Respected fund manager Wilson Asset Management (WAM) has recently identified two ASX shares that it owns in its portfolio.
WAM operates several listed investment companies (LICs). Two of those LICs are WAM Capital Limited (ASX: WAM) and WAM Research Limited (ASX: WAX).
There's also one called WAM Leaders Ltd (ASX: WLE) which looks at the larger businesses on the ASX.
WAM says WAM Leaders actively invests in the highest quality Australian companies.
The WAM Leaders portfolio has delivered gross returns (that's before fees, expenses and taxes) of 14.9% per annum since inception in May 2016, which is superior to the S&P/ASX 200 Accumulation Index average return of 10.1%.
These are the ASX shares that WAM outlined in its most recent monthly update:
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Aristocrat Leisure Limited (ASX: ALL)
WAM Leaders pointed out that in May, it released a "strong" half-year result, which was well ahead of market expectations and demonstrated its leverage to the economic recovery.
That result was attributed to land-based revenues recovering faster than expected, driven by clear market share gains and strength in US gambling spend, as well as an improvement in the profit margins of its digital division.
WAM Leaders is still positive on Aristocrat Leisure based on expectations that the company can continue to gain market share and grow its mobile gaming business. The fund manager believes there's upside optionality from the iGaming opportunity, and the company has a strong balance sheet to continue to invest for future growth.
CSL Limited (ASX: CSL)
CSL is a business that WAM Leaders increased its position in during the month. The LIC increased its holding of CSL as it became more positive on the business.
WAM Leaders said that CSL is premised on plasma collection foot traffic reaching post-coronavirus highs as the vaccine rollout continues, combined with improvements in plasma yields, and therefore profit margins.
Computershare Ltd (ASX: CPU)
Computershare was another ASX share that WAM Leaders added to with its portfolio.
WAM Leaders bought more shares of Computershare because of its earnings leverage to higher US interest rates, as the world's largest economy continues to deliver strong inflation data.
The fund manager said that leverage to interest rates has nearly doubled with Computershare's recent acquisition of commercial banking business with Wells Fargo Corporate Trust Services.
Challenger Ltd (ASX: CGF)
The annuity business was the final ASX share that WAM Leaders referenced that it bought more shares of in the portfolio.
WAM Leaders added Challenger to its portfolio after its earnings guidance downgrade in April. The fund manager is positive on the company due to its rebased expectations around the life business' profit margin, upside from new distribution opportunities and its attractive valuation.
