Tag: Motley Fool

Shares of mining giant BHP Group Ltd (ASX: BHP) are rangebound today on no news.

At the time of writing, shares in the diversified miner are trading up 0.05% at $39.43 apiece after a choppy period these past few months.

Meanwhile, the S&P/ASX 300 Metals and Mining Index (ASX: XMM) is up 0.82% at the time of writing.

BHP shares set to get a boost?

There’s been a spate of merger and acquisition (M&A) activity within the mining sector over the past 2 years, resulting in a large consolidation of some enormous players.

BHP’s play for OZ Minerals Limited (ASX: OZL) is one prime example. The move has helped investors in the Perennial Value Australian Shares Trust already clip a tidy gain in the new financial year. It is up 6.2% since June 30.

In the fund’s August report, portfolio managers Stephen Bruce, Damian Cottier, and Andrew King noted the performance saw strong attributions from healthcare and “resource holdings”.

Chief to this upside was OZ Minerals, having rallied after securing the takeover bid from BHP.

It had been long speculated that BHP would make a move on OZ Minerals, with copper being a key area of growth for BHP as it reorients its portfolio towards so called “future facing” commodities, which are required for the energy transition.

Further, there will be operational benefits from combining OZ Minerals’ copper assets in South Australia with BHP’s Olympic Dam operations, consolidating BHP’s position in the region. 

Following the positive contribution from OZ Minerals, the Trust returned 1.3% net of fees in August, but it was other resource and energy players helping clip the positive return.

Energy stocks Santos and Woodside Energy both outperformed, after delivering strong results on the back of high energy prices. Woodside, in particular, was able to benefit from strong pricing…This saw average realised prices more than double from the previous period, resulting in massive cash flows.

The fund’s portfolio managers are also constructive on further M&A within the industry, and believe this could be a key growth driver for BHP looking ahead.

With Woodside, for instance, it says the company “stands to benefit from its merger with BHP’s energy assets over the medium-term”.

“We expect further M&A in the resources sector as people scramble to secure supply of critical minerals, with particular focus on those located in stable, well-regulated and geopolitically friendly regions,” the portfolio managers added.

In the meantime, BHP shares have climbed nearly 7% during the past 12 months.

The post Why harpooning Oz Minerals could be ‘beneficial’ for BHP shares: fundie appeared first on The Motley Fool Australia.

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More reading

• Why is the BHP share price booming on Monday?
• Why A2 Milk, BHP, Lovisa, and Nickel Industries shares are charging higher
• How big will the BHP dividend be in 2023?
• Are ASX copper shares worth buying right now?
• 5 things to watch on the ASX 200 on Monday

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 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.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

After Tesla‘s (NASDAQ: TSLA) recent three-for-one stock split, you might be wondering if now is the ideal time to buy Elon Musk’s dynamic electric vehicle (EV) company.

The split has not been beneficial for the stock; its price has declined nearly 10% since it took effect.

But that decline likely has more to do with the larger market selloff since concerns around prolonged inflation continue to punish equities.

Long-term investors understand that declining stock prices create potential buying opportunities. So with the tech-heavy Nasdaq Composite also down more than 10% over the last few weeks, what is the better opportunity right now: Tesla or a Nasdaq index fund?

If you’re an investor with a strong stomach for volatility, I believe Tesla offers greater potential due to its many similarities with other once-in-a-generation stocks.

Unmatched efficiency

Many of the greatest companies today have one thing in common: They flip traditional business models on their heads.

Tesla has done this in many ways, but none are more apparent than its manufacturing efficiency. This has largely been accomplished by Musk’s first-principles approach to building his cars.

Atomic Habits author James Clear defines first principles thinking as “… the act of boiling a process down to the fundamental parts that you know are true and building up from there.”  

The average automobile consists of about 30,000 parts. By contrast, the Tesla Model 3 is made up of around 10,000 parts, and the drivetrain has only 17 to 18 individual pieces compared to a standard internal combustion engine, which has around 200 parts.

Tesla has been able to achieve this manufacturing efficiency through its Giga Press, a large-scale die-casting machine. Instead of casting thousands of individual parts and welding or gluing them together, the Giga Press can produce large portions of the car in a single cast.

For example, the entire rear section of the Model Y is cast in a single mold, which would traditionally consist of over 70 individually produced parts. This innovation alone eliminates approximately 300 robots and reduces the body shop’s space by 30%.

This manufacturing efficiency can be seen in the company’s operating margins, which significantly beat the competition.

TSLA operating margin (TTM). Data by YCharts. TTM = trailing 12 months.

Tesla is a data company

The biggest oversight many investors make when analyzing Tesla is thinking of it as simply a car manufacturer. You’ve likely seen the various articles pointing out that Tesla’s market capitalization equates to roughly all of the other major automobile manufacturers combined.

While Tesla’s leadership in the EV space certainly contributes to its lofty valuation, I believe the main justification has more to do with its data-centric business model.

Tesla vehicles are essentially computers on wheels, and just like all of the best companies today, the company is leveraging the data captured by its computers to maximize its value proposition.

This is clearly seen in its push toward autonomous driving. While Musk has been infamously overly optimistic about the release of the company’s Full Self Drive (FSD) feature, Tesla has been beta-testing it for nearly two years and recently surpassed over 100,000 vehicles on the road actively testing the software.

For reference, Alphabet‘s (NASDAQ: GOOG)‘s Waymo, a major competitor in the autonomous driving space, has an estimated 600 autonomous vehicles being tested on the road today.

FSD is built on a foundation of machine learning, so each mile driven by owners is in theory enhancing its capabilities. Tesla’s lead in testing autonomous vehicles is just one example of how it’s using its proprietary data as an advantage over its competitors.

Other examples of the company’s use of data capture can be seen in its metric-based insurance product as well as its over-the-air software updates.

While the valuation is lofty, the profits are flowing

Tesla’s valuation is without a doubt the biggest concern for buying the stock. With a price-to-earnings (P/E) ratio of over 100, there’s not much of a claim that the stock is cheap.

But while that valuation is high, consider how drastically the P/E has been reduced over the last few years:

TSLA PE ratio. Data by YCharts.

This is in part due to the pullback in the overall market, but it’s also a result of Tesla’s dramatically increasing profitability.

Tesla’s Consolidated Net Income (Loss)
2017	2018	2019	2020	2021	YTD
($2.2 billion)	($1.1 billion)	($775 million)	$862 million	$5.6 billion	$5.4 billion

Data source: Tesla. Table by author.

Tesla isn’t a value play, but a bet on optionality. Even at today’s lofty prices, I believe there is tremendous upside if the company delivers on its wide array of disruptive products (autonomous driving, robo-taxis, robotics, solar energy, and more).

Very few of the highest-valued companies today ever traded at traditionally cheap valuations. There is certainly risk baked into this investment, but the range of potential outcomes for Tesla is astronomical, and it reminds me a lot of another high-flying technology company that was critiqued for years as being massively overvalued.

It’s Amazon, whose founder, like Elon Musk, also sends rockets into space.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Better buy: Tesla stock or a Nasdaq index fund? appeared first on The Motley Fool Australia.

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More reading

• Why Tesla shares moved higher today
• Where does Tesla get its lithium and do any ASX shares benefit?
• Why Tesla shares dropped today
• Why Tesla stock dropped Monday morning
• Why Tesla shares rose today ahead of the stock split

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, 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. Mark Blank has positions in Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, and Tesla. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Treasury Wine Estates Ltd (ASX: TWE) share price has been on the up-and-up this year.

It has gained 9.04% year to date to trade at $13.63 at the time of writing.

Could the wine maker and marketer continue on its upwards trajectory? These experts see more blue skies ahead for the previously embattled S&P/ASX 200 Index (ASX: XJO) favourite.

Is the future bright for the Treasury Wine share price?

Treasury Wine shares are among the top five overweight holdings in Perennial Partners’ Perennial Value Australian Shares Trust.

The company ­– behind such beloved brands as Penfolds, Wolf Blass, and 19 Crimes – has bounced back from disastrous tariffs imposed by China in 2020 that effectively locked it out of the Chinese market.

Fortunately for long-term shareholders, the company’s journey to recover lost earnings from the region has been successful. Its latest results noted that growth in global markets and channels improved so much as to mostly offset the earnings before interest and tax dint effectively imposed by the tariffs.

Additionally, the company has continued the premiumisation of its portfolio. Indeed, 83% of its global net sales revenue came from its premium and luxury portfolios in financial year 2022.

Perennial Partners’ fund upped its holding in Treasury Wine shares last month amid the release of the company’s earnings.

But it’s the company’s future margins and built-in inflation protection that it really likes. The fund’s latest monthly report notes:

Given the long inventory cycle, wine margins are somewhat protected in inflationary environments.

Looking further ahead to [financial year 2024], earnings are expected to benefit from the lower grape costs in the 2021 and 2022 vintages.

And it’s not alone in its bullish outlook.

Broker Morgans has slapped Treasury Wine shares with an add rating and a $15.71 price target, my Fool colleague James reports.

That represents a potential 15% upside for the ASX 200 stock.

The post Up 9% this year, could Treasury Wine shares still be ripe for the picking? appeared first on The Motley Fool Australia.

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More reading

• 2 ASX growth shares analysts rate as buys right now
• 2 fantastic ASX growth shares to buy now according to analysts
• Why is the Treasury Wine share price on the slide today?
• Hoping to crack open the next Treasury Wine dividend? Read this
• 5 ASX 200 shares turning ex-dividend on Wednesday

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

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If you’re interested in small caps and lithium shares, then read on!

Listed below are two small cap ASX lithium shares that have been tipped as speculative buys by analysts at Bell Potter.

Here’s why the broker is bullish on them:

Green Technology Metals Ltd (ASX: GT1)

According to the note, the broker has a speculative buy rating and $1.37 price target on the company’s shares. This compares favourably to the latest Green Technology Metals share price of 83 cents.

Bell Potter highlights that the company is well-placed to supply the massive North American electric vehicle (EV) market in the future. It commented:

GT1’s hard rock lithium assets are located in Ontario Canada, on the doorstep of North America’s fast evolving EV manufacturing sector. The company is fast tracking appraisal activities in partnership with leading mineral investment and processing groups and established North American lithium developers. GT1’s asset locations bring ESG benefits through proximity to end markets and the potential to employ established low-carbon electricity generation through its processing operations. Our valuation is supported by modelling a potential project development at Seymour.

Red Dirt Metals Ltd (ASX: RDT)

Another small cap ASX lithium share that the broker is positive on is Red Dirt Metals. Its analysts currently have a speculative buy rating and 95 cents price target on its shares. As a comparison, the Red Dirt Metals share price is currently fetching 72 cents.

The broker notes that this Western Australia-based lithium explorer owns the Mt Ida Lithium Project. It has also recently acquired the promising Yinnetharra Lithium Project. The latter is a 520 km2 exploration project which has identified potential lithium mineralisation-hosting geology at surface over a 7km strike length. Its analysts commented:

RDT is leveraged to the electrification thematic, and growing lithium market demand. The company is now advancing two pre-Resource, Western Australian, lithium projects. […] Our valuation is supported by a risked and diluted assessment of a potential project development at the Mt Ida Lithium Project, which we estimate could convert to a Reserve of 10Mt at 1.4% Li2O, supporting a 10-year mining project and concentrating at least 1 Mtpa of ore to produce at least 210 ktpa of SC6 (31 ktpa LCE).

The post Broker names 2 small cap ASX lithium shares to buy appeared first on The Motley Fool Australia.

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More reading

• Are Yamaha and Toyota about to upend the ASX lithium share party?
• Global Lithium share price backtracks despite ‘highest ever grade’ discovery
• 3 ASX mining shares leaping more than 20% on battery minerals news
• Broker tips 100% upside for Lake Resources share price
• The ASX 200 rare earths mining share this fundie is watching like a hawk. (Hint: not Lynas)

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ASX lithium shares have been amongst the top performers over the past 12 months.

Just have a look at the returns from these top ASX lithium shares since this time last year:

• Allkem Ltd (ASX: AKE) shares up 73.0%
• Core Lithium Ltd (ASX: CXO) shares up 368.6%
• Latin Resources Ltd (ASX: LRS) shares up 200.0%
• Lake Resources N.L. (ASX: LKE) shares up 147.5%

I’ll go out on a limb here and say you likely wouldn’t object to having held these ASX lithium shares in your portfolio over the year gone by. A year that saw the All Ordinaries Index (ASX: XAO) lose 6.2%.

What’s driving the big gains?

ASX lithium shares have been big winners from soaring lithium prices.

The lightweight, highly conductive metal is a core element in EV batteries. And with global EV markets booming, and widely expected to continue booming as the world transitions away from fossil fuels, lithium prices hit new record highs this year. And lithium continues to trade within a whisker of those records.

But there’s a reason I italicised ‘expected’ in the paragraph above.

Lithium prices, and ASX lithium shares, have been making hay on the expectation that EVs represent the future of 21st-century transport.

But what if those expectations prove premature?

Could Yamaha and Toyota upend the ASX lithium share party?

There’s little doubt that the world will continue to move away from fossil fuels.

But lithium-ion battery powered vehicles aren’t the only potential alternative low-emission fuel source.

As The Motley Fool reported in August, Porsche is among the car manufacturers working on hydrogen combustion engines. These are not hydrogen fuel cell vehicles, which have similar characteristics to EVs. We’re talking about proper combustion engines fuelled by hydrogen.

And Porsche is far from alone in potentially upending the party for ASX lithium shares.

As Ride Apart reports, Yamaha Motors and Toyota are collaborating on a hydrogen combustion engine “focused on sustainability and performance”.

Toyota has awarded Yamaha the contract to develop a new 5.0-litre V8 internal combustion engine that runs on hydrogen. Alongside other Japanese car manufacturers, Toyota is actively investigating how to increase the variety of sustainable fuel options for combustion motors.

Commenting on the hydrogen motor project, Yamaha Motors’ president Yoshihiro Hidaka said:

We are working toward achieving carbon neutrality by 2050. At the same time, ‘Motor’ is in our company name and we accordingly have a strong passion for and level of commitment to the internal combustion engine.

With plenty of drivers the world over sharing that passion for the internal combustion engine over battery power, ASX lithium shares could be in for some hydrogen powered headwinds.

The post Are Yamaha and Toyota about to upend the ASX lithium share party? appeared first on The Motley Fool Australia.

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More reading

• Broker tips 100% upside for Lake Resources share price
• Top broker tips 25% upside for Allkem share price
• ASX lithium stocks are ‘the buy now, pay later of 2022’: expert
• Here’s the lithium price forecast through to 2024
• Investors are obsessed with ASX lithium shares, but what about this other critical battery metal?

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.

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The Global Lithium Resources Ltd (ASX: GL1) share price is heading south on Tuesday despite the company providing its latest drilling results.

Currently, the lithium explorer’s share price is down 1.22% to $2.42 after spending the morning in positive territory.

At one point, the share price rose to as high as $2.54 before profit takers swooped in.

Let’s take a closer look at what the Western Australia-based lithium company announced and why its shares are falling.

Global Lithium returns significant lithium assay results

In its release, Global Lithium announced that it has received the highest-ever grade of a lithium-bearing pegmatite from the Manna Lithium Project.

It is the first diamond core drilling program at the site which is located 100 kilometres east of Kalgoorlie in Western Australia.

Global Lithium highlighted the assay results:

• 5.7 metres @ 1.82% lithium oxide (Li2O) from 136.7 metres
• 3.9 metres @ 1.72% Li2O from 148.9 metres
• 6.8 metres @ 1.65% Li2O from 160.3 metres
• 6.8 metres @ 1.49% Li2O from 313.2 metres

In addition, a second reverse circulation (RC) rig has now commenced drilling at the Manna Lithium Project.

Once the drilling program and metallurgical test work is complete, Global Lithium will update the mineral resource estimate (MRE). This is expected to occur around the fourth quarter of 2022.

At present, the Manna Lithium Project hosts a maiden inferred mineral resource of 9.9Mt @ 1.14% Li2O.

Commenting on the results, Global Lithium general manager of exploration Stuart Peterson said:

It is very encouraging to see such high grade spodumene zones within the pegmatites at the Manna Lithium Project. This result shows that the spodumene crystal growth was complete during the pegmatites formation and having these clean, high grade spodumene intervals within the pegmatites should provide a clear metallurgical upgrade pathway to produce a saleable lithium concentrate.

So why is the Global Lithium share price tumbling?

Investors are selling down the Global Lithium share price today after surging more than 50% in the past week.

A key indicator, the relative strength index (RSI), touched 81 as sellers began to swing into action.

The RSI is a momentum oscillator that is used to assess the strength or weakness of a share price. Normal levels range between 30 and 70, but anything outside this tells us if the share price is cheap or expensive.

Furthermore, the share price was drifting outside the Bollinger Bands. This works well in conjunction with the RSI, which signals if a share is oversold or overbought.

Despite today’s decline, the Global Lithium share price has risen 160% in 2022, and is up an astonishing 525% over the past 12 months.

The post Global Lithium share price backtracks despite ‘highest ever grade’ discovery appeared first on The Motley Fool Australia.

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More reading

• 2 ASX lithium shares leaping more than 9% on Monday
• Why is the Global Lithium Resources share price rocketing 27% this week?
• 3 little-known ASX lithium shares that rocketed today
• Global Lithium shares edged higher today amid ‘very promising’ results
• Why are ASX lithium shares having such a cracking start to the week?

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

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The S&P/ASX 200 Materials Index (ASX: XMJ) is up 0.89% Tuesday, but three ASX mining shares are lifting much higher.

Critical Resources Ltd (ASX: CRR), Rafaella Resources Ltd (ASX: RFR), and Recharge Metals Ltd (ASX: REC) shares are all soaring today.

So why are these ASX mineral explorer shares having such a great day today?

Critical Resources

The Critical Resources share price is surging 34% at the time of writing. The lithium explorer provided an update on the Mavis Lake Lithium Project in Ontario, Canada. Assay results delivered “the highest grade lithium results” in the project’s history. The company said the results confirmed “thick, high-grade intercepts” with up to 4.32% lithium oxide. Commenting on the news, chairman Robert Martin said:

To receive such exceptional assays results and for them to contain the company’s highest
grading results of lithium mineralization ever to be intersected at Mavis Lake is absolutely
outstanding.

Rafaella Resources

This ASX mining share is soaring nearly 37% today. It comes amid news Rafaella will acquire the Horden Lake battery metals project in Quebec, Canada for C$4 million (AU$4.485). The company has secured financing for $2 million and other “significant” late-stage discussions are continuing around funding. Rafaella has paid C$400,000 already from existing cash.

Commenting on the news, managing director Steven Turner said:

The acquisition of the Horden Lake deposit will be, once completed, truly and immediately transformative for the company.

Recharge Metals

The Recharge Metals share price also soared 20% in earlier trade before pulling back. The company’s share price is currently rising nearly 3%. Recharge announced “encouraging” results from drilling at the Brandy Hill South project in Western Australia. Drilling intercepted with broad zones of nickel and cobalt mineralisation, along with silver and multiple intercepts of copper.

Commenting on the results, managing director Brett Wallace said:

We are very excited to report not only multiple zones of copper mineralisation and broad
zones of silver intercepts, but thick, shallow intercepts of nickel and cobalt mineralisation from
the two remaining diamond holes.

The post 3 ASX mining shares leaping more than 20% on battery minerals news appeared first on The Motley Fool Australia.

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More reading

• Broker tips 100% upside for Lake Resources share price
• The ASX 200 rare earths mining share this fundie is watching like a hawk. (Hint: not Lynas)
• Why this top broker is tipping 14% upside for the Wesfarmers share price
• Runaway train? Pilbara Minerals share price leaps to yet another all-time high
• Why Bitcoin and Solana jumped on Monday

Motley Fool contributor Monica O’Shea 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.

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The Lake Resources N.L. (ASX: LKE) share price is pushing higher on Tuesday afternoon.

At the time of writing, the lithium developer’s shares are up almost 3% to $1.29.

This means the Lake Resources share price is now up 19% since the start of the year.

Where next for the Lake Resources share price?

While opinion is fiercely divided on this heavily shorted lithium share, one top broker that is sitting well and truly on the bull side of the fence is Bell Potter.

According to a note released this morning, the broker has retained its speculative buy rating with a trimmed price target of $2.54.

Based on the latest Lake Resources share price, this implies a potential return of almost 100% for investors over the next 12 months.

What did the broker say?

Bell Potter notes that Lake Resources is currently transitioning into project development and has appointed a new CEO to lead the charge. It said:

LKE’s near-term outlook centres on delivery of the Kachi project definitive feasibility study, demonstrating larger scale success of the ion exchange direct lithium extraction technology which the project will employ, and ultimately coordinating binding lithium offtake and debt financing arrangements. The March 2021 prefeasibility study pointed to 25ktpa lithium carbonate production at a capital cost of US$544m; the DFS is now assessing a project with 50ktpa production. LKE has sufficient funds to take Kachi to development with cash at 30 June 2022 of $175m at 30 June 2022. A new Managing Director has been appointed to transition the company into development.

However, given the doubts over the company’s direct lithium extraction technology, the broker acknowledges that demonstrating that it works will be very important in the near future. As this is not guaranteed, it explains why Bell Potter’s buy rating has a speculative warning.

The broker commented:

LKE’s Kachi lithium project in Argentina is strategic in terms of scale, applied technology and uncommitted product offtake. Demonstrating the feasibility of ion exchange lithium extraction is key to de-risking the project; success will disrupt traditional lithium brine production. The technology also brings significant ESG benefits including less land disturbance and water consumption. […] LKE is an asset development company with prospective operations and cash flows. Our Speculative risk rating recognises this higher level of risk and volatility of returns.

The post Broker tips 100% upside for Lake Resources share price appeared first on The Motley Fool Australia.

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More reading

• Here are the 10 most shorted ASX shares
• Here are the 3 most heavily traded ASX 200 shares on Friday
• Why are Lake Resources shares among the most shorted on the ASX?
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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.

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When you think of S&P/ASX 200 Index (ASX: XJO) rare earths mining shares, Lynas Rare Earths Ltd (ASX: LYC) may be the first to spring to mind. It’s certainly dominant in the field with a market cap of $8 billion.

But in Perennial Partners’ August 2022 report, the ASX 200 rare earths miner under the spotlight isn’t Lynas. It’s the somewhat smaller Iluka Resources Ltd (ASX: ILU) which has a market cap of $4.3 billion.

This ASX 200 miner fits the bill

Perennial expects to see more merger and acquisition (M&A) activity in the resources sector “as people scramble to secure supply of critical minerals, with particular focus on those located in stable, well-regulated and geopolitically friendly regions”.

Perennial said ASX 200 miner Iluka, one of its holdings, “fits this bill”.

According to Perennial:

Iluka, which delivered a strong result on the back of high mineral sands prices, is currently developing a rare earths refining facility in Western Australia. The facility, which is predominantly funded by a $1 billion non-recourse loan from the Australian Government’s Critical Minerals Facility, will process rare earths for Iluka and other miners.

Rare earths are strategically important, being used in a range of advanced electronics applications as well as being critical to electrification, where they are used to produce very strong magnets.

Perennial added, “Currently, the majority of the world’s supply of rare earths come from China, which presents obvious risks.”

Below is quick recap of how the ASX 200 rare earths miner has been performing.

Iluka performance snapshot

The Iluka share price has outperformed in what’s broadly been a difficult year in the markets, gaining 4% in 2022 compared to the 8.7% loss posted by the ASX 200.

As the Perennial report mentioned, Iluka has benefited from high mineral sands prices. This saw a 186% increase in its net profit after tax (NPAT) in H122 to $369 million. The miner also more than doubled its interim fully franked dividend to 25 cents per share.

At the current share price, the ASX 200 rare earths miner pays a 3.7% trailing dividend yield.

The post The ASX 200 rare earths mining share this fundie is watching like a hawk. (Hint: not Lynas) appeared first on The Motley Fool Australia.

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More reading

• These ASX 200 shares are going ex-dividend on Monday
• 5 ASX shares that could rocket from a rare earths crisis: expert
• Guess which ASX 200 share just upped its dividend by 108%
• These three ASX 200 shares rocketed higher on earnings updates today
• Why Domino’s, Iluka, Netwealth, and WiseTech shares are storming higher

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.

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It’s been a solid start for the S&P/ASX 200 Index (ASX: XJO) so far this Tuesday. At the time of writing, the ASX 200 has added a healthy 0.54% and is now over 7,000 points. But let’s talk about the Wesfarmers Ltd (ASX: WES) share price.

Wesfarmers shares are having an even better time than the overall market over this session thus far. The ASX 200 industrial and retail conglomerate has added a pleasing 1.41% so far today to $48.495 a share.

Saying that, the Wesfarmers share price has still been a bit of a laggard in recent months. The company remains down a painful 18% or so over 2022 thus far. That doesn’t compare too well with the ASX 200’s loss of 6% year to date. The company also remains down 15% over the past 12 months.

So what might be next for Wesfarmers shares as we stand here in September 2022?

Well, let’s discuss what one ASX broker reckons.

Is the Wesfarmers share price a buy today?

ASX broker Morgans is indeed calling Wesfarmers a buy today. As my Fool colleague James covered on the weekend, the broker has a buy rating on the company at present, complete with a 12-month share price target of $55.60. That target implies a potential upside of around 14.4% over the coming year.

Morgans describes Wesfarmers as having “one of the highest quality retail portfolios in Australia with strong brands including Bunnings, Kmart and Wesfarmers Consumer Officeworks”.

Here’s some of what the broker said on its buy rating:

The company is run by a highly regarded management team and the balance sheet is healthy. While COVID-related staff shortages are proving to be a challenge, the core Bunnings division (>60% of group EBIT) remains a solid performer as consumers continue to invest in their homes.

We see the pullback in the share price as a good entry point for longer term investors.

In terms of dividends, Morgans is also anticipating some big things. The broker has pencilled in fully franked dividends of $1.82 per share for FY23 and $1.89 for FY24. That compares to the $1.80 the company will shell out for FY22.

So no doubt that would all be very welcome news for Wesfarmers shareholders. But we’ll have to see what happens.

At the current Wesfarmers share price, this ASX 200 retail share has a market capitalisation of $54.99 billion, with a dividend yield of 3.51%.

The post Why this top broker is tipping 14% upside for the Wesfarmers share price appeared first on The Motley Fool Australia.

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More reading

• How I’d invest $10,000 in ASX shares if I were saving for a house
• Brokers rate these ASX dividend shares as buys
• Buying Wesfarmers shares? Here’s why the company says Bunnings can continue to outperform
• Could these ‘little’ businesses be a secret weapon for Wesfarmers shares?
• Are ‘cracks starting to show’ for ASX 200 retail shares?

Motley Fool contributor Sebastian Bowen has positions in Wesfarmers. 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 Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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