This week we heard how current conditions remind Forager Funds chief investment officer Steve Johnson of 2017, and why he reckons it's now time to flee to "boring" ASX shares.
Interest rates are at all-time lows, shares are at historic high valuations, inflation is worryingly persistent, energy prices are skyrocketing and post-COVID reopening is overheating the economy.
"People are inventing new metrics like revenue multiples to justify absurd prices for growth stocks," he wrote in Money magazine.
"More importantly, there are very few pockets of undue pessimism."
All this means it's time to pull your money out of risky hyper-growth companies and bank on reliable oldies, according to the investment veteran.
"It is time, once again, to be thinking about the benefits of safe and boring."
Here are 2 specific ASX shares that Johnson named that fit that bill:
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Industrial services is boring, so it's perfect for now
Industrial services provider Downer EDI Limited (ASX: DOW) has been involved in a wide variety of sectors like transport, utilities, mining, and construction. The company hires 52,000 employees.
"If that sounds boring, that's the whole point," said Johnson.
"After a number of slip-ups in recent years, the company has been focussing on making itself as boring as possible."
He added that Downer EDI has been phasing out the "higher-risk" construction arm, had sold off its laundries business and most of its mining services division.
"By 2024, we estimate 80% to 90% of revenue will come from government-related entities."
This de-risking was not duly recognised by ASX investors, with the share price stuck at 2016 levels until the annual results in August.
"We think it can generate an 8% to 9% cash return from these prices, is committed to sharing most of that cash with shareholders and should be able to generate growth in line with the wider economy," said Johnson.
"In a world of expensive assets, that adds up to just fine."
Downer shares closed Friday at $6.05, which is 11% up for the year.
TPG beat the ACCC, but the watchdog might be right after all
Telecommunications stocks have been out of favour with investors the past few years.
The industry had been caught in a race to the bottom with mobile and internet plans highly commoditised.
In this environment, TPG Telecom Ltd (ASX: TPG) was the growing challenger to the giants like Telstra Corporation Ltd (ASX: TLS) and Optus.
"The original TPG was a popular founder-led business which David Teoh built from the ground up and created a huge amount of shareholder value," said Johnson.
"His final act was to merge with Vodafone, much to [ACCC chair] Rod Sims' ire… TPG won, the ACCC lost and the combined company is now a significant player with more than 5 million mobile subscribers and 2 million fixed broadband subscribers."
But now Teoh is no longer involved with the business and TPG looks no different to the big boys.
In fact, TPG shares have lost more than 26% since the Vodafone merger in the middle of 2020.
Johnson, though, reckons the exact concerns that the ACCC held bodes well for this ASX share's prospects.
"There is upside in potential NBN price cuts and the networks themselves are starting to bypass the NBN with home 5G wireless devices," he said.
"In mobile, all 3 large players are talking about a 'better' pricing environment, with all of them selling new contracts at better than the current average."
Such a pickup in the sector, Johnson estimates, will result in a cash return of 8% per annum on TPG's current valuation.
"Unlike Downer, we might need to wait a few years while TPG repays some debt, but shareholders should see most of that paid out as dividends from the 2023 financial year," he said.
"The telco sector is mature, boring, and stable, but we will take 8% over most of the opportunities we are seeing today."
TPG shares closed Friday at $6.35, down 10.5% since January.
