It’s looking like another rough day is in store for the S&P/ASX 200 Index (ASX: XJO) and most ASX shares this Tuesday. At the time of writing, the ASX 200 has sunk by another 0.95%, leaving the index at just over 7,550 points. But let’s talk about the Magellan Financial Group Ltd (ASX: MFG) share price.

Magellan shares are having an even worse time of it today so far. The fund manager closed up shop at $8.94 a share yesterday afternoon. But this morning, the Magellan share price opened at just $8.90 and is going for $8.85 a share at the time of writing, down 1.01%.

So what’s going on at Magellan today that might explain this miserly performance so far this Tuesday?

Well, it’s probably got something to do with the funds under management update the company released this morning just before market open.

FUM rises, but shares sink anyway

Magellan has revealed that its funds under management (FUM) had grown from $35.8 billion as of 31 December to $36.3 billion on 31 January, an increase of 1.4%. Retail FUM rose from $16.7 billion up to $17 billion, while institutional funds ticked up from $191 billion to $19.3 billion.

In terms of the company’s divisions, ‘global equities’ rose from $14.9 billion to $15.5 billion, while ‘Australian equities’ grew FUM from $5.1 billion to $5.2 billion.

Magellan’s ‘infrastructure equities’ shrank from $15.8 billion in FUM to $15.6 billion.

However, most of these gains can probably be attributed to rising stock prices. The company reported that over January, it experienced net FUM outflows of $400 million, split evenly between retail and institutional investors.

This data from January continues the trend of slow FUM upticks for Magellan that we’ve seen in recent months. Earlier last month, we covered Magellan’s total FUM increase of 1.7% to $35.8 billion. However, the company also experienced a net outflow in January of $200 million.

In January 2023, Magellan commanded a total of $46.2 billion in FUM, so the company has seen a 12-month FUM decline of 21.4%.

Magellan share price snapshot

The past 12 months have not been kind to the Magellan share price. The ASX 200 fund manager has lost 4.01% over the past year, as well as 82% of its value since July 2021.

Saying that, Magellan shares are also up more than 46% since its October 52-week (and 10-year) low of $6.06 a share.

At the current Magellan share price, this ASX 200 fund manager has a market capitalisation of $1.61 billion, with a trailing dividend yield of 9.75%.

The post Down 1%: Here’s why the Magellan share price is having an awful Tuesday appeared first on The Motley Fool Australia.

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More reading

• Why Arcadium Lithium, BHP, Core Lithium, and Magellan shares are falling today
• Magellan share price snapping back to reality amid competitive gravity
• Why Core Lithium, Magellan, Pantoro, and Sayona Mining shares are sinking today

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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Three S&P/ASX 200 Index (ASX: XJO) shares just received substantial upgrades from leading brokers.

Two of the stocks have outpaced the benchmark index in 2024, while one is deep in the red.

But according to top Aussie brokers, the outlook for all three ASX 200 shares looks bright.

Here’s what you need to know.

(Broker upgrade figures courtesy of The Australian.)

Three ASX 200 shares tipped to outperform

First up we have vertically integrated poultry producer Inghams Group Ltd (ASX: ING).

As you can see on the chart above, the ASX 200 share has been on a tear over the past five months, with the stock up 57% since 15 August. In morning trade today, shares are swapping hands for $4.46 apiece.

The most recent share price surge followed a promising half-year update on 31 October.

Investor enthusiasm was roused when the ASX 200 share forecast a 110% increase in underlying net profit after tax (NPAT) to $71 million for the first half of FY 2024. Management said statutory NPAT could leap 278% to $65 million.

Despite the huge share price gains already in the bag, Bell Potter sees more growth ahead.

The broker raised Inghams to a buy rating with a $4.90 target price. That represents a 10% potential upside from current levels.

Inghams trades on a fully franked 3.4% trailing dividend yield.

Moving on…

The second ASX 200 share getting a broker upgrade today is lithium stock and diversified resources producer Mineral Resources Ltd (ASX: MIN).

The Mineral Resources share price has come under significant pressure amid a crash in global lithium prices. That sees that stock down 37% over the past 12 months, currently trading for $55.08 a share.

On the positive side, in late January Mineral Resource reported that its Wodgina, Mt Marion and Bald Hill lithium projects all remain profitable at the current depressed lithium prices.

Management also expects costs at Wodgina and Mt Marion to come down in 2024.

JPMorgan believes the ASX 200 share has suffered through the worst of it. The broker raised Mineral Resources to an overweight rating with a $77 price target. That represents a 40% potential upside from current levels.

Mineral Resources trades on a 3.4% fully franked trailing dividend yield.

Which brings us to the third ASX 200 share getting a broker upgrade today, wholesale distributor Metcash Ltd (ASX: MTS).

The Metcash share price is down 13% over 12 months but has gained 3% so far in 2024. Shares are currently trading for $3.60 apiece.

A lot’s been happening with Metcash just over the past week, particularly relating to the company’s growth outlook.

Yesterday Metcash announced it was undertaking a $325 million capital raising.

As Motley Fool analyst James Mickleboro noted, the raising is to fund the acquisition of “three strategically aligned businesses that deliver further diversification and resilience, and an even stronger growth trajectory”.

Superior Food is the primary acquisition, for an enterprise value of up to $412 million.

This morning the ASX 200 share reported it had completed the oversubscribed capital raising.

Jeffries sees a good run ahead for this ASX 200 share. The broker raised Metcash to a buy rating with a $4 price target. That represents an 11% potential upside from current levels.

Metcash trades on a 6.1% fully franked trailing dividend yield.

The post These 3 ASX 200 shares just got some big broker upgrades! appeared first on The Motley Fool Australia.

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More reading

• Why are Metcash shares tumbling today?
• 5 things to watch on the ASX 200 on Tuesday
• History shows 2024 could be a big year for ASX 200 shares. Here are 3 to look at now
• Here are the top 10 ASX 200 shares today
• Stocks on the rocks: Why the ASX 200 is backtracking from record highs today

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Bernd Struben 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 JPMorgan Chase. The Motley Fool Australia has recommended Metcash. 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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The Myer Holdings Ltd (ASX: MYR) share price is catching the eye on Tuesday.

In morning trade, the department store operator’s shares are up 13% to 75.5 cents.

Why is the Myer share price jumping?

Investors have been fighting to get hold of the company’s shares this morning after it released a trading update.

According to the release, the company has achieved a marginal increase in comparable sales during the first half. Management believes this demonstrates the strength of the improved customer value proposition under its Customer First Plan.

Particularly given that this has been achieved despite the challenging trading conditions compared to the prior corresponding period when a record sales performance was delivered.

Total sales for the first half of FY 2024 are expected to be down 3% on the prior corresponding period to $1,829.1 million, but 13.8% higher than the same period pre-COVID.

From this, group online sales are expected to be $390.1 million. This will be an increase of 2% and represents 21.3% of total sales.

What about profits?

Myer is guiding to a first half net profit after tax of between $49 million and $53 million. This will be down from $65 million a year earlier, which reflects the unfavourable impacts of store closures and inflationary cost pressures.

Nevertheless, this appears to have been better than feared by the market, hence why the Myer share price is lifting off this morning.

Myer CEO, John King, commented:

To match our best first half sales result on record, on a comparable sales basis, is an encouraging result given the current economic environment. Like many retailers, we have had to contend with inflationary pressures and greater promotional cadence, which has had an impact on profits.

Our focus remains on seeking to drive further and sustainable cost efficiencies and inventory management. We expect the consumer to remain cautious in the second half of FY24 but believe we remain well positioned with the strength of our leading loyalty program, our national distribution centre starting to scale and the continued roll out of successful brand extensions and new additions.

The post Why is the Myer share price jumping 13% today? appeared first on The Motley Fool Australia.

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More reading

• Buying ASX retail shares? You’ll want to see these numbers

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 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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At the small side of the market there are opportunities to generate incredible returns.

However, it is worth remembering that the risks are also very high.

So, the (potentially) cheap stock that I am going to talk about in this article would only be suitable for investors with a high tolerance for risk.

That stock is Paradigm Biopharmaceuticals Ltd (ASX: PAR), which is currently trading at 32.5 cents. This is well short of the late-stage drug development company’s 52-week high of $1.68.

But one broker that believes it has the potential to return close to those lofty levels is Bell Potter.

According to a recent note, the broker has a speculative buy rating and $1.40 price target on its shares. This implies potential upside of approximately 325% for investors over the next 12 months.

To put that into context, if Bell Potter is on the money with its recommendation, a $10,000 investment would turn into $42,500.

Why could Paradigm be a cheap ASX stock?

Bell Potter highlights that the company is well funded and not far off launching its treatment for osteo arthritis of the knee.

In respect to its treatment, the broker appears very excited by its potential. It said:

MRI quantitative data demonstrated that compared to placebo, patients on drug experience a) an increase in cartilage volume and thickness from baseline, most notably in the medial compartment where the highest proportion (72%) of knee OA occurs; b) an average 17% reduction in bone marrow lesion volume; and c) a reduction in inflammation (synovitis). As far as we are aware no other molecule has demonstrated a capability to apparently halt disease progression, let alone regenerate cartilage.

In our view the findings are strongly supportive of future commercial adoption and are likely to enhance upcoming discussion with both regulators and commercialisation partners.

In light of this, the broker believes the risk/reward from an investment in this cheap ASX stock is compelling for investors. It concludes:

PAR continues to expect to commence dosing in the phase 3 program in 1Q CY24. The company is funded though 1Q CY2024 and is yet to partner in a single region or indication. PAR intends to proceed with a provisional approval application for iPPS in Australia, which if successful may see the drug on market in 2025. Valuation is maintained at $1.40 and we retain our Buy (Speculative rating). There are no changes to earnings. The next major catalysts include potential non dilutive funding deal(s).

The post Here’s a 33c ASX stock that could have the potential to reach $1+ appeared first on The Motley Fool Australia.

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More reading

• Why are Metcash shares tumbling today?
• Citi says Coles and these ASX dividend stocks are buys
• Are investors underestimating ASX iron ore big-wigs this earnings season?
• What history says on avoiding CBA shares because they’re ‘expensive’
• Own Wesfarmers shares? Here’s your half-year results preview

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 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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Metcash Limited (ASX: MTS) shares have returned from their suspension on Tuesday.

In early trade, the wholesale distributor’s shares are down 5% to $3.46.

Why are Metcash shares falling?

The company’s shares are falling this morning in response to the completion of its $300 million fully underwritten institutional placement.

These funds were raised at $3.35 per new Metcash share, which represents an 8% discount to its last close price.

These funds, as well as its existing cash and debt facilities, will be used to acquire three strategically aligned businesses that management believes deliver further diversification and resilience, and an even stronger growth trajectory.

This includes Superior Food, which is being acquired for an enterprise value of up to $412.3 million. It is a leading Australian foodservice distribution business.

Management believes Superior Food is a logical extension of Metcash’s Food strategy and will enhance its core Food wholesale and distribution capabilities.

Also joining the Metcash portfolio will be Bianco Construction Supplies for an enterprise value of $82.2 million and Alpine Truss for $64 million.

Bianco is a construction and industrial supplies business, whereas Alpine Truss is one of the largest Frame & Truss operators in Australia.

Metcash will now push ahead with a $25 million non-underwritten share purchase plan. This is being undertaken at the lower of the institutional placement price and the volume weighted average price of Metcash shares traded on the five trading days up to and including the closing date.

What’s the reaction to the acquisitions?

Goldman Sachs has been running the rule over the acquisitions and has mixed thoughts. It said:

Focusing on Superior Food, we note the strategic rationale of entering a faster structural growth category in Food Service with A$21bn TAM, ~5% growth p.a. in FY23-28E vs Grocery (based on estimates from Superior Food).

However, the broker highlights that this sector has been boosted from a post-COVID rebound and there are signs of softening. It adds:

In November 2023, ABS sales for Cafes, restaurants and takeaway food services category was +3.8% YoY, with a softening trend vs 5.4% in Oct 23. With cost of living still a focus and our understanding of people returning to in-home cooking (vs eating out), we expect potential further softening in FY24. Additionally, over the past 10 years, the seasonality of Food Service category sales exhibit higher volatility mom vs grocery sales at 6.5% vs 4.4%. Currently, SFG is the 3rd player, with ~6% market share though stable margins (based on estimates from Superior Food).

In light of this, Goldman has held firm with its neutral rating and $3.60 price target on Metcash shares.

The post Why are Metcash shares tumbling today? appeared first on The Motley Fool Australia.

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More reading

• Metcash shares paused for $325m capital raising to fund Superior Food acquisition
• 5 things to watch on the ASX 200 on Monday
• ‘Attractive’: 2 ASX 200 shares to buy right now from the boom sector for 2024
• Top ASX dividend shares to buy in February 2024
• Guess which ASX 200 stock is halted on $500m acquisition talks

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 recommended Metcash. 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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Income investors searching for dividends might want to read on.

That’s because listed below are three ASX dividend stocks that analysts at Citi are recommending as buys.

Here’s what you need to know about them:

Coles Group Ltd (ASX: COL)

The first ASX dividend stock that could be a buy is supermarket and liquor giant Coles.

Citi is bullish on the company and currently has a buy rating and $17.50 price target on its shares.

In respect to dividends, the broker is forecasting fully franked dividends of 64 cents per share in FY 2024 and 70 cents per share in FY 2025. Based on the current Coles share price of $15.98, this will mean dividend yields of 4% and 4.4%, respectively.

Dalrymple Bay Infrastructure Ltd (ASX: DBI)

Another ASX dividend stock that has been given a buy rating by Citi is Dalrymple Bay Infrastructure. It is the long-term operator of the Dalrymple Bay Coal Terminal (DBCT).

DBCT operates around the clock, exporting thermal and metallurgical coal from Queensland’s Bowen Basin mines to ports around the world.

Citi has a buy rating and $3.00 price target on its shares.

As for income, the broker is forecasting big dividend yields in the coming years. It expects dividends per share of 20.6 cents in FY 2023 and 22 cents in FY 2024. Based on the latest Dalrymple Bay Infrastructure share price of $2.79, this will mean yields of 7.4% and 7.9%, respectively.

Stockland Corporation Ltd (ASX: SGP)

A third ASX dividend stock that could be a buy according to Citi is Stockland.

It is Australia’s largest community creator. It owns, manages, and develops retail town centres, workplace and logistics assets, residential, and land lease properties.

Citi has a buy rating and $5.10 price target its shares.

In respect to dividends, the broker is forecasting dividends per share of 27 cents in both FY 2024 and FY 2025. Based on the current Stockland share price of $4.49, this will mean yields of 6% in both years.

The post Citi says Coles and these ASX dividend stocks are buys appeared first on The Motley Fool Australia.

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More reading

• Falling yields? I’d buy these ASX dividend beasts for a beefed-up income in 2024
• Brokers say these ASX dividend stocks are buys
• The ASX dividend dream: 18% returns to fuel your income goals
• Here’s how the ASX 200 market sectors stacked up this week
• Got $15,000? How I’d invest for a bulletproof ASX passive-income portfolio

Citigroup is an advertising partner of The Ascent, a Motley Fool company. 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 no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Coles Group. 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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ASX iron ore shares are benefiting from a better commodity environment, but is the market fully appreciating how good things are looking for the sector?

The Rio Tinto Ltd (ASX: RIO) share price and BHP Group Ltd (ASX: BHP) share price have both seen a pullback of their valuations since the start of the year. The Fortescue Ltd (ASX: FMG) share price has done a bit better.

Is the ASX iron ore share sector being undervalued?

According to reporting by the Australian Financial Review, Citi thinks the strength of the iron ore price durability will help deliver strong miners during this reporting season and may lead to an increase in forecasts for profit and dividends in FY24.

Some investors have thought the iron ore price would be at a lower price by this point, but the AFR suggested prices have remained strong thanks to elevated steel production in China, as well as investor optimism that the US economy may only see a reduction.

The broker Citi said to clients:

We expect mark-to-market adjustments across the street will see consensus first-half iron ore forecast profits move higher heading into reporting season.

Second half iron ore price forecasts across the street will also likely need to move higher, boosting profit and dividend forecasts for FY24.

What is the valuation of the miners?

A business is usually valued on expectations of its future annual profit generation.

According to Commsec, Fortescue could be valued at 9 times FY24’s estimated earnings, BHP might be valued at 11 times FY24’s estimated earnings and Rio Tinto shares could be valued at 10 times FY24’s estimated earnings. Those numbers are certainly not as high as other sectors.

Time will tell whether these are good, cheap valuations or not, with a heavy influence from China and the iron ore price.

The post Are investors underestimating ASX iron ore big-wigs this earnings season? appeared first on The Motley Fool Australia.

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• Why is the BHP share price starting the week with a whimper?
• Could Rio Tinto shares be a gold mine for dividends in 2024 and beyond?
• Buy ANZ and this ASX dividend share
• 3 ASX blue-chip stocks I think every Aussie should own
• Top ASX dividend shares to buy in February 2024

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Tristan Harrison has positions in Fortescue. 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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Commonwealth Bank of Australia (ASX: CBA) shares often trade on a valuation that seems more pricey than other ASX bank shares. So should we avoid CBA shares?

Commonwealth Bank of Australia, Westpac Banking Corp (ASX: WBC), ANZ Group Holdings Ltd (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB) all have fairly similar business setups. The main noticeable differences between these businesses are their size and the split between household and business lending.

So how can investors easily compare them? The valuation is one of the best and easiest ways.

P/E ratios of big ASX bank shares

If a café makes $100,000 of annual profit and it’s sold to someone else for $300,000, that translates into an earnings multiple, or P/E ratio, of 3.

We can do a similar comparison for banks, except we’re talking about billions of profit and market capitalisations that are measured in the tens of billions of dollars.

Investors in the share market normally like to think about the future profit rather than the past when valuing a business, so I’m going to compare the valuations of these businesses based on (independent) projections on Commsec for the 2024 financial year.

CBA shares are currently valued at 20 times FY24’s estimated earnings, Westpac shares are valued at 13 times FY24’s estimated earnings, ANZ shares are valued at 12.6 times FY24’s estimated earnings and NAB shares are valued at 14.5 times FY24’s estimated earnings.

We can see there is a major difference in the earnings multiple.

Just look at the chart below, showing the P/E ratio of the four banks going back to the early 1990s. It seems to be the last five or so years where CBA shares have more consistently traded on a noticeably higher earnings multiple.

Three main things affect returns for shareholders – earnings growth, changes in the earnings multiple/ P/E ratio, and the dividend.

Total shareholder returns

Despite being on a more expensive P/E ratio, CBA shares have delivered stronger total shareholder returns over the last few years.

According to CMC Markets, CBA shares have delivered an average total shareholder return (TSR) per year of 16.3% over three years and 13.6% per year over five years.

Looking at the same metrics, NAB shares have delivered an average TSR per year of 15.2% over three years and 10.4% per year over five years.

ANZ shares have delivered an average TSR per year of 8% over three years and 5.1% per year over five years.

Westpac shares have delivered an average TSR per year of 6.1% over three years and 2.8% over five years.

This seems to indicate that, historically at least, CBA’s higher valuation didn’t stop it from outperforming. Perhaps we could say the higher P/E ratio of CBA shares was vindicated?

Past outperformance is not a guarantee of future outperformance. CBA earnings growth will be key from here – can it keep up the quality performance of its loan book?

For me, the ASX bank share sector is so competitive that I’m not sure the next year or two will see strong profit growth from the banks. But, it’s possible CBA shares could continue to positively surprise.

The post What history says on avoiding CBA shares because they’re ‘expensive’ appeared first on The Motley Fool Australia.

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More reading

• 3 ASX blue-chip stocks I think every Aussie should own
• Own CBA shares? Here’s what to expect from its half year results
• Why these 3 ASX 200 shares leapt into the Motley Fool’s headlines this week
• 5 things to watch on the ASX 200 on Friday
• Better buy: Westpac or CBA shares?

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.

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Wesfarmers Ltd (ASX: WES) shares have been on a strong run in recent weeks.

So much so, the conglomerate’s shares have risen 13% since the start of December.

Clearly, the market is feeling very positive about the company’s prospects in FY 2024.

But what is it actually pricing in for the first half? Let’s find out.

First half results preview

According to a note out of Morgans, its analysts aren’t expecting an overly strong result from Wesfarmers later this month.

This is due to its WesCEF business, which the broker expects to act as a drag on its performance during the first half and offset growth across other segments. The broker commented:

WesCEF is expected to be a drag on earnings. We forecast group 1H24 EBIT to be down 5% mainly due to materially lower WesCEF earnings reflecting weaker global ammonia prices and higher gas costs. All other segments are expected to deliver higher earnings.

What about the full year?

Looking further ahead, Goldman Sachs expects Wesfarmers’ EBIT to be largely flat for FY 2024.

Once again, the WesCEF business is expected to weigh on its profitability for the period. Goldman expects the business to report a 24.2% decline in EBIT to $449 million in FY 2024.

This is expected to offset a solid 5.1% increase in EBIT to $2,343 million from the key Bunnings business.

Should you buy Wesfarmers shares?

Goldman believes it will be onwards and upwards for Wesfarmers’ earnings after FY 2024.

In light of this, it sees value in Wesfarmers shares at the current level and recently put a buy rating and $62.90 price target on them.

This implies an 8% annual return for investors before dividends and an 11% return including them.

The post Own Wesfarmers shares? Here’s your half-year results preview appeared first on The Motley Fool Australia.

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More reading

• Would I be crazy to buy Wesfarmers shares at $58?
• Beginner investors: 5 top Aussie stocks I’d buy for 2024
• Where I’d invest $2,000 in ASX 20 shares today
• Why I prefer buying ASX shares over bonds
• Top brokers name 3 ASX shares to buy next week

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 and Wesfarmers. The Motley Fool Australia has positions in and has recommended Wesfarmers. 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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There are some names in the S&P/ASX 200 Index (ASX: XJO) that used to be staples in many investor portfolios, but have fallen out of favour in recent years.

However, at least one expert reckons there’s an opportunity to buy some of those for cheap right now with a long horizon to make some reasonable money.

Here are the two picks that Shaw and Partners portfolio manager James Gerrish has in mind:

Could the victim of geopolitics now become the beneficiary?

In 2020, COVID-19 seemingly had the whole world locked down without any vaccination or protection.

The Australian government then called for an independent enquiry into the origins of the pandemic.

While it was a reasonable suggestion, the Chinese Communist Party took great offence and started to place punitive economic measures against Australian businesses.

One of the biggest victims was Treasury Wine Estates Ltd (ASX: TWE), which instantly lost its biggest export market.

Four years later, the brutal fact is that the share price has still not recovered to its pre-COVID high.

However, Gerrish indicated in his Market Matters newsletter that his team was convinced the outlook looked positive from here for the winemaker.

“This week saw Wine Australia announce that Dec 23 export growth had improved significantly against the previous quarter,” he said.

“Strong demand from Hong Kong was the standout, with the over-$10-a-bottle category remaining stronger than the discount end.”

He pointed out that “Hong Kong is a major trading hub”, so wines could be distributed to the rest of Asia from there.

Gerrish’s analysts are “long and bullish” for Treasury Wine shares.

“We remain optimistic towards Treasury Wine Estates, based on our ongoing confidence in its Penfold distribution and pricing growth, plus the positive risk from the potential removal by China of duties on Australian wine, which we don’t believe is reflected in the share price.”

The team already holds Treasury in its active growth portfolio.

The ASX 200 healthcare outfit dispelling the doubters

Notwithstanding a recent rally, Resmed CDI (ASX: RMD) is still 12% lower than where it was in late July.

Gerrish loved the January business update.

“ResMed rallied strongly in late January after reporting better-than-expected 2Q earnings, primarily driven by better margins — a welcome relief after the stocks plunge on demand fears courtesy of Ozempic and other weight loss ‘wonder drugs’.”

His team already holds ResMed shares, but will continue to back it for further growth.

“The stock’s strength over the last fortnight is encouraging, but we aren’t tempted to cut this position even after it bounced ~38%,” said Gerrish.

“We can see ResMed trading well above $30 through 2024.”

ResMed closed Monday at $29.53.

The post ‘Long and bullish’: 2 classic ASX 200 shares to buy while they’re still cheap appeared first on The Motley Fool Australia.

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More reading

• Don’t look now, but these 3 ASX shares look poised for a nice rally
• ‘Appealing outlook’: 2 ASX 200 shares that just started their latest rally
• 3 top ASX 200 blue chip shares to buy in February
• Hoping to bag the ResMed dividend? You better be quick!
• Top brokers name 3 ASX shares to buy next week

Motley Fool contributor Tony Yoo has positions in ResMed. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ResMed. The Motley Fool Australia has positions in and has recommended ResMed. The Motley Fool Australia has recommended Treasury Wine Estates. 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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