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% per annum since inception in January 2008, which is superior to the Bloomberg AusBond Bank Bill Index return per annum of 3.1%.
These are the two ASX shares that WAM outlined in its most recent monthly update:
Ingenia Communities Group (ASX: INA)
The fund manager described Ingenia Communities as a business that owns, operates and develops a portfolio of 74 holiday and lifestyle communities throughout Australia. According to the ASX, it has a market capitalisation of $1.6 billion.
WAM said that in December, Ingenia announced three acquisitions: the Big4 Inverloch Holiday Park in the Gippsland region of Victoria, the Middle Rock Holiday Park and Village in Port Stephens in New South Wales and the Merry Beach Caravan Park on the New South Wales South Coast for a total cost of $73.9 million.
The fund manager is positive on the ASX share’s holiday parks division, which is benefiting from strong levels of domestic tourism and WAM believes that the company will continue to make earnings accretive acquisitions. Given the positive backdrop of increasing property prices across Australia, the fundie expects strong demand for Ingenia’s residential business, which should be reflected in stronger than expected settlements at the half year result in February.
Last month Ingenia said in a trading update for its holidays division that lower FY21 first quarter revenue was offset by a strong second quarter performance. The year to date revenue to the end of November 2020 was up 5% compared to the prior corresponding period. The occupancy rate was steady at 59% for the ASX share with the revenue per available room (REVPAR) up 4% to $45.64. Management said that strong December performance should support revenue growth of around 10% for the first half of FY21.
Nuix Ltd (ASX: NXL)
WAM said that Nuix, which was listed on 4 December 2020, is a leading provider of investigative analytics and intelligence software, with over 1,000 customers in 78 countries utilising the software to manage cyber security risk, compliance and fraud. The company started in the early 2000s, with the development of an algorithm to search unstructured data.
The fundie said that Nuix’s platform is underpinned by more than 15 years of research and development, with more than $200 million of research and develop costs spent over the past 12 years.
The Nuix software was involved in some recent investigations like the Panama Papers and the Royal Commission into financial services in Australia.
Despite the company having Australian headquarters, 80% of its $175.9 million FY20 revenue came from overseas. The Nuix share price rose by 50% on its first day of trading.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Nuix Pty Ltd. 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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