Australian Foundation Investment Co.Ltd. (ASX: AFI) has told investors about some of the ASX shares that it hopes will help the portfolio returns, and therefore assist the AFIC share price and dividend.
AFIC is one of the oldest listed investment companies (LICs) in Australia. It has a portfolio of 60 to 80 companies across a range of industries, that are selected for their ability to perform through economic cycles and generate returns over the long term.
AFIC aims to provide shareholders with long-term returns and dividends that grow faster than the rate of inflation.
Its portfolio is now approximately $9 billion in size.
Biggest positions in the AFIC portfolio
The LIC tells investors every month about what its top 25 investments are in the portfolio.
At the end of January 2022, these are some of the biggest holdings:
Commonwealth Bank of Australia (ASX: CBA) – 8.5% of the portfolio
BHP Group Ltd (ASX: BHP) – 7.4% of the portfolio
CSL Limited (ASX: CSL) – 7% of the portfolio
Macquarie Group Ltd (ASX: MQG) – 4.7% of the portfolio
Wesfarmers Ltd (ASX: WES) – 4.5% of the portfolio
Transurban Group (ASX: TCL) – 4.1% of the portfolio
Westpac Banking Corp (ASX: WBC) – 3.6% of the portfolio
National Australia Bank Ltd (ASX: NAB) – 3.5% of the portfolio
Woolworths Group Ltd (ASX: WOW) – 2.7% of the portfolio
James Hardie Industries plc (ASX: JHX) – 2.7% of the portfolio
The AFIC share price and portfolio returns are heavily influenced by the bigger positions.
New investments
AFIC recently released its FY22 half-year result, which included details of buys for the portfolio.
These are some of the latest additions to the portfolio:
Transurban Group (ASX: TCL) – Transurban owns a high-quality, diversified toll road portfolio.
AFIC likes Transurban because of its "good track record" of capital allocation by management, driving strong long-term free cash flow growth. It's expecting a recovery for Transurban in FY23 and the West Gate Tunnel project cost blowout issue has now been resolved. Transurban also has an attractive pipeline of potential opportunities.
CSL Limited (ASX: CSL) – The biotech giant is another addition. It specialises in the treatment of rare diseases and influenza.
AFIC likes the consistently high return on capital that CSL has achieved, with a long and successful track record of capital allocation driving shareholder returns. It continues to invest in 10% to 11% of global sales of R&D.
The LIC likes the acquisition of Vifor Pharma, a new growth area treating kidney disease and iron therapy.
Other additions include the purchase of JB Hi-Fi Limited (ASX: JBH) shares and Coles Group Ltd (ASX: COL) shares.
AFIC portfolio performance
In AFIC's January monthly update, it revealed that its net asset per share growth plus dividends (including franking) return was 12.5% compared to 10.9% for the S&P/ASX 200 Accumulation Index, including franking.
Over the past five years, the AFIC portfolio return was an average of 10.6%, compared to 10% for the benchmark.
At the time of writing, the AFIC share price has risen 14% over the last year. The S&P/ASX 200 Index (ASX: XJO) has grown 6.3% in the last 12 months.
