Tag: Motley Fool

The BHP Group Ltd (ASX: BHP) share price has lifted higher in the past year, but is it the time to sell?

BHP shares have risen 18% in the last year and are now fetching $49.23 as of Monday’s close. For perspective, the S&P/ASX 200 Materials Index (ASX: XMJ) has returned 14% in the last year.

Let’s take a look at the outlook for the BHP share price.

What’s ahead?

BHP is a major iron ore producer on the ASX 200 that also explores copper, nickel, potash, and metallurgical coal.

Shaw and Partners senior investment advisor Jed Richards is recommending investors sell BHP shares.

Commenting on BHP in The Bull, Richards highlighted the impact of commodity prices on investor sentiment in the next year. He said:

The company’s most recent result delivered a strong cash dividend above expectations. Investors will be closely monitoring iron ore, copper and coal prices during the next 12 months.

The macro backdrop is still fragile given global growth is slowing. Iron ore prices are now softer than in previous years. Costs continue to increase and port facilities are operating at maximum capacity.

On the flip side, Macqaurie analysts placed an “outperform” rating on BHP shares with a $50 price target on the company’s shares in January. The broker is predicting the company to deliver a fully franked dividend of $2.88 per share.

BHP delivered a 3.3% lift in iron ore production to 66.9 Mt in the December quarter. The company produced 424.3 kt of copper, also a 3% boost on the previous quarter.

Meanwhile, BHP is planning to acquire copper miner Oz Minerals Limited (ASX: OZL) in 2023. Oz Minerals shareholders will vote on this proposal in late March or early April. This could also weigh on the company’s share price in the future.

BHP share price snapshot

BHP shares have climbed about 8% in the year to date. However, in the past week, BHP shares have slid more than 1%.

BHP has a market capitalisation of about $249 billion based on the current share price.

The post Up 18% in a year, is it time to cash in the chips on BHP shares? appeared first on The Motley Fool Australia.

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More reading

• Core Lithium shares led the charge on this trading platform in 2022. Can you guess the other top stocks?
• Sick of the grind? Here’s how I’d aim to replace my wage with dividend income in 2023
• Why is the BHP share price slipping on Monday?
• Invested $5,000 in BHP shares 5 years ago? Here’s how much passive income you’ve earned
• 5 things to watch on the ASX 200 on Monday

Motley Fool contributor Monica O’Shea has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has 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 Fortescue Metals Group Limited (ASX: FMG) share price has been in sensational form over the last six months.

As you can see on the chart below, the iron ore miner’s shares have risen a sizeable 22% since the start of August.

Can the run continue or is the Fortescue share price heading lower?

While the Fortescue share price has been defying gravity for some time, a growing number of analysts are warning that it could fall heavily in the near future.

One of those is Goldman Sachs, which this morning has reiterated its sell rating with a $13.60 price target. Based on where its shares are trading now, this implies potential downside of 39% over the next 12 months.

Goldman’s bearish view is driven by its valuation, decarbonisation, and dividend concerns. In respect to the former, the broker highlights that Fortescue’s shares trade at a significant premium to rivals BHP Group Ltd (ASX: BHP) and Rio Tinto Ltd (ASX: RIO). It said:

Relative valuation: the stock is trading at a premium to RIO & BHP on our estimates; 1.7x NAV vs. BHP at c. 1.15x NAV and RIO at 0.95x NAV, c. 7.5x NTM EV/EBITDA (vs. BHP/RIO on c. 6x/5x), and c. 3% FCF vs. BHP/RIO on c. 5%/7%.

Goldman has also warned investors that there’s no guarantee that Fortescue will be able to continue paying big dividends in the near future because of its decarbonisation spend. It explained:

Our recent FMG site trip to the Pilbara highlighted ongoing elevated spend to maintain hematite group shipments at ~190Mtpa going forward. Combined with the ~US$7bn decarb program, we forecast FMG’s capex to increase from ~US$3.2bn in FY23 to ~US$4.6bn by FY26. We continue to think FMG is at an inflection point on capital allocation, and to fund the ambitious strategy, we assume the company raises ~US$5bn of new debt, reduces the dividend payout ratio from the current ~75% in FY22 to ~50% from FY24 onwards, and increases gross gearing to 30-35% by FY26 (in-line with the company’s target of 30-40%).

This sentiment is echoed by analysts at Morgans. Its analysts have retained their reduce rating with a $15.60 price target. It warned:

Significant capex is still to come from FMG’s decarbonisation spend and various projects targeting FID in CY23. FMG expects to fund this spending through its iron ore cash flow, which sees its FCF yield reducing significantly over the next few years, and increasing its sensitivity to any unexpected market volatility.

Morgans thinks it will get so bad that Fortescue’s shares will provide a yield of just 1.4% in FY 2025.

All in all, the broker community appears to believe the good times are coming to an end for this mining giant.

The post Broker warns that the Fortescue share price could crash 39% from current levels appeared first on The Motley Fool Australia.

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More reading

• Has the Fortescue share price topped out?
• Fortescue share price hits 52-week high on record half
• 5 things to watch on the ASX 200 on Friday
• How much profit could Fortescue shares make in 2023?
• ASX passive income: My game plan to reach $30,000 per year

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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Most retirees have spent a lifetime working and building up a nest egg. But life happens, and some people will find that they haven’t built up enough income for a comfortable retirement.

I think that ASX dividend shares could be the answer.

The dream of living out the golden years with ample money is one that plenty of people aspire to.

A recent article on CNBC suggested that to “maintain your standard of living in retirement, the rule of thumb is you need to be able to replace at least 70% of the income you had while you were working.”

However, of a survey of 1,566 participants in the United States by Goldman Sachs Asset Management, just 25% of retirees generated that 70% level of former income. The research showed that 51% of retirees made less than 50% of their pre-retirement income.

What can Aussies do about this?

While Australia isn’t the same as the US, there are a few things to consider for how much is needed to retire in Australia.

For example, the age that people can access a pension and their superannuation can play a part. For those born on or after 1 January 1957, the retirement age (being the age pension entitlement age) will move to 67 years as of 1 July 2023.

The Motley Fool’s article on retirement planning outlines an example of how long a nest egg may need to last:

So, theoretically, an Australian woman who retires at 67 and lives until the average age of 85 will need her retirement savings, investments, and superannuation to fund her living expenses for 18 years.

Households will need to determine how much they want/need to spend in retirement as well.

For a comfortable retirement, the Association of Superannuation Funds of Australia’s Retirement Standard suggests a couple that owns their home will need an income of $67,000, while a single person will need an annual income of more than $47,000, according to Motley Fool research.

I think that ASX dividend shares can play a very helpful role in boosting retirement income and supplementing other forms of income, such as a pension or a part-time job.

Strong yields from ASX dividend shares

The US market isn’t particularly known for paying good dividends. As an example, the Vanguard US Total Market Shares Index ETF (ASX: VTS) has a dividend yield of 1.7%, according to Vanguard.

Meanwhile, franking credits give Aussie investors the ability to significantly boost their after-tax dividend income.

Some businesses are building a record of consecutive years of dividend growth, such as Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), Sonic Healthcare Ltd (ASX: SHL), APA Group (ASX: APA) and Brickworks Limited (ASX: BKW).

Some of these businesses are seeing rising share prices.

There are also some names that have higher dividend yields and, in most years, tend to increase their payouts. These include Wesfarmers Ltd (ASX: WES), Charter Hall Long WALE REIT (ASX: CLW) and Rural Funds Group (ASX: RFF)

While ASX dividend shares aren’t a magic cure, they can allow retirees to generate more investment income from their nest egg than many other types of assets.

The post Why ASX dividend share income could be so important for 75% of retirees appeared first on The Motley Fool Australia.

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More reading

• Broker warns that the Fortescue share price could crash 39% from current levels
• Buy these ASX dividend shares for income: broker
• Core Lithium shares led the charge on this trading platform in 2022. Can you guess the other top stocks?
• 3 ASX lithium shares to buy right now: experts
• Forget bonds, I’d much rather buy this ASX 200 stock for its 4% dividend yield

Motley Fool contributor Tristan Harrison has positions in Brickworks, Rural Funds Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks, Goldman Sachs Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Apa Group, Brickworks, Rural Funds Group, Washington H. Soul Pattinson and Company Limited, and Wesfarmers. 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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If you’re looking to boost your income with some dividend shares, then you may want to consider the two listed below.

Both dividend shares are rated as buys by Morgans and expected to provide investors with attractive yields in the near term. Here’s what you need to know about them:

Coles Group Ltd (ASX: COL)

The first ASX dividend share that has been tipped as a buy is Coles.

It is one of Australia’s most recognisable brands and the operator over 800 supermarkets and over 900 liquor retail stores.

Morgans is positive on the company’s outlook and has an add rating and $19.50 price target on its shares. It said:

We continue to see COL as offering good value with the company’s solid balance sheet and defensive characteristics putting it in a good position to navigate through a weaker economic environment. The unwinding of local shopping should also help further market share gains.

As for dividends, the broker is expecting fully franked dividends per share of 64 cents in FY 2023 and 66 cents in FY 2024. Based on the current Coles share price of $17.35, this implies yields of 3.6% and 3.8%, respectively.

Dexus Industria REIT (ASX: DXI)

Another ASX dividend share to consider buying is Dexus Industria.

It is a listed Australian real estate investment trust which owns, manages and develops high-quality industrial properties and business parks. This includes the Jandakot Airport industrial precinct.

Morgans is a fan of Dexus Industria and has an add rating and $3.25 price target on the industrial property company’s shares. It likes the company due to its exposure to key industrial markets. It explained:

DXI’s key industrial markets remain robust with the outlook for solid rental growth backed by strong tenant demand. The development pipeline also provides near and medium term upside potential. A key focus will be the leasing up of the business park assets and a potential divestment could be a positive catalyst. While the portfolio remains well positioned, we acknowledge there will be near-term uncertainty around interest rates.

In respect to dividends, Morgans is forecasting dividends per share of 16.4 cents in FY 2023 and 16.9 cents in FY 2024. Based on the current Dexus Industria share price of $3.08, this will mean yields of 5.3% and 5.5%, respectively.

The post Buy these ASX dividend shares for income: broker appeared first on The Motley Fool Australia.

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More reading

• ASX 200 consumer staples shares raced higher to finish the day on top
• Why I think Woolworths shares aren’t worth the worry
• I think Coles shares are a top ASX 200 buy for 2023
• Coles shares: Here are the dividend forecasts for 2023 and 2024
• Here are the top 10 ASX 200 shares today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Coles 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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Core Lithium Ltd (ASX: CXO) shares were the most traded of any in 2022 on the investment platform Stake.

65% of those transactions saw investors buying Core Lithium shares, while 35% sold.

As we know now, investors who bought the S&P/ASX 200 Index (ASX: XJO) lithium stock at the beginning of the year won’t be complaining. Although they have endured plenty of volatility along the way, the Core Lithium share price closed the year up 73%.

The top-traded findings come from Stake’s Stockest 100, showing last year’s most traded ASX shares and exchange traded funds (ETFs). The data is based on more than one million ASX trades completed on the platform in 2022.

So, we know Core Lithium shares led the charge. Can you guess the other top-traded stocks?

Following close on the heels of Core Lithium shares…

We won’t leave you hanging.

The second most traded stock last year, following Core Lithium shares, was the Vanguard Australian Shares Index ETF (ASX: VAS).

The popular ETF tracks the performance of the largest 300 ASX companies by market cap. So it’s not surprising that VAS closed the calendar year down 8.5% as companies struggled with rising costs and investors mulled over the impact of higher interest rates.

Still, 91% of investors on Stake bought VAS in 2022, while only 9% sold the ETF.

Coming in at number three was lithium producer Pilbara Minerals Ltd (ASX: PLS), which owns the Pilgangoora Lithium Project in Western Australia.

53% of those trades saw investors buying Pilbara shares, while 47% sold. That came as the Pilbara share price struggled amid falling lithium prices in the latter half of the year. Despite the retrace, Pilbara shares gained 17% in 2022.

Which brings us to Lake Resources NL (ASX: LKE), the fourth most popular traded share.

The ASX lithium exploration and development company faced some headwinds in 2022, with the abrupt mid-year departure of its CEO. Questions were also raised about the viability of its direct lithium extraction (DLE) technology.

All up, Lake Resources closed 2022 down 21%. 61% of investors on Stake sold shares over the year while 39% bought them.

Rounding off the list at number five is mining giant BHP Group Ltd (ASX: BHP), with 75% buying BHP shares and 25% selling them in 2022.

On the back of strong iron ore and copper prices for much of the year, BHP delivered some outsized dividend payments while the share price gained 10% over the 12 months.

ASX investors held their nerve and predominantly kept buying

Commenting on the results, Stake markets analyst Megan Stals noted that despite the tough trading conditions of 2022 amid rocketing interest rates, “investors didn’t panic and continued to add to their positions, with 68% of trading activity consisting of buy orders”.

On Core Lithium shares leading the pack, Stals said:

Lithium was by far the most popular segment overall in 2022, as the metal saw record high prices. Core Lithium was the most popular company on Stake, seeing 78% returns for the year. That said, it wasn’t an easy ride for shareholders, with the stock experiencing large peaks and troughs throughout the year. 

As for the number two traded stock, the Vanguard Australian Shares ETF, Stals noted, “It was the most popular by far, showing how Australians are optimistic about the long-term prospects of the local economy.”

With 10 investors buying VAS for every one selling despite the index-tracking ETF slipping during the year, Stals said this demonstrated “investors are committed to long-term returns”.

The post Core Lithium shares led the charge on this trading platform in 2022. Can you guess the other top stocks? appeared first on The Motley Fool Australia.

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More reading

• 3 ASX lithium shares to buy right now: experts
• 5 things to watch on the ASX 200 on Tuesday
• Here are the top 10 ASX 200 shares today
• Sick of the grind? Here’s how I’d aim to replace my wage with dividend income in 2023
• Here are the 3 most heavily traded ASX 200 shares on Monday

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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There is much speculation about whether lithium stocks have had their run, considering the steep price rises seen the past year or two for the mineral.

But many experts still reckon the insatiable demand for the battery ingredient will outstrip supply for the foreseeable future.

Two such professionals this week named three ASX lithium shares to buy at the moment:

‘Strong growth potential’ with a possible surprise coming

Seneca investment advisor Arthur Garipoli is pleased with where Pilbara Minerals Ltd (ASX: PLS) is heading.

“In the December quarter, Pilbara delivered a 10% increase in spodumene concentrate production compared to the September quarter,” Garipoli told The Bull.

“Unit operating costs were down 5% and shipments were up 8%. The company’s cash balance rose by 62% to $2.226 billion.”

The Pilbara share price is up 55.8% over the past year.

Those who buy the stock now may also benefit from a pleasant surprise down the track.

“In our view, the company offers strong growth potential. It may announce a maiden interim dividend.”

Garipoli is not the only one excited about Pilbara.

According to CMC Markets, eight out of 16 analysts that currently cover the stock rate it as a strong buy. Five are recommending a hold, while three reckon Pilbara’s a sell.

‘Business growth profile is appealing’

Mineral Resources Ltd (ASX: MIN) doesn’t just produce lithium but is also involved in providing services for iron ore hubs.

“Mineral Resources is underpinned by its resilient mining services business, holding long-term contracts with some of Australia’s biggest tier-1 miners,” said Shaw and Partners senior investment advisor Jed Richards.

And, he adds, the stock is an absolute bargain at the moment.

“The company’s target to double volumes over the next three-to-five years isn’t fully captured in analyst forecasts, nor is the company’s current market valuation.

“In our view, the business growth profile is appealing.”

Richards’ buy conviction is almost universally agreed by upon his peers. CMC Markets currently shows 12 out of 16 analysts rating Mineral Resources as a strong buy.

The Mineral Resources share price has gained a tidy 65.8% over the last 12 months.

18 months until this stock potentially rockets

Leo Lithium Ltd (ASX: LLL) differs from the other two buy recommendations in that it has yet to produce lithium.

But Garipoli is confident that’s not far away.

“The company is developing the Goulamina lithium mine in Mali and recently announced a resource upgrade,” he said.

“In our view, this confirms the outstanding scale of a high-grade project. The project is less than 18 months from production.”

Leo Lithium, which is backed by a deep-pocketed Chinese benefactor, could see its share price going through the roof once it actually starts producing minerals.

“Partner Ganfeng Lithium is providing funding to the project. More drilling results are imminent, but sovereign risk remains.”

Garipoli’s peers agree on Leo’s potential. All five analysts currently covering the stock say it’s a strong buy, according to CMC Markets.

The Leo share price is now more than 29% higher than where it was a year ago.

The post 3 ASX lithium shares to buy right now: experts appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most heavily traded ASX 200 shares on Monday
• Why lithium prices could be ‘higher for longer’: Macquarie
• Pilbara Minerals share price ‘offers strong growth potential’: expert
• Top brokers name 3 ASX shares to buy next week
• What’s with ASX 200 lithium shares today?

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has 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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Bonds now offer investors much more potential investment income. But I’d still rather buy a few S&P/ASX 200 Index (ASX: XJO) dividend stocks over bonds.

Investing in bonds essentially means buying debt. Generally, bonds are seen as less risky than shares because they are prioritised in the capital structure. If a company goes out of business, the bondholders are paid before shareholders (if equity holders get anything at all).

With interest rates now a lot higher, most bonds are offering investors a higher yield.

For example, Vanguard Australian Government Bond Index ETF (ASX: VGB) had a running yield of 2.8% on 31 December 2022, with a yield to maturity of almost 4%.

However, here’s why bonds don’t appeal to me that much. While they may have a fixed level of interest, that’s essentially all bond investors will gain. One-off interest rate changes can impact bond valuations, as can concerns about bond investors being paid.

Skilled active investors may be able to buy bonds at a discounted price and sell them at a higher price. But, the income will largely form the basis of the return.

However, my preferred form of income investing is one that takes advantage of the power of compounding.

This ASX 200 stock can benefit from compounding

If someone invested $1,000 in a bond with a 4% yield, they’d get $40 of income over a year. After the end of 12 months, they could invest the $40 into bonds, but they wouldn’t be able to spend the income. If they spent the $40 income, they’d be left with the $1,000 again – no growth, assuming the 4% yield stayed the same.

However, let’s use an ASX 200 dividend stock as an example.

Imagine I invested $1,000 into Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares with a 4% grossed-up dividend yield. The total income would still be $40. But, an investor could spend that $40 and the business could still grow its dividend (and the investor’s income) over the next 12 months as it re-invests its retained profit within the business for more growth.

According to Commsec, Soul Pattinson is expected to grow its annual dividend by 4.3% in FY24 compared to the projected FY23 payout.

Over time, ASX 200 dividend stocks can steadily grow and compound their earnings and dividends, even if investors spend that money on their living expenses.

Other reasons to like Soul Pattinson shares

It’s an investment house, meaning it invests in other businesses, thus making it a diversified company thanks to its holdings. The company has investments in ASX shares like TPG Telecom Ltd (ASX: TPG), New Hope Corporation Limited (ASX: NHC), Brickworks Limited (ASX: BKW), Macquarie Group Ltd (ASX: MQG) and BHP Group Ltd (ASX: BHP).

It’s also invested in private businesses such as electrical parts, agriculture, swimming schools and luxury retirement living.

The company has grown its annual ordinary dividend every year since 2000 and intends to keep increasing it. I think its income payments could be as resilient as corporate bonds, though nothing is guaranteed.

This ASX 200 dividend stock is already one of the largest positions in my portfolio, and I plan to regularly invest in it as time goes on. I like that the business can change its portfolio to be future-focused.

The post Forget bonds, I’d much rather buy this ASX 200 stock for its 4% dividend yield appeared first on The Motley Fool Australia.

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More reading

• ASX passive income: My game plan to reach $30,000 per year
• How to invest $10,000 this year to create ‘safe’ passive income
• Why I’ll be buying more ASX dividend shares for my portfolio in 2023
• With almost no investments at 30, can ASX shares still make me rich?
• ‘Attractively priced’: Why fund is excited by these 2 ASX 200 shares

Motley Fool contributor Tristan Harrison has positions in Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Macquarie Group and Tpg Telecom. 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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While there are many different views about what will happen to S&P/ASX 200 Index (ASX: XJO) shares in 2023, most experts agree on one thing — the global economy will have a rough year.

Interest rates rose rapidly through the developed world last year, and that is starting to bite consumers and businesses alike. The full impact will be felt in 2023, with some countries even plunging into recession.

During such times, it’s not a bad idea to search for ASX shares to buy that represent businesses that have resilient earnings. Some companies produce goods or services that people simply can’t do without, even in tough economic times. 

Here are two stocks exactly in this position that have been rated as buys this week:

‘A bright outlook’

Endeavour Group Ltd (ASX: EDV) is both an alcohol retailer and an operator of hotels and pubs.

Ord Minnett senior investment advisor Tony Paterno reckons it’s a stock worth buying at the moment.

“Endeavour operates liquor outlets, hotels and gaming facilities. Recent electronic machine gaming has been strong in Victoria, Queensland and South Australia,” Paterno told The Bull.

Buying Endeavour stocks now would be backing the idea that Australians will still have a drink through the tougher part of the economic cycle.

Paterno is pleased with the direction the business is heading.

“Group sales in the first quarter of fiscal year 2023 were up 3.1% on the prior corresponding period,” he said.

“The company offers diversified revenue streams and a bright outlook.”

The Endeavour share price has been up and down over the past year but is now 3.8% up. The stock pays out a dividend yield of 2.36%.

Paterno’s peers are somewhat divided on the alcohol retail giant though. According to CMC Markets, five of nine analysts are rating it as a buy but three others are urging investors to sell.

Demand for decades

If you want evidence of how the world can change rapidly in just one year, you just need to take a look at coal mining stocks.

Only 12 months ago, ASX shares related to coal were untouchables. The theory was that, sooner or later, environmental imperatives would catch up with these companies, so avoid them like the plague.

But after a war in Ukraine and energy prices spiking up like this generation has never experienced, coal producers have gained remarkable popularity.

Paterno’s current pick, New Hope Corporation Limited (ASX: NHC), has seen its share price gain a whopping 160.8% over the past year.

The party will continue, as far as Paterno is concerned.

“Asia is expected to remain a relative bright spot for coal demand in coming decades,” he said.

“Near-term thermal coal prices remain high on supply concerns, as the war in Ukraine reinforces the need for energy security.”

High coal prices have allowed New Hope to “generate strong free cash flow and return cash to shareholders via fully franked dividends”, said Pateno.

“We expect an attractive dividend yield this financial year based on the current share price.”

The post 2 ASX 200 shares to buy even as the world slips into recession appeared first on The Motley Fool Australia.

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More reading

• 4 ASX All Ords shares insiders have been buying up in January
• With a 30% forecast yield, is this dividend stock the biggest bargain on the ASX 200?
• Why did ASX 200 coal share New Hope Corporation sink 9% today?
• Guess which ASX 200 share is projected to pay the biggest dividend yield in FY24?
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has 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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Ask A Fund Manager

The Motley Fool chats with the best in the industry so that you can get an insight into how the professionals think. In this edition, Schroders portfolio manager Ray David picks the two ASX shares he would buy right now, although he actually mentions three.

Hottest ASX shares

The Motley Fool: What are the two best stock buys right now?

Ray David: Two favourites, and these make up two big positions of the fund. 

The first one is Ramsay Health Care Ltd (ASX: RHC). Ramsay is the largest provider of private hospital services in Australia and France, and also third largest player in the UK. 

During COVID, private hospitals were hit hard by elective surgery cancellations and also had cost blowouts because of nurses having to isolate. And then Ramsay having to effectively backfill those nurses with high-cost agency staff. So you had revenue declining and costs going up and profitability really took a hit. 

But that’s all behind us now. We think the outlook for elective surgery volumes looks really strong because there’s quite a big backlog. And those cost headwinds associated with COVID are really abating. So we expect Ramsay to deliver pretty strong earnings growth in ’23 and ’24 that’s well above market growth.

In addition to that, during the pandemic, Ramsay invested over $2.7 billion to upgrade its facilities and expand its facilities, which it really hasn’t had any benefit from. So it’s positioned quite well to come out of this COVID period with extra capacity to cater for the backlog. 

In the longer run, they’ve got positive demographic trends. So they’ve got increasing healthcare utilisation, [an] ageing population, and pretty strong support [from] the government for a private healthcare system. 

Outlook looks really strong and the valuation looks incredibly cheap. 

What really highlighted how cheap the stock was, [private equity firm] KKR came in and bid for the stock around $88 per share and it really shone a light on Ramsay Health Care’s freehold property.

[Ramsay] basically owns a significant or most of all their Australian properties — hospital sites. Based on our analysis, we think if you were to spin off the property, that accounts for about $30 a share compared to the stock where it’s trading in the mid-$60s. 

So it’s a company that’s got strong tailwinds and a good earnings outlook and there’s a big property freehold there that’s supportive of the valuation. Management have recently announced that they are looking at freeing up some of those properties for sale and lease back some of the tier-three properties. We think it’s a pretty good investment right now.

MF: It’s interesting you mentioned Ramsay as a stock to buy because earlier you mentioned healthcare as one of the sectors that might be overvalued?

RD: That’s right. Yeah, Ramsay has probably been one of the poorest-performing healthcare stocks over that three-year period compared to the big names like CSL Limited (ASX: CSL) and ResMed CDI (ASX: RMD). Mainly because Ramsay was a COVID loser because of all those issues it faced.

MF: Your second buy?

RD: The second one is News Corporation CDI (ASX: NWS). 

It’s got about a $10 billion valuation but, to us, it’s probably one of the highest-quality businesses on the ASX. 

If we look at News Corp’s key assets, it’s mainly digital media assets, and the print exposure is quite small and modest. The largest asset that New Corp holds is the 61% holding in REA Group Limited (ASX: REA), which is listed realestate.com.au. That’s the number one property classifieds portal in Australia. They’ve got around a 70% market share and they’ve got significant amount of pricing power. They’re effectively putting up prices by high single-digits, but there’s new products that they’re rolling out, which they call Premier Plus. It’s going to add another 6% to revenue growth. 

So it’s a really monopoly-type business that’s got high returns on capital, high margins, generates a lot of cash flow, and News Corp owns 60% of [REA], which forms part of the News Corp valuation.

MF: Whenever a fund manager picks News Corp and mentions the REA ownership, readers often ask why wouldn’t they just own REA?

RD: We own REA in the fund as well.

If you back out REA’s 61% holding from News Corp, basically you’re implying an earnings multiple of six times for the rest of the other assets. And those other assets are just as good quality. 

News Corp also owns the Dow Jones business, which is basically the Wall Street Journal, a flagship newspaper. That business has been growing its top line by low double-digits, and about 70% of that revenue is now digital. So it’s not as exposed to the traditional advertising cycle as what newspapers used to be. 

And the Journal‘s a fantastic masthead. The costs are well under control because unlike a Spotify Technology SA (NYSE: SPOT) or a Netflix Inc (NASDAQ: NFLX) where you have to acquire third-party content, the Wall Street Journal creates all its own content through journalists, such as yourself, for example.

The third large business within News Corp is the HarperCollins book publishing business. They are basically the second-largest publisher globally. And it’s a pretty stable business. Book sales have been growing at three to 4% per annum, and that’s even with audiobook growth and ebook growth. Physical books are still in high demand, but the kicker for HarperCollins is 60% of the revenue comes from the back catalogue. That’s titles that have been published many, many decades ago. So it is like an annuity revenue business.

When you back out News Corp’s holding of REA, you’re actually getting HarperCollins and the Wall Street Journal for about six times earnings. And there’s a whole heap of other businesses that they own which aren’t that material, such as Foxtel and the Australian newspapers. But the other two businesses are high quality. 

For us, it’s undervalued. It’s got a good balance sheet. The management team and board have recognised a disconnect between their view of valuation and the market price. Governance is improving and they’re looking at ways to increase shareholder value.

MF: I am slightly surprised that your fund owns REA because we think of Schroders as the flag bearer for value investing. Investors don’t typically think of REA as a value stock.

RD: Yeah, REA, we recently added to the portfolio. It would’ve been the third quarter of last year. So it got down to a level of just over $100 or under $100. The stock had really been belted.

What we saw was a multiple which wasn’t cheap by any standards, but a pretty decent discount from its historic valuations. And we saw a pretty strong growth profile relative to the rest of the economy. 

So we haven’t owned it for long, but there was a moment there in the market sell-off where REA was getting sold off progressively with the rest of the tech sell-off. And to us, REA is a great business. It makes its own in cash. It’s pretty durable, which is why it’s made its way into the fund.

The post ‘Incredibly cheap’: 2 ‘strong’ ASX shares expert would pounce on right now appeared first on The Motley Fool Australia.

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More reading

• Why Brainchip, IAG, Metcash, and ResMed shares are sinking today
• ResMed share price sinks 7%: Is this a buying opportunity?
• Add some oomph to your portfolio with these ASX growth shares: analysts
• 5 things to watch on the ASX 200 on Monday
• $20,000 invested in these ASX shares 10 years ago is worth how much now?

Motley Fool contributor Tony Yoo has positions in CSL and ResMed. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL, Netflix, ResMed, and Spotify Technology. The Motley Fool Australia has positions in and has recommended ResMed. The Motley Fool Australia has recommended Netflix and REA Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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On Monday, the S&P/ASX 200 Index (ASX: XJO) started the week in a subdued fashion. The benchmark index fell 0.15% to 7,481.7 points.

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

ASX 200 expected to edge higher

The Australian share market looks set to edge higher on Tuesday despite a poor start to the week on Wall Street. According to the latest SPI futures, the ASX 200 is poised to open the day 3 points higher. In late trade in the United States, the Dow Jones is down 0.55%, the S&P 500 is down 1%, and the NASDAQ is down 1.6%. Rate hike jitters are weighing on the US market.

Oil prices tumble

Energy shares Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) could have a difficult day after oil prices tumbled overnight. According to Bloomberg, the WTI crude oil price is down 2% to US$78.09 a barrel and the Brent crude oil price is down 2% to US$84.92 a barrel. Oil prices fell after data showed that Russian exports remain strong.

Core Lithium rated as a sell

The Core Lithium Ltd (ASX: CXO) share price remains overvalued according to analysts at Goldman Sachs. Although the broker was pleased with the progress the lithium developer is making at the Finniss project, it has reiterated its sell rating and 95 cents price target. Goldman said: “DMS construction progressing, but valuation remains well ahead of peers.”

Gold price falls

It could be a tough day for gold miners Evolution Mining Ltd (ASX: EVN) and Regis Resources Limited (ASX: RRL) after the gold price dropped overnight. According to CNBC, the spot gold price is down 0.4% to US$1,937.5 an ounce. Traders have been selling gold ahead of the US Federal Reserve’s rate decision later this week.

Newcrest upgraded

One gold miner that could have a better day is Newcrest Mining Ltd (ASX: NCM). That’s because Morgans has upgraded the company’s shares to an add rating with a $25.70 price target. It said: “Trailing its smaller gold peers, we see an emerging value proposition on offer in NCM, which benefits from mine diversification, solid margins, and long-life reserves.”

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

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More reading

• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Monday
• Why lithium prices could be ‘higher for longer’: Macquarie
• Investing in ASX 200 energy shares? Here’s why the oil price may already have hit its 2023 lows
• Why Block, Core Lithium, Lynas, and Xero shares are charging higher today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has 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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