There are still a number of ASX shares around that look great value to me this January, despite the market's rally over the last couple of months. Mid-cap stocks can be a good place to look for businesses that are strong but still have plenty of growth potential.
Cyclical industries hit harder by interest rate rises look particularly interesting. I believe they can rebound, especially when interest rates start falling again – perhaps sometime later this year?
I like these two stocks, which both have a market capitalisation of at least $1 billion according to the ASX.
Pinnacle Investment Management Group Ltd (ASX: PNI)
This ASX share invests in high-performing fund managers to help them start their own business and grow. Some of the fund managers it's invested in include Hyperion, Plato, Solaris, Antipodes, Spheria, Firetrail, Metrics, Coolabah, Five V and Langdon.
Pinnacle has stakes ranging from 23.5% to 49.9% in these funds management businesses. Executives of both Pinnacle and affiliates have "significant" equity interests in their businesses, which Pinnacle says "enhances alignment with shareholders."
Funds under management (FUM) growth is a key driver of earnings for Pinnacle because it can increase management fees.
A decline in share prices hurts FUM while rising asset prices are a natural boost for the FUM. Pinnacle also saw a return to FUM inflows in the second half of FY23, which I think bodes well for FY24.
The Pinnacle share price is down 45% from November 2021, so it's much cheaper than it was before. If FUM keeps growing and earnings grow, I think Pinnacle's share price and dividend can grow over time. I'd call this ASX share a buy, particularly with a two-year or three-year timeframe in mind if interest rate cuts start happening.
Accent Group Ltd (ASX: AX1)
This is an ASX retail share which sells a wide variety of shoes. It may be best known for the brand The Athlete's Foot in Australia.
It acts as a distributor of a number of international brands in Australia, including Ugg, Skechers, Hoka, Kappa, Vans and plenty more.
The company also has its own growing portfolio of businesses where it can grow sales. Accent owns names like Glue Store, Nude Lucy and Stylerunner.
Retail sales may suffer in 2024 if households need to tighten their financial belts, but I think that can be a shorter-term decline. The Accent share price is down 25% from April 2023. Australia's population growth is also helping because it means more people in the country need shoes.
Despite the weaker environment, the ASX share is planning to open dozens more stores in 2024, which could help long-term earnings growth when household spending recovers.
The financial metrics on this one look very appealing if we look ahead to the projections for FY25. According to Commsec, the Accent share price is valued at under 13 times FY25's estimated earnings, with a possible grossed-up dividend yield of 9.7%.
