If a business saw its shares plummet in one year but its operations are still sound, is it a fair recovery bet for the new year?
To test this "it can't get any worse" theory, at the end of each year the team at Marcus Today puts together a mini-portfolio of half-a-dozen ASX shares that saw their values plummet the previous 12 months.
Last year's picks — AMP Ltd (ASX: AMP), Boral Limited (ASX: BLD), Challenger Ltd (ASX: CGF), Insignia Financial Ltd (ASX: IFL), Treasury Wine Estates Ltd (ASX: TWE) and Unibail-Rodamco-Westfield CDI (ASX: URW) — turned out to have a pretty good 2021.
"In this model 'Dog Basket', we started with equal weightings of $10,000 in each, for a total of $60,000 around October 2020," stated the Marcus Today team.
"Current valuation is around $81,000, up approximately 34%."
If you're interested in making a similar recovery punt for 2022, here are this year's Dog Basket picks:
Guess who's back… again
AMP has, unfortunately, been a mainstay on end-of-year "worst ASX shares" lists for a while now.
The stock price has lost 35.9% for the year so far and an eye-watering 80% over the past 5 years.
And it once again makes Marcus Today's Dog Basket.
"Maybe the renaissance of the AMP building dominating Circular Quay is a sign that things can only get better."
Shooting themselves in the foot
A2 Milk Company Ltd (ASX: A2M) ran into trouble last year for a similar reason to Treasury Wines — a significant loss of its Chinese consumer market.
In response, one company redirected its sales and adjusted its marketing — and the other did not.
"Unlike Treasury Wines, which has pivoted away from China and driven the premiumisation of its brands, A2 Milk has failed to pivot," the Marcus Today team wrote.
"Failed on many fronts. Reflection and action are the mantra from the CEO. We shall see — but definitely one for the basket."
A2 shares have lost more than 52% for the year.
Similarly, the AGL Energy Limited (ASX: AGL) share price struck trouble due to its management's poor judgments.
"AGL has been under considerable pressure since a past CEO picked a fight with the government over the Liddell Power Station. He clearly did not learn from the Telstra experience under Sol," the memo from Marcus Today read.
"Never take on the government. They will win. They have more money."
AGL has, however, proposed to split itself into two: one green business and one polluting business.
"2022 could see the company split into 2, and with the arrival of Shell into the energy retail game in Australia, maybe we will see the interest in AGL pick up. Corporate activity would certainly be easier without the fossil fuel power station exposure."
AGL shares have also lost around 50% over 2021.
One COVID beneficiary, one COVID casualty
While many technology companies saw their stocks soar after the pandemic forced people to stay at home, one exception is Appen Ltd (ASX: APX).
The machine learning services provider truly was a COVID-19 loser, losing 58% of value this year and 73% since August 2020.
"EBITDA down 14%, revenue down 2%. It has been a COVID-19 casualty. Data annotation and collection for AI has been lumpy in revenue terms."
Appen has big plans to expand into China, but given Australia's political issues with that nation, it's a long shot.
"It has a strong balance sheet (+$66m) and maybe as the world reopens in 2022 and the Metaverse becomes a reality, we could see some buyers emerge," the Marcus Today team wrote.
"Still a stretch to get back on track."
On the opposite side is Ansell Limited (ASX: ANN), which was definitely a COVID beneficiary with its disposable medical products.
But according to the Marcus Today team, the demand has fallen off a cliff far earlier than expected, so the company needs to rally over the remaining financial year.
"It had better be a good second half. Chip shortages and supply chain issues have been a hindrance," stated the team.
"Earnings per share [EPS] is expected to be more weighted to 2H relative to prior years. EPS guidance of 175 to 195 US cents per share was reiterated. But [that] looks a stretch — and second half is crucial."
Ansell shares have lost 8.5% this year.
Do you remember buy now, pay later?
The market has really cooled on buy now, pay later stocks since Afterpay Ltd (ASX: APT)'s blockbuster sale to Block Inc (NYSE: SQ) was revealed earlier this year.
Zip Co Ltd (ASX: Z1P) now seems to be the forgotten ASX share that used to be everyone's tip.
For its investors, the 52-week high of $14.53 seems like a distant memory with Zip going into Christmas at $4.39.
The Marcus Today team reckons size really matters as the BNPL industry consolidates. And Block-Afterpay will be a huge gorilla.
"Zip may just end up in the mist. Missed could be the operative word as it fails to fire, and costs continue to weigh," their memo stated.
"Merchants do not want a myriad of terminal possibilities for customers to dither over at the checkout."
