‘Top quality’: Expert picks 2 ASX 200 shares to buy at a nice discount

a middle-aged woman holds up two fingers with a wide mouthed smile on her face and wide open eyes.a middle-aged woman holds up two fingers with a wide mouthed smile on her face and wide open eyes.

If you go shopping for a couch or a car, you target ones that are on sale. 

So why wouldn’t you do the same for ASX shares?

For those who are still scared of buying into stocks that have fallen in price, here’s a couple of recommendations that might change your mind:

‘The shares are trading at a discount’

Even though Lynas Rare Earths Ltd (ASX: LYC) is the only major producer of rare earth minerals outside of China, the stock price has taken a 17.8% dive over the past month.

If you go back six months, the shares have taken a painful 21.8% haircut.

According to Catapult Wealth portfolio manager Tim Haselum, recent news from the world’s largest electric car marker sent a scare through investors.

“In our view, Tesla Inc (NASDAQ: TSLA) announcing a plan to eliminate rare earths from next generation electric vehicles… impacted the share price,” Haselum told The Bull.

“But we believe investors over-reacted to the Tesla news, given continuing demand for rare earths. Consequently, we believe the shares are trading at a discount.”

Shaw and Partners portfolio manager James Gerrish said pretty much the same last week.

“Tesla, and EVs in general, are just one of many demand sources of rare earth materials.”

Haselum also felt like reporting season last month didn’t flatter the Lynas Rare Earths.

“The company posted higher revenue in the first half of fiscal year 2023, but the cost of sales also rose,” he said.

“The company also experienced water supply disruptions at its Malaysian plant.”

‘A strong track record of compound sales growth’

Xero Limited (ASX: XRO) shares lifted 10.5% in a single day last week after its new chief executive announced plans to slash costs and focus on profitability.

However, the stock is still almost half what it was in November 2021.

Haselum thus sees a golden buying opportunity at the moment.

“This accounting software provider is trading at a discount to prior earnings multiples since the price has fallen from its highs,” he said.

“The company has a strong track record of compound sales growth and penetrating key markets… We consider Xero a top quality company.”

This week Xero shares took another dive due to the collapse of Silicon Valley Bank, which had substantial clientele in the US tech industry.

However, the New Zealand software company assured investors that it has no “material exposure” to the failed institution.

“As at 10 March 2023, Xero’s total exposure to Silicon Valley Bank was approximately US$5 million, reflecting Xero’s local transactional banking relationships with SVB in the US and UK,” the company announced to the ASX.

“That amount represents less than 1% of Xero’s cash and cash equivalents as at September 30 2022.”

The post ‘Top quality’: Expert picks 2 ASX 200 shares to buy at a nice discount appeared first on The Motley Fool Australia.

4 ways to prepare for the next bull market

It’s a scary market. But staying in cash when inflation is surging likely won’t do investors any good either.

And when some world-class companies have pulled back considerably from their recent highs… All while their fundamentals remain unchanged…

It begs the question…

Do you have these 4 stocks in your portfolio?

See The 4 Stocks
*Returns as of March 1 2023

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);

More reading

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

from The Motley Fool Australia https://ift.tt/zdL2uXa

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s