2 ASX shares to buy for CHEAP after a shocking August: expert

If you want to beat the market, you have to behave differently to other investors.

Not surprisingly, many people are put off shares that have recently plunged in value.

After all, if other investors dislike a stock, why would you risk your own money?

However, if you want your investment to perform better than the average, many financial experts point out that you have to do things differently to everyone else.

"Buy when the crowd is bearish, sell when it is bullish," AMP Ltd (ASX: AMP) chief economist Dr Shane Oliver said last month.

"Extremes of bullishness often signal eventual market tops, and extremes of bearishness often signal bottoms."

The other bonus is that if other investors have abandoned the ship, the stock can be bought at a significant discount.

So with this in mind, let's take a look at two ASX shares that had shockers in August:

A man reacts with surprise when her see a bargain price on his phone.

Image source: Getty Images

Sell-off has been 'overly excessive'

Glenmore Asset Management portfolio manager Robert Gregory, in a memo to clients, lamented the reporting season performance of two of his stocks.

First was industrial chemicals provider DGL Group Ltd (ASX: DGL).

"DGL Group fell 26.1% in the month," he said.

"DGL's FY22 result was solid, with NPAT of $33.6 million (up +197% vs FY21 NPAT) being in line with guidance given in April. However, commentary from the company around FY23 guidance for earnings growth to 'flatten' spooked investors," Gregory said.

The market was specifically worried about comments regarding how the company had earned more than it should have because of one-off opportunities that would not repeat in the next financial year.

"In addition, operating cash flow was weak, which DGL said was due to earlier than normal inventory purchases."

Despite this, Gregory feels like the market overreacted.

"Whilst the FY23 guidance was clearly worse than expected, we have maintained our position in DGL given our view the post result sell-off has been overly excessive."

The DGL share price almost halved in just one week at the end of last month but has since recovered slightly to be 39.4% down year to date.

Remaining positive on real estate trust

Gregory's other August dog was childcare and healthcare real estate trust Arena REIT No 1 (ASX: ARF).

"Arena REIT fell 12.7% in the month," he said.

"ARF's reported FY22 funds from operations (FFO) of 16.3 cents, up +7% vs FY21, which was in line with market expectations."

The result was "quite solid" and the company announced a distribution for financial year 2023 that was more than 5% higher than the previous period.

So why the plunge in share price?

"The stock price weakness was likely driven by expectations around higher interest costs which will dampen distribution growth in the next few years."

Again, Gregory reckons the market has not reacted proportionately.

"We remain positive on ARF given its long term lease profile (weighted average ~20 years) and attractive rent review structure where the majority of assets have annual rent increases linked to changes in consumer price index."

Arena REIT shares are down 17% so far this year while paying out a 3.6% dividend yield.

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended DGL Group Limited. The Motley Fool Australia has recommended DGL Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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