If you are a long-term investor then you won't worry about short-term hiccups for ASX companies that have excellent prospects.
In fact, a one-off blight could temporarily send the share price down, presenting a discounted entry opportunity.
Wilsons equity strategist Rob Crookston identified precisely two such opportunities this week:
'Isolated incidents' opening up buying opportunities
Crookston recently observed some disappointing earnings downgrades from two S&P/ASX 200 Index (ASX: XJO) companies that his team considers as "resilient growers": CSL Limited (ASX: CSL) and IDP Education Ltd (ASX: IEL).
"In our view, these downgrades are isolated incidents and therefore present good opportunities to buy these stocks," Crookston said in a memo to Wilsons clients.
He called the revision from biotech giant CSL "a rare downgrade".
"The key disappointment for the market was CSL's FY24 guidance for NPATA of US$2.8 to US$3.01 billion, representing 13% to 18% growth in constant currency terms," said Crookston.
"[It] was markedly below consensus expectations, which were unrealistically optimistic on the speed of the recovery of Behring's gross margins — currently weighed down by elevated donor fees and labour costs — from post COVID-lows of ~49% (in 1Q23) to pre-COVID levels of ~56%."
Despite this development, which has sent the CSL share price plummeting 8.5% since 13 June, the Wilsons' investment thesis "remains firmly intact".
Crookston said that the incident was not the start of an earnings downgrade cycle.
"Looking forward, with the market's expectations re-anchored, we see material earnings upside from expected product launches over the medium-term (in addition to the gradual recovery in Behring's gross margins)."
Monopoly lost, but it's no big deal
Meanwhile, consensus earnings forecasts for IDP Education have been downgraded by 9% for the 2024 financial year.
"The downgrades occurred on the back of news that Canada will open Student-Direct-Stream (SDS) visas to four new English test competitors, meaning IDP's test will no longer be the monopoly player in this market," said Crookston.
"This is a negative — although not entirely unexpected — development as IEL will lose some market share to new entrants in the Canadian market."
The international education services provider experienced a similar situation in the UK previously, losing 10% of market share.
IDP shares have plunged 14.3% since 26 May because of this crisis.
But, again, the Wilsons analysts believe this headwind does not change the structural drivers that will grow IDP's business in the long run.
"Canada is the last major market to open to new competitors," said Crookston.
"Our investment thesis remains intact with IDP remaining a market leader that is poised to benefit from the long-term structural tailwinds associated with rising university participation rates, increasing student mobility and the burgeoning emerging market middle class."
