There are few LICs that I don’t own higher on my watchlist higher than Naos Emerging Opportunities Company Ltd (ASX: NCC).
The LIC is run by Naos Asset Management. I like the long-term, high-conviction share choices that the investment team makes and that leadership want to pay a steadily-growing sustainable dividend.
It revealed the monthly performance net tangible asset (NTA) per share update today showing the investment portfolio returned 2.88% in September 2018 after expenses but before fees.
Since inception in February 2013 its portfolio has returned an average of 16.2% per annum before fees but after expenses.
High-conviction portfolios will be quite volatile year to year as the total performance is dependent on a few key shares, but it’s the long-term performance which matters.
One of the main reasons why I like this LIC so much is that it invests in microcap industrial companies with market capitalisations of less than $250 million. The smaller you go down in market cap the bigger the opportunity – a $200 million business could grow in value by ten times and only be a $2 billion company.
Many fund managers, analysts and normal investors do not scour the small end of the ASX for opportunities, so they’re usually valued on a lower multiple too.
Another attractive feature of this LIC is the large grossed-up dividend yield of 8.2%.
According to the figures released by Naos, it was trading at a slight discount to the NTA. Ideally you’d like to buy LICs at a discount of more than 10%, but I’d be willing to buy a parcel of shares at today’s price and buy more if the small cap space were hit due to volatility.
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