Tag: Motley Fool

High growth and high yield? Who doesn’t want a piece of action like that!

Moomoo market strategist Jessica Amir this week named two S&P/ASX 200 Index (ASX: XJO) stocks her team is bullish on that are both displaying some impressive numbers:

Chicken run

There is a theory that in times of economic distress, consumers turn to cheaper sources of dietary protein.

So after 13 interest rate rises, Australians could be eating less red meat and turning to more poultry.

Perhaps this is why Inghams Group Ltd (ASX: ING) is going gangbusters, rocketing 53% over the past 12 months.

“The old chicken stock is doing well and shareholders are being rewarded… and, likely, more green pastures are ahead,” said Amir.

“The biggest cost for chicken businesses is wheat — which is at an all-time low. Given that 70% of the cost of growing a bird is food, this is a huge benefit to farmers.”

Inghams also produces turkey, which is also cheap to produce at the moment.

“The biggest cost for turkeys is soybeans, which is down 31% at four-year lows. Revenues for Inghams; turkeys are going strong at the moment.”

The financial outlook is pretty bright, with earnings forecast to rise.

“Ingham’s forward earnings have been strong with a forward dividend yield of 3.3%. 

“The market expectation is 95.7% earnings per share growth this year — more than last year’s 73% EPS growth.”

Qualitatively, Amir noted that Ingham is shifting from renting real estate to buying, which is a sign of “low debt and a strong outlook”.

‘High potential growth’ ASX 200 stock paying 10.5% yield

Now that a merger with Santos Ltd (ASX: STO) has been ruled out, Amir admits the Woodside Energy Group Ltd (ASX: WDS) could see some volatility in the near term.

But she cannot resist the latter’s incredible 10.5% dividend yield.

“In the long-term, Woodside shows signs of high potential growth.”

The caveat is the rise of nuclear-generated power.

“Nuclear energy will be the talk of the town in the coming years, led by the US, Canada and Japan. 

“Woodside is looking to be more primed to pivot into the global LNG sector.”

Many other professional investors are also bullish on Woodside. According to CMC Invest, eight out of 13 analysts currently rate the energy stock as a buy.

The post Up 53% and 10.5% yield: 2 ASX 200 shares with signs of ‘high potential growth’ appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Monday
• How to build a bulletproof ASX 200 passive income portfolio with just $10,000
• What this Warren Buffett-linked CEO’s prediction could mean for Woodside shares
• ASX dividend shares: What’s better, growth or consistency?
• Why the Santos share price could surge in 2024 without Woodside

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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On Friday, the S&P/ASX 200 Index (ASX: XJO) ended the week with a modest gain. The benchmark index rose slightly to 7,644.8 points.

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

ASX 200 expected to open flat

The Australian share market looks set for a subdued start to the week despite a reasonably positive finish on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day flat. On Friday on Wall Street, the Dow Jones was down 0.15%, but the S&P 500 rose 0.6% and the Nasdaq jumped 1.25%.

Oil prices rise

ASX 200 energy shares including Santos Ltd (ASX: STO) and Woodside Energy Group Ltd (ASX: WDS) could start the week positively after oil prices rose on Friday night. According to Bloomberg, the WTI crude oil price was up 0.8% to US$76.84 a barrel and the Brent crude oil price was up 0.7% to US$82.19 a barrel. Oil prices rose amid rising tensions in the Middle East.

JB Hi-Fi results

JB Hi-Fi Limited (ASX: JBH) shares will be on watch today when the retail giant releases its half year results. Morgans sees scope for JB Hi-Fi to surprise to the upside. It said: “We think there’s a good chance JB Hi-Fi could surprise positively in its 1H24 result. We forecast EBIT of $371.0m, 4% above consensus of $358.2m.”

Gold price falls

ASX 200 gold shares Newmont Corporation (ASX: NEM) and Northern Star Resources Ltd (ASX: NST) could trade lower after the gold price fell on Friday. According to CNBC, the spot gold price was down 0.45% to US$2,038.70 an ounce. Rising bond yields reduced the appeal of the precious metal.

Boral rated as a sell

Boral Ltd (ASX: BLD) shares are overvalued according to analysts at Goldman Sachs. According to a note, the broker has reiterated its sell rating on the building materials company’s shares with a $5.40 price target. Goldman said: “Although the turnaround has gained momentum, the upside appears to be substantially priced into the stock suggesting near flawless execution is required.”

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

• How to build a bulletproof ASX 200 passive income portfolio with just $10,000
• Top brokers name 3 ASX shares to buy next week
• What this Warren Buffett-linked CEO’s prediction could mean for Woodside shares
• ASX dividend shares: What’s better, growth or consistency?
• Here’s how the ASX 200 market sectors stacked up this week

Motley Fool contributor James Mickleboro has positions in Woodside Energy Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has recommended Jb Hi-Fi. 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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As reporting season continues in earnest, if you are invested in ASX shares you need to pay attention.

Fortunately for The Motley Fool readers, eToro market analyst Josh Gilbert has pointed out the three biggest events to monitor this week:

1. Australia unemployment

The financial markets, the Reserve Bank of Australia (RBA), and the general public will all be watching for the latest unemployment figures on Thursday.

Gilbert pointed out that December’s rise to 3.9% exceeded expectations.

“December’s uptick was perceived as a sign that the labour market could be loosening up, with job advertisement figures dipping and population growth remaining robust, suggesting that we might see a further rise in unemployment this week.”

Similar to the rate hikes over 2022 and 2023, Gilbert reckons the RBA will again fall behind compared to its peers.

“It’s likely to be one of the last major central banks to introduce rate cuts this year.”

2. CSL half-year results

Biotech giant CSL Ltd (ASX: CSL) has enjoyed a 32% rise in its share price since late October.

But it recently saw a setback that could have longer term implications.

“The company’s share price faced a decline [last week] following news of a UK investigation into alleged anti-competitive behaviour from CSL Vifor. 

“If found guilty, CSL faces potential fines and reputational damage, which may impact the company’s FY24 results.”

The last reporting season was positive for the ASX healthcare company.

“Shareholders were pleased with the healthcare giant’s FY23 results, where revenue growth went up 31% year-over-year to US$13.31 billion, and the company’s FY24 guidance continued to hold firm.”

On Tuesday morning, the market will be watching carefully how CSL is progressing in its underlying profit guidance of US$2.9 billion to US$3 billion for FY24.

“[Investors] are keen to ascertain whether CSL has sustained its course toward recovery following the turbulence its share price experienced in 2023.”

3. Telstra half-year results

Another portfolio staple, Telstra Group Ltd (ASX: TLS) is reporting on Thursday.

According to Gilbert, the telco stock has been disappointing in recent times.

“It’s been a lacklustre couple of years for Telstra, with shares falling by around 2% in that time, despite a 14% jump in profitability last year.

“This week’s half-year results will be a key insight as to how cost-cutting has aided the businesses bottom line.”

Gilbert is optimistic about the coming results, though.

“Telstra’s profits look set to continue growing. 

“In August, the business forecasted an EBITDA of $8.2 billion to $8.4 billion in FY24, well ahead of FY23’s $7.86 billion.”

The post 3 things ASX investors should watch this week appeared first on The Motley Fool Australia.

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More reading

• Own CSL shares? What to expect from its half-year results
• 10 time-wasters that could destroy your ASX investments
• 5 ASX shares to buy and hold forever in your investment portfolio
• Here’s how the ASX 200 market sectors stacked up this week
• This tiny ASX tech share is leaping 25% after striking a deal with Telstra

Motley Fool contributor Tony Yoo has positions in CSL. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool Australia has recommended CSL. 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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Even for longtime readers of The Motley Fool, the question of how much one should invest persists.

Like anything in life, that depends on your personal goals.

How does a passive income of $1,000 each month sound?

If that’s about the level you wouldn’t mind achieving, let’s work backwards to see how much you need to invest.

How to grab $12,000 a year for doing nothing

A monthly income of $1,000 would require an annual payout of $12,000.

For ease of calculation, if you’re maintaining a 12% compound annual growth rate (CAGR), you need a stock portfolio of $100,000 to receive that level of passive income.

Is 12% realistic? I think it is.

Check out popular ASX growth stocks like Johns Lyng Group Ltd (ASX: JLG) or Xero Ltd (ASX: XRO).

Over the past five years, through such trauma as the COVID-19 crash and the inflation selloff, they have returned 480% and 130% respectively.

That equates to a CAGR of 42% and 18%.

Even looking at dividend stocks, if you had the foresight to own Whitehaven Coal Ltd (ASX: WHC) over the past half-decade, you would have gained almost 70% while raking in a yield of 9.7%.

I’m not suggesting you will consistently pick spectacular winners like Johns Lyng, Xero and Whitehaven.

If you did, you would be some sort of stock-picking savant who would be working for an investment bank.

No, the point is that if you have some such winners, they can absorb the losses from your flops and then some.

It’s all about diversification.

The short answer and the long answer

That’s the short answer — $100,000 is how much you need to produce $1,000 of monthly passive income.

But what if you don’t have that sort of cash just laying around?

If you just have $20,000 to invest, but you can afford to chip in an extra $200 each month, the power of compounding will take you to the promised land in 10 years.

From then on it’s all gravy as you rake in a grand every month for doing nothing.

Sweet as.

The post ASX passive income: How much should you invest to earn $1,000 every month? appeared first on The Motley Fool Australia.

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More reading

• If I’d invested $10,000 in this ASX 200 share 3 years ago I’d have $58,538 today!
• 3 ASX shares predicted to enjoy ‘strong growth’ in 2024 earnings
• These ASX tech shares could rise 18% to 30% this year
• $20,000 in savings? Here’s how I’d try to turn that into $1,463 a month of passive income
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Tony Yoo has positions in Johns Lyng Group and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Johns Lyng Group and Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool Australia has recommended Johns Lyng Group. 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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Recent years have been volatile for ASX healthcare shares.

The past eight months have seen the S&P/ASX 200 Health Care Index (ASX: XHJ) swing 23% from peak to trough, then another 27% back the other way.

It seems the market can’t decide whether the health sector is valuable as a defensive investment or the rapid rise in interest rates is harming future earnings.

But amid this to-ing and fro-ing, there have been some gems strong enough to keep swimming in one direction.

One of these is Clarity Pharmaceuticals Ltd (ASX: CU6).

‘The most exciting company I’ve come across in Australia’

Clarity, which is developing treatments for prostate cancer, saw its shares languish at 41 cents in May 2022.

Let’s imagine you bought $20,000 at that time.

Since then, the business has hit home run after home run, sending the market into a frenzy.

In fact, Frazis Capital portfolio manager Michael Frazis was full of praise for the biotech last month.

“This is the most exciting company I’ve come across in Australia lately,” he said in an update to clients.

“Clarity has been steadily releasing data from patients treated with their copper therapies with late-stage prostate cancer.”

On Thursday morning, the Clarity share price hit a new 52-week high of $2.87.

That $20,000 you invested only 21 months ago would now be worth a stunning $140,000.

That’s a seven-bagger in less than two years, thank you very much.

The bulls are still bullish on this healthcare stock

As well as Clarity’s own wins with favourable test results and regulatory approvals, there is a potential structural tailwind for prostate cancer therapies.

Currently, new treatments, such as the one Clarity is working on, are given only to “heavily pretreated patients” who have already had more traditional therapies applied to them.

But this could change, according to Frazis.

“The trend is towards increased monitoring and — where possible — fewer surgeries and hormone therapy, which involves the unwelcome side effects of incontinence, impotence, low testosterone and depression.

“The hope is that these targeted treatments, with their milder side effects, will move further up the treatment timeline, which could double or even triple industry revenues.”

Admittedly this cultural change will take time, but Frazis reckons the shift is “looking more likely than ever today”.

This is why, despite a 237% rocket in the share price over the past 12 months, many professionals are still bullish on Clarity.

Broking platform CMC Invest currently shows all three of Bell Potter, Jefferies, and Wilsons rating the healthcare stock as a buy.

The post This ASX healthcare stock turned $20k into $140,000 in less than 2 years appeared first on The Motley Fool Australia.

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More reading

• 3 pharma shares outshining the ASX index today

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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Next week will be a big one for CSL Ltd (ASX: CSL) shares and shareholders.

That’s because the biotechnology company is scheduled to release its half year results on Tuesday.

Ahead of the release, let’s now take a look to see what the market is expecting from the company.

Half-year results preview

There are likely to be two key things to look out for when CSL releases its results next.

The first is its profit growth and whether it is on course to achieve its guidance in FY 2024. Morgans is expecting a solid first half performance. It said:

FY24 guidance suggests solid 1H. FY24 constant currency guidance calls for NPATA US$2.9-3bn (13-17%) on 9-11% revenue growth, with operating efficiency improving, B/S leverage declining (2x ND/EBITDA) and ROIC “steadily improving” over time.

Elsehwere, the team at Citi is forecasting 17.6% earnings per share growth in FY 2024. So, its analysts will no doubt be looking for similar growth during the first half.

What else?

Another metric to keep an eye on is the gross margin of the key CSL Behring business. This arguably has the biggest impact on the company’s profitability. So, if this margin shows signs of improvement, it could go down well with the market.

According to a note out of UBS, the consensus estimate for CSL Behring’s gross margin is 50.3%. This is slightly ahead of the broker’s estimate of 49.8%.

Should you buy CSL shares?

Citi, Morgans, and UBS are all bullish on CSL and currently have the equivalent of buy ratings on its shares.

The notes reveal that Citi has a buy rating and $325 price target, Morgans has an add rating and $328.20 price target, and UBS has a buy rating and price target of $350.

The post Own CSL shares? What to expect from its half-year results appeared first on The Motley Fool Australia.

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More reading

• Here’s how the ASX 200 market sectors stacked up this week
• Morgans says these ASX 50 shares are strong buys
• Up 28% since October, why are CSL shares attracting regulator scrutiny?
• 3 ASX blue-chip stocks I think every Aussie should own
• Brokers name 3 ASX shares to buy now

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor James Mickleboro has positions in CSL. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL. The Motley Fool Australia has recommended CSL. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If you’re wanting to supercharge your portfolio returns, then it could be worth checking out the ASX growth shares listed below.

That’s because analysts at Goldman Sachs have recently put buy ratings on them with price targets offering major upside.

Here’s what they are saying about these ASX growth shares:

IDP Education Ltd (ASX: IEL)

Goldman Sachs believes that this language testing and student placement company’s shares are significantly undervalued following a recent selloff.

Its analysts have a buy rating and $27.60 price target on its shares. This implies potential upside of 43% for investors over the next 12 months.

While Goldman acknowledges that there has been a series of negative events that could impact IDP Education, it remains very positive and believes that structural tailwinds will underpin very strong medium term growth. It said:

IEL trades at 28x our 12mf EPS estimate vs 45x historically and against a +17% FY23-26E EPS CAGR. Reiterate Buy into a strong 1H result where we sit +10% ahead of VA Consensus EBIT based on a strong start to FY24E as seen in the available visa data. News flow may continue to be choppy, however IEL’s fundamental quality and structural growth drivers remain intact while the company possesses levers to continue to grow earnings (e.g. costs).

Readytech Holdings Ltd (ASX: RDY)

Goldman Sachs also sees major upside potential for this enterprise software provider’s shares.

It currently has a buy rating and a $4.50 price target on the ASX growth share. This implies a 12-month potential return of over 30% for investors.

Goldman likes Readytech due to its positive growth outlook and attractive valuation. It said:

We believe RDY remains undervalued compared to SaaS peers on an absolute and growth adjusted basis, trading on 11.5x FY24E EV/EBITDA vs a 19% FY23-26E EBITDA CAGR or a growth-adjusted multiple of 0.6x vs peers typically at ~1.5x.

The post These top ASX growth shares can rise 30% to 40% appeared first on The Motley Fool Australia.

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More reading

• 6 oversold ASX shares to buy in February 2024
• 50% down: 2 ‘world leader’ ASX 200 shares ready to bounce back
• Buy these ASX growth shares for 20% to 40% returns
• These are the 10 most shorted ASX shares
• These are the 10 most shorted ASX shares

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 Goldman Sachs Group, Idp Education, and ReadyTech. The Motley Fool Australia has recommended Idp Education and ReadyTech. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If I were aiming to build a bulletproof passive income stream by investing $10,000 in S&P/ASX 200 Index (ASX: XJO) dividend stocks, here’s how I’d go about it.

First, while it’s not a hard rule, I’d tend to stick to the bigger dividend-paying companies.

Sticking to ASX 200 stocks should give my portfolio less volatility than investing in small-cap shares. That in turn should help smooth out the annual passive income I can expect to land in my bank account.

Second, I’d strongly lean towards companies paying fully franked dividends. This should see me hold onto more of that dividend income at tax time.

Third, I’d invest my $10,000 across a range of companies operating across a variety of sectors. That will decrease the odds of my passive income portfolio taking a big hit if any particular sector comes under pressure.

Now, I’d also keep in mind that the yields I generally see quoted are trailing yields. Future yields may be higher or lower depending on a range of company-specific and macroeconomic factors.

However, by spreading my $10,000 across the retail, finance, energy and resources sectors, my long-term aim is to see any dip in dividends from one stock balance out by increased payouts from another.

With that said…

Four ASX 200 shares for diversified passive income

The first ASX 200 dividend stock I’d invest in for reliable passive income is home furnishings and white goods retailer Harvey Norman Holdings Ltd (ASX: HVN).

Over the past 12 months, the retail stock has delivered 25 cents a share in fully franked dividends. At Friday’s closing price of $4.65, Harvey Norman shares trade on a trailing yield of 5.38%.

The second company I’d target for passive income is financial stock Australia and New Zealand Banking Group Ltd (ASX: ANZ).

Over the past 12 months, ANZ has paid out $1.75 a share in partly franked dividends. At Friday’s closing price of $27.68, ANZ shares trade on a trailing yield of 6.32%.

Turning to the resources sector for passive income, I’d target mining giant Fortescue Ltd (ASX: FMG).

Over the past 12 months, Fortescue has paid out $1.75 a share in fully franked dividends. At Friday’s closing price of $28.26, the ASX 200 resources stock trades on a trailing yield of 6.19%.

Which brings us to the fourth company I’d invest in for a bulletproof passive income portfolio, ASX 200 oil and gas stock Woodside Energy Group Ltd (ASX: WDS).

Over the past 12 months, Woodside has paid out $3.40 in fully franked dividends. At Friday’s closing price $31.86, Woodside shares trade on a trailing yield of 10.6%.

To the maths!

To aim for that bulletproof passive income stream, I’d invest an equal amount into each of the above four companies. Or $2,500 apiece.

Based on the trailing yields, I can then expect to earn an average yield from these four ASX 200 dividend stocks of 7.1%.

This means my $10,000 investment should see me earning $710 a year in passive income, with potential tax benefits from those franking credits.

And, of course, I’ll be hoping for some share price gains as well!

The post How to build a bulletproof ASX 200 passive income portfolio with just $10,000 appeared first on The Motley Fool Australia.

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More reading

• What this Warren Buffett-linked CEO’s prediction could mean for Woodside shares
• Shares vs. property: Beginner investors choosing Aussie shares, ASX ETFs and rentvesting
• ASX dividend shares: What’s better, growth or consistency?
• Shares vs. property: 3 furniture retailers hit 52-week highs amid continually rising home values
• Which Big Four ASX bank share will pay the biggest dividend this year?

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 positions in and has recommended Harvey Norman. 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 was another busy week for Australia’s top brokers. This led to the release of a large number of broker notes.

Three ASX broker buy ratings that you might want to know more about are summarised below. Here’s why brokers think these ASX shares are in the buy zone:

Lovisa Holdings Ltd (ASX: LOV)

According to a note out of Bell Potter, its analysts have retained their buy rating on this fashion jewellery retailer’s shares with an improved price target of $26.50. The broker has been looking into the company’s opportunity in China following the launch of its first store at the end of 2023. Bell Potter highlights that the latest customer reviews for Lovisa from Mainland China on the dominant social media app, Xiaohongshu, have been positive. This bodes well for the company given that the market is 25 times larger than Australia. The Lovisa share price ended the week at $24.37.

Santos Ltd (ASX: STO)

A note out of Macquarie reveals that its analysts have retained their outperform rating and $9.95 price target on this energy producer’s shares. This follows news that its merger talks with Woodside Energy Group (ASX: WDS) have ended without a deal being reached. Macquarie isn’t fazed by the news, believing there’s still significant value in its assets that is being overlooked. In addition, it suspects that Santos may soon reinstate its buyback program. The Santos share price was fetching $7.32 on Friday.

WiseTech Global Ltd (ASX: WTC)

Analysts at Morgan Stanley have retained their overweight rating and $85.00 price target on this logistics solutions company’s shares. Morgan Stanley highlights that the market is expecting a strong half year result from WiseTech this month. It suspects that if the company beats the market’s estimate of 30% revenue growth, its shares could jump. Though, it warns that softer than expected revenue growth could mean the opposite for its shares. The WiseTech share price ended the week at $77.15.

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

• Could Lovisa shares help you become a millionaire?
• ASX dividend shares: What’s better, growth or consistency?
• Here are the top 10 ASX 200 shares today
• Why the Santos share price could surge in 2024 without Woodside
• Why Alliance Aviation, Platinum, REA, and Santos shares are dropping today

Motley Fool contributor James Mickleboro has positions in Lovisa and Woodside Energy Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Lovisa, Macquarie Group, and WiseTech Global. The Motley Fool Australia has positions in and has recommended Macquarie Group and WiseTech Global. The Motley Fool Australia has recommended Lovisa. 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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Woodside Energy Group Ltd (ASX: WDS) shares may be in line to benefit in the medium term if a compelling oil-price prediction comes to fruition.

US company Occidental Petroleum CEO Vicki Hollub told CNBC that the oil market will face a supply shortage by the end of 2025 because the world is not replacing crude oil reserves fast enough.

What does this mean for Woodside?

This could spell good news for Woodside shares. If there is less supply than demand for oil, it could push up the oil price, which may then boost Woodside’s profitability. It costs roughly the same to extract oil each month, so a boost to revenue would probably translate directly into higher net profit as well.

But, keep in mind that Woodside earns a large amount of its profit from LNG (liquified natural gas), which is a different commodity. A 10% rise in Woodside’s oil earnings won’t necessarily translate into a 10% in overall profit. In the HY23 result, crude oil and condensate made up US$1.76 billion, or 24%, of Woodside’s overall revenue from hydrocarbons.

Oil supply forecast

According to reporting by CNBC, Hollub said 97% of the oil being produced right now was discovered in the 1900s. The world has reportedly replaced less than 50% of the crude oil produced in the last decade. The CEO said:

We’re in a situation now where in a couple of years’ time we’re going to be very short on supply.

At the moment, the market is “oversupplied”, which has kept a lid on prices despite the conflict in the Middle East. Places like the United States, Brazil, Canada and Guyana have pumped record amounts of oil as demand slows amid a faltering economy in China.

Hollub thinks the supply and demand balance and outlook will “flip” by the end of 2025. She said:

The market is out of balance right now, but again, this is a short-term demand issue. But it’s going to be a long-term supply issue.

The oil-producing companies of OPEC are forecasting that global oil demand will grow by 1.8 million barrels per day in 2025 thanks to a recovery of the Chinese economy. The growth of demand is expected to beat the growth of supply of 1.3 million barrels per day by countries outside of OPEC.

Woodside share price snapshot

Over the past six months, shares in the company have fallen 16%, so it’s cheaper to invest in than it was before. Added to the prediction from the Occidental CEO, this seems to be an interesting time to be looking at Woodside shares.

And possibly lending weight to the prediction is Occidental’s links with investing legend Warren Buffett. Buffett’s company Berkshire Hathaway owns at least 28% of Occidental, so he likely holds its leadership in high regard. 

The post What this Warren Buffett-linked CEO’s prediction could mean for Woodside shares appeared first on The Motley Fool Australia.

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More reading

• ASX dividend shares: What’s better, growth or consistency?
• Why the Santos share price could surge in 2024 without Woodside
• 5 things to watch on the ASX 200 on Thursday
• Why this US forecast just lifted my 2024 outlook for the Woodside share price
• How Charlie Munger used $1,500 to make a $107k-a-year passive income

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 Berkshire Hathaway. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Occidental Petroleum. The Motley Fool Australia has recommended Berkshire Hathaway. 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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