Respected fund manager Wilson Asset Management (WAM) has recently identified two ASX shares that it owns in one of 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 12.2% 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:
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Life360 Inc (ASX: 360)
WAM said that Life360 is a family safety platform serving over 33 million users globally.
In October, Life360 released its September 2021 quarterly update, which beat market expectations and raised its 2021 annualised monthly revenue guidance to between US$125 million to US$130 million.
Life360 CEO Chris Hulls said:
This was another milestone quarter for Life360, with growth continuing to accelerate in the US as the country emerges from COVID-19. We are excited by the metrics the business is delivering, in particular the second consecutive quarter of record subscriber additions taking us to more than 1.1 million Paying Circles, underlying revenue growth of 45% year on year and reaching US$120 million in annualised monthly revenue (AMR) for the first time.
The fund manager is positive on the ASX share, due to its large addressable market, accelerating revenue growth profile and cost discipline.
WAM also said that the company remains "rich" in catalysts that may support the Life360 share price, including potential mergers and acquisitions and a dual listing in the United States.
Pact Group Holdings Ltd (ASX: PGH)
Pact Group was described as an Asia Pacific packaging business that manufactures and supplies plastic and metal packaging for a range of trusted brands.
The fund manager pointed out that during the month, the ASX share released a trading update highlighting the impact that the COVID-19 pandemic had on its FY22 first quarter sales, which coincided with rising input costs as oil prices rose.
Pact said that its FY22 demand remained resilient in the packaging and sustainability and materials handling and pooling segments, with higher raw material and international freight costs being "well managed". In the contract manufacturing segment, demand was weaker than expected and margins were lower because of higher input costs.
WAM believes that the Pact Group share price is trading below its underlying value and that the company's long-term strategy, with a focus on increasing recycling capability and reducing inefficiencies, will drive revenue growth and profit margin expansion in the future.
Regarding ceasing the sale process of its contract manufacturing business, Pact CEO and managing director Sanjay Dayal said:
I have consistently advised shareholders we would sell the business if the sale process met our value hurdle. Continued market uncertainty and supply chain disruption arising from COVID-19 has created challenges in realising our expectation. At this time, we believe retaining the business delivers greatest value for our shareholders.
