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The Brickworks Limited (ASX: BKW) share price is forging into the green in morning trade amid the company reporting its full-year results for FY22.

Shares of Australia’s largest building products manufacturer currently trade for $21.76 apiece, up 0.32%, after dropping as low as $21.05 shortly after market open.

Let’s go over the report’s highlights.

What did Brickworks report?

• Total revenue up 28% year over year (yoy) to $1.09 billion
• Underlying earnings before interest, taxes, depreciation, and amortisation (EBITDA) up 133% yoy to $1.05 billion
• Underlying net profit after tax (NPAT) up 159% yoy to $746 million
• Final fully franked dividend of 41 cents per share

Brickwork’s standout operating segment for the year was property. Namely, its industrial property portfolio around Sydney and Brisbane. Total earnings for the segment increased 155% yoy to $644 million.

The company stated its portfolio benefited from a “strong uplift in valuation in response to the burgeoning demand for prime logistics and warehousing space. In addition, strong development activity contributed to the Property result.”

Meanwhile, Brickwork’s earnings for building products also grew in Australia and the United States. This was said to be helped by the company’s investment in Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).

Revenue for building products in Australia grew 7% to $694 million, and EBITDA grew 110% to $205 million.

Over the same period, revenue for North American building products grew considerably more, recording a 97% gain to $399 million while EBITDA grew 84% to $48 million.

Brickwork’s fully franked dividend of 41 cents per share has a record date of 2 November and an expiry date of 1 November. The expected payment date is 23 November.

What else happened in FY22?

The company’s joint venture trust value surged in FY22 to $1.54 billion, up from $631 million in FY21.

As well, Brickworks launched an additional joint venture property trust with Goodman Group (ASX: GMG) comprising 15 manufacturing facilities. The total value of the trust stands at $416 million.

Brickworks also notes that despite its considerable investments over the years, its leverage remains low, with a net debt-to-equity ratio of 15%.

What did management say?

Brickworks managing director Lindsay Partridge commented on the growth of its Industrial JV trust:

A highlight for the year was the completion of the state-of-the-art Amazon distribution centre, the first facility at Oakdale West, in Sydney. This followed many years of planning and investment in site preparation and infrastructure at this Estate. With further facilities now close to completion, Oakdale West is well on the way to becoming one of the most prestigious industrial property precincts in the southern hemisphere. Other Estates at Oakdale South (Sydney) and Rochedale (Brisbane) have now been fully built out, following the completion of final developments at these precincts during the second half.

What’s next?

Partridge described the future as having “an increasingly uncertain outlook”. Some factors at play were stated to be rising interest rates and threats of a recession.

He also gave the following commentary on what the future could look like:

There is a significant development pipeline within the Industrial JV Trust, and the continued development of Oakdale West will drive asset growth over the coming years. The anticipated sale of the balance of Oakdale East into the Trust in FY23 will support continued growth over the medium term. We continue to explore property opportunities in North America, and have recently executed a non-binding Heads of Agreement with Goodman, to investigate the development of the Mid-Atlantic site in Pennsylvania. From FY23, Property will also include earnings generated by the Brickworks Manufacturing Trust.

Brickworks share price snapshot

The Brickworks share price is down almost 12% year to date.

Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is around 11% lower over the same period.

The company’s current market capitalisation is $3.28 billion.

The post Brickworks share price edges higher on $746 million profit result appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Why Brickworks, IDP Education, IGO, and New Hope shares are racing higher
• Why is the Brickworks share price racing 6% higher today?
• One ‘safe’ and one ‘exciting’ ASX share to own for years like Warren Buffett: fund manager
• If I had to own only one ASX 200 share forever, this would be it

Motley Fool contributor Matthew Farley 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 Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company 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 Coles Group Ltd (ASX: COL) share price is trading lower on Wednesday.

At the time of writing, the supermarket giant’s shares are down 0.25% to $16.72.

Though, this is better than the ASX 200 index, which is down over 1% currently.

What’s going on with the Coles share price today?

The Coles share price is outperforming the ASX 200 on Wednesday after it announced a major divestment.

As we reported here earlier, Coles has entered into a binding agreement to sell its fuel and convenience retailing business to Viva Energy Group Ltd (ASX: VEA) for $300 million.

Once complete, the transaction will see Viva Energy own and operate the 710 Coles Express sites currently operated by Coles. In addition, the Fuel and Convenience Alliance between Coles and Viva Energy, which was due to end in 2029, will terminate upon completion.

These 710 Coles Express sites will be rebranded by Viva Energy over the next two years. However, the two parties have entered into a multi-year strategic partnership. This will mean that Coles and Coles Express customers continue to enjoy “the compelling customer offer and loyalty benefits they currently enjoy at Coles Express sites.”

Though, it is worth noting that the deal is subject to customary closing conditions. This includes Viva Energy obtaining Australian Competition and Consumer Commission (ACCC) and Foreign Investment Review Board (FIRB) approval. If all goes to plan, completion is expected to occur in the second half of FY 2023.

Why is Coles selling?

Coles’s CEO Steven Cain revealed that selling the business will allow the company to focus on its supermarket and liquor businesses, as well as its ambition to become Australia’s most sustainable supermarket company. He commented:

This agreement is positive not only for Coles and Viva Energy, but also for our customers, team members and respective shareholders. Viva is well-placed to make the most of opportunities to grow the Express business into the future, while we will strengthen our focus on our omnichannel supermarket and liquor businesses and our ambition of becoming Australia’s most sustainable supermarket group.

Judging by the relative outperformance of the Coles share price today, it appears as though the market supports this transaction.

The post Coles share price falls despite $300m Coles Express sale appeared first on The Motley Fool Australia.

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More reading

• Coles shares on watch after massive $300 million selloff to Viva Energy
• 5 ASX energy shares powering portfolios with the highest dividend yields
• Why I think Coles shares are a top buy for ASX dividend investors
• Experts name 2 ASX dividend shares for your retirement portfolio
• Are these ASX blue-chip shares losing their defensive benefits?

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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Not since the 1970s has there been such an emphasis on a potentially uncontrollable oil price.

Back then, we had an unhappy triad of stagflation, soaring commodity prices and geopolitical tension [of note, the OPEC oil embargo to the U.S.] feeding into the oil markets.

Eventually, interest rates tipped past 20% to combat the inflation dynamics and from then on, there’s been a number of peaks and troughs in the oil price, the latest from FY20 to date.

After a strong rally from December 2021 to 8 June 2022, Brent Crude now trades more than 5% down on the month at US$90.6/Bbl, having sunk from highs of US$139/Bbl in March.

What’s behind the moves?

Chief to the downside in the oil price has been concerns about a slowdown in the global economy.

Whereas traders first rallied the Brent Crude oil contract on the back of geopolitical tensions in Europe and elsewhere, the scene has shifted to that of lower demand.

As central banks around the world embark on their monetary tightening regimes to combat inflation, the outlook for global economic growth is also tightening.

Not helping the situation is the strength of the US Dollar, at its highest mark in years relative to most other currencies, making oil [in some instances, prohibitively] expensive.

Commodity analysts at UBS echoed this sentiment, noting the oil market “is caught between downward concerns and upside hopes”.

“The concerns are driven by the aggressive monetary tightening in the U.S. and Europe, which is increasing the likelihood of a recession and might weigh on oil demand prospects,” it added.

Meanwhile, analysts at Mizuho Securities said in a recent note the US dollar and the US Fed “is key” to the oil price, and that “they’re [the Fed] going to kill demand for anything inflationary,” including commodities like oil.

Not to mention, the Organisation of the Petroleum Exporting Countries (OPEC) also fell short of target output numbers in August by nearly 3.6 million barrels.

With global oil prices established via the complex interplays of supply and demand, this is sure to have an impact on the oil price too.

However, it appears concerns about a recession in Europe and the United States continue to be the major drivers behind oil’s latest drop.

As to where it will be next, that’s a bold prediction that many aren’t game to make right now. With the rally in Brent Crude now settled, it may be that the above mentioned points continue to weigh the price of oil down.

The downside in oil hasn’t been terrible for dominant energy players such as Woodside Energy Ltd (ASX: WDS) and Santos Ltd (ASX: STO). Each are up 51% and 24% in the year to date, respectively.

It remains to be seen just how much of an impact the decline in oil pricing will have on this broad basket.

The post Why is the oil price sinking lately? appeared first on The Motley Fool Australia.

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More reading

• Why is the Cochlear share price slipping on Wednesday?
• Why is the Sezzle share price outperforming on Wednesday?
• NAB shares: Buy, hold, or fold?
• Could the current Woolworths dividend be in jeopardy?
• Pilbara Minerals share price hits record high following lithium auction

Motley Fool contributor Zach Bristow 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 Cochlear Limited (ASX: COH) share price is heading south on Wednesday morning.

This comes amid the S&P/ASX 200 Index (ASX: XJO) falling wayside today after global markets dipped on the expectation that the United States Federal Reserve will lift interest rates by 75 basis points.

At the time of writing, the hearing solution company’s shares are down 1.5% to $203.84.

Why are Cochlear shares falling on Wednesday?

Investors are offloading the Cochlear share price as it trades ex-dividend today.

This means if you purchased the company’s shares yesterday or before, you will be eligible for the latest dividend.

However, when a company’s shares trade ex-dividend, the share price tends to fall in proportion to the dividend paid out. This can also vary on how the market is tracking for the day, as well as investor sentiment.

For those eligible for Cochlear’s final dividend, shareholders will receive a payment of $1.45 per share on 17 October.

The dividend is 40% franked.

Are Cochlear shares a buy now?

Following the company’s financial scorecard, a number of brokers weighed in on the Cochlear share price.

As reported by ANZ Share Investing, analysts at Morgan Stanley raised its price target by 4.1% to $202 for Cochlear shares.

In addition, the team at Wilsons raised its target by 4% to $245 apiece. Based on the current share price, this implies an upside of roughly 20%.

On the other hand, Macquarie cut its rating to underperform from neutral and slashed its price target by 1.5% to $194.

This indicates a downside of 5% from where Cochlear shares trade today.

Cochlear share price summary

The Cochlear share price has dropped 13.8% over the past 12 months.

In comparison, the S&P/ASX 200 Health Care Index (ASX: XHJ) is down around14% for the same period.

Based on today’s price, Cochlear commands a market capitalisation of roughly $13.61 billion, and has a dividend yield of 1.4%.

The post Why is the Cochlear share price slipping on Wednesday? appeared first on The Motley Fool Australia.

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More reading

• Here’s how to grab your piece of the latest Cochlear dividend
• Here are 3 ASX 200 shares turning ex-dividend tomorrow
• ASX 200 better buy: Cochlear or CSL shares?
• Goldman Sachs says these ASX shares are flying under the radar post-results
• How do CSL shares stack up against Cochlear following earnings season?

Motley Fool contributor Aaron Teboneras 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 Cochlear Ltd. The Motley Fool Australia has recommended Cochlear 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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The Sezzle Inc (ASX: SZL) share price is holding up well in early trade.

Sezzle shares closed yesterday trading for 59 cents and are currently trading for, well, 59 cents apiece.

This comes after the ASX buy now, pay later (BNPL) share released its August business update before market open this morning.

It also comes amid wider selling pressure in the leadup to tonight’s US Federal Reserve rate decision. This sees the All Ordinaries Index (ASX: XAO) down 0.93% at this same time, with rival ASX BNPL stocks down significantly more.

So, a flat share price is a win today.

What was reported for August?

The Sezzle share price is outperforming after the company reported underlying merchant sales (UMS) edged 1.1% higher month on month to US$142.8 million.

Despite that, the BNPL stock reported a 4.8% decrease in total income in August from the prior month to US$9.7 million. While down from July, total income increased 1.7% year on year.

The Sezzle share price could be receiving some tailwinds after the company reported its key revenue and cost initiates are proceeding and expected to generate US$40 million in annualised revenue and cost savings. While the company’s cash burn is declining significantly, the average monthly burn in 3Q22 (through to 31 August) still stands at US$1.9 million.

Commenting on the performance, Sezzle CEO Charlie Youakim said:

In 2022, we have not pursued growth for the sake of growth, and this has been reflected in our recent monthly results, which have shown year on year improvement in total income despite lower UMS. We have had opportunities to pursue significant growth that would be unprofitable, but we believe it is not the right time or environment for us to pursue such activities

Regarding Sezzle’s revenue and cost savings plans, Youakim added, “We are just getting started and are excited to announce we are embarking on another US$20 million in annual revenue and cost saving initiatives.”

Sezzle share price snapshot

There’s no beating around the bush on this one. It’s been an absolute horror year for the Sezzle share price, down 90% over 12 months. That compares to a full-year loss of 8% posted by the All Ordinaries.

The post Why is the Sezzle share price outperforming on Wednesday? appeared first on The Motley Fool Australia.

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More reading

• August’s RBA rate hike saw investors favour Macquarie and BHP shares. Here’s what to expect in September: expert
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• Why has the Sezzle share price exploded 128% in a month?
• Why is the Block share price tumbling 6% today?

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 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 National Australia Bank Ltd (ASX: NAB) share price has been outperforming the broader market this year.

The NAB share price is trading at $30.14 right now. That’s 2.8% higher than it started out 2022.

Meanwhile, the S&P/ASX 200 Index (ASX: XJO) has dumped 10% year to date. That leaves the banking major having outperformed the market by around 13%.

Does it still have a bright future ahead of it? Top brokers appear to think so.

Is now a good time to snap up NAB shares?

According to brokers, the NAB share price is gearing up to post further gains in the near future. But not everyone is bullish.

Morgan Stanley had a rating similar to a hold on NAB and a $27.20 price target on its shares, as my Fool colleague Tristan reported earlier this month. That implies a potential 10% downside on its current level.

However, the broker’s cynicism is overshadowed by others’ optimism.

Citi recently upgraded the big four bank’s stock to a buy rating and slapped it with a $32.75 price target – representing a potential 8% upside.

It likes NAB’s growing business lending and tips it to benefit from rising net interest margins, Tristan reports.

Finally, Goldman Sachs is more bullish still. It also expects the bank’s business lending to drive its growth as rate hikes boost its bottom line, as my Fool colleague James reports.

It tips the NAB share price to rise as high as $34.63, implying a potential 15% upside.

The broker is also expecting NAB to up its dividends to $1.50 per share in financial year 2023 and $1.70 per share in financial year 2024.

If those predictions come true, NAB’s dividends will have lifted 18% on its financial year 2021 levels next fiscal year and by 34% in financial year 2024.

The post NAB shares: Buy, hold, or fold? appeared first on The Motley Fool Australia.

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More reading

• Here’s why I decided to buy each of the big 4 ASX 200 bank shares
• NAB shares: Boring or beautiful?
• Looking to buy CBA shares? Here’s how the bank’s balance sheet stacks up
• The NAB share price has gained 10% in 3 months. Too late to buy?
• Which ASX 200 bank share will win the great tech battle?

Citigroup is an advertising partner of The Ascent, a Motley Fool company. 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 Goldman Sachs. 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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Shares of Woolworths Group Ltd (ASX: WOW) have been cyclical these past 12 months, having entered and exited a number of peaks and troughs.

Woolworths had also narrowed its dividend payment earlier in 2022. Although upped its final dividend to 53 cents per share (cps). This brought the FY22 payment to 92cps.

However, what’s the health score of Woolworths’ dividend, and is it in jeopardy of continuing?

Coverage potentially at risk?

Woolworths increased its full-year payout by around 1.1% on the previous year. It currently trades on a trailing yield of 2.65%.

The total amount paid for the FY22 dividend is expected to be just over $1 billion. And there’s also the option for investors to participate in the company’s dividend reinvestment plan.

However, it’s relevant to know that Woolworths also converted around the same amount in free cash flow (FCF) for the 12 months to 26 June 2022.

Judging from these numbers, it might appear the sustainability of the Woolworths dividend might be at risk.

However, as dividend investors, one critical piece of information we need to obtain is the company’s dividend policy. That is, where does it pay dividends from?

This is relevant as some companies choose to pay dividends from profits, whilst others choose to do it from cash flows.

Where does Woolworths pay its dividend from?

Looking at the latter, the conglomerate paid around 115% of its free cash flow in dividends for FY22.

Thankfully, Woolworths doesn’t pay dividends from this pile of cash earnings.

According to its annual report, the company says that “[d]ividends are distributions of the group’s profit after tax before significant items and assets to its shareholders”.

That means it pays dividends from its profit ‘pile’, versus the remaining free cash it has after obligations.

In that vein, the payout is well covered. Approximately 72.5% of the payout figure is covered by the $1.55 billion in after-tax earnings Woolworths booked in FY22.

Despite this, there’s one disadvantage of covering the dividend payout figure from profits versus cash flow, and that’s the volatility in dividend payment and yield that can result.

We’ve seen this in the food and retail giant’s dividend stream over the past few years, coming off a high of $1.39 in FY15, and remaining lumpy since.

Meanwhile, the Woolworths share price has slipped more than 8% into the red this year to date.

The post Could the current Woolworths dividend be in jeopardy? appeared first on The Motley Fool Australia.

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More reading

• How many Woolworths shares does the CEO hold after his $8.4 million sell-down?
• Are these ASX blue-chip shares losing their defensive benefits?
• Attention Endeavour shareholders: Here’s some news on your dividends
• Have Woolworths shares ‘got their mojo back’?
• Supermarket shakeup: Do Coles shares offer better dividends than Woolworths?

Motley Fool contributor Zach Bristow 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 Pilbara Minerals Ltd (ASX: PLS) share price has climbed to a new record high on Wednesday after some good news offset the market selloff.

At the time of writing, the lithium miner’s shares are up almost 3% to a new high of $5.03.

This compares very favourably to the ASX 200 index, which is down a disappointing 1.2% in early trade following weakness on Wall Street overnight.

Why is the Pilbara Minerals share price rising?

The Pilbara Minerals share price is rising today following the release of a positive update relating to the company’s latest battery material exchange (BMX) auction.

After the market close on Tuesday, the company revealed the that its BMX auction had been another big success.

According to the release, Pilbara Minerals has commanded another increase in the price it commanded from the BMX auction.

After accepting bids of US$6,188 per dmt in July and US$6,350 per dmt in August, the company accepted the highest bid of US$6,988 per dmt in September.

This is for 5,000 dmt at a target grade of ~5.5% lithia and represents a decent 10% increase month on month. On a pro rata basis for lithia content (and adjusted to be inclusive of freight costs), this equates to a price of ~US$7,708 per dmt (SC6.0, CIF China basis).

This strong pricing appears to demonstrate that the insatiable demand for lithium is not cooling despite concerns about the potential for a global recession in the coming months.

Following today’s gain, the Pilbara Minerals share price is now up an impressive 40% in 2022.

The post Pilbara Minerals share price hits record high following lithium auction appeared first on The Motley Fool Australia.

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More reading

• Pilbara Minerals share price on watch following BMX lithium auction
• 5 things to watch on the ASX 200 on Wednesday
• Is this prediction great news for ASX lithium shares?
• Is this the new frontier for ASX lithium shares?
• Pilbara Minerals share price racks up ninth all-time high for September

Motley Fool contributor James Mickleboro has positions in Allkem 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 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 300 Index (ASX: XKO) is built from shares in most of the market’s biggest names. But, in an interesting turn of events, a fair chunk of them are currently unprofitable.

Indeed, nearly a sixth of the entire index is said to be trading on red balance sheets.

So, which of the market’s favourites are operating at a loss? Let’s take a look.

Do you own unprofitable ASX 300 shares?

The ASX 300 is reportedly housing a higher-than-normal number of unprofitable companies right now.

Research by MST Marquee, cited by the Australian Financial Review, found 48 of the 300 shares making up the index are currently operating at a loss.

That’s said to be 30% more unprofitable companies than is historically housed by the index.

And some may well be filling a spot in many investors’ portfolios.

Of course, market watchers are probably aware that the likes of Zip Co Ltd (ASX: ZIP) is yet to post a profit.

The buy now, pay later (BNPL) favourite posted a $1.1 billion loss for financial year 2022. As my Fool colleague Tony pointed out, that figure is greater than the company’s market capitalisation.

Looking to Zip’s tech peers, ASX 300 icon Novonix Ltd (ASX: NVX) is also unprofitable. As is Life360 Inc (ASX: 360).

Other non-profitable stocks that garner plenty of attention from investors are those operating in the lithium space.

Core Lithium Ltd (ASX: CXO), for instance, isn’t yet producing. Thus, it has nothing to profit from. It’s a similar story for Core Lithium’s peer, Lake Resources NL (ASX: LKE).

All up, the 48 ASX 300 shares yet to turn a penny are worth around $200 billion combined, the AFR reports.

Is there hope for unprofitable ASX favourites?

MST Marquee senior research analyst Hasan Tevfik dubbed unprofitable companies “birds without wings”, courtesy of the publication.

He reportedly said for every stock that evolves from a loss-maker to a market champion, there are likely to be several that miss out on such happy endings.

However, as Tevfik reportedly noted, Amazon.com Inc (NASDAQ: AMZN) was, for the years leading up to the early 2000s, an unprofitable tech stock.

And ASX 300 lithium share Pilbara Minerals Ltd (ASX: PLS) announced its maiden profit just last month, perhaps proving the journey can sometimes be worth it.

The post Guess how many companies in the ASX 300 actually make no money appeared first on The Motley Fool Australia.

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More reading

• Is this prediction great news for ASX lithium shares?
• Could this be a red flag or false alarm for Novonix shares?
• Here are 3 ASX growth shares analysts rate as buys
• Here are the top 10 ASX 200 shares today
• Why Lake Resources, Life360, Pilbara Minerals, and PolyNovo shares are storming higher

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. 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 Amazon and ZIPCOLTD FPO. 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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Warren Buffett is one of the world’s greatest investors. He has an extraordinary record of identifying businesses with strong compounding potential and owning them for the long term. But he isn’t known for being an exchange-traded fund (ETF) investor.

Sure, he hasn’t gotten every single investment right, such as Tesco or airlines. But, he has made enough right decisions over the decades to make Berkshire Hathaway into one of the world’s biggest and greatest businesses.

I like the approach that Warren Buffett has taken with many of his investments.

But, I think that as one of the world’s leading stockpickers, it’s worthwhile looking into what his opinion on ETFs is considering the passive nature of many ETFs.

Buffett’s advice for the public about ETFs

According to commentary by my American Foolish colleague, Keith Speights:

In Buffett’s 2013 letter to Berkshire Hathaway’s shareholders, he wrote about how he and his longtime business partner Charlie Munger evaluate stocks. After this discussion, though, he noted that most investors don’t need to do what he and Munger do.

Buffett rightly pointed out, “In aggregate, American business has done wonderfully over time and will continue to do so (though, most assuredly, in unpredictable fits and starts).” He stated that non-professionals should simply invest in a cross-section of businesses and that “a lost-cost S&P 500 index fund will achieve this goal.” An index fund, as the name implies, simply holds all of the assets in the index that it attempts to track.

How serious was Buffett about this recommendation? He even put similar instructions in his will for how his cash should be invested for the benefit of his family. Buffett revealed that his will stipulates that 90% of the money should be invested in a low-cost S&P 500 index fund with 10% in short-term government bonds.

For investors on the ASX, the type of investment that would be the equivalent on the Australian Stock Exchange would be iShares S&P 500 ETF (ASX: IVV).

What’s in the iShares S&P 500 ETF?

Blackrock, the provider of this ETF, touts three compelling reasons to consider the fund.

First, it provides exposure to large, established US companies.

Next, the investment access it provides to the top 500 US stocks in a single fund.

Finally, it can be used to diversify internationally and seek long-term growth opportunities in a portfolio.

It owns names like Apple, Microsoft, Amazon, Tesla, Alphabet¸ Berkshire Hathaway, Johnson & Johnson, PayPal, Adobe, Visa, Mastercard and Home Depot.

What does Warren Buffett think about investing at times like this?

In 2001 Warren Buffett said the following:

To refer to a personal taste of mine, I’m going to buy hamburgers the rest of my life. When hamburgers go down in price, we sing the ‘Hallelujah Chorus’ in the Buffett household. When hamburgers go up in price, we weep. For most people, it’s the same with everything in life they will be buying — except stocks. When stocks go down and you can get more for your money, people don’t like them anymore.

In other words, I think he’d be very interested in looking at investing in shares on the ASX because of the selloff.

The post What does Warren Buffett think about investing in ETFs? appeared first on The Motley Fool Australia.

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More reading

• 3 excellent ETFs for beginner investors to buy
• Does the iShares S&P 500 ETF (IVV) pay dividends?
• 3 quality ETFs for ASX investors in September
• How does VGS stack up against other ASX index funds?

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Home Depot, Mastercard, Tesla, and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Mastercard, and iShares Trust – iShares Core S&P 500 ETF. 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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