Investors keep hearing that the ASX is dominated by miners and banks, which is undoubtedly true.
But that means it’s easy to forget there are plenty of finance stocks to buy that aren’t one of the big banks.
The major players, although stable and reliable, are working with very static market share. They may hand out reasonable dividends, but growth is anaemic.
If you want a chance at really cashing in during these times of steeply rising interest rates, it’s worth considering smaller-cap ASX finance shares.
Here are two that the team at Celeste Funds Management is backing right now:
‘Extremely conservative guidance’
Debt buying business Credit Corp Group Limited (ASX: CCP) enjoyed a whopping 19.2% gain in its share price last month.
Celeste analysts attributed this to “industry feedback that the pricing of new debt ledger purchasers in the US had begun to soften”, which is a great omen for Credit Corp’s future earnings.
Unfortunately, just last week Credit Corp shares gave back much of those July gains after its annual financial report.
The Celeste team is not in the least bit worried though, with the stock remaining the fourth largest holding in the fund.
“While the FY23 result was solid, meeting market expectations, the outlook for FY24 was weaker than expected due to what we view as extremely conservative guidance.”
According to CMC Markets, four analysts believe Credit Corp is a strong buy, while four others insist it’s a hold.
Over the past year, the Credit Corp share price has dropped around 11%.
‘46% growth over the last 12 months’
Small business lender Judo Capital Holdings Ltd (ASX: JDO) could face some short-term problems with borrowers who may default during the difficult economic conditions.
Regardless, the stock rocketed 15.2% over July after revealing gross loans had reached $8.9 billion at the end of June.
“This 46% growth over the last 12 months was driven by increased banker activity and ongoing market share growth.”
Similar to Credit Corp, the hot July performance has been cancelled out somewhat by a 9.7% drop so far this month.
The Celeste team has highly positive conviction about Judo’s potential in the coming years.
“While current market conditions are likely to see loan losses increase for the system, we believe that Judo is well placed to navigate these headwinds and use the well capitalised balance sheet to fund future growth.”
Judo Capital has other fans among the professional ranks, with five out of eight analysts currently surveyed on CMC Markets rating it a buy.
