MENU

WAM Microcap Limited (ASX:WMI) is winning with small cap investing

There are few listed investment companies (LICs) on the ASX that have performed as well as WAM Microcap Limited (ASX: WMI) over the past year.

WAM Microcap is the LIC run by Wilson Asset Management that focuses on the smallest shares on the ASX, typically industrial businesses with market capitalisations under $300 million at the time of acquisition.

In August 2018 its portfolio grew by 5.4% before fees and expenses, outperforming the S&P/ASX Small Ordinaries Accumulation Index by 2.9%. Over the past year its portfolio has returned 30.1% before fees and expenses, outperforming its benchmark by 7.8%. This is a solid result.

Small caps potentially offer the biggest returns because they are often under-researched by the market, leading to lower valuations, and the small size means they can grow many times bigger before they hit a growth ceiling.

WAM Microcap has achieved these strong results whilst also keeping a double-digit level of cash on hand for protection and opportunities. At the end of August 2018 it had 13.7% of the portfolio as cash.

The investment team attributed some of August’s strong performance to Specialty Fashion Group Ltd (ASX: SFH), a company which is selling all of its retail chains except City Chic. Pleasingly, City Chic delivered comparable same store sales growth of 13% – quite the performance for a retailer. Some of its other top holdings currently include Adairs Ltd (ASX: ADH) and Baby Bunting Group Ltd (ASX: BBN).

Foolish takeaway

WAM Microcap is a good way to get diverse exposure to small caps if you’re not sure about doing it yourself. I think over a 10+ year timeframe it will deliver very pleasing results.

It currently offers a (regular) grossed-up dividend yield of 3.9%, plus the special 2 cents per share dividend. It’s trading at a decent premium to the NTA, but not as high as some of the other WAM LICs. I’d be happy to buy a parcel today, although I hope it trades at NTA at some point in the future so I can buy at a more attractive price.

Want some more growth ideas for your portfolio? You should read about this hot stock.

Motley Fool Australia Issues Rare "Double Down" Buy Alert

Scott Phillips has stumbled upon a little-owned stock he believes could be one of the greatest discoveries of his 25 years as a professional investor.

 

This is your chance to get in early on of what could prove to be a very special investment recommendation. Think about how many investing trends you've missed out on, even though you knew they were going to be big. Don't let that happen again. This is your chance to get in early.

Simply click here to get started and access our secure sign-up page.

Motley Fool contributor Tristan Harrison owns shares of WAM MICRO FPO. 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.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!