Sometimes an ASX stock has an exciting development coming that will boost its fortunes, but that hasn't been fully reflected in the current share price.
That's when the shrewd investor could swoop in to supercharge their returns.
Wilson Asset Management senior investment analyst Anna Milne this week revealed one such investment:
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'A potential earnings upgrade cycle'
Milne, in a memo to clients, mentioned how Treasury Wine Estates Ltd (ASX: TWE) has been a long-term holding in the WAM Leaders Ltd (ASX: WLE) fund.
The stock took a hammering back in 2020 after China imposed punishing tariffs on wine imports from Australia, as political retaliation.
But now, more than three years later, Milne reckons the outlook is bright for "the largest listed premium wine company globally".
"There has been positive news flow on the China and Australia trade relationship, including the Chinese Ministry of Commerce releasing a statement around its willingness to work with Australia to resolve the current wine tariff matters."
The optimism that a deal can be done arises from China's recent actions, including removal of tariffs on Australian barley and hay, and Australia's newly bestowed status as "a preferred tourist destination".
The inevitability of the wine tariff removal gives Treasury Wine a sure-fire share price catalyst sometime in the near future, according to Milne.
"Treasury Wine Estates continues to be a key holding in the investment portfolio, as we see the eventual removal of China's wine tariff to drive a share price re-rating, along with a potential earnings upgrade cycle."
Strong balance sheet could be used for 'capital returns or acquisitions'
Treasury Wine shares are especially tempting right now considering it has dipped more than 10% year to date.
Milne added that the company's recent pivot towards more expensive wines has set it up for the coming period of economic turbulence.
"We also believe the company is well placed to capitalise on the strong luxury and premium wine industry trends, which have proven resilient against a softening macroeconomic backdrop."
Plus corporate activity is on the cards.
"The company's strong balance sheet position also provides further optionality for capital returns or acquisitions."
The team at Wilson Asset Management are far from the only ones bullish on Treasury Wine shares.
According to CMC Markets, a stunning 12 out of 17 analysts believe the ASX stock is currently a buy.
