Respected fund manager Wilson Asset Management (WAM) has recently identified two ASX shares that it thinks are buys.
WAM operates several listed investment companies (LICs). Some focus on larger companies like WAM Leaders Ltd (ASX: WLE), whilst others go for smaller companies like WAM Research Limited (ASX: WAX) and WAM Microcap Limited (ASX: WMI).
WAM Microcap targets small cap ASX shares with a market capitalisation under $300 million at the time of acquisition.
WAM says WAM Microcap targets the most exciting undervalued growth opportunities in the Australian microcap market.
The WAM Microcap portfolio has delivered gross returns (that’s before fees, expenses and taxes) of 25% per annum since inception in June 2017, which is superior to the S&P/ASX Small Ordinaries Accumulation Index average return of 11.6%.
These are two ASX shares that WAM outlined in its most recent monthly updates:
Dusk Group Ltd (ASX: DSK)
This is a pick by WAM Microcap.
Dusk is the leading Australian omni-channel specialty retailer that is focused on home fragrance products.
The ASX share recently gave a trading update for the third quarter of FY21 with sales of $27.7 million, up from $18.4 million in the prior year. Financial year to date sales were $118.7 million, up from $77 million in the prior corresponding period.
Wilson Asset Management also pointed out that full year sales guidance is for a range of between $147 million to $151 million. It’s delivering a lot of growth.
Dusk had a strong inventory position for Mother’s Day in May according to WAM. New stores will further add to growth, it has added 10 new stores over the last year.
The fund manager is positive on Dusk because the disciplined cost management provides the business with operating leverage as it rolls out new stores across the country.
Imdex Limited (ASX: IMD)
This is a pick by WAM Research.
What’s Imdex? The LIC explains that it’s a global provider of end to end technology solutions for mining exploration and development, developing drilling optimisation products and sensors to provide real-time data.
Imdex is truly a global business with operations in the mining regions in Asia Pacific, Europe, Africa and the Americas. It has a presence on 70% of minerals drilling projects globally and sales in more than 100 countries.
The ASX share has benefited from strong copper prices, which reached almost US$10,000 per tonne in April, which is the highest in 10 years.
WAM Research explained where it’s seeing opportunities. Clean energy and the battery mineral space continue to see significant investments. This help gives copper, nickel and lithium a strong outlook because of all of the demand.
Wilson Asset Management also thinks that the company will benefit from higher global exploration budgets after years of under-investment.