Why WAM Capital Limited owns shares of Platinum Asset Management Limited

Chinese Citizens Watching Stock Market at China Securities in Beijing, China, August 24, 2015

WAM Capital Limited (ASX: WAM) is one of the highest-performing listed investment companies (LICs) and has a great record over the last two decades.

The LIC releases a monthly update with its latest performance and some of its top holdings. Over the last three years the WAM portfolio has returned 17.4% per annum over the past three years, outperforming the S&P/ASX All Ordinaries Accumulation Index by 8.2% per annum.

Its latest top holdings suggest which shares it believes will beat the market in the near future.

One of its top holdings in its December 2017 update was Platinum Asset Management Limited (ASX: PTM).

Platinum is an investment manager that focuses on international shares, particularly Asia. The fund manager has a focus on long-term returns and is index-unaware. Platinum’s portfolios give investors very different exposures to index funds.

The Platinum share price has risen by 95% since 31 May 2017, which is largely thanks to the funds under management (FUM) increasing from $23.96 billion at the end of April 2017 to $27.1 billion at the end of December 2017.

The fund manager has really turned it around and is now attracting more funds under its belt. It also has delivered a good run of outperformance in recent times for a lot of its products. This should grow its normal management fees and also its performance fees.

Platinum has a great chance of delivering a very good result next month and it also helps that Platinum has a grossed-up dividend yield of 5.16%.

Foolish takeaway

Australian investors are looking for a better place for their cash than the Australian market and Platinum could be a big beneficiary over the next few years. It’s currently trading at 25x FY18’s estimated earnings, which could still be good value today.

Asia is a fast-growing region, which is why this stock could also be a great investment.

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Motley Fool contributor Tristan Harrison owns shares of WAM Capital Limited. The Motley Fool Australia owns shares of Platinum Investment Management Limited. 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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