A curious phenomenon happens with ASX shares in June every year.
A bunch of stocks that performed badly during the financial year plunge even further.
That's because of the fact that the income tax year in Australia ends on June 30.
Each June, many investors do a "clean out" of their portfolios and cut loose stocks that have done poorly. That means those capital losses will be put on their tax return, reducing their liabilities to the government.
So that's terrible news for those who want to hold onto those stocks.
But it's great news for shrewd investors who want to buy ASX shares on the cheap.
Shaw and Partners portfolio manager James Gerrish this week named four S&P/ASX 200 Index (ASX: XJO) shares that investors should consider picking up if they plummet next month.
"The ASX 200 has rallied +10.6% so far this financial year, leading to fewer candidates than on a more balanced year," he said in Market Matters.
"But there are still plenty of stocks entrenched in the naughty corner in a year when the weak have tended to get weaker and vice versa."
Two stocks already tempting enough to buy
Debt buyer Credit Corp Group Limited (ASX: CCP), closing Thursday's session at $16.63, is already in the buy zone for Gerrish's team.
"After more than halving over the last 18 months we believe the risk/reward has finally swung in favour of the buyers of Credit Corp," he said.
"With interest rate hikes starting to bite the consumer we believe debt ledgers will become more readily available as people struggle with rising repayments across their various borrowings."
Conditions are similarly becoming favourable for Lendlease Group (ASX: LLC), which has also plumbed to Gerrish's desired entry point.
"Market Matters likes Lendlease around the $8 area," he said.
"As the rental crisis continues to escalate and we are expecting significant immigration over the coming few years, the fundamental backdrop for this property and infrastructure business is starting to improve."
Two stocks that could be tempting if June is a shocker
Casino operator Star Entertainment Group Ltd (ASX: SGR) has seen its share price more than halve over the past 12 months as it battled a series of well-publicised governance scandals.
With the company facing potentially massive fines from authorities, Star Entertainment shares are already trading near 52-week lows.
But Gerrish could be tempted if it keeps hitting new troughs.
"The risk profile is wide for Star but the value is returning for this unpopular business depending on the potential NSW casino duties with very real risks that NSW Labor may restructure the business model," he said.
"We believe Star Entertainment will trade between $1.10 and $1.50 through 2023 providing solid opportunities for active/aggressive investors."
Gerrish's fourth pick, which is the least preferred, is Bank of Queensland Ltd (ASX: BOQ).
"We see further downside risks for BoQ despite the valuation being close to extreme multiples, but it is starting to represent value into its current decline," he said.
"We believe it's too early to catch this falling knife… [But] Market Matters may consider BOQ under $5."
Bank of Queensland shares closed Thursday at $5.61.
