The S&P/ASX 200 Index (ASX: XJO) shares revealed in this article could be in line to experience a rebound in their share prices, according to a fund manager.
Contact Asset Managementâs Australian ex-50 fund seeks to balance growth and income with a portfolio of quality Australian companies. It aims to return 10% per annum and looks for businesses that are typically founder-led and could be tomorrowâs leaders.
In its latest monthly update, Contact said there are mixed signals from a macroeconomic perspective. The fund management outfit suggested this is a âstock pickers’ marketâ, one where fundamentals and quality matter.
Contact noted it started to see a âmean reversion in small stocks versus large stocks in April and believe[s] this could continue given the extent of dispersion over the past two yearsâ.
With that in mind, the Contact ex-50 fund remains âinvested in high-quality companies that are profitable, generate solid returns and offer an income stream”.
These are the two ASX 200 shares Contact named as opportunities.
IPH Ltd (ASX: IPH)
IPH is a law business that specialises in providing intellectual property and trademark services in the Australia-New Zealand and Asian regions.
Earlier this year, the company disclosed it was subject to a cybersecurity incident, which made some investors fearful of the repercussions. Yet, the IPH share price was a performer in April, rising by 10%.
The fund manager noted an update from IPH that said there had been a ârelatively immaterial impact [from the cybersecurity incident] to date and that the revenue would likely be deferred”.
Contact noted the ASX 200 share has a strong market share of 35% in Australia, with global growth opportunities. The fund manager also said IPH is a defensive business with a âhigh proportion of recurring revenue and strong cash flow generation”.
The fund manager revealed the fund recently added to its IPH position and the investment team âremain[s] optimisticâ about the company.
Bank of Queensland Limited (ASX: BOQ)
Contact noted BOQ recently delivered a âsoftâ FY23 interim result that âhighlighted the intensifying competition in the Australian banking industry for both mortgages and deposits”. It further noted pressure on the bank’s net interest margin (NIM) has intensified.
The ASX 200 bank share is only a small position in the Contact portfolio. However, the fund manager intends to be patient with the ASX bank share because of the discount the BOQ share price is valued at compared to its book value. This means the bankâs shares are valued more cheaply than the bank’s net asset value (NAV) on the balance sheet.
The fund manager says the ME Bank acquisition is âintegrating well and should deliver on synergies”. The leader of Bank of Queensland, its chair and CEO Patrick Allaway is âeager to reduce the cost baseâ.
Contact Asset Management is expecting any sign of good news will result in a âmaterial re-rating of the stock”.
The post 2 ASX 200 shares this fund manager believes could zoom higher appeared first on The Motley Fool Australia.
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More reading
- Down 10% in a month, are Bank of Queensland shares in for a material re-rating?
- 4 ASX 200 shares to buy if they plunge from June tax-loss selling
- With interest rates rising, why have ASX 200 bank shares been pummelled in 2023?
- ‘Welcome improvement’: 3 ASX small-cap shares to grab right now
- Warren Buffett is dumping bank stocks. Should you?
Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. 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 recommended IPH. 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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