When you shop for a car or a sofa, you logically don't go around buying it at the highest possible price.
Most Australians would wait for a sale or at least negotiate for a discount.
So why are so many investors afraid of buying ASX shares that have fallen in recent times?
If the long-term business outlook remains positive, a short-term dip in the stock price merely presents a buying opportunity. Think of it as a Boxing Day sale for stocks.
To demonstrate, here are two ASX shares that were hammered in March that Glenmore Australian Equities Fund is happy to buy and hold:
Image source: Getty Images
'Solid earnings outlook across its portfolio of brands'
Food retail franchisor Retail Food Group Ltd (ASX: RFG) is the business behind ubiquitous brands like Gloria Jean's, Michel's Patisserie and Donut King.
Glenmore portfolio manager Robert Gregory has been a fan of the stock for a while, and a hair-raising 25.3% drop in March isn't about to put him off.
He attributed a $25 million capital raising and a new $20 million debt facility announced during the month as the cause of its stock price woes.
"There was no specific acquisition or initiative to increase earnings for the equity funds raised," Gregory said in a memo to clients.
"[This] undoubtedly disappointed the market, with RFG stating the funds would be used to 'reset and strengthen the company's balance sheet and provide capital to pursue core business and inorganic growth opportunities'."
The big drop in stock price just makes Retail Food Group shares even more of a bargain, as far as Gregory is concerned.
"Despite the 15% earnings per share dilution from the raising, with the stock having fallen materially in the month, RFG trades on an FY23 PE multiple of 9x, and has a solid earnings outlook across its portfolio of brands."
Pick up this bargain before it explodes
US investment manager GQG Partners Inc (ASX: GQG) saw its share price fall 12.1% over March, due to a revelation that its fund-under-management dropped 1.3%.
This is just a short-term hiccup, according to Gregory.
"Whilst the investment performance of GQG's funds underperformed in the first quarter of 2023, performance over longer time frames is still well ahead of benchmark," he said.
"Positively, net inflows for the first two months of 2023 were US$3.0 billion, a very strong result."
Similar to Retail Food Group, Gregory is convinced GQG shares are an absolute bargain, but with the bonus of a fat dividend.
"GQG continues to look attractively priced, trading on an FY23 PE multiple of ~11x and a dividend yield of 8.5%."
Even with the March drop, the GQG share price is up 6.5% year to date.
