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Wilson Asset Management (WAM) is a fund manager who likes to search the stock market to find ASX stocks that look like opportunities.
Typically, WAM likes to look for companies where a catalyst could drive the company’s valuation up.
One of the funds it operates is the Listed Investment Company (LIC) WAM Active Limited (ASX:WAA).
The idea behind WAM Active is to find mispricing opportunities in the Australian market.
Since its inception in January 2008, this LIC has generated a gross return of 11% per annum, ie before expenses, taxes and fees.
Here are the two ASX shares described in the latest WAM Active update:
Wilson Asset Management described Steadfast Group as the largest general insurance brokerage network and a group of underwriting agencies in Australasia, with growing operations in Asia and Europe.
Last month, insurance share ASX announced its FY22 half-year result, which beat expectations, according to WAM. The fund manager noted that Steadfast’s underlying net profit after tax (NPAT) rose 26.4% to $76.3 million.
WAM explained that a positive environment for commercial insurance policy pricing and the successful integration of previous acquisitions helped the company beat expectations. Explaining why Steadfast is part of the WAM Active portfolio, the fund manager said:
We remain positive about Steadfast Group’s outlook and believe that a strong balance sheet can give the company the ability to continue to make accretive acquisitions.
Wilson Asset Management said this company is focused on building basic telecommunications infrastructure. It is also the owner and operator of fiber optic cable networks across Australia.
In February 2022, the company announced its half-year results for FY22, showing a 98.4% increase in revenue to $109.5 million and a 130.3% increase in operating cash flow to $65.4 million. Uniti’s half-year earnings before interest, tax, depreciation and amortization (EBITDA) rose 140.3% to $70.5 million.
WAM noted that the result was in line with market expectations, but the report disappointed the market – Uniti’s share price fell after the announcement.
The fund manager believes Uniti has the ability to make accretive acquisitions due to its “strong” balance sheet. ASX stock also recently started a market buyback.
WAM is not the only investor to think Uniti looked like good value for money.
Uniti has entered into exclusive discussions with HRL Morrison & Co, a New Zealand asset manager. There is a non-binding conditional indicative quote for an indicative price of $4.50 per share.
There is also speculation that Macquarie Group Ltd.‘s (ASX:MQG) Vocus Group may be interested in making an offer for Uniti.