The investment team at Wilson Asset Management (WAM) were touring the country in October to meet more than 150 companies to "check the pulse" of corporate Australia. It has found ASX share opportunities in sectors like tourism and mining services.
Let's have a look at some of the companies that the fund manager has unearthed as ideas.
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Mining services
WAM said that the outlook for mining services companies is "positive" with commodity prices "continuing to boost activity" coupled with borders reopening. The fund manager noted that Australia's open borders are leading to an easing of labour constraints.
There are various businesses in this sector that the company named, of various sizes. To give context for the size of these companies, I'll quote the market capitalisations from the ASX.
There's Seven Group Holdings Ltd (ASX: SVW) with a market capitalisation of $6.5 billion.
SRG Global Ltd (ASX: SRG) was another pick in the mining services sector, with a market cap of around $310 million.
NRW Holdings Limited (ASX: NWH), with a market cap of $1.1 billion, was another of the fund manager's picks from the sector.
Travel and international migration
While the investment team are noticing strong sales from the retail sector thanks to ongoing consumer spending, WAM is going with a "cautious view" because the impact of interest rate rises are yet to flow through to the industry.
However, in terms of consumer spending, the fund manager named tourism as an interesting sector to look at.
ASX travel shares are being bolstered by the reopened borders and consumer spending shifting from goods to services. It named Webjet Limited (ASX: WEB) as one of the ASX shares that is benefiting from the improvement of movement.
The fund manager also said that international migration is "finally recovering" and this is helping businesses that are involved in education and student placements, with Idp Education Ltd (ASX: IEL) also holding a place in the portfolio.
Getting insights into business performance
At the moment it's annual general meeting (AGM) season, with many companies giving updates as they tell shareholders how FY22 went, trading updates for FY23 and expectations for future growth.
WAM said:
Strong results are not being reflected in the share prices, due to the current uncertainty with the consensus view that a weaker economy will lead to earnings downgrades in the future. This is providing the team with plenty of strong opportunities to invest in companies trading at record low valuations.
One trend is clear, the market has a preference for companies with strong balance sheets that will give them the ability to weather the storm. A select group of companies are demonstrating that strength and taking advantage of depressed share prices by announcing capital management initiatives, including buy backs.
It will be interesting to see how the WAM portfolios develop as interest rate impacts start to flow through to households and ASX share reports.
