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Why WAM Microcap Limited owns shares of this company

One of the best performing listed investment companies (LIC) over the past six months has been WAM Microcap Limited (ASX: WMI). Since its inception in June 2017 the portfolio has returned a total of 23.1% to 30 November 2017.

It has achieved this strong performance whilst maintaining a good amount of cash on hand for protection as well as opportunities. In its November update it revealed that 19.7% of the portfolio was in cash.

I think the WAM investment team are one of the best investment managers out of all the LIC choices and how they invest clearly works very well.

I think it’s worth looking at some of the top holdings to see what has worked well for the portfolio and where the WAM team believe future strong returns will come from.

One of the top holdings is Integral Diagnostics Ltd (ASX: IDX). As the name might suggest, it’s a small diagnostics business. It has three different businesses called Global Diagnostics, Lake Imaging and South Coast Radiology.

Integral has a promising future as the Australian population ages and more people need treatment, which usually starts with a diagnosis. Over time there will be even better equipment which patients will likely have to pay more for.

One of the main reasons why the WAM Microcap team might be interested in Integral Diagnostics is that Capitol Health Ltd (ASX: CAJ) has made an-off market takeover offer of 6.9 fully paid ordinary shares of Capital and $0.36 cash per share.

This offer represented a 30% premium to Integral’s previous share price at the time. However, the board of Integral are working with advisors to review the offer but for now the board recommended shareholders to take no action in relation to the takeover offer.

If the recommendation by the board is to reject the offer then Capitol may have to up the offer, which could increase Integral’s price even further.

Foolish takeaway

Either way, it appears WAM Microcap’s portfolio has benefited from the takeover offer. It wouldn’t surprise me if the next portfolio update shows that it has sold its Integral shares and crystallised the gain to move onto other targets.

If Integral seems too small for your portfolio, then these top growth shares could be what your portfolio needs.

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Motley Fool contributor Tristan Harrison owns shares of WAM MICRO FPO. 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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