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Recent volatility on the ASX has likely left many quality shares trading for dirt-cheap prices – and that’s good news for long-term investors.

Buying undervalued shares amidst market downturns means shareholders might have a greater chance of taking advantage of market cycles and capitalising on a future recovery.

Though, investors should be wary that not all troubled stocks will post a recovery.

Historically, however, the market has always returned to ­– and surpassed – its previous highs following a downturn. Plenty of cheap ASX shares might be gearing up to outperform over the coming decade.

Is now a good time to hunt for bargain stocks?

The ASX has struggled to gain traction amid soaring inflation, rising interest rates, and global turmoil in 2022.

Indeed, the S&P/ASX 200 Index (ASX: XJO) has fallen 6% year to date while the benchmark All Ordinaries Index (ASX: XAO) has dropped 7%.

That’s better than the pain felt on Wall Street. The Dow Jones Industrial Average Index (DJX: .DJI), the S&P 500 Index (SP: .INX), and the Nasdaq Composite Index (NASDAQ: .IXIC) all succumbed to bear markets this year.

Of course, plenty of ASX shares have fallen alongside global markets.

Many might have dumped a chunk of their value for good reason, such as structural or financial uncertainties. Others, however, might be unfairly undervalued due to the market’s own uncertainties. These are the stocks I’d be hunting right now.

How I’d find cheap ASX shares to hold for 10 years

It can be tricky to discern which ASX shares are trading cheaply for good reason, and which might be being overlooked by the market.

Personally, I would be seeking out cheap shares with a strong balance sheet, competitive advantages over their peers, and a history of coming out of tough times stronger. In my opinion, such stocks are more likely to outperform their peers over the coming decade.

I would also delve into a company’s reports to calculate metrics such as its price-to-book (P/B) ratio and price-to-earnings (P/E) ratio. Doing so might help gauge if an ASX share is, indeed, trading for a dirt-cheap price.

Finally, I would hunt for multiple shares across various sectors so to diversify my portfolio. Diversification can help manage some of the risks involved in investing.

The post Why I’d buy dirt-cheap ASX shares now and aim to hold them for a decade appeared first on The Motley Fool Australia.

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More reading

• Vulcan share price storms higher on lithium extraction update
• Here’s why the ANZ share price could be a good value pick for dividends
• Flight Centre share price tumbles on trading update
• Could government intervention rain on the Core Lithium share price parade?
• Goldman Sachs names the ASX retail shares to buy in the current environment

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 Vulcan Energy Resources Ltd (ASX: VUL) share price is on the move on Monday morning.

At the time of writing, the lithium developer’s shares are up 4% to $8.10.

Why is the Vulcan share price charging higher?

Investors have been bidding the Vulcan share price higher today after the company released a positive announcement.

According to the release, Vulcan has successfully developed, tested, and demonstrated its own in-house lithium extraction sorbent, VULSORB, for sustainable lithium extraction from the Upper Rhine Valley Brine Field and the Zero Carbon Lithium Project.

The release notes that VULSORB has demonstrated higher performance and lower water consumption for lithium extraction in Vulcan’s pilot plant, compared with commercially available sorbents tested by the company.

The company also highlights that the manufacturing process for the lithium extraction sorbent has been shown to be environmentally benign and many of the reagents are recycled.

Another positive with the process is that it is much faster and more efficient, with a lower carbon footprint, than the legacy industry method of using large-scale evaporation and large quantities of chemical reagents to extract the lithium and process into lithium hydroxide.

In fact, the sorbent extraction happens in hours, rather than up to 18 months as is the case with legacy extraction routes. This will allow Vulcan to quickly respond to the needs of its customers.

In light of the above, Vulcan has selected VULSORB as its first choice of sorbent for lithium extraction in its planned Phase 1 commercial development, with first commercial production of lithium targeted for the fourth quarter of 2025. Though, it intends to continue testing other sorbents from commercial suppliers to provide further optionality.

‘Uniquely positioned’

Vulcan’s CEO, Dr. Francis Wedin, commented:

In contrast to other developers who are increasingly using sorption in their developments but often outsourcing to external technology providers, Vulcan is uniquely positioned as both a lithium extraction technology provider, as well as a lithium chemicals and renewable energy developer.

Until now, there have been no commercially available sorbents for lithium extraction manufactured in Europe, thus making the region dependent on foreign supply chains. VULSORB will enable Europe to extract lithium from its own brine fields, without being exposed to geopolitical risk.

Vulcan will assess the potential of VULSORB to be used in other lithium brines in Europe and globally, particularly renewably-heated brines that can be used to extract lithium with net zero carbon footprint and zero fossil fuels, in line with Vulcan’s strict mandate to be carbon neutral.

The post Vulcan share price storms higher on lithium extraction update appeared first on The Motley Fool Australia.

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More reading

• What’s going on with the Vulcan share price today?
• ‘Well positioned’: Why the Vulcan share price is climbing today
• 3 ASX 300 shares off to the races on Wednesday
• Why Life360, Novonix, Pilbara Minerals, and Vulcan shares are storming higher today
• 4 ASX lithium shares surging more than 10% 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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The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price could be at a good value to consider the ASX bank share for dividend income.

ANZ is one of the biggest banks on the ASX, along with Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and Commonwealth Bank of Australia (ASX: CBA).

ANZ wants to become even bigger by buying the banking division of Suncorp Group Ltd (ASX: SUN).

In terms of the dividend income, let’s have a look at what the bank may be able to achieve.

Dividend estimate for ANZ shares

According to Commsec, ANZ will pay an annual dividend per share of $1.54 in FY23. This would translate into a grossed-up dividend yield of 8.9%.

It’s estimated that ANZ may pay an annual dividend per share of $1.60 per share in FY24. If the ASX bank share were to pay this, then it would translate into a grossed-up dividend yield of 9.3%.

This compares well to the estimated yield CBA might pay in the next couple of years. In FY23, CBA could pay a grossed-up dividend yield of 5.7%, and then in FY24, the biggest bank could pay a grossed-up dividend yield of 6%.

Why ANZ could be a good pick for investment income

Things seem to be looking up for ANZ.

The FY22 result included attractive amounts of growth. Statutory net profit after tax (NPAT) increased by 16% to $7.1 billion, while continuing operations cash profit grew by 5% to $6.5 billion. The annual dividend per share increased by 3% to $1.46 per share.

FY22 gross loans and advances went up 7% to $676 billion, while customer deposits increased 5% to $620.4 billion.

ANZ also said that it had restored momentum in Australian home loans, with application approval times back in line with peers.

ANZ also told investors about how much profit it could make from higher interest rates.

Compared to FY22, ANZ expects FY23 to see an additional $1.5 billion net interest income earned. In FY25, the additional net interest income could amount to $3.2 billion. In my opinion, this could be very beneficial for the ANZ share price.

I think that the ASX bank share is interesting in this context of higher earnings.

I’m not sure how high the Reserve Bank of Australia (RBA) interest rate will go, but it’s proving to be a boost for the bank. As long as the interest rate doesn’t go too high, the loan book may not suffer too much from elevated arrears.

It looks quite cheap

Despite the potential for increasing profit, the ANZ share price is actually down by more than 10% in 2022.

Currently, it’s valued at 10x FY23’s estimated earnings and 10x FY24’s estimated earnings.

While the price/earnings (p/e) ratio isn’t everything, it allows us to compare it against other businesses.

According to CBA, it’s valued at 19x FY23’s and 18x FY24’s estimated earnings. I think that ANZ shares look cheap when considering CBA’s valuation.

The post Here’s why the ANZ share price could be a good value pick for dividends appeared first on The Motley Fool Australia.

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More reading

• ASX 200 bank shares: Buy, hold, or fold?
• Bendigo Bank share price climbs as chair slams ANZ-Suncorp deal as ‘sub-optimal’
• Are storm clouds gathering over ANZ’s Suncorp bid?
• Analysts say these ASX dividend shares are buys this week
• Are ASX 200 bank shares a no-brainer buy in an inflationary environment?

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

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The Flight Centre Travel Group Ltd (ASX: FLT) share price is under pressure on Monday.

At the time of writing, the travel agent’s shares are down 4% to $16.30.

Why is the Flight Centre share price dropping into the red?

Investors have been selling down the Flight Centre share price on Monday following the release of a trading update at the company’s annual general meeting.

According to the release, during the first four months of FY 2023, Flight Centre’s total transaction value (TTV) increased 246% over the prior corresponding period to reached $6.8 billion.

And with its revenue margin remaining steady year-over-year at 9.8%, Flight Centre’s revenue grew at a similar rate of 248% to $667 million. This appears to have been slower than some in the market were expecting due to softer margins.

Revenue margin impacts

Management advised that Flight Centre’s revenue margin is being adversely impacted by reduced front-end commission payments from some airlines in Australia and New Zealand.

And while it is partially offsetting the impact through a combination of revenue margin improvement strategies and by securing better arrangements with some carriers, it estimates that these changes are adversely affecting overall leisure revenue margins by approximately 1% in Australia.

Management advised that while it believes the company’s “revenue margin will increase from its current level as the trading cycle normalises, it is expected to remain below pre-COVID levels in the near-term.”

One positive, though, is that Flight Centre revealed that its cost margin for the four months to October 31 was 10%, which is in line with the long-term target that it set pre-COVID. Pleasingly, it expects further improvements over the medium-term, which it believes will help to offset the impacts of its lower revenue margin on its profit.

Speaking of which, Flight Centre recorded an underlying $61 million EBITDA profit for the period. This is up from a $137 million underlying EBITDA loss during the same period last year.

And on the bottom line, the company broke-even on an underlying profit before tax basis.

Outlook

Management advised that it continues to work towards an aspirational 2% net margin target (profit before tax to TTV) and believes it is “achievable by 2025.”

In the immediate term, the company currently expects underlying EBITDA to be between $70 million and $90 million for the first half. That means an additional $9 million to $29 million of EBITDA is expected to be generated in the remaining two months of the half.

The post Flight Centre share price tumbles on trading update appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Monday
• Could this emerging trend dent the recovery for Flight Centre shares?
• Here are the 10 most shorted ASX shares
• The Flight Centre share price soared 17% in October. Here’s why
• Why are Flight Centre shares still the most shorted on the ASX?

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 Flight Centre Travel Group 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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This year has been an incredible one so far for ASX lithium shares, including the Core Lithium Ltd (ASX: CXO) share price, which is up by 165%.

Other lithium miners have also seen major gains.

The Pilbara Minerals Ltd (ASX: PLS) share price has risen by around 50%.

The Allkem Ltd (ASX: AKE) share price has soared up by 44%.

The Mineral Resources Limited (ASX: MIN) share price has leapt by 39%.

The Liontown Resources Limited (ASX: LTR) share price has gone up by around 18%.

It has been a very strong year for the sector, but asset management business Schroders has suggested that things could go wrong if governments try to get involved in accelerating decarbonisation.

A warning for the ‘pot of gold’ lithium sector

Martin Conlon, head of Australian equities from Schroders, recently wrote that the lithium industry is a “pot of gold” that “just keeps on giving”.

He pointed out that companies that are currently producing such as Pilbara Minerals, Mineral Resources and Allkem are now “very large companies”.

Conlon noted that it’s understandable that these businesses are now so large because it’s “reflective of very high long-run price expectations given the small number of mines involved and limited capital employed relative to market capitalisation.”

However, he also said that “prospective producers such as Liontown Resources and Core Lithium are multi-billion-dollar companies well in advance of producing anything.”

One of the main things that he pointed out was that while quality high iron ore with a 60% grade “lies fairly close to the surface” in places like the Pilbara, the lithium projects are closer to a 1% grade.

He said “massive quantities of ore need to be moved and processed using large quantities of reagents to deliver the high purity end products”. Therefore, the carbon footprint of electric vehicles is “not quite as low as most Tesla buyers would hope”.

Estimates of the climate footprint of electric vehicles compared to traditional vehicles suggest that climate neutrality is “only reached after more than 100,000km of driving”, according to Conlon.

For now, this doesn’t seem to have an effect on the Core Lithium share price.

Why government intervention could be a bad thing

The expert acknowledged that decarbonisation is important to pursue. However:

We believe policies which attempt to accelerate the take-up of electric vehicles and other solutions more quickly than the physical capability of mining and manufacturing can deliver, risk being significantly counter-productive.

Lithium prices are reflective of a mismatch in the ability of supply to respond to demand. These stratospheric prices are vastly higher than needed to incentivise new supply and are therefore difficult to rationalise on any fundamental basis.

Nevertheless, if governments insist on attempting to create additional (often artificial) demand assisted by subsidies to appease the voracious appetite for rapid climate action, there is an obvious possibility large amounts of global taxpayer money will be transferred to ‘green metal’ producers.

As is usually the case when large scale market intervention displaces free-markets, rational economics will not be overly useful in determining the outcome. The wager in purchasing lithium and many other battery material exposures at present is firmly in the hands of ongoing ill-considered government intervention.

Foolish takeaway

The Core Lithium share price has been a big winner this year, though Conlon raises some relevant points about how the lithium market could be impacted in the future.

The post Could government intervention rain on the Core Lithium share price parade? appeared first on The Motley Fool Australia.

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More reading

• Why is the Core Lithium share price having such a top run on Friday?
• Here are the 3 most traded ASX 200 shares on Friday
• Here are the top 10 ASX 200 shares today
• Here are the 3 most traded ASX 200 shares on Thursday
• Are ASX 200 lithium shares the new recession-proof investment?

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 Tesla. 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 retail sector has become a difficult place to invest this year due to concerns that rising interest rates and energy costs will put significant pressure on consumers.

The good news is that not all ASX retail shares are expected to underperform in the current environment.

In fact, the team at Goldman Sachs has just named two ASX retail shares that it believes are well-placed in this environment and could be great investment options today.

Which ASX retail shares should you buy now?

Goldman Sachs has picked out Accent Group Ltd (ASX: AX1) and Universal Store Holdings Ltd (ASX: UNI) as a couple of ASX retail shares to buy now. It commented:

We initiate on four discretionary retailers in the apparel, footwear and accessories space. Our top picks are Accent Group (AX1, Buy) and Universal Store Holdings (UNI, Buy) which we believe are best placed heading into a more challenging discretionary spending environment given a heavy sales skew towards a younger, Gen-Z consumer.

The broker highlights that younger consumers, especially those that still live at home, still have plenty of disposable income thanks to the increase in the minimum wage. This bodes well for these retail shares. It explained:

We believe the young Australian consumer, aged ~15-24 is uniquely well positioned. […] We estimate that the combined impact of a minimum wage uplift and limited inflationary/housing cost pressures has resulted in an additional ~A$570 to A$935 per person annual disposable income for those that work and live at home; at the midpoint this is an aggregated ~A$1bn in incremental spending power.

When coupled with this cohort’s prioritisation of ‘social’ spending on experiences and associated attire, we view UNI (with its core customer a Gen-Z consumer) and AX1 (~80-85% skew to younger age cohorts) as best positioned.

Goldman has initiated on Accent’s shares with a buy rating and $2.20 price target and on Universal Store’s shares with a buy rating and $7.20 price target.

The post Goldman Sachs names the ASX retail shares to buy in the current environment appeared first on The Motley Fool Australia.

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More reading

• Brokers say these top ASX dividend shares are buys
• Why Accent, Block, Nufarm, and Zip shares are racing higher
• Why is this ASX All Ords retail share rocketing 13% higher today?
• Analysts say these ASX dividend shares are buys
• Analysts say these ASX dividend shares with 6%+ yields are buys

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 Accent 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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If you’re looking for dividend shares to buy, then the two listed below could be worth checking out.

Both have been named as buys by analysts recently and tipped to provide very attractive yields. Here’s what you need to know about them:

Accent Group Ltd (ASX: AX1)

The first ASX dividend share that has been tipped as a buy is footwear and apparel retailer Accent.

It is the owner of a stable of retail brands such as Hype DC, The Athlete’s Foot, Glue, Platypus, Sneaker Lab, and Stylerunner.

This morning, the team at Goldman commented:

AX1’s diversified product exposure includes a number of product categories which we believe are resilient in the current cycle including youth footwear (Platypus, Hype), youth apparel (Glue, Nude Lucy), performance footwear (TAF), and a higher income consumer (Stylerunner).

Goldman is expecting some attractive dividend yields from the company’s shares. It is forecasting fully franked dividends of 10.2 cents per share in FY 2023 and 11.4 cents per share in FY 2024. Based on the current Accent share price of $1.68, this will mean yields of 6.1% and 6.8%, respectively.

The broker also sees plenty of upside for its shares with its buy rating with a $2.20 price target.

HomeCo Daily Needs REIT (ASX: HDN)

Another ASX dividend share that has been named as a buy for income investors is HomeCo Daily Needs.

It is a property investment company with a focus on metro-located, convenience-based assets across neighbourhood retail, large format retail, and health and services.

Morgans explained why it is bullish. It commented:

HDN offers investors an attractive distribution yield which is underpinned by contracted rental income. Sites are also in strategic locations with strong population growth. The portfolio has exposure to ‘last mile’ logistics, as well as a significant land bank with future development potential (38% site coverage with a ~$500m development pipeline).

As for dividends, the broker is forecasting dividends per share of 8.3 cents in FY 2023 and 8.7 cents in FY 2024. Based on the current HomeCo Daily Needs share price of $1.30, this will mean dividend yields of 6.4% and 6.7%, respectively.

Morgans has an add rating and $1.56 price target on HomeCo Daily Needs’ shares.

The post Brokers say these top ASX dividend shares are buys appeared first on The Motley Fool Australia.

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More reading

• Why Accent, Block, Nufarm, and Zip shares are racing higher
• Why is this ASX All Ords retail share rocketing 13% higher today?
• Analysts say these ASX dividend shares are buys
• 2 dirt cheap high yield ASX dividend shares to boost your income: analysts
• Analysts say these ASX dividend shares with 6%+ yields are buys

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 Accent 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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Ask a Fund Manager

The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In part three of this edition, we’re rejoined by Romano Sala Tenna, co-founder of Katana Asset Management.

The Motley Fool: 2022 has been a difficult year for many ASX shares. Which sectors are you likely to avoid in the year ahead?

Romano Sala Tenna: At some stage you want to be in a lot of these companies, but I think you don’t want to be in most things at the moment.

We need to get through this period, to where we see the impact of some of the tangible consequences of central bank policy. Interest rates have risen significantly to counter inflation, which is also having its own direct impact. For example, we saw 9% food inflation reported in the September quarter. We also have the effect of the energy crisis and the war in Ukraine, and so forth.

All these things are reducing the disposable income of households. But I think it will be post-Christmas before we see the impact on consumer spending really hit. Interest rates are only just starting to bite now.

All the numbers we’re seeing now are rear-looking. And consumer spending is about 50% of GDP.

MF: How do you see this all playing out on company balance sheets?

RS: Some companies have really been on a debt splurge. Companies have been rewarded for bad acquisitions for the last five years. And good companies have been penalised for maintaining tidy balance sheets.

NextDC Ltd (ASX: NXT), for example, a recent research note from Macquarie highlighted that a 1% increase in interest rates could increase finance costs by 14% and reduce earnings per share by 34%.

A lot of these corporates are heavily geared. And you can’t really pass it on to the consumer, so that hits the bottom line.

We’re going to see those two things, the impact on consumer spending and the impact on corporate profitability, flow through the market. And we haven’t seen that yet.

Whether or not the markets are forward-looking enough to look through that, only time will tell. But I suspect we’ve got another leg down to come in the new year.

You also want to try to avoid your high P/E companies or ‘long duration growth assets’. If cash flows are 10 years out, when you model it back with the higher discount rate, $10 million 10 years out is worth a lot less in today’s dollars.

These are the obvious areas you want to avoid, which really exclude some large chunks of the market.

MF: Some analysts have pointed to ASX bank shares as being able to better weather fast-rising interest rates. What are your thoughts?

RS: Yes, the banking sector gets a lot of margin expansion. But we’re going to see a reduction in volumes, strong competition for consumer deposits coming through, so that’s going to reduce their margins; strong deposit for tier-one mortgages, rise in bad and doubtful debts. All these things are yet to play out.

I think it’s the back half of next year they’ll be worried about these things. But it still means today, it makes it hard to get on board.

MF: So, there’s quite a field of ASX stocks to likely avoid in the short term. Which sectors and ASX stocks do you believe are likely to outperform over the year ahead?

RST: Clearly lithium, EVs and decarbonisation.

So, try to find ways to play this theme. We think that’s got multi-decade timeframes. So if we get it wrong short-term, we’ll get it right over the medium to long term.

For example, our largest holdings are still in the lithium space; we’ve just started to trim a little bit now but we’ve held our nerve in the lithium space, and that’s served us very well.

The two that are currently in our portfolio in size are Mineral Resources Limited (ASX: MIN) and Allkem Ltd (ASX: AKE). We’ve stuck with the ones that have a long history and we understand well, and that make a lot of sense in terms of the metrics that we see.

MF: Aside from the ASX lithium shares, are there other sectors and stocks that look strong in the decarbonisation trend?

Copper is the other major electrification theme we can play in Australia. It’s a bit hard. Despite the importance of copper and despite Australia being the largest resources market, there are really only a handful of copper plays of any quality.

Sandfire Resources Ltd (ASX: SFR) is a highly leveraged play. They’ve got to get through the next six months. They’re not for the faint-hearted. They have to make sure they get their Motheo mine in Botswana up and running. And they’ve also had some issues with power at their MATSA mine in Spain. It’s a company-transforming moment for them. The CEO has left, which always concerns us a little bit, but mind you he’s been there 15 years. But if they execute well, Sandfire has very significant upside from here. But not without risk.

The other way to play copper is with OZ Minerals Limited (ASX: OZL) and to a lesser extent BHP Group Ltd (ASX: BHP).

Secondly, we’re looking at LNG [liquefied natural gas]. We think there’s a structural change underway due to the war in the Ukraine. People aren’t buying gas off Russia anymore. And they need to replace that in the short term. On the way to renewables, you need LNG.

There are some nuances around it. For example, what happens in terms of the gas reservation, if governments overstep the mark.

**

If you missed part one of our interview with Romano Sala Tenna, click here. For part two, click here.

(You can find out more about the Katana Australia Equity Fund here.)

The post 4 ASX 200 shares to play the global decarbonisation theme: fund manager 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 no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group 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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It might be hard to believe after a crazy volatile 2022, but the S&P/ASX 200 Index (ASX: XJO) is still well up since the start of the COVID-19 pandemic. 

However, according to Wilsons equity strategist Rob Crookston, there is one usually reliable sector that’s just gone sideways over that time.

“Since April 2020, the ASX 200 is up 49% [but] the healthcare sector is flat,” he said in a memo to clients.

“We think the next 12 months will be very different from the last, with vital signs improving for the sector.”

As such, the Wilsons team is now overweight on ASX healthcare shares.

“Healthcare offers a number of high-quality companies, with pricing power,” said Crookston.

“Earnings look to be at the start of an upgrade cycle. Valuations look reasonable relative to pre-COVID – the sector could rerate on easing inflation.”

He added healthcare is also the perfect cure for economic slowdowns.

“CY23 could continue to be challenging due to inflation, rate hikes and worries about a recession,” said Crookston.

“Against this backdrop, we think healthcare stocks — which have historically been reliable defensives — can provide a degree of downside protection amidst volatile conditions.”

The memo mentioned three ASX shares that Wilsons are currently targeting:

Dominant player

The team at Wilsons rates Resmed CDI (ASX: RMD) as a buy for its strong position in the market.

“RedMed is the dominant player within the CPAP market, which in our view reflects the superiority of its offering and a history of strong execution from management,” said Crookston.

“The global CPAP market remains significantly under-penetrated. This under-penetration drives typical organic ‘system growth’ of 6-8% pa, which is structurally above healthcare at 2% to 3% pa.”

After a wild up-and-down year, the ResMed share price is now just 3.6% down from where it started 2022.

Larger collection network and higher donor numbers

CSL Limited (ASX: CSL) has multiple tailwinds going for it, reckons Wilsons analysts.

“The market for immunoglobulin products is supply constrained, while underlying demand is highly defensive given IG is used to treat patients with a range of serious immunologic and neurologic diseases,” said Crookston.

“CSL was impacted by lower plasma collections during COVID-19… Collection volumes are recovering and now exceed pre-pandemic levels as fears of the virus have faded and stimulus cheques have dried up.”

The biotechnology giant isn’t just relying on external themes though. Crookston observed that CSL has “invested heavily” in its immunoglobulin collection infrastructure.

“The new Rika Plasma Donation System will allow for the collection of more plasma in less time, increasing throughput by 30%,” he said.

“We expect CSL’s larger collection network, in combination with higher donor numbers and operational efficiencies from new tech, to drive higher IG volumes and margins over the medium-term.”

CSL shares are flat on the year and still have not surpassed the pre-COVID high.

Pre-revenue phase now finished

The third ASX share Wilsons mentioned is less mature than the other two, but perhaps the most exciting in its potential — Telix Pharmaceuticals Ltd (ASX: TLX).

In April this year, the company commercially launched its first-ever approved product, the prostate cancer diagnostic tool Illuccix.

“With proof of product sales now demonstrated, Telix has moved out of the pre-revenue biotech space and into a commercial business with a capacity to meet, and potentially exceed revenue forecasts.”

The Telix share price is down 12.5% year to date but 49% higher since 28 September.

The post 3 ASX shares to buy in a sector ready to explode: expert appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo has positions in CSL Ltd., ResMed Inc., and TELIXPHARM DEF SET. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL Ltd. and ResMed Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended ResMed. The Motley Fool Australia has positions in and has recommended ResMed Inc. 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 Friday, the S&P/ASX 200 Index (ASX: XJO) finished the week with a stunning gain. The benchmark index rose a whopping 2.8% to 7,158 points.

Will the market be able to build on this on Monday? Here are five things to watch:

ASX 200 expected to rise again

The Australian share market looks set to start the week strongly after a good session on Wall Street on Friday night. According to the latest SPI futures, the ASX 200 is expected to open the day 42 points or 0.6% higher this morning. On Wall Street, the Dow Jones was up 0.1%, the S&P 500 rose 0.9%, and the NASDAQ jumped 1.9%.

Oil prices jump

ASX 200 energy shares such as Santos Ltd (ASX: STO) and Woodside Energy Group Ltd (ASX: WDS) could have a great start to the week after oil prices jumped on Friday night. According to Bloomberg, the WTI crude oil price was up 2.9% to US$88.96 a barrel and the Brent crude oil price rose 2.5% to US$95.99 a barrel. Traders were buying oil after China announced that it was easing some of its COVID curbs.

Flight Centre annual general meeting

The Flight Centre Travel Group Ltd (ASX: FLT) share price will be on watch on Monday when the travel agent giant holds its annual general meeting. Flight Centre is likely to provide a trading update at the event. Investors will finally be able to see if its high level of short interest is justified or not.

Breville named as a buy

The Breville Group Ltd (ASX: BRG) share price could be great value at current levels according to Goldman Sachs. This morning the broker has reiterated its buy rating with a $23.40 price target. The broker commented: “[W]e still see strong growth in BRG with FY22-25e total revenue CAGR of ~9% and NPAT CAGR of ~12%.”

Gold price rises

Gold giants Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) could have a good start to the week after the gold price rose again on Friday. According to CNBC, the spot gold price was 0.9% to US$1,769.4 an ounce during the session. A softer US dollar boosted the price of the precious metal.

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

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