The Santa rally seems to be on in earnest and the S&P/ASX 200 Index (ASX: XJO) is cooperating accordingly, rising 6.75% over the past month.
If you want to catch the updraft, it helps to buy ASX shares that other investors haven't quite cottoned on to yet.
Helpfully, Alphinity Investment Management portfolio manager Stuart Welch this week revealed two stocks that his fund has just bought and explained why they have a bright future:
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'Very strong demand' while supply is constrained
Welch's team's investment philosophy is to find companies that are in the midst of an earnings upgrade cycle.
"Interestingly you can find these stocks across different company types — be they cyclical, defensives, growth or value," he told an Alphinity webinar.
In the cyclical basket, one stock his team has bought is airline Qantas Airways Limited (ASX: QAN).
"Despite a more difficult outlook for the consumer, I do think there is a COVID recovery story at play here, which after a few fits and spurts is actually underway."
The recovery really kick-started back in April when massive domestic travel demand saw queues snaking out of airport terminals.
"It was led by visiting friends and family, but it has expanded into leisure, business travel and even more recently into the international side."
The airline, according to Welch, is currently enjoying an enviable supply and demand equation.
"We're seeing very strong demand in an environment where capacity is constrained," he said.
"Capacity has been cut back domestically to help improve on-time performance and internationally there's just not enough planes coming in and out of the country."
The Qantas share price is up 12.4% year to date.
Pricing power in times of high inflation
On the defensive side of the fund, Welch's team has bought into supply-chain services and warehousing container provider Brambles Limited (ASX: BXB).
"There is a global shortage of pallets at the moment," said Welch.
"Part of that is an inventory story but also through other constraints."
This imbalance between supply and demand is resulting in a pallet market where Brambles can really flex its price-setting muscles.
"They just got a trading update where their revenues, off the back of the strength of that pricing, are well ahead of expectations," Welch said.
"And that strong pricing environment is likely to continue throughout the rest of the year."
Welch admitted historically one of the worries about Brambles has always been the cash flow.
"But in an environment where that strong pricing is coming through, and we're seeing things like transport costs and lumber costs rollover, that should improve your earnings outlook but also decrease your capex," he said.
"We're initially seeing that in the US, but now we're seeing it in Europe as well. The outlook there is quite positive."
In a year when many non-mining ASX shares have fallen in price, Brambles has actually gained more than 5.1%.
The stock also pays out a dividend yield of 2.86%.
