The leading investors from Wilson Asset Management (WAM) have shared thoughts on two ASX shares.
WAM operates several listed investment companies (LICs). Some, like WAM Leaders Ltd (ASX: WLE), focus on larger companies.
Meanwhile, WAM Capital Limited (ASX: WAM) targets "the most compelling undervalued growth opportunities in the Australian market".
But does WAM have a claim of stock-picking pedigree? The WAM Capital portfolio has delivered an investment return of 14.9% per annum since its inception in August 1999. That's before fees, expenses, and taxes. This gross return outperformed the All Ordinaries Accumulation Index (ASX: XAOA) return of 8.3% per annum over the same timeframe.
With that in mind, here are the two ASX shares WAM Capital has outlined in its recent monthly update.
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Estia Health Ltd (ASX: EHE)
Estia Health was described as a leading residential aged care provider in Australia, which operates in NSW, Queensland, South Australia, and Victoria.
The aged care ASX share recently received a $775 million takeover offer from private equity outfit Bain Capital. The offer was that shareholders would get $3 per share, which was a premium of around 28% compared to the closing price of $2.34 on 23 March 2023.
WAM noted that the takeover proposal came before the industry is due to receive "crucial regulatory clarity" around the national aged care reforms that are expected later this year.
The fund manager noted:
We expect that quality aged care operators with scale, like Estia Health, will attract further interest from strategic and financial investors, given the prohibitive cost to build new centres and a more favourable government funding environment.
Neuren Pharmaceuticals Ltd (ASX: NEU)
WAM described Neuren Pharmaceuticals as a business that's developing new therapies for highly debilitating neurodevelopment disorders that emerge in early childhood, which currently do not have approved treatment medicines.
The fund manager pointed out that in March, the ASX share announced that its North American partner Acadia Pharmaceuticals received the US Food and Drug Administration (FDA) approval for its compound trofinetide after it showed positive results for the treatment of Rett syndrome.
WAM explained that as it is the first and only approved treatment for this genetic condition, Neuren Pharmaceuticals is set to receive US$40 million from Acadia Pharmaceuticals after the first commercial sale of trofinetide in the US and ongoing royalties on annual sales.
The investment team concluded:
We believe the company's deep expertise in new drug development and strong forecasted earnings growth will allow the business to maintain its positive momentum.
