MENU

Here are 2 LICs with exciting futures

It gets progressively harder to generate strong returns the further up the market capitalisation ladder you go. It’s much easier to find strong returns at the smaller end of the market – particularly with small caps.

Some of the strongest-performing listed investment companies (LICs) are the ones that focused on the small end of town.

Here are two of the best LICs on the ASX:

WAM Microcap Limited (ASX: WMI)

WAM Microcap is one of the newest LICs launched by Wilson Asset Management. It aims for shares that have market capitalisations of less than $300 million at the time of acquisition.

Even at the small end of market WAM Microcap follows the same strategy as the other WAM LICs, it looks for undervalued growth companies and sells them when they reach the calculated valuation.

Some of its current top holdings include travel agent business Helloworld Travel Ltd (ASX: HLO) and healthcare business Integral Diagnostics Ltd (ASX: IDX).

Since inception in June 2017 the WAM Microcap portfolio has returned 24.1% before fees and expenses. It has just started paying a dividend and currently has a grossed-up dividend yield of 2.08%.

Naos Emerging Opportunities Company Ltd (ASX: NCC)

This LIC is the oldest of the current three LICs in Naos’ stable. It usually invests in shares that have market capitalisations below $250 million.

It has a much more concentrated portfolio than most other managers, with a target of up to 15 positions. Strong convictions can mean strong returns if the right shares are chosen, but the opposite is true too.

Over the past five years its portfolio has returned an average 17.09% per annum before fees. One of its larger holdings include telecommunications company MNF Group Ltd (ASX: MNF).

It has been paying a growing dividend since 2013, it currently has a grossed-up dividend yield of 8.03%.

Foolish takeaway

Both LICs have generated strong returns since inception. Small caps are the most volatile and will continue to be, but that is the price of admission into the small cap arena. I think both will make good long-term buys at today’s prices, but investors must accept that there could be a lot of steep declines over the years.

Want more exciting growth ideas? You should read about these hot stocks.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool's in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool's Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand - and how quickly the share prices of these companies moves - we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Tristan Harrison owns shares of NAOS EMERG FPO and WAM MICRO FPO. The Motley Fool Australia owns shares of and has recommended MNF Group Limited. The Motley Fool Australia owns shares of Helloworld 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 Scott Phillips.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.