Listed investment company (LIC) WAM Leaders Ltd (ASX: WLE) is one of the first companies to report the result for FY18.
The highlight was that the investment portfolio increased by 17.8% before fees, compared to the S&P/ASX 200 Accumulation Index return of 13%. This means that WAM Leaders outperformed the benchmark index by 4.8%.
The LIC also reported that the operating profit before tax increased by 155.7% to $100.5 million.
Most WAM Leaders shareholders will want to know about the dividend. It announced a final dividend of 2.5 cents per share, bringing the total dividends announced for FY18 to 5 cents per share. This was a 66.7% increase compared to last year.
Chairman Geoff Wilson attributed the pleasing year to the sound stock selection by the investment team, led by Portfolio Manager Matthew Haupt.
A key reason for the outperformance was exposure to the resource sector with picks like Origin Energy Ltd (ASX: ORG), Santos Ltd (ASX: STO) and BHP Billiton Limited (ASX: BHP). Other shares that also contributed to the result were CSL Limited (ASX: CSL) and Macquarie Group Ltd (ASX: MQG).
Geoff Wilson said that there were reasons to be careful with the current share market “We remain cautious about the direction of equity markets over the short-to-medium term. Globally, we have seen the return of volatility following a protracted period of stability. We are currently in the later stages of the second-longest bull market in history.
“Central banks have injected $13 trillion into equity markets since the global financial crisis and kept interest rates artificially low. We are now seeing the central banks unwinding this quantitative easing, with interest rates rising. As an active fund manager, we are excited about the mispricing opportunities this presents when investing in undervalued growth companies.”
Is WAM Leaders a buy?
According to Mr Wilson, WAM Leaders is currently the only WAM LIC that is trading at a discount. He has recently been buying shares due to the discount and believes that the discount will disappear with continued portfolio performance.
I agree that WAM Leaders appears the most attractively valued LIC of the WAM stable at the moment. It also comes with a grossed-up dividend yield of 6%. If you want to increase your exposure to the ASX 200, whilst avoiding the deficiencies of the index’s focus on banks, then WAM Leaders could be worth a spot in your portfolio.
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