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 Management's 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 tomorrow's leaders.
In its latest monthly update, Contact said there are mixed signals from a macroeconomic perspective. The fund management outfit suggested this is a "stock pickers' market", one where fundamentals and quality matter.
Contact noted it started to see a "mean reversion in small stocks versus large stocks in April and believe[s] this could continue given the extent of dispersion over the past two years".
With that in mind, the Contact ex-50 fund remains "invested 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 "relatively 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 "high 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 "remain[s] optimistic" about the company.
Bank of Queensland Limited (ASX: BOQ)
Contact noted BOQ recently delivered a "soft" FY23 interim result that "highlighted 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 bank's 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 "integrating well and should deliver on synergies". The leader of Bank of Queensland, its chair and CEO Patrick Allaway is "eager to reduce the cost base".
Contact Asset Management is expecting any sign of good news will result in a "material re-rating of the stock".
