The fund managers from WAM Leaders Ltd (ASX: WLE) have revealed two S&P/ASX 200 Index (ASX: XJO) shares that they're excited about.
WAM Leaders — a listed investment company (LIC) under Wilson Asset Management — focuses on actively investing in the "highest quality Australian companies". Those investment targets are typically from the ASX 200.
At the moment, the WAM Leaders investment team has a significantly smaller position in the ASX financial share sector compared to how the ASX 200 is invested. Positions it's most 'underweight' compared to the index are Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC) and ANZ Group Holdings Ltd (ASX: ANZ).
However, the WAM Leaders fund managers recently highlighted two ASX 200 shares that they do like.
QBE Insurance Group Ltd (ASX: QBE)
Shares in this global commercial insurer have rallied more than 17% since 4 November. The WAM team attributes this rise to the global bond yield rally following Donald Trump's win in the US election, which will benefit QBE's future investment income.
The investment team said the Republican candidate's win had led to expectations of sustained budget deficits, proposed tariffs and the potential for an "upside surprise in inflation."
Investment income is an important driver of QBE's earnings – it contributes more than 40% of the company's pre-tax profit, according to WAM.
In QBE's recent quarterly update, the ASX 200 insurance share said it was on track to meet its earnings guidance, with its global catastrophe costs currently running below their allowance.
WAM concluded with the following:
We are positive about the outlook for QBE as we expect to see a further unwinding of the valuation discount and potential capital management activity in the form of a buyback.
Sonic Healthcare Ltd (ASX: SHL)
WAM described Sonic Healthcare as a global pathology services provider with specialist operations in pathology, radiology, general practice medicine and corporate medical services.
The ASX 200 healthcare share provided a trading update at its November annual general meeting (AGM), with the company's performance stronger than the market had expected.
Sonic Healthcare said revenue growth was 10% in the first four months of FY25 to October 2024, and earnings growth was stronger than that. WAM pointed out that this update was stronger than what competitor Healius Ltd (ASX: HLS) told the market last month.
The team from WAM Leaders believe that Sonic Healthcare's profit margins could improve from here thanks to both revenue growth and a focus on costs:
We believe that margins are at an inflection point for Sonic Healthcare, as stronger revenues are supported by a cost management program which is nearing completion.
As current economic data suggests, inflationary pressures on labour and other costs also continue to ease. We are monitoring industry data closely, to ensure these favourable trends for Sonic Healthcare are continuing.
