When you're looking for ASX 200 investments which will drive outsized returns it pays to turn to the experts for help.
I've been through the research reports issued by the Macquarie team over the past week and singled out two companies from very different industries which Macquarie analysts believe will generate returns of about 30% over the next 12 months.
Let's take a look.
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Judo Capital Holdings Ltd (ASX: JDO)
Last week, Judo released its third quarter report, revealing that its lending growth, net interest margins and operating expenses all remained on track to meet existing guidance, "resulting in Judo reaffirming guidance for FY26 profit before tax of between $180 million – $190 million''.
This also included the company factoring in an extra provision, "in response to current economic conditions''.
Judo's gross loan balance was $13.8 billion at the end of the quarter, up from $13.4 billion, with strong loan growth coming through high levels of originations and lower attrition.
The bank's net interest margin was about 3.15%, up from 3.03% in the first half and in line with guidance.
Macquarie said in its note to clients on Judo that the underlying revenue performance was strong, "with continued lending book growth and positive margin momentum''.
The broker said they remained of the view that Judo would beat its guidance on margins in the second half.
Macquarie has an outperform rating on Judo shares, with a 12-month price target of $1.85, compared with the current share price of $1.43, implying a potential return of 29.4%.
Judo does not pay dividends.
IGO Ltd (ASX: IGO)
IGO was sharply sold down after its third quarter results recently, with ongoing challenges at the company's Greenbushes asset in focus.
Despite the price of the lithium mineral spodumene nearly doubling during the quarter, the market focused on the fact that Greenbushes' production was flat, with operational performance declining in areas including grade, plant recoveries and in increased downtime from maintenance outages.
On the other hand, the company's Nova nickel operation performed well, with production up 11% for the quarter and free cash flow generation of $52 million.
Macquarie said in its note to clients that despite the company's issues, it still held value at current levels.
Despite a 17.9% sell-off on the day of the quarterly report, we continue to see value in IGO given its exposure to a tier-one lithium asset. While several factors drive near term operational volatility, resource quality is inherently more stable over the short to medium term. On our forecasts, IGO is trading at an implied lithium price of US$1,150/t, ~50% below spot (US$2,390/t) and 10% below our long-term price assumption of US$1,350/t.
Macquarie has a price target of $9.50 on IGO shares compared with $7.32 currently, implying potential upside of 29.7%.
IGO does not pay dividends.
