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.

What happened

Shares of Tesla (NASDAQ: TSLA) are reacting to an overnight report on how it it planning to ensure it has the raw materials to continue to lead the EV market as it grows. The report has Tesla shares jumping in early trading. As of 11:03 a.m. ET, the stock was up 3.5%. 

So what

Tesla has plans to add another battery supplier, and it is one of the largest EV makers in China, according to CNBC. That supplier, Chinese automaker BYD, is also a company Warren Buffett likes. Buffett’s Berkshire Hathaway owned 225 million shares of BYD as of Dec. 31, 2021, representing a 7.7% ownership stake in the company. The report quoted BYD Vice President Lian Yubo as saying his company is “now good friends” with Tesla CEO Elon Musk, and that BYD is ready to supply batteries to Tesla soon. 

Now what

BYD sold more than 740,000 electric and fossil-fuel-based vehicles combined last year. Its new-energy-vehicle production — which includes both plug-in hybrid and battery electric cars — more than tripled year over year in 2021, to more than 600,000. That makes it a direct competitor to Tesla, which also has a manufacturing plant in the largest global EV market. 

While vehicle production was a much larger portion of its sales, battery sales represented about 7.3% of total revenue in 2021. The alignment makes for an interesting combination, as its other battery suppliers are not competing directly with Tesla for vehicle sales. 

But Musk knows EV competition is heating up, and one of the supply chain restrictions could be battery supply in coming years. Investors are cheering the news that Tesla is thinking ahead to be able to supply its growing manufacturing volume with a necessary part that might be in short supply for many EV makers. 

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

The post Why Tesla stock bounced today appeared first on The Motley Fool Australia.

More reading

• Twitter stock: The 1 huge challenge Elon Musk faces
• Is now the time to buy oil stocks?
• Why did the Tesla share price just dump 9%?
• Why Tesla stock did a U-turn today
• The Tesla share price has rallied 18% in less than a fortnight. What’s going on?

Howard Smith has positions in BYD and Berkshire Hathaway (B shares). The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Berkshire Hathaway (B shares) and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Berkshire Hathaway (B shares). 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/FzaoV7U

The All Ordinaries Index (ASX: XAO) has struggled this year – tumbling 6% year to date – but not all shares on the index have suffered.

In fact, these three have gained more than 130% in 2022 so far. Let’s take a look at what’s been driving them higher.

3 ASX All Ordinaries shares boasting massive 2022 gains

Yancoal Australia Ltd (ASX: YAL)

All Ordinaries coal producer Yancoal has seen its share price lift a whopping 134.6% so far this year. As of Wednesday’s close, it was trading at $6.10.

Surging energy prices following Russia’s invasion of Ukraine have likely been behind much of its gains. Though, recent talk of a potential takeover offer from Yankuang Energy might have also spurred interest.

Yankuang Energy is a Chinese state-owned entity and Yancoal’s controlling shareholder. Yesterday, the market heard its response to news the ASX-listed company wouldn’t support its takeover bid.

Yankuang said the bid – which is still hypothetical at this stage – would provide “a reasonable opportunity for those Yancoal shareholders who wish to exit but are not able to do so at current market prices”.

Stanmore Resources Ltd (ASX: SMR)

The share price of Yancoal’s fellow All Ordinaries coal producer Stanmore Resources has also taken off this year. It’s currently trading at $2.75 – 190.1% higher than it was at the start of 2022.

The company has also likely had tailwinds due to the price of coal in 2022.

Additionally, it completed its acquisition of BHP Group Ltd (ASX: BHP)’s 80% stake in BHP Mitsui Coal last month.

Grange Resources Limited (ASX: GRR)

Finally, the Grange Resources share price has lifted a whopping 133.8% this year so far. It closed yesterday’s session at $1.77.

The All Ordinaries share mines iron ore and produces iron ore pellets in Tasmania. It also owns a 70% stake in a magnetite project in Western Australia.

The company has benefited from strong iron ore prices this year, allowing it to declare a 10-cent per share fully franked final dividend in April. That’s its highest routine dividend ever and equal to a 10-cent special dividend it paid out late last year.

The post 3 ASX All Ordinaries shares up by more than 130% so far in 2022 appeared first on The Motley Fool Australia.

More reading

• Why Core Lithium, Perenti, Strandline, and Yancoal shares are pushing higher
• Yancoal share price lifts as potential takeover slammed
• Here are the best performing ASX dividend shares so far this year
• Why Appen, Elders, Predictive Discovery, and Yancoal shares are dropping
• Why these ASX coal shares could be ‘bigger than Ben-Hur’: fundie

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/rlku6AV

The Magellan Financial Group Ltd (ASX: MFG) share price has rebounded on Thursday after hitting a multi-year low yesterday.

In morning trade, the fund manager’s shares are up 3% to $12.96.

Why is the Magellan share price rising?

Investors have been bidding the Magellan share price higher today after the company announced the return of its co-founder Hamish Douglass.

According to the release, Mr Douglass will resume working with Magellan in a new consultancy role in October. In this new role, he will provide investment insights, including geopolitical and macroeconomic views.

The release notes that this new role will allow Mr Douglass to deliver his expertise to investors free from board, management, and portfolio responsibilities.

‘Another important step’

Magellan’s Chairman, Hamish McLennan, believes this appointment is another important step for the company. He said:

The Board and Hamish have carefully considered the right balance for Hamish, for Magellan and most importantly for our clients as they navigate global markets. Hamish’s appointment in this new role is another important step as Magellan moves forward as a focused global funds manager.

Magellan’s macroeconomic team has advised clients through the recent inflation, higher interest rates, war, financial crises and supply chain issues. Magellan combines its perspectives with access and insights at the highest levels from around the world. Magellan’s investment team of 30 plus investment professionals focuses on research of major global companies and sectors, also providing real time microeconomic information and data which feed into our analysis.

New CEO starting sooner

In other news, Magellan’s next CEO, David George, has brought forward his start date to 19 July. Previously Mr George was expected to commence in the role on 8 August.

Mr McLennan commented:

The Board has received very positive feedback from clients and investment professionals globally following the announcement on 11 May 2022 of the appointment of David George as Chief Executive Officer and Managing Director of Magellan. Today, the Board is also delighted to announce that Mr. George’s commencement date with Magellan has been brought forward from 8 August 2022 to 19 July 2022.

The post Magellan share price pushes higher on Hamish Douglass return appeared first on The Motley Fool Australia.

More reading

• Why BrainChip, Firefinch, Magellan, and Westpac shares are dropping
• 10 ASX All Ords shares that could be stung by tax-loss selling
• 3 ASX 200 shares defying today’s sell-off to leap higher
• Magellan share price lifts amid buyback speculation
• Why A2 Milk, Appen, Magellan, and Tyro shares are dropping 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/dshmrI7

The BrainChip Holdings Ltd (ASX: BRN) share price has had a poor run in the past week.

Since last Wednesday, the artificial intelligence (AI) technology company’s shares have shed a touch over 16%.

In particular, the BrainChip share price has been deep in the red across the last three trading days.

At yesterday’s market close, BrainChip shares ended the day 5% down at 95 cents apiece.

What’s driving BrainChip shares lower?

While the company has been relatively quiet on the news front, investors have offloaded the BrainChip share price.

This comes after some concerns from investors that the company’s market capitalisation may have gotten ahead of itself.

BrainChip is currently valued at $1.71 billion and will only just sit inside the S&P/ASX 200 Index (ASX: XJO) from 20 June.

However, with an exorbitant market cap, it’s worth noting that the company generates very little revenue.

In its last quarterly report for the period ending 31 March, BrainChip received US$0.2 million in cash receipts from customers. And that’s a decrease of 81% from the prior US$1.1 million collected in Q4 FY21.

Furthermore, BrainChip shares rose strongly last month following investor hype regarding its acceptance into the Arm AI Partner Program.

It appears the sentiment has also worn off in the company.

Nonetheless, the S&P Dow Jones Indices announced some changes in its quarterly rebalance of the S&P/ASX Indices in which Brainchip will be added.

What this means is that a majority of fund managers can only buy shares within a certain index. The updated list may help prop up BrainChip shares as well as investors looking to take advantage of the upcoming change.

BrainChip share price snapshot

Regardless of treading lower in recent times, the BrainChip share price has gained almost 70% over the last 12 months.

When looking at year-to-date, its shares are up around 40%.

BrainChip has approximately 1.74 billion shares on its registry.

The post Why has the BrainChip share price fallen 16% in a week appeared first on The Motley Fool Australia.

More reading

• Why BrainChip, Firefinch, Magellan, and Westpac shares are dropping
• BrainChip market cap is ‘not even close to where it can and should be’: CEO
• Appen and PolyNovo tumble after being kicked out of the ASX 200 along with these shares
• Brainchip shares could get a massive boost this month: here’s how
• 5 things to watch on the ASX 200 on Monday

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

from The Motley Fool Australia https://ift.tt/MndR50T

If you’re looking to take advantage of recent weakness in the lithium industry, then Allkem Ltd (ASX: AKE) shares could be worth considering.

That’s the view of analysts at Morgans, which earlier this week reiterated their bullish view on this lithium stock.

According to the note, the broker has retained its add rating with a slightly trimmed price target of $16.38.

Based on the latest Allkem share price, this implies potential upside of over 40% for investors over the next 12 months.

Why is Morgans bullish on the Allkem share price?

Morgans is feeling very positive about the Allkem share price due to sky high lithium prices, its production mix, and its bold production growth plans.

The broker explained:

We maintain our ADD rating given the strong growth outlook for the company.

AKE’s diverse products and geographical mix adds opportunities to capture value as the market evolves. There is further potential upside that are not in our numbers such as Olaroz stage 3 and/or another lithium hydroxide plant. Should the lithium market continue to remain strong AKE still has a large amount of untapped growth potential.

What about concerns over weaker lithium prices in the coming years?

Something that has been weighing on lithium shares in recent weeks are concerns over the potential for lithium prices to tumble in the coming years as supply increases.

Morgans has considered this and acknowledges that prices will inevitably retreat from current levels in the future. However, it doesn’t necessarily think that decline is imminent.

We don’t think spot prices are likely to remain at current levels forever but we think there is still plenty of scope for contract prices to increase further before settling down into a long term average.

Overall, the broker appears to see the current Allkem share price as a great entry point for investors looking for lithium exposure.

The post Why this top broker is bullish on the Allkem share price appeared first on The Motley Fool Australia.

More reading

• Top brokers name 3 ASX shares to buy today
• Why Macquarie still sees ‘material upside’ for ASX lithium shares
• Analysts have just named these 2 ASX lithium stocks as buys
• ASX 200 midday update: Magellan smashed, Liontown signs Tesla deal
• Allkem share price falls on mixed lithium update

Motley Fool contributor James Mickleboro has positions in Allkem 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 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/C8c9ae6

The Woolworths Group Ltd (ASX: WOW) share price has taken a bit of a tumble in recent weeks.

Since this time last month, the retail giant’s shares have fallen over 10%.

This has left the Woolworths share price trading within touching distance of a 52-week low.

Is the weakness in the Woolworths share price a buying opportunity?

According to a note out of Goldman Sachs, its analysts think that investors should be taking advantage of this share price weakness.

This morning the broker has reiterated its buy rating and $41.70 price target on the company’s shares.

Based on the current Woolworths share price of $34.47, this implies potential upside of 21% for investors over the next 12 months.

What did the broker say?

Goldman has been busy looking deeply into the grocery industry in recent weeks and its channel checks have revealed that trading remains strong despite rising inflation.

It explained:

We have conducted a series of channel checks in the last 2 weeks with key grocery industry participants (FMCG suppliers, fresh wholesalers, freight and logistics solution providers, SimilarWeb online traffic update). Bottom line: we see continued resilience in the grocery space, where most players have not seen a noticeable change in consumer behaviour.

We are encouraged by the resilience and superior operations of WOW and reiterate our unchanged FY22-24e Sales and EPS CAGR of 6.9% and 14.9% respectively. We expect this to be driven by high price growth, well protected GPM and slight EBIT margin expansion as COVID costs roll-off and cost efficiencies continue.

In light of this, the broker feels that the recent weakness in the Woolworths share price has created a buying opportunity. Particularly given that its shares are trading at their lowest valuation premium to the Coles Group Ltd (ASX: COL) since its spinoff from Wesfarmers Ltd (ASX: WES) in 2018.

The post Why this top broker thinks the Woolworths share price is cheap appeared first on The Motley Fool Australia.

More reading

• Tolls and phones: Wilsons unveils 3 ASX shares to buy for a slowing economy
• Woolworths share price edges lower despite green milestone
• Why did the Woolworths share price underperform on Thursday?
• Own Woolworths shares? Here’s how the retailer plans to combat rising wage costs
• How do ASX shares typically perform following a demerger?

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 COLESGROUP DEF SET and Wesfarmers 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/FqJlgWw

With oil prices trading above US$120 per barrel and looking unlikely to retreat meaningfully any time soon, energy shares look well-placed to deliver bumper profits in the near term.

If you’re wanting to gain exposure to this side of the market, then the two ASX shares listed below could be worth considering. Here’s what you need to know:

BetaShares Global Energy Companies ETF (ASX: FUEL)

The first option for investors to consider is actually an exchange traded fund (ETF). The BetaShares Global Energy Companies ETF could be a top option for investors as it provides them with easy access to some of the biggest energy companies in the world.

Among its 40+ holdings you will find giants such as BP, Chevron, ConocoPhillips, ExxonMobil, Phillips 66, Royal Dutch Shell, and Total.

BetaShares notes that these companies are typically larger, more geographically diversified, and more vertically integrated than Australian listed energy companies.

Santos Ltd (ASX: STO)

Another option for investors to consider in the energy sector is Santos. It is one of Australia’s leading energy producers with a number of quality operations and growth projects.

The team at Morgans remain very positive on the company despite its strong gain (32%+) this year. They recently named Santos as one of the best shares to buy this month. The broker currently has an add rating and $10.00 price target on its shares, which compares favourably to the current Santos share price of $8.76.

Morgans commented:

We expect the resilience of STO’s growth profile and diversified earnings base see it best placed to outperform against a backdrop of a broader sector recovery. While pre-FEED, we see Dorado as likely to provide attractive growth for STO, while its recent acquisition increasing its stake in Darwin LNG has increased our confidence in Barossa’s development.

PNG growth meanwhile remains a riskier proposition, with the government adamant it will keep a larger share of economic rents while operator Exxon has significantly deferred growth plans across its global portfolio.

The post 2 ASX energy shares to buy now to take advantage of booming oil prices appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Thursday
• Why are ASX 200 energy shares jumping today?
• 3 ASX 200 shares cracking new 52-week highs on Wednesday
• 5 things to watch on the ASX 200 on Wednesday
• Will June be a good month for the Santos share price?

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 Energy Companies ETF – Currency Hedged. 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/xUmvtMA

It’s been just over seven months since the Betashares Crypto Innovators ETF (ASX: CRYP) began trading on the ASX.

When the exchange traded fund (ETF) opened for trade on 4 November, it broke a number of barriers.

Namely, CRYP was the first ASX-listed ETF that offered investors direct exposure to a range of crypto-related assets.

Second, the ETF also set a new record for the volume of trades on an opening day. $8 million worth of trades went through within the initial 15 minutes of trade, with ASX investor interest seeing CRYP end its first day with record net buys of $39.7 million.

Does the ASX-listed Betashares CRYP ETF invest in Bitcoin?

Unlike a few crypto ETFs that launched on Cboe Australia recently, the ASX-listed CRYP does not invest directly in Bitcoin (CRYPTO: BTC) or any of the range of altcoins.

Instead, it provides ASX investors exposure to a range of crypto mining and blockchain-related companies.

The Betashares website states that CRYP can invest in as many as 50 related assets. It currently holds 34.

The ETF’s top four holdings, at the time of writing, are:

Silvergate Capital Corp (13.8%); Microstrategy Inc (10.1%); Galaxy Digital Holdings Ltd (8.1%); and Coinbase Global Inc (7.3%).

How has the ETF performed?

If you think timing the market is hard when it comes to buying shares, spare a thought to trying to time the entry of the first ASX-listed crypto ETF.

Unfortunately, the 4 November timing for CRYP could scarcely have been worse, with the share price now down 74% since launching.

While not investing directly in cryptocurrencies, the fortunes of the crypto mining and blockchain-related companies the ETF does invest in are closely tied to the rise and fall of digital asset prices.

Just six days after CRYP hit the boards at the ASX, Bitcoin hit all-time highs on 10 November. Good news on the day, but not so much over the past seven months, with Bitcoin down 56% since that peak.

Ethereum (CRYPTO: ETH), the world’s number two token, also hit its own record highs on 16 November. Ethereum is down 63% since then.

Tumbling crypto prices have seen the Silvergate share price tank 61% since 4 November; the Microstrategy share price lose 70%; Galaxy Digital shares drop 81%; and the Coinbase share price slide 80%.

CRYP has remained under pressure, with shares down 25% over the past month.

The post How has the ASX-listed Betashares CRYP ETF been performing? appeared first on The Motley Fool Australia.

More reading

• 3 high quality ETFs for ASX investors to buy this month
• ‘Wherever there’s smoke there’s probably crypto,’ warns Dogecoin founder
• Why are Bitcoin miners selling their holdings?
• What’s the outlook for crypto prices in June? Industry insiders weigh in
• 2 top cryptocurrencies to buy and hold for decades

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Betashares Crypto Innovators ETF, Bitcoin, and Ethereum. The Motley Fool Australia has positions in and has recommended Bitcoin and Ethereum. 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/jW5v14N

So interest rates have risen 75 basis points over the past five weeks, and there is more to come.

This means that Australian consumers will rein in their spending and bunker down in order to make higher mortgage repayments.

If life’s excesses are trimmed, perhaps it’s best to back ASX shares of companies that provide goods and services that Aussies just can’t live without.

Wilsons investment advisor Peter Moran this week named two such examples to buy right now:

An ASX stock buy for the great outdoors

You may have seen the logo of ARB Corporation Limited (ASX: ARB) on other vehicles as you drive around Australia.

This is because ARB provides accessories and parts for a favourite Australian pastime — 4-wheel driving.

The company absolutely went gangbusters during the COVID-19 pandemic as Australians trapped in lockdown made their own adventures.

By November last year, ARB shares had quadrupled from its panic-selling low in March 2020.

Yes, it rose 300% over just 20 months.

But 2022 has been pretty ugly for the ASX stock. It has lost nearly half its value.

Moran still has faith, and believes it has been oversold.

“Underlying demand for parts remains strong, and the trend towards owning 4-wheel drive vehicles is likely to continue,” he told The Bull.

“We expect supply constraints to ease over time, which should generate higher levels of sales growth. We hold an overweight rating.”

Who wants a bucket tonight?

After enjoying the outdoor lifestyle, Australians also like to enjoy a greasy meal now and then.

This is where Moran’s other buying tip, Collins Foods Ltd (ASX: CKF), comes in.

“Collins Foods owns more than 300 KFC outlets in Australia,” he said.

“Collins is well-positioned for additional growth through its continuing rollout of Taco Bell outlets in Australia and via its KFC European operations.”

The owner of Kentucky Fried Chicken, like ARB, thrived during the lockdown era as Australians bought takeaway in droves.

Its share price almost tripled from the March 2020 trough.

However, Collins shares have fallen almost 33% year-to-date, and KFC outlets are now having to replace lettuce with cabbage in their burgers due to high supply costs.

But Moran is not worried.

“Concerns about increasing input costs have flowed to a weaker share price,” he said.

“Although costs will rise, investor concerns are too exaggerated, in our view. We hold an overweight rating.”

The post 2 ASX shares the Aussie lifestyle can’t do without appeared first on The Motley Fool Australia.

More reading

• 3 high-quality ASX 300 shares trading at 52-week lows today
• Are these 3 ASX 200 shares trading around 52-week lows a buying opportunity?
• These ASX All Ordinaries shares have the greatest margin risks from surging inflation: UBS

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Collins Foods Limited. The Motley Fool Australia has recommended ARB Corporation Limited and Collins Foods 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/kEuGJI3

It’s been a terrible year for mid- and small-cap ASX shares, and professional fund managers have fared no better than retail investors.

Montgomery Investment Management chief investment officer Roger Montgomery is no exception, recently making a stunning revelation about his personal holdings.

“When I first invested in the Polen Capital Global Small and Mid Cap Fund, I didn’t expect the unit price to decline by nearly 40%,” he said.

“But it has.”

That’s all good and well, but everyone’s portfolios are in the red right now.

The big question is whether it’s time to buy up bargains, or are there more falls to come?

“Several friends have asked me to let them know when I decide to make additional investments in equities,” he said on his blog.

“Of course, I can’t predict what will happen in markets in the short term… [But] over the longer term, I am acutely aware of the old investing aphorism: the lower the price you pay, the higher your return.”

Earnings will now rule the share market

The aggregate forward price-to-earnings ratio of the stocks in the Polen Capital fund was 44 when it started its journey.

Now that ratio has tumbled to 25 times.

Montgomery analysed this drop to figure out a clue about whether it’s time to buy.

“If I break up the PE multiple compression of the portfolio into its components, we find about 70% is due to lower prices but 30% is due to higher earnings the companies have generated,” he said.

“And that’s the point. Polen calculates the companies in the portfolio have grown earnings by nearly 25% per annum over the last five years on revenue growth of 18.5% per annum over the last five years.”

And forward earnings growth for the next five years is estimated to range between 20% and 25%.

‘I will be calling my banker’

The fact that an increase in earnings is a major contributor to the dramatic fall in PE ratios gives Montgomery much confidence.

“Unless the [US] Fed surprises with even more aggressive rate hikes, the future direction of the market should now be determined by earnings growth.”

He reckons that explains why Warren Buffett’s Berkshire Hathaway Inc (NYSE: BRK.A) bought up more than US$51 billion of shares in the March quarter.

“I trust you can see why I have instructed my banker to transfer additional funds into the Polen Capital Global Small and Mid Cap Fund,” said Montgomery. 

“And if the market continues to fall, I will be calling my banker again to continue the process of dollar cost averaging.”

A spanner in the works is possible though, in the form of a global recession.

Montgomery admits it’s possible, but unlikely.

“Current economic forecasts for the rest of 2022 and 2023 aren’t suggesting any negative rates of growth,” he said.

“So, with PEs now at recent historical lows, I’d prefer to look at the earnings growth of the companies we own.”

The post My shares have plunged 40% but I’m buying like there’s no tomorrow: fundie appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Thursday
• Here are 2 ASX 50 shares analysts rate as buys
• Here’s why the Fortescue share price is 8% higher so far in June
• Peninsula Energy share price soars 20% amid US news on uranium market
• Why is everyone talking about Netflix stock?

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Berkshire Hathaway (B shares). The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Berkshire Hathaway (B shares). 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/1z89iT4