2 hot share picks from a top fund manager

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When it comes to listed investment companies (LICs) they don’t come any bigger than Australian Foundation Investment Co.Ltd. (ASX: AFI) which has a market capitalisation of $6.3 billion. This is around $1.4 billion ahead of the next largest LIC Argo Investments Limited (ASX: ARG).

Amongst the appealing attributes of Australian Foundation as an investment option for investors are:

  • the group’s portfolio offers a low risk way for a shareholder to gain exposure to a diversified cross-section of blue chip stocks
  • the remarkably low management expense ratio of just 0.16%
  • the long track record of growing dividend payments
  • the long term track record of outperforming its benchmark the S&P/ASX 200 Accumulation Index

Two top picks

With Australian Foundation recently releasing a half yearly review, investors can learn about two new additions to the portfolio which management singled out.

  1. Challenger Ltd (ASX: CGF) – with its focus on providing Australian retirees with financial security via its range of annuity products, Australian Foundation presumably is drawn to Challenger’s leading market position. Given the poor returns many super funds have produced over the past decade –  a period in which the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has gained a measly 3% – the outlook for alternative offerings such as annuities would appear bright.
  2. Macquarie Group Ltd (ASX: MQG) – Australia’s leading investment bank can boast of impressive global operations that provide services ranging from banking and financial advisory to investment and funds management. These services in turn are offered to a range of clients including institutional, corporate and retail clients across the globe. Australian Foundation highlighted Macquarie’s asset management business as particularly strong with over $502 billion of assets under management across the spectrum of asset classes including infrastructure, real estate and equities.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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