The fund manager Wilson Asset Management (WAM) has recently identified some S&P/ASX 200 Index (ASX: XJO) shares that it owns (or owned) in one of its main portfolios.
WAM operates several listed investment companies (LICs), including WAM Capital Limited (ASX: WAM) and WAM Research Limited (ASX: WAX).
There's also one called WAM Leaders Ltd (ASX: WLE) that looks at the larger businesses on the ASX, often referred to as ASX blue-chip shares.
WAM says WAM Leaders actively invests in the highest quality Australian companies. But does WAM have a good reputation for picking stocks?
The WAM Leaders portfolio has delivered gross returns (before fees, expenses, and taxes) of 14.4% per annum since its inception in May 2016. This compares to the S&P/ASX 200 Accumulation Index average return of 8.4% over the same time.
WAM outlined these ASX 200 shares in its recent monthly update.
Lendlease Group (ASX: LLC)
The fund manager described Lendlease as a globally diversified real estate business that operates through three main segments, property development, construction and investment.
WAM noted that the Lendlease share price fell to a 10-year low in mid-December because of concerns about the company's ability to "meet financial targets in a more challenging economic environment".
The investment team believe that the market is being too pessimistic, so used the decline to increase its position in the portfolio.
WAM also noted that the ASX 200 share has a new CEO, adding that the company had been "simplified and overall better positioned than the market implies to weather headwinds".
Concluding its thoughts about the business, the WAM investment team said:
We expect further returns over the medium-term and are impressed by the new strategic direction of the business, which is focusing on using the development pipeline to grow investment earnings, while reducing the exposure to construction will improve earnings predictability.
DEXUS Property Group (ASX: DXS)
This business was described as an Australian office, industrial and funds management real estate company.
The fund manager noted that Dexus traded at around a 40% discount to its asset backing at the start of December, which was the lowest level since the Global Financial Crisis of 2007-08.
WAM noted that back then, the market was impacted by "high debt margins, capital constraints and forced sellers".
But the conditions now were not the same. Demand for high-quality assets remained strong, according to WAM.
Explaining the positive outlook for the ASX 200 share, the investment team wrote:
As such, we remain confident on the further returns expected over the medium-term. We believe management are exceptional asset allocators, and are continuing to move up the quality spectrum by recycling lower-quality office assets into high-quality development projects.
Additionally, growth in Dexus' industrial and funds management businesses is impressive and diversifies the business from its pure office exposure. We continue to see value in Dexus with its strong balance sheet, with gearing well below its target range and long-dated average debt maturities.
