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The Qantas Airways Limited (ASX: QAN) share price has been taking off lately, leaping nearly 10% over the last six months. And there have been plenty of positive releases driving the S&P/ASX 200 Index (ASX: XJO) stock higher.

The airline announced it expects to post its first half-year profit since the onset of the COVID-19 pandemic in October. It then upped its predictions once more, telling investors it tips its first-half underlying pre-tax profit to come in at between $1.35 billion and $1.45 billion last week.

Though, recent months haven’t been all smooth sailing for Qantas. The airline has fielded its fair share of criticism. Indeed, Choice recently crowned the airline as Australia’s ‘shonkiest’ brand – a critique Qantas rebuked.

All in all, the Qantas share price is currently $6.15. That’s 19% higher than it was at the start of 2022 and 25% higher than it was this time last year.

Not to mention, it peaked at $6.36 last week – marking its highest point since February 2020.

But there might be clouds on the horizon for the Qantas share price. Here’s why one fundie tips the stock as a sell.

Is the Qantas share price about to dive?

Red Leaf Securities CEO John Athanasiou has tipped Qantas shares as one to sell, as per The Bull, saying the airline could soon suffer amid cost-of-living pressures.

The fundie said Qantas has benefited from surging demand for travel after previous lockdowns despite claims of poor customer service. But that might soon come to an end. Athanasiou continued:

Our concerns are higher interest rates and rising cost of living expenses.

As interest rates rise and inflation continues to run rampant, Aussies might find themselves struggling to pay for housing, food, and other essentials. It’s likely that holidays could be among the first expense surrendered in such an environment, according to Athanasiou.

Of course, that could be bad news for Qantas’ bottom line and, in turn, its share price.

The post The Qantas share price is flying again. Why this fundie is concerned appeared first on The Motley Fool Australia.

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More reading

• 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?
• 5 of the craziest things making news on the ASX this week

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 TASK Group Holdings Ltd (ASX: TSK) share price is lighting up today after the ASX tech share released its interim FY23 results and upgraded guidance.

In early afternoon trade, the TASK share price has raced 35.7% higher to 38 cents.

The group formerly traded as Plexure (ASX: PX1), a mobile engagement software company behind the MyMacca’s mobile app.

But in late 2021, Plexure made a $120 million play for TASK, a transaction management platform for enterprise clients across food service companies, stadiums, and casinos.

TASK’s platform takes care of everything from point of sale and online ordering to loyalty, mobile apps, and other engagement products, all on a single technology stack. 

Its customer base includes the likes of Starbucks Australia, Guzman Y Gomez, Retail Food Group Limited (ASX: RFG), Crown Casino, and Marvel Stadium.

Last month, the merged group changed its name and ticker code to reflect the completion of its business transformation.

And today, this group has handed in its interim results for the six months ended 30 September 2022. Let’s take a look.

Up to the task

Starting with the topline, the group delivered total revenue of NZ$26.6 million. This represents a whopping 97% growth over the pre-merger period of 1H22, but it includes the contribution from TASK.

TASK generated revenue of NZ$9.6 million during the half, an increase of 50% on 2H22. 

The Plexure division achieved the remaining NZ$17 million of revenue, up 26% on 1H22, reflecting increased user numbers and customer engagement. 

Notably, the Plexure division was cashflow positive during the half, aided by a 25% reduction in staff costs on the back of the business restructuring undertaken in FY22.

Before the merger, Plexure was operating at a loss. But it’s now added a profitable TASK to the fray, helping to improve the earnings of the combined group.

In the most recent half, the group achieved positive adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA) of NZ$2 million. This is a marked turnaround from the adjusted EBITDA loss of NZ$7 million in the prior period.

On the bottom line, the group posted a net loss after tax of NZ$4.6 million, a 46% improvement on the prior period. This was driven by the contribution from TASK, along with benefits from the restructuring of the Plexure division.

The group boasts a debt-free balance sheet with NZ$24.2 million of cash at its disposal.

It achieved positive operating cash flows of NZ$10.1 million during the half, a dramatic improvement from outflows of NZ$7.8 million in the prior period. 

At the same time, the group’s deferred revenue increased from NZ$9.8 million to NZ$22.1 million.

Management commentary

Commenting on the results, TASK CEO Dan Houden said:

The strong growth in revenue and turnaround in profitability we have delivered this half is testament to team’s progress in transforming the business. 

The results demonstrate the merged Group’s turnaround following a corporate restructuring of the Plexure division in FY22 and the renegotiated contracts with McDonald’s on 1 August 2022, as well as increased customer demand across both divisions.

Earnings guidance receives big boost

Pleasingly for shareholders, TASK has upgraded its FY23 guidance.

It’s now expecting total revenue of between NZ$59 million and NZ$62 million compared to prior guidance of NZ$56 million. 

Adjusted EBITDA is also expected to come in between NZ$8.5 million and NZ$9.5 million, a stellar improvement from prior guidance of NZ$3.7 million.

This has been driven by the group’s strong first-half results and management’s confidence in the impact of new terms with McDonald’s and other contracts executed throughout 1H23.

In August, Plexure entered into new agreements with its largest customer, McDonald’s.

Under the new deal, Plexure will continue to provide its platform to McDonald’s over the next five years, for net positive cash flow per annum, subject to operational performance. This compares to previous losses from the Plexure division.

TASK share price snapshot

Even after today’s meteoric rise, TASK is still a minnow in the ASX tech space, currently commanding a market capitalisation of around $135 million.

Shareholders will be hoping the TASK merger will be the impetus of a sustained turnaround after the Plexure business faced a rocky start to listed life on the ASX.

So far, it’s been delivering. The TASK share price has rocketed 81% over the last six months. But it’s still down 67% since listing on the ASX at the end of 2020.

The post Guess which ASX tech share is rocketing 36% on a huge ‘turnaround in profitability’ 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
• Why is the Bubs share price tumbling 9% to a 52-week low on Monday?
• 3 ASX 200 shares to weather the inflation storm: fundie
• Mike Henry has sold $650k of BHP shares in the past week. What’s going on?
• Telstra share price ‘hasn’t fully captured the upside in value’: fundie

Motley Fool contributor Cathryn Goh 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 Bubs Australia Ltd (ASX: BUB) share price has continued its poor run and is sinking on Monday.

In afternoon trade, the junior infant formula company’s shares are down 9% to a 52-week low of 31 cents.

This means the Bubs share price is now down more than 50% over the last six months.

Why is the Bubs share price sinking?

Investors have been hitting the sell button today after Bubs releases its annual general meeting presentation ahead of the main event.

Unfortunately, that update revealed that the company’s performance has deteriorated since the end of the first quarter.

At the event, Bubs’ under-fire CEO, Kristy Carr, revealed that revenue is expected to be flat during the first half. That’s despite the company delivering a 29% increase in revenue over the prior corresponding period during the first quarter.

Why is Bubs underperforming again?

Carr blamed the shift to a manufacturer to consumer model (M2C) in China for some of this underperformance. The M2C model aims to give Bubs visibility on where each tin of infant formula is sold to the final consumer. It expects this to help understand where to invest each marketing dollar to obtain the best return in the future.

In respect to the company’s first half growth, Carr commented:

Short-term revenue growth is likely to be constrained by the transition to the new M2C model in China, and sell-through velocity of the initial high volume pipe-fill orders to new retailers in the USA. Due to this phasing, we expect 1H23 revenue to be largely consistent with prior year, with strong growth momentum to be realised in 2H23.

For the full year, management expects an improvement in the second half to lead to “healthy” full year growth. Though, this will be driven by an increased investment in resources and marketing, which is likely to put pressure on margins and ultimately its balance sheet if it continues to burn through its cash. Carr added:

Overall, we expect FY23 to deliver healthy growth in revenue and further improvements to our product margin. The business will increase its investment in resources and marketing to support the growth in demand. In 2H FY23, the business will also commence an ERP upgrade project which will bring further efficiency and automation to daily business operations.

Despite the ongoing macro challenges, and softer start to the new financial year than planned, we remain confident in achieving our long-term growth ambitions.

Given this update and the Bubs share price performance, it certainly will make the shareholder vote interesting today.

The post Why is the Bubs share price tumbling 9% to a 52-week low on Monday? appeared first on The Motley Fool Australia.

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More reading

• Why I’d buy and hold these ASX shares until 2030
• Why is the Bubs share price down 16% this week?
• Why Brainchip, Bubs, EML, and Fortescue shares are falling today
• Why is the Bubs share price sinking today when the ASX All Ords is roaring?

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 recommended BUBS AUST FPO. 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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Not all S&P/ASX 200 Index (ASX: XJO) shares are created equal.

That may seem an obvious statement.

But with 2022 having seen inflation rocketing to 30-year highs with the prospect of a recession ahead, the ASX 200 shares that outperformed during the COVID recovery years may not deliver that same strong performance in the year ahead.

So which blue-chip companies look best set to weather the inflation storm?

For some expert insight into that, we defer to the analysts over at Perpetual Asset Management Australia.

Three ASX 200 shares to weather the inflation storm

When looking for ASX 200 shares likely to outperform in a time of high inflation and rising interest rates, the analysts focused on companies with pricing powers that are able to better control their own destinies than their competitors.

The first ASX 200 share to make their list is automotive spare parts and accessories giant Bapcor Ltd (ASX: BAP).

“Australia’s new and used car market has experienced unprecedented demand over 2022, and we expect this growth to continue in the medium term,” Perpetual said. “The attraction of the business centres on the strength of their competitive position within the automotive aftermarket industry, the nature of that industry, as well as Bapcor’s proven strategy.”

Perpetual notes that the number of cars in Australia continues to grow consistently even as they get more technologically complex, requiring higher-end repair and maintenance parts.

According to Perpetual:

Their customers are essentially the mechanics, and the mechanics are much more focused on getting the right part quickly, than on price. Ultimately, that means Bapcor has a high degree of pricing power, an attribute that is increasingly important in the current inflationary environment.

Which brings us to the second inflationary resilient ASX 200 share.

The world’s largest pallet pooling operator

Brambles Ltd (ASX: BXB) has operations in 60 nations. Its pallets and containers are used to transport goods across the world.

Explaining why Perpetual likes this ASX 200 share in today’s inflationary environment, the analysts note: “The transport and logistics company has been able to use its considerable pricing power and clout in the market as insulation from inflationary costs, while also being disciplined in recovering costs.”

According to Perpetual:

Brambles has kept revenues strong over 2022 through its ability to pass on in full the rising costs of timber, fuel, labour and transport to customers using its pool of 360 million pallets, crates and containers…

We expect Brambles to win new customers in the US, management to extract better operating performance from the existing network and to continue to push prices to reflect the higher inflation in the business.

They noted this ASX 200 share achieved a 14% year-on-year profit growth in 2021-22 “despite having to absorb US$470 million in timber price inflation”.

The third inflation-resistant ASX 200 share

Rounding off the list of ASX 200 shares likely to outperform in a time of rising interest rates and high inflation is telecommunications and information service provider Telstra Group Ltd (ASX: TLS).

Perpetual said it’s bullish on Telstra, with its analysts “attracted to Telstra’s market-leading mobile position”.

On the inflation front, Perpetual notes that Telstra “offers an infrastructure-like exposure through the Infraco assets, in particular inflation-linked receipts from the National Broadband Network for use of Telstra’s network assets”.

The analysts said there is some risk that rising interest rates could see some valuation pressure on this ASX 200 share. However, they added that “the quality, scale and defensive revenue attributes of Telstra’s network assets make them an appealing proposition”.

The post 3 ASX 200 shares to weather the inflation storm: fundie appeared first on The Motley Fool Australia.

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More reading

• Telstra share price ‘hasn’t fully captured the upside in value’: fundie
• These 2 ASX 200 shares could be a lifeline in a recession
• Use the ASX 200 market correction to retire early. Here’s how
• Telstra is in strife again. Here’s why
• Could the stage now be set for Telstra shares to outperform?

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 positions in and has recommended Telstra Corporation Limited. The Motley Fool Australia has recommended Bapcor. 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 a CEO of an ASX share sells stock of their own company, it is usually enough to pique the attention of investors. But when the CEO of the largest share on the S&P/ASX 200 Index A(SX: XJO) offloads more than half a million dollars worth of shares, it’s a big deal. So let’s talk about BHP Group Ltd (ASX: BHP) shares.

BHP is of course the largest publically-traded company in Australia. With its market capitalisation of almost $224 billion, BHP occupies more than 10% of the total weighting in the ASX 200 Index alone.

And BHP has been on quite the run lately. It was only back in late September that the mining giant was trading at close to $36 a share. But today, BHP is closing in on the $44 mark, having gained an impressive 21% or so over the past two months.

So that brings us to the CEO. Mike Henry has run BHP since 2020, succeeding Andrew Mackenzie at the top job.

But a recent ASX filing shows that Henry has just unloaded 15,002 BHP shares. Yep, on 22 November, Henry sold those 15,002 shares for a price of $43.32 each. That’s a grand total of $649,886.64 in proceeds.

So why is the CEO of BHP selling out such a large parcel of shares? Is this a vote of no confidence in BHP’s future?

BHP’s CEO selling off shares?

Well, it’s time for some context.

So yes, Henry did make this sale. However, on this same day, he became eligible for a massive influx of new shares and performance rights. So on this day, Henry received a grant of 325,471 rights to acquire BHP shares at a later date.

These form part of Henry’s compensation package. In addition, Henry also received 31,616 ordinary BHP shares granted from previous performance rights.

It was from these 31,616 BHP shares that Henry sold his 15,002 shares. So he still holds more shares than he did before 22 November, despite the $650k sale.

Thus, for investors worried that Henry might not have enough skin in the game, let’s set minds at ease. Even after this sale, Henry now has 677,218 BHP shares to his name. That has a value of approximately $29.6 million at today’s prices.

Henry also has an additional 761,423 rights that could convert into additional BHP shares in the future. As well as another 248,854 ‘cash and deferred plan awards’ that can also convert to stock at some point.

That’s a lot of skin.

The post Mike Henry has sold $650k of BHP shares in the past week. What’s going on? appeared first on The Motley Fool Australia.

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More reading

• Almost ready to retire? How to generate $70k per year of passive income from ASX dividend shares
• 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
• BHP share price has ‘no upside’: Goldman Sachs
• ‘Rare opportunity’: Expert explains why he just added this ASX 200 share

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Telstra Group Ltd (ASX: TLS) share price is slightly in the green today, but could it have even more upside potential in the future?

Telstra shares are up 0.25% at the time of writing and are currently trading at $4.01 apiece. For perspective, the S&P/ASX 200 Index (ASX: XJO) is falling 0.46% today.

Let’s take a look at the outlook for this ASX communication share.

What’s ahead for Telstra?

Perpetual Asset Management has named Telstra as one of three “resilient stocks” with pricing power.

Analysts are particularly positive on Telstra’s exposure to InfraCo assets. Telstra created InfraCo as a standalone business with the entity building a national fibre network for internet connectivity. Commenting on Telstra InfraCo, analysts said:

We believe the stock hasn’t fully captured the upside in value for the Infraco assets, and as such we see some downside protection.

Further, Telstra carries far less debt relative to earnings than many other infrastructure-like exposures. As such a partial (or even full) selldown of Infraco assets would see significant sums returned to shareholders through capital management.

InfraCo fixed delivered $2.4 billion of income for Telstra in the 2022 financial year. NBN recurring receipts lifted 3.3%. As Telstra highlighted in its AGM in October, InfraCo’s fixed growth is tipped to be further supported in the future by the inter-city fibre project announced in February.

Analysts at Perpetual also touted Telstra’s mobile network, amid Optus and TPG challenges. Perpetual said:

One stock held by some Perpetual funds is Telstra.

We are attracted to Telstra’s market leading mobile position. Competitors Optus and TPG are dealing data privacy and integration challenges, which ought to provide Telstra an opportunity to capitalise on their already strong subscriber momentum.

Telstra’s mobile business contributed $700 million to EBITDA growth in the 2022 financial year.

Share price snapshot

The Telstra share price has descended 1.1% in the past year. In the last month, Telstra shares have climbed just over 2%.

For perspective, the ASX 200 has lost nearly 1% in the past year.

Telstra has a market capitalisation of more than $46 billion based on the current share price.

The post Telstra share price ‘hasn’t fully captured the upside in value’: fundie appeared first on The Motley Fool Australia.

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More reading

• Rio Tinto share price dips amid ‘important agreement’
• I’d drip-feed $500 a month into cheap ASX shares in this share market rally
• 3 ASX 200 shares that announced supersized dividends in November
• 5 things to watch on the ASX 200 on Monday
• If you bought $20,000 worth of Fortescue shares this year, here’s how much dividend income you’d have

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

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The Rio Tinto Limited (ASX: RIO) share price is in the red on Monday despite the company announcing an agreement with the Puutu Kunti Kurrama and Pinikura (PKKP) Aboriginal Corporation.

The agreement marks an effort to remedy the S&P/ASX 200 Index (ASX: XJO) iron ore giant’s relationship with the PKKP people following the destruction of two ancient rock shelters at Juukan Gorge in 2020.

Right now, the Rio Tinto share price is 1.85% lower at $103.70.

For comparison, the ASX 200 has slipped 0.49% at the time of writing. Meanwhile, the S&P/ASX 200 Materials Index (ASX: XMJ) is underperforming, falling 1.49%.

Let’s take a closer look at Rio Tinto’s latest agreement and how the company’s share price is performing today.

Rio Tinto share price falls amid ‘important agreement’

The Rio Tinto share price is slipping despite the company shaking hands on the creation of the Juukan Gorge Legacy Foundation.

Under the agreement, the ASX 200 giant will provide financial support to the foundation, which will be led and controlled by traditional owners. The financial terms of the agreement will not be disclosed.

The foundation will work to progress major cultural and social projects. Such projects will include creating a new keeping place for storage of important cultural materials.

Today’s release from Rio Tinto reads:

In accordance with the right to self-determination, the agreement reflects the desire of the Traditional Owners to create a foundation that supports the cultural, social, educational, and economic aspirations of the group. The foundation … will also enable the delivery of broader benefits through commercial partnership opportunities.

Further discussions have centred on a new approach to co-management of Country and the ongoing rehabilitation of the rock shelters and their surrounds.

Rio Tinto CEO Jakob Stausholm commented:

We fell far short of our values as a company and breached the trust placed in us by the PKKP people by allowing the destruction of the Juukan Gorge rock shelters. As we work hard to rebuild our relationship, I would like to thank the PKKP people, their elders, and the Corporation for their guidance and leadership in forming this important agreement.

Today’s tumble included, the Rio Tinto share price is 4% higher than it was at the start of 2022. It has also gained 10% over the last 12 months.

Comparatively, the ASX 200 has fallen 5% year to date. The index is currently 0.5% higher than where it was this time last year.

The post Rio Tinto share price dips amid ‘important agreement’ appeared first on The Motley Fool Australia.

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More reading

• I’d drip-feed $500 a month into cheap ASX shares in this share market rally
• 3 ASX 200 shares that announced supersized dividends in November
• 5 things to watch on the ASX 200 on Monday
• If you bought $20,000 worth of Fortescue shares this year, here’s how much dividend income you’d have
• Here are the top 10 ASX 200 shares today

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 S&P/ASX 200 Index (ASX: XJO) has lifted by around 12% since the end of September 2022. Delivering an annual return in just two months is quite the share market rally. But it could still be a good hunting ground for cheap ASX shares.

Some businesses still have low price/earnings (p/e) ratios despite investors pushing through a bit of a recovery for share prices.

The retail sector has gone through a tough time this year. Not only do higher interest rates hurt the valuation of companies, but lower demand by consumers could hurt businesses even more.

While there may be more volatility ahead, here’s why I think investing in the following two cheap ASX shares during this rally could make sense.

Adairs Ltd (ASX: ADH)

Adairs is a leading retailer of homewares and furniture through three different brands: Adairs, Mocka, and Focus on Furniture.

In terms of the Adairs share price, the ASX share has dropped by more than 40% this year to date. This puts the valuation at just 8x FY23’s estimated earnings.

I think that the cheap ASX share has plenty of long-term potential for returns. It has identified several locations where demographics would “clearly support” new stores, which will be larger ones.

The company hopes that more retail floor space will lead to stronger margins and more members. Management says there is a strong link between membership numbers and sales, as well as between store floor space and sales.

Mocka has been an online-only company, and sales have grown by between 30% to 35% in four of the last five years. But, it’s now expecting to establish a brick-and-mortar presence to leverage the benefits of an omni-channel strategy in time. There could be good synergies between Mocka and the acquired Focus on Furniture business. Mocka sales are expected to be at least $150 million annually within five years.

Adairs thinks Focus on Furniture can grow its store network from 23 to between 50 to 60 across Australia. This could “result in annual sales of circa $250 million” for the company when it generated $121 million in FY22.

The cheap ASX share could pay a grossed-up dividend yield of 11.4% in FY23.

Shaver Shop Group Ltd (ASX: SSG)

Shaver Shop is another retail ASX share. It is a part of the $10 billion beauty and personal care market in Australia – this market is expected to grow to $12 billion by 2026. The company says that it sells some of the “most innovative and technically advanced products” in its categories.

Interestingly, in FY22, exclusive products generated more than 50% of sales and around 60% of gross profit.

The company wants to continue to expand its ranges and products on offer. It’s planning to expand its New Zealand store presence. The business also noted recently that it had a “clean” inventory position with no material supply chain concerns.

While online sales may dip, store sales have recovered as shoppers resume normal shopping behaviour.

According to Commsec, the Shaver Shop share price is valued at under 9x FY23’s estimated earnings. The cheap ASX share could pay a grossed-up dividend yield of 13.1% in the current financial year.

The post I’d drip-feed $500 a month into cheap ASX shares in this share market rally appeared first on The Motley Fool Australia.

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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 ADAIRS FPO. The Motley Fool Australia has positions in and has recommended ADAIRS FPO. 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.

There are few, if any, people whose names are associated with success in the stock market quite like Warren Buffett, and for good reason. With a net worth of more than $100 billion, Buffett has rightfully earned his spot among investing royalty. And one of the best things about his success is that it didn’t take some extravagant strategy to do it.

As we endure a bear market that has shrunk the value of many investors’ portfolios, here are some gems from Buffett that can help you better handle it and, indeed, use it as an opportunity.

There’s value to be found

Warren Buffett is the poster child for value investing, which is a strategy by which investors look to find stocks trading at prices lower than their intrinsic (true) value. Value investors aim to buy undervalued stocks and profit from the increase in their intrinsic value eventually. For example, if a stock is trading at $100, but an investor believes the intrinsic value is $120, they’d invest, hoping to, at minimum, profit from the 20% increase once the market realizes its true value.

During bear markets, investors can find many great companies trading at a ‘discount’ or whose stock price may have overcorrected. Let’s take Walmart, for example. From early April to mid-June 2022, Walmart’s stock price dropped by well over 20% to around $120 per share, which many investors would agree was below its intrinsic value. Investors who took advantage of that dip have made more than 25% returns since then.

Generally, when a stock’s price drops significantly, you must ask yourself why it’s happening. But, during a bear market, when prices are dropping across the board, many of these declines are just a byproduct of the greater economy and not an indication of something fundamentally changing with the business.

Don’t follow the crowd

There are many great investing quotes credited to Buffett, but none may be as relevant to today’s environment as: “Be fearful when others are greedy, and greedy when others are fearful.” Stock prices decline because investors begin selling more shares than people are buying, and demand drops. This is usually a sign that investors are fearful. Instead of following suit, it could be time to get greedy and turn it up a notch if you have the financial means.

History has shown us that bear markets are inevitable, and often necessary. The sooner you learn that the better because it helps you tune out the short-term noise and focus on the long term. It’s easy to invest consistently when prices are rising, but not so much when prices are seemingly dropping before your eyes. Slowing or stopping investing can set back your financial progress.

Since going public in December 1980, Apple‘s stock price has increased well over 100,000% yet during that span, it’s had negative returns in one-third of those years (including 2022 so far). Down years happen to even the best of companies; it’s virtually inevitable. However, if you’re focused on the long term, it shouldn’t matter too much if your portfolio fluctuates weekly, monthly, or yearly as long as the results are there in the long run.

Utilize dollar-cost averaging

Buffett has long been a proponent of dollar-cost averaging, stating, “If you like spending six to eight hours per week working on investments, do it. If you don’t, then dollar-cost average into index funds.” To dollar-cost average, you pick your stocks, determine how much you can invest, and then invest on a set schedule no matter what. The frequency isn’t as important as sticking to your preset schedule.

Dollar-cost averaging is good because it keeps you consistent as well as prevents you from trying to time the market — which investors tend to do during bear markets more so than bull markets. Think about it: If prices are dropping, why buy today when you can get it cheaper later on, right? In theory, yes. But the problem is that’s trying to time the market, which is essentially impossible to do consistently over the long run.

Dollar-cost averaging makes it easier to focus on the end goal without getting distracted.

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

The post What Warren Buffett can teach us about handling bear markets appeared first on The Motley Fool Australia.

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More reading

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• Three comforting lessons for investors whose portfolio has been smashed versus the surprisingly good return of the ASX 200
• Warren Buffett owns these 5 value stocks
• Warren Buffett doesn’t follow his own advice – and it’s made him richer
• I’d use the Warren Buffett method to create a ‘best ASX shares to buy now’ list

Stefon Walters has positions in Apple. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Berkshire Hathaway (B shares), and Walmart Inc. 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), long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Apple and 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.

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

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Investors are selling down the City Chic Collective Ltd (ASX: CCX) share price again on Monday.

At the time of writing, the plus sized fashion retailer’s shares are down over 23% to a multi-year low of 76 cents.

This means the City Chic share price has now lost 45% of its value in just two trading sessions.

Why are investors selling down the City Chic share price?

Investors have been heading to the exits in their droves following the release of a dismal trading update at its annual general meeting last week.

Financial year to date, City Chic reported a 2% decline in revenue to $128.6 million. This was driven largely by a very poor performance in the United States despite the benefits of favourable currency movements.

As a comparison, Goldman Sachs was expecting 18% revenue growth for the first half.

Management revealed that this poor performance was driven by “the consumer is looking for promotion as a reason to buy.” This has led to the competitive landscape intensifying as retailers promote aggressively to capture the limited spending. This is also putting significant pressure on margins.

Another area that could be causing alarm for investors is the company’s inventory position. Management’s decision to load up on inventory in order to combat supply chain issues appears to have backfired spectacularly.

City Chic expects its inventory to be in the range of $168 million to $174 million at the end of the first half. That’s almost as much as its market capitalisation. Following today’s decline, City Chic now has a market capitalisation of approximately $185 million.

Broker response

According to a note out of Goldman Sachs, in response to the update, its analysts have retained their neutral rating but slashed their price target by almost a third to $1.10.

Goldman commented:

Both a weaker top line and gross margin pressure were key risks we had flagged in our initiation, particularly around US/UK/EMEA; however, the quantum of the downgrade was more severe than we had factored in our numbers. As a result, we revise our FY23/FY24/FY25 EPS down by -101%/-26%/-17% reflecting both revenue and gross margin downgrades and lower our 12m TP by 29% to A$1.10. With this offering 10% potential upside, we remain Neutral rated.

Despite the attractive long term growth opportunity, we believe there is near term risk around (1) elevated inventory levels; (2) the macro environment for the middle-income consumer in the US and Europe which has proven to be weak; and (3) discount intensity with the competitive landscape highly promotional.

The post Why has this ASX All Ordinaries share crashed 45% in 2 days? appeared first on The Motley Fool Australia.

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More reading

• Why City Chic, Deep Yellow, Objective Corp, and Pilbara Minerals shares are falling
• What is driving the City Chic share price 21% lower on Friday?

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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