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The last 12 months have been reasonably positive for ASX uranium shares.

As we recently covered here, many uranium shares outperformed the market during the 2022 financial year. This includes Boss Energy Ltd (ASX: BOE) and Paladin Energy Ltd (ASX: PDN), which recorded strong gains over the period despite broad sector weakness in April.

But that was then. What about the future? Let’s take a look and see what may lie ahead for ASX uranium shares in FY 2023.

What is the outlook for ASX uranium shares?

The team at Bell Potter has been looking at the uranium sector and believes that weakness since April has created “selective opportunities.”

It commented:

ASX Uranium equities are on average down 44%, vs the ASX300 Resources Index of 19%. The sell-off, in our opinion, has been indiscriminate in the case of BOE and PDN and completely irrespective of 1) broader uranium market fundamentals and 2) company specific situations. The April sell-off has created an interesting opportunity to build/establish positions in either of these two companies.

Valuations for BOE and PDN 40% off from April highs – BOE and PDN are now trading at ~40% discounts to their April high, on a Market Value/ Resource pound metric. In addition to this, we believe there is further upside for both businesses as per our stated valuations.

However, the broker does acknowledge that “shorts continue to build,” with both companies experiencing rising short interest despite the selloff.

Nevertheless, Bell Potter has reiterated its speculative buy ratings on both companies. It has a $3.32 price target on Boss Energy’s shares and a $1.06 price target on Paladin Energy’s shares.

Overall, the broker remains positive on uranium due to its belief that reach net zero ambitions would be difficult with nuclear power.

The post Will ASX uranium shares be market-beaters in FY23? appeared first on The Motley Fool Australia.

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More reading

• The ups and downs for ASX uranium shares in the 2022 financial year
• Here are the top 10 ASX shares today
• Lake Resources shares are the most traded today. What’s going on?
• Here are the top 10 ASX shares today
• Why the Paladin share price fell 25% in June

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

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The Woodside Energy Group Ltd (ASX: WDS) share price was a strong performer during the first six months of 2022. So, can the company do it again in the next six months?

A lot has happened over the last 12 months for the oil and gas giant. It may not be a surprise that Woodside shares have gone up by around 30% over the past year.

As Australia’s biggest ASX oil and gas share, changes in commodity prices can have sizeable impacts on what happens to a company’s profit and investor sentiment. Energy prices jumped after the Russian invasion of Ukraine.

However, a business can achieve things operationally that can also help.

Let’s look at one of the biggest changes that has happened to the business recently, which will have a significant impact on the following months (and years).

Merger with BHP business

As a result of the merger between Woodside and BHP’s oil and gas business, Woodside is now a top 10 global energy company by hydrocarbon production and the largest listed energy company on the ASX.

Woodside expects the larger, more diversified portfolio to deliver “significant cash flow to help fund committed projects, Woodside’s participation in the energy transition and shareholder returns”.

The ASX oil and gas business has started activities to integrate the two organisations.

Woodside’s CEO Meg O’Neill said that completing this merger was one of the most significant events in the company’s 67-year history:

The merger delivers a diverse portfolio of quality operating assets, plus a suite of growth opportunities across oil, gas and new energy that promises ongoing value for our shareholders.

We believe the completion of the merger will enable Woodside to play a more significant role in the energy transition that is imperative as we respond to climate change while ensuring reliable and affordable supplies of energy to a growing and aspirational global population.

We are focused on unlocking pre-tax annual synergies of more than $400 million as we merge the two businesses.

Those synergies alone could be quite beneficial for the Woodside share price.

Projects

Woodside continues to make progress on projects that can help grow profit in the future.

For example, it said that in the first three months of FY22 work on the Scarborough and Pluto Train 2 projects began to ramp up, with Bechtel (the engineering, procurement, construction and commissioning contractor for Pluto Train 2) beginning major civil works.

Manufacture of the Scarborough pipeline has also commenced.

Progressing and completing these projects could be helpful for the Woodside share price over the rest of 2022 and beyond.

Broker ratings on the Woodside share price

A price target is where a broker has estimated a share price will be in 12 months from that date.

UBS recently upgraded its rating on Woodside to a buy, with a price target of $34.25. That implies a possible upside of around 10%.

However, Macquarie is neutral on Woodside with a price target of just $29.25, implying a mid-single-digit decline.

Citi is also neutral on the business, though the price target is $33.40. That suggests a possible mid-single-digit rise.

The post Can the second half of 2022 be even better for the Woodside share price? appeared first on The Motley Fool Australia.

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More reading

• How does the Woodside dividend compare to Santos over the last 5 years?
• What’s the outlook for ASX 200 energy shares in FY23?
• 5 things to watch on the ASX 200 on Monday
• How did Beach Energy shares pull off a 40% return in FY 2022?
• Why are ASX 200 energy shares making a comeback on Friday?

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 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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The IDP Education Ltd (ASX: IEL) share price has fallen hard in 2022.

Since the start of the year, the language testing and student placement company’s shares are down 30%.

Is the IDP Education share price in the buy zone?

While the pullback in the IDP Education share price this year is disappointing for shareholders, it could be a buying opportunity for non-shareholders.

That’s the view of the team at Goldman Sachs, which believe the company’s shares could rise materially from current levels.

According to a note, the broker has reiterated its buy rating and $35.50 price target on its shares.

Based on the current IDP Education share price of $24.35, this implies potential upside of 46% for investors over the next 12 months.

Why is Goldman bullish?

Goldman notes that the latest student visa data out of Australia reveals that international student arrivals have now reached 74% of pre-pandemic levels. Goldman is expecting this momentum to continue and for pre-pandemic levels to be achieved in FY 2023. This bodes well for IDP Education’s student placement business.

Outside this, the broker has named four reasons for its positive view. It explained:

We see a compelling long-term growth opportunity with a number of drivers:

1. Structural growth in multi-destination student placement markets; supplemented by ongoing recovery in the Australian market;
2. Ability to grow market share in highly fragmented Canadian and UK SP markets;
3. Reinvestment in digital capabilities to increase competitive advantage and strengthen relationships with tertiary institutions and;
4. Consolidation of IELTs business and ability to supplement organic growth with bolt-on acquisitions.

All in all, in light of this positive growth outlook, the broker appears to believe the IDP Education share price is trading at a very attractive level today.

The post Why this broker says the IDP Education share price can rise almost 50% appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Wednesday
• Here are the top 10 ASX shares today
• 3 excellent ASX growth shares that analysts are excited about
• Leading brokers name 3 ASX shares to buy today
• 2 top ASX growth shares with major upside potential

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 Idp Education Pty Ltd. 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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Small-cap ASX shares have been brutalised in 2022, with some funds specialising in that area shrinking by 38% over the last financial year.

The month of June was especially horrifying, with the S&P/ASX Small Ordinaries Industrials (ASX: XSI) taking a whopping 10.4% fall.

However, small-cap investor Celeste Funds Management told its clients in a memo that three of its holdings actually increased in value last month.

And what’s more, it is looking forward to further gains in the future:

All smiles as Australians get their teeth checked again

Dental centre operator Pacific Smiles Group Ltd (ASX: PSQ) saw its share price skyrocket 15.8% in June after the company indicated patients are returning and staff absence due to COVID-19 has started to slow.

“Pacific Smiles’ same centre patient fees for May 2022 were up 2.8% on pcp [prior corresponding period] while total patient fees were up 7.4%.”

But the best indicator was that in an environment of rising rates the business is already well funded.

“Pacific Smiles also extended its $40 million CBA loan facility for a further 3 years,” read the memo.

“Pleasingly, the board confirmed that due to the headroom in the facility and the improving operating outlook, the company is adequately funded and has no need or desire to raise capital.”

The team at Celeste isn’t the only one bullish about Pacific Smiles shares.

According to CMC Markets, all three surveyed analysts recommend it as a buy.

A tech stock that’s also defensive

Financial services software provider Iress Ltd (ASX: IRE) enjoyed a nice rise in its stock price last month despite making no price-sensitive announcements.

“Iress rose 9.9% over the month of June, outperforming the broader ASX 200 technology sector which fell 11.0%,” stated Celeste analysts.

“We remain positively disposed to management’s renewed focus to its capital base and delivery on FY25 targets.”

For a tech company, Celeste reckons it boasts defensive characteristics in the face of possible recession or an economic downturn.

“Looking ahead, we believe the nature of Iress’ recurring revenues, its cash flow generation and defensive qualities will provide ballast in a macro environment where earnings predictability has become increasingly difficult.”

The wider analyst community is polarised on Iress.

Five out of the nine surveyed on CMC Markets are neutral, rating the stock as a hold. Three recommend it as a strong buy and one labels it a strong sell.

‘A string of positive announcements’

Omni Bridgeway Ltd (ASX: OBL) operates funds that pay for litigation cases.

Celeste analysts attributed the 5.3% rise in the share price last month to “a string of positive announcements”.

“Firstly, they announced the successful completion of a US law firm portfolio that resulted in US$23 million of income into Fund 4, with the same law firm entering into a second $30 million portfolio funding also from Fund 4,” read the memo.

“Omni Bridgeway has also launched its new Fund 8 which is a EUR300 million insured, leveraged special purpose vehicle with materially higher expected returns to Omni Bridgeway than previous funds.”

The company also sold a 20% stake, worth $7.5 million, in a Commonwealth Bank of Australia (ASX: CBA) shareholder class action.

“Omni Bridgeway expects to be an active participant in the secondary market due to the improved liquidity it provides,” stated Celeste analysts.

“We see significant upside in OBL as the transition to legal fund manager continues.”

The post 3 small-cap ASX shares to buy that are actually rising: fund appeared first on The Motley Fool Australia.

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More reading

• Why Althea, AnteoTech, New Hope, and Omni Bridgeway shares are pushing higher
• 5 best ASX All Ordinaries shares in June
• These were the best performing ASX 200 shares in June

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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If you’re looking to bolster your income portfolio with some ASX dividend shares, then you may want to check out the ones listed below.

Here’s why analysts rate these dividend shares as buys:

Dexus Industria REIT (ASX: DXI)

The first ASX dividend share that could be in the buy zone is Dexus Industria.

The company, which was previously known as APN Industria, has a focus on industrial and office  properties that provide functional and affordable workspaces for businesses.

One broker that is very positive on the company is Morgans. Its analysts appear confident that Dexus Industria is well-placed to deliver sustainable income and capital growth prospects for shareholders over the long term.

Its analysts are forecasting attractive dividends per share of 17.3 cents in FY 2022 and 17.6 cents in FY 2023. Based on the current Dexus Industria share price of $2.71, this will mean yields of 6.4% and 6.5%, respectively.

Morgans has an add rating and $3.65 price target on the company’s shares.

Telstra Corporation Ltd (ASX: TLS)

Another ASX dividend share that could be in the buy zone is Telstra.

After a long period of earnings declines and dividend cuts, the telco giant is back on form and now targeting solid and sustainable growth. This is being driven by the success of its transformative T22 strategy and the upcoming growth-focused T25 strategy.

The team at Morgans is also very positive on Telstra. It was pleased with the telco giant’s first half results in February, noting that its “performance is tracking in the right direction” again.

As for dividends, it expects fully franked dividends per share of 16 cents in FY 2022 and FY 2023. Based on the current Telstra share price of $3.86, this will mean yields of 4.15%.

Morgans has an add rating and $4.56 price target on its shares.

The post Here are 2 quality ASX dividend shares to buy according to experts appeared first on The Motley Fool Australia.

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More reading

• Own Telstra shares? Here are details on the telco’s 2,000 new Australian call centre workers
• How big will the Telstra dividend yield be in FY23?
• Here’s why brokers rate these ASX dividend shares as buys
• Experts name 2 ASX dividend shares to buy with big yields
• Telstra share price in the red despite taking out green crown

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 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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Ask A Fund Manager

The Motley Fool chats with the best in the industry so that you can get an insight into how the professionals think. In this edition, Redpoint Australian Equity Income Fund portfolio manager Max Cappetta names three ASX shares he’d buy right now, which all pay out dividends.

Hottest ASX shares

The Motley Fool: What are the three best stock buys right now?

Max Cappetta: First one is Orora Ltd (ASX: ORA) — a packaging company. 

They operate in about 70 countries. Key markets are, obviously Australia, but also North America. Now, for people that may not know the company name, there’s every chance that you interact with Orora many times every day, because they provide bottling and caps, aluminium beverage cans, soft packaging boxes, and cartons. They’re really the dominant player in Australia. 

They’re less dominant in North America. And I think this is the interesting part of their business because being able to grow their market share in North America really gives them an interesting growth runway over the next couple of years.

Now the company has a stated payout ratio of around 60% to 80% of their net profit after tax (NPAT). So at the moment, with the share price having fallen down recently, it’s at a pretty attractive yield of 4.5%. That’s unfranked, so you do get that cash dividend yield and look, it’s about 30% below its pre-COVID price of $4. We think that this looks pretty attractive for a globally diversified business that is quite defensively positioned overall, in providing all of this packaging across a range of markets and products.

MF: It’s fallen about 8% just in the last couple of trading days. No concerns there?

MC: It really wasn’t about the company. It was more that really one of the brokers downgraded their view to hold. I actually think … there’s probably a little bit of an overreaction, and that this probably presents a really good buying opportunity for a business of this quality, given their cash flow and their profitability.

MF: And the second one?

MC: The other one is sort of related, Endeavour Group Ltd (ASX: EDV). 

Again, people may not recognise the company name — but you’ve probably done business with them many times, particularly if you’ve been to a Dan Murphy’s, or to a BWS, or if you’ve actually gone into one of their 340-odd hotels that they own around the country. 

Endeavour was spun out of Woolworths Group Ltd (ASX: WOW) last year, and, at the moment they have 75% of their revenues derived from beverage distribution and 25% comes from their hotel portfolio. We think that it has this real interesting balance of operating within public venues, as well as beverage supply to venues and retailers.

It’s not as strong [as Orora] in terms of its gross yield. So again, for income-focused investors, as we are in our Equity Income Fund, the gross yield is 3.2%. That does include franking credits. 

The other thing is it has been a standout performer so far in 2022. While the market has gone backwards, it has actually risen to $7.80 from around $6.80 at the start of the year. We still find it attractive. We think that the benefits of it now being a standalone entity enables management to clearly focus on converting really what is their absolute market-leading position into profit margin improvement in the years ahead.

MF: Does the market like it because it expects the hotel side of the business to grow now that people are more out and about in the post-lockdown era?

MC: Yeah, absolutely. And I think this was one of the real interesting standouts for this business over the last couple of years, whereby when public venues were obviously constrained through COVID, they actually picked up more in terms of their retail and distribution of beverages through the retailers of those beverages. 

So what we see is that there is this nice diversity, and as we’re starting to see people obviously get back out and about in hopefully a post-COVID world, then they do actually pick up that incremental uplift through having that portfolio of around 350 venues around the country.

MF: Your third pick?

MC: The next one is WiseTech Global Ltd (ASX: WTC). This is one in the IT sector. Yes, it has actually fallen along with the broader IT sector over the last few months. But, for those that don’t know WiseTech, it is a global logistics software business. 

I think one of the real things that we like is their very impressive history of being able to grow revenue and to actually improve their profit margins year on year. 

Even today, it’s not the kind of company that you would call a valuation pick — it trades at around 80 times next year’s earnings or FY22, which will be reported shortly. But it does have a global dominant position. 

The thing that we like is that it has been able to grow its profits faster than the growth in its revenue, and that’s a really nice metric that you want to have behind some of these growth stocks, because that’s what the market really wants.

Now, in terms of the fallback in its price, it is now probably back in line with its pre-COVID highs. However, its profit expectations for financial year 2022 is actually about three times what it earned in the financial year ended 2019.

MF: Wow.

MC: It has had this really great profit expansion, but as I said, even today it does trade at a forward PE of 80 times. There obviously still [are] massive growth expectations for the company. But if you think about it, if they can triple earnings again, over the next three to five years, we don’t actually expect that it’ll be trading at 25 times earnings in three years’ time because just those profits have multiplied. 

So, yes, there is risk in terms of interest rates in the broader IT sector, continuing to weigh on that valuation. But obviously the one thing that we like is that it is a profitable business. We see that there’s profit growth through a market-leading position. As I said, their ability to grow profit faster than revenue, if they can maintain that, then for people that are looking for that IT growth thematic within their portfolio. 

It also pays a dividend, albeit very low yield.

We think it could be one to keep an eye on, given how far it’s fallen back to date.

MF: For these tech businesses, once they get to that maturity stage where they do make a profit, it’s much easier going than earlier stages, isn’t it? Because they’ve got their product already made and it’s just scalable at the press of a button?

MC: Absolutely. That’s exactly right. And that’s one of the key things that we do like about the business, that software is very scalable. And if we do start to see supply chains, cargo movements, et cetera, returning back to normal, I know we’re still talking about higher inflation, which means higher interest rates and maybe lower global growth, but if you are taking a longer-term view, then it’s a stock that you’d say in that industry would be worthwhile having exposure to.

The post ‘Pretty attractive’: Expert reveals 3 ASX shares to buy right now appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX shares today
• ASX 200 supermarket shares lead as household spending jumps
• Has a turnaround already begun for ASX tech shares? Experts reveal the outlook for FY23
• Why Eagers Automotive, Viva Energy, Woolworths, and Zip shares are rising
• The Endeavour share price just hit a new 52-week high!

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 positions in and has recommended WiseTech Global. The Motley Fool Australia has positions in and has recommended WiseTech Global. 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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An uplift in energy prices led the Woodside Energy Group Ltd (ASX: WDS) share price to post-COVID highs in 2022.

The Russian war in Ukraine sparked oil prices to touch US$120 a barrel last month before retracing to US$100 today.

Woodside shares have moved in sync with the price of oil, reaching a year-to-date high of $35.77 in early June.

Subsequently, the company paid its biggest-ever dividend to shareholders after reporting robust growth in its full-year results.

This is in sharp contrast to the previous dividends paid by Woodside over the years, given the market’s volatility since COVID-19.

A quick recap on the Woodside dividend history

Here’s a quick look at the Woodside dividends distributed to shareholders over the last five years.

• September 2017 – 61.95 cents (interim)

• March 2018 – 62.61 cents (final)

• September 2018 – 72.80 cents (interim)

• March 2019 – 127.06 cents (final)

• September 2019 – 53.24 cents (interim)

• March 2020 – 83.13 cents (final)

• September 2020 – 36.24 cents (interim)

• March 2021 – 15.29 cents (final)

• September 2021 – 41.03 cents (interim)

• March 2022 – 146.15 cents (final)

In total, Woodside has paid $6.99 in dividends to shareholders from this time in 2017.

At yesterday’s closing price of $31, the company has a trailing dividend yield of 6.03%.

How does this compare with the Santos dividend?

Like Woodside, the Santos Ltd (ASX: STO) share price has also surged recently.

In fact, Australia’s second-largest energy company by market capitalisation is up 10% year to date, and up around 140% since 2017.

When looking at the dividend history, Santos has distributed a total of 58.5 cents to shareholders since 2017.

Although this may seem minuscule, it’s worth noting that Santos shares fetch considerably lower than its peer at $6.97 apiece.

However, when comparing the energy giants against each other, the Woodside dividend offers better value.

Currently, Santos has a trailing dividend yield of 2.79%.

Woodside share price snapshot

The Woodside share price is up 32% over the last 12 months and more than 40% in 2022.

The company has a price-to-earnings (P/E) ratio of 16.50 and commands a market capitalisation of roughly $58.58 billion.

The post How does the Woodside dividend compare to Santos over the last 5 years? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Wednesday
• What’s the outlook for ASX 200 energy shares in FY23?
• Worley shares dip despite deal with Santos
• 5 things to watch on the ASX 200 on Tuesday
• 5 things to watch on the ASX 200 on Monday

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

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A prominent fund manager has revealed the latest ASX share that she has bought for her fund.

The share price for insurance building repairer Johns Lyng Group Ltd (ASX: JLG) has dropped almost a quarter year to date.

And Tribeca portfolio manager Jun Bei Liu this week disclosed that her fund took advantage of this price weakness.

“I really like this company,” she told Switzer TV Investing.

“It recently got into my portfolio.”

Bad weather is not bad news for this ASX share

Unfortunately, Australia’s east coast has been battered with excessive rain for much of this year.

But for a company whose clients are insurance companies, this provides a surge of business.

“No analyst [can] forecast those natural disasters,” said Liu.

“Once you have the natural disaster, it takes a couple of years to build.”

This has a snowball effect on Johns Lyng’s financial performance.

“It’s a constant upgrade cycle. Last year it upgraded 12 times, and this year it’s already done it three or four times.”

The market has appreciated Johns Lyng’s worth in recent times, sending the stock price up a stunning 450% over the past five years.

But this year’s sell-off has made it cheaper than it has been for quite some time.

“The share price cratered because it was expensive. But now it looks pretty good value.”

More tailwinds: acquisition and strata

Many of Liu’s peers agree with her assessment. According to CMC Markets, seven out of eight analysts are rating the stock as a strong buy.

QVG Capital analysts, in a memo to clients last week, boasted that they hold Johns Lyng shares.

They said:

Looking forward into FY23, Johns Lyng Group will benefit from a full year contribution of their US acquisition Reconstruction Experts and a full pipeline of ‘cat’ [catastrophe] work, given the sequence of extreme weather events experienced over this financial year.

As well as all the rain, Liu identified another tailwind that could boost performance even further.

“They just recently got into strata, as well, for the large buildings,” she said.

“It’s just been incredibly consistent in terms of earnings.”

The post I just bought this ASX company enjoying ‘a constant upgrade cycle’: fundie appeared first on The Motley Fool Australia.

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More reading

• 2 ASX shares you never heard of ready to make hay
• These 2 ASX shares are ‘compelling opportunities’: fund manager
• Why is the WAM Capital share price down 20% in June?

Motley Fool contributor Tony Yoo has positions in Johns Lyng Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Johns Lyng Group Limited. The Motley Fool Australia has recommended Johns Lyng 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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Fears of rising interest rates have really taken their toll on growth and small-cap ASX shares.

That’s because smaller, rapidly expanding businesses are typically the ones who have taken on debt to fuel their growth.

And when a company borrows funds to operate, investors revise down its valuation as interest rates rise. This is because every dollar of future earnings will cost more to produce.

As such, during frightening times for small cap and growth shares, it could be worthwhile checking out the businesses that have plenty of cash on their books.

This theoretically means rate hikes don’t affect their future performance. If anything, it can help them marginally, as they can earn a better return on their cash.

And of course, not needing to do equity raising rounds means existing shareholders don’t have their investments diluted.

Small caps with so much cash they gave some back

In a shocking month, small-cap specialist fund Cyan C3G saw almost every stock in its portfolio suffer a freefall in June.

But portfolio managers Dean Fergie and Graeme Carson feel especially comfortable about their holdings that boast useful cash reserves.

In fact, two of those companies actually implemented a share buyback to return some of that excess capital back to investors.

“Touch Ventures Ltd (ASX: TVL) holds almost all of its current market capitalisation in cash — $74 million market cap vs $67 million in cash, plus investment assets valued in May 2022 at over $120 million!” Fergie and Carson said in a memo to clients.

“And, quite prudently, has activated an aggressive share buyback, repurchasing over 1 million shares in June.”

Despite this, Touch shares lost 24% in June.

ReadCloud Ltd (ASX: RCL) suffered even more, shaving 29% off its valuation last month.

“Digital textbook company ReadCloud holds $5.4 million on its balance sheet, made a net profit of over $1 million in 1H22 and has also announced a share buy-back.”

Price crashes don’t make sense

The memo also named three other cashed-up businesses that Cyan is keeping the faith in.

“Other companies that hold significant net cash balances include Alcidion Group Ltd (ASX: ALC) $18 million; Raiz Invest Ltd (ASX: RZI) $19 million; and Vita Group Limited (ASX: VTG) $20 million.”

The portfolio managers spoke of their angst in seeing great businesses like Alcidion and Raiz respectively lose 21% and 22% of their valuation last month.

“With Alcidion having a strong balance sheet, significant recurring revenues derived from government and private domestic and international hospitals and health care providers, there are numerous reasons to expect this stock could be a strong performer again in FY23,” read the memo.

“With almost 300,000 active and engaged financial customers in Australia, Raiz is generating strong recurring revenues and is likely to garner the interest of a myriad of local financial institutions.”

The post 5 small-cap ASX shares sitting on a pile of cash: experts appeared first on The Motley Fool Australia.

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More reading

• 2 ASX shares we’re sticking with after 60% falls: fund managers
• ‘Frustrating’: Fund backs 3 great ASX shares with plunging prices

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 positions in and has recommended Alcidion Group Ltd and ReadCloud Limited. The Motley Fool Australia has recommended Alcidion Group Ltd and ReadCloud 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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On Tuesday, the S&P/ASX 200 Index (ASX: XJO) gave back the majority of its intraday gains to finish the day a fraction higher. The benchmark index rose 4.1 points to 6,606.3 points.

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

ASX 200 expected to edge lower

The Australian share market looks set to edge lower on Wednesday following a poor night of trade in the United States. According to the latest SPI futures, the ASX 200 is expected to open the day 3 points lower this morning. On Wall Street, the Dow Jones fell 0.6%, the S&P 500 dropped 0.9%, and the Nasdaq tumbled 0.95%. Investors were selling stocks ahead of the release of a key US inflation report.

Oil prices crash

Energy producers such as Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) could have a tough day after oil prices crashed overnight. According to Bloomberg, the WTI crude oil price is down 8.1% to US$95.64 a barrel and the Brent crude oil price has sunk 7.5% to US$99.10 a barrel. Demand concerns weighed heavily on prices.

IDP Education rated as a buy

The IDP Education Ltd (ASX: IEL) share price has major upside potential according to analysts at Goldman Sachs. This morning the broker reiterated its buy rating with a $35.50 price target. It commented: “We view this as a structural growth story as international student markets open up. India is a key driver of this trend.”

Gold price tumbles

Gold miners Evolution Mining Ltd (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) could have a difficult day after the gold price tumbled lower again overnight. According to CNBC, the spot gold price is down 0.5% to US$1,723.2 an ounce. Looming rate hikes are weighing on the safe haven asset.

South32 sells royalties

The South32 Ltd (ASX: S32) share price will be on watch today after the miner announced the sale of four non-core base metals royalties to Anglo Pacific Group for US$185 million. This comprises US$103 million in cash and US$82 million in scrip. The latter will leave South32 with a ~16.9% interest in Anglo Pacific. These royalties are from third party interests in copper and nickel projects in Australia, USA and Chile.

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

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More reading

• What are experts predicting will be the best-performing ASX sectors in FY23?
• Here are the top 10 ASX shares today
• What’s the outlook for ASX 200 energy shares in FY23?
• Has a turnaround already begun for ASX tech shares? Experts reveal the outlook for FY23
• Here are the 3 most heavily traded ASX 200 shares on Tuesday

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 Idp Education Pty Ltd. 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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