Tag: Motley Fool

Key points

• ResMed delivered solid revenue and profit growth in the second quarter
• A major competitor product recall boosted demand
• However, its revenue still fell short of analyst expectations

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The ResMed Inc. (ASX: RMD) share price will be one to watch on Friday morning.

This follows the release of the sleep treatment focused medical device company’s second quarter update.

ResMed share price on watch after falling short of expectations

• Revenue increased 12% (13% in constant currency) to US$894.9 million
• Gross margin contracted by 230 basis points to 57.6%
• Net income up 12% to US$201.8 million
• Diluted earnings per share up 11% to US$1.37
• Quarterly dividend of 42 US cents declared

What happened during the quarter?

For the three months ended 31 December, ResMed reported a 12% increase in revenue to US$894.9 million. This was driven by increased demand for sleep and respiratory care devices and the benefits of a major product recall by one of its largest competitors.

ResMed recorded top line growth across all its operations. Revenue in the Americas grew 14%, in Europe, Asia, and other markets it grew 12%, and its software-as-a-service business reported 8% revenue growth.

However, while this revenue growth was strong, it still fell short of the market’s expectations. The consensus estimate was for revenue of US$927.5 million. In after hours trade in the US, the ResMed share price is down 4.5% on the news.

Also potentially weighing on the ResMed share price today was its softer gross margin. Management advised that its gross margin decreased by 230 basis points due to higher freight and manufacturing costs, which were partially offset by favourable product mix changes.

Management commentary

ResMed’s CEO, Mick Farrell, was pleased with the company’s performance during the quarter, especially given the supply chain challenges it was facing.

He said: “Our second-quarter results reflect continued strong performance across our business resulting in double-digit top-line revenue growth, driven by ongoing high demand for our sleep and respiratory care products, and solid growth in our software-as-a-service business. Our global ResMed team continues to find ways to deliver products and solutions to our customers, even amid ongoing supply chain challenges that have limited additional access to critical electronic components.”

“We are working every day to meet the extraordinary demand generated by our competitor’s ongoing device recall. We continue to ensure priority for the highest-need patients first, and we are working with physicians, providers, and healthcare systems to maintain delivery of medical devices and digital health solutions for the patients who need care,” he added.

Mr Farrell remains positive on the future and notes that the company continues to focus on improving 250 million lives by 2025.

He commented: “Despite constantly evolving market dynamics, we remain focused on our goal to improve 250 million lives in the year 2025; supporting patients with the sleep apnea therapy, respiratory care therapy, and digital health solutions they need as we deliver value for all of our customers.”

“We are investing in medical device research and development, as well as digital health innovation that will unlock value across the healthcare system. I am incredibly proud of our global ResMed team, working around the clock with providers and physicians across 140 countries to get products directly into the hands of patients who most need our help,” Mr Farrell concluded.

The post ResMed (ASX:RMD) share price on watch after Q2 update disappoints appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Friday
• Why broker thinks falling ResMed (ASX:RMD) share price is a buying opportunity
• Top brokers name 3 ASX shares to buy today
• $20,000 invested in these ASX shares 10 years ago is worth how much today?
• 3 ASX shares brokers have named as buys

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Key points

• Wesfarmers-owned Bunnings named Australia’s No. 1 brand and Officeworks No. 3
• The titles – given out annually by Brand Finance Australia – are based on brand strength and other metrics
• The news not enough to bring the Wesfarmers share price out of its slump this week

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Owners of Wesfarmers Ltd (ASX: WES) shares have something to celebrate this week after 2 of the retail conglomerate’s businesses were named among Australia’s 3 strongest brands.

Bunnings has been crowned Australia’s strongest brand while Officeworks came in third.

As of Thursday’s close, the Wesfarmers share price is $50.61, down 3.69% for the day.

Let’s find out more about these awards.

Bunnings and Officeworks among Australia’s strongest brands

The Wesfarmers share price might be having a bad week – it has slumped 5% since last Friday’s close – but 2 of the company’s major businesses have claimed a new achievement, knocking the Commonwealth Bank of Australia (ASX: CBA) off its post.

The bank took out the top spot as Australia’s strongest brand last year, but Bunnings has taken the crown for 2022.

According to reporting by the Australian Financial Review (AFR), Brand Finance Australia calculates a brand’s ‘strength’ using metrics including marketing investment, familiarity, loyalty, and reputation.

It not only found that Bunnings is Australia’s strongest brand, but that its brand strength is also the most improved.

The body reportedly estimated the Bunnings brand is worth approximately $4 billion, 46% more than it was during last year’s analysis.

Managing director of Brand Finance Australia, Mark Crowe, was quoted by the AFR as saying Bunnings’ place on the ranking was helped along by its “[response] to residential and trade demand along with aiding the vaccination rollout”.

Officeworks has been found to be Australia’s third strongest brand, behind Woolworths Ltd (ASX: WOW). The business reportedly has an estimated valuation of just $473 million.

Meanwhile, Woolworths has been crowned Australia’s most valuable brand, worth an estimated $13.7 billion.

Telstra Corporation Ltd (ASX: TLS) and BHP Group Ltd (ASX: BHP) came in as the second and third most valuable.

Wesfarmers share price snapshot

This week has been a tough one for the Wesfarmers share price – and those of many other ASX 200 companies.

The conglomerate’s stock has fallen 4.6% since last Friday’s close. Meanwhile, the ASX 200 has slipped 4.7%.

The Wesfarmers share price is also 14% lower than it was at the end of 2021. It’s underperformed the index by 6% in that time.

The post Own Wesfarmers (ASX:WES) shares? 2 of its major businesses are wearing new crowns appeared first on The Motley Fool Australia.

More reading

• Could this signal the next big acquisition for Wesfarmers (ASX:WES)?
• Here’s a deep dive into the historical returns of Wesfarmers (ASX:WES) shares
• What’s happening to the Wesfarmers share price (ASX:WES) this year?
• Kogan (ASX:KGN) share price hits new 52-week low. Down 37% in 6 months
• Leading brokers name 3 ASX shares to sell today

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns and has recommended Wesfarmers 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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Ask A Fund Manager

The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In this edition, Shaw and Partners portfolio manager James Gerrish tips a couple of quality businesses that have been oversold and will roar back.

Hottest ASX shares

The Motley Fool: What are the 2 best stock buys right now?

James Gerrish: Goodman Group (ASX: GMG) and Hub24 Ltd (ASX: HUB). 

It’s all about buying quality that’s been sold off. So if you think the year that we’re likely to have is going to be dictated by big change, change is entrenched from a sector point of view, but [dictated by] quality companies coming in and out of vogue. 

Goodman’s down 16% from its highs. That’s a really high quality company that’s growing really strongly. They’ve got caught up in the sell-off of high valuation stocks. 

And Hub24 is similar. It’s fallen 30%. They just came out with their best quarterly trading update in a long time. The growth there is accelerating. 

But I think the important thing is they’re real businesses. There’s a lot of high-value type stocks that are promising a lot, but are yet to deliver. These are stocks that have delivered, and the trend of delivery is there and ingrained. I think this year you want to be in things that have got some defensive qualities, but also, you want to be high quality. 

This is why this year could be such a good year. You will get opportunities in those high quality companies.

The market has ultimately become too bearish bonds — bullish bond yields — and if we’re correct here, these high quality growth-oriented stocks will recover strongly in the near term. Importantly, however, that is not a long term view. It’s a more short to medium term stance in response to the question of what to buy right here.

Looking back

MF: Is there a move that you regret from the past? For example, a missed opportunity or buying a stock at the wrong timing or price.

JG: There are always lots of regrets in the market, I should have done this, I should have done that. It’s important to frame these as learnings — and over the years you tend to have fewer of these pop up if you learn from each one. 

The most recent ‘learning’ has been around how quickly and aggressively hot money can come out of technology. While we were correct on the macro side in 2021 and into the start of 2022 around interest rates, we should have been more aggressive in culling our exposure as a consequence of that view. In our International Equities Portfolio, our position in Trade Desk Inc (NASDAQ: TTD) springs to mind here.

We called the macro pretty reasonably well, around interest rates and to remain underweight technology in that environment. I regret not being more aggressive in reducing some of our holdings in that space… Where we’ve still got painful holdings there, we could have done better in terms of exiting them based on our macro view.

The post 2 quality ASX shares going for dirt cheap right now appeared first on The Motley Fool Australia.

More reading

• 3 blue chip ASX 200 shares to buy after the selloff
• Top brokers name 3 ASX shares to buy today
• Here are the top 10 ASX shares today
• Why Corporate Travel Management, Goodman, Lendlease, and Uniti shares are rising today
• Here are the latest broker updates from Macquarie. It’s not all pretty for ASX shares.

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. owns and has recommended Hub24 Ltd and The Trade Desk. The Motley Fool Australia has recommended Hub24 Ltd and The Trade Desk. 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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While the expectations for rate increases continues to improve, it is still likely to be some time until term deposits offer liveable yields.

But don’t worry because there are plenty of quality dividend shares on the Australian share market that offer the potential for capital returns and generous yields.

Two such ASX dividend shares are listed below. Here’s what you need to know:

Australia and New Zealand Banking Group Ltd (ASX: ANZ)

The first ASX dividend share that could be a buy is ANZ. This is due to its strong position in commercial banking and its attractive valuation. The former gives the bank some protection from the margin pressures being experienced in retail banking from aggressive competition for mortgages.

As for the latter, according to a note out of Bell Potter this week, its analysts estimate that ANZ’s shares are trading at 12.5x earnings and 1.2x book value. Based on this, the broker sees scope for the bank’s shares to rise strongly in 2022. In fact, it has just slapped a buy rating and $31.00 price target on its shares. This implies potential upside of 14.5% over the next 12 months.

In addition, the broker is forecasting fully franked dividends per share of 144 cents in FY 2022 and 151 cents in FY 2023. This implies yields of 5.3% and 5.6%, respectively, over the next two years.

Coles Group Ltd (ASX: COL)

Another ASX dividend share to look at is this supermarket giant. It has been a solid performer over the last few years and even during the pandemic.

Pleasingly, its sales growth has continued in FY 2022, with Coles reporting a 1.5% increase in total first quarter sales to $9,756 million. This growth was driven by its Supermarket and Liquor businesses, which offset weakness in the Express business due to lockdowns.

And while COVID costs are likely to weigh on its margins in the near term, this should only be temporary. After which, Coles looks well-placed to expand its margins as its focus on automation starts to pay dividends.

Speaking of dividends, the team at Citi is forecasting fully franked dividends per share of 65 cents in FY 2022 and then 72 cents in FY 2023. Based on the current Coles share price of $15.74, this implies yields of 4.1% and 4.6%, respectively.

Citi also sees a lot of value in its shares and has a buy rating and $19.60 price target on them.

The post 2 buy-rated ASX dividend shares that smash term deposits appeared first on The Motley Fool Australia.

More reading

• What to expect from the ANZ (ASX:ANZ) Q1 update next month
• Why is the Woolworths (ASX:WOW) dividend smaller than Coles?
• Are ASX consumer staples shares really ‘safe’ to hold in a market selloff?
• The ANZ (ASX:ANZ) share price is outperforming its big bank peers in 2022. Here’s why
• 2 ASX dividend shares Morgans rates as buys

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 owns and has recommended COLESGROUP DEF SET. 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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On Thursday, the S&P/ASX 200 Index (ASX: XJO) fought hard and was able to record a small gain. The benchmark index rose 0.15% to 7,342.4 points.

Will the market be able to build on this on Friday and end the week on a high? Here are five things to watch:

ASX 200 expected to jump

The Australian share market looks set to end the week in a very positive fashion. According to the latest SPI futures, the ASX 200 is expected to open the day 106 points or 1.6% higher this morning. This is despite further weakness on Wall Street, which late on sees the Dow Jones down 0.2%, the S&P 500 down 0.6%, and the Nasdaq dropping 1.1%. It is worth noting, however, that the US market and the SPI futures have been swinging wildly and all this could change come opening time.

ResMed Q2 update

The ResMed Inc. (ASX: RMD) share price will be on watch today when it releases its second quarter update. The sleep treatment focused medical device company is expected to deliver a strong result thanks partly to rival Philips dealing with a major 5 million + CPAP device recall. The big question will be how much supply chain constraints limited its growth.

Oil prices fall

Energy producers including Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL) will be on watch today following a poor night for oil prices. According to Bloomberg, the WTI crude oil price is down 0.45% to US$86.97 a barrel and the Brent crude oil price is down 0.4% to US$89.63 a barrel. Oil prices softened as traders took profit after prices hit seven-year highs.

Gold price tumbles

Gold miners Newcrest Mining Ltd (ASX: NCM) and St Barbara Ltd (ASX: SBM) could have a subdued finish to the week after the gold price dropped. According to CNBC, the spot gold price is down 1.9% to US$1,794.40 an ounce. The precious metal came under pressure after the US Federal Reserve’s hawkish comments spooked traders and boosted the US dollar.

Premier Investments a sell

The Premier Investments Limited (ASX: PMV) share price is overvalued according to analysts at Goldman Sachs. Although the retailer delivered a half year trading update ahead of the market’s expectations, it isn’t enough for a change of rating. Goldman said the update did not ease its longer term concerns. As a result, it has retained its sell rating with a $23.60 price target.

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

More reading

• Here are the top 10 ASX shares today
• Why broker thinks falling ResMed (ASX:RMD) share price is a buying opportunity
• 3 reasons not to panic in this ASX 200 correction
• ASX gold shares fall hard. Is now the time to buy?
• Top brokers name 3 ASX shares to sell today

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Looking for a blue chip ASX 200 share or two for your portfolio following the market selloff? Listed below are three that have been given buy ratings recently.

Here’s what you need to know about them:

CSL Limited (ASX: CSL)

The first blue chip ASX 200 share to consider is CSL. It is a leading biotechnology company which is home to the CSL Behring business and the Seqirus business. Combined, these two businesses have a portfolio of life-saving and lucrative therapies and vaccines which are generating billions of dollars in sales each year. In addition, the company invests in the region of 10% to 11% of its sales back into research and development activities every year. This means it is on course to invest around US$1 billion into these activities this year. This ensures that CSL has a pipeline of potentially lucrative products to drive its future growth.

Citi remains positive on CSL. This week the broker put a buy rating and $340.00 price target on its shares.

Goodman Group (ASX: GMG)

Another blue chip ASX 200 share to look at is Goodman Group. It is a leading integrated commercial and industrial property company with a portfolio of warehouses, large scale logistics facilities, and business and office parks. Management notes that it continues to experience strong demand for its properties, which is being driven by increased intensification of use, long-term supply chain requirements, tight supply in urban infill locations and the quality of its assets. In addition, the company has $12.7 billion of development work in progress, which is expected to underpin further solid growth over the coming years.

Citi is also a fan of Goodman. It currently has a buy rating and $28.00 price target on the company’s shares.

SEEK Limited (ASX: SEK)

A final blue chip ASX 200 share to look at is SEEK. It is the dominant force in job listings in the ANZ market and has a number of international operations. While FY 2021 was a difficult year because of the pandemic, SEEK has been bouncing back strongly now the worst is over and hiring is ramping up.

This morning Macquarie retained its outperform rating and $37.00 price target on the company’s shares. It expects SEEK to upgrade its guidance with its half year results.

The post 3 blue chip ASX 200 shares to buy after the selloff appeared first on The Motley Fool Australia.

More reading

• Own CSL (ASX:CSL) shares? Here’s why the company is moving on from COVID research
• Top brokers name 3 ASX shares to buy today
• Analysts name 2 beaten down ASX shares with 30% upside
• Can the CSL (ASX:CSL) share price reach pre-COVID highs?
• 2 excellent blue chip ASX 200 shares to buy this month

Motley Fool contributor James Mickleboro owns SEEK Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended CSL Ltd. The Motley Fool Australia has recommended SEEK 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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Key points

• The Zip share price sank 9.66% today
• The news came amid mixed views on a potential acquisition of Sezzle by Zip Co
• Zip confirmed earlier this week it is in talks to acquire Sezzle

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The Zip Co Ltd (ASX: Z1P) share price slumped today amid reports Citi analysts have concerns over the company’s Sezzle Inc (ASX: SZL) takeover aspirations.

The ASX buy now, pay later company’s shares finished the day trading at $2.90 apiece, down 9.66%.

Let’s take a look at the latest chatter surrounding Zip.

Zip takeover talks get mixed reviews

The Zip share price fell nearly 10% today and is now down nearly 21% since market close on 19 January.

News that research analysts at Citi had mixed views on the possibility of Zip acquiring Sezzle may have weighed on investors’ minds today. Of course, this was also against the backdrop of tumbling ASX tech shares, with the S&P/ASX All Technology Index (ASX: XTX) ending the day more than 5% lower.

A report in today’s The Australian said Citi analysts have raised questions over whether a takeover of Sezzle is the correct strategy — despite the fact the acquisition could help Zip gain scale in the US buy now, pay later sector.

However, the analysts do seem to be in favour of some industry consolidation, reportedly saying, “From a sector perspective, we see the increasing consolidation activity as positive for industry profitability”.

But the analysts also expressed some concern, adding, “…we do not expect the acquisition to meaningfully change Zip’s enterprise retailer penetration immediately”.

Earlier this week, Zip confirmed media speculation it is in talks with rival Sezzle over a possible acquisition.

In a statement to the ASX, Zip’s board said:

Zip confirms it is in discussions with Sezzle in relation to a potential acquisition.

Zip is always interested in pursuing options that are in the best interests of shareholders; however the discussions with Sezzle are preliminary in nature and there is no certainty that the discussions will result in a transaction of any kind.

Zip is not the only ASX buy now, pay later stock that slipped in a horror day for the tech sector. Block Inc CDI (ASX: SQ2) dropped 5.35%, Openpay Ltd (ASX: OPY) dived 8.33%, and Sezzle sank 8.09%.

Humm Group Ltd (ASX: HUM) also descended 1.86%.

Zip share price snapshot

The Zip share price has crashed by 33% since the end of 2021. Over the past 12 months, Zip shares have lost almost 63%.

For perspective, the S&P/ASX 200 Index (ASX: XJO) has returned just under 1% over the past year.

Zip has a market capitalisation of roughly $1.7 billion based on its current share price.

The post Zip (ASX:Z1P) share price tumbles 10% as top broker questions possible Sezzle play appeared first on The Motley Fool Australia.

More reading

• What happened to ASX buy now, pay later shares today?
• Why A2 Milk, Baby Bunting, Codan, and Sezzle shares are surging higher
• ASX 200 (ASX:XJO) midday update: Zip confirms Sezzle talks, Fortescue’s Q2 update
• Why is the Sezzle (ASX:SZL) share price rocketing 20% higher?
• Zip (ASX:Z1P) share price higher amid Sezzle acquisition talks

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Block, Inc. and ZIPCOLTD FPO. The Motley Fool Australia has recommended Humm Group 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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Key points

• Buy now, pay later shares took a beating on the ASX today
• The Zip share price fell 9.66%, while Block sunk 5.35%
• The All Technology Index also descended overall

Buy now, pay later (BNPL) shares had a shocking day on the market today but they are not alone.

Leading the pack is the Zip Co Ltd (ASX: Z1P) share price, diving 9.66%. For perspective, the S&P/ASX 200 Index (ASX: XJO) also fell 1.77% today, while the S&P/ASX All Technology Index (ASX: XTX) slumped 5.05%

Let’s take a look at what happened to BNPL shares today.

Tech sector weakness hurts BNPL shares

The Block Inc CDI (ASX: SQ2) share price gravitated 5.35% while Openpay Group Ltd (ASX: OPY) shares cascaded 8.33%.

Meanwhile, Sezzle (ASX: SZL) shares tumbled 8.09% and Humm Group Ltd (ASX: HUM) shares plunged 2.48%.

Today’s fall came amid an overall weakness in the technology sector in Australia.

Among the ASX tech share fallers was Xero Limited (ASX: XRO), down 6.69%.

Meanwhile, Wisetech Global Ltd (ASX: WTC) plunged 9.85% and NextDC Ltd (ASX: NXT) sunk 1.85%. Additionally, Megaport Ltd (ASX: MP1) dropped a mammoth 9.46%.

Block’s ASX shares dropped slightly more than the company’s US listing. The Block Inc (NYSE: SQ) share price fell 3.71% overnight in the United States.

Paypal Holdings (NASDAQ: PYPL) fell 0.77%. However, the Nasdaq-100 Index (NASDAQ: NDX) gained 0.17%.

The broader ASX index moved closer towards ‘a correction’ on Thursday, as my Foolish colleague Bernd noted.

Correction broadly refers to any pullback of more than 10% and the index is down more than 8% since the market close on 31 December.

The post What happened to ASX buy now, pay later shares today? appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Thursday
• What happened to ASX tech shares today?
• Why is the Openpay (ASX: OPY) share price up 7% today?
• There’s a new kid on the Block (ASX:SQ2), but how does it make money?
• ASX 200 (ASX:XJO) midday update: Zip confirms Sezzle talks, Fortescue’s Q2 update

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Block, Inc. and ZIPCOLTD FPO. 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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With the market under significant pressure this month, a good number of shares are trading at 52-week lows.

While this is disappointing, analysts appear to believe it could be a buying opportunity for some of them. Here are three beaten down shares that brokers rate as buys:

Cochlear Limited (ASX: COH)

The Cochlear share price was out of form and sank to a 52-week low of $178.55 today before recovering slightly to end the session at $182.06.

The team at Credit Suisse are likely to see this recent share price weakness as a buying opportunity for investors. Earlier this week, the broker upgraded the hearing solutions company’s shares to an outperform rating with a $235.00 price target. Based on the current Cochlear share price, this implies potential upside of 29% over the next 12 months.

Harvey Norman Holdings Limited (ASX: HVN)

The Harvey Norman share price got caught up in the market selloff and tumbled to a 52-week low of $4.57 on Thursday before ending the day at $4.67.

Goldman Sachs believes there’s material upside for the retail giant’s shares from this level. The broker currently has a buy rating and $6.00 price target on its shares. This implies a potential return of 28% before dividends. Speaking of which, the broker is forecasting fully franked dividends yields of 7.7% over the next three financial years.

NEXTC Ltd (ASX: NXT)

The NEXTDC share price dropped to a 52-week low of $9.74 on Thursday before recovering slightly to $9.82.

This share price weakness could also be a buying opportunity for investors according to Goldman Sachs. Its analysts currently have a conviction buy rating and $14.40 price target on the data centre operator’s shares. This implies potential upside of 48% for investors over the next 12 months.

The post 3 buy-rated ASX shares that just hit 52-week lows appeared first on The Motley Fool Australia.

More reading

• Why is the Cochlear (ASX:COH) share price tumbling 5% on Thursday?
• Top brokers name 3 ASX shares to buy today
• $20,000 invested in these ASX shares 10 years ago is worth how much today?
• 2 ASX dividend shares with fully franked 7% yields
• What happened to ASX tech shares today?

Motley Fool contributor James Mickleboro owns NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Cochlear Ltd. The Motley Fool Australia owns and has recommended Harvey Norman Holdings Ltd. The Motley Fool Australia has recommended Cochlear 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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As the market closes on its fourth consecutive day of steep losses, investors are coming to terms with the S&P/ASX 200 Index (ASX: XJO) now being in a correction. To say there has been plenty of red across ASX shares lately is perhaps an understatement.

It can be difficult to stay the course when portfolios are relentlessly ticking lower. Each day can feel like a one-way ticket to more losses. It is in these times that the fortitude of an investor is truly put to the test.

Now, it is a different story if the intention is to sell. However, more often than not, the pressure to sell during a downturn comes from a place of fear.

With that being said, now seems like an appropriate time to brush up on some fundamental investing principles that have stood the test of time.

These lessons have served many investors over the years during countless rough patches. Considering the start to 2022, they might need to be deployed once again.

Follow the business, not the share price

The first investing principle to remember during a sell-off is that the market can be erratic, but the underlying company often remains unchanged. One of the greats, Peter Lynch, once said:

Behind every stock is a business, find out what it’s doing.

In the long run, the price of an ASX share will be determined by the success of the business itself. Whereas, in the short-term, the share price bounces violently around changes in emotions and sentiment from investors.

A lot of pain can be avoided sometimes if investors focus less on what the share price is doing, and more on how the company is performing. Whether that be an assessment of revenue/earnings growth, board quality, or customer satisfaction. These are the factors that many investing greats have paid attention to during difficult times in the market.

Why do you own that ASX share in the first place?

Another principle that can help with weathering the storms is rooted in a bit of self-awareness.

Warren Buffett has said in the past:

Risk comes from not knowing what you are doing.

It could be reasonable to tack onto the end of that: why are you doing it?

Understanding what you are invested in and why you are investing provides some degree of self-certainty during an otherwise uncertain time.

As an investor, if you can feel confident in the ASX shares you hold — both knowing what the company does, and why you are invested in it — conviction is pre-built and at the ready when the volatility hits.

In addition, this is often the difference between selling out of a company you may like at a lower price; compared to buying more shares in it at a discount.

Foolish takeaway

In essence, difficult times in the share market sort the investors from the traders. Those with conviction and those without it. Ultimately, there are no right or wrong decisions in absence of hindsight. However, sometimes as investors, we can lose sight during rough waters — only to realise we detoured from our previously chartered course after the fact.

Many investing greats know this. They have lived it through the experience of many treacherous times in the market before. Fortunately, each time the market has come out the other side — proceeding to reach new all-time highs.

While the past performance of ASX shares is not an indicator of future performance, the abovementioned principles offer us a glimpse of how successful investors have navigated these seas before.

The post Here’s a quick way to ride out the sell-off in ASX shares appeared first on The Motley Fool Australia.

More reading

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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 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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