The Infratil Limited (ASX: IFT) share price is one to watch today after an acquisition update from the Kiwi infrastructure group.

Why is the Infratil share price in focus?

In its update, Infratil advised it will acquire between 50.1% and 60.1% of Pacific Radiology Group Limited (Pacific Radiology).

Pacific Radiology is a New Zealand-based comprehensive diagnostic imaging business with 46 clinics across the South Island and lower North Island, including more than 90 radiologists.

The Infratil share price will be one to watch as investors react to the latest acquisition news. The Pacific Radiology acquisition is conditional on counterparty consents to change of control in a “small number” of material contracts.

Infratil currently expects the acquisition to complete by 31 May 2021. The acquisition enterprise value of NZ$867 million implies an EV/EBITDA multiple of 12.6 to 13.3 times EBITDA.

What did management say?

Infratil CEO Jason Boyes said the Pacific Radiology acquisition would sit well with Infratil’s other “high performing, high-quality assets”, and built on its investment last year in Qscan Group, a leading diagnostic imaging business in Australia.

The purchase also confirms our continuing confidence in the New Zealand market and the thematics which are driving our capital allocation in communications and digital infrastructure, decarbonisation and aging populations.

We also see this as an opportunity to scale Infratil’s investment in Qscan Group and create a meaningful Australasian healthcare platform with potential synergies and adjacent opportunities.

Foolish takeaway

All eyes will be on the Infratil share price especially after slumping 2.4% lower in yesterday’s trade. The latest purchase adds to the group’s 2020 acquisition of Qscan.

Infratil announced that transaction’s completion on 22 December 2020. The Kiwi infrastructure group used A$289.6 million to purchase the 56.25% stake.

The Infratil share price is one to watch in early trade after the Kiwi infrastructure group’s latest acquisition announcement.

More reading

• 4 ASX shares to boom when inflation goes up: fundie
• Wesfarmers (ASX:WES) share price on watch as Bunnings buys Beaumont Tiles
• Here’s why the Austal (ASX:ASB) share price is in the spotlight today
• What to expect from the ANZ (ASX:ANZ) half year result
• Credit Corp (ASX:CCP) share price on watch following market update

Motley Fool contributor Ken Hall 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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Share markets have seen volatility this year due to one factor: the possibility of inflation as the world recovers from a COVID-19 recession.

Rising inflation could trigger interest rates to move up. And this would be a punch to the fortunes of many ASX shares that are currently valued as if near-zero rates would continue forever.

Fortunately, there are defensive stocks that are set to do well in a higher inflation world.

According to Pengana Capital chief investment officer Rhett Kessler, his fund has been focusing “laser-like” on businesses that have “hard assets”.

“It’s a company that has assets which provide it with the pricing power to pass on any input costs to their customers.”

There are 4 ways an organisation can achieve this nirvana, he said:

1. Long-term contractual arrangements with strong counterparties
2. Owning unique or scarce assets
3. Being the lowest-cost producer in the sector
4. Owning superior non-trivial intellectual property

Kessler’s fund, among its top 10 biggest holdings, owns several shares that meet one or more of this inflation-proof criteria.

Here are 4 of them, as he told a Pengana investor webinar last week:

CSL Limited (ASX: CSL) and Aristocrat Leisure Limited (ASX: ALL)

CSL is Pengana Australian fund’s 4th largest holding, while Aristocrat is 8th.

Kessler strongly rates the healthcare giant and the gaming provider for one massive reason.

“CSL and Aristocrat have really strong intellectual property that they’re able to monetise.”

CSL was up 0.98% on Wednesday to trade at $271.01 upon close. Aristocrat gained 1% for the day to end the session at $37.46.

Kessler is not the only one optimistic about these 2 ASX stocks.

Last week Citi rated CSL as a “buy” while putting on a price target of $310. The brokers there have high hopes for its plasma collection business as more Americans are vaccinated against the coronavirus.

Citi also rated Aristocrat as a “buy” while giving it a target of $40.60. Again, the reopening of US society is expected to lift demand for the company’s gambling machines.

Woolworths Group Ltd (ASX: WOW)

The supermarket giant is the 10th largest holding for Pengana.

According to Kessler, it is very easy to explain Woolies’ appeal in inflationary times.

“Woolworths will actually move the same amount of boxes in an inflationary environment, but for more money,” he said.

“So your absolute level of profitability should go up.”

Already there are plenty of signs that grocery bills are going up, with international prices for staples like corn, wheat and soybeans all shooting up.

Last week, Goldman Sachs agreed with Kessler, rating Woolies as a “buy” with a price target of $43.60. It ended Wednesday at $41.41.

Telstra Corporation Ltd (ASX: TLS)

The telecommunications giant is Pengana’s largest holding “by quite a long way”.

“We have it as just under 8% of our portfolio,” said Kessler.

And no wonder, as it meets multiple of Kessler’s criteria for holding “hard assets”.

“Its businesses are unique assets and are the lowest-cost producer,” he said.

“And a really nice chunk of it – 25 cents in every dollar – is actually an inflation-protected business, which is that it gets an income stream from the NBN, which is linked to inflation.”

Telstra closed Wednesday 0.59%, trading at $3.40.

Ord Minnett brokers also love the telco, currently rating the stock as a “buy” with a target of $4.05.

Of course, Telstra’s other advantage is the potential for nice dividends.

“A prospective dividend yield of 5% is certainly not to be sneezed at,” Kessler said.

More reading

• 5 things to watch on the ASX 200 on Thursday
• Should CSL (ASX:CSL) be your next dividend share?
• 2 fantastic blue chip ASX 200 shares for your portfolio
• Here’s an ASX telco share tipped to rise 40%
• These ASX dividend shares have attractive fully franked yields

Tony Yoo owns shares of CSL Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of Woolworths 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 Wesfarmers Ltd (ASX: WES) share price will be one to watch when trading resumes this morning. At close of trade yesterday, shares in the retailing conglomerate were selling for $55.20 – up 1.1% on the previous day. By comparison, the S&P/ASX 200 Index (ASX: XJO) finished the day 0.44% higher.

The company comes into focus as its largest subsidiary, Bunnings, announced it is acquiring privately owned Beaumont Tiles.

Let’s take a closer look at the announcement.

Bunnings buying Beaumont

Late yesterday, Wesfarmers announced that Bunnings Group has entered into an agreement to purchase Beaumont Tiles for an undisclosed amount. The deal is still subject to “a number of conditions, including regulatory approval.”

The purchase marks the latest move by Wesfarmers to diversify its business and consolidate its hold on the trade and construction market.

Wesfarmers says Beaumont will remain “separate and distinct” to the Bunnings Warehouse brand, just like Adelaide Tools, which the subsidiary purchased in April 2020.

In its statement, Wesfarmers said the purchase of Beaumont will allow the company to expand into further market segments.

“Beaumont Tiles services both trade and consumer customers and has a specialised product and service capability that is not able to be offered through the Bunnings Warehouse format,” Bunnings managing director Mike Schneider said. Mr Schneider also said Bunnings will continue to invest in the future growth of Beaumont.

Beaumont Tiles executive chair Bob Beaumont commented that the executive team is happy to sell. He said:

After 53 years dedicated to a business that my dad started in South Australia, it’s time to retire. I knew that it would never be an easy thing to do, and it’s been a tough decision, but the board and I recognised the need for us to make way for a younger team.

What made the decision easier, was knowing the brand and business we worked so hard to build from scratch would be placed in the best possible position for on-going success and growth and I’m really thrilled at the outcome for Beaumont. Our family signed a contract to sell the business to Bunnings, as they understand our brand and culture, and will look after our extended Beaumont family including our franchisees and our teams.

Other recent news

Aside from Bunnings, Wesfarmers owns a number of other major retailers including Kmart, Target, and Officeworks.

Wesfarmers recently gave a presentation on the future of Kmart. In it, the company said it plans to make Kmart the focal point of the group, whilst simplifying the Target business and reducing costs. Wesfarmers has already begun the process of converting Target-branded stores to Kmart.

As well, some top brokers believe the Wesfarmers share price is currently a good deal, despite its 33.25 price-to-earnings (P/E) ratio.

In other news outside of the ASX, Bunnings recently said it was ready, willing, and able to host mass vaccination sites at its warehouses.

Wesfarmers share price snapshot

Over the past 12 months, Wesfarmers shares have increased by 46.3%. At its current level, the Wesfarmers share price is only just off its all-time high of $56.40, which it achieved earlier this year.

Wesfarmers has a market capitalisation of around $62 billion.

More reading

• 2 quality ASX dividend shares for May
• What’s going on with the Wesfarmers (ASX:WES) share price today?
• Top brokers name 3 ASX dividend shares to buy today
• 2 strong ASX 200 shares offering good income
• 2 high quality ASX shares for your retirement portfolio

Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of 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 Austal Limited (ASX: ASB) share price could be on the move this morning after the company announced an update on its joint venture program.

At Wednesday’s market close, the shipbuilder’s shares finished the day at $2.45.

What did Austal announce?

In a statement to the ASX, Austal advised it’s in discussions to sell its shareholding in Aulong Shipbuilding Co Ltd.

Established in June 2016, Aulong is a joint venture company focused on pursuing Chinese commercial and non-military vessel opportunities. It’s operated by Austal and Guangdong Jianglong Shipbuilding Company (Jianglong Shipbuilding) of Zhuhai, China. Austal owns a 40% stake in Aulong, with the remaining 60% interest held by Jianglong Shipbuilding.

Austal stated that its currently in talks to sell its ownership in Aulong to Jianglong Shipbuilding. A letter of intent has been executed targeting completion of negotiations by 31 October 2021.

The company highlighted that it has licenced a number of commercial aluminium vessel designs for marketing throughout mainland China. With construction at Jianglong Shipbuilding’s facilities in the Guangdong province, the ships are supported by local shipbuilding infrastructure and expertise. Close to 1,000 employees work across two shipyards at the site, running the joint venture.

Austal noted it will provide further updates to shareholders when more information about the divestment becomes available.

How has the Austal share price performed?

Austal designs and manufactures high performance vessels for commercial and defence customers worldwide. Most notably, Austal builds and services warships for the Australian Royal Navy and the United States Navy.

Over the last 6 months, the Austal share price has significantly dropped amid worrisome media speculation around the company. Its shares sunk from $3.50 to around $2.70, reflecting a 20% fall. To date, Austal shares have moved in circles, most likely frustrating investors.

Based on the current share price, Austal presides a market capitalisation of roughly $880 million, with 359 million shares outstanding.

More reading

• ASX 200 shares thrown in the bargain bin: Here’s 3 ideas
• The War in Afghanistan is ending. Which ASX companies supply our military?

Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Austal Limited. 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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Over the next couple of weeks, the big four banks will be handing in their latest report cards. Ahead of their releases, I thought I would take a look to see what the market is expecting from them.

On this occasion, I’m going to look at the Australia and New Zealand Banking GrpLtd (ASX: ANZ) half year result.

What is expected from ANZ in the first half?

ANZ Bank will be releasing its half year results on Wednesday 5 May.

According to a note out of Goldman Sachs, its analysts are expecting the banking giant to report first half cash earnings (pre-one offs) of $3,073 million. This will be a massive 117% increase on the prior corresponding period, which of course was impacted by COVID-19.

The broker is expecting this to allow the ANZ board to declare a fully franked interim dividend of 60 cents per share.

What else should you look out for?

Goldman has named three key things to look out for with ANZ’s results next week.

One of those is its margins. The broker notes that ANZ’s first quarter net interest margin (NIM) was 1.62%, up 5 basis points from the second half average of FY 2020. It expects this to have carried over into the second quarter.

“Management expects the 1H21E NIM to be up slightly on the 1.59% delivered in 2H20 driven by further upside from TD pricing and mix benefits, offset by ongoing asset competition. This is consistent with our detailed analysis which quantifies the scope for sector NIM upside in the near term. Accordingly, we forecast 1H21E NIM of 1.62% which is up 5bp vs 2H20 and will be paying attention to the NIM drivers at the result particularly on funding.”

Asset quality will be another key focus for Goldman Sachs. It is forecasting a notable drop in the bank’s bad and doubtful debts during the half.

“ANZ reported a 1Q21 bad debt benefit of A$150 mn which significantly outperformed what was implied by our prior 1H21E bad debt forecast. This comprised an individually assessed provision (IP) charge of A$23 mn and a collective provision (CP) release of A$173 mn. While management expects IPs to rise as government and bank support fell away post Mar-21, it sees ANZ as well-placed given strong CP coverage, its large Institutional exposures being in strong shape and the de-risking of its Institutional book over recent years. We currently forecast a moderation of 1H21E BDDs/TL to 8bp from 35bp in the previous half and will be keeping a close eye on commentary around underlying asset quality.”

Finally, the broker has suggested that ANZ’s expenses could decline during the first half of FY 2021 and will be looking for a 0.6% reduction.

“Expenses were flat in the quarter on the 2H20 average, and we think the 1Q21 run-rate is broadly consistent with the A$8.4-8.5 bn FY21E cost base (ex-notable items) implied by comments made by management at the 2H20 result (here). While ANZ expects investment spend to be >A$1.8 bn in FY21E (c. 75% of that to be expensed), it believes longer-term investment spend should settle at c. A$1.5 bn. We are forecasting 1H21E expense growth of -0.6% hoh and will be looking for details management can provide on how its c.A$8 bn cost target could be achieved.”

Is the ANZ share price in the buy zone?

Goldman Sachs is positive on ANZ and has a buy rating and $29.24 price target on its shares.

However, with the ANZ share price currently trading at $29.10, the near term upside is limited based on this price target.

More reading

• 2 highly rated ASX dividend shares
• 2 quality ASX dividend shares for May
• ASX bank shares best placed to ride the $1bn+ provisioning profit boost this reporting season
• What could APRA’s climate guidance mean for ASX bank shares?
• Is the Commonwealth Bank (ASX:CBA) share price a buy at $90?

Motley Fool contributor James Mickleboro 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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More reading

• Here’s why the Austal (ASX:ASB) share price is in the spotlight today
• What to expect from the ANZ (ASX:ANZ) half year result
• Credit Corp (ASX:CCP) share price on watch following market update
• 2 exciting small cap ASX shares tipped for big things
• Is the Coles (ASX:COL) share price in the buy zone after its update?

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Kate O’Brien owns shares of Apple and Rio Tinto Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Apple. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Apple. 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 Credit Corp Group Limited (ASX: CCP) share price will be one to watch this morning.

This follows the release of a trading update by the debt receivables company this morning.

How is Credit Corp performing?

According to the release, Credit Corp continues to be very competitive in all its debt buying markets. This left it with a purchasing pipeline of $290 million contracted at the end of March.

As a result, it remains on target to achieve its FY 2021 purchasing guidance of $310 million to $330 million.

Another positive was that the acquisition of the Collection House book is performing to expectations. And while there has been some softening in collections since COVID-19 stimulus has been withdrawn, this has been within expectations.

Pleasingly, the company notes that it still has the capacity to increase investment as opportunities arise. As things stand, it has cash and undrawn lines of ~$400 million.

FY 2021 guidance

Looking ahead the company is on track to achieve or surpass all of the upgraded guidance given in February.

Purchase debt ledger investments guidance remains in the range of $310 million to $330 million and its net profit after tax guidance remains $85 million to $90 million. The latter compares to FY 2020’s underlying net profit after tax of $79.6 million.

Net lending, however, is now expected to be $10 million to $20 million. This compares to previous guidance of $5 million to $10 million.

Is the Credit Corp share price in the buy zone?

While brokers haven’t responded to this update as of yet, one broker that was already positive on the company is Macquarie.

According to a note from last month, the broker has an outperform rating and $34.80 price target.

Based on the latest Credit Corp share price, this price target implies potential upside of almost 17% over the next 12 months.

More reading

• ASX 200 up 0.6%: Zip rises, Resolute rockets, tech shares storm higher

Motley Fool contributor James Mickleboro 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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Due to the potential returns on offer at the small end of the market, if your risk profile allows, having a little exposure to it could be a good thing for a portfolio.

But which small caps should you look at? Listed below are two small caps that are highly rated. Here’s what you need to know about them:

Bigtincan Holdings Ltd (ASX: BTH)

The first small cap ASX share to look at is Bigtincan. It is an artificial intelligence-powered sales enablement automation platform provider. 

The Bigtincan Hub platforms allows users to work with a unified set of productivity tools for creating, editing, annotating, sharing, and collaborating. This helps drive sales, productivity, engagement, and opportunities.

Demand for its platform has been growing strongly, leading to stellar annualised recurring revenue (ARR) growth in recent years. This has continued in FY 2021 despite the pandemic. During the first half of FY 2021, Bigtincan reported a 50% increase in its ARR to $48.4 million.

This went down well with analysts at Morgan Stanley, which put an overweight rating and $1.40 price target on its shares. This compares to the latest Bigtincan share price of 98 cents.

Mach7 Technologies Ltd (ASX: M7T)

This medical imaging data management solutions provider is another small cap to look closely at.

Like Bigtincan, it has been experiencing strong demand for its award-winning enterprise imaging platform in recent years. This has also underpinned very strong ARR growth.

For example, at end of the first half of FY 2021, Mach7’s ARR had grown to $10.2 million. This was up a sizeable 88% on the prior corresponding period.

Positively, this brings it closer to becoming profitable on an operating basis. Management advised that its ARR now provides 64% coverage of its operating expenses.

Morgans is a fan of the company. It recently put an add rating and $1.68 price target on the company’s shares. This compares to the latest Mach7 share price of $1.21.

More reading

• 2 highly rated small cap ASX shares you need to know
• 3 excellent small cap ASX shares to watch closely
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• Big brokers think these 5 ASX shares can outperform the market
• The Mach7 (ASX:M7T) share price jumps 11% on record quarterly update

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends BIGTINCAN FPO and MACH7 FPO. The Motley Fool Australia has recommended BIGTINCAN FPO and MACH7 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 Coles Group Ltd (ASX: COL) share price was on form on Wednesday and pushed higher following its third quarter update.

The supermarket giant’s shares rose 1.5% to $15.85.

Is the Coles share price in the buy zone?

According to a note out of Goldman Sachs, its analysts remain positive on Coles despite its third quarter update falling short of its expectations.

The broker has retained its buy rating and a trimmed its price target slightly to $20.50. Based on the latest Coles share price, this represents potential upside of 29%.

Goldman is also forecasting dividend yields of 3.9% and 4.2% over the next couple of years. This stretches the total potential return to approximately 33% over the next 12 months.

What did Goldman say?

Goldman said: “Coles Group reported 3Q21 sales at A$8.8bn, -3.1% vs. GSe and -2.0% yoy. Supermarket comparable growth was disappointing at -6.4%, implying a 2 year CAGR of +2.9%. However, the update also provided a positive outlook on both near-term trends and longer-term supply chain efficiency.”

It is partly because of the company’s supply chain plans that the broker is so positive on Coles.

Goldman continued: “Operationally, management noted that the Smarter Selling program was expected to deliver savings in excess of A$250mn (in line with prior guidance) and that construction had commenced on the NSW Witron DC [distribution centre]. Further updates on this regard and eCommerce strategies are expected to be provided during the Strategy Day on 9th of June.”

“Overall, the 3Q21 update was a disappointment vs. GSe, in a volatile period; however, with both Ocado CFC’s and now both Witron DC’s under construction the longer-term thesis is coming into focus for COL. We revise NPAT forecasts by -0.9% and -1.2% respectively over FY21 and FY22. Our revised Target Price on COL is at A$20.50, and we maintain our Buy rating on COL,” it concluded.

More reading

• 5 things to watch on the ASX 200 on Thursday
• ASX 200 up 0.5%: Coles Q3 update, Westpac settles class action, JB Hi-Fi loses its CEO
• Coles (ASX:COL) share price in focus after Q3 sales update
• 5 things to watch on the ASX 200 on Wednesday
• 2 high quality ASX 50 shares for your retirement portfolio

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET. 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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Are you building an income portfolio? If you are, you might want to take a look at these highly rated ASX dividend shares.

Here’s what you need to know about them:

Australia and New Zealand Banking GrpLtd (ASX: ANZ)

The big four banks have seen their shares shoot higher this year. The ANZ share price, for example, is up 26% since the start of the year.

The good news is that it doesn’t appear to be too late to invest for both capital returns and dividends.

According to a recent note out of Morgans, its analysts have retained their add rating and lifted their price target on its shares to $33.50.

The broker is also forecasting fully franked dividends of $1.54 per share in FY 2021 and $1.75 per share in FY 2022. Based on the current ANZ share price, this will mean yields of 5.3% and 6%, respectively, over the next couple of years.

Morgans believes the outlook for the banks is becoming increasingly positive thanks to home loan growth, favourable credit spread movements, and lower than expected impairments.

Transurban Group (ASX: TCL)

Another ASX dividend share to look at this toll road operator.

Transurban owns a collection of important roads in Australia and North America such as CityLink in Melbourne and the Cross City Tunnel and Eastern Distributor in Sydney.

While COVID-19 has led to a notable decline in traffic on its roads, volumes are recovering and are expected to continue doing so in the near term. Particularly given the significant time-savings these roads have.

Ord Minnett is positive on the company and recently retained its buy rating and $16.00 price target on its shares.

Its analysts are forecasting dividends of 37 cents per share in FY 2021 and 58 cents per share in FY 2022. Based on the latest Transurban share price, this equates to yields of 2.7% and 4.2%, respectively, over the next two years.

More reading

• 2 quality ASX dividend shares for May
• ASX bank shares best placed to ride the $1bn+ provisioning profit boost this reporting season
• What could APRA’s climate guidance mean for ASX bank shares?
• Is the Commonwealth Bank (ASX:CBA) share price a buy at $90?
• Is the CBA (ASX:CBA) share price a buy for a recovery of dividends?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Transurban Group. 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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