One of the highest performing listed investment companies (LICs) in Australia over the past decade or two has been WAM Capital Limited (ASX: WAM). According to its latest monthly update to 31 December 2017 its portfolio had generated average returns per annum of 12.2% over the past ten years and 17.1% over the past five years.
Any investor who can achieve those types of returns is worth studying, particularly if that LIC updates the market about its top holdings.
Today, WAM Capital revealed in an ASX release that it increased its ownership of Wealth Defender Equities Ltd (ASX: WDE) from 13.01% to 14.02%.
Wealth Defender is another LIC, it aims to outperform the S&P/ASX 300 Accumulation Index by investing in a diversified portfolio of Australian shares whilst using derivatives and cash to protect the portfolio through market cycles.
According to Wealth Defender’s latest investment performance update it has underperformed its benchmark over the last year and since inception in May 2015.
Its top holdings are fairly similar to the index, but I don’t think that’s why the WAM investment team are interested.
According to its latest weekly net tangible assets (NTA) per share update, Wealth Defender estimated that its pre-tax NTA on 25 January 2017 was $0.9815, which is a discount of around 6% compared to the share price of $0.925.
WAM Capital is known for identifying these NTA discounts in LICs and then through various methods bringing the discount much closer to 0%.
Perhaps unsurprisingly, Wealth Defender announced that it intends to undertake an on-market share buy-back of around 12.5 million shares as part of a capital management plan over the next 12 months.
This seems like a classic move by the WAM team and is likely to work out well for them as WAM Capital has used this market-driven tactic before. I don’t think it’s a reason to necessarily buy Wealth Defender shares, but it speaks volume of the acumen of the WAM team.
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Motley Fool contributor Tristan Harrison owns shares of WAM Capital Limited. 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.