The leading investors from Wilson Asset Management (WAM) have told investors about two compelling All Ordinaries Index (ASX: XAO) ASX shares on their radar.
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 15.3% per annum since its inception in August 1999. That's before fees, expenses, and taxes. This gross return outperformed the All Ordinaries Total Accumulation Index (ASX: XAOA) return of 8.5% per annum over the same timeframe.
Here are the two ASX shares WAM Capital has outlined in its recent monthly update.
Codan Limited (ASX: CDA)
WAM describes Codan as a technology company that develops a range of radio and detection products.
The fund manager pointed out that in May 2022, the company provided a "positive" market update. The update showed that it's expecting to generate a record full-year profit in FY22, thanks to its strategy to diversify revenue.
The ASX share also says that the increase in profitability of its communications division contributed to the potential for Codan to match its record FY22 first-half profit of $50 million in the second half of the financial year.
WAM says that the company noted the expanding opportunity pipeline for Domo Tactical Communications and Zetron businesses are tracking "ahead of schedule". Codan acquired the two businesses in 2021. The expectation is that both companies will deliver a strong result for the six months to June 2022.
The fund manager is positive about the upcoming Codan FY22 report and believes in management's ability to sustain profits.
Johns Lyng Group Ltd (ASX: JLG)
This business continues to be one of the preferred picks by WAM.
Johns Lyng is an integrated building services group delivering building and restoration services across Australia and the United States.
WAM points out that last month, the ASX share announced its managing director and CEO Scott Didier and executive director and chief operating officer Lindsay Barber each sold 1 million shares in the company. The reason provided was to "manage their personal asset portfolios".
As the fund manager noted, the share sales represented a small percentage of their holdings in the company, but this still led to a decline in the Johns Lyng share price after the update.
But, the ASX share did say that it's on track to reach its FY22 guidance. Those targets are sales revenue of $802.4 million and earnings before interest, tax, depreciation and amortisation (EBITDA) of $78.7 million.
The fund manager calls Johns Lyng a quality business with an "important role" in managing ongoing catastrophes. As an example, WAM referred to the appointment to lead New South Wales' flood recovery response earlier this year. WAM thinks that further projects will increase its profits in the future.
