Last edited 2 months ago
#Monthly NTA Reports

13-Jun-2019:  May 2019 Investment Update and NTA Report

WLE's before tax NTA only rose 0.93% in May - from $1.2039 to $1.2151, despite ending the month with 26.1% of the portfolio in "financials" including the big 4 banks plus Macquarie Bank.

They also featured a number of resources companies in their top 20, including BHP, FMG (Fortescue), ILU (Iluka), NCM (Newcrest), NST (Northern Star), RIO & WPL (Woodside).

AFI, ARG & MLT all performed better, with less active management.  Back at WAMG, WLE's stablemates had mixed results.  WAX's NTA rose +1.86%, WMI's NTA rose a tiny bit (they were almost flat), but the Net Tangible Assets of WAM, WAA & WGB all lost ground in May.  However the share prices of all 6 of WIlson's LICs rose.

This is how they finished May (the SP rises from April 30th to May 31st):

  • WAM, +3.0% (WAM Capital)
  • WLE, +0.5%(WAM Leaders)
  • WGB, +5.5% (WAM Global)
  • WAX, +3.9% (WAM Research)
  • WAA, +2.5% (WAM Active)
  • WMI, +5.4% (WAM Microcap)

Funny old world...

 
Added 3 months ago
#Media

http://www.livewiremarkets.com/wires/wilson-the-return-of-global-growth

That's a link to a 23rd May 2019 article published this week on Livewiremarkets.com (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.

 

Changing the subject now, here's another interesting Livewire link:

http://www.livewiremarkets.com/wires/ben-griffiths-markets-are-at-an-inflection-point

When Isaac Newton first posited that an object in motion would stay in motion unless acted upon, he probably wasn't thinking of stock markets. But hundreds of years later, the same principle has been adapted for investors; or "the trend is your friend" as it's more commonly stated. While this rule of thumb can be pretty handy, there are rare moments in financial markets where everything can turn on a dime, and suddenly that trend doesn't look so friendly. George Soros called these times 'inflection points', and according to Ben Griffiths, Principal and Portfolio Manager at Eley Griffiths, we stand at one of these crossroads today.

“It is classic exhaustion price action. Bulls aren’t sure if they’re convinced anymore, and bears are in the process of giving up after that strong run-up from December. It’s what markets do best at turning point; they confound the bulls, they trip up the bears, and they generally exhaust investors.”

In this week’s episode of The Rules of Investing podcast, Ben explains why the Australian economy could be doing better than it seems, how he knew it was time to start buying shares near the bottom of the GFC, and three simple investing rules that’ve served him well. 

 
Added 3 months ago
#Management

The WAMG funds are well run and have mostly outperformed their benchmarks, certainly since inception, although they have their rough patches.  WAX, WMI, WAA & WAM all underperformed over the past 6 months due to their PMs (Portfolio Managers: Oscar Oberg & Martin Hickson) cashing up in December (to around 50% cash) and failing to redeploy that cash into the market rapidly enough in January (2019) when the market bounced back up sharply on the back of the US Fed's turnaround (when they made it clear they weren't planning to gradually raise interest rates any more in the near term and also lightened up on the quantitative tightening) and the fresh Chinese economic stimulis measures began to show traction.  The result was they lost a lot of money during that period (Dec/Jan) and now need to make that up,  By contrast, the PM of WLE, Matthew Haupt, never went to more than 15% cash, and WLE ended December with a cash weighting of just below 10%, so he has done a lot better with WLE than all of their other 5 LICs over that period.  He also views the big 4 Australian banks as more trading stocks than core holdings, which is a interesting viewpoint, and has paid off for him so far.  He also dislikes the 2nd tier (smaller) banks in Australia and feels they have competitive disadvantages compared to the big 4.  He rarely holds them unless he sees a particular catalyst that should cause a near-term positive re-rating.  He has been holding a lot of gold stocks recently as well as BHP, RIO, OZL, WSA & IGO, and he's done well there too.  All in all, I think Matt is doing well with WLE, and it's a core holding of mine.  It provides large cap exposure but with an active manager, rather than the more passive styles that you get with Argo (ARG), AFIC (AFI) or Milton (MLT) who tend to hug the index a lot more.

 
Last edited 3 months ago
#Business Model/Strategy

WLE (WAM Leaders) is one of six LICs (Listed Investment Companies) managed by Wilson Asset Management Group (WAMG).  WLE focusses on larger companies, predominantly in the ASX100, and most of their positions are in the ASX50.  

They are currently (as at Friday 17th May 2019) trading at a 10% discount to their April 30th pre-tax NTA - which was $1.23.  WLE closed on Friday at $1.105.  It would be reasonable to expect a little bit of a rise today (Monday 20th May 2019) considering Labor has just lost the unlosable Federal Election, partly on the back of their policy of changing the refundability of franking credits for a large number of Australians.  With the Libs now set to retain government, that issue has been put to bed for at least another 3 years (and quite probably longer), and WAMG's founder and CIO, Geoff Wilson, who is also the Chairman of WLE, was a very vocal opponent of Labor's failed policy on franking credit changes.  He was the first to coin the phrase "Retirement Tax" which was picked up by most of the opponents to the policy and most of the independents and minor party senators who in most cases also pledged to vote against the changes should Labor win the election and try to introduce legislation to bring into effect their poorly thought out and badly structured policy (a little editorial licence here thank you, those views expressed here are not necessarily those of Strawman.com owners or staff or even necessarily the views of the majority of Strawman users, although I suspect that most people who hold dividend paying shares would prefer the status quo).  Anyway, bank shares might have a little bounce today, as might Telstra and other stocks viewed as "yield" or "income" stocks.  WLE, ARG, AFI, MLT and some of the larger LICs who hold bank shares and other large cap income stocks might also do reasonably well on the back of Labor's defeat.  WLE look good here as long as you can buy them below their last reported NTA, and, as I said, they closed Friday at around 10% below their last reported NTA (net tangible asset backing).