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The volatility we’ve seen on the ASX share market has thrown up a number of interesting investment questions and possible opportunities.

Businesses that have plans to improve their foundations for growth could be opportunities for the long term. While a low price/earnings (P/E) ratio doesn’t automatically mean that a business is good value, when combined with longer-term earnings growth, it could lead to good results over time.

Growing store counts won’t automatically lead to higher revenue and profit, but I think these two ASX shares have plenty of potential at the current levels.

Bapcor Ltd (ASX: BAP)

Bapcor is an auto parts business that operates through a number of different brands including Burson, Autobarn, Autopro, Midas, ABS, Truckline and WANO.

The Bapcor share price has fallen by 15% since the beginning of 2022. That’s despite the business recently saying in a trading update that it had “performed strongly” with “strong market demand”.

In the FY22 third quarter, trade segment revenue rose 5.2% year on year, retail revenue was down 1.6% but online retail sales had jumped 39.7% year on year. Specialist wholesale revenue was up 10.1% year on year.

The ASX share is going to do a number of things to improve its profitability including optimising its pricing, procurement and property management, while also leveraging its end-to-end supply chain advantage.

The business wants to grow its store network from 1,100 to 1,500 locations, while also growing the percentage of sales that are ‘own brand.’

According to Commsec, the Bapcor share price is valued at 16 times FY22’s estimated earnings. I think this is an attractive valuation with the company’s plans to grow its footprint and margins.

Adairs Ltd (ASX: ADH)

Adairs is one of the country’s larger retailers of furniture and homewares. However, it’s a bit smaller after the Adairs share price fell 51% in 2022 to date.

The business sells through three different brands – Adairs, Mocka and Focus on Furniture. The ASX share has plans to grow all three segments. It wants to grow its number of members, grow the store count, increase its online sales and upsize some existing stores.

Adairs recently bought Focus on Furniture, which gives the company an increased exposure to the bulky furniture segment.

I think that the company’s plan to upsize stores is particularly good because it reportedly significantly increases the profitability of that store, with an example being able to display and sell more of its products. Range expansion at all three businesses is also seen as a future growth driver.

The dividend can also be a helpful boost for the returns of Adairs. According to CMC, Adairs could pay a grossed-up dividend yield of 13.7% in FY23.

CMC’s numbers suggest that the Adairs share price is now valued at 7 times FY23’s estimated earnings.

The post Why I think these 2 ASX shares are trading at bargain basement prices appeared first on The Motley Fool Australia.

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More reading

• The Adairs share price is down 54% in 2022. What’s happened?
• Why did the Adairs share price surge 5% today?
• Is Adairs really going to pay a dividend yield of 21%?
• Down 20% in a month: Top broker tips 75% upside for the Adairs share price
• Broker tips 2 ASX 200 dividend shares with major upside AND juicy yields

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ADAIRS FPO. The Motley Fool Australia has positions in and has recommended ADAIRS FPO. The Motley Fool Australia has recommended Bapcor. 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 Pro Medicus Limited (ASX: PME) share price has dropped quite a bit since the beginning of 2022, down by 30%.

However, the company came roaring back on Friday, rising by 8%. With investor sentiment returning (at least temporarily), is the ASX healthcare share an attractive idea?

Pro Medicus is a business that describes itself as a leading healthcare informatics company. It provides a full range of medical imaging software and services to hospitals, imaging centres and healthcare groups worldwide. The company boasts that it offers a comprehensive end-to-end offering.

Ongoing contract wins

While the Pro Medicus share price has been suffering, it has continued to win contracts with clients.

For example, earlier in June, it signed two contracts with a combined minimum value of $47 million. Sutter Health renewed for seven years and WellSpan Health renewed for five years. The contract renewals are transaction-based with potential upside. The renewals were negotiated at an increased fee per transaction.

Pro Medicus’ CEO says its renewal success rate sends a positive message to the market and helps build on its network effect.

At the start of June it also won a seven-year, $28 million contract with Allina Health. Pro Medicus says this continues the company’s rapid expansion into North American integrated delivery networks (IDN).

The Allina Health win was the fifth major contract in the North American IDN space in 18 months. Pro Medicus says that IDNs are important and growing because of the trend towards value-based medicine coupled with industry consolidation.

Strong financials

The company is showing high and increasing levels of profitability.

In the FY22 half-year result, it generated 40.3% growth in underlying revenue to $44.3 million, helping net profit after tax (NPAT) increase by 52.7% to $20.7 million.

Pro Medicus has a high earnings before interest and tax (EBIT) margin of 65%, which means that a lot of revenue turns into profit.

The company is debt free and the business continues to lift its dividend at a fast rate. The HY22 dividend increased by 42.9% to 10 cents per share.

Is the Pro Medicus share price a buy?

The broker Morgans thinks the business offers plenty of upside. It has a buy rating on the Pro Medicus share price, with a target of $56.20. That’s a possible rise of around 30%.

Morgans likes the momentum that the ASX share is achieving and its online offering has attractive strengths compared to its competition. The fact that its clients are organisations rather than households is a useful feature in this high-inflation period.

Citi is ‘neutral’ on the business, with a price target of $46. That implies mid-single-digit potential for the Pro Medicus share price. The broker notes the recent renewals at a better price per transaction as a positive. It thinks the company can keep growing its market share.

Both brokers think the business is valued at around 84x FY23’s estimated earnings.

The post The Pro Medicus share price is down 30% in 2022. Is it a buy? appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX shares today
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 midday update: Block and Zip crash amid market selloff
• Pro Medicus share price tumbles despite $47m contract renewal news
• Dividend beasts: 3 ASX 200 shares that have powered up their dividends over the past 5 years

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Pro Medicus Ltd. The Motley Fool Australia has positions in and has recommended Pro Medicus Ltd. 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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At the current Xero Limited (ASX: XRO) share price of around $80, I think Xero looks like a top S&P/ASX 200 Index (ASX: XJO) share idea.

Even at around $90 I think Xero would be a top long-term pick. That would still represent a large decline in 2022, given this ASX 200 share has lost nearly 42% year to date.

There are plenty of ASX tech shares that have compelling business models. But I believe Xero is one of the best.

It’s one of the world’s leading cloud accounting businesses. Xero has a significant presence in New Zealand, Australia and the United Kingdom. The business is also growing in several other countries including the United States, Canada, Singapore and South Africa.

I believe the Xero share price looks like a good opportunity for a number of reasons.

ASX 200 share with global growth

A company that has a large addressable market gives it a significant potential growth runway. Finding businesses that can deliver many years of compounding growth can be beneficial.

Xero has a particularly large addressable market because it’s now in numerous countries. And it’s growing its subscriber numbers at an attractive rate.

In FY22, the ASX 200 tech share grew its total subscribers by 19% to 3.3 million. That helped operating revenue rise by 29% to $1.1 billion. It achieved 24% revenue growth, excluding acquisitions.

While I’d need a crystal ball to know how long Xero can grow at a double-digit rate, I think it’s a very positive sign that its oldest market – New Zealand – is still growing at a decent rate. In FY22, New Zealand’s subscribers grew by 15% to 512,000.

The platform nature of its business model is attractive for different users to connect, in my opinion, including business owners, employees, accountants, external application providers and so on.

I think the global growth will be helpful for the Xero share price over the long term.

Strong SaaS metrics

As a software-as-a-service business (SaaS), Xero receives monthly cash flow from its subscriber base. It has a very high customer retention rate. In FY22, it only lost around 0.9% of its subscribers, meaning it kept more than 99%.

The high level of customer loyalty allows it to implement price increases without losing many customers.

In FY22, the ASX 200 tech share reported that the average revenue per user (ARPU) went up 7% to $31.36. This helped annualised monthly recurring revenue (AMRR) go up 28% to $1.23 billion. Thanks to the low churn, ARPU growth and total subscriber growth, the total lifetime value of subscribers increased by 43% to $10.9 billion.

I think these metrics are very beneficial for the company’s long-term prospects as it invests to grow its number of subscribers around the world.

High gross profit margin

Xero had a very high gross profit margin of 87.3% in FY22. This was an increase from 86% in FY21.

This high margin allows Xero to re-invest most of the new revenue back into the business. For example, in FY22 it grew its overall sales and marketing costs by 32% to $405.7 million, which has helped subscriber additions and brand awareness.

Meanwhile, the ASX 200 tech share grew its product design and development expenses by 49% to $372 million. Examples of focus include production localisation in a number of international markets and future innovation areas such as platform, ecosystem and integration of acquisitions.

Xero says that it will continue to focus on growing its global small business platform and maintain a preference for re-investing cash generated to drive long-term shareholder value, which could be helpful for the Xero share price.

The post Here’s what I consider to be the very best ASX 200 share to buy in July appeared first on The Motley Fool Australia.

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More reading

• Why is the Xero share price leaping higher today?
• ‘Price makers’: 3 ASX 200 shares that can pass on rising costs in an inflationary environment
• Why is Goldman Sachs tipping 50% upside for the Xero share price?
• 2 ASX tech shares Goldman Sachs rates as buys
• Is it time to go bargain hunting for ASX 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 positions in and has recommended Xero. The Motley Fool Australia has positions in and has recommended Xero. 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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ASX travel shares might be an exciting sector in which to look for opportunities with travel returning, according to experts.

COVID-19 has had a huge impact on the travel sector over the past two and a half years. But now things are returning somewhat to normal – borders are opening, planes are in the air and so on.

Experts have named two shares that could fly higher with significant upside. While one expert’s opinion doesn’t automatically mean a share will do well, it could be worth paying attention.

Having said that, here are two buy-rated ASX travel shares.

Corporate Travel Management Ltd (ASX: CTD)

Corporate Travel Management is one of the world’s largest corporate travel operators.

It’s currently rated as a buy by the broker Macquarie, with a price target of $25.80. That suggests a possible rise of around 40% over the next year as the company sees a return to almost pre-COVID levels.

In terms of activity, Corporate Travel gave an investor update last month which showed total transaction value (TTV) had recovered to 70% of 2019 levels in North America, 86% in Europe, and 71% in Australia and New Zealand.

However, the company expects monthly revenue to surpass 2019 calendar year levels in the fourth quarter of FY22. It’s targeting $265 million of earnings before interest, tax, depreciation and amortisation (EBITDA) when things are 100% recovered.

The business claims it’s recovering faster than the corporate travel sector in its largest regions, with “strong” market share gains in all regions. Management boasts that its value proposition, global scale and financial strength are all relevant during this COVID recovery period. It currently has zero debt.

Macquarie puts the current Corporate Travel share price at 20x FY23’s estimated earnings.

Webjet Limited (ASX: WEB)

Webjet is another ASX travel share that has a large presence in the corporate travel world with its WebBeds division. It also has its online travel agency (OTA) business.

Webjet is currently rated as a buy by the broker Citi, with a price target of $6.94. That suggests a possible rise of around 30% in the next year.

Citi thinks the Webjet setup will allow it to perform well in the coming years and that WebBeds can perform.

Last month, the business reported its FY22 result. It says it returned to profitability in the second half of FY22, delivering positive cash flow. The company says its working capital continues to improve, with a cash surplus of $4 million per month.

Furthermore, Webjet says it has seen a strong start to FY23, with all businesses profitable in April and indications of a “further strong uplift in May”. In May 2022, WebBeds’ total transaction value was ahead of May 2019, while Webjet OTA bookings were tracking at 80% of pre-pandemic levels.

Management sees “significant growth opportunities in all businesses as global travel markets reopen”.

WebBeds’ costs are more than 20% lower than pre-pandemic levels, despite global wage pressures, which will help its profitability margins as the company fully recovers.

The post 2 ASX travel shares buy-rated by experts that could take off appeared first on The Motley Fool Australia.

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More reading

• When might Corporate Travel shares start paying dividends again?
• Why is the Webjet share price tailgating the ASX 200 today?
• Analysts name 2 top ASX 200 shares to buy today
• ASX 200 travel shares take off again on Tuesday. Here’s why
• Why are ASX 200 travel shares lifting off on Monday?

Citigroup is an advertising partner of The Ascent, a Motley Fool company. 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 Corporate Travel Management Limited, Macquarie Group Limited, and Webjet Ltd. 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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ASX shares exploring for and producing rare earths have delivered some of the best gains on the index over the past 12 months.

The miners have received some healthy tailwinds as the West moves to secure supplies of the diverse range of metals outside of China. To give you some context, in 2020 China was responsible for around 60% of global rare earths production.

The Australian Federal Government lists rare earths among its critical mineral designation.

According to the government website:

A critical mineral is a metallic or non-metallic element that has two characteristics:
1. It is essential for the functioning of our modern technologies, economies or national security and
2. There is a risk that its supply chains could be disrupted.

The government reports that Australia has a high geological potential for rare earths with a 2020 Economic Demonstrated Resource of 4.2 million tonnes. In 2020 Australia produced 20,000 tonnes of rare earths out of a total global production of 240,000 tonnes.

Below, we look at three of the bigger ASX shares hunting for and digging up rare earths.

But first…

What are rare earth elements?

Taking the broader definition, there are 17 different rare earth elements, with exotic (and hard to spell) names like praseodymium and ytterbium.

While rare earths are actually found in abundance, they’re also generally found in very limited concentrations. That means miners need to do a lot of digging and sorting before extracting the valuable metals.

Rare earths’ unique electronic and magnetic properties make them indispensable in developing many of today’s technologies. Technologies like satellites, computers, smartphones, lasers, electric motors, and a wide range of military tech, from submarines to aircraft.

Hence the critical minerals designation.

So, which three ASX shares are producing rare earths?

Three ASX shares cashing in on rare earths

Starting with a mid-cap stock, we have Arafura Resources Limited (ASX: ARU), which has a market cap of $420 million.

Arafura’s flagship Nolans Project is located in the Northern Territory. According to the company, the project (under development) has the potential to supply “a significant proportion” of the world’s neodymium and praseodymium (NdPr) demand.

The company received a welcome boost last month when it announced an offtake agreement with global vehicle manufacturer Hyundai Motor Company.

The Arafura share price is up 119% over the past 12 months. That compares to an 11% loss posted by the All Ords over that same time.

Moving on to the second ASX share cashing in on rare earths we have Iluka Resources Limited (ASX: ILU), with a market cap of $3.7 billion.

Iluka prospects globally for rare earths, with projects across Australia and in Sierra Leone. It is currently developing its Eneabba rare earths refinery in Western Australia. The company expects construction to commence in the second half of 2022, with the first rare earth production slated for 2025.

The Iluka share price is up 10% over the past 12 months.

This brings us to our third, and biggest, ASX share in the rare earths space, Lynas Rare Earths Ltd (ASX: LYC), with a market cap of $7.6 billion.

Headquartered in Perth, Lynas is the world’s second-largest producer of rare earths. It is currently the only significant producer outside of China.

The ASX share operates in Australia and Malaysia. Its Australian concentration plant is located at Mt Weld, Western Australia. Additionally, it has an advanced materials plant in The Gebeng Industrial Park in Malaysia.

The Lynas share price is up 57% since this time last year.

You can find out which ASX shares are cashing in on cobalt, lithium and vanadium in more of our ‘Mineral Monday’ series.

The post Mineral Monday: What you need to know about rare earths and which ASX shares are cashing in on them appeared first on The Motley Fool Australia.

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More reading

• Guess which ASX 200 mining shares these experts are backing
• Here’s why analysts rate these ASX 200 mining shares as buys
• How is the Lynas share price performing against its sector this month?
• Iluka share price lifts off on rare earths refinery progress
• Top brokers name 3 ASX shares to buy today

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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Looking for some dividend shares to add to your income portfolio? If you are, you may want to look at the two listed below.

Both have been rated as buys by analysts and tipped to provide investors with big dividends. Here’s what you need to know about these ASX dividend shares:

HomeCo Daily Needs REIT (ASX: HDN)

The first ASX dividend share to look at is the HomeCo Daily Needs REIT.

It is a property company that invests in convenience-based assets across target sub-sectors of neighbourhood retail, large format retail, and health and services.

The team at Goldman Sachs are positive on its outlook and believe its shares are undervalued at current levels. The broker commented:

We believe HDN is undervalued at its current valuation given its diversified tenant base, and see it as well positioned to benefit from the shift to omni channel retailing, with additional external growth opportunities to drive earnings growth over the medium-term.

Goldman has a buy rating and $1.70 price target on its shares.

In respect to dividends, the broker is forecasting dividends per share of 8 cents in FY 2022 and 9 cents in FY 2023. Based on the current HomeCo Daily Needs share price of $1.34, this will mean dividend yields of 6% and 6.7%, respectively.

South32 Ltd (ASX: S32)

Another ASX dividend share that is rated as a buy is South32.

It is diversified mining and metals company producing a range of commodities. This includes green metals such as aluminium, copper, and nickel.

Morgans is a big fan of the company following changes to its portfolio. It commented:

We see attractive long-term value potential in S32 from de-risking of its growth portfolio, the potential for further portfolio changes, and an earnings-linked dividend policy.

The broker currently has an add rating and $6.10 price target on the miner’s shares.

As for dividends, Morgans is forecasting fully franked dividends in the region of 26 cents per share in FY 2022 and 35 cents per share in FY 2023. Based on the current South32 share price of $3.99, this equates to yields of 6.5% and 8.8%, respectively.

The post Experts name 2 ASX dividend shares with big yields to buy appeared first on The Motley Fool Australia.

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More reading

• Here are 2 ASX 200 dividend shares to buy according to analysts
• Down 40% Tuesday, up 21% today, what’s going on with this ASX coal share?
• How big will the South32 dividend be in 2023?
• Here are 2 ASX dividend shares experts say are buys
• Here are the 3 most heavily traded ASX 200 shares on Friday

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 Wesfarmers 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 Friday, the S&P/ASX 200 Index (ASX: XJO) finished the week with a very strong day. The benchmark index fell 1.75% to 6,474.8 points.

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

ASX 200 expected to jump

The Australian share market looks set to start the week on a very positive note after a particularly strong night on Wall Street on Friday. According to the latest SPI futures, the ASX 200 is expected to open the day 103 points or 1.6% higher this morning. On Wall Street, the Dow Jones was up 2.7%, the S&P 500 rose 3.1%, and the Nasdaq jumped 3.3%.

Oil prices rebound

Energy producers Santos Ltd (ASX: STO) and Woodside Energy Group Ltd (ASX: WDS) could have a good start to the week after oil prices rebounded on Friday. According to Bloomberg, the WTI crude oil price rose 3.2% to US$107.62 a barrel and the Brent crude oil price climbed 2.7% to US$113.12 a barrel. However, this couldn’t stop oil prices from recording a second weekly decline on recession fears.

Metcash results

The Metcash Limited (ASX: MTS) share price will be on watch on Monday when the wholesale distributor releases its full year results. According to a note out of Goldman Sachs, its analysts expect Metcash to report a 1.8% increase in revenue to $16.6 billion and a 6% lift in underlying net profit to $268 million. The latter is lower than the consensus estimate of $279 million.

Gold price flat

Gold miners Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) could have a soft start to the week after the gold price traded flat on Friday night. According to CNBC, the spot gold price ended the week at US$1,830.3 an ounce. This led to gold recording a small weekly decline amid a stronger US dollar.

NAB shares rated as a buy

The National Australia Bank Ltd (ASX: NAB) share price is great value according to analysts at Goldman Sachs. This morning the broker has retained its conviction buy rating with an improved price target of $34.26. Goldman has amended its “FY22/23/24E EPS by +0.6%/+2.0%/+2.3% post the completion of NAB’s acquisition of Citigroup’s Australian Consumer business.”

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

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More reading

• Top brokers name 3 ASX shares to buy next week
• ‘Need to see cash’: Why these fundies tip big things for the Santos share price
• Brokers name 2 ASX dividend shares to buy next week
• 4 reasons to stick with battered small-cap ASX shares
• Here are the top 10 ASX shares 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.

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There are a growing number of exchange traded funds (ETFs) for investors to choose from on the Australian share market.

Three that could be worth getting better acquainted with this weekend are listed below. Here’s what you need to know about them:

BetaShares Global Banks ETF (ASX: BNKS)

The first ETF for investors to look at is BetaShares Global Banks ETF. As its name implies, this ETF gives investors exposure to many of the world’s largest banks (excluding Australian banks). Due to weakness in the global banking sector, this ETF is down 23% from its high and trading at a 52-week low. This could make it an opportune time to make an investment with a long term view. Among the banks included in the fund are Bank of America, Barclays, Citigroup, HSBC, JPMorgan and Wells Fargo.

iShares Global Consumer Staples ETF (ASX: IXI)

Another ETF for investors to look at is the iShares Global Consumer Staples ETF. This fund provides investors with exposure to large global consumer staples companies. These are companies that produce essential products such as food, tobacco, and household items. Given that demand for this type of products is relatively consistent whatever happens in the economy, this ETF could be a good option in the current environment. Among its holdings are giants such as Coca-Cola, Nestle, PepsiCo, Procter & Gamble, Unilever, and Walmart.

VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT)

A final ETF for investors to look at is the VanEck Vectors Morningstar Wide Moat ETF. This popular ETF has generated strong returns for investors in recent years thanks to its focus on companies with attractive valuations and sustainable competitive advantages. There are around 50 companies included in the fund with these desirable qualities. These include Gilead Sciences, Kellogg Co, Microsoft, Philip Morris, and Walt Disney.

The post 3 quality ETFs for ASX investors to buy next week appeared first on The Motley Fool Australia.

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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 BetaShares Global Banks ETF – Currency Hedged. The Motley Fool Australia has positions in and has recommended iShares Global Consumer Staples ETF. The Motley Fool Australia has recommended VanEck Vectors Morningstar Wide Moat ETF. 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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Everyone is bearish but one expert has revealed he’s personally started buying ASX shares.

Montgomery Investment Management chief investment officer Roger Montgomery is detecting wholesale pessimism in the industry at the moment.

“Talking to brokers, other fund managers and economists, I don’t find many people who are very bullish at all. In fact, most of them expect another leg lower in the stock market,” he said on a Montgomery vlog.

“Bearishness pervades almost every corner of the market at the moment.”

But to Montgomery, such unanimous despair means the opposite.

“For me, that starts to become optimistic because if everyone’s already bearish, there’s not many others left to become bearish,” he said.

“Those who are bearish have already sold, there’s not many people left to sell, and so it may be that prices are now on the cusp of a bounce.”

What can happen from here?

Putting aside sentiment, Montgomery analysed what could logically happen to the economy and stock markets from here.

He explored two different scenarios that could come true.

The first option is that interest rates stabilise without sending the economy into strife.

“If rates stop rising, and if economies don’t go into a recession, and we don’t get a financial crisis, then there’s a very real possibility that the indiscriminate selling that we’ve witnessed recently becomes something more discerning,” he said.

“And buyers return to the market to look for downtrodden, high-quality growth companies.”

The second possibility is that by the time rate hikes are done, the unemployment queues have lengthened.

“If that happened, then we would get a much more significant decline in economic growth, and then the possibility of a recession goes up.”

I’m buying ASX shares. Are you?

Montgomery thinks the first scenario is much more likely, as he doesn’t foresee a recession or financial crisis hitting Australia.

“Then we’re in a situation where we’ve had indiscriminate selling, pushing PE ratios very, very low, and that of course means the possibility of better returns in the future,” he said.

“So if indiscriminate selling gives way to more discerning buying, we’ll get an expansion of PEs again, and that will increase the return that would normally be available just from the earnings growth.”

Montgomery said that he’s now started to buy for his personal portfolio.

“My suggestion now is to start dipping your toe back in.”

Montgomery doesn’t pretend to know whether stock prices will head lower, higher or flatline for the rest of the year.

But that doesn’t matter for a long-term investor.

“It could be that the rest of my peers in the market are absolutely correct and we get another leg down. I just don’t know,” he said.

“But I do know that there are some mouthwatering opportunities already appearing, and rather than try and predict what prices are going to do next, I’d rather start filling my portfolio with wonderful businesses at rational prices.”

The post ‘Dip your toe back in’: Expert reveals why he’s buying ASX shares now 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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Last week saw a number of broker notes hitting the wires once again. Three buy ratings that investors might want to be aware of are summarised below.

Here’s why brokers think investors ought to buy them next week:

Pilbara Minerals Ltd (ASX: PLS)

According to a note out of Ord Minnett, its analysts have retained their buy rating and $4.25 price target on this lithium miner’s shares. This follows news that the company has received and accepted the equivalent of a US$7,000 per tonne offer for its lithium ahead of its BMX auction. The broker believes that this is a positive indicator for lithium prices and expects them to remain elevated in the medium term. Overall, the broker feels this makes Pilbara Minerals’ shares cheap at the current level. The Pilbara Minerals share price was fetching $2.23 on Friday.

REA Group Limited (ASX: REA)

A note out of Citi reveals that its analysts have retained their buy rating and $153.50 price target on this property listings company’s shares. This follows news that the New South Wales government is making changes to stamp duty rules. Citi sees the changes as a positive for the property market and suspects that other states could follow suit in the future. The REA share price was trading at $114.07 at the end of the week.

Woodside Energy Group Ltd (ASX: WDS)

Analysts at Morgan Stanley have retained their overweight rating and $40.00 price target on this energy producer’s shares. While the broker acknowledges that there are risks of a recession, it also reminds investors that there’s no guarantee that we will enter one. Furthermore, the broker believes that structural tailwinds and its attractive valuation would offset any weakness in oil prices caused by one. The Woodside share price ended the week at $30.61.

The post Top brokers name 3 ASX shares to buy next week appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX shares today
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• What’s going on with the Woodside Energy share price 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 recommended REA 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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