Everyone knows ASX shares are prone to short-term fluctuations.
This has been especially applicable the past year as volatility ruled markets. And experts — both bulls and bears — unanimously agree that this will also be the case in 2023.
In such times it's critical to keep focused on the long-term prospects of a company.
To demonstrate, Glenmore Asset Management portfolio manager Robert Gregory named one stock that went gangbusters in February and another that had a shocker — but explained why he's happy to be invested in both.
Demand-supply balance seems 'very favourable'
Car dealership network Eagers Automotive Ltd (ASX: APE) saw its shares soar 19.9% last month.
"Eagers delivered a solid full-year result, with underlying pre-tax profit of $405 million, up +1% vs prior comparable period, which itself was a very strong result," Gregory said in a memo to clients.
"FY22 dividend was 71 cents per share, up 14%."
Despite the boom result and market reaction, Gregory feels like there's plenty left in the tank for the business.
"Eagers has targeted an uplift in revenue of ~$1 billion in FY23, with ~$400 million from acquisitions made in 2022, ~$450 million from BYD (Chinese electric vehicle manufacturer) deliveries and the balance from organic growth projects."
The outlook for the retail car market looks positive for Eagers shares.
"The demand/supply balance in the new vehicle market continues to be very favourable, whilst Eagers' order book continues to grow, driven by orders well in excess of deliveries."
Many of Gregory's peers are also bullish on the stock. Ten out 16 analysts currently covering Eagers reckon it's a buy, according to CMC Markets.
Donut King leading the way
Retail Food Group Ltd (ASX: RFG) is the franchisor for many retail food brands ubiquitous in Australian shopping centres, such as Gloria Jean's Coffee, Donut King, Michel's Patisserie, and Crust Pizza.
Unfortunately for the group, the stock price plunged 13.3% in February.
That's despite Gregory's assessment that it had "delivered a strong 1H23 result", with earnings up 47%.
"All brand systems across Retail Food Group's portfolio reported strong same-store sales growth, with Donut King (+41% growth) a particular standout," he said.
"Retail Food Group's international division also performed well, with EBITDA of $2.0 million, up +39%."
The portfolio manager was glad that RFG confirmed its previous forecast for the full year.
"FY23 profit guidance was reiterated, with EBITDA expected to fall within the upper end of $26 million to $29 million."
