Geoff Wilson’s listed investment company WAM Capital had moved heavily back into cash at the end of last month after dumping short-terms plays on the Trump rally and remains cautious about a bull market that is now in its mature phase.
Unveiling an increase in interim dividend despite a 22.6 per cent fall in half-year profit for his flagship listed investment company, Mr Wilson said the fund was sitting on 46 per cent cash as it resumed the search for unloved and undervalued mid and small-cap stocks.
“What worries me about the market is that we have had a long bull market and for every month that goes by the risk increases that we are going to see the end of the bull market,’’ Mr Wilson said.
WAM Capital has averaged 33 per cent cash over its 19 years on the stock exchange but is one of the few LICs big enough to trade at a premium to its net asset backing as investors bet on its ability to outperform. Argo and Australian Foundation Investment Co are among the others.
WAM posted a $79.7 million interim net profit, down from $103m for the first half of the 2015-16 financial year.
After including the 7.25c-a-share interim dividend from 2015 net tangible assets rose by 8.8 per cent from $1.88 a share to $1.95.
WAM Capital shares closed up 2c at $2.44, their equal record high and a 25 per cent premium to net assets per share.
The interim dividend increased 0.25c to 7.5c a share.
WAM Capital runs a dual strategy of researching and investing in undervalued stocks and running a trading portfolio able to capitalise on directional shifts in the market, such as the rally following the election of Donald Trump as US President.
It bought financial stocks such as Macquarie Group and Challenger Financial that profited in the Trump rally and participated in a capital raising for oil and gas group Santos in anticipation of rising oil prices.
The investment portfolio rose 14.5 per cent in the 12 months to December, outperforming the market by 2.9 per cent, and returned 9.7 per cent in the half year. Chief executive Kate Thorley said the LIC increased its shareholders equity by 30 per cent to $1.2 billion after a $247m placement to WAM shareholders in August.
Its largest holding by value at balance date was the Hunter Hall Global Value listed investment company, with its stake valued at $27.98m.
After the surprise resignation of founder Peter Hall from the Hunter Hall group, WAM increased its holding 11.5 per cent and is preparing to call a shareholder meeting to oust the board and enact an equal access buyback at net asset value.
But it faces a fight with the Millner family-controlled Washington H, Soul Pattinson.