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 14.1% per annum since inception in May 2016, which is superior to the S&P/ASX 200 Accumulation Index average return of 8.9%.
These are the two ASX shares that WAM outlined in its most recent monthly update, which were two of the largest contributors of performance for the month:
Bank of Queensland Limited (ASX: BOQ)
WAM Leaders said that it has been positive on Bank of Queensland due to the industry-wide tailwinds such as lower funding costs and the potential for a loan growth surprise, coupled with an undemanding valuation compared to the big four banks of Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking Group Ltd (ASX: ANZ).
During February, BOQ announced the acquisition of ME Bank for approximately $1.3 billion, which is being funded by the regional bank with a capital raising.
WAM said that this is a transformative acquisition for the ASX share and will increase the number of Bank of Queensland customers by around 50%. BOQ will become the sixth largest lender in Australia, being behind only the big four ASX banks and Macquarie Group Ltd (ASX: MQG).
The fund manager expects that Bank of Queensland will be able to achieve good scale benefits from lower wholesale funding costs as well as significant cost synergy benefits.
Oil Search Limited (ASX: OSH)
Oil Search is one of the largest oil businesses on the ASX.
The fund manager said that oil and demand imbalances intensified in February with 'OPEC+' maintaining discipline while demand continues to recover towards pre-COVID-19 levels. OPEC+ includes countries like Saudi Arabia, UAE, Iran, Iraq, Kuwait, Nigeria, Russia, Mexico, Kazakhstan and Bahrain.
WAM Leaders said that it expects the oil price rally will be supported by investors repositioning for a reflationary environment, with oil offering the characteristics of a real asset, benefiting from a stimulus-driven recovery and demonstrating a powerful hedge against inflation shocks.
The fund manager concluded about the ASX share:
As a pure play oil and liquid natural gas exploration company, Oil Search has the highest leverage to changes in the oil price across our investable universe. Other upcoming catalysts for Oil Search include progressing key growth projects in Alaska and Papua New Guinea towards a financial investment decision, and the sell down of equity in Alaska over 2021.
