The high-performing fund manager Wilson Asset Management (WAM) has recently identified some ASX blue-chip shares that it owns (or owned) in one of its leading portfolios.
WAM operates several listed investment companies (LICs). Two of those LICs are WAM Capital Limited (ASX: WAM) and WAM Research Limited (ASX: WAX).
There’s also one called WAM Leaders Ltd (ASX: WLE) which looks at the larger businesses on the ASX, which you could call the ASX blue-chip shares.
WAM says WAM Leaders actively invests in the highest quality Australian companies.
The WAM Leaders portfolio has delivered gross returns (that’s before fees, expenses, and taxes) of 14.9% per annum since its inception in May 2016. That is superior to the S&P/ASX 200 Accumulation Index average return of 9.8%.
These are the blue-chip ASX shares that WAM outlined in its most recent monthly update:
Fortescue Metals Group Limited (ASX: FMG)
Fortescue Metals is one of the biggest mining businesses in Australia, and the world.
WAM Leaders pointed out that Fortescue Metals has underperformed the market “significantly” over the last six months due to declining iron ore prices.
Chinese authorities have been cutting emissions ahead of next year’s Winter Olympics and reduced demand amid a slowdown in China’s property sector.
However, during November, iron ore prices jumped on the news of stronger than expected economic data from China, according to the fund manager. There was also speculation that China’s steel mills are preparing for an easing of production cuts as early as December, which could help the blue chip ASX share.
WAM Leaders initially invested in Fortescue Metals Group because WAM believes the market’s negative sentiment has far exceeded the reality of the situation in China and continue to hold the company as it offers an attractive double digit free cash flow yield, with further upside potential for the Fortescue share price from the current level.
Crown Resorts Ltd (ASX: CWN)
Crown Resorts was the other business that WAM Leaders picked from its portfolio to outline.
During November 2021, it was revealed that the large gaming and entertainment group had received an acquisition proposal from the US private equity group Blackstone to buy the whole business at an increased price of $12.50 per share.
This bid is the third one from Blackstone for Crown, following previous proposals of $11.85 in March 2021 and $12.35 in May 2021.
WAM said that Crown Resorts was added to the WAM Leaders portfolio because of the significant leverage to the reopening of the borders, the blue chip ASX share’s “high quality” portfolio of assets, the underlying value of its land portfolio and the material steps that Crown Resorts has taken in its reform journey.
The fund manager also thinks there is potential for further takeover interest from Star Entertainment Group Ltd (ASX: SGR) due to the benefits of the potential combined entity including synergies, property scale and unlocking the Sydney market.