If you want to buy a car, you try to look for the best price.
Who in their right mind would want to pay $50,000 if they can purchase the same vehicle for $40,000?
So it's irrational when investors are put off by ASX shares that have recently plunged in price.
If the business behind it is sound and has an exciting future, short-term discounting in the stock price should present a golden buying opportunity.
With this in mind, the analysts at Celeste Funds Management recently named two stocks in its portfolio that had a pretty ordinary December:
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Still a quality company
Shares for cooling systems provider PWR Holdings Ltd (ASX: PWH) have done outstandingly in the past year while most other stocks have struggled.
The stock price has rocketed more than 38% upwards over the last 12 months.
However, it detracted from the Celeste portfolio as 2022 ended, dipping a painful 8% in December.
In a memo to clients, the Celeste team noted that the Christmas fall came after a strong November rally on the back of its yearly financial results.
"While there were no new trading updates over the period, the stock was supported by a strong FY22 result that saw NPAT of $20.8 million (+23.9% vs pcp), 6.5% ahead of consensus expectations."
The analysts are "mindful" of how the share price has risen in recent times, but reckon more good times are ahead.
"We believe the committed order book, a strong balance sheet and the growth optionality in emerging technologies will underwrite earnings momentum over the near term."
Post-COVID recovery expected
Pathology services provider Australian Clinical Labs Ltd (ASX: ACL) watched in horror as its shares crashed 12.1% in December.
A longer timeframe doesn't do it any favours either, with the stock halving in value over the past 12 months.
The Celeste team attributed the disastrous showing to two factors.
"The first is revenue generated from COVID testing. With Australia well into the endemic phase of COVID-19, the number of COVID tests and government funding for those tests has declined precipitously," the memo read.
"This should not have come as a surprise, but consensus estimates have been slow to come down."
The second issue is the recovery in "business-as-usual" (BAU) pathology tests.
"While testing rates have recovered from pandemic lows, the recovery has been slower than expected across the industry," the Celeste team stated.
"In part this has been driven by increased telehealth consultations and in part by staff/patient absenteeism."
It's this second business that the Celeste analysts are hanging their hats on.
"As the endemic phase of COVID-19 annualises, we expect BAU testing to recover to well above pre-COVID levels."
