The leading investors from Wilson Asset Management (WAM) have told investors about two compelling All Ordinaries Index (ASX: XAO) ASX shares that are liked.
WAM operates several listed investment companies (LICs). Some, like WAM Leaders Ltd (ASX: WLE), focus on larger companies.
WAM Capital Limited (ASX: WAM) targets “the most compelling undervalued growth opportunities in the Australian market”.
Does WAM have a claim of stock picking pedigree? The WAM Capital portfolio has delivered an investment return of 15.7% per annum since its inception in August 1999, before fees, expenses, and taxes. This gross return outperformed the All Ordinaries Total Accumulation Index (ASX: XAOA) return of 8.6% per annum over the same timeframe.
These are the two ASX shares that WAM Capital outlined in its most recent monthly update:
GUD Holdings Limited (ASX: GUD)
WAM describes GUD as a business that owns a portfolio of companies in the automotive aftermarket and water products sectors with the “principal” markets being Australia and New Zealand.
The fund manager pointed out that the All Ordinaries ASX share released a trading update last month at an investor day.
The company revealed that revenue had recovered strongly in March as COVID-19 disruptions receded.
GUD showed that the backlog in dealer sales was at a historically high level, which is expected to support revenue growth in the shorter term. New vehicle sales are expected to return to pre-COVID levels in the medium term.
However, the company did say that inflationary pressure in the costs of freight, supply, and materials will increase prices in the first half of FY23.
WAM noted that despite the cost pressures being experienced by the business, it reaffirmed its guidance for FY22 that underlying earnings before interest, taxes, and amortisation (EBITA) will be in the range of between $155 million and $160 million.
The fund manager said its outlook for the All Ordinaries ASX share is “strong” and it’s confident the company can deliver on its FY22 guidance.
Credit Corp Group Limited (ASX: CCP)
Credit Corp is the other All Ordinaries ASX share that WAM referred to in the WAM Capital portfolio.
The fund manager said Credit Corp is Australia’s largest provider of “sustainable financial services” in the credit impaired consumer segment.
WAM pointed out that last month the Credit Corp share price dropped on the news that the recovery in credit card spending among Australians is taking longer than expected since the decline experienced during the lockdowns.
The slower-than-expected recovery has meant there has been a delay in the recovery of purchased debt ledger (PDL) volumes, which WAM points out is a core driver of earnings growth for Credit Corp.
But, WAM is confident thanks to a resumption of “typical” spending patterns in the US, which it thinks means that credit card spending will return in the Australian market.
The fund manager says the All Ordinaries ASX share continues to leverage the strength of its balance sheet to “tactfully” acquire a number of assets, which will help keep earnings momentum going within the business.
Last month, Credit Corp confirmed that it had completed the deal to buy the New Zealand ledger book of Collection House Limited (ASX: CLH) after buying the Australian ledgers in December 2020.
WAM is “positive” on the outlook of the business, with a number of medium-term growth drivers for its US PDL and global lending businesses.