2 small-cap ASX shares to buy that had a MASSIVE October: fund

In volatile times like 2022, it’s worth paying attention to ASX shares that are on a winning streak.

That’s because they must be doing something right to consistently attract support from investors while other stocks yo-yo up and down.

The analysts at Celeste Funds Management, in a memo to clients this week, pointed out two small-cap stocks that each had a spectacular October. 

They are still holding on to them, confident of further rises:

Bright future even after ‘ongoing consistent performance’

Litigation fund Omni Bridgeway Ltd (ASX: OBL) saw its share price rocket 19.6% upwards last month, reported the Celeste team, on the back of “ongoing consistent performance”.

“Income conversion for the quarter was lower than expected as a Fund 5 investment was realised earlier than the previously forecast FY27, resulting in an internal rate of return (IRR) of 152%,” read the memo.

“Estimated portfolio value (EPV) in FY23 experienced normal slippage to outer years, although pleasingly total EPV increased by 4.4% [from] the June quarter.”

Against the odds in a turbulent stock market, Omni Bridgeway shares have climbed in excess of 25% year to date.

The outlook for the coming years is bright, according to Celeste analysts.

“Commitments of $69 million and indicative investment opportunities of $214 million imply the business is on track to meet FY23 commitments guidance.”

As of the end of October, Omni Bridgeway was the Celeste Australian Small Companies Fund’s largest holding.

Coverage is sparse from other professionals on the litigator, but three out of the four analysts currently surveyed on CMC Markets are rating it as a strong buy.

Rare business where increased debt facility is to be celebrated

Lifestyle Communities Ltd (ASX: LIC) develops, owns and operates land lease properties for older Australians.

The stock price enjoyed a 15.7% rise in October, despite unfavourable conditions for real estate assets.

The Celeste team attributed the ascent on the news of new debt capacity.

“Lifestyle Communities increased its [debt] facility size from $375 million to $525 million, secured as a $150 million, five-year tranche.”

The facility in totality now has expiries spread over mid-2025 to late 2027, according to Celeste analysts.

“The debt is earmarked for ongoing land acquisitions and development costs as the business scales up to enable the sale of two communities per annum to move towards three over the next few years.”

Celeste’s peers are less convinced about Lifestyle Communities than Omni Bridgeway.

According to CMC Markets, three analysts each think the stock is a strong buy and a hold respectively, while one recommends it as a moderate buy.

The post 2 small-cap ASX shares to buy that had a MASSIVE October: fund appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo 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 no position in any of the stocks mentioned. 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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