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The Carsales.com Ltd (ASX: CAR) share price is in focus on Monday after the automotive classified company released its full-year earnings.

The Carsales share price closed Friday’s trade at $21.65.

Carsales share price in focus amid full-year earnings

Here are the highlights of the company’s FY22 results:

• $609 million of look-through revenue ­– a 36% jump on that of the prior corresponding period (pcp)
• $509 million of reported revenue – a 19% improvement
• Reported earnings before interest, tax, depreciation, and amortisation (EBITDA) came to $270 million – up 12%
• Reported after-tax profit of $161 million – a 23% improvement
• Earnings per share (EPS) of 56.9 cents – up 8%
• 24.5 cent fully franked final dividend ­ – 9% more than that of the pcp

The company’s revenue lifted amid a strong domestic performance from its private and media segments, its Korean Encar business, and revenue from the TyreConnect business (acquired in July 2021).

Its Australian adjusted revenue lifted 18% last financial year while its adjusted EBITDA rose 10%, excluding wage subsidies. Overseas, it delivered double-digit revenue and EBITDA growth.

The company’s revenue and EBITDA lifted 11% and 16% respectively in the US, while those same metrics rose 17% and 16% respectively in South Korea.

Brazil posted the best increase, however. Carsales’ revenue gained 26% in the South American nation while its EBITDA lifted 23%.

What else happened in financial year 2022?

The major news from Carsales last financial year was its acquisition of the remaining 51% stake in Trader Interactive. It underwent a capital raise to snap up the stake for approximately $1.17 billion.

The Carsales share price crashed 12% on the back of the news, released in late June.

The company also launched its Australian online buying service carsales SELECT in August 2021.

What did management say?

Carsales CEO Cameron McIntyre commented on the company’s full-year earnings, saying:

Our team have worked hard to deliver an excellent operational and financial performance while continuing to deliver our strategy and invest in future growth opportunities including progressing the acquisition of the remaining 51% of Trader Interactive in the US.

We continue to see robust levels of demand in all our key markets, reflecting the strength of our market position and the resilience of marketplace businesses through economic cycles.

What’s next?

Carsales didn’t provide any additional guidance today. Though, it did outline its expectations for financial year 2023.

The company expects to deliver “very strong growth” in adjusted revenue and EBITDA on an actual basis this financial year.

That will likely be driven by strong underlying automotive conditions in both dealer and private markets, as well as growth in its media and investments segments.

Carsales share price snapshot

While Carsales’ earnings have been on the up and up lately, its share price has struggled.

The stock is currently trading 13% lower than it was at the start of 2022. It has also fallen 5% over the last 12 months.

Meanwhile, the S&P/ASX 200 Index (ASX: XJO) has slipped 7% year to date and 7% since this time last year.

The post Carsales share price on watch as full-year profit jumps 23% appeared first on The Motley Fool Australia.

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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 carsales.com 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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Once a week I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Flight Centre Travel Group Ltd (ASX: FLT) remains the most shorted share with 14.9% of its shares held short. There are concerns that cost of living pressures could weigh on the travel market recovery.
• Betmakers Technology Group Ltd (ASX: BET) has seen its short interest ease to 12.2%. This could be due to weak investor sentiment in the betting industry.
• Block Inc (ASX: SQ2) has short interest of 11.3%, which is down slightly week on week again. Much to the dismay of short sellers, this payments company’s shares have rallied 40% in a month.
• Lake Resources N.L. (ASX: LKE) has short interest of 10.8%, which is up week on week. As with Block, short sellers may be regretting that they didn’t close their positions sooner. This lithium developer’s shares rocketed over 40% last week.
• Nanosonics Ltd (ASX: NAN) has short interest of 10.8%, which is down week on week again. Concerns over changes to this infection prevention company’s sales model in the US have been weighing on its shares.
• Zip Co Ltd (ASX: ZIP) has seen its short interest ease to 9.1%. This buy now pay later provider’s shares are down 83% over the last 12 months. Short sellers don’t appear to believe the declines are over.
• Regis Resources Limited (ASX: RRL) has short interest of 9%, which is down week on week. This gold miner’s shares have come under pressure over the last 12 months due to production issues.
• Mesoblast limited (ASX: MSB) has short interest of 8.3%, which is flat week on week. Last week this biotech company’s shares tumbled lower after it raised equity once again.
• Inghams Group Ltd (ASX: ING) has returned to the top ten with short interest of 8%. Concerns over margin pressure from higher input costs has been weighing on sentiment.
• Megaport Ltd (ASX: MP1) has seen its short interest drop to 7.9%. Unfortunately for short sellers, this network as a service provider’s shares have rallied strongly over the last month amid optimism that it could soon be profitable.

The post These are the 10 most shorted ASX shares appeared first on The Motley Fool Australia.

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• Lake Resources share price finally slumps after jumping 72% this week
• New records and looming deficits. Why ASX lithium stocks are in the spotlight

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 Betmakers Technology Group Ltd, Block, Inc., MEGAPORT FPO, Nanosonics Limited, and ZIPCOLTD FPO. The Motley Fool Australia has positions in and has recommended Block, Inc. and Nanosonics Limited. The Motley Fool Australia has recommended Betmakers Technology Group Ltd, Flight Centre Travel Group Limited, and MEGAPORT FPO. 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 Wesfarmers Ltd (ASX: WES) share price could become increasingly influenced by lithium as the company builds exposure to the resource.

Wesfarmers is best known for being a leading retailer. It has some of the largest retail businesses within its portfolio including Bunnings, Officeworks, Target, and Kmart. The e-commerce business Catch is another name in its portfolio.

However, Wesfarmers is not only a retailer. It has a portfolio of businesses, including industrial businesses and a chemicals, energy, and fertiliser division called WesCEF.

So how does lithium fit in?

Mt Holland

In May 2019, Wesfarmers launched a successful bid to acquire Kidman Resources which was an ASX share at the time.

Kidman’s major asset was a 50% interest in the Mt Holland project based in Western Australia, which it owns jointly with Sociedad Quimica y Minera de Chile, one of the world’s largest producers and marketers of lithium products. It included the construction of a mine and co-located concentrator at Mt Holland as well as a lithium hydroxide refinery in Kwinana. Wesfarmers pointed out that lithium hydroxide is key to the electric vehicle value chain.

Why did Wesfarmers buy this business?

Not only does Wesfarmers see attractive long-term growth trends for lithium (thanks to electric vehicles), but the company can also utilise the WesCEF business’ ability to “design, construct, commission and operate complex plants”.

The Wesfarmers managing director Rob Scott said:

The acquisition of Kidman provides an opportunity to invest and develop a large-scale, long-life and high-grade lithium hydroxide project in Western Australia. It also creates a unique partnership with SQM, a global leader in the lithium industry with a long operating history and deep market knowledge.

Wesfarmers said that the increasing global uptake of electric vehicles in the longer term will be driven by “significant reductions in manufacturing costs, lower operating costs relative to traditional vehicles, increasing battery range and the transition of major auto manufacturers to electric drivetrains”.

In July 2021, the Mt Holland project received ministerial approval which was the last critical approval. Construction and project development started last year.

Progress on Mt Holland

Wesfarmers said that first production from the refinery is expected in the second half of the 2024 calendar. The life of the project is expected to be around 50 years. The production capacity is expected to be 50kt per annum. Wesfarmers’ share of the capital expenditure is around $950 million.

In terms of progress on the site, the Mt Holland village and aerodrome construction has been completed.

Construction of the concentrator and refinery are underway. Pre-strip mining has commenced.

Despite the impact of inflation, Covalent (which is the name of the lithium business) said it’s currently containing the impacts of this challenging environment to remain in line with the original guidance.

Further growth opportunities

Wesfarmers outlined in a recent presentation that it is investigating expansion opportunities for the mine and refinery to improve investment returns.

It’s also evaluating “adjacent step-out opportunities and downstream investments” within the battery minerals theme.

Wesfarmers said that it is considering options for the sale of spodumene concentrate.

Foolish takeaway

So, there you have it, Wesfarmers could be a sizeable lithium miner later this decade. Investors can already get exposure to the progress that Wesfarmers is making with its lithium plans.

The Wesfarmers share price has gone up around 4% over the last month.

The post Did you know you’re investing in lithium when you buy Wesfarmers shares? appeared first on The Motley Fool Australia.

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• Do any ASX lithium shares pay dividends?
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• What are you getting when you buy Wesfarmers shares on the ASX today?

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 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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The Telstra Corporation Ltd (ASX: TLS) share price has been slowly but steadily rising over the last few weeks.

It comes during a period of rising inflation but it seems the telco giant may be able to shield itself from some of these impacts.

Certainly, the last few years have been tricky for Telstra’s bottom line and profit margins.

A shift by households to the NBN has meant that Telstra no longer owns the infrastructure being used. This, in turn, means lower operating margins as the company has to compete on the same terms as every other telco that offers NBN services.

The telco industry has also had to get used to intense competition in the mobile space. However, that seems to be lessening after a series of acquisitions have reduced the number of players in the telco space. Inflation has also changed the situation to some extent.

Perhaps things may not be as bad as they seemed for Telstra.

Telstra is largely untroubled by inflation

The telco recently acknowledged that there is much uncertainty right now. But, Telstra believes there are some “natural hedges” against inflation in the business and that it is “better placed than many”.

One example is Telstra’s recurring infrastructure revenue from the NBN, which grew by 3.3% in FY22 to $930 million. This revenue is indexed to CPI inflation for the remaining average contracted period of 25 years.

However, in its infrastructure segment, Telstra acknowledged it has seen cost inflation for construction and fibre supply. However, it expects to remain within its strategic capital expenditure spending for FY23 of $350 million (including Viasat). However, “given the cost inflation and the customer demand profile”, its estimated FY26 earnings before interest, tax, depreciation and amortisation (EBITDA) will be “significantly lower than previously indicated”.

But, I believe it’s important to keep in mind that it is the ‘mobile’ division that generates the most revenue and may be the key influencer on the Telstra share price.

Within its costs, labour is one of the key expenses. It has some “protection” against inflation from a newly-reached enterprise agreement with agreed wage increases for the next two years.

There are contracts in place for some other costs that offer “some protection”.

On interest costs, hedges are in place with around 65% of its debt at fixed rates.

Price rises

Perhaps one of the most important things to note is that Telstra recently increased its prices for many customers in line with CPI inflation for its ‘in-market branded postpaid’ mobile plans and also introduced an ‘option’ to review prices annually against CPI inflation.

That results in increased prices for around 65% of postpaid mobile customers and will flow through from September. There are “different dynamics” in the other 35% of postpaid customers, and it continues to review pricing across the portfolio.

Telstra also said that with international travel back on the agenda, roaming is also expected to support growth, though “it is unclear if it will completely return to pre-COVID levels”.

In FY22, roaming EBTIDA was around 20% of the around $250 million of the pre-COVID level. For June, it was around 45%.

Telstra share price snapshot

Since the beginning of 2022, the Telstra share price has dropped around 4.3%.

The post Own Telstra shares? How the telco is tackling inflation pressures appeared first on The Motley Fool Australia.

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More reading

• ‘Strongest tailwinds in a decade’: Morgans tips Telstra shares as a buy
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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 positions in and has recommended Telstra Corporation 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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It can be pretty tough seeing the ASX share market go significantly into the red over a short period of time. How are investors meant to make money when things get rough?

Firstly, it could be important to remember that investing is a long-term endeavour. What happens this month or even this year may be long forgotten in a few years from now. For example, the GFC saw huge declines for some share prices. But then there was a recovery for many businesses in the subsequent years.

But, during the time of a bear market, how are investors meant to invest and make returns?

Well, it may not necessarily be with something going up when everything else is going down. It may be finding a share, or shares, that has been hurt heavily but then goes on to recover strongly.

One of the fund management outfits that is typically effective at finding good opportunities during periods of volatility is Forager, which operates the Forager Australian Shares Fund (ASX: FOR).

Forager’s advice

The Forager chief investment officer, Steve Johnson, had some wise words to say about the current investment environment for ASX shares. He said:

You need to identify businesses with characteristics that you like. Those characteristics might be the consensus view at the time that you find it, but you agree with it and you like it. You need to do your research and value the business and then you need to wait for the right environment.

What does that environment look and feel like? Well, you want to see a lot of selling. You want to see market panic and you want to see sector and business disdain. You yourself are probably going to be feeling very nervous and very uncertain. If you’re not feeling that emotion then it’s not a dysfunctional market.

What about the wider market? What sort of factors will we be able to see in the described scenario?

You’re going to be reading bearish headlines in the paper or online and you’re going to be seeing brokers downgrading their estimates for businesses. Really importantly, there’s probably no obvious reasons for things to change in the short term. If it was obvious the share prices wouldn’t be where they are.

That’s what a dysfunctional environment feels like. And that’s what we’re seeing in the small cap end of the market at the moment.

What kind of ASX shares does Forager currently own?

In the latest Forager fund update, the company outlined a couple of quarterly updates from businesses in its portfolio.

Whispir Ltd (ASX: WSP) – Forager described Whispir as a communications technology business. The fund manager noted that the ASX share “burned through” $5.2 million of cash in the three months to 30 June 2022. It ended the quarter with $26.1 million in the bank account.

But, Forager said the cash flow figures don’t give a true representation of the progress that the business has been making. The fund manager noted that commentary in the cash flow summary suggested revenue will exceed prior guidance of 42% growth and that costs are well controlled.

The fund manager thinks that the next financial year should already see free cash flow generation.

Bigtincan Holdings Ltd (ASX: BTH) — this business is described as a sales and training software provider. It finished the quarter with $39 million cash after utilising $4.9 million over the three months to June 2022.

Forager said that growing revenue and a declining cost base “should result in free cash flow” this financial year. The fund manager noted that the annual revenue run-rate rose a “healthy” 25% organically to $120 million. This was slightly above prior guidance and “sets the business up well for future years”.

The post How and where can an ASX investor make money in a dysfunctional share market? appeared first on The Motley Fool Australia.

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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 BIGTINCAN FPO and Whispir Ltd. The Motley Fool Australia has positions in and has recommended BIGTINCAN FPO. The Motley Fool Australia has recommended Whispir Ltd. 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 Flight Centre Travel Group Ltd (ASX: FLT) share price is in focus as the ASX travel share sees a return of demand for flying.

It has been a volatile few years for the company with the ongoing impacts on flying and the resulting financials of the business.

It was only a few weeks ago that the business announced a travel update after a “solid rebound” in travel demand globally.

What is the company expecting in FY22?

Based on some preliminary numbers, Flight Centre is expecting to achieve an underlying earnings before interest, tax, depreciation and amortisation (EBITDA) loss of between $180 million to $190 million for the 12 months to 30 June 2022.

The mid-point of that range would be an 11.9% improvement on the mid-point in the company’s initial FY22 market guidance of an underlying loss of between $195 million and $225 million.

It also represents a “material improvement” on the FY21 underlying EBITDA loss of $337.9 million.

Flight Centre expects to be breakeven, on an underlying EBITDA basis, for the six months to 30 June 2022.

Broker ratings on the Flight Centre share price

The broker UBS is ‘neutral’ on the business, with a price target of $18.65. That implies a small, mid-single-digit rise over the next 12 months. A problem for the sector is that there are still things holding back the industry, such as airlines reducing capacity.

Macquarie is also ‘neutral’ on the ASX travel share, with a price target of $18. It is keeping in mind that problems relating to slowing economic demand (such as inflation) could lead to slower travel demand.

But there are some brokers that are negative on the business.

Credit Suisse has an ‘underperfom’ rating on Flight Centre, with a price target of just $14. It thinks that profit margins could be challenged in the company’s leisure segment. It also predicts the ASX travel share may not be able to increase prices as much as the company needs to make up for the higher costs.

Ord Minnett rates it as a ‘sell’ with a price target of $13.18. Part of the negativity relates to an expectation that corporate travel could suffer as the economic situation becomes more difficult.

Management comments

Flight Centre managing director Graham Turner said with the recent business update:

The scale of our recovery exceeded our initial expectations and meant that we should now exceed our preliminary FY22 result target, with early trading results pointing to a breakeven second half result and a healthy fourth quarter profit (underlying EBITDA).

There will inevitably be ongoing challenges for the industry over the next six to twelve months as new strains of the virus emerge, airline capacity returns and as we rebuild staff numbers to required levels, but we feel that we are well placed to overcome these concerns given our corporate business’ continued rise and our leisure business’ ongoing strength.

Flight Centre share price snapshot

Over the last month, the ASX travel share has seen its share price rise by almost 6%.

The post Do experts think the Flight Centre share price is ready for imminent takeoff? appeared first on The Motley Fool Australia.

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More reading

• Better ASX travel buy: Flight Centre or Webjet?
• Are we flying first class with Flight Centre shares?
• These are the 10 most shorted ASX shares
• Why did the Flight Centre share price underperform the ASX 200 in July?
• Own Flight Centre shares? Here’s why the boss is predicting more pain for the travel sector

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. 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 recommended Flight Centre Travel Group Limited and Macquarie Group 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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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.

The Polygon (CRYPTO: MATIC) blockchain made a name for itself over the last few years thanks in part to Ethereum‘s (CRYPTO: ETH) rise. Polygon is a Layer 2 scaling solution for Ethereum. This means that Polygon helps make Ethereum more efficient, since Ethereum suffers from congestion and high traffic at times. Users flock to Polygon because it offers the security and decentralization of Ethereum, but with faster speeds and lower fees. 

Polygon has a proven track record, but its future is what’s most exciting. Even with a brutal bear market gripping most cryptocurrencies, Polygon’s developers continue to create new solutions to support more and more use cases. 

zk-What?

Arguably the most important development coming from Polygon is known as the zero-knowledge Ethereum Virtual Machine (zkEVM). This technological feat allows the Polygon blockchain to support further use cases without sacrificing speeds or costs. 

Without getting too technical, zkEVMs make Polygon more versatile to support not only new smart contracts but even old smart contracts that were originally written on Ethereum. These zkEVMs allow developers to migrate their Ethereum-based smart contracts to Polygon’s blockchain without having to rewrite any code. Developers might want to do this because Polygon offers those lower fees and faster speeds previously mentioned. In addition, a move to Polygon won’t sacrifice any of the highly desired security and decentralization that comes with the Ethereum blockchain.

It is planned that the zkEVMs will be live in early 2023. Timelines in crypto are notoriously unstable — look no further than Ethereum’s merge to proof of stake, which has been delayed multiple times — but zkEVMs could enable Polygon to reach a new level of usefulness, something that might be worth waiting a few more months for. 

Polygon pairs with Meta

As if the last month wasn’t good enough for Polygon, the blockchain garnered attention from one of the most well-known companies in the world. In late July, Disney (NYSE: DIS) announced that its latest round of participants in the Accelerator Program was finalized — and Polygon was one of them.

In those next few months, an increased number of users might start realizing that Polygon offers a world of opportunities. Just a few weeks ago it was announced by Meta (NASDAQ: META) CEO Mark Zuckerberg that Instagram will unveil NFTs to users in over 100 countries across Asia, Africa, the Middle East, and the Americas. The plan is for NFTs from Solana (CRYPTO: SOL), Flow (CRYPTO: FLOW), Ethereum, and — last but not least — Polygon to be compatible with Instagram.

Rather than being a marketplace to purchase NFTs, users will be able to show off and share their digital assets with followers. The NFTs will have basic information like the creator, name of the piece, and the blockchain on which it was purchased. 

This is likely the most exposure Polygon NFTs have ever received. Now that Polygon has a presence in front of Instagram’s two billion users, hopefully more users will learn of its lower fees and faster transaction speeds compared to Ethereum.

Disney does crypto

The Accelerator Program is a “business development program designed to accelerate the growth of innovative companies from around the world.” As one of six members to be part of this year’s class, Polygon receives investment capital, access to co-working space at Disney’s creative campus, and mentor support. Disney hopes that eventually a collaboration will come out of these ventures.

Imagine what this could do for Polygon’s growth — and its price. Serving as the blockchain of choice for Disney could propel Polygon to heights that we haven’t seen before. When taking into account that zkEVMs are on the horizon, a presence with Instagram is looming, and the possibility of joining forces with Disney — it almost seems too good to be true.

Despite being down nearly 70% from its all-time high, out of all the other beaten-down cryptocurrencies, Polygon might have the most upside in the entire market. Even if Polygon were to only return its previous high of almost $3, that would present investors with a possible 300% return. Nothing is guaranteed in investing, but if Polygon could reach that price before its associations with Instagram or  Disney and the introduction of zkEVMs, imagine where it could head in the future.

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

The post 3 reasons I’m buying this crypto hand over fist appeared first on The Motley Fool Australia.

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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. RJ Fulton has positions in Ethereum and Solana. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Ethereum, Meta Platforms, Inc., Polygon, Solana, and Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2024 $145 calls on Walt Disney and short January 2024 $155 calls on Walt Disney. The Motley Fool Australia has recommended Meta Platforms, Inc. and Walt Disney. 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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Fund manager Wilson Asset Management (WAM) has recently picked National Australia Bank Ltd (ASX: NAB) as its preferred S&P/ASX 200 Index (ASX: XJO) bank share.

WAM operates several listed investment companies (LICs). Two of these LICs are WAM Capital Limited (ASX: WAM) and WAM Research Limited (ASX: WAX).

There’s also one called WAM Leaders Ltd (ASX: WLE) that looks at the larger businesses on the ASX, often referred to as ASX blue-chip shares.

WAM says WAM Leaders actively invests in the highest quality Australian companies. But does WAM have a good reputation for picking stocks?

The WAM Leaders portfolio has delivered gross returns (before fees, expenses, and taxes) of 14.7% per annum since its inception in May 2016. This compares to the S&P/ASX 200 Accumulation Index average return of 8.3%.

The WAM Leaders team has outlined its thoughts on the current economic situation when it comes to rising interest rates and bank shares.

WAM makes a quick return on ASX bank shares

The Reserve Bank of Australia (RBA) has been quickly increasing its cash interest rate over the last few months which, according to WAM, has meant there is a “wide range of forecasts” for both house prices and the economy. This sent sentiment in the banking sector to “extremes”.

WAM Leaders noted that ASX bank shares significantly underperformed the broader ASX share market in June. The fund management team attributed this decline to the flipping from the initial positive view that rising interest rates would help banks. It now says there’s a prevailing view that the rapid rises could hurt the Australian housing market and overall economic growth.

The fund managers said:

We viewed this weakness as exaggerated and tactically went overweight in the banking sector, with the banks then outperforming the market in July.

Still positive on the banks

Wilson Asset Management remains “positive” on the outlook for banks. The fund manager noted that the first bank update, from Australia and New Zealand Banking Group Ltd (ASX: ANZ), showed “improved lending growth, strong underlying net interest margin trends and robust cost control.

WAM thinks that other major ASX 200 banks will report similar, or even better, outcomes.

The fund manager doesn’t think that rising bad debts will be a significant issue for banks because household balance sheets and loan-to-debt ratio profiles are “strong” thanks to the house price growth seen in recent years.

However, the team from WAM Leaders did note that credit growth will be “further impacted” and that the market is already forecasting this will reach its lowest level for over 40 years in late 2023.

However, WAM does think that net interest margins (NIMs) across all the banks “should improve” as earlier and larger interest rate rises occur.

NAB shares are the preferred pick

WAM explained which candidate is the favoured big four ASX 200 bank share and why:

Our preference among the banks in this environment remains National Australia Bank. The company continues to deliver above system growth, is overweight business banking which continues to perform strongly and has a capable management team.

Commonwealth Bank of Australia is our next preferred name given its sector leading position, largest deposit base and capital management optionality following the divestment of non-core assets.

The post Why this leading fund manager’s favourite ASX 200 bank share is NAB appeared first on The Motley Fool Australia.

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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.

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The Westpac Banking Corp (ASX: WBC) share price will be one to watch on Monday.

This follows the release of the banking giant’s third quarter update this morning.

Westpac share price on watch following Q3 update

All eyes will be on the Westpac share price at the market open after Australia’s oldest bank released an update on its capital, credit quality, and funding.

In respect to its capital, Westpac’s CET1 capital ratio stood at 10.75% at the end of June, which is down from 11.33% at the end of March. This reflects a dividend payment (45 basis points), higher risk-weighted assets (RWA) (42 basis points) and higher capital deductions.

The bank’s RWA were up $18 billion or 3.9% during the third quarter of FY 2022, mostly from higher interest rate risk in its banking book.

Credit quality remains strong

Potentially giving the Westpac share price a lift today is news that its credit quality remained strong during the third quarter.

The bank revealed that its provision cover was little changed, with total provisions to credit RWAs at 1.25%. This was down 5 basis points over the quarter.

Another positive was that Westpac’s stressed assets to total committed exposures (TCE) fell 4 basis points to 1.06%.

The bank’s mortgage 90+ day delinquencies also improved, falling 5 basis points to 0.83% in Australia and 2 basis points to 0.28% in New Zealand.

Strong funding and liquidity

Westpac’s funding and liquidity was strong with a Liquidity Coverage Ratio (LCR) of 130% and a Net Stable Funding Ratio (NSFR) of 123%.

In addition, the bank revealed that its deposit to loan ratio was 83.1%, down from 83.5% at the end of March.

No details were provided in respect to its profits, margins, or cost cutting during the quarter. Investors may have to wait until its full year results later this year for that unfortunately.

The post Westpac share price on watch following Q3 update appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Monday
• Up 12% in 30 days, is the Westpac share price still a buy?
• Top ASX dividend shares to buy in August 2022
• Own Westpac shares? Here’s when the ASX 200 bank will release its FY22 earnings
• Analysts say these ASX dividend shares are top buys

Motley Fool contributor James Mickleboro has positions in Westpac Banking Corporation. 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 Westpac Banking Corporation. 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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With reporting season in full swing, investors are warned not to get too excited about buoyant 2022 financials.

This is because the 2023 and 2024 outlook is more important, with interest rates rising and consumers locking up their wallets.

It’s through this lens that the team at Wilsons continues to advise clients to buy ASX shares that are labelled “quality”.

The advisory’s head of investment strategy David Cassidy revealed that his team just added weightings to two ASX shares:

‘An attractive valuation’ for business with excellent outlook

The Wilsons team this week welcomed Resmed CDI (ASX: RMD) to its “focus list” of shares to buy.

The continuous positive air pressure device (CPAP) maker is a business that can remain resilient through the economic cycle, according to Cassidy.

“Resmed is an inherently defensive business, with the treatment of medically diagnosed breathing conditions being essential and therefore non-discretionary,” he said in a memo to clients.

“CPAP therapy is reimbursed by private and public payers in most major markets, making it affordable for most patients.”

What’s more, the CPAP market around the world is currently largely underserved.

“Industry level penetration of the market is estimated at less than 20% in the US, and less than 5-10% in Europe and other ROW markets, leaving a long runway for growth across the industry.”

Resmed has smartly mitigated a couple of huge risks this year, according to Cassidy.

It managed to find a workaround for the global computer chip shortage by providing customers with a chip-free temporary solution.

And it has passed on rising input costs to its end clients without dampening demand.

The Resmed share price has dropped about 7.5% since the start of the year, presenting a tempting buying opportunity.

“Resmed trades at a 12-month forward PE ratio of ~37x, broadly in line with its trailing 3-year average,” said Cassidy.

“We view this as an attractive valuation considering both the long-term runway for growth in the under-penetrated CPAP market and the medium-term opportunity for RMD to strengthen its market position while [rival] Koninklijke Philips NV (AMS: OHIA) is sidelined.”

The industrial metal that could keep going up

The Wilsons team also recently increased its exposure to lithium producer Allkem Ltd (ASX: AKE).

That’s despite Cassidy’s team having a dim outlook for mining, with economies about to slow down and commodity prices due to deflate.

That’s because lithium could be an exception to the rule.

“We remain favourable towards lithium over the medium-term,” Cassidy said.

“The metal is forecast to be in a structural deficit over the next decade due to the rapid transition towards electric vehicles.”

Wilsons analysts think lithium is far less cyclical than another “popular industrial metal”, copper.

“Realised lithium prices have held up well this year, while other industrial metals, like copper, have recently softened.”

The Allkem share price is up more than 10.5% so far this year.

The post 2 quality ASX shares Wilsons just bought appeared first on The Motley Fool Australia.

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More reading

• Resmed share price dips despite profit and dividend boost
• Why Baby Bunting, PointsBet, ResMed, and Suncorp shares are dropping today
• New records and looming deficits. Why ASX lithium stocks are in the spotlight
• ResMed share price on watch following solid FY22 growth
• 5 things to watch on the ASX 200 on Friday

Motley Fool contributor Tony Yoo has positions in ResMed Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ResMed Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended ResMed. The Motley Fool Australia has positions in and has recommended ResMed Inc. 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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