Image source: Getty Images
While stock markets have darkened in recent months, we know from experience that everything could turn around pretty quickly.
However, to combat rising interest rates, experts are emphasizing quality.
There is no universal definition of “quality”, but some of the most popular interpretations include profitability and tailwinds that weather economic cycles.
As such, here are 2 ASX stocks that have been pretty badly beaten this year, but experts believe they could surprise a year from now:
“We Bought It”
It’s fair to say Megaport Ltd. (ASX: MP1) Shareholders have sweated bullets this year.
The share price has fallen 62% so far in 2022.
Megaport is far from the only technology company to suffer the wrath of a violent rotation away from growth shares.
Julia Lee, Chief Investment Officer of Burman Invest, doesn’t think it will get any easier for the tech sector in the immediate future.
However, she thinks Megaport is worth it if you have the patience.
“If you’re a longer-term investor, there are definitely opportunities in the type of market we’re in,” she told Switzer TV Investing.
“If you can…get out of the cycle, there’s no problem accumulating high-quality companies like Megaport.”
Megaport provides virtualized networking channels to enterprise customers. In the age of the Internet, where customer demand for connectivity can vary widely, its services can be scaled up or down as needed.
And the already formidable shift from computing to the cloud has only accelerated since the arrival of the COVID-19 pandemic.
“We are still seeing this move to the cloud. They had that first mover advantage.
Shaw and Partners senior investment adviser Adam Dawes also views Megaport shares as a buy.
“We really like this one. We bought it and put it in customers’ wallets,” he said.
“It’s still less than $8 today – I think there’s definitely some value there.”
37%: has this stock of education been sufficiently updated?
Lee also favors international education placement provider IDP Education Ltd (ASX:IEL), despite its valuation down more than 37% since November.
“It made a very smart acquisition in India,” she said.
“I like the fact that they managed to improve the company. The margins resulting from this acquisition in India are much higher than a few years ago, which is nice to see.
As the world outside of China moves past coronavirus restrictions, international study placements will pick up steam.
Despite the share price falling over the past 6 months, Lee admits that IDP is still expensive in many ways.
“He has a very high multiple. It trades on a [price to earnings] multiple of more than 40 times,” she said.
“But I think after COVID, as things start to move…it’s going to be one of those companies that’s bigger and better than it was before COVID hit.”
Dawes likes the current discounted IDP stock price, but he feels it was too expensive to begin with.
“[During] COVID, it really shouldn’t have traded where it was and it’s still trading at a real premium to the rest of this sector, and even the market,” he said.
“I would wait for this selloff to potentially calm down before getting back into this one. I think there are probably still sales to be made.