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If you were to gauge the outlook of ASX uranium stocks by the past month’s performance, you might be tempted to throw in the towel.

After enjoying some of the strongest share price gains among any group of companies, Australia’s top uranium shares have all lost ground over the last four trading weeks.

The selling pressure has come amid a roughly 8% decline in uranium prices over the last month.

Four weeks ago, uranium was trading for US$93 a pound. Currently, the radioactive metal is fetching US$86 per pound, well down from the 16-year highs of US$106 per pound reached in early February this year.

Still, bear in mind that in 2023 uranium prices averaged just US$67 per pound in 2023. And back in 2021 the spot price for yellow cake averaged around only US$30 per pound.

Still, with the past month’s retrace, investors have been quick to hit the sell button.

Here’s how these five top ASX uranium stocks have performed since this time last month:

• Paladin Energy Ltd (ASX: PDN) shares are down 13.56%
• Bannerman Energy Ltd (ASX: BMN) shares are down 8.22%
• Deep Yellow Limited (ASX: DYL) shares are down 10.19%
• Boss Energy Ltd (ASX: BOE) shares are down 26.86%
• Alligator Energy Ltd (ASX: AGE) shares are down 8.33%

For some context, the All Ordinaries Index (ASX: XAO) is down 0.2% over this same period.

Despite that retrace, longer-term shareholders will still be sitting on some outsized gains.

Here’s how these ASX uranium stocks have performed over the past 12 months, a period that’s seen the All Ords return 8.5%.

• Paladin shares are up 99.30%
• Bannerman shares are up 142.17%
• Deep Yellow shares are up 86.54%
• Boss Energy shares are up 33.12%
• Alligator Energy shares are up 37.50%

That’s more like it!

Now here’s why I think these companies could continue to outperform.

Why ASX uranium stocks could outshine

The first reason I remain bullish on ASX uranium stocks is the rapidly changing global public opinion surrounding nuclear power.

Nuclear energy was all but off the table following the 2011 Fukushima disaster in Japan.

But with climate change at the top of many nations’ agendas, we’ve seen a big turnaround in sentiment for the reliable, carbon-free baseload power offered by both the newer design modular and traditional large scale nuclear reactors. Though disposing of the radioactive waste remains an ongoing concern.

The second reason ASX uranium shares could charge higher once more is the massive forecast demand growth that’s come along with this shift in public sentiment.

Currently, more than 60 nuclear power plants are under construction worldwide. Another 90 are in the planning stages, with hundreds more being considered.

China and India lead the charge in building new nuclear plants, but other nations are also doing so, including Japan, South Korea, Russia, and Brazil.

Indeed, it was only back in December that 22 nations at the COP28 climate conference – including Japan, the United States and France – pledged to triple their nuclear power capacity by 2050.

And the third reason ASX uranium stocks could continue to reward investors into 2025 and beyond is that there is very limited supply growth to meet that booming demand growth.

According to the World Nuclear Association, global demand is likely to outpace global supply through to 2040.

And over the medium term, a number of nations are turning their backs on Russia’s uranium exports amid its ongoing invasion of Ukraine.

The US has gone so far as to ban Russian uranium imports, a ban that drew the attention of Boss Energy managing director Duncan Craib this week.

Craib said, “US President Joe Biden’s recent signing of legislation to ban the importation of uranium products from Russia … was a game-changing event for the uranium market and in particular for uranium projects in North America and Australia.”

And with Australia sitting on the world’s largest proven uranium reserves, I reckon ASX uranium stocks are well-placed to capitalise on the ongoing supply and demand imbalances.

The post 3 reasons ASX uranium stocks can keep charging higher into 2025 appeared first on The Motley Fool Australia.

More reading

• 3 reasons to be positive on ASX 200 shares in FY25 (and 3 to be wary)
• Here are the top 10 ASX 200 shares today
• Why Boss Energy, Judo Capital, Life360, and Paladin Energy shares are pushing higher
• Why is ASX 200 uranium stock Boss Energy flying higher on Friday?
• 3 ASX All Ords shares raised to ‘strong buy’ status in May

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

It has been another busy week for Australia’s top brokers. This has led to the release of a number of broker notes.

Three broker buy ratings that you might want to know more about are summarised below. Here’s why brokers think these ASX shares are in the buy zone:

BHP Group Ltd (ASX: BHP)

According to a note out of Citi, its analysts have retained their buy rating and $48.50 price target on this mining giant’s shares. The broker points out that its global commodities team has become more bullish on copper and lifted its forecast by 20% to US$12,000 per pound. This is to reflect increased demand due to the decarbonisation megatrend. In light of this, Citi has lifted its earnings estimates for the coming years. Another positive is that the broker is now forecasting an attractive ~6% dividend yield from the Big Australian’s shares in FY 2025. This gives the total potential 12-month return a nice boost. The BHP share price ended the week at $43.09.

Capricorn Metals Ltd (ASX: CMM)

A note out of Bell Potter reveals that its analysts have retained their buy rating on this gold miner’s shares with an improved price target of $6.53. The broker believes that recent share price weakness has created a very attractive opportunity for investors to buy Capricorn Metals’ shares on the cheap. Especially given the recent announcement of a 26% increase in ore reserves at the 100%-owned Mt Gibson Gold Project in Western Australia. Bell Potter also highlights that the company has sector leading cash generation and strong production record, which it believes means that it deserves to trade at a premium to sector average valuation metrics. The Capricorn Metals share price was fetching $4.46 at the end of the week.

QBE Insurance Group Ltd (ASX: QBE)

Analysts at Goldman Sachs have retained their buy rating and $20.90 price target on this insurance giant’s shares. The broker points out that QBE has recently held a number of investor meetings. Goldman highlights that management conveyed greater confidence on the delivery of its 95% combined operating ratio (COR) in North America by 2025. This is a big positive as the lower the COR, the more profitable QBE’s operations are. As a result, Goldman believes that there is now upside risk to the FY 2025 consensus group COR of 92.8%. In fact, it sees under 92.5% as possible, reflecting the improvement in North America, a North America non-core run off, and organic trends. The QBE share price ended Friday’s session at $18.31.

The post Top brokers name 3 ASX shares to buy next week appeared first on The Motley Fool Australia.

More reading

• This fund returned 30% per annum for 3 years. Here are the ASX shares it’s buying now.
• Tax-busters: 5 fully-franked ASX dividend shares I’d buy for FY25
• These ASX shares could rise 25% to ~50%
• 2 outstanding ASX 200 shares to buy and hold for a decade
• Brokers name 3 ASX shares to buy now

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

ASX consumer discretionary shares led the ASX 200 market sectors last week with a minor 0.36% gain over the five trading days.

Meantime, the S&P/ASX 200 Index (ASX: XJO) lost 1.48% to finish the week at 7,724.3 points.

Only two of the 11 market sectors finished the week in the green.

Let’s recap.

Consumer discretionary shares led the ASX 200 sectors last week

ASX 200 consumer discretionary shares are arguably the most susceptible to weakness in today’s inflationary economy, amid high interest rates and the weakest economic growth since COVID.

As we learned earlier this month, gross domestic product (GDP) rose 0.1% in the March quarter and just 1.1% over 12 months.

Such economic conditions generally encourage people to restrict their discretionary spending, as evidenced by household spending data released by the Australian Bureau of Statistics last week.

The data showed Australians are having to allocate more of their money to essential items and cut back on discretionary items.

Robert Ewing, ABS head of business statistics, said:

We saw a 5.8 per cent rise in spending on non-discretionary goods and services, with households also spending more on fuel and food. In contrast, discretionary spending rose 0.6 per cent over the year as households continue to limit their spending on non-essentials.

One factor supporting discretionary spending is low unemployment. Data released by the ABS last week revealed the jobless rate fell by 0.1% in seasonally adjusted terms in May to 4%.

What else happened last week?

United States inflation data released last week suggested global inflation was resuming a downward path.

The US core consumer price index (CPI), which excludes volatile items like food, increased by 0.2% in May. That put the CPI at 3.4% year over year, the lowest inflation rate in three years.

If inflation falls, so will interest rates, and anything indicating this gets the markets excited these days.

The S&P 500 Index reset its all-time again, and ASX 200 shares lurched forward on Thursday on the news, which prompted speculation the same trend would eventuate here.

After its last board meeting in May, the Reserve Bank said it “remains vigilant to the risk of continued high inflation and is not ruling anything in or out” in relation to rate cuts or even a further hike in 2024.

There has been concern that inflation may prove stickier than expected during what economists refer to as the ‘last mile’ of reducing it from 3.6% now to the RBA’s target band of 2% to 3%.

Is there any chance of an interest rate cut in Australia when the Reserve Bank board meets on Tuesday? Find out here.

Which discretionary retail stocks outperformed last week?

Among the best performers last week was Tabcorp Holdings Ltd (ASX: TAH), up 7.91% over the five trading days to close at 66 cents on Friday. This was despite no news from the company.

JB Hi-Fi Ltd (ASX: JBH) shares also did well, rising 5.71% to finish at $63.28 on Friday.

The biggest of the ASX 200 consumer discretionary stocks, Wesfarmers Ltd (ASX: WES), lifted 1.23% to close at $67.90 on Friday.

The Super Retail Group Ltd (ASX: SUL share price rose by 1.06% over the week to finish at $13.38.

Harvey Norman Holdings Limited (ASX: HVN) shares gained 0.78% to close at $4.50 on Friday. 

ASX 200 market sector snapshot

Here’s how the 11 market sectors stacked up last week, according to CommSec data.

Over the five trading days:

S&P/ASX 200 market sector	Change last week
Consumer Discretionary (ASX: XDJ)	0.36%
Information Technology (ASX: XIJ)	0.14%
Healthcare (ASX: XHJ)	(0.17%)
Consumer Staples (ASX: XSJ)	(0.46%)
Financials (ASX: XFJ)	(1.12%)
Energy (ASX: XEJ)	(1.47%)
Communication (ASX: XTJ)	(1.52%)
A-REIT (ASX: XPJ)	(1.56%)
Industrials (ASX: XNJ)	(2.44%)
Utilities (ASX: XUJ)	(2.64%)
Materials (ASX: XMJ)	(4.28%)

The post Here’s how the ASX 200 market sectors stacked up last week appeared first on The Motley Fool Australia.

More reading

• 3 reasons to be positive on ASX 200 shares in FY25 (and 3 to be wary)
• Where Aussies are spending their money, and the ASX shares that could benefit
• Here are the top 10 ASX 200 shares today
• 3 ASX 200 shares going gangbusters in June
• 5 things to watch on the ASX 200 on Friday

Motley Fool contributor Bronwyn Allen has positions in Harvey Norman. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Wesfarmers. The Motley Fool Australia has positions in and has recommended Harvey Norman and Wesfarmers. The Motley Fool Australia has recommended Jb Hi-Fi. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

As we near the halfway point of 2024, many investors may be wondering if now is a good time to buy ASX shares. But where to start?

Checking where the experts are positioned is a good place.

The Perennial Natural Resources Trust has delivered impressive returns of 30% per annum over the last three years. It believes ASX resources stocks could offer compelling value in the future.

With stocks such as BHP Group Ltd (ASX: BHP) and Rio Tinto Ltd (ASX: RIO) often the first Australian resource companies that come to mind, some might forget there is a whole universe of commodity stocks on the ASX.

Here’s a look at the ASX shares the fund is bullish on and whether they are suitable ASX shares to buy.

Undercovered commodity shares

Perennial’s resources fund, headed up by Sam Berridge, has returned 32.3% in the year to May 31, with notable gains from commodities like gold, lithium, uranium, rare earths, and bauxite.

According to the Australian Financial Review, the fund has shown a keen interest in Brazilian Rare Earths Ltd (ASX: BRE).

“We’ve had solid runs from gold, lithium, uranium, rare earths, and bauxite at different points over the last four years”, Berridge said.

He says one of these “big winners” included Brazilian Rare Earths. The company is Australian-based but has exploration sites for rare earths and critical minerals in Brazil and operates the Rocha da Rocha Critical Minerals project there.

This diversification away from traditional resources such as iron ore is critical to the fund’s strategy, which involves buying ASX shares in the commodity space.

The commodity sector is becoming more diverse, with new boutique metals periodically rising to prominence due to some energy-related change in demand.

As such, players like Brazilian Rare Earths with exposure to critical minerals fit this bill well. Regarding the company’s prospects, Berridge notes that it has “plenty more to give.”

Should you buy these ASX shares?

The fund is also bullish on Capricorn Metals Ltd (ASX: CMM), an ASX-listed gold miner. Berridge said the ASX share has been a major contributor to its total 2024 return.

But he said that investors could capitalise on the AI theme in commodities through DUG Technology Ltd (ASX: DUG). Regarding the thesis to buy the ASX share, he said:

I think the most interesting direct exposure is DUG Technology. DUG makes most of its money by processing vast quantities of seismic data for oil and gas companies, but the compute it uses for this has ubiquitous applications.

Its key advantage is the use of immersion cooling, in which the hard drives sit in gently circulating baths of oil. This is more energy-efficient and cheaper than air-conditioning whole rooms full of computers. Elsewhere, the energy demands for AI and data centres require immense amounts of power. It must be cheap 24/7 power so, in the short term, that means US gas.

Leading brokers are also bullish on Capricorn Metals. Analysts at Bell Potter recently maintained a buy rating on the ASX share with a price target of $6.50 per share. According to my colleague James, the broker said the company deserved to be traded at a premium.

Foolish takeaway

According to the Perennial Resources Fund, investors looking to buy ASX shares may find potential in Capricorn Metals and Brazilian Rare Earths.

The Brazilian Rare Earths share price is trading 70% higher year to date, while shares in Capricorn Metals are down 5.3% over the same period. Dug Technology shares are up 34.7% since January this year.

As always, remember to conduct your own due diligence before investing.

The post This fund returned 30% per annum for 3 years. Here are the ASX shares it’s buying now. appeared first on The Motley Fool Australia.

More reading

• These ASX shares could rise 25% to ~50%
• Why ASX, Brazilian Rare Earths, Liontown, and Sigma shares are sinking today
• Leading brokers name 3 ASX shares to buy today
• Is this the very best ASX 200 gold stock to buy now?
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Dug Technology. The Motley Fool Australia has recommended Dug Technology. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

We’re now well into the month of June. That means many things… cold weather, short days, and end-of-financial-year sales. Maybe even a late payout from one of your ASX dividend shares. But it also means it’s nearly tax time.

Yep, from 1 July, you can lodge your tax return for the 2024 financial year. Getting your taxes in line is a task that most of us probably don’t exactly look forward to.

Hopefully, most readers will have a big refund coming their way. In the spirit of this time of year, it’s a great opportunity to think about some ASX shares you can buy if you wish to beef up your franking credit balance.

As most dividend investors would know, franking credits are a major tax perk of owning ASX shares. They enable us to claim a tax deduction for the corporate taxes our companies have already paid on the dividends they dole out to us.

Because of this transfer effect, these ‘tax-busting’ franking credits can make a significant impact on both our tax returns and overall wealth.

So, with that in mind, there are five ASX dividend shares that I would happily buy over the coming 2025 financial year that all tend to pay healthy and fully franked dividends.

5 fully-franked ASX dividend shares I’d buy to bust my taxes

Telstra Group Ltd (ASX: TLS)

First up is ASX 200 telco Telstra. Telstra has a long and well-known history of paying large, fully-franked dividend payments to its shareholders. This has continued over the past few years, with Telstra raising its most recent dividends pretty consistently.

This is a strong company with a solid financial foundation, thanks to Telstra’s dominance of both the mobile and fixed-line internet market in Australia. And that makes for a good investment from a dividend perspective.

Today, investors can expect a hefty dividend yield of around 5% if they buy Telstra stock at recent pricing.

Woolworths Group Ltd (ASX: WOW)

I have historically favoured Coles Group Ltd (ASX: COL) shares over arch-rival Woolworths when it comes to dividend income. However, the tables have turned a little in 2024, thanks to a significant drop in the Woolworths share price over the past 12 months.

I like Woolies as a dividend investment for similar reasons to Telstra: a mature business model, and a defensive earnings base.

Because Woolworths sells us goods that we need — rather than want — to buy, the company has a boosted capacity to pay out passive income in all forms of economic weather.

At recent pricing, you could nab a fully-franked dividend yield of 3.22% from Woolworths shares.

Westpac Banking Corp (ASX: WBC)

It wouldn’t be a ‘best dividend shares’ list without at least one ASX bank stock. Our big four banks enjoy some unique benefits from an investing standpoint, including government support and a loyal customer base.

Normally, my pick of the banks right now would be National Australia Bank Ltd (ASX: NAB). However, if one was prioritising dividend income, Westpac might be a better option to consider today.

This bank is currently trading on a chunky dividend yield of 5.49%. Unlike ANZ Group Holdings Ltd (ASX: ANZ) stock, Westpac’s dividends still come with full franking credits attached too.

BHP Group Ltd (ASX: BHP)

Like the ASX banks and Telstra, BHP is a renowned source of dividends on the ASX. The ‘Big Australian’ has been paying out hefty, fully franked dividends for generations.

Unlike most resources stocks, BHP has a rather diversified earning base, with the company having significant operations in iron ore, copper, potash and nickel.

Although most resources stocks tend to pay cyclical dividends, this diversified earnings base gives BHP significant wiggle room compared to some of its rivals.

BHP stock was recently trading on a fully franked dividend yield of 5.45%.

Woodside Energy Group Ltd (ASX: WDS)

ASX 200 oil and energy stock Woodside is our final dividend share to discuss. Woodside is the largest oil stock on the ASX, and a global giant. It has some of the lowest oil and gas production cost bases on the Australian markets.

Since it only deals in energy commodities, Woodside doesn’t have that diversified earnings base that lends stability to its dividend.

Even so, I think it’s a great option for income-hungry investors, because when oil and gas prices are high, Woodside tends to shower its investors with dividend cash.

At last pricing, Woodside was trading with a fully franked dividend yield of 7.92%.

The post Tax-busters: 5 fully-franked ASX dividend shares I’d buy for FY25 appeared first on The Motley Fool Australia.

More reading

• 3 reasons to be positive on ASX 200 shares in FY25 (and 3 to be wary)
• Where Aussies are spending their money, and the ASX shares that could benefit
• 2 outstanding ASX 200 shares to buy and hold for a decade
• Is there any chance of an interest rate cut in Australia next week?
• Brokers name 3 ASX shares to buy now

Motley Fool contributor Sebastian Bowen has positions in National Austalia Bank and Telstra Group. 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 positions in and has recommended Coles Group and Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Commonwealth Bank of Australia (ASX: CBA) share price has risen by close to 30% in the past year, as shown on the chart below. After such a strong year, investors may be wondering whether the ASX bank share can go on another run.

The focus on inflation and interest rates has dominated discussions regarding banks in the last couple of years. The performance of CBA’s net interest margin (NIM) and loan arrears could be key moving forward into the 2025 financial year.

Keep in mind that CBA’s FY25 first half involves the last six months of the 2024 calendar year.

First, we’ll examine how the bank sees the outlook.

Challenges are building

When CBA released its FY24 third quarter update, the CEO Matt Comyn said:

We have continued to focus on supporting our customers and communities, investing for the future and providing strength and stability for the broader economy. We know that many Australians are feeling under pressure due to a higher cost of living, and we are here to support those customers that need our help.

We have continued to strengthen our balance sheet to ensure we remain well positioned to support our customers, communities, and economy. All Australians benefit from strong and stable banks.

The fundamentals of the Australian remain sound. Unemployment remains low, supported by business and government investment and elevated terms of trade. We recognise that all households are feeling the impact of higher inflation and higher rates, however immigration is providing a structural tailwind for the economy.

So, while the overall picture is still solid, there are pockets of weakness, though CBA is confident it can navigate any difficulties. which could mean good news for CBA shares.

Arrears do seem to be building at the bank – the ratio of home loans that were at least 90 days overdue was 0.43% at December 2022, 0.47% at June 2023, 0.52% at December 2023, and 0.61% at March 2024.

In the third quarter update, CBA said it expects to see “further increases in arrears in the months ahead given continued pressure on real household disposable incomes”.

In terms of the NIM, CBA reported an 11 basis point decline to 1.99% in the HY24 result because of continued competitive pressures and higher funding costs.

Analyst views on CBA shares

The broker UBS recently noted CBA may see a softer fourth quarter on the revenue front, with CBA showing “good cost disciplined and management”, though there has been a “visible deterioration” in asset quality metrics.

UBS notes CBA is leaning on its own distribution channels to defend and drive volume growth in mortgages, a strategy that has seen CBA grow at 0.7 times the rate of Australia’s loan system.

The broker believes defending its ‘back book’ profitability remains a “key imperative” for management.

UBS has made a number of forecasts for CBA shares in FY25.

The broker has forecast CBA can generate $27.2 billion of revenue, $13.6 billion of pre-tax profit and $9.8 billion of net profit after tax (NPAT).

In terms of the dividend, UBS thinks CBA shares will have a fully franked dividend yield of 3.5%.

UBS has a price target on CBA shares of $105, implying the bank could drop by well over 10% in the next 12 months.

The post What is the outlook for CBA shares in FY25? appeared first on The Motley Fool Australia.

More reading

• 3 reasons to be positive on ASX 200 shares in FY25 (and 3 to be wary)
• Where Aussies are spending their money, and the ASX shares that could benefit
• Is there any chance of an interest rate cut in Australia next week?
• Here’s how much I’d have if I’d bought 500 CBA shares 10 years ago
• Big bank bargain: Are this week’s tumbling ASX 200 bank shares a good buy?

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

Vinay Ranjan from Airlie Funds Management says investors should ignore industry predictions for where ASX 200 shares might go in the new financial year and instead simply focus on buying quality companies.

Ranjan says attempting to profit from the market’s short-term ups and downs “is likely to detract from returns rather than add to them”.

He points out that despite all the challenges for the S&P/ASX 200 Index (ASX: XJO) over the past five years, the market has had an upward trajectory, albeit not in a straight line.

First came the pandemic, then the war in Ukraine, then a surge in worldwide inflation, the fastest interest rate hiking cycle in Australia’s history, and now the Middle East conflict.

Through all of that, global equity markets have risen, Ranjan says.

The S&P/ASX 200 Accumulation Index (which includes dividends) has delivered a total return of 47%, or 8% per annum over the five years to 3 May. 

Indeed, some ASX 200 shares have shot the lights out over the past five years.

They include Boss Energy Ltd (ASX: BOE), up 8,180% and Neuren Pharmaceuticals Ltd (ASX: NEU), up 1,581%.

There’s also Pro Medicus Limited (ASX: PME), up 450%, and Pilbara Minerals Ltd (ASX: PLS), up 391%.

Several ASX 200 stalwarts have done well, too. Fortescue Ltd (ASX: FMG) shares are up by 164%, and Macquarie Group Ltd (ASX: MQG) and Commonwealth Bank of Australia (ASX: CBA) are up by 56% and 57%, respectively.

In the United States, the S&P 500 Index (SP: .INX) has risen by more than 88% over five years. The stand-out stocks include Nvidia Corp at 3,480%, Tesla Inc at 1,173%, and Apple Inc at 345%.

In a blog published on asx.com.au, Ranjan says:

In Airlie’s view, the past five years have shown that buying and selling stocks based on a view of the market’s impending movements is a fool’s game.

… we believe investing in companies with strong balance sheets, and that are market leaders with pricing power, may help drive returns over the long term. 

So, instead of offering predictions as to how many points the ASX 200 may gain or lose next year, Ranjan offers three reasons to be bullish and three reasons to be bearish on ASX 200 shares in FY25.

Bull case for ASX 200 shares in FY25

Corporate balance sheets in good shape

Airlie’s view is that the balance sheets of ASX 200 shares generally look “healthy”.

Ranjan says the leverage ratio of industrial companies today vs. previous economic cycles is less than 1.0x Net Debt/EBITDA.

He comments:

Airlie considers this suggests that Australia’s largest companies could be well placed to handle any adverse bumps the economic cycle, competitors or internal issues may throw at them. 

Oligopolies among ASX 200 shares

Several industry oligopolies with substantial barriers to entry are among the ASX 200 shares. Australia’s smaller population means industry profit pools often cannot support a third or fourth entrant.

Examples include Woolworths Group Ltd (ASX: WOW), Coles Group Ltd (ASX: COL), Qantas Airways Limited (ASX: QAN), and the big four ASX 200 bank shares.

Ranjan commented: “Historically these businesses tend to have a track record of stable returns and market-share gains versus their smaller rivals.”  

Australia’s place in the world is only getting better

Ranjan says Australia continues to attract people and capital, both of which provide long-term tailwinds for the economy.

Bearish factors for ASX 200 shares in FY25

Valuations have re-rated higher

In Airlie’s view, higher company valuations reduce the prospect of near-term upside for investors.

Ranjan says ASX 200 shares are unlikely to go much higher until it’s clear that interest rates have peaked.

ASX 200 shares are currently trading at a price-to-earnings (P/E) ratio of 16.7x. This is well above the median long-term average of 14.6x.

High cost of living is gaining political attention 

Airlie views the recent inquiries into supermarket grocery prices as potentially just the start of things to come for the oligopolies among ASX 200 shares.

Ranjan says:

Airlie would not be surprised if the government turned its attention to other concentrated sectors, so as to be seen to be tackling the cost-of-living crisis.

Even if there is no immediate change to regulation of these sectors, Airlie has seen this kind of political pressure hurt returns as companies respond by pulling back on pricing power. 

Sticky inflation

Airlie thinks the optimism embedded in the valuations of ASX 200 shares assumes we’re at the peak with interest rates.

If inflation proves stickier than expected, this “may lead investors to reprice securities lower to reflect a higher cost of capital”, Ranjan said.

To date, the Australian economy has been strong with elevated migration and record-low unemployment supporting demand. And on the supply side, the cost of the energy transition and the restructuring of global trade (away from China) could continue to act as inflationary forces that may well be structural. 

The post 3 reasons to be positive on ASX 200 shares in FY25 (and 3 to be wary) appeared first on The Motley Fool Australia.

More reading

• Where Aussies are spending their money, and the ASX shares that could benefit
• These ASX shares could rise 25% to ~50%
• Top ASX AI stocks to buy in June 2024
• Here are the top 10 ASX 200 shares today
• 3 ASX 200 shares going gangbusters in June

Motley Fool contributor Bronwyn Allen has positions in Commonwealth Bank Of Australia and Macquarie Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Macquarie Group, Nvidia, Pro Medicus, and Tesla. The Motley Fool Australia has positions in and has recommended Coles Group and Macquarie Group. The Motley Fool Australia has recommended Apple, Nvidia, and Pro Medicus. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Australian households are driving certain areas of the economy, with some sectors seeing growth, according to Commonwealth Bank of Australia (ASX: CBA). It’s not confirmed, but some ASX shares could be benefiting.

CBA has released its monthly household spending insights for May, which showed a 1.1% increase in spending after a 1% fall in April. The monthly average has only gained 0.1% since January, which suggests a “weak consumer environment” according to CBA. As a comparison, the first four months of 2023 saw a growth rate of 0.8%.

Strong performing sectors

CBA revealed nine of the 12 spending categories rose in May.

There was a 2.3% increase for household goods, 1.8% for food and beverage goods, 1.7% for hospitality and 1.3% for transport. These sectors were “weak” in April, according to CBA.

Communication and digital saw a 1% monthly rise, recreation saw a 0.7% increase, insurance 0.6%, household services 0.5%, and health 0.5%.

In terms of household goods, food and beverage, there are a few ASX shares that come to mind that may be benefitting, including JB Hi-Fi Ltd (ASX: JBH), Harvey Norman Holdings Limited (ASX: HVN), Wesfarmers Ltd (ASX: WES), Coles Group Ltd (ASX: COL), Woolworths Group Ltd (ASX: WOW) and Metcash Ltd (ASX: MTS).

Looking at some of the other spending categories that have seen growth, I’d point to names like Qantas Airways Limited (ASX: QAN), Transurban Group (ASX: TCL), Telstra Group Ltd (ASX: TLS), Insurance Australia Group Ltd (ASX: IAG) and Suncorp Group Ltd (ASX: SUN) that could have experienced a solid May.

Weak sectors

There were three sectors that suffered a decline in CBA’s monthly spending insights.

Motor vehicles suffered a 0.6% monthly decline, utilities saw a 1% drop, and education suffered a 1.8% decline.

It’s possible for ASX shares to deliver a stronger performance within their business than the wider sector because they’re usually the biggest and strongest in the industry, giving them an economic moat. They could also have better brand power and win market share in a decline.

Some of the ASX shares that may be facing headwinds include car dealership business Eagers Automotive Ltd (ASX: APE) and utility businesses AGL Energy Limited (ASX: AGL) and Origin Energy Ltd (ASX: ORG), at least in the short-term.

Where could spending go next?

CBA senior economist Belinda Allen noted that the consumer environment remains soft despite the spending rise in May. She said:

When looking at spending trends since January however, we can see that the consumer spending environment remains muted, having risen by just 0.1 per cent per month on average since January and driven in large part by spending on essential categories like insurance, utilities and transport. This suggests that consumers are still needing to make spending choices and are prioritising essential purchases.            

It is unlikely tax cuts commencing in the third quarter of 2024 will have a material impact on consumer spending and we are expecting households to save rather than spend their tax cut. Looking forward, the key for consumption will be growth in real household income, and the first quarter 2024 National Accounts data indicated this remains weak.

The post Where Aussies are spending their money, and the ASX shares that could benefit appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Metcash. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Transurban Group and Wesfarmers. The Motley Fool Australia has positions in and has recommended Coles Group, Harvey Norman, Telstra Group, and Wesfarmers. The Motley Fool Australia has recommended Eagers Automotive Ltd, Jb Hi-Fi, and Metcash. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Nobody wants to get to retirement age only to realise they don’t have enough funds to live as comfortably as they had dreamed.

The good news is that this living nightmare doesn’t have to happen to you. By planning ahead and investing wisely in ASX shares, you could put yourself in a position to have a rich retirement.

Let’s take a look at three steps you could take to try and make this dream a reality.

Step one: Start as early as you can

Time is an investor’s best friend. The longer you have to allow compounding to do its thing, the less capital you need to deploy into ASX shares.

For example, if you have an investment time horizon of 30 years, then by investing $500 a month, you would grow your investment portfolio to a sizeable $1 million if you can generate an average total return of 10% per annum.

And while future returns are not guaranteed, this return is in line with historical averages. As a result, I feel it is reasonable to aim for this in the future.

Now imagine you only have 10 years to invest until retirement. Instead of making $500 monthly investments into ASX shares, you would need to put in $5,000 a month to get to $1 million if you achieve an average 10% per annum return.

Step two: Buy quality ASX shares for your retirement portfolio

If you’re wanting a rich retirement, then you ought to consider buying only the highest quality ASX shares for a balanced portfolio.

Traits to look for are strong business models, experienced and talented management teams, sustainable competitive advantage, and positive long-term growth outlooks.

These are the qualities that Warren Buffett looks for when he makes his investments. And given that he has doubled the market return since the 1960s, it’s fair to say that his investment strategy is tried and tested.

Companies like CSL Ltd (ASX: CSL) and Goodman Group (ASX: GMG) could tick these boxes and be worth further investigation.

Step three: Reinvest dividends

While getting a pay check every six months from your ASX shares is undoubtedly very nice, unless you absolutely need these dividends, you should consider reinvesting them into the market.

That’s because if you take them out, you’re stopping them from compounding each year along with the rest of your funds. This will slow down your wealth creation and could leave you with less in your retirement portfolio than you were hoping to have come retirement time.

Let’s imagine that you have a 2% dividend yield across your investment portfolio. If you take those dividends out, your investment portfolio would only grow by 8% per annum (if you achieve a 10% total return).

Going back to our $500 a month investment example, this new growth rate would mean you end up with a portfolio valued at $710,000 after 30 years. That’s almost $300,000 that you have sacrificed by pulling out the dividends.

Overall, by following these three steps, investors have a good chance of retiring rich.

The post 3 steps to take for a rich retirement with ASX shares appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in CSL. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL and Goodman Group. The Motley Fool Australia has recommended CSL and Goodman Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Artificial Intelligence (AI) is revolutionising industries globally, and ASX AI stocks are reaping the benefits.

Savvy investors are increasingly looking beyond the tech giants directly involved in AI to companies providing essential infrastructure and services.

According to TAMIM Asset Management, these companies are often referred to as the ‘picks and shovels’ play, a nod to the entrepreneurial types who sold shovels to miners during the gold rushes.

Let’s explore two ASX stocks well-positioned to benefit from the AI boom: Southern Cross Electrical Engineering Ltd (ASX: SXE) and IPD Group Ltd (ASX: IPG).

ASX AI stocks in favour

Southern Cross Electrical Engineering is a prominent player in the Australian electrical contracting sector. It operates across the resources, commercial, and infrastructure markets.

While not directly involved in AI, it is well-placed to capitalise on the growing demand for data centres, as noted by TAMIM. Data centres are crucial for AI operations and require substantial electrical infrastructure.

The global data centre market is estimated to grow at a compound annual growth rate of 9.6% during the period 2023-2030, driven by the increasing adoption of cloud computing and AI technologies.

The market has recognised this potential. Southern Cross’s share price surged nearly 140% in the past year, reflecting strong market demand for its services. It is “riding a wave of AI momentum,” TAMIM notes.

Moreover, the company is expanding its business. Following its acquisition of MDE Group in June, management upgraded the ASX AI stock’s FY24 EBITDA guidance to $53 million.

Data centres are electrically dense, with electrical work comprising the largest component of construction costs,” according to TAMIM. The group has announced thirteen data centre awards totalling over $120 million in the last four years.

The company expects this growth to be sustainable, with further earnings growth anticipated in FY26 and beyond.

Beyond TAMIM, other experts are bullish on Southern Cross Electrical Engineering. It is rated as a strong buy according to the consensus of broker estimates on CommSec.

IPD is capitalising on AI infrastructure demand

IPD Group is an Australian distributor of electrical products and solutions. It plays a crucial role in energy management and automation.

As AI and data centres expand, IPG’s services are becoming increasingly critical, putting it at the forefront of TAMIM’s picks and shovels strategy. This, it says, could make it a potentially attractive ASX AI stock.

The company supplies essential electrical infrastructure products to the market. As noted by TAMIM, “IPD Group has demonstrated its capabilities in the data centre space by successfully completing projects such as supplying low-voltage switchgear for the Stack data centre.”

IPG expects robust earnings growth, with FY24 EBITDA projected between $39 million and $39.5 million. According to my colleague Kate,  the company could benefit from power shortages caused by AI-related demand.

The company has already completed several large data centre projects. TAMIM says this could be a tailwind as demand for cloud computing increases.

[IDP’s FY 2024] guidance reflects the company’s strong performance and the positive impact of its recent acquisitions, including EX Engineering and CMI Operations, which have strengthened its electric vehicle infrastructure team and expanded its customer reach.

In addition to TAMIM, Bell Potter analysts have a buy rating on IPD Group, with a $5.60 price target. According to CommSec, the consensus broker rating is a strong buy.

ASX AI stocks come in many shapes and sizes

Investing in ‘picks and shovels’ ASX AI stocks could be a sound strategy. Stocks like Southern Cross Electrical Engineering and IPD Group provide essential electrical infrastructure and services, positioning them as indirect beneficiaries of the AI revolution.

As always, consider your own personal financial circumstances before investing.

The post 2 ‘pick and shovel’ ASX stocks to cash in on the AI megatrend appeared first on The Motley Fool Australia.

More reading

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• 3 under the radar ASX shares to buy this month
• Is this ASX small-cap stock an overlooked beneficiary of the AI boom?
• Why Alligator Energy, Data#3, Fisher & Paykel, and IPD shares are storming higher
• 2 of the best ASX growth shares to buy right now

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Ipd Group. The Motley Fool Australia has positions in and has recommended Ipd Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.