MFF Capital Investments Ltd (ASX: MFF) is a Listed Investment Company (or LIC) that, while listed on the ASX, mostly invests in US companies. LICs can be a great investment for a number of reasons. Their simple company structure allows you to easily invest in multiple underlying investments through a single tax-efficient vehicle. LICs can pay dividends and franking credits as well, but can also hoard them and pay them out at different times as needed.
Why I love MFF
MFF was founded as part of the Magellan Financial Group Ltd (ASX: MFG) but is now more independent of its parent company (the MFF stands for Magellan Flagship Fund). MFF was also started by one of the co-founders of Magellan – Chris Mackay. Mr Mackay is considered by many to be one of the best fund managers in Australia and I share this confidence.
I like MFF as it offers a great level of diversification through a single company. By owning shares in MFF, you are owning a stake in all the companies MFF invests in. As of the start of July, these include names like Visa, Mastercard, Bank of America, Coca-Cola and Wells Fargo – all quality businesses that would be expensive to invest in outside of a LIC structure in this country.
Another reason I like MFF is its focus on long-term goals and a healthy disregard for short term opportunism. Mr Mackay is a value-investor and likes buying quality businesses at a cheap price and holding them for as long as possible. This serves the dual purpose of minimising unnecessary taxes and letting a good company compound our wealth effectively.
Is MFF a buy today?
I think there is good cause to pick up some MFF shares at the moment for a simple reason – the shares are trading at an 8% discount to the value of its underlying holdings at $2.98 and $3.22 respectively (as of June 28). Another advantage of a LIC is sometimes you can pick up shares that the market is discounting, and this is what is happening with MFF presently.
MFF is a great long-term investment in my opinion and I hope to be adding to my position again soon, especially while the shares are at a discount.