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It is a decent day on the market on Thursday, but it is a volatile day for the Magellan Financial Group Ltd (ASX: MFG) share price.

Moments after the market kicked off, investors were flocking to the financial management company, lifting more than 3%. However, Magellan shares quickly inversed and are now down 1% at $14.49 at the time of writing. As a point of comparison, the S&P/ASX 200 Index (ASX: XJO) is up 0.5% this morning.

While it appears Magellan was still bleeding outflows throughout July, there are some positives. Let’s take a closer look.

What is boosting the Magellan share price?

It has been a challenging past year for Magellan, with the negative news cycle accelerated by the loss of its St James Place mandate back in December last year.

Today, the pain subsides as onlookers absorb a month of fund flows that could hint at a flattening.

According to the funds under management (FUM) update for July, the company’s total FUM stood at $60.2 billion at the end of the month. For context, FUM finished at $61.3 billion at the end of June, meaning Magellan experienced a further 1.8% deterioration in its managed funds.

On a positive note, the rate of the reduction has slowed compared to the prior month, which was a 5.7% decrease at the end of June. This could be one aspect of the update giving the Magellan share price a boost today.

Where the money flows

Taking a closer look at how the specific segments fared in July, FUM changes were as follows:

• Global equities FUM down 0.01% to $33 billion
• Infrastructure equities FUM down 6% to $18.9 billion; and
• Australian equities FUM up 13.7% to $8.3 billion

Investors might also be shifting their gaze toward the significant uptick in Australian equity funds. While it represents the smallest portion of the company’s FUM, it is a welcomed positive for the Magellan share price.

Despite today’s reprieve, Magellan shares remain roughly 23% lower compared to where they were at the beginning of the year.

The post What’s $1 billion between friends? Magellan share price shrugs off latest FUM figures  appeared first on The Motley Fool Australia.

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More reading

• Is the Magellan share price a buy for its big dividend yield?
• Morgan Stanley forecasts Magellan share price will sink 35%
• Why has the Magellan share price leapt 21% in a week?
• Here are the top 10 ASX shares today
• What market prediction sent the Magellan share price spiking 9% today?

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has 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 lead economists of the S&P/ASX 200 Index (ASX: XJO) banks have run their slide rules over the latest 0.50% interest rate increase from the Reserve Bank of Australia (RBA). Tuesday’s hike brought the official cash rate to 1.85%.

ASX bank shares gained on Tuesday in the wake of the RBA’s announcement and retraced yesterday alongside a broader market pullback.

Now the top economic thinkers at the ASX 200 banks have dusted off their crystal balls and offered their forecasts on what investors can expect from the RBA over the rest of the year.

First, up Gareth Aird, head of Australian economics at Commonwealth Bank of Australia (ASX: CBA).

Top economist of biggest ASX 200 bank says keep an eye on wages growth

Aird expects the cash rate will reach 2.60% this year but says any weakness in wages growth could see the RBA reduce its tightening pace.

According to Aird (quoted by The Australian Financial Review):

Despite forecasts for below trend economic growth in 2023 and 2024 we do not expect the RBA to take the policy rate above their estimate of neutral provided they pause for a few months after reaching approximately 2.60%.

We expect the cash rate to be 2.60% by November. Our base case is a further 50 basis point hike in September and a 25 basis point hike in November, but the RBA could shift to ‘business as usual’ 25 basis point monthly increments from here if the upcoming data makes the case (particularly if the Q2 22 Wage Price Index, due 17 August, indicates wages pressures are below expectations). On that basis we would expect three consecutive 25 basis point rate hikes (ie. September, October, November) to still arrive at the same terminal rate of 2.60% in November.

Aird also pointed out that much of the data the RBA and financial analysts work with stems from the previous months, with the coming months likely looking significantly different. He added:

Note that there is a significant dichotomy in the domestic economic data at present and this will continue over coming months. Backward looking labour market data will remain robust, wages growth will accelerate and inflation will remain elevated. But forward looking data has deteriorated and further weakness is expected. This includes consumer sentiment, home prices, housing lending and building approvals.

RBA’s language takes a modest dovish turn

David Plan, head of Australian economics at ASX 200 bank Australia and New Zealand Banking Group Ltd (ASX: ANZ), noted the moderately dovish shift in the RBA’s language.

“The RBA tightened by 50 basis points at its August meeting. The key change from July is that there is no longer any reference to the withdrawal of extraordinary monetary support,” he said.

According to Plan (courtesy of the AFR):

This could be a signal that the RBA Board may be thinking about reducing the size of the monthly increases to 25 basis points in September. We think a 50 basis point increase is still the most likely choice.

The RBA’s updated forecasts have inflation peaking at 7.75% and only dropping to ‘around’ 3% through 2024. This is despite growth slowing below 2% in 2023 and 2024. We will be very interested to see what interest rate assumption is part of that forecast mix.

ASX 200 bank forecasts ‘slightly restrictive monetary policy setting’

Ivan Colhoun, chief economist at ASX 200 listed National Australia Bank Ltd (ASX: NAB) said the RBA will need somewhat restrictive policies to get the inflation genie back inside the bottle.

“NAB’s view is that seeking a return to 2-3% inflation will likely require at least a slightly restrictive monetary policy setting, which we suggest is in the 2.60% to 2.85% cash rate range,” he said.

Colhoun continued (quoted by the AFR):

NAB remains comfortable with its 2.85% cash rate forecast for end 2022 but continues to see a step down in the size of rate increases after this next meeting and a likely pause before the year end. The ‘not on a pre-set’ path is likely to see significant debate about whether the Bank might even step down the pace of rate increases at the September Board meeting, while continuing to tighten.

NAB expects a further 50 basis point increase in the cash rate in September. With the cash rate then at 2.35% and approaching more neutral levels, we expect the Bank to step down to 25 basis point increases in October and November, to achieve a mildly restrictive 2.85 basis point cash rate in early November. A pause for some time is likely as the RBA assess the impact of recent moves.

There you have it.

If the top economists at these three ASX 200 banks have it right, we can expect the RBA to hike rates to between 2.60% and 2.85% by the end of 2022.

After that, we’re likely to see some smaller and more gradual increases to bring inflation back into the central bank’s 2% to 3% target range.

The post Here is the RBA interest rate outlook according to ASX 200 banks appeared first on The Motley Fool Australia.

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More reading

• Is the NAB share price a buy ahead of next week’s quarterly update?
• Guess how much ANZ shares have paid in dividends over the last 5 years
• ANZ share price best of bad bunch after pocketing extra $2.3b
• 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 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 Orica Ltd (ASX: ORI) share price is plummeting after the company successfully raised $650 million to partly fund a major acquisition.

The explosives company is acquiring geospatial tools manufacturer Axis Mining Technology in a deal worth up to $350 million.

The Orica share price has broken its single-session trading halt this morning with a 9.88% fall at the time of writing. Shares in the company are currently swapping hands for $15.50 apiece.

Let’s take a closer look at what’s going on with the S&P/ASX 200 Index (ASX: XJO) commercial blasting systems provider.

Orica share price plunges 10% after successful placement

The Orica share price is tumbling after being removed from the freezer following a successful $650 million capital raise.

The placement saw around 40.6 million new shares offered to institutional investors for $16 apiece. That represents a 7% discount on Monday’s close.

Its proceeds will go towards the acquisition of Axis. The business will cost the ASX 200 company $260 million in cash upfront.

Orica could also end up forking out up to $90 million in earn-out payments. Such payments are subject to financial performance and other conditions.

The raised money will also help the company fund incremental trade working capital requirements arising from global supply chain dislocations and strengthen its balance sheet.

Commenting on the successful placement, Orica managing director and CEO Sanjeev Gandhi said:

We are extremely pleased and thankful for the support we have received from new and existing institutional investors who recognise the compelling strategic benefits of our acquisition of Axis and support our goal of establishing a leading Digital Solutions platform.

And it’s not all over yet. A $75 million share purchase plan will open next week.

It will see shareholders able to grab up to $30,000 worth of new Orica shares for the lower of $16 per share or a 2% discount to the stock’s five-day volume average weighted price.

The share purchase plan will close on 26 August.

The post Orica share price plummets 10% following successful cap raise appeared first on The Motley Fool Australia.

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More reading

• Orica share price in the freezer amid acquisition and $650m cap raise
• 3 ASX 200 shares rocking new, multi-year highs on Tuesday

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 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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Woodside Energy Group Ltd (ASX: WDS) shares seem like a better pick compared to Santos Ltd (ASX: STO) in my opinion.

Both are ASX oil and gas share giants.

Woodside has a market capitalisation of $61.7 billion according to the ASX. Santos has a market capitalisation of $23.8 billion.

I’m not picking Woodside because of its size, but scale does come with some economic advantages that can help with profit margins. That was one of the reasons for the merger with the oil and gas division of BHP Group Ltd (ASX: BHP).

While I’m not the world’s biggest fan of oil and gas businesses, I think Woodside shares can make the better pick because of these two factors:

Dividends

Woodside has typically paid investors a solid dividend, but thanks to the help of higher energy prices, Woodside is expected to pay a large dividend in the next couple of financial years.

First, let’s look at the expected dividends from Santos.

According to CMC Markets, Santos is expected to pay an annual dividend of 37.7 cents per share in 2022 and 40.5 cents per share in 2023. Using those projections (and a franking rate of 70% as per the last dividend paid by Santos), Santos is estimated to pay a grossed-up dividend yield of 6.8% for FY22 and 7.3% in FY23.

Let’s compare that to Woodside. The CMC Markets estimate for the 2022 dividend is $3.60 per share and $2.72 for 2023. That translates into a grossed-up dividend yield of 15.8% in FY22 and 12% in FY23 at the current Woodside share price.

While dividends aren’t everything, I think the bigger dividend yield from Woodside can help provide stronger returns.

$5 billion investment target

Woodside has a plan to invest billions in green energy. I think this is an important part of the company’s plan to future-proof itself.

There’s H2Perth, which has a flexible design for hydrogen or ammonia. The initial phase is targeting around 110,000 tonnes per annum of hydrogen production, including a 250MW electrolysis component. It has a future capacity of up to 550,000 tonnes per annum of hydrogen for export.

H2TAS is targeting 200,000 tonnes per annum of ammonia and a 300MW electrolysis. It has completed studies with potential customers for ammonia export to Japan.

H2OK is targeting around 33,000 tonnes per annum of liquid hydrogen including a 290MW electrolysis component.

Heliogen is another project, which is described as “breakthrough solar technology”. The initial phase is targeting 5MW. It’s a concentrated solar energy system with a power supply that could work nearly all day and all night. It’s targeting construction to begin in 2022. It’s working towards a joint marketing arrangement for technology in the US and Australia.

It’s also working on a large-scale solar farm with an initial phase targeting up to 100MW capacity. This will deliver electricity through the North West Interconnected System in WA. The maximum capacity will be up to 500MW.

Foolish takeaway

Woodside shares are paying investors more in the short-term and the company is starting to invest in green energy for the long-term as well. While I wouldn’t call it a great buy today, I think it could be a better long-term pick than Santos.

The post 2 reasons why I’d pick Woodside shares over Santos appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Thursday
• 5 things to watch on the ASX 200 on Wednesday
• Why is the Santos share price lagging the ASX 200 on Tuesday?
• Why Appen, Credit Corp, Fortescue, and Santos shares are dropping
• Looking to buy Woodside shares? Here’s why the energy giant faces a fresh legal battle from climate activists

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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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.

What happened

Tesla (NASDAQ: TSLA) will hold its annual shareholder meeting Thursday, when investors will find out if the company’s proposed 3-for-1 stock split has been approved. Anticipation of that had Tesla shares trading 2.2% higher as of 2 p.m. ET Wednesday. 

So what

Wednesday’s gains came despite escalating tensions between the U.S. and China that potentially could directly impact the businesses of U.S. electric vehicle (EV) manufacturers. But investors seemed more focused on Tesla’s annual meeting, which will be the final chance for shareholders to vote on the proposed stock split. 

Now what

The company has offered two main reasons to support the stock split.

“We believe the stock split would help reset the market price of our common stock so that our employees will have more flexibility in managing their equity,” management said. “…[T]he stock split will also make our common stock more accessible to our retail shareholders.”

Tesla last split its shares in a 5-for-1 transaction in August 2020. The stock is up about 80% since that time. While stock splits don’t change anything about a business or its valuation, a lower per share price can make a stock more accessible for some retail investors and options traders. 

Shareholders also hope the meeting will provide more details on how the company plans to meet its battery needs as it continues to rapidly increase production volumes. Tensions between the U.S. and China have been on the increase with U.S. House Speaker Nancy Pelosi visiting Taiwan this week. Chinese EV battery maker CATL was rumored to be postponing its plans to expand its manufacturing to North America. But Reuters subsequently reported that the world’s largest battery maker will move forward with those plans.

Given that it has a major manufacturing facility in Shanghai, Tesla would benefit from stability between the two countries. Both China and the U.S. want to expand the use of electric vehicles, and investors seem to be seeing good news on that front, beyond their optimism about the upcoming stock split vote.

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

The post Why Tesla shares bounced ahead of its stock-split vote appeared first on The Motley Fool Australia.

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More reading

• Why the Tesla share price jumped on Monday
• Tesla Q2 earnings call: 3 must-see quotes from Elon Musk
• Tesla beats earnings estimates and sells Bitcoin — Is the stock a buy?
• Why is the Vulcan Energy share price leaping 7% on Thursday?
• Tesla sells 75% of Bitcoin holdings. Here’s why Elon Musk is unloading

Howard Smith 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 Tesla. 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.

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

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The AMP Ltd (ASX: AMP) share price has pushed its way over the past month of trade as financial shares retain their position as one of the best performing sectors in H1 FY23.

The S&P/ASX 200 Financials (ASX: XFJ) index has ticked more than 9% higher in the past month of trade, ahead of the benchmark S&P/ASX 200 Index (ASX: XJO)’s return of around 6% in the same time.

Can the AMP share price keep up the pace?

After a string of capital budgeting moves that saw AMP sell off underperforming business segments, AMP has reshuffled its operations.

Consequently, AMP is now focused on growing its numbers and in the 2022 first quarter, it reported a total loan book increase of $500 million to $22.6 billion.

In addition, Inflows from external financial advisers increased by more than 50% to 342 million, prompting CEO Alexis George to remark on the company’s “strong and sustainable future”.

The other fact to consider is the effect of rising policy rates on the ASX financial shares bucket.

Rising interest rates are typically a net positive for companies within the financial services sector, seeing as a portion of income is tied to net interest income (NII). An industry benchmark is also the net interest margin (NIM) to compare between companies.

In other words, with the increase in interest rates comes the prospects of increasing NII and lifting NIMs to potentially increase profits. That’s the thinking anyway.

As seen in the chart below, along with a surge in the Australian cash rate and the yields on the Australian Government 10-year note, the AMP share price has pushed its way north as well.

The question now becomes if AMP can sustain the pace of growth on the chart.

Brokers are positioned such to say this might be a challenge. According to Refinitiv Eikon data, there is just 1 buy call on the share, with the remaining coverage split evenly between sell and hold.

The consensus price target from this list is $1.06 per share, suggesting the AMP share price could pull back to this level if the brokers are correct.

The post Up 13% in July, can the AMP share price maintain its momentum? appeared first on The Motley Fool Australia.

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More reading

• Here’s the good news about bear markets
• The AMP share price has surged 9% so far this month. Can it keep going?
• ‘Ready to compete’: Will AMP seek out new opportunities or stick to its knitting?
• Own AMP shares? CEO touts its ‘digital bank’ status in competitive landscape
• ‘CBA and Westpac are too big’: One fund manager’s take on the future of ASX 200 bank shares

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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The metaverse is a term that’s marched into the zeitgeist the last couple of years, helped by Facebook boss Mark Zuckerberg’s constant references to it.

The term describes what used to be referred to as ‘virtual reality’. The metaverse concept elevates that old idea to a broader base that, in the future, might represent the entire internet as a massive unified virtual world.

Zuckerberg is so sure the world is destined for the metaverse that in October last year he renamed Facebook Meta Platforms Inc (NASDAQ: META).

“The metaverse is the next frontier in connecting people, just like social networking was when we got started,” he wrote in a letter at the time.

“Our hope is that within the next decade, the metaverse will reach a billion people, host hundreds of billions of dollars of digital commerce, and support jobs for millions of creators and developers.”

So how can investors buy ASX shares for exposure to this trend?

A new ETF to take advantage of the theme

The answer to this question became a whole lot easier this week as BetaShares launched a new exchange-traded fund (ETF) that represents a global basket of Metaverse stocks.

The BetaShares Metaverse ETF (ASX: MTAV) will start trading on the ASX on Thursday.

BetaShares chief executive Alex Vynokur said the metaverse is “a powerful megatrend” forecast to “shake up” how the world communicates.

“This secular trend is expected to revolutionise the way we engage with sport, live music and other ways of staying connected.”

He added that the industry is still “in the early stages of evolution”.

“We are proud to provide investors with access to this investment opportunity,” he said. 

“This innovative new fund will form part of our leading suite of thematic funds that offer investors exposure to the megatrends that are changing the world around us.”

Which stocks will be in the MTAV ETF?

The BetaShares Metaverse ETF will track the Bloomberg Metaverse Select Index, which currently contains 32 stocks from around the world.

The contributing companies are from a variety of industries — not just software. Examples include NVIDIA Corporation (NASDAQ: NVDA), Roblox Corp (NYSE: RBLX), and Apple Inc (NASDAQ: AAPL).

BetaShares stated the fund exposes investors to “both large, profitable technology and entertainment companies, as well as more specialised companies”.

The fund is the “the first exchange traded fund of its kind in Australia”, it added.

The ETF will charge investors 0.69% per year of its net asset value.

The post How to buy ASX shares exposed to the metaverse appeared first on The Motley Fool Australia.

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More reading

• What Warren Buffett can teach you from his top 3 holdings
• 2 Nasdaq growth stocks that could turn $100,000 into $1 Million by 2030
• Why are ASX 200 tech shares having such a lousy start to the week?
• What’s in store for the BetaShares NASDAQ 100 ETF in the next 12 months?
• Why Apple stock is down 17% so far this year

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 Tony Yoo has positions in Roblox Corporation. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Meta Platforms, Inc., Nvidia, and Roblox Corporation. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Apple, Meta Platforms, Inc., and Nvidia. 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 AGL Energy Limited (ASX: AGL) share price lifted slightly last month, but not enough to mirror the gains posted by the broader market.

The energy producer and retailer’s stock rose from $8.25 at the end of June to close July trading at $8.38, representing a 1.58% gain over the course of the month.

The S&P/ASX 200 Index (ASX: XJO), on the other hand, surged 5.74% while the S&P/ASX 200 Utilities Index (ASX: XUJ) rose 3.13% in that time.

So, why did the AGL share price lag the ASX 200 and its sector in July? Let’s take a look.

What drove the AGL share price last month?

The reason behind the AGL share price’s underperformance last month is tough to pinpoint. Particularly as the company has been notably quiet lately.

In fact, the last time the market heard price-sensitive news from AGL was on 30 June.

Then, the energy giant revealed its former suitor Brookfield Asset Management sneakily snapped up a 2.5% stake in the company’s shares.

Off the market, the company announced it will be investing $40 million over five years into the Clover hydro power station, part of the Kiewa Hydro Scheme, last month.

The money will go towards upgrading the station – a move that will see the scheme’s output increase by 14 megawatts, the equivalent of powering Victoria’s Alpine region.

Finally, a notable broker revealed its expecting big things from the AGL share price last month.

JP Morgan is said to be bullish on wholesale electricity prices and, as a result, it believes AGL could be a winner.

The broker slapped AGL’s shares with an overweight rating and a $10.60 price target, as my Fool colleague Bronwyn reports.

Morgans also has an add rating and a $9.67 price target on the stock.   

The post Why was the AGL share price undercooked in July? appeared first on The Motley Fool Australia.

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More reading

• ‘Massive untapped demand’: The $3 trillion opportunity ASX 200 energy shares could be missing
• Can the AGL dividend bounce back this earnings season?
• What’s been impacting the AGL share price this week?
• ‘Elevated prices’ give AGL share price a shot at 26% upside: JP Morgan
• These were the best (and worst) performing ASX 200 sectors of FY22

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. 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 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 National Australia Bank Ltd (ASX: NAB) share price has lifted in the last month, but could it go higher?

The major bank’s share price has jumped 12% in the past month. In Wednesday’s trade, NAB’s shares fell 0.58%.

Let’s examine the outlook for the NAB share price.

What is ahead?

The ASX bank share will report important financial results next week, but what are analysts predicting?

Morgan Stanley analyst Richard Wiles is forecasting a “sweet spot” for the bank with “robust volume growth, margins tracking ahead of consensus, strong credit quality and healthy capital”.

He is predicting an underlying cash profit of $1.8 billion with 5% revenue growth and 4% expense growth.

In comments cited by The Australian, he added:

Any commentary on the impact of higher rates and the margin outlook should be positive.

Sharing his thoughts on his outlook for the NAB share price in light of these forecast results, Wiles said:

The current share price reflects this and factors in a 15 per cent probability of recession in 2023, so we stay equal weight.

The Reserve Bank of Australia (RBA) boosted the official cash rate by 0.5% on Tuesday, as my Foolish colleague Bernd reported. Australia’s official cash rate is now 1.85%.

NAB is due to provide its third-quarter trading update on 9 August.

Share price snapshot

The NAB share price has lifted 17% in the past year and nearly 7% year to date.

For perspective, the S&P/ASX 200 Financials Index (ASX: XFJ) has descended more than 3% in the past year.

NAB has a market capitalisation of nearly $98 billion based on its current share price.

The post Is the NAB share price a buy ahead of next week’s quarterly update? appeared first on The Motley Fool Australia.

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• How are ASX 200 bank shares responding to the RBA rate increase?
• ‘The great reallocation’: The $4 trillion financing opportunity in front of NAB
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• The NAB share price is up 20% from its YTD low. Is now the time to buy?

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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Growth shares have been hammered this year after investors turned their backs on them due to rising interest rates.

But for a decade before that, growth ruled over value stocks.

So what style of ASX shares are the best going forward from now?

Perhaps fittingly for unprecedented conditions like we’re seeing in 2022, Wilsons head of investment strategy David Cassidy has nominated a third way to go.

“Quality-focussed investment strategies arguably receive less attention than growth and value investing, yet the quality factor has an impressive long-term track record,” he said in a memo to clients.

“The outlook for quality is particularly attractive at the current juncture in the global business cycle.”

What is quality?

Cassidy expects the global economy and earnings growth to “slow significantly” over the next 12 months.

“As a result, companies with high quality, resilient earnings streams should be increasingly sought after by the market.”

But what exactly makes a stock or a company “quality”?

There is no universal definition of what a quality stock is, but Cassidy mentioned a few quantifiable attributes that most investors would find hard to argue against:

• High return on equity or return on invested capital
• Resilient earnings streams
• Strong balance sheets with modest level of debt

On top of this, he added, more active investors can consider these more subjective qualities:

• Management quality
• Industry positioning

Cassidy said a high quality business typically has a wide moat, which is a measure of competitive advantage.

“These competitive strengths can include: superior product or service quality, a strong brand, superior scalability, distribution strength, or proprietary technology.”

How does quality investing work in real life?

“Highly active” investors with a quality strategy will often exclude entire sectors. For example, mining and financials might be completely ignored due to the earnings volatility.

Quality shares often display a “risk asymmetry”, as Cassidy calls it.

“This risk asymmetry, with decent performance in rising markets but superior performance in falling or sluggish markets, that gives quality its outperformance trend over the long-term.”

He added that there is “a large body” of academic research that shows low volatility and high quality portfolios outperform their high volatility and low quality rivals. 

“This perhaps flies in the face of traditional portfolio theory, which holds that higher risk portfolios will generate higher returns in the long run.”

‘Free lunch’ for investors

So with so much going for it, Cassidy said buying up quality shares might be considered a “free lunch” for investors of ASX shares.

But the catch is that the outperformance only comes over a long duration.

In fact, quality has actually underperformed over the past two years.

“The growth stock rally entered a speculative phase last year with many high-growth (pre-earnings) stocks being bid up aggressively. More recently, a big first quarter commodity rally, led by energy in particular, saw quality indices lag again.”

But in 2022 high-growth stocks have definitely been humbled and commodity prices are starting to cool.

“Quality has begun to show signs of outperformance. With earnings slower and downgrades increasing, resilient high-quality companies look set to outperform in our view.”

The post ‘Free lunch’: Forget growth or value, Wilsons is hunting these ASX shares appeared first on The Motley Fool Australia.

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More reading

• Is the NAB share price a buy ahead of next week’s quarterly update?
• Looking to buy BHP shares? Here’s how the miner is gearing up to secure its share of booming EV demand
• Brokers name 2 top ASX dividend shares to buy
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• Own A2 Milk shares? Here’s how the company is battling to rebuild lost daigou sales

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.

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