more focused on just the insurance business and giving them a lot of benefit for that. But I think this whole health side that they’re focusing on… that’s just the trend of the future. 

So that’s really where we are seeing a lot of potential upsides. They’re really enjoying a lot of earnings upgrades, which, as I’ve mentioned, is one of the key things that we look at. But also from here onwards, we think there’s a very strong underlying gross margin, but also then just strong earnings growth from the whole Medibank health side.

MF: There’s a perception with the private health insurance sector that they’re at the whim of changes in regulations and how the government of the day feels at the time. Are you worried about that for Medibank?

EJ: No, I think Medibank specifically over the last number of years has really worked very hard at that… to improve the relationships and really to improve that perception in general. 

I think any sector always has some sort of risk from a regulation perspective. And that definitely goes for banks as well as general insurance and health insurance sectors. 

But I think at this point in time, we do think that that sort of risk is priced. And specifically, Medibank has really worked so hard in building the brand and building those relationships and to smooth over some of the historic issues that might have been. 

So we are not particularly concerned about any immediate or really rising risks in the shorter term, that can really negatively impact them. But I do think that it is something that investors always need to bear in mind when you do look at the valuation of the company, is that risk price at the current levels.

The post 2 ASX shares that tick all the right boxes for the long term: expert appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo owns shares of Macquarie Group 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 recommended Macquarie Group 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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