Reporting season is informative for ASX share investors, but it can get overwhelming.
There is information overload. And reported results sometimes have no correlation to stock price, as the market will buy and sell according to what the future prospects are.
And that's before the spectre of the coronavirus' Delta variant hanging over everyone's heads right now.
"The COVID-19 pandemic, and associated lockdowns, have impacted some businesses very positively, but been less kind on others," said Montgomery Investment Management chief investment officer Roger Montgomery.
"These impacts are coming to light in the current FY21 reporting season."
The complexity of this situation can mean it can be helpful to see which ASX shares a professional liked after their financial reporting.
Here are 2 stocks that Montgomery liked coming out of the August frenzy.
Image source: Getty Images
Redbubble is not just a lockdown winner
Online art merchandise marketplace Redbubble Ltd (ASX: RBL) won over many investors last year as consumers turned to e-commerce for homewares and gifts. Its shares multiplied 14 times from the March 2020 trough to January 2021.
But this year has been a different story, as investors saw it as a loser in the post-COVID reopening economy.
Despite a massive rally after its results earlier this month, the stock is still down about 30% for the year.
"The stock initially fell and then closed higher last Thursday producing a near-40% range on extremely high turnover," said Montgomery on the company blog.
"We currently believe Redbubble will prove to be a high-quality company provided it can convert the long-term prospects for its 'flywheel' into its potential economics."
Redbubble's financials slightly missed analyst forecasts, but Montgomery likes the network effect starting to take hold in its ecosystem.
"Repeat purchases grew by 67%, outpacing first purchase growth of 52%. When combined with transactions per customer rising from 1.1 times to almost 1.2 times, it suggests the platform is becoming established," he said.
"Indeed, the rising customer base is attracting more suppliers to the platform with artist growth of 54% to 728,000 artists."
He added that the network effect is a "powerful" driver of sustainable competitive advantage, which helps "entrench high returns on equity".
ASX share that offers growth and defence
Vehicle accessories and parts provider Bapcor Ltd (ASX: BAP) reported outstanding results after virus-weary Australians turned to their cars for commuting and recreation.
"Bapcor reported FY21 NPAT [net profit after tax] growth of 47% from 20% revenue growth and 39% EBIT [earnings before interest and tax] growth," said Montgomery.
"Trade revenue rose 15.5% and Trade EBITDA rose 19%… Wholesale was 26.8% higher at the revenue line and EBITDA rose 42.2%. Finally, retail rose 26% and retail EBITDA rose 20%."
Despite this, Bapcor shares are down almost 10% this month and 5.9% for the year.
The business is currently taking a battering from the Sydney and Melbourne lockdowns.
"Bapcor's NSW trade business has copped a 20% hit and NSW retail is off 20 to 30%," Montgomery said.
"An opening up pre-Christmas, however, could produce a mini-boom."
Bapcor management was cautious about forecasts for the current financial year. But, according to Montgomery, the business is expecting 2022 financial year earnings to "at least" match the previous year.
"Our small caps team really likes Bapcor and believe it is a high-quality business with defensive business characteristics offering growth."
