Tag: Motley Fool

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.

In our prior dispatch, we learned that return on invested capital (ROIC) is the most important financial metric because:

1. An increase in ROIC always increases intrinsic business value but revenue growth does not always increase intrinsic value. Revenue growth only increases intrinsic value when ROIC is greater than the weighted average cost of capital (WACC).
2. Companies with high ROIC outperform the stock market by a country mile.
3. And companies with rising ROIC (and high incremental returns on invested capital) outperform the market by even more!

Return on invested capital is calculated as net operating profit after tax (NOPAT) divided by average invested capital, so it has a robust profitability metric in the numerator and a balance sheet measure in the denominator. In this way, it is the linchpin that connects a company’s profitability (income statement), balance sheet, and free cash flow (FCF).

And strong and growing free cash flow (particularly FCF per share) is ultimately what we are after as investors. As we stated (and repeated) in the linked article and are restating again now, businesses with higher ROIC generate more FCF per dollar of earnings, and growth of free cash flow is what drives growth of intrinsic value! In fact, the definition of intrinsic value (also referred to as fair or fundamental value) is the present value of future free cash flows. Fair value can also be thought of as the price you can pay for a stock and roughly earn your required rate of return (or hurdle rate in your discounted cash flow model).

The great Michael Mauboussin says (100% correctly, I might add) that all of the quantitative and qualitative work (due diligence) that we do as analysts serves one purpose and one job only: to help us estimate (with a high-enough degree of conviction) the free cash flows a company will generate from now until the end of the life of that business and then to compare our estimates for free cash flow growth to the expectations for free cash flow priced into the stock. Then, when we think the expectations for future free cash flow growth are too low, we buy the stock. And when we think the expectations for future free cash flow growth priced into the stock are too high (and even extreme and insane like we saw in 2020-2021), we can choose to trim or sell the stock.

That’s it, Fools. All of the weeks and months (and sometimes years) of research and analysis that we do as investors is only so that we can make educated guesses about how much free cash flow the company will generate and at what rate that free cash flow will grow over the forecast period in our discounted cash flow models.

So, if everything boils down to free cash flow, it may come as no surprise that companies that generate high free cash flow margins (FCF divided by revenue) and companies that provide high free cash flow yields (FCF divided by enterprise value) also outperform the market by light-years.

Free cash flow margin measures the true economic profitability and cash-generating power of a business and is simply the number of pennies of FCF a company generates for every dollar of sales. And free cash flow yield is the inverse of the enterprise value-to-FCF multiple. Thinking in terms of yield allows investors to compare a stock’s FCF yield to the risk-free rate (the yield on the 10-year U.S. Treasury bond), to the yields of other stocks and bonds, and to the yields from investing in real estate (a real estate’s cap rate is calculated as annual net cash flow divided by the purchase price of the property). All else being equal, whether you are dealing with stocks, bonds, or real estate, higher yields indicate cheaper purchase prices. 

Here is how I like to think about free cash flow yield: a company’s dividend yield is how much cash the company actually pays out as a dividend, but free cash flow yield is how much cash the company could potentially pay out as a dividend if it chose to pay out all excess free cash flow as a dividend. As Bill Miller told me: “Empirically, free cash flow yield is the most useful metric. If a company is earning above its cost of capital, free cash flow yield plus growth is a good rough proxy for expected annual return.” Several of the world’s best investors use this FCF total return formula (FCF yield + expected growth of FCF over the next 5 years) when picking stocks.

Said another way, FCF yield is the amount of cash (as a percentage of the firm value) a sole owner could take out of the business every year to pay themselves. This is the excess, unencumbered free cash that is left over after investing to maintain and grow the business, and it is calculated as NOPAT less new invested capital, where invested capital is any form of investment including working capital, capital expenditures (property, plant and equipment), or acquisitions. Research and development (R&D) and sales and marketing (S&M) is also subtracted out (accounted for) on the income statement to get NOPAT. So all growth investments are accounted for and free cash flow is what is left over to pay all claim holders after investing in paying all bills and growing the business. Hence, the term “free.” To understand more on free cash flow, this article from Michael Mauboussin is a must-read.

This free cash flow is what we care most about because it can be used to reward shareowners by either (1) paying down debt (which reduces the claim that debtholders have on the business and strengthens the company’s financial position), (2) paying a dividend, or (3) buying back stock at attractive prices. Then any leftover free cash that isn’t used to pay down debt, pay a dividend, or repurchase stock can sit on the balance sheet and be used at a later date (i.e., large cash and net cash positions create optionality value).

So, now that you know that companies with high and/or rising ROIC and strong and growing FCF selling at attractive prices outperform the market, why would you not focus your largest positions on companies that have high and/or rising ROIC with high and/or rising FCF margins selling at high FCF yields?

I’ve said it at least 100 times and I’m going to say it again: Strong free cash flow generation, a long runway of free cash flow growth, and the price we pay for it is really all that matters to long-term investing success. If you want to live the free cash flow way, read Expectations Investing by Michael Mauboussin and Al Rappaport. It’s the best investing book I’ve ever read, and it could change your life. This is the way to investing nirvana, Fools. 

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

The post Companies with high free cash flow margins and high free cash flow yields massively outperform the market over time 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

• Why is the Cann share price smoking out the ASX by 20% today
• ASX 200 midday update: Energy shares drop, PointsBet jumps
• What’s in store for the ANZ share price in July?
• Why is the Race Oncology share price soaring 13% today?
• Why is the Ardent Leisure share price jumping 9% today?

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.

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

from The Motley Fool Australia https://ift.tt/QxAsc2e

The Cann Group Ltd (ASX: CAN) share price is rocketing on Thursday.

This comes after the cannabis company announced a positive update regarding its Mildura facility.

At the time of writing, Cann shares are fetching at 27.5 cents, up 19.57%.

Cann secures GMP licence

Investors are bidding up the Cann share price following the company’s approval to manufacture active pharmaceutical ingredients (API).

According to its release, Cann advised it has received a GMP manufacturing licence from the Therapeutic Goods Administration (TGA).

This allows Cann to produce API and hard capsules and conduct GMP-approved activities at its existing chemistry and microbiology laboratories.

The milestone certification could lead to an expanded sales base as the company can now perform in-house tests to meet domestic and overseas regulatory requirements.

Cann noted that obtaining the GMP licence enables medicinal cannabis products to be sold in Australia and for export markets. The latter however is subject to further approvals.

Cann CEO, Peter Crock touched on the achievement, saying:

GMP licencing is the regulatory capstone of the Mildura facility, allowing us to cultivate, extract, manufacture, test, and supply finished products entirely in-house. With the licence in place, we can now add additional GMP capabilities in response to market demands.

About the Cann share price

Despite today’s strong gains, the Cann share price is down 7% in 2022.

When looking further out, the company’s shares are down 20% over the last 12 months.

Based on valuation metrics, Cann presides a market capitalisation of around $87.28 million.

The post Why is the Cann share price smoking out the ASX by 20% today 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

• ASX 200 midday update: Energy shares drop, PointsBet jumps
• What’s in store for the ANZ share price in July?
• Why is the Race Oncology share price soaring 13% today?
• Why is the Ardent Leisure share price jumping 9% today?
• CSR share price lights up amid mega $100 million buyback

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.

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

At lunch on Thursday, the S&P/ASX 200 Index (ASX: XJO) is on course to record another decline. The benchmark index is currently down 0.8% to 6,645.2 points.

Here’s what is happening on the ASX 200 today:

Energy shares drop

The energy sector is weighing on the ASX 200 index on Thursday. The likes of Beach Energy Ltd (ASX: BPT) and Woodside Energy Group Ltd (ASX: WDS) are tumbling following a pullback in oil prices overnight. This was driven by fears that a recession could lessen demand for oil. The S&P/ASX 200 Energy index is down 1.7% at the time of writing.

CSR announces share buyback

The CSR Limited (ASX: CSR) share price is trading lower today despite the company announcing a share buyback. The building products company is planning to return $100 million to shareholders via an on-market buyback. CSR notes that its strong balance sheet has positioned it to repurchase shares. A broker downgrade by Ord Minnett to “hold” appears to be offsetting this positive news.

OZ Minerals upgraded

The OZ Minerals Limited (ASX: OZL) share price is pushing higher today. This appears to have been driven by a broker note out of UBS. This morning the broker upgraded the company’s shares to a buy rating with a $23.65 price target. It believes that OZ Minerals’ shares have dropped to an attractive level for investors to invest.

Best and worst ASX 200 performers

The best performer on the ASX 200 on Thursday has been the Pointsbet Holdings Ltd (ASX: PBH) share price with a 12% gain. This is despite there being no news out of the sports betting company. Going the other way, the worst performer has been the Coronado Global Resources Inc (ASX: CRN) share price with a 6% decline. This is likely to have been driven by a pullback in coal prices overnight.

The post ASX 200 midday update: Energy shares drop, PointsBet jumps 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

• CSR share price lights up amid mega $100 million buyback
• Can the Beach Energy share price hit $1.95?
• Why have ASX lithium shares had such a lousy month in June?
• 5 things to watch on the ASX 200 on Thursday
• Volt gets packing as ASX 200 bank shares prove to be a formidable force

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 Pointsbet Holdings Ltd. The Motley Fool Australia has recommended Pointsbet Holdings Ltd. 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/y48D6Vx

Since we’re almost at the end of June, today is a good day to look at some of the ASX 200’s most popular shares and see what the next month might hold in store. So let’s see how the Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price is looking right now.

ANZ shares have had a rough June, as has most of the S&P/ASX 200 Index (ASX: XJO).

Since 31 May, the ANZ share price has lost a painful 11.2% of its value from a starting share price of $25.04. That’s including the 1.77% loss to $22.23 a share this ASX 200 bank has lost so far today.

However, it could have been even worse. On 17 June, ANZ shares hit a new 52-week low of $20.95. That represented a June loss of more than 15% at the time. But even though ANZ shares have bounced back since then, it’s still been a rough month for this ASX bank.

That was despite an absence of any real news out of ANZ over June. Perhaps the biggest development was a rumour that ANZ might be in the wings to purchase the accounting software provider MYOB.

What does July hold in store for the ANZ share price?

But now that June is all but over, what’s next for the ANZ share price?

Well, predicting what one ASX share might do in one month is extremely difficult. But let’s look at the outlook that brokers are pencilling in.

As we covered earlier this month, one broker bullish on ANZ shares is Macquarie. It is tipping ANZ shares as a buy, with a 12-month share price target of $34.

The broker is anticipating that ASX banks such as ANZ are about to reap some success from rising interest rates. Macquarie points out that ASX banks tend to raise their lending rates very quickly after an interest rate rise but are far slower in hiking deposit interest rates, leading to higher margins.

If this prediction turns out to be accurate, ANZ shares could be heading more than 50% higher over the coming 12 months. That could bode well for ANZ next month. But we’ll have to see what happens.

At the current ANZ share price, this ASX 200 bank share has a market capitalisation of $62.67 billion, with a dividend yield of 6.42%.

The post What’s in store for the ANZ share price in July? 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

• Volt gets packing as ASX 200 bank shares prove to be a formidable force
• Why is the ANZ share price outperforming the ASX 200 today?
• ASX 200 bank ANZ turns to crypto for carbon credit settlement
• CBA share price leads the big four as banks outperform ASX 200 on Monday
• Why ANZ, Block, Bubs, and PayGroup shares are pushing higher

Motley Fool contributor Sebastian Bowen 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.

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

The Race Oncology Ltd (ASX: RAC) share price is surging today on anti-cancer drug news.

Shares in the oncology company reached $2.10 in early trading, a 13% gain. For perspective, the S&P/ASX All Ordinaries Index (ASX: XJO) is 0.87% in the red today.

So, what scientific news did Race Oncology announce to the ASX today?

News of successful trial boosts Race Oncology share price

Investors appear to be buying up Race Oncology shares after the company released results from its latest trial.

The results showed that Race Oncology’s anti-cancer drug Zantrene protected the hearts of mice from chemotherapy damage.

Their hearts were protected from the impact of anthracyclines when the chemotherapeutic dose of Zantrene was boosted. Anthacyclines are chemotherapy drugs commonly used to treat cancer.

No further toxicity or bone marrow suppression was identified with this higher dose.

Race Oncology is working with the University of Newcastle on this trial, as announced in April last year.

Race Oncology CEO Phillip Lynch said Zantrene is a “large commercial opportunity” with significant potential to improve modern chemotherapy.

He added: “We are committed to producing further preclinical data that will continue to prove the case for this opportunity for Zantrene.”

The company said the results support further clinical trials using Zantrene with anthracyclines to improve cancer treatment.

Further commenting on the trial, associate professor Aaron Sverdlov said: “To date, there are no widely used or well established strategies to protect the heart against chemotherapy-induced damage.”

Share price snapshot

Race Oncology shares have tumbled nearly 44% in the past year.

In the year to date alone, they have lost nearly 43%.

For perspective, the All Ords index has shed nearly 9% in a year.

Race Oncology has a market capitalisation of $329 million based on the current share price.

The post Why is the Race Oncology share price soaring 13% today? 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

• Why did the Race Oncology share price rocket 10% today?
• Race Oncology share price soars 16% on buyback news

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.

from The Motley Fool Australia https://ift.tt/ItW086T

The Ardent Leisure Group Ltd (ASX: ALG) share price soared shortly after the market open on Thursday.

This came after the company announced an update on the divestment of its United States business.

At the time of writing, the entertainment company’s shares are up 4.07% to $1.41. But earlier, they reached $1.48 — up 9.6% on yesterday’s closing price.

Ardent Leisure concludes divestment

In its release, Ardent Leisure advised it has completed the sale of its main event business to Dave & Buster’s Entertainment, Inc.

Established in 1982, Dave & Buster’s owns and operates a number of entertainment venues and dining facilities in North America. The concept revolves around playing games and watching live sports and other televised events within a restaurant and bar venue.

Shareholders approved the sale at an extraordinary general meeting (EGM) yesterday. This means all conditions have now been satisfied.

This paves the way for Ardent Leisure to receive US$835 million in the all-cash transaction.

Subsequently, management will return $455.7 million to shareholders in the form of a capital return and unfranked special dividend.

This means eligible shareholders will receive 95 cents per share on 13 July.

However, to participate in the scheme you’ll need to own Ardent Leisure shares on or before next Monday 4 July.

Update on theme parks & attractions business

Furthermore, Ardent Leisure provided an update regarding its theme parks & attractions business.

Ardent said the cash retained from the main event sale will be used to support and unlock potential value.

This includes investing in new major rides and attractions, the redevelopment of existing attractions, and costs associated with preliminary town planning work and council approvals.

Ardent Leisure also noted changes to key management personnel.

Main event president and CEO, Chris Morris, as well as group chief financial officer, Darin Harper, have left the company.

Both of their departures are effective from today.

Ardent Leisure share price snapshot

Over the past 12 months, the Ardent Leisure share price has gained 43%.

When looking at year to date, its shares are 4% in the green.

Based on today’s share price, Ardent Leisure commands a market capitalisation of around $647 million.

The post Why is the Ardent Leisure share price jumping 9% today? 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

• CSR share price lights up amid mega $100 million buyback
• AGL share price lifts as Brookfield caught buying
• HRL share price jumps 10% as board backs takeover from ALS
• Is it time to load up on beaten-down growth stocks (like Tesla)?
• Can the Beach Energy share price hit $1.95?

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.

from The Motley Fool Australia https://ift.tt/NFwqD9U

The CSR Limited (ASX: CSR) share price has walked out of the gates and is rangebound in early trade on Thursday.

Investors are bidding up the CSR share price in response to a company release where it announced the commencement of a $100 million share buyback.

At the time of writing, CSR is drifting less than 1% higher at $4.14 apiece. It is down 30% this YTD, seen below.

CSR to commence buyback

The company said it will begin an on-market share buyback of up to $100 million in order to unlock long-term shareholder value.

CSR said it was well-positioned with a strong balance sheet and highlighted ongoing strengths in its building products business.

The combination of factors illustrates “CSR’s strength and prospects for the coming years,” chairman John Gillam said.

“We are also progressing major property development projects that will deliver short and long-term earnings, alongside the hedged Aluminium position,” he added.

Meanwhile, CSR CEO Julie Coates said the building products segment continued to improve outcomes “across diversified market positions”.

Coates also remarked that the investment strategy is intended to promote growth and increase capacity for the business.

“Given our robust balance sheet and strong operational performance, CSR is able to invest in growth while also increasing returns to our shareholders via implementing an on-market share buyback,” she added.

CSR also hosted its Annual General Meeting today. In the last 12 months, the CSR share price has lost more than 28%.

The post CSR share price lights up amid mega $100 million buyback 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

• These were the worst performing ASX 200 shares in May

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/FY8kX2U

The AGL Energy Limited (ASX: AGL) share price performed a U-turn this morning. Its return to the green came on the back of news an entity that previously aimed to acquire the energy giant appears to have snapped up a notable stake.

At the time of writing, the AGL share price is $8.44, 0.54% higher than its previous close, having been deep in the red in early trading.

For context, the S&P/ASX 200 Index (ASX: XJO) is down 0.59% right now while the All Ordinaries Index (ASX: XAO) has slipped 0.58%.

Let’s take a closer look at what’s going on with AGL on Thursday.

What’s driving the AGL share price today?

The AGL share price is launching higher despite the market’s continued downturn this morning.

It comes after the energy producer and retailer announced it appears to have caught Brookfield Asset Management buying into the company, snapping up a 2.56% stake in AGL under an apparent subsidiary.

Brookfield was part of a consortium offering AGL $8.25 per share to take over the energy provider earlier this year.

AGL told the market this morning an entity named Australian 123456789 4 Pty Limited had acquired around 17.2 million shares in AGL as of 24 June.

The company subsequently performed an ASIC search, finding the generically named entity looks to be a subsidiary of Brookfield. AGL continued:

AGL became aware of this information through routine registry analysis responses, and therefore the information is historical. It is possible that subsequent trading may have altered the position.

AGL has not received any updated acquisition proposal from Brookfield.

AGL rejected the offer posted by the Brookfield Consortium in March. The consortium was made up of Brookfield and Mike Cannon-Brookes’ Grok Ventures.

Of course, market watchers will likely remember Cannon-Brookes snapped up a majority hold in the company and mounted a campaign against its now-scrapped demerger plan in May.

The AGL share price has gained a notable 34% since the start of 2022. It’s also 3% higher than it was this time last year.

The post AGL share price lifts as Brookfield caught buying 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 shares today
• 2 ASX 200 dividend shares analysts rate highly
• What’s with the AGL share price today?
• ASX utilities shares electrifying the market as suspension begins to unwind
• Own AGL shares? Here’s what to know about the company’s latest green hydrogen push  

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.

from The Motley Fool Australia https://ift.tt/nvIeV4W

The HRL Holdings Ltd (ASX: HRL) share price has climbed to a 52-week high on Thursday.

In morning trade, the testing services company’s shares jumped a further 10% to 16.5 cents.

When the HRL share price reached that level, it had doubled in value over the last two trading sessions.

Why is the HRL share price surging higher?

Investors have been bidding the HRL share price higher today after the company announced an agreement with industry giant ALS Ltd (ASX: ALQ) regarding a takeover.

According to the release, the two parties have entered into a bid implementation agreement under which ALS will acquire all of the HRL shares it does not already own by way of an off-market takeover at 16 cents cash per share.

This follows yesterday’s announcement, which revealed that ALS had tabled an unsolicited, non-binding indicative offer.

The two parties have also agreed to a deal protection regime that includes no shop and no talk rights. Furthermore, ALS has a right to match any superior offers and HRL has agreed a break fee of $800,000.

‘A very good outcome’ for shareholders

The HRL board is advising shareholders to accept the offer, subject to there being no greater offer made from a third party.

HRL’s non-executive chair, Greg Kilmister, believes the offer is a very good outcome for shareholders. He commented:

The HRL Board is unanimous in its view that this transaction is in the best interests of HRL shareholders. In making this assessment, the Board has carefully considered a range of matters including its view of the intrinsic value of HRL taking into account the company’s current position and future prospects, and the certainty for shareholders of this all-cash offer. We believe this transaction is a very good outcome for HRL’s shareholders, and for stakeholders more broadly, including our customers, staff and suppliers.

The post HRL share price jumps 10% as board backs takeover from ALS 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

• Guess which small-cap company is soaring 71% on a takeover bid from an ASX 200 share
• 3 ASX 200 shares trading ex-dividend today

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/4N1EuXj

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.

It’s been a challenging year for investors, with the S&P 500 index down more than 22%. In such an environment, growth investors inevitably may ask whether it’s time to start loading up on some growth stocks like Tesla (NASDAQ: TSLA). Here are some thoughts on the matter.

What happened in 2022

Going into 2022, the general narrative around the market was as follows:

• Raw-material cost inflation would persist but ease in the second half as supply chain issues ironed out.
• Smoothing supply chain issues would ease cost pressures — with no more high spot prices for components or transportation.
• In concert with an opening of the economy, labor shortages would ease alongside a gradual easing of COVID-19 restrictions. 
• Strong demand, rising backlogs, and price increases would lead to stronger substantial profit margins in the second half.

That was the game plan. However, as Mike Tyson famously observed, everyone has a plan until they get punched in the mouth. The unfortunate reality is that raw material prices remain elevated, supply chain pressures persist, and companies struggle to secure components. Labor shortages are ongoing (witness the high-profile issues at airports); COVID-19 lockdowns have continued longer than most expected (notably in China), and Russia’s invasion of Ukraine (along with the policy response to it) has exacerbated many of these issues.

The year in charts

These adverse developments have caused a slew of full-year guidance earnings downgrades. Given the persistence of these headwinds, it’s reasonable to expect more to come in the second-quarter earnings season.

It gets worse. The persistent inflation caused the Federal Reserve to hike interest rates. It was a move widely anticipated by the market, and as you can see below, market rates (the 10-year Treasury) increased, taking mortgage rates higher too. That’s bad news for interest rate-sensitive sectors like housing and autos.

Data by YCharts

What does this mean for Tesla?

Industry analysts have rushed to downgrade global industry production forecasts in 2022 due to supply chain pressures. Tesla is not immune to such challenges, and there’s an open debate on whether the company will meet its target of 1.5 million units in 2022. And in a leaked email, CEO Elon Musk appeared to call on employees to rally back from a tough second quarter. After only 305,000 units were produced in the first quarter (and possibly fewer in the second quarter), Tesla’s target goal is in question.

Also, Tesla is in one of the interest rate-sensitive sectors mentioned above. Rising interest rates will inevitably make it harder for consumers to take on debt to buy electric vehicles.

The case for buying growth stocks like Tesla

That said, there’s still a robust case for buying growth stocks, Tesla included. 

First, the Federal Funds rate hike appears to have taken some speculative fervor away from commodities investors. The Thomson Reuters/CoreCommodity Commodity Research Bureau (TR/CC CRB) index follows 19 commodities, including aluminum, copper, and other industrial metals; precious metals; crops; livestock; and energy commodities.

As you can see below, although still at relatively high levels, it’s corrected slightly. Moreover, as the economy continues to open up and labor shortages get ironed out, the supply chain issues will likely ease eventually.

Data by YCharts

Second, just as the bond market wasted no time in pricing higher rates, the stock market sell-off means equities look like a much better long-term value than in January. 

Third, growth stocks like Tesla will, by definition, generate the overwhelming bulk of their earnings in the future. Therefore, investors shouldn’t overly stress over one year’s earnings or failure to meet production targets.

Fourth, Tesla is a growth company with relatively secular growth drivers (not reliant on economic growth). Indeed, many investors favor it precisely because it sells EVs and therefore has an opportunity to outgrow light vehicle sales growth significantly.

Time to buy growth stocks?

Suppose you believe that these trends — higher inflation, interest rates, mortgage rates, and supply chain issues — will persist. In that case, you’d want to stay away from growth stocks because their outlooks would be muted. And that would include Tesla.

However, if you believe the economy will muddle through and supply chain issues will eventually ease, then it’s an excellent time to get exposure to growth stocks like Tesla.

History suggests that the economy will muddle through, but the upcoming second-quarter earnings season will likely feature a slew of earnings downgrades. As a result, cautious investors might want to wait until it’s over before trying to find an entry point. However, if the “muddle through” thesis is correct, the recent dip looks like a good buying opportunity. 

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

The post Is it time to load up on beaten-down growth stocks (like Tesla)? 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

• 3 reasons Tesla could soar after its stock split
• Better stock-split buy: Alphabet or Tesla?
• 3 top stock splits to watch in 2022
• Should You Buy Tesla Stock Right Now?
• Here’s what moved Tesla shares today

Lee Samaha 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.

from The Motley Fool Australia https://ift.tt/0x7TVA2