One fund manager has picked out 3 shares that he believes will become the next Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG) or Amazon.com Inc (NASDAQ: AMZN).

Holon Global Investments portfolio manager Heath Behnke reckons investing in digital infrastructure, innovative digital products and new payment fintech is the way to “future proof” an investor’s holdings.

“People mistakenly think that our products and solutions are tech funds,” he told Livewire.

“We don’t invest in tech companies. We invest in companies that embrace technology, so we look for great global business models, fueled by innovation.”

Next generation of ‘mega-caps’

The inclusion of “mega-caps” Google, Amazon, Alibaba Group Holding Ltd (NYSE: BABA) and Tencent Holdings Ltd (HKG: 0700) in a portfolio is “obvious” to Behnke.

“They have a spot in any modern portfolio because their balance sheets are bulletproof.”

But he has also highlighted 3 companies that he’s tipped to become the next generation of mega-cap companies.

Behnke believes these businesses have huge potential but their prospects can’t be analysed with a simple formula.

“The ones that don’t ‘fit’ a PE ratio — like Megaport Ltd (ASX: MP1), Roku Inc (NASDAQ: ROKU) or Tesla Inc (NASDAQ: TSLA) — that have all the hallmarks of exponential growth and are universal in nature.”

Megaport shares were up 1.59% on Monday to close at $13.40. The Tesla stock price rose 3.16% on Monday morning Australia time, to finish the trading session at US$589.74.

Roku shares were up 2.05% to close Monday morning at US$315.95.

Sitting on the sidelines is more risky than embracing change

According to Behnke, wealth creation is triggered these days through “innovation and disruptive new business models” — not “embracing safety and the status quo”.

“How well did failing to embrace change go for Eastman Kodak Company (NYSE: KODK)?” he said.

“It’s critical investors and those who manage investors’ money to get comfortable with change.”

The fund manager also picked out MicroStrategy Incorporated (NASDAQ: MSTR) as an intriguing buy at the moment.

The software company’s core business hasn’t been exciting the last few years. But recently it has become famous for investing its cash reserves into  Bitcoin (CRYPTO: BTC).

“NASDAQ-listed MicroStrategy is also a good investment and one of the best Bitcoin proxies for Australian investors,” said Behnke.

“With central banks debasing currencies and the risk of rampant inflation increasing, we are strong believers in Bitcoin’s value proposition as a store of wealth.”

More reading

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• Why these 3 experts aren’t worried about the tumbling Bitcoin price
• Bitcoin suffers largest correction since March 2020
• What’s happening with the Bigtincan (ASX:BTH) share price?
• Why I’m loving this ASX bank share at the moment: fundie

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Tony Yoo owns shares of Alphabet (A shares) and Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alibaba Group Holding Ltd., Alphabet (A shares), Alphabet (C shares), Amazon, Bitcoin, MEGAPORT FPO, Roku, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends MicroStrategy and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, and MEGAPORT 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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Goldman Sachs has been busy looking through the banking sector following the recent release of updates.

Overall, the broker was pleased with what it saw and believes things will continue to improve in the near term.

What did Goldman say?

Goldman commented: “1H21 reported PPOP/cash earnings were up 14%/108% on pcp. Into 2H21E, we believe that lower funding costs should largely offset the pressures on NIMs from competition and lower rates. On volumes, we expect system housing loan growth to continue to recover to >5% and business lending to pick up slightly. We continue to see costs as a key determinant of relative sector performance, and while all banks are now focused on reducing their absolute cost bases, each bank is at different stages in reaching this goal. Finally, capital returns are likely to become a feature of bank TSR in 2H21.”

The broker now believes it is onwards and upwards for pre-operating provision profit (PPOP) growth in the sector. It is also positive on returns and bad and doubtful debts.

It explained: “Having fallen by >20% over the last five years, we now forecast sector PPOP RoRWA (the key determinant of sector valuation, in our view) to rise over the next three years, supported by improving productivity.”

Goldman believes this, combined with cost cutting, potential provision releases, and capital management, means the banks are trading at an unnecessary discount to their industrials peers.

“Coupled with i) the potential for further efficiency benefits if banks reach their stated cost targets, ii) the potential for further collective provision releases given the continued improvement in economic conditions, and iii) our capital forecasts indicating that the major banks potentially have between A$6.3 bn (ANZ) and A$11.1 bn (CBA) of surplus which should allow for capital returns, we think the 35% discount the banks are currently trading on versus the non-bank industrials (vs. 20% historical average discount) is too great and note our analysis of relative fundamentals can only explain about half of this relative PER deterioration,” it explained.

Which bank is Goldman’s top pick?

Goldman has named National Australia Bank Ltd (ASX: NAB) as its preferred sector exposure.

This is due to its cost management initiatives, which it notes are further progressed relative to peers and should drive productivity benefits sooner, its strong business banking position, and its robust capital position.

The broker has a conviction buy rating and $29.97 price target on the bank’s shares. Based on the current NAB share price of $26.05, this implies potential upside of 15% over the next 12 months. This stretches to approximately 20% if you include dividends.

More reading

• Is there more upside to the CBA (ASX:CBA) share price following recent results?
• Why I’m loving this ASX bank share at the moment: fundie
• ASX 200 Weekly Wrap: After record high, ASX dips on inflation fears
• Is the NAB share price a buy at $26?
• Why American Pacific Borates, NAB, Perenti, & Xero are tumbling lower

Motley Fool contributor James Mickleboro 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 Commonwealth Bank of Australia (ASX: CBA) share price is in the spotlight today.

This comes as CBA’s CEO Matt Comyn is set to join Adam Beavis – Amazon Web Services (AWS) Australia and New Zealand managing director – for the AWS Online Summit.

Comyn and Beavis will look at the expanding role that cloud computing and data is playing in digital banking.

Cloud computing’s expanding footprint

Commonwealth Bank is investing $1 billion in technology over the next 5 years. A tidy sum by any standards.

About half of that technology investment will go into risk, resilience, security and data privacy as the bank plans to move 95% of its computing to the public cloud over the coming 5–7 years.

According to Comyn, CBA’s foray into technology is far from new:

As a company with a rich history in technological innovation and leadership in Australia, Commonwealth Bank considers technology to have a fundamental role in support our customers. From developing the first mainframe in the 1960s, to rolling out Automatic Teller Machines (ATMs) in the 80s and going online for the first time in 1995, CBA has used technology to provide the best in digital banking services to our 7.5 million digitally-active customers.

This is a major opportunity but also represents a significant responsibility in ensuring that we deliver the most personalised and relevant experience to our customers.

CBA and AWS are working together to tailor the suite of products and services they provide via the cloud to their online customers.

Addressing the partnership, Beavis says:

Since 2012, AWS has been proud to support the CBA’s venture towards more digitally-focused banking and the effective use of data and analytics to provide the best customer service. It’s exciting to see how CBA is leveraging AWS to help empower them to modernise their infrastructure, meet rapidly changing consumer behaviours, and drive business growth, while supporting the most stringent security, compliance, and regulatory requirements.

Commsec counts as the first Commonwealth Bank business unit to migrate to AWS back in 2012. This helped enable CBA to quickly scale up Commsec during the height of COVID-19 last year when Commsec facilitated as many as 400,000 trades per day.

Commenting on the success of Commsec, Comyn says:

Ever since 2012, AWS has been working with us to move our workloads to the cloud and were instrumental in allowing us to scale up rapidly during peak trading periods for Commsec during COVID. As we look into the future, CBA is focused on getting more of our core workloads to the cloud and making sure that key applications are running natively on the AWS platform. AWS allows a stronger level of reliability and resilience as we move our workloads to the cloud.

In an age where even our printers and refrigerators communicate via the internet, the role of cloud computing in the business world looks set to keep on growing.

Commonwealth Bank share price snapshot

CBA shareholders have enjoyed a strong year, with shares in the big four banks up 67% over the past 12 months. That easily outpaces the 29% gain posted by the S&P/ASX 200 Index (ASX: XJO).

Year-to-date the Commonwealth Bank share price is up 17%.

More reading

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• Is there more upside to the CBA (ASX:CBA) share price following recent results?
• Why is the Telstra (ASX:TLS) share price falling today?

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The post-COVID recovery is being hampered by an international shortage in some items, but that could mean good news for some ASX shares.

According to T Rowe Price Australia equities head Randal Jenneke, this is due to extreme consumption patterns caused by the pandemic in the past 15 months.

“A sudden shift in consumption away from services like travel, into goods such as electronics for furniture, coupled with global supply chain disruptions has generated imbalances across many markets from commodities to semiconductors,” he said in a memo to investors.

“Copper hit an all-time high in April, and iron ore the highest level in a decade. There’s also [a] notable supply/demand imbalance in the property market.”

Semiconductor shortage sets a rocket under one ASX share

One supply imbalance that’s having a global impact is the shortage of semiconductors.

Semiconductors are materials that contribute towards computer chips. And with so many everyday items now computerised, everyone’s feeling the pinch.

“The semiconductor shortage has had significant impacts on the auto industry,” said Jenneke.

“With the US first-quarter earnings season underway, the largest automakers highlighted production constraints due to input shortages (chips), which in turn has eaten into profits.”

For the Australian market, this supply anomaly won’t be rectified until 2023, according to Jenneke.

And that’s excellent news for one ASX company.

“This… means delays for new vehicles and higher prices,” he said.

“For dealerships and marketplaces, including listed Eagers Automotive Ltd (ASX: APE), it means higher margins and a stronger outlook – the stock was our second largest contributor for the month.”

The Eagers share price was up 1.1% on Monday to close the day at $14.66. It was trading at just $5.43 one year ago.

Imbalances don’t equate to inflation

Supply imbalances are pushing prices up for many commodities and products.

But Jenneke warned that this doesn’t automatically lead to economy-wide inflation, which would trigger higher interest rates.

“The RBA actually assessed the implications of supply chain disruptions for local businesses in its May statement on Monetary Policy,” he said.

“It noted that ‘issues have generally been mild and/or temporary’ with only 10% of businesses experiencing severe supply chain issues. Moreover, the significant increases in freight costs experienced make up a small portion of total costs and that businesses have adapted to delays by changing order behaviour.”

He added that these findings matched up with the Reserve Bank governor’s comments that inflation would stay subdued in the medium-term with just temporary spikes.

“In turn, it supports their critical outlook for monetary policy to stay loose and rates to remain on hold over the coming years, which we believe should continue to be a large positive for domestic businesses and equity valuations.”

More reading

• The ASX shares poised to benefit from new spending in the 2021 federal budget
• Why the Eagers Automotive (ASX:APE) share price lifted today
• Why retailers are stepping up as top performing ASX shares this week
• Brokers think these shares can outperform the ASX 200
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Motley Fool contributor Tony Yoo 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 James Hardie Industries plc (ASX: JHX) share price will be on watch on Tuesday.

This follows the release of the building materials company’s fourth quarter update this morning.

How did James Hardie perform in the fourth quarter?

James Hardie finished FY 2021 in fine form, reporting strong sales and profit growth during the fourth quarter.

For the three months ended 31 March, the company reported a 20% increase in sales to US$807 million and a 44% jump in adjusted net income to US$124.9 million.

This led to its full year sales coming in 12% higher year on year at US$2,908.7 million, with adjusted net income rising 30% to US$458 million.

Growing even quicker was its operating cash flow, which rose 74% year on year to US$786.9 million for the 12 months.

What were the drivers of its growth?

All of the company’s businesses performed positively in the fourth quarter.

North America Fiber Cement segment sales increased 17% to US$555.3 million and adjusted EBIT rose 27% to US$152.9 million.

Whereas its Europe Building Products segment delivered a 12% lift in sales to 104.6 million euros and EBIT of 15.7 million euros.

Finally, the Asia Pacific Fiber Cement business delivered an 11% increase in sales to A$162.6 million and a 46% jump in EBIT to A$43.7 million.

Management commentary

James Hardie’s CEO, Dr. Jack Truong, commented: “I am proud of our globally integrated team’s ability to close out the fiscal year with a fourth quarter of exceptionally strong results. We have now delivered eight consecutive quarters of consistent profitable growth, including record financial results each of the past three quarters.”

“Our performance in fiscal year 2021 marked a significant step change across multiple facets of our Global Company that allowed us to deliver this consistent profitable growth on an expanding global scale. Over the past twelve months, we were able to accelerate our strategy: (i) to unlock capacity and increase efficiency in our global manufacturing network through LEAN initiatives, and (ii) to better integrate our supply chain with our customers, which collectively drove consistent market share gains in all three regions.”

Outlook

Management advised that the company is experiencing strong growth momentum in its businesses across all three regions. It also notes that residential and market growth in the USA is expected to continue.

In light of this, it expects FY 2022 adjusted net income to be between US$520 million and US$570 million. This will be a year on year increase of approximately 13.5% to 24.5%.

Furthermore, the company revealed that it is aiming to increase its margins and has provided the market with EBIT margin targets for each operating segment.

It is aiming to increase its North American EBIT margin to 25% in FY 2022 and then 30% in FY 2024. Whereas it is targeting Asia Pacific EBIT margins of 25% and then 30% and European EBIT margin expansion to 11% and then 16% over the same period.

More reading

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Motley Fool contributor James Mickleboro 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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Ask A Fund Manager

In part 1 of our interview, Pengana Capital senior fund manager Rhett Kessler told how he started a successful fund during the chaos of the global financial crisis. Now in part 2, he reveals the finance company that’s almost been a 30-bagger for his team.

Overrated and underrated shares

The Motley Fool: What’s your most underrated stock at the moment?

Rhett Kessler: In our portfolio, we’ve got a few – that’s why we own them. 

By underrated, you say ‘it deserves to trade at a much higher share price’. And so probably the most underrated one for us at the moment is one we are puzzling over – trying to work out what we’re missing – and that’s Super Retail Group Ltd (ASX: SUL).

The investment thesis is that it’s a well-managed, strong branded business, particularly Rebel and Supercheap Auto, which make up about 85 cents in the dollar. 

They have successfully built moats around their business through buying power, as well as an omnichannel retail capability that’s very strong. Thirdly, the company has no debt, that’s got net cash positive. And fourthly, we can buy on a roughly 10% after-tax cash earnings yield, which implies a barely double-digit PE [price-to-earnings] multiple.

We understand that they have benefited from the lockdowns and COVID-19, but the business continues to do good numbers. And we think even if they go backwards while they catch up to the trend, in terms of the top line, buying in on a 12 or 13 PE, which it quotes at 8% after-tax cash earnings yield, [with] no debt, is still a really compelling value proposition.

MF: When did you buy in?

RK: Before COVID. And one of the things we participated in quite heavily was the deeply discounted placement. It’s a place we deployed a lot of cash. 

MF: What do you think is the most overrated stock at the moment?

RK: We have quite a large collection of companies that we’d love to own, but think the multiples are just way too high for us. And that doesn’t mean that we think if they fell 10 or 15% or 20%, we could own them. It means that we can’t get close to the price, even if they fell 30% or 40%.

I’m always loathe to name them, but we watch them jealously – we think they’re great businesses run by competent management. They’re just nowhere close to the right price.

Our biggest concern is that, like with some of these cryptocurrencies, that when someone actually finally calls out that the emperor has no clothes, they’ll come tumbling down.

MF: Is there a sector that worries you in that regard?

RK: Yeah. This seems to be a bifurcation in the market. 

Companies that have a sexy story with a charismatic CEO that make no money and have had enough people to buy into the story. So that has given them a big cash file so that they can sell products that are worth a dollar for 80 cents. Which is problematic for us, right?

We’ve actually bought some puts because at the end of the day, if the proverbial does hit the fan, we think that people will push the liquidity button. And liquidity won’t only be in those stocks. It’ll [also] be in the other more robust companies that people are happy to own. 

So we think the market, together with very cheap money, is just being pushed up to levels that we’re concerned about.

MF: Do you think that scenario will come in the next 12 to 24 months or is it further down the track?

RK: I don’t want to avoid answering this question directly. We have two issues. The one is that this enormous amount of stimulus will turbocharge most businesses, probably around the world. Because not only is there a lot of liquidity around available for consumers and even businesses to spend, but more importantly, you earn absolutely nothing for holding it in cash.

You don’t get rewarded for holding it in cash, plus you actually probably get penalised because the cost of everything is going up – even though inflation is only at 1.8% or whatever. 

I don’t know if anyone’s tried to buy a domestic holiday, or a second-hand car, or a property, or pay their electricity bill, or buy insurance or school fees. Everything’s going up. 

So we think that the only safe place is hard assets that aren’t overvalued. Luckily there’s a bifurcated equity market.

MF: If the market closed tomorrow for 5 years, which stock would you want to hold?

RK: I have great aspirations for CSL Limited (ASX: CSL) on several levels. Not only have they’ve got a big cash cow in terms of their immunoglobulin business, but in addition, they’ve got a number of R&D projects that we think over 5 years, even if they only get half of them right, will create enormous value for shareholders.

I’m referring directly here to CSL112. You and I [will] definitely partake because it’s the first pipe cleaner to clean your arteries. And secondly, that their very big, but not well understood, transplant biotech business, which we think has got great promise. But that’s a nice, longer term pipeline of money-making businesses.

Looking back

MF: Which stock are you most proud of from a past purchase?

RK: Probably Credit Corp Group Limited (ASX: CCP). It’s been a remarkable winner for us. I remember turning up at a management meeting to try to understand the banks when I first started my fund. And I thought Credit Corp would be a good place to get some insights.

[I] discovered a business that was new management with a remarkably common sense turnaround strategy. And we were able to buy it at close to $1. It’s paid healthy dividends all along the way, and currently, it’s almost $30. 

It’s been a remarkable journey. We still hold – it’s still one of our larger positions.

MF: If you bought at $1, it might have even been one of your early ones when you started the fund?

RK: It was. 

That one and NIB Holdings Limited (ASX: NHF). The health insurance [company] was $1 with massive dividends and capital return. So, those two. 

Every year we have an event where we thank not only our investors but also the CEOs of the companies who’ve never lied to us and have just consistently delivered. And both Credit Corp and NIB have been on that list almost every year. 

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

RK: I can’t even remember their names anymore that I’ve struck from my memory. It’s been suppressed, so I won’t even name them. 

We really did get caught out with Spotless Group Holdings Ltd (ASX: SPO). We like to think that we understand and know management pretty well, but we certainly got caught out there.

When I went back and did a forensic on how we did, it was all in the provisions that we should have picked up. And yeah, we paid the price and ended up losing a bit of money.

MF: Were you still holding when it delisted from the ASX?

RK: No, they were actually bought out by Downer EDI Limited (ASX: DOW), I think. But that actually gave us a great opportunity to at least lick our wounds a little bit where there was a lot of talk from M&A, and the share price ran up quite strongly on the back of that. 

Still well below what we paid for it, don’t get me wrong.

More reading

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Tony Yoo owns shares of CSL Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Super Retail Group Limited. The Motley Fool Australia has recommended NIB Holdings 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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More reading

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• 2 buy-rated ASX dividend shares
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Kate O’Brien owns shares of Apple and Rio Tinto Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Apple. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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There are quite a few compelling reasons why the Brickworks Limited (ASX: BKW) share price looks like an interesting idea.

Brickworks is a building construction business that has been operating for many decades. It manufactures and sells bricks, pavers, roofing, precast and so on in Australia. In the US it has a sizeable brickmaking segment. 

There are a number of really good reasons to consider Brickworks shares:

Strong dividend record

For the income-seekers, Brickworks has produced a lot dividend income. Indeed, for over 40 years Brickworks has maintained or grown the dividend in every one of those years. There hasn’t been a single dividend cut in that time despite the recessions.

The Brickworks dividend is supported by its diversified asset base, including a large shareholding of Washington H Soul Pattinson and Co Ltd (ASX: SOL).

Dividends can form a sizeable part of the overall returns, particularly if the share market isn’t firing on all cylinders.

At the current Brickworks share price, it offers a grossed-up dividend yield of 4.2%.

Industrial property trust

One of the main segments of the Brickworks business is that it owns 50% of a high quality industrial property trust with its joint venture partner Goodman Group (ASX: GMG).

This property business is used to build industrial properties on excess land that Brickworks sells into the trust.

COVID-19 has accelerated the demand for industrial properties in light of the logistics and e-commerce demand.

It’s currently working on two huge warehouses that will have the latest technology in them. They will generate a lot more rent for the trust.

When those two projects are completed it should increase the capital value and profit.

There is still enough land for quite a few years of development and this can drive the net asset value of Brickworks higher during this development phase.

Brickworks share price and asset value

Brickworks has a lot of assets. When you add up all of the assets in the Australian building products business, the US building products business, the Soul Patts shares and the stake in the property trust, it comes to a number materially higher than the current Brickworks share price.

At the time of the Brickworks FY21 half year result, it said that its total inferred asset backing was $4.1 billion (including the $479 million of net debt). Per share, that equated to a value of $27. That means the current Brickworks share price is at a 24% discount compared to that inferred value from a few months ago.

More reading

• Forget Dogecoin! Here are 2 ASX dividend shares to buy for income today
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• ASX stock of the day: Brickworks (ASX:BKW) shares top the ASX 200
• Why Soul Patts (ASX:SOL) is such a strong ASX dividend share

Motley Fool contributor Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company 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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Are you building an income portfolio? If you are, you might want to take a look at these buy-rated ASX dividend shares.

Here’s what you need to know about them:

Transurban Group (ASX: TCL)

The first ASX dividend share to look at this toll road operator. Transurban is the company behind major roads such as CityLink in Melbourne and the Cross City Tunnel and Eastern Distributor in Sydney.

While the pandemic hit the company hard due to a significant reduction in mobility, traffic volumes are increasing now. For example, weekly traffic on its Melbourne roads was down just 12% on 2019’s levels in April.

And given the significant time-savings that its road offer, these volumes are expected to continue to rise as life returns to normal and our other (non-toll) roads get busier again.

Ord Minnett is a fan of Transurban and is forecasting a recovery in its dividends in the near future. The broker expects dividends of 37 cents per share in FY 2021 and 58 cents per share in FY 2022. Based on the current Transurban share price, this will mean yields of 2.6% and 4.1%, respectively.

The broker has a buy rating and $16.00 price target on its shares. 

Westpac Banking Corp (ASX: WBC)

Another ASX dividend share to consider is Westpac. This banking giant has been recovering very quickly from the pandemic.

For example, it recently released its half year results and revealed cash earnings of $3,537 million. This was a 256% increase over the prior corresponding period and a 119% lift over the second half of FY 2020.

Positively, with the banking sector’s outlook continuing to improve and Australia’s economic recovery remaining strong, the medium term looks very positive for the bank and its shareholders.

Morgan Stanley is positive on the company. It has an overweight rating and $29.20 price target on its shares. The broker is also expecting Westpac to pay fully franked dividends per share of $1.18 and $1.25 over the next two years.

Based on the latest Westpac share price, this will mean yields of 4.7% and 5%.

More reading

• Is there more upside to the CBA (ASX:CBA) share price following recent results?
• ASX 200 Weekly Wrap: After record high, ASX dips on inflation fears
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Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of Transurban Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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On Monday the S&P/ASX 200 Index (ASX: XJO) gave back the majority of its early gains to finish the day only slightly higher. The benchmark index rose 0.1% to 7,023.6 points.

Will the market be able to build on this on Tuesday? Here are five things to watch:

ASX 200 expected to rise

The Australian share market looks set to push higher on Tuesday despite a poor start to the week on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 16 points or 0.2% higher this morning. On Wall Street, the Dow Jones dropped 0.15%, the S&P 500 fell 0.25%, and the Nasdaq tumbled 0.4%.

Oil prices rise

Energy producers such as Beach Energy Ltd (ASX: BPT) and Woodside Petroleum Limited (ASX: WPL) could be on the rise today after oil prices pushed higher. According to Bloomberg, the WTI crude oil price is up 1.5% to US$66.35 a barrel and the Brent crude oil price has risen 1.2% to US$69.53 a barrel. Oil prices climbed on global economic recovery hopes.

EML Payments on watch

The EML Payments Ltd (ASX: EML) share price could return from its trading halt this morning. On Monday the payments company requested the halt pending an announcement in relation to significant regulatory concerns notified by the Central Bank of Ireland. These concerns relate to the Prepaid Financial Services business that EML acquired back in March 2020.

Gold price jumps

Gold miners Evolution Mining Ltd (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) could have a solid day after the gold price jumped overnight. According to CNBC, the spot gold price is up 1.55% to US$1,866.60 an ounce. Weakness in stocks and bond yields drove the gold price to a three-month high.

South32 given buy rating

On Monday South32 Ltd (ASX: S32) announced the divestment of its coal business. This went down well with the market and analysts. One of the latter was Goldman Sachs, which believes the move is transformational. In light of this, the broker has reaffirmed its conviction buy rating and $3.40 price target on the mining giant’s shares.

More reading

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• 3 ASX 200 gold mining shares that shone today
• These 3 ASX ETFs are some of the cheapest on the market
• Why is the Telstra (ASX:TLS) share price falling today?
• Is ASX 200 share market volatility always a buying opportunity?

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

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

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