Tag: Motley Fool

The Costa Group Holdings Ltd (ASX: CGC) share price will be one to watch closely this morning.

This follows news that a private equity firm has been buying the ASX 200 horticulture company’s shares.

What’s going on with the Costa share price?

Investors have been scrambling to buy the company’s shares today after its former owner snapped up a major stake at a sizeable premium.

According to a notice of initial substantial holder, Paine Schwartz Food has taken advantage of recent weakness in the Costa share price to return to its share registry.

The US based private equity firm, which floated Costa onto the Australian share market back in 2015 at $2.25 per share, has acquired a relevant interest in 13.78% of the company’s issued shares.

It achieved this through a series of trades this week, which were as follows:

• 46,408,191 shares for $120.66 million or $2.60 per share
• 11,041,386 shares for $23.2 million or $2.10 per share
• 6,568,934 shares for $17.1 million or $2.60 per share

This equates to an average purchase price of approximately $2.51 per share, which is a sizeable 12.5% premium to the Costa share price at yesterday’s close. Clearly, Paine Schwartz Food was keen to get hold of this stake.

It is also worth noting that technically the private equity firm only owns the first row of shares (~46.4m). This is due to Foreign Investment Review Board (FIRB) rules that limit its ownership to 9.99% without FIRB approval.

The remainder of the shares are forward contracts or total return swaps, which provide for physical settlement subject to receipt of a no objection notification under the Foreign Acquisitions and Takeovers Act.

What’s next?

It remains unclear whether Paine Schwartz Food will take things further from here and seek to take Costa private again or just sit passively on this investment.

What is clear, though, is that this private equity firm sees the Costa share price pain in 2022 as a buying opportunity.

The post Could the pain ease for this ASX 200 share following a $160m after market raid? appeared first on The Motley Fool Australia.

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More reading

• Top brokers name 3 ASX shares to buy next week
• Here are the top 10 ASX 200 shares today
• Here are the top 10 ASX 200 shares today
• Why Adbri, Costa, Hawsons Iron, and Medibank shares are sinking today
• Why the Costa share price is crashing 14% to a 52-week low

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 COSTA GRP 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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Regular readers of The Motley Fool would know that during a turbulent 2022, the lone shining light has been ASX resources stocks.

While some experts think the sector has now had its run, others are picking out individual ASX mining shares for their bright outlook.

Here are two such stocks:

‘A vital role in the energy transition to renewables’

Bell Potter investment advisor Christopher Watt this week rated metals miner South32 Ltd (ASX: S32) as a buy.

“South32 is a diversified mining company with aluminium, alumina, manganese, nickel, silver and coal assets in Australia, South America and Africa,” Watt told The Bull.

“These resources play a vital role in the energy transition to renewables.”

He also sees the company cashing in on global themes of “global population growth, urbanisation and increasing demand for commodities”. 

“South32 offers attractive fully franked dividends.”

Indeed, the stock is currently paying out a whopping 8.94% dividend yield.

The share price has dropped sharply since early June, losing around 30%.

According to CMC Markets, more than 15 analysts are currently rating South32 as a strong buy, while just seven deem it a hold.

The stock is certainly generating much interest at the moment. Both on Friday and Monday, it was one of the heaviest-traded ASX shares.

‘Attracting more attention’

Rumble Resources Ltd (ASX: RTR) is an ASX mining share investors don’t hear much about, but Fat Prophets chief Angus Geddes is now rating it as a buy.

“Zinc and lead is attracting more attention, as Rumble Resources proves up its Earaheedy zinc-lead project in Western Australia.

“The latest drill results confirm the prospective nature of Earaheedy, with high-grade zinc-lead assays reported.”

He added that “feeder zones” are likely to push up the future potential of the Earaheedy site.

“There’s much more exploration ahead.”

As an exploration business, Rumble does not pay out a dividend. Its share price is down more than 40% so far this year.

The post 2 ASX mining shares ready to rocket: experts appeared first on The Motley Fool Australia.

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More reading

• Morgans names the ASX 200 dividend shares to buy
• Why did the South32 share price take a beating on Tuesday?
• Why Ampol, Cann, Reliance Worldwide, and South32 shares are dropping
• Here are the 3 most heavily traded ASX 200 shares on Monday
• Why Austal, New Hope, Playside, and South32 shares are dropping

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

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What do I think about last night’s federal budget?

I’m glad you asked.

You didn’t? Well, that’s awkward, but read on, anyway!

Last night’s budget was, well, an anticlimax as far as budgets go.

They’re usually full of bluster and big announcements:

“Mr Speaker, this government realises the [X] is important, so tonight we’re announcing [$X] to fix it”

Often it’s a laundry list of politically and ideologically targeted promises, designed to tell us how good the government is, and why we should be happy they’re in power.

If I were a betting man, I’d reckon that’ll happen more, as the government’s term rolls on.

But this one was… different.

Yes, there were some big and welcome announcements – primarily funding for early childhood education, money to lower the cost of PBS medicines and extra weeks of paid parental leave – but they were essentially just the make-good of pre-election promises.

Those are sensible, responsible and help those who need it, as well as helping the country (more childcare places should help more parents rejoin the workforce, for example).

But there was precious little else.

The affordable housing ‘announcement’ is largely just a commitment to use the ‘big stick’ of government to get others – including States and Super Funds – to deliver on one of the government’s policy preferences, with a target of 1 million new affordable homes. Whether this amounts to anything, or is just political sleight-of-hand, we’ll find out, in time. But, as I said yesterday, without meaningful policies on what, where and how (including the impact on the natural and built environments, and the ability of infrastructure to cope), consider me sceptical.

Speaking of yesterday… in this space, I shared a list of other things I’d have liked the Treasurer’s speech to include, but I wasn’t exactly surprised that none of them made the cut.

There was no rollback of Stage 3 tax cuts for high-income earners (though he left the door wide open on that one), no sovereign wealth fund, and the early childhood funding didn’t go far enough (I argue it should be universal and free, just like primary and secondary school education).

There was nothing for productivity and job creation (a few token announcements – red meat to the base – on ‘making stuff here’, but nothing meaningful to improve our economic competitiveness).

And there was nothing serious done to rein in what is a structural budget deficit (an inherited problem, to be fair, and one that neither side of politics has seriously addressed).

In fact, perhaps the most notable part of this budget was not the announcements, but the Treasury forecasts.

Power costs are forecast to rise by up to 50% over the next two years.

It’s going to take two years until real wages start to grow again (in other words, inflation is going to be higher than wages growth between now and then).

Economic growth will slow to 1.5% next financial year.

And unemployment is expected to tick up.

Which, in aggregate, is why the Treasurer felt constrained – he simply couldn’t justify spending more money and adding to inflationary pressures.

The result? A ‘nip and tuck’ budget.

A little extra spending here, a little spending cut there, but overall no big moves.

It was, in short, boring and sensible.

It’s hard to blame the Treasurer for that – he’s inherited the role at a time when ‘boring and sensible’ is required.

Which, given Australian politics at the moment, is to be commended.

I’m not sure what others might have been tempted to do, playing for votes, ideology, or both (and I’m not just talking about the LNP – both those on the left and the right of the current government might have been tempted to do other things, and I’m sure Government ministers were begging for more money for their portfolios too!).

So he deserves a lot of credit for doing the right thing.

And, of course, the usual suspects are making the usual criticisms – partly political and partly ideological. Either he did too much, or not enough, depending on who you ask.

Would others have done better, overall? Maybe. Probably not. And Treasurers never quite get enough credit for doing the right thing. It’s just expected.

But he did duck the harder issues.

As I said, the deficit didn’t get addressed. And there was little to no support for lower-income earners and welfare recipients who are going to be hardest hit by rising prices and rising rates.

It was a solid, responsible budget. A 7.5 / 10 effort.

To use a cricket analogy, the Treasurer played a Test Match opener’s innings – he played with a straight bat, didn’t take any risks, and took the shine off the new ball.

This budget is perhaps most notable for how unbudget it was – nothing to scare the horses, and not much in the way of big-ticket spending or reform.

But there is still a lot of work left to do.

—

Given my day job, I should highlight a couple of additional elements for investors:

The government has confirmed that Bitcoin (CRYPTO: BTC) is to be taxed as an asset, rather than currency. And that any central bank digital currency assets would be considered ‘foreign currencies’ for tax purposes.

Disappointingly, the Treasurer announced that companies can no longer stream excess franking credits to shareholders using off-market buybacks at below-market prices. Given the principle of not having ‘double taxation’ of dividends, The change means companies will no longer be able to use those buybacks to distribute excess franking credits, leaving them largely ‘stranded’ on company balance sheets.

But not much of note in this area, either. Just like the rest of the budget.

Fool on!

The post What to make of last night’s budget appeared first on The Motley Fool Australia.

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• If this US retail giant is serious about crypto, Bitcoin might soar
• Why the Bitcoin price could soar in the coming years
• Could the next bull run be coming for the Bitcoin price?
• How has the Bitcoin price responded to the network’s latest hiccup?
• Crypto surges: Is now the time to buy Bitcoin and Ethereum?

Motley Fool contributor Scott Phillips 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 Bitcoin. The Motley Fool Australia has positions in and has recommended Bitcoin. 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 Coles Group Ltd (ASX: COL) share price will be one to watch on Wednesday.

This follows the release of the supermarket giant’s first quarter sales update this morning.

Coles share price on watch after first quarter update

For the three months ended 30 September, Coles reported a modest 1.3% increase in group sales over the prior corresponding period to $9,891 million.

This was driven by a 1.6% increase in supermarket sales to $8,771 million and an 8.4% lift in express sales to $284 million, which offset a 4.3% decline in liquor sales to $836 million. On a comparable store sales basis, Coles’ supermarket sales rose 2.1% and its liquor sales dropped 4.1%.

Segment performance

In respect to its supermarkets business, management notes that its growth was achieved despite cycling heightened COVID-19 related sales in the prior corresponding period and customers returning to dining out at cafes and restaurants. Its sales were supported by strong trade plans, including the “Locked” value campaign as well as the Harry Potter “Magical Builders” collectibles and Schott Zwiesel glassware customer continuity programs.

Coles also benefited from supermarket price inflation of 7.1% for the first quarter compared to 4.3% in the fourth quarter. Fresh inflation was 8.8% and continued to be driven by the bakery channel, reflecting higher wheat prices, and fresh produce, particularly in berries and bananas.

As for its liquor sales, they were down 4.3% due to the business cycling COVID-19 lockdowns in New South Wales, Victoria and the Australian Capital Territory in the prior corresponding period. Excluding these states and their bulk sales, liquor sales grew in the first quarter.

In other news, the company confirmed that it is on track to deliver cumulative Smarter Selling benefits of $1 billion by end of FY 2023 under its four year program. Furthermore, the Witron Queensland automated distribution centre is being commissioned, with the first Ocado “Bots” recently arriving in New South Wales.

How does this compare to expectations?

The company’s first quarter performance appears to have fallen short of the expectations of analysts at Goldman Sachs, which could be bad news for the Coles share price today.

For example, a recent note reveals that its analysts were forecasting a 2.5% increase in Supermarket same store sales and a 1% decline in liquor same store sales. Coles has missed on both metrics.

Management commentary

Coles’ CEO, Steven Cain, was pleased with the quarter. He said:

Despite record levels of hospitality expenditure in Australia, we are pleased that a strengthening sales trajectory is being driven by improved availability, new value campaigns, and the unwind of local shopping as consumer shopping behaviour normalises. Our commitment to providing trusted value, including Australia’s widest range of own brand products and the successful introduction of ‘DROPPED & LOCKED’ prices, is more relevant than ever with rising inflation placing pressure on many Australian households.

Outlook

Management appears positive on its sales outlook for the second quarter. It advised:

Sales, volumes and transactions strengthened through 1Q23 which has continued into 2Q23 with improvements in availability and the introduction of new value campaigns, including ‘DROPPED & LOCKED’. Cost price inflation is expected to increase in the second quarter, given the ongoing level of supplier CPI requests as well as further flooding impacting supply volumes.

However, it has warned that the company is “not immune to the inflationary cost pressures, including the impact from increased logistics and fuel costs, salary and wages and construction costs on capital expenditure projects.”

As a result, it expects its depreciation and amortisation expense to be approximately $1.7 billion in FY 2023. This is up from $1.52 billion in FY 2022. This could put pressure on its profit margins.

The post Coles share price on watch following mixed first quarter update appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Wednesday
• Send in the drones: Why is the Coles share price taking off today?
• 5 ways to be carefree during the next ASX share market downturn
• Is the Coles share price a buy ahead of next week’s quarterly results?
• Could buying Woolworths shares help ‘recession-proof’ your ASX portfolio?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended COLESGROUP DEF SET. 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 National Australia Bank Ltd (ASX: NAB) share price has been a strong performer in 2022 to date. It’s up around 9%. That compares to the S&P/ASX 200 Index (ASX: XJO) which is down 10.4%.

NAB has outperformed the ASX share market by approximately 20%, which is significant for a blue-chip ASX share.

Before considering the upcoming period, let’s consider what may be helping the NAB share price.

Higher interest rates and profit growth

NAB is one of the main ASX 200 bank shares, with a loan book of many billions.

What margin it makes on its lending is an important factor for NAB’s bottom line.

With interest rates on the rise, this is expected to help the NAB’s net interest margin (NIM). This measure compares the bank’s lending rate against the cost of the money it’s lending. One of the main examples of this is the amount banks pay on savings accounts.

With savings accounts not getting the same interest rate boost as loans, banks are expected to earn higher profits, at least in the shorter term.

Even before the ramping up of interest rates, NAB was already reporting that its net profit after tax (NPAT) was growing. For example, in early May, NAB revealed that its FY22 half-year cash earnings had increased 4.1% to $3.48 billion.

Can the NAB share price keep rising?

The profit boost from rising interest rates may only be part of the picture — and it may not all be positive, particularly over the longer term.

The Australian Financial Review has reported comments from Jarden analyst Carlos Cacho on the situation with rising interest rates:

While this is clearly positive for the sector, especially the major banks with their large low-cost deposit bases, we believe it is likely only a temporary benefit before deposit competition returns and the cash rate is eventually cut again.

The broker Citi currently has a buy rating on NAB, though the price target is only $32.75. That implies a very small rise in the NAB share price over the next year. The broker is expecting good profit growth from NAB in the shorter term, thanks to a stronger NIM and high liquidity.

However, the broker Morgan Stanley is less optimistic. It has an equal-weight rating, essentially a hold rating, however, the NAB share price target is $29.60. That suggests a possible fall of around 7.5% over the next year. It thinks that economic uncertainty could mean the NAB share price may not rise.

The NAB full-year result is expected to be released on 9 November 2022.

Citi thinks that NAB’s grossed-up dividend yield for FY22 will be 6.7%. Morgan Stanley also estimates that the NAB grossed-up dividend yield will be 6.7%.

The post Could the best be yet to come for the NAB share price? appeared first on The Motley Fool Australia.

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More reading

• 22 high-yield ASX dividend shares Wilsons is targeting
• 5 things to watch on the ASX 200 on Wednesday
• Here are the top 10 ASX 200 shares today
• Here’s how I allocate my ASX share portfolio and why
• Is buying CSL shares right now a smart move?

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 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 fortunes of ASX shares in 2022 have been dominated by economic issues, whether that would be inflation, interest rates or recessions.

But, of course, stocks are a slice of ownership of a company, so the underlying business does actually matter in the long run.

So while everyone else is distracted by macroeconomic concerns, the team at Auscap Asset Management is focusing on what’s under the bonnet.

“For most high-quality businesses, particularly those with structural tailwinds and high returns on invested capital, our view is that what is occurring inside the company is often more important than what is happening in the broader economy,” read its memo to clients.

“We think this is true of most companies that are owned within the fund.”

The Auscap analysts presented a few examples and explained why they have such conviction in each:

‘Clear market leader in Australia’ pushing into the US

Reece Ltd (ASX: REH), according to Auscap analysts, is “one of the highest quality industrial businesses on the ASX, with a long history of resilient growth through market cycles”.

“It is the clear market leader in Australia, where it focuses on the construction, renovation and repair plumbing markets,” read the memo.

“Reece delivered what we consider to be a very strong result during FY22, with net profit after tax up 37% on sales growth of 22%.”

However, the real catalyst at the moment is expansion within the “highly fragmented” US market, which was kick-started with a 2018 acquisition.

“The US business continues to demonstrate that it is a huge opportunity for the company, with sales growth of 33% for the year,” the memo read.

“Reece has 645 store branches in Australia compared with 204 in the US, and domestic margins are currently roughly double that of the US division.”

The market has been harsh on Reece recently, almost halving its share price since the start of the year.

The Auscap attributes this to worries about supply cost inflation and the negative impact of higher interest rates on housing markets.

“Although there is currently cyclical uncertainty across all of Reece’s end markets, we have taken advantage of the recent market sell off to rebuild the fund’s Reece position at what we believe to be attractive long-term prices.”

Supercharging lithium revenues

The bullish prospects for lithium is making Mineral Resources Limited (ASX: MIN) a compelling investment for the Auscap team.

“The lithium price… continues to make new highs due to an incredibly strong structural demand outlook.

“Global demand looks reasonably likely to exceed supply for the foreseeable future.”

Auscap analysts noted that since February this year Mineral Resources started producing processed lithium hydroxide rather than just the raw lithium spodumene.

“MinRes is therefore able to monetise more of the downstream lithium supply chain through a vertically integrated model,” read the Auscap memo.

“MinRes intends to convert all of its share of the mined lithium spodumene into lithium hydroxide. This conversion delivered EBITDA of US$154 million on lithium hydroxide sales of 6.7kt in the last quarter of FY22.”

The company is aiming for production of 118ktpa over the medium term.

“We continue to be very positive about MinRes’ outlook and we anticipate many years of transformational progress across each of MinRes’ four divisions: Mining Services, Lithium, Iron Ore and Energy.”

Share are too cheap as slowdown is ‘overemphasised’

The Auscap team felt furniture provider Nick Scali Limited (ASX: NCK) delivered a 2022 result ahead of expectations and continues to sell well in the current financial year.

“New sales orders [are] up 60% on pre-COVID-19 levels for the Nick Scali stores despite macroeconomic uncertainty.”

The acquisition of sofa seller Plush holds much potential.

“At its FY22 results presentation, Nick Scali management flagged upside to its estimates for Plush synergies, continued strong double digit online order growth of 59.9% year-on-year and an aggressive store rollout plan, with targets to nearly double the store network across its two brands over time.”

At just 10 times forecast earnings, Nick Scali shares are going for cheap at the moment, according to Auscap analysts.

“Most analyst concerns centre on an interest rate and housing related slowdown in furniture sales following the COVID-19 induced boom,” read the memo. 

“While we are cognisant that this may occur, we suspect that the impact of any slowdown in sales is overemphasised.”

The post 3 ASX shares to buy no matter what the market’s doing: Auscap appeared first on The Motley Fool Australia.

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More reading

• 22 high-yield ASX dividend shares Wilsons is targeting
• 3 ASX mining shares hitting all-time highs today
• This ASX 200 lithium share turned a $15,000 investment into $1.4 million
• No savings at 35? I’d buy cheap ASX shares to try and retire rich
• Here are the top 10 ASX 200 shares today

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

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Looking for ASX 200 growth shares to buy? Listed below are three that are rated as buys by experts.

Here’s why they could be top options for investors right now:

Aristocrat Leisure Limited (ASX: ALL)

The first ASX 200 growth share to look at is Aristocrat Leisure. It is a leading global gaming content and technology company and top-tier mobile games publisher. Aristocrat offers a diverse range of products and services including electronic gaming machines, casino management systems, and freemium mobile games. The company is also looking at the real money gaming market, which could be a significant growth driver in the coming years.

Macquarie is positive on the company and has an outperform rating and $44.00 price target on its shares.

ResMed Inc. (ASX: RMD)

ResMed could be an ASX 200 growth share to buy. It is a medical device company which has a focus on the sleep treatment market. ResMed’s revenue and earnings have grown at a very strong rate over the last decade thanks to the quality of its products and its large and growing market opportunity. In respect to the latter, management estimates that there are almost one billion people with sleep apnoea globally and a little under half a billion people that suffer from chronic obstructive pulmonary disease (COPD). Thanks to its leadership position in these markets, they give ResMed a long runway for growth over the 2020s and beyond.

Goldman Sachs is bullish on ResMed and has a buy rating and $36.80 price target on its shares.

Xero Limited (ASX: XRO)

A final ASX 200 growth share that has been named as a buy is Xero. It is a provider of a cloud-based business and accounting solution. Like the others, Xero has been growing strongly over the last few years and looks well-positioned to continue this strong form for the foreseeable future. This is thanks to its international expansion, the ongoing shift to the cloud, and its burgeoning app ecosystem. The latter, which is similar to Apple’s App Store, could have significant monetisation potential in the future.

Goldman Sachs is also positive on Xero and has a buy rating and $111.00 price target on its shares.

The post 3 excellent ASX 200 growth shares experts rate as buys appeared first on The Motley Fool Australia.

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More reading

• Goldman Sachs names 2 quality ASX tech shares to buy right now
• Analysts say these ASX 200 shares are buys in October
• 2 classic healthcare ASX shares priced to buy now: expert
• What’s the outlook for ASX healthcare shares in Q2?
• These 3 ASX shares have halved this year. I’d buy 2 of them: advisor

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ResMed Inc. and Xero. 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. and Xero. 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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For more than a decade, investors became rich from ASX growth shares — but all that changed almost overnight late last year.

As the very infectious Omicron variant of COVID-19 struck the world in November, share markets turned against growth, and haven’t really looked back since.

In such an environment, The Motley Fool has certainly noticed a big change in attention towards dividend shares.

The logic among investors seems to be that if capital growth is so anaemic, you might as well grab some income to make up for it.

However, the team at Wilsons had a stark warning for dividend hunters.

“However, high yield stocks have proven to underperform the market on a long-term view,” its recent memo to clients read.

“We therefore believe a dividend strategy cannot solely rely on high yielding stocks to be successful.”

The checklist for quality ASX dividend shares

For Wilsons analysts, it’s imperative to search for businesses that grow dividends over time. That might mean sacrificing some yield now.

“We think selecting a dividend strategy by its initial yield is a poor choice because the growth of the dividend over time ultimately determines the income payouts in future years.”

Also, a high current dividend yield tells nothing about the business performance or its outlook.

“Therefore, we think it is also paramount to consider companies based on their competitive positioning and industry backdrop, their earnings quality, and their long-term growth outlook.”

Considering this, the team screened the S&P/ASX 100 [XTO] (ASX: XTO) for businesses that met the following criteria:

• Financial year 2025 dividend yield greater than 2%
• Positive or flat three-year forecast dividend per share compound annual growth rate
• Balance between growth and yield
• Predictable earnings supported by “relatively defensive demand” through economic cycles
• Decent moat or industry outlook
• No iron ore miners, which Wilsons believes to be in structural decline 

Using this screen, the team came up with 22 ASX shares that are providing 2023 financial year yields above 3%:

• Westpac Banking Corp (ASX: WBC)
• Australia and New Zealand Banking Group Ltd (ASX: ANZ)
• Scentre Group (ASX: SCG)
• APA Group (ASX: APA)
• Insurance Australia Group Ltd (ASX: IAG)
• National Australia Bank Ltd (ASX: NAB)
• Ampol Ltd (ASX: ALD)
• Transurban Group (ASX: TCL)
• Telstra Corporation Ltd (ASX: TLS)
• Woodside Energy Group Ltd (ASX: WDS)
• Mineral Resources Limited (ASX: MIN)
• Wesfarmers Ltd (ASX: WES)
• Medibank Private Ltd (ASX: MPL)
• Macquarie Group Ltd (ASX: MQG)
• Domino’s Pizza Enterprises Ltd (ASX: DMP)
• Charter Hall Group (ASX: CHC)
• Carsales.Com Ltd (ASX: CAR)
• Treasury Wine Estates Ltd (ASX: TWE)
• ALS Ltd (ASX: ALQ)
• Steadfast Group Ltd (ASX: SDF)
• Woolworths Group Ltd (ASX: WOW)
• Seek Limited (ASX: SEK)

“Overall, we think it is worth taking a holistic view of total return when considering a dividend strategy,” read the memo. 

“Investors should adopt a total return approach when selecting stocks for their portfolios by thinking long-term and understanding that earnings growth will support long-term dividend income.”

The post 22 high-yield ASX dividend shares Wilsons is targeting appeared first on The Motley Fool Australia.

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More reading

• Up 16% so far this month, is it too late to buy Westpac shares now?
• 5 things to watch on the ASX 200 on Wednesday
• Analysts say these high quality blue chip ASX 200 shares are buys
• Here’s how I allocate my ASX share portfolio and why
• Why Ampol, Cann, Reliance Worldwide, and South32 shares are dropping

Motley Fool contributor Tony Yoo has positions in Macquarie Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Steadfast Group Ltd. The Motley Fool Australia has positions in and has recommended APA Group, Insurance Australia Group Limited, Steadfast Group Ltd, Telstra Corporation Limited, and Wesfarmers Limited. The Motley Fool Australia has recommended Dominos Pizza Enterprises Limited, Macquarie Group Limited, SEEK Limited, Treasury Wine Estates Limited, Westpac Banking Corporation, and carsales.com 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 Westpac Banking Corp (ASX: WBC) share price has been in fine form this month.

Since the start of October, the banking giant’s shares have risen an impressive 16% to $23.90.

This compares favourably to the ASX 200 index and its 5% gain over the same period.

Is it too late to buy Westpac shares?

The good news for investors looking for banking sector exposure is that it may not be too late to jump onto the Westpac investment train.

That’s because a number of brokers believe the bank’s shares can chug along nicely over the next 12 months.

One of those brokers is Goldman Sachs, which earlier this week retained its conviction buy rating and $27.07 price target on the bank’s shares.

This price target implies potential upside of approximately 13% for investors over the next 12 months before dividends. The total return stretches to almost 19% if you include the fully franked 5.8% dividend yield that Goldman is forecasting in FY 2023.

The broker is bullish on Australia’s oldest bank due to its “strong leverage to rising rates given a relatively larger proportion of low cost deposits” and its “cost management initiatives.”

Is anyone else bullish?

But it isn’t just Goldman Sachs that believes Westpac shares can keep rising.

A recent note out of Morgans reveals that its analysts have an add rating and $26.68 price target on the bank’s shares. Whereas the team at Citi is even more bullish with its buy rating and $30.00 price target and UBS recently upgraded the company’s shares to a buy rating with a $27.00 price target.

All in all, the broker community appears to agree that the Westpac share price is trading at an attractive level ahead of its results next month.

The post Up 16% so far this month, is it too late to buy Westpac shares now? appeared first on The Motley Fool Australia.

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More reading

• Westpac share price trails ASX 200 big four following earnings dint
• Westpac share price on watch following $1.3b earnings hit
• 2 much-maligned ASX shares cheap enough to buy now: experts
• ASX 200 bank shares have had a stellar month. Here’s why this expert is now worried
• Could chasing high yields mean missing out on potentially top-notch ASX dividend shares?

Motley Fool contributor James Mickleboro has positions in Westpac Banking Corporation. 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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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 two of this edition, we’re rejoined by Kristiaan Rehder, portfolio manager of the Bennelong Kardinia Absolute Return Fund.

The Motley Fool: The high inflation and rising interest rate environment of 2022 presents ASX investors with a very different picture than 2021. Has strategy changed this year?

Kristiaan Rehder: Our strategy hasn’t changed at all. Our investment process has stayed the same since inception back in 2006.

But we do have a heightened focus on our short book, which has provided very strong returns this year.

MF: What do you look for when you’re considering shorting ASX shares?

KR: We treat our short book as a profit centre. There are many fund managers out there who use their short book as hedge to their long book. That’s not what we do. Our shorts have to be profitable in their own right.

So, we use the same investment process for our longs as we do with our shorts, but for the shorts it’s that process in reverse. For shorts, we’re looking for companies that have weak balance sheets, weak management teams, poor earnings quality, low returns, small or shrinking industries, and are trading at unattractive valuations.

Shorting is a difficult business as you’re fighting so many different factors.

Markets tend to go up over the long term; research houses tend to publish supportive research, often acting as cheerleaders for companies; and management are incentivised to talk up their story.

So, it’s not for everybody. If you want to successfully short companies, you must know your facts. You need to have a lot of patience. And it can be a lonely experience.

MF: Has the outlook for shorting ASX shares changed with the re-emergence of inflation?

KR: The next five years could be very different from the previous five years we’ve just experienced, where shorting could really come into its own. Previously each hiccup from the pandemic all the way back to the GFC has been met with central banks coming to the market’s rescue.

This time around, the one big difference is inflation. And central banks have been very hardnosed in ensuring that interest rates are going higher and inflation is removed from the system.

So, this time around, we don’t think there will be life jackets thrown out by central banks anytime soon. Until they get inflation under control, we think markets are going to continue coming under pressure.

Which provides a very interesting environment for shorting ASX shares.

MF: Are there any specific short investments on the ASX you can share with us?

KR: One long-standing short of ours is Adbri Ltd (ASX: ABC). It’s a cement, lime and concrete producer for the building and construction industries.

Its earnings have been impacted by flooding and rain. And the wet weather is forecast to persist. Labour and energy costs continue to rise, which is leading to a margin squeeze. Returns are under pressure from increasing competition in the New South Wales and Queensland markets. And finally, cement is a very carbon-intensive industry. We estimate around 6% to 7% of global emissions comes from the cement industry.

The short has done exceptionally well. Adbri’s down around 50% this calendar year.

MF: What is your current exposure to the market?

KR: Our exposure to the market is currently around 65% net long. But it hasn’t always been like that. We’ve only recently lifted this from a market neutral position, after the market drew down in September.

The reason we did that is we wanted to take advantage of the improved risk-reward balance that was on offer. We believe the rally we’ve seen so far this month, which might persist in the short term, is a bear market rally. We don’t believe the bottom has been seen.

Investors have to be very mindful that positioning is extremely bearish at present. Bank of America Corp (NYSE: BAC) publishes a survey, for decades now, and it highlights where investors are positioned. Across sectors and also across asset classes.

It really illustrates how conservatively positioned investors are right now. It’s, in fact, at extreme levels. And whenever you get in a situation where investors are positioned in one direction, markets tend to surprise everyone by moving in the opposite direction.

MF: How do you see the ASX and US markets evolving over the coming months?

KR: Valuations have compressed over the last nine months, but we think earnings forecasts are too high going into calendar year 2023. If you look at US earnings forecasts, earnings are expected to rise 8% next year and a further 9% in calendar year 2024. But we’re starting to see corporate earnings roll over in the US.

There was a very disappointing result recently by FedEx Corporation (NYSE: FDX). It missed its earnings by 30%. Its share price sold off 20% shortly thereafter. I think that’s a very important signpost for global growth because of the industry it’s in, the handling and distribution of goods and its reach across the globe,

In addition, we’ve also had Dow Inc (NYSE: DOW), Nike Inc (NYSE: NKE), and Carnival Corp (NYSE: CCL) in the US report disappointing results.

In Australia, we’re right now in AGM season. And we’ve recently seen profit downgrades by Magellan Financial Group Ltd (ASX: MFG), St Barbara Ltd (ASX: SBM), Appen Ltd (ASX: APX), Adbri, and Costa Group Holdings Ltd (ASX: CGC), just to name a few.

But so far, earnings have held up much better in Australia than we have seen overseas. Perhaps the earnings downgrades are still ahead of us. We would expect our net exposure will likely come down early in the new year.

**

Tune in tomorrow for part three of our interview, where Kristiaan Rehder unveils three S&P/ASX 200 Index (ASX: XJO) shares he’s confidently long on. If you missed part one, you can find that here.

(You can find out more about the Bennelong Kardinia Absolute Return Fund here.)

The post What to consider when shorting ASX shares in a bear market: fund manager appeared first on The Motley Fool Australia.

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More reading

• Which ASX 200 shares could benefit from the federal budget?
• Here are the top 10 ASX 200 shares today
• Why Adbri, Rio Tinto, St Barbara, and Whitehaven Coal shares are dropping today
• Why Adbri, Costa, Hawsons Iron, and Medibank shares are sinking today
• What caused this ASX 200 share to crash 20% on Monday?

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Appen Ltd and Nike. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Carnival. The Motley Fool Australia has recommended COSTA GRP FPO and Nike. 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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