There is a common trap that investors fall into of not buying ASX shares that have reached a year-long peak.
Perhaps the logic is that the stock has "exhausted" its good run, so there can't be much upside.
But that would be false reasoning.
Shares have no memory of where they have been in the past. The only thing that matters is how the business will perform in the future, and how that will be received by investors.
As such, Shaw and Partners portfolio manager James Gerrish gave his thoughts on whether two particular S&P/ASX 200 Index (ASX: XJO) shares that are currently on fire are still worth buying:
Buy this stock now for exposure to a commodity in hot demand
The Washington H Soul Pattinson and Co Ltd (ASX: SOL) share price hit a 52-week high about a fortnight ago and has hovered around there since.
Gerrish admitted that the investment company stock has been wild in recent times, but with good reason.
"It's certainly been a volatile stock over the last few years, which is a reflection of the volatility in New Hope Corporation Limited (ASX: NHC), where Soul Pattinson holds a 37.6% stake, a whopping ~$1.7 billion investment," he said in a Market Matters Q&A.
Indeed the New Hope share price has swung up and down within a massive range of $3.14 to $7.46 in the past year.
But because Gerrish's team is "long and bullish" on New Hope and fellow coal miner Whitehaven Coal Ltd (ASX: WHC), Soul Pattinson is worth a buy as a proxy.
"Whitehaven Coal… rallied strongly on Friday because the market came to appreciate just how much cash they are producing," he said.
"Hence we would be accumulating Soul Pattinson now if we were looking for some additional quasi-coal exposure."
'Strong earnings growth' justifying high share price
Pallet provider Brambles Limited (ASX: BXB) this week celebrated a 52-week peak in its share price.
"Brambles has indeed been a top performer over the last 12-months rallying 58% from its April 2022 low, with the most important question being 'Can it continue'?"
Earlier this month the company provided a positive update.
"They delivered a strong 3Q23 update, plus they also upgraded FY23 guidance," said Gerrish.
"There is a shortage of pallets globally which means they can charge more while the cost of new ones has dropped as the price of lumber has fallen. This has driven a return to positive free cash flow."
While this anomaly will not last forever, Gerrish reckons the current share price is still decent value.
"While things will go back to normal as supply chains pick up and pallet availability improves, Brambles is in a good position, and on 20x estimated FY23 earnings we are adopting a mildly bullish stance at this point in time," he said.
"Bramble's current price can be justified, as it's underpinned by strong earnings growth."
