Ann: May 2020 Investment Update, page-5

Hey guys, I've been in and out of all the Wilson LIC's over the past 12 years and done very well out of them. Some thoughts from this experience:

WAM/WAX
- WAM and WAX are trading at ridiculously high premiums (WAX over 40%!!). I bought both of these at 20% discounts and sold out at over 20% premiums whilst also enjoying great performance of the underlying portfolio + huge dividends.
- Performance has been lacklustre the past 3 years as both funds were hurt badly by the call to go heavily to cash in late 2018 as the Fed was tightening monetary policy. Of course, the Fed relaxed then reversed its decision and the quick rebound hurt the portfolios. However, this is what you're paying Geoff to do - protect capital first, make money second.
- WAM has a very small profit reserve of just 6c that makes the dividend looking shaky going forward (WAX much higher at 26c)
- But ... at >20% and >40% premiums - why are you guys still holding these? How can anyone expect to make a reasonable return on their money if they're paying such high premiums to the value of the share portfolio they're buying? Suggest consider rotating into other LIC's (as Geoff himself advises and does).

WGB
- Performance has lagged the market. A good chunk of this is due to being underweight FAANG stocks. As stated in their prospectus, they go underweight the large caps and hold a larger proportion of mid-caps (so no surprise given the outsized movement of the S&P500 from FAANG).
- Trading at a discount so affected anyone who bought in early. Seems like a quality manager and well thought thru strategy to me. I suspect the discount will close over time and provide returns above the underlying portfolio for those with patience ... However
- ... I've sold WGB on the way down the dip and switched to FGG after the dip for international exposure (great performance, balanced portfolio of long, long/short and market neutral and still sort of part of the Wilson Stable as Geoff is Chair and set it up) and trading at >30% discount to NTA (a gift IMO). Buying into funds like Magellan at 70c to the $1 and zero fees seems too good to be true (especially as I hold a number of the funds directly in a wrap account too .. and pay $1 for $1, pay fees to Magellan and wrap fees). Note, the zero fees are partially offset by the 1% annual charitable donation.

WMI and WLE
- Both trading currently at discounts to NTA (by my calcs WMI by ~4c and WLE by ~10c).
- Both have beaten the market by significant margins (both before and after fees)
- Both have large profit reserves (despite their relatively short lives). WLE at 16c and WMI at a massive 26c! So dividends look incredibly secure.
- Both trade far more frequently and as such came thru the 4Q18 and Coronadip better than their larger stablemates.
- Both have provided opportunities to buy at discounts to NTA then sell at premiums (locking in gains above the market/portfolio movement)
- Note, they are focussed on the opposing ends of the market (vs all/mid market for WAX/WAM) so can balance your weighting by buying a ratio of both.

Hence, I bought some WLE at open this morning and continue to hold the WMI and FGG I bought some weeks ago.

One last comment re index ETF's and stockpicker LICs.... worldwide the longest bull market in history was very kind to ETF's, but its times like now that we should be getting the benefit of good fund managers (as always - time will tell).

Cheers and good luck with your decisions, Simon