Leading fund manager Wilson Asset Management (WAM) has revealed two ASX shares that it rates as buys within the WAM Research Limited (ASX: WAX) portfolio.
WAM operates several listed investment companies (LICs). Two of those LICs are WAM Capital Limited (ASX: WAM) and WAM Leaders Ltd (ASX: WLE).
One of the LICs is called WAM Research, which looks at smaller businesses on the ASX.
WAM describes WAM Research as a LIC that "invests in the most compelling undervalued growth opportunities in the Australian market".
The WAM Research portfolio has delivered gross returns (that's before fees, expenses, and taxes) of 15.3% per annum since the investment strategy changed in July 2010, which is superior to the All Ordinaries Total Accumulation Index (ASX: XAOA) return of 9% per annum.
These are the two compelling ASX shares that WAM outlined in its most recent monthly update for WAM Research.
Accent Group Ltd (ASX: AX1)
The fund manager described Accent Group as an Australian-based company that operates more than 700 stores, over 20 online platforms with 19 brands including Platypus, Vans, and Skechers, that are focused on the footwear sector.
WAM pointed out the company recently announced its FY22 half-year result that included earnings before interest and tax (EBIT) of $30.3 million which was in line with market expectations.
The fund manager noted that Accent Group highlighted in its result that trading in January and February 2022 was severely impacted by COVID-19-related disruptions in Australia and New Zealand, with deliveries from some external suppliers delayed.
Why is WAM particularly bullish on Accent? The fund manager said it believes Accent Group's trading will improve and the relaxation of restrictions should contribute to increased foot traffic across its store footprint.
Ardent Leisure Group Ltd (ASX: ALG)
Ardent Leisure is the other ASX share named in the WAM Research portfolio.
This company operates in Australia in the US. It may be best known for its theme parks, including Dreamworld and WhiteWater World.
Ardent Leisure was one of the better performers for the WAM Research portfolio last month after beating expectations in its half-year report with its "key" US business called Main Event Entertainment. What does Main Event do? It operates 45 bowling centres in 16 US states.
WAM noted that Main Event Entertainment continued to outperform 'constant centre revenue' expectations with growth of 20% in the financial year to date compared to pre-COVID levels in FY20.
The Ardent Leisure share price jumped 18% after investors got a look at the result.
The ASX share reported that its EBIT jumped 98.9% to a loss of $0.5 million. The net loss after tax improved 55.3% to $36.8 million.
WAM said Main Event Entertainment's growth pipeline remains "robust" with plans for three new centres to open in the second half of FY22.
The fund manager believes that as domestic and international border restrictions ease, momentum will return to the entertainment sector. It sees a strong outlook for both Main Event Entertainment and Dreamworld.
