'Excellent buying opportunity': Expert reveals the ASX 200 share he just bought

There are plenty of cheap stocks out there, but not all of them are bargains. Selective buying is required in fraught times.

| More on:
couple talking with a real estate agent.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Cheap is not the same as a bargain.

A pair of trousers might be cheap, but if they're such poor quality that you can only wear them twice then it's certainly not great value.

The same goes for ASX shares.

With the S&P/ASX 200 Index (ASX: XJO) down more than 12% year to date, and with mining stocks holding that average up, there are plenty of stocks that are dirt cheap right now.

But only some of them are a bargain. Even in the long run, they won't all see a resurrection in their share price.

So when a professional stock picker reveals that he recently bought a specific ASX 200 stock due to a heavy discount, it's worth taking notice.

The ASX 200 share that discounted 20% last month

Arena REIT No 1 (ASX: ARF) shares, like most ASX shares involved in real estate, have struggled mightily in 2022.

Rising interest rates always mean reduced demand for property, which has a flow-on effect to real estate investment trusts.

Not only has the Arena REIT share price plunged more than 30% year to date, but just in the month of September, it lost a hair-raising 20.7%.

Glenmore Asset Management portfolio manager Robert Gregory said in a memo to his clients that the bond market had a big impact.

"The sharp increase in bond yields was the main driver behind the decline, which impacts property trusts like Arena REIT by increasing the discount rate used to value properties."

But the rapid decline in share price has merely brought Arena back to its net tangible asset (NTA) value of $3.37. The September carnage ended at $3.33, and the stock closed Friday at $3.44.

So Gregory and the Glenmore team have bought more shares.

"Whilst it is reasonable to assume there will be some form of downward revaluation due to higher interest rates, in our view the material stock price fall has created an excellent buying opportunity for medium-term investors, hence we added to our position."

Gregory also pointed out that Arena has an advantage during times of high inflation.

"Arena REIT does have a large proportion of its properties with rents linked to CPI increases, hence the current high levels of inflation do assist rental revenues."

Despite Gregory's outlook, his peers aren't quite as sure about Arena.

According to CMC Markets, five out of nine analysts rate the ASX 200 share as a hold. The other four are urging their clients to sell.

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 no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on REITs

a man with hands in pockets and a serious look on his face stares out of an office window onto a landscape of highrise office buildings in an urban landscape
REITs

Is it time to grab these cheap ASX 300 stocks before it's too late?

Here’s why these ASX shares seem very cheap in my view.

Read more »

Group of successful real estate agents standing in building and looking at tablet.
Opinions

Should ASX REITs be on your buy list right now?

Analysts offer their views.

Read more »

An older couple dance in their living room as they enjoy their retirement funded by ASX dividends
REITs

Why I think this could be the #1 ASX property stock for retirement

I believe this stock is offering everything that retirees could want.

Read more »

Boys making faces and flexing.
REITs

These 3 ASX index-beaters are setting new records today (I'd still buy)

I think these stocks still have plenty of growth potential.

Read more »

A business woman flexes her muscles overlooking a city scape below.
REITs

Why ASX property shares could be set for a comeback

The recovery could be strong, too, according to one global investment giant.

Read more »

An Australian farmer wearing a beaten-up akubra hat and work shirt leans on a fence with livestock in the background and a blue sky above.
REITs

Why I'm more bullish than ever on this ASX 300 dividend stock

This is a leading passive income share, in my opinion.

Read more »

a man with hands in pockets and a serious look on his face stares out of an office window onto a landscape of highrise office buildings in an urban landscape
REITs

Is now the time to consider this heavily discounted ASX 300 stock?

Could this be one of the deepest value stocks on the ASX?

Read more »

Two businesspeople walk in opposite directions on a staircase with arrows under their arms, one pointing up and one pointing down.
Earnings Results

One up, one down: ASX REITs vary after FY24 results

Two very different outcomes for these REITs after their FY24 results.

Read more »