It's a scary time on the market for many invested in ASX shares. The S&P/ASX 200 Index (ASX: XJO) has dumped 10% year to date and two of Wall Street's three major indexes have fallen into bear markets.
But Airlie Funds Management's Emma Fisher isn't worried. The portfolio manager reportedly welcomes volatility and the stock picking prospects it brings.
Here's how the fundie is taking advantage of recent turbulence in the market.
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Market downturns or buying opportunities?
"It sounds counterintuitive, but you've got a better chance of making good money when markets are down," Fisher said, as quoted by the Australian Financial Review (AFR).
Fisher continued:
We welcome volatility, we welcome short-termism because it increases the chance that you're going to be able to buy mispriced assets.
While concerns of stalling growth and even a potential recession have swirled in some circles recently, Fisher has been eyeing a new set of opportunities.
The publication quoted Fisher as saying:
The thing about the dominant narrative is we love it … because if it's driving the headlines, then it's probably creating opportunities.
It's not saying that the dominant narrative of, say, economic turmoil is wrong, and that it's not going to happen. It's saying it's been more than priced into some stocks, in some sectors.
And the best place to be during such volatility? ASX shares.
The fundie said Australia's housing market, filled to the brim with variable mortgages, will likely mean rate hikes will impact the economy faster here. Therefore, the Reserve Bank of Australia could get away with fewer hikes than other central banks.
Meanwhile, Aussie companies' balance sheets are stronger than they have been in previous downturns.
Should ASX investors get defensive?
Investors may be tempted to turn to defensive stocks but Fisher warned this could set them back.
She said some defensive stocks are currently trading at "eye-wateringly expensive" levels. Meanwhile, other consumer-facing businesses have been "bombed out", but their earnings remain "too high".
Fisher said, courtesy of the AFR:
Our playbook there is to really focus on the balance sheets of these companies. Because the market's probably right that earnings are too high, but valuations have now priced that in.
If you're looking at consumer discretionary-facing businesses, you want to own businesses that are pretty much net cash or that they own a lot of property.
3 ASX retail shares that might be worth looking at
Fisher and fellow portfolio manager Matt Williams have reportedly flagged three ASX retail shares that meet the criteria.
These include Nick Scali Limited (ASX: NCK) and Premier Investments Limited (ASX: PMV).
The former closed financial year 2022 with $74.6 million in cash and $97.4 million worth of property. It also boasted an outstanding order bank of $185 million.
The latter is behind such brands as Peter Alexander, Jay Jays, and Just Jeans. It ended the first half with a net cash position of $400 million.
Finally, Fisher reportedly dubbed four-wheel drive accessories retailer ARB Corporation Limited (ASX: ARB) a quality business trading at a reasonable price.
The three ASX retail shares have fallen 32%, 31%, and 46% respectively year to date.
