Why this could be the best LIC on the ASX

There are few listed investment companies (LICs) on the ASX that could come remotely close to performing as well as MFF Capital Investments Ltd (ASX: MFF) over the past few years.

It is headed by Chris Mackay, co-founder of leading international fund management business Magellan Financial Group Ltd (ASX: MFG).

It focuses on investing in businesses that are listed overseas. Whilst many of its largest investments are listed in the US, that just happens to be where many global businesses are listed – the underlying earnings are truly global.

Some of its top holdings include Visa, MasterCard, Home Depot, Bank of America, Alphabet (Google), Lowe’s, JPMorgan, HCA Healthcare, Wells Fargo, Facebook and US Bancorp.

It’s a quality list of businesses and has been a key reason why it has delivered an average total shareholder return of 18.4% per annum over the past decade. The recovery and growth of the US & global economies have been integral to this. It chose the right place to invest.

The next five years may not be as strong due to the inevitable slowdown (recessions regularly happen) and rising interest rates.

There are a few things I particularly like about MFF Capital other than the obvious good returns. It offers diversification away from Australian shares, the investment team seem very aware of potentially large risks such as Amazon and it has committed to raising its dividend in the coming years.

However, the dividend currently doesn’t add up to much – its grossed-up yield is only 1.5%.

Foolish takeaway

MFF Capital obviously isn’t a dividend share idea. However, its long-term investment approach with international shares is very attractive and I definitely want to buy a lot more of its shares when the next recession hits the American economy.

Until then, I’m going to be buying quality ASX growth shares like one of these top stocks.

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Motley Fool contributor Tristan Harrison owns shares of Magellan Flagship Fund Ltd. 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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