A top fund manager owns these ASX shares. Should you?

Here's why Breville Group Ltd (ASX: BRG) and Aristocrat Leisure Limited (ASX: ALL) are currently in the top 20 holdings of more than one of the Wilson Asset Management portfolios.

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Every so often I like to look at the top holdings of fund managers for investment ideas. Compared to me (an individual investor) they have a team of trained employees looking for the best investments. I find this can be great place to start when looking for my own potential investment ideas.

Below are 2 companies that are currently in the top 20 holdings of more than one of the Wilson Asset Management portfolios. Each of the portfolios containing these companies has outperformed its index, laying credence to the investment strategy used, which is why I believe they could be worth a closer look.

Aristocrat Leisure Limited (ASX: ALL)

Aristocrat listed on the ASX in 1996 and is a gaming company that operates in more than 90 countries. It serves more than 300 gaming jurisdictions with a diverse range of products and services including electronic gaming machines and casino management systems.

More recently Aristocrat has made acquisitions in the online gaming sector with Plarium Global and Big Fish – the former being a web-based game developer and the latter a leading global publisher of free-to-play mobile and desktop games. These acquisitions brought further diversity to Aristocrat's digital portfolio, which grew revenues by 24% and now accounts for 41% of the groups $4.4 billion revenue.

With total group revenue and earning per share (EPS) growing at close to 23% in FY19 and management expecting continued growth in 2020 this makes Aristocrat look fairly valued based on a price-to-earnings (P/E) ratio of 31.8 and a price-to-earnings-growth (PEG) ratio of 1.38. Another benefit is its grossed-up dividend yield of 2.29%, which is up 22% from last year.

Breville Group Ltd (ASX: BRG)

I'm sure Breville needs little introduction – you would be hard pressed to find a household in Australia without at least one of its electronic appliances.

It has had a stellar year of growth, with the Breville share price rising more than 72% to sit at $17.50 at the time of writing. A large part of this rise coming after the first half financial report where it showed solid revenue growth, but, perhaps more importantly a successful entrance into the German and Austrian markets where it has since also expanded into Benelux and Switzerland. The European market has since seen the greatest growth with Breville's annual report showing a 35.1% increase on a constant currency basis.

In fact, since Breville only generates around 22% of its revenue from within Australia and New Zealand (ANZ) with the vast majority coming from North America (NA), its total revenue growth on an Australian Dollar (AUD) basis is significantly higher at 17.2%, as opposed to 12%, thanks to the falling AUD. To support this growth, it invests in marketing and R&D with new products such as the blender/juicer hybrid (Blucier), a combination microwave oven, and the worlds fastest flat white maker hitting the market in the first half of FY20.

Breville offers a grossed-up dividend yield of 2.74% on a PE ratio of 33.7 and PEG ratio of 2.22.

Foolish takeaway

The PEG ratio of a company takes its P/E and divides it by the earnings growth. It is a rough valuation metric to standardise company P/E ratios against earnings growth, in an attempt to compare companies with different growth rates. In theory, a lower PEG ratio is more favourable.

I love companies that are easy to understand and Breville certainly ticks this box. However, at today's prices I would choose Aristocrat Leisure for its cheaper growth profile.

Motley Fool contributor Michael Tonon has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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