Looking to energise returns with this pocket of undervalued ASX shares in 2023

The S&P/ASX 200 Index (ASX: XJO) and ASX shares have already made a flying start to 2023. As of yesterday’s share market close, the ASX 200 has gained an impressive 7.4% over the year to date.

After 2022’s full-year loss of 5.5%, it’s certainly a pleasing change of pace to see the ASX 200 start the year with such optimism.

But 2023’s strong showing thus far doesn’t mean there aren’t still cheap shares out there to find.

One area that might be worth taking a dive into is ASX energy shares. That’s according to one ASX expert, anyway.

Looking for undervalued ASX shares in 2023? Try cooking with gas

ASX mining resources and energy shares were some of the only places to hide from the market’s poor showing last year. In fact, many had stellar years.

Just take the BHP Group Ltd (ASX: BHP) share price. BHP shares rose almost 10% last year, defying the gloom that infected the broader market. Rio Tinto Limited (ASX: RIO) shares fared even better, giving investors a share price return of more than 16%.

But that’s nothing compared to ASX coal share Whitehaven Coal Ltd (ASX: WHC). Whitehaven shares gave investors a spectacular return of 165% last year, not including dividends.

Expert investor Aaron Binsted saw the writing on the wall for these sectors. Binsted is an Australian equities portfolio manager at Lazard Asset Management. Lazard’s Select Australian Equity fund was one of the best-performing managed funds in 2022, returning 26.34% for investors last year.

According to reporting in the Australian Financial Review (AFR) this week, Lazard went in hard on resources and energy sources in 2020 and 2021, which helped to drive the fund’s stellar returns last year.

Binsted reckons, “This energy crisis has been brewing for a long time”. In 2020, he recalls saying, “If you’re not overweight energy now, you never will be. It was absolutely against the consensus of the time.”

Back in 2020, he favoured oil shares like Woodside Energy Group Ltd (ASX: WDS), but in 2023, he’s looking to gas, largely due to the “superior cashflow generation” on offer:

Most people’s long-run numbers [for LNG prices] are probably in the $US7 to $US8 mark. No one’s got that in their valuations for the equities…

We are in a world that’s short energy, while a bit over 80 per cent is coming from fossil fuels, and governments are saying, ‘give us more energy, but don’t invest in fossil fuels’. It’s very hard to make up that gap from fossil fuels at the moment…

We can only assume Binsted is still looking at Woodside shares (Woodside is also a gas producer), as well as other gas stocks such as Santos Ltd (ASX: STO), Karoon Energy Ltd (ASX: KAR) and Beach Energy Ltd (ASX: BPT).

The post Looking to energise returns with this pocket of undervalued ASX shares in 2023 appeared first on The Motley Fool Australia.

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More reading

• Why Whitehaven Coal shares could ‘continue rewarding’ ASX 200 investors in 2023: expert
• 5 things to watch on the ASX 200 on Tuesday
• Here are the top 10 ASX 200 shares today
• Should I buy ASX mining shares now or not?
• Own Santos shares? Here’s why the ASX 200 company’s net-zero plan is taking heat

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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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