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#Profit Reserves/Div Guidance
Last edited 3 months ago

14-Jan-2021:  In the cover letter accompanying their December 2020 Investment Update or "LIC Snapshot" as they now call it, Geoff Wilson (from WAM Funds) said today:

Dear Fellow Shareholder, 

We are pleased to announce the December 2020 Investment Update for our listed investment companies.

Markets rallied in the final month of a very turbulent year. The Trump Presidency is coming to a disgraceful end with the storming of the United States Capitol building and a second impeachment of the outgoing President, while a new strain of the coronavirus and rising case numbers in the US and Europe weigh on healthcare systems. The vaccine roll-out and the US stimulus package approval supported equity markets in December.

The S&P 500 Index rose by 3.7%, the NASDAQ Composite Index 5.7%, the UK FTSE 100 Index 3.1%, the Euro Stoxx 600 Index 2.5%, Japan’s TOPIX Index 2.8% and China’s CSI 300 Index 5.1% in local terms, while the MSCI World Index (AUD) declined 0.5% for the month. In Australia, a coronavirus outbreak in Sydney and localised lockdowns during the month caused concern among investors ahead of the summer holiday period. The Australian dollar rose 9.7% against the US dollar in 2020, underpinned by rising commodity prices, with iron ore reaching a nine-year high in December. The S&P/ASX All Ordinaries Accumulation Index rose 1.8% for the month. 

Our listed investment companies' 2020 performance

We are pleased to deliver strong absolute and relative investment portfolio performance during the challenging social, economic and financial landscape that we witnessed this year. Our six equity-focused listed investment companies’ (LIC) investment portfolios outperformed* their respective benchmarks in the 2020 calendar year and the 2021 financial year to date.

Supported by strong risk-adjusted outperformance and profits reserves available, WAM Leaders Limited (ASX: WLE) and WAM Global Limited (ASX: WGB) announced FY2021 fully franked interim dividend guidance of 3.5 cents per share and 5.0 cents per share respectively. 

Based on their 13 January 2021 share prices, these represent annualised grossed-up fully franked dividend yields of 7.5%# for WAM Leaders and 6.0%# for WAM Global.

WAM Leaders has 24.3 cents per share in profits reserve**, representing 3.5 years of dividend coverage for shareholders.   WAM Global has 43.0 cents per share in profits reserve**, representing 4.3 years of dividend coverage for shareholders. We look forward to sharing the interim results for all seven of our LICs in the coming weeks. 

 

* Investment portfolio performance and index returns are before expenses, fees and taxes.

# Grossed-up dividend yield includes the benefit of franking credits and is based on a tax rate of 30.0%.

** The profits reserve is before the fully franked interim dividend guidance.

 

--- end of excerpt ---  You can access their full December 2020 report here.

 

[I currently hold WGB and WMI, and I have held WAM, WMA (previously BAF), WAA, WAX and WLE previously, and may do so again in the future.]

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#Shareholder Communication
Last edited 10 months ago

10-July-2020:  I listened in on the WAM Leaders (WLE) Investor Q&A Call this morning, and it was time well spent.  Click here for the slide pack.  They had lead PM Matt Haupt on the call, plus John Ayoub and Geoff Wilson, and it was great to hear them answer questions without notice on anything and everything, even on some positions that they don't even hold in WLE.  

For the first time ever, they listed their top 30 positions, in order of position size, and included the portfolio weightings for all of them as well.  I am not a fan of Australia's big 4 banks, so was not particularly happy (as a WLE shareholder) to see the banks feature in that list, with NAB being their #1 position.  NAB in my opinion is the worst of the 4.  However, I know that Johnny and Matt have a LOT more knowledge on the sector and on the individual banks than I do.  I just look at them (the 4 banks) in terms of historical performance and the headwinds that I see them facing in the near and mid-term, but I know that Matt and John are very active and move in and out of these companies quickly and regularly, and adjust their weightings as they think it appropriate, and I guess they see some short-term upside for NAB in particular at this point in time.  In reality, as a large cap fund, they are likely to hold the banks most of the time, and it would just be the weightings in them that would change.

I have a soft spot for mining and materials stocks personally, particularly at this point in the cycle, so I was pleased to see the following in the WLE top 30:

  • BHP, 6.2% of WLE
  • WES, 2.6%
  • RIO, 2.4%
  • NCM, 2.2%
  • OZL, 2.0%
  • FMG, 1.8%
  • AWC, 1.7%
  • WSA, 1.7%
  • S32, 1.0%

And I was also interested that the only gold miner in their top 30 now is Newcrest (NCM), the one I do NOT hold.  Of that list of 9 above, I do hold WES and S32.  I almost bought back into WSA a couple of days ago actually, but I bought back into IGO instead (earlier today).  IGO looks to have more upside from current levels than WSA, in terms of nickel miners and how much each of them have recovered from their March lows.  IGO also has that gold interest (30% of Tropicana) in addition to their world-class Nova nickel / copper / cobalt mine.  My exposure to WLE is therefore quite complimentary to my own direct holdings. 

In copper I hold SFR, they hold OZL.  I don't hold any iron ore stocks directly, although I do hold ILU (mineral sands) and Iluka do also own a royalty over all of the iron ore that BHP produce from Mining Area C (the MAC royalty) - which they are planning to spin out into a separate company later this year or next year.  WLE hold all of the major iron ore stocks (BHP, RIO, FMG).  In nickel, they hold WSA.  I hold IGO.  We both hold S32 (alumina/aluminium, manganese, nickel, met coal, silver, lead, zinc).  S32 are selling their energy coal assets this year.  I also hold RVR (zinc).  They also hold AWC (alumina / aluminium). 

In gold, they hold NCM, and I hold NST, EVN, SAR, RRL, SBM, PNR, plus a handful of gold explorers and developers.

In mining and engineering services, WLE and I both hold DOW, and I also hold MND, NWH, MAH, and smaller companies (way too small for WLE) like LYL, GNG, SRG, SXE and BSA.  WLE has worked out to be very complimentary to my own direct positions at this point, although I do note that their postions and position sizes do change regularly, so this is really just a snapshot in time in terms of their holdings and weightings.

Geoff mentioned that they do have a couple of years worth of dividends in their WLE profit reserve and that it was their intention to at least maintain their dividend but hopefully to increase it.  As usual, he added that this would of course be up to the full board at the appropriate time.  However, as the Board Chairman - and the founder of the company - I reckon he might have a decent say in what happens there.

WLE is paying a good dividend, with a gross yield of over 8% (when grossed up to include franking credits - for those of us who can make use of those) and, importantly, with so much in their profit reserve, that fully franked yield is entirely sustainable.  They are also a good way to gain exposure to Australian large caps, for those of us who spend more time following and investing in smaller companies. 

Their fees are clearly higher than you would pay if you instead held an index-tracker ETF like VAS (follows the ASX300) or A200, QOZ, GEAR, IOZ STW (those track the ASX200) or SFY (ASX50) or ILC (ASX20), or more selective ETFs like MVW, VLC, AUST, MVOL, RVL or UBA, but with WLE you do get active management which has shown to add value.  Click here for a fee comparison.

Matt and John are doing a pretty good job of running WLE so far.

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#Shareholder Presentations
Added one year 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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#Business Model/Strategy
Last edited one year ago

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).

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