LIC & LIT Reading LIC share value...

Beginners question, but how can one read the share value/price?
For example, from google a search for AFIC gives the following 5 year data:


so reading that by itself the share price has barely moved when comparing the end of mid-2013 to now (with some fluctuations in the middle of course).
But Cuffelink says that AFIC has growth over 5 years at 9.9% pre-tax NTA per annum.

I don't see how the difference is made up from SPPs/DRPs - there's no dilution/share price change based on SPPs/DRPs is there?

Help

 

I may be wrong, but I'm guessing that this means the actual value of the shares owned by AFIC and the dividends paid have returned 9.9%. The share price doesn't necessarily follow NTA and more recently AFI is below NTA while it has been above in the past.

 

The marketindex.com.au website conveniently shows a representation of NTA in a form similar to the share price.

You can see it here on this screenshot. Handy if you don't want to be bothered looking up NTA on cuffelinks.
Share price $5.75
NTA $5.87

 

So does that mean the AFI shares are "trading below NTA", and are good value to purchase now? why?

 

9% NTA figure is the underlying NTA and includes dividends. So could be 4.5% per annum growth only on chart, plus 4.5% dividends each year paid out. They're counted in figure

Read austings beginners guide to LICs - answers all these questions, and explains better than i could

 

See attached:

 

@austing, in the beginners guide your diagram on pg13 shows the same for WHF - the share price (left y axis) starts arounf $4 in 2006 and end in 2016 at...around $4!

Cuffelinks shows that the nett yield for WHF is 3.8%, gross yield 5.5%, and 10 year NTA growth of 4.1%.

So if I buy @4 in 2006, sell @4 in 2017, take a 3.8% nett yield along the way through divs, then I see no capital growth - I bought at 5 and now sell at 5 = no CG.

Now in theory the 10 year NTA growth per annum is 4.1%. Presumably then, that Cuffelink "annual growth" is the addition of dividend + capital, not just capital (allowing that the difference between 3.8% paid out and 4.1% shown is made up of tax + management + some capital growth).
Is that correct?

If so, the AFI above had 5.0% 10-year growth (dividend + capital), the majority of which 4.2% was through dividends. But that's essentially the capital not keeping up with inflation!
I'm confused...how can you retire on LICs when capital isn't keeping up with inflation? I thought the common/"usual" is 4-6% dividend and 4-6% capital (on a mild/mid-risk profile, not aggressive)

 

GFC

What's with 10 years? If you are focused on 10 year charts, what 2 more years

 

Ah, ok. Thanks. So the reasoning right (almost no CG since GFC)?
I used the 10 years because that's what Cuffelinks has in it's table and is easy to compare many LICs on one page.

 

Pull up the 10 year ASX200 chart and all will be revealed.

 

NTA used in performance calcs is capital plus dividends net of all costs / fees / tax. It doesn't include franking credits.

The 10 year time period in question included a little thing called the GFC at the start. You're assuming all your retirement savings were invested around the start of this period.

The red lines shown in the following chart are somewhat more representative of what a long term investor would experience. Top red line is for an accumulator (dividends reinvested) and the lower red line for a retiree drawing on ALL their dividends. Franking credits are not included which could improve returns depending on structures used to invest in.



Perhaps consider attending a Thornhill course and ask him to explain it.

Not advice.

PS: Whilst typing I just see now that @Il Falco has already given you the short answer.

 

Thanks @austing - AFI and WHF really look the same as the XJO since 2006 rather than the XJOAI. I thought they both measured against the latter though.

I'm certainly not assuming 2006 as the start point - in fact any purchase of AFI or WHF from 2006 to now would be pretty much the same: going backwards on CG even with the lowest inflation in decades, with the benefit of holding only being dividend yield.

The diagram you gave looks just like a property play - hold and wait for a boom (hope for CG over the time you have - I started late so haven't as much!) with a yield play as CF+. For some reason I thought shares (index) was a different beast - very much a newby and still learning.

 

AFI and WHF charts don't include dividends so they can't be compared with dividend accumulation indexes (suffixed by "AI"). It's very difficult to get hold of direct shares / LICs data wth dividends reinvested. So all you can do is compare these with major indexes that don't include dividends. That is WHF / AFI vs XJO (Not XJOAI).

This chart below might help:

 

@austing - would be great if you could post a sticky covering these two charts on the FB group. I'm sure plenty of people would appreciate it.

 

As @austing would attest to, Value, Like Beauty, Is In The Eye Of The BeerHolder.

 

I don't think the above second chart would be well received on the FB page. Below is my chart of Industrials vs ASX 200 vs Resources for the last 25 years. I'm pretty confident the chart is accurate. Following that is Peter T's chart to end of 2015 over 37 years.

In the last 25 years the difference between Industrials and ASX 200 / All Ords is roughly around 0.6% in favour of Industrials. The discrepency between the two charts was discussed in depth in the Thornhill thread. I did at one stage email Peter about it but didn't get an answer. So it's still a bit of a mystery.

 

Most don't show more than ten years because after every market downturn/shakeout, or significant negative returns, they close the fund and start again.

They brag about being around for decades, but don't you think they would brag about the returns too, if they were good.

edit: from another thread

 

Its called being selection, they also the same with property graphs, that's why I ignore them, main thing is to get your timing right, otherwise you are up the creek without a paddle.

 

Only 0.6%? Wondering why all the noise about industrial tilted LICs over the likes of say AFI, AUI etc.

 

Yep, fair observation. The one thing in common though is a focus on dividends. Typically any resource stocks owned by these LICs have a history of paying dividends albeit more volatile. Peter T has posted an interesting chart comparing ARG, MLT and WHF against Buffet's Berkshire Hathaway on the Thornhill Enthusiasts Facebook Page started by @Gockie.

Join and check it out if interested. You can ask Peter T questions directly there. Search Facebook using "Peter Thornhill share investing enthusiasts".