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 15.2% per annum since its inception in May 2016. This compares to the S&P/ASX 200 Accumulation Index (ASX: XAOA) average return of 9.2% over the same period.
Below are two of the ASX 200 shares in the WAM Leaders portfolio the fund manager is positive about.
Incitec Pivot Ltd (ASX: IPL)
The fund manager noted Incitec Pivot is split into two businesses. Incitec Pivot Fertilisers is based on the east coast of Australia and focused on soil health for Australian farmers. Dyno Nobel is an explosive producer with global operations focused on mining, quarry, and construction end markets.
WAM noted the Incitec Pivot share price has been impacted by lower commodity prices, wet weather, plant shutdowns, termination of gas contracts, and management changes "to a point where the implied valuation for the fertiliser business neared zero".
The ASX 200 share has confirmed there are a number of parties interested in purchasing its fertiliser business, with media reporting the valuation as close to $1.5 billion. These reports recently drove the Incitec Pivot share price higher.
The WAM Leaders investment team said:
We remain confident in the outlook for Incitec Pivot, with its valuation low and multiple catalysts to realise value.
Rio Tinto Ltd (ASX: RIO)
One of the larger positions in the WAM Leaders portfolio is ASX 200 mining share Rio Tinto.
WAM's fund managers said they're excited by Rio Tinto's medium-term growth prospects in future-facing metals.
They noted the Oyu Tolgai copper project in Mongolia that's set to become the world's fourth-largest copper mine by 2030.
WAM Leaders also noted Rio Tinto's Jadar project, one of the world's largest greenfield lithium deposits. This project is currently going through a consultation period after environmental concerns triggered the Serbian government to revoke the project's license.
The final project on WAM Leader's radar is Resolution, a proposed copper mine in Arizona that "has the potential supply up to 25% of US copper demand".
