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Diversification is one of the simplest and most effective risk reduction tools an everyday investor can hang on their belt. And it needn’t take hours of stock picking to employ. Some S&P/ASX 200 Index (ASX: XJO) shares offer a degree of built-in diversification – Wesfarmers Ltd (ASX: WES) being one.

However, I wouldn’t rely on the stock to diversify my portfolio if it was already retail-heavy.

Wesfarmers is a diversified ASX 200 share, but…

Wesfarmers is, of course, just one company. However, its multitude of businesses surpass sector borders, thereby providing some built-in diversification.

Most Aussies will know the ASX 200 share for its headline retail brand, Bunnings. They’ll also likely be familiar with discount retailer Kmart, its sibling Target, and Officeworks.

But there’s far more to the company than meets the eye of most consumers.

Wesfarmers also boasts a chemical, energy, and fertiliser segment, supplying products including ammonia, phosphate, nitrogen, and potassium-based fertilisers, and polyvinyl chloride resins.

The company is also involved in the mining sector.

It might surprise the uninitiated to learn that Wesfarmers has a 50% stake in the Mt Holland lithium mine. It also owns Western Australia’s only manufacturer of sodium cyanide – used by miners to extract gold.

To the health sector, Wesfarmers has recently branched out into pharmacies, health, and beauty. It snapped up the owner of Priceline in a high-profile bidding war involving Woolworths Group Ltd (ASX: WOW) last year. It’s now got its eye on another acquisition in the space – listed aesthetics clinic operator Silk Laser Australia Ltd (ASX: SLA).

Why I wouldn’t turn to the ASX 200 stock for diversification

Diversifying your portfolio means spreading your investments out over various companies, sectors, and asset classes to protect against isolated downturns and make the most of single-sector or asset-class swings.  

In similar steed, Wesfarmers may find its overall earnings protected if one – or a handful – of its businesses suffer a rough patch. However, not all of the conglomerate’s brands can offer equal protection.

Of the $22.6 billion of revenue the company brought in last half, $9.8 billion came from Bunnings. Another $5.7 billion came from Kmart and Target.

Thus, Wesfarmers is still, for the most part, an ASX 200 retail share.

For that reason, I doubt adding it to an already retail-heavy portfolio would be a worthwhile diversification move.

Though, I might look into the company if my portfolio were looking a little light in the consumer discretionary department.

The post Is Wesfarmers a diversified ASX 200 stock? appeared first on The Motley Fool Australia.

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More reading

• Could Wesfarmers shares get a boost from further acquisitions?
• Dalio says US and China ‘on brink of war’. Which ASX shares could be impacted?
• 6 excellent ASX 200 dividend shares that aren’t banks or miners
• Why did the Wesfarmers share price perform so well in April?
• Another 52-week high: Are Wesfarmers shares stretched, or could they be a buy?

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 positions in and has recommended Wesfarmers. The Motley Fool Australia has recommended Silk Laser Australia. 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 ANZ Group Holdings Ltd (ASX: ANZ) share price will be one to watch closely today.

That’s because this morning it has become the latest big four bank to release its half-year results.

ANZ share price on watch amid record half-year cash earnings

• Statutory profit after tax down 1% from the prior half to $3,547 million
• First-half cash earnings from continuing operations up 12% to a record of $3,821 million
• CET1 ratio up 89 basis points to 13.2%
• Net interest margin (NIM) up 7 basis points to 1.75%
• Fully franked interim dividend up 9.5% to 81 cents per share

What happened during the half?

For the six months ended 31 March, ANZ reported record first-half cash earnings of $3,821 million, up 12% on the second half of FY 2022.

Pleasingly, unlike with National Australia Bank Ltd (ASX: NAB) on Thursday, this result has come in ahead of the consensus estimate. The market was expecting cash earnings of $3,769 million for the half.

ANZ CEO, Shayne Elliott, revealed that all four dividends contributed to its earnings growth. He said:

This was a strong financial performance in which all four divisions made a material contribution. The record result was driven by solid revenue growth across the board and the benefits of having a well-diversified business. It was also a direct outcome of our deliberate strategy to simplify, reshape and de-risk the bank, which has allowed us to replace revenue following the disposal of non-core assets.

Elliott also highlighted its home loans growing faster than the market, its record half-year result from the institutional business, an improvement in New Zealand, and a particularly strong performance from the Australia Commercial division. In respect to the latter, the CEO said:

Australia Commercial was a strong contributor to Group revenue, generating the highest return on equity of our divisions and delivering revenue growth of 30%5 compared with the prior comparable period.

In light of this solid earnings growth, the ANZ board elected to increase its fully franked interim dividend by 9.5% to 81 cents per share. This was ahead of the 80 cents per share that Goldman Sachs was forecasting.

Outlook

One thing that could potentially hold back the ANZ share price was management’s outlook commentary. Elliott warned that the second half will be harder than the first due to “intense” competition in retail banking. He said:

The next six months will be more difficult than the last. Competition in retail banking is as intense as it has ever been, both in Australia and New Zealand. We understand that sustained higher inflation and interest rates create further challenges for some households and businesses across the economy. While the number of ANZ customers in difficulty remains low, we stand ready to help in these potentially challenging times.

We enter the next half with a business structure that brings the benefits of geographic and product diversification. We have a robust capital position, credit loss provisions higher than any other time pre-COVID, a strong and diverse deposit base and a track-record of execution. We are seeing continued momentum and high employee engagement across all four divisions, each with a clear strategy and a funded roadmap for growth.

The ANZ share price is down 12% over the last 12 months.

The post ANZ share price on watch after record result beats expectations appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Friday
• 4 reasons to buy ASX 200 banks stocks right now
• 3 ASX 200 bank shares to go ‘long and bullish’ on right now
• Why did ANZ shares smash the other ASX 200 banks in April
• What’s happening with ASX 200 banks today as First Republic teeters on the brink of collapse?

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 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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If you’re looking for some new ASX 300 stocks to buy, then you may want to check out the three listed below that Goldman Sachs has just named as buys.

Here’s why the broker is bullish on them:

Jumbo Interactive Ltd (ASX: JIN)

This online lottery ticket seller could be an ASX 300 share to buy according to Goldman. It has just slapped a buy rating and $16.10 price target on its shares.

Although Goldman wasn’t blown away by the company’s performance during the third quarter, it was pleased with its plan to increase prices. It is expecting this to fall to the bottom line and boost its earnings. The broker explained:

While the update for FY23 was negative in view of the ongoing weakness in the jackpot games, the proposed portfolio pricing changes are expected to have a positive impact on JIN’s earnings outlook.

JIN expects to increase Powerball prices by a further A¢10 and all other games by A¢5 from late May when TLC implements the price increase for Powerball. These price increases are largely likely to fall directly to the bottom line given no major additional costs.

Nine Entertainment Co Holdings Ltd (ASX: NEC)

Another ASX 300 stock that the broker is positive on is media company Nine. Goldman has a buy rating and $2.40 price target on its shares.

Its analysts are positive on Nine due to their belief that the company is well-placed to offset tough trading conditions in the advertising market. It explains:

We are Buy rated on NEC and are positive on the outlook for the company, even with increasing macro uncertainty, seeing NEC to be well placed to offset ad market declines with its high-quality suite of digital assets (incl. Stan, BVOD and Domain), with strong cost performance in prior market downturns, and an attractive valuation entry point given recent share price weakness.

Super Retail Group Ltd (ASX: SUL)

A third ASX 300 stock that Goldman Sachs has just rated as a buy is this diversified retailer. In response to its third-quarter update, the broker has retained its buy rating and lifted its price target to $14.90.

Goldman is positive on Super Retail due largely to its loyalty program, which it feels is a meaningful competitive advantage. It said:

We believe that the company’s positive trading update continues to display resilience that is built upon its competitive advantage of high loyalty (~10m active members accounting for >70% of sales) and this will be further bolstered in 2H23 as the company launches the Rebel loyalty program and continues to build personalisation capabilities.

The post 3 ASX 300 stocks Goldman Sachs has just put buy ratings on appeared first on The Motley Fool Australia.

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More reading

• Why CogState, Jumbo, Magellan, and St Barbara shares are rising today
• Why Genesis Minerals, NAB, oOh!Media, and Super Retail shares are sinking today
• Brokers say buy these ASX dividend stocks for their big fully franked yields
• Why Flight Centre, Jumbo, Pilbara Minerals, and Ramelius shares are charging higher
• Why Citi says these ASX 200 dividend shares are 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 positions in and has recommended Jumbo Interactive and Super Retail Group. The Motley Fool Australia has positions in and has recommended Super Retail Group. The Motley Fool Australia has recommended Jumbo Interactive and Nine Entertainment. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It’s been a relatively tough week for Telstra Group Ltd (ASX: TLS) shares so far. Telstra closed out last week at $4.38 a share, before building on that during Monday’s trading with a new 52-week high of $4.40.

But the rest of the week has told a different story. Tuesday’s trading saw the Telstra share price lose a nasty 2.28%. The ASX 200 telco has recovered somewhat over Wednesday and Thursday’s sessions and closed trading yesterday at $4.33.

But the hard numbers don’t lie – Telstra has gone backwards this week.

This is quite a change of pace for Telstra. The company has had a strong year so far, almost tripling the returns of the S&P/ASX 200 Index (ASX: XJO) with its year-to-date gain of 9.6%. Telstra shares have also booked quite a few new 52-week highs over the past couple of months too:

So the value investors out there might be asking if this pullback for Telstra shares is a good chance to jump in.

Well, let’s see what some of the ASX’s top brokers have to say about that.

Are Telstra shares a buy after this week’s slump?

First up is Macquarie. As we covered last month, Macquarie currently rates Telstra shares as outperform. This broker has given the ASX 200 telco a 12-month share price target of $4.68. It is expecting Telstra to continue to outperform expectations when it comes to earnings over the next few years after the company’s recent mobile price hikes.

That’s one notch on the belt.

But another ASX broker in Goldman Sachs is also positive on Telstra. This expert rates Telstra shares as a buy, with an even better share price target of $4.70. Goldman is also eyeing off Telstra’s ability to generate strong earnings down the road, together with higher dividends.

Finally, let’s go over the views of yet another broker in Morgans. As we covered last month, Morgans is our third ASX broker to recommend Telstra. It currently has an add rating on the telco, and shares Goldman’s $4.70 price target.

Morgans reckons the Telstra share price is sporting an attractive valuation, and anticipates further value if the company proceeds with asset divestment.

So that’s three out of three brokers that are currently recommending Telstra shares for investors today. No doubt Telstra shareholders will be exceptionally pleased with that outcome.

At Telstra shares’ current pricing, this ASX 200 telco has a market capitalisation of $50.03 billion, with a dividend yield of 3.93%.

 

The post Should I buy this week’s slump on Telstra shares? appeared first on The Motley Fool Australia.

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More reading

• My 5-step plan to achieving $500 in monthly passive income
• 5 things to watch on the ASX 200 on Wednesday
• Here are the 3 most heavily traded ASX 200 shares on Monday
• Dalio says US and China ‘on brink of war’. Which ASX shares could be impacted?
• These ASX 200 shares could be top options for your retirement portfolio: experts

Motley Fool contributor Sebastian Bowen has positions in Telstra Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has positions in and has recommended Macquarie Group and Telstra 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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Some S&P/ASX 300 Index (ASX: XKO) retail shares facing an uncertain time. Households are facing painful inflation and elevated interest rates. This could be difficult for a number of retailers if households spend less.

Plenty of businesses saw excellent retail conditions during COVID as households had more savings and fewer other places where they could spend their discretionary money.

However, now that the RBA has ramped up the cash rate to lower economic demand in the Australian economy, retailers may see subdued conditions.

But, according to Australian Financial Review reporting on comments from Josh Clark, portfolio manager of QVG Capital’s long short fund, there are a few pockets of the retail industry that could keep performing.

Pockets of strength

Clark is cautious about housing-related retailers, asking the question “how many couches, cushions and coffee machines can you fit in your house?”. There are certainly a few ASX shares that specialise in those sorts of products.

But, while he believes that cost of living pressures make it “inevitable” that spending will slow, the economy is “only just starting to see evidence of consumer softness from early this year”.

Clark acknowledged that the portfolio he manages has minimal exposure to the consumer sector, but he does like the look of retailers who are focused on younger shoppers.

He pointed out that customers aged between 18 to 25 years old are “reaping the benefits of low unemployment without the headwinds of higher mortgage rates.”

There was one ASX share in particular that he called out with this younger demographic angle in mind – Lovisa Holdings Ltd (ASX: LOV).

What does Lovisa do?

Lovisa is an affordable jewellery retailer. It has a strong market presence in Australia, with 163 stores.

However, the company is rapidly growing in a number of different markets. In the first half of FY22, it had 81 USA stores and by the first half of FY23, it had 155 stores.

The business has only recently entered a number of regions that I think offer compelling growth potential including Italy, Poland, Hong Kong, Romania, Canada, Mexico and South America.

Some day, the business may decide to enter the huge population markets of mainland China and India.

In the first half of FY23, it saw net profit after tax (NPAT) grow by 31.9%. In the second half of FY23, it had opened 31 net new stores by the time it announced its HY23 result.

The ASX 300 retail share is expecting to deliver growth in “existing and new markets, and expect rollout momentum to increase going forward.”

Any other ASX retail share ideas?

While Lovisa was the only one that he named, there are a few other retailers that are aimed at younger shoppers that could perform better.

Shoe retailer Accent Group Ltd (ASX: AX1) has a number of brands that are targeted at younger shoppers such as Glue Store and Beyond Her.

Universal Store Holdings Ltd (ASX: UNI) owns three different brands that are “premium youth fashion brands” – Universal Store, THRILLS and Perfect Stranger.

So, it could be worthwhile to look more into these ASX retail shares.

The post Why these ASX 300 retail shares could be immune to rising interest rates appeared first on The Motley Fool Australia.

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More reading

• Buy 16,900 shares in this top ASX dividend stock for $400 per month in passive income
• Expect big yields from these buy-rated ASX dividend stocks: brokers
• ‘Under the radar success’: 3 quality ASX 200 growth shares to buy right now
• Top ASX shares to buy in May 2023
• These ASX dividend shares have big yields

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Lovisa. The Motley Fool Australia has recommended Accent Group 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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Flight Centre Travel Group Ltd (ASX: FLT) shares could be great value right now.

That’s the view of analysts at Morgans, which have just upgraded the travel agent giant’s shares following the release of its quarterly update.

Flight Centre share price tipped to soar

According to the note, the broker has upgraded Flight Centre’s shares to an add rating with a significantly improved price target of $26.25.

Based on the current Flight Centre share price of $21.05, this implies potential upside of 25% for investors over the next 12 months.

In addition, the broker is expecting the company to be in a position to resume paying dividends in FY 2024. It has pencilled in a 50 cents per share dividend that year, followed by an 88 cents per share dividend in FY 2025.

This will mean dividend yields of 2.4% and 4.2%, respectively, for investors in those financial years.

Why is Morgans bullish?

There were a couple of reason why Morgans has upgraded its rating and valuation of the Flight Centre share price.

One was the strong trading update it released which has led to the broker lifting its earnings estimates through to FY 2025. The other is a change in its valuation model to a sum of the parts (SOTP) methodology, which it feels is now a more appropriate way to value its shares. Morgans explained:

Given FLT’s stronger FY23 EBITDA guidance and it bringing forward its FY25 margin target, we have upgraded our EBITDA forecasts by 2.8%/4.3%14.2% in FY23/24/25. Our new FY25 EBITDA forecast of A$295.5m is slightly ahead of the top end of FLT’s guidance range as we think it will prove to be conservative and wouldn’t be surprised if it was upgraded following its key trading period.

Given the company’s operating and financial leverage, the upgrades at the NPAT level are greater. Our forecasts are now well ahead of consensus estimates. To better account for FLT’s different business units and compare it to peers, we now value the company using a SOTP methodology. Our SOTP is A$26.26 per share.

The post Why this broker just upgraded Flight Centre shares to a buy rating appeared first on The Motley Fool Australia.

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More reading

• 4 ASX 200 shares just upgraded by brokers
• How did the Flight Centre share price manage to flog the ASX 200 in April?
• Here are the top 10 ASX 200 shares today
• Why Flight Centre, Jumbo, Pilbara Minerals, and Ramelius shares are charging higher
• Flight Centre share price lifts following record, $1 billion month

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 Flight Centre Travel 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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Investors hoping to earn some handy passive income on the side could take a look at ASX 200 bank shares.

Two ASX 200 bank shares that could provide monthly passive income are Commonwealth Bank of Australia (ASX: CBA) and National Australia Bank Ltd (ASX: NAB). In fact, these two have already announced interim dividends for FY23.

ANZ Group Holdings Ltd (ASX: ANZ) is due to report its financial results today, while Westpac Banking Corporation (ASX: WBC) is due to report next week.

Let’s take a look at how I could receive $200 monthly income with Commonwealth Bank and NAB shares.

Could I receive $200 monthly income from CBA and NAB?

Firstly, it’s worth noting the calculations I am looking at reflect dividend payments announced in the last year. Of course, the dividends for these ASX 200 bank shares could change in the future.

Secondly, a $200 monthly income equates to $2,400 in annual income.

Taking a look at Commonwealth Bank of Australia, the biggest of the big four paid an interim dividend of $2.10 in the first half of this year. This followed a $2.10 final dividend in the second half of 2022.

This equates to $4.20 in dividend payments from the CBA overall in the year.

The bank’s share price dropped 7% in the last year and last closed at $95.76.

Based on CBA’s latest share price, this represents a trailing dividend yield of about 4.4%.

Let’s now take a look at the NAB dividend. NAB yesterday announced an interim dividend to shareholders of 83 cents per share fully franked. This will be paid on 5 July 2023.

NAB paid a 78 cents per share final dividend in the second half of last year.

In total, this means NAB is paying $1.61 worth of dividends to investors in a year.

National Australia Bank shares fell 6.41% on Thursday following the release of the company’s results and closed at $26.72 each. NAB shares have fallen nearly 18% in a year.

However, based on Thursday’s closing price, NAB’s dividend yield is 6%.

What would I need to invest to get $200 a month?

If I invest the same amount in both NAB and CBA shares, my average dividend yield would be 5.2%.

So, to generate $200 a month (or $2,400 a year) in passive income with a 5.2% average dividend yield, I would need to invest $46,153.85 in these two shares overall.

Another approach would be to invest $3,846 a month for the next 12 months in these two ASX bank shares.

The post Here’s how I’d aim for $200 a month in passive income using ASX 200 bank shares appeared first on The Motley Fool Australia.

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More reading

• Is the NAB share price in the buy zone after crashing?
• 5 things to watch on the ASX 200 on Friday
• Here are the 3 most heavily traded ASX 200 shares on Thursday
• Why Genesis Minerals, NAB, oOh!Media, and Super Retail shares are sinking today
• Everything you need to know about the NAB dividend

Motley Fool contributor Monica O’Shea 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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Long-term buy-and-hold investing is straightforward in theory but in practice, it can be testing for even the most disciplined investors.

That’s especially so in turbulent times for the market, such as the past 18 months.

After all, it’s only human nature to feel disappointed when they see one of their ASX shares fall off a cliff in any given month.

QVG analysts recently saw this happen to two stocks in their Long Short Fund, but explained why investors need to look past the calamity:

Recent troubles don’t change ‘long-term outlook’

The Imdex Limited (ASX: IMD) share price has plunged almost 10% since 30 March. It’s a 20% fall if you go back to 23 January.

The QVG team attributed this to the fortunes of Imdex’s clientele.

“It appears their clients (miners & drillers) have had a slow start to the year.”

But with revenue, operating income, and cash holdings consistently growing, the analysts are backing Imdex shares to rise in the long run.

“We don’t see [the current slowdown] as changing the long-term outlook for the business.”

QVG is not the only one who thinks this.

According to CMC Markets, seven out of eight analysts currently rate Imdex shares as a buy.

The Motley Fool’s Mitchell Lawler last month rated the stock as his top pick, on the back of recent acquisitions.

“I believe the addition of Devico sweetens the investment case for Imdex, adding a higher earnings before interest, taxes, depreciation and amortisation (EBITDA) margin business and cementing the company’s global position in the sensor and directional drilling tech markets.”

Production hiccup is just temporary

It’s been an ugly 2023 for Mineral Resources Ltd (ASX: MIN), with its share price sinking 28% since 24 January.

April was especially distressing for the mining service provider.

“Mineral Resources… saw their share price decline 9% for the month as their lithium production expansion delivered less tonnes than expected and at a higher cost.”

The recent drop in lithium prices isn’t helping either.

And of course, the prospects of recession or an economic slowdown always hits the resources industry hard.

QVG analysts are keeping the faith with a long-term horizon.

“We believe the mining services volume dip and production ramp at Mt Marion are temporary in nature.”

The team at Morgans is also a fan of Mineral Resources’ long-term prospects.

Based on the Thursday trading price of $69.05, Morgans’ $103 price target implies an amazing upside of 49%. 

“But it gets better!” reported The Motley Fool’s James Mickleboro.

“The broker is also forecasting a $5.79 per share fully franked dividend in FY 2024. This represents a [sizable] 8% forward dividend yield for investors that buy shares at today’s price.”

The post Keep the faith: 2 ASX shares to buy now at a temporary dip appeared first on The Motley Fool Australia.

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• 2 ASX 200 lithium shares to buy for $100 monthly passive income each
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• ASX lithium shares: Short-term pain for long-term gain?
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Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Imdex. The Motley Fool Australia has positions in and has recommended Imdex. 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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Small-cap ASX shares were thoroughly demolished in the past 18 months, but there are now some green shoots showing up.

In a memo to clients, the team at QVG Capital Long Short Fund named three such stocks that have rocketed in recent times, which it is still backing for further gains:

‘High energy, entrepreneurial culture’

Mader Group Ltd (ASX: MAD) is an outsourcer for clients in the mining industry.

On the back of its latest numbers, the stock has soared an eye-opening 37% year to date.

“Their update showed revenues up 59% and was particularly pleasing given their March quarter is typically seasonally weak.”

There are two reasons why the QVG analysts reckon Mader shares are set for further rises.

“Firstly, their customer is paying a discount to what an OEM would charge and only a small premium to what it would cost to do it ‘in house’,” read the memo.

“Considering the additional quality and flexibility this means good value for the customer.”

The other tailwind is that, despite it now having a $1 billion market capitalisation, Mader has maintained a “high energy, entrepreneurial culture” first established by founder and chair Luke Mader.

“A highly incentivised and fast paced team is exactly what’s required to expand successfully into new markets, as is Mader’s strategy.”

73% gain already this year

Dental centre network Pacific Smiles Group Ltd (ASX: PSQ) has seen its share price take off 28% over the past three weeks.

The QVG team noted that the company last month reaffirmed its earnings guidance.

“When people talk about stocks being cheap on a price-to-earnings or PE ratio, we remind ourselves this is only true if you use the right ‘E’,” read the memo.

“This update confirms that trading has improved and removes uncertainty around the ‘E’.” 

Mader and Pacific Smiles have done pretty well in 2023, but they are not even in the same ballpark as Duratec Ltd (ASX: DUR).

The share price for the infrastructure maintenance contractor has gained a spectacular 73% since the start of the year.

The QVG note mentioned that in April the company boosted its earnings guidance by 12%.

“The rate of contract wins, the performance of their recent acquisition WPF and the absence of problem projects underpins Duratec’s guidance and outlook.”

The conservative nature of the projects Duratec’s management takes on is a big bonus for QVG analysts.

“We are only aware of a few problem projects in their history, which is testament to their internal controls and the nature of the jobs and customers they’re willing to take on.”

The post ‘Revenues up 59%’: 3 small-cap ASX shares rocketing right now (and set for more gains) appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Mader Group. The Motley Fool Australia has positions in and has recommended Mader 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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The Qantas Airways Ltd (ASX: QAN) share price closed down 2.5% on Thursday.

Shares in the S&P/ASX 200 Index (ASX: XJO) airline stock finished the day trading for $6.35 apiece.

But even with that retrace, the Qantas share price continues to outperform the ASX 200 in 2023, up 7% compared to a 4% gain posted by the benchmark index.

The flying kangaroo has been buoyed by a rebound in travel demand, fuelled by pent up demand following years of pandemic  border closures.

ASX 200 investors have also been attracted by the company’s recently reported strong half-year results.

Qantas revenue over the six months surged 222% year on year to $9.9 billion. The airline also returned to profit, reporting a net profit of $1.4 billion. That helped to reduce net debt by $2.4 billion.

But could the Qantas share price be in for some headwinds amid massive planned expenditures to renew its ageing fleet of aircraft?

299 new airplanes over the next decade

According to UBS the average age of Qantas airplanes has reached 13.6 years. Meaning a lot of the aircraft are due for renewal.

Qantas expects to purchase 299 new airplanes over the coming decade. And UBS puts a price tag of just over $12 billion on the renewal plan over the next five years.

That’s no chump change.

And it has some analysts wondering if the Qantas share price could come under pressure if the company can no longer fund share buybacks or return to dividend payments, which have been suspended since 2020.

Newly appointed CEO Vanessa Hudson expressed confidence the airline can do both.

According to Hudson (courtesy of The Australian Financial Review), “Not only can we afford the capital expenditure that is coming, but we can also continue to reward our shareholders through the cycle.”

Managing director at White Funds Management Angus Gluskie pointed to the potential for increased risk for the Qantas share price down the road.

According to Gluskie (quoted by the AFR):

Any large capital expenditure program like that increases the risk into the future. As they embark on that program, they are running the risks that if there is a downturn in the market they may have over committed and lose any flexibility in being able to adjust.

However, he noted this as a “normal business risk”, adding that the new airplanes would improve the airline’s product line.

Citi analyst Samuel Seow said he expects Qantas should be able to fund its new aircraft while still engaging in buybacks and potentially returning to dividend payouts.

According to Seow:

While the cost of the renewal is material, at the end of the day, Qantas can flex the order to align with earnings. In particular, the airline has the ability to scale up or down the number of planes it receives per year and spread the renewal over an extended timeframe.

Additionally, the majority of the cash is only required to be paid on delivery of the plane, and terms were agreed before the rise in narrow body prices.

Qantas share price snapshot

The Qantas share price is up 12% over the past 12 months, handily beating the 2% loss posted by the ASX 200 over that same time.

The post Is the Qantas share price at risk over the airline’s $12 billion renewal plans? appeared first on The Motley Fool Australia.

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More reading

• Why did the Qantas share price struggle in April?
• Here’s what this broker is saying about the Qantas share price
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• How might Qantas shares perform under Vanessa Hudson?
• Brokers name 3 ASX 200 blue chip shares to buy

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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