2 ASX shares just had a shocking month but could be bargains now

Do you like to 'buy the dip'? Here are 2 stocks that a fund manager is keeping the faith in, despite an awful August

| More on:
Two men sit in garden on chairs facing each other and fist bump while holding a beer.

Image source: Getty Images

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 fund manager had admitted 2 ASX shares in his portfolio tumbled terribly last month, but revealed why patient investors could potentially buy in cheaply right now.

Cyan Investment Management portfolio manager Dean Fergie told clients in a memo that both Mighty Craft Ltd (ASX: MCL) and Vita Group Limited (ASX: VTG) had shockers in August.

Vaccinations will lift spirits

Shares for brewing company Mighty Craft lost 15% over the month.

"Mighty Craft has come under reasonable operational and sharemarket pressure due to the extensive lockdowns in VIC and NSW which have severely impacted its venue businesses," Fergie said.

The Melbourne business is a craft-brewer, a spirits distiller, and owns some venues.

"The company owns brands such as Jetty Road, Ballistic and Mismatch Brewers, Kangaroo Island Gin, 78 Whisky, and over a dozen associated venues in NSW, VIC, and SA."

Mighty Craft shares have shaved 35% off their value so far this year.

Fergie told The Motley Fool it's a victim of circumstances and believes fortunes are about to swing around for this ASX share.

"MCL is currently in the eye of the COVID storm with its closed venue businesses but the present tight restrictions are only likely to ease and a strong rebound is likely before Christmas and patrons flood back into venues," he said.

"The timing of the recent capital raise and purchase of Adelaide Hills group, just before the latest COVID outbreak on June 21, was unfortunate timing."

One positive the very contagious Delta variant has brought is a sense of urgency for Australians to receive a coronavirus vaccine.

The rising coverage will also help Mighty Craft, according to Fergie.

"As vaccination rates roll forward it would appear likely that a gradual reopening will occur in the coming months which should see a rebound in the company's operations and its share price."

Patience is a virtue for this ASX share

Vita Group is best known for owning a network of Telstra shops.

But in February, Telstra Corporation Ltd (ASX: TLS) announced it would shift all its franchised retail outlets in-house.

But that's now 6 months ago and Vita Group still has not struck a buyout agreement with the telco.

Vita shares lost 10% over August.

"Investors are getting somewhat impatient with Vita," Fergie told The Motley Fool.

"The market has been expecting a deal to be struck between the two companies to exit the franchise but COVID closures have likely lengthened this process." 

The company has turned to other ventures, one of which shone during the recent reporting season.

"Vita Group reported great numbers from its growing beauty clinic division (Artisan) which saw revenue and gross profit rise over 40%."

The other reason for patient investors to hold onto Vita stock is that it's bringing in a nice income.

"VTG is paying a 9% fully franked yield, so investors are certainly being rewarded for their patience."

Motley Fool contributor Tony Yoo 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 owns shares of and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Broker Notes

A female ASX investor looks through a magnifying glass that enlarges her eye and holds her hand to her face with her mouth open as if looking at something of great interest or surprise.
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »

A smiling businessman in the city looks at his phone and punches the air in celebration of good news.
Broker Notes

These ASX 200 shares could rise 50% to 60%

Brokers believe these shares could deliver big returns for investors.

Read more »

Broker written in white with a man drawing a yellow underline.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

Woman with a scared look has hands on her face.
Broker Notes

Bapcor shares fell more than 30% yesterday. Should investors buy in the dip?

Is this a value opportunity?

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Broker Notes

Broker raises price targets on 2 ASX 200 shares to buy

Ord Minnett has just upped its 12-month share price targets on 2 buy-rated ASX 200 stocks.

Read more »

Man drawing an upward line on a bar graph symbolising a rising share price.
Broker Notes

Morgans says these ASX can rise 30% to 50%

The broker has good things to say about these shares.

Read more »

Two businessmen look out at the city from the top of a tall building.
Broker Notes

2 ASX REITs to buy in July: expert

Is it time to consider ASX REITs?

Read more »

Delighted adult man, working on a company slogan, on his laptop.
Broker Notes

Broker tips 20% upside for these ASX utilities shares

Bell Potter sees upside in these two shares.

Read more »