How does the AFIC (ASX:AFI) share price compare to its net tangible assets?

How is AFIC’s ASX share portfolio stacking up right now?
The post How does the AFIC (ASX:AFI) share price compare to its net tangible assets? appeared first on The Motley Fool Australia. –

The S&P/ASX 200 Index (ASX: XJO) has dramatically recovered from its early losses this morning and has closed in the green, up 0.35% to 7,273 points. Despite this recovery, the Australian Foundation Investment Co Ltd (ASX: AFI) share price, or AFIC for short, remains in the red.

AFIC shares finished at $8.30 each, down 1.07% for the day.

This is rather strange since, as a Listed Investment Company (LIC), AFIC’s portfolio is quite similar to the ASX 200’s own holdings.

To illustrate, here are AFIC’s top 10 ASX holdings, as of 31 August:

Commonwealth Bank of Australia (ASX: CBA)
CSL Limited (ASX: CSL)
BHP Group Ltd (ASX: BHP)
Wesfarmers Ltd (ASX: WES)
Westpac Banking Corp (ASX: WBC)
Macquarie Group Ltd (ASX: MQG)
Transurban Group (ASX: TCL)
National Australia Bank Ltd (ASX: NAB)
Woolworths Group Ltd (ASX: WOW)
James Hardie Industries plc (ASX: JHX)

That list almost exactly mirrors the ASX 200’s current lineup. The only exceptions are Telstra Corporation Ltd (ASX: TLS) instead of James Hardie and Australia and New Zealand Banking Group Ltd (ASX: ANZ) in place of Transurban.

AFIC’s August NTA reveals a share price premium

So let’s check out what’s going on here. We’ll start with AFIC’s Net Tangible Assets (NTA). Since LICs are what’s known as a “closed-ended investment vehicle”, their market valuation can stray from the value of their underlying share portfolio. In other words, an LIC’s shares can either trade at a premium or at a discount to what they’re worth on paper.

As of 31 August, AFIC tells us that its NTA per share stands at $7.71 before tax considerations and $6.36 per share after tax.

As you can gather from the current AFIC share price, this (before tax) NTA undershoots the current AFIC share price by around 8%. This means that AFIC shares are currently trading with an 8% premium to their underlying value.

This could explain today’s share price fall in the face of the rising ASX 200. A big premium to an LIC’s NTA could conceivably give nervous investors the chance to sell out of their holdings, even in the face of a rising market.

At the current AFIC share price, this LIC has a market capitalisation of $10.16 billion and a dividend yield of 2.89%, or 4.13% grossed-up with AFIC’s full franking.

The post How does the AFIC (ASX:AFI) share price compare to its net tangible assets? appeared first on The Motley Fool Australia.

Should you invest $1,000 in AFIC right now?

Before you consider AFIC, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and AFIC wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

More reading

Here are the ASX 200’s most active shares this Tuesday

ASX 200 (ASX:XJO) midday update: APA makes AusNet bid, New Hope results impress

Why is everyone talking about ASX SPI Futures?

New Hope (ASX:NHC) share price jumps on $337m profit turnaround
5 things to watch on the ASX 200 on Tuesday

Motley Fool contributor Sebastian Bowen owns shares of National Australia Bank Limited and Telstra Corporation Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended CSL Ltd. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited and Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!