With reporting season in full swing, investors are warned not to get too excited about buoyant 2022 financials.
This is because the 2023 and 2024 outlook is more important, with interest rates rising and consumers locking up their wallets.
It's through this lens that the team at Wilsons continues to advise clients to buy ASX shares that are labelled "quality".
The advisory's head of investment strategy David Cassidy revealed that his team just added weightings to two ASX shares:
Image source: Getty Images
'An attractive valuation' for business with excellent outlook
The Wilsons team this week welcomed Resmed CDI (ASX: RMD) to its "focus list" of shares to buy.
The continuous positive air pressure device (CPAP) maker is a business that can remain resilient through the economic cycle, according to Cassidy.
"Resmed is an inherently defensive business, with the treatment of medically diagnosed breathing conditions being essential and therefore non-discretionary," he said in a memo to clients.
"CPAP therapy is reimbursed by private and public payers in most major markets, making it affordable for most patients."
What's more, the CPAP market around the world is currently largely underserved.
"Industry level penetration of the market is estimated at less than 20% in the US, and less than 5-10% in Europe and other ROW markets, leaving a long runway for growth across the industry."
Resmed has smartly mitigated a couple of huge risks this year, according to Cassidy.
It managed to find a workaround for the global computer chip shortage by providing customers with a chip-free temporary solution.
And it has passed on rising input costs to its end clients without dampening demand.
The Resmed share price has dropped about 7.5% since the start of the year, presenting a tempting buying opportunity.
"Resmed trades at a 12-month forward PE ratio of ~37x, broadly in line with its trailing 3-year average," said Cassidy.
"We view this as an attractive valuation considering both the long-term runway for growth in the under-penetrated CPAP market and the medium-term opportunity for RMD to strengthen its market position while [rival] Koninklijke Philips NV (AMS: OHIA) is sidelined."
The industrial metal that could keep going up
The Wilsons team also recently increased its exposure to lithium producer Allkem Ltd (ASX: AKE).
That's despite Cassidy's team having a dim outlook for mining, with economies about to slow down and commodity prices due to deflate.
That's because lithium could be an exception to the rule.
"We remain favourable towards lithium over the medium-term," Cassidy said.
"The metal is forecast to be in a structural deficit over the next decade due to the rapid transition towards electric vehicles."
Wilsons analysts think lithium is far less cyclical than another "popular industrial metal", copper.
"Realised lithium prices have held up well this year, while other industrial metals, like copper, have recently softened."
The Allkem share price is up more than 10.5% so far this year.
