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There are a lot of unloved ASX shares out there at the moment, but which ones are deserving of your investment?

The team at IML Australian Smaller Companies Fund had some ideas for a difficult time ahead.

“Rising interest rates will eventually lead to reduced consumer spending and lower demand, which will impact both business earnings and company valuations,” its memo to clients read.

“We remain focused on investing in companies with predictable recurring revenues and strong market positions, which are likely to perform better in these times.”

Here are two ASX shares that fit the bill for IML analysts at the moment:

‘Stable, predictable cash flow’

Transport services company Kelsian Group Ltd (ASX: KLS) is not a name investors hear much of, but with a $1 billion market cap, the IML team reckons it can’t be ignored.

In fact, IML has bought up Kelsian shares over the past quarter even as the stock price plunged.

“Kelsian is Australia’s largest land and marine transport and tourism provider,” the memo read.

“We remain attracted to Kelsian in a higher inflation environment as its main business comes from public bus transport which delivers stable, predictable cash flow, protected from cost pressures due to its government-backed contracts that deliver full recovery of cost increases.”

The Kelsian share price has dropped a hair-raising 38% so far this year, and 30% since late August.

According to IML analysts, the valuation plummeted even though the reporting update was positive.

“The drop was due to concerns that the company may need to raise funds if its overseas acquisition plans are successful,” read the memo.

“We took advantage of this weakness to increase our position in Kelsian after it became clear that it was not going to raise equity.”

The recent discount means that it’s now “reasonably priced on 13.5 times FY23 profit”, added IML’s notes.

Kelsian also pays out a tidy 3.6% dividend yield.

Keeping the faith in this challenger

Telecommunications provider TPG Telecom Ltd (ASX: TPG) has been frustrating to own ever since it floated in mid-2020 after its birth from the Vodafone-TPG merger. The share price has almost halved from where it started.

It’s been no picnic in recent times either, dropping more than 31% since mid-August.

“Its shares fell sharply over the quarter due to a weaker than expected first half result,” read the IML memo.

“The soft result took the market by surprise after an upbeat investor day in June, with mobile trends notably weaker than peers Telstra Corporation Ltd (ASX: TLS) and Optus in the June quarter.”

Despite all this drama, the IML team is convinced TPG will head upwards in the long term.

“We remain attracted to TPG given the defensive and recurring nature of its earnings,” read the memo.

“Going forward, earnings should benefit from increasing immigration and tourism, which will help grow the number of mobile subscribers, as well as the proposed regional network sharing agreement with Telstra, and the migration of some NBN broadband customers to TPG’s fixed wireless network.”

TPG shares currently boast a dividend yield of 3.9%.

The post 2 slaughtered ASX dividend shares now looking attractive: fund appeared first on The Motley Fool Australia.

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More reading

• Which ASX All Ords shares could perform well in a recession?
• Here are the top 10 ASX 200 shares today
• Telstra share price lower amid ACCC update on TPG agreement
• Own ASX 200 telco shares? Here’s the latest following the Optus hack
• These ASX 200 giants are unlocking new lows on Friday

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 positions in and has recommended Telstra Corporation Limited. The Motley Fool Australia has recommended TPG Telecom 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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On Tuesday, the S&P/ASX 200 Index (ASX: XJO) had a very strong day and charged notably higher. The benchmark index jumped 1.7% to 6,779.2 points.

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

ASX 200 expected to fall

The Australian share market looks set to fall on Wednesday after a volatile but positive night on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 54 points or 0.8% lower this morning. That’s despite in late trade on Wall Street, the Dow Jones is now up 0.9%, the S&P 500 is up 0.8%, and the Nasdaq is up 0.5%.

Oil prices sink

Energy shares Beach Energy Ltd (ASX: BPT) and Woodside Energy Group Ltd (ASX: WDS) could have a tough day after oil prices sank overnight. According to Bloomberg, the WTI crude oil price is down 3.1% to US$82.80 a barrel and the Brent crude oil price has fallen 1.8% to US$89.97 a barrel. Global recession fears are weighing on prices.

BHP Q1 update

The BHP Group Ltd (ASX: BHP) share price will be one to watch today when the mining giant releases its first quarter update. The market is expecting the Big Australian to report copper production of 429kt, iron ore shipments of 72.3Mt, met coal production of 7.6Mt, and nickel production of 21.1Mt. All eyes will be on its cost guidance as well.

Gold price falls

Gold miners Evolution Mining Ltd (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) could have a subdued day after the gold price dropped overnight. According to CNBC, the spot gold price is down 0.5% to US$1,655.4 an ounce. Gold fell despite a spot of weakness in the US dollar and treasury yields.

Webjet shares a strong buy

The Webjet Limited (ASX: WEB) share price could be heading a lot higher from current levels. According to a note out of Goldman Sachs, its analysts have added the online travel agent’s shares to their coveted conviction list with a price target of $6.50. It said: “WEB is a structural beneficiary of the recovery from COVID with favorable exposure to the growing online channel and, more importantly, a strong positioning and improving scale in the niche Bedbanks segment.”

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

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More reading

• Why was the Fortescue share price on such a rollercoaster today?
• Here are the top 10 ASX 200 shares today
• Could investors in this ASX 200 share be in for more payment windfalls?
• What could a possible Tyro takeover mean for NAB shares?
• Here are the 3 most heavily traded ASX 200 shares on Tuesday

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 Webjet Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Are you looking for some dividend options for your income portfolio this week? If you are, then take a look at the two ASX 200 dividend shares listed below.

Here’s why they have been tipped to as buys by experts:

Bapcor Ltd (ASX: BAP)

The first ASX 200 dividend share for income investors to look at is Bapcor.

Through brands such as Autobarn, Burson Auto Parts and Midas, it is the Asia Pacific’s leading provider of vehicle parts, accessories, equipment, service and solutions.

The team at Citi is positive on Bapcor and has a buy rating and $7.82 price target on the company’s shares. It believes that the company’s guidance for FY 2023 is conservative.

As for dividends, its analysts are forecasting fully franked dividends of 21 cents per share in FY 2023 and then 24 cents per share in FY 2024. Based on the current Bapcor share price of $6.35, this will mean yields of 3.3% and 3.7%, respectively.

Coles Group Ltd (ASX: COL)

Another ASX 200 dividend share for income investors to consider is this supermarket giant.

Thanks to its defensive qualities and strong market position, which includes 800+ supermarkets and 900+ liquor retail stores, it has been tipped to continue growing its sales, profits, and dividends in the coming years whatever the economy throws at it.

This will be supported by the construction of its smart distribution centres, which are aiming to make its operations more efficient and cut costs.

Morgans is bullish on Coles and has an add rating and $20.00 price target on its shares.

In respect to dividends, Morgans is forecasting fully franked dividends per share of 65 cents in FY 2022 and 66 cents in FY 2023. Based on the current Coles share price of $16.57, this will mean yields of 3.9% and 4%, respectively.

The post Experts say income investors should buy these ASX dividend shares appeared first on The Motley Fool Australia.

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More reading

• Better buy: Woolworths or Coles shares?
• Which ASX All Ords shares could perform well in a recession?
• Own Coles shares? Here’s what to expect from the supermarket giant’s Q1 update
• Brokers say these are the ASX 200 dividend shares to buy now
• Are Coles shares a buy ahead of the company’s November AGM?

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 Australia has recommended Bapcor. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Fortescue Metals Group Limited (ASX: FMG) share price was up and down like a yo-yo on Tuesday.

Fortescue shares closed at $17.07 today, up 0.95% on yesterday’s closing price. For perspective, the S&P/ASX 200 Index (ASX: XJO) lifted 1.72% today.

Let’s take a look at what went on with the Fortescue share price today.

What went on?

Fortescue shares lifted 1.3% to $17.12 in early trade. However, the company’s shares then slipped into the red during the afternoon before recovering to finish the day in the green.

BHP Group Ltd (ASX: BHP) shares rose 1.38% today while Rio Tinto Limited (ASX: RIO) shares also finished 0.14% in the green.

Fortescue is among the world’s largest iron ore producers.

The iron ore price fell 1.55% overnight to US$95 a tonne, Trading Economics data shows. This is its lowest level since November 2021.

In March, the commodity was fetching almost US$160 a tonne and almost US$230 a tonne in May 2021.

Overnight, iron ore prices struggled amid news China is planning to maintain its COVID-19 zero strategy. It’s expected to further constrict the nation’s economic growth. China is the biggest iron ore importer in the world.

Also today, news emerged that iron ore giant Vale SA (NYSE: VALE) produced more iron ore than analysts expected in the last quarter. Vale produced 89.7 million metric tonnes of the commodity, ahead of expectations, Bloomberg reported. This may put more pressure on the iron ore price, the publication noted.

Meanwhile, fellow iron ore producer Rio Tinto released mixed third-quarter production results today.

Iron ore production jumped 1% to 83.4 Mt, while iron ore shipments fell 1% year on year to 82.9 Mt. Analysts had been tipping 84.5 Mt of iron ore shipments, my Foolish colleague James noted today.

Rio noted commodity prices “continued their downward trend” during the quarter, highlighting “there are further downside risks”.

The Singapore Exchange Iron Ore Futures Contract for November is 0.17% in the red at the time of writing.

Share price snapshot

Fortescue shares have gained almost 16% in the past year, but they have fallen 11% year to date.

For perspective, the ASX 200 has shed 8% in the past year.

Fortescue has a market cap of $52.5 billion based on the current share price.

The post Why was the Fortescue share price on such a rollercoaster today? appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Could investors in this ASX 200 share be in for more payment windfalls?
• What could a possible Tyro takeover mean for NAB shares?
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• It’s a good day on the ASX 200. So why is the Woodside share price getting beaten up?

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

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The S&P/ASX 200 Index (ASX: XJO) jumped higher on Tuesday, driven by tech shares. The index ended the day 1.72% higher at 6,779.2 points.

Its strong performance followed Wall Street’s day in the green. The Dow Jones Industrial Average Index (DJX: .DJI) lifted 1.9% overnight while the S&P 500 Index (SP: .INX) surged 2.6% and the Nasdaq Composite Index (NASDAQ: .IXIC) rocketed 3.4%.

It’s likely no surprise then that the S&P/ASX 200 Information Technology Index (ASX: XIJ) led the Aussie bourse today. It soared 4.2% on Tuesday.

Meanwhile, the S&P/ASX 200 Materials Index (ASX: XMJ) posted a 1.7% gain and the S&P/ASX 200 Financials Index (ASX: XFJ) lifted 2%.

On the other hand, the S&P/ASX 200 Energy Index (ASX: XEJ) fell 0.6% after oil prices posted slight losses.

The Brent crude oil price fell less than 0.1% to US$91.62 a barrel overnight, while the US Nymex crude oil price dumped 0.2% to trade for US$85.46 a barrel.

All in all, 10 of the ASX 200’s 11 sectors closed higher on Tuesday. But which share outperformed all others? Let’s take a look.

Top 10 ASX 200 shares countdown

The Novonix Ltd (ASX: NVX) share price topped the lot on Tuesday despite no news having been released by the company.

Find out more about the battery technology and materials share and what it’s been up to here.

Today’s biggest gains were made by these shares:

ASX-listed company	Share price	Price change
Novonix Ltd (ASX: NVX)	$2.13	18.99%
Hub24 Ltd (ASX: HUB)	$25.21	14.18%
Telix Pharmaceuticals Ltd (ASX: TLX)	$6.21	11.09%
Block Inc (ASX: SQ2)	$92.90	10.69%
Lake Resources NL (ASX: LKE)	$1.09	8.46%
Megaport Ltd (ASX: MP1)	$8.49	8.02%
Chalice Mining Ltd (ASX: CHN)	$3.97	7.3%
Seek Limited (ASX: SEK)	$21.53	7.17%
Costa Group Holdings Ltd (ASX: CGC)	$2.14	7%
Virgin Money UK (ASX: VUK)	$2.41	6.64%

Our top 10 shares countdown is a recurring end-of-day summary to let you know which companies were making big moves on the day. Check in at Fool.com.au after the weekday market closes to see which stocks make the countdown.

The post Here are the top 10 ASX 200 shares today appeared first on The Motley Fool Australia.

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More reading

• 4 ASX tech shares with ‘long runways for growth at valuations rarely seen’: expert
• Could investors in this ASX 200 share be in for more payment windfalls?
• What could a possible Tyro takeover mean for NAB shares?
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• It’s a good day on the ASX 200. So why is the Woodside share price getting beaten up?

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 positions in and has recommended Hub24 Ltd and MEGAPORT FPO. The Motley Fool Australia has positions in and has recommended Hub24 Ltd. The Motley Fool Australia has recommended COSTA GRP FPO, MEGAPORT FPO, and SEEK 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 Flight Centre Travel Group Ltd (ASX: FLT) share price flew 4.38% higher today to finish at $15.24.

It’s been a rocky road for ASX travel shares since the pandemic hit, and the impact continues today.

Add to that rising inflation and interest rates, which are pushing up living costs and dissuading consumers from buying discretionary goods and services, and rising energy prices making air travel more expensive, and you could say ASX travel shares have some headwinds.

In light of this, many investors are feeling uncertain about travel stocks. This is one of the reasons Flight Centre remains the most shorted share on the ASX today.

As my Fool colleague James reported yesterday, Flight Centre has a short interest of 14.75%.

Broker says AGM could boost Flight Centre share price

According to the Australian Financial Review (AFR), Macquarie reckons Flight Centre could be among the ASX 100 shares to benefit from mini-trading updates at upcoming annual general meetings (AGMs).

The broker thinks the AGMs could provide a positive catalyst for the share prices of companies like Flight Centre, Coles Group Ltd (ASX: COL), Endeavour Group Ltd (ASX: EDV), Downer EDI Limited (ASX: DOW), Charter Hall Group (ASX: CHC), and Origin Energy Ltd (ASX: ORG).

According to the article:

Macquarie said unemployment rates were still very low and “consumer spending has not declined as feared” in Australia and that could also help travel groups such as Flight Centre.

Flight Centre will conduct its AGM on 14 November.

What’s the outlook for ASX travel shares?

An update from Qantas last week, which sent its share price soaring 12%, could be a positive indicator for the broader travel sector.

As my Fool colleague Tristan wrote:

Qantas revealed that travel demand remains “strong” across all categories. This sounds good for the wider ASX travel share sector. Revenue intake for business purposes is more than 100% of pre-COVID levels and leisure revenue intake has “further strengthened” to more than 130%.

… Qantas noted that the broader operating environment remains “complex” with high fuel prices and high inflation, as well as higher interest rates hitting consumer confidence.

Even so, the airline believes that “robust demand indicates that people are prioritising spending on travel above other categories”, allowing it to recover higher fuel costs through fares.

The post Why the heavily shorted Flight Centre share price could be an outperformer: Macquarie appeared first on The Motley Fool Australia.

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More reading

• These are the 10 most shorted ASX shares
• What is the outlook for ASX travel shares for the rest of 2022?
• Why are Flight Centre shares still the most popular among ASX short-sellers?
• Here are the 10 most shorted ASX shares
• Why CBA, Flight Centre, Life360, and Link shares are storming higher

Motley Fool contributor Bronwyn Allen has positions in Flight Centre Travel Group Limited, Macquarie Group Limited, and Qantas Airways Limited. 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 Australia has recommended Flight Centre Travel Group Limited and 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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If you have room for some new portfolio additions in October, then it could be worth considering the three ASX 200 shares listed below.

Here’s what you need to know about these buy-rated shares:

Lovisa Holdings Limited (ASX: LOV)

The first ASX 200 share to look at is fast-fashion jewellery retailer Lovisa. It could be a top long term option due to the popularity of its affordable offering (potentially important in the current environment) and its bold global expansion plans. In respect to the latter, analysts at Morgans see huge potential in the US market. They highlight that in Australia there are 6 stores per million people. Whereas in the US, Lovisa only has 0.25 stores per million people.  In light of this, the broker feels that this could be “the start of a period of remarkable expansion.”

Morgans has an add rating and $24.50 price target on its shares.

ResMed Inc. (ASX: RMD)

Another ASX 200 share to look at is ResMed. It is a medical device company which has a focus on sleep treatment solutions. This is a great market to be in. With education around sleep disorders improving, the company’s addressable market continues to increase. This bodes well for demand for ResMed’s industry-leading hardware and software solutions in the coming years. Particularly given how management estimates that only 20% of sufferers have been diagnosed.

Credit Suisse is a fan of ResMed and currently has an outperform rating and $40.00 price target on its shares.

TechnologyOne Ltd (ASX: TNE)

A final ASX 200 share to look at is enterprise software provider TechnologyOne. It could be a top option thanks to its ongoing transition to a software-as-a-service (SaaS) focused business. This transition has been going very well and management expects this positive trend to continue in the coming years. In fact, it is aiming to almost double its annual recurring revenue (ARR) to $500 million by FY 2026. This also bodes well for its profit growth, given it is higher margin revenue.

The team at Bell Potter is very positive on Technology One and currently has an add rating and $14.25 price target on its shares.

The post Analysts say these ASX 200 shares are buys in October appeared first on The Motley Fool Australia.

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More reading

• 2 classic healthcare ASX shares priced to buy now: expert
• What’s the outlook for ASX healthcare shares in Q2?
• ResMed share price drops: Is this a buying opportunity?
• 3 ASX dividend shares proving they can handle inflation
• 2 very exciting ASX growth shares experts rate as 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 positions in and has recommended Lovisa Holdings 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 Australia has recommended Lovisa Holdings Ltd and TechnologyOne 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 S&P/ASX All Technology Index (ASX: XTX) has had a ripper day, closing 4.19% higher on Tuesday. But it’s still down 31% in the year to date.

The broader S&P/ASX All Ordinaries Index (ASX: XAO) finished 1.86% higher today and remains down 11% in 2022 so far.

So, you see the potential opportunity here.

ASX tech shares have been sold off much more than ASX shares overall in 2022. This is because rising inflation and interest rates have made technology investors nervous.

The Aussie tech market is pretty young compared to that of the United States. Young companies tend to be small-cap shares with market capitalisations of between a few hundred million and about $2 billion.

As they’re in their growth phase, most of them carry a fair bit of debt (which gets much more expensive as rates rise, eating into profits). Many of them weren’t profitable before interest rates rose, anyway.

So, not so attractive to investors when inflation is eating into their returns.

But that’s short-term thinking. Here at the Fool, we advocate buying and holding for the long term.

Nick Sladen of LSN Capital Partners is thinking longer term, too.

Sladen writes on Livewire that “the current drawdown is presenting opportunities to invest in high-quality small cap businesses, with long runways for growth at valuations that are rarely seen”.  

ASX small-caps ‘strongest after major drawdowns’

Sladen says ASX small-cap shares are the go for better returns during the eventual recovery:

… while all cycles are not the same in terms of duration and performance, history tells us that small caps returns are the strongest after major drawdowns, with liquidity and valuations a major driver of this.

Valuations in small caps overall are now at levels only seen during previous periods of market turmoil (GFC, Euro Debt crisis) and for those companies that can deliver earnings growth, this will provide investors with a platform for strong returns over the medium to long term.

Obviously, the global economy has a way to go before inflation is under control and rate hikes stop. The share market is going to be volatile while this plays out.

But Sladen says analysts will eventually turn their attention to “which companies are successfully navigating the headwinds”.

They’ll also look at which ASX shares have been hammered most and now present attractive buying. In other words, ASX tech shares.

4 ASX tech shares to benefit

Sladen said the LSN Emerging Companies Fund has been taking advantage of the market sell-off.

There are four ASX tech shares that Sladen and his team like at the moment. They are Hub24 Ltd (ASX: HUB), Netwealth Group Ltd (ASX: NWL), ELMO Software Ltd (ASX: ELO), and Life360 Inc (ASX: 360).

He explained:

We consider the best return opportunities are in those companies that operate in structurally growing industries who can deliver earnings growth despite the difficult economic backdrop.

The specialist platform providers (HUB24 (ASX: HUB)/Netwealth (ASX: NWL)) continue to grow as they benefit from market share gains, providing annuity-style revenue, high margins, and strong cash flow. The industry tailwinds support a clear trajectory for growth over the long term. 

Life360 (ASX: 360) is the global leader in family safety services with an addressable market of well over $12b. With a growing subscriber base and strong pricing power, the business is well-positioned to scale into profitability in the period ahead. 

Elmo Software (ASX: ELO) is the largest domestic HR tech company which has compounded four-year organic annualised recurring revenue [ARR] of +38%. The company is on the cusp of profitability and has now attracted takeover interest.

The post 4 ASX tech shares with ‘long runways for growth at valuations rarely seen’: expert appeared first on The Motley Fool Australia.

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More reading

• Why Hub24, Sezzle, Telix, and Westpac shares are rising
• Guess which ASX 200 tech share is surging 14% following a $3 billion quarter
• It wasn’t all bad news for ASX All Ords shares on Monday. Here are some big winners
• 3 ASX shares that are great-value buys right now: fund manager
• Why Atlantic Lithium, Elmo, Qantas, and Westpac shares are pushing higher

Motley Fool contributor Bronwyn Allen 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 Elmo Software, Hub24 Ltd, Life360, Inc., and Netwealth. The Motley Fool Australia has positions in and has recommended Elmo Software, Hub24 Ltd, and Netwealth. 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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Wesfarmers Ltd (ASX: WES) shares are back on form on Tuesday.

In afternoon trade, the conglomerate’s shares are up over 1.5% to $45.10.

This has reduced the Wesfarmers share price year to date decline to approximately 25%.

Can Wesfarmers’ shares keep rebounding?

The good news is that Morgans believes Wesfarmers shares have major upside potential over the next 12 months.

In fact, its analysts are so positive on the company, they have named its on their best ideas list again.

This list contains the ASX shares that the broker believes offer the highest risk-adjusted returns over a 12-month timeframe and are supported by a higher-than-average level of confidence. They are its most preferred sector exposures.

According to the note, Morgans has an add rating and $55.60 price target on its shares.

This implies a potential return of 23% for investors before dividends and approximately 27% including them.

What did the broker say?

Morgans believes recent share price weakness has created a buying opportunity for investors. Particularly given the quality of the company, its talented management team, and robust balance sheet. It commented:

WES possesses one of the highest quality retail portfolios in Australia with strong brands including Bunnings, Kmart and Officeworks. The company is run by a highly regarded management team and the balance sheet is healthy. While COVID-related staff shortages are proving to be a challenge, the core Bunnings division (>60% of group EBIT) remains a solid performer as consumers continue to invest in their homes. We see the pullback in the share price as a good entry point for longer term investors.

Morgans also previously said:

Trading on 22.5x [now 21x] FY23F PE and 3.8% [now 4%] yield, we continue to see WES’s valuation as attractive for a high-quality business with a diversified group of retail and industrial brands, solid balance sheet and strong leadership team that will continue delivering long-term value for shareholders.

All in all, this could make Wesfarmers’ shares worth considering if you’re looking for some new additions this month.

The post Wesfarmers shares could be one of the best options on the ASX 200: Morgans appeared first on The Motley Fool Australia.

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More reading

• These ASX 200 dividend shares have been named as buys by analysts
• Top ASX dividend shares to buy in October 2022
• Is the Wesfarmers share price in the buy zone ahead of this month’s AGM?
• Down 9% in a month, is the Wesfarmers share price a bargain buy for dividends?
• Morgans names 2 ASX 200 blue chip shares to buy

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 Wesfarmers 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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Coles Group Ltd (ASX: COL) shares are up 1.3% in afternoon trade on Tuesday.

The Woolworths Group Ltd (ASX: WOW) share price is also climbing, up 1.1%.

When comparing Coles shares to Woolworths, income investors will note Coles pays a 3.8%, fully franked trailing dividend yield. That compares to a 2.7% yield paid by Woolworths, also fully franked.

So, which of the S&P/ASX 200 Index (ASX: XJO) retail giants is the better buy?

Which ASX 200 retail share has the advantage?

For some greater insight into whether Woolworths or Coles shares are the better buy, we defer to UBS (courtesy of The Australian).

According to UBS, shoppers can expect to keep paying more for their food, especially fresh food, heading into 2023.

Overall, food inflation in the three months ending 30 September (Q1 FY23) increased by 8.2%. Fresh food prices rose an even steeper 9%.

And UBS analyst Shaun Cousins forecasts that the food inflation trend will stick around for some time yet.

“Food inflation is expected to reach 8.7% over the next 12 months,” he said. “We expect food inflation to peak in [Q2 FY23] as cost pressures remain.”

Cousins added that Woolies and Coles have taken a “divergent approach” to operating in a competitive market amid fast-rising prices.

According to Cousins:

COL is seeking to maintain promotional breadth & depth, arguably reflective of it seeking to differentiate on price as per its period of market share gains in the early to mid 2010s and following market share losses in recent years.

WOW has more sales drivers (for example, online, refurbished store network, fresh participation) and hence is taking a more nuanced approach to inflation, moderating breadth & depth of promotions, although this raises risks as cost of living pressures rise.

UBS predicts that volume weakness will hinder Woolworths shares more than Coles shares. That’s due to Woolies’ online sales outperformance in the first half. With a less developed online offer, Coles’ like-for-like sales growth is forecast to outperform in H1 FY23, with Woolies retaking the lead in H2.

UBS has a neutral rating on both Woolworths and Coles shares.

Its price target for Woolworths is $32.91, 1.5% below the current share price.

UBS’s price target for Coles is $16.23, 2.3% below the current share price.

How have Coles shares performed compared to Woolies longer-term?

Longer-term, the Woolworths share price has been the stronger performer.

Over the past five years, Woolies shares are up 54%. That compares to a 29.4% gain for Coles shares.

The post Better buy: Woolworths or Coles shares? appeared first on The Motley Fool Australia.

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More reading

• How is the Woolworths share price handling the MyDeal cyberattack news?
• Which ASX All Ords shares could perform well in a recession?
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• 2 first-rate ASX 200 dividend shares experts rate as buys
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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 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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