Tag: Motley Fool

The Liontown Resources Ltd (ASX: LTR) share price finished higher today, up 3.75% to $1.52.

But that’s nothing compared to the 70% bump that broker Macquarie is tipping for the next 12 months.

Let’s find out why Macquarie is bullish on this ASX 200 lithium share.

Why will the Liontown share price rise by 70%?

As my Fool colleague James reported on Monday, Macquarie has issued a new broker note.

The team has retained its outperform rating and kept its share price target at $2.60 for Liontown.

This followed news last week that open pit mining has commenced at Liontown’s Kathleen Valley lithium project in Western Australia.

Macquarie continues to expect production to commence in the middle of next year. It also likes Liontown’s revelation that it might be able to make money from direct shipping ore (DSO) before then.

In its statement, Liontown said:

The expanded Kathleen’s Corner open pit will result in more material being moved over the initial project period. Strong lithium market conditions provide a potential opportunity to monetise material not previously expected to be processed as a Direct Shipping Ore (DSO) product, delivering early revenue during the pre- and post-commissioning phase at Kathleen Valley.

Liontown is currently progressing this DSO opportunity with sample composites currently being prepared for potential customers.

What else is happening with Liontown?

Liontown shares were among the best performers of the S&P/ASX 200 Index (ASX: XJO) in January.

The Liontown share price flew 19% higher compared to a 6.2% leap for the benchmark.

During the month, Liontown revealed construction at Kathleen Valley was going to cost more than expected, partly due to a site plan expansion which will increase the initial throughput rate by 20%.

We also learned that Liontown chair Tim Goyder bought an extra $1.5 million worth of shares on-market.

The post Buy Liontown shares today for 70% upside: Macquarie appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Leading brokers name 3 ASX shares to buy today
• These are the 10 most shorted ASX shares
• Liontown share price roars amid milestone transition from lithium explorer to mining operator
• 3 ASX 200 lithium stocks that leapt beyond 20% in January

Motley Fool contributor Bronwyn Allen has positions in Macquarie Group. 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 Macquarie 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 S&P/ASX 200 Index (ASX: XJO) posted its first gain of the week on Wednesday, lifting 0.35% to close at 7,530.1 points.

It followed a strong session over on Wall Street. The Dow Jones Industrial Average Index (DJX: .DJI) rose 0.8% overnight while the S&P 500 Index (SP: .INX) gained 1.3% and the Nasdaq Composite Index (NASDAQ: .IXIC) lifted 1.9%.

Back home, the S&P/ASX 200 Financials Index (ASX: XFJ) was out in front, gaining 0.9% today. The Suncorp Group Ltd (ASX: SUN) share price helped drive the sector higher, rising 4.6% on the company’s half-year earnings.

On the other end of the market, the S&P/ASX 200 Health Care Index (ASX: XHJ) dropped 0.6%. It was dragged lower by shares in Healius Ltd (ASX: HLS). The stock plummeted 5.4% amid a broker downgrade.

But which ASX 200 shares managed to post today’s biggest gains? Let’s take a look.

Top 10 ASX 200 shares countdown

The top performing ASX 200 share today was building and construction materials company Boral Limited (ASX: BLD).

It lifted 12.8% to close at $3.97 on the back of a $56.8 million first-half profit – a 53% year-on-year improvement.

These shares made today’s biggest gains:

ASX-listed company	Share price	Price change
Boral Limited (ASX: BLD)	$3.97	12.78%
Imugene Limited (ASX: IMU)	$0.14	7.69%
Suncorp Group Ltd (ASX: SUN)	$13.04	4.57%
Adbri Ltd (ASX: ABC)	$1.92	4.35%
Tabcorp Holdings Limited (ASX: TAH)	$1.05	3.96%
Pilbara Minerals Ltd (ASX: PLS)	$4.94	3.78%
Nickel Industries Ltd (ASX: NIC)	$1.105	3.76%
Liontown Resources Ltd (ASX: LTR)	$1.52	3.75%
ARB Corporation Limited (ASX: ARB)	$30.21	3.49%
AMP Ltd (ASX: AMP)	$1.365	3.41%

Our top 10 shares countdown is a recurring end-of-day summary to let you know which companies were making big moves on the day. Check in at Fool.com.au after the weekday market closes to see which stocks make the countdown.

The post Here are the top 10 ASX 200 shares today appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• Why Boral, Galan Lithium, Nuix, and Suncorp shares are racing higher
• Why the Suncorp share price has rebounded and hit 52-week high
• Boral share price soars 12% on ‘strong profit growth’
• Invest $20,000 in ASX 200 shares and get $1,500 each year without lifting a finger

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 positions in and has recommended ARB Corporation. The Motley Fool Australia has recommended ARB Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Spacetalk Ltd (ASX: SPA) share price was rocketing higher again on Wednesday.

The ASX tech share was up 52% to 9.6 cents before being paused.

The release notes that “trading in the securities of the entity will be temporarily paused pending a further announcement.”

That announcement is likely to be a price query request, asking the company to explain why its shares were up 50% on no news.

Why did this ASX tech share rocket higher today?

While there’s no news out of the kids smart watch maker today, there has been some news recently that got investors very excited.

So much so, following today’s gain, this ASX tech share is now up over 250% since this time last week.

That announcement was the appointment of its new CEO, Simon Crowther.

Crowther was previously the CEO of patent troll company Ipernica, which morphed into aerial imagery technology company Nearmap under his watch. Nearmap was acquired by Thoma Bravo late last year for $1 billion.

Investors appear to be hoping that the new CEO will turn around the fortunes of this poor performing tech company and have been scrambling to buy shares this month.

Crowther seems relatively bullish on the company’s future. Commenting on his appointment, he said:

As soon as I met with the board and learnt more about Spacetalk I saw the opportunity to build an exciting business, target valuable sectors and execute in a focused and disciplined way. Spacetalk has an opportunity to make an impact for good as we help give children, parents, guardians, people aging in place, care recipients and their carers freedom to live their lives. I am focused on building on the progress that has been made to date and realising the full potential of the business and the team.

It will be interesting to see if this tech share decides to take advantage of this incredible rise to raise funds and shore up its balance sheet.

The post Guess which ASX tech share just boomed 50% before being halted appeared first on The Motley Fool Australia.

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More reading

• Blastoff! Guess which ASX tech share has rocketed 200% in 2 days

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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Overall, it’s been a fairly positive day for ASX shares and the S&P/ASX 300 Index (ASX: XKO) this Wednesday. At market close, the ASX 300 gained a healthy 0.36%, putting the index at just over 7,740 points. But let’s talk about the massive losses of one ASX 300 healthcare stock – Polynovo Ltd (ASX: PNV)

Polynovo shares evidently did not get an invite to the ASX 300’s party this Wednesday. In fact, the healthcare stock plunged by a nasty 12.08% to close at $2.33 a share. That was after the Polynovo share price closed at $2.65 yesterday and opened at $2.68 this morning.

So what went on with Polynovo shares today that elicited this rather horrible share price drop?

Why did ASX 300 healthcare stock Poynovo tank today?

Well, to be exact about it, it’s a darn-tootin’ mystery.

There was no news or announcements out of Polynovo today. Nor has there been since 17 January.

So we can rule that out.

What we do know, however, is that ASX healthcare stocks were some of the worst-performing shares on the ASX boards today. Indeed, the ASX 200 healthcare sector was the worst-performing sector on the entire market. Other ASX healthcare stocks took a hammering today too, as you might expect.

Ramsay Health Care Ltd (ASX: RHC) shares finished 0.27% lower. Nanosonics Ltd (ASX: NAN) shares lost 1.5%. The Sonic Healthcare Limited (ASX: SHL) share price shed close to 3%, while Healius Limited (ASX: HLS) tanked more than 5%.

So it looks as though Polynovo was just caught up in the wave of pessimism that engulfed most ASX healthcare stocks this Wednesday.

There is another factor to consider as well though. In 2023 so far, the Polynovo share price has risen by a whopping 15.8%. And that’s after today’s fall.

Over the past 12 months, this company has gained a rather incredible 89%:

When a company has had this much success, especially over a short period of time, investors can tend to get itchy fingers when it comes to taking profits off the table.

This could well be a factor in why Polynovo shares tanked so dramatically today. And selling does often beget more selling. Yesterday saw the Polynovo share price put on an impressive 3.52%. So maybe this was the trigger for investors to start taking some profits.

We can’t really know what was behind the Polynovo share price’s poor performance on the ASX 300 today. But this scenario is certainly a strong possibility.

The post Why did ASX 300 healthcare stock Polynovo tumble 12% today? appeared first on The Motley Fool Australia.

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More reading

• Why Amcor, Dicker Data, Elders, and Healius shares are dropping today
• Why right now is a once-in-a-decade opportunity to make passive income from ASX shares
• Why Appen, Gold Road, Healius, and Pinnacle shares are dropping today
• Avoid my biggest mistake in investing: fund manager
• ‘Incredibly cheap’: 2 ‘strong’ ASX shares expert would pounce on right now

Motley Fool contributor Sebastian Bowen has positions in Ramsay Health Care. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nanosonics and PolyNovo. The Motley Fool Australia has positions in and has recommended Nanosonics. The Motley Fool Australia has recommended Sonic Healthcare. 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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Many of Australia’s top brokers have been busy adjusting their financial models again, leading to the release of a number of broker notes this week.

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

Macquarie Group Ltd (ASX: MQG)

A note out of Morgans reveals that its analysts have retained their add rating on this investment bank’s shares and lifted their price target on them to $214.50. This follows a third quarter update which was well ahead of expectations. Morgans was expecting financial year to date earnings to be down 6% on the prior corresponding period, but they were up slightly. This was driven by an exceptional performance from the Commodities and Global Markets business and has led to Morgans bumping its full year earnings estimates by 4%. The Macquarie share price is trading at $195.57 this afternoon.

Qualitas Ltd (ASX: QAL)

According to a note out of Goldman Sachs, its analysts have retained their buy rating and lifted their price target on this investment company’s shares to $3.90. The broker has also added Qualitas to its coveted conviction list. Goldman made the move on the back of its positive view on the opportunities for the company to deploy funds under management and grow earnings over the coming years. The Qualitas share price is fetching $2.86 on Wednesday.

Transurban Group (ASX: TCL)

Analysts at Citi have reiterated their buy rating on this toll road operator’s shares with a $16.00 price target. Although the broker notes that Transurban’s half year result was boosted by one-off factors, it was still pleased and remains positive on the future. Particularly given that CPI-linked increases come through with a delay, which it feels indicates a strong growth path ahead. So much so, Citi is forecasting a ~6% p.a. dividends per share CAGR from FY23 to FY26. The Transurban share price is trading at $14.03 today.

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

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More reading

• Macquarie share price continues to climb as acquisition speculations heat up
• 5 things to watch on the ASX 200 on Wednesday
• Macquarie share price races higher after Q3 result shocks analysts
• Transurban share price gains on earnings, dividend guidance boost
• 10 ASX stocks to buy before they report this earnings season: Goldman

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 positions in and has recommended Macquarie 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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One of the most common refrains we hear from would-be investors considering investing in ASX shares is the simple “I don’t earn enough to invest”.

This is very understandable. Rising inflation, higher energy bills and rocketing interest rates… We are certainly living in challenging times when it comes to the cost of living.

But I’m here to tell you that almost anyone can invest if they put their mind to it – even if you don’t earn as much as you might like.

Shares are not like property. You don’t need a loan to buy them, and some can even cost under $1 each to purchase.

Now, there are a few things you should know about buying shares though.

If you wish to own individual shares, bought on the ASX, there is a minimum amount you have to spend – $500. That might sound like a lot. But if you put away $10 per week in a savings account, you’d have $500 to spend on your shares of choice in under a year.

If you put the cost of a daily cup of coffee (let’s say $5) under the mattress, you could get there in 100 days.

But you don’t have to buy ASX shares directly for a minimum $500 spend if you want to start investing. There are many other options available that require far lower amounts.

Under $500 to spend on ASX shares? No problem

There are some Australian brokers that offer trading for less than $500. For example, Superhero lets you invest with as little as $100. Or just US$10 if you want to buy American shares

For example, exchange-traded fund (ETF) provider Vanguard has an Auto Invest service that requires a $200 minimum spend if you’re buying Vanguard ETFs or managed funds.

Commonwealth Bank of Australia (ASX: CBA) runs an ETF-focused brokerage service called CommSec Pocket. This only requires $50 to get started, with a small range of ASX ETFs to choose from.

But the options don’t stop there. There are a number of investing apps that allow access to the markets for even less than that. Raiz, for example, lets you invest in ETFs with just a $5 minimum spend.

Spaceship, another investing app available in Australia, has no minimum investment amount to get started.

Now, remember that many of these services might charge you fees for the added flexibility. So make sure you’re on top of those before parting with your hard-earned cash.

But all of these different options just go to show that you don’t have to be wealthy to get started investing in shares.

The post Think you don’t earn enough to invest in ASX shares? Read this appeared first on The Motley Fool Australia.

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More reading

• The smartest ASX shares to buy with $20 right now
• Why Boral, Galan Lithium, Nuix, and Suncorp shares are racing higher
• Why Amcor, Dicker Data, Elders, and Healius shares are dropping today
• With interest rates heading higher again, the risk is to the downside for these popular blue chip ASX shares
• How I’d invest $300 a month in ASX shares to target a $2,000 monthly passive income

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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You don’t need $1 million to invest in ASX shares. With the Australian Securities Exchange, these days we can invest a very small amount of money.

Typically, brokers have a minimum investment of $500 for the first time a company enters a person’s portfolio. But, it’s possible that a much smaller investment can be made once someone owns shares of that company already. There is even a limited number of ways for investors to make specific investments with $0 brokerage.

With all of the volatility that’s going on, the share market is throwing up potential opportunities.

Assuming an investor is happy with the brokerage they’re paying for a $20 investment, there are a few ASX share options where I think it could make sense to build up an investment position.

Betashares Nasdaq 100 ETF (ASX: NDQ)

This is an exchange-traded fund (ETF) that enables investors to invest in 100 of the biggest businesses on the NASDAQ stock exchange.

I think that many of the world’s best businesses are on the NASDAQ. The ones that are changing the world in their own small way, with new services and products, are the ones that could drive their earnings and shareholder returns higher.

Inside the ETF are globally-leading names like Microsoft, Alphabet, Apple, Amazon.com, Nvidia, Tesla, and Costco.

With the Betashares Nasdaq 100 ETF down by around 20% since the start of 2022, this could be a good time to top up the holding of this quality ETF.

Xero Limited (ASX: XRO)

Xero is one of the world-leading software businesses when it comes to accounting software. The ASX technology share can help save time by automating a number of processes across business operations, while providing financial information in an easy-to-understand format.

It’s proving to be very popular, particularly in Australia and New Zealand. The high level of customer loyalty is allowing Xero to implement price increases that improve its long-term profitability potential. It loses less than 1% of its customers each year.

With global expansion into places like South Africa, Singapore, and Canada, the ASX tech share is giving itself more room to grow.

This potential investment looks like a good opportunity right now because it’s down heavily over the last 15 months. In fact, it’s down almost 50% since November 2021 despite growing its revenue and subscribers significantly since then.

Foolish takeaway

I think it only makes sense to invest small amounts of money in ASX shares or units that we’re planning to hold for a long time — and planning to accumulate more of over time at the right price. That’s why my suggestions are based on quality businesses with long-term growth potential.

The post The smartest ASX shares to buy with $20 right now appeared first on The Motley Fool Australia.

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More reading

• How I’d invest $300 a month in ASX shares to target an extra income of $20,000 per year
• Conviction list: Goldman Sachs tips big returns from these ASX 200 shares
• Sitting on cash? These 2 ASX shares are great buys today but won’t be forever
• 3 scintillating ETFs for ASX investors to buy this month
• ASX investors are buying up the Betashares Nasdaq 100 ETF. Should you?

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. 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 Alphabet, Amazon.com, Apple, BetaShares Nasdaq 100 ETF, Costco Wholesale, Microsoft, Nvidia, Tesla, and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has positions in and has recommended BetaShares Nasdaq 100 ETF and Xero. The Motley Fool Australia has recommended Alphabet, Amazon.com, Apple, and Nvidia. 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 S&P/ASX 200 Index (ASX: XJO) is on form on Wednesday. In afternoon trade, the benchmark index is up 0.35% to 7,531.1 points.

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

Boral Limited (ASX: BLD)

The Boral share price is up 12% to $3.94. This follows the release of the building materials company’s half year results. Boral reported a 12% increase in revenue to $1,681.1 million and a 53% jump in net profit after tax to $56.8 million. Looking ahead, management expects its second half earnings before interest and tax (EBIT) to be broadly in line with its first half numbers.

Galan Lithium Ltd (ASX: GLN)

The Galan Lithium share price is up 10% to $1.23. This morning, the lithium developer revealed that it now has 100% ownership of the Candelas Project in Argentina. This project is close to its flagship Hombre Muerto West project. Management estimates that Candelas has an indicated mineral resource of 685kt lithium carbonate (LCE) and can generate 14ktpa of battery grade LCE over 25 years of operations.

Nuix Ltd (ASX: NXL)

The Nuix share price is up a further 4.5% to $1.36. This investigative analytics and intelligence software provider’s shares have been on fire this week after the company won a major court battle. Nuix’s former CEO took Nuix to court seeking damages of $187 million plus interest.

Suncorp Group Ltd (ASX: SUN)

The Suncorp share price is up almost 4% to $12.94. Investors have been buying this banking and insurance giant’s shares following the release of its half year results. Although the company’s headline result fell short of expectations, its underlying performance was better than the market was expecting.

The post Why Boral, Galan Lithium, Nuix, and Suncorp shares are racing higher appeared first on The Motley Fool Australia.

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More reading

• Why the Suncorp share price has rebounded and hit 52-week high
• Guess which ASX lithium share is surging 9% on the prospect of ‘robust economic returns’?
• Boral share price soars 12% on ‘strong profit growth’
• Suncorp share price under pressure despite huge half-year profit growth
• 5 things to watch on the ASX 200 on Wednesday

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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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to record a decent gain. At the time of writing, the benchmark index is up 0.35% to 7,530.3 points.

Four ASX shares that have failed to follow the market higher today are listed below. Here’s why they are dropping:

Amcor (ASX: AMC)

The Amcor share price is down over 3% to $16.70. Investors have been selling this packaging giant’s shares following the release of its first half results. Amcor reported net sales of US$7.35 billion, which is an increase of 6% on the prior corresponding period. And while management has reaffirmed its full year guidance, this hasn’t been enough for some investors.

Dicker Data Ltd (ASX: DDR)

The Dicker Data share price is down 10% to $9.37. This follows the release of the wholesale computer hardware and software distributor’s unaudited full year results. Dicker Data reported a 25% increase in revenue to $3.1 billion but a small decline in net profit after tax to $73.4 million. Interestingly, last week, Goldman Sachs warned that Dicker Data‘s earnings could disappoint.

Elders Ltd (ASX: ELD)

The Elders share price is down 5% to $8.90 despite there being no news out of the agribusiness company. However, it was sent a price query by the ASX today. Elders said it could not explain the decline but noted that it “held two investor briefings yesterday with a number of institutional investors.”

Healius Ltd (ASX: HLS)

The Healius share price is down almost 5% to $2.84. This morning, Morgan Stanley downgraded this healthcare company’s shares to an underweight rating with a trimmed price target of $2.65. It was disappointed with Healius’ performance during the first half of FY 2023.

The post Why Amcor, Dicker Data, Elders, and Healius shares are dropping today appeared first on The Motley Fool Australia.

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More reading

• With interest rates heading higher again, the risk is to the downside for these popular blue chip ASX shares
• ASX 200 listed Amcor shares tumble despite increased earnings and dividends
• Why Appen, Gold Road, Healius, and Pinnacle shares are dropping today
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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 Dicker Data. The Motley Fool Australia has positions in and has recommended Amcor Plc and Dicker Data. The Motley Fool Australia has recommended Elders. 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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1) Interest rates and central bankers are back on centre stage.

Yesterday, the RBA hiked interest rates by 25 basis points to 3.35%, with governor Philip Lowe saying “further increases in interest rates will be needed over the months ahead to ensure that inflation returns to target and that this period of high inflation is only temporary”.

That sent the ASX 200 into negative territory as traders priced in the risk of a higher terminal interest rate, and interest rates staying higher for longer.

According to the Australian Financial Review, Commonwealth Bank head of Australian economics Gareth Aird had been expecting the RBA to pause at 3.35%. On Tuesday, he was forced to revise that figure higher to 3.85%, implying two more increases.

The same publication quotes head of market economics at National Australia Bank Tapas Strickland as saying there is now a risk the RBA could increase the cash rates as high as 4.1%.

Earning around 4% on your money, risk-free in a savings account, looks a better bet than investing in a number of ASX blue chips, including…

Company	Earnings Yield	Dividend Yield
Commonwealth Bank of Australia (ASX: CBA)	4.9%	3.5%
CSL Ltd (ASX: CSL)Â	2.2%	1.0%
Telstra Group Ltd (ASX: TLS)	3.5%	4.4%
Woolworths Group Ltd (ASX: WOW)	3.4%	2.5%
Coles Group Ltd (ASX: COL)	4.3%	3.5%

Source: S&P Capital IQ. Earnings yield is the inverse of the price-to-earnings (P/E) ratio.

Just like tech stock investors ignored valuation as they bid market darlings up to the moon, so are blue chip investors buying at today’s elevated prices. 

Any resulting pain won’t see share prices of these popular ASX shares plunge 50% or more – these are profitable, dividend-paying companies with sustainable competitive advantages – but the risk is definitely to the downside, especially as the economy slows and interest rates keep edging higher.

2) So if it’s not industrial blue chips, where does an Aussie investor plonk their cash?

According to the AFR, although commodity prices broadly have eased from their June 2022 highs, they are still higher than at any stage since 2014, helping propel local resources stocks.

“A combination of supply discipline, China reflating and emerging from their COVID-zero policy and elevated cost pressures suggests strong commodity prices are likely to remain,” says Todd Hoare, head of public markets at LGT Crestone.

By contrast to the above valuations, blue chip resources stocks look positively cheap, with BHP Group (ASX: BHP) shares trading on an earnings yield of 12% and a dividend yield of 9.8%. Fellow mining giant Rio Tinto (ASX: RIO) shares trade on an earnings yield of 14.8% and a dividend yield of 9.5%.

Resources shares are notoriously cyclical, something that is reflected in the very modest valuations of those two mining giants. As to whether that still means they are incredible value… well, that’s not a game in which I have an edge, nor one I have a desire to play. 

3) Back to interest rates and central bankers…

Overnight in the US, Federal Reserve chief Jerome Powell stuck to his script that US interest rates would need to go higher as the fight against inflation carries on.

Markets initially fell, then rallied strongly as traders – perhaps clutching at straws – noted Powell had the chance to signal he’d be more aggressive in hiking interest rates, but didn’t take it.

The tech-heavy Nasdaq Composite jumped 1.9% higher, putting it close to bull market territory. How quickly things can change from bear to bull.

It was only yesterday when the focus was on corporate earnings, and not interest rates, inflation, and sentiment. 

As results continue to roll in for US and Australian companies, I fully expect the focus to return to earnings, particularly outlook statements.

Speaking of which…

In the US, the Chipotle Mexican Grill (NYSE: CMG) share price is down 5% in after-hours trade after the popular burrito restaurant chain said higher costs associated with labour cut into its profit in its most recent quarter, while sales were depressed during the holidays.

Here in Australia, the Amcor PLC (ASX: AMC) share price is down 3.4% after the packaging company gave a more cautious near-term outlook, saying it saw softening in demand for its consumer staples and healthcare end markets and customer destocking through the December quarter.

Earnings season really hots up next week, with JB Hi-Fi (ASX: JBH) – somewhat of a bellwether for consumer discretionary goods – reporting on Monday. 

JB Hi-Fi shares are cheap, trading on an earnings yield of 10% and a dividend yield of 6.6%. We’ll find out Monday whether they are cheap for good reason. 

4) In its statement accompanying the RBA’s monthly meeting, the Board recognised “monetary policy operates with a lag and that the full effect of the cumulative increase in interest rates is yet to be felt in mortgage payments”.

Today we have somewhat conflicting opinions on talk of a mortgage cliff as fixed-rate housing loans at around 3% roll over into the new standard variable rate of around 6%.

No doubt talking her own book, Australian Banking Association chief executive Anna Bligh said there was a minority of people who were “very stretched” with repayments and that many homeowners had considerable savings buffers, according to the AFR.

“For those people who find it really tough, banks are not going to be sitting there watching people fall off a cliff. They are already working with some of those customers to make different arrangements so that they can get through this period of high-interest rates and get through until interest rates start to stabilise and come down.

“It is in banks’ commercial interest to keep people in their homes and get them to keep them there until they’ve paid off the loan in 25 years’ time.”

On the other hand, ANZ Bank chief executive Shayne Elliott says a recession in Australia is possible but not likely, and that households are in for a “period of pain” now that the buffer built into mortgage loans has gone, also according to the AFR.

Quoting an interview on 3AW radio, Elliott said “we are at a very difficult pivot point”.

“Up to now people have been managing OK… but it’s really from here on it gets very difficult because we are over that buffer, and it starts to really bite into people’s savings.” 

It might be no coincidence that ANZ shares are by far the cheapest of the big four banks, although I’d imagine if one big bank is bracing itself for headwinds, the three others will be too.

The post With interest rates heading higher again, the risk is to the downside for these popular blue chip ASX shares appeared first on The Motley Fool Australia.

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More reading

• Why Amcor, Dicker Data, Elders, and Healius shares are dropping today
• How I’d generate a $10,000 second income from Telstra shares
• Buy CSL shares today for 15% upside: Morgan Stanley
• Should I buy CBA shares for 2023 dividend potential?
• 2 ASX stocks I’d buy in February for lifelong passive income

Motley Fool contributor Bruce Jackson 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 CSL and Chipotle Mexican Grill. The Motley Fool Australia has positions in and has recommended Amcor Plc, Coles Group, and Telstra Group. The Motley Fool Australia has recommended Chipotle Mexican Grill and Jb Hi-Fi. 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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