Pinned straw:
@Bear77 , could I please get your expert input into the attached announcement and see if this is a legit stake increase?
I think it is given the relatively large transaction volumes that have gone through and I didn't think WAM allowed its holders to trade?
Yep it's legit @jcmleng - they have to notify every time they move up or down by 1% or fall below 5% (Cease to be "Subs") or move from below 5% to 5% or above (Become "Subs"), and in this case the WAM Group, a.k.a. WAM Funds, whose funds are all listed in Annexure A - all 14 of them - moved from 8.83% on 20th June this year (the date of their last "Subs" notice about EML) to now owning 10.43% of EML's SOI (shares on issue) as at 27th August, being the date of this notice (the effective date listed in the notice on page 1).
Now not all of those 14 funds hold EML, but of the ones that do - and I know 2 of their LICs do and 6 of their LICs do not hold EML, their total combined shares held across those funds that do hold EML now equals 10.43% of EML.
Now, we know that WAM and WMI DO hold EML because they both posted that same notice today (28th August) however we also know that WAA, WAX, WLE, WGB, WMA and WAR do not hold EML because they did NOT post that notice today. WAA and WAX posted a notice for EOL, but not for EML.
All of the transactions in the 2 pages of transaction in Annexure B were on-market buys or on-market sells, and there were a lot more buys than sells during that time period - and those listed trades cover all of their buys and sells between their last notice (20th June) and yesterday (27th August).
It is my understanding that WAM (WAM Capital) and WMI (WAM Microcap Fund) are long-only funds (no short positions), so they are bullish on EML by increasing their exposure to the company. It's also most likely a research-driven position rather than an opportunistic market-driven position which they call "active" positions (short term trades, arbitrage trades, etc) because those "active" positions almost always end up being held in WAM Active (WAA) and WAA did NOT post a "Subs" notice for EML today, so yeah, it's legit and it looks bullish from their point of view. Interesting however that they did not add EML to WAX, their Research Driven fund, but that could be because they class EML as a microcap and not big enough for WAX, however EML's market cap is $427 M and I would have thought that qualifies them as being a mid-cap in Australia where we tend to have lower market caps than the US (smaller companies listed on the ASX than over there, on average) - I would normally have expected WAX to have also lodged the same notice today, but they didn't, just WAM and WMI.
They are likely using $500 million as the cut-off point for classing companies as microcap companies, and EML falls below that threshold / level, so would be classed as a Microcap company if that's their guideline.
For those that don't know, WAM Capital (WAM) is WAM Funds' flagship fund, although no longer their biggest fund (WLE is larger, and holds Large Caps), and WAM Capital (WAM) owns EVERYTHING that WMI, WAA and WAX hold, except WAM holds larger quantities than those other funds because it's a much bigger fund than WMI, WAA or WAX, especially WAA which is very small. And WMI is also fairly small, because of the companies that they hold (microcaps).
Hope that answers your question.
That's good that it was helpful @jcmleng - I was a WAM shareholder back when they only had the three LICs (WAM, WAX and WAA), and I partipated in the IPOs of WMI and WLE and I reckon also WGB if I'm not mistaken, although I might have adopted a "wait and see" approach with WGB because that's their Global fund that holds companies listed on exchanges outside of Australia and I wasn't sure how they'd go with that. I did buy into WGB on multiple occasions later, including last year. All sold out of now. WLE (WAM Leaders Fund, their large cap fund) was also my largest real money position for a while last year - for their dividend, but I got out of WLE completely after hearing Matt and John (in a webinar) talk about why they weren't going to sell out of Star Entertainment Group (ASX: SGR) and Sky City (SKC) claiming that Australian Casino operators still had good business models and there was value there. WLE have had a bad couple of years, underperforming their benchmark index, and a lot of that has to do with Matt and John refusing to admit when they've made a really bad call and just selling out before the position can do them even more harm. My largest position is now LYL which has much more sensible management.
I was also holding BAF (Bluesky Alternatives Fund or Bluesky Alternative Assets Fund) when WAM Funds took over their management and then renamed them WAM Alternative Assets (WMA) and I did well out of the re-rate that they got out of that - they had an NTA-discount in the share price of over 20%, I think it was over 30% at one stage before WAM Funds took over the fund, and they still trade at an NTA discount but a much smaller one now - and I never held WAR - I thought that was taking the piss if I'm honest, or milking the shareholder base a bit too much.
Anyway, I don't hold any of them now, but I watched Geoff grow his LIC stable from 3 to 8 LICs and open up an open-ended version of WLE as well (LICs are closed-end funds, while open-ended funds grow and shrink with demand like ETFs). I don't actually hold any LICs now, but I was following many of them quite closely for about 15 years, possibly longer.
I became fairly knowledgeable about WAM Funds, NAOS funds, TGG (Templeton Global Growth Fund as it was known, which was actually a value fund, not a growth fund, so a misleading fund name) - which has now been absorbed into WAM Funds also, and a few others, attending all of their roadshows when they came to Adelaide back in the pre-Covid years, and got to chat to many of their lead portfolio managers like Matt Haupt, Oscar Oberg, Geoff Wilson himself (he manages WAR now only, leaving the portfolio management of the other 7 LICs to the others), Catriona Burns, and even Martin Hickson and Chris Stott before they left and set up 1851 Capital - they've done alright with that business too - see here: https://www.afr.com/street-talk/chris-stott-s-1851-capital-hires-from-wilsons-advisory-20241210-p5kx52 [10-Dec-2024]
1851 Capital’s Martin Hickson (left) and Chris Stott.
Back when he was at WAM as their chief investment officer (CIO), Chris told us about how he stumbled across Baby Bunting when he and his wife had their first child and they found that Baby Bunting was like a Bunnings for Baby stuff and was always packed and doing great business so they invested in it and did very well out of it in the early years after they first IPO'd. It reminded me of Peter Lynch in one of the most famous investing books of all time, One Up On Wall Street, where he suggests that the best investment ideas are usually right under our noses - we just need to look at what we do in our everyday lives through a prospective investment lens. Lynch wrote that book a few decades ago but it's still true today. You can learn a lot about a company through first hand experience as a customer, or by studying their stores or whatever their offering is and how popular it is.
LICs are different of course because as Listed Investment Companies they are simply a company that invests in other companies, but you can certainly learn a lot about LICs by studying their track records, and listening to what they have to say, and how the story changes over the years.
For instance Geoff Wilson used to regularly make takeover offers for other LICs, and was often succesful, although not always, and during those scuffles he would call out all of the failings of the other LICs' Board and Management as he saw them, which inevitably included either fees that were too high or fees that were not disclosed properly. He used to say that any fund that published before fee returns rather than after fee returns was basically treating their shareholders and prospective shareholders with contempt, yet that is exactly what all of his own LICs do now, publish before fee returns.
After he had adopted the same evil practise of before-fee return disclosures, he changed his focus to the large NTA discounts in the share prices of his target LICs (the ones he was trying to takeover to increase his own Funds' FUM) and then a few of his own LICs developed some double digit NTA discounts, including WAA and WMA at various times, and even WAM Global (WGB) some of the time, so he had to find something else to winge about with other fund managers.
To be clear, WAM Capital, WAM Microcap and WAM Research (WAM, WMI & WAX) almost always trade at NTA premiums, sometimes premiums up over 20% and sometimes as high as 30%, which is just rediculous, but that's the market for you, but his other LICs have not all enjoyed the same sort of NTA premiums in their respective share prices.
Anyway, that's all to say that WAM Funds has been an area of special interest to me for many years, so you just happened to ask me about something that I knew something about. If you had asked about a different LIC that I wasn't familiar with it would likely have been a different story.
When I was in hospital recovering from my second hip replacement, I got a call from one of the higher up admin people at WAM Funds to encourage me to vote for some resolution or other that they were putting forward in relation to a takeover - it could have been about BAF actually - and I recognised his name (Marty McCathie) and we ended up talking for over an hour about a whole range of different issues like if Geoff would ever wind up WAA because it was so sub-scale and what was he waiting for before rolling it into one of their other LICs, what his strategy was with all the other LICs he was accumulating shares in - the LICs managed by other firms, not WAM Funds - those positions all later ended up either being taken over by WAM Funds - like TGG (Templeton Global Growth Fund), Westoz Investment Company (WIC) and Ozgrowth (OZG) in late 2021, and PM Capital's Asian Opportunities Fund (PAF) in early 2022, or they were rolled into WAM Fund's most recently created (and eighth) LIC, WAM Strategic Value (WAR) - which is the only WAM Funds LIC that Geoff manages himself, how Oscar was coping without Martin Hickson, since Hickson used to handle all the Active side (WAA, half of WMI and half of WAM) and Oscar used to handle all of the Research side of the small caps (WAX, half of WMI and half of WAM) and since Hickson has quit to join Stotty over at 1851 Capital, Oscar was running 4 LICs all by himself - he had help but he was the sole lead portfolio manager of WAM, WAX, WAA and WMI after Hickson left. And stuff like that. I remember the nurses came in and did 2 different sets of Obs during that call, and gave me some good pain meds.
Another time I had a phone call from Kate Thorley who is WAM Funds CEO and is a Director on the Boards of a number of their LICs, about another matter, and we ended up talking for about 45 minutes about similar stuff. I pressed her about WAM Capital's lack of a profit reserve (it was basically empty) and if that meant they were forced sellers of positions they didn't really want to sell - just to generate enough profits and franking credits to cover their dividends - since those dividends hadn't been raised for a number of years at that point due to their profit reserve having nothing in it - it's now been 7 years - WAM Capital last raised their dividend in 2018 - and she denied that was the case and said that both herself and Geoff believed that WAM Capital would be building up their profit reserve soon and that would enable them to once again "provide their shareholders with a rising stream of fully franked dividends" - which was the fund's mission statement - their stated aim - and they were failing at the "rising" part - and the share price was falling as a result - I wasn't in it at the time but I was just asking what their rescue plan was because their presentations are all positive spin and they don't address those negative issues. I also asked about WAA and the fact that it was really just the fee generation that was keeping it as a separate fund (because it was so small) but she had a company line rationale for that also and denied that it was just there to generate fees but was there to give people an option to invest directly in that "Active" style of investment as opposed to their (much more successfull) Research-driven investment style. She also suggested that WAA's FUM (and therefore value) could be grown via the acquisition of other similar funds, although I don't see too many of those around, none with a similar strategy to WAA .
Anyway, I guess I have gotten the odd spot of insight from those sort of conversations - both the phone ones and the in-person talks (at their roadshows) with their lead portfolio managers plus Tobias Yao, who I think started out as one of their traders and progressed to being a portfolio manager, and John Ayoub who is the 2IC at WLE (Matt Haupt's second in command of the WAM Leader's portfolio).
As I said, an area I used to be fairly interested in.