Making money even while stock markets fall

The ASX 200 has fallen in early Wednesday trade, but investors in these three companies have plenty to cheer about.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A woman and man hold a wad of money with big smiles on their faces.

Image source: Getty Images

1) Overnight, the Dow fell 400 points or 1.2% after senior Federal Reserve officials said it was nowhere near finished with its fight against inflation.

In response, short-term interest rates moved higher, with two-year Treasuries climbing back above 3%. 

Quoted on MarketWatch, Neil Dutta, head of economics at Renaissance Macro Research, opined this perhaps "caps the upside to equity multiples".

2) Try telling that to PayPal shareholders, of which I am one. 

This morning, after the US market close, even though the payments giant reported second quarter revenue growth of just 9%, the PayPal share price jumped more than 10% higher after saying activist investor Elliott Investment Management is now one of its largest shareholders.

PayPal also raised its forecast for earnings per share for the year to a range of $3.87 to $3.97, putting PayPal on a forward P/E multiple of around 25 times earnings.

In the heady days of cheap money, this was cheap. In today's interest rate environment, especially for a company that only grew its second quarter top line by 9%, PayPal shares look fully valued. Still, I'm happy to celebrate today's win. 

3) The S&P/ASX 200 Index (ASX: XJO) has fallen around 0.5% in early Wednesday trade, likely following US markets lower, as commodity stocks weighed on the benchmark index.  

With global equity markets adding roughly 10% in the past few weeks, a period in which the share prices of some of the previously beaten and battered stocks like Megaport (ASX: MP1) and Life360 (ASX: 360) have risen from the dead, perhaps we're in a holding period in advance of reporting season.

4) In contrast to the US — where the latest inflation print was 9.1% — in light of a less hawkish tone from RBA governor Philip Lowe, some economists are suggesting the next interest rate rise will be a more moderate 25 basis points.

Quoted in the AFR, HSBC chief economist Paul Bloxham said he expects the RBA will pivot to smaller hikes from here as "the cooling housing market, weakening consumer spending and global downturn are set to worsen in the next few months".

Better news for equity markets, but tougher times ahead for consumers. In these inflationary times, it's hard to have your cake and eat it.

4) Earnings season is just kicking off here in Australia, with Pinnacle Investment Management (ASX: PNI) quick off the blocks, reporting a 14% jump in full-year profits and a 22% increase in its full-year fully-franked dividend.

Pinnacle reported a rare 6% drop in total funds under management (FUM) as volatile equity markets weighed on the fund manager. 

Still, considering the extreme dislocations investors have experienced, particularly over the past six months, it's a solid result and a testament to Pinnacle's diversified affiliate platform. 

The Pinnacle Investment Management share price soared almost 13% higher in morning trade, going some way to offset the near 40% fall from its November 2021 peak. 

In hindsight, like so many companies, as the great bull market neared its peak, it's clear the Pinnacle share price got ahead of itself.

5) Stating the obvious, it's been a tough year for most fund managers. Bucking the trend however was the WAM Leaders Ltd (ASX: WLE) investment portfolio. It increased by 9.7% for FY22, handily outperforming the index, which fell 6.5%.

With gross assets of more than $1.5 billion, WAM Leaders is one of the largest listed investment companies (LICs) on the ASX. The portfolio has holdings in many ASX 200 companies, including Commonwealth Bank of Australia (ASX: CBA), BHP Group (ASX: BHP) and National Australia Bank (ASX: NAB).

WAM Leaders trades on a fully-franked dividend yield of 5.3%. It's good money, even as term deposit rates edge higher.

Motley Fool contributor Bruce Jackson has positions in PINNACLE FPO and PayPal Holdings. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Life360, Inc., MEGAPORT FPO, PINNACLE FPO, and PayPal Holdings. The Motley Fool Australia has positions in and has recommended PINNACLE FPO. The Motley Fool Australia has recommended MEGAPORT FPO and PayPal Holdings. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on ASX Share Market News

Man sits smiling at a computer showing graphs.
Exchange-Traded Funds (ETFs)

IonQ just posted record revenue. What does it mean for the ASX's newest quantum computing ETF?

A record quarter, a brand new fund, and one big catch.

Read more »

A neon sign says 'Top Ten'.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a lukewarm end to a stunning trading week today.

Read more »

A white EV car and an electric vehicle pump with green highlighted swirls representing ASX lithium shares
Broker Notes

Here's what brokers tip for PLS shares over the next 12 months

PLS shares ripped 275% in FY26. Here are 6 new 12-month share price targets from the experts.

Read more »

Happy friends holding shopping bags in a shopping mall.
Broker Notes

Buy, hold, sell: Myer, Centuria Office REIT, Viva Energy shares

Analysts reveal their ratings and 12-month share price targets.

Read more »

Three trophies in declining sizes with a red curtain backdrop.
ASX Share Market News

3 ASX 200 stocks storming higher this week on big news

These three ASX 200 stocks surged 17% to 23% this week following big announcements.

Read more »

A young woman holds her hand to her ear and leans sideways as if to listen to something that's surprising her as her eyes and her mouth are wide open.
ASX Share Market News

Why James Hardie, Avita Medical and ResMed shares are turning heads on Friday

Why is everyone talking about Avita Medical, ResMed, and James Hardie shares today?

Read more »

Animation of a man measuring a percentage sign, symbolising rising interest rates.
ASX Share Market News

Will they hold, or won't they? What experts are saying about Tuesday's RBA interest rate meeting

Leading experts sound off on what to expect at next week’s RBA interest meeting.

Read more »

Woman using mobile phone for digital banking, with hologram of globe and different currency symbols.
ASX Share Market News

Why this international market could be a "hidden giant" – Expert

This market could be set for takeoff.

Read more »