2 top ASX shares to buy according to WAM

Domino's is one the ASX shares that WAM likes right now.

| More on:
A stopwatch ticking close to the 12 where the words on the face say 'Time to Buy' indicating its the bottom of the falling market and time to buy ASX shares

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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 Leaders Ltd (ASX: WLE).

There's also one called WAM Active Limited (ASX: WAA) which looks at businesses it thinks are the most undervalued.  

WAM says WAM Active invests in market mispricing opportunities in the Australian market.  

The WAM Active portfolio has delivered gross returns (that's before fees, expenses and taxes) of 12.1% per annum since inception in January 2008, which is superior to the Bloomberg AusBond Bank Bill Index return per annum of 3%.  

These are the two ASX shares that WAM outlined in its most recent monthly update:

Domino's Pizza Enterprises Ltd. (ASX: DMP)

WAM Active explains that Domino's Pizza is a multinational pizza restaurant chain, with the Australian business representing the largest franchisee outside of the US. It also has operations in Europe and Japan.

The fund manager pointed out that in June, Domino's Pizza entered its tenth market, with an agreement with Formosa International Hotels Corporation to acquire the corporate stores and franchise rights of Domino's Taiwan for $79 million on a cash and debt free basis.

Domino's Pizza is the second largest operator in Taiwan with 157 stores and long-term market potential of more than 400 stores.

WAM says that the deal expands Domino's Pizza Asian market by more than 18%. It has increase its store count outlook in Asia to 1,900 by 2030 to 2032 as a result of the acquisition.

The fund manager is positive about the future of Domino's Pizza, with "key" growth markets such as Japan and Germany reaching an inflection point supporting a "robust" organic growth profile. The business has the potential for further acquisitions in the future, according to WAM.

Seven West Media Ltd (ASX: SWM)

Seven West was the other ASX share that WAM Active referenced as an opportunity.

The fund manager described Seven West Media as a large diversified media business. It makes content for television, publishing and digital networks.

Seven West is made up of a few different subsidiaries such as the Seven Network and affiliate channels, as well as The West Australian, The Sunday Times and Seven Studios.

WAM pointed out that, last month, Seven West Media released a "positive" fourth quarter trading update. Those quarterly numbers showed advertising revenue grew by more than 45%. Momentum is expected to continue into the quarter ending 30 September 2021.

Seven West Media's 7plus has also seen a 62% rise in registered users in the year to date. That was faster growth than the market growth of 50.7%. Digital revenue saw an increase of 130% for FY21, with earnings before interest, tax, depreciation and amortisation (EBITDA) of $60 million.

The fund manager is still positive on Seven West Media, with the company expecting to more than double its digital EBITDA in FY22 and continuing cost control. WAM also pointed to the strong free cashflow which is helping de-leverage the balance sheet, which WAM believes is being undervalued by the market.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Dominos Pizza Enterprises Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

Yellow rising arrow on a brick wall with a man on a ladder.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a rough start to the trading week for investors this Monday.

Read more »

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
Opinions

3 great lessons I learned being an owner of Brickworks shares

I’m going to take these lessons with me.

Read more »

Magnifying glass in front of an open newspaper with paper houses.
Share Market News

Thinking of buying an ASX REIT? Check out Macquarie's top picks

The leading broker has named its picks in the sector. Here's what they are.

Read more »

Man with rocket wings which have flames coming out of them.
Share Gainers

Guess which ASX 200 stock has rocketed 86% since April?

This sky rocketing ASX 200 stock continues to defy short sellers. But how?

Read more »

Contented looking man leans back in his chair at his desk and smiles.
Broker Notes

Leading brokers name 3 ASX shares to buy today

Here's why brokers believe that now could be the time to snap up these shares.

Read more »

Man looking happy and excited as he looks at his mobile phone.
Share Market News

Why BlueScope, Brickworks, Resimac, and Soul Patts shares are racing higher today

These shares are starting the week with a bang. But why?

Read more »

Disappointed man with his head on his hand looking at a falling share price his a laptop.
Share Fallers

Why Brazilian Rare Earths, Mineral Resources, Pilbara Minerals, and Syrah shares are falling

Why are these shares starting the week in the red?

Read more »

A bricklayer peers over the top of a brick wall he is laying with a level measuring tool on top and looks critically at the work he is carrying out.
Opinions

The pros and cons of the Soul Patts and Brickworks merger

This is a big deal. What are the positives and negatives of the merger?

Read more »