If one of the top performing listed investment companies (LICs) owns shares in a small cap, then I believe it's worth having a look to see if that small cap would be a good fit for our portfolios.
WAM Capital Limited (ASX: WAM) is one of the largest LICs in the country and also has one of the most impressive track records. Its portfolio has returned an average of 15.4% per annum over the past five years, before fees.
It manages to identify unloved stocks like Nine Entertainment Co Holdings Ltd (ASX: NEC) and make excellent returns from them. The Wilson Asset Management investment team also have a knack for identifying good up-and-coming shares or attractive value opportunities.
The WAM group of LICs own enough of Ask Funding Limited (ASX: AKF) to be counted as a substantial holder, in-fact between them the WAM group owns 12.71% of the company.
In November 2011 shareholders approved the run-off and closure of Ask Funding's loan books to new loans. The business' current activities are now limited to servicing and amortising its current loan books with the sale objective of distributing all surplus funds to shareholders.
In its half-year report for the six months to 31 December 2017 the company said that it has returned $5 million to shareholders through franked dividends and returns of capital. However, management said that the loan book makes it hard to predict the amount and timing of future distributions to shareholders.
I can see why WAM Capital is interested in the company because it says that net tangible assets per share is 4.9 cents and the current share price is 2.1 cents.
Foolish takeaway
Ask Funding will eventually de-list from the ASX, so I don't think any regular investor should try to get a piece of it. However, it goes to show there are value opportunities out there in the smaller end of the market and also shows how talented the WAM team are at finding those opportunities.
