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BHP Group Ltd (ASX: BHP) shares will be in focus on Monday.

That’s because it has just been revealed that the mining behemoth has made a new takeover offer for Anglo American plc (LSE: AAL).

As a reminder, late last month the Big Australian tabled a non-binding offer of:

• 0.7097 BHP shares per Anglo American share,
• And ordinary shares in Anglo American Platinum and Kumba Iron Ore (which would be distributed by Anglo American to its shareholders in direct proportion to each shareholder’s effective interest in Anglo Platinum and Kumba)

This was swiftly rejected by its target on the belief that the offer undervalued the company and was opportunistic. Anglo American’s chair, Stuart Chambers, explained:

The BHP proposal is opportunistic and fails to value Anglo American’s prospects, while significantly diluting the relative value upside participation of Anglo American’s shareholders relative to BHP’s shareholders.

New offer

Overnight, Anglo American Mining revealed that it has received another offer from BHP.

It notes that the structure of the latest proposal is unchanged and comprises an all-share offer.

What has changed is the amount of BHP shares that are being put on the table. The new offer is as follows:

• 8132 BHP shares
• Ordinary shares in each of Anglo American Platinum and Kumba Iron Ore

This values Anglo American Mining at GBP34 billion or A$64 billion.

Second rejection

Unfortunately for BHP, the copper miner has also rejected this latest offer. Once again, its board believes the proposal significantly undervalues its business.

Chambers commented:

The latest proposal from BHP again fails to recognise the value inherent in Anglo American. Anglo American shareholders are well positioned to benefit from increasing demand from future enabling products while the increasing capital intensity to bring greenfield supply online makes proven assets with world class resource endowments ever more attractive. The Anglo American team is focused on delivering against its strategic priorities of operational excellence, portfolio simplification and growth and is set to accelerate delivery in order to unlock this inherent value.

Anglo American also dislikes the structure of the proposal, which was unchanged from the last offer. The chairman adds:

The BHP proposal also continues to have a highly unattractive structure. This leaves Anglo American, its shareholders and stakeholders disproportionately at risk from the substantial uncertainty and execution risk created by the proposed inter-conditional execution of two demergers and a takeover.

What’s next?

BHP has yet to comment on the offer and its rejection.

Nor has there been any comment on whether the miner will try to make it third time lucky. But given its determination to boost its copper exposure, it wouldn’t be surprising to see BHP return with an improved offer.

The post BHP shares on watch after new $64b Anglo American takeover offer rejected appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• 4 founder-led ASX 300 shares that have helped this fund outperform
• ASX 200 banks vs. mining stocks: Which is the better buy today?
• 4 excellent ASX 200 dividend shares to buy for your income portfolio
• Should you buy BHP stock on a pullback?

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.

If you are on the lookout for big returns to supercharge your investment portfolio, then read on.

That’s because analysts at Goldman Sachs have just tipped an ASX 200 stock to generate a 12-month total return of over 40%.

To put that into context, a $10,000 investment in this company’s shares would turn into approximately $14,000 in a year if the broker is on the money with its recommendation.

Which ASX 200 stock could deliver big returns?

The ASX 200 stock in question is media and entertainment company Nine Entertainment Co Holdings Ltd (ASX: NEC)

According to a note that was released this morning, the broker has responded to the company’s strategy day presentation by retaining its buy rating and $2.10 price target.

Based on the Nine Entertainment share price of $1.53, this implies potential upside of 37% for investors over the next 12 months.

In addition, Goldman Sachs is forecasting fully franked dividend yields of 5.2% in FY 2024 and then 5.9% in FY 2025. This boosts the total annual potential return to over 42%.

What did the broker say?

Goldman was cautiously optimistic about the strategy day update, noting that it demonstrated how the company stands to benefit from its technology, data and artificial intelligence (AI) offerings. The broker said:

Broadly we were encouraged by the detailed update and remain positive on Nine’s strategy. However although currently being masked by challenging ad markets, we would want to see the c.$100mn p.a. investment being made in product/tech translate into both above market growth (from higher yields), alongside improving efficiency across the business as ad markets ultimately recover. Nine was upbeat on this, reiterating its view that it can grow its Total TV Audience, grow average CPMs given 9Now adoption, and improve efficiency through AI.

It then adds:

Supporting this view, a range of examples was provided, including: (1) 9 Ad Manager driving 2X CPMs, with 12% of users currently adopting the Gen AI tool; (2) Nine’s Second Gen data across its 22mn signed in users and 68 Tribes provides powerful targeting in a cookie-less world; (3) Automated captions to save and estimate $3-5mn in cost p.a.; (4) 9 ExPress, which converts scripted TV news content into news articles is improving output c.100%; (5) Gen AI improving journalist productivity 4X at Domain (potential revenue/opex benefits).

Overall, the broker continues to believe this ASX 200 stock is well positioned to deliver consistent earnings and dividend growth over the coming years. As a result, it thinks it would be a good option for investors at current levels.

The post Why this ASX 200 stock could generate a 40% 12-month return appeared first on The Motley Fool Australia.

More reading

• Why Flight Centre, Nine Entertainment, Polynovo, and QANTM shares are pushing higher
• 9 ASX 200 shares tumbling to 52-week lows 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 positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has recommended Nine Entertainment. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

On Monday, the S&P/ASX 200 Index (ASX: XJO) fought hard and managed to record the smallest of gains. The benchmark index rose a single point to 7,750 points.

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

ASX 200 expected to edge lower

The Australian share market is expected to edge lower on Tuesday following a mixed start to the week on Wall Street. According to the latest SPI futures, the ASX 200 is poised to open the day 8 points or 0.1% lower. In the United States, the Dow Jones was down 0.2% and the S&P 500 was down a fraction, but the NASDAQ rose 0.3%.

BHP makes new takeover offer

The BHP Group Ltd (ASX: BHP) share price will be on watch today after the mining giant made another offer to acquire Anglo American plc (LSE: AAL). BHP has increased its offer to 0.8132 BHP shares and ordinary shares in each of Anglo American Platinum and of Kumba Iron Ore. This compares to its previous offer of 0.7097 BHP shares per share. However, it hasn’t been enough for the Anglo American board, which has rejected the offer.

Oil prices charge higher

It could be a good session for ASX 200 energy shares Santos Ltd (ASX: STO) and Karoon Energy Ltd (ASX: KAR) after oil prices charged higher overnight. According to Bloomberg, the WTI crude oil price is up 1.1% to US$79.14 a barrel and the Brent crude oil price is up 0.75% to US$83.42 a barrel. Oil demand optimism boosted prices overnight.

Fletcher Building rated neutral

Fletcher Building Ltd (ASX: FBU) shares are about fair value according to Goldman Sachs. This is despite the building products company’s shares crashing to a multi-year low on Monday following the release of a disappointing market update. In response to the update, Goldman has retained its neutral rating with a $3.05 price target (from $3.70). It said: “We believe the valuation appears undemanding on a through-the-cycle basis. However, we expect leverage to weigh on valuation. Specifically, we estimate that ND:EBITDA will peak at 2.2x in Dec24, which is above management’s target range of 1-2x.”

Gold price tumbles

ASX 200 gold shares including Evolution Mining Ltd (ASX: EVN) and Regis Resources Limited (ASX: RRL) could have a tough session on Tuesday after the gold price tumbled overnight. According to CNBC, the spot gold price is down 1.4% to US$2,342.2 an ounce. Traders appear to have doubts over the outlook for rate cuts in the United States.

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

More reading

• 4 founder-led ASX 300 shares that have helped this fund outperform
• 3 ASX shares at 52-week lows or worse
• Here are the top 10 ASX 200 shares today
• Why ANZ, Fletcher Building, Macquarie, and Sayona Mining shares are dropping today
• ASX 200 energy shares slip as cracks appear in OPEC unity

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.

Beating the market by buying our own portfolio of ASX 300 shares is always a difficult task.

Most ASX share market index funds have historically delivered some compelling returns over long periods of time. Overcoming the efficiency of an index fund and generating even higher returns is the north star of most ASX investors. But it’s a task that’s far easier said than done.

So when a fundie manages to do so, it’s always worth taking a look to see how they pulled it off.

That’s exactly what Airlie Funds Management can boast of today. Airlie’s Australian Share Fund has returned an average of 10.65% per annum (as of 30 April) since its founding in 2018, handily outperforming an ASX index fund by more than 2% per annum.

Airlie has also managed to hit an average return of 11.85% over the five years to 30 April 2024, beating its benchmark by 3.85% per annum.

So Airlie clearly knows what it’s doing when it comes to beating the market.

Luckily, today we get a chance to go through the ASX 300 shares that this successful fundie is eying off for its next investments.

The ASX 300 shares that Airlie is buying

As reported in the Australian Financial Review (AFR), Airlie portfolio manager Emma Fisher named Mineral Resources Ltd (ASX: MIN), Reece Ltd (ASX: REH), Resmed Inc (ASX: RMD) and Premier Investments Limited (ASX: PMV) as some of Airlie’s most recent successes, helping to drive the fund’s 12.7% return over the 12 months to 30 April.

These ASX 300 shares are all founder-lead – an attribute that Fisher names as a critical component of Airlie’s success with them. She told the AFR that the meetings with these companies management “stood out”:

I have always found a lot of value from being in a room with management. Maybe not in every meeting, maybe a lot of them are a wash, but when you meet the real deal, it really stands out for you.

In terms of the fund’s next winners, Fisher states that blue chips like Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP) and CSL Ltd (ASX: CSL) are long-term staples of Airlie’s portfolio.

But she’s most excited about her next ASX 300 shares, which are “big bets” and include IDP Education Ltd (ASX: IEL).

IDP is currently going through some regulatory issues, which has resulted in the company’s share price losing significant value in recent months. But Fisher is taking advantage of this as a buying opportunity:

They’ve got the balance sheet, they’re the leading player, it’s not a capital-intensive industry, and they don’t need much cash to grow, so they’re going to survive a downturn.

Fisher has also been showing serious interest in the big supermarkets Woolworths Group Ltd (ASX: WOW) and Coles Group Ltd (ASX: COL):

They’ve fallen so much… If you bought the banks off the back of the royal commission, if you bought Qantas when it was having its own inquiry grilling last year, you’ve done pretty well. So now it’s the supermarkets’ time in the headlights.

So those are the ASX 300 shares that Airlie is eyeing off as its next potential winners. Let’s see how they do over the next 12 months and beyond.

The post 4 founder-led ASX 300 shares that have helped this fund outperform appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• 3 ASX shares at 52-week lows or worse
• How to help recession-proof your ASX share portfolio in May 2024
• 3 easy ways to reduce your ASX share portfolio’s volatility right now
• Top fundie says this heavily shorted ASX 200 stock is ‘cheaper than it’s worth’

Motley Fool contributor Sebastian Bowen has positions in CSL. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL, Idp Education, and ResMed. The Motley Fool Australia has positions in and has recommended Coles Group and ResMed. The Motley Fool Australia has recommended CSL, Idp Education, and Premier Investments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The market may be trading close to its record high, but the same cannot be said for the ASX shares in this article.

Much to the dismay of their shareholders, these shares have just hit 52-week lows or worse. Here’s what you need to know:

AVITA Medical Inc (ASX: AVH)

The AVITA Medical share price dropped to a 52-week low of $2.54 on Monday. This means that the regenerative medicine company’s shares have now lost around a third of their value over the last 12 months.

Almost all of this decline was generated last month when the company released its first-quarter sales update. That update revealed that AVITA Medical expects to report commercial revenue in the range of US$11 million to US$11.3 million for the quarter. This compares to its previous guidance of US$14.8 million to US$15.6 million.

Management advised that its guidance downgrade is attributable to a slower-than-expected conversion rate of new accounts for its expanded label of full-thickness skin defects.

Interestingly, its first quarter results are being released on Tuesday. So, watch out for them.

Fletcher Building Ltd (ASX: FBU)

The Fletcher Building share price sank to a multi-year low of $2.85 yesterday. This was driven by the release of a disappointing trading update.

That update revealed that market conditions across the company’s Materials and Distribution divisions have weakened throughout FY 2024. In light of this, management expects to fall short of its EBIT before significant items guidance of NZ$540 million to NZ$640 million.

It now expects a result in the range of NZ$500 million to NZ$530 million for FY 2024. Management also warned that it expects market conditions to remain challenging in both New Zealand and Australia in the near term.

Fletcher Building shares are now down approximately 36% since this time last year.

Omni Bridgeway Ltd (ASX: OBL)

The Omni Bridgeway share price tumbled to a multi-year low of 77.5 cents on Monday.

Investors were selling the litigation funder’s shares after the Federal Court of Australia ruled in favour of Commonwealth Bank of Australia (ASX: CBA) in a shareholder class action.

This is a big loss for the company. It notes that CBA investment’s pre-judgment fair value represented approximately 5% of the aggregate A$2.5 billion non-IFRS portfolio fair value at 31 December 2023 and approximately 8% of the A$4.4 billion EPV.

Following this decline, this ASX share is now down by a very disappointing 72% over the last 12 months.

The post 3 ASX shares at 52-week lows or worse appeared first on The Motley Fool Australia.

More reading

• Why ANZ, Fletcher Building, Macquarie, and Sayona Mining shares are dropping today
• This ASX 200 stock just slashed its earnings guidance by 17%
• Morgans names the best small cap ASX shares to buy in May
• Here’s the CBA dividend forecast through to 2026
• It was huge week for ASX 200 bank shares. Here’s why

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 Avita Medical. The Motley Fool Australia has recommended Avita Medical. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The global population’s hunger for software and data shows no signs of abating, and the question on many an investor’s mind is, what does this mean for ASX 200 tech shares?

As recently penned by my colleague Mitch Lawler, the ASX tech sector traded at nosebleed valuations throughout April. In fact, many investors believe tech shares are not a safe place to park their money right now, given such high valuations.

Let’s also paint the current economic scene for a moment.

The Reserve Bank of Australia (RBA) expects economic growth to “remain low over the next year”, only picking back up well into 2025. It also predicts inflation won’t return to target levels until the second half of next year, potentially ruling out the chance of a rate cut in 2024.

Hardly conducive to growth.

However, returning to the subject of ASX tech shares, I’m of the opinion that tech companies with outstanding projected revenue growth in the face of economic uncertainty have a competitive advantage. That is why, when looking at ASX tech shares, it’s important to gauge what’s behind the optimism.

One theme that has recently supported surging tech stock prices is artificial intelligence (AI). This has given rise to new growth in data centres.

For instance, according to consulting giant McKinsey, global demand for data centres is forecast to grow by 10% per year until 2030, driven by advancements in computing and AI.

So, against this backdrop, here are three ASX 200 tech companies analysts think will hold up well in the current climate, despite high valuations in the sector.

TechnologyOne Ltd (ASX: TNE)

When I think “safety”, I think stability. For many ASX 200 tech stock investors, this means solid annual recurring revenue, or “ARR” for short.

Top broker Goldman Sachs also takes a keen interest in ARR, as evidenced by its recent note on enterprise software company TechnologyOne.

In case you weren’t aware, TechnologyOne is one of Australia’s largest public software players. It has operations in six countries. Its share price has grown from $2.52 apiece in May 2014 to $16.47 at Monday’s close, an average 20% return per year.

Analysts at Goldman believe the company could grow its ARR by $425 million this year, a 35% increase from last year.

But, it says this growth potential is “not being fully reflected at [TechnologyOne’s] valuation”.

The broker instead values this ASX 200 tech share at $18.10, around 10% upside potential at the time of writing.

TechnologyOne has also increased its dividend every year since 2005, and any growth in ARR could potentially support continued dividend hikes.

Xero Ltd (ASX: XRO)

After Xero announced it would introduce a number of price increases on its Australian subscription plans, Goldman Sachs flagged the accounting platform as a standout looking forward.

The announced changes will see an 8% to 14% average price increase across all plans, effective 1 July this year.

Following the update, Goldman immediately upgraded the company’s FY 2025/2026 revenue projections by 2% to 3%, “reflecting strong ANZ annual revenue per user”.

“We see Xero as very well-placed to take advantage of the digitisation of SMBs globally”, the broker added in its note.

Goldman analysts also estimate the ASX tech share’s total addressable market to be around $91 billion, and growing.

That’s currently around 4.7 times the size of Xero’s market capitalisation of $19.1 billion, illustrating the size of the opportunity.

As such, Goldman values Xero at $156 apiece, which is around 27% upside potential, as I write.

Nextdc Ltd (ASX: NXT)

Shares in regional data centre operator Nextdc have rallied around 27% into the green this year.

Following this, it’s little surprise to see analysts at Morgans chime in on the company, placing Nextdc in a prominent position on the data centre mantlepiece.

Morgans projects Nextdc could “comfortably” generate over $300 million in earnings before interest, tax, depreciation and amortisation (EBITDA) in the next 5 years.

That’s around 50 cents per Nextdc share or roughly 2.8% of the company’s market value.

Morgans rates Nextdc as a buy with a $19.00 valuation. But, as covered by my Foolish colleague James Mickleboro late last month, the broker is also eyeing a potential $40 price target by 2030.

Foolish takeaway

Even with a downturn in the economic cycle, as some are predicting, analysts have projected strong revenue growth for each of these ASX 200 tech shares.

I believe this should provide investors with a level of confidence moving forward and could even be seen as a competitive advantage.

The post What are 3 of the safest ASX 200 tech shares in Australia right now? appeared first on The Motley Fool Australia.

More reading

• $20,000 invested in these ASX 200 shares 10 years ago is worth…
• Brokers name 3 ASX shares to buy now
• Buy this ASX 200 tech stock now before it’s too late: Goldman Sachs
• Here are the top 10 ASX 200 shares today
• 5 ASX shares to buy following the market selloff

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 Goldman Sachs Group, Technology One, and Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool Australia has recommended Technology One. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Are you looking for ASX dividend stocks to buy? If you are, it could be worth looking at the ones in this article.

That’s because they have all recently been named as buys and tipped to offer attractive dividend yields. Here’s what you need to know about them:

Aurizon Holdings Ltd (ASX: AZJ)

The first ASX dividend stock that could be a buy next week is Aurizon.

Each year, it transports more than 250 million tonnes of Australian commodities, connecting miners, primary producers and industry with international and domestic markets. This includes providing customers with integrated freight and logistics solutions across an extensive national rail and road network that traverses Australia.

Ord Minnett is positive on the company’s outlook and has an accumulate rating and $4.70 price target on its shares.

As for dividends, its analysts are forecasting partially franked dividends of 17.8 cents per share in FY 2024 and then 24.3 cents per share in FY 2025. Based on the latest Aurizon share price of $3.78, this will mean yields of 4.7% and 6.4%, respectively.

Centuria Industrial REIT (ASX: CIP)

Another ASX dividend stock that could be a buy according to analysts this month is Centuria Industrial.

It offers investors the opportunity to invest in industrial property via a real estate investment trust. It is also Australia’s largest domestic pure play industrial property investment vehicle with a portfolio of 88 high-quality, fit-for-purpose industrial assets worth a collective $3.8 billion. These assets are situated in key in-fill locations and close to key infrastructure.

UBS currently rates the company’s shares as a buy and has a $3.71 price target on them.

As for income, the broker is expecting Centuria Industrial to pay dividends per share of 16 cents in both FY 2024 and in FY 2025. Based on the current Centuria Industrial share price of $3.25, this represents dividend yields of 4.9% for income investors in both years.

Telstra Corporation Ltd (ASX: TLS)

A final ASX dividend stock that could be a buy is Telstra.

Telstra is of course Australia’s leading telecommunications and technology company. It offers a full range of communications services and currently provides 22.5 million retail mobile services and 3.4 million retail bundle and data services in Australia.

Goldman Sachs thinks the telco giant would be a top buy right now. It has a buy rating and $4.55 price target on Telstra’s shares.

In respect to dividends, its analysts are forecasting fully franked dividends of 18 cents per share in FY 2024 and 19 cents per share in FY 2025. Based on the current Telstra share price of $3.67, this represents yields of 4.9% and 5.2%, respectively.

The post Buy Telstra and these ASX dividend stocks for income appeared first on The Motley Fool Australia.

More reading

• How to help recession-proof your ASX share portfolio in May 2024
• 3 easy ways to reduce your ASX share portfolio’s volatility right now
• How to choose ASX shares for passive income
• Why I’d buy high-yield ASX dividend shares for superannuation in retirement
• 4 excellent ASX 200 dividend shares to buy for your income portfolio

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

Many time-tested quality companies are within the top 50 ASX shares, known as the S&P/ASX 50 Index (ASX: XFL). On the flip side, I’d also argue there’s a fair number of mediocre to poor businesses within the mix that I’d rather not own.

Sure, I could buy the entire bunch through an exchange-traded fund (ETF) and call it a day. But I believe that a little fundamental analysis goes a long way. It doesn’t take a rocket scientist to work out that an extremely indebted business with declining revenue may not have as bright of a future as some of its peers.

I’ve flipped through the top 50 big dogs of Australian equities. After doing a little digging, two companies are a strong buy this month at the current prices, in my opinion.

Detecting for top value shares on the ASX

Being a stock picker is all about ‘finding value’ — discovering the companies with upside where others see none.

Uncovering a misunderstood business with solid fundamentals is the holy grail of stock picking. Investing in such a stock can grow a person’s wealth well beyond the market average.

I believe Aristocrat Leisure Limited (ASX: ALL) is one top ASX share that fits the bill this month.

A pioneer in gaming technology, Aristocrat knows the industry well. Yet, investors have shied away from this top ASX share amid softness in pokie machine sales. Concerns have pushed the Aristocrat Leisure price-to-earnings (P/E) ratio down to its lowest since 2020, during the pandemic, at around 18 times earnings.

A net cash position of $845 million, a net income margin of 21%, and an expanding presence in the United States haven’t won over the market. The chart below shows that shares in Aristocrat Leisure are flat versus a year ago.

In my opinion, Aristocrat Leisure has appealing fundamentals and a hard-to-ignore valuation.

Moving along, Origin Energy Ltd (ASX: ORG) is also catching my attention in May. The largest listed utility company on the Australian market might be up 18.8% over the last 12 months, but I still think there is value to be found.

First, Origin easily touts the healthiest balance sheet out of the three largest ASX utility companies. Debt-to-equity has been drastically reduced from 80% to 30% over the last decade. Whereas AGL Energy Ltd (ASX: AGL) has increased slightly (41% to 45%), and APA Group (ASX: APA) has ballooned (117% to 364%).

My two cents are that Origin Energy appears to be skillfully positioning itself for the energy transition. The combination of gas production, renewable energy assets, and its finger in smart grid technology via its Octopus Energy stake is a future-proof mix.

I think it’s an undervalued combination of assets, even at a market capitalisation of $17.1 billion.

Honourable mention goes to

I won’t be calling the bottom for Pilbara Minerals Ltd (ASX: PLS) just yet. Still, the most shorted stock on the ASX could be starting to show signs of value for anyone brave enough to face the ocean of short sellers.

Sitting on nearly $1.7 billion of net cash, the top ASX lithium share is positioned to ride out subdued lithium demand. Given the quality of its resources and low cost of production, Pilbara Minerals is one miner that can make it through the lull.

While I won’t be rushing out to buy shares in this lithium company, it’s certainly a top 50 ASX share I’ll watch closely.

The post Where to find value inside the top 50 ASX shares in May appeared first on The Motley Fool Australia.

More reading

• Why these ASX mining shares have ‘got some huge advantages’: Chalmers
• These are the 10 most shorted ASX shares
• An ASX dividend giant I’d buy over NAB shares for 2024
• Here’s how the ASX 200 market sectors stacked up last week
• Forget Pilbara Minerals and buy this ASX 200 lithium stock instead

Motley Fool contributor Mitchell Lawler 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 Apa Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Recessions can wreak havoc on your share portfolio. They are a sign that the economy is contracting, and business conditions are getting tougher. Unemployment is high, consumer confidence is low, and households are finding it harder to pay their bills. Some companies, particularly junior companies with high debt, might even go kaput. Share prices, on the whole, are in the toilet.

Sounds scary, right?

Well, don’t get too despondent. There are some quick and easy ways to recession-proof your ASX share portfolio. In this article, I’ll cover 3 of them.

Diversify

The quickest and easiest way for any investor to recession-proof their portfolio is simply through diversification. Spreading your investments out over a range of different companies, industries, and even asset classes is one of the easiest ways to ensure your portfolio can ride out a recession.

At heart, diversification relies on the fact that, depending on the nature of their business operations, different shares will respond differently to the same macroeconomic event. One share might increase in price, while another might fall. If you only own one, there’s a 50% chance you’ll lose money. But if you owned both, you’ll have a better chance of coming out even – or maybe even on top. Either way, being diversified has limited your downside risk.

For example, a higher global oil price is a risk for airlines because it increases fuel costs – bad news for you, too, if you’re a Qantas Airways Limited (ASX: QAN) shareholder. But if you also had some stock in an oil company like Woodside Energy Group Ltd (ASX: WDS), which will benefit from higher oil prices, you could potentially offset some (or maybe even all) of the losses on your Qantas shares.

The same holds true in a recession. Although a recession will likely cause share prices to fall pretty much right across the board – and may even result in a prolonged bear market – not all shares will be impacted equally. Some will fall a lot less than others, and a lucky few might even rise. This means that an investor with a diversified portfolio has a much better chance of limiting their downside losses and beating the market.

Buy some defensive shares

It’s all good to diversify, but if you want to recession-proof your portfolio, you need to diversify in the right places. And one of the best places to start is defensive shares.

Defensive shares are a group of shares that tend to outperform in an economic downturn. These are companies that people view as being essential, like consumer staples, healthcare, and utilities. Even when times are tough, households still spend money on them, which allows these companies to continue to be relatively profitable, even in a recession.

There are differing opinions about what makes an ideal defensive share, and you never quite know how a stock will really perform under pressure. But some common ASX examples include supermarket chain Woolworths Group Ltd (ASX: WOW), telco Telstra Group Ltd (ASX: TLS), and toll road operator Transurban Group (ASX: TCL).

Buy safe-haven assets

Investing a portion of your portfolio in safe-haven assets is probably the best way to protect your portfolio from a recession. Throughout history, safe-haven assets have proven themselves to be the most reliable stores of value. In other words, the prices of these assets don’t decline (in fact, they may even rise) during a financial crisis.

Safe haven assets include some major global currencies (like the Swiss franc or the US dollar – the jury’s still out on Bitcoin), government bonds, and precious metals. But the granddaddy of all safe-haven assets is gold.

Adding some gold exposure to your portfolio has never been easier – check out our useful guide for investing in gold if you want some tips. One great option for ASX investors to access gold is through an exchange-traded fund (ETF) like the Global X Physical Gold ETF (ASX: GOLD). And because the fund is backed by physical gold (as opposed to futures contracts), the Global X ETF returns should replicate those of gold quite closely.

The Foolish bottom line

There are some easy ways you can fortify your portfolio against the adverse effects of a recession. In this article, I’ve covered diversification, defensive shares, and safe-haven assets.

However, also keep in mind that you are giving up some growth opportunities by investing only in defensive shares and safe haven assets. These are low-risk, low-reward investments. So, although these assets are more likely to outperform in a recession, they are almost certain to underperform when the economy is booming.

A well-balanced portfolio that caters to your personal risk appetite and growth objectives is the optimal scenario. So, at the end of the day, don’t fixate too much on recession risks – you want a portfolio that can benefit when the economy is strong too!

The post How to help recession-proof your ASX share portfolio in May 2024 appeared first on The Motley Fool Australia.

More reading

• Should you buy ASX gold ETFs right now?
• 3 easy ways to reduce your ASX share portfolio’s volatility right now
• How to choose ASX shares for passive income
• Coles share price holds firm while Woolworths tumbles 18% in 2024. Time to buy?
• Why I’d buy high-yield ASX dividend shares for superannuation in retirement

Motley Fool contributor Rhys Brock 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 Transurban Group. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Vanguard U.S. Total Markets Shares Index ETF (ASX: VTS) is not among the most popular exchange-traded funds (ETFs) on the ASX.

This fund from provider Vanguard can boast of having $4.39 billion in assets under management. But that’s a far cry from the $14 billion-plus that the ASX’s most popular index fund – the Vanguard Australian Shares Index ETF (ASX: VAS) – can claim.

Even amongst other internationally-focused ETFs, VTS isn’t among the biggest hitters. The iShares S&P 500 ETF (ASX: IVV), the BetaShares Nasdaq 100 ETF (ASX: NDQ) and the Vanguard MSCI Index International Shares ETF (ASX: VGS) all have more funds under management than the Vanguard US Total Markets ETF.

And yet, the ASX’s VTS ETF offers a unique portfolio of investments that is unique on the Australian stock market. Let’s dive into the how and why.

What does the VTS ETF offer ASX investors?

Put simply, this VTS ETF offers a scope of exposure to the US markets that no other ASX fund can match.

Take the iShares S&P 500 ETF. This popular index fund tracks the S&P 500 Index (SP: .INX), which is a collection of the 500 largest companies listed on the American stock markets. As such, an investment in IVV units can be thought of as an investment in the largest 500 companies on the US market, weighted by market capitalisation of course.

Similarly, the BetaShares Nasdaq 100 ETF allows investors to gain exposure to the largest 100 companies on the Nasdaq Stock Exchange. The Nasdaq is one of the two major American stock exchanges. It is known for housing most of the tech giants, including Apple, Amazon and Alphabet, that now dominate the US markets.

So IVV, NDQ and VTS all give investors exposure to the likes of Apple, Amazon and Alphabet. As well as other well-known US shares like Netflix, Meta Platforms, Adobe and PayPal.

But what makes VTS unique? Well, this really means what it says on the tin regarding ‘total US markets’.

3,717 shares but one ASX ETF

Its portfolio consists of no fewer than 3,717 individual stocks (as of 31 March 2024 anyway).

Those 3,717 holdings are all US shares. That means that you are getting the largest of the large, as well as the smallest of the small, of all the United States of America has to offer.

As such, no other ASX ETF gives exposure to the US markets like VTS does. It’s the ETF that investors are most likely to choose if they wish for a complete and dedicated investment in the American economy.

Of course, it’s not quite as diverse as these numbers might suggest in practice. The VTS ETF has thousands of individual holdings. However, the fund still allocates close to a third of its portfolio towards the largest 10 American public companies.

This means that the bottom few hundred shares in this fund have an arguably near-tokenistic presence.

Even so, ASX ETF investors have enjoyed some solid returns from a VTS investment in recent years. As of 30 April, the Vanguard US Total Markets ETF has returned 24.47% over the preceding 12 months. As well as an average of 14.69% per annum over the past five years. Those figures are very similar to those of the IVV ETF.

The Vanguard US Total Markets ETF charges a management fee of 0.04% per annum, or $4 a year for every $10,000 invested.

The post Here’s what makes the Vanguard US Total Market ETF (VTS) stand out from other index funds appeared first on The Motley Fool Australia.

More reading

• How much money should I put in one ASX ETF?
• 5 ASX ETFs to invest $10,000 into next week

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. 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 Sebastian Bowen has positions in Adobe, Alphabet, Amazon, Apple, Meta Platforms, and Vanguard Australian Shares Index ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Adobe, Alphabet, Amazon, Apple, BetaShares Nasdaq 100 ETF, Meta Platforms, Netflix, PayPal, and iShares S&P 500 ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: short June 2024 $67.50 calls on PayPal. The Motley Fool Australia has positions in and has recommended BetaShares Nasdaq 100 ETF. The Motley Fool Australia has recommended Adobe, Alphabet, Amazon, Apple, Meta Platforms, Netflix, PayPal, Vanguard Msci Index International Shares ETF, and iShares S&P 500 ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.