The WAM Capital Limited (ASX: WAM) share price outperformed others in its sector on Wednesday. It's one of the ASX's biggest listed investment companies (LICs).

While WAM Capital shares were down 0.54%, other LICs saw significant sell-downs amid market declines due to US inflation data.

For example, the Argo Investments Limited (ASX: ARG) share price declined 0.87% while the Carlton Investments Limited (ASX: CIN) share price dropped 1.64%.

It was a much rougher day for the funds management sector. The Perpetual Limited (ASX: PPT) share price fell 3.7% and the Magellan Financial Group Ltd (ASX: MFG) share price declined 5.52%.

What could have supported the WAM Capital share price?

What happens to share prices on the ASX is up to investors. So, it's investors that are ensuring that WAM Capital shares didn't get dragged down as much as other ASX shares today.

One factor could be that the LIC announced its monthly update to the market today.

In it, WAM Capital said that its investment portfolio increased during the month of August 2022, outperforming the S&P/ASX All Ordinaries Accumulation Index (ASX: XAOA).

Investors may also be factoring in that the LIC reported that its portfolio had a 12.5% cash weighting at the end of last month, which may help cushion the blow against market declines.

Another factor could be that WAM Capital shares have not gone ex-dividend yet. Some shareholders may not want to sell because they know that if they do, they will lose their entitlement to the FY22 final dividend of 7.75 cents per share. At the current WAM Capital share price, its annualised dividend comes to a grossed-up dividend yield of 12%.

What else was announced?

WAM Capital also told investors about two of its investments that did well — NRW Holdings Limited (ASX: NWH) and oOh!Media Ltd (ASX: OML).

NRW is a provider of diversified contract services to the resources and infrastructure sectors. WAM pointed out that the business upgraded its earnings guidance in early August, then told the market about its strong outlook when it reported its FY22 result. Its order book was at "record levels".

The withdrawal of the merger proposal with Maca Ltd (ASX: MLD) was seen as "disciplined capital management" from NRW which strengthened the fund manager's confidence in the company and its management.

Meantime, oOh!Media is the largest outdoor advertising media company in Australia. Its result impressed, with a 62.1% rise in adjusted underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to $51.5 million. It also reduced net debt.

The investment team at WAM said:

We remain positive on oOh!Media as the company recovers from the coronavirus pandemic and believe that earnings will perform better than market expectations. The company also announced an on-market share buyback of up to 10% of its issued share capital, highlighting the strength of the balance sheet.

The post Why did the WAM Capital share price outperform its sector today? appeared first on The Motley Fool Australia.

You've heard the one about The Beatles' album which, when played backwards, says 'Paul is dead', right?

It was a fun conspiracy theory (though it was a simpler time — imagine what they'd find on it these days with 5G chips in every COVID vaccination!).

It was, of course, untrue.

I haven't had my COVID vaccine yet (they're booked out!), but I expect my phone signal to improve when I do.

(I can't decide whether to make sure you know I'm kidding, or just watch the emails roll in from those who think I'm serious. Somehow, I don't think I'm going to stop them, either way, but for the record, I'll be getting the jab as soon as I can. And no, it's not some Bill Gates New World Order plot.)

Now, where was I?

That's right — songs being played backwards.

There's something of an ASX analogy — it's not a conspiracy, but it's equally silly — which plays out, in one form or another, almost continuously.

It's the forwards-backwards dance of acquisition-and-spinoff, merger-and-demerger.

The latest, of course, is Westpac's reported consideration of parting ways with its New Zealand operations.

That news comes on the heels of Treasury Wine Estates (I own shares) considering spinning off the Penfolds brand.

And Crown, back in the day, trying to list its property assets in a separate entity.

Woolies is about to spin off Endeavour Drinks.

It's kind of a trend.

But it's not a one-way story.

Google (I own shares) once-upon-a-time bought YouTube.

IOOF has acquired MLC.

Ramsay Health is buying UK hospitals.

Carsales bought 49% of a US classifieds mob.

And there's Tabcorp, which is either being taken over, selling assets, or spinning them off. It kinda depends what day it is!

Then there's the merry-go-round:

It wasn't that long ago that Treasury itself was merged into Carlton & United Breweries. Then spun out.

Or that long ago that our banks bought into NZ, and strapped on wealth management arms (now also all-but gone).

Woolies bought — and then sold — EziBuy, the online catalogue retailer.

BHP has had as chequered a career as anyone on that front, too.

You'd almost be forgiven — and forgive me, as I drop into an almost-conspiratorial whisper — for thinking that the common thread here is 'activity', maybe even encouraged by investment banks and brokers who (I know, I'm surprised too), stand to make a cut of the transaction.

Surely not.

Right?

Well, I'll let you make your own decision on that one.

What I will say is that CEOs and company boards, like the rest of us, find it bloody hard to resist the temptation to just leave things alone.

They feel compelled to tinker, driven by the idea that they might be able to 'create value' through the 'synergies' of a merger, or the 'increased focus' of a divestiture.

That both can't be simultaneously true seems to elude them, or perhaps they just think they're the exception to the rule.

After all, CEOs don't get the big chair by lacking confidence…

And the blame doesn't lie just with CEOs, either.

We investors are happy to accept — or sometimes even encourage — the sort of thinking that gives us what I've decided to call 'piano accordion capitalism'().

In. Out. In. Out. In. Out.

When we bid up a company's share price after they announce a merger, we're implicitly approving the decision.

When one company becomes two — and the market capitalisation of the two businesses is higher than when they were a single company — we're justifying the decision.

Why wouldn't a CEO do those things, when they're given share price 'applause' as a result?

We're also very fickle, though — if things don't work out, we're only too happy to knife the incumbent and blame him for our problems.

It's good to be the king.

So which is it?

Should we be cheering on mergers?

Or pushing for divestments?

Or should we be wary of acquisitions and preferring our companies to keep their businesses intact?

Alas, dear reader, there is no easy answer.

There are plenty of cases that support the 'don't just sit there, do something' approach, and plenty of cases that make you wish the top brass had just played golf that day, instead.

Which is, in its way, the point.

If something is a crapshoot, doesn't it stand to reason that, for all of the costs, hassle, disruption and uncertainty, the better course of action is just to leave well enough alone?

It's a pipedream, of course.

CEOs spend their lives with investment bankers and short-term investors in their ears; exhorting them, in Warren Buffett's baseball metaphor, to 'swing, ya bum'!

And so, the decision falls to us, as investors.

If we can't control the CEOs and boards, we can at least control our own emotions and decisions.

And we can remember that the motivation of those who would make these things happen is almost always short-term in nature. So, the bottom line is, unfortunately, that we should be sceptical.

As a Treasury shareholder, I hope the company resists the urge to demerge its crown jewel, even if, in the short term, the combined price jumps a little.

If I was a bank shareholder, I'd want Westpac to keep its NZ operations — and I'm on record as saying I think the banks will rue spinning off their wealth management businesses. After all, long term mortgage debt can only rise as fast as wages (plus or minus any change in interest rates), while wealth management has a long term, compounding, tailwind!

Again, though, some spin offs will be good for shareholders. And some acquisitions will truly create long term value.

So there's no easy answer other than, as Buffett's right hand man Charlie Munger would suggest, to keep an eye on the incentives at play — and to keep a slightly sceptical countenance.

(Alternatively, if you want to buy all of the parts of my car for more than the market is offering for the whole thing, give me a call. I'm sure we can come to an arrangement!)

Fool on!

The post When the music stops… the investment bankers stop getting paid! appeared first on The Motley Fool Australia.

With every year that passes, there are more of these vehicles listed on the market and it's becoming a bit overwhelming.

We're spoilt for choice and it's hard to know which companies are actually worth our investment dollar. Here are two LICs that are less well-known, but I think have proven their worth over the long-term…

Carlton Investments Limited (ASX: CIN)

An unusual investment company, Carlton Investments owns a portfolio of 75 dividend-paying stocks, along with a very large position in Event Hospitality and Entertainment Ltd (ASX: EVT). The position in Event makes up around 44% of the portfolio.

The company regularly trades at a discount to its NTA (net portfolio value per-share) – often over 10%, which helps to mitigate the concentration risk.

The total return over the last 10 years has been 11.5% per annum, eclipsing most other LICs, due to its large holding in Event. Better than that, over the last 15 years, Carlton has increased its dividend by 8.3% per annum.

The management fee is a rock-bottom 0.08% per annum and its Chairman, Alan Rydge, has a very substantial shareholding and is also the Chairman of Event Hospitality. Carlton currently trades on a yield of around 3.5%, or 5% grossed-up.

Diversified United Investment Limited (ASX: DUI)

This LIC has been listed since 1992 and is a quiet achiever. The company invests in a diversified group of Aussie dividend-paying shares, as well as a few international ETFs – which make up over 10% of the portfolio.

DUI has provided total returns which are slightly ahead of the market and a solid growing dividend. The company has never cut its dividend, and over the last 20 years, the company has increased its dividend by 5.4% per annum.

It also regularly trades at a discount to its NTA – usually up to 5%. DUI currently trades on a yield of 3.5%, or 5% grossed-up.

Foolish takeaway

Both companies are not as popular as the big LICs and that could provide an opportunity for investors who like buying assets at a discount. I think both of these companies are worth considering for a reliable and growing stream of fully-franked dividends.

The post 2 under-the-radar LICs with growing fully-franked dividends appeared first on The Motley Fool Australia.

Carlton Investments Limited (ASX: CIN) has returned an average of 13.4% per annum over the last five years. This performance is better than most of its peers which focus on large caps and it could be on track for further outperformance because of one key investment.

It's rare for a fund manager to have one share that makes up more than 10% of their portfolio. If they do hold more than 10% it's a sign of very high conviction in that business.

In its update for 30 September 2017 Carlton revealed that 41% of its portfolio is invested in Event Hospitality and Entertainment Ltd (ASX: EVT).

Event operates cinemas, hotels and resorts in Australia, Fiji, New Zealand and Germany.

The share price has almost doubled over the last five years, growing from $6.77 to today's $13.02. This growth has been somewhat validated by the earnings per share growing from 50.1 cents in FY12 to 68.7 cents In FY17.

The main reason that Event could be a market-beating idea is that leisure spending is expected to increase over the coming years with both more people reaching retirement age and increasing amounts of tourists visiting Australia who will probably use Event's hotels and resorts.

Foolish takeaway

Event is trading at 17x FY18's estimated earnings with a grossed-up dividend yield of 5.6%. If I wanted to get exposure to Event then I'd consider investing in Carlton because it has such a large exposure, but also has a good grossed-up dividend yield of 5%.

The post This fund manager thinks Event Hospitality and Entertainment Ltd is a buy appeared first on The Motley Fool Australia.

For investors looking to get immediate diversification, an LIC makes a lot of sense. Most investors will gravitate towards the top two largest LICs – Australian Foundation Investment Co.Ltd. (ASX: AFI) and Argo Investments Limited (ASX: ARG), but there is a case to look beyond those two.

For one, their 10-year performance is average, coming in at 5.7% for AFIC and 4.9% for Argo. 6 LICs have performed better than AFIC.

These are the top 10 performing LICs over the past 10 years on a pre-tax net tangible assets basis. In other words, these companies have grown their assets the most – although their share price growth may not reflect that.

Source: Bell Potter

It also pays to remember that the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has returned 4.9% annualised, including dividends reinvested over the past 10 years. Which means that all companies above managed to beat the primary index – a fabulous result.

However, the SPDR S&P/ASX 200 Fund (ASX: STW) ETF has returned a compound annual return of 7.7% since inception in August 2001 – more than 15 years ago. That partly reflects the importance of investing for the long term.

Foolish takeaway 

Investing in LICs can be an easy way to gain instant diversification and exposure to different classes (like small and micro caps or international equities), but it's also important to make sure that their performance is better than the index – otherwise investors may as well just put all their cash into a low-fee exchange traded fund (ETF).

The post The Top 10 best performing Listed Investment Companies in the past decade appeared first on The Motley Fool Australia.

Historical data suggests that the best returns are achieved in the sharemarket – and over long periods a compound annual return of around 10% on average is the benchmark.

The largest listed investment company on the ASX, Australian Foundation Investment Co.Ltd. (ASX: AFI) has delivered compound annual returns over the past 10 years of 5.5%, compared to the S&P/ASX 200 Accumulation index (which factors in dividends) of 4.5% to the end of April 2016.

Over the past 20 years, the sharemarket has delivered annual returns of 8.7% before tax, while residential investment property is even higher at 10.5% also before tax.

If you are investing in the sharemarket directly, then that's an implicit statement that you are aiming to beat the professional fund managers and the market. That might be easier than you think when plenty of research has shown that most fund managers can't even beat the index (including here and here).

However, investors should not think that they can generate returns of 20% or more consistently each year. That's extremely difficult to do, and history has shown that very few investors have managed to do that for long periods – with Warren Buffett the most well-known example.

Breaking the Rules. Celebrating the Super Investing (14 years) by @DavidGFool https://t.co/XBWdoPnRIq pic.twitter.com/4Izp4pN8Sv

— Mark Robertson (@manifestinvest) May 14, 2016

Interestingly, 3 ASX-listed investment companies have managed to produce annual returns of above 10% over the 10 years to end of 2015 including Carlton Investments Limited (ASX: CIN) – 11.3%, WAM Capital Limited (ASX: WAM) – 10.3% and Australian Leaders Fund (ASX: ALF) – 10.3%, according to broker Bell Potter.

Given investors would have only achieved returns of 4.5% investing in the S&P/ASX 200 and reinvesting dividends over the past 10 years, the performance of the LIC fund managers is outstanding. It also indicates that to beat the market over the past 10 years means making sure your portfolio was substantially more diversified than the index – which has been top heavy with financial companies and the two large miners.

The big four banks still dominate the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), making up 27% of the index, and 35% when you include the two large miners and Macquarie Group Ltd (ASX: MQG).

To beat the index then, investors need to look outside the top 10 shares – which represent 47% of the index.

Foolish takeaway

The data suggests investors should aim for an annualised return of between 10% and 20% – as long as your portfolio is widely diversified beyond the ASX's top 20 shares. Aiming for anything less than that and you should buy shares in several LICs (or Exchange Traded Funds -ETFs – that track the indices) and find a hobby.

The post What investment returns should you aim for? appeared first on The Motley Fool Australia.