Tag: Motley Fool

Warren Buffett isn’t one to try to time the markets.

The legendary investor and CEO of Berkshire Hathaway prefers to play the long game.

“Our favourite holding period is forever,” he once quipped.

But that doesn’t mean the Oracle of Omaha is blind to the fact that stock market crashes happen.

In fact, the 92-year-old has lived through at least 12 stock market crashes. Yet he’s come out of it with a net worth north of US$115 billion.

Warren Buffett flags slowdown

Warren Buffett hosted Berkshire’s annual general meeting last week alongside his right-hand man Charlie Munger.

And he cautioned investors that the “incredible period” the United States economy has enjoyed over the previous year is winding down. Which in turn will impact Berkshire’s holdings.

“The majority of our businesses will report lower earnings this year than last year,” he said (quoted by Bloomberg).

But in a silver lining, fast-rising interest rates helped boost Berkshire’s investment earnings. Sitting on a mammoth cash pile, the company posted a quarterly profit of US$35.5 billion.

“Our investment income is going to be a lot larger this year than last year, and that’s built in,” Warren Buffett said.

Berkshire ended the quarter with some US$131 billion (AU$193 billion) in cash.

Speaking of cash…

That cash pile is an important aspect of how to tackle any upcoming stock market crash in line with Warren Buffett.

Even most top-name ASX stocks are likely to sell down if the wider market falls by 20% or more, which is the generally accepted definition of a crash. But quality stocks are also likely to enjoy the fastest recovery.

A lot of the selling during a stock market crash isn’t rational. Many companies will be sold down well below their intrinsic values.

And you don’t want to find yourself having to sell your ASX stock holdings when the market is at or near the lows.

“Hold cash for emergencies, then plan to spend the rest on smart investments,” Warren Buffett advises.

Indeed.

Make sure you’ve got enough cash set aside for any unexpected events, like medical emergencies or that major car repair.

Then look to invest some of the rest into top-run businesses selling at a fair price, like the Oracle of Omaha himself.

In line with his long-term investment horizon, he once wrote:

In business, I look for economic castles protected by unbreachable moats… We are trying to figure out what is keeping – why is that castle still standing? And what’s going to keep it standing or cause it not to be standing five, 10, 20 years from now.

Coca-Cola Co (NYSE: KO) is a classic example.

Warren Buffett is famous not only for guzzling five cans of coke a day, but Berkshire also owns 9% of the company’s stock.

Why?

According to Buffet, “If you gave me $100 billion and said take away the soft drink leadership of Coca-Cola in the world, I’d give it back to you and say it can’t be done.”

That’s one heck of a moat.

Investing on the ASX like Warren Buffett

Like Warren Buffett, I won’t speculate on when the next stock market crash will strike.

But with history as a guide, we do know another big market fall is coming. And we know that crashes are often preceded by periods of high inflation and fast-rising interest rates.

So, atop ensuring I have plenty of cash on hand to deal with emergencies and a bit extra to deploy when there look to be some top ASX bargains, I’ll prepare for that crash by investing in companies that are likely to be more resilient to the heavy selling. And likely to bounce back quickly on the recovery.

In a high-rate environment insurance companies can outperform.

Which is why Warren Buffett highlighted the improving fortunes of Berkshire’s auto insurance branch, Geico, noting that it’s also less correlated to business activity.

One option on the ASX is QBE Insurance Group Ltd (ASX: QBE). The QBE share price is up 22% over the past year.

Other defensive stocks that I think will weather a market crash better than most include Telstra Group Ltd (ASX: TLS) and Coles Group Ltd (ASX: COL).

At the end of the day, we all still need phones and the internet.

And we all still need to eat.

The post I’m following Warren Buffett and preparing for a stock market crash appeared first on The Motley Fool Australia.

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More reading

• QBE shares plunge 3% as floods, cyclones, and storms take their toll
• Turning ASX shares into a $40,000 annual passive income generator
• QBE share price on watch following strong Q1 update
• These ASX 200 dividend stocks are highly rated for a reason
• How to invest $5,000 in ASX shares today like Warren Buffett might

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Berkshire Hathaway. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2024 $47.50 calls on Coca-Cola. The Motley Fool Australia has positions in and has recommended Coles Group and Telstra Group. The Motley Fool Australia has recommended Berkshire Hathaway. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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QBE Insurance Group Ltd (ASX: QBE) shares are suffering on Friday despite the company reporting an outwardly prosperous March quarter.

However, the market might be balking at the insurer’s first-half catastrophe allowance, which was nearly drained as of April, my Fool colleague James reported earlier.

QBE chair Mike Wilkins told those attending the company’s annual general meeting (AGM) today that catastrophe events unfolding in late 2022 and early 2023 would have an “adverse impact on QBE in 2023”.

Right now, the QBE share price is $14.66, 3.33% lower than its previous close.

Let’s take a closer look at today’s news from the S&P/ASX 200 Index (ASX: XJO) insurance giant.

QBE shares slump as natural catastrophes take a heavy toll

The QBE share price is sliding, with market watchers potentially fixated on the insurer’s depleting natural catastrophe allowance.

The company budgeted US$535 million for catastrophes in the first half. Nearly 90% of that had been spent by the time last month rolled around.

It was dried up on the back of Cyclone Gabrielle and flooding events in New Zealand’s North Island, as well as a series of storms in Australia and North America.

QBE also flagged US$130 million of adverse development on natural catastrophe events occurring late last year.

For reasons related to timing and complexity, few claims related to events occurring in Australia and North America late last financial year, such as winter storm Elliot, were received and assessed prior to the company’s full-year reporting.

That, along with an assessment of the company’s underwriting performance to date, saw it revise its expected combined operating ratio for this fiscal year to 94.5%. That’s up from prior expectations of 93.5%.

But not all was dire

On a more positive note, QBE’s gross written premium jumped 11% last quarter. That likely led the company to boost its constant currency gross written premium outlook. It now expects full-year growth of around 10%.

Commenting on the quarter, CEO Andrew Horton told QBE’s AGM:

After what felt like another volatile quarter, we delivered a solid investment result for the quarter, underpinned by supportive interest rates.

Our fixed income running yield improved, exiting the first quarter at 4.2%, while our risk asset performance was also sound, with no direct impacts to note from recent turmoil in the Northern Hemisphere banking sector.

Further, Wilkins assured the company’s balance sheet was still “conservatively structured”, with its capital position strong. It remained at the upper end of its target range of 1.6 to 1.8 times the regulatory minimum at the end of 2022.

Broker reactions

Citi was among those disappointed by the company’s quarterly result. Its analysts said, courtesy of Reuters:

While this mostly relates to particular events rather than underlying operating performance, this is nonetheless disappointing especially as industry loss estimates for some of these events seem to have been stable.

QBE share price snapshot

Today’s drop hasn’t proven enough to drag the QBE share price back into the longer-term red.

The stock is still 11% higher than it was at the start of 2023. It has also gained 19% since this time last year.

Meanwhile, the ASX 200 has gained 4% both year to date and over the last 12 months.

The post QBE shares plunge 3% as floods, cyclones, and storms take their toll appeared first on The Motley Fool Australia.

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More reading

• QBE share price on watch following strong Q1 update
• 2 top ASX 200 dividend shares to buy this week: brokers
• Up 23% in the past year. Is it too late to buy this ASX 200 insurance share?
• Morgans names the best ASX 200 dividend shares to buy in May
• Perfect balance: 2 ASX 200 shares set to surge while paying dividends

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Investors in ASX 200 bank share Bendigo and Adelaide Bank Ltd (ASX: BEN) have not had a great time watching their investment over the past five years.

Bendigo Bank shares were asking a share price of over $11 back in May 2018. But today, this ASX bank is going for $8.75 at the time of writing. Although that’s up a decent 1.6% for the day, it is still a good 21.3% lower than where it was five years ago.

Not exactly a solid return on investment there. But most ASX investors don’t buy bank shares for their capital growth potential. The name of the name here is usually the dividends.

All ASX bank shares tend to pay out chunky and fully franked dividends to their investors. Bendigo Bank is no different. Today, this ASX 200 bank has a trailing (and fully franked) dividend yield of 6.28% on the table.

Now that looks impressive, to be sure. But have Bendigo Bank’s dividends over the past five years been enough to make up for the rather lousy share price performance we’ve just discussed?

Let’s dive in.

How much have Bendigo Bank shares paid out in dividends since 2018?

Bendigo and Adelaide Bank has paid out two dividends every year since 2018, with the exception of 2020, when the pandemic forced the Bank to scrap its final dividend for that year.

2018 had the bank fork out a total of 70 cents per share in dividends. We’ll only use one 35 cents per share payment, as the interim dividend was paid out more than five years ago (back in March 2018).

2019 again saw 70 cents per share distributed.

2020’s single interim dividend came to 31 cents per share.

2021 saw biannual dividends resume, with a total of 54.5 cents per share doled out.

2022 saw this total rise to 53 cents per share.

And we have had one dividend payment from Bendigo Bank in 2023 so far – the interim dividend of 29 cents per share that investors bagged back in March. All of these dividend payments came with full franking credits.

So that’s a total of $2.725 in dividends per share that investors have enjoyed over the past five years.

If an investor invested $10,000 into Bendigo Bank shares five years ago, they would have received 899 shares, with a little change left over. Today, those 899 shares would be worth just over $7,866.

Has this ASX 200 bank share been worth the wait?

But each of those shares would have attracted $2.725 in dividends over this period. That’s an extra $2,449.78 in dividend income for our 899 shares. Combining the dividends with our principle of $10,000, and subtracting the capital losses, we get a sum total of $10,312.88.

Therefore, we can conclude that our $10,000 investment into Bendigo Bank shares five years ago would be worth $10,312.88 today, including the value of Bendigo Bank’s dividends. So indeed, the dividends from this ASX 200 bank share have indeed made up for its rather steep share price falls. Shareholders are better off today to the tune of $312.88.

That’s still not a great return for five years of waiting. But it’s certainly better than losing money.

Still, no doubt Bendigo and Adelaide Bank investors will be hoping the next five years are a little more lucrative for this ASX 200 bank share.

The post The Bendigo Bank share price has slumped 20% in 5 years. Have the dividends made up for it? appeared first on The Motley Fool Australia.

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More reading

• Did you buy $6,000 of Bendigo Bank shares 5 years ago? If so, here’s how much dividend income you’ve realised
• Lowest ASX bank yield: Are CBA shares still worth it?
• Want big dividends? This ASX bank share smashes the big four
• Are these ASX All Ords shares ready to buy at fundamentally fire sale prices?

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Bendigo And Adelaide Bank. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If you’re interested in adding some ASX 200 blue chip shares to your portfolio this month, then the three listed below could be worth considering.

These ASX 200 shares have all been named as buys recently. Here’s what you need to know about them:

Cochlear Limited (ASX: COH)

The first ASX 200 blue chip share to look at is Cochlear. It is one of the world’s leading hearing solutions companies with a portfolio of industry-leading cochlear implant devices.

But management is never one to rest on its laurels. Each year, the company spends heavily on its research and development activities in order to stay ahead of the pack.

Goldman Sachs is a fan of Cochlear. It believes it is well-placed to outperform expectations in FY 2023. As a result, the broker has put a buy rating and $265.00 price target on its shares.

Goodman Group (ASX: GMG)

Another ASX 200 blue chip share that has been named as a buy is Goodman Group. It is one of the world’s leading integrated commercial and industrial property companies.

Goodman has been growing at a consistently strong rate for years thanks to its expertly constructed portfolio that gives it exposure to key growth markets such as ecommerce and logistics.

The good news is that the team at Citi appears to believe this run can continue. Its analysts are forecasting double-digit earnings per share growth out until at least FY 2025.

It’s no surprise then to learn that Citi has a buy rating on its shares with a $24.00 price target.

ResMed Inc. (ASX: RMD)

A final ASX 200 blue chip share to consider buying is ResMed. Like the others, it is an industry leader, this time in the sleep treatment market.

Also like the others, ResMed has been growing at a solid rate for years and has been tipped to continue doing so for the foreseeable future.

Morgans is among the brokers expecting big things from the company in the coming years. As a result, it has ResMed on its best ideas list with an add rating and $37.80 price target.

The post Here are 3 ASX 200 blue chip shares that analysts love appeared first on The Motley Fool Australia.

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More reading

• 2 ASX 200 stocks surging ahead following guidance upgrades
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• On my ASX watchlist: Is ResMed borrowing Apple’s multi-billion-dollar playbook?
• Brokers name 3 ASX 200 blue chip shares to buy
• Leading brokers name 3 ASX shares to buy today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Cochlear and ResMed. The Motley Fool Australia has positions in and has recommended ResMed. The Motley Fool Australia has recommended Cochlear and Goodman Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Dividend investing is one of the best ways anyone can achieve a stream of passive income. Sure, it might not have the allure of producing TikTok videos, or the glamour of drop shipping. But ASX dividend shares can offer a strong, dependable and immediate source of secondary income that you can start using right way.

Let’s now look at what would be the best way to build up a portfolio of ASX dividend shares that could have the potential to generate $40,000 in annual passive income for an investor.

Right off the bat, it’s worth pointing out that building a portfolio of ASX dividend shares that is capable of generating $40,000 in dividend income is not an easy task. It will take years of patience and discipline, not to mention a lot of capital to invest.

But don’t let that put you off. The reward of gaining such a high level of passive income is clearly worth a lot of effort. So let’s get started.

The first thing we need to do is build a portfolio of ASX dividend share candidates that will fund our stream of passive income.

Following good investing practise, we should have a diversified portfolio of dividend-paying shares, that cover multiple sectors of the economy.

Building a $40,000 passive income portfolio

To start with, I would choose Westpac Banking Corp (ASX: WBC). Westpac is one of the big four ASX banks and has a long history of paying robust dividends. Right now, its shares offer a dividend yield of 6.34%.

Then, let’s add Coles Group Ltd (ASX: COL). Coles may not have as high of a yield as Wesptac today, with its 3.65%. But Coles brings a lot of defensive stability to the table, given its consumer staples nature, and inflation-resistant properties. Unlike Westpac, this ASX 200 dividend share did not cut its payouts during the COVID-ravaged years of 2020 and 2021.

Telstra Group Ltd (ASX: TLS) makes the cut, for similar reasons. It currently has a dividend yield of 3.94%.

Then, let’s throw in ASX retailers JB Hi-Fi Limited (ASX: JBH), Super Retail Group Ltd (ASX: SUL) and Harvey Norman Holdings Limited (ASX: HVN). These retailers have dividend yields of 7.63%, 6.03% and 8.38% respectively as of yesterday’s close.

Retail is one of the more cyclical sectors of the ASX, but these companies are all of the highest calibre and have been at the top of the ASX retail pole for decades. Plus, these extremely lucrative dividend yields arguably make up for the cyclicality they bring to the table.

Finally, let’s add Washington H. Soul Pattinson and Co Ltd (ASX: SOL). Soul Patts might have the lowest dividend yield of all of these shares at present, currently sitting at 2.43%. But it also has the high honour of having the best dividend record on the ASX, with a 22-year-and-counting streak of delivering annual dividend increases.

The ASX dividend share waiting game

If we invest $60,000 into each of these dividend shares right now, we would immediately gain a passive income stream of $22,277 per annum (assuming those dividend yields hold).

Well, that’s a good start, but it’s not $40,000.

But let’s now assume that each of these divided shares increases their annual payouts by 5% every year going forward. That’s not an unreasonable assumption. For example, last year, Westpac increased its 2022 dividends by 5.93% over 2021’s levels.

Harvey Norman jacked up its dividend by a similar amount. Soul Patts managed a 16% hike, which more than makes up for Coles and Telstra’s more conservative increases of around 3% each.

If our dividend portfolio can bank an average 5% increase in yield every year going forward, it would only take 12 years before our $22,277 stream of passive income turns into $40,006 per annum.

As we discussed earlier, achieving a $40,000 stream of passive dividend income from ASX shares is not easy. But it certainly can be done if given enough time, patience and discipline.

The post Turning ASX shares into a $40,000 annual passive income generator appeared first on The Motley Fool Australia.

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More reading

• 3 ASX 200 shares with strong balance sheets
• How much would I need to invest in ASX shares for a retirement income of $65,000 per year?
• It’s still rare to find a term deposit paying over 5%. Why not buy ASX dividend shares instead?
• Snapped up $5,000 worth of Westpac shares on the June dip? Here’s the passive income you’re earning now
• The top 10 ASX shares held by millionaires

Motley Fool contributor Sebastian Bowen has positions in Telstra Group and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Harvey Norman, Super Retail Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Coles Group, Harvey Norman, Super Retail Group, Telstra Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Jb Hi-Fi and Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Some ASX All Ords shares do more of the heavy lifting than others.

Over the past five years, the All Ordinaries Index (ASX: XAO) has gained just over 20%.

But one obscure ASX All Ords share has left those gains well and truly in the dust.

And I’ll admit, until recently, this one was flying beneath my own radar as well.

Any guesses?

If you said Alpha HPA Ltd (ASX: A4N), go to the front of the virtual class.

What is Alpha working on?

Alpha, if you’re not familiar, is a battery metals development company with a market cap of $952 million.

The ASX All Ords share is primarily focused on its licensed Smart SX Technology, which enables it to produce sustainable, high-purity aluminium.

Alpha is currently developing its new Gladstone-based HPA First Project in Queensland.

According to the company website, Gladstone will “meet the growing demand for high purity alumina (HPA) using the most environmentally responsible and efficient methods”.

Alpha is targeting LED lighting, lithium-ion batteries and semiconductors as its primary demand drivers.

With that said…

This ASX All Ords share has been on fire

Spurred on by a $15.5 million federal government grant in late 2022 to support the production of critical minerals in Australia, Alpha has been steadily progressing the Gladstone plant towards full production.

In the latest quarterly report, the company advised it was “rapidly” deploying the first $6.8 million of that grant to expand equipment capabilities to include its full high-purity product range.

And investors clearly believe the ASX All Ords share has a bright future ahead.

Five years ago, you could have bought shares in the critical battery metals stock for 12 cents apiece.

Today those same shares are swapping hands for $1.08.

That’s a whopping 800% gain.

Or enough to turn a $5,000 investment into $45,000 in just five years.

Happy investing!

The post This obscure ASX All Ords stock has quietly turned a $5,000 investment into $45,000 in 5 years appeared first on The Motley Fool Australia.

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More reading

• REA shares fall as costs take a bite out of bottom line
• 3 ASX 200 shares with strong balance sheets
• Morgans names the best ASX 200 growth shares to buy in May
• Newcrest share price slips as exclusivity period for $32b takeover extended
• Brokers name 3 ASX shares to buy now

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

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The REA Group Ltd (ASX: REA) share price is in the red after the company revealed a notable jump in operating costs in the March quarter.

Right now, stock in the real estate advertising company is down 1.05%, trading at $137.26

REA share price slips as EBITDA drops 13%

Here are the key takeaways from the S&P/ASX 200 Index (ASX: XJO) communications company’s quarterly earnings:

• Revenue slumped 3% year on year to $269 million
• Earnings before interest, tax, depreciation, and amortisation (EBITDA) plunged 13% to $136 million
• Free cash flow dipped 9% to $83 million
• Operating expenses across the group rose 9% to $133 million

Zooming out, REA revealed its revenue for the nine months ended 31 March jumped 2% year-on-year to $887 million.

Meanwhile, its EBITDA for the financial year so far has dropped 5% on that of the prior period to $495 million, dragged down by a 13% lift in operating costs.

What else happened last quarter?

A 12% drop in Australian property listings dinted the company’s performance last quarter following a strong listing environment in the prior period. The major capitals were hit hardest, with listings in Sydney falling 20% and those in Melbourne dropping 18%.

The company’s realestate.com.au platform maintained its leadership position, with 11.9 million people visiting the site each month – representing 59% of Australia’s adult population.

Meanwhile, REA India saw revenue jump 63% year-on-year. However, higher costs in the segment, along with technology costs and higher marketing spend, drove growth in operating costs.

What did management say?

REA CEO Owen Wilson commented on the update driving the company’s share price today, saying:

While interest rate uncertainty continued to impact the Australian property market, conditions have improved with the stabilisation of house prices and more vendors returning to the market.

The strength of REA’s premium product offering and audience continued to support revenues, and our Indian business delivered exceptional growth.

Lack of supply and interest rate uncertainty have caused some vendors to sit on the sidelines, but we expect this to improve given strong demand, positive price sentiment and increasing confidence that we are near the peak of the rate cycle.

What’s next?

While REA appears confident an uptick is on the way, listings remain lower than the prior period. National residential new listings were down 24% year-on-year in April, with Sydney listings dropping 25% and Melbourne listings falling 22%.

The company expects its Residential Buy yield growth to increase 10% in financial year 2023. Meanwhile, costs are forecast to increase in the low single-digits and Australian operating jaws are expected to be modestly negative.

Looking to financial year 2024, its Buy yield growth is expected to post a double-digit jump, mainly driven by an average 12% price increase in Premiere+.

REA share price snapshot

Fortunately for investors, today’s slump hasn’t been enough to send the REA share price into the longer-term red.

The stock is currently 27% higher than it was at the start of 2023. It has also risen 29% since this time last year.

For comparison, the ASX 200 has gained 4.3% year to date and 4.4% over the last 12 months.

The post REA shares fall as costs take a bite out of bottom line appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Friday
• Top broker tips 7 ASX 200 property-related shares to cash in on the 2023 budget
• 3 ASX 200 stocks I’ll be watching like a hawk in May
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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 recommended REA Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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There are some S&P/ASX 200 Index (ASX: XJO) shares that have a very secure financial position. A good balance sheet can benefit the company in a number of different ways, which I’ll outline below.

ASX 200 shares create three different statements for each financial reporting period – the profit and loss (P&L), the balance sheet and cash flow.

The balance sheet tells us about the assets, liabilities and shareholder equity in the business. As an example, we can think about the balance sheet items of a household. Assets could include bank accounts, shares and property, while liabilities could include a mortgage and a credit card balance.

Let’s talk about why strong balance sheets are important.

Advantages of a great balance sheet

It’s worthwhile having a good balance sheet through all parts of the economic cycle, and it could be essential during downturns for that sector or even the whole economy. Below are some of the advantages.

Strong emergency fund – It’s a wise idea for households to set aside some cash in an emergency fund for a rainy day. If the main breadwinner loses their job, the household expenses still need to be paid, so having money available can be a lifeline in tough times.

Companies still need to be able to pay for their operations even if revenue were to (temporarily) decline. If ASX 200 shares have a good balance sheet, they can hopefully navigate a market correction or even a recession with no significant long-term issues. Having that cash could even mean the business is able to invest and keep growing during difficult times, making it well-positioned for recovery.

When Bill Gates started Microsoft, he ensured that the company had enough cash to last 12 months with no revenue coming in.

Acquisitions – Having financial strength can enable an ASX 200 share to make useful deals. Acquisitions can happen at any point in the economic cycle, and being able to swallow up a weaker competitor when they’re struggling in a downturn can be a very beneficial move.

Avoid dilutive capital raisings – ASX 200 shares have a few different sources of funding – they can use cash on their own balance sheet, they can use debt (not ideal as that comes with risk and the interest cost) or a capital raising by issuing more shares.

Ideally, businesses will do capital raisings at a good share price. But, if an ASX 200 share has to raise capital at a low share price, it can mean ‘giving away’ a greater portion of business ownership.

Dilutive capital raisings have happened in recent history, with some ASX travel shares having to raise capital at much lower share prices during the COVID-19 crisis.

A good balance sheet should mean a company doesn’t need to raise capital during a crisis.

Which ASX 200 shares have strong balance sheets?

There are plenty of companies with good balance sheets on the ASX. But I think the best ones are companies that have little to no debt and a good amount of cash and are increasing their financial strength over time.

The three below are good examples of ASX companies with strong balance sheets, in my opinion.

Altium Limited (ASX: ALU) – this ASX tech share makes electronic PCB design software. At December 2022, it had US$205 million of cash which had increased from US$195 million at December 2021. The business has no debt and net assets of US$284 million.

Pro Medicus Ltd (ASX: PME) – this ASX healthcare share provides enterprise imaging and radiology software for large medical institutions. At December 2022, it had no debt and $65.5 million of cash, which was up around $8.5 million from December 2021.

JB Hi-Fi Limited (ASX: JBH) – this ASX retail share sells a wide variety of consumer electronics and appliances. It had no debt and $391.2 million of cash at 31 December 2022, up from $125.6 million at 30 June 2022.

The post 3 ASX 200 shares with strong balance sheets appeared first on The Motley Fool Australia.

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More reading

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Motley Fool contributor Tristan Harrison has positions in Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Altium and Pro Medicus. The Motley Fool Australia has recommended Jb Hi-Fi and Pro Medicus. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If you’re looking for ASX 200 growth shares to buy, then look no further.

That’s because Morgans has recently named some among its best ideas for the month of May.

Two that make the cut are listed below. Here’s why it is very bullish on them:

Corporate Travel Management Ltd (ASX: CTD)

This corporate travel booker has been named as an ASX 200 growth share to buy by Morgans. It has the company on its best ideas list with an add rating and $24.00 price target.

The broker believes Corporate Travel Management is well-placed for growth thanks to acquisitions it made during the pandemic, cost reductions, and its focus on technology. It explains:

Taking a longer term view, CTD remains as a key pick for the travel sector. We see substantial upside in its share price as the company recovers from the COVID affected travel downturn. In fact, CTD should be a materially larger business post COVID given it has made two highly accretive acquisitions during the downturn. The company has also won a lot of new business, implemented structural cost out opportunities and continued to develop its market leading technology offering which means that it will require less staff in the future. CTD is well managed and has a strong balance sheet (no debt).

Lovisa Holdings Ltd (ASX: LOV)

When it comes to ASX 200 growth shares, there are few with a better long-term outlook than Lovisa. Thanks to its global expansion plans and the popularity of its products with young consumers, it has been tipped to grow very strongly over the coming years.

Morgans certainly expects this to be the case. It has the fast fashion jewellery retailer on its best ideas list with an add rating and $28.50 price target. The broker commented:

We think it may prove to be one of the biggest success stories in Australian retail. With ambitious and well-incentivised new leadership in place, we think now is the time LOV steps up to become a global force. […] Investment will be needed to expand LOV’s network in the US and Europe and to take it into new markets, but the returns could be stellar. We think LOV’s products fill an underserved niche, offering fast fashion jewellery at prices that are attainable to a resilient target demographic.

The post Morgans names the best ASX 200 growth shares to buy in May appeared first on The Motley Fool Australia.

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More reading

• 2 ASX 200 travel stocks (not Qantas!) just upgraded by Citi
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• ‘We’ve learnt the hard way’: 3 ASX shares that can grow in tough times
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• 2 ASX travel shares poised for a massive 2023

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Lovisa. The Motley Fool Australia has recommended Corporate Travel Management and Lovisa. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Newcrest Mining Ltd (ASX: NCM) share price is in the red after the S&P/ASX 200 Index (ASX: XJO) gold icon extended the exclusivity period offered to suitor, Newmont Corporation (NYSE: NEM).

Newmont offered to acquire its ASX 200 counterpart in February, but its bid was rejected by its Aussie rival. It later upped its all-scrip offer to an implied price of $32.87 per share.

The Newcrest share price slipped on open and is trading 1.38% lower at $28.49 in early morning trade.

Let’s take a closer look at today’s news of the $32 billion takeover facing the ASX 200 gold producer.

ASX 200 gold giant extends exclusivity period

The Newcrest share price is falling after the company announced Newmont will have an extra week to comb through its books.

Newmont will now have until 18 May before submitting a binding offer or losing its forfeiting its exclusivity. That is unless the period is extended further.

The US-listed rival-turned-suitor is said to have substantially completed its due diligence.

Newcrest investors have been offered 0.4 Newmont shares for each stock held in the ASX 200 gold company. That offer was declared best and final by the acquisition hopeful.

That represents an implied value of $32.87 per share and an enterprise value of $32 billion for the mining giant. Newcrest had a $25.8 billion market capitalisation as of Thursday’s close.

The offer also allows the ASX 200 gold share to pay a fully franked special dividend of as much as US$1.10 per share.

If the tabled acquisition goes ahead, Newcrest shareholders will walk away with a 31.1% ownership in Newmont.

Newcrest share price snapshot

The Newcrest share price has had a ripper run as of late.

The stock has gained 38% since the start of 2023. It’s also 17% higher than it was this time last year.

In comparison, the ASX 200 has lifted 4% year to date and 4% since this time last year.

The post Newcrest share price slips as exclusivity period for $32b takeover extended appeared first on The Motley Fool Australia.

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More reading

• What’s the gold price forecast for the remainder of 2023?
• 5 things to watch on the ASX 200 on Friday
• Top defensive ASX shares to buy in May 2023
• 5 things to watch on the ASX 200 on Friday
• Why are ASX 200 gold shares going gangbusters 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 has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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