I bought some shares at the start of the week on Monday, before the market staged its (brief?) recovery, to take advantage of the market volatility.
It was hard to choose, so many things had fallen in price. And Fool's trading rules also meant that I wasn't able to buy a couple of different names that I may have wanted to purchase.
I decided to buy shares of WAM Microcap Limited (ASX: WMI).
What is WAM Microcap?
It's a listed investment company (LIC) that invests in small caps on the ASX with market capitalisations under $300 million.
WAM Microcap is run by Geoff Wilson and the skilled team at Wilson Asset Management (WAM).
It's one of the newer LICs in the WAM stable but it's also been one of the best-performing ones.
How has it performed?
The LIC releases its performance number once a month, the latest figures are to January 2020, so before the coronavirus correction.
Since inception in June 2017 to January 2020 its portfolio returned 22.8% per annum before fees, expenses and taxes, outperforming the S&P/ASX Small Ordinaries Accumulation Index which returned 12.2%. I think this is an impressive result.
What's the dividend yield?
WAM Microcap paid special dividends in the last two financial years, but excluding any effects of special dividends, it currently has an annualised dividend of 6 cents per share, which translates to a grossed-up yield of 6.4% at a share price of $1.34.
Why I bought it
In times of declining markets, it's small caps that usually get sold off the most, which is what I saw with WAM Microcap's share price decline. I like taking advantage of good shares that have fallen more than the market.
Adding to that, LICs seemed to sell off more than normal shares with regular investors heading for the exit to try to protect their capital. I guessed that WAM Microcap's share price had fallen more than its net tangible assets (NTA), so it became even better value.
WAM Microcap usually holds a healthy amount of cash for protection and opportunities, so this will have been extremely useful over the past few weeks.
The fact that it is such a good long-term performer, with a cheaper and better value price, meant I was happy to buy shares. Its diverse portfolio will help ensure it isn't exposed to any shares that are too negatively affected.
