I try to regularly invest into ASX shares. At least once a month. A few months ago I was investing very regularly because I saw a number of cheap opportunities during the crash.
But the ASX has recovered strongly since March 2020. Over the past two months alone the S&P/ASX 200 Index (ASX: XJO) has gone up just over 10%.
I still think there is a lot of uncertainty in the local and global economy. COVID-19 impacts are being felt around the world and government economic support is starting to wind down. Many businesses seem like less obvious winners at the current prices.
My recent investing has kept the above uncertainty in mind. These are two ASX shares I've bought in recent weeks:
WCM Global Growth Ltd (ASX: WQG)
This is a listed investment company (LIC), its job is to invest in shares listed outside of Australia. The Australian dollar continues to strengthen against the US dollar, it's now worth US$0.71. The stronger the Australian dollar is the cheaper it is to buy US shares.
At the current WCM Global Growth share price of $1.30 the ASX share is trading at a 13% discount to the pre-tax net tangible assets (NTA) at 17 July 2020. Thankfully I bought shares at around $1.25.
I liked the idea of buying a quality LIC at a double digit discount to its NTA. But I also like the investment style of WCM, a California-based asset manager. WCM aims for businesses with an expanding economic moat. One of the main ways it measures this is with a rising return on invested capital, as opposed to a large but static or declining moat. The other key factor that WCM looks for is a corporate culture that supports the expansion of the economic moat.
At the end of June 2020 its five largest holdings were: Shopify, West Pharmaceuticals, MercadoLibre, Visa and Stryker. Just under half of the ASX share's portfolio is invested in IT and healthcare. I like the long-term outlook for these two sectors.
Its investment style has performed well. Its investment performance, after fees, has been 20.15% per annum over the past three years.
I think this LIC is a solid ASX share, it even pays a partially franked dividend yield of 3.1%.
WAM Microcap Limited (ASX: WMI)
WAM Microcap is another LIC. It targets ASX share small caps with market capitalisations under $300 million at the time of acquisition.
There have been few Australian investment managers that have performed as well as Wilson Asset Management's WAM Microcap over the past three years. Since inception in June 2017, WAM Microcap's portfolio has returned an average of 15.9% per annum (before fees, expenses and taxes), outperforming the S&P/ASX Small Ordinaries Accumulation Index by 10% per annum. Over the past three months the WAM Microcap's portfolio has returned 32.9%, outperforming the index by 9%.
Future strong performance is definitely not guaranteed, but I think WAM Microcap's team has shown they can identify good value ASX shares.
I think small caps can produce very strong returns, you just have to choose the right ones. I'm happy to get a fair amount of my small cap exposure with WAM Microcap and receive a good dividend along the way.
At the current WAM Microcap share price of $1.38 it offers a grossed-up dividend yield of 6.2%, though luckily I recently bought shares at a price of around $1.25.
I believe that WAM Microcap will deliver strong total shareholder returns over the next few years from here. However, it tends to fall very hard during market uncertainty, so I may wait until the next market drop to buy more shares.
At the end of June 2020 it had a solid cash weighting of 17.2% to buy beaten-up opportunities if the market drops again.
Foolish takeaway
I really like both of these ASX shares. I think international shares and small cap ASX shares could outperform the broad ASX share market over the longer-term. At today's prices I'd probably buy WCM Global Growth again due to the high Aussie dollar and the discount to the NTA. But I'd love to buy even more WAM Microcap shares at the right time.
