Wilson Asset Management LIC WAM Capital (ASX:WAM) has outlined the investment case for 2 ASX shares including Bega Cheese Ltd (ASX:BGA).
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Respected fund manager Wilson Asset Management (WAM) has recently identified two ASX shares that it owns in its portfolio.
WAM operates several listed investment companies (LICs). Some focus on larger companies like WAM Leaders Ltd (ASX: WLE) and WAM Research Limited (ASX: WAX).
There’s also one called WAM Capital Limited (ASX: WAM) which targets “the most compelling undervalued growth opportunities in the Australian market.”
The WAM Capital portfolio has delivered an investment return of 16.3% per annum since inception in August 1999, before fees, expenses and taxes. This gross return outperformed the S&P/ASX All Ordinaries Accumulation Index return of 8.3% per annum over the same timeframe.
These are the two ASX shares that WAM Capital outlined in its most recent monthly update:
Bega Cheese Ltd (ASX: BGA)
WAM describes Bega Cheese as a leading Australian dairy and food company. It has 2,000 employees and produces 236,000 tonnes of dairy products each year.
The fund manager explained that the dairy company is undertaking a strategic shift in its operations to move production and volume higher up the dairy value chain, de-risking exposure to pure commodity markets.
In January, Bega announced the successful acquisition of Lion Dairy & Drinks for $534 million.
The acquisition will double the ASX share’s annual revenue to $3 billion, strengthen Bega Cheese’s dairy footprint and will see a significant expansion of the company’s domestic distribution network.
Fletcher Building Limited (ASX: FBU)
WAM describes Fletcher Building as a manufacturer of building products, a diversified construction business and partner on major infrastructure projects, with 10,000 employees across New Zealand, 5,000 in Australia and 800 across the South Pacific.
The fund manager said that data from the Australian Bureau of Statistics (ABS) showed housing loan construction commitments rose 119% in 2020. A record low interest rate environment, together with accommodative policies from the Australian government, such as the homebuilder grant, will continue to support building materials companies such as Fletcher Building going forward and WAM expects earnings upgrades to come through at the upcoming half-year result.
At the company’s annual general meeting (AGM) it gave guidance that FY21 first half earnings before interest and tax (EBIT) and before significant items is expected to be in the range of $305 million to $320 million. In the first half of FY20, EBIT before significant items was $219 million. That means that Fletcher Building is expecting half-year underlying EBIT to rise by 39.2% to 46%.
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Motley Fool contributor Tristan Harrison 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.
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