Ask A Fund Manager

The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In part 1 of our interview, 1851 Capital portfolio manager Martin Hickson tells us the telecommunications company that gets paid to build its products, then milks 40 years of recurring revenue out of it.

Investment style

The Motley Fool: Why is your fund called 1851?

Martin Hickson: Good question. 1851 was a pivotal year in Australian history. The gold rush had kicked off. Over the next decade, the population doubled. 

It was a year that things started growing, and Australia became the country that it is today, with those gold rushes. We wanted a number in the name, and it seemed as good as any number to pick.

MF: What’s the fund’s investment strategy?

MH: We’re a small micro-cap focused fund manager. So, ex-[ASX] 100 universe, we’ll invest all the way down to $50 million market cap. 

In that range, there are around 900 stocks on the ASX. We don’t invest in resource companies — it’s not our expertise or area of focus. And again, we don’t really invest in the biotech space. Given we’re not doctors, it’s hard to work out whether a phase 2 or 3 trial result will be positive or negative. It’s a binary outcome. 

So we focus on those industrial style companies. So if you strip out resources and biotechs, there are about 650 stocks in our investable universe. 

To describe our philosophy in a sentence, we’re growth investors with a value overlay. What does that mean? It means we’re looking for companies with strong earnings growth, but that are trading on attractive valuations. So to put some numbers around that, our current portfolio is trading at a 10% cheaper valuation versus the index — around 19 times price-to-earnings ratio versus the index at 21 times.

However, it has 4 times the level of earnings growth compared to the index. So that shows that we’re finding those cheap companies that are growing strongly, with an event that’s going to re-rate the share price. 

That’s us in a nutshell. We are restricting the size of the fund. It’s our belief that, particularly in the smaller micro-cap end of the market, the bigger you get, the harder it is to outperform. So we’ve said numerous times now that, once we reach $300 million, which we expect to occur imminently, we’ll put out a final call to investors, before soft-closing the fund.

MF: How concentrated is the portfolio?

MH: We’re pretty diversified. We’ll hold between 30 and 80 stocks. 

At the moment we’re at the upper end of that range, so around 75 stocks. We like having a diversified portfolio for 2 reasons. One, it helps with liquidity. So by having the funds, the remainder of the equity spread over a number of companies, means that liquidity is improved. It’s easy to get into and out of them, as opposed to having a very concentrated portfolio. 

And also just for risk metrics, it helps us sleep at night, knowing that we haven’t got 10% or 15% of the fund within one stock. The largest holding in the fund at the moment is Uniti Group Ltd (ASX: UWL) — that represents 5% of the portfolio. And the top 5 stocks at the moment are 18% or 19% of the funds under management. 

MF: To give our readers an idea, what are your two biggest holdings?

MH: Uniti, as I mentioned, is the largest position in the fund. It operates in the telecommunication space, run by [chief executive] Mick Simmons and [executive director] Vaughan Bowen, both ex M2 Telecommunications. They built up that business over a number of years. Mick was also at TPG in the older days — so both proven operators. 

Uniti, what do they do effectively? They’re a competitor to the NBN, focused on new broad-acre housing estates. In the growth corridors of Sydney — Oran Park as an example — what they do is, they will help the developer. When the developer might have a new housing estate, where they’re rolling out 5,000 new homes over a 5 to 10 year period, Uniti will lay the dark fibre to allow those homes to connect to the internet. 

They get paid by the developer to install that fibre, and then once someone moves into the home, they then sell access to that fibre to an ISP or an internet service provider, like Telstra Corporation Ltd (ASX: TLS) or iiNet. 

Effectively, they are building a recurring revenue stream, with an infrastructure-style earning stream, which will generate income for the next 30 or 40 years by selling access to that fibre. But they’re also being paid by the developer to install it. So they’re building long-term assets and someone else’s funding that build-up for them. 

That’s why we like it… We also think that there’s a potential for earnings upgrades over the next couple of years, as they prove out that model. 

Definitely over time too, there’s potential for Uniti to become a takeover candidate themselves. They acquired OptiComm Ltd last year — that was a competitive process. There was a large super fund, Aware Super, also vying for control of OptiComm. Uniti won out.

More recently, we’ve seen Vocus Group Ltd (ASX: VOC) get taken over by Macquarie Group Ltd (ASX: MQG). So we get that there is corporate appeal in this space. 90% of [Uniti’s] earnings are recurring — so high-quality renewable stream — and that’s why it’s recently into the ASX 200 as well. 

MF: What’s the second-biggest holding?

MH: Second largest is Capitol Health Ltd (ASX: CAJ). They’re a radiology company, Victorian-focused — 80% of their revenue comes from Victoria. 

New CEO, Justin Walters, joined around 18 months ago. He’s taken costs out of the business, made the business more efficient. We’re also going through a period where they’ve delivered strong revenue growth despite the lockdown in Victoria. So they’ve got positive draws, costs have come down, revenue’s gone up, that’s led to a large increase in their profit margins… They’ve got a very strong balance sheet and a very minimal amount of debt. So that provides them with a capacity to make creative acquisitions. 

The company trades on EV-to-EBITDA multiple of 9 times. The largest peer, which is Integral Diagnostics Ltd (ASX: IDX), trades on 11 times. And then there’s been private takeovers or transactions done at 13 times. Capitol is trading at a significant discount to those private transactions on IDX. 

So we think it’s very, very cheap. Again, we think that over time it could become a potential candidate for one of these private companies, given that it’s trading on such a depressed multiple. 

Do these shares tempt you? 

MF: These are the 5 most-searched shares at the moment. Would you buy or ignore each of these? MoneyMe Ltd (ASX: MME), Cettire Ltd (ASX: CTT), Nuix Limited (ASX: NXL), iSentia Group Ltd (ASX: ISD), Patrys Limited (ASX: PAB)?

MH: To be honest, we don’t own any of them… We would ignore [all five]. 

I mean, putting them all in the one basket, all of those stocks trade on quite high multiples. Some of them don’t make earnings at all. And those that do, are trading on significant revenue multiples. So, none of them meet our investment criteria. 

iSentia obviously received a takeover a bit earlier in the week. We don’t own it. We wouldn’t buy it… It’s not part of our investment philosophy. We don’t do takeover arbitrages.

Basically, we like investing in companies that are profitable, or have a very clear path to being profitable in the short term.

Tomorrow in part 2 of our interview, Hickson reveals the ASX shares that revved up his portfolio after the COVID-19 crash.

The post Why we avoid mining and biotech ASX shares: fund manager appeared first on The Motley Fool Australia.

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Tony Yoo owns shares of Macquarie Group Limited, Cettire Limited, and Nuix Pty Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Cettire Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Nuix Pty Ltd. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited and Telstra Corporation Limited. The Motley Fool Australia has recommended Cettire Limited, Integral Diagnostics Ltd, and Nuix Pty 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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The Laybuy Holdings Ltd (ASX: LBY) share price will be one to watch when trading opens up this morning. This comes after the buy now, pay later (BNPL) provider announced an update to its recent capital raising efforts.

At close of trade on Monday, Laybuy shares finished the day at 51 cents – up 0.99%. The All Ordinaries Index (ASX: XAO) closed the trading day at 7,485 points – down 1.8%.

Let’s take a closer look at what the company released in yesterday’s late market news.

What did Laybuy announce?

Laybuy shares could be on the move today following the announcement of a successfully completed share purchase plan (SPP).

In a statement to the ASX, Laybuy advised it has raised $5 million to accelerate its growth strategy in the United Kingdom.

The non-underwritten SPP received overwhelming support from eligible shareholders, totalling $14.4 million in valid applications. This almost tripled the size of the tabled offer put towards retail investors, with over 1,000 shareholders participating in the SPP.

As a result, Laybuy will scale back the applications based on the shareholding balances of applicants at the record date. All eligible applicants, however, will be allocated a minimum quantity of $1,000 in Laybuy shares. The average participation amount for each application was $14,025.

In total, almost 10 million new ordinary shares will be issued under the SPP after rounding and scale back is applied. The offer price was listed at 50 cents apiece.

The SPP shares are expected to be issued on 25 June, and be available for trading from 28 June 2021.

Laybuy’s capital raising efforts, including the $35 million two-tranche placement completed last week, provide additional firepower on its balance sheet.

The company’s managing director, Gary Rohloff, commented:

We are very pleased with the demonstration of support by our shareholders shown in this SPP. The capital raising will allow us to focus on our strategic priorities, including investment in our people, our platform and accelerated growth in the UK.

Laybuy share price summary

The Laybuy share price is down more than 75% since its 52-week high of $2.30 reached in September 2020. The company’s shares are also down more than 60% year to date.

On valuation grounds, Laybuy has a market capitalisation of around $125 million, with approximately 244 million shares outstanding.

The post Why the Laybuy (ASX:LBY) share price will be on watch 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 Bruce Jackson.

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ASX tech shares could be a way for investors to get exposure to exciting businesses.

Technology companies are often the ones that are producing the quickest growth because of the nature of software which is easy to replicate for clients and customers.

Here are two ASX tech share ideas to consider:

Betashares Nasdaq 100 ETF (ASX: NDQ)

This is an exchange-traded fund (ETF) that is invested in 100 of the biggest businesses that are listed on the NASDAQ.

It’s one of the investment products on the ASX that provides the largest exposure to the FAANG shares. That stands for Facebook, Apple, Amazon, Netflix and Google (Alphabet).

These are global businesses that have huge worldwide userbases.

But there are plenty more names in the portfolio beyond just the ones I mentioned.

Other tech shares include: Microsoft, Tesla, Nvidia, PayPal, Adobe, Cisco Systems, Broadcom, Texas Instruments, Qualcomm and Intuit. Many of the holdings in this ETF are either directly or indirectly changing the way we live our lives.

The annual management fee is 0.48%.  

Past performance is not an indicator of future performance. Since inception in mid-2015, the net returns of the ETF have been 20.9% per annum.

There are some other holdings in there that aren’t technology businesses such as PepsiCo, Costco, Moderna, Mondelez and Starbucks.

Bailador Technology Investments Ltd (ASX: BTI)

Bailador is an investment business that focuses on information technology and media sectors.

The company picks businesses that are seeking growth stage investment.

There are a few different factors that Bailador looks for when it invests in something.

The ASX tech share looks for companies that have been typically running for two to six years, that are run by the founders, have a proven business model with attractive KPIs, have the ability to generate repeat revenue, generate international revenue, have a “huge” market opportunity and require capital to grasp that opportunity.

The typical investment size is between $2 million to $10 million of equity.

It currently has a portfolio of different names.

Siteminder is described as the world leader in hotel channel management and distribution solutions for online accommodation bookings.

Bailador says Instaclustr is an open source data platform for cloud-based solutions that require immense scale, providing enterprise support and managed solutions for technologies such as Apache Cassandra.

Stackla is a social marketing platform that aggregates user-generated content that curates its display and integrates at various touch points within the marketing stack.

Straker Translations provides a cloud-based ‘hybrid’ translation platform that uses a combination of both machine translation and human refinement to rapidly speed up language translation.

Other investments in the ASX tech share’s portfolio include Rezdy, Brosa and Standard Media Index.

At the end of May 2021, its pre-tax net tangible assets (NTA) per share was $1.53. That compares to the current share price of $1.37.

The post 2 exciting ASX tech shares that could be buys appeared first on The Motley Fool Australia.

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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 shares of and has recommended BETANASDAQ ETF UNITS and Bailador Technology Investments Limited. The Motley Fool Australia owns shares of and has recommended BETANASDAQ ETF UNITS. The Motley Fool Australia has recommended Bailador Technology Investments 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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If you’re looking to add some growth shares to your portfolio, then you might want to take a look at these shares listed below.

All three of these ASX growth shares have been tipped as buys recently. Here’s what you need to know about them:

Afterpay Ltd (ASX: APT)

This buy now pay later (BNPL) focused payments company could be a growth share to consider buying. It has been growing at a rapid rate in recent years thanks to the increasing popularity of BNPL with consumers and merchants, the demise of credit cards, and its global expansion. Positively, due to its international expansion, it still has a long runway for growth over the 2020s. In addition to this, it is planning to expand its offering beyond BNPL in the near future.

Morgan Stanley is a fan of the company. It currently has an overweight rating and $145.00 price target on Afterpay’s shares.

Breville Group Ltd (ASX: BRG)

Breville is one of the world’s leading appliance manufacturers. It has been growing its sales and profits at a strong rate over the last few years. This is being underpinned by its international expansion and its investment in research and development. The latter is ensuring that Breville has a strong and innovative product portfolio.

UBS is positive on its growth outlook. Its analysts currently have a buy rating and $35.70 price target on its shares.

Hipages Group Holdings Ltd (ASX: HPG)

Hipages is a leading Australian-based online platform and software as a service (SaaS) provider. The company’s platform connects tradies with residential and commercial consumers, providing job leads from homeowners and organisations looking for qualified professionals.

Analysts at Goldman Sachs are very positive on the company’s future and see a huge growth runway ahead of it. The broker has a buy rating and $3.40 price target on its shares.

The post 3 excellent ASX growth shares rated as buys appeared first on The Motley Fool Australia.

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James Mickleboro does not own any shares mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO and Hipages Group Holdings Ltd. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO. 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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If you’re interested in boosting your portfolio with some dividend shares, then the two listed below could be worth considering.

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

BHP Group Ltd (ASX: BHP)

This mining giant could be a dividend share to consider. This is because with commodity prices improving significantly over the last 12 months, particularly the iron ore price, BHP is well-positioned to deliver an exceptionally strong result in FY 2021.

And thanks to its strong balance sheet and favourable dividend policy, this is likely to lead to bumper dividends for investors in the near term.

Macquarie certainly expects this to be the case. Yesterday the broker retained its outperform rating and lifted its price target on the company’s shares to $63.00. It also increased its dividend forecasts to ~$4.05 per share and ~$3.68 per share for FY 2021 and FY 2022, respectively.

Based on the current BHP share price of $45.61, this will mean fully franked yields of 8.9% and 8% over the next two years.

Wesfarmers Ltd (ASX: WES)

Another dividend share to look at is Wesfarmers. It is the conglomerate behind several popular retail brands such as Bunnings and Kmart, and the owner of diverse portfolio of industrial businesses. The latter includes chemicals companies and lithium miners.

Wesfarmers has been on form again this year and has been tipped to build on this next year, leading to increasing dividends for investors.

For example, analysts at Macquarie are forecasting fully franked dividends of $1.74 per share in FY 2021 and then $1.76 per share in FY 2022. Based on the latest Wesfarmers share price of $57.54, this represents attractive yields of 3% and 3.1%, respectively. Macquarie has an outperform rating and $58.12 price target on its shares.

The post 2 ASX dividend shares with attractive fully franked yields appeared first on The Motley Fool Australia.

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James Mickleboro does not own any shares 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 shares of 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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On Monday the S&P/ASX 200 Index (ASX: XJO) started the week with a day to forget. The benchmark index crashed 1.8% to 7,235.3 points.

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

ASX 200 expected to rebound

The Australian share market looks set to rebound strongly from yesterday’s sell off thanks to a very positive start to the week on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 96 points or 1.35% higher this morning. Wall Street had its best day since March, with the Dow Jones rising 1.75%, the S&P 500 jumping 1.4%, and the Nasdaq pushing 0.8% higher.

Oil prices storm higher

Energy producers such as Beach Energy Ltd (ASX: BPT) and Woodside Petroleum Limited (ASX: WPL) could be on the rise today after oil prices stormed higher. According to Bloomberg, the WTI crude oil price is up 2.65% to US$73.54 a barrel and the Brent crude oil price has risen 1.9% to US$74.90 a barrel. Oil prices rose amid a softening US dollar and Iranian supply uncertainty.

Tech shares on watch

Tech shares such as Afterpay Ltd (ASX: APT) and Xero Limited (ASX: XRO) could be on the charge today. This follows a strong night of trade on the Nasdaq index. The buying drove the tech-heavy Nasdaq index 0.8% higher. This left the famous index trading within sight of its record high.

Gold price rises

Gold miners Evolution Mining Ltd (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) could be on the rise today after the gold price pushed higher. According to CNBC, the spot gold price is up 0.8% to US$1,783.20 an ounce. The gold price rose after the US dollar softened and traders bought the dip.

Metcash rated as a buy

The Metcash Limited (ASX: MTS) share price could be good value right now. According to analysts at Goldman Sachs, its team have retained their buy rating and $3.95 price target on the wholesale distributor’s shares ahead of its results next week. Goldman is expecting Metcash to report a 24.5% increase in EBITDA to $606.6 million.

The post 5 things to watch on the ASX 200 on Tuesday appeared first on The Motley Fool Australia.

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James Mickleboro does not own any shares mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO and Xero. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO and 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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Shares in Actinogen Medical Ltd (ASX: ACW) soared today after the company released news on the upcoming study of its drug designed to treat Alzheimer’s disease.

At market close, the Actinogen share price was trading at 16 cents – 19.23% higher than its previous close.

Let’s take a closer look at today’s news from the biotech company.

XanaMIA study

Today, Actinogen announced it has made deals with several companies to run the XanaMIA Part A dose-ranging study.

The dose-ranging study is the company’s first step towards testing whether XanaMIA can treat cognitive ability in volunteers and patients with mild cognitive impairment, the first clinical stage of Alzheimer’s disease.

The study will enrol 105 healthy volunteers aged 50 or older, starting next month. The volunteers will be given either 5 milligrams or 10 milligrams of XanaMIA to determine the minimum effective dose.

Actinogen also advised today that research organisation Avance Clinical will manage the XanaMIA study. Avance will charge Actinogen around $1.25 million for the service.

Additionally, Actinogen has employed Paratus Clinical to recruit the dose-ranging study’s subjects, for which Actinogen will provide a budget of around $850,000.

Paratus will also provide the 4 Australian clinical-trial sites that will house the study.

Finally, Actinogen has made an agreement with CogState Limited (ASX: CGS) to use the neuroscience technology company’s Neuropsychological Test Battery in the dose-ranging study.

CogState’s Neuropsychological Test Battery is a platform that delivers highly sensitive cognition tests.

Actinogen will pay CogState around US$300,000 for access to the platform.

Today’s news comes nearly 3 weeks after Actinogen announced the XanaMIA study received approval from the Bellberry Human Research Ethics Committee.

Following the XanaMIA Part A dose ranging study, Actinogen will begin its XanaMIA Part B study.

The Part B study will see people with early-stage Alzheimer’s disease treated with XanaMIA. It will try and find if the drug can treat mild cognitive impairment.

Actinogen share price snapshot

The Actinogen share price has performed exceptionally well on the ASX this year.

Currently, the Actinogen share price is a whopping 675% higher than it was at the start of 2021.

The company has a market capitalisation of around $215 million, with approximately 1.6 billion shares outstanding.

The post Here’s why the Actinogen Medical (ASX: ACW) share price is up 20% appeared first on The Motley Fool Australia.

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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 Megaport Ltd (ASX: MP1) share price closed today at an all-time high.

Earlier in the day, Megaport shares touched a record high of $18.27 before settling to close at $18, up 2.27%.

What’s helped drive Megaport’s growth?

The company describes itself as a “global leading provider of elastic interconnection services”.

In a nutshell, Megaport allows its customers to connect their networks to other services across its platform. The company connects more than 2,100 customers in some 740 enabled data centres around the globe, with its customer base including some of the biggest players in the industry.

While many factors have helped push the Megaport share price to a new record high, the company has clearly benefitted from the rapid growth of cloud computing. That’s where your data is stored offsite in a data centre, rather than on your own facility’s servers.

Cloud computing demand has been growing steadily since the turn of the century. But the work, shop, and play from home trend spurred by COVID-19 mitigation efforts has accelerated the trend.

A recent Australian Bureau of Statistics report revealed that 55% of Australian businesses are now leveraging paid cloud computing, up from 31% in 2015–2016.

Megaport share price snapshot

Megaport shares have gained around 40% over the past 12 months, compared to a lift of 21.75% on the S&P/ASX 200 Index (ASX: XJO).

Year to date, the Megaport share price has continued to outperform, up 26.32% so far in 2021.

The post ASX tech company Megaport (ASX:MP1) share price hits all-time high appeared first on The Motley Fool Australia.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT FPO. 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 Charter Hall Social Infrastructure REIT (ASX: CQE) share price will be one to watch on Tuesday.

This follows the release of a very positive update after the market close on Monday.

What did it announce?

This afternoon the Charter Hall Social Infrastructure REIT announced that it has signed new ultra-long leases with its major tenant, Goodstart Early Learning.

According to the release, the two parties have agreed mutually beneficial terms including fixed annual increases for a further 48 properties.

Prior to the new leases, these properties had a weighted average lease expiry (WALE) of 5.5 years. As a result of this transaction and other portfolio activities during the second half, the company expects to end the period with a WALE of approximately 15 years.

This compares to its WALE of 14 years at the end of the first half and provides the company with great visibility on its future earnings.

Property valuations

The Charter Hall Social Infrastructure REIT also provided the market with an update on its property valuations.

During the second half, the company had 211 childcare properties, or 61% of the childcare portfolio by gross asset value, independently valued. This includes the 48 properties subject to new leases with Goodstart.

The valuations resulted in a $81 million or 12.3% uplift on the prior book values, with the passing yield on these properties firming by 56 bps to 5.7%.

In addition to this, the company revealed that its 50% interest in the Brisbane Bus Depot was independently revalued to $61.12 million. This reflects a passing yield of 4.5% and an uplift of $6.1 million or 11.1% on the prior book value.

Distributions

In light of its strong form, the company has declared a fourth quarter distribution of 4.1 cents per unit. This brings its full year distribution to 15.7 cents per unit which, based on the current Charter Hall Social Infrastructure REIT share price of $3.46, represents a 4.5% yield.

But it won’t stop there. Due to the portfolio curation activity undertaken during the year and resultant capital gains, the company has declared a special distribution of 4 cents per unit. This brings its quarterly distribution to 8.1 cents per unit and full year distribution to 19.7 cents per unit.

The post This ASX dividend share just declared a special distribution appeared first on The Motley Fool Australia.

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James Mickleboro does not own any shares 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 S&P/ASX 200 Index (ASX: XJO) has found itself in deep waters, sliding 1.81% to 7,235 by market close on Monday.

ASX 200 shares in the banking and financials sector were the main victims in today’s sharp pullback. Most notably, Commonwealth Bank of Australia (ASX: CBA) shares finished the session down 5.43%.

Smaller and regional banks including Bendigo and Adelaide Bank Ltd (ASX: BEN) and Bank of Queensland Limited (ASX: BOQ) were also major losers today, sliding 5.32% and 4.98% respectively.

Elsewhere, iron majors including BHP Group Ltd (ASX: BHP), Rio Tinto Ltd (ASX: RIO) and Fortescue Metals Group Ltd (ASX: FMG) have slipped 1.96%, 2.77% and 2.72% respectively, despite iron ore prices remaining relatively buoyant at US$214/tonne.

Other typically defensive sectors such industrials and utilities also finished in the red.

In contrast, the S&P/ASX Information Technology (INDEXASX: XIJ) managed to eke some green, up 0.18%. Afterpay Ltd (ASX: APT) shares also managed to stand tall, closing 2.46% higher to $117.21.

What’s driving these blue chip ASX 200 shares lower?

It’s likely that the ASX 200 has been influenced by the selloff across US indices on Friday night. The S&P 500 Index (INDEXSP: .INX), Dow Jones Industrial Average (INDEXDJX: .DJI) and Nasdaq Composite (INDEXNASDAQ: .IXIC) tumbled 1.31%, 1.58% and 0.92% respectively.

More specifically, financials, energy and utilities were the main laggards for the US market on Friday, falling 2.45%, 2.92% and 2.63% respectively.

This came after the US Federal Reserve took the spotlight last week when it signalled a potential rate rise by late 2023 despite previously saying there would no increases until at least 2024 in March.

The Australian Financial Review reported today that the post-Fed meeting market reaction which has seen investors reversing some cyclical bets and inflation hedges was “likely an overreaction” even though “it could continue for a while yet”.

In Australia, we have not seen an interest rate increase since late 2011. The prospect of such hikes on the horizon could dampen growth prospects and spell the end of a near-zero interest rate era.

The post Why are blue-chip ASX 200 shares selling off today? appeared first on The Motley Fool Australia.

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Kerry Sun has no position in any of the stocks mentioned.  The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO. 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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