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The Vulcan Energy Resources Ltd (ASX: VUL) share price is having a strong start to the week.

In morning trade, the lithium developer’s shares are up over 12% to $6.79.

Why is the Vulcan share price racing higher?

The catalyst for the rise in the Vulcan share price on Monday has been the release of a promising announcement relating to its Zero Carbon Lithium Project in Germany.

According to the release, the company has produced the highest grade, lowest impurity lithium hydroxide to date from its pilot plant.

The lithium hydroxide was produced from Vulcan’s sorption pilot plant, which is located at its commercial geothermal renewable energy plant, with downstream electrolysis processing offsite.

The release notes that the latest material produced graded 57.1% LiOH, which exceeds the best-on-the-market battery grade specification of 56.5% LiOH required from offtake customers. Impurities were also well below market specification minimums.

Another positive is that Vulcan’s pilot plant, which has been operating since April 2021, has now produced sufficient data to complete the company’s Phase 1 Definitive Feasibility Study (DFS), which is scheduled for the first quarter of 2023.

Based on the above, it seems quite likely that the DFS will be a success.

Management commentary

Vulcan’s managing director and CEO, Dr. Francis Wedin, was encouraged by the results. He commented:

As our DFS draws towards its conclusion, we are encouraged by these latest highest grades and lowest impurities recorded to date, from LiCl production from our pilot plant, with electrolysis conducted offsite. The embodied renewable heat within our brine means we are able to leverage sorption, a commercially proven process to extract lithium from brines that requires heat to work. Sorption is highly selective, which means that we can produce a very pure LiCl eluate. This in turn means we are able to use lithium electrolysis, a method of producing lithium hydroxide directly which by its nature produces a very pure product, in excess of the purity required for use in Electric Vehicle (EV) batteries, with minimal reagent usage.

Works are continuing apace on our Demo Plant and DFS, and we are looking forward to sharing further updates with our stakeholders in the coming months, as we continue to execute towards our target of first commercial production from our Zero Carbon Lithium Project in 2025.

The post Vulcan share price rockets 12% on lithium update appeared first on The Motley Fool Australia.

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More reading

• Which ASX All Ords shares avoided a sell-off during the last recession?
• Down 30% in 2022: Here’s why I’m holding tight to my Vulcan Energy shares
• ‘We have the right team to deliver’: What’s going on with the Vulcan Energy share price 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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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.

In November 2021, Bitcoin (CRYPTO: BTC) looked unstoppable as its price approached $70,000 per coin. Since then, the cryptocurrency has lost nearly 70% of its value and now trades for around $19,000.

Was this just a big financial experiment gone bust, or should investors continue to look at Bitcoin as a possible vehicle for building a diversified investment portfolio?

It’s certainly possible that the king of cryptos has seen its best days, but there’s also plenty to be optimistic about. When you consider Bitcoin’s history of sell-offs and recoveries and an important upcoming event, this crypto looks quite attractive at current prices.

Bitcoin has a history of crashes and recoveries

If you’ve followed the Bitcoin story for more than a couple of years, you know that huge drawdowns are a common occurrence. In fact, there have been three crashes in the past decade that are worse than the current one:

Year	The Crash	% Loss	The Reason
2011	Fell from $32 to $0.01	99%	Mt. Gox breach
2015	Fell from $1,000 to $170	83%	Chinese ban/Mt. Gox halts trading
2017	Fell from $20,000 to $3,200	84%	Crypto winter

Source: Cointelegraph. Table by author.

The main takeaway is that on all three occasions, Bitcoin recovered from these huge declines.

When you look at the reasons for the previous crashes, the current situation feels rather tame. In 2011, Mt. Gox — a Japanese exchange that was responsible for roughly 70% of all Bitcoin transactions — was hacked, which resulted in the theft of more than 800,000 Bitcoins.

And yet, Bitcoin not only recovered from this predicament but surged to new highs in the years following.

If Bitcoin can survive an event as detrimental as a 99% crash, I have no doubt it can recover from the current bear market and macroeconomic headwinds.

The next halving could push Bitcoin to a new all-time high

Perhaps the most important catalyst in the near term is the next halving, which is scheduled to take place in the second quarter of 2024.

Halving refers to an event that occurs roughly every four years. Bitcoin’s protocol requires that after every 210,000 blocks are mined, the reward given to miners is cut in half. In the early days, miners were rewarded with 50 bitcoins every time they solved a problem.

Fast forward to today, and miners are receiving 6.25 tokens, and that number is scheduled to be cut in half in about 18 months. It doesn’t take a genius to understand that if fewer Bitcoins are being rewarded to miners, the value of those coins is likely to rise. It’s simple supply-and-demand logic.

If we look at past halvings, we see how this premise played out:

Year of Halving	% Increase over the next 12 months
2012	950%
2016	400%
2020	120%

Source: Investopedia. Chart by author.

The light at the end of the tunnel

Bitcoin recently has been lumped into a broad basket of risky investments and, as such, the market has hammered it. But investors should also understand that the market is a leading indicator, and it recovers before the broader economic environment.

It’s entirely possible that we could see a resolution in supply chain constraints caused by the pandemic and the Russian invasion of Ukraine in the next 12 to 24 months, which would ease the rate of inflation. This would likely prompt the Federal Reserve to shift its rate-hiking strategy and could very well be the catalyst growth investors have been waiting for.

Considering that Bitcoin has tracked growth stocks almost in lockstep during the past year, the next halving and a potential decline in inflation could send the coin’s price surging.

^IXIC data by YCharts.

While we can only speculate on the macro environment, we can be certain that the Bitcoin halving will occur sometime in 2024. And if history is any indicator, this is likely to be good news for its price.

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

The post Why the Bitcoin price could soar in the coming years appeared first on The Motley Fool Australia.

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More reading

• 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?
• I’ve already made 158% on Bitcoin. Here’s why I keep holding
• Is Google now joining the crypto party following its latest move?

Mark Blank has positions in Bitcoin. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin. The Motley Fool Australia positions in and recommends Bitcoin. 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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The definition of a ‘top share’ varies among those interested in investing on the ASX.

Some believe top shares are those trading at low valuations with plenty of future prospects. Others could hunt for top shares in nooks and crannies, searching for companies operating in an in-demand corner of the market with little competition.

For every definition of a top share, there’s likely an ASX stock that embodies it. And with the All Ordinaries Index (ASX: XAO) having slumped 13% in 2022, there are plenty of top ASX shares trading at bargain prices right now. Here’s how I would find them.

How I’d craft a portfolio of top ASX shares in 2022

Step 1: What makes an ASX top share?

Possibly the most common definition of a top ASX share is one that offers competitive advantages.

In that case, the dream could be to find a listed company that can corner a market where its offerings are in demand. A company in such a position will likely have little trouble growing its margins faster than its competitors. A loyal, returning customer base could also indicate that a company has a competitive advantage over its peers.

Others might argue that a top ASX share is one that can boast plenty of cash flow and a strong balance sheet, thereby increasing its chances of sailing through tough times.

Finally, a top stock might be one that’s trading at a low valuation due to no fault of its own. They might also be dubbed ‘diamonds in the rough’, having been beaten down by shifting market sentiment or sell-offs despite offering underlying value.

It could also be argued that the criteria for a top share has shifted slightly in 2022 to one that’s either shielded or benefits from inflation and rising interest rates.

Step 2: Building a portfolio

Once I found a few top shares on the ASX, I would get to work building a portfolio. Though, that might be easier said than done.

Of course, I’m a huge fan of diversification, even when investing in top-shelf stocks.

A portfolio that covers numerous stocks in numerous sectors will generally offer the best protection from market shifts. Therefore, I will always encourage those shopping for ASX shares to build a diverse portfolio.

Additionally, as Warren Buffett advises, investors would be wise to understand all the ins and outs of a business and its industry before investing in it.

Thus, those building a portfolio of top shares could find themselves spending a lot of time researching.

Step 3: The power of time

Finally, once I’d built my portfolio of top ASX shares – hopefully taking advantage of market volatility to do so – I’d sit back and trust my picks.

That’s not to say I’d set and forget. I would still seek to be informed about my holdings.

However, good things come with time. More often than not, top shares will reward investors over years and decades, not weeks and months.

Taking this approach could also help to ward off the anxiety that so often accompanies short-term downfalls.

The post How I’d build a portfolio by investing in top ASX shares now appeared first on The Motley Fool Australia.

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More reading

• 5 things I love about investing in ASX shares
• 3 ASX All Ords shares smashing multi-year highs today
• It wasn’t all bad news for ASX All Ords shares on Monday. Here are some big winners
• Top broker says opportunities abound for ‘high quality’ ASX shares
• 3 ASX All Ords shares smashing multi-year highs on Friday

The Motley Fool Australia has no positions 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 South32 Ltd (ASX: S32) share price is on the move on Monday morning following the release of the miner’s quarterly update.

In early trade, the mining giant’s shares are up 2.5% to $3.82.

South32 share price higher on first quarter update

Investors have been bidding the South32 share price higher today after a strong night for materials shares on Wall Street on Friday offset the release of a mixed first quarter production update.

For the three months ended 30 September, South32 reported the following production compared to the fourth quarter:

• Alumina down 8% to 1,257kt
• Aluminium up 9% to 279kt
• Copper up 12% to 19kt
• Lead down 5% 24.6kt
• Manganese down 1% to 1,460kt
• Met coal down 8% to 1,270kt
• Nickel down 11% to 14kt
• Silver down 3% to 2,748koz
• Zinc down 9% to 9.6kt

How does this compare to expectations?

This was a mixed quarter from South32, with a number of its operations outperforming expectations and other underperforming consensus estimates.

For example, aluminium, copper, manganese, and nickel production came in ahead of consensus estimates. Whereas alumina, met coal, and zinc production fell short of the market’s expectations.

The soft quarter from its met coal operations was caused by workforce disruptions and has led to management reducing its full year met coal guidance by 5%. This is particularly disappointing given the high prices that the black gold is commanding right now.

One small positive, though, is that management doesn’t expect a material impact on its FY 2023 met coal operating unit cost guidance of US$116/t, with the benefit of a weaker Australian dollar expected to offset the impact of lower volumes.

The rest of the company’s guidance for FY 2023 remains unchanged.

Management commentary

South32’s chief executive officer, Graham Kerr, appeared to be pleased with the quarter. He said:

Highlights during the September 2022 quarter included an 11 per cent increase in copper equivalent production at the Sierra Gorda copper mine in Chile, a nine per cent increase in aluminium production and a six per cent increase in manganese ore production at GEMCO. We maintain a strong outlook with 13 per cent production growth expected in FY23.

We returned US$50M to shareholders via our on-market share buy-back and finished the quarter with a net cash position of US$446M, with a further US$784M returned in October 2022 via fully-franked ordinary and special dividends. Our strong balance sheet and disciplined approach to capital management enables us to continue to make returns to shareholders while investing in our portfolio of growth options focused on metals critical to a low-carbon future.

The post South32 share price higher despite met coal downgrade appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Monday
• Here are the 3 most heavily traded ASX 200 shares on Friday
• Here are the 3 most heavily traded ASX 200 shares on Thursday
• Opportunities across the mining sector: Expert names ASX 200 shares to buy
• Morgans names the best ASX resources shares to buy now

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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At the start of each week, I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Flight Centre Travel Group Ltd (ASX: FLT) continues its long run as the most shorted share on the Australian share market after its short interest rose to 15.1%. Short sellers seem to believe that the market is too bullish on the travel market recovery due to rising living costs.
• Betmakers Technology Group Ltd (ASX: BET) has seen its short interest rise to 14.5%. This betting technology company’s shares are down 60% in 2022 but short sellers appear to believe they can keep falling. In other news, last week it was revealed that major shareholder, Tom Waterhouse, sold $11 million worth of shares in recent weeks
• Block Inc (ASX: SQ2) has seen its short interest rise to 11.8%. Investors continue to target this payments company amid concerns that a global recession could slow its growth.
• Domino’s Pizza Enterprises Ltd (ASX: DMP) has seen its short interest jump to 10.7%. There are fears that cost inflation could be weighing on this pizza chain operator’s performance.
• Megaport Ltd (ASX: MP1) has seen its short interest rise to 10.6%. Short sellers will have been pleased to see this tech share crash lower last week after the release of a soft quarterly update.
• Perpetual Limited (ASX: PPT) has seen its short interest jump to 10%. A number of fund managers have been under pressure this year amid tough trading conditions.
• Lake Resources N.L. (ASX: LKE) has short interest of 9.8%, which is down slightly week on week. Short sellers have major doubts over this lithium developer’s unproven DLE technology.
• Nanosonics Ltd (ASX: NAN) has short interest of 8.3%, which is down week on week. This infection prevention company’s disruptive business model change in the key US market is causing concerns.
• Breville Group Ltd (ASX: BRG) has seen its short interest rise to 8.1%. Investors may be concerned that the uncertain economic backdrop could impact consumer spending on kitchen goods.
• Zip Co Ltd (ASX: ZIP) has returned to the top ten with short interest of 7.8%. Doubts over this buy now pay later provider’s profitability targets continue to weigh on its shares.

The post These are the 10 most shorted ASX shares appeared first on The Motley Fool Australia.

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More reading

• Brokers say these exciting ASX growth shares are buys
• Are Flight Centre shares worth buying in October?
• A certain ex-bookie has sold off $11m worth of this ASX 300 share in a month
• Why is ASX 200 tech share Block dropping like a stone today?
• Why is the Megaport share price receiving a 9% spanking 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 positions in and has recommended Betmakers Technology Group Ltd, Block, Inc., MEGAPORT FPO, Nanosonics Limited, and ZIPCOLTD FPO. The Motley Fool Australia has positions in and has recommended Block, Inc. and Nanosonics Limited. The Motley Fool Australia has recommended Betmakers Technology Group Ltd, Dominos Pizza Enterprises Limited, Flight Centre Travel Group Limited, and MEGAPORT 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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Looking for some dividend shares to add to your income portfolio? If you are, you may want to look at the two listed below.

Both have been rated as buys by analysts and tipped to provide investors with big dividends. Here’s what you need to know about these ASX dividend shares:

HomeCo Daily Needs REIT (ASX: HDN)

The first ASX dividend share to look at is the HomeCo Daily Needs REIT.

HomeCo Daily Needs is a growing property company that invests in convenience-based assets across the neighbourhood retail, large format retail, and health and services sub-sectors.

Goldman Sachs is a fan of the company and believes its shares are “undervalued at its current valuation given its diversified tenant base.” The broker also sees HomeCo Daily Needs’ portfolio as “well positioned to benefit from secular trends toward last-mile fulfilment offerings.”

In respect to dividends, the broker is forecasting dividends per share of 8.3 cents in FY 2023 and 8.5 cents in FY 2024. Based on the current HomeCo Daily Needs share price of $1.16, this will mean dividend yields of 7.1% and 7.3%, respectively.

Goldman has a buy rating and $1.57 price target on its shares.

Telstra Corporation Ltd (ASX: TLS)

Another ASX dividend share that has been tipped to provide income investors with a generous dividend yield is telco giant Telstra.

After battling through a difficult time over the last decade, at long last there is light at the end of the tunnel for the company and its shareholders. In fact, that light is shining very brightly after a return to growth in FY 2022.

The good news is that the company’s new T25 strategy is expected to underpin further solid growth in the coming years, which could be good news for its dividend payments.

For now, though, Morgans is expecting Telstra to continue to pay fully franked 16.5 cents per share dividends in FY 2023 and FY 2024. Based on the current Telstra share price of $3.85, this equates to yields of 4.3%.

Morgans has an add rating and $4.60 price target on the company’s shares.

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

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More reading

• Is there something strange going on with Telstra shares today?
• Is Telstra only worth considering for dividends, not share price growth?
• Broker says these ASX dividend shares are buys this month
• The Telstra share price is still trading at less than half its record highs. Time to pounce?
• Morgans names 2 ASX dividend shares to buy right now

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 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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When the COVID-19 pandemic first hit a couple of years ago, public transport instantly fell out of favour.

Private transport — like cars, motorbikes and scooters — saw sales surge as people around the world sought to get around without close contact with other commuters.

Businesses that supplied, manufactured and sold such vehicles did pretty well and enjoyed a tidy rise in their valuations.

But now that much of the developed world is moving into the post-pandemic era, how will they fare?

The analysts at Auscap Asset Management think that at least two automotive ASX shares have strong futures ahead of them:

‘Considerable earnings tailwind’

Eagers Automotive Ltd (ASX: APE) owns and operates a network of car dealerships in Australia and New Zealand.

The share price enjoyed a spectacular 466% rise from March 2020 to April 2021 on the back of incredible demand for private transport.

Since then the stock has cooled off, with AP Eagers shares now going for about 20% less than at the start of this year.

For the Auscap team, the market is too focused on external drivers rather than the actual business performance.

“Eagers delivered another strong half-year result in August 2022,” its memo to clients read.

“The market continues to focus on the potential for a slowdown in new vehicle orders, given the widespread expectation of a softening consumer environment, although Eagers said they had yet to see a slowdown in demand as of August.”

Pandemic-induced supply constraints have meant Eagers now has a huge backorder of vehicles yet to be delivered. And revenue is not counted until the customer is behind the wheel of their new car.

“Eagers has delivered fewer cars than it has sold in every single month since the onset of the COVID-19 pandemic,” read the memo.

“This record order bank provides Eagers with a considerable earnings tailwind for the rest of this calendar year and into 2023.”

In addition, the company has improved its business throughout the pandemic.

“Eagers has taken advantage of COVID-19 uncertainty and current earnings visibility to improve its dealership footprint with a number of acquisitions and divestments, invest in future growth initiatives such as the AutoMall concept and omni-channel used car offering known as EasyAuto123, and aggressively right-size its cost base.”

Eagers shares currently pay out a dividend yield of 5.8%.

Auscap already holds Eagers shares and has watched in glee as insiders bought up the stock in recent weeks.

“Nick Politis, the company’s 28% shareholder and a major automotive player in his own right, has purchased over $4 million worth of shares on-market since July. Chairman Timothy Crommelin and board member David Blackhall have also bought shares in recent months.”

‘Consistently grown’ market share

The Auscap team also loves the fund’s holding in MotorCycle Holdings Ltd (ASX: MTO), which operates Australia’s largest motorcycle dealership network.

The company is responsible for 12% of all new motorbike sales in the country and sells all 10 of the top-selling brands.

“While the motorcycle industry does experience cyclical swings, Motorcycle Holdings has consistently grown share through both organic and inorganic means since listing in 2016,” read the Auscap memo.

“In addition to growth, MotorCycle Holdings has been focused on diversification, which we think is underappreciated.”

This refers to the recent acquisition of “large” parts and accessories business MOJO, a “consistently profitable” finance joint venture and geographic expansion.

“MOJO is a specialist in scooters, all-terrain vehicles (ATVs) and electric motorcycles. These are categories experiencing structural market share growth where MTO has been underweight,” read the memo.

“While businesses focused purely on distribution can tend to have key supplier risk, we think MOJO has the potential to fit in well and grow strongly within a diversified MotorCycle Holdings.”

The MotorCycle Holdings share price has dipped 19.7% year to date, and currently pays a 8% dividend yield.

The $153 million company, Ausbil analysts believe, is flying “under the radar”.

“[The stock] is currently trading on just 5.6x pro-forma FY22 net profit after tax pre-synergies.

“It has net Debt/EBITDA of just 0.6x and management expects MOJO to experience strong earnings growth in FY2023.”

There is also a connection to the other auto stock, with former Eagers chief Martin Ward set to join the MotorCycle Holdings board.

Ward was at the helm of Eagers over a 15-year period when its profit before tax multiplied more than eight times.

“It is not surprising to us that the MOJO vendors took as much of their acquisition consideration as possible — 50% — in MTO stock.”

The post Vroom vroom: Fund names 2 ASX shares it loves right now appeared first on The Motley Fool Australia.

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More reading

• Is this why a certain ASX 200 director keeps buying up big on their company’s shares?
• Brokers name 3 ASX shares to buy today
• 4 ASX 200 directors who raised the stakes in their company shares in September

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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There are some ASX shares that used to be staples in investor portfolios and superannuation accounts but in recent years have become stinkers.

That could be their own fault for mismanaging their business, or be caused by external factors.

One could name AMP Ltd (ASX: AMP) as an example of the former and Treasury Wine Estates Ltd (ASX: TWE) to demonstrate the latter category.

The AMP share price has lost a painful 80% over the past 4.5 years after a series of financial, governance and staffing scandals of its own making.

Meanwhile, Treasury Wine is about 33% down from its pre-COVID highs after it lost its largest export market, China. In 2020, Beijing imposed stiff tariffs on wine imports in retaliation to Canberra’s call for an independent review into the origins of the pandemic.

However, this week Montgomery Investment Management founder Roger Montgomery stunningly revealed his funds have recently bought both these stocks:

Don’t let this ASX share’s past fool you about the future

Montgomery, in his role as guest lecturer at the University of Sydney, has presented AMP to students as the prototypical example of a company that doesn’t meet the definition of “quality”.

So why did his funds buy into it just now?

“AMP is an example of a so-called ‘improving quality’ company with a strong valuation case because the potential upside is not appreciated, nor factored-in, by the market,” he said on the Montgomery blog.

“To disregard it, or write it off, on the basis of its historical performance, would be to potentially miss the future value being created under investors’ noses.”

Montgomery pointed out the “significant progress” the ASX share has made under new management since the disastrous finance industry Royal Commission.

“Management is completing the divestment of Collimate Capital (formerly AMP Capital) which will result in a strong surplus capital position,” he said.

“The advice division’s losses are less than half of those from a year ago, and it remains on target to break even by 2024.”

The speed of fund outflows from the wealth management business has also slowed. The AMP North platform is attracting new investor capital despite the tarnished AMP brand.

“AMP Bank also remains a steady contributor to group earnings with recent growth outpacing the rest of the industry,” Montgomery said.

“Elsewhere, the bank’s digital-only offering is gaining traction with new and existing customers.”

With the AMP share price tanking so much in recent years, Montgomery believes stock buyers now receive many of these businesses effectively for nothing:

With surplus capital of $2 billion, after the sale of assets, and a valuation of over $1.5 billion for the AMP Bank – based on book value – AMP’s market capitalisation of about $3.5 billion suggests shareholders are receiving the +$100 billion multi-platform AMP North business, the Australian and New Zealand advice business and a share of a Chinese asset management and pension company, for free. 

This is a different business from what it was in 2020

The tragedy of Treasury Wine Estates is so ingrained in investors’ minds that it’s now considered “a barometer for Australian-Sino relations”, according to Montgomery.

But for him, the business now has a completely different investment thesis from two years ago.

“This year, they have embarked on an expansion into the premium luxury sector with acquisitions of other premium wine labels,” said Montgomery.

“The quality of the American division’s earnings has also improved with the divestment of commoditised commercial wines, resulting in lower volume but much higher operating margins operations.”

But the catalyst for his team’s decision to buy into this ASX share recently was its Asian expansion outside of China.

“This occurred despite a virtual ban on the export of the company’s prized Penfolds brand wines, reflecting management’s distribution expertise and providing confidence in their multi-country expansion of the Penfolds brand. 

“The strategy simultaneously expands the company’s total addressable market and reduces geopolitical risk.”

He believes the reduced reliance on China has actually improved the quality of the business and provides better downside protection for investors.

“Growth options concurrent with margin expansion have the potential to grow earnings for many years above current analyst projections.”

The post Why we just bought 2 ASX 200 shares that everyone abandoned: expert appeared first on The Motley Fool Australia.

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More reading

• Why is the AMP share price beating the ASX 200 today?
• Treasury Wine share price climbs on strong Q1 performance
• This is what will get ASX shares rising again early 2023: economist
• 5 things to watch on the ASX 200 on Tuesday
• Is the company’s buyback helping boost the AMP share price?

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 recommended Treasury Wine Estates 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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Ask A Fund Manager

The Motley Fool chats with the best in the industry so that you can get an insight into how the professionals think. In this edition, Alphinity Investment Management portfolio manager Elfreda Jonker shows us her strategy for buying three devastated ASX shares.

Cut or keep?

The Motley Fool: We’ll now examine three ASX shares that have plunged recently, to get your thoughts on whether they’re a bargain or if you’d stay well away.

The first one is Goodman Group (ASX: GMG), which has fallen about 40% year to date. What do you reckon?

Elfreda Jonker: Well, it’s a stock that we currently own. We do still have an overweight position in it currently, but it is a stock that we’ve also owned for 10 years. So it’s probably one of those that, in our view, is a stock that is going to be a long-term winner. 

Modern logistics is a theme of the future — fantastic business, fantastic management team, and it’s a very strong capital position. But there are certain times in the cycle — and we’re currently in one of them — when yields continue to rise, any real estate company will, generally speaking, be under pressure because they’re seen as bond proxies. So what you’ve seen in this 40% [fall in share price] that you’re referring to is really very much driven by the fact that yields have continued to increase. For example, in the US, the bond yield that’s gone from 1.5% at the start of the year when it reached the peak to almost 4% currently.

So that has really been the key issue with Goodmans. Underlying business fundamentals are still very, very strong in our view. We think there’s been a lot of fear around [major customer] Amazon.com Inc (NASDAQ: AMZN) slowing and that’s going to spill over into Goodman. Amazon has only really given up [a] marginal amount of space and the demand from other customers has still remained really strong. We still see good earnings growth coming through and a strong balance sheet… We think this is a business that you can hold for the long term.

That being said, we do think that it’s a bit early to add more at this point in time until you get to the point where you feel that the interest rate hikes have run their course. The market’s priced in that higher yield, the market’s always forward-looking, but we think there are more interest rate hikes coming. The Fed’s been very obvious about it and here at the RBA probably as well, just to a lesser extent. In that environment, you need to be careful to really bolster your real estate’s exposure too much. So we’ll wait, but we definitely will be adding once we’re in a better interest rate cycle.

MF: The next one is semi-related as it plays in the housing sector. James Hardie Industries plc (ASX: JHX) has also fallen about 40% this year?

EJ: James Hardie is a company that we used to own, but we actually sold out on the back of all the pressures that are currently happening in the US housing markets. 

As you know, they manufacture building products for new home construction as well as remodelling of existing homes, and that’s a 35/65 split. Currently what we’ve seen is that we still see ongoing pressure in that space. 

The stock is quite cheap, but we are concerned around what’s going to happen to the earnings into 2023, 2024. So at the moment, if you look at it, the US housing starts — the new builds — that’s continuing to reduce, mortgage rates are still going up. It’s now 7.2% versus 3% a year ago. And there’s still a lot of evidence in the leading indicators that that market continues to soften. 

The recent update in the US — our portfolio manager was actually there just after their results — was in August. They talked a pretty good story from a medium-term target’s perspective, but shorter term they continued to downgrade revenue targets as well as margins on the back of increased costs. Then, also obviously, the overall demand has continued to decline. 

So for us, we think it’s too early to buy. We think it’s good to just wait a little bit longer until you see some indicators on the mortgage rates or the housing starts need to improve — and we need to see signs of that staying there and improving for a while before we would be willing to get in. 

As I’ve mentioned at the start, we invest in companies in an earnings upgrade cycle and currently James Hardie is still in an earnings downgrade cycle. So a bit too early for us, but overall another fantastic business that we wouldn’t mind owning again in the future.

MF: The last ASX share pays a pretty decent 7.4% dividend yield, but it’s in the retail space with some clouds over the economy. What are your thoughts on Super Retail Group Ltd (ASX: SUL), down about a quarter year to date?

EJ: Super Retail, we currently do have a small overweight position. Our view at the moment is that Super Retail is probably a little bit more shielded to a very big consumer meltdown. 

We don’t expect that, but we certainly are in an environment where the economy is softening and consumer spend has remained strong despite rates going up. You haven’t really seen the impact of higher mortgages and high inflation really hitting the consumer massively in Australia just yet. So we are definitely a bit concerned that you can still see that coming through. 

That being said, we think a business, particularly Supercheap Auto on the auto side, Macpac, Rebel, BCF, these are all businesses where we think from an inventory point of view, it’s easier to manage these inventories that you can buy and hold in a warehouse, it’s not necessarily super high fashion that you have to churn consistently.

In the past, one of the things that really stood out for us in Super Retail Group is the fact that they manage their inventory incredibly well. Even at the last update we had from them is that they have increased their inventory, but they’re not too concerned. They wanted to do that given the supply chain constraints. 

At this point in time for us, we would probably hold our position currently and wait to see how the consumer really plays out. From our perspective, we’d rather hold Super Retail Group and many of its peers just given that we think it’s definitely on the more defensive side of the consumer space. But we think it’s also a bit early to add too much at this point in time until we see what the real impact is. 

We’ll keep an eye on it, happy to hold it and could potentially add later on when we get more clarity.

The post 3 ASX 200 shares I’d pounce on when the clouds clear: expert appeared first on The Motley Fool Australia.

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More reading

• Analysts say these beaten down blue chip ASX 200 shares can rise 50%
• Goodman share price hits two-year low: Time to buy?
• 3 beaten-up ASX shares this fund manager thinks are ‘compelling’ buys
• 2 high quality blue chip ASX 200 shares that experts rate as buys
• Here are the top 10 ASX 200 shares today

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tony Yoo has positions in Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon and Super Retail Group Limited. The Motley Fool Australia has positions in and has recommended Super Retail Group Limited. The Motley Fool Australia has recommended Amazon. 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 deep in the red. The benchmark index fell 0.8% to 6,676.8points.

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

ASX 200 expected to jump

The Australian share market looks set to rebound strongly on Monday after a very positive end to the week on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 95 points or 1.4% higher this morning. On Wall Street, the Dow Jones was up 2.5%, the S&P 500 rose 2.4%, and the NASDAQ stormed 2.3% higher.

Oil prices rise

Energy shares such as Santos Ltd (ASX: STO) and Woodside Energy Group Ltd (ASX: WDS) could have a good start to the week after oil prices pushed higher on Friday night. According to Bloomberg, the WTI crude oil price was up 0.65% to US$85.05 a barrel and the Brent crude oil price rose 1.2% to US$93.50 a barrel. Optimism over Chinese demand offset recession fears.

South32 update

The South32 Ltd (ASX: S32) share price will be one to watch on Monday when the mining giant releases its quarterly update. According to a note out of Goldman Sachs, its analysts are expecting the miner to report alumina production of 1,345kt, aluminium production of 271kt, and met coal production of 1,650kt.

New Hope goes ex-dividend

The New Hope Corporation Limited (ASX: NHC) share price is likely to drop deep into the red on Monday. That’s because the coal miner’s shares are due to trade ex-dividend for its latest dividend. Thanks to sky high coal prices, last month New Hope was able to declare a mammoth fully franked final dividend of 56 cents per share. This will be paid to eligible shareholders on 8 November.

Gold price rebounds

Gold miners including Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) could have a good start to the week after the gold price rebounded on Friday. According to CNBC, the spot gold price was up 1.2% to US$1,656.3 an ounce during the session. This was driven by hopes that rate hikes will happen at a slower pace in the US.

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

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More reading

• Expert reveals why these ASX All Ords shares are drumming up a ‘growing international appetite’ right now
• Demolished ASX 200 materials shares: Why this fundie is buying the 30% dip
• Why did ASX 200 coal shares have such a cracking Friday?
• Here are the top 10 ASX 200 shares today
• Why did the IAG share price get smashed 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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