If small caps are a little too risky for your liking, then it could be worth moving up the risk scale to mid-cap ASX shares.
But which mid-cap ASX shares could be worth considering? Well, two that Bell Potter rates as buys are listed below. Here's what the broker is saying about them:
GUD Holdings Limited (ASX: GUD)
Bell Potter is a fan of this diversified products company due to its recent shift to a focus on the automotive market. The broker believes this leaves GUD well-positioned in the current environment thanks to the resilient nature of its target market. It said:
The company recently reported an impressive FY23 result with NPAT of $119 million beating Citi forecast by 3% and consensus by 14%. This was driven by the better-than-expected APG performance (the highest-quality business in GUD, in our view) and the improvement in gearing. We see GUD as well-placed to benefit from the ongoing improvement in OEM supply constraints into FY24. Overall, our Buy rating for GUD is predicated on the relative resilience of the legacy auto business and improving momentum in new car sales, which should be favourable for APG's earnings.
The broker has a buy rating and a $13.78 price target on its shares. This implies almost 20% upside over the next 12 months.
Rural Funds Group (ASX: RFF)
Another mid-cap ASX share that has been tipped as a buy by analysts at Bell Potter is Rural Funds. It is an agricultural focused property company.
The broker highlights that Rural Funds' shares are trading at a deep discount and sees this as a buying opportunity for investors. It explains:
RFF trades at a historical high discount to its market NAV per unit ($2.78 pu) at ~28%. While we are in general seeing large discounts to NAV in ASX listed farming and water assets to market NAV, the discount that RFF is trading appears excessive and we are seeing a value opportunity in RFF. While the timing of that value discount closing is difficult to call, investors are likely to be rewarded with a ~6% yield to hold the position until such a time as the asset class rerates. Furthermore, RFF aims to achieve income growth through productivity improvements, conversion of assets to higher and better use along with rental indexation which is built into all of its contracts with its tenants.
Bell Potter has a buy rating and a $2.25 price target on its shares. This suggests a potential upside of 22% from current levels.
