Key points
- WAM Leaders has revealed some of the blue chip ASX shares it likes
- One pick is the ASX healthcare giant CSL after acquiring Vifor
- The fund manager also likes several resources businesses such as like BHP, Rio Tinto and South32
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 can call 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 15.4% per annum since its inception in May 2016. That is superior to the S&P/ASX 200 Accumulation Index average return of 10.1%.
These are the blue-chip ASX shares that WAM outlined in its most recent monthly update:
CSL Limited (ASX: CSL)
During December, CSL revealed the acquisition of the Swiss business Vifor Pharma, a global leader in the treatment of iron deficiency, nephrology and cardio-renal therapies.
The ASX healthcare giant has completed a $6.3 billion capital raising to partly fund the $16.4 billion deal, the largest equity raise to take place on the ASX.
WAM noted that while the acquisition means a deviation from CSL's core competencies of plasma related products and vaccines, there are compelling reasons to like it.
CSL stated there are three factors for the strategic rationale for the transaction.
The ASX blue chip share notes the revenue growth outlook is strong with several products due to launch over the coming years.
Next, the acquisition augments the ASX share's current therapeutic categories by expanding its presence in the chronic kidney disease space.
The final factor is that it facilitates access to patient populations that will support future clinical trial execution.
The fund manager noted that the 2014 acquisition of Novartis' flu vaccine business was contentious at the time but has proven to be "extremely successful", growing Seqirus revenue from US$650 million in the first full year of integration to over US$1.7 billion five years later.
WAM has confidence in management's ability to replicate this strategy for Vifor.
Resources
WAM Leaders also outlined a number of mining businesses that it thinks are opportunities.
The fund manager likes iron ore mining names including BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG). Iron ore prices are hitting four-month highs.
WAM Leaders owns iron ore businesses because WAM believes that the market sentiment had "exceeded the reality" of China's slowdown and the People's Bank of China reduction of the one year lending rate to stimulate the economy is evidence of that dynamic.
The fund manager also noted that it's invested in copper and lithium miners with ASX blue chip share holdings in South32 Ltd (ASX: S32), IGO Ltd (ASX: IGO) and OZ Minerals Limited (ASX: OZL). A key reason for the bull case on those companies and commodities is that battery demand continues to outpace supply and push prices to record levels.
It has also been increasing its gold exposure with investments in Newcrest Mining Limited (ASX: NCM) and Evolution Mining Ltd (ASX: EVN). WAM did this after weak share prices as well as thinking it would provide some defence against potentially higher market volatility.
