Tag: Stock pick

ANZ Group Holdings Ltd (ASX: ANZ) shares are trading in the green on Wednesday afternoon. At the time of writing, the banking giant’s shares are up 1.55% to $37.88.

After spiking at an all-time high of $40.98 a piece in mid-February, ANZ shares have fallen 7.4%. Although they’re still 4.01% higher for the year to date and 30.53% higher over the year.

What caused ANZ shares to spike to an all-time high?

In mid-February, the ASX bank stock posted a first-quarter cash profit of $1.94 billion, up a whopping 75% from the second-half average of FY25. Operating income was up 4% and cash return on tangible equity climbed 11.7% over the quarter.

ANZ also confirmed that it is pressing ahead with its strategy to simplify its business and reduce operational costs this year. 

The news delighted investors and instilled some renewed confidence into the stock and its other banking peers. ANZ shares closed at an all-time high following the announcement.

So, why has the share price now cooled?

There hasn’t been any price-sensitive news out of ANZ since its trading update last month. This implies the drop may have come down to investors taking profit off the table after the shares rallied sharply to their all-time peak.

At the same time, investors are cautious about bank shares as global uncertainty, geopolitical tensions, and inflation pressures weigh heavily on sentiment across the sector.

What’s next for the ASX bank’s shares?

Analysts are very split about the outlook for ANZ shares this year. TradingView data shows that six out of 16 analysts have a buy or strong buy rating, and another six have a hold rating. Meanwhile, four analysts have a sell or strong sell rating.

The potential upsides vary wildly, too. The average is $37.09, which implies a 1.87% downside at the time of writing. But some analysts think the shares can just 13.74% to $43 and others think the stock will crash 31.44% to $25.92.

Following the bank’s results last month, Morgan Stanley upgraded the stock to a buy with a $41.30 target price. 

Meanwhile, Macquarie and Jeffries have a hold rating on the bank shares.

Morgans is one of the brokers which is bearish on ANZ shares. The team recently downgraded ANZ shares to a sell. They said that ANZ’s quarterly update suggests that it is performing ahead of expectations. But this outperformance was driven by cost-outs. While this would usually be good news, management has retained its cost guidance for the full year, the broker noted. 

The post What’s next for ANZ shares after expectations-busting results? appeared first on The Motley Fool Australia.

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Motley Fool contributor Samantha Menzies 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 Jefferies Financial Group. 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.

One of the most important metrics I look at when analysing an ASX dividend stock is its cash flows. Ultimately, free cash flow, or the money left over after a company has deducted its expenses from its revenues, drives the intrinsic valuation of a company. It is from its cash flow that a company can fund reinvestment in its business, initiate share buybacks, or pay dividends.

If a business can’t deliver a consistent return on its invested cash, well, it doesn’t make for a great investment itself.

Telstra Group Ltd (ASX: TLS), fortunately, does not have this problem. Free cash flow, for any business, can fluctuate from year to year. Given that this metric is more difficult to play with from an accounting perspective, one-off expenses and unforeseen hits to the budget can’t be amortised or depreciated over many years.

As a telco, Telstra does have a large capital expenditure budget. Network towers, data centres, and cabling ducts need regular and ongoing maintenance. Saying that, this ASX dividend stock’s position as the country’s largest provider of both mobile and fixed-line internet and telephony services more than makes up for this relatively large cost base. Telstra is a company with a formidable economic moat. Customers know that its mobile network is superior to that of its rivals, with Telstra often the only choice for Australians who live in rural or regional areas.

This gives this ASX dividend stock enormous pricing power, a consistently wide profit margin, and thus, cash flows.

How this ASX dividend stock turns cash flow into income

We can see this in the massive amounts of free cash flow that this ASX dividend stock generates. For its full 2025 financial year, Telstra reported operating net cash flow of $7.32 billion, up 3.9% from FY 2024’s $7.05 billion.

It is this free cash flow that enabled Telstra to increase its annual dividend by 5.55% from 2024 to 2025, which rose from 18 cents per share to 19 cents.

In 2026 thus far, the pattern has continued. In its earnings report last month, Telstra announced that its 2026 interim dividend would rise by 10.5% to 10.5 cents per share. If this pattern continues for the rest of 2026, this year will be the fourth in a row that shareholders will see an annual dividend hike.

Today (at the time of writing anyway), Telstra is trading fairly close to its 52-week high ($5.26) at $5.15 a share. Even so, this ASX dividend stock is trading with a hefty dividend yield of 3.88%.

The post An ASX dividend stock yielding 3.9% with consistent cash flow appeared first on The Motley Fool Australia.

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• 2 ASX blue-chip shares offering big dividend yields
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Motley Fool contributor Sebastian Bowen 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 Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Shares in Imugene Ltd (ASX: IMU) are tumbling on Wednesday after the cancer immunotherapy company returned from a trading halt.

At the time of writing, the Imugene share price is down 19.57% to 18.5 cents. The stock is now down roughly 40% since the start of 2026.

The company requested the halt yesterday while it prepared an update for investors.

Here is what the company revealed.

Imugene announces $20 million capital raising

According to its announcement, Imugene is planning to raise up to $20 million through a combination of a placement and a share purchase plan (SPP).

The company has already secured firm commitments for a $12 million placement from institutional and sophisticated investors. These investors will subscribe for approximately 66.7 million new shares at 18 cents each.

That price represents a 21.7% discount to the last closing price of 23 cents on 9th March and about a 20.8% discount to the 5-day VWAP.

Imugene will also launch a share purchase plan to raise up to $8 million, allowing eligible shareholders to apply for new shares at the same 18-cent price.

The SPP will allow investors to apply for up to $30,000 worth of shares.

Investors participating in the placement and SPP will also receive free attaching options. These options have an exercise price of 18 cents and expire in April 2027.

Why Imugene is raising fresh capital

Management says the funds will be used to continue advancing its lead cancer therapy program known as azer-cel.

This therapy is an allogeneic CAR-T treatment being developed to treat blood cancers.

The proceeds will support the ongoing Phase 1b clinical trial of azer-cel, including expansion of cohort 2 and the new cohort 3 BTKi combination study.

The funding will also help extend the company’s cash runway into the fourth quarter of 2026.

Imugene said the trial program aims to generate additional clinical data that could support future regulatory progress.

Encouraging clinical data emerging

The company has previously reported promising early results from the azer-cel program.

Early phase 1b trial results showed an overall response rate of about 82% in relapsed or refractory diffuse large B cell lymphoma (DLBCL) patients.

The therapy is designed as an off-the-shelf CAR-T treatment that can be manufactured in advance rather than customised for individual patients.

If successful, this approach could offer faster treatment access and lower manufacturing costs compared with traditional CAR-T therapies.

What investors should watch next

Imugene plans to continue enrolling patients in its clinical trials and generate additional data throughout 2026.

The company is also exploring combination strategies involving BTK inhibitors, which could expand the therapy’s potential applications.

However, the sizeable discount on the new shares appears to be weighing on the share price today.

The post Why this ASX healthcare stock has crashed 20% today appeared first on The Motley Fool Australia.

More reading

• I would put $10,000 into these Vanguard ETFs tomorrow if I could
• What’s next for ANZ shares after expectations-busting results?
• An ASX dividend stock yielding 3.9% with consistent cash flow
• 5 ASX shares I’d buy with $5,000 today
• 2 ASX blue-chip shares offering big dividend yields

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 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.

The S&P/ASX 200 Index (ASX: XJO) is climbing higher again in Wednesday afternoon trade. Here are five ASX shares that could drive even more growth on the index this year. With a spare $5,000, I’d snap them up today. 

NextDC Ltd (ASX: NXT)

NextDC has a rapidly expanding network of data centres for cloud computing, telecommunications, and AI workloads. It also has physical infrastructure, such as power, cooling, and security. Demand for data usage is expected to grow this year, and I think the company is well-positioned to absorb a good chunk of it. At the time of writing, the shares are trading at $12.92, and it looks like the consensus is that they’ll jump significantly this year.

Coles Group Ltd (ASX: COL)

The supermarket giant could face some headwinds from renewed concerns about inflation this year. But the ASX stock is very defensive, and the business is well-positioned to be resilient under pressure. Its business is strong, and sentiment surrounding the business is positive. At a seven-month low of $20.475 per share, I view Coles as a rare opportunity to buy a decent stock for cheap.

CSL Ltd (ASX: CSL)

The ASX biotech company’s shares have taken several beatings over the past six months after a number of headwinds caused brutal sell-offs. But the company is actively growing its pipeline. This, combined with rocketing global demand for plasma therapies, means we could see plenty more from the company this year. At $142.06, at the time of writing, I think the CSL share price is a screaming buy. 

Droneshield Ltd (ASX: DRO)

The counter drone technology company was one of the fastest-growing stocks on the planet in 2025. And that success has continued through to 2026. Droneshield has faced a few headwinds over the past 12 months, but has also won some impressive contracts valued at $21.7 million. I think the ASX shares are undervalued at the trading price of $3.97.

Qantas Airways Ltd (ASX: QAN)

The ASX airline’s shares were in the spotlight last week after its value tumbled sharply. Investors were disappointed by the flying kangaroo’s first-half FY26 results, and it sent the share price crashing. Uncertainty around the outlook for fuel prices has also contributed to the downturn, but analysts are bullish about steep upside once global uncertainty cools. At the time of writing, Qantas shares are cheap at $8.735 a piece.

The post 5 ASX shares I’d buy with $5,000 today appeared first on The Motley Fool Australia.

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Motley Fool contributor Samantha Menzies 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 CSL and DroneShield and is short shares of DroneShield. The Motley Fool Australia has recommended CSL. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

ASX blue-chip shares are some of the best contenders for providing reliable passive income. Resilient products allow for consistent dividend payments and good dividend yields.

Businesses with a strong market share, cost advantages, larger margins, and a good outlook can be very appealing investments. Rising profits can lead to capital growth over time and, typically, dividend growth too.

With their current dividend yields and appealing prospects for further growth, I’m optimistic about what the following two businesses can accomplish.

Medibank Private Ltd (ASX: MPL)

Medibank is the largest private health insurer in Australia and it’s steadily growing its exposure to other healthcare businesses.

The ASX blue-chip share is delivering exactly the growth I’d want to see if I were a shareholder.

In the FY26 half-year result, the business reported that it added 38,300 net resident policyholders and 1,500 net non-resident policy units. These are key metrics which maintain/grow its market share, add to scale advantages and hopefully deliver rising profit margins over time.

HY26 revenue climbed by 5.5%, group operating profit increased by 6% to $360.1 million and the interim dividend per share was increased by 6.4% to 8.3 cents per share.

I view healthcare as a defensive sector and health insurance is an effective way to invest across a broad range of healthcare areas, including growing demand for healthcare services amid Australia’s ageing and growing population.

I’m expecting dividend growth to continue for the foreseeable future. Its latest two declared dividends comes to a grossed-up dividend yield of 6.4%, including franking credits. That’s a great starting point for income, in my view.

Telstra Group Ltd (ASX: TLS)

Telstra is a leading ASX telecommunication share that has built an impressive 5G network that helps it continue to stay ahead of competitors.

Its excellent mobile division is key for delivering long-term growth and there was good news across the board in the FY26 half-year result. The average revenue per user (ARPU) rose by 5.1% year over year and mobile handheld users increased by 135,000, with growth in both metrics across postpaid handheld, prepaid handheld and wholesale users.

These growth figures allowed the business to deliver net profit growth of 9.4% to $10.5 billion. This saw earnings per share (EPS) grow by 11.2% and the dividend per share increase by 10.5% to 10.5 cents. Cash EPS increased by 19.7% to 14 cents.

It seems to me like the ASX blue-chip share is very effectively balancing investing for growth, delivering net profit growth and rewarding shareholders.

If I assume that Telstra will repeat the same dividend in another six months, it would have a grossed-up dividend yield of approximately 5.8% for FY26, including franking credits, at the time of writing.

With Australia becoming increasingly digital, I believe that Telstra will be able to benefit from that tailwind and continue winning new subscribers. I’m also optimistic the business can continue growing its wireless broadband subscribe count, providing 5G-powered broadband, which means capturing the margin that the NBN is currently taking.

The post 2 ASX blue-chip shares offering big dividend yields appeared first on The Motley Fool Australia.

More reading

• 5 ASX dividend stocks to buy with $25,000 in March
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Fortescue Ltd (ASX: FMG) share price is climbing higher in lunchtime trade on Wednesday. At the time of writing, the iron ore and copper miner’s stock is 3.09% higher at $19.86 a piece.

Today’s uptick means the shares have recovered some of the losses seen so far in 2026. For the year to date, the Fortescue share price is now 10.32% lower, but it’s 26.46% higher than this time 12 months ago.

While today’s share price gain is great news for Fortescue, its investors should prepare for the miner to have a few turbulent months ahead.

Here are four reasons why.

1. Fortescue is heavily reliant on iron ore prices

Although Fortescue has a copper footprint, the miner primarily mines and exports iron ore. This means the stock is heavily reliant on the price of iron ore and is subject to any price fluctuations that the material might have.

The price of iron ore is expected to soften through 2026 and then gradually decline through to 2030 as supply increases and Chinese steel demand tapers off.

A sharp fall in iron ore prices could prompt investors to exit the stock quickly, sending the Fortescue share price tumbling. Equally, a spike in iron ore could see investors snap up the stock and send it flying.

2. Its dividends may fluctuate

Fortescue is a popular stock for its high-yielding dividends. The miner pays investors a fully-franked dividend yield of 6.23%.

Although the miner is a low-cost producer, meaning it can remain profitable even when iron ore falls, its dividends may fluctuate wildly. 

If the price of iron ore softens in the next few months, markets might begin pricing in lower dividends, which can lead to short-term selling.

3. The company is investing heavily in expansion and growth

Fortescue is continually investing in business expansion. For example, just yesterday it announced that it has now completed the acquisition of all the shares it did not yet already own in Canadian-listed Alta Copper. The move is part of its plan to tap into growing global demand for the red metal and expand its footprint in Latin America.

The company is focused on building significant renewable energy infrastructure, is focused on decarbonisation and expanding its green energy projects, and plans to develop and expand its existing iron ore sites to improve production efficiency.

These projects are positive for long-term profitability, but they require significant capital, which could raise concerns about the company’s near-term financials.

4. Analysts aren’t sure about the outlook of the Fortescue share price

TradingView data shows that 10 out of 17 analysts have a hold rating on Fortescue shares. The remaining seven have a sell or strong sell rating on the stock.

The average target price is $19.86 a piece, which implies a 0.1% downside at the time of writing. However, analysts expect the Fortescue share price to range from $23.11 to $14.96 over the next 12 months. That’s a swing between a 16.29% upside and a 24.72% downside at the time of writing.

Even the experts can’t agree on where the stock will go next!

The post Here’s why the Fortescue share price may have a turbulent few months appeared first on The Motley Fool Australia.

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• 5 high-yield ASX dividend shares paying 6% to 10%
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Motley Fool contributor Samantha Menzies 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.

Harvey Norman Holdings Ltd (ASX: HVN) shares are slipping today.

Shares in the S&P/ASX 200 Index (ASX: XJO) electronics and home furnishings retail stock closed yesterday trading for $5.41. In early afternoon trade on Wednesday, shares are swapping hands for $5.38 each, down 0.6%.

For some context, the ASX 200 is up 0.4% at this same time.

Harvey Norman shares have struggled in 2026, now down 23.5% year to date. However, after a strong run in 2025, the ASX 200 stock remains up 5.1% over 12 months.

Atop those capital gains, Harvey Norman also paid out (or shortly will pay out) two fully-franked dividends over the full year, totalling 29 cents a share. This sees the stock trading on a 5.4% fully-franked dividend yield (partly trailing, partly pending).

But despite that appealing passive income, Investor Pulse’s Mark Elzayed believes investors would do well to sell the stock (courtesy of The Bull).

Time to sell Harvey Norman shares?

“Much of the operational recovery now appears reflected in the retail giant’s share price,” Elzayed said.

Commenting on the company’s performance, he noted:

Fiscal year 2025 results and early fiscal year 2026 trading updates confirmed solid aggregated sales growth, aided by an improving UK performance and continuing strength in Europe.

As for his sell recommendation on Harvey Norman shares, Elzayed said, “Yet after a material re-rating over the past year, we see limited room for positive surprises. Competition in the consumer electronics category is intense.”

And that “appealing” passive income isn’t enough to sway his recommendation.

“While the dividend yield remains appealing, consumer discretionary sector headwinds leave valuation multiples looking extended, in our view,” Elzayed concluded.

What’s the latest from the ASX 200 retail stock?

Harvey Norman reported its half-year (H1 FY 2026) results on 27 February.

Highlights for the six months to 31 December included a 6.9% year-on-year increase in sales revenue to $5.16 billion, while earnings before interest and tax (EBIT) increased by 14.4% to $527.5 million.

On the bottom line, the company achieved a 15.2% increase in net profit after tax (NPAT) to $321.9 million.

“This is a very solid first-half result, with profit growth driven by higher system sales, disciplined cost control and strong performances across our franchising operations and overseas retail businesses,” chairman Gerry Harvey said.

But with market expectations clearly high, Harvey Norman shares closed down 9% on the day of the results release.

The post Sell alert! Why this expert is calling time on Harvey Norman shares appeared first on The Motley Fool Australia.

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

A senior resources executive is emerging as a potential candidate in leadership discussions involving two of Australia’s biggest companies.

Recent reports suggest Geraldine Slattery, currently president of Australia for BHP Group Ltd (ASX: BHP), is being considered for the chief executive role at Woodside Energy Group Ltd (ASX: WDS).

The situation has drawn attention because Slattery is also viewed internally as a possible successor to current BHP chief executive Mike Henry.

At the time of writing, the BHP share price is $51.77, up 1.05%, while the Woodside share price is $30.07, down 0.36%.

Let’s take a closer look at what we know so far.

A leadership crossroads for two resources giants

Slattery is widely seen as one of Australia’s most experienced resources executives, with senior roles across both the mining and energy sectors.

She currently leads BHP’s Australian operations and has played a key role in shaping the company’s domestic strategy.

Speculation has been building around BHP’s future leadership, with Slattery reportedly viewed as a leading internal candidate if Mike Henry eventually steps down.

If appointed, she would become the first woman to lead BHP in the company’s 140-year history.

At the same time, her name has also been linked to Woodside’s search for a permanent chief executive.

The oil and gas producer is continuing its leadership transition following the departure of former CEO Meg O’Neill.

Woodside weighing internal and external candidates

Woodside’s board is expected to appoint a new chief executive in the coming months as it reviews both internal and external candidates.

Several senior leaders inside the company are already seen as strong contenders.

These include acting chief executive Liz Westcott, chief commercial officer Mark Abbotsford, and chief operating officer for international operations Daniel Kalms.

A number of external candidates have also been mentioned in industry discussions.

Slattery is considered one of the leading outside contenders given her experience working across major energy assets, including projects previously operated by BHP.

Another name linked to the process is Nigel Hearne, chief operating officer at Harbour Energy plc (LSE: HBR) and a former Chevron Corporation (NYSE: CVX) executive.

Leadership decision could shape Woodside’s next phase

Whoever takes the role will inherit a company that has expanded significantly in recent years.

Woodside’s merger with BHP’s petroleum business reshaped the company and created one of the largest independent oil and gas producers listed on the ASX.

The company is now progressing major developments including the Scarborough gas project and the Pluto Train 2 LNG expansion.

These projects are expected to play an important role in lifting production in the years ahead.

Industry observers say the next chief executive will help guide Woodside through the next phase of global energy demand.

The post BHP and Woodside linked in CEO race as top executive emerges as contender appeared first on The Motley Fool Australia.

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• Up 30% in a month: Is it too late to buy the BetaShares Crude Oil ETF (OOO)?
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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 Chevron. The Motley Fool Australia has recommended BHP Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

If you are looking for new additions to your income portfolio, then read on!

That’s because the team at Bell Potter has just named a number of ASX dividend shares as best buys for the month of March.

Listed below are two that it is bullish on. Here’s what it is saying about them:

COG Financial Services Ltd (ASX: COG)

This asset finance company could be a best buy according to Bell Potter.

The broker believes it is an ASX dividend share to buy due to its external accumulation strategy, which it expects to support attractive dividend yields. Bell Potter said:

COG Financial is a diversified conglomerate of distribution businesses focused on Australia. The group principally provides access to credit providers (and related insurance) for yellow commercial goods.

This is delivered through a nationwide broker net. In addition, the company has some balance sheet funded direct originations, with a focus on capturing some of the overflow for non-prime chattel mortgages. A proportion of this is offered under peer-to-peer lending. Following the acquisition of Paywise, the company has articulated an external accumulation strategy, focussed on novated leasing and salary packaging services.

As for income, Bell Potter is forecasting fully franked dividends of 7 cents per share in FY 2026 and then 8.9 cents per share in FY 2027. Based on its current share price of $1.35, this would mean dividend yields of 5.2% and 6.6%, respectively, for income investors.

Universal Store Holdings Ltd (ASX: UNI)

Another ASX dividend share that Bell Potter is bullish on is youth fashion retailer Universal Store.

It thinks its shares are undervalued based on its current PE ratio and positive medium-term growth outlook. It explains:

Universal Store Holdings is a leading youth focused apparel, footwear and accessories retailer in Australia. UNI will continue to increase store numbers over the next few years, supporting earnings growth of 10% p.a.. Valuation looks attractive, trading on a forward P/E of ~14.1x. UNI is a quality small cap (ROE ~26%) that is executing on its rollout strategy.

With respect to dividends, Bell Potter is expecting the company to reward shareholders with fully franked payouts of 37.3 cents per share in FY 2026 and then 41.4 cents per share in FY 2027. Based on its current share price of $8.64, this would mean attractive dividend yields of 4.3% and 4.8%, respectively, over the next two financial years.

The post Bell Potter names more of the best ASX dividend shares to buy this month appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Universal Store. 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 Universal Store. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

It’s been a lucrative month to own the BetaShares Crude Oil Index Currency Hedged Complex ETF (ASX: OOO). Exactly one month ago, this exchange-traded fund (ETF) was asking $5.72 per unit. Today, those same units are fetching $7.47 each at the time of writing. That’s up 30.6% in four weeks.

It’s no secret why this oil-based ETF has fared so well.

A futures ETF?

The BetaShares Crude Oil ETF is a rather unique ASX fund. Rather than holding a portfolio of underlying stocks or bonds, as most ETFs do, it instead offers investors exposure to a portfolio of futures contracts. Futures contracts are derivatives that represent the value of a commodity, to be delivered in the future, at a price determined in the past or present. They are commonly used by both businesses and investors to mitigate risks associated with volatile commodities.

To illustrate, an oil-based futures contract might stipulate that 1,000 barrels of crude oil are to be delivered on 31 December 2026 at a price of US$60 per barrel. If the contract was made when oil prices were at US$60 a barrel, and the oil price rises to US$80 soon after, then that contract’s value just increased. Of course, it works the other way as well.

The OOO ETF holds a basket of these contracts. Given the sharp increase in the price of oil this week as a result of the new US-Iran war, it’s no surprise to see the value of OOO units rise rapidly in response.

We’ve also seen other energy-focused ASX ETFs react similarly on the ASX this week. One example is the BetaShares Global Energy Companies Currency Hedged ETF (ASX: FUEL). This ASX ETF doesn’t hold futures contracts. Instead, it opts for the traditional ETF model of holding an underlying portfolio of global energy stocks like Chevron, ConocoPhillips, Shell and ExxonMobil. FUEL units have risen by almost 6% over the past month.

Is it too late to buy funds like OOO and FUEL?

Investors might be looking at these gains and wondering whether it’s worth jumping on this train.

While it might be tempting to look at what’s going on with oil prices and conclude that either OOO or FUEL might be a good way to insulate your ASX share portfolios, I think that would be a mistake.

Oil is a highly volatile commodity at the best of times. But this volatility has reached unprecedented heights over the past week. On any given day now it seems, oil can move by double-digits in either direction. Whilst you might be able to time a trade perfectly to take advantage of one of these upswings, there’s just as likely a chance that you can be caught out by a downturn. You may as well go down to the casino and put it all on red.

Further, commodity-specific ETFs like OOO and FUEL tend to charge relatively high management fees and deliver low long-term gains. At least compared to market-wide index funds.

As such, I think ASX investors would be better off finding high-quality companies that compound their earnings every year and buying them at a good price over trying to take advantage of the whipsawing energy prices that we are seeing.

The post Up 30% in a month: Is it too late to buy the BetaShares Crude Oil ETF (OOO)? appeared first on The Motley Fool Australia.

More reading

• BHP and Woodside linked in CEO race as top executive emerges as contender
• Oil slumps to US$83 per barrel. Here’s what is driving the sharp pullback
• If you think global instability will persist, these ASX ETFs might be for you
• Oil tumbles after nearing US$120. Here’s why prices are pulling back
• Oil rockets past US$100 as Iran war escalates. This ASX oil ETF is surging

Motley Fool contributor Sebastian Bowen 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 Chevron. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended ConocoPhillips. 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.