One of the best performing fund managers over the past two decades has been WAM Capital Limited (ASX: WAM). Since inception in August 1999 WAM Capital has returned an average of 17.5% per annum before fees.
I think it can be a good idea to monitor what the best fund managers do because you might find a share that could be one of the top performers over the next 12 months. I have a lot of respect for how fund managers manage to find a hidden gem that outperforms.
Concentrated Leaders Fund is a geared listed investment company (LIC) that uses a concentrated portfolio of shares from the S&P/ASX 200 Accumulation Index.
Over the five months to May 2018, Concentrated Leaders Fund said that its portfolio outperformed the benchmark by 2.25% before fees.
I believe a key reason why the WAM group increased the Concentrated Leaders holding from 7.18% to 8.28% of the company is because it usually trades at a discount to the net tangible assets (NTA) per share.
At 31 May 2018 it was trading at a 4.29% discount to the post-tax NTA and an 8.67% discount to the pre-tax NTA. One of WAM Capital’s main aims is to find value arbitrage where something is clearly trading cheaper than its underlying value.
There’s a good chance that Concentrated Leaders Fund could continue to outperform the index due to its portfolio choices. It has identified reasons for each of its large holdings.
Its two biggest holdings are BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) which it owns for the strong commodity cashflow theme. Its next two biggest holdings are Macquarie Group Ltd (ASX: MQG) and Amcor Limited (ASX: AMC) for an expanding global economy.
It seems decent value, but there are LICs out there trading with at an even bigger discount to NTA if you can find them.
However, for market-beating potential I’d rather buy shares of this top business that is just expanding into Asia.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. 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 Scott Phillips.