Fundie is buying these 2 ASX All Ords shares at discount prices

This fundie says the recent volatility is the perfect time to pounce on high-quality shares.

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Key points

  • The recent volatility has offered one portfolio manager the opportunity to add more to key holdings
  • AUB Group and City Chic have been beaten down in 2022, offering exciting entry points
  • Both are well into the red since trading resumed in January 2022

ASX shares have staged a snap-back rally this month as investors pile back into equities and ETFs. The All Ordinaries Index (ASX: XAO) has jumped 156 basis points over the last week and is continuing its march today.

It’s up another 0.62%, or 48 points, in early trading on Tuesday at 7,737 points.

Leading the charge are financial, tech, and commodity-based players fronting the benchmark indices and stringing up the broader market.

As the world winds back from COVID-19 and starts to reopen, it’s no wonder money managers are positioning themselves to take advantage of the prevailing trends.

Pullbacks: add to ‘high-quality businesses’

The All Ords has started to climb back towards its 3-month highs and has shrugged off fears of a global recession in March.

Within the Australian market, two players have caught the eye of Prime Value Emerging Opportunities Fund portfolio manager Richard Ivers.

Ivers said that his fund had managed to capitalise on the recent pullback in equity markets and used the selloff to add more to key holdings.

“Recent volatility has enabled us to add to existing holdings of high-quality businesses we know well which became cheaper,” the portfolio manager told The Australian Financial Review.

Two of these names are insurance broker AUB Group Ltd (ASX: AUB) and fashion retailer City Chic Ltd (ASX: CCX), Ivers noted.

TradingView Chart

Why the bullish outlook?

AUB has spiked 19% in the past 12 months after a wobbly year, but momentum has slowed in 2022.

Since trading restarted in January, its shares have tumbled more than 12%, giving the portfolio manager an exciting entry point. They now trade at $22.77 apiece at the time of writing.

In its half-yearly results in February, the company reported underlying net profit after tax (NPAT) growth of 17% to $30 million while reported NPAT grew 28% year on year.

The board also declared a 17 cents per share dividend with shareholders to receive full franking credits as a taxable offset.

It also guided NPAT growth for FY22 between 19%-22.3%, calling for $72-$74 million at the bottom line.

Meanwhile, shares in City Chic have been punished in 2022, having erased more than 39% since January when trading resumed.

Investors weren’t satisfied with the company’s half-yearly results and no doubt wanted more from the company’s 6% reduction in net profit to $12.3 million.

As a result, shareholders aren’t privy to a dividend this earnings cycle from the fashion retailer. As The Motley Fool’s Brooke reported at the time, “due to COVID-19 uncertainty, investment in inventory, a decline in operating cash flows, and acquisition opportunities, the company hasn’t paid a dividend this half.”

“It didn’t pay a dividend for financial year 2021 either.”

Nonetheless, Ivers is constructive on the stock, as he is on all the holdings in the Emerging Opportunities Fund.

And the experienced market pundit doesn’t fear calamity, opting to view it as an opportunity to pounce instead.

“…the sell-off finally gave us the opportunity to buy at an attractive price – that’s the great thing about volatility. Many people hate it, we like it!”

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Austbrokers Holdings Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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