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 biggest 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 companies 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 14.8% per annum since its inception in May 2016. This compares to the S&P/ASX 200 Accumulation Index's average return of 8.8% over the same period.
These are two ASX 200 shares that the WAM Leaders investment team picked out.
Medibank Private Limited (ASX: MPL)
WAM Leaders revealed that it added Medibank Private shares to its portfolio late last year after the "cyber breach incident" and subsequent earnings guidance downgrade.
The large Australian private health insurer suffered from a share price decline. But, after the negative news flow "dissipated" and the share price still hadn't recovered, the WAM Leaders team thought that the negative sentiment was "overdone".
WAM noted that the result released in February 2023 was "strong", with health insurance claims remaining "subdued" because the healthcare system is "capacity constrained" due to the lack of staff, while industry growth remains "buoyant", driven by net migration and new participants domestically.
The fund manager also pointed out that the ASX 200 share noted its policyholder numbers had "stabilised" and the outlook has "improved for the year ahead."
Brambles Limited (ASX: BXB)
The WAM investment team described Brambles as a business that specialises in the pooling of unit-load equipment. The ASX share has been in the WAM Leaders portfolio for over 12 months.
WAM said that Brambles' half-year result in February was "strong", which was driven by "significant pricing increases."
Brambles is expecting its cash flow to remain in outflow this year. But, it upgraded its earnings guidance and noted cash flow pressures will "ease into next year as capital expenditure slows."
The fund manager finished its bullish case on the ASX 200 share with the following:
Going forward, we expect profitability to be a key focus, with pricing increases in a tight market continuing while pallet efficiencies improve. The impact of pallet destocking as the economy slows should help bring more balance to the pallet market globally.
