Why you should buy these cheap stocks before somebody else does

Fund managers are hoping a new wave of buyout bids sweeping the ASX could prove a saving grace for some of the bourse’s still-burgeoning comeback stories.

Ethical Partners portfolio manager Andrew Wilson said the share prices for companies such as the country’s largest private hospital group, Ramsay Healthcare, are continuing to lag improving financial metrics.

“Ramsay has a strong balance sheet and an asset base that is world-class in nature. The market continues to price the business off near-term earnings revisions whilst ignoring the long-term value of the asset base,” he told The Australian Financial Review.

He noted that the smaller actively managed pool of capital in Australia, along with a greater reliance by investors on earnings revisions, had resulted in beaten-up stocks being ignored by the market for longer than in previous cycles.

As a result, Mr Wilson said more of the so-called “turnaround” companies on the ASX were becoming attractive takeover targets. Ramsay’s shares, for example, are still trading roughly 35 per cent below the takeover bid by private equity group KKR in 2022.

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