Tag: The Motley Fool Australia

The ANZ Group Holdings Ltd (ASX: ANZ) share price will be one to watch on Tuesday.

That’s because the banking giant has become the latest big four member to release its half-year results this morning.

Let’s now take a look at what the bank reported.

ANZ share price on watch following results release

• Statutory profit after tax down 4% half on half to $3,407 million
• Cash profit down 1% to $3,552 million
• Net interest margin down 2 basis points to 1.63%
• Partially franked interim dividend up 2.5% to 83 cents per share
• $2 billion on-market share buyback

What happened during the half?

For the six months ended 31 March, ANZ posted a cash profit of $3,552 million. This represents a 1% decline compared to the second half of FY 2023.

The good news for shareholders is that this result is a touch ahead of the consensus estimate of $3,531 million.

The key driver of its result was the Institutional business, which reported a 12% lift in cash profit to $1,522 million. This reflects a 27% increase in Markets income driven by higher customer activity and favourable trading conditions. Management notes that it was the business’ strongest first half performance since FY 2017. It also highlights that international profit was up 19%, which it believes demonstrates the benefit of its globally diversified business.

Also delivering growth was the New Zealand business, which saw its cash profit increase 2% to NZ$852 million. This reflects moderate balance sheet growth with lending up 1% and deposits up 2%, despite challenging economic conditions.

The Australia Commercial business had a soft half, reporting a 5% decline in cash profit to $665 million. This was despite strong balance sheet growth with lending up 4% and deposits up 3%.

But the main drag on its profits was the Australia Retail business. It posted a 9% decline in cash profit to $794 million for the half. Management advised that this was despite delivering above system home loan growth with pricing above cost of capital.

Dividend increase and share buyback

ANZ’s softer earnings didn’t stop its board from increasing its dividend by 2 cents or 2.5% to 83 cents per share. As with its final dividend, this interim dividend will be partially franked (65%).

This dividend was also ahead of the consensus estimate of 81 cents per share.

But the returns don’t stop there. Following in the footsteps of Westpac Banking Corp (ASX: WBC), ANZ has declared a $2 billion on-market share buyback this morning. This is part of its capital management plan. The bank advised that it reflects its strong capital position and the benefits of the partial sale of its share in AmBank.

This means it was three for three for ANZ, with analysts at Goldman Sachs only forecasting a $1.5 billion share buyback. This could bode well for the ANZ share price on Tuesday.

Management commentary

ANZ CEO, Shayne Elliott, was pleased with the half. He said:

This half’s strong performance is a direct consequence of peer-leading diversification as well as our disciplined focus on productivity and delivery. Coming off a record 2023, each division delivered for the Group and we’ve made good progress on the things we said we would: preparing for the integration of Suncorp Bank, growing ANZ Plus, leveraging our Institutional processing platforms, and further driving productivity.

Commenting on the bank’s outlook, Elliott appears cautiously optimistic. He adds:

Both the domestic and international environments are expected to remain challenging across the remainder of the year. The Australian and New Zealand economies are likely to remain subdued, while geopolitical tensions, electoral uncertainty and the introduction of interventionist trade and industry policies will continue internationally.

Despite these conditions, we are well positioned with the diversity of our businesses, prudent management, and the strength of our customers holding us in good stead. In fact, our work to build a well-managed, de-risked and diversified bank, coupled with our unique international presence, means we are well placed to succeed in this environment.

The ANZ share price is up 21% over the last 12 months.

The post ANZ share price on watch amid first-half earnings beat and $2b buyback appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• Brokers say these ASX dividend stocks are buys
• Own ANZ shares? Here’s your first-half results preview
• Here’s how I’d aim for a tonne of passive income from $20,000 in an ASX share portfolio
• An ASX dividend giant I’d buy over ANZ shares for 2024

Motley Fool contributor James Mickleboro has positions in Westpac Banking Corporation. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs 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.

The ASX stock Close The Loop Ltd (ASX: CLG) is a small-cap share I’m excited about. I recently decided to buy more of it for my investment portfolio.

I don’t own many shares with market capitalisations under $500 million. But, in my opinion, smaller businesses generally have more growth potential because we’re able to get in at an earlier point of their growth journey.

What Close The Loop does

The company has locations across Australia, the United States, South Africa, and Europe. Through its resource recovery division, it collects and repurposes products with ‘takeback’ programs. The ASX stock also has a sustainable packaging division, which allows for “greater recoverability and recyclability”.

The overall mission is “zero waste to landfill”.

Close The Loop recovers from a wide variety of products, including electronic products, print consumables, cosmetics, plastics, paper, and cartons. It also reuses toner and post-consumer soft plastics as an asphalt additive.

Why I’m bullish about the ASX stock

The world is moving towards a circular economy where more of the products and materials are reused and recycled.

For example, computer giant HP — one of Close The Loop’s main customers — wants to reach 75% circularity of its products and packaging by 2030. HP has reached 40% circularity by weight. By 2025, HP wants to use 30% post-consumer recycled plastic across its personal systems and print product portfolio. In 2022, it achieved 15% in HP products.

There appears to be a lot of volume growth still to come, with Close The Loop playing a key part. And HP is just one business.

The ASX stock’s financials are outperforming expectations. In the FY24 first-half, Close The Loop generated $106.2 million of revenue, compared to the guidance for FY24 of $200 million. It reported strong growth from its recovery division driven by increased volumes and new programs.

The company also said the recently acquired ISP Tek Services had performed better than expected and opened opportunities in other jurisdictions.

The company’s margins are growing, which bodes well for the long term as revenue grows. HY24 saw revenue increase 76%. Gross profit rose 94%, earnings before interest, tax, depreciation and amortisation (EBITDA) went up 139% to $22.7 million, and underlying net profit before tax jumped 204% to $15.2 million.

Close The Loop is doing a good job improving its balance sheet — in the FY24 first-half result, it reduced its net debt by $11.8 million to $26.2 million.

Close The Loop share price valuation

Forecasts are just educated guesses, but the valuation looks very appealing if the Commsec projections come true.

It’s suggested that the business could generate earnings per share (EPS) of 4.2 cents in FY24 and 5.5 cents in FY25. That would put it at 7x FY24’s estimated earnings and 5x FY25’s estimated earnings.

If that’s what it generates, this seems very cheap to me.

The post Why I’m bullish about this ASX stock and recently bought more! appeared first on The Motley Fool Australia.

More reading

• 2 ASX shares to buy for strong diversification
• I think these 2 ASX growth shares are primed for blast-off

Motley Fool contributor Tristan Harrison has positions in Close The Loop. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Close The Loop. The Motley Fool Australia has recommended Close The Loop. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

If you have room in your portfolio for some more ASX dividend stocks in May, then it could be worth checking out the three listed below.

They have been named as buys and tipped to provide attractive dividend yields. Here’s what you need to know about them:

Rio Tinto Ltd (ASX: RIO)

The first ASX dividend stock for investors to look at buying is Rio Tinto.

It is of course one of the largest miners in the world and the owner of a portfolio of operations across multiple commodities. This includes the Gudai-Darri iron ore mine and the ISAL aluminium smelter.

Goldman Sachs thinks it would be a great option if you’re not averse to investing in the mining sector. Particularly given its belief that “Rio is a FCF and production growth story.”

The broker expects this to underpin fully franked dividends per share of US$4.29 (A$6.48) in FY 2024 and then US$4.55 (A$6.87) in FY 2025. Based on the latest Rio Tinto share price of $129.68, this will mean yields of approximately 5% and 5.3%, respectively.

Goldman has a buy rating and $138.30 price target on its shares.

Stockland Corporation Ltd (ASX: SGP)

Another ASX dividend stock that could be a buy is Stockland.

It is a leading residential developer with a focus on delivering a range of master planned communities and medium density housing in growth areas across Australia.

Analysts at Citi are bullish and see Stockland as a buy at current levels. Particularly given recent positive news on residential sales momentum.

In respect to dividends, Citi is expecting dividends per share of 26.2 cents in FY 2024 and 26.6 cents in FY 2025. Based on the current Stockland share price of $4.45, this will mean yields of 5.9% and 6% yields, respectively.

Citi has a buy rating and $5.20 price target on its shares.

Woodside Energy Group Ltd (ASX: WDS)

A final ASX dividend stock that could be in the buy zone this month is Woodside Energy.

It is one of the globe’s largest energy producers and the operator of world class operations such as Pluto LNG and Shenzi.

Morgans thinks that investors should be taking advantage of recent share price weakness. Particularly given the quality of its earnings and strong balance sheet.

In addition, the broker is forecasting attractive dividend yields in the near term. It is expecting the company to pay fully franked dividends of $1.25 per share in FY 2024 and $1.57 per share in FY 2025. Based on the current Woodside share price of $27.33, this equates to 4.6% and 5.75% dividend yields, respectively.

Morgans has an add rating and $36.00 price target on its shares.

The post 3 ASX dividend stocks to buy for an income boost appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Monday
• Here’s how the ASX 200 market sectors stacked up last week
• Brokers say these ASX dividend stocks are buys
• Why are ASX 200 energy shares getting smashed in May?
• These 3 ASX blue-chip shares just hit multi-year lows. Am I buying?

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor James Mickleboro has positions in Woodside Energy Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs 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.

The BetaShares Global Sustainability Leaders ETF (ASX: ETHI) is a leading exchange-traded fund (ETF) pick in my opinion. I’m going to tell you why I think it’s a top ASX ETF to own in 2024 and beyond.

First, I’ll point out that the ETHI ETF is one of the larger ETFs on the ASX, with net assets of around $3 billion.

Ethical leaders

This investment provides an ethically screened portfolio of large global stocks that have been identified as ‘climate leaders’ and have also passed screens to exclude companies engaged in activities “deemed inconsistent with responsible investment considerations”.

It excludes industries like fossil fuels, gambling, tobacco, armaments, animal cruelty and payday lending. There must also be no human rights concerns, and companies must have gender diversity on the board.

The ETHI ETF gives examples of businesses it has excluded. It’s not invested in McDonald’s because a majority of its revenue comes from junk food, Goldman Sachs has significant lending to fossil fuel projects, General Electric is a major military and armaments manufacturer, and Tesla is “implicated in workplace relations related controversies.”

The annual management cost is just 0.59%, which I think is good value for how much ESG screening work has been done.

Strong businesses

These are not just, small ethical businesses. The ETHI ETF starts with the entire global share market and what remains after the screening are 200 of the biggest (and ethical) companies from across the world.

When we look at the ASX ETF’s holdings, they are some of the world’s leading businesses at what they do, including Nvidia, Visa, Apple, Mastercard, Toyota, Home Depot, ASML, Salesforce, Unitedhealth, Novo Nordisk, SAP and Adobe.

Many of these businesses rank well on quality metrics such as their return on equity (ROE), earnings stability and balance sheet health.

Pleasingly, just over a third of the portfolio is invested in IT businesses, which is usually a good sector for delivering growth.

Great returns for this ASX ETF

It may not be a surprise to learn that this collective group of businesses have done very well in terms of shareholder returns.

According to BetaShares, the ETHI ETF has delivered an average return per annum of 18.7% since its inception in January 2017 to 28 March 2024. Past performance is not a reliable indicator of future performance when it comes to returns of that size, considering the huge gains its Nvidia holding has seen.

In the past three years, the average return per annum was 15%, which seems a bit more realistic, but still very, very good.

The post Why this is one of the top ASX ETFs I’d buy in 2024 appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• How important is copper for the future of BHP shares?
• Almost ready to retire? I’d buy cheap ASX dividend shares for income
• Down 24% since July, are AGL shares a cheap buy?
• Why has Warren Buffett just sold $20 billion of his biggest investment?

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 ASML, Adobe, Apple, Goldman Sachs Group, Home Depot, Mastercard, Nvidia, Salesforce, Tesla, and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Novo Nordisk and UnitedHealth Group and has recommended the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool Australia has recommended ASML, Adobe, Apple, Mastercard, Nvidia, and Salesforce. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

On Monday, the S&P/ASX 200 Index (ASX: XJO) had a strong start to the week and charged higher. The benchmark index rose 0.7% to 7,682.4 points.

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

ASX 200 expected to rise again

The Australian share market is expected to rise again on Tuesday following a strong start to the week on Wall Street. According to the latest SPI futures, the ASX 200 is poised to open the day 41 points or 0.5% higher. In the United States, the Dow Jones was up 0.45%, the S&P 500 was up 1%, and the NASDAQ rose 1.2%.

ANZ half year results

All eyes will be on the ANZ Group Holdings Ltd (ASX: ANZ) share price on Tuesday when the banking giant becomes the latest big four member to release its results. A note out of Goldman Sachs reveals that its analysts are expecting the bank to report cash earnings (before one-offs) of $3,683 million for the first half. This represents a 4% decline on the prior corresponding period. This is ahead of the consensus estimate of $3,531 million. Goldman also expects an 81 cents per share dividend and a $1.5 billion share buyback.

Oil prices rise

ASX 200 energy shares Santos Ltd (ASX: STO) and Karoon Energy Ltd (ASX: KAR) could have a good session on Tuesday after oil prices rose overnight. According to Bloomberg, the WTI crude oil price is up 0.65% to US$78.60 a barrel and the Brent crude oil price is up 0.55% to US$83.41 a barrel. Oil prices pushed higher despite confusion over whether a Gaza ceasefire had been accepted.

NAB shares are going ex-dividend

National Australia Bank Ltd (ASX: NAB) shares are going ex-dividend this morning and are likely to trade lower. Last week, the banking giant released its half-year results and declared a fully franked interim dividend of 84 cents per share. Eligible shareholders won’t have to wait too long until pay day. NAB is currently scheduled to make its payment on 3 July.

Gold price charges higher

ASX 200 gold shares such as Evolution Mining Ltd (ASX: EVN) and Regis Resources Limited (ASX: RRL) could have a positive session on Tuesday after the gold price charged higher overnight. According to CNBC, the spot gold price is up 1.1% to US$2,333.8 an ounce. A softer US dollar and rate cut hopes boosted the precious metal.

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

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More reading

• Here are the top 10 ASX 200 shares today
• What you need to do to secure the next NAB dividend
• What can ASX 200 investors expect from the RBA interest rate call tomorrow?
• These are my top ASX 200 share picks for growth right now
• Forget NAB and buy these ASX dividend shares

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 Goldman Sachs 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.

BHP Group Ltd (ASX: BHP) shares have been closely linked to the performance of the iron ore price over the last few years. But copper could have a growing influence on the ASX mining share as time goes on.

BHP is already one of the largest copper miners in the world, but it wants to increase its exposure further. Of BHP’s US$27.2 billion revenue in the first-half period, copper was responsible for US$8.66 billion of that revenue.

Anglo-American acquisition attempt

The mining giant recently confirmed it had made a bid for the large UK-listed miner Anglo-American. It offered 0.7097 BHP shares for each Anglo-American share.

There were a few different reasons for that bid.

BHP said it would increase its exposure to future-facing commodities, including copper assets. These assets would add growth and diversification to its existing portfolio.

Other benefits include additional iron ore and metallurgical coal projects, as well as the ability to deliver meaningful synergies.

Some large institutional investors have given their blessing to BHP’s pursuit of Anglo-American and copper plays in general. According to reporting by the Australian Financial Review, HESTA chief executive Debby Blakey said:

Australian mining companies stand to benefit from boosting their exposure to transition minerals.

These commercial opportunities must also have the appropriate scale and efficiencies to meet the expected surge in demand for future-facing commodities.

Critical minerals are key to supporting the energy transition, given the need for a rapid shift to clean energy technology.

On The Bull, Tom Bleakley from BW Equities (who rates BHP shares as a hold) said BHP was the “conservative path for exposure to the copper price”, though he pointed out iron ore was still currently the “dominant driver” of BHP’s revenue and earnings.

Two tailwinds for the copper price

The fund manager, L1 Capital, thinks both supply and demand could help copper’s medium-term fundamentals.

L1 said there was robust demand growth due to “electrification tailwinds, incremental data centre and AI-related demand, as well as the potential for improving global manufacturing activity on easy monetary policy.”

There is also “constrained supply resulting from the insufficient number of new major mines planned over the next decade and the significant decline of the existing production base.”

L1 expects copper market deficits to “continue to widen over time, with copper prices moving closer to scarcity pricing over the next few years”. The fund manager suggests physical deficits are “virtually unavoidable”.

BHP share price snapshot

Since the start of 2024, the BHP share price has dropped by 15%, as we can see in the chart above.

The post How important is copper for the future of BHP shares? appeared first on The Motley Fool Australia.

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More reading

• Buy BHP and these ASX dividend shares in May
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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 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.

Cheap ASX dividend shares are a good source of passive income. People who are about to retire might like a boost to their portfolio’s dividend yield.

Ideally, good income ideas should be ones that pay an appealing yield and can deliver growth of the dividend/share price over time to account for inflation and deliver pleasing total returns.

The positive difference a good dividend yield can make may be a huge addition to how much cash flow a retiree receives.

For example, if someone has a $750,000 portfolio that yields 4%, that would generate $30,000 of annual income. If the portfolio had a 6% dividend yield, that would result in $45,000 of annual income.

What ASX dividend shares are cheap?

I wouldn’t suggest buying a share just because it has fallen. A share price that falls can be expensive. I’d want to identify businesses that are facing a shorter-term sell-off and could recover, or are trading at a cheap level to their underlying assets/cash flow generation.

In my mind, sometimes we can find whole sectors that are disliked and undervalued. During 2022, I wrote many times about global/ASX tech shares being undervalued.

A lot of the market has rallied strongly over the past few months, making opportunities harder to find.

But, there are still a few cheap ASX dividend shares that look good value to me.

For starters, there are some ASX retail shares that are seeing some challenging conditions now, but earnings could accelerate in FY25 and FY26. According to Commsec, shoe retailer Accent Group Ltd (ASX: AX1) could pay a grossed-up dividend yield of over 10% and youth apparel business Universal Store Holdings Ltd (ASX: UNI) might pay a grossed-up dividend yield of over 8% in FY26.

Higher interest rates are undoubtedly an issue for real estate investment trusts (REIT) because these commercial property businesses tend to have sizeable debt on their balance sheet.

I’m looking at farmland REIT Rural Funds Group (ASX: RFF) with a current yield of 5.78% and diversified property owner Charter Hall Long WALE REIT (ASX: CLW) with a yield of 7.89% as opportunities in the property sector. Both of them are seeing solid contracted rental income growth.

Brickworks Limited (ASX: BKW) is another ASX dividend share with a significant asset base, including a large property portfolio, though the grossed-up dividend yield is only 3.5%.

Telstra Group Ltd (ASX: TLS) has returned to giving investors dividend increases after a difficult period due to the NBN transition. The company is benefiting from increasing subscriber numbers. It’s trading at close to a 52-week low and currently has an annualised grossed-up dividend yield of 7.2%.

Diversification is important, so I think a portfolio of the above ASX dividend shares could be a solid starting point.

The post Almost ready to retire? I’d buy cheap ASX dividend shares for income appeared first on The Motley Fool Australia.

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More reading

• Forget NAB and buy these ASX dividend shares
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• Where I’d invest $10,000 in ASX shares for passive income
• Is Brickworks the best stock to buy in the ASX 200 right now?

Motley Fool contributor Tristan Harrison has positions in Accent Group, Brickworks, and Rural Funds Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks. The Motley Fool Australia has positions in and has recommended Brickworks, Rural Funds Group, and Telstra Group. The Motley Fool Australia has recommended Accent Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The AGL Energy Limited (ASX: AGL) share price has taken a painful 23.54% tumble since July 2023, as seen on the chart below.

It has seen a lot of volatility with the changing energy prices, as well as the unpredictability of the strength of Australia’s summers and winters.

But, AGL shares have been on the rise in recent weeks. We recently heard from the Australian Energy Regulator that in the first quarter of 2024:

Average quarterly prices were higher than the preceding quarter in all regions. Prices ranged from $69/MWh in Tasmania to $137/MWh in Queensland. Weather was a key price-driver, with heat causing higher demand while a severe storm in Victoria caused network outages.

…Heat and humidity drove record maximum demand in Queensland (11,055 MW) while Victoria and South Australia had record minimum demands for a Q1.

Is the AGL share price a buy?

Energy generators and energy retailers are facing significant change in the coming years with an expectation that coal power can be largely replaced by renewable energy over time

The business has grown its development pipeline to 5.8GW in pursuit of its goal of 12GW by 2035, with an interim target of 5GW by 2030.

AGL said as it builds its pipeline, it will “periodically review market dynamics, customer demand and development options and seek to accelerate options and the decarbonisation pathway where possible.”

It also has 800MW of new grid scale batteries in operation, in testing or under construction. The 250MW Torrens Island battery became operational in August. Construction is underway for the 500MW Liddell battery at its Hunter energy hub in NSW, following the final investment decision in December.

AGL sees growth potential as it helps customers like Microsoft, CSL Ltd (ASX: CSL) and NBN Co electrify and decarbonise.

The broker UBS thinks AGL shares are a buy, with a price target of $11.25. UBS said:

With the lowest cost generation portfolio in the market, we expect AGL to deliver a strong earnings profile over FY25-28e. If AGL continues to maintain solid generation availability (as it has over the past 12 months), we believe earnings could surprise to the upside, particularly following other (higher cost) thermal generators exiting the market.

While earnings may fall in FY25 according to UBS, AGL is projected to make earnings per share (EPS) of $1.24 in FY27 and $1.32 in FY28. That would put the current AGL share price at under 8x FY27’s estimated earnings and 7x FY28’s estimated earnings.

The UBS forecasts also suggest AGL could pay a dividend yield of 8.25% in FY27 and 8.8% in FY28, which is before any potential franking credits.

Bonus tailwind

One thing that could be a real (extra) boost in demand for energy is AI and data centres.

As reported by the Australian Financial Review in April, a boom in data centre demand could mean a tripling of demand for the poles and wires company (Endeavour Energy) that services Sydney’s western suburbs. Endeavour Energy has 16 data centres in its distribution area, 19 applications for connection and 18 additional inquiries.

In a submission to the Australian Energy Market Operator, Endeavour Energy said:

If realised, we expect data centres alone to reach a peak demand…representing over 250 per cent of our total network demand today.

While I’m not expecting a large increase in energy prices, I think the data centre-fuelled demand could be enough to make AGL shares more attractive than the market is suggesting right now.

The post Down 24% since July, are AGL shares a cheap buy? appeared first on The Motley Fool Australia.

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More reading

• Here’s how I’d aim for a tonne of passive income from $20,000 in an ASX share portfolio
• 2 unexpected ASX 200 stocks to buy now for the AI revolution
• Here’s how the ASX 200 market sectors stacked up last week
• Here are the top 10 ASX 200 shares today
• Here’s how the ASX 200 market sectors stacked up last week

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 CSL and Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended CSL and Microsoft. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Warren Buffett is without question the most famous investor in the world. At 93 years old, Buffett is one of the world’s richest people, with an estimated fortune of around US$140 billion.

Buffett has been investing in shares for decades, and his astronomical returns over the past six or seven decades is a source of inspiration for almost all investors.

Thankfully, Buffett has never been shy when it comes to educating other investors and teaching his secrets to investing success. Over the weekend, Buffett hosted the annual shareholders meeting of his company Berkshire Hathaway Inc (NYSE: BRK.A)(NYSE: BRK.B), famously held in his hometown of Omaha, Nebraska.

Routinely dubbed the ‘Woodstock for capitalists’, this annual meeting has Warren Buffett appear in front of crowds of shareholders and admirers and answer questions for hours. It’s essential viewing for any aspiring value investor.

Buffett is famous for his long-term ‘buy-and-hold’ investing style. He notably once said that his favourite length of time to own a share is ‘forever’.

With this in mind, it was rather strange to see that Buffett had made a substantial sale of Berkshire’s largest individual stock holdings when the company’s most recent 10Q report came out just before the meeting. That largest holding is none other than the iPhone maker Apple Inc (NASDAQ: AAPL).

Buffett sells US$21 billion worth of Apple stock

Yes, Berkshire’s most recent 10Q filing – which covers the three months to 31 March 2024 – shows that Berkshire offloaded approximately 115 million Apple shares over the quarter in question. At recent pricing, this sale would amount to roughly US$21 billion worth of stock.

To be fair, Buffett, through Berkshire, still has a US$144.8 billion position in Apple. It remains Berkshire’s largest single holding by far, making up just over 40% of the company’s stock portfolio.

But it is odd to see Buffett selling down this position by more than US$20 billion, given what he has said in the past about his love of owning high-quality companies forever.

So what gives? Well, Buffett was asked about Apple at the Berkshire meeting over the weekend, and whether his positive outlook on the company has changed.

Here’s some of what he said:

No… But we have sold shares, and I would say that at the end of the year, I would think it extremely likely that Apple is the largest common stock holding we have now…

We will have Apple as our largest investment, but I don’t mind at all, under current conditions, building the cash position. I think when I look at the alternative of what’s available, the equity markets, and I look at the composition of what’s going on in the world, we find it quite attractive…

And I would say with the present fiscal policies, I think that something has to give, and I think that higher taxes are quite likely, and the government wants to take a greater share of your income, or mine or Berkshire’s, they can do it…

And if I’m doing it at 21% this year and we’re doing it at a higher percentage later on, I don’t think you’ll actually mind the fact that we sold a little Apple this year.

Taxes and risk-free returns

So it seems that Buffett reckons some of the capital that Berkshire has deployed in Apple is better off sitting in cash right now. With interest rates at decade-highs, Berkshire can get a risk-free rate of over 5% on its cash right now.

It seems that Buffett would prefer to get this ‘safe’ level of return on that US$21 billion in the current climate rather than have it invested in Apple.

He also alludes to perhaps taking advantage of the current low US corporate tax rate to crystalise some of the extraordinary gains Berkshire has made on its Apple investment over time.

It could be that Buffett would rather pay a 21% corporate tax rate today than pay a higher rate in the future if he feels that trimming Berkshire’s Apple position is inevitable.

The post Why has Warren Buffett just sold $20 billion of his biggest investment? appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has positions in Apple and Berkshire Hathaway. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple and Berkshire Hathaway. The Motley Fool Australia has recommended Apple and Berkshire Hathaway. 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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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 Goodman Group and Megaport. The Motley Fool Australia has recommended Goodman Group and Megaport. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.