I nearly always enter an investment assuming I may be holding that company in terms of years not months, but with some selling I have done of late it hasn’t turned out that way. A month or two ago I pointed out the difference in performance of the leading companies on the ASX versus the small ordinaries over the last year or so.
It could be described as a bull market in the small cap sector but not with your standard “mum & dad” index as it sometimes gets described. E.g. the banks, tls, wow , wes, bhp etc
The enthusiasm in the small cap sector has in part helped the LICs that are focused on smaller companies both in NTA performance and also contracting the discounts to NTA that they trade with. I made 3 sales in smaller LICs recently in part because of these factors. In some cases, I will try and link back to the recent post I made when buying which will help explain why I am now selling.
NCC – I have made over 17% in about 7 weeks on this and believe in the time I owned it the actual underlying portfolio probably only gained in the order of 3%. I think the portfolio should do ok still from here, particularly with AIK being a main component which I am still positive on. Remember though that I still own AIK directly so will not be upset if that goes higher from here. Now though NCC has been trading very close to the pre-tax NTA, and comfortably above the post-tax NTA. Historically most smaller higher fee LICs find it difficult to maintain these levels so I felt it prudent to take some profits here. Here is the recent post I made when buying NCC.
TOP – Here SSM has really helped this LIC and remember I still own some directly. MNY has been very strong for them also. The prices of these 2 holdings from this point are not as attractive as when I went into TOP recently. TOP charges high management fees and sometimes I find we could assemble a portfolio similar to theirs yourself if you really wanted to. So partly for this reason when the discount to NTA contracts which it has lately I want to reassess and in this case sold TOP. In about 2.5 months I found myself sitting on a gain of over 18%, possibly about a third of the gains might be attributable to the discount to NTA contracting. Here is the recent post I made when acquiring TOP.
MVT – This is only a half sell at 16 cents as it made up a larger holding than the above 2 positions. In this case the NTA actually did nothing in the time I held it, yet I gained 14% from the discount contracting whilst buying just after Brexit.
I have spoken of late that markets since Brexit, particularly the small cap sector on the ASX have been quite upbeat, so I expressed a desire over time to simplify the portfolio with some selling into strength which can also reduce the number of holdings I have. Today’s selling goes a long way to fulfilling that desire. Now I would welcome some weakness in markets from here because as I said recently it is very difficult to come up with new buy ideas. Unfortunately, the markets rarely do what you would like to happen though so we shall have to wait and see!