My ASX share of the week is listed investment company (LIC) PM Capital Global Opportunities Fund Ltd (ASX: PGF).
The best performers over the last few months have been growth shares that are leveraged to the change in the way that people are now spending or living. Usually those strong performers have a strong digital presence. Some of the ASX shares that have performed really well have been Afterpay Ltd (ASX: APT), Temple & Webster Group Ltd (ASX: TPW) and Pushpay Holdings Ltd (ASX: PPH). I think it will be hard for them to perform as well over the next six months as the last six months.
It’s getting harder to find good value. The businesses that are doing well are priced highly and the rest face a lot of uncertainty over the next six months or longer.
But I think there are some ASX shares like LICs that look good value which are trading at an attractive discount to their net tangible assets (NTA).
You may be wondering what a LIC actually does. It’s pretty simple, it’s just a listed investment fund that invests in other shares on your behalf. I think globally-focused LICs are good investment ideas because ASX shares only represent 2% of the global share market. You may be missing out on exposure to good opportunities.
Overview of ASX share PM Capital Global Opportunities Fund
It’s a LIC that invests in international shares. It’s run by PM Capital, an investment management business led by Paul Moore. The ASX share was listed in December 2013, though there has been an unlisted version of the fund operating since October 1998.
The LIC charges a management fee of 1% per annum of the portfolio and a performance fee of 15% of the investment return above the benchmark return. The benchmark is the Morgan Stanley Capital International World Index (AUD).
What shares does it invest in?
The ASX share can invest in any global share. It’s not restricted by country, industry sector or market capitalisation. It only invests in businesses that it has conviction in. It generally holds around 40 globally listed shares in its portfolio.
Each month the LIC discloses what percentage of its portfolio is invested in a particular theme or sector. At the end of May, 8% of the portfolio was invested in businesses related to housing Ireland and Spain, global domestic banking was a 24.4% weighting, service monopolies had a 14.8% allocation, Macau gaming was a 8.3% weighting, alternative investment managers had a 12.6% allocation, industrial European businesses had a 6.7% allocation, materials had a 11.4% weighting and ‘other’ had a 12% allocation.
The LIC can also short shares if it wants to. It had short positions amounting to 8.2% of the portfolio at the end of May 2020.
Some of the actual names it actually owns include: Cairn Homes, Bank of America, Visa, MGM China, KKR & Co, Siemens and Freeport-McMoRan Copper.
Why I think it’s good value
I think the ASX share represents good value. Many of the businesses that it’s invested in are somewhat cyclical, those shares have been punished more than others due to COVID-19. I’m not expecting rapid returns, but some of those holdings do look cheap. When investing in cyclical shares the best time to invest is during the bottom of a cycle.
PM Capital Global Opportunities Fund releases a weekly NTA update. At 26 June 2020 it had NTA before tax of $1.12 per share. This is an 18% discount to the current PM Capital Global Opportunities Fund share price of $0.92.
The large NTA discount also boost the potential dividend yield from the ASX share. Assuming it pays 4 cents per share over the next 12 months, it has a grossed-up dividend yield of 6.2%.
I think that over the next 24 months, or less, the shares that the LIC owns could perform well as the global economy recovers to a new normal. I’d be very happy to buy some shares today for the long-term. Both for capital growth and dividends.
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Tristan Harrison owns shares of PM Capital Global Opportunities Fund Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX and Temple & Webster Group Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended PUSHPAY FPO NZX and Temple & Webster Group Ltd. 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.