Why I piled into this unloved ASX share when others were running a mile

I bought this share last week when others were selling.

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When it comes to investing in ASX shares, I love being a contrarian and buying when others are selling. It's the tried-and-true way that the legendary Warren Buffett has used for decades to become one of the world's richest people, and it's pretty much essential if you want to consistently beat the market.

It's also one of the reasons that I recently bought shares of Endeavour Group Ltd (ASX: EDV).

Endeavour is an ASX 200 consumer staples stock and name behind the popular Dan Murphy's and BWS bottle shop lines.

Endeavour actually used to be part of Woolworths Group Ltd (ASX: WOW) until it was floated on the ASX in its own right back in June 2021.

So why have I waited two years to buy this ASX share?   

Well, a simple look at this company's recent share price performance will tell you everything you need to know: 

Put simply, Endeavour shares have been through the wringer over the past few months. The pain started back in mid-July when the company was rocked by news that the Victorian government would be introducing new gaming regulations.

Then, we had Endeavour's less-than-well-received earnings covering the 2023 financial year last week, which didn't exactly help the company to rebuild confidence.

As we went through at the time, these earnings saw Endeavour report a 2.5% rise in group sales to $11.9 billion, as well as a 10.7% jump in earnings before interest and tax to $1.02 billion. The company's net profit after tax (NPAT) was also up, rising 6.9% to $529 million.

Yet it seems that investors were expecting better from the company. Since these earnings were released on 16 August, the Endeavour share price has dropped 9.3%. That includes the nasty 2.33% drop we saw yesterday.

Why I'm buying this ASX 200 share when others are selling

Now I don't know why this company is suddenly so on the nose. I thought that these earnings were robust indeed, and refects Endeavour's ongoing dominance of the takeaway alcohol market.

As such, I took advantage of this opportunity and picked up some shares of Endeavour.

I think the recent pricing on this company is a compelling buying opportunity for a long-term investor. We have a company that houses two of the strongest brands in alcohol retailing in BWS and Dan Murphy's.

Its resilient earning base and consumer staples nature should protect Endeavour from both inflation and recessions going forward. And right now, this company is trading at a cheap (in my view) earnings multiple of just 18.42.

Endeavour also offers a fully franked dividend yield of over 4% right now.

So, all in all, I was happy to pile into this company while other investors were running away. Only time will tell if it was the right move, but I'm confident in my decision and expect to at least have a shot at a market-beating investment here.


Motley Fool contributor Sebastian Bowen has positions in Endeavour Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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