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The S&P/ASX 200 Index (ASX: XJO) healthcare stock Pro Medicus Ltd (ASX: PME) have performed incredibly well. It’s up more than 90% in 12 months, and over 480% in five years, as we can see on the chart below. It hit a new all-time high of $119.09 during Wednesday’s trading, rising by around 3% by the end of the day.

After such an incredible performance, investors may be wondering if this IT healthcare stock is a buy or not.

Why is the ASX 200 healthcare stock soaring?

The business continues to deliver on its strategy.

Pro Medicus is one of the most profitable businesses on the ASX, with an earnings before interest and tax (EBIT) margin of 66%. That means around two-thirds of revenue is turning into EBIT. The net profit after tax (NPAT) margin was 49% in the FY24 first-half result, so around half of the new revenue is turning into NPAT.

Impressively, margins are continuing to climb as the company’s footprint increases. Pro Medicus says it has a highly scalable offering, with a contained cost base.

It’s delivering excellent revenue growth as it wins more contracts in Europe and North America.

I’ll mention its biggest contract won in FY24 to date – in September 2023; it won a $140 million contract (over 10 years) from BaylorScott&White Health. It has also won a $24 million contract over seven years, a $16 million contract over eight years and a $20 million contract over eight years.

When you add those new contracts to the ASX 200 healthcare stock’s previously-announced revenue, at the margins it’s earning, the company is clearly on track for strong profits over the rest of this decade.

Is it too late to buy?

Pro Medicus is clearly one of the best businesses on the ASX.

The company’s service offers several benefits to its clients, including “significant IT and infrastructure savings, improved physician engagement, unparalleled increase in radiologist efficiency, delivers superior value proposition and greater clinical accuracy.”

It’s aiming to grow in a number of different ways including winning new clients, seeing transaction growth from existing clients, delivering new product offerings, extending to new geographical markets and leveraging its research and development capability to introduce the next generation of products.

Management says there is a very significant addressable runway, and its pipeline is strong.

The question is – what valuation makes sense for the ASX 200 healthcare stock? According to the forecasts on Commsec, the Pro Medicus share price is valued at 154x FY24’s estimated earnings and 93x FY26’s estimated earnings. That’s a very high earnings multiple, particularly when interest rates are still so high.

Profit is growing strongly, but it’s difficult to say what the right price is. I’d be exceptionally happy if I were a long-term shareholder. I’m just not sure what a fair earnings multiple is for the business.

According to Commsec, the business currently has four sell ratings, five holds, and six buys. The average rating is a hold, but there are a range of views.

The post This ASX 200 healthcare stock just hit an all-time high: Is it too late to buy? appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
• 2 of the best growth-focused ASX shares to consider buying in May
• Aussie investors: 3 ASX shares to buy and hold forever
• Here are the top 10 ASX 200 shares today
• 4 ASX shares exposed to the ‘largest technological change ever seen’

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 positions in and has recommended Pro Medicus. The Motley Fool Australia has recommended Pro Medicus. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

On Wednesday, the S&P/ASX 200 Index (ASX: XJO) returned to form and pushed higher. The benchmark index rose 0.35% to 7,753.7 points.

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

ASX 200 expected to rise again

The Australian share market looks set for another good session on Thursday following a strong night on Wall Street after US inflation came in lower than expected. According to the latest SPI futures, the ASX 200 is expected to open the day 42 points or 0.55% higher this morning. In the United States, the Dow Jones was up 0.9%, the S&P 500 rose 1.2%, and the Nasdaq jumped 1.4%. The S&P 500 closed at a record high.

Oil prices charge higher

ASX 200 energy shares such as Beach Energy Ltd (ASX: BPT) and Woodside Energy Group Ltd (ASX: WDS) could have a good session after oil prices stormed higher overnight. According to Bloomberg, the WTI crude oil price is up 1.1% to US$78.88 a barrel and the Brent crude oil price is up 0.7% to US$82.95 a barrel. Oil prices pushed higher amid news that US stockpiles have fallen.

Aristocrat Leisure results

The Aristocrat Leisure Limited (ASX: ALL) share price will be one to watch on Thursday when the gaming technology company releases its half-year results. According to a note out of Macquarie, its analysts are expecting Aristocrat Leisure to achieve consensus estimates. This will mean earnings growth of approximately 6% year on year.

Gold price jump

It looks set to be a very good session for ASX 200 gold shares such as Newmont Corporation (ASX: NEM) and Northern Star Resources Ltd (ASX: NST) after the gold price charged higher again overnight. According to CNBC, the spot gold price is up 1.4% to US$2,392.7 an ounce. Traders were bidding the precious metal higher after softer than expected inflation in the United States bolstered the prospect of rate cuts from the US Federal Reserve.

JB Hi-Fi shares downgraded

The JB Hi-Fi Ltd (ASX: JBH) share price could be overvalued according to analysts at Goldman Sachs. This morning, the broker has downgraded the retail giant’s shares to a sell rating with a new $50.00 price target (from $56.50). This implies potential downside of approximately 14% from current levels. Goldman notes that the company is facing “stronger competition on JBH AU from several fronts including expanding range at Amazon, recovery of execution from HVN, and intensifying competition from Officeworks.”

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

More reading

• Here are the top 10 ASX 200 shares today
• Which ASX shares could be set to benefit from the federal budget?
• Top brokers name 3 ASX shares to buy today
• What the federal budget means for interest rates and ASX shares
• 2 of the best ASX 200 dividend giants to buy in May

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor James Mickleboro has positions in Woodside Energy Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon, Goldman Sachs Group, and Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool Australia has recommended Amazon and Jb Hi-Fi. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Liontown Resources Ltd (ASX: LTR) shares have been having a rough time of late.

So much so, on a 12-month basis, the lithium developer’s shares have halved in value.

While this is disappointing for shareholders, could it be a buying opportunity for the rest of us?

The team at Bell Potter appears to believe this is the case and is tipping the company’s shares to roar materially higher from current levels.

Where are Liontown shares heading?

According to a recent note out of Bell Potter, its analysts have a speculative buy rating and $1.85 price target on its shares.

Based on the latest Liontown share price of $1.40, this implies potential upside of 32% for investors over the next 12 months.

To put that into context, a $20,000 investment would grow to be worth approximately $26,400 if Bell Potter is on the money with its recommendation. Though, it is worth highlighting that the broker’s speculative rating means it is a high risk, high reward option. This makes it unsuitable for investors with a low to normal risk tolerance.

Why is the broker positive?

Bell Potter thinks very highly of the company’s wholly owned Kathleen Valley (KV) lithium project in Western Australia.

This project, which is due to commence production in the middle of the year, has been optimised for an initial 3 Mtpa, producing approximately 500,000 tpa of spodumene concentrate. It also has a 4Mtpa expansion planned in year six, which aims to deliver approximately 700,000 tpa spodumene concentrate.

The broker notes that the project is highly strategic and should be fully funded through to free cash flow generation. It said:

LTR’s 100% owned KV lithium project remains highly strategic in terms of its stage of development, long mine life and location. LTR has offtake contracts with top tier EV and battery OEMs (Ford, LG Energy Solution and Tesla). Hancock Prospecting has a 19.9% interest in LTR. Under our modelled assumptions which includes the drawdown of the $550m debt package and repayment of Ford debt, and under a more conservative spot price scenario, we expect that LTR is fully funded to free cash flow. LTR is an asset development company; our Speculative risk rating recognises this higher level of risk.

All in all, Bell Potter appears to believe this makes Liontown shares a good option for investors (with a high risk tolerance) that are looking for exposure to the lithium industry before it rebounds.

The post Could Liontown shares roar 30%+ higher? appeared first on The Motley Fool Australia.

More reading

• What the federal budget means for interest rates and ASX shares
• Why these ASX mining shares have ‘got some huge advantages’: Chalmers
• These are the 10 most shorted ASX shares
• Liontown shares charge higher on lithium project update
• Here are the top 10 ASX 200 shares today

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

Next week will be a big one for Xero Ltd (ASX: XRO) shares and its shareholders.

That’s because the cloud accounting platform provider will be releasing its FY 2024 results on Thursday 23 May.

Ahead of the release, let’s take a look at what analysts are expecting from the market darling tech stock.

Xero results preview

According to a note out of Goldman Sachs, its analysts are expecting the company to deliver revenue slightly ahead of consensus estimates.

The broker has pencilled in a 22% increase in revenue to NZ$1,709 million. The consensus estimate is for revenue of NZ$1,696 million.

Goldman also expects Xero’s earnings to grow quicker than the market is expecting. It has pencilled in EBITDA of NZ$480 million for FY 2024. This represents a 59% increase on the prior corresponding period and is ahead of the consensus estimate of NZ$469 million.

This will mean an operating expense ratio (as a percentage of sales) of 75.3% for the period, which is broadly in line with management’s target. Though, Goldman expects this number to reduce into the low 70s in FY 2025 and will be looking for this in its guidance statement. In fact, the broker referred to this as one of its “key focus points.”

Another key focus point will be its second half subscriber growth. Goldman is expecting subs growth in the UK and North America of 50,000 and 23,000, respectively.

In addition, it thinks that average revenue per user (ARPU) trends will be worth watching, “particularly any underlying expansion outside of price growth – which would suggest strong mix/upsell/transactions growth.”

It also wants to see if management reiterates its “Rule of 40 or greater aspiration, and whether this could be achieved in FY25.”

Should you buy Xero shares?

Goldman thinks that Xero shares would be a great option for investors right now.

The broker has reiterated its conviction buy rating and $156.00 price target on them. This implies potential upside of 28% for investors over the next 12 months.

Commenting on its buy recommendation, the broker said:

Xero is a Global Cloud Accounting SaaS player, with existing focuses in ANZ, UK, North American and SE Asian markets. We see Xero as very well-placed to take advantage of the digitisation of SMBs globally, driven by compelling efficiency benefits and regulatory tailwinds, with >100mn SMBs worldwide representing a >NZ$100bn TAM. Given the company’s pivot to profitable growth and corresponding faster earnings ramp, we see an attractive entry point into a global growth story with Xero our preferred large-cap technology name in ANZ – the stock is Buy rated (on CL).

The post Own Xero shares? Here’s what to expect from next week’s results appeared first on The Motley Fool Australia.

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• Brokers name 2 rapidly growing ASX 200 tech stocks to buy
• What are 3 of the safest ASX 200 tech shares in Australia right now?
• Coles share price holds firm while Woolworths tumbles 18% in 2024. Time to buy?
• 5 ASX shares to buy following the market selloff
• 3 excellent ASX 200 blue-chip shares to buy in May

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

Warren Buffett’s legendary company Berkshire Hathaway Inc (NYSE: BRK.A)(NYSE: BRK.B) is one of the most popular investments in the world. And fair enough.

Many investors (including this writer) can’t resist hitching their financial wagons to a company (and an investor in Buffett) that has achieved some of the most remarkable returns of any stock on the US markets over the past 60 years or so.

To illustrate, one Berkshire Class A share was asking US$1,345 each back in May of 1984. Today, that same share (with no stock splits) was going for US$619,250 at recent pricing. That’s a return of around 46,000% over four decades, enough to make anyone who was lucky enough to own even one share over this period immensely rich.

Buffett himself only owns Berkshire stock, which is why he has an estimated net worth of US$136 billion today.

But those returns reflect the past, not the future of course. So are there any reasons to buy Berkshire Hathaway shares today? Well, I can think of two reasons to buy and one reason why investors might want to hold off.

2 reasons to buy Berkshire Hathaway shares today

First up is Berkshire’s enormous and diversified portfolio of underlying investments. Unlike most companies, Berkshire has diversification built in. This stock basically functions as a holding company for Buffett’s underlying investment portfolio. It owns dozens of listed and unlisted assets within it, including public companies, private companies, and government bonds.

Some of Berkshire’s most famous holdings, which have been held for decades in some cases, include Coca-Cola, American Express, Chevron, Bank of America, Kraft Heinz, Geico, BNSF Railway, See’s Candies and Dairy Queen. The company’s largest investment by a country mile is a massive stake in a company we all know – Apple.

But simply, an investment in Berkshire is an investment in a vast and diverse collection of some of the best businesses in America, if not the world.

The second reason to buy Berkshire Hathaway shares today is the company’s culture. Buffett might be in his 90s (more on that in a moment). But he has worked assiduously over the years to ensure that the company’s culture of seeking substantial but honest returns for long-term investors remains Berkshire’s north star. Buffett’s right-hand man, Charlie Munger, is sadly no longer with us. But Buffett has handpicked Greg Abel as his successor at the company, and has also employed two investment officers – Todd Combs and Ted Weschler – in which he has confidence. Buffett tells us that Berkshire will remain in good hands as a result for decades to come.

Why not buy Buffett’s company?

Well, the elephant in the room when discussing investing in Berkshire today is Buffett’s age. At 93, Buffett’s time at Berkshire and on this planet is lamentably in its inevitable twilight.

Now Buffett may have put a succession plan into place that most investors would be confident in. But at the end of the day, there is only one Warren Buffett. Investors have no guarantee that Abel, Weschler and Combs will be able to keep Berkshire’s past track record going at Berkshire once Buffett has exited the stage.

In addition, Berkshire is a giant of a company today, with a market capitalisation of close to US$900 billion. At this size the company’s growth rate will be difficult to maintain, a problem Buffett himself has struggled with in recent years. Investors might have to face an eventual breakup of Berkshire once Buffett is no longer at the helm, which would make the company’s future even more uncertain.

Foolish takeaway

I’m a shareholder of Berkshire myself, and I would happily buy more shares today if the price were right. Even though Buffett is getting on, I have confidence that he has set up Berkshire for success well into the future. But once Buffett has left the building, investors might want to endeavour to keep a closer eye on the company he will leave behind than they are used to.

The post 2 reasons to buy Berkshire Hathaway shares today (and one not to) appeared first on The Motley Fool Australia.

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Bank of America is an advertising partner of The Ascent, a Motley Fool company. American Express is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Sebastian Bowen has positions in American Express, Apple, Berkshire Hathaway, Coca-Cola, and Kraft Heinz. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Bank of America, Berkshire Hathaway, and Chevron. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Kraft Heinz. The Motley Fool Australia has recommended Apple and Berkshire Hathaway. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The superannuation system is a key asset for helping people fund their retirement. But with all of this inflation, investors may wonder if their nest egg is still on track.

For many people, the retirement phase of their lives can be many years, perhaps decades. Therefore, we need to ensure the superannuation balance lasts as long as possible.  

Inflation reduces the buying power of a dollar. We need to ensure that this cost-of-living crisis doesn’t detrimentally affect our purchasing power in retirement by harming our superannuation-building efforts.

Aussies are worried about the financial impacts

According to research from Findex, four in five Australians (81% of people) have changed their investment and saving goals in the past year, with the primary reason for the shift being to ‘make ends meet and or rising costs of living’ (44% of people).

Who is feeling it the most? The younger Australians. Around 90% of Gen Z and 87% of millennials have de-prioritised investing and saving because of cost of living pressures.

The trouble is that inflation is likely increasing how much we’ll need in retirement to pay for goods and services in our golden years.

Findex says more than four in five (83% of people) say the rising cost of living has had a “significant or some adverse impact on their confidence in achieving the amount they think they need for a comfortable retirement.”

On average, Australians believe they will need $1.13 million in superannuation for a comfortable retirement at age 67.

Currently, the AFSA Retirement Standard suggests a couple will need a superannuation balance of $690,000 and a single person will need $595,000 for a comfortable retirement. That amount is, in my opinion, likely to keep rising in the coming years.

What can people do to help their superannuation?

It’s a tough time for many households, so keeping food on the table and a roof over our heads is the most important thing.

Everyone who earns a wage is (hopefully) receiving mandatory (concessional) superannuation contributions, which is a percentage of the amount of wages earned. These contributions can keep building the balance, even if no extra money is invested inside or outside superannuation.

Over the ultra-long-term, ‘growth’ assets can typically outperform defensive assets like cash and bonds because of their capital growth and compounding potential. So it could be useful for Aussies in the accumulation phase to allocate their nest egg to the superannuation fund’s ‘growth’ option rather than the defensive option (or even balanced, depending on how much that option allocates to defensive assets).

If Aussies have plenty of excess cash flow in their personal budgets, increasing superannuation contributions could be advantageous because of the tax savings and compounding ability. Of course, this should be balanced against thoughts of home ownership and possibly paying down the mortgage.

Aussies don’t need to invest inside superannuation. The money is locked away for retirement for potentially decades, whereas investing in (ASX) shares outside of superannuation can mean being able to access the capital/dividends instantly.

I’m investing outside of super and also building up my superannuation balance through regular concessional contributions.

The post Is your superannuation keeping up with the cost of living crisis? appeared first on The Motley Fool Australia.

More reading

• Guess which ASX lithium stock dived 9% after parting ways with Albemarle
• Here are the top 10 ASX 200 shares today
• Which ASX shares could be set to benefit from the federal budget?
• My 2024 Budget verdict
• Buy this ASX 200 share for a 20%+ return

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.

It was a difficult session for Patriot Battery Metals Inc. CDI (ASX: PMT) shares on Wednesday.

The lithium developer’s shares sank as much as 9.5% to 76.5 cents before recovering in late trade.

The ASX lithium stock ended the day 5.5% lower at 80 cents.

Why did this ASX lithium stock crash into the red?

Investors were heading to the exits today after the company released an update on its agreement with lithium giant Albemarle Corp (NYSE: ALB).

According to the release, the two parties’ memorandum of understanding’s (MOU) nine-month term has concluded and will not be extended.

The MOU was assessing partnership opportunities to study the viability of a downstream lithium hydroxide plant integrated with the Corvette Lithium Project and located in Canada or the United States.

At the time, the ASX lithium stock cautioned that there was no assurance that the MOU will result in the completion of a study or the formation of a partnership or joint venture with Albemarle. Which is exactly what has happened, much to the dismay of shareholders.

What now?

Patriot advised that it now expects to fully engage with other downstream companies in the lithium supply chain. The good news is that management appears confident that it will be able to replace Albemarle.

It notes that as the scale and quality of the Corvette Project has become increasingly evident, it has received significant interest from participants in the lithium industry. Especially given the potential for Corvette to be a large and high-quality raw material supplier for the future of lithium-ion battery supply chains outside China. It believes that being able to fully engage with other downstream companies is in the best interests of shareholders.

The ASX lithium stock’s President and CEO, Ken Brinsden, commented:

Our collaboration with Albemarle has been extremely valuable. We are proud of the progress we’ve made and are excited by the intense market interest in the Corvette project. As we move forward, Patriot is eager to expand its operations and explore new partnerships that support the growing demand for lithium raw materials and chemicals in North America and Europe. We also look forward to continuing our productive relationship with Albemarle in a flexible, non-exclusive format.

As things stand, Albemarle remains the company’s largest shareholder with a 6.4% stake.

Though, with the mining giant paying C$15.29 per share for its stake, it is down heavily on its investment. The company’s shares are currently fetching C$8.03 on the Canadian stock exchange.

The post Guess which ASX lithium stock dived 9% after parting ways with Albemarle appeared first on The Motley Fool Australia.

More reading

• Why AGL, HMC Capital, Megaport, and Patriot Battery Metals shares are racing higher

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

The post Here are the top 10 ASX 200 shares today appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen 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 Idp Education, Pro Medicus, and REA Group. The Motley Fool Australia has recommended Ansell, Idp Education, Premier Investments, Pro Medicus, and REA Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Well, last night was one of the biggest nights of the year on both the political and economic calendars – Federal Budget night. It’s the night when the Treasurer tells us what the government intends to collect in terms of taxes. And where it intends to spend this money in government expenditure.

In other words, it’s a list of both economic winners and losers thanks to government intervention in the economy for the next financial year.

Last night was the Labor Party’s second budget since coming to power in the 2022 Federal election. It was also the second surplus the government has posted in as many years. This one represents a $9.3 billion difference between what the government takes out of the economy and what it puts back in expected over the coming financial year.

Since the budget is such a huge part of the economy, it can have significant impacts on the share market. Not to mention on individual ASX shares. So today, let’s discuss which ASX shares are set to benefit the most from what was announced last night.

First up, the budget implements the revamped ‘stage three’ tax cuts that have been on the cards for a while now. This will result in every Australian income taxpayer receiving a tax cut beginning on 1 July. In addition, every household in the country will also be eligible for a $300 energy bill rebate.

Which ASX shares are winners from last night’s federal budget?

For one, this will probably benefit energy generators and retailers like AGL Energy Ltd (ASX: AGL) and Origin Energy Ltd (ASX: ORG). That’s because consumers arguably won’t feel the full brunt of their energy use over the 12 months from 1 July.

But more money in pockets from both the tax cuts and the energy rebates will probably disproportionately flow through to consumer discretionary shares. Those might include Harvey Norman Holdings Ltd (ASX: HVN), JB Hi-Fi Ltd (ASX: JBH), Premier Investments Limited (ASX: PMV) and Super Retail Group Ltd (ASX: SUL).

But perhaps the centrepiece of last night’s Budget was the ‘Future Made in Australia’ policy. According to AMP economist Shane Oliver, this $22.7 billion program consists of a package of measures. These include tax breaks, loans, subsidies and cuts to red tape to facilitate additional investment in Australian critical mineral production and processing.

These critical minerals are all commodities needed for future-facing technologies like green hydrogen, renewable energy generation and rechargeable battery manufacturing. They include lithium, cobalt, rare earths, nickel and vanadium.

Most ASX shares that are involved in the mining, production or processing of one or more of these ‘critical’ commodities stand to be potentially massive winners from last night’s budget.

That’s probably why we saw big share price gains for the likes of Arcadium Lithium plc (ASX: LTM), Lynas Rare Earths Ltd (ASX: LYC) and Fortescue Ltd (ASX: FMG) today.

Foolish takeaway

So these are just some of the shares that might benefit the most from last night’s budget. We saw a notable market reaction for many of these shares today in response, but only time will tell exactly how much these shares will tangibly benefit from what was announced by the government last night.

The post Which ASX shares could be set to benefit from the federal budget? appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
• What the federal budget means for interest rates and ASX shares
• 5 things to watch on the ASX 200 on Wednesday
• Buy BHP and these ASX dividend stocks
• Should you buy Fortescue shares for that fat 8% dividend yield?

Motley Fool contributor Sebastian Bowen 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 positions in and has recommended Harvey Norman and Super Retail Group. The Motley Fool Australia has recommended Jb Hi-Fi and Premier Investments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Well, only 364 days until the 2025 Federal Budget! Start the countdown.

And, as a finance, economics and policy nerd, I’m only very slightly kidding!

But before we get to that, let’s take a look at what the Treasurer announced overnight in the 2024 Federal Budget.

The headlines?

Well, there’s a $9.3b Budget surplus. Given the size of our national debt and inflation pressures, that’s a good thing.

And, as we all well and truly know by now, every (income) taxpayer will get a tax cut from July 1. They’ll cost $105 billion over the next five years.

The new ‘what’s in it for me’ for everyone is a $300 saving on our energy bills (and $325 for one million small businesses), which will cost the Budget about $3.5 billion.

That’s the biggest of the big stuff announced yesterday, but it’s not the whole thing.

The government’s other ‘signature policy’, the focus-group-named ‘Future Made in Australia’ program will cost $23b over a decade.

Additionally, there’s $3b for additional medicines to be included in the Pharmaceutical Benefits Scheme, the previously announced $3b reduction in HECS/HELP debts and $1.9b in rent assistance. There’s also the best part of $1b for victims of domestic violence, and another $1b for more housing.

That’s a lot of ‘stuff’ to take in. And the numbers are mind-boggling.

Oh, and the bad news? This year’s surplus is expected to be the last one for yonks. Indeed, the cumulative surplus of the next 4 years is forecast at $112 billion, wiping out this year’s surplus a dozen times over.

Unfortunately, the Treasurer seems to have not received, or misplaced, my letter from yesterday. There is no Sovereign Wealth Fund. No structural Budget balance, and no plan to pay down the national debt.

And while the Budget was relatively restrained, there is spending in this Budget that will, unfortunately, put upward pressure on inflation. (Yes, the Treasurer said otherwise, but I don’t know how you put extra money into the economy from tax cuts and energy rebates and have it magically not put upward pressure on inflation, even if you think they’re justified).

I was asked on radio this morning: “You’ve been watching Budgets for years… what’s your verdict on this one?”

My answer: It’s better than it could have been, but not as good as it should have been.

How so? Let me explain.

I’m a broken record on Stage 3 tax cuts, but one more time: they’re unaffordable and irresponsible, because they add to the national debt and – notably at this time in particular – are inflationary.

The $300/$325 energy rebate/subsidy is not means-tested. There are plenty of people in our country who need every spare dollar the government can give them. And plenty of people who don’t. Giving everyone some money is politically convenient, but not economically responsible.

The Budget is still expansionary, despite the surplus. Which at first blush doesn’t seem possible. The reason is that the surplus comes primarily from sales of commodities to overseas customers. The ‘domestic balance’ is still stimulatory, overall.

And as I’ve written before, the ‘Future Made in Australia’ thing is very, very likely to be a waste of money. If there are new, profitable, things that business could be doing, it already would. And if it’s not profitable, there’s only a very slight chance that government subsidies can make it so… without those subsidies going on forever. And they’re subsidies that could otherwise be spent elsewhere or, more preferably, banked to help lower the national debt.

(Also, any assets – human and financial – that are dragged toward these subsidised activities would likely be coming from higher value activities elsewhere, so we lose, twice.)

Those are the very real downsides for the economy and the country from this Budget.

But it’s also true that the Treasurer (and his ministerial colleagues) could have spent more of the extra revenue on other things. That they didn’t, should count for something (yes, it’s a function of low expectations and bitter experience that ‘it could have been worse’ is a positive, but here we are!).

Much of the new spending is objectively worthwhile, too, on social and welfare grounds. Not everything needs an economic return to be justified.

It is, overall, a bit of a nothing Budget, though. Some handouts, as we’re used to expecting, but not that much in the way of newly announced spending. A surplus, which is welcome, but not particularly large, and not as a result of government policy… more just luck, internationally and domestically.

Not much ambition. No signature policies. No great nation-building. And no Sovereign Wealth Fund, unfortunately. But also, on the other side, no (new) grandiose spending plans of any significant scale.

So, a bit… nothing.

For all of that, every taxpayer and every household gets some extra cash from July 1. If that feels to you like a pre-election Budget, you’re not alone. I could be wrong, but this seems designed to make us all feel like we’re a little better off (even if it’s funded by national debt!), without scaring the horses.

And the investing takeaways? It’s really rare that any Federal Budget changes the outlook for the long-term investor. And that’s the way I feel about this one, too. In the short term, retailers might get a little bump when the tax cuts are spent and when people find they’ve got a few bucks left over from lower energy prices. Builders and building materials companies may benefit if the government’s plans for more housing come to fruition. Green energy and green metals may benefit – eventually – from some of the ‘Future Made in Australia’ piggybank, but that’s years away, and it’s unclear if the Opposition will support it, or retain it if they win the next election.

The bigger question for investors from any Budget should be ‘How does this impact the Australian economy over the next 5, 10 and 20 years?’.

The answer? It doesn’t change the outlook much, at all. Which isn’t as good as it sounds, given we have a large and growing national debt (and national interest bill). At some point we may need to reckon with the can that’s been kicked down the road by successive governments, but it shouldn’t (needn’t) derail our investing plans.

So, that’s a wrap. I’ll send the Treasurer my letter again next year. Hopefully with some time to think about it, he, and the Shadow Treasurer, might have an opportunity to plan for an even brighter future.

Fool on!

The post My 2024 Budget verdict appeared first on The Motley Fool Australia.

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Motley Fool contributor Scott Phillips 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.