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Leading fund manager names 2 value picks for reporting season

Reporting season is only a couple of weeks away and accountants are busily working away at the annual reports for most businesses.

This is the perfect time to buy shares of businesses that you believe that are long-term growth ideas but are undervalued going into reporting season.

Marni Lysaght from Perennial Value Management wrote for Livewire about two shares in the small cap space she believes look like good value picks before reporting season:

Ingenia Communities Group (ASX: INA)

Ingenia is one of the smaller senior lifestyle community and holiday park businesses, as well as being a retirement village operator, in Australia. Its two main sources of earnings are rental earnings from its land lease communities & selling homes, as well as rent from the lifestyle locations.

There is a large amount of Australians who own their home but have little in superannuation. Therefore, Ingenia offers exposure to the ageing population who wish to downsize and unlock home equity.

Ingenia is looking to increase the amount of communities that don’t charge deferred management fees (DMF) and focus on the affordable offering space.

I think that the recent increase to FY18 guidance and increasing profit margins could mean further share price performance from Ingenia.

People Infrastructure Ltd (ASX: PPE)

This is a business that provides contracted staff and human resources outsourcing to other businesses in Australian and New Zealand. It has a speciality with disability care, which will grow due to the NDIS.

The business’ revenue is derived from the wages paid to the hired staff. Although national wage growth is limited it appears that the focus on growth sectors is helping the business. People Infrastructure will benefit from the shift to a casualisation of the work force.

It also has exposure to the IT industry through a 50% stake of an IT recruitment business.

Foolish takeaway

I’m quite attracted to Ingenia and its peer Gateway Lifestyle Group (ASX: GTY) due to the preference for sustainable fees. I’m a little concerned about what the current sluggish housing market and rising interest rates will do to the business, but underlying demand could continue to rise.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.