The fund manager Wilson Asset Management (WAM) has recently identified some S&P/ASX 200 Index (ASX: XJO) shares that it owns (or owned) in one of its main portfolios.
WAM operates several listed investment companies (LICs). Two of these 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, often referred to as ASX blue-chip shares.
WAM says WAM Leaders actively invests in the highest quality Australian companies. But does WAM have a good reputation for picking stocks?
The WAM Leaders portfolio has delivered gross returns (before fees, expenses, and taxes) of 14.3% per annum since its inception in May 2016. This compares to the S&P/ASX 200 Accumulation Index average return of 8.1% over the same time.
WAM outlined these ASX 200 shares in its recent monthly update.
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Insurance Australia Group Ltd (ASX: IAG)
The fund manager revealed that IAG, an insurance giant in Australia, has been a "core holding" in the portfolio because it is a "high-quality company that has been impacted by multiple significant one-offs". WAM referred to business interruption lawsuits, elevated natural disasters and management turnover.
The investment team noted that the downsides of the above factors have been "more than captured" by the IAG share price.
It continues to hold the ASX 200 share position because of a few different factors: continued strength in the premium rate cycle, leverage to higher bond yields, the internal turnaround program and the potential for a capital return.
WAM pointed out that one of the catalysts occurred in the middle of October 2022, with the business interruption test case appeal being dismissed by the High Court, and then IAG announced a $350 million on-market share buyback.
Star Entertainment Group Ltd (ASX: SGR)
The casino ASX 200 share was another name that the fund manager wrote about. It is another company that is in the WAM Leaders portfolio despite the negative media attention.
Investors have sent the Star Entertainment share price down around 20% this year.
WAM pointed out that the market valued the entire company at less than the land value of its properties alone.
The conclusion of the Star Entertainment Bell review's final outcome was announced in October.
The investment manager thought there was an attractive risk-to-return opportunity given the precedent set by the Crown Resort Royal Commission finding last year.
As a reminder, the outcome was that a manager was appointed to control The Star Sydney casino, while Star Entertainment retains the profits made during the period, as well as the payment of a fine.
WAM noted the Star Entertainment share price has rallied on the back of the news, as it removed a key factor of uncertainty for investors.
The fund manager believes an unlisted investor would be a "natural owner" of the ASX 200 share because they could reap synergies with existing gaming assets, making it an "attractive takeover candidate".
