WAM Strategic Value (ASX:WAR) used its latest shareholder webinar to outline portfolio performance, dividend coverage, and efforts to narrow the gap between its share price and net tangible assets (NTA), while also addressing investor questions on specific holdings, cash levels, and the broader listed investment company (LIC) opportunity set.
Portfolio performance and approach
Portfolio manager Geoff Wilson reiterated the fund’s strategy of buying undervalued companies—particularly LICs and listed investment trusts (LITs) trading at discounts—where the team can identify a catalyst that could unlock value over a medium-term timeframe. While the portfolio may appear relatively stable from the outside, he said the team is “very active” when opportunities arise.
NTA discount, “look-through” value, and share price goal
Management said a key objective is for the share price to trade at a premium to NTA over time. Wilson highlighted that WAR reports both pre-tax NTA and a “look-through” NTA, which he said reflects underlying value more fully. He said he believes a “fair value” share price should sit between those two measures, and suggested that, based on the then-current numbers, that implied a level “closer or slightly above” $1.40.
The team noted that WAR’s discount to “actual hard NTA” had previously widened into the high teens but had narrowed to around 10%, and they expect it to continue narrowing. Wilson characterized discount movements as ultimately a supply-and-demand issue, influenced by performance, dividends, and shareholder alignment over time.
In response to a shareholder suggestion about paying dividends quarterly as a catalyst to close the discount, Wilson said he was not persuaded that quarterly payments meaningfully address discounts, citing examples in Australia and the UK. He added that moving to monthly dividends could be a different debate but would come with additional costs.
Dividends, yield, and coverage
Martyn McCathie said dividends received from WAR’s investment portfolio were currently about $0.078 per share on a grossed-up basis (including franking credits), which he said equated to roughly 80% dividend coverage for what the company is paying shareholders. He said the combination of the portfolio’s “look-through yield” and the LIC profit reserve mechanism supports dividend sustainability.
Wilson also pointed to the board’s decision to increase the dividend again for the last six months and said the plan is to keep lifting dividends over time, aiming to deliver a “fully franked return.”
Defensive characteristics and market drawdowns
McCathie highlighted what he described as defensive characteristics in the portfolio during volatility. Referring to calendar year 2025 drawdowns, he said WAR’s portfolio delivered around a 1% drawdown during four market sell-offs, compared with a market fall of slightly over 10%. He described this as a downside capture ratio of about 8.2%—and said a similar figure of about 8.8% applied over two years.
On the upside, he said the portfolio captured about 80% of the market’s gains, framing the approach as one designed to compound returns “taking significantly less risk than the market.”
Portfolio positioning, cash, and notable holdings
McCathie said WAR’s cash position had fallen to about 16%, down from around 30% at the prior webinar, as the team deployed capital selectively. He said the hurdle rate for new positions was elevated given market volatility, with the team seeking larger discounts before initiating positions.
In discussing active position management, McCathie highlighted several examples:
- Salter Brothers (SB2): The team said it had continued to increase its stake, with the last substantial holding disclosure at “19 point something%” before Christmas. McCathie said SB2 announced it had exited two unlisted investments at a meaningful premium to the 31 December carrying value, generating about a $7.8 million uplift (about $0.088 per share), which helped firm NTA.
- Perpetual: McCathie described it as trading close to NTA on internal models and said the team was trimming the position, noting it has been “in and out” of the stock multiple times, typically buying at wider discounts and trimming as it approaches parity.
- OPH: The team described opportunistic block trading, buying at a discount to NTA and later selling, generating about 4%–5% returns over roughly a month on two separate trades. They said they were “pretty much out” at the time of the webinar.
- URF: The team said it had previously been a sizeable shareholder but exited at $0.41 after analyzing asset sale risks and leverage, later noting the price had fallen to around $0.18–$0.19.
- Lark: Wilson said the position was based on valuing inventory (“whiskey under maturation”) but acknowledged operational and management issues and described it as “a bit of a value trap.” The team also described a separate short-term trade in the stock that generated about a 10% return.
On cash policy, Wilson said the firm does not run to fixed minimums or maximums but adjusts cash based on the opportunity set and the desire to be prepared for dislocations. He said the highest cash level since he has been involved was about 40%, while the lowest was “sub-10%.” He suggested the team is generally comfortable with roughly 10%–20% cash when fully invested opportunities are not compelling.
The webinar also included brief updates on other topics raised by shareholders, including:
- AOF: Management discussed AOF’s remaining Brisbane asset at 150 Charlotte Street, noting the prior sale failed to settle and that the property is being actively marketed, with the then-current valuation cited at $52.5 million. They said AOF’s half-year accounts were expected the next day.
- Sector opportunity: McCathie said LIC sector discounts have been narrowing and that there has been increased issuance, including five to six new listings over the last 12 to 15 months. He also pointed to opportunities in both primary and secondary raisings, which can be priced at discounts to market.
- Succession planning: Wilson said the broader business had more than 70 people, including more than 20 on the investment side, and that there is bench strength and internal protocols for continuity.
- AI: Wilson said artificial intelligence has improved research efficiency but has not changed the portfolio’s strategy or capital deployment, while cautioning that AI can still get numbers wrong and must be checked.
Management closed by inviting shareholder feedback on the revised webinar format and reiterated that suggestions—such as the look-through NTA disclosure—have been adopted in the past based on investor input.
About WAM Strategic Value (ASX:WAR)
WAM Strategic Value Limited invests in discounted assets. The company provide capital growth over medium to long term, deliver fully franked dividends and preserve capital. It also offers risk-adjusted returns and intends to invest in LIC. The company was founded in 1997 and is headquartered in Sydney, Australia.
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