2 'very high-quality' ASX retail shares with significant inside ownership

A fund manager has named two appealing stocks to own.

| More on:
Two fashionable asx investors dancing among confetti.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The fund manager Blackwattle has revealed two ASX retail shares that are exciting and have good long-term growth potential.

The Blackwattle Large Cap Quality Fund aims to outperform the S&P/ASX 200 Accumulation Index (ASX: XJOA) over the long-term. It's looking for quality companies at low or reasonable valuations.

Two core positions

Two of the ASX shares that the fund manager highlighted in a recent update were ARB Corporation Ltd (ASX: ARB) and Premier Investments Limited (ASX: PMV).

ARB is a business that sells "well-engineered, durable equipment that would meet the vigorous demands of 4WD owners". It's Australia's largest manufacturer and distributor of 4×4 accessories, with a presence in over 100 countries.

Premier Investments owns several retail brands, including Just Jeans, Jay Jays, Jacqui E, Portmans, Dotti, Peter Alexander, and Smiggle. It also has stakes in Breville Group Ltd (ASX: BRG) and Myer Holdings Ltd (ASX: MYR).

Blackwattle said both of these ASX shares are "very high-quality retailers" that are led by "excellent stewards aligned with high levels of ownership."

Why own these ASX retail shares?

Blackwattle said its thesis for owning them is underpinned by both ARB and Premier Investments' "differentiated offerings and strong global presence" which have taken many years to build.

The fund manager pointed out that Premier Investments has "hidden growth brands", namely Smiggle and Peter Alexander. Blackwattle suggested Premier Investments is undervalued because the market is applying a 'conglomerate discount' to the ASX share, placing the Premier Investments share price at a "low" price/earnings (P/E) ratio of 13 times.

The investment team suggested the ongoing strategic review might "unveil these brands' growth prospects," potentially leading to a higher valuation, as we see with Lovisa Holdings Ltd (ASX: LOV) and Breville Group.

What's the outlook for the ASX share market?

Blackwattle said that looking ahead, increasing takeover activity bodes well for investors focusing on the intrinsic quality of a business and prevailing valuations.

The investment team then said the heightened market volatility observed during the ASX reporting season "underscores the influence of fast money in the markets".

The fund manager suggested that for investors with a longer-term view of fundamental value, the volatility "presents an opportunity to acquire outstanding companies at discounted values."

However, fast-moving share prices of ASX shares that lack a sustainable competitive edge are, in Blackwattle's opinion, prone to result in capital losses "when the market aligns with reality."

Motley Fool contributor Tristan Harrison has positions in Lovisa. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended ARB Corporation and Lovisa. The Motley Fool Australia has recommended ARB Corporation, Lovisa, and Premier Investments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Retail Shares

A man and woman in an office look at a laptop and discuss investing, budget strategies or other financial concepts
Retail Shares

How much passive income would $10,000 in Wesfarmers shares generate?

The owner of Bunnings is paying pleasing dividends.

Read more »

a woman wearing fashionable clothes and jewellery checks her phone with a satisfied smile on her face in a luxurous home setting.
Retail Shares

This hot ASX 300 stock is down 30% since February. Is it a buy?

This stock has fallen hard, but should investors buy the dip?

Read more »

A man eases back onto his sofa, happy with the relaxed vibe from his furniture.
Retail Shares

Why I just sold half my shares in this ASX 300 stock even though I still love it!

I’m still a big fan of this business.

Read more »

A man sits on a bench atop a mountain with a laptop, making investments with a green ESG mind.
Earnings Results

ASX All Ords stock KMD tumbles as interim dividend cancelled

Investors are hitting the sell button on ASX All Ords stock KMD today.

Read more »

Close-up Of Empty Shopping Cart Near Person's Hand Using Calculator Over White Desk
Retail Shares

Better buy: Coles or Woolworths stock?

Which stock should go in the shopping basket?

Read more »

Person handing out $100 notes, symbolising ex-dividend date.
Retail Shares

Why did Super Retail shares drop after going ex-dividend?

This is the story behind the decline.

Read more »

Happy couple doing online shopping.
Opinions

Is it too late to buy after the Kogan share price rocketed 90% in a year?

Is this online retailer still an investment opportunity?

Read more »

Two people comparing and analysing material.
Retail Shares

Better buy in March 2024: Wesfarmers stock vs JB Hi-Fi stock

Which of these two retail heavyweights would be a better buy?

Read more »