I'm always on the lookout for appealing buying opportunities in S&P/ASX 300 Index (ASX: XKO) shares.
It seems increasingly difficult to find good value companies due to this year's significant rally in various sectors, including ASX bank shares, tech and other growth shares.
We don't need to be purposefully contrarian to invest well. But, we could be opportunistic by looking at some sectors that have fallen out of favour within the market.
It's likely these unloved sectors can become favoured again when conditions change.
If there's a rebound, the ASX 300 shares that have declined could deliver pleasing returns. For example, if a share price has fallen 50% from $10 to $5, then simply returning to that former level of $10 would mean a return of 100%. Of course, nothing is guaranteed to rise again after a fall.
While plenty of individual companies might be good investment opportunities, let's examine two options where I think we can find cheap ASX 300 shares.
ASX REITs
In my view, the Australian real estate investment trust (REIT) sector could be a useful place to look for opportunities.
Many REITs are still heavily down from their 2021 peaks when interest rates were low. And many have seen a further decline in the last few months as it became apparent that Australian interest rates weren't going to be cut any time soon, with inflation proving stickier than expected.
The great thing about ASX REITs is that they typically generate predictable rental income from large, blue-chip tenants, including multinationals, other ASX shares, and large national companies.
While higher interest rates are headwinds for both commercial property valuations and rental profit (due to higher interest costs), I think the lower share prices of these ASX property shares reflect the economic situation and present long-term value.
It's debatable how much REIT properties are worth at the moment, but the current share price to net asset value (NAV) discounts for businesses like Rural Funds Group (ASX: RFF) and Centuria Industrial REIT (ASX: CIP) are appealing, particularly with their growing rental income profiles.
Additionally, they can provide attractive yields.
ASX 300 energy shares
The other sector I think that the market may be undervaluing is the ASX energy share sector.
It's important to remember that commodities go through cycles, with energy demand linked to the global economy.
The share prices of Woodside Energy Group Ltd (ASX: WDS) and Santos Ltd (ASX: STO) have both fallen by double digits in percentage terms from their 2024 highs.
They are not just petroleum businesses. A significant amount of their earnings comes from LNG, which is seen as an important part of the energy mix.
With Republicans taking charge in the United States and falling interest rates globally, there could be increased demand for energy like LNG and oil, particularly if China and other Asian economies can boost their economic growth.
While ASX 300 energy shares are a higher-risk play, I think this could be an opportunistic time to invest in the sector, particularly when the useful potential passive income is factored into possible returns.
According to the FY25 forecasts on Commsec, Woodside could pay a fully franked dividend yield of 8.4%, and Santos could pay a dividend yield of 4.3%.
