Tag: Motley Fool

It’s one of the great headlines: “Beer, cigs up”.

And, as any smoker or drinker knows, it’s one that could be applied regularly, as government taxes increase in line with inflation.

Which, as you might know, is kinda high right now, leading to headlines suggesting that we might soon have to pay $15 for a pint.

Now, I’m not sure, but I think if anything is unAustralian, it’s four beers costing more than a Pineapple.

Yes, yes, I hear the harm minimisation angle, but apparently we pay double the grog tax the Kiwis pay, around 6 times as much as the Poms, and a staggering 15 times the amount they pay in Germany – the home of beer.

Am I talking out of my ‘kick’?

Maybe.

I don’t mind a quiet beer from time to time.

But there are legitimate questions to ask about whether beer tax (and fuel tax, for that matter) are the right ways to fund government spending in this day and age.

Once upon a time, trade excises were the best, most reliable way to raise revenue – when hiding income was easier and computerisation was a pipe dream.

That was the 1800s.

These days? Well, let’s just say we’ve moved on (and in the case of petrol excise, there won’t be much to tax in 10 or 15 years!).

But the beer tax palava also asks questions about rising prices in general.

Beer tax isn’t a consideration for the RBA when discussing interest rates, but the same forces are at play in both cases.

The Reserve Bank put rates up on Tuesday. The Big Four banks finally followed, yesterday.

And there’s almost-certainly more to come.

Meanwhile?

Meanwhile, we’re in the opening salvos of earnings season, where companies will give us a look under the bonnet – and one of the key things to keep an eye on is how well – or otherwise – they’re dealing with inflation.

I’m regularly asked ‘How are you investing in this time of…’.

At the moment it’s ‘…inflation and rates.’

In the past it was high valuations.

Before that, it was COVID.

And so it goes.

My answer is boring – and probably doesn’t help me get invited back on those programs!

I haven’t changed my investing strategy in years.

Oh, I’ve learned some things. And modified my approach accordingly.

But I’ve never taken a ‘…this time of…’ strategy.

For example, I’ve always liked businesses with strong brands and pricing power.

Sometimes that’s not what the cool kids are investing in, and sometimes those companies can be out of favour.

But ask yourself how the ‘hot stocks’ have performed recently.

You know, the ones that people loved because they were ‘cool’, no matter how good or bad their financials looked.

Remember when everyone wanted to buy buy-now-pay-later stocks?

Or lithium miners?

Or whatever.

No, I’m not saying they can’t or won’t come good.

Some probably will.

Some, well… won’t.

I’m a bit old school. I like profitable companies.

Not exclusively – I’ve recommended loss-making companies where I think there’s a clear path to profitability – but mostly.

That doesn’t get me invited to the ‘hot stock’ forums or panels.

Meanwhile?

Meanwhile, shares in a company I own, Berkshire Hathaway, are up 62% over the last 5 years.

Another, Washington H. Soul Pattinson, is up 52%.

Amazon (ditto) is up 171%.

Oh, they’re not all winners – I’ve lost some money, too.

Have other companies gained more over the last 5 years? Absolutely.

Would I have liked to own them? Sure, if I’d have known, in advance, what might happen.

But that would have required luck. And, in some cases, blatant speculation.

Hey, someone wins lotto every week, too, right?

I looked silly for a while, eschewing buy-now-pay-later.

Afterpay shareholders got a Godfather offer from a US payments company and – if they’d sold, rather than taking shares in the deal – got very, very lucky.

Others, who bought shares in competitors are down 84% over the last year (Zip), 86% (Sezzle), or 76% (Openpay).

There were others.

No, I’m not raining on their parade.

I’m not rubbing it in.

But I am making the point that, at certain times, a ‘boring’ investment strategy can look hopelessly out of touch.

One business magazine, in 1999, famously asked ‘What’s Wrong, Warren?”.

They were, of course, talking about Warren Buffett, whose company, Berkshire Hathaway that I mentioned earlier, had not only avoided investing in tech, but had suffered serious share price falls as investors abandoned it.

They were investing, instead, in dot.com high-flyers.

We know how that ended.

Unfortunately, investment memories are short.

Maybe it’s the seduction of seemingly quick, easy wins.

The challenge of watching other people get rich and not being able to resist joining the party.

Of ‘this time it’s different’.

Sometimes, it is different.

Amazon made it through the dot.com carnage and went on to bigger and better things.

There will be winners from the current tech slump that will look cheap, today, in hindsight.

Hopefully, including a couple I own.

But I own some boring businesses. Ones that tick away, compounding in the background.

They’re not going to be ‘hot stocks’ any time soon.

But they’re slowly, surely, growing.

Some have been ‘’hot stocks’, but have fallen to Earth.

And I’m okay with that, too.

Because I didn’t buy them because they were ‘hot’.

I bought them because I think they’ll be bigger, better and more profitable in 5, 10 and 15 years.

I plan to own the vast majority of my current holdings well beyond 2037, if they continue to perform.

And if they do?

Not only will the compound returns be great, but I’ll have avoided brokerage, capital gains tax and the challenge of finding better companies to replace them.

I’ll keep adding money to my portfolio regularly, too – sometimes buying more of what I already own, sometimes buying shares in companies I haven’t owned before.

Some years will be great.

Some will be ordinary.

But over the long term?

I reckon it’ll be pretty boringly wonderful.

Which beats ‘exciting, but mediocre’, don’t you reckon?

Fool on!

The post The New Normal? Kinda like the Old Normal… appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#43B02A”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43B02A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• ‘Higher costs and lower capacity’: Why this broker tips the Qantas share price to nosedive
• Why has the Lynas share price surged 22% in the last 3 weeks?
• This $45 billion ASX 200 share just hit a new multi-year high. Can it keep going?
• 3 things I love about the iShares S&P 500 ETF right now
• Block share price in danger of sinking following Q2 update

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Scott Phillips has positions in Amazon, Berkshire Hathaway (B shares), and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon, Berkshire Hathaway (B shares), Washington H. Soul Pattinson and Company Limited, and ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Amazon and Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/IEWnsAC

The Lynas Rare Earths Ltd (ASX: LYC) share price has outperformed its benchmarks in the new financial year.

In the last three weeks of trade, investors have bid the share 22% higher.

In broad market moves, the S&P/ASX 300 Metals and Mining Index (ASX: XMM) has risen less than 1% over the past month of trade.

What’s up with the Lynas share price?

Lynas shares caught a bid on 13 July and have surged ever since.

It’s curious because as commodity markets such as oil and gas cool off, rare earths have followed suit. Their price on global markets is down 13% on the month.

Despite this, investors have piled into Lynas shares since mid-July, with trading volumes shooting higher again yesterday following a company announcement.

The miner advised of a $500 million project to expand capacity at its Western Australia Mt Weld mine and concentration plant.

As The Motley Fool reported, global demand for NdFeB [neodymium] magnets is expected to grow from 130,000 tonnes in 2020 to 265,000 tonnes by 2030.

Lynas’ new project is fully funded from cash flow. The company’s initial expansion plans have already been scoped, with Lynas looking to produce 12,000 tonnes per annum equivalent of neodymium and praseodymium in 2024.

Prior to this, the company’s Q2 FY22 earnings report was a positive catalyst that saw shares head back to longer-term price ranges.

In the report, Lynas grew cash receipts to a record $351 million, also 34% up on the same time last year. This was recognised with sales revenue of roughly $295 million.

In the last 12 months, the Lynas share price has clipped a 23% gain.

The post Why has the Lynas share price surged 22% in the last 3 weeks? appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#43B02A”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43B02A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Here are the top 10 ASX 200 shares today
• Why BWP, Lynas, Pilbara Minerals, and Pinnacle shares are charging higher
• ‘Essential foundation for success’: Lynas share price leaps on $500 million expansion
• Here are the top 10 ASX 200 shares today
• Rare earths are now in the red for 2022. What does this mean for the Lynas share price?

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.

from The Motley Fool Australia https://ift.tt/fHr6q4A

The Transurban Group (ASX: TCL) share price was rangebound yesterday and finished the day at $14.72 apiece. This extends the month’s gains to more than 1.3% and a 52-week high.

Zooming out, the share now trades at its highest level in more than 2 years. It nudged this level briefly in 2021, before quickly receding below the neckline.

As such, Transurban has nudged to another multi-year high and the question now becomes if it can keep up the pace.

Returns for the share versus the benchmark S&P/ASX 200 Index (ASX: XJO) for the past 5 years are plotted on the chart below.

Can Transurban push higher?

Analysts at Bell Potter reckon it can and recently affirmed their buy rating in a recent note to clients. In the release, Bell Potter reckons there are large opportunities on the horizon for the toll road giant.

The company’s “current pipeline of growth projects is $3.9 billion,” the broker said.

“[F]urther huge development opportunities are expected over the next few decades supported by population and economic growth” are also expected to be key drivers of the share price.

Meanwhile, more than 42% of brokers reckon Transurban is a buy right now, according to Refinitiv Eikon data.

However, 50% also say it’s a hold with the remainder urging clients to sell.

From this list, the consensus price target is $14.21, suggesting that the Transurban share price might have difficulty climbing higher if the group is correct.

One fund manager is positioned in TCL to capture a return from the current trends in inflation.

As TMF reported in July, “Atlas Funds Management chief investment officer Hugh Dive has named Transurban as one of three companies that could do quite well in a high interest rate environment.”

According to the Australian Bureau of Statistics (ABS), the consumer price index – Australia’s primary measure of inflation – increased 6.1% over the 12 months to 30 June.

Hence, if the relationship between the Transurban share price and upturns in inflation turns out to be true, that’s certainly something to think about.

In the last 12 months, the Transurban share price has clipped a 4% gain as well as 6% this year to date.

The post This $45 billion ASX 200 share just hit a new multi-year high. Can it keep going? appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• 3 ASX 200 shares smashing new 52-week highs on Thursday
• Broker names 3 ASX 200 shares to buy and hold
• When inflation = profit: Why this fundie is tipping the Transurban share price to outperform
• Expert prediction: 3 ASX 200 shares that can ‘do well’ in volatile times
• 3 ASX shares for ‘predictability’ through tough times: expert

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.

from The Motley Fool Australia https://ift.tt/JoqOsnl

The iShares S&P 500 ETF (ASX: IVV) could be one of the best exchange traded funds (ETFs) for Aussies to consider for their portfolios.

There are a few things I look for when it comes to ETFs.

Firstly, I want to see that the ETF has quality holdings.

Next, I like to know that the ETF is sufficiently diversified or can improve the diversification of an existing portfolio.

Finally, I’d prefer the ETF to have relatively low management fees. I don’t want my portfolio to be paying excessive management fees to the fund provider.

So, let’s look at each of those areas.

Quality holdings

The first reason I like the IVV ETF is because of the high-quality nature of its holdings.

This ETF is invested in 500 of the biggest companies invested in the US. It’s an index fund that follows the S&P 500 Index.

When it comes to world leaders in various sectors of the global economy, plenty of them can be found in the US.

Areas like smartphones, software, e-commerce, cloud computing, electric vehicles, online streaming, and many more are represented in the biggest holdings of the fund.

Here are some examples of those leading businesses: Apple, Microsoft, Alphabet, Amazon, Tesla, Berkshire Hathaway, UnitedHealth, Nvidia, Johnson & Johnson, Meta Platforms, Procter & Gamble, Visa, Mastercard, Costco, Broadcom, Adobe, and McDonalds.

While past performance is no guarantee of future returns, the iShares S&P 500 ETF returned an average of 17.4% per annum over the ten years to 30 June 2022. I think that demonstrates how well the underlying businesses have done over the last deade.

As new businesses become important players in the share market, they can grow their position in the ETF’s holdings.

Diversification

This ETF offers Aussie investors the potential to buy a wide array of great businesses.

But, I think it’s useful because of the fact that it offers exposure to different sectors than the S&P/ASX 200 Index (ASX: XJO). The ASX is focused on two sectors: resources and banks.

But, the IVV ETF has a heavier weighting to sectors that typically have attractive margins and better growth profiles – namely technology and related areas.

Let’s look at the sector breakdown at 2 August 2022.

IT (27.85%)

Healthcare (14.26%)

Consumer discretionary (11.54%)

Financials (10.5%)

Communication (8.42%)

Industrials (7.81%)

Consumer staples (6.68%)

Energy (4.3%)

Utilities (3.02%)

Real estate (2.86%)

Materials (2.49%)

Low management fees

The iShares S&P 500 ETF has one of the lowest management fees of the whole ETF sector on the ASX.

Its annual management fee is just 0.04%. That means almost all of the returns generated by the IVV ETF portfolio stay in the hands of investors rather than being paid to Blackrock, the provider of the ETF.

We don’t know what the returns of an index or individual company are going to be, but we can ensure that fees paid are as low as possible (or are worth it).

With this investment option, I think investors can be happy knowing that we’re getting good value for money with this option.

Foolish takeaway

I’m a fan of this ETF. It ticks the boxes of the factors that I outlined earlier. The lower price in 2022 for this investment puts the icing on the cake – it’s down 10% since the start of the year.

The post 3 things I love about the iShares S&P 500 ETF right now appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#43B02A”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43B02A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• I rate these top ASX growth shares as buys in August
• 3 wonderful ETFs for ASX investors to buy today
• 3 quality ETFs for ASX investors in July
• Here are 3 ETFs for ASX investors to buy in FY23

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. 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. 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 Adobe Inc., Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Berkshire Hathaway (B shares), Costco Wholesale, Mastercard, Meta Platforms, Inc., Microsoft, Nvidia, Tesla, and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Johnson & Johnson and UnitedHealth Group and has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long January 2024 $420 calls on Adobe Inc., long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), short January 2024 $430 calls on Adobe Inc., and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Adobe Inc., Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Berkshire Hathaway (B shares), Mastercard, Meta Platforms, Inc., Nvidia, and iShares Trust – iShares Core 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.

from The Motley Fool Australia https://ift.tt/tSAeCuH

The Block Inc (ASX: SQ2) share price looks likely to drop into the red on Thursday.

This follows the release of the payments company’s second quarter update this morning.

Block share price expected to tumble amid soft guidance

• Total quarterly revenue down 6% year over year to US$4.4 billion
• Quarterly gross profit up 29% year over year to US$1.47 billion
• Adjusted EBITDA down 48% to US$197 million
• Net loss of US$208 million
• Growth expected to moderate early in Q3

What happened during the quarter?

For the three months ended 30 June, Block reported a 6% reduction in revenue to US$4.4 billion. This reflects a decrease in bitcoin revenue, which offset a 34% in revenue excluding the cryptocurrency.

Block’s gross profit came in at US$1.47 billion for the quarter. This was a 29% increase year over year and up 47% on a three-year compound annual growth rate (CAGR) basis.

Excluding its Afterpay buy now pay later (BNPL) platform, gross profit was US$1.32 billion. This was up 16% year over year and 42% on a three-year CAGR basis.

Block’s growth was driven by solid performances from its Square ecosystem and Cash App business. Both reported gross profit growth of 29% to US$755 million and US$705 million, respectively.

The food and drink channel was the highlight for the company. It has achieved the fastest gross profit growth of any Square vertical on a five-year CAGR basis. Through the first six months of 2022, gross payment volume (GPV) from Square for Restaurants more than doubled year over year.

How does this compare to expectations?

The good news is that Block’s gross profit was in line with the market’s expectations and its revenue was a touch ahead.

That was despite Block’s gross payment volume of US$52.5 billion missing the market consensus estimate of US$53.47 billion.

However, it may not be enough to stop the Block share price from being sold off today. That’s because of the company’s disappointing outlook commentary.

Outlook

Management is expecting its growth to moderate during the early part of the third quarter of FY 2022.

It advised that Square GPV is expected to be up 18% year on year in July. This compares to 25% growth during the second quarter.

And worryingly, the company didn’t commit to a percentage growth figure for the Cash App business. It only expects “to grow on a year-over-year” basis.

Finally, management warned that it operating expenses are expected to increase by US$75 million in the third quarter compared to the second quarter.

In after-hours trade on Wall Street, the Block share price is down 7%.

The post Block share price in danger of sinking following Q2 update appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#43B02A”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43B02A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• 5 things to watch on the ASX 200 on Friday
• Here are the top 10 ASX 200 shares today
• Why is the Block share price charging 10% higher on Thursday?
• Why are ASX 200 tech shares having such a stellar run today?
• Why is the Block share price leaping 5% on Wednesday?

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

from The Motley Fool Australia https://ift.tt/BitzHPq

Last month the Suncorp Group Ltd (ASX: SUN) share price stormed higher following the announcement of a divestment.

The insurance giant’s shares finished the day 6% higher at $11.78 after it agreed to sell its banking business to Australia and New Zealand Banking Group Ltd (ASX: ANZ).

Since then, however, the Suncorp share price given back half of these gains, closing Thursday’s session at $11.46.

Why is the Suncorp share price backtracking?

Investors have been selling the insurer’s shares after its divestment received a lukewarm response from a number of analysts.

For example, the team at Citi have warned that the company’s sale could be dilutive to its earnings in the coming years. Citi commented:

We estimate SUN’s sale of its bank to ANZ would be ~9% dilutive in FY24E. It would also dilute RoE [return on equity] but materially increase return on tangible book. Overall, we see the bank sale as strategically sound but not one that adds materially to our estimated value.

In our view, it would, however, firm up value in its bank and pave the way for a material capital return, ACCC permitting. Shareholders can also hope for better medium-term returns from general insurance.

In light of this, the broker has reduced its earnings per share estimates as follows: FY22E: -15%; FY23E: -4%; FY24E: -13%.

It’s not all bad news

The good news, though, is that the broker still sees plenty of value in the Suncorp share price despite this.

It has retained its buy rating with a trimmed price target of $13.00. This implies potential upside of 13.5% over the next 12 months. Citi concluded:

Despite several current headwinds and tailwinds that we discuss inside, we still forecast expanding margins and continue to see reasonable value. We retain our Buy call.

The post Why has the Suncorp share price gone backwards since the ANZ takeover news? appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#43B02A”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43B02A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Here are the top 10 ASX 200 shares today
• What might the ANZ deal mean for Bank of Queensland shareholders?
• ANZ to buy Suncorp’s banking business, and real wages going backwards. Scott Phillips on Sky News First Edition
• What might ANZ’s Suncorp deal mean for competition among ASX 200 banks?
• ‘CBA and Westpac are too big’: One fund manager’s take on the future of ASX 200 bank shares

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.

from The Motley Fool Australia https://ift.tt/GHJwDSU

If you’re interested in gaining some exposure to the healthcare sector, then Healthco Healthcare and Wellness REIT (ASX: HCW) shares could be for you.

That’s because the team at Goldman Sachs believes the healthcare property company’s shares have major upside potential.

What did Goldman say about this healthcare share?

Goldman is very bullish on Healthco Healthcare and Wellness REIT’s shares and has reiterated its conviction buy rating with a $2.20 price target.

So, with its shares currently changing hands at $1.66, this implies potential upside of 33% for investors over the next 12 months.

In addition, the broker is forecasting a 4.5% dividend yield in both FY 2022 and FY 2023. This lifts the total 12-month return to ~38%.

5 reasons Goldman is bullish

Goldman Sachs has named five reasons that it is bullish on the Healthco Healthcare and Wellness REIT share price.

These include the company’s strong balance sheet, robust demand for its properties, and the attractive valuation of its shares following a period of underperformance. The broker explained:

Year-to-date, HCW has underperformed the REIT index by ~7% as concerns over the macro environment and rising rates have impacted HCW’s share performance. However, the REIT remains one of our top picks in the sector given:

1) its net cash position with over $450mn of liquidity, providing flexibility for near term opportunities, 2) its diversified mix of strong tenant covenants in sub-sectors that are majority government-backed across the care spectrum, mitigating potential tenant credit risks, 3) Healthcare and childcare assets valuations have remained resilient, 4) the expansive forecast future demand for assets across the care spectrum, underpinning development opportunities, and 5) inexpensive valuation, trading below its IPO share price and an ~18% discount to NTA.

And while Goldman acknowledges that there are risks from higher capital costs, it believes the risk/reward on offer is compelling enough to support its conviction buy rating.

Whilst we acknowledge risks remain we believe the current valuation provides an attractive entry point. HCW offers a potential 12m total return of +c.39% at our revised 12-m A$2.20 TP. We maintain our Buy (on CL) rating.

The post 5 reasons to buy this ASX healthcare share: Goldman Sachs appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#43B02A”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43B02A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• 2 ASX shares in a sector ready for a massive comeback

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.

from The Motley Fool Australia https://ift.tt/Wn9dBJH

All eyes will be on the Commonwealth Bank of Australia (ASX: CBA) share price next week.

On 10 August, Australia’s largest bank will be releasing its highly anticipated full-year results.

Ahead of the release, let’s take a look to see what the market is expecting from the banking giant.

What is the market expecting from the CBA result?

According to a note out of Goldman Sachs, its analysts are expecting the banking giant to outperform consensus expectations with its second-half cash earnings.

The broker has pencilled in cash earnings from continued operations (before one-offs) of $4,742 million for the six months. This will be a 1% decline on the prior corresponding period, but ahead of the consensus estimate of $4,546 million.

This will take its full-year cash earnings to $9,488 million for FY 2022, up 9.7% year over year.

From these earnings, Goldman Sachs is expecting the bank to pay a 205 cents per share fully franked final dividend. Interestingly, despite forecasting higher than consensus earnings, the broker’s estimate is lower than the consensus estimate of 208 cents per share.

Goldman’s estimate would mean a full-year dividend of 380 cents per share, up 8.6% on FY 2021’s payout.

What else should you look out for?

Outside its earnings and dividend, arguably the key focus for investors will be CBA’s net interest margin (NIM). Goldman is expecting an improvement in this metric thanks to the rising cash rate. It explained:

We estimate CBA’s 3Q22 NIM was 1.87%, and supported by the early benefits of cash rate rises. We estimate a 2H22E NIM of 1.88%. However, we expect the market will focus more on any updated commentary around the leverage of its NIM to cash rate rises and/or commentary around exit NIMs.

In addition, the broker is expecting the bank’s asset quality to remain strong. It said:

Despite rising interest rates, high inflation, and supply chain disruptions, asset quality has remained strong with CBA reporting a BDD contribution of A$48 mn (-2 bp of total loans) in 3Q22 driven by a slight reduction to credit provisions. For us, the key focus will be around how CBA frames its downside and severe scenarios as part of its expected credit losses (ECL) modeling, which we suspect will need to shift from scenarios based around Covid-lockdowns, to be more focused around stagflation.

Is the CBA share price good value?

Unfortunately, Goldman Sachs continues to believe that the CBA share price is overvalued at the current level.

It has retained its sell rating and $90.45 price target on the bank’s shares.

The post Own CBA shares? Here’s what to expect from the bank’s FY22 results appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Which ASX 200 shares will prove to be dividend heavyweights this earnings season?
• First mover: CBA share price rises amid interest rate changes
• Here is the RBA interest rate outlook according to ASX 200 banks
• How are ASX 200 bank shares responding to the RBA rate increase?
• Up 10% in a month, is the CBA share price now fully valued?

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.

from The Motley Fool Australia https://ift.tt/9f1SXDj

ASX shares involved in lithium production have been so hot in recent years that it’s difficult to find cheap buys these days.

But Wilson Asset Management analyst Cooper Rogers reckons he’s found a major resources company where the market is materially undervaluing its lithium operations.

“Mineral Resources Limited (ASX: MIN)’s a buy for us,” he said in a Wilson video.

“Their mining services division is underwritten for a 10% growth on their EBITDA line next year, along with that, we really do like the lithium business.”

Lithium, which is highly sought after for its role in modern batteries, could be a massive cash cow for the company in the coming years.

“We think [the lithium business] is undervalued versus its peers,” said Rogers.

“We think the MD Chris Ellison is going to come out of the full-year result and outline a really strong strategy for that division… that’s a catalyst for this stock to re-rate.”

The company’s preliminary results are scheduled to report on Wednesday.

The Mineral Resources share price has fluctuated widely in 2022, as mining stocks do. It is currently about 5.3% down from the start of the year.

(Almost) everyone reckons this stock is a buy right now

Rogers is not the only one bullish on Mineral Resources Limited.

According to CMC Markets, 10 out of 11 analysts recommend it as a buy. Nine of those 10 rate Mineral Resources as a strong buy.

Last week, The Motley Fool reported that Citibank analysts have a buy rating on the stock and a price target of $73.

That’s a nice 31.5% premium on the Thursday closing price of $55.50.

“Citi is positive on Mineral Resources due to its exposure to iron ore and lithium,” wrote James Mickleboro.

“Its analysts expect the price of the latter to stay higher for longer thanks to strong demand and tight supply.”

Bell Potter has a $75 price target for similar reasons to Rogers.

“Bell Potter is bullish on Mineral Resources due largely to its lithium business,” The Motley Fool reported last week.

“The broker is expecting this side of its business to start yielding increasing returns from FY 2023.”

The post Buy this ASX share for its ‘undervalued’ lithium business: expert appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#43B02A”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43B02A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Top brokers name 3 ASX shares to buy next week
• Brokers name 3 ASX shares to buy today
• Here are the top 10 ASX 200 shares today
• Mineral Resources share price on watch following Q4 update
• How much has Mineral Resources paid in dividends over the last 5 years?

Motley Fool contributor Tony Yoo 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.

from The Motley Fool Australia https://ift.tt/hClbn9y

The Objective Corporation Limited (ASX: OCL) share price was a strong performer on Thursday.

The information technology software and services company’s shares stormed 7% higher to end the day at $16.60.

Why did the Objective Corp share price shoot higher?

The catalyst for the strong gain by the Objective Corp share price appears to have been a bullish broker note out of Goldman Sachs.

According to the note, the broker has upgraded the company’s shares to a buy rating with an improved price target of $18.90.

Based on the current Objective Corp share price, this implies potential upside of 14% for investors over the next 12 months even after yesterday’s strong gain.

What did the broker say?

One of the reasons that Goldman is bullish on the company is its Regworks offering, which it believes has a major total addressable market (TAM). Goldman explained:

While more difficult to quantify based on the broad applicability of Objective RegWorks (regulatory compliance software) across public sector use cases, we are attracted to the large potential market opportunity. OCL estimates its RegTech addressable opportunity at A$27bn, based on the administrative burden of regulation. Given the wide reach of regulation across all parts of the economy and layers of government, arguably RegWorks has the largest TAM of any part of OCL’s product suite per our estimates.

In addition, the broker believes that recent weakness in the Objective Corp share price has created an attractive entry point for investors. Particularly given its forecast for an earnings per share compound annual growth rate of 20% between FY 2022 and FY 2025

Since initiating in April, we highlight two key developments driving our more constructive view: (1) a more attractive entry point, with the shares now having de-rated -40% since late 2021; and (2) increased conviction around OCL’s growth outlook as new products scale. We now see OCL’s valuation as attractive compared to SaaS peers after adjusting for its growth outlook and conservative accounting policies (all R&D expensed).

The post Goldman Sachs just slapped a buy rating on this ASX tech share appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Expert says Telstra is a blue chip ASX 200 share to buy
• 3 ASX 200 shares to buy for a post-COVID resurgence: experts
• Brokers name 2 ASX dividend shares to buy now
• 3 reasons this broker says Woolworths shares are a strong buy
• The retailer that’s a ‘recession-proof’ ASX share to buy: analyst

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 Objective Corporation Limited. 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.

from The Motley Fool Australia https://ift.tt/krlKsea