Why did the AFIC share price go backwards in April?

AFIC shares dropped in April. What happened?

| More on:
man looks at phone while disappointed

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The AFIC share price fell in April 
  • The ASX 200 also declined last month 
  • AFIC’s recent net returns are lagging the ASX 200 

The Australian Foundation Investment Co. Ltd (ASX: AFI) (AFIC) share price went down around 1% in April 2022.

The listed investment company (LIC) is also down by 3.4% since the start of 2022.

What happened in April 2022?

While AFIC has a diversified portfolio, it can drop in value just like any other ASX share.

A LIC’s share price can be influenced by two different things: the underlying portfolio performance of the LIC and changes to the premium/discount that investors are willing to pay for the net tangible assets (NTA) of the LIC.

The S&P/ASX 200 Index (ASX: XJO) also fell by almost 1% during April 2022. So, the AFIC portfolio performed similarly to the ASX 200.

The biggest positions in the AFIC portfolio have the biggest influence on the overall portfolio performance. At the end of March 2022, these were the biggest positions:

Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), CSL Limited (ASX: CSL), Macquarie Group Ltd (ASX: MQG), Transurban Group (ASX: TCL), Westpac Banking Corp (ASX: WBC), Wesfarmers Ltd (ASX: WES), National Australia Bank Ltd. (ASX: NAB) and Woolworths Group Ltd (ASX: WOW).

Over April 2022, the CBA share price dropped 1.8%, the BHP share price fell 7.2% and the CSL share price climbed 1.9%.

Recent investment performance

Every month, AFIC tells investors about its investment performance.

Over the 12-month period to 31 March 2022, the AFIC net asset per share growth plus dividends, including franking, was 11.4%. That underperformed the 16.6% return of the All Ordinaries Total Accumulation Index (ASX: XAOA), including franking.

The last five years also show underperformance by AFIC, with an average portfolio of 10.6% compared to the 10.7% return of the index.

However, beating the index isn’t the LIC’s stated investment objective. It says:

AFIC aims to provide shareholders with attractive investment returns through access to a growing stream of fully franked dividends and enhancement of capital invested over the medium to long term.

The LIC says that its investment style is long-term, fundamental and ‘bottom-up’. Its annual management cost is 0.14%, with no performance fees.

AFIC share price premium or discount?

Investors get a monthly update about whether AFIC shares are trading at a premium or a discount.

At the end of March 2022, the AFIC share price was at a premium of more than 10%, though the size of the premium has reduced over the last couple of months. It has been a while since the AFIC share price was last trading at a discount to its NTA.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended CSL Ltd. The Motley Fool Australia has positions in and has recommended Wesfarmers Limited. The Motley Fool Australia has recommended Macquarie Group Limited and Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Financial Shares

Three colleagues stare at a computer screen with serious looks on their faces.
Dividend Investing

Here are 3 ASX financial shares going ex-dividend this week

Let's check out some funds going ex-div this week.

Read more »

A female financial services professional with a manicured black afro hairstyle turns an ipad screen to show a client across the table a set of ASX shares figures in graph format
Financial Shares

Broker names 2 ASX 200 financials shares to buy

These financials shares could be in the buy zone according to a broker...

Read more »

A man thinks very carefully about his money and investments.
Financial Shares

Macquarie share price slips amid move to fortify war chest by $400 million

Macquarie is raising funds. Here's how...

Read more »

A man and a woman sit in front of a laptop looking fascinated and captivated by ASX shares news articles especially one about the Bannerman Energy share price
Financial Shares

Down 10% in a month, here’s the latest for the AMP share price

AMP shares are taking a breather after tumbling 10% in a month.

Read more »

AMP share price demergerThree zigsaw pieces pulled apart to symbolise a demerger
Financial Shares

Suncorp share price lifts on demerger plans

Suncorp shares extend a relief rally today.

Read more »

A man in a business suit holds his coffee cup aloft as he throws his head back and laughs heartily.
Financial Shares

Latitude share price launches 19% in first major gain since scrapped Humm deal

The stock is rebounding on Friday.

Read more »

A man analyses stockmarket graph on his computer.
Financial Shares

Is the Challenger share price cheap after sliding 13% in a month?

Challenger shares have had a rough month. Time to buy?

Read more »

A woman sitting in her lounge room punches the air in a gesture of success, having seen the rising IAG share price on her laptop
Financial Shares

Why did the IAG share price surge 5% on Thursday?

The insurance stock has bounced back from a recent 10-year low.

Read more »