The first few months of 2022 has seen share market volatility like we could not even imagine last year.
This means that quite a few businesses have seen their stock fall like a stone. Yet their operations and fortunes may not have changed all that much.
That's why it's worth noting ASX shares that have plunged that professional investors are still holding onto.
The idea is that, over the long term, any massive disjoint between company performance and share price will moderate.
Here's a trio of ASX shares in that situation that Firetrail Investments is holding:
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Fell 48%, but still up over last 12 months
Shareholders for cancer treatment developer Telix Pharmaceuticals Ltd (ASX: TLX) have been crying in despair this year.
"Shares fell 48% in the quarter with news that its competitor, Novartis AG (SWX: NOVN), had received FDA [US Food and Drug Administration] approval for a competing prostate cancer imaging agent (PCIA)," Firetrail analysts said in a memo to clients.
However, the shares are still more than 14% higher than where they were 12 months ago.
The Firetrail team is still bullish on Telix, noting that it launched its own PCIA in the US at the start of this month.
"The US PCIA market is estimated to be a US$900 million per annum market, and we expect Telix to gain meaningful share thanks to broad coverage of imaging centres and hospitals across the US via distribution partners Cardinal Health and Pharmalogic."
'Valuation upside over the next 2 to 3 years'
The Firetrail team blamed the 25% drop in technology stock Megaport Ltd (ASX: MP1) in the first quarter on "a disappointing second quarter update".
"Port and Megaport Virtual Edge additions were weaker than expected, resulting in consensus downgrades," the memo read.
"The weaker result was exacerbated by a selloff in technology and growth names in the quarter."
But the fall in Megaport's share price just meant that Firetrail was able to buy more at a bargain price.
"We used the stock weakness to add to our long position," stated the analysts.
"Our investment thesis remains intact and we see material earnings and valuation upside over the next 2 to 3 years."
Market yet to catch onto true potential
Building materials provider James Hardie Industries plc (ASX: JHX) saw its share price freefall 27% in the first quarter.
That puzzled Firetrail analysts, as they felt the company's latest result was "solid" and the financial year 2023 guidance was "ahead of expectations".
"The ability to provide earnings guidance 12-months out should have stoked confidence," the memo read.
"However, the stock has instead followed US homebuilders and building products companies lower in response to rising US 30-year fixed mortgage rates."
Investors are yet to understand the big picture potential of the company, according to Firetrail.
"We believe the market is missing a material market share and margin-accretion opportunity which lies ahead of James Hardie as it shifts its product mix towards higher-margin products," its memo read.
"We estimate current North America margins of 29% could increase to 46% by FY27, materially higher than consensus FY27 margins of 34%."
