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

As of 12:30 p.m. ET, the Nasdaq remains in the red, following a steep morning sell-off that saw significant declines in all major indexes from their earlier gains this morning. That said, equities have begun to rally higher, pushing cryptocurrencies like Shiba Inu (CRYPTO: SHIB) that have had a mostly solid green day even higher. As of 12:30 p.m. ET, Shiba Inu has surged 11% higher, cutting its seven-day loss in half in today’s session. 

One of the key drivers of today’s rally in Shiba Inu is news that it is among the most traded tokens for Ethereum whales, and has recently hit an all-time high in the number of wallets holding the token. These metrics are solid indications that the community-oriented token is seeing its community grow stronger on this recent dip. 

So what

Reportedly, Shiba Inu has surged into the top spot among the most traded cryptocurrencies by Ethereum whales over the past 24 hours, surpassing Uniswap. This move suggests there are a number of influential, and wealthy, crypto traders who believe momentum may be coming back to the meme token trade. 

Additionally, the number of wallets holding Shiba Inu has surged, suggesting that the breadth of investors holding this token is widening. Unlike many cryptocurrencies that are often highly centralized in terms of ownership, this broadening investor base could be bullish for momentum-driven rallies, assuming retail investors hold on to their positions.

Now what

Shiba Inu remains among the most volatile crypto tokens in the market right now. As far as large-cap tokens go, Shiba Inu’s high-beta moves provide for more of a trading vehicle than a long-term investment, for most in the crypto world. However, as Shiba Inu’s investor base broadens, perhaps the volatility dynamics with this token will change as well. Time will tell. 

For now, positive momentum in the crypto market is spurring yet another impressive day for Shiba Inu holders. For those looking at this token from the outside, this ongoing market volatility may provide for an entertaining ride from here. 

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

The post The market is down, but Shiba Inu has surged 11%. Here’s why appeared first on The Motley Fool Australia.

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• 2 reasons Shiba Inu and Dogecoin are soaring this weekend
• Chasing its tail? Shiba Inu price tumbles today following 38% leap
• It’s happening again — Shiba Inu goes parabolic, shooting 38% higher
• Here’s what’s driving stability with Shiba Inu today

Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Ethereum. The Motley Fool Australia owns and has recommended Ethereum. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 

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

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The Iluka Resources Ltd (ASX: ILU) share price is in the red after the company released its earnings for 2021.

At the time of writing, the Iluka Resources share price is $10.94, 0.45% lower than its previous close.

Iluka Resources share price falls as profit surges

• Mineral sands revenue came to $1.48 billion – a 57% increase on that of 2020
• Underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) of $652 million – up 54%
• Underlying net profit after tax (NPAT) of $315 million – a 108% increase
• Operating cash flow came to $528 million – up 189%
• 12 cent, fully franked dividend declared – 500% more than last year’s 2 cent dividend

While Iluka Resources’ underlying NPAT substantially increased in 2021, its reported NPAT dropped from $2.41 billion to $366 million.

That’s mainly due to a $2.24 billion payday recorded during 2020 on the demerger of Deterra Royalties Ltd (ASX: DRR). Iluka Resources retained a 20% holding in Deterra.

The company said higher exchange rates between the United States dollar and the Australian dollar impacted its revenue last year.

Still, Iluka Resources experienced increased volumes across all markets.

Global zircon production dropped while the ceramics industry’s growth continued.

Iluka sold 355 kilotons of zircon last year – up from 240 kilotons in 2020. During the final quarter of 2021, the company’s weighted average zircon price was US$1,590 a tonne – a 23% increase on the final quarter of 2020.

At the same time, demand continued to outstrip supply for high-grade titanium feedstocks.

Iluka Resources sold 513 kilotons of high-grade titanium feedstocks – up from 278 kilotons. 2021 also saw the company report a rutile price of US$1,264 per tonne, a 4% increase on that of 2020.

The company’s unit cost of production for the period came to $777 per tonne, 15% less than that of 2020.

Meanwhile, its unit cost of goods sold was $916 per tonne ­– 11% lower than in the prior period. That reflects the company’s move to lower-cost products.

What else happened in 2021?

The company also continued to advance its position in rare earths – its Eneabba project in Western Australia and its Wimmera project in Victoria – in 2021.

The company progressed the development of Eneabba in 2021, completing phase 1 and securing an offtake agreement. 

In 2021, Iluka Resources received encouragement from Australian Government ministers to continue pushing to get Eneabba up and running. However, the news saw the Iluka Resources share price slide lower.

Meanwhile, the Wimmera project is the subject of a feasibility study.

Today, the company announced the inaugural mineral resource estimates for 2 of Wimmera’s heavy mineral deposits – WIM100 and WIM50.

The WIM100 deposit contains an indicated mineral resource estimate of 340 megatons grading 4.7% heavy minerals for 16 megatons of contained heavy minerals.

It also contains an inferred mineral resource estimate of 100 megatons grading 3.4% heavy minerals for 3.4 megatons of contained heavy minerals – totalling 440 megatons grading 4.4% heavy minerals for 19 megatons of contained heavy minerals.

Meanwhile, the WIM50 deposit contains an inferred mineral resource estimate of 360 megatons grading 4.1% heavy minerals for 15 megatons of contained heavy minerals.

What did management say?

Iluka Resources managing director Tom O’Leary commented on the company’s earnings for 2021, saying:

Iluka delivered an excellent result in 2021 underpinned by strong operating performance, increasing demand, and observable supply-side challenges across the mineral sands industry.

In zircon, tile manufacturers in many geographies maintained high levels of demand after rebounding to pre-pandemic levels of production in the first half of the year. This occurred despite increasing challenges from raw material cost inflation, supply chain disruptions and some dampening sentiment from deleveraging in the Chinese property market…

Tightness is also a feature of the high-grade titanium feedstock market, with demand in all regions continuing to outstrip supply…

Ongoing logistics issues due to port fires and other disruptions in South Africa continue to impact industry production.

What’s next?

In 2022, the company will be focusing on supplying key accounts and balancing sustainable pricing outcomes with reinvestment in its mineral sands market.

Additionally, it is expecting the first production from the restarted SR1 kiln at its Cataby project to occur in the final quarter of next year, and a final investment decision for its Balranald deposit around the same time.

The company also plans to finalise Wimmera’s processing solution and scale-up to inform its economic feasibility.

The feasibility study for Eneabba’s phase 3 is expected to be finalised in the first quarter of 2022 with a final investment decision to be made thereafter.

Over 2022 in Australia, Iluka Resources expects to produce 280 kilotons of zircon – 40 kilotons less than in 2021, 65 kilotons of rutile – 2 kilotons less than in 2021, and 230 kilotons of synthetic rutile – 31 kilotons more than in 2021.

It expects its Australian operation’s unit cash costs of production to come to $820 per tonne – up from $636 in 2021. While its unit cost of goods sold is predicted to increase from $774 per tonne to $930 per tonne.

Its capital expenditure is expected to increase from $54 million to $220 million.

At Sierra Rutile, the company’s predicting it will produce 144 kilotons of rutile – 15 kilotons more. It’s also expected to produce 5 kilotons of zircon – a 1 kiloton increase.

It expects it will record unit cash costs of production of US$970 per tonne with capital expenditure of US$30 million.

Looking to the group, its outlook includes cash costs of production to be $660 ­– up from $559.

Additionally, today the company’s chair Greg Martin announced his intent to retire from the board at April’s annual general meeting.

Martin’s seat will be filled by non-executive director, Rob Cole.

Iluka Resources share price snapshot

So far, 2022 has been good to the Iluka Resources share price.

It has gained 5% since the start of this year. It is also 48% higher than it was this time last year.

The post Iluka Resources (ASX:ILU) share price slips despite ‘excellent’ full-year results appeared first on The Motley Fool Australia.

More reading

• 2 All Ordinaries mining shares smashing all-time highs today
• 2 ASX mining shares cracking 52-week highs today
• What even are rare earths and why are ASX shares with exposure always in the spotlight?
• Top broker picks 6 ASX 200 shares with earnings surprise potential

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 Bruce Jackson.

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The Qantas Airways Limited (ASX: QAN) share price is down 2.1% in early trade.

Qantas shares closed yesterday at $5.35 and are currently trading for $5.24.

Below we look at the highlights from the ASX 200 airlines financial results for the half year ending 31 December (1H FY22).

Qantas share price tumbles on losses

• Revenue and other income increased 32% from 1H FY21 to $3.07 billion
• Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) came in at a loss of $245 million, down from a positive $86 million in the prior corresponding period
• Underlying loss before tax of $1.28 billion
• Net debt decreased to $5.5 billion
• No interim dividend declared

What else happened during the half year?

Pandemic travel restrictions continued to severely hamper operations during the half year. Qantas reported its total flying during the period was only 18% of pre-COVID levels.

However, the ASX 200 airline said it still managed to make “significant inroads to balance sheet repair”. Crediting a surge of bookings when the Delta lockdowns ended alongside the cash it received from the sale of its land at Mascot, Qantas net debt of $5.5 billion ended the half within its target range.

The half finished strong, with Qantas reporting 3 consecutive month of positive net free cash flow from October through December, not including its land sale. The positive cash flow was mostly due to improved forward bookings.

Travel demand was again negatively impacted later in December with the spread of the Omicron variant, dragging on the Qantas share price. This occurred just as Qantas had decided to stand up all its Australian-based employees, leaving the airline with a temporary 17% surplus of its workforce in Q3.

Despite the headwinds, Qantas reported its recovery program is on track to deliver some $900 million in annualised cost benefits by the end FY22, ahead of schedule.

As at 31 December, the airline had $4.3 billion in cash and undrawn facilities.

What did management say?

Commenting on the results, Qantas CEO, Alan Joyce said:

We saw a sharp rebound in travel demand when borders started opening in November and December, only to be hit by the Omicron wave and all the uncertainty that came with it.

The uncertainty carried over into January but demand has started to recover as Australia adjusts to truly living with COVID. Our frequent flyer surveys show the intent to travel is extremely high and we’re seeing good leisure demand into the fourth quarter. We’ve also seen a sharp uptick in international ticket sales in the past few weeks…

Despite all the uncertainty, we finished the first half with net debt back inside our target range and with strong liquidity, meaning we can start to look further ahead at strategic decisions on fleet, network and growth opportunities.

What’s next?

Looking ahead, Joyce said, “Predictions in a pandemic are naturally fraught, so we always forecast according to the best information we have but with the agility to adjust as needed.”

He said that the $900 million in annualised savings Qantas will realise through restructuring means it will be able to recover faster and perform better than it did before the pandemic.

Qantas estimates EBIT in the second half of the financial year will take a $650 million hit from ongoing issue with Omicron.

It expects domestic capacity to reach 68% of pre-COVID levels in the third quarter and hit 90-100% in the fourth quarter.

International capacity will recover more slowly, forecast to reach 22% in Q3 and 44% in Q4.

Qantas share price snapshot

The Qantas share price remains up 2% in 2022, compared to a year-to-date loss of 6% posted by the S&P/ASX 200 Index (ASX: XJO).

Qantas shares are still trading some 30% below their pre-COVID levels.

The post Qantas (ASX:QAN) share price nosedives as losses mount appeared first on The Motley Fool Australia.

More reading

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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 Bruce Jackson.

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The Appen Ltd (ASX: APX) share price is being crushed on Thursday morning.

At the time of writing, the artificial intelligence data services company’s shares are down 17% to $7.11 following the release of its full year results.

Appen share price crushed following earnings and guidance miss

• Group revenue up 8% to a record of US$447.3 million
• Underlying EBITDA margin (constant currency) improved 5 basis points to 17.6%
• Underlying EBITDA (constant currency) up 11.6% to US$78.9 million up 11.6%
• Underlying EBITDA up 3% to US$77.7 million
• Net profit after tax down 20% to US$28.5 million
• Dividends per share flat at 10 cents.

What happened in FY 2021?

For the 12 months ended 31 December, Appen delivered an 8% increase in revenue to US$447.3 million. Management advised that this was driven by a strong second half from Global Services and a higher contribution from New Markets.

Global Services revenue was up 5% for the year to US$344.7 million thanks to a 32% half on half lift in the second half. Management highlights that non-ad related projects now represent 76% of total revenue from Global customers.

Elsewhere, New Markets revenue grew 21% year on year to US$102.5 million. This was driven by a 55% increase in revenue from Enterprise, China, Government and Quadrant to US$60.8 million. Collectively, these channels now account for 14% of group revenue, up from 9% in FY 2020. Management notes that this is improving its customer diversification.

However, despite this growth, Appen has fallen short of its earnings guidance. With its half year results, Appen downgraded its EBITDA guidance to the low end of US$81 million to US$88 million. This compares to its actual EBITDA of $77.7 million or US$78.9 million excluding foreign exchange impacts.

Also missing the mark was its net profit after tax, which fell 20% to US$28.5 million. This compares to the Factset consensus estimate of US$36.1 million.

This may go some way to explaining the weakness in the Appen share price today.

Management commentary

Appen’s Chief Executive Officer, Mark Brayan, commented: “Appen has maintained its track record of profitable growth in 2021. The result benefited from an increase in new non-ad-related Global projects and a significant increase in new business in China.”

“We continue to invest for the future. Our investments in product development reflect the important role our technology plays to drive new business, scale, quality and margin expansion.”

“This year we also completed a strategic review to ensure that we remain at the forefront of technology and market trends. As part of this strategy, we’ve set ourselves ambitious future revenue, business mix and profitability targets,” he added.

Outlook

No short term guidance will be given anymore, with management instead laying out longer term targets.

It is aiming to at least double its FY 2021 revenue by FY 2026, which would imply a top line compound annual growth rate (CAGR) of approximately 15%.

Appen is also targeting improvements in its customer mix, with one-third of revenue coming from non-Global customers. And, finally, it is aiming to lift its EBITDA margin to 20% by FY 2026.

Though, it has warned that its pursuit of these targets could impact its earnings and dividends in the near term.

Management commented: “We are highly focused on these targets and will invest for growth in new products, sales and marketing, partnerships and explore M&A opportunities with a focus on long-term revenue growth. Our long-term revenue focus may impact EBITDA margins in the near term and future dividend payouts.”

The post Appen (ASX:APX) share price crashes 17% after FY21 guidance miss appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Thursday
• Why is the Appen (ASX:APX) share price having such a dire start to 2022?
• How did ASX tech shares perform today?
• These were the worst performing ASX 200 shares last week
• Why are these ASX 200 tech shares tumbling more than 6% 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. owns and has recommended Appen Ltd. The Motley Fool Australia owns and has recommended Appen Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Airtasker Ltd (ASX: ART) share price is moving to the downside on Thursday. This follows the release of the company’s results for the first half of FY22.

In early trade, shares in the services marketplace provider are down 4% to 72.5 cents per share.

Airtasker share price falls on record revenue

• Record gross marketplace volume (GMV) of $83.6 million, up 15.5% on prior corresponding period
• Record revenue of $13.9 million, increasing 10.4% year on year
• Gross profit of $12.9 million, up 9.5% year on year
• Take rate of 16.7%, flat on prior corresponding period
• Average task value up 24% to $255
• Upgraded guidance range for second half
• Losses widen to $5.4 million from $2.06 million

What else happened during the half?

Airtasker battled through yet another six months of COVID-19 impacted operations in the first half of FY22. While the company maintained growth, imposed restrictions weighed on performance during the first quarter.

Fortunately, operations rebounded strongly during the second quarter as lockdowns across Sydney and Melbourne eased. The removal of lockdowns led to a 39% increase in GMV during the second quarter compared to the first.

Measures to support the Airtasker community during the half, such as tier freezing, resulted in a reduced take rate compared to the previous half. Clearly, shareholders are unimpressed with the compressed margins as the Airtasker share price moves lower this morning.

These actions — in combination with increased investment in product development and marketing — pushed the company’s earnings before interest, tax, depreciation, and amortisation (EBITDA) into the negative by $3.2 million.

However, Airtasker pleasingly saw positive signs for its growth prospects across operations in the UK and the US. For example, UK GMV increased 121% to more than $4 million in the second quarter. Meanwhile, job postings in the US grew by 71% quarter on quarter.

What did management say?

Airtasker’s co-founder and CEO, Tim Fung, commented:

We’re super pleased to announce that the Airtasker marketplace has continued to demonstrate strong growth in H1. Whilst the first quarter was impacted by lockdowns, it was incredible to see our marketplace rebound rapidly in the second quarter to deliver a strong result for the half. By taking measures to support our Tasker community during lockdowns, we were able to bounce back together – and that feels awesome!

What’s next?

Looking forward, the second half will be dominated by a significant push in marketing for Airtasker. Working-media market investments are said to be ramped up in the US and the UK. The company indicated the split of marketing spend in FY22 will be 20%/80% between the first and second half.

Additionally, Airtasker has upgraded its guidance for GMV in the second half as it sees strong growth ahead amid its marketing spend. The new range is between $107 million and $110 million, compared to the previous $105 million to $110 million range.

Airtasker share price snapshot

The Airtasker share price has underperformed the S&P/ASX 200 Index (ASX: XJO) in the last 11 months. Since listing on the ASX in March 2021, Airtasker shares have tumbled 28%. Over the same timeframe, the Aussie index has climbed 6.8% higher.

In addition, investors have been hesitant on unprofitable companies as interest rates look set to rise. With Airtasker still making a loss on the bottom line, the company has fallen victim to the recent waning in investor appetite for unprofitable growth shares.

The post Airtasker (ASX:ART) share price falls 4% amid half-year plagued by COVID appeared first on The Motley Fool Australia.

More reading

• Own Airtasker (ASX:ART) shares? Here’s what to watch when the company reports tomorrow
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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Airtasker Limited. 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 Bruce Jackson.

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The Accent Group Ltd (ASX: AX1) share price rocketed on Wednesday.

While the company posted a disappointing first-half result, investors appeared to be confident that its performance will improve.

The footwear retailer’s shares surged to an intraday high of $2.115 before settling back to $2.07, up 7.81% at market close.

Interestingly, Accent shares hit a 52-week low of $1.855 when trading opened up yesterday. If you were brave enough to pick up its shares during this time, you’d be sitting on an 11.6% gain.

Below we take a look at the company’s latest financial performance and its interim dividend for investors.

H1 FY22 performance drags the Accent dividend lower

In the half-year report for the 2022 financial year, Accent reported double-digit losses across key metrics, except total sales figures.

In summary, sales increased by 9.7% to $594 million over the previous corresponding period. This was predominately underpinned by wholesale sales, up 47.7% to $81.9 million.

The group expects core brands and new distribution agreements including Reebok and Hoka One One to further drive wholesale sales.

Despite the above result, net profit after tax (NPAT) plunged 72% to $14.8 million, impacted by the continuing COVID-related disruptions.

Based on Accent’s performance, the board declared a fully franked interim dividend of 2.5 cents per share. This represents a 69% decline from the 8 cents declared in the prior comparable period.

When can Accent shareholders expect payment?

Accent will pay the interim dividend to eligible shareholders next month on 17 March.

However, to be eligible you’ll need to own Accent shares before the ex-dividend date which falls on Wednesday 9 March. This means if you want to secure the dividend, you will need to purchase Accent shares by Tuesday 8 March at the latest.

It is worth noting that on the ex-dividend day, the share price traditionally falls in proportion to the dividend amount.

The post Accent (ASX:AX1) dividend alert: Here’s all the details you need to know appeared first on The Motley Fool Australia.

More reading

• Analysts name 2 ASX dividend shares to buy now
• Why Accent, Healius, PEXA, and WiseTech shares are rising today
• Accent (ASX:AX1) share price lifts 6% despite ‘severely impacted’ first half results
• Analysts name 2 ASX dividend shares to buy with attractive yields
• 2 underrated ASX dividend shares expected to unleash big payouts in FY23

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 recommended Accent Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://www.fool.com.au/2022/02/24/accent-asxax1-dividend-alert-heres-all-the-details-you-need-to-know/

If you’re looking for dividends shares with good yields, then you may want to look at the ones listed below.

Here’s why analysts rate these dividend shares as buys:

Accent Group Ltd (ASX: AX1)

The first ASX dividend share to look at is this footwear focused retailer. It is the company behind a growing collection of popular brands including HYPEDC, Stylerunner, and The Athlete’s Foot.

Accent’s shares have been hammered this year due to being impacted significantly by COVID lockdowns. For example, its recent half year results revealed a 72% decline in net profit after tax to $14.8 million.

The good news is that these impacts are only expected to be temporary, which could make the recent share price weakness a buying opportunity for patient income investors.

The team at Bell Potter remains positive on Accent and retained its buy rating and $2.75 price target this week. As for dividends, it is expecting fully franked dividends per share of 5.8 cents in FY 2022 and then 10.9 cents in FY 2023.

Based on the current Accent share price of $2.07, this will mean yields of 2.8% and 5.3%, respectively.

Charter Hall Long WALE REIT (ASX: CLW)

Another dividend share to look at is the Charter Hall Long Wale REIT. It manages a wide range of listed and unlisted property funds for institutional and retail investors with a focus on office, industrial, and retail sectors.

Charter Hall Long Wale REIT also recently added to its portfolio with the acquisition of ALE Property with Hostplus for ~$1.7 billion. This adds ~78 hotel properties across the five mainland states that are all leased to ALH Group, which is part of Endeavour Group Ltd (ASX: EDV).

Citi is a fan of Charter Hall Long Wale REIT. It currently has a buy rating and $5.71 price target on its shares.

The broker is also forecasting dividends per share of 30.8 cents in FY 2022 and 30.9 cents in FY 2023. Based on the current Charter Hall Long Wale REIT share price of $5.05, this will mean yields of ~6.1%.

The post Analysts name 2 ASX dividend shares to buy now appeared first on The Motley Fool Australia.

More reading

• Why Accent, Healius, PEXA, and WiseTech shares are rising today
• Accent (ASX:AX1) share price lifts 6% despite ‘severely impacted’ first half results
• 3 reasons why the Charter Hall Long WALE REIT (ASX:CLW) share price is a top buy for dividends
• 2 ASX dividend shares that could provide steady passive income
• Analysts name 2 ASX dividend shares to buy with attractive yields

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 Accent Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The sun is now setting on high-growth technology and biotechnology ASX shares.

That’s according to several experts, who acknowledge that stocks in those sectors have performed well in recent years.

“In a world of zero interest rates, you can pay almost any price for future growth because of the risk-free rate, as represented by government bond yields,” said Investors Mutual Limited director Anton Tagliaferro.

“It should therefore not be surprising that growth stocks have performed so strongly in the last few years.”

Abrdn portfolio manager Gerry Fowler told The Australian Financial Review that “this cycle is over” for growth stocks that produce “no profits and won’t have any for a very long time”.

“They are simply priced for their potential for growth.”

The change in scenario means shares typically found in the tech and biotech sectors can be a drag on portfolios from now.

“Now, more than ever, it’s important to make sure growth assets don’t destroy a client’s wealth,” Tagliaferro wrote on a blog post. 

“With interest rates almost certainly to be on the rise in 2022, the sustainability of the returns from growth and speculative stocks is likely to be severely tested.”

He admitted this would be a challenge for investors now after years of “over-reliance” on growth shares to build their wealth.

Cash flow is king now 

After years of near-zero interest rates, any increase in borrowing costs, however minor, will be felt more sensitively than ever before.

“Valuation multiples for many growth stocks are so high that a 100 basis points of interest rate rises today is far more material compared to any other time in current investors’ memories,” said Tagliaferro.

“Highly priced growth stocks, or speculative stocks, will likely see a material de-rating as interest rates and hence the discount rates rise.”

While Fowler recommended investors turn to corporate bonds for their 8% to 10% yield, Tagliaferro still believed there was value among ASX shares.

“What you want as an investor is current cash flow — not 2040 or 2050s cash flow discounted back.”

So investors needed to be super selective from here onwards.

“We continue to find opportunities to invest in good quality stocks that we believe have strong competitive advantage, generate good cash flow, are managed by very credible and competent management teams, and where the outlook for the next 3 to 5 years looks very favourable.” 

Fowler hasn’t entirely abandoned tech all together though. 

He said giants like Microsoft Corporation (NASDAQ: MSFT) and Amazon.com Inc (NASDAQ: AMZN) are still worth holding because they’re already profitable, have pricing power and measurable growth.

“We are not [of] the opinion that broad markets need to fall significantly,” he said.

“Growth is still strong enough to support equity markets and their current valuations so long as we don’t get an even more aggressive [interest rate] hiking path.”

The post Is the party over for tech and biotech ASX shares? appeared first on The Motley Fool Australia.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tony Yoo owns Amazon and Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Amazon and Microsoft. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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This year started with some significant volatility in January. But will 2022 be the year of a cash or crash for ASX shares?

By 27 January 2022, the S&P/ASX 200 Index (ASX: XJO) had fallen by around 10%. There has been a bit of a recovery since then. But, the ASX 200 is still down by approximately 5% this year.

Some leading ASX shares are still down significantly. For example, since the start of the year the Xero Limited (ASX: XRO) share price is down 33%, the Altium Limited (ASX: ALU) share price is down 25% and the WiseTech Global Ltd (ASX: WTC) share price is down 25%.

Crash or ‘cash’ this year?

There has already been an ASX share market correction this year, with that drop of around 10%.

Rudi Filapek-Vandyck wrote on Livewire about what’s happening to the ASX share market and how inflation is factoring into a lot of the volatility:

The change in inflation forecasts over the past five weeks has been nothing short of dramatic… markets are now considering the idea that the Federal Reserve might have waited too long, and will be forced to step on the monetary brakes through accelerated actions. It is this change in projections that is currently feeding into volatility and uncertainty in markets.

In Australia, the general shift is to pull forward the first RBA rate hike to November or August this year.

In the US, forecasts have literally gone into overdrive with all kinds of scenarios being considered, including starting the cycle with 50bp, hiking at every meeting this year, having rate hikes in between meetings, and continuing at full force throughout 2023.

Indeed, the economists at Goldman Sachs now think that there could be seven interest rate hikes by the US Federal Reserve in 2022.

Why do interest rates matter so much?

Higher interest rates can have a big impact on asset prices, particularly the assets that are being priced for the long-term because investors then have to use a larger ‘discount rate’ to get back to today’s value for that asset. Meaning, higher interest rates lead to lower asset prices for the ASX share market, on paper.

Billionaire Ray Dalio from Founder Bridgewater Associates once said:

It all comes down to interest rates. As an investor, all you’re doing is putting up a lump sum payment for a future cash flow.

The Reserve Bank of Australia has itself acknowledged that:

Low global policy rates have boosted a broad range of asset prices and encouraged financial risk-taking…the historically low level of interest rates and the protracted length of time they have been at those levels have led to particularly strong responses of asset prices.

Metrics of many assets’ valuation, which are contingent on the low risk-free interest rates, are elevated relative to history. In addition, investor compensation for bearing many types of risk has fallen to record levels, and some investors have significantly increased their risk prices.

A sharp increase in long-term risk-free interest rates toward historically normal levels could result in widespread asset price falls if it is not accompanied by stronger growth.

Is this decline an opportunity or is a crash certain?

There are lots of different opinions on what’s happening. Serial bear Jeremy Grantham thinks that the share market is a “super bubble” and that 2022 could be the year it unravels. But he’s been saying that for a while.

Auscap Asset Management’s principal Tim Carleton thinks that the market has seen some indiscriminate selling but inflation won’t affect all ASX shares equally, according to reporting by the Australian Financial Review. Some could actually benefit in these conditions. Mr Carleton said:

The one thing that I think is getting confused is this correction, particularly in highly priced stocks in the market, has nothing to do with the outlook for the domestic economy. For us, it’s very positive.

Warren Buffett once famously said: “Be fearful when others are greedy and greedy when others are fearful.”

Two of Motley Fool Australia’s leading investors have also shared some thoughts about their views of the recent volatility.

The post Will 2022 be the year of the cash or the crash for ASX shares? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison owns Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Altium, WiseTech Global, and Xero. The Motley Fool Australia owns and has recommended WiseTech Global and Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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There are a handful of ASX dividend shares that have a record of growing dividends for shareholders and have the intention of continuing to grow the payments.

COVID saw lots of dividend cuts for some of the ASX’s most popular income payers like Commonwealth Bank of Australia (ASX: CBA), Transurban Group (ASX: TCL) and Sydney Airport.

These two businesses are ones with growing dividends:

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

Soul Pattinson has the longest-running dividend growth record on the ASX. It has grown its dividend every year since 2000. No other business has a record like that, though there are some which haven’t cut the dividend for decades, they just haven’t increased the dividend like this ASX dividend share has.

It’s an investment conglomerate that owns a large and diversified portfolio of ASX blue chips, as well as some core holdings where it has substantial ownership. Its ‘strategic portfolio’ includes: TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW), New Hope Corporation Limited (ASX: NHC), Tuas Ltd (ASX: TUA), Pengana Capital Ltd (ASX: PCG) and Apex Healthcare.

The ASX dividend share also has a private equity portfolio which includes things like agriculture, resources, swimming schools and electrical parts. With this, it’s looking for established businesses with sector tailwinds that provide a strong platform for growth.

For new opportunities, it is looking at themes like the energy transition, financial services, health and ageing, food and agriculture, and education.

Soul Pattinson says that its investment strategies have delivered above market returns for decades. It also aims for “steady and growing dividends.”

It has a trailing grossed-up dividend yield of 3.5%.

Sonic Healthcare Ltd (ASX: SHL)

Sonic has been one of the performers in the healthcare sector over the last two years.

Its pathology services were put to use with all of the COVID-19 PCR testing that was carried out in places like Australia, the USA, Germany and the UK.

Growth continued in the first half of FY22 with overall revenue growth of 7% to $4.8 billion, earnings before interest, tax, depreciation and amortisation (EBITDA) growth of 18% to $1.5 billion and 22% growth of net profit to $828 million.

Excluding COVID testing, HY22 base revenue was up 4.3%. Management are expecting ongoing growth of the base business, with strong underlying drivers including a catch-up of testing that was postponed through the pandemic.

Sonic is expecting a sustainable level of COVID testing into the future, including routine COVID testing, screening programs, variant testing, antibody testing and so on.

The ASX dividend share spent $585 million on acquisitions in the first half, including ProPath and Canberra Imaging Group. There is also an active pipeline of opportunities under evaluation.

It has launched a share buy-back of up to $500 million with an intention to move towards long-term average gearing through acquisitions and this buy-back.

Sonic maintains a progressive dividend policy. The interim dividend was grown by 11% to $0.40. Its dividend has been growing for approximately a decade.

The pre-franking trailing dividend yield of Sonic is 2.7%.

The post 2 ASX shares that could keep growing the dividend every year appeared first on The Motley Fool Australia.

More reading

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Motley Fool contributor Tristan Harrison owns Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Sonic Healthcare Limited and TPG Telecom Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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