With Perpetual Limited (ASX: PPT) being one of Australia's most famous fund managers with $29.8 billion of funds under management, I feel it is always good to stay up to date with what it is buying or selling.
Not that this is a guarantee of success. Perpetual has made a few bad calls recently, which appear to have shaken the confidence of some investors in its funds. Perhaps the most notable bad call was a 5% stake taken in Shine Corporate Ltd (ASX: SHJ) – shortly before it plummeted 75%.
According to the Fairfax media, its portfolio manager Vince Pezzullo is seeing value in the following three ASX shares at the moment:
BlueScope Steel Limited (ASX: BSL)
BlueScope Steel has enjoyed a great 2016 so far, putting on a huge gain of 37% for its shareholders. These gains can be partly attributed to a recent earnings guidance update, which sent the steel producer's share price hurtling higher.
Previously the company had provided second-half guidance for earnings before interest and tax of $209 million. But management now expects earnings to come in at least 29% higher than the initial guidance at around $270 million.
Pezzullo also points to BlueScope paying down its debt quicker than expected and the Colorbond building materials segment's strong growth as reasons to be bullish.
Nine Entertainment Co Holdings Ltd (ASX: NEC)
Perpetual has a stake of almost 15% in Nine Entertainment. Even with the share price down 45% in the last 12 months, Pezzullo sees reasons to be bullish.
He believes that streaming rivals Netflix and Presto won't harm revenues of Nine Entertainment and its streaming platform Stan as much as expected. Additionally, he sees opportunities for mergers eventuating due to media law reform.
With the shares trading at just over 9x estimated FY 2016 earnings, it's fair to say they do appear to be cheap.
Woolworths Limited (ASX: WOW)
Woolworths is another investment which has been subject to significant selling in recent months. Pezzullo advised that Perpetual built up a position in Woolworths late last year. With the shares down around 10% in 2016, it's not been a great investment so far for the fund manager.
But the portfolio manager does see reasons to be optimistic. A new CEO, the sale of Masters, and potential exits from other under-performing businesses could get Woolworths back to where it was.
A focus on its food and liquor businesses can only be a good thing. After all, this is where the majority of its sales come from. In the last fiscal year 88% of sales were attributable to this segment if you include its New Zealand supermarkets also.
Foolish takeaway
Of all the picks, Woolworths would be my preference today. It may still have a number of challenges ahead, but ultimately I expect it will find its feet and start producing results that provide strong returns for investors.
