I assume you know about the first year NTA discount in LICs after they list. Studies in the US have shown that (on average) a new LIC develops a large discount to NTA in the first year (see reference below).
Some Australian examples:
WAM listed Jul1999 - at Jun 2000 was trading at 25% discount to NTA (before tax) despite actual NTA increase of 25%.
ALF listed Jan2004 - at end Nov 2004 was trading at 15% discount to NTA (before tax)
CAM listed Jan 2004 - at end Jan 2005 was trading at 19% discount to NTA (before tax)
CTN listed Feb2004 - at end Sep 2004 was trading at 16% discount to NTA despite 20% increase in actual NTA
I want to buy this stock but I cannot decide when. There are few alternatives in Oz with this investment strategy.
The usual warning applies, previous performance does not guarantee future returns. This sounds suspiciously like "this time it is different".
The references mentioned above are here:
Dimson, E. and C. Minio-Paluello 1999. Closed-end funds: a survey, Financial Markets,
Institutions and Instruments, 8, 2, 1-41
Martin Gold 2006. Equity Issuance trends in Australia's listed equity funds market, p 399
These are academic references so be warned about the technical nature. However, the first one does cover a large numbers of funds in US and UK, many more than in Oz (second reference). Search for section on NEW ISSUES in first one. and section 25.4.2 in second.
ACQ Price at posting:
89.0¢ Sentiment: Buy Disclosure: Not Held
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