WCM Global Growth Ltd (ASX: WQG) is an ASX listed investment company (LIC) which I recently added to my portfolio.
About WCM
WCM is a leading independent fund manager who has been appointed to manage and invest the portfolio. WCM has successfully managed investor money for over two decades and now has assets under management exceeding $35 billion (AUD). WCM’s interests are strongly aligned with its investors as it is 100% owned by its employees.
WCM is appointed by the manager, which is a wholly owned subsidiary of Contango Asset Management Ltd (ASX: CGA).
Essentially WCM will be responsible for investing the portfolio, whereas Contango will oversee WCM and has the power to terminate WCM (subject to termination fees etc.). Termination of WCM is highly unlikely in my view, not least because the LIC bares WCM’s name.
What is WCM’s investment strategy and how have they performed?
According to WCM’s prospectus its investment strategy is to “invest the Company’s Portfolio in quality global growth businesses with high returns on invested capital, superior growth prospects and low debt”. Companies in the portfolio are also required to, “maintain a durable and growing competitive advantage, or growing economic moat”. The portfolio will be diversified across sectors including information technology, consumer sectors of staples and discretionary, healthcare, financials and industrials.
WCM’s strategy has outperformed its target benchmark over the last decade, the MSCI World ex Australia Index. Of course, as the saying goes, past performance does not guarantee future performance.
Is It Time To Buy WCM Global Growth Ltd Shares?
As of January 31 2019, WCM’s reported post-tax net tangible assets (NTA) were $1.184 per share. Based upon the recent share price of $1.05, this represents a discount to post-tax NTA of about 11%.
WCM is currently undertaking a share buyback which commenced in June 2018. In WCM’s 2018 annual report, chairman Valentina Stojanovska confirmed the purpose of the buyback is ‘to take advantage of the deep discount of the share price relative to NTA. This Buyback Program is ongoing and reflects the Board’s commitment to delivering improved returns to shareholders’.
Overall I believe there is a strong case that this discount to NTA will narrow and that WCM will provide strong returns over the longer term. For these reasons I have recently purchased shares in WCM and will hold them in my portfolio for the longer term.
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Disclaimer: At the time of writing, William owns shares in WCM Global Growth Ltd.
