AFI - Australian Foundation Investment Company

[peter2]

Impressive price rally this FY and since making new yearly highs in June 21.

 

[Dona Ferentes]

Small cap LICs doing even better. MIR just gone ex divi

 

[qldfrog]

I checked for my investment portfolio but well above intrasic value..i forgot the english term but you know what I mean

 

[peter2]

I rarely look at this sector (LICs) because I can usually beat them. Over the past four months I haven't. Too late now that price is going parabolic.

I've been looking for about five opportunities for a conservative portfolio that I can buy in dips and hold for longer without worrying about earnings seasons. Buying AFI on the break-out (>7.55) would have been a perfect start. I've been keeping an eye on the Wilson stable but they're not looking very attractive at the moment. MIR, any others worth monitoring?

Edit: I've also been looking at a few ETFs as well for this portfolio. Bought a position with a longer term outlook in ACDC in the recent div dip. Holding CHC and GMG in this portfolio as well.

 

[sptrawler]

I rarely look at this sector (LICs) because I can usually beat them. Over the past four months I haven't. Too late now that price is going parabolic.

I've been looking for about five opportunities for a conservative portfolio that I can buy in dips and hold for longer without worrying about earnings seasons. Buying AFI on the break-out (>7.55) would have been a perfect start. I've been keeping an eye on the Wilson stable but they're not looking very attractive at the moment. MIR, any others worth monitoring?

Edit: I've also been looking at a few ETFs as well for this portfolio. Bought a position with a longer term outlook in ACDC in the recent div dip. Holding CHC and GMG in this portfolio as well.

I have quite a few AFI and treat them a bit like a term deposit, set and forget sort of thing, probably not the best way to do it but my trading skills are anything to write home about.

 

[Dona Ferentes]

The AFI Half Yearly came out yesterday. Pretty much as expected; a positive period for the Company. At end Dec, 2021, the NTA was $7.76, up from $6.64 at 31 December 2020. Portfolio performance was a couple of % above the benchmark S&P ASX Index.

The management expense ratio for AFIC is 0.15% (annualised), with no performance fees

Interim dividend is 10 cents per share, fully franked, the same as last year, on an ex-dividend basis 09 February 2022. There is no conduit foreign income component of the dividend.

Portfolio Adjustments
Short term volatility provided attractive prices to increase our holdings in Transurban, Coles Group, CSL, Goodman Group, Domino’s Pizza Enterprises and BHP, where we consider long term prospects for all these companies remains strong. Transurban will be a significant beneficiary as economies gradually reopen, leading to increased traffic across its road transport network, while improved mobility will enhance plasma collection volumes for CSL.

We initiated positions in JB Hi-Fi and WiseTech Global. JB Hi-Fi is the largest consumer electronics retailer in Australia and New Zealand. While primarily providing attractive income to the portfolio, we expect the consumer electronics category to continue delivering meaningful growth. WiseTech Global is a leading developer and provider of software solutions to the global logistics industry facilitating customers to digitise their freight forwarding operations.

We exited Qube Holdings, APA Group, Lifestyle Communities, Origin Energy and Altium, considering each company’s long term prospects increasingly challenged as competitive intensity increases. We also exited our holding in Milton Corporation as a result of the takeover by Washington H. Soul Pattinson.

Outlook
Our strategy of owning a diversified portfolio of quality companies that are well placed to deliver earnings growth over the medium to long term remains appropriate. While market volatility may emerge, short term periods of uncertainty often present good buying opportunities for investors focused on a company’s long term prospects. The portfolio is soundly positioned despite the spectre of rising interest rates and heightened global uncertainty.

 

[Belli]

We initiated positions in JB Hi-Fi and WiseTech Global. JB Hi-Fi is the largest consumer electronics retailer in Australia and New Zealand. While primarily providing attractive income to the portfolio, we expect the consumer electronics category to continue delivering meaningful growth. WiseTech Global is a leading developer and provider of software solutions to the global logistics industry facilitating customers to digitise their freight forwarding operations.

We exited Qube Holdings, APA Group, Lifestyle Communities, Origin Energy and Altium, considering each company’s long term prospects increasingly challenged as competitive intensity increases. We also exited our holding in Milton Corporation as a result of the takeover by Washington H. Soul Pattinson.

If I read it correctly, AFI did not take up the SOL script I gather.

I do not hold AFI.

 

[Dona Ferentes]

If I read it correctly, AFI did not take up the SOL script I gather.

That is what I read. And out at a higher price than SOL is at now.

Ditto Lifestyle Communities ((code LIC); was in the $18-23 range, closing at $20 at end of the reporting period .when disposed of and these shares now trading around the low $17 range. Also ALU, QUB, APA , (but not ORG) generally below the previous half year, so timely disposals (and kudos to AFI for selling into a rising market)

 

[divs4ever]

If I read it correctly, AFI did not take up the SOL script I gather.

I do not hold AFI.

that was the way i interpreted as well

i do not hold AFI ( but do hold SOL )

i suppose i should crunch the numbers of AFI , again

i note it holds several shares i do not so a slight reduction in concentration risk , if i buy in

DYOR

 

[Belli]

Beyond me how someone can think investing in AFI or any other LIC reduces concentration risk.

They all have a relatively small number of shares in comparison with the whole market. And in AFI's case the Top 25 account for 77% of the entire portfolio. That was easy to discover simply by bothering to look at the web-site. It could be argued that is a level of increased concentration risk not a reduction.

What should be expected if outsourcing decisions to the management of LICs is they do it well. They won't always get it right but are likely to do better than the average investor. If you're good enough (and how are you going to objectively measure and determine valid parameters to apply in order to prove it?) you would not invest in LICs at all. Or, like me, prefer to do other things and let professionals do it for me.

 

[divs4ever]

Beyond me how someone can think investing in AFI or any other LIC reduces concentration risk.

They all have a relatively small number of shares in comparison with the whole market. And in AFI's case the Top 25 account for 77% of the entire portfolio. That was easy to discover simply by bothering to look at the web-site. It could be argued that is a level of increased concentration risk not a reduction.

What should be expected if outsourcing decisions to the management of LICs is they do it well. They won't always get it right but are likely to do better than the average investor. If you're good enough (and how are you going to objectively measure and determine valid parameters to apply in order to prove it?) you would not invest in LICs at all. Or, like me, prefer to do other things and let professionals do it for me.

simple , i hold a very small number of WBC ( and no other direct exposure to the other big 4 ) , no RIO , no CSL , no SQ2 , no TLS ( sold them ) , no NCM ( sold them ) , no ALL , no BXB ( sold them ) no TCL , no GMG ( but they are still on my watch-list )

and there are a few popular names missing from the top 50 list as well

i was chasing divs + room for growth , just being a 'blue chip' wasn't enough for me

i am just not very heavy in most of the popular shares

my top 10 holdings at the end of last month ( that will have changed after today but some sort of guide )

1. MQG. ( 'free-carried ')

2. PME ( 'free-carried ' )

3. APE ( at some cash risk )

4. API ( full cash risk ) ( less than $100 behind )

cash ( boosted by take-over payouts )

5. WES ( at full cash risk )

6. JHG ( full cash risk )

7. BHP ( some profit taken )

8. CMW ( at full cash risk ) ( less than $400 behind )

9. GRR ( at full cash risk )

10. CDM ( at full cash risk )

 

[divs4ever]

AFI , AUI or ARG , would be a perfect choice for me ( at the bottom of a crash ) as would a top 200 index fund

 

[Belli]

A Top 200 Index fund? AFI? Convoluted thinking at it's best.

A200, STW or IOZ are index funds. AFI is not.

 

[divs4ever]

i was talking about exposure to 'blue chips ' of which AFI holds several , while the ETFs will hold anything with a large market cap.

but currently many think dumb ( computer algos ) is smart , a good LIC chooses it's investments , but asks more fees

one is thoughtful precise but ( more ) expensive , the other is cheap and less discriminatory

 

[So_Cynical]

A200, STW or IOZ are index funds. AFI is not.

AFI due to sheer size pretty much tracks the index, STW - AFI 5 year comparison chart below, AFI more than twice the MC of STW.
~

 

[sptrawler]

I think it depends on what stage of your investment journey you are on, as most investment decisions do IMO, AFI give a pretty reliable dividend and I find them better than a term deposit.
If your retired that becomes important, especially when the market is in turmoil, there is a hell of a difference between getting a pa ypacket in your bank every week whether you want it or not and having to live off your wits.
So AFI might not be everyone's cup of tea, but IMO it fits well with my overall strategy, I run about 30% cash and 60% equities and 10% property. So the 30% cash is earning zip, the property I use for leisure and the 60% has to provide the legislated drawdown for the SMSF, so everyone to their own.

 

[kenny]

I'm fond of AFIC's Bonus shares option as a tax management tool. I am willing to pay for the discretionary oversight and stewardship of my funds in a way that Index funds & ETF's will never claim to do. I have and do get exposure in both and Index funds have certainly shone a necessary light on LIC's to force them to justify their continued relevance.

 

[divs4ever]

I'm fond of AFIC's Bonus shares option as a tax management tool. I am willing to pay for the discretionary oversight and stewardship of my funds in a way that Index funds & ETF's will never claim to do. I have and do get exposure in both and Index funds have certainly shone a necessary light on LIC's to force them to justify their continued relevance.

yes SOME LICs needed a shake-up , and give other LICs the opportunity to shine a little brighter

 

[Dona Ferentes]

it's interesting that AFI will come out with this . today.

recent fall in markets through January 2022 has meant AFIC’s Net Tangible Asset Backing per share (NTA) has fallen by approximately 9.5% since 31 December 2021. The NTA at 31 December 2021 was $7.76 per share (before tax).

And with AFI shares are trading well North, last price $8.49 (with 10c dividend), and a quick calc puts it really only worth $7 a share.

Keeping the market informed.

 

[Dona Ferentes]

And with AFI shares are trading well North, last price $8.49 (with 10c dividend), and a quick calc puts it really only worth $7 a share.

the premium to NTA is still there. Latest trade $8.65 and the NTA announced for end Jan at $7.19 cum dividend. The 10c ff divi goes ex- on 09 Feb

I had thought about selling some MIR which was trading at a similar discrepancy, and noted the small distribution, but as a smaller company, there wasn't the volume to make a meaningful clip. (Was $4.02 prior to going ex- but if I had tried to unload say 10,000 shares, I would have only got around $3.95 according to the depth. Then when it went ex- the 3.5c, the drop was only to about $3.82; with low volume on offer it would be likely re-entry price would have cost me closer to $3.90 which is where it is now.)

And with AFI, although the depth is greater, I'm not sure there's too much benefit in any similar strategy. There's no guarantee the market will sell it off. Hence I'll be like @sptrawler and take the div, and continue to hold.

"I think it depends on what stage of your investment journey you are on, as most investment decisions do IMO, AFI give a pretty reliable dividend and I find them better than a term deposit."