One of the best listed investment companies (LIC) on the ASX in my opinion is WAM Research Limited (ASX: WAX), operated by the high-performing Wilson Asset Management investment team.
A LIC's purpose is to invest shareholder money into other shares it thinks are good opportunities.
WAM Research invests in undervalued growth companies where the investment team believe a catalyst could send the share price higher. It usually targets businesses that are industrial in nature.
It just revealed its monthly performance for August 2018, it showed a return of 2.9%, outperforming the ASX All Ordinaries Accumulation Index by 1.2% before fees and expenses.
But, one month isn't significant – it's the long-term that counts. Over the past seven years it has returned an average of 19.3% per annum, outperforming the benchmark by an average of 9% per annum during that time.
The strong performance has been achieved by WAM Research despite holding a high level of cash throughout that time period. Whilst the cash level has dropped in recent months, it still had 23.3% of the portfolio as cash at the end of August 2018.
One of the attractive features of WAM Research is that it pays out a lot of the returns generated as a growing dividend. Its dividend has grown each year since the GFC and it currently offers a grossed-up dividend yield of 8.1%.
Foolish takeaway
So, despite seemingly being a strong dividend candidate its underlying portfolio is actually very growth-focused. It's just that the growth is regularly paid out by WAM Research as cash.
The main thing holding me back from buying at the moment is the current 27% premium to the pre-tax NTA. This is a very hefty premium to pay! It's usually better to find investments trading at a discount to their underlying value.
