MENU

WAM Capital Limited (ASX:WAM) just invested in Greencross Limited (ASX:GXL)

I think following some of the top-performing manager’s investment moves can be a decent strategy because it could mean finding one of the next best-performing ideas.

After the market closed yesterday, WAM Capital Limited (ASX: WAM), WAM Leaders Ltd (ASX: WLE) and WAM Active Limited (ASX: WAA) announced that a few members of the Wilson Asset Management (WAM) listed investment company (LIC) group had taken a 5.2% stake in Greencross Limited (ASX: GXL).

This investment amounts to over $27 million, which isn’t a huge position for the WAM LICs but is still a large investment in most people’s books.

I only just wrote yesterday about how Greencross could be a top performer over the next 15 months. The new CEO has cleared the accounting decks by writing off and writing down a number of items that perhaps should have been written-down earlier.

Greencross is still generating very pleasing sales growth, particularly like for like growth. Most retail businesses would be very happy with a 4.5% increase in like for like sales.

Aside from the write-offs, the market has been worried how online retailers could hurt Petbarn’s margins. However, Petbarn itself has a strong online presence with Australian online sales growing by 92% in its half-year result.

One main worry for me from the trading update announcement around two months ago was that standalone vet like for like sales decreased by 2.8% because of a 4% decline in visit numbers. Management didn’t state why this was – perhaps the co-located vets were cannibalising sales or perhaps competition from other vets like National Veterinary Care Ltd (ASX: NVL) is heating up.

Whatever the reason, Greencross will try to solve the problem by improving the retail cross referral program, an increased focus on its Healthy Pets Plus membership, new partnership arrangements with the New South Wales & Victorian police, targeted de-sexing & seniors campaign and an uplift in digital marketing. Management said that vet visits had stabilised.

Foolish takeaway

Greencross is currently trading at 12x FY19’s estimated earnings with a grossed-up dividend yield of 6.3%.

The WAM LICs seem to be confident as they have been buying shares regularly since 18 May 2018. I can see why the WAM investment team is interested and if I didn’t already own shares of Greencross I’d heavily consider buying some at this price.

Another exciting business I’d like to buy more shares of is this top share which is predicting profit growth of 30% in FY18 and is just starting to expand into Asia.

The best dividend stock to buy in June

Financial year 2018 is here and The Motley Fool’s dividend detective Andrew Page has revealed his must buy dividend share to grow your wealth in 2018.

You might not know this market leader's name, but it's rapidly expanding into a highly profitable niche market here in Australia. Even better, the shares boast a strong, fully franked dividend that should balloon in the years to come. In other words, we're looking at the holy grail of incredible long-term growth potential AND income you can watch accruing in your account in real time!

Simply click here to grab your FREE copy of this up-to-the-minute research report on our #1 dividend share recommendation now.

Motley Fool contributor Tristan Harrison owns shares of Greencross Limited and NATVETCARE FPO. The Motley Fool Australia owns shares of and has recommended Greencross Limited. The Motley Fool Australia owns shares of NATVETCARE FPO. 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.