Are you waiting to pounce on ASX shares that have turned their fortunes around after a terrible 2022?
Why wait when there are already some stocks that fit that bill exactly?
Glenmore Asset Management portfolio manager Robert Gregory revealed two such ASX shares in a memo to clients this week.
Both his examples soared in value over December, but Gregory is convinced that the party has only just started.
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Back from the wilderness
Most investors who have held Retail Food Group Ltd (ASX: RFG) in the past would have likely long expunged it from their portfolios.
The stock price, over the past five years, has lost an eye-watering 96% of its value.
The franchisor for brands like Donut King and Michel's Patisserie had been in deep trouble with legal and regulatory issues arising from its relationships with its franchisees.
But then in December, the bleeding suddenly stopped. The share price amazingly rose 21.2%.
"Late in the month, RFG announced the resolution to the long running investigation by the ACCC into misconduct by previous management," said Gregory.
"The outcome was that RFG must pay $8 million to franchisees that were the subject of the misconduct. In addition, RFG agreed to waive $1.8 million of debt to certain franchisees."
Gregory reckoned that the penalties were "broadly in line with investor expectations".
The case had been "a major headwind" for Retail Food with an uncertain timeframe for resolution. But Gregory's team long believed the outcome would not be as severe as how dramatic the decline in share price suggested.
"RFG had been trading on a FY23 PE of ~7x before this announcement," he said.
"With the ACCC investigation now behind it, we believe RFG is well positioned to grow earnings from multiple internal growth initiatives, as well as being better placed to attract new franchisees and commercial partners, which has been impacted by the shadow of the ACCC investigation."
The December stock price surge now has it trading at a P/E ratio of 10, but that's still dirt cheap, as far as Gregory is concerned.
"We continue to see [it] as attractive, given [the] quality of its earnings base and growth prospects."
Still 'cheap valuation' even after tripling stock price
Metallurgical coal producer Stanmore Resources Ltd (ASX: SMR) enjoyed an 8.1% rise last month.
There were no official announcements from the company to the ASX, but Gregory has a theory.
"The stock was likely assisted by the +21% rally in the benchmark hard coking coal price, as well as growing investor awareness of Stanmore Resources' material free cash flow generation and cheap valuation."
In November, the Glenmore team visited Stanmore's site in Queensland.
The trip assured them that the stock is worth holding onto, even after a phenomenal 235% return over the past 12 months.
"The assets acquired from BHP Group Ltd (ASX: BHP) were operating well, with clear scope to be expanded, albeit any material production increases are likely to be in the medium term."
