Tag: Motley Fool

Shut the front door. There’s no way an ASX All Ordinaries Index (ASX: XAO) share has a 29% dividend yield right now… is there? Well, time to check out the Base Resources Ltd (ASX: BSE) share price to find out.

Base Resources is an ASX resources share specialising in the production of mineral sands. It has operations in a few countries, including Australia, Kenya, and the United States.

Today, Base Resources is trading at 20.5 cents per share at the time of writing, down a nasty 4.65% so far this session.

This company has paid out two dividends over the past 12 months. The first was the interim dividend of 3 cents per share from March. The second was the final dividend worth 3 cents per share that investors received in September. Neither payment came with franking credits. So that’s an annual total of 6 cents per share for Base Resources.

On today’s share price of 20.5 cents, this does indeed give Base Resources a trailing dividend yield of 29%.

Hallelujah! So we should all run out and buy Base Resources shares right now? Who wouldn’t want their capital back after just three-and-a-bit years, after all?

Is Base Resources really offering a 29% dividend yield right now?

Well, not so fast.

A trialling dividend yield is always just that – trailing. It reflects only the past, not the future. The reality is that no Base Resources investor has enjoyed a 29% dividend yield over the past year.

That’s because the Base Resources share price has plummeted by almost 38% in 2022. It was at more than 33 cents per share back in early January, a far cry from the 20.5 cents we see today.

So we can probably conclude that the market is predicting that Base Resources will not be able to fund dividends at 2022’s levels going forward. Otherwise, it wouldn’t have sent Base Resources shares down to a level that gives the company a trailing dividend yield approaching 30% – a level that is obviously well above a conventional yield.

We’ll have to see if the market is right on this. If this company pays out 6 cents per share in dividends next year, it will be very interesting to see where the Base Resources share price goes.

The post Does this ASX All Ordinaries share really have a dividend yield of 29% right now? appeared first on The Motley Fool Australia.

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More reading

• Who needs nuance?
• Why has the Queensland Pacific Metals share price crashed over 30% so far this week?
• How to make $56,000 in passive income by investing $500 a month in ASX shares
• CSL share price ‘ticks all the defensive boxes’: fundie
• Why is the Qantas share price smashing the ASX 200 on Tuesday?

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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I have a pretty good working knowledge of behavioural psychology.

No, not in a clinical or academic sense, but as a practitioner, of sorts, as an investor and investment advisor.

In fact, I’m convinced that, once you know the investing basics, the vast bulk of most people’s returns are influenced more by behavioural psychology than their ability to analyse businesses.

Exhibit A: Study after study shows that most managed funds fail to beat the index. But they keep trying.

Exhibit B: The average managed fund investor underperforms those very managed funds! Generally, because they can’t leave well enough alone, switching funds and trying to time the market.

But that’s not all.

Our biology, and our pack instinct, lead us to generally eschew nuance and uncertainty, in favour of black-and-white answers and ‘taking sides’.

And then, once we’ve done that, we tend to stop listening to counter arguments or, perhaps worse, we stop looking for flaws in our own thinking.

We’ve chosen a side, and we’re sticking with it, goddamnit!

There have been a lot of examples in this area in recent times.

Take the recent electric vehicle subsidy legislation. So sure are EVs’ proponents that EVs are the answer, that any policy – no matter how ineffectual or suboptimal – must be good.

Giving new EV buyers a $2,000 taxpayer subsidy to buy a $75,000 car is hailed as ‘progress’. Which it undoubtedly is.

A bit.

See, if you’re spending $75,000 on a new car, you have a choice of dozens of cars in that price bracket, including Teslas, but also BMWs, Audis, Mercedes’ and more.

Let’s say the BMW is $75,000 but the Audi is $73,000. Which do you choose?

The vast bulk of people will say the price is essentially the same, and just go with the one they like most.

Exactly.

So, the vast, vast bulk of people won’t buy the Tesla (or any other manufacturer’s EV) just because it’s $2,000 cheaper.

Worse, most those people who end up buying the EV would have bought one anyway!

Meaning the $2,000 is changing almost no-one’s behaviour. And costing the taxpayer a small fortune.

But you can’t say that – or, if you do, no-one listens.

“But EVs are good!” they say.

And they’re dead right. Lowering transport emissions is really important.

But that doesn’t mean every EV policy is smart, effective or efficient.

Worse, the money being wasted here could have been used on a more effective program, elsewhere, instead.

Have I offended everyone yet?

No? Okay, let’s see who else I can annoy.

I think we should decarbonise the world economy as quickly as possible. The science is clear.

(There goes some of my readers.)

But I also think there’s zero reason to ban Australian coal exports, if some other country is simply going to pick up that trade.

(There goes another chunk.)

Let’s work hard to stop all coal-burning around the world. But, while we do it, giving up economic opportunities for no net climate change gain is… silly.

But – and here’s the key point – you can think both of those things (that we should decarbonise and we should sell coal while there’s a market) at the same time.

Nuance.

We don’t have to be in one intransigent camp. We can hold two thoughts in our minds at once.

Next, let’s get rid of whatever readers remain.

Let’s talk RBA Governor Lowe’s apology for getting his interest rate forecasts wrong.

Here, three things can be true.

1. Governor Lowe didn’t say ‘rates won’t go up until 2024’. He was misreported; but

2. He should have corrected that misreporting, and he didn’t; but

3. There’s no reason, other than bloodlust, that the ‘Governor Lowe should resign’ campaign should succeed.

Let’s break that down.

In case you didn’t know, the RBA essentially said ‘we don’t think rates will go up until wages and prices do, and we don’t think that’ll happen until 2024’.

Which was reported as ‘Lowe says rates won’t rise until 2024’.

Now, I wrote at the time about that misreporting.

But, as much as I’d like to believe everyone hangs on my every word, apparently they don’t!

So, Lowe and the RBA had an opportunity – and an obligation – to correct the record, but they didn’t.

And so?

So, the pitchforks are out for Governor Lowe, because he, and the RBA, got it wrong.

A decent chunk of the media – a few mainstream and a lot of social – are demanding Lowe resign.

But I think that’s an unfortunate view.

Lowe made a mistake. He, and the RBA board, got it wrong.

But why should he resign?

To make us feel better?

To satisfy a little bloodlust?

Nah.

Either he’s the best person for the job, or he’s not.

If he is, mistake or not, he should keep the job. If anything, he’ll now be doubly careful not to make another one.

If he’s not, he should go, whether or not he made a blue.

Literally that’s it.

Anything else is just action for its own sake. And for bloodlust.

To bring it back to investing, should Warren Buffett have resigned from Berkshire Hathaway because he bought a business that subsequently went broke?

Because his company’s share price lagged the S&P 500 in 1999? Or almost halved in 1974?

Of course not.

We love a ‘heads should roll’ outcome. It makes us feel like justice has been done.

Turns out, we’re not that evolved, after all.

As the old saw has it: “There’s always an easy solution to every human problem—neat, plausible and wrong.”

It’s a bad idea, for public policy.

And it’s a bad idea for your investing.

No company is above criticism.

No CEO is perfect.

No investment thesis is bulletproof.

No investing strategy is going to outperform in all markets.

We must leave room for doubt. We must expect the occasional SNAFU.

We are not perfect. Nor is anyone else.

My suggestion?

Get comfortable with nuance.

Make your peace with ambiguity.

Quieten down the parts of your brain that want easy answers. And revenge.

Realise that your tendency – and mine – will be to want to ignore facts that could prove us wrong.

Embrace that, instead.

Oh, and give yourself a break when you try, but still make mistakes.

At the end of the day, we’re all human.

Fool on!

The post Who needs nuance? appeared first on The Motley Fool Australia.

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More reading

• Why has the Queensland Pacific Metals share price crashed over 30% so far this week?
• How to make $56,000 in passive income by investing $500 a month in ASX shares
• CSL share price ‘ticks all the defensive boxes’: fundie
• Why is the Qantas share price smashing the ASX 200 on Tuesday?
• Can the Rio Tinto dividend maintain its high yield of 9.9%?

Motley Fool contributor Scott Phillips has positions in Berkshire Hathaway (B shares). The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Berkshire Hathaway (B shares). The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Berkshire Hathaway (B shares). 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 Queensland Pacific Metals Ltd (ASX: QPM) share price has taken another tumble on Tuesday.

At the time of writing, the energy chemicals developer’s shares are down 8% to 11.5 cents.

This means the Queensland Pacific Metals share price is now down 34% in the space of two days.

Why is the Queensland Pacific Metals share price crashing this week?

Investors have been hitting the sell button this week after the company released the results of the advanced feasibility study on stage 1 of the Townsville Energy Chemicals Hub (TECH) project.

Investors appear alarmed at the capital expenditure estimate for stage one of $1.9 billion plus contingency allowance. This compares to the 2020 pre-feasibility study (PFS) estimate of $650 million.

Though, it is worth noting that the plant scale has increased 2.7x since the PFS and global equipment costs have increased over the past two years.

Nevertheless, the big question is how will the company fund this massive cost? With a market capitalisation now under $200 million, Queensland Pacific Metals needs to raise 10x its market cap in debt or equity to get the project up and running.

Though, with a base case stage one annual EBITDA estimate of $546 million and a pre-tax IRR of 18.4%, there might be some takers.

The company also has a conditional commitment of $250 million from Export Finance Australia and interest from other export credit agencies and commercial banks.

Time will tell what happens, but the existing shareholders that have stuck around might need to brace for some major share dilution in the coming months.

The post Why has the Queensland Pacific Metals share price crashed over 30% so far this week? appeared first on The Motley Fool Australia.

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More reading

• Who needs nuance?
• How to make $56,000 in passive income by investing $500 a month in ASX shares
• CSL share price ‘ticks all the defensive boxes’: fundie
• Why is the Qantas share price smashing the ASX 200 on Tuesday?
• Can the Rio Tinto dividend maintain its high yield of 9.9%?

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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This year has been rough on many ASX shares, but I believe the market still offers plenty of opportunities for investors seeking out notable passive income.  

The S&P/ASX 200 All Ordinaries Index (ASX: XJO) is down 6% year to date. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) has slumped 5% in 2022 so far.

No doubt, plenty of investors will be looking for some inspiration right now. If that sounds like you, you’ve come to the right place!

I’ve crunched the numbers on how I would build a portfolio of ASX 200 dividend shares potentially capable of providing $56,000 in annual passive income by investing just $500 a month. And it involves near-minimal stock picking.

Keep reading to find out how I would aim to retire comfortably with substantial dividend income.

How I would aim for $56,000 of passive income from ASX shares

Stock picking isn’t for everyone. It not only takes time but it generally demands plenty of patience, emotional discipline, and nerve. And even professional stock pickers have been known to get it wrong from time to time.

But there is a simple way to realise the benefits of investing in the market without stock picking.

If I were aiming to receive $56,000 of passive income each year from ASX shares, investing just $500 a month, and didn’t want to research which shares to buy to best capitalise on my investment, I would seek out an index fund.

Personally, I would choose a fund that tracks the ASX 200 – of which there are many.

According to data from S&P Dow Jones Indices, the ASX 200 recorded an average annual growth rate of around 6.6% over the 10 years to 2021 – before considering dividends.

Investing $500 per month into a fund that gains 6.6% each year would see my portfolio with a value of around $531,000 in 30 years.

That’s not bad considering my total outlay would come to a grand total of just $180,000. That’s the power of compounding! Of course, it’s worth mentioning here that past performance isn’t an indication of future performance.

But that’s not all. The real magic kicks off when we consider dividends.

Right now, the SPDR S&P/ASX 200 (ASX: STW) – an exchange-traded fund (ETF) tracking the ASX 200 – offers a 4.51% dividend yield.

Factoring in that figure, and assuming I’d make use of a dividend reinvestment plan (DRP), my figurative portfolio could grow to be worth $1,243,510 in 30 years’ time.

Now, a portfolio of ASX shares valued at $1.24 million and offering a 4.51% dividend yield would likely pay out slightly over $56,000 annually. That’s certainly nothing to scoff at. And it could provide capital gains to boot.

However, as I previously alluded to, nothing in investing is guaranteed, and past performance certainly doesn’t guarantee future performance. It’s also worth considering inflationary impacts when planning a long-term portfolio.

Still, such figures might provide inspiration for those that have found themselves disheartened by 2022’s downturn.

The post How to make $56,000 in passive income by investing $500 a month in ASX shares appeared first on The Motley Fool Australia.

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More reading

• Profit down 57%, share price up 12%. What’s with this ASX 200 healthcare stock today?
• Bought $1,000 of ANZ shares 10 years ago? Here’s how much dividend income you’ve received
• 5 things to watch on the ASX 200 on Tuesday
• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Monday

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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The CSL Limited (ASX: CSL) share price is up 1.4% in early afternoon trade at $304.58 per share.

The global biotechnology company is outpacing the S&P/ASX 200 Index (ASX: XJO) today, with the benchmark index having only just clawed its way back into the green, up 0.1%.

That’s today’s price action for you.

Now, here’s why this fund manager is bullish on the CSL share price moving forward.

A defensive ASX 200 share in volatile times

Speaking to Livewire, Blake Henricks, portfolio manager at Firetrail Investments said CSL fits the bill as a defensive ASX 200 share likely to remain resilient despite any future market volatility.

“It’s large, it’s liquid, it’s healthcare. So to me, it ticks all the defensive boxes. It’s in a defensive growth category,” he said.

CSL’s plasma business operates one of the largest plasma collection networks in the world.

Which is a core reason why Henricks sees growth ahead for the CSL share price:

I think what’s really important is, the tougher the economy gets, the lower one of their key costs goes. And that’s the plasma collection. This is where they pay donors to give blood and they turn that into plasma. The higher unemployment goes, the more people want to give plasma and the costs come down. On that basis, it’s really attractive as a defensive. 

Henricks acknowledged that some investors may be put off by the high price-to-earnings (P/E) ratio. At the current CSL share price, that’s just over 40 times.

But that P/E ratio is backwards looking. Meaning it’s based on CSL’s share price today and on its earnings over the past financial year.

Henricks believes those earnings are set to increase, bringing the P/E ratio sharply lower:

2023 is already written. 2024, the earnings are looking very strong in our view, and you’re seeing it in a mid to high-20s P/E. They expense all their R&D. It’s a very well-run business. And for a defensive, I can’t go past it.

How has the CSL share price performed longer-term?

Over the past five years, the CSL share price has gained 109%, compared to a 21% gain posted by the ASX 200 over that same period.

The post CSL share price ‘ticks all the defensive boxes’: fundie appeared first on The Motley Fool Australia.

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More reading

• ‘Over 100% gain next year’: Expert picks 3 best ASX shares for 2023
• 3 ASX shares to combat the next market dip: experts
• I’d aim for $1 million in retirement buying just 10 ASX 200 shares
• Why this could be a ‘powerful driver of sector dominance’ for CSL shares: Wilsons
• Here’s what Citi is saying about the CSL share price

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 CSL Ltd. 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 Qantas Airways Limited (ASX: QAN) share price is in the green today.

Qantas shares are climbing 0.65% today and are currently trading at $6.20. However, in earlier trade, the airline‘s shares jumped 1.3% to $6.22. For perspective, the S&P/ASX 200 Index (ASX: XJO) is 0.03% in the green.

Let’s take a look at what could be impacting the Qantas share price.

What’s going on?

Qantas shares are outperforming other ASX travel shares on the market today. The Flight Centre Travel Group Ltd (ASX: FLT) share price is 0.38% in the red, while Webjet Limited (ASX: WEB) shares are descending 0.4%.

In news today, Qantas Frequent Flyer has launched thousands of points planes to coastal cities in the summer.

More than 3,000 flights will be turned into “points planes” where every seat can be booked as a classic flight reward.

The destinations include Byron Bay, Hamilton Island, Broome, Whyalla, Kangaroo Island and the Gold Coast.

Qantas states this is the “biggest ever release” of points plane flights. Qantas Loyalty CEO Olivia Wirth said:

While strong demand and higher fuel prices have seen the price of airfares for all airlines increase off historic lows over the past 18 months, the points required to book these seats haven’t increased in years.

Analysts at UBS have recently maintained a buy rating and lifted the price target on the Qantas share price to $7.60.

The broker was impressed with Qantas’ profit guidance update last week. The airline is forecast to deliver an underlying profit between $1.35 billion and $1.45 billion in the first half of the financial year.

Qantas share price snapshot

The Qantas share price has soared 26% in the past year, while it has climbed 5% in the last week.

For perspective, the S&P/ASX 200 Index (ASX: XJO) has shed nearly 0.05% in the past year.

The company has a market capitalisation of about $11.7 billion based on its current share price.

The post Why is the Qantas share price smashing the ASX 200 on Tuesday? appeared first on The Motley Fool Australia.

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More reading

• The Qantas share price is flying again. Why this fundie is concerned
• Top brokers name 3 ASX shares to buy next week
• Own Qantas shares? Guess what the airline is being accused of now
• 3 ASX 200 shares on the coveted Goldman Sachs conviction list
• Why is the Qantas share price having such a top run this week?

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 Flight Centre Travel Group Limited and Webjet Ltd. 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 Rio Tinto Ltd (ASX: RIO) dividend is one of the most popular options out there for income investors.

And it certainly isn’t hard to see why!

According to CommSec data, based on the Rio Tinto share price at the time, the mining giant’s shares have provided investors with above-average dividend yields over each of the last four financial years. Here are the yields:

• FY 2018 – 9.7%
• FY 2019 – 6.6%
• FY 2020 – 5.4%
• FY 2021 – 14.2%

So far in FY 2022, which ends 31 December, Rio Tinto has declared an interim dividend of approximately $3.84 per share. On a trailing twelve-month basis, this brings its dividends to $10.47 per share.

Based on the current Rio Tinto share price of $105.93, this represents a trailing 9.9% dividend yield.

Can Rio Tinto’s 9.9% dividend yield be sustained?

Rio Tinto is one of the world’s largest miners and has exposure to a number of commodities. However, there’s no getting away from the fact that iron ore is its biggest contributor to earnings.

In light of this, iron ore price strength (or weakness) has a big impact on its earnings and ultimately the dividends it is able to pay out.

In FY 2021, iron ore EBITDA came to US$27.5 billion thanks to an average iron ore price of US$160 a tonne. That represents approximately 73% of its underlying EBITDA of US$37.7 billion for the period.

Unfortunately, the iron ore futures price is currently fetching US$93.04 a tonne. And while it hasn’t traded at this level for the whole of FY 2022, the average price received is still likely to be down meaningfully for the year.

This has been driven by softening demand in China following long lockdowns driven by its zero-COVID policy. And with COVID cases soaring again, demand looks likely to remain subdued in the near term. Particularly given the ongoing property crisis in China, which is a sector that consumes significant amounts of iron ore.

Dividend cut incoming

In light of the above, a note out of Goldman Sachs reveals that it expects Rio Tinto’s iron ore EBITDA to fall by over a third to US$17.7 billion in FY 2022. A similarly sharp decline in group EBITDA to US$26.3 billion is also expected.

Unsurprisingly, given this earnings weakness, the Rio Tinto dividend looks unsustainable at FY 2021’s levels and a dividend cut is expected.

Goldman Sachs is forecasting the Rio Tinto dividend to come to US$4.80 per share for FY 2022. This equates to $7.20 in local currency at current exchange rates. Based on the latest Rio Tinto share price, this implies a full year dividend yield of 6.8% for investors.

While certainly not as great as FY 2021 or its trailing yield, the Rio Tinto dividend yield still remains among the biggest on the Australian share market.

Goldman Sachs also sees room for the miner’s shares to rise further with its buy rating and $114.70 price target.

The post Can the Rio Tinto dividend maintain its high yield of 9.9%? appeared first on The Motley Fool Australia.

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More reading

• Rio Tinto share price dips amid ‘important agreement’
• Brokers name 3 ASX shares to buy today
• Does an investment in Fortescue shares provide the ‘healthiest’ ASX exposure to iron ore?
• 3 reasons this fundie is still bullish on ASX mining shares
• The Rio Tinto share price is trading at a ‘compelling’ level: broker

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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When ASX shares take a big fall, it’s worth keeping an eye on what management is doing.

Any big selling action among the company directors tends to indicate they have a negative view on where the share price is heading.

Conversely, when directors go on a buying spree, they likely believe the company is undervalued.

Which brings us to the ASX share that’s dropped 75.8% in 2022 and just saw a director snap up 500,000 shares.

Namely, Electro Optic Systems Holdings Ltd (ASX: EOS).

Bargain hunting executive

On 4 January, the defence and space systems company was trading for $2.34. Today the ASX share is swapping hands for 57 cents, up 1.8% in intraday trading.

Last Thursday, the Electro Optic share price was right around 60 cents.

Indeed, Garry Hounsell, the newly appointed independent chair of EOS, paid 60.4 cents per share for his 500,000 allotment on Thursday. Or about $302,000.

If Hounsell had bought the same number of shares at the beginning of 2022, it would have cost $1.17 million.

If the company can turn its fortunes around, this executive may have scooped up a bargain.

Why has this ASX share nosedived in 2022?

The Electro Optic share price has struggled in the face of operational challenges and stiff competition from global powerhouses.

The ASX share’s satellite communications segment is up against challengers including Apple’s satellite-connected handsets and Elon Musk’s Starlink. Talk about some major rivals.

In its delayed half-year results for the six months ending 30 June (not released until 8 September), the company reported a 45% decline in revenue to $53.8 million. And its net loss after tax leapt to $99 million, up from $11.7 million in the prior corresponding period.

The ASX share has lost 22% since recommencing trade on 8 September following the release of those results.

The post This ASX share is down 76% in 2022, and a director just scooped up 500,000 of them appeared first on The Motley Fool Australia.

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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 Electro Optic Systems Holdings Limited. 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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Stock splits, while popular in the United States, are a relatively rare occurrence for ASX shares. Perhaps it’s our lack of $2,000 shares which, until recently, were sported by both Amazon.com Inc and Alphabet Inc (parent company of Google). Or perhaps it’s just a cultural preference. But what is even rarer is an ETF stock split.

Exchange-traded funds (ETFs) technically don’t have shares. Instead, investors buy units of ETFs. That’s because they are buying into a trust, not a company.

But, just like shares, units can get expensive over time as well. And just like with a share, an ETF provider can order a stock split of its units.

That’s exactly what is happening with the iShares S&P 500 ETF (ASX: IVV) very soon.

S&P 500 ETF to undergo stock split

The iShares S&P 500 ETF is one of the most popular international ETFs on the ASX. It invests in a portfolio tracking the S&P 500 Index. This is the most dominant index representing the US market. It’s also the most widely tracked index in the world.

Everyone who’s anyone in the US markets can probably be found in the S&P 500. Apple, Amazon and Alphabet are all there. As are Ford, Microsoft, Coca-Cola, Tesla, and McDonald’s.

Yet today, one unit of the iShares S&P 500 ETF will cost an ASX investor $598.65 – no mere chunk of change. By comparison, one unit of the Australian-focused iShares Core S&P/ASX 200 ETF (ASX: IOZ) will only set an investor back $29.18 right now.

But this is about to change. Last week, BlackRock, the ETF provider behind these two funds, announced a stock split for the iShares S&P 500 ETF. This will be a 15:1 split, which will see each unit of the ETF become 15 units.

This will have the effect of lowering the cost of one unit by a factor of 15 times, with all unitholders getting 15 times as many shares as they currently own in compensation.

So if an investor owns a single share of the iShares S&P 500 ETF today, valued at $598.65, they will own 15 units, each worth $39.91, following the split. Overall, the investor won’t see either an increase or decrease in their overall position.

IVV or IVVDB?

The last day that units of the iShares S&P 500 ETF will trade on a pre-split basis will be 6 December. Trading will then commence the following day on a post-split basis.

However, this ETF will temporarily use the ticker code IVVDB while trading on a deferred settlement arrangement from 6 December onwards. The ETF will only return to its old code of IVV and to normal trading on 13 December.

So if you own units of the iShares S&P 500 ETF, get ready to own a lot more at a far lower unit price.

The post What you need to know about next week’s iShares S&P 500 ETF (IVV) stock split appeared first on The Motley Fool Australia.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Motley Fool contributor Sebastian Bowen has positions in Alphabet (A shares), Amazon, Apple, Coca-Cola, McDonald’s, Microsoft, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Microsoft, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2024 $47.50 calls on Coca-Cola, long March 2023 $120 calls on Apple, and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, and iShares Trust – iShares Core S&P 500 ETF. 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

You might not realize it, but two weeks ago marked one of the most important data releases of the quarter. November 14 was the last day for money managers and wealthy individuals with at least $100 million in assets under management to file Form 13F with the US Securities and Exchange Commission.

A 13F lets Wall Street professionals and everyday investors have a look under the hood to see what the brightest minds on Wall Street bought, sold, and held in the most recent quarter. Even though 13Fs have their flaws — they’re at least six weeks old by the time they’re filed, meaning additional trades may have been made — they can help investors identify the companies and trends garnering the attention of top money managers.

Although most billionaire money managers have used the 2022 bear market as an opportunity to buy high-quality companies at a discount, others haven’t been able to run to the exit quickly enough. What follows are three ultra-popular stocks billionaires have been busy selling.

Tesla

There’s arguably no stock billionaires sold more aggressively during the third quarter than electric-vehicle (EV) manufacturer Tesla (NASDAQ: TSLA). All told, five billionaire money managers pressed the sell button, including Jim Simons of Renaissance Technologies, Jeff Yass of Susquehanna International, Philippe Laffont of Coatue Management, Ken Griffin of Citadel Advisors, and Israel Englander of Millennium Management. Simons reduced his fund’s stake by 99.9%, while the four other billionaire fund managers reduced their stakes by 16% to 55%.

Why run for the exit? One reason may be the realization that Tesla isn’t immune to the cyclical challenges facing the auto industry. Tesla has historically been valued at a nosebleed premium to legacy automakers on the notion that it’ll outpace these stalwarts in the sales and profit-growth department. However, COVID-related supply chain disruptions, especially in China, coupled with historically high inflation and a weaker US and global economic outlook, bode poorly for near-term EV sales.

Perhaps an even bigger downside catalyst is Tesla’s own CEO Elon Musk. Although Musk is a visionary who’s been largely credited with helping Tesla become one of the world’s largest publicly traded companies, he’s also become a significant liability for the company. Aside from the significant distraction of operating social media site Twitter, a large number of promises regarding the debut of new vehicles or innovations have failed to come to fruition. Tesla’s valuation is very much dependent on Musk’s visions becoming reality.

On the bright side, Tesla is profitable on a recurring basis, and the ramp-up at its two new gigafactories (Berlin, Germany, and Austin, Texas) should allow production and sales to quickly scale. But maintaining its North American market share will undoubtedly prove difficult as legacy automakers and newer players scale their own EV operations.

Walt Disney

Disneyland may be the “Happiest Place on Earth,” but Walt Disney (NYSE: DIS) has been nothing short of a frowny face for billionaire investors. During the third quarter, billionaires Ole Andreas Halvorsen of Viking Global Investors, Simons of Renaissance Technologies, and Ray Dalio of Bridgewater Associates, all sold shares. In particular, Halvorsen and Dalio completely exited their respective fund’s positions in Disney.

The about-face we’ve witnessed in Disney stock can likely be explained by two factors. First, the company still hasn’t put its operating issues tied to the COVID-19 pandemic into the rearview mirror. China’s zero-COVID strategy continues to hamper Disney’s theme-park operations. Additionally, traditional moviegoing hasn’t come close to achieving its pre-pandemic level.

The other issue is that Walt Disney’s streaming services are racking up some jaw-dropping losses as they scale. While direct-to-consumer revenue rose 8% in the company’s fiscal fourth quarter (ended Oct. 1, 2022), the segment’s operating loss nearly doubled to $1.5 billion.  Poor operating performance is not something Disney shareholders are used to.

However, the subscriber figures at Disney+ (164.2 million) have ramped up incredibly fast, and the company appears confident the segment will turn the corner to profitability by the end of fiscal 2024.

What’s more, Walt Disney has exceptional pricing power and the ability to engage consumers like no other media company. In short, these billionaire sellers may ultimately regret their decision.

Meta Platforms

The third ultra-popular stock billionaires were busy selling in the third quarter is social media behemoth Meta Platforms (NASDAQ: META). Billionaires Stephen Mandel of Lone Pine Capital, Griffin of Citadel Advisors, and Simons of Renaissance Technologies, all slashed their stakes in Meta by multiple millions of shares from the sequential second quarter.

Perhaps the biggest knock against Meta is a weakening macroeconomic outlook for the US and global economy. Advertising is one of the first spending categories to be hit when the winds of recession begin blowing. Given that Meta generates 98% of its revenue from advertising, its top and bottom line are directly impacted by economic weakness.

Another plain-as-day concern billionaires have about Meta is CEO Mark Zuckerberg’s exorbitant spending on the metaverse — the 3D virtual world that allows users to interact with each other and their environment. Reality Labs, the company’s metaverse operations, recorded $1.4 billion in sales through the first nine months of 2022, but racked up a jaw-dropping $9.4 billion in losses.  Worse yet, spending is expected to increase in 2023. The end result has been reduced free cash flow and lower quarterly profits.

But as with Walt Disney, I’m skeptical of the skeptics. Meta owns four of the most popular social media assets on the planet (Facebook, Facebook Messenger, WhatsApp, and Instagram) and should benefit from strong pricing power during extended periods of economic expansion.

Furthermore, Meta is sitting on a healthy net cash pile totalling nearly $32 billion. The company has levers it can pull if it wants to boost its free cash flow. The point being that Meta Platforms’ operating model is so dominant, and its balance sheet so flush with cash, it has the financial flexibility to make aggressive investments in the metaverse. After all, the metaverse could be the next multitrillion-dollar opportunity.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 3 ultra-popular stocks billionaires have been busy selling appeared first on The Motley Fool Australia.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Sean Williams has positions in Meta Platforms, Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Meta Platforms, Inc., Tesla, and Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2024 $145 calls on Walt Disney and short January 2024 $155 calls on Walt Disney. The Motley Fool Australia has recommended Meta Platforms, Inc. and Walt Disney. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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