The fund manager Wilson Asset Management (WAM) has recently identified some ASX blue-chip shares that it owns (or owned) in one of its leading portfolios.
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) that looks at the larger businesses on the ASX, which investors can call ASX blue-chip shares.
WAM says WAM Leaders actively invests in the highest quality Australian companies.
The WAM Leaders portfolio has delivered gross returns (before fees, expenses, and taxes) of 16.1% per annum since its inception in May 2016. That is superior to the S&P/ASX 200 Accumulation Index average return of 10.1%.
These are the blue-chip ASX shares that WAM outlines in its recent monthly update.
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BHP Group Ltd (ASX: BHP)
WAM pointed out that BHP benefitted from the widespread volatility in commodity prices in March 2022. The fund manager believes that the higher prices will help earnings momentum going into FY23.
According to Wilson Asset Management, another factor helping BHP is the rising iron ore price despite increasing COVID-19 cases in China. WAM noted that the Chinese government promises to stimulate the economy.
WAM said signals by the government have become "louder" in recent weeks as it implements more lockdowns across the country. The fund manager thinks China will likely need to stimulate the economy in the second half of 2022 to achieve its annual GDP growth target, which could benefit the ASX blue-chip share.
Wilson Asset Management believes there is further upside for the BHP share price because of the strategic locations of the ASX mining share's assets "deserving higher valuations" due to geopolitical tensions and concerns about the security of supply globally.
Wilson points out another bonus for BHP is that proceeds from the petroleum demerger will mean shareholders can expect a "significant" capital return over the next six months. WAM estimates this to be more than $40 billion.
Ramsay Health Care Limited (ASX: RHC)
WAM revealed that it had recently increased its position in Ramsay Health Care because of its earnings growth potential over the coming years.
There is a growing backlog of private and public hospital admissions after multiple suspensions of elective surgeries globally due to COVID lockdowns. According to WAM, this has led to an extended pipeline of elevated demand.
The fund manager said that between New South Wales, Victoria, Queensland and Western Australia, there are more than 260,000 people on public waiting lists for surgery.
There are a few things that WAM finds appealing about the private hospital operator. There are the "structural industry tailwinds" – that is, there are ageing populations in the countries where Ramsay operates. The ASX blue-chip share has $9 billion of land backing. WAM also points to a "favourable valuation" in an expensive sector.
The fund manager also points out that Ramsay's Asia-based joint venture with Sime Darby received an indicative non-binding proposal from IHH Healthcare to buy the business for approximately $1.8 billion on a cash and debt-free basis. WAM thinks the proceeds would be put into debt reduction if that transaction goes ahead because of the recent acquisition of Elysium Healthcare.
