These 2 ASX shares have been named as opportunities

Australian Clinical Labs and Lovisa have been chosen as potential ideas.

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Leading fund manager Wilson Asset Management (WAM) has revealed two ASX shares that it rates as buys within the WAM Research Limited (ASX: WAX) portfolio.

WAM operates several listed investment companies (LICs). Two of those LICs are WAM Capital Limited (ASX: WAM) and WAM Leaders Ltd (ASX: WLE).

One of the LICs is called WAM Research, which looks at smaller businesses on the ASX.

WAM describes WAM Research as a LIC that invests in the most compelling undervalued growth opportunities in the Australian market.

The WAM Research portfolio has delivered gross returns (that's before fees, expenses and taxes) of 16.3% per annum since the strategy changed in July 2010, which is superior to the S&P/ASX All Ordinaries Accumulation Index return of 9.7% per annum.

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

Lovisa Holdings Ltd (ASX: LOV)

WAM described Lovisa as an Australian retailer that specialises in 'fast fashion' jewellery that has grown to more than 400 stores globally.

The fund manager believes that the company has a compelling business model including an online store and "compact" physical stores. This allows the business to keep rental costs to a minimum.

It was noted by WAM that Lovisa's business model is vertically integrated. It develops, designs, sources and sells 100% of its Lovisa-branded products.

Lovisa's stores have been impacted at various times by store closures in Australia because of COVID-19 impacts.

WAM is focused on the ASX share because it believes that the stores in countries that are already 'reopened' from COVID-19, like the US and the UK, can positively surprise against expectations in its FY21 result.

The fund manager is confident on Lovisa's global growth aspirations for the medium-term and expects levels of pent-up demand to benefit its Australian stores once lockdown measures ease.

Australian Clinical Labs Ltd (ASX: ACL)

Australian Clinical Labs was the other ASX share that WAM picked out in the WAM Research portfolio.

WAM notes that this business provides pathology services in Australia. It has 86 laboratories that perform services for more than 8 million people and 90 public and private hospitals.

The company listed three months ago in May 2021 and in early trading went below its listing price. But the fund manager put that down to the market misunderstanding the company's earnings power because of its pre-listing focus on automating systems and processes, combined with increased levels of COVID testing.

WAM said it was positive on Australian Clinical Labs' opportunity to grow its market share. The company's balance sheet is well placed to find acquisitions that can add to earnings.

Over time, it's expecting the ASX share to achieve "superior organic growth rates and successful inorganic expansion" to drive a 're-rating', meaning valuation change, of the business compared to its peers. According to WAM, Australian Clinical Labs is/was valued at a 30% discount to its peers.

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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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