Australian (ASX) Stock Market Forum

ARG - Argo Investments

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transit said:
.........can you please tell me what SPP stands for?
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SPP = Share purchase Plan. Within every 12 months (calender?) companies are allowed to offer current shareholders the ability to purchase up to $5,000 worth of shares. The Co's do not have to issue a prospectus to raise these new funds.

Last year AFI offered 1020 shares @ $4.90. CHO will be offering an SPP at a price still yet to be determined (normally is the averaged weighted price over the period between the ex-dividend date and the record date.) If history is anything to go by, it is possible that that MLT, CHO's stablemate, will offer a SPP at the September/October reporting period.

ARG usually offers an SPP of $2,500 every dividend time but this year has a 1 for 8 renounceable rights issue at $7.20 per share to current shareholders. Shareholders can also apply to take up any shortfall if other shareholders do not take up the rights issue. Back in early 2004, ARG had a 1 for 10 rights issue at $4.40 per share and had to limit applications for additional shares to 1000 shares for each applicant. Could happen again.
 
transit said:
Thanks drmb, can you please tell me what SPP stands for? Is this some type of share issue particular to LIC's? Someone recently mentioned Whitefield (WHF) [/URL]
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SPP - Judd answered above. If you decide to put part of your investment into LICs then it is worth considering spreading them around the elite ones because you get a limit of $5000 worth of discounted shares every 12 months. It's like another 2-3% dividend. But the point is you get the option whether you hold 5000 or 500000 shares. So by spreading between say arg, afi, dui, aui, cho, ect., you can maximise the return you get if you take up the spp.

I don't know WHF, but you can do some initial research by comparing its performance against some of the others. I just did a quick comparison and it seem to be in between ARG and DUI, another reason to spread them around if you are a defensive investor. Past performance is no guartee of future performance etc, etc

I suggest you do what I didn't when I started investing, and that is do some research, eg check each site and check the major investments, they usually publish a top 25. If you feel comfortable with the spread then that fund may be OK with you. I just put money into whatever the financial advisor said to, or the stockbrokers tips and ended up with a lot of slow performers, such as PRV, and WIL. These 2 seem to be moving now but I spent months and months watching them stagnate while there was a bull market booming. Could've been ahead! But now I'm sorted out. Also look at the size of the fund, you will find ARG is sitting near the top with total funds under investment. What impressed me right from the start with arg is its annual reporting is very low key brochure, its not 100 pages of glossy paper with lots of earnest people in hard hats looking at shovels. Keeps the costs down!
 

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Thanks for the info Judd and drmb. I just checked the sp for ARG and it's dropped quite a bit recently with todays close at $8.08 which is still a premium to the NTA of $7.74. Does anyone know if this is considered fair value at this price. I would like to get some ARG but not sure how to determine what amount of premium i should be paying to the NTA.
 
transit said:
Thanks for the info Judd and drmb. I just checked the sp for ARG and it's dropped quite a bit recently with todays close at $8.08 which is still a premium to the NTA of $7.74. Does anyone know if this is considered fair value at this price. I would like to get some ARG but not sure how to determine what amount of premium i should be paying to the NTA.
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Value is such a personal thing! ARG to me is a long term investment that if I wanted to buy more I probably would not even look at the NTA premium or discount, since it's an elite LIC with a proven track record. Have a look at the top 20 holdings (as published on the arg website as of today's date) and see if it fits in with your perception of value, whether you think these companies are going to increase in value with time (the figure after is the market value that ARG holds). If you bought them in the same proportion, how much brokerage would you have to pay to get the same spread? -

Macquarie Bank Ltd. 306.2
Milton Corporation Ltd. 181.8
BHP Billiton Ltd. 164.1
National Australia Bank Ltd. 149
Australia and New Zealand Banking Group Ltd. 124.1
Australian United Investment Company Ltd. 118.2
Telstra Corporation Ltd. 111.5
Rio Tinto Ltd. 99.5
Wesfarmers Ltd. 96.7
Westpac Banking Corporation 92.1
Commonwealth Bank of Australia 88
St. George Bank Ltd. 83.6
Woolworths Ltd. 75.8
AMP Ltd. 65.2
Rinker Group Ltd. 59.9
Westfield Group 50.8
Foster’s Group Ltd. 50.4
QBE Insurance Group Ltd. 42.7
Woodside Petroleum Ltd. 42.3
Origin Energy Ltd. 42

You'll notice 2 elite LICs in the top 20, Milton and AUI. Milton's top holdings

Westpac Banking Corporation 135,466
National Australia Bank 94,806
Commonwealth Bank 89,369
Bank of Queensland Limited 70,802
Choiseul Investments Limited 70,615 (an elite LIC)
St George Bank Limited 59,635
Wesfarmers Limited 46,967
ANZ Banking Group Limited 46,821
Perpetual Limited 46,057
Washington H Soul Pattinson 42,207
Bendigo Bank Limited 41,160
Suncorp-Metway Limited 39,398
Woolworths Limited 36,104
Campbell Brothers 32,139
BHP Billiton Limited 28,242
Trust Company of Australia Limited 26,385
QBE Insurance Group Limited 24,740
Brickworks Limited 24,615
Macquarie Bank Limited 22,388
CFS Retail Property Trust 20,604

AUI top holdings

1. BHP Billiton Ltd 53,650 7.7%
2. Rio Tinto Ltd 46,680 6.7%
3. ANZ Banking Group Ltd 46,533 6.7%
4. Woodside Petroleum Ltd 37,400 5.4%
5. National Australia Bank Ltd 35,160 5.1%
6. Diversified United Investment Ltd 31,735 4.6% (another elite LIC)
7. Westpac Banking Corporation Ltd 31,428 4.5%
8. Alumina Ltd 29,362 4.2%
9. Tabcorp Holdings Ltd 24,320 3.5%
10. Wesfarmers Ltd 21,198 3.1%
11. Woolworths Ltd 20,150 2.9%
12. Commonwealth Bank Ltd 19,985 2.9%
13. Brambles Industries Ltd 19,800 2.9%
14. Orica Ltd 17,917 2.6%
15. Westfield Group 17,330 2.5%
16. AXA Asia Pacific Holdings Ltd 15,675 2.3%
17. Suncorp Metway Ltd 15,480 2.2%
18. Perpetual Trustees Australia Ltd 14,630 2.1%
19. QBE Insurance Group Ltd 14,350 2.1%
20. St George Bank Ltd 13,198 1.9%
21. Alesco Corporation Ltd 11,933 1.7%
22. Southern Cross Broadcasting (Aust) Ltd 10,500 1.5%
23. Iluka Resources Ltd 9,825 1.4%
24. Australian Gas Light Company Ltd 9,630 1.4%
25. Bluescope Steel Ltd 9,540 1.4%

There was a 1:8 renouncable rights announced 5 Feb and the reason for the apparent drop in value is due to the shares going ex rights on 12 February - the entitlement is 16 February but the rights are already trading as ARGR, and were 0.71 at close today. Arg closed at 8.08 today. Add those together and you get 8.79 for a holder on the 11 February.

In conclusion up to you to decide what to buy but ARG forms part of the untouchable base of my SMSF. It's one of those shares that Warren Buffett might well say "hold forever". Don't buy it to trade in a few weeks or months because it's a "keeper" imo.
 

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transit said:
Thanks for the info Judd and drmb. I just checked the sp for ARG and it's dropped quite a bit recently with todays close at $8.08 which is still a premium to the NTA of $7.74. Does anyone know if this is considered fair value at this price. I would like to get some ARG but not sure how to determine what amount of premium i should be paying to the NTA.
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Dear transit and drmb,

Thanks for the informative posts.

There was an interesting article in the Weekend AFR about the rights ARGR and ARG.

I was considering buying the rights and then applying for shares for my SMSF, however the shares from the rights miss the div in March and existing shares are now ex div.

So I may wait and see how broader market goes for a while , or look at other LIC's

Garpal
 
Drmb, thanks heaps for taking the time to post this and educate me a bit more about LIC's and ARG in particular.

As you pointed out, it's interesting to note that a lot of LIC's hold other LIC's in their portfolio such as Milton Corp holding Choiseul Investments Limited, and AUI holding Diversified United Investment.

I also noticed that ARG have a large holding in Milton Corp (MLT) as well. I guess this strategy allows LIC's to be even more diversified as well as spread their risk a bit more with their portfolio.
 
transit said:
Drmb, thanks heaps for taking the time to post this and educate me a bit more about LIC's and ARG in particular.
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No probs
transit said:
As you pointed out, it's interesting to note that a lot of LIC's hold other LIC's in their portfolio such as Milton Corp holding Choiseul Investments Limited, and AUI holding Diversified United Investment. I also noticed that ARG have a large holding in Milton Corp (MLT) as well. I guess this strategy allows LIC's to be even more diversified as well as spread their risk a bit more with their portfolio.
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I did used to get worried about the "circular holdings" which if you did a reducto ad absurdum, would mean that each LIC only held other lics in the portfolio with apparently no income! And no growth. And one wonders which is the chicken and which is the egg? Here are some typical LIC cross holdings with "parent" and "child"
ARG hold DUI, AUI, MLT, CHO, BKI
AUI hold DUI
BKI hold MLT, CHO
CHO hold MLT
DUI hold nil other LICs
MLT hold CHO

I guess it is done as a way of diversifying and spreading risk. If all LIC's trade at discounts the cross-holdings work in the holder and the LIC's favour since the 'parent LIC' has its NTA calculated by marking the 'child' NTA to market, but this understates the true worth of the 'child' LIC. If LIC's trade at premiums to NTA the cross-holding work against you. However I don't care now! I just hold and watch grow.

If you are looking at other LICs take into consideration volume since when it comes time to sell you may find your LIC is illiquid. Eg AUI, DUI would seem to be a problem. In these cases the discount to NTA persists when you try to sell and you may be selling at a greater discount if you are impatient and want the sale on the same day or even same week. Check DUI sales for example - the market depth sit on the bid below NTA and there are typically very few, very few sellers and sometimes none. Along you come wanting to sell but find no buyers at the price you want so you wait, and wait since most sales are on the bid.

This is not a problem with eg ARG and AFI since the sales volumes are considerably more each day.

Anyway take care and remember your choice of LIC is a longer time horizon than say with other stocks, take a 5 - 10 year approach!!! Also note I am not an expert, I just have DUI, AFI and ARG as about 30% of my smsf.
 
Anyone still monitoring ARG or the other LIC's and can give a view? Im also interested in finding out if there are LIC's out there that focus on internationally based shares.
 
From what I have read ARG expects a correction, and have been holding off on a number of investments as they see the market over valued in certain areas.

They have been a consistant performer with a dividend re-investment plan that is good for long term investors, and that suits me.

Whether they are overvalued now I don't know.

Its a stock that I will be accumulating when the market has any minor corrections.

If you like the look of the stocks they hold then I guess you'd invest in them.
 
I have been accumulating Argo for many years now. They just keep on keeping on, no great surges, no great dips. One of those almost Blue chip shares!
 
Bluebeard,

TGG is a LIC that invests in international shares. Only found out about it recently when AFI put in a notice of being a substantial holder.

I am keen to diversify out of the Australian market and I like LICs (hold a reasonable amount of AFI), so I've now got TGG on my watchlist. However, before I buy I'll wait until I feel the $A has topped and its effect washed through the share price of a LIC like TGG.

Ferret
 
Note that TGG does not hedge its holdings against the $AUS. Hold TGG as well as (low cost) Vanguard International Indexed (Hedged) and PMC which takes the bets and shorts as well. Also hold AFI, ARG, DJW and WAM (the last not really being an LIC but is classified as a trading company by the ATO so cannot pass on discounted LIC capital gains)
 
ARG the life time stock.

Purchased 2007 sold never.

This stock is tucked away BHP would not find this one in my drawer.
 
Ken said:
ARG the life time stock.

Purchased 2007 sold never.

This stock is tucked away BHP would not find this one in my drawer.
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Purchased in 1989! Never to be sold. Always accumulating in their wonderful SPP :p: :p:
 
this is actually the only stock the college i used to live owns. they have held it for about 5 years now and that is how i first heard of it. nice little dividend and excellent capital gains. plus they are adelaide based :D
 
It's generally boring and true to its aim - to increase dividends overtime at a rate greater than inflation. This lot, combined with the dividends from other LIC's we hold, mean that each year, we do not scramble around for funds to pay: rates; house/contents insurance; car registration and insurance or health insurance. And there are still funds left over to buy a few more now and then.
 
Hi all,
This has been a great thread to read through.
I dont own arg but do believe the best LIC going around is aui. Very tightly held by only a handful of shareowners and own a quality portfolio of other businesses. Interested to hear other posters who own aui or thoughts on LIC's.
 
Kravis said:
Hi all,
This has been a great thread to read through. I dont own arg but do believe the best LIC going around is aui. Very tightly held by only a handful of shareowners and own a quality portfolio of other businesses. Interested to hear other posters who own aui or thoughts on LIC's.
I hold DUI, ARG, and AFI in my SMSF, and they are about 15% of my shares portfolio, about 8% of total investments. I have been reducing DUI although it has been the great performer of the 3 since liquidity is the big problem with DUI and its allied lic, AUI. When it comes time to sell unless you are prepared to wait days or weeks for a sale, you may have to sell at a substantial discount to nta.

ARG is a steady performer for sure and I use the SPP with all of them, its a no brain way to invest. But not as exciting or interesting as some of the speccies, which in the bull market have evened out with wins and losses at about 3x the LICs. Come Monday that may all change though if the Dow continues to misbehave, although now I am very thankful to have sold out of RIN to Cemex for a good profit, given the problems with the subprimes in the US.

If you like LICs then it is probably best to spread your investment amongst several of the better performing ones, since you can participate in the $5k share offer at a discount each year that most offer. Another LIC that I should probably get into is ALR, since it seems to have same steady growth but with better divies. I also remind myself that these LICs are a LOONNNGGG term investiemnt, don't even think about them for the first 5-10 years!

Do some research and the easiest is on www.asx.com.au, use the search function and enter eg "AUI", "DUI", and "LIC" and you will get a lot of information, eg the sp to nta price. Personally I do not go too much on that these days as you think will get a bargain with eg 10% discount to nta, only to find when you sell, it evens out!

Good luck
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