Unfortunately, the major influence on ASX shares in 2022 has been external factors, not company performance.
Inflation, fear of interest rate rises, actual rate hikes, supply chain dysfunction, and surging energy prices have all brought the market to its knees at one point or another.
It's kind of crazy if you think about it.
Shares are a part-ownership in a business. For the worth of that to swing wildly up and down despite not much variation in the underlying business is pretty illogical.
This is why more than one expert will tell you to ignore all the "noise" and just buy ASX shares on business fundamentals.
Because eventually this craziness will abate, and investors will once again start paying attention to the quality of companies.
With this in mind, the team running the IML Australian Share Fund explained why it is backing two ASX shares with great conviction, even though one rocketed up last quarter while the other plummeted.
This business will perform through tough economic times
In the winner's corner was Brambles Limited (ASX: BXB), which went up 8.2% over the quarter ending 30 September.
The IML team was impressed with the pallet and supply chain company's reporting season update.
"It reported a very strong result, with profits up 11%, helped by the company's margin expansion in its US operations thanks to its ability to pass on costs despite strong inflation," read its memo to clients.
The outlook continues to look positive for Brambles, as the IML analysts feel the business will be resilient through an economic downturn.
"Given Brambles' strong market position, its pricing power and customer base of predominantly food and beverages companies, we remain confident in the company's ability to continue to perform well despite uncertain economic times."
Many of IML's peers agree with the bullish view on Brambles.
According to CMC Markets, 11 out of 17 analysts currently rate the stock as a buy. However, four of the dissenters do recommend it as a sell.
'Offers outstanding value'
Not so fortunate during the quarter was the Orica Ltd (ASX: ORI) share price, which fell 16.2%.
IML analysts attributed this to the dilution from a capital raising round.
"Investors reacted poorly to a capital raising at $16 a share which the company earmarked to fund the acquisition of Axis, as well as to help bolster its working capital position."
Despite this fall, Orica shares have held up fairly well in a year when many other stocks have stumbled. Orica is down just 2% so far in 2022.
The team at IML is ignoring the recent market hate and is keeping the faith in the industrial explosives provider.
"We believe it offers outstanding value," he said.
"It has a reinvigorated management team and we believe its earnings are set to benefit greatly in the years ahead from higher explosive prices and the repricing upwards of many of its contracts."
The IML Australian Shares Fund actually increased its holding in Orica during the September quarter, taking advantage of the discount.
