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.
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Motley Fool contributor Sebastian Bowen 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.