Listed Investment Companies (LICs)

Discussion in 'Other Asset Classes' started by The Falcon, 21st Jun, 2015.

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  1. Pins

    Pins Well-Known Member

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    Just found this thread. Great insight! What is the main advantage of an LIC like Argo over a managed fund? Is it the low fees? More passive less active approach?
     
  2. The Falcon

    The Falcon Well-Known Member

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    Low fees, low turnover, more tax efficient. Unlisted managed funds can be useful (ie. Small cap) but for large cap ASX I don't think they are particularly attractive.

    The other day I was having a look at AFIs turnover, it's exceptionally low. (Excluding buy-write portfolio). Those wanting to take individual positions for long term buy and hold could do worse than using AFI / ARG / MLT top 25 holding lists as a starting point....these LICs enter these positions with the intention of holding for a very long time, so likeminded investors could clone these holdings on weakness, and can perhaps load up on value in way that the large LICs can't.
     
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  3. BingoMaster

    BingoMaster Well-Known Member

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  4. Pins

    Pins Well-Known Member

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    Article in Eureka Report today recommending BKI as an LIC that invests in large caps but is trading at a discount to NTA?
     
  5. BingoMaster

    BingoMaster Well-Known Member

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    What does it mean when a LIC (currently trading at a discount to NTA) announces it is buying back it's own shares? I am invested in WMK, which I bought a little while back around the 90c mark. Now trading at 95c ish, and it's NTA is 1.03.

    I know share buybacks are generally a good sign for stocks, but just getting my head around what it means for a LIC. Is it an attempt to get the share price closer to NTA?
     
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  6. D.T.

    D.T. Specialist Property Manager Business Member

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    Quite possibly. What amount/price have they offered to buy back at?
     
  7. The Falcon

    The Falcon Well-Known Member

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    Ok, first time I've come across this LIC.

    Per buyback notice, up to 10% of issues shares, at market over 12 months.

    http://www.asx.com.au/asxpdf/20150828/pdf/430xgrw87qtb4t.pdf

    Yes, shrinking the share count will close the NTA discount, all else being equal. Buybacks are a common capital management technique and can be very effective in the case of undervalued assets.
     
  8. BingoMaster

    BingoMaster Well-Known Member

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    Thanks for the replies.

    I really find investing in LICs to be quite rewarding. It seems like they're certainly an area where the market isn't always efficient. A few free lunches seem to get put on by the market in tougher times. And during market falls, the older established LICs put on expensive lunches. Though this is good if you felt like selling, I guess.

    Seems like WMK should be a reasonably good investment. It's a relatively new LIC, but I checked the trading history back to 2013 and the discount to NTA was only temporary, after the LIC underperforming for a period. And at the price I invested the dividend yield alone should be a reasonable return (5.5%).

    Though with some LICs trading at a discount to NTA, there is no reason why the price might ever track back up to meet the NTA, I think this might be less likely with the LICs that pay out strong dividends. If not, suits me anyway as I could keep buying more at a better dividend yield, should I want to.
     
  9. Ouga

    Ouga Well-Known Member

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    Hi guys, is there an easy way to get today's NTA for a given LIC to see the premium/discount to share price? I am looking at say AFI and want to know its NTA today without having to wait for the end of month update - is there any convenient way to do this? I had a look at the commsec info but could not find it.

    This info would make it easy to grab LICs when they are at or under NTA.

    Thanks
     
  10. The Falcon

    The Falcon Well-Known Member

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    Depends how hard core you want to be. For something like AFI I think you can just look at XJO movement. So, at 31 August XJO close was 5207. NTA at 31 August was 548cps. XJO yesterday's close was 5042, so approx -3%. Now just do the same with AFI NTA , so NTA at yesterday's close approx 531cps. SP at close 573cps. So approx ( within 1-2%) AFI is trading at an 8% premium.

    Now, if you want to be hardcore about it you construct an xls listing top 25 holdings, by weight and track movements that way. But for something that isn't too far from the index then the former will suffice imho.
     
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  11. Ouga

    Ouga Well-Known Member

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    "Trying is the first step towards failure" Homer
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