WAM Capital Limited (ASX: WAM) is one of the largest listed investment companies (LIC) in Australia.
The purpose of a LIC is to invest in other companies for the benefit of shareholders.
So, what are some features of WAM Capital?
History
WAM Capital was set up by Geoff Wilson in 1999 and he's been a part of the investment team ever since.
Focus
WAM Capital's investment focus is to buy undervalued growth companies that could see a 'catalyst' propel the share price higher.
The top 20 ASX businesses by market capitalisation aren't going to offer market-beating opportunities, which is why most of the top holdings are below the ASX50.
Performance
The key aspect to compare LICs on is performance.
Over the last five years the portfolio has returned an average of 20.8% per annum. This is before taxes, fees and expenses.
However, the total shareholder return over the last five years has been an average of 16.5% per annum. This has been helped by an increase of the premium to NTA per share.
Holds high levels of cash
One thing that I really like about WAM Capital (and the other WAM LICs) is that they aren't afraid to hold large amounts of cash. In its August update it revealed 28.9% of its portfolio was cash.
Holding large amounts of cash not only protects against downside risk but also means the investment team have ample ammunition to invest in any beaten-down share prices.
Dividends
WAM Capital has a very generous dividend policy of paying out a lot of the market-beating profit it makes each year.
It has increased its dividend every year since the GFC and currently has a grossed-up dividend yield of 8.44%.
Is it the best?
Its strong performance and large dividend make it the clear winner out of the large LICs since the GFC in my opinion.
I would be fairly hesitant to buy it at the current price because of how much the share price is trading above its NTA. However, I definitely think it's worth a buy in the long run and it could be trading cheaper in two to three months from now.
