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ARG - Argo Investments

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FY24

Record fully franked dividend maintained
Argo’s final dividend to shareholders has been maintained at a record high of 18.0 cents per share, fully franked.
In addition to the benefit of franking credits, the final dividend includes a LIC capital gain component of 3.0 cents per share.

Investment portfolio
During the financial year, Argo purchased $344 million of investments, which included new holdings and additions to existing positions. Over the same period, Argo received $287 million from sales of investments, including numerous takeovers.

The larger movements in the portfolio during the period were:
Purchases
APA Group
BHP Group
CSL
IDP Education
Resmed*
Santos
Woodside Energy Group
Woolworths Group
* New portfolio position

Sales
ADBRI (takeover)**
Australian United Investment Co.
Estia Health (takeover)**
Invocare (takeover)**
Liontown Resources**
National Australia Bank
Wesfarmers
** Fully exited position

The total number of stocks in the investment portfolio decreased from 89 to 86, reflecting considerable merger and acquisition activity in the Australian share market over the period.
 
Bellcose said:
Thanks @Dona Ferentes. Additional income to hit the bank given I hold a greater number of shares than I did this time last year.
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yes indeed, belli, I have never sold any. Board and Management have continued soothing words , backed up by consistent performance.
- Low MER , at 0.15 per cent
- regular fully franked dividends.

Their view, as expressed in the latest summary, makes a lot of sense (to me, at least):
Dividend reliability throughout market volatility
The cash dividend paid by the constituent companies in the S&P/ASX 200 Accumulation Index (Index) fluctuates over time. Over the nearly five years since the start of the COVID crisis, it has been particularly volatile, falling as much as 45% relative to pre-pandemic levels. Furthermore, since 2019, the level of Index franking has fluctuated between 68% and 85%.

In contrast, Argo’s dividend has remained largely steady throughout this volatile period and remains at record-high levels this year. Importantly, our dividend has also remained 100% franked.

The relative stability of Argo’s dividends throughout a period of considerable market dislocation illustrates an important benefit of our listed investment company (LIC) structure: our ability to draw on reserves of retained earnings and franking credits. This allows us to effectively ‘smooth’ the dividends we pay to shareholders over time, providing a consistent income stream.
 
with ARG now ex-dividend of 18c and trading around $8.80, the company has started reporting a weekly NTA, most likely to try and reduce the discount that shares have been carrying.
Screenshot_20240820-104936_Drive.jpg
 
Dona Ferentes said:
with ARG now ex-dividend of 18c and trading around $8.80, the company has started reporting a weekly NTA, most likely to try and reduce the discount
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let's hope the NTA discount is cyclical. At today's AGM, they put the case
Screenshot_20241021_110228_Drive.jpg

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... and some commentary ... "In addition to focusing on dividends we are searching for relative value in the market. This is a challenge as most of the upward movement in the market is not supported by material earnings growth. This is further exacerbated by the continued ‘de-equitisation’ of the Australian share market. This dynamic undermines traditional valuation methods with increasing compulsory superannuation inflows inflating prices in a shrinking share market.

"The domestic banks' recent performance has been phenomenal, resulting in record valuations. A number of the banks will report their full-year results beginning next week and we expect continued strong earnings results with the potential for further capital management.

"One factor driving the bank’s outperformance has been the lack of investor interest in resources stocks due to a weak and uncertain China outlook. However, the recent stimulus announcements in China may see some shift into resources, which would likely be funded from the banks.
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Screenshot_20241021_110215_Drive.jpg

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With no debt, cash available and a diversified portfolio, we believe Argo is well-positioned to navigate the evolving economic cycle, applying our conservative, long-term investment approach.
 
Dona Ferentes said:
let's hope the NTA discount is cyclical. At today's AGM, they put the case
View attachment 186257
.
... and some commentary ... "In addition to focusing on dividends we are searching for relative value in the market. This is a challenge as most of the upward movement in the market is not supported by material earnings growth. This is further exacerbated by the continued ‘de-equitisation’ of the Australian share market. This dynamic undermines traditional valuation methods with increasing compulsory superannuation inflows inflating prices in a shrinking share market.

"The domestic banks' recent performance has been phenomenal, resulting in record valuations. A number of the banks will report their full-year results beginning next week and we expect continued strong earnings results with the potential for further capital management.

"One factor driving the bank’s outperformance has been the lack of investor interest in resources stocks due to a weak and uncertain China outlook. However, the recent stimulus announcements in China may see some shift into resources, which would likely be funded from the banks.
.
View attachment 186256
.
With no debt, cash available and a diversified portfolio, we believe Argo is well-positioned to navigate the evolving economic cycle, applying our conservative, long-term investment approach.
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Just decided to help your SMSF @Dona Ferentes and put a buy order on both arg and ali.
Some small move PM to other assets
 
I would just point out that Argo is at a discount to its pre-tax NTA. Its actually trading at a slight premium to its after-tax NTA.....

Post tax NTA for Argo is probably around $8.62 and the share price is currently at $9. So currently trading at a premium to post tax NTA of around 4.5%
 
Value Hunter said:
I would just point out that Argo is at a discount to its pre-tax NTA. Its actually trading at a slight premium to its after-tax NTA.....

Post tax NTA for Argo is probably around $8.62 and the share price is currently at $9. So currently trading at a premium to post tax NTA of around 4.5%
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yes sir. could you perhaps help me with a post-tax NTA for Berkshire Hathaway ?
Ferret said:
The post tax NTA is fairly irrelevant for a LIC.

They are not about to liquidate all their holdings and the value of their portfolio that earns them their dividends is best measured by the pre-tax NTA.
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Agreed. It's a company, been around for 80 years.
 
Ferret said:
The post tax NTA is fairly irrelevant for a LIC.

They are not about to liquidate all their holdings and the value of their portfolio that earns them their dividends is best measured by the pre-tax NTA.
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I understand what you are saying but its relevant in the sense that you could go out and replicate their portfolio (approximately) by buying the underlying shareholdings directly on the market and not have the legacy tax liability. So thereby by looking at the post tax NTA it gives you an idea how much you are paying (the premium to post tax NTA) for the stock picking expertise of the Argo investment team so in that way its a baseline for comparison. Besides in any given year they will sell some portion of their shares and pay some capital gains tax so the reality from the perspective you are talking about lies somewhere in between the pre-tax and the post tax NTA.
 
Value Hunter said:
I understand what you are saying but its relevant in the sense that you could go out and replicate their portfolio (approximately) by buying the underlying shareholdings directly on the market and not have the legacy tax liability.
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You have misunderstood this. If you go out and replicate their portfolio by buying the share holdings you will pay the pre-tax NTA, not the post tax NTA.

If instead you buy shares in the LIC, when the LIC is trading for less than its pre-tax NTA you get the portfolio at a discount to what you would pay to buy the portfolio.
 
Ferret said:
You have misunderstood this. If you go out and replicate their portfolio by buying the share holdings you will pay the pre-tax NTA, not the post tax NTA.

If instead you buy shares in the LIC, when the LIC is trading for less than its pre-tax NTA you get the portfolio at a discount to what you would pay to buy the portfolio.
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I believe this is what VH was saying so everyone agrees,😊
 
i place less relevance on NTA ( but still take some notice ) the div. returns are what catches my eye ( and i have not been watching when ARG is a compelling price )

i do not hold
 
Ferret said:
You have misunderstood this. If you go out and replicate their portfolio by buying the share holdings you will pay the pre-tax NTA, not the post tax NTA.

If instead you buy shares in the LIC, when the LIC is trading for less than its pre-tax NTA you get the portfolio at a discount to what you would pay to buy the portfolio.
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I did not misunderstand anything. You missed my point entirely. The if you spend the pre-tax NTA you could replicate the portfolio but you do not have the attached legacy capital gains tax liability hence its not an equal position.

All else being equal would you rather own $1000 of assets you could sell tomorrow and pay no tax on or $1000 of assets you could sell tomorrow but pay for example you must pay 10% capital gains tax on? Obviously they are not equal.

Hence my point that you need to look at the post tax NTA to equalize it to what it would be like to purchase the portfolio yourself.
 
I'm happy to agree to disagree on this one.

I fully understand what you are saying about the CGT liability, but many LICs are long term holders and may never realise that liability.

I prefer to use the pre-tax NTA when deciding if a LIC is a buying opportunity, but if you prefer the post-tax NTA, that's fine.
 
Ferret said:
I'm happy to agree to disagree on this one.

I fully understand what you are saying about the CGT liability, but many LICs are long term holders and may never realise that liability.

I prefer to use the pre-tax NTA when deciding if a LIC is a buying opportunity, but if you prefer the post-tax NTA, that's fine.
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bought back another 100k on Friday ... must have a fair idea what they're worth / capital management.
 
Ferret said:
I prefer to use the pre-tax NTA when deciding if a LIC is a buying opportunity, but if you prefer the post-tax NTA, that's fine.
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I just prefer to err on the side of conservatism and hence I use whichever figure is the lower figure. If post tax NTA is lower (the most common case) I use that and if pre-tax NTA is lower (some LICs have accumulated tax losses) then I use that.
 
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