With Australian consumers and businesses reeling after 11 interest rates rises in the past year, resilience is critical when buying ASX shares right now.
The team at QVG Capital agrees, saying in a recent memo to clients that it's currently keen on investing in companies that can maintain earnings growth through difficult economic times.
"Examples of these sorts of stocks include Lovisa Holdings Ltd (ASX: LOV), Corporate Travel Management Ltd (ASX: CTD) and regional construction materials and commercial property developer Maas Group Holdings Ltd (ASX: MGH)," read the memo.
"The commonality among all these companies is that we believe they can generate double-digit, organic, through-the-cycle earnings growth."
Don't fall for the svengali chief executive
So how does one spot these resilient businesses?
For one, the QVG team has "a strong preference" for founder-led businesses.
"Or, in the case of Lovisa, ones where a major shareholder is actively engaged in the business," the memo read.
"We tend to find companies with founders or 'motivated insiders' at the helm or on the board are more rational and patient when it comes to capital allocation."
The analysts confessed that they have made grave mistakes in the past becoming dazzled by "professional CEOs with a mandate for growth".
"Their short tenures, lack of true alignment and asymmetric incentive structures (heads I win, tails you lose) means they're more likely to push too hard for growth, sometimes via transformative acquisition," read the memo.
"We've learnt the hard way a 'transformative' acquisition often means we should 'transform' off the register."
Are you sick of Zoom? You're not the only one
Corporate Travel Management is a stock that the QVG team has "materially increased" its position in over the past month.
"The past 5 years have not been easy for CTD as they were hit with a much publicised short-report and then COVID.
"Despite this they were the only large-listed travel company to not raise capital through COVID and are now poised to deliver earnings per share 25% ahead of pre-COVID levels."
According to the QVG memo, travel is conventionally "a GDP-plus" industry.
And business travellers are itching to take off at the moment.
"With many of our portfolio companies flagging the limitations of Zoom for winning business and collaboration, we believe Corporate Travel Management can sustain high levels of organic revenue and earnings growth in the future as corporate travel continues to recover."
Corporate Travel shares have risen an impressive 39% year to date.
