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The S&P/ASX 200 Index (ASX: XJO) is having a fairly decent day of trading so far this Thursday. At present, the ASX 200 has put on a healthy 0.17%, which lifts the Index to back over 7,260 points. But one ASX 200 share isn’t joining in the fun. That would be Pilbara Minerals Ltd (ASX: PLS) shares. 

ASX 200 lithium stock Pilbara has decisively gone the other way today. At the time of writing, the lithium leader has shed a nasty 1.71% and is down to $4.03 a share. It was even worse earlier this morning too, with Piblara dipping as low as $3.96. That’s the lowest this company has been for over a month.

As my Fool colleague Bernd covered this morning, this share price fall is probably the result of Pilbara trading ex-dividend for its first-ever dividend payment to shareholders. But there are also some interesting rumours swirling around about a major investor possibly selling a massive parcel of shares.

As we discussed on Tuesday, rumours have surfaced that China-based Contemporary Amperex Technology (Hong Kong) Limited (CATL) has just sold off a major tranche of Pilbara shares.

CATL has been a Pilbara shareholder since 2019 when it was able to pick up a massive stake in Pilbara at 30 cents per share. CATL reportedly threw $55 million into Pilbara shares back then, worth around 8.5% of Pilbara’s entire market capitalisation at the time.

At today’s share price of $4.03, CATL would have made a return of over 1,240% based on its 30 cents per share entry point. Not bad for just four years of waiting.

Did a whale just sell $600 million of Pilbara shares?

But according to reporting in The Australian today, we can now put a figure on these CATL sale rumours. CATL reportedly might have sold up to $601 million worth of Pilbara shares. The article stated that “the block sale of Chinese battery giant [CATL]’s shareholders was undertaken by brokers, according to reports”.

This could indicate that CATL has sold the majority of its Pilbara stake. The report found that CATL held 207.5 million Pilbara shares on its books as of 14 September 2022. So if CATL has indeed offloaded $600 million worth of shares, it has cashed out around three-quarters of its entire Pilbara stake.

So with so many shares possibly up for sale, it’s perhaps no wonder that the PIlbaa share price has fallen by more than 10% over the past week or so:

The post Someone in China has just sold $600 million of Pilbara Minerals shares. Here’s what we know appeared first on The Motley Fool Australia.

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More reading

• Why is the Pilbara Minerals share price falling in a hole Thursday morning?
• 4 ASX 200 lithium shares to buy now: broker
• 5 things to watch on the ASX 200 on Thursday
• Investing in ASX 200 lithium stocks? Here’s why this 6% decline in China matters
• Here are the 3 most heavily traded ASX 200 shares on Wednesday

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 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 Zip Co Ltd (ASX: ZIP) share price tumbled 26.1% in February. 

Shares in the buy now, pay later (BNPL) company ended January trading for 69 cents apiece.

By the time the closing bell rang on 28 February, those same shares were changing hands for 51 cents.

So, why did the Zip share price come under so much selling pressure in February?

What headwinds did the ASX BNPL stock face?

It looks like the company was facing headwinds on three fronts this past month.

First, Zip shares found themselves amongst the top ten most shorted shares on the ASX for much of February. The ASX BNPL stock had a 7.4% short interest heading into the last week of the month.

Short interest alone won’t send a company’s share price lower. But high levels of short interest can be a signal of potential problems ahead. And this, in turn, can make other investors hesitant to buy shares.

Another headwind dragging on the Zip share price in February, along with most ASX BNPL stocks, came courtesy of the Australian Securities and Investments Commission (ASIC).

This followed ASIC’s announcement of its support for the most stringent of three new regulatory proposals facing the BNPL sector.

That proposal hasn’t been passed into law yet. But should it pass, Zip and other BNPL companies will be subject to essentially the same regulations as credit card companies.

This would include researching their customer’s financial situation before offering them interest free pay by instalment credit lines. And that could lead to fewer customers and lower revenue for the business.

Which brings us to the third headwind pressuring the Zip share price in February.

The company’s half-year earnings results.

While half-year revenue increased by 19% year on year to a record $351 million, Zip still reported a loss after tax of $243 million.

And in the new era of higher interest rates, investors are increasingly wary of investing in loss-making companies.

Zip share price snapshot

As you can see in the chart below, the Zip share price has struggled to hold onto any shorter-term gains, leaving the stock down 74% over the past 12 months.

The post Why did the Zip share price crash 26% in February? appeared first on The Motley Fool Australia.

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More reading

• Why is Choice gunning for ASX BNPL companies like Zip?
• Are Zip shares finally cheap enough to buy following last week’s 12% dive?
• Here are the 10 most shorted ASX shares this week
• Is Block one-upping Zip shares with its double-digit growth?
• Why Platinum, Qantas, Red 5, and Zip shares are dropping today

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 Zip Co. 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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It’s looking like the S&P/ASX 200 Index (ASX: XJO) is on track to post something of a recovery so far this Thursday. After a pretty rough week, the ASX 200 has gained a healthy 0.21% so far today. But let’s talk about the Woolworths Group Ltd (ASX: WOW) share price.

Woolworths shares seemingly didn’t get an invite to this ASX 200 party. While the Index is healthily in the green today, Woolworths shares are nursing a fairly hefty loss. The supermarket giant ended yesterday at $36.77 a share.

But today, Woolies shares are trading at $36.04 at the time of writing. That’s a good 1.99% below where this blue-chip share finished up at yesterday.

So why does it look like investors are singling out Woolworths shares for punishment this Thursday?

Well, they’re not really. See, Woolworths shares are falling today because this ASX blue chip has just traded ex-dividend.

Last month, Woolworths revealed its latest earnings report to investors, covering the six months to 31 December 2022. As we covered at the time, these results were well-received by the market. Woolworths reported sales growth of 4% to $33.17 billion.

The company’s earnings before interest and tax (EBIT) rose by an even larger 18.4% to $1.64 billion, while net profit after tax (NPAT) was up 14% to $907 million.

This enabled Woolworths to declare a fully franked interim dividend of 46 cents per share for the half. That was a pleasing rise of 17.9% over last year’s interim dividend of 39 cents per share.

Woolworths share price falls as company trades ex-dividend

But, as we warned on Tuesday, eligibility for receiving this dividend is now closed for new investors. That’s because Woolworths has just traded ex-dividend. When a share goes ex-dividend, it cuts off new investors from receiving an upcoming dividend.

Any shareholder who owned Woolworths shares as of yesterday’s close will be receiving this latest 46 cents per share dividend. But any investors who buy Woolies today onwards will not be seeing this next paycheque from the company.

As such, we have just seen Woolworths share become nominally less valuable, reflecting this dividend getting cut off. So it’s no surprise to see the Woolworths share price retreat today, demonstrating this fall in value. This is typically what we see when an ASX share trades ex-dividend.

Eligible Woolworths investors can now look forward to receiving this latest dividend next month on 13 April.

In the meantime, the Woolworths share price right now gives this ASX 200 blue chip share a dividend yield of 2.75%.

The post Why is the Woolworths share price sliding lower today? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Thursday
• Here are the top 10 ASX 200 shares today
• Own Telstra shares? Here’s how the ASX 200 telco is raising $650 million
• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• ASX 200 leaps higher on latest GDP and inflation news

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 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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Commonwealth Bank of Australia (ASX: CBA) shares are a popular way to generate dividend income. But, I think there are better S&P/ASX 200 Index (ASX: XJO) dividend shares to consider, like Telstra Group Ltd (ASX: TLS) shares.

CBA is one of the best banks in Australia. However, it is not immune to the impacts of competition.

For a long time, I’ve thought that lenders essentially offer a commoditised product – there are loads of lenders for borrowers to choose from. Each of them can offer a loan. A lower interest rate on that loan could win a borrower, but it lowers profitability.

If numerous lenders are offering large cash backs or cheaper interest rates, then banks have to compete if they want to retain and win customers.

This dynamic is apparently happening in the Australian loan market right now. The CBA boss confirmed that in his comments after delivering the CBA’s half-year result.

While the short-term profits of CBA are up, I’m not sure how the next 12 months and beyond will develop. Lending margins may not go up as much as previously expected, while it seems almost inevitable to me that arrears and bad debts are going to increase from the very low-level today after all of the interest rate rises.

Hence, there are better ASX 200 share options for dividends in my opinion, such as Telstra.

Growth has returned

In the FY23 half-year result, it reported that total income went up 6.4% to $11.6 billion, underlying earnings before interest, tax, depreciation and amortisation (EBITDA) climbed 11.4% to $3.9 billion and earnings per share (EPS) soared 27.1% to 7.5 cents.

The profit growth enabled interim dividend growth of 6.3% to 8.5 cents per share.

While CBA also reported profit growth, I think Telstra has a much stronger market position in Australia. Telstra says that it has the largest 5G network, with its 5G population coverage reaching over 81% of the population and it’s “on track” for its FY23 target of 85%.

The ASX 200 dividend share said that it’s currently leading the majority of key mobile and fixed network surveys for coverage and speed.

I like Telstra’s future

I think this strength bodes very well for the future. For starters, Telstra has felt empowered to increase mobile prices in line with inflation. That provides a very useful organic boost to revenue.

Telstra experienced a 4.5% increase in mobile postpaid handheld average revenue per user (ARPU) in the first half of FY23.

I’m also excited about what 5G could mean in the longer term. Telstra has lost a lot of margin and earnings from the shift to the NBN. But, if Telstra is able to offer households a 5G-powered wireless home internet option that’s similar, or better, than the NBN connection then it could lead to a much higher margin on that household for Telstra.

Telstra is expecting solid EPS growth in the next few years, which could fund more dividend growth for the ASX 200 dividend share.

Commsec numbers suggest that Telstra could be paying an annual dividend per share of 19 cents by FY25. That would be a grossed-up dividend yield of 6.7%.

Telstra share price snapshot

Since the start of 2023, Telstra shares have risen 2%.

The post An ASX 200 dividend heavyweight I’d buy over CBA shares right now appeared first on The Motley Fool Australia.

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More reading

• Own Telstra shares? Here’s how the ASX 200 telco is raising $650 million
• Looking to buy Telstra shares? Boss reveals ‘profound opportunity’ for growth
• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• Why Brainchip, Cooper Energy, Link, and Telstra shares are dropping today
• Why is the Telstra share price sliding lower on Wednesday?

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 no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended 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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The South32 Ltd (ASX: S32) share price is having a very strong session.

At the time of writing, the mining giant’s shares are up over 5% to $4.72.

Why is the South32 share price charging higher?

Investors have been scrambling to buy this miner’s shares following a strong night for commodity prices.

According to CommSec, base metal prices climbed on Wednesday after data from China showed that manufacturing activity rose at the fastest pace in more than a decade in February.

Given that China is the world’s biggest metals consumer, this has sparked hopes that demand could increase materially for metals. This sent the copper futures price up 1.7% and the aluminium futures price up 2.3%.

It isn’t just the South32 share price that is rising today. The S&P/ASX 200 Resources index is up a solid 2.3% currently, with BHP Group Ltd (ASX: BHP) and Rio Tinto Ltd (ASX: RIO) contributing strongly with gains of over 3%.

Can South32 shares keep rising?

The team at Morgans believes there’s plenty of room for the South32 share price to climb from here. Last month, its analysts put an add rating and $5.60 price target on its shares.

This implies potential upside of almost 19% for investors over the next 12 months.

The post Why is the South32 share price surging 5% on Thursday? appeared first on The Motley Fool Australia.

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More reading

• Want an income boost? Buy these ASX dividend shares: experts
• Why are ASX 200 mining shares ending the week in the red?
• Bought $1,000 of South32 shares in 2015? Here’s how much passive income you’ve made
• 2 excellent ASX 200 mining shares to buy now: experts
• Passive income watch: 3 ASX 200 shares that slashed their dividends this week

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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At face value, finding the best ASX dividend shares seems easy. You just do some research, find the companies with the highest dividend yields, and start making passive income. Easy, right?

Well, good dividend investing isn’t that simple. And in fact, following this ‘chasing yields’ path is probably a bad idea. Actually, it’s a horrendous idea – and one that will probably result in mediocre dividend income, while perhaps giving you some nice capital losses.

See, the dividend yields that we normally see quoted for ASX shares are a reflection of the dividends a company has paid out in the past, not what it will pay out in the future. Take what used to be a popular dividend share, AGL Energy Limited (ASX: AGL).

What does an ASX dividend trap look like?

In 2022, AGL paid out two dividends, one worth 16 cents per share, and one worth 10 cents per share. Using the AGL share price of $8.07 that the company ended 2022 at, those two dividends would have given AGL a dividend yield of 3.22%. That’s because 26 cents is 3.22% of $8.07.

Today, the AGL share price is going for $6.89 at the time of writing. That should in theory increase AGL’s dividend yield because 26 cents is 3.22% of $8.07, but 3.77% of $6.89. If AGL paid out the same 16 cents per share interim dividend in 2023 as it did in 2022, this would be true.

The problem is that last month, AGL announced its interim dividend would come in at 50% of 2022’s levels – yep, just 8 cents per share.

As such, AGL’s dividend yield is now 2.61%. So any investor who bought AGL shares a month or two ago expecting a dividend yield of 3.22% or 3.77% has now been caught in a classic dividend trap.

They’ve lost the yield they thought might be coming their way. And, they’ve had to endure AGL shares’ near-15% drop in value over 2023 thus far.

Everyone in the share market loves a good dividend. So when you see a company offering a dividend yield of 8, 9 or even 10%, it should tell you that investors are staying away for a reason.

Let’s take a high-yield example now.

WAM Capital Ltd (ASX: WAM) is a listed investment company on the ASX. It paid out two dividends last year, both worth 7.75 cents per share each. That’s an annual total of 15.5 cents per share, giving WAM Capital a whopping dividend yield of 9.2% right now.

So why isn’t everyone flocking to WAM Capital shares for that kind of return and thus increasing WAM Capital’s share price and reducing its yield down to a more normal level?

Well, investors are being put off by something.

High yield doesn’t mean high return

It might be this company’s performance track record. Even though this listed investment company (LIC) is yielding a massive figure right now, shareholders have only enjoyed a return of 3.7%, an average over the past three years (as of 31 January)

That means that capital losses have more than offset this high dividend yield. And that’s without accounting for WAM Capital’s 1% per annum management fee either.

Investors would have been far better off investing in an index fund than this company over the past three or five years. What’s more, as of 31 January, this company only had 14.7 cents per share in its profit reserve. Yet last year it paid out 15.5 cents per share in dividends.

So no wonder its dividend yield is so high – the market clearly has doubts over this company’s future performance potential.

Compare that to an ASX dividend share like Washington H. Soul Pattinson and Co Ltd (ASX: SOL). On the surface, Soul Patts’ current dividend yield of 2.8% doesn’t look that impressive. But this figure hides much.

It hides how Soul Patts has increased its dividend every single year since 2000, averaging an 8.5% increase per annum. It also hides that Soul Patts shareholders have enjoyed a total return of 12.5% per annum over the 20 years to December 2022.

Sometimes, a small dividend yield can be worth more than a big one. So don’t be deceived by the largest dividend yields on the ASX. Some, if not most, of them are too good to be true.

The post Don’t be deceived by ASX dividends appeared first on The Motley Fool Australia.

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More reading

• Should I target $1,000 of annual dividends by investing $10,000 today?
• 6 ASX 200 directors buying up their company shares in the past week
• Invest $1,500 each month in this ASX dividend stock to actually create a $1 million portfolio
• 6 asset-rich ASX 200 shares to buy for their takeover potential: expert
• Here’s why the AGL share price is dipping on Wednesday

Motley Fool contributor Sebastian Bowen has positions in Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended 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 Scott Phillips.

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Wouldn’t it be nice to grow your ASX share portfolio from $20,000 to $1 million?

Well, the good news is that this is entirely possible. All you need is time, patience, a portfolio of high-quality ASX 200 shares, and compounding.

How to turn $20k into $1 million with ASX 200 shares

Historically, the stock market has provided investors with an average annual return of approximately 10% per annum.

And while there is no guarantee that it will continue to generate returns of this nature in the future, if it were to do so, your single $20,000 investment would grow into $1 million after 41 years.

Maybe that’s too long for you? If it is, don’t worry. All you need to do is add to your portfolio each year and you’ll cut down the time it takes to reach your million-dollar target.

For example, if you were able to invest $20,000 each year, your portfolio would grow to our target value after 17 years.

Alternatively, starting with a $20,000 investment and then investing $10,000 into high-quality ASX 200 shares each year would get you to $1 million in 22 years if you averaged 10% per annum.

Which shares should you buy?

I would aim to buy quality over quantity and focus on building a portfolio filled with ASX 200 shares that have the following characteristics:

• Competitive advantages
• Fair valuations
• Strong long-term growth prospects
• Sizeable addressable markets
• Growing dividends

A few ASX shares that spring to mind immediately are gaming technology company Aristocrat Leisure Limited (ASX: ALL), hearing solutions specialist Cochlear Limited (ASX: COH), and sleep treatment company ResMed Inc (ASX: RMD).

Over the last decade, these ASX shares have generated average annual total returns of 26.7%, 13.4%, and 22.4%, respectively. And based on their qualities, I would not be surprised to see them beat the market over the next decade.

The post How I’d invest $20,000 in ASX 200 shares to aim for a million appeared first on The Motley Fool Australia.

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More reading

• Buy these 3 ASX growth shares this month: experts
• 3 incredible ASX 200 growth shares to buy: analysts
• $20k invested in these ASX shares 10 years ago is now worth over $100k
• Guess which ASX 200 share is giving another $500 million back to its shareholders
• Buy these ASX 200 growth shares: Goldman Sachs

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. 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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A little-known ASX mining share is setting the bar high today.

In morning trade, the All Ordinaries Index (ASX: XAO) is up a healthy 0.38%.

But this mining stock is leaving those gains in the dust.

Any guesses?

If you said Rox Resources Ltd (ASX: RXL), give yourself a gold star.

Rox Resources entered a trading halt on Friday pending today’s announcement.

The gold miner’s shares closed Thursday trading for 14.5 cents each. This morning, the Rox Resources share price shot as high as 23.5 cents, up a whopping 62%. At the time of writing, it remains up an impressive 48% at 21.5 cents a share.

Here’s what’s driving investor interest in the ASX mining share today.

ASX mining share rockets on bonanza gold strike

The Rox Resources share price is off to the races after the company reported some very promising initial drilling results. Those come from the reverse circulation (RC) and diamond drilling (DD) programs at its Youanmi Gold Project, located in Western Australia.

The announcement was made in conjunction with its joint venture partner, Venus Metals Corp Ltd (ASX: VMC). The Venus Metals share price is up 11% on the news.

The ASX mining shares reported that the first of a series of holes at Youanmi returned continuous bonanza grades in RC drilling.

The release highlights results of 28 metres at 34.81grams of gold per tonne from 204 metres including:

• 18m @ 51.96g/t from 207m, including;
• 10m@ 79.55g/t from 211m, including;
• 3m @ 138.07g/t from 218m

The miner said the results open up a new near-mine area for exploration and potential high-grade resource growth. With the true widths currently unconstrained, follow-up drilling is planned to determine the orientation and dip direction of the discovery.

Commenting on the initial drill results sending the ASX mining share soaring today, Rox Resources managing director Robert Ryan said:

Youanmi South is just 250 metres from the Youanmi main open pit, yet historical drilling was largely restricted to the weathered zone so true geology has been unconstrained.

The exceptional grade and continuous high-grade tenor of the intersection in an area previously untested by drilling is cause for cautious optimism whilst we determine orientation of the mineralised zone.

Rox Resources share price snapshot

With today’s big intraday leap factored in, the ASX mining share is up 19% in 2023. As you can see in the chart below, over the past 12 months the Rox Resources share price remains down 51%.

The post Guess which ASX mining share just leapt 62% on a ‘bonanza gold’ find appeared first on The Motley Fool Australia.

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More reading

• An insider just loaded up on Allkem shares: Should you buy into this lithium giant?
• With nothing in the bank, I’d use Warren Buffett’s method to build wealth
• What caused the A2 Milk share price to spill almost 6% in February?
• Why is the Pilbara Minerals share price falling in a hole Thursday morning?
• Why did the Woodside share price outperform the ASX 200 in February?

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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Allkem Ltd (ASX: AKE) shares are falling on Thursday.

In morning trade, the lithium miner’s shares are down 3% to $11.55.

That’s despite some potential positive news out of the miner.

Insider buys Allkem shares

With Allkem shares down by almost a third from their 52-week high of $16.75 amid concerns that lithium prices could soon tumble, one of the company’s directors appears to believe this has created a buying opportunity.

According to a change of director’s interest notice, Allkem’s non-executive chairman, Peter Coleman, has more than doubled his holding through a series of on-market purchases.

The notice reveals that Coleman picked up 17,054 shares across 24, 27, and 28 February at an average price of $11.6115 per share. This equates to a total consideration of just a touch under $200,000 and increases the chairman’s holding to 33,025 Allkem shares.

Is this a smart move?

The team at Goldman Sachs is likely to approve of this purchase.

At the end of last week, the broker responded to Allkem’s half-year results by retaining its buy rating with a slightly trimmed price target of $15.40. This implies potential upside of 33% for investors over the next 12 months.

It also means that those 17,054 shares that Coleman picked up in recent days would be worth approximately $262,000 if Allkem’s shares rose to that level. That’s over $60,000 more than the chairman’s investment.

Why Allkem?

Goldman explained that it is positive on Allkem even if lithium prices tumble for the following reason:

Allkem has one of the best production outlooks in our lithium coverage, with broad-based growth optionality, second only to Mineral Resources on an LCE basis when including downstream hydroxide production on an equity basis. This drives our forecast for the company’s equity LCE production growth of >4x by FY27E, supporting earnings rebounding to near current record levels despite the declining lithium price environment.

The post An insider just loaded up on Allkem shares: Should you buy into this lithium giant? appeared first on The Motley Fool Australia.

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More reading

• 4 ASX 200 lithium shares to buy now: broker
• Here are the top 10 ASX 200 shares today
• Why are ASX 200 mining shares leading the market today?
• Investing in ASX 200 lithium stocks? Here’s why this 6% decline in China matters
• Why Allkem, Argosy Minerals, Mayne Pharma, and NextDC shares are racing higher

Motley Fool contributor James Mickleboro has positions in Allkem. 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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Warren Buffett may be one of the world’s richest people, but anyone can replicate the billionaire’s investment strategy ­– even ASX investors starting from scratch.

Buffett has generously offered investing advice for decades. In the meantime, he’s amassed a US$106 billion fortune on the stock market.

Let’s take a look at a few of the billionaire’s key lessons I’d employ if I were to be starting out on my investment journey.

The best opportunity is often the one you understand

The decades gone by have brought many a market trend. Think, booming ASX tech shares seen amid the low-interest rate environment of the 2010s and the rise (and fall, and rise, and fall) of cryptocurrencies.

But rarely will you see Buffett getting on board with such developments. That’s because the ‘Oracle of Omaha’ aims to invest in what he knows, and what he knows alone.

It’s what he calls his “circle of competence”. He once said:

There are all kinds of things I’m not competent to value. There are a few that I am confident to value … I don’t have to make money in every game.  

The companies behind ASX shares are generally complex machines, often operating in even more complicated fields.

Thus, an investor who admits what they know and what they don’t and chooses to invest within that circle of competence may be best prepared to identify winning opportunities.

Look to the horizon

Pop culture often depicts investing in the stock market as a fast-paced, ride-or-die activity. Images of flashing red and green boards and hour-by-hour share price updates can perpetuate this myth.

But those focused on long-term wealth building generally have plenty of time to decide if an ASX share is a buy.  

Long-term investing is more often a game of quality. Buying shares in a quality business with a good management team and plenty of room for growth will likely help build wealth over the years and decades to come.

Indeed, Buffett spends plenty of time pondering, researching, and analysing a stock before buying in.

He also advises that an investor doesn’t need to buy every opportunity that comes their way. There’s no penalty for not snapping up the ‘next big stock’ whenever it comes around.

Don’t pay too much for a quality ASX share

The final piece of Buffett wisdom I’ll leave you with harks back to one of his most famous mantras:

It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.

Note, the billionaire’s criteria is a “fair” price. He doesn’t pay too much for a share, even if it’s in a “wonderful” company.

Indeed, buying an ASX share for more than its underlying value can be a sure way to stall long-term returns as there’s less room to realise growth.   

Further, Buffett told investors in 2014 that buying cheap stocks in fair businesses is “the wrong foundation on which to build a large and enduring enterprise”.

There are many ways to find out if a stock is trading cheap. Perhaps the simplest is its price-to-earnings ratio.

The post With nothing in the bank, I’d use Warren Buffett’s method to build wealth appeared first on The Motley Fool Australia.

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More reading

• What caused the A2 Milk share price to spill almost 6% in February?
• Why is the Pilbara Minerals share price falling in a hole Thursday morning?
• Why did the Woodside share price outperform the ASX 200 in February?
• Why is the Coles share price sinking today?
• 3 steps I’d take to unearth the best ASX shares to buy in March

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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