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The S&P/ASX 200 Index (ASX: XJO) is having a tough day on Tuesday. In afternoon trade, the benchmark index is down 0.6% to 7,400.9 points.

Four ASX shares that are falling more than most today are listed below. Here’s why they are sinking:

ARB Corporation Limited (ASX: ARB)

The ARB share price is down 12% to $46.61. Investors have been selling the 4×4 parts company’s shares after it was downgraded by analysts at Credit Suisse. According to the note, Credit Suisse has downgraded its rating to underperform with a price target of $38.00. While the broker is predicting a strong result in February, it expects margin pressure and slower growth thereafter.

Inghams Group Ltd (ASX: ING)

The Inghams share price is down 6% to $3.31. This follows the release of a disappointing trading update this morning. According to the release, the poultry producer revealed that COVID-19 and elevated feed costs are impacting its performance. Management also warned that it is not currently possible to predict how long this disruption will continue.

James Hardie Industries plc (ASX: JHX)

The James Hardie share price is down 3% to $49.37. This decline may have been driven by a broker note out of Morgan Stanley. Its analysts have downgraded the company’s shares to an equal weight rating and cut the price target on them to $58.00. The broker made the move in response to the surprise exit of its CEO and slowing US housing.

SDI Limited (ASX: SDI)

The SDI share price has tumbled 10% to 92.5 cents following the release of a trading update out of the dental products company. While SDI expects to report a 26% increase in half year revenue to $46.2 million, it warned that its margins have been impacted by supply chain issues. As a result, first half net profit is only expected to be between $2.5 million and $3 million. This is down from $4.6 million a year earlier.

The post Why ARB, Inghams, James Hardie, and SDI shares are sinking appeared first on The Motley Fool Australia.

More reading

• Why the SDI (ASX:SDI) share price is falling 10% today
• Why is the ARB Corporation (ASX:ARB) share price sliding 9% today?
• James Hardie (ASX:JHX) share price slips amid Jack Truong battle heating up
• ASX 200 (ASX:XJO) midday update: PolyNovo rockets, Inghams sinks
• Inghams (ASX:ING) share price sinks as Omicron bites

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 ARB Corporation Limited and SDI 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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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to record a disappointing decline. At the time of writing, the benchmark index is down 0.5% to 7,406.9 points.

Four ASX shares that are not letting that hold them back are listed below. Here’s why they are pushing higher:

BrainChip Holdings Ltd (ASX: BRN)

The BrainChip share price is up 7% to $1.10. This morning the artificial intelligence technology company responded to a speeding ticket from the ASX. BrainChip suggested that its incredible rise in 2022 may have been driven by recent media coverage. This includes the reports that the company’s Akida chip has been used in a Mercedes concept car.

PointsBet Holdings Ltd (ASX: PBH)

The PointsBet share price is up 5% to $6.51. Investors have been buying the sports betting company’s shares after it announced a deal with the NHL Alumni Association (NHLAA). PointsBet Canada has become the exclusive sports betting partner of the NHLAA in Canada and also an official partner of the association in the United States.

PolyNovo Ltd (ASX: PNV)

The PolyNovo share price has rocketed 25% higher to $1.79. This follows the release of a first half sales update from the medical device company. According to the release, following a strong second quarter, PolyNovo expects to report first half group sales growth of 45% to A$16.28 million (excluding Barda revenue). A strong performance in the US underpinned this growth.

Syrah Resources Ltd (ASX: SYR)

The Syrah share price has jumped 11% to $2.06. This is despite there being no news out of the graphite producer. However, investors have been buying the company’s shares in recent weeks after it announced a deal with electric car giant Tesla. The Syrah share price hit a multi-year high just after lunch.

The post Why BrainChip, PointsBet, PolyNovo, and Syrah shares are pushing higher appeared first on The Motley Fool Australia.

More reading

• ASX 200 (ASX:XJO) midday update: PolyNovo rockets, Inghams sinks
• Why is the PointsBet (ASX:PBH) share price winning today?
• Why have BrainChip (ASX:BRN) shares become such hot property?
• Here’s why the PolyNovo (ASX:PNV) share price is jumping 13% today
• 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. owns and has recommended POLYNOVO FPO and Pointsbet Holdings Ltd. The Motley Fool Australia has recommended Pointsbet Holdings 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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Many of Australia’s top brokers have been busy adjusting their financial models again, leading to the release of a large number of broker notes this week.

Three ASX shares brokers have named as buys this week are listed below. Here’s why they are bullish on them:

A2 Milk Company Ltd (ASX: A2M)

According to a note out of Citi, its analysts have retained their buy rating and $7.30 price target on this infant formula company’s shares. The broker remains positive on A2 Milk due to its strong brand health in China and improved inventory position. Citi is also optimistic that management’s new strategy will support its performance in the coming years. Particularly if other struggling foreign brands decide to exit China. The A2 Milk share price is trading at $5.51 on Tuesday.

Costa Group Holdings Ltd (ASX: CGC)

A note out of Macquarie reveals that its analysts have retained their outperform rating but trimmed their price target on this horticulture company’s shares to $3.41. While the broker has reduced its earnings estimates to reflect new leases, it isn’t enough to change its positive view. Macquarie continues to believe that weakness in the Costa share price in 2021 is a buying opportunity this year. The Costa share price is fetching $2.97.

Incitec Pivot Ltd (ASX: IPL)

Analysts at Morgan Stanley have retained their overweight rating and $4.30 price target on this agricultural chemicals company’s shares. This follows news that the company is acquiring European rival Titanobel. Morgan Stanley believes this is a good move by management. And while the European market is not a quick-growing one, the broker expects the synergies to boost its earnings. The Incitec Pivot share price is trading at $3.43 this afternoon.

The post Leading brokers name 3 ASX shares to buy today appeared first on The Motley Fool Australia.

More reading

• Why you shouldn’t expect the A2 Milk (ASX:A2M) share price to bounce back in 2022
• Incitec Pivot (ASX:IPL) share price higher on $142m acquisition
• These were the 5 worst performing ASX 200 shares in 2021
• Analysts tip A2 Milk (ASX:A2M) and this share as buys
• Down 50%: Broker tips A2 Milk (ASX:A2M) and this ASX share to rebound in 2022

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 A2 Milk and COSTA GRP FPO. 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 BHP Group Ltd (ASX: BHP) share price is moving sideways today despite news about the company’s latest investment.

At the time of writing, shares in the world’s second-largest miner are swapping hands for $44.93, up 0.35%. It’s worth noting that in the past month, the company’s shares have climbed 12% following a rebound in iron ore prices.

Let’s take a look at the company’s latest announcement.

BHP capitalises on African nickel mine

In a joint release, BHP has entered into an agreement to invest up to US$100 million in the Kabanga Nickel project in Tanzania.

Yet, it seems the company’s move to invest in the nickel and cobalt project has had minimal impact on the BHP share price.

Located in western Tanzania, the Kabanga Nickel project is considered as the largest development-ready nickel sulphide deposit in the world. The site is estimated to contain nickel equivalent resources of 1.86 million tonnes with a grade of 3.44%.

First production is anticipated to begin sometime in 2025. Kabanga is targeting minimum annual production of 40,000 tonnes of nickel, 6,000 tonnes of copper, and 3,000 tonnes of cobalt.

The deal between BHP and UK registered private company Kabanga Nickel Limited will see the accelerated development of the Kabanga Nickel Project. An initial investment of US$40 million has so far been made by the Australian-based mining giant.

In addition, BHP will also pour US$10 million into Lifezone Limited to advance the roll-out of its patented hydrometallurgical technologies. This mining tech company is seeking a more cost-efficient and environmentally-friendly way to produce battery-grade metals than smelting.

With the first US$50 million allocated to getting the project online, BHP’s investment in Kabanga will stand at 8.9%.

A second tranche of US$50 million in unsecured convertible securities is subject to Kabanga Nickel achieving certain milestones. If this goes ahead, then BHP’s stake will jump to 17.8% in the UK-based company, valuing the project at US$658 million.

Clearly, BHP is thinking ahead by increasing its exposure to the shifting trend from fossil fuels to cleaner energy. Nickel is a key element needed to make lithium-ion batteries which are used to power of electric vehicles.

BHP share price summary

Since the beginning of the year, the BHP share price has accelerated to post a gain of around 8% for its shareholders. However, when looking at the past 12 months, the company’s shares have lost around 3% in value.

This is a stark contrast from when its shares were tracking almost 30% higher in August, reaching an all-time high of $54.55.

Based on today’s price, BHP presides a market capitalisation of roughly $132 billion and has approximately 2.95 billion shares outstanding.

The post Own BHP (ASX:BHP) shares? Here’s the lowdown on the miner’s latest nickel play appeared first on The Motley Fool Australia.

More reading

• Dividend beasts: 5 ASX 200 shares with the highest dividend yield
• These are the 10 most shorted ASX shares
• Experts tip the ASX sectors that are set to outperform in 2022
• ASX says Block listing is ‘most important since BHP’. Here’s why
• 5 things to watch on the ASX 200 on Friday

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

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The ARB Corporation Limited (ASX: ARB) share price is plummeting today after reaching a 52-week high last week.

At the time of writing, ARB shares are down 8.92%, swapping hands at $48.11 apiece. For comparison, the S&P/ASX 200 Index (ASX: XJO) is currently down 0.36% to 7,420.5.

Let’s take a look at what may be weighing on the four-wheel-drive accessories company’s shares.

What’s going on at ARB?

There’s been no news out of the company since November. However, investors may be reacting to two new broker tips on the ARB share price released today.

Credit Suisse has downgraded its recommendation on the share price to underperform with a price target of $38 per share. That’s 21% less than the ARB share price at the time of writing.

Meanwhile, the team at JP Morgan has upgraded its share price guidance to underweight today with a price target of $35. This is more than 27% lower than the current price.

In the list of analysts covering ARB provided by Bloomberg Intelligence, 40% have the company as a buy, 40% have it a sell, and 20% have it as a hold.

This comes after Wilsons gave the shares an overweight rating with a price target of $57 back in October.

Today’s fall comes after the ARB share price hit a 52-week high of $54.53 last week on January 4.

Looking at the wider market, the S&P/ASX200 Consumer Discretionary Index (ASX: XDJ) is currently down 0.3%, while the S&P/ASX200 Consumer Staples Index (ASX: XSJ) is down 1.63%.

ARB share price snapshot

In the past 12 months, the ARB share price has soared by around 54%. The share price low during that time was $31.10 on 15 January 2021.

ARB shares are down 7.2% in the past week, and 6.7% in the past month.

ARB commands a market capitalisation of roughly $4.3 billion at the time of writing.

The post Why is the ARB Corporation (ASX:ARB) share price sliding 9% today? appeared first on The Motley Fool Australia.

More reading

• Why the Ramsay (ASX:RHC) share price is outperforming the ASX today
• The Afterpay (ASX:APT) share price has plummeted since the Block takeover. How does the deal now stack up for shareholders?
• Dividend beasts: 5 ASX 200 shares with the highest dividend yield
• ‘Stop viewing cash as a safe investment’: Ray Dalio
• These were the top 5 ASX 200 bank shares in 2021

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 ARB Corporation 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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The Ramsay Health Care Limited (ASX: RHC) share price is beating the market gloom this morning after striking a new agreement with the UK’s National Health Service.

Shares in the hospital operator jumped 1.7% to $68.38 during lunchtime trade. That stands in contrast to the 0.6% dive by the S&P/ASX 200 Index (ASX: XJO).

Ramsay announced after the market closed yesterday that it reached a new volume-based agreement with NHS England (NHSE).

Ramsay share price bolstered by NHSE agreement

Like the previous agreement, the ASX-listed hospital group can continue providing private patient activity. This is a relief to investors as I will explain later.

The difference is the NHSE may trigger a “Peak Surge Period” on seven days’ notice if it requires Ramsay to help manage a spike in COVID-19 cases. Should that happen, Ramsay will be paid on a cost recovery basis.

This agreement comes into effect from today and runs till 31 March. It may be extended by mutual agreement on or before 15 March.

COVID restrictions crimps the Ramsay share price

The surge in COVID cases is bad news for Ramsay’s earnings as hospitals tend to make bigger profits from elective surgeries.

This is why the Ramsay share price has been under pressure recently. Its hospitals in New South Wales had to stop performing non-urgent treatments in response to the flood of patients with the Omicron COVID variant being admitted to hospitals.

Ramsay announced on Friday that the NSW Ministry of Health has put restrictions on overnight Category 2 and Category 3 elective surgery.

No light at the end of COVID tunnel

The move follows Victoria’s Department of Health and Human Services (DHHS) decision to suspend non-urgent elective procedures.

Unlike the deal struck with NHSE, the restrictions imposed by NSW and Victorian health authorities have no end date. Ramsay and shareholders don’t know when it can return to “business as usual”.

The only silver lining is that January tends to be the quietest month for Ramsay Australia. Elective surgery patients rather lie in the sun than in hospital beds till after the school holidays end.

Foolish takeaway

Nonetheless, Ramsay has warned investors that it is expected to take a $55 million hit to earnings before interest and tax in the first quarter of this financial year.

This could change depending on how long the restrictions last and if NHSE triggers the Peak Surge Period.

Looks like it’s too early to hope that the COVID cloud will start to dissipate in 2022.

The Ramsay share price is lagging behind other medical facility operators. Over the past 12-months, its shares have gained around 12%. But the Healius Ltd (ASX: HLS) share price and Sonic Healthcare Limited (ASX: SHL) share price have gained around 30% each.

This is because the latter two run COVID tests, something Australians can’t seem to get enough of.

The post Why the Ramsay (ASX:RHC) share price is outperforming the ASX today appeared first on The Motley Fool Australia.

More reading

• ASX 200 (ASX:XJO) midday update: PolyNovo rockets, Inghams sinks
• 5 things to watch on the ASX 200 on Tuesday
• 2 ASX healthcare shares to give your portfolio a boost
• Why is the Ramsay (ASX:RHC) share price so volatile today?
• Ramsay (ASX:RHC) share price falls 6% amid reports of COVID battle plan

Motley Fool contributor Brendon Lau 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 Ramsay Health Care Limited and Sonic Healthcare 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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The Afterpay Ltd (ASX: APT) share price is pushing higher at long last on Tuesday.

In afternoon trade, the buy now pay later provider’s shares are up 1.5% to $73.32.

However, this is little consolation to longer term shareholders who have seen the Afterpay share price tumble in recent months.

What’s happened to the Afterpay share price in recent months?

In August, Afterpay and Block (previously named Square) agreed an all-scrip deal which will see Afterpay shareholders receive a fixed exchange ratio of 0.375 shares of Block Class A common stock for each Afterpay share they hold.

At the time of the deal, the Block share price was trading at US$247.26. This implied a transaction price of approximately $126.21 per Afterpay share, which valued the deal at approximately US$29 billion or $39 billion.

However, as this deal is an all-scrip one, the value of the transaction rises and falls with the Block share price. But unfortunately, since the deal was announced, the Block share price has fallen time and time again.

In fact, the Block share price closed Monday night’s session at US$144.48, down almost 42% since making its proposal. This has unsurprisingly weighed heavily on the Afterpay share price, which has been dragged 42% lower than the original implied transaction price of $126.21. This values the transaction at under $23 billion, down from the original $39 billion.

What now?

Investors that have watched the Afterpay share price tumble in recent months may now be wondering whether to hold onto their shares when they convert into Block shares in the coming weeks when the takeover completes.

One fund manager that isn’t tempted is Atlas Funds Management. This is because it isn’t confident that its shares (or the ASX listed Block shares) will rebound in 2022 due largely to the lofty multiples that the Block share price trades on.

It commented: “After agreeing to a takeover in mid-2021, Afterpay’s share price is tethered to Block’s (née Square) share price in the NYSE. As we have no unique insight into Square’s global merchant payments activities and are alarmed at its price-earnings ratio of 156x, it is tough to pick Afterpay as the sharp recovery candidate in 2022.”

The post The Afterpay (ASX:APT) share price has plummeted since the Block takeover. How does the deal now stack up for shareholders? appeared first on The Motley Fool Australia.

More reading

• Buying ASX shares in 2022? Here’s what you need to know: expert
• These were the worst performing ASX 200 shares last week
• Why Afterpay, BrainChip, Medibank, and WiseTech shares are racing higher
• ASX says Block listing is ‘most important since BHP’. Here’s why
• ASX 200 (ASX:XJO): Woolworths withdraws API proposal, tech shares rebound

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 Afterpay Limited and Block, Inc. The Motley Fool Australia owns and has recommended Afterpay 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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As investors, it is important to remember there’s more than one way to make money from shares. Share price appreciation is the most obvious method, but receiving a steady stream of dividends can be another. Fortunately, there are plenty of shares in the S&P/ASX 200 Index (ASX: XJO) that offer some form of passive income.

It’s worth prefacing that dividend yield alone as a measurement can at times be deceptive. Because yield is a backward-looking metric reliant on the company’s share price, if the price falls the dividend yield can be inflated. Following this, the company might reduce its payout.

Keeping that in mind, let’s dive into our five highest-yielding ASX 200 shares.

5 ASX 200 shares with beefed-up dividend yields

BHP Group Ltd (ASX: BHP)

The first ASX 200 share on our list is also the biggest company by market capitalisation out of the bunch. Standing at $132 billion, the diversified mining giant is boasting a dividend yield of 9.6%.

BHP is one of many miners to benefit from a booming iron ore price throughout the 2021 financial year. In addition, other commodities, such as copper, experienced a massive surge in price. As a result, the company served up a record fully franked dividend of 200 US cents per share in August 2021.

The BHP share price is down around 4% in the last 12 months following the pullback in iron ore prices.

AGL Energy Limited (ASX: AGL)

Typically dividend-paying ASX 200 shares are profitable. However, AGL Energy is the only company on this list that is currently unprofitable. Despite this, one of Australia’s largest energy providers reached deep into its pockets to pay $427.9 million worth of dividends in the last year — giving this share a yield of 10.4%.

This outlandishly high yield has been partly a product of AGL’s falling share price over the past 12 months. Although shareholders might have received solid dividends, their capital was reduced in value by 43% during the year-long stint.

Magellan Financial Group Ltd (ASX: MFG)

Once again, the next ASX 200 share ranks highly on dividend yield due to its uninspiring price performance over the last year.

Currently, the Magellan share price is offering a dividend yield of 10.9%. This might appear remarkable at first glance. However, when paired with the full context — that the company’s share price is down 59% in the past 12 months — it becomes less surprising.

Investors have been scampering to sell out of Magallen shares in recent months. Sentiment shifted for the fund manager following its funds’ underperformance and loss of a significant client, St. James Place.

Rio Tinto Limited (ASX: RIO)

Sliding into second place on the ASX 200 shares with the highest dividend yield is Rio Tinto. Much like BHP Group, this iron ore mining giant had a gangbuster year for earnings. As a result, the company passed on these staggering profits to shareholders in the form of a big dividend — giving it a 13.3% yield.

Similarly, the world’s second-largest metals and mining company hasn’t had as much luck for its share price. Over the last 12 months, shares in Rio Tinto have fallen by more than 13%.

Meanwhile, analysts at Citi are unphased by the pullback. In fact, the broker sees the current share price as a buying opportunity, assigning it a price target of $115 per share.

Fortescue Metals Group Limited (ASX: FMG)

The last ASX 200 share on this list blows its dividend-paying peers right out of the water. At present, Fortescue Metals Group is rocking a mind-bending 20.7% dividend yield.

As a testament to Fortescue’s incredibly low cost of mining iron ore, the company achieved similar earnings (US$10.3 billion) to BHP Group in FY21 on a little more than one-third of the revenue. As such, shareholders were showered in dividends in the last year.

However, Fortescue is in the same boat as Rio Tinto and BHP — having suffered an 18% fall in its share price in the past year.

The post Dividend beasts: 5 ASX 200 shares with the highest dividend yield appeared first on The Motley Fool Australia.

More reading

• 2 high-yielding ASX 200 dividend shares to boost income
• Own Fortescue (ASX:FMG) shares? Here’s how the share price performed in 2021
• Here are the top 10 ASX shares today
• Why AGL, Genetic Signatures, Liontown, and Novonix shares are charging higher
• Here’s why the AGL (ASX:AGL) share price is surging 8% today

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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When the co-CIO of the world’s largest hedge fund talks, we listen.

Legendary investor Ray Dalio’s Bridgewater Associates didn’t get to manage circa US$150 billion in funds under management without holding at least some authority on investing and portfolio management.

And given the recent volatility in the S&P/ASX 200 Index (ASX: XJO) – spurred by rising US Treasury yields and a rotation out of growth-type stocks into defensives – many investors might be wondering just how much weight they should have in cash moving forward.

Here’s what Ray Dalio had to say on the matter during his address to the 22nd annual UBS Greater China Conference that started on Monday.

Cash is a lazy asset that’s susceptible to inflation risk

Even amid the market volatility in global stocks, Dalio advocates that investors should keep exposure to cash light.

The hedge fund giant explained that recent quantitative easing (QE) programs from central banks around the world — the US in particular – have contributed to record levels of country debt to GDP.

This creates a vicious cycle where central banks must flood the economy with more liquidity to keep servicing the ever-soaring debt load.

As such, this has resulted in “significantly negative real rates of cash and negative real rates of bonds”. For reference, a ‘real’ rate is generally adjusted for inflation, whereas ‘nominal’ rates exclude inflationary data.

Many investors and fund managers like Ray Dalio advocate thinking in terms of real rates/returns, given they paint a more accurate picture by factoring in all the market mechanics.

Plus, Dalio argues that central banks around the world are stuck between a rock and a hard place following their QE efforts in 2020/21.

Dalio says that “if there was a rise in rates to equal the inflation rate or the long-term returns of asset classes, assets would go down and it would be a problem – they’d shut off everything”.

Given these points, the legendary investor and “new world order” theorist submits that investors must “stop viewing cash as a safe investment”.

Typically, according to Dalio, investors think cash is safe because it doesn’t present with the same volatility as stocks or derivatives for instance.

“The mindset needs to change,” Dalio says, to one “in which everybody looks at real returns. In other words, inflation-adjusted, because you want buying power”.

Holding cash will see investors inevitably lose their buying power as the ‘invisible tax’ of inflation will eat into the real returns and/or purchasing power on the asset class.

Imagine if inflation is at 3% net year, and then 3% again the year after that. What $100 buys you today will not be the same as the next 2 years in this scenario. Imagine we wanted to buy a $100 jumper. As prices increase by 3%, the $100 jumper will cost $103 next year then $106.09 the following period. Our $100 note has lost some of its value.

That is what Dalio refers to when speaking of a loss of buying power. It’s another way of stating cash is susceptible to the risk of inflation, as too are cash-producing assets like dividend stocks.

That’s precisely why one should try to store buying power, Dalio says. “If you’re holding an asset that has very little return … and is not volatile, but loses to inflation that could be 5 per cent a year”, then there’s a lot of inflation risk which must be considered.

Diversification – the only free lunch

Meanwhile, Dalio also advocates that investors stay light in cash due to the benefits achieved through proper diversification within and across asset classes.

Diversification – which has been touted ‘the only free lunch’ in finance – doesn’t just mitigate risks. It also helps to generate more sources of value and/or return.

The hedge fund co-CIO notes that he is keeping a close eye on 3 or 4 themes in his investment reasoning. These include: “the country or the place, the company or the individual, earning more than they’re spending and financially sound, with a good balance sheet”.

Following a similar approach means investors can remain “highly diversified” and are able to “take tactical moves from those [allocations]”.

As such, remaining too concentrated in cash goes against the principles of diversification and, based on Dalio’s commentary, would ultimately hurt a portfolio’s alpha potential with more risk.

Dalio’s concluding remarks note that “we’re all interested in how the world’s order is changing because that tells us where the risks and opportunities are, and that relates not only to China and the US”.

In summary, Dalio says stay light on cash, think in terms of “real rates of return” and remain diversified across asset classes. Most importantly, he says, is to stop thinking of cash as some safe haven asset that has no risk involved. He says this simply isn’t true.

The post ‘Stop viewing cash as a safe investment’: Ray Dalio appeared first on The Motley Fool Australia.

More reading

• ASX 200 (ASX:XJO) midday update: PolyNovo rockets, Inghams sinks
• 2 high-yielding ASX 200 dividend shares to boost income
• 5 things to watch on the ASX 200 on Tuesday
• Here are the top 10 ASX shares today
• ASX retail investors should be banned from ‘financial heroin’: Choice

The author has no positions 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 banking sector was a great place to be invested in 2021, with the majority of the big four banks outperforming the market.

But which ASX 200 bank shares performed best? Here are the top five performers from 2021:

Macquarie Group Ltd (ASX: MQG)

The Macquarie share price was the best performing ASX 200 bank with a gain of 48% in 2021. A key driver of this was the investment bank’s first half results for FY 2022. Those results revealed a whopping 107% jump in first half profit to $2,043 million. Particularly strong performances from its Commodities and Global Markets (CGM) and Macquarie Capital businesses underpinned this stellar result.

National Australia Bank Ltd (ASX: NAB)

The NAB share price was some way behind as the next best performer with a gain of 27.6%. This banking giant’s shares were in demand with investors after it returned to form in FY 2021. In addition, due to its overweight exposure to business and commercial banking, it has some level of protection from the margin pressures being caused by aggressive home loan competition.

Commonwealth Bank of Australia (ASX: CBA)

The CBA share price was on form and charged 23% higher over the 12 months. This was despite a blip at the end of the year following the release of a weaker than expected first quarter update. While CBA’s margins are being impacted by the aforementioned increase in competition for home loans, it wasn’t enough to put investors off. This is despite a number of brokers calling its shares overvalued.

Australia and New Zealand Banking GrpLtd (ASX: ANZ)

The ANZ share price wasn’t far behind with a 21.2% gain in 2021. As with NAB, ANZ returned to form in FY 2021 and deliver strong profit growth. In addition, the bank appears relatively well-placed in FY 2022 thanks to its strong business banking franchise.

Westpac Banking Corp (ASX: WBC)

The Westpac share price rounds out the top five after outperforming the regionals with its 10.2% gain. Australia’s oldest bank was the worst performer of the big four due to concerns over its margin outlook and cost cutting plans. In respect to the latter, there are doubts that Westpac will be able to meet its cost base reduction target of $8 billion by FY 2024. However, Morgans believes it can achieve this and sees 2021’s underperformance as a buying opportunity in 2022.

The post These were the top 5 ASX 200 bank shares in 2021 appeared first on The Motley Fool Australia.

More reading

• Why the CBA (ASX:CBA) share price jumped 23% in 2021
• Why did the Westpac (ASX:WBC) share price significantly underperform the other big banks in 2021?
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• Top ASX dividend shares to buy in 2022
• Top brokers name 3 ASX shares to sell next week

Motley Fool contributor James Mickleboro owns Westpac Banking Corporation. 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 Macquarie Group Limited and Westpac Banking Corporation. 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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