Cash Is Key Trump Trade for $96 Billion Australian Pension Fund
John Pearce, chief investment officer of the A$149 billion ($96 billion) fund, called cash the 'only risk-free investment' and said his firm was wary of the risk that a rise in US inflation could hit both stocks and bonds simultaneously.
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32 minutes ago
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Australian and Philippine forces launch largest military exercises near disputed South China Sea
MANILA, Philippines (AP) — Australia on Friday launched its largest military exercises with Philippine forces, involving more than 3,600 military personnel in live-fire drills, battle maneuvers and a beach assault at a Philippine town facing the disputed South China Sea, where the allies have raised alarm over Beijing's assertive actions. The exercises are called Alon, meaning wave in the Philippine language, and will showcase Australia's firepower. The drills will involve a guided-missile navy destroyer, F/A-18 supersonic fighter jets, a C-130 troop and cargo aircraft, Javelin anti-tank weapons and special forces sniper weapons. Military officials said defense forces from the United States, Canada, Japan, South Korea, New Zealand and Indonesia will join as observers. 'This exercise reflects Australia's commitment to working with partners to ensure we maintain a region where state sovereignty is protected, international law is followed and nations can make decisions free from coercion,' Vice Admiral Justin Jones of the Royal Australian Navy said in a statement. The combat exercises are 'an opportunity for us to practice how we collaborate and respond to shared security challenges and project force over great distances in the Indo-Pacific,' Jones said. The exercises will run until Aug. 29. Australia is the second country after the U.S. with a visiting forces agreement with the Philippines, allowing the deployment of large numbers of troops for combat exercises in each other's territory. The Philippines has signed a similar pact with Japan, which will take effect next month. It is in talks with several other Asian and Western countries including France and Canada for similar defense accords. China has deplored multinational war drills and alliances in or near the disputed South China Sea, saying the U.S. and its allies are 'ganging up' against it and militarizing the region. China claims most of the South China Sea, a busy global trade route, where it has had a spike of territorial faceoffs with the Philippines in recent years. Vietnam, Malaysia, Brunei and Taiwan also lay claims to the resource-rich waters. On Monday, a Chinese navy ship collided with a Chinese coast guard ship while trying to drive away a smaller Philippine coast guard vessel in the Scarborough Shoal in the South China Sea. The Australian Embassy in Manila expressed concern over 'the dangerous and unprofessional conduct of Chinese vessels near Scarborough Shoal involving the Philippine Coast Guard' and said the incident 'highlights the need for de-escalation, restraint and respect for international law.' In response, the U.S. deployed two warships off the Scarborough on Wednesday in what it called a freedom of navigation operation to protest China's expansive claims, restrictions and its demand for entry notifications in the disputed waters. In February, a Chinese J-16 fighter jet released flares that passed within 30 meters (100 feet) of an Australian P-8 Poseidon military surveillance plane in daylight and in international air space, Australian defense officials said at the time. Solve the daily Crossword
Yahoo
2 hours ago
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Is Amcor plc (NYSE:AMCR) Trading At A 44% Discount?
Explore Amcor's Fair Values from the Community and select yours Key Insights Using the 2 Stage Free Cash Flow to Equity, Amcor fair value estimate is US$15.55 Amcor's US$8.73 share price signals that it might be 44% undervalued Analyst price target for AMCR is US$11.04 which is 29% below our fair value estimate Today we will run through one way of estimating the intrinsic value of Amcor plc (NYSE:AMCR) by taking the expected future cash flows and discounting them to today's value. We will use the Discounted Cash Flow (DCF) model on this occasion. Believe it or not, it's not too difficult to follow, as you'll see from our example! We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model. This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality. What's The Estimated Valuation? We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. To start off with, we need to estimate the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we need to discount the sum of these future cash flows to arrive at a present value estimate: 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Levered FCF ($, Millions) US$1.69b US$2.05b US$1.90b US$1.82b US$1.79b US$1.78b US$1.79b US$1.82b US$1.85b US$1.89b Growth Rate Estimate Source Analyst x6 Analyst x7 Analyst x1 Est @ -3.96% Est @ -1.85% Est @ -0.37% Est @ 0.66% Est @ 1.39% Est @ 1.90% Est @ 2.25% Present Value ($, Millions) Discounted @ 7.3% US$1.6k US$1.8k US$1.5k US$1.4k US$1.3k US$1.2k US$1.1k US$1.0k US$984 US$938 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = US$13b After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 3.1%. We discount the terminal cash flows to today's value at a cost of equity of 7.3%. Terminal Value (TV)= FCF2035 × (1 + g) ÷ (r – g) = US$1.9b× (1 + 3.1%) ÷ (7.3%– 3.1%) = US$47b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$47b÷ ( 1 + 7.3%)10= US$23b The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$36b. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Relative to the current share price of US$8.7, the company appears quite good value at a 44% discount to where the stock price trades currently. Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind. Important Assumptions The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. If you don't agree with these result, have a go at the calculation yourself and play with the assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Amcor as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 7.3%, which is based on a levered beta of 0.995. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. Check out our latest analysis for Amcor SWOT Analysis for Amcor Strength Debt is well covered by earnings. Dividend is in the top 25% of dividend payers in the market. Weakness Earnings declined over the past year. Shareholders have been diluted in the past year. Opportunity Annual earnings are forecast to grow faster than the American market. Trading below our estimate of fair value by more than 20%. Threat Debt is not well covered by operating cash flow. Dividends are not covered by earnings and cashflows. Revenue is forecast to grow slower than 20% per year. Looking Ahead: Whilst important, the DCF calculation is only one of many factors that you need to assess for a company. It's not possible to obtain a foolproof valuation with a DCF model. Rather it should be seen as a guide to "what assumptions need to be true for this stock to be under/overvalued?" For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. Why is the intrinsic value higher than the current share price? For Amcor, there are three further factors you should consider: Risks: To that end, you should learn about the 5 warning signs we've spotted with Amcor (including 3 which are significant) . Future Earnings: How does AMCR's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered! PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the NYSE every day. If you want to find the calculation for other stocks just search here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
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3 hours ago
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Best semiconductor ETFs in 2025: Top chip companies for your portfolio
If you're looking to invest in the ongoing rise of semiconductors, then buying a semiconductor exchange-traded fund (ETF) is an easy way to get started without the work of analyzing individual companies. With a semiconductor ETF, you can buy a cross-section of the industry and not have to pick the winners, making it more accessible for non-experts. Plus, an ETF offers the benefits of diversification, reducing your risk compared to investing in individual stocks. Invest in Gold Priority Gold: Up to $15k in Free Silver + Zero Account Fees on Qualifying Purchase Thor Metals Group: Best Overall Gold IRA American Hartford Gold: #1 Precious Metals Dealer in the Nation The semiconductor industry offers huge potential for growth. In particular, the rise of artificial intelligence (AI) is driving huge demand for chips, and semiconductor companies such as Nvidia and Broadcom have surged to become trillion-dollar companies. As AI continues to infiltrate more and more into the marketplace, semiconductor firms are selling the products that make it all possible. Of course, there's a huge range of other daily products that have chips inside, too. So a semiconductor ETF can be a great way to invest in what's likely to be one of the most dynamic sectors of the economy for years, if not decades. And you can buy one of these funds inside a retirement account such as a tax-free Roth IRA and take extra advantage of its benefits. Here are some of the best semiconductor ETFs, their performance and their cost. Overview of the best semiconductor ETFs Fund (ticker) 3-year performance (annualized) 5-year performance (annualized) VanEck Semiconductor ETF (SMH) 35.9% 29.6% Invesco PHLX Semiconductor ETF (SOXQ) 25.4% N/A iShares Semiconductor ETF (SOXX) 22.9% 21.6% First Trust Nasdaq Semiconductor ETF (FTXL) 18.4% 17.4% Invesco Semiconductors ETF (PSI) 17.9% 18.5% SPDR S&P Semiconductor ETF (XSD) 14.7% 18.2% 1. VanEck Semiconductor ETF (SMH) This fund tracks the MVIS US Listed Semiconductor 25 Index, which has heavy concentrations in the largest semiconductor firms. Its largest positions include Nvidia, Taiwan Semiconductor Manufacturing and Broadcom, and it charges an expense ratio that's in the middle of the pack. 5-year returns (annualized): 29.6 percent Expense ratio: 0.35 percent 2. Invesco PHLX Semiconductor ETF (SOXQ) This fund tracks the PHLX Semiconductor Sector Index, which measures the stock performance of the 30 largest semiconductor firms traded on U.S. exchanges. The fund has a strong three-year performance record, but has not existed long enough to have a five-year record. Key positions include Nvidia, Taiwan Semiconductor Manufacturing and Broadcom. The expense ratio here is notably lower than other top semiconductor funds. 5-year returns (annualized): N/A Expense ratio: 0.19 percent 3. iShares Semiconductor ETF (SOXX) This fund tracks the NYSE Semiconductor Index, which measures the performance of the stocks of the 30 largest semi stocks traded on the U.S. exchanges. Key positions include Advanced Micro Devices, Nvidia and Taiwan Semiconductor Manufacturing. 5-year returns (annualized): 21.6 percent Expense ratio: 0.34 percent 4. First Trust Nasdaq Semiconductor ETF (FTXL) This fund tracks the Nasdaq US Smart Semiconductor Index, which ranks companies based on return on assets, gross income and price momentum. This fund's largest positions include Broadcom, Nvidia and Micron Technology. 5-year returns (annualized): 17.4 percent Expense ratio: 0.60 percent 5. Invesco Semiconductors ETF (PSI) This fund tracks the Dynamic Semiconductor Intellidex Index, which evaluates companies based on price momentum, earnings momentum, value, management actions and quality. The fund includes 30 stocks, and its largest positions include Nvidia, Broadcom and Lam Research. 5-year returns (annualized): 18.5 percent Expense ratio: 0.56 percent 6. SPDR S&P Semiconductor ETF (XSD) This fund tracks the S&P Semiconductor Select Industry Index, and its portfolio includes 40 stocks, including its top positions of Astera Labs, Credo Technology and Advanced Micro Devices. 5-year returns (annualized): 18.2 percent Expense ratio: 0.35 percent What to look for in an ETF When you're investing in ETFs, you'll want to look at the ETF's features to ensure that you're buying what you want to buy. Here are three key things to analyze. The sub-sector: A sector ETF may have its investments focused in a specific sector, and those sub-sectors may respond differently to developments in the industry. Some industries may have a variety of sub-sectors with funds dedicated to the sub-sectors. The investment track record: How has the fund performed over time? Look at the annualized performance of the funds to help gauge how they might do in the future. The longer the performance period, the better view you'll have of how the ETF may perform. Any fund can be hot in a given year, but strong returns over five or 10 years may indicate that the fund can outperform in the future, too. The expense ratio: The fund's expense ratio tells you how much you'll pay in annual fees for owning a fund, as a percent of your total investment in it. Larger funds tend to charge lower expense ratios because they can spread the costs of the fund across more assets. Then they may try to lock in their advantage by keeping their expense ratio toward the lower end of the competition. The cheapest funds may often be the largest funds, and a low expense ratio is an important measure of what makes one of the best ETFs. The best brokers for ETFs can help you find attractive funds with strong long-term returns. Bottom line If you're looking for concentrated exposure to the semiconductor industry — one of the market's best sectors for years — then a semiconductor ETF is a great way to get it. With an ETF, you'll get some diversification and reduced risk by buying a wide swath of semiconductor companies — without having to do the heavy research and analysis to buy individual stocks. Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
