Enero is one of the ASX shares that WAM likes right now.
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Leading fund manager Wilson Asset Management (WAM) has revealed two ASX shares that it rates as buys within the WAM Research Limited (ASX: WAX) portfolio.
WAM operates several listed investment companies (LICs). Two of those LICs are WAM Capital Limited (ASX: WAM) and WAM Leaders Ltd (ASX: WLE).
One of the LICs is called WAM Research, which looks at smaller businesses on the ASX.
WAM describes WAM Research as a LIC that invests in the most compelling undervalued growth opportunities in the Australian market.
The WAM Research portfolio has delivered gross returns (that’s before fees, expenses and taxes) of 16.5% per annum since the strategy changed in July 2010, which is superior to the S&P/ASX All Ordinaries Accumulation Index return of 9.6% per annum.
These are the two ASX shares that WAM outlined in its most recent monthly update:
Codan Limited (ASX: CDA)
WAM said that Codan was a detractor from the portfolio performance during October 2021.
The fund manager described the business as a manufacturer and supplier of communications and metal detection products to security and military groups, governments and consumers globally.
In its comments at the annual general meeting (AGM) about its trading it said that its existing businesses are tracking in line with FY21’s record first half profitability. This was below market expectations, with slower than anticipated organic growth in the metal detection business being the key driver.
WAM said this was disappointing in the short-term, but the medium-term outlook remains “positive” for the ASX share, underpinned by significant ongoing investment in product development and expansion into new markets.
The fund manager also pointed out that during the month, Codan announced it had secured a significant multi-year contract supplying communications equipment to a military program, with the outlook for further potential awards remaining “positive”.
Enero Group Ltd (ASX: EGG)
Enero was described as a global marketing and communication services business that employs over 650 staff across 13 cities around the world.
At the company’s recent annual general meeting (AGM), Enero Group provided an “impressive” trading update with growth ahead of market expectations.
WAM noted that for the three months to September 2021, Enero’s quarterly revenue increased to $45.6 million, which was a 22.6% year on year rise, with its Hotwire, BMF and OB Media businesses that the fund manager said outperformed.
The fund manager said that Enero’s management expect the strong momentum to continue and WAM sees further upside to consensus earnings estimates.
WAM points out that the ASX share continues to trade at a material discount to offshore peers despite a stronger growth outlook.
It was also noted by the investment outfit that Enero’s balance sheet provides “ample room” for acquisitions that would improve the business in the future. The upcoming initial public offering (IPO) of the comparable business called System1 in the United States could end up being a catalyst that ends up helping Enero Group’s valuation.
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Should you invest $1,000 in Codan right now?
Before you consider Codan, you’ll want to hear this.
Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Codan wasn’t one of them.
The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.
*Returns as of August 16th 2021
Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.