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#Profit Reserves & NTA discount
Last edited 2 months ago

14-May-2020:  WAM Funds April 2020 Investment Update (for WAM, WLE, WGB, WMI, WAX & WAA)

Page 2 of WAM Funds' April report (link above) is interesting.  Firstly they have WAM (WAM Capital, their flagship fund) trading at a +24.5% premium to NTA and WAX (WAM Research) trading at a whopping +38.8% premium to NTA while WLE (WAM Leaders Fund) was trading at a -7.3% discount to their NTA and WGB (WAM Global) was trading at a -13.8% discount. 

BAF (Blue Sky Alternatives Fund) will soon become WAM Funds' 7th managed LIC, with a new name (the WAM Alternatives Fund) and a new ticker code too I'm thinking, and BAF was trading at a -34% discount to NTA at April 30.  

Another interesting feature of page 2 is the differences in the profit reserves (right side of slide).  Profit Reserves are where the dividends are paid from.  WAM (WAM Capital) don't even have enough for their next dividend, and WAA (WAM Active) has a pretty low reserve also.  However, the other 4 (WLE, WGB, WMI & WAX) are all fine, with enough to cover the next 4 (WLE) to 9 (WMI) dividends. Of course that's based on the most recent interim dividend payments.  In reality, they are committed to providing a growing stream of dividends so the quantity of dividends covered by the reserves reduces as those dividend amounts increase, but the point is that the reserves for those 4 LICs are very healthy.

The best option to me, based on a good NTA discount plus a healthy profit reserve looks like WGB, WAM Global, with their double digit discount to NTA (in the share price) plus a Profit Reserve of 24 cps, being 8 x the most recently declared dividend (of 3 cps).  This means you can buy a basket of actively managed global companies at a discount to their market value, and be assured of a healthy growing dividend as well, regardless of how the company performs from here. 

To be clear, Catriona Burns has performed exceptionally well with WAM Global, hence the very healthy profit reserve in just two years of operation, and I expect her to continue to outperform, but even if she was to hit a rough patch (like her colleague Oscar Oberg and former-colleague Martin Hickson hit in 2019 with WAM, WAX and WAA), the big profit reserve that her fund has already accumulated will underpin future dividends regardless.  And you can buy WGB shares now at a double digit (10%+) discount to the fund's net tangible assets (NTA).  The discount was 13.8% at April 30.

The worst ones to buy at current prices are clearly WAM & WAX because of their huge premiums to NTA (24.5% and 38.8% respectively at April 30).  WAM also has a very low Profit Reserve.  WMI and WAA are trading at much smaller NTA premiums, and, as mentioned, WLE and WGB are trading at discounts to NTA.  

WAM Microcap (WMI) is also looking interesting.  Trading pretty close to NTA and they have the healthiest Profit Reserve of the 6 funds, at 28.7 cps (at April 30), which not only strongly underpins their dividend - but also almost guarantees a rising dividend.

Disclosure:  I currently hold a small position in WAM (bought at much lower prices), and larger positions in WGB & WLE.  I have held WAA, WMI & WAX in the past, but don't currently.  I do hold a decent position in BAF and believe that 34% to 35% discount to NTA in the BAF SP will substantially reduce once they become managed by WAM Funds and rebranded as a Wilson LIC and the former association with the failed Blue Sky Funds Management (BLA) will not be obvious in their name or ticker code.

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#Defence, defence, defence
Added 4 months ago

20 March 2020:

Last week, Wilson Asset Management hosted their 2020 investor conference call. Chairman and CIO, Geoff Wilson used the opportunity to talk about market volatility, and how the lead portfolio managers are restructuring their portfolios in this time of uncertainty. Geoff is confident that the impact COVID-19 has had on the market is incredibly significant.

“There’s a high probability we’re going to have recessions globally.” 

Three of Wilson Asset Management’s lead portfolio managers, Catriona Burns, Oscar Oberg and Matthew Haupt were asked how COVID-19 will impact their portfolio and their best stock pick for this volatile time. 


Lead portfolio manager Catriona Burns has felt the wrath of COVID-19 more than most as she tries to return home after travelling to the USA and Europe. Despite this, she gathered insight into the American and European reaction to the virus, saying there is significant uncertainty about company’s operations and earnings. Particularly in the USA, tech and payment stocks have adapted well to the current climate and healthcare is upbeat, but all other sectors are suffering. Catriona says that globally, the coronavirus will be a massive hit to the GDP in the long term and recovery will not come easily.

How will you position the portfolio as a consequence of COVID-19? 

Catriona acknowledged that, given the global market is so volatile, significant changes had to be made to the portfolio. LVMH, a substantial holding, was sold with the announcement of the outbreak of COVID-19 as less people are inclined to purchase luxury goods. was also sold given travel bans, and the fund reduced weightings in more cyclical stocks including AMEX and Airbus.

Catriona tilted the portfolio more defensively to companies that benefit from volatility and that could withstand the effects of the virus. Some defensive inclusions were Nomad Foods, CME Group and TransUnion.

What is one stock you really like right now?  

One stock that Catriona has increased within the portfolio is Nomad Foods. It is the largest European frozen foods company. This is an ideal stock to own at the moment given the demand for non-perishable goods. The small cap trades at a big discount and has a strong balance sheet, according to Catriona.

[Click on link above for more]

You can listen to Wilson Asset Management’s 2020 Investor conference call here

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#ASX Announcements
Last edited 5 months ago

30-Jan-2020:  WGB - interim profit up 186% and 50% increase in FF div


  • 185.7% increase in operating profit before tax
  • 3.0c inaugural fully franked interim dividend, a 50% increase
  • 28.2% investment portfolio performance  in CY2019

Excerpt (from page 1):

WAM Global achieved a 185.7% increase in operating profit before tax to $38.8 million and a 186.3% increase in operating profit after tax to $27.2 million in its FY2020 half year results*. The operating profit is reflective of the sound investment portfolio performance and the growth in assets over the period.

The Board of Directors is pleased to declare an inaugural fully franked interim dividend of 3.0 cents per share, representing a 50% increase on the FY2019 inaugural fully franked final dividend. The fully franked dividend has been achieved through the performance of the investment portfolio since inception and the profits reserve available and is consistent with the Company’s investment objective of delivering investors a stream of fully franked dividends.

Driven by accommodative monetary policies, global equity markets rallied as corporate earnings stagnated during the period. The MSCI World Index (AUD) rose 9.0% and the MSCI World SMID (Small/Mid) Cap Index increased 8.1% in AUD terms.

Against this background, the WAM Global team demonstrated excellent stock selection and delivered solid risk-adjusted returns. WAM Global increased 8.8% with an average cash level of 8.3% during the period and ended the 2019 calendar year up 28.2%.

WAM Global has grown its assets from the $465.5 million raised following its initial public offering in May 2018 to $523.1 million after the payment of the FY2019 fully franked final dividend of 2.0 cents per share in October 2019.

WAM Global shares are currently trading at an attractive discount to net tangible assets (NTA) of 11.3%** which is in the process of narrowing as the Company continues to deliver a track record of performance, increasing fully franked dividends and the share register tightens. The Company’s profits reserve is currently 19.6 cents per share and forms part of the NTA.

We look forward to providing an update at our Investor Conference Call on Thursday, 12 March 2020 at 4.00pm – 5.00pm (Sydney time) and seeing you at our Shareholder Presentations in May 2020.


*The HY2020 profit figures are unaudited. Audited half year results will be announced to the market in February 2020.

**Based on the 29 January 2020 share price of $2.18 per share. 


Disclosure:  I hold WAM Global (WGB) shares.  I also hold WLE and WAM shares and occasionally do also hold WMI, WAX &/or WAA shares - although not at this point in time. 

I do also hold BAF shares, and BAF will soon be managed by Wilson Asset Management Group (WAMG) also.  It will become the 7th LIC managed by the group and will likely be renamed to something like WAM Alternative Assets.  Geoff Wilson has already recruited his new lead portfolio manager (to manage BAF or whatever they're going to call it) with a lot of experience in managing alternative assets.  BAF's board have also confirmed that the fund will soon transition to WAMG management.  It would not be unreasonable to expect some sort of positive market re-rating of BAF once they do officially move under the management umbrella of WAMG.  A number of Wilson's LICs usually trade at premiums to NTA (although not WGB or WLE at this point) and BAF has been trading at an NTA-discount of around 20%.  BAF's current 88c SP is 22.4% below their most recently published (Dec 31) pre-tax NTA of $1.1344. 

One of the more attractive alternative assets that BAF own are substantial water rights - which have been a very succesful investment for them, as explained by BAF's Chairman, Michael Cottier in this interview with the Eureka Report's Alan Kohler:

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#Catriona Burns Interview
Added 2 months ago


James Marlay (from interviews Catriona Burns, the lead portfolio manager of WAM Global, about how she has been positioning the LIC for a global recession and what wishlist companies she has been buying in March and April.

Disclosure:  I hold WGB shares.

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Last edited 7 months ago

28th June 2019:  From this AFR article:

Where cautious fundies are hunting in 2020

Source: The Australian Financial Review Published June 28, 2019

by James Thomson

The international investor
Catriona Burns is blunt on the conundrum of falling interest rates and surging equity markets.

“I don’t think that disconnect can continue for much longer. The question is: Are bond markets or equity markets reading the future correctly?”

As the lead portfolio manager for Wilson Asset Management’s listed investment company WAM Global, Burns is watching data points from the US economy closely, and trying to get a sense of the state of the economy from on the ground. She says the test for markets could come as early as next month.

“If the Fed does not cut rates in July, and the data coming out of the US continues to deteriorate, it’s very hard to see equity markets moving higher,” she says.

The challenge for WAM Global is finding decent returns in markets where cyclical stocks are unloved, but money is pouring into high-tech growth stocks.

“We are trying to sit in the middle of those extremes. While we are not trying to call whether a recession is imminent, it does feel prudent to be wary of deep cyclicals … nor are we playing companies trading on crazy multiples of revenue without any earnings. We are focused on the opportunities that exist in between.”

“You’ve got to do some digging, get on the ground and go out and meet management.”

Part of this is being willing to look outside the US.

For example, one of Burns’ picks for 2020 is Japanese supermarket operator Kobe Bussan. Unlike in Australia, where the grocery sector is relatively concentrated, the top 10 players in Japan have a total market share of about 15 per cent.

Burns says Kobe Bussan, which has seen its shares rise 61 per cent since the start of the year, looms as the equivalent of Aldi in the Japanese market.

“They’ve got a really compelling private label offering, at prices that are 50 per cent to 70 per cent below other players in the market, because they’ve got a vertically integrated model.

“Japan has some exciting opportunities, but you’ve got to do some digging, get on the ground and go out and meet management.”

Burns is also looking to Europe for value.

“Sometimes it does get overlooked in favour of the US, but there are some high quality companies that we still find are well placed to grow despite the difficult macro environment.”

Her pick there is German company CTS Eventim, which is similar to Australia’s Ticketek.

The business has delivered consistent earnings growth, has a net cash position on its balance sheet and is 43 per cent controlled by the founding family, meaning there is plenty of skin in the game.

But Burns is particularly attracted by the margin boost the company should continue to enjoy as it migrates more of its customers online. The stock is up 24 per cent year-to-date.


--- click on the link above for more ---


Disclosure:  I hold WGB shares.

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Last edited 8 months ago

That's a link to a 23rd May 2019 article published this week on (Livewire) in which Geoff talks about what has happened over the past 6 months to turn him from being ultra-bearish to now moderately bullish ("My prognosis was wrong"). 

Each of Geoff's lead PMs (portfolio managers) also talk about their own views and discuss some individual holdings that they have within their own portfolios and why they like them (and why they hold them).  Those PMs are Catriona Burns (responsible for WAM Global, WGB), Matt Haupt (WAM Leaders, WLE), Oscar Oberg (WAM, WAX & WMI) and Martin Hickson (WAM, WAA & WMI).  [Note: Oscar is the PM of WAX - WAM Research, Marty is the PM of WAA - WAM Active, and they jointly manage WAM & WMI - WAM Capital and WAM Microcap]. 

Geoff is the CIO (chief investment officer) with the overall responsibility for the performance of the 6 LICs that they manage, but Geoff's role is more hands-off nowadays, having set up the investing framework, philosophy and rules, he sits in on the weekly meetings and monitors their progress, but he mostly leaves the stockpicking to those 4 now.  He has other things that keep him busy, like media and takeovers.

Their previous CIO, Chris Stott, has recently retired, but is still a director on the board of a couple of those LICs.

This Livewire article is mostly distilled from the presentations given at the recent WAM Roadshow that has been happening over the past fortnight around Australia's largest cities, but it's presented in a nice, easy-to-follow way, and does contain a couple of additional bits that have been added in.


Disclosure:  I currently hold WAM, WAA, WAX, WLE and WGB.  I have also held WMI in the past, and may well do so again in the future.  I've become a little concerned with the performance of Oscar and Marty since Chris left, especially over the December-January period when they seriously underperformed, especially with WAM & WAX.  I'm happy enough with Catriona and the WGB portfolio, and I think Matt is doing a good job with WLE, which is my largest holding currently.  It's interesting that the two Wilson LICs that I'm most bullish about (WLE & WGB) are both trading at NTA-discounts, while the ones trading at NTA-premiums are the ones that have performed the worst (WAX & WAM) more recently - and the ones I hold the least amount of shares in currently.  I sold most of my WAM & WAX - and all of my WMI - earlier last year when they were still trading at NTA-premiums of over 20% in the case of both WAX & WAM and I can't remember what WMI's NTA-premium was, but it was significant.  Those premiums have all since reduced significantly.  Ideally, buy good quality LICs when their outlook is bright, they have tailwinds, and they are trading at NTA discounts.  I would argue that only two of Wilson's six LICs tick all those boxes currently.

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#Shareholder Presentations
Added 8 months ago

19-Nov-2019:  November 2019 Shareholder Presentation

Note: This Presentation is related to the WAM Group (WAM Funds) + FG (Future Generation) Funds November 2019 Australian Roadshow (which I'll be attending here in Adelaide next Wednesday) and covers all of WAM Group's 6 LICs:  WAM Global (WGB), WAM Leaders (WLE), WAM Capital (WAM), WAM Research (WAX), WAM Microcap (WMI) and WAM Active (WAA).

This one is for the Sydney leg of the roadshow, which includes their AGMs, but similar Presentations will be made at all of the venues they attend during the roadshow over the next couple of weeks.

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