With the end of a financial year and the beginning of a new one this week, it's pertinent to look back on some of our share market's best and worst stocks over the past 12 months and assess whether we should buy these ASX shares.
On the weekend, my Fool colleague James named the worst-performing shares for FY24. They included Fletcher Building Ltd (ASX: FBU), Healius Ltd (ASX: HLS), Star Entertainment Group Ltd (ASX: SGR) and IGO Ltd (ASX: IGO). However, the worst performer on the index over FY24 was lithium stock Liontown Resources Ltd (ASX: LTR).
These shares were dastardly performers over the 12 months to 30 June 2024. Liontown, in particular, lost its investors a painful 68%.
As it happens, Liontown shares rallied more than 10% yesterday before news of a funding deal halted the shares. Still, this move comes too late to save the company from taking out the crown of thorns as the worst ASX 200 stock of FY24.
But the more value-inclined investors out there might be sizing up these FY24 laggards today. After all, it was the legendary Waren Buffett who famously told us to "be greedy when others are fearful". And investors were clearly mighty fearful of Fletcher Building, Healius, Star Entertainment, IGO and Liontown last financial year.
Well, the good news for these value investors is that most of these shares are currently being eyed off by some ASX experts for their value potential.
ASX experts rate some of the worst ASX shares of FY24 as a buy
As reported in the Australian Financial Review (AFR) this week, Richard Coppleson, director of institutional sale and trading at Bell Potter, reckons the lithium sector is undervalued. Coppleson's pick in lithium is the poor FY24 performer Pilbara Minerals Ltd (ASX: PLS) rather than Liontown:
I own this and like it a lot… I think it's a super buy at these levels – when lithium does recover, this is back to $5 – only question is when will that be?
Star Entertainment is another beaten-down stock that has an enthusiastic backer. Atlantic Pacific Capital is reportedly a big fan of Star shares at their recent pricing. Fund manager Nicolas Bryon recently stated:
If one were to read popular media, social media or the anonymous on chat forums, you would be convinced that this is potentially the worst decision in the world…
Often those who don't understand distressed investing will dump positions. This is true of institutional and retail investors alike … ultimately these assets are premium entertainment precincts. If operated well, they can earn above their cost of capital.
Atlantic Pacific Capital joins other fund managers like Cooper Investors and L1 Capital in holding Star shares.
Healius also has some fans amongst the ASX professional investing class. Maple-Brown Abbott, Perpetual Ltd (ASX: PPT) and Argo Investments Ltd (ASX: ARG) all retain significant stakes in Helius within their portfolios.
But before we go, it's worth keeping in mind another one of Warren Buffett's best quotes:
Mr. Market [the stock market] is there to serve you, not to guide you. It is his pocketbook, not his wisdom, that you will find useful. If he shows up some day in a particularly foolish mood, you are free to either ignore him or to take advantage of him, but it will be disastrous if you fall under his influence.
Just because a share has had a disastrous year doesn't mean it will bounce back in value. Sure, some beaten-down shares will end up getting oversold and might represent buying opportunities. But others are sold off for a very good reason and might end up being value traps.
So make sure you follow Buffett's advice and avoid getting 'guidance' from the share market. As he says, letting it guide our investing decisions is a path to disaster.
