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The Fortescue Metals Group Limited (ASX: FMG) share price has come under pressure this month amid weakness in the iron ore price.

Since the start of June, the mining giant’s shares are down 10%.

Is the Fortescue share price cheap?

Following this decline, the Fortescue share price is now trading at $18.00. Based on this and FY 2021’s earnings per share of $4.43, this means that its shares are changing hands for just 4.1x earnings.

However, it is worth remembering that the market is more interested in what the future holds than in what happened in the past.

FY 2021 was an incredible year for Fortescue. And while FY 2022 will go down as a very good year, it won’t stop the company from posting a big decline in its earnings.

Goldman Sachs is expecting earnings per share of US$2.00, which equates to $2.90 per share in local currency. This means that Fortescue’s shares are trading at 6.2x forward earnings.

Let’s now take a look at how this compares to other ASX 200 mining shares:

• BHP Group Ltd (ASX: BHP) shares trade at 6.1x FY 2022 estimated earnings
• Rio Tinto Limited (ASX: RIO) shares trade at 6.2x FY 2022 estimated earnings
• South32 Ltd (ASX: S32) shares trade at 5.3x FY 2022 estimated earnings

As you can see above, based on price-to-earnings (PE) multiples, the Fortescue share price is no cheaper than the rest of its peers.

What about other multiples?

While PE multiples are a popular tool for investors to use for share market valuations, they’re not used widely with mining shares. Instead, price to net asset value (NAV) and EBITDA/EV multiples are seen as better suited for mining valuations.

This is important, because if you rely on PE multiples to value mining shares, you may end up buying shares that you think are cheap, but the rest of the market thinks are expensive.

The Fortescue share price is actually a prime example of this.

Goldman Sachs recently explained why Fortescue shares are actually expensive compared to the likes of BHP and Rio Tinto. This is despite its outlook being much weaker than the others.

The stock is trading at a significant premium to BHP & RIO; c. 1.7x NAV vs. RIO & BHP at c. 0.9x NAV & 1.1, c. 6.5x EBITDA (vs. BHP & RIO on c. 4x), and c. 4% FCF vs. BHP & RIO on c. 11-13%.

In light of this, the widening of low grade 58% Fe product realisations, execution and ramp-up risks on the Iron Bridge project, and uncertainties around its Fortescue Future Industries (FFI) diversification and Pilbara decarbonisation plans, Goldman has a sell rating and $13.50 price target on Fortescue’s shares.

This implies potential downside of 25% for investors over the next 12 months. Food for thought.

The post Is the Fortescue share price really the cheapest ASX 200 materials share on the market? appeared first on The Motley Fool Australia.

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More reading

• Guess which sector is delivering the biggest gain across the ASX 200 today
• Why are ASX 200 mining shares having such a dire week?
• Why is the Fortescue share price sinking 4% on Thursday?
• ASX 200 midday update: Pilbara Minerals’ lithium price update, BHP tumbles
• Can the Fortescue share price hold up if the iron ore price falls?

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 Imugene Ltd (ASX: IMU) share price is exploding today on the back of phase two trial results.

Imugene shares have soared a mammoth 30.3% to 21.5 cents each at the time of writing after hitting a high of 23.5 cents a share today. For perspective, the S&P/ASX 200 Index (ASX: XJO) is up 1.72% so far today.

So what did the immuno-oncology company announce today?

‘Statistically significant’ data

Imugene reported positive survival rates among advanced gastric cancer patients treated with HER-Vaxx. HER-VAxx is a B-cell immunotherapy candidate for treatment of tumours over-expressing the HER-2/neu protein.

Patients treated with HER-Vaxx were found to have a 41.5% less chance of death than if they had just been given chemotherapy.

Overall, the median survival for patients treated with HER-Vaxx was 13.9 months. This compared to 8.3 months for those patients only given chemotherapy.

Imugene highlighted the trial result affirms a “favourable survival outcome with no further toxicity for the use of HER-Vaxx combined with chemotherapy compared to just treatment with chemotherapy”.

Commenting on today’s results, Imugene CEO Leslie Chong said:

I am delighted to report that we have achieved this significant milestone for patients with advanced gastric cancer.

The final analysis favoured the survival outcome for HER-Vaxx and I note the Independent Data Monitoring Committee previously suggested to shorten the study by lowering the number of patients.

In more positive news, the company has received approval to use a 100 microgram dose of the HER-Vaxx in further studies to start soon.

This higher dose could improve antibody generation and, therefore, the clinical response to HER-Vaxx.

Imugene share price snapshot

The Imugene share price has lost 41% in the past 12 months, while it has fallen around 45% year to date.

For perspective, the benchmark S&P/ASX 200 Index (ASX: XJO) has lost nearly 10% in a year.

Imugene has a market capitalisation of about $1.3 billion based on the current share price.

The post ‘Significant milestone’: Why the Imugene share price is soaring 30% today appeared first on The Motley Fool Australia.

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More reading

• ASX 200 midday update: Metcash and Imugene jump, Evolution downgrades guidance again
• Why is the Imugene share price one of the biggest ASX 200 fallers today?
• These were the worst performing ASX 200 shares last week

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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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.

Crypto is struggling, but one high profile investor thinks there is more to it.

Mark Cuban has become renowned for his successful venture capitalist career in the early 2000s. He invested in some of the first social networks and software to come around and has since seen his net worth climb to nearly $4.7 billion.

Since he’s no stranger to innovative technologies, it comes as no surprise that Cuban has been a vocal advocate for what cryptocurrency and blockchain technology has to offer. He made headlines in 2021 when his National Basketball Association basketball team, the Dallas Mavericks, said it would accept Dogecoin for merchandise and tickets.

Cuban is more than just a fan of Dogecoin. He considers himself an Ethereum maximalist, which means he believes in Ethereum more than other blockchains. He has also made plenty of purchases in the NFT (non-fungible token) market.

While his investments, like many others, are worth considerably less than just a year ago, Cuban remains optimistic about the direction crypto is headed.

Cuban’s thoughts

Despite the recent pullbacks and talk about a crypto winter, Cuban believes this decline in prices is healthy and necessary to weed out weak competitors in the crypto economy. In a recent interview he said that the recent bull market fostered an environment for companies that didn’t actually have “valid business prospects” to stick around longer than they should have. He made reference to a famous Warren Buffett quote that seems fitting, “When the tide goes out, you get to see who is swimming naked.”

Given current macroeconomic factors like inflation, rising interest rates, and the slowing economy, it makes sense that the blockchains and cryptocurrencies that have failed to provide any real-world value would suffer the most.

In addition, events in the crypto market that have recently transpired have only added to the less-than-ideal macroeconomic factors. When the Terra blockchain imploded in early May as the result of its UST stablecoin losing its peg to $1, it caused a widespread market sell-off.

And just last week, one of the most popular crypto lending platforms, Celsius, announced that it would halt withdrawals as the result of the poor economic conditions. This announcement sent all cryptocurrencies down even more.

Yet despite all of this, Cuban still thinks there is hope and value for crypto over the long haul. Specifically, he believes bear markets force companies to innovate. Cuban elaborated, saying, “Disruptive applications and technology released during a bear market, whether stocks or crypto or any business, will always find a market and succeed.”

A final thought

Mark Cuban has seen his fair share of bear markets. It seems that in his opinion bear markets should be a cause for concern but not a cause for hysteria. 

Bear markets create opportunities for blockchains and investors alike. Cryptocurrencies that continue to develop innovations in a bear market position themselves for long-term success. 

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

The post What one tech guru thinks of the current crypto market appeared first on The Motley Fool Australia.

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More reading

• Why Bitcoin, Ethereum, and Dogecoin are down today
• The ATO is collecting crypto taxes. Here are 5 handy expert tips come tax time
• These 3 cryptos are feeling the Elon Musk effect today
• Can Ethereum reach $5,000?
• The key driver behind the recovery in Bitcoin, Ethereum, and Solana today

RJ Fulton has positions in Ethereum. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Ethereum. The Motley Fool Australia owns and has recommended Ethereum and Terra. 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 S&P/ASX 200 Index (ASX: XJO) is back in the green on Monday, gaining 1.93%, and shares in one sector are leading the way.

The S&P/ASX 200 Materials Index (ASX: XMJ) is outperforming right now, gaining 2.65%. Stocks belonging to the sector currently make up half of the 10 best performing ASX 200 shares.

Among the market’s best performers are lithium shares. Meanwhile, the materials sector’s gold-focused constituents are struggling.

Resource giants BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO), and Fortescue Metals Group Limited (ASX: FMG) are also outperforming.

Let’s take a closer look at what’s going on with ASX materials giants on Monday.

ASX 200 materials shares lead on Monday

Many ASX 200 materials shares are leading the market on Monday.

It comes as lithium shares continue to rebound from last week’s carnage. Right now, the materials sector is led by the Core Lithium Ltd (ASX: CXO) share price’s 13% gain. Those of Lake Resources N.L. (ASX: LKE) and Liontown Resources Limited (ASX: LTR) are up 8.3% and 8.7% respectively.

Meanwhile, shares in iron ore giants BHP, Rio Tinto, and Fortescue are gaining 2.9%, 4.2%, and 4.5% respectively.

Their gains come despite iron ore futures slumping 0.6% to US$128.53 a tonne on Friday. It closed last week 2.2% lower than the week prior, according to CommSec.

However, it’s not all sunshine in the sector today. Many ASX 200 gold shares are bucking the trend to tumble lower. Evolution Mining Ltd (ASX: EVN) is leading their downfall, plummeting 20% after the company released disappointing guidance for financial year 2022.

In encouraging news for ASX investors, all 11 of the benchmark index’s sectors are currently in the green.

Hot on the materials sector’s heels is the S&P/ASX 200 Energy Index (ASX: XEJ). It has gained 2.48% right now.

The worst performing sector right now is the S&P/ASX 200 Real Estate Index (ASX: XRE). It’s currently 0.79% higher.

The post Guess which sector is delivering the biggest gain across the ASX 200 today appeared first on The Motley Fool Australia.

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More reading

• Why is the Core Lithium share price racing 13% higher?
• Here are the top 10 ASX shares today
• Here are the 3 most heavily traded ASX 200 shares on Friday
• Why Betmakers, Block, Lake Resources, and Vulcan shares are racing higher
• ‘Nothing has changed’: Why the Lake Resources share price is rocketing 19% today

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 Core Lithium Ltd (ASX: CXO) share price has been one of the best performers on the ASX 200 index on Monday.

In afternoon trade, the lithium developer’s shares are up an impressive 13% to $1.03.

Why is the Core Lithium share price racing higher?

Investors have been bidding the Core Lithium share price higher despite there being no news out of the lithium developer.

However, there are a couple of potential drivers of its strong performance today.

The first is improving investor sentiment, particularly at the higher risk side of town, which is driving the ASX 200 index meaningfully higher on Monday.

For example, the ASX 200 index is up a solid 1.8% to 6,698.2 points this afternoon.

What else?

Also potentially giving the Core Lithium share price a lift has been last week’s battery material exchange (BMX) update from Pilbara Minerals Ltd (ASX: PLS).

The lithium miner revealed that it received and accepted a record bid of the equivalent of US$7,000 per tonne ahead of its BMX auction.

In response to the pre-auction bid, Pilbara Minerals’ CEO, Dale Henderson, said:

Contrary to recent suggestions that the market has peaked, the evidence we are seeing at the coal-face with our customers, including this pricing outcome, suggests that demand remains incredibly strong, with a continued healthy outlook for the foreseeable future.

This bodes well for Core Lithium, which is aiming to commence production from its Northern Territory-based Finniss project by the end of the year.

The post Why is the Core Lithium share price racing 13% higher? appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX shares today
• Here are the 3 most heavily traded ASX 200 shares on Friday
• Here are the 3 most heavily traded ASX 200 shares on Thursday
• Why is the Core Lithium share price down 14%?
• Here are the 3 most heavily traded ASX 200 shares on Wednesday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has 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 BHP Group Ltd (ASX: BHP) share price is on the move on Monday while the broader market also recovers.

At the time of writing, shares in the world’s largest miner are up 4.17% to $41.69.

For context, the S&P/ASX 200 Index (ASX: XJO) is 1.91% higher to 6,704.5 points at the time of writing.

Let’s take a look at what’s causing the miner’s shares to race past the benchmark ASX 200 index.

What’s up with BHP shares?

There are a couple of reasons as to why the BHP share price is heading north today.

First and foremost, the S&P/ASX 200 Materials Index (ASX: XMJ) is surging 2.55% to 16,039.8 points during early afternoon trade.

This represents a turnaround of more than 4% after the index hit a year-to-date low of 15,403 points last Friday.

Bearish sentiment impacted global markets from 8 June following investor concerns about a looming recession in the United States.

However, those worries have since been alleviated as the Federal Reserve indicated it will narrowly avoid an economic slump.

The turnaround in investor sentiment across the ASX has led other mining shares to also accelerate.

The Rio Tinto Ltd (ASX: RIO) and Fortescue Metals Group Ltd (ASX: FMG) share prices are up 2.85% and 4.34%, respectively.

Furthermore, the price for iron ore is fetching at US$116.50 per tonne. While down 10% in a month, there’s hope China will provide additional stimulus packages to spruce up its economy. This comes after the Asian powerhouse experienced a fall in GDP growth following harsh COVID-19 lockdowns in its most populous cities.

In essence, the financial support from the Xi government appears to have created a floor price for iron ore.

BHP share price snapshot

Since the start of 2022, the BHP share price has continued to move in circles after choppy economic conditions.

The mining giant’s shares are up 12.63% year-to-date, but down almost 3% in the past 12 months.

Listed as the biggest company on the ASX in terms of market capitalisation, BHP is approximately valued at $210 billion.

The post BHP share price bounces as materials outpace the ASX 200 appeared first on The Motley Fool Australia.

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More reading

• Broker sees 23% upside and a huge yield for BHP shares
• Why are ASX 200 mining shares having such a dire week?
• Own BHP shares? ‘Almost unbelievable’ breakthrough could be key to miner’s climate strategy
• Here’s the BHP dividend forecast through to 2024
• Here’s why the BHP share price is in the red today

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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The Whitehaven Coal Ltd (ASX: WHC) share price is expected to offer investors significant upside, according to one broker.

While coal may not be everyone’s favourite commodity, Morgan Stanley thinks the business could rise by more than 60% over the next year. The broker has a price target of $7.75 on the company.

Whitehaven describes itself as the leading Australian producer of ‘premium-quality’ coal.

Further, it says it’s the “dominant player” in Australia’s only emerging high-quality coal basin. North-west New South Wales is the focus of its capital investment and workforce presence.

It operates four mines – three open-cut mines and one large underground mine in the Gunnedah coal basin. It also has two near-term development assets. Vickery is near Gunnedah in New South Wales, and Winchester South in Queensland’s Bowen Basin.

Additionally, Whitehaven has customers across Asia including South Korea, Japan, Taiwan, India, Vietnam, Malaysia, the Philippines, Indonesia and New Caledonia.

What’s causing the bullishness for the Whitehaven Coal share price?

Morgan Stanley’s reason for the high price target is that it thinks the coal price will stay stronger for longer. That’s thanks to supply and demand factors.

Whitehaven is the broker’s pick of the coal sector and it likes the growth potential that the business has.

What’s more, Morgan Stanley is expecting a large increase in profit and dividends in FY23. Based on those numbers, the broker is implying the current Whitehaven share price comes with an FY23 dividend yield of 17.5%.

Latest business update

The coal miner said that in the three months to 31 March 2022, it achieved a record average coal price of $315 per tonne for the quarter.

For context, Whitehaven managing director and CEO Paul Flynn explains that coal prices remain well supported in an environment where there’s “strong demand and constrained supply”.

The three months to 31 March 2022 saw saleable coal production of 4.5mt. This is an increase of 50% on the previous quarter and up 5% year on year.

After buying back $67 million of shares and paying $80 million in dividends in March, it had $161 million of net cash at 19 April 2022.

The company says it’s on track to deliver on FY22 guidance. That’s despite a tight labour market and COVID-related absenteeism which impacted production and sales.

Outlook for Whitehaven and the coal price

The company points out that sanctions on Russia could mean that the 110 million tonnes of high calorific value seaborne coal from Russia could potentially be excluded from its traditional seaborne markets. That’s around 29% of the global market.

After the invasion of Ukraine, “many importing nations are reconsidering energy security and customers have become eager to lock in supply”.

Whitehaven says it expects both thermal and metallurgical coal prices to be “well supported” over 2022 and 2023.

Whitehaven CEO Flynn said:

As the developed world re-focuses on the critical importance of energy security, Whitehaven presents a compelling investment thesis.

The post This broker is eyeing off a huge 65% upside for the Whitehaven share price appeared first on The Motley Fool Australia.

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More reading

• Why Beach, Cooper Energy, Leo Lithium, and Whitehaven Coal are dropping
• Down 40% Tuesday, up 21% today, what’s going on with this ASX coal share?
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• Why are ASX 200 coal shares having such a smoking session today?
• Are these coal miners shaping up to be underrated ASX dividend shares?

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

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The Newcrest Mining Ltd (ASX: NCM) share price is sliding hard today, down 4.6% in late morning trade.

Newcrest shares closed Friday at $23.04 and are currently trading for $22.01.

But it’s not just the Newcrest share price under pressure.

Most of the ASX gold producers are deep in the red, as witnessed by the 6.9% intraday losses posted by the S&P/ASX All Ordinaries Gold Index (ASX: XGD). Meanwhile, the All Ordinaries Index (ASX: XAO) is up 1.7%.

With today’s losses factored in, the Newcrest share price is down 23% from pre-pandemic levels, with 21 February 2020 the final pre-pandemic day of trading on the ASX.

So, what gives?

Why are ASX gold shares under pressure?

Sticking with 21 February 2020 as the final pre-pandemic day, the All Ordinaries is down 5% since that date while the All Ords Gold Index has tanked by 28%.

Looking at the gold price, the yellow metal was trading for US$1,643 per troy ounce pre-pandemic, significantly lower than the current US$1,832 per ounce.

So it looks to be more gold’s fall from a peak of US$2,050 in March this year that’s pressuring gold shares.

Over the past months investors have become increasingly nervous over the potential of a recession in the United States, the world’s biggest economy. Those concerns have seen the prices for copper, iron ore and most industrial metals tumble.

While the gold price has held up better, the Newcrest share price and other gold stocks have faced stiff headwinds from fast rising interest rates.

Aggressive tightening by the US Federal Reserve has seen a stronger greenback and an uptick in yields of US Treasuries. That’s of particular importance for gold stocks because both the US dollar and US government bonds are go-to haven assets in times of uncertainty. While gold, also a classic safe haven asset, doesn’t pay any interest.

Newcrest share price was post-pandemic positive two months ago

The real pressure on the Newcrest share price and the broader gold sector has really only come into play over the past few months.

In fact, on 19 April this year, Newcrest shares closed at $28.84, edging out the US$28.72 per share the company closed at on 21 February 2020.

The post The Newcrest share price is 23% below pre-pandemic levels, what gives? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Monday
• Why are ASX 200 mining shares having such a dire week?
• 5 things to watch on the ASX 200 on Friday
• Stagflation and gold: Could it be an ideal match for ASX 200 gold miners?
• 5 things to watch on the ASX 200 on Monday

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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It’s been a cracking start to the trading week so far for ASX shares and the S&P/ASX 200 Index (ASX: XJO). At the time of writing, the ASX 200 is up a pleasing 1.57% and approaching 6,700 points. But it’s ASX bank shares, like the Commonwealth Bank of Australia (ASX: CBA) share price, that are really hitting their straps today.

All four of the ASX 200 major banks are outperforming the market so far this Monday. Take Westpac Banking Corp (ASX: WBC). Westpac shares are presently up a healthy 2% at $19.87 each. Or National Australia Bank Ltd (ASX: NAB). Its shares are up an even more pleasing 2.37% at $27.66 each.

Australia and New Zealand Banking Group Ltd (ASX: ANZ) shares are powering ahead with a gain of 2.49% to $22.45 a share. But it’s CBA shares that are leading the pack. The ASX’s largest bank is now up 2.55% at $92.46 a share.

CBA shares are now up a pleasing 4.4% over the past five trading days. However, that still puts CBA at a loss of around 13% over the past month, and down almost 10% in 2022 thus far.

CBA and ASX bank shares light up the ASX 200

So what’s going on with these bank shares today?

There’s been no specific news out of any of the big four this Monday. So it seems like the market is just in the mood to give bank shares a run. These were some of the hardest-hit blue chip ASX shares over June, after all. Between 1 June and 17 June, for example, CBA shares fell more than 18%. The ASX 200 fell just 10.5% over the same period.

17 June actually saw three of the big four ASX bank shares hit new 52-week lows. NAB was the only big four bank not to see a new 52-week low share price on that day. So perhaps investors have decided that things went too far and have catapulted the valuations of the ASX banks further away from these lows today.

Whatever the reason for today’s rally, it’s certainly a good day to own ASX bank shares.

At the current CBA share price, this ASX 200 bank share has a market capitalisation of more than $157 billion, with a dividend yield of 4.07%.

The post CBA share price leads the big four as banks outperform ASX 200 on Monday appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has positions in National Australia Bank Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Australian Taxation Office has warned it will be watching a particular practice involving investors who dabble in ASX shares and cryptocurrencies.

In June, just before the financial year ends, many investors sell off badly performing stocks or crypto to reduce their capital gains tax liability.

This is called tax-loss selling which, in itself, is legitimate.

But the tax office will be watching out to see if those same investors re-buy those dumped ASX shares straight after the new financial year starts.

Because then innocent tax-loss selling becomes a ‘wash sale’.

“A wash sale is different from normal buying and selling of assets because it is undertaken for the artificial purpose of generating a tax benefit for the current financial year,” the ATO stated.

“The taxpayer disposes of and reacquires the asset for the deliberate purpose of realising a capital gains loss and obtaining an unfair tax benefit.”

Too good to be true? It probably is

Investors who are practising wash selling will face “swift compliance action” that may result in additional tax, interest, and penalties, the tax office warned.

The ATO also cautioned that following financial advice from social media influencers could get investors into trouble.

“If something seems too good to be true, it probably is,” stated the office.

“The clear advice from the ATO is to check the ATO website or check with an independent registered tax professional and not to rely on advice you may receive through media, social media, or advertisements.”

The ATO disclosed that it uses “sophisticated” data analytics to sniff out wash sales, with the assistance of information from share registries and crypto exchanges.

When a wash sale is identified, the capital loss is rejected, magnifying the loss for the investor.

“Don’t hang yourself out to dry by engaging in a wash sale,” ATO assistant commissioner Tim Loh said.

“We want you to count your losses, not have them removed by the ATO.”

Dob in investors who are wash selling

The ATO also warned of action against tax advice professionals who are promoting wash sales.

“Most tax advisors do the right thing, but a small number encourage this behaviour,” said Loh.

“Promoting a tax avoidance scheme will have serious consequences for the tax advisor and could leave their client with a large tax bill.”

Australians are encouraged to dob in investors who are practising wash sales via the ATO tip-off form or reporting the professional advisor to the Tax Practitioners Board.

The post ATO’s brutal warning to ASX investors appeared first on The Motley Fool Australia.

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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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