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Top fund manager thinks this share is a value opportunity

One fund that has been a high performer ever since inception is WAM Capital Limited (ASX: WAM), which is run by Geoff Wilson and his investment team. Since the portfolio was created in August 1999 it has returned an average of 17.5% per annum before fees and expenses.

WAM Capital looks to find undervalued growth companies, or it looks to find value arbitrage relative to the share’s underlying value. For example, Aveo Group (ASX: AOG) was a value opportunity when it was trading at a discount of 30% to its net tangible assets (NTA).

According to an investment move that was notified to the market last night, WAM Capital thinks Templeton Growth Fund Ltd (ASX: TGG) is an opportunity because it bought almost another two million shares of the listed investment company (LIC), bringing the total investment value to be around $32.6 million at yesterday’s price.

The Templeton Growth LIC looks to give investors exposure to an actively managed portfolio of shares that are listed overseas. Some of its top holdings include Samsung, BP, Oracle, Royal Dutch Shell, Alphabet (Google), BHP Paribas and Citigroup. You can see the portfolio is well positioned due to rising interest rates and the oil price recovery.

WAM Capital appears to have been interested by the discount to the NTA. At the end of June 2018 Templeton was trading at a 9% discount to its pre-tax NTA and 5.1% discount to its post-tax NTA. It’s always a simple, yet pleasing, result when you can buy something for less than it’s worth.

Templeton also aims to buy a dividend of not less than 3% of the value of its pre-estimated tax NTA at 30 June of the prior year. This offers shareholders a decent income return.

Foolish takeaway

According to research done by Wilsons, Templeton delivered a total return to shareholders of 63% over five years to May 2018, which isn’t bad at all. If you don’t have much of your portfolio exposed to international shares then Templeton could be a good place to start for income and growth.

Investment managers are also interested in this top stock which is predicting profit growth of 30% this year and has just started 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.

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