Listed investment companies (LICs) offer a unique advantage to investors – they can trade at a discount to their underlying value.
Due to their company structure, LICs are essentially stocks that invest in other stocks – a pass-through vehicle if you like. Thus, if the value of the stocks a company holds is more than the company's share price, you can essentially buy $10 worth of companies for $9 (or whatever the discount may be).
That's exactly what's happening with the WAM Global Ltd (ASX: WGB) share price. WGB shares closed yesterday at $2.20, yet WAM Global holds $2.37 of assets per share (as of October 31) – giving us investors the opportunity to buy in at a 7.7% discount.
Sometimes, the market under-prices an LIC if it doesn't have faith in the management team, but Wilson Asset Management (the WAM in WAM Global) has a long and impressive track record with its LICs performances. Its flagship LIC WAM Capital Ltd (ASX: WAM) has delivered an average 16.8% annual return since its listing in 1999.
Is WAM Global a buy right now?
Since WAM Global only launched in June last year, perhaps the market hasn't made up its mind yet. But WGB's performance has been solid so far, delivering an 8.4% return and an inaugural 2 cents per share dividend since launch.
This LIC aims to take WAM's tried-and-true investing style to global companies for the first time. It currently holds top stocks like American Express Co, LVMH, Airbus and Diageo and is 60% exposed to US stocks. The UK, France and Japan make up the lion's share of the rest.
Foolish takeaway
I think WAM Global is a great way to get some exposure to global companies that ordinary retail investors would normally have difficulty investing in. Its discount is definitely offering a potential buying opportunity here and I think WAM Global would serve any long-term investor very well from here on out.
