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 14.6% per annum since its inception in May 2016. That is superior to the S&P/ASX 200 Accumulation Index average return of 8.7%.
These are the blue-chip ASX shares that WAM outlined in its most recent monthly update:
BHP Group Ltd (ASX: BHP)
For readers that didn't see it, BHP has released its FY22 half-year result for the six months to 31 December 2021. It included net operating cash flow growing by 42% to US$13.3 billion and attributable profit rising 144% to US$9.4 billion. It also declared an interim dividend of US$1.50 per share, which was 49% higher.
WAM made some comments about BHP and its prospects before seeing the result.
During January, WAM saw strengthening evidence that the slowdown in China had passed a trough. The People's Bank of China began to signal monetary policy easing by cutting the one-year policy loan rate and added 200 billion yuan into the financial system in order to reduce borrowing costs and encourage credit growth. This helped increase iron ore prices, which led to BHP shares outperforming last month, according to WAM.
On 28 January 2022, BHP consolidated its London-listed company into its Australian-listed business, making it the largest corporation listed on the ASX with a market capitalisation of $237 billion, which equates to more than 11% of the total S&P/ASX 200 Index (ASX: XJO).
Santos Ltd (ASX: STO)
Santos is the other business that WAM Leaders referred to.
The fund manager noted that in January 2022, oil prices surged to the highest level since 2014, benefiting ASX shares like Santos.
WAM said that the rally was underpinned by a number of factors.
Those factors included strengthening demand following a decline in severity COVID-19 cases globally and mobility returning to pre-COVID levels. Stockpiles of oil are still low, with China at a bare minimum inventory level with the possibility of 'price-agnostic' restocking after the Chinese New Year.
Oil production has been interrupted due to a number of Organisation of the Petroleum Exporting Countries (OPEC+) members operating with spare capacity, limiting OPEC+'s ability to ramp up production meaningfully.
WAM also pointed to geopolitical tensions with Ukraine and Russia. Russia is responsible for supplying over 10% of global oil. There is a possibility of crippling sanctions against Russia.
The fund manager is expecting oil prices to stay high as these factors play out.
Santos is the preferred pick for rising oil prices because of the highly-rated management team and the expected realisation of synergies after the acquisition of the ASX share Oil Search.
WAM also said that the planned project equity sell downs over 2022 will provide the company with optionality to lift the dividend or accelerate the investment in the energy transition.
