ASX Darlings & Duds 2023: Market Stars & Underperformers Revealed

Team Veye | 08-Dec-2023 asx darlings duds

Many investors in general perceive the stock market’s investments as high-risk features. As per their perseverance, risk is a negative element that they hate and ignore, imagining it can only ruin their hard-earned money. But very few investors understand the essence of risk and do not hesitate to take the chance to invest in companies that come with high risk but have a significant future outlook. These stocks are sometimes alluded to as “growth stocks.".

It is quite natural that where there is a risk, the possibility of high returns also prevails. However, there is no guarantee that any definitive investments will result in a positive outcome and will remain in favour with investors in the future. When companies go through tough times, many investors will sell off their shares and prefer to shift to other shares. This is exactly what has happened to a few former market darlings, which have had a major correction from March 2022 onwards. Currently, ASX markets are posing for a rally.

The big question is: how do you find ASX darlings that will turn someone’s fortune in the future? Let's take a look at some ‘Darling stocks’ that our ‘Think Tank’ has managed to identify, these are as follows:

IGO Ltd. (ASX: IGO)

IGO Ltd. (ASX: IGO) has a market cap of $6.08 billion and a share price of $8.03 as of 7 December 2023. Robust financials with substantial cash reserves, reduced debt, and positive cash flows, providing a solid foundation for future growth and dividend distribution. IGO's prudent debt management and asset management strategies have significantly contributed to the company's robust financial position and overall strengthFirst, the company's achievement in reducing its debt by an impressive 60% compared to FY22, down to $360 million, is a noteworthy accomplishment. IGO looks promising with a P/E ratio of 20.2x, a solid ROE of 15.2%, and a decent 5.06% dividend yield.

Vulcan Steel Ltd. (VSL)

Vulcan Steel Ltd. (ASX: VSL) has a market cap of $981.62 and a share price of $7.47 as of 7 December 2023. Vulcan Steel Limited has been consistently growing its customer base, and the company has been well-positioned to capitalize on the uplift in the cycle. The effort invested in customer engagement during FY2023 has already started to translate into an increased number of active trading accounts (ATAs). The company’s monthly ATAs for pre-existing business averaged 3% higher in May to July 2023 compared with the same period in 2022. The benefits from the aluminum integration program are expected to be more evident in the company’s financial performance in the 2H, FY2024,

Apart from naming a few gems, we also observe some Duds that are lethal to investors' portfolios. It is high time that investors should be cautious when holding them in their portfolios. Let’s take a look at some of the ‘Duds’, which we suggest to ‘Stay Away', as follows:

DEVEX Resources Ltd. (ASX: DEV)

DEVEX Resources Ltd. (ASX: DEV) has a market cap of $110.30 million and a share price of $0.25 as of 7 December 2023. On a fundamental note, the company’s revenues have yet to materialize in distinct numbers, though its reported cash balance as of September 30, 2023, was $7,778,202. The rising economic uncertainty and high-interest rate regime have gradually been nudging down demand scenarios. The high cost base is also creating a sluggish outlook for operational income growth. The higher opex has become a barrier to materializing profitability, and bottom-line income has been substantially demonstrating negative numbers. The growing interest expenses are also becoming a great impediment to sustainable business operations. Therefore, overhauling the overall earnings and other valuation parameters of the company at this juncture in the near-term outlook does not appear to be very bright.

Nico Resources Ltd. (ASX: NC1)

Nico Resources Ltd. (ASX: NC1) has a market cap of $30.89 million and a share price of $0.29 as of 7 December 2023. The company has notably not shared any major developmental updates since the latest quarterly reporting. Furthermore, nickel prices dropped substantially by 46% from the beginning of 2023, and based on the current prices, a third of the industry is cash flow negative as many producers have moved into a cash deficit. Given the uncertain market conditions and lack of developmental updates, the outlook for Nico continues to be bleak in the near future, and the major milestone capable of driving investor confidence remains the DFS, not expected to commence within the next couple of months.

**All Data has been sourced from Company announcements and Refinitiv, Thomson Reuters

Frequently Asked Questions (F.A.Q)

Is there any relevant strategy to make money from the ASX market?

Track the fundamentals of the company, understand the potential developmental aspects, and most importantly, take a chance and patiently hold a company for a long time. Buying at a good price is the most important part of an investment.

Is investing in a FD well-suited for generating returns?

Inflation is the main thing that dominates the FD return. The inflation rate in Australia is currently hovering at approximately 7.0%, while savings account returns are normally in the range of 4.0%–5.0%. Therefore, the real gain in investors' pockets is marginal. Therefore, growth above the inflation rate is more feasible.

How can I learn to invest?

Understand the financial terminologies in the beginning, watch interviews of most market legends, and track macro-economic activities; moreover, realization is the ultimate gain one can have after series of failure and winning in investments. Track market.

How do you choose which shares to buy?

Look at the comparable valuation and the developmental activities of the company; understand the trend of the market as a whole. The basic criteria are the fundamental and technical studies for identifying a gem.
 

Disclaimer

Veye Pty Ltd(ABN 58 623 120 865), holds (AFSL No. 523157 ). All information provided by Veye Pty Ltd through its website, reports, and newsletters is general financial product advice only and should not be considered a personal recommendation to buy or sell any asset or security. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation, or needs. You should look at the Product Disclosure Statement or other offer document associated with the security or product before making a decision on acquiring the security or product. You can refer to our Terms & Conditions and Financial Services Guide for more information. Any recommendation contained herein may not be suitable for all investors as it does not take into account your personal financial needs or investment objectives. Although Veye takes the utmost care to ensure accuracy of the content and that the information is gathered and processed from reliable resources, we strongly recommend that you seek professional advice from your financial advisor or stockbroker before making any investment decision based on any of our recommendations. All the information we share represents our views on the date of publishing as stocks are subject to real time changes and therefore may change without notice. Please remember that investments can go up and down and past performance is not necessarily indicative of future returns. We request our readers not to interpret our reports as direct recommendations. To the extent permitted by law, Veye Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss, or data corruption) (as mentioned on the website www.veye.com.au), and confirms that the employees and/or associates of Veye Pty Ltd do not hold positions in any of the financial products covered on the website on the date of publishing this report. Veye Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services.

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