AFIC shares are currently trading well below their value.
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Australian Foundation Investment Co Ltd (ASX: AFI), or AFIC for short, is a popular listed investment company (LIC) that many ASX investors have in their share portfolios.
AFIC is one of the oldest LICs and companies on the ASX. It first opened its doors in 1928.
Ever since, AFIC has offered a conservative style, holding a portfolio of stable and mature blue-chip shares on behalf of its investors.
Today, AFIC has given shareholders an update on its portfolio, as well as its pricing. Let’s dig into what this venerable ASX share had to say.
Are AFIC shares trading at a discount or a premium right now?
First, AFIC tells us that, as of 31 January, the company’s net tangible assets (NTA) were worth $7.10 per share on an after-tax basis and $8.55 on a pre-tax basis. That’s up from $6.87 and $8.24 as of 31 December, respectively.
AFIC’s NTA represents the value of the company’s portfolio if all assets were liquidated on a specific date. The ‘pre-tax’ and ‘post-tax’ differentiation merely reflects the taxes that AFIC would have to pay if it did sell everything.
As with all LICs, the ‘true’ value of an AFIC share can differ, sometimes substantially, from the price at which its shares are traded. Given that AFIC is currently trading at $7.41 a share (at the time of writing), this tells us that the company is currently available at a rough 13.3% discount to the value of its underlying portfolio, disregarding those taxes, of course.
AFIC’s top stocks
In today’s update, AFIC also explained what investors are purchasing when they buy AFIC shares.
True to the LIC’s conservative outlook, almost all of its top holdings are well-known ASX blue chips. Here are the top ten of those stocks, along with their portfolio allocations in AFIC’s portfolio (as of 31 January):
- Commonwealth Bank of Australia (ASX: CBA) at 9.2% of AFIC’s portfolio
- BHP Group Ltd (ASX: BHP) at 7.9%
- CSL Ltd (ASX: CSL) at 6.9%
- Macquarie Group Ltd (ASX: MQG) at 4.9%
- National Australia Bank Ltd (ASX: NAB) at 4.7%
- Wesfarmers Ltd (ASX: WES) at 4.7%
- Westpac Banking Corp (ASX: WBC) at 4.3%
- Goodman Group (ASX: GMG) at 3.5%
- Transurban Group (ASX: TCL) 3.5%
- Telstra Group Ltd (ASX: TLS) at 2.5%
So, as you can see, there are some pretty familiar names there.
In terms of sectors, 19.8% of AFIC’s current portfolio is made up of ASX bank shares. Another 13.7% comes from the materials (mining) sector, and 12.5% from healthcare.
Over the ten years to 31 January, AFIC shares have delivered a total performance (assets per share growth, along with dividends and franking) of 9.6% per annum.
Motley Fool contributor Sebastian Bowen has positions in CSL, National Australia Bank, and Telstra Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL, Goodman Group, Macquarie Group, Transurban Group, and Wesfarmers. The Motley Fool Australia has positions in and has recommended Macquarie Group and Telstra Group. The Motley Fool Australia has recommended BHP Group, CSL, Goodman Group, and Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.