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 12.1% per annum since inception in January 2008, which is superior to the Bloomberg AusBond Bank Bill Index return per annum of 2.9%.
These are the two ASX shares that WAM outlined in its most recent monthly update:
Temple & Webster Group Ltd (ASX: TPW)
Temple & Webster was the first business that WAM Active picked out as an opportunity. The fund manager explained that this business is an online retailer for furniture and homewares that is capitalising on the tailwinds in e-commerce and the increasing penetration of online retail for furniture and homewares in Australia.
Last month, the ASX share revealed that FY21 revenue had increased by 85%. It also saw earnings before interest, tax, depreciation and amortisation (EBITDA) growth of 141% to $20.5 million.
WAM was pleased to note the performance in the final three months of the 2021 financial year, with revenue beating analyst expectations, despite that period being when the economy and bricks and mortar stores were reopening/reopened.
The fund manager believes this shows that its market share of the furniture and homewares sector is increasing.
WAM thinks that the first few months of FY22 could show strong revenue growth with the lockdowns in Sydney and Melbourne.
Select Harvests Limited (ASX: SHV)
Select Harvests was the other ASX share that WAM noted, which is one of the biggest growers of almonds in Australia.
The fund manager points out that Select Harvests has been a beneficiary of the large increase in demand for Australian almonds over the last decade. Australia is now the second biggest producer of almonds globally, second only to the US.
Last month, the business said it’s still seeing strong demand for almonds, with Australian exports up 67% on the prior period. It also confirmed that market pricing had increased, with a downgrade in the US 2021 crop harvest driving an increase in the overall market price for almonds by around $0.50 per kilo, up to a range of between $6.75 per kilo to $7.25 per kilo.
WAM believes almond prices can climb even further, which will benefit Select Harvests, given is increased acreage after the acquisition of the Piangil Orchard in October 2020.