Three unloved assets to buy now

Each week, a professional investor tells MoneyWeek where he'd put his money now. This week:Mark Costar, senior fund manager, JOHCM UK Growth Fund.

Anyone reading the financial press recently cannot have escaped the deluge of cautious commentaries. These bristle with stern warnings about complacency and unusually low volatility, and largely predict an imminent sell-off in risk assets. But this simply betrays how deep the scars of financial crisis still run. Investors are still on the defensive.

Companies have been deleveraging for seven years, and consumers remain reluctant to put their hands in their pockets. Yet, as the old adage goes, bull markets climb a wall of worry and the last three years have thrown up plenty of opportunities for that.

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The near meltdown of the euro, a US government shutdown, appropriation of Cypriot savings, conflicts in Syria, Iraq and Ukraine not to mention the taper tantrum, deflation, Chinese property fears and countless banking misdemeanours.

Investors should take advantage of this fluid situation to identify interesting, well-invested and under-appreciated assets, focusing in particular where the fundamentals are stronger and the growth prospects more robust than reflected in their current share price.

AstraZeneca (LSE: AZN) is one such opportunity. Its transformation has been remarkable. Vigorous management action, a focus on areas of unmet clinical need, and its embrace of innovative discovery techniques have revolutionised its drug pipeline.

The share price has not kept up with the scale and significance of these changes, which leaves it as perhaps one of the richest opportunities in global pharma. No wonder it piqued Pfizer's interest. It's also worth noting that five directors have bought shares recently, including a £2m purchase by the chief executive. These are signals not to be ignored.

At the other end of the size spectrum, Aim-listed Augean (Aim: AUG) is a fascinating situation. At first sight its core competence doesn't set the pulse racing incinerator ash management and specialist waste treatment of low-level radioactive material.

But this is an asset-rich gem of a company, with extremely valuable strategic positions in attractive, long-term growth markets, where it possesses significant barriers to entry.

A major investment programme has ensured it is well-placed to capitalise on growing volumes in both areas. Due to its fixed cost base, rising revenues will rapidly turn into cash flow and shareholder equity the company has the potential to generate a free cash-flow yield of 14% ormore, which hopelessly misprices the business. A substantial rerating isn't hard to envisage.

On to a slightly more glamorous industry CSR (LSE: CSR) is rapidly emerging as a global leader in mobile wireless connectivity. Unusually for a British technology firm, it has outspent virtually all of its international rivals on research and development over the last few years.

This is now bearing fruit in the form of platform positions in markets with great potential, such as home automation,wearable technology and next-generation cars. The share price reflects none of this potential.

That means prospective investors have the comfort of knowing it's trading on a modest rating and at a material discount to its peers. On top of that, more than 20% of the market capitalisation is in cash.

It has a substantial, very valuable portfolio of intellectual property and it also has appreciable tax losses to offset future profits. I expect revenues to accelerate and the share price to follow.