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). Some focus on larger companies like WAM Leaders Ltd (ASX: WLE) and some go for medium and smaller ones like WAM Research Limited (ASX: WAX).
There's also one called WAM Capital Limited (ASX: WAM) which targets "the most compelling undervalued growth opportunities in the Australian market."
The WAM Capital portfolio has delivered an investment return of 16.4% per annum since inception in August 1999, before fees, expenses and taxes. This gross return outperformed the S&P/ASX All Ordinaries Accumulation Index return of 8.3% per annum over the same timeframe.
These are the two ASX shares that WAM Capital outlined in its most recent monthly update:
Ingenia Communities Group (ASX: INA)
WAM explained that Ingenia Communities owns, operates and develops a portfolio of 74 holiday and lifestyle communities throughout Australia. According to the ASX, it has a market capitalisation of $1.56 billion.
In December, the ASX share announced three acquisitions: the Big4 Inverloch Holiday Park in the Gippsland region of Victoria, the Middle Rock Holiday Park and Village in Port Stephens, New South Wales and the Merry Beach Caravan Park on the New South Wales South Coast for a total cost of $73.9 million.
The fund manager is positive on Ingenia's holiday parks division, which is benefiting from strong levels of domestic tourism and WAM believes that the company will continue to make earnings accretive acquisitions. Given the positive backdrop of increasing property prices across Australia, the fundie expects strong demand for Ingenia's residential business, which should be reflected in stronger than expected settlements at the half year result in February.
Australian Finance Group Ltd (ASX: AFG)
WAM explained that this ASX share operates the largest aggregation platform of mortgage brokers in Australia, with almost 3,000 brokers offering business finance, insurance and securitised products. According to the ASX, Australian Finance Group has a market capitalisation of $722 million.
With the company leveraged to new loan originations and refinancing for homeowners, the fund manager see a positive outlook for the company going forward, driven by a combination of record low interest rates, government stimulus measures and improving consumer confidence.
The ASX share recently gave an update at its annual general meeting (AGM). The quarter ending 30 September 2020 was a record quarter of lodgement activity in the residential broking division. October volumes continued with that momentum.
Significant government incentives at both a federal and state level have targeted the first home buyer market. As a result, the first home buyer market share activity has increased to 23% in October, up from 15% in the same period last year.
Looking at October trading showed increases in lodgements across the country. Lodgement volumes for October exceeded $6.7 billion. That was the highest the company has ever recorded and represented a 16% increase from October last year. WA saw the largest percentage increase in volume with lodgements increasing 41% from the same period last year. Queensland growth was 30%, South Australian growth was 25%, NSW growth was 7% and Victoria growth was 11%.
