Why did the AFIC share price go backwards in April?

man looks at phone while disappointed

man looks at phone while disappointedThe Australian Foundation Investment Co. Ltd (ASX: AFI) (AFIC) share price went down around 1% in April 2022.

The listed investment company (LIC) is also down by 3.4% since the start of 2022.

What happened in April 2022?

While AFIC has a diversified portfolio, it can drop in value just like any other ASX share.

A LIC’s share price can be influenced by two different things: the underlying portfolio performance of the LIC and changes to the premium/discount that investors are willing to pay for the net tangible assets (NTA) of the LIC.

The S&P/ASX 200 Index (ASX: XJO) also fell by almost 1% during April 2022. So, the AFIC portfolio performed similarly to the ASX 200.

The biggest positions in the AFIC portfolio have the biggest influence on the overall portfolio performance. At the end of March 2022, these were the biggest positions:

Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), CSL Limited (ASX: CSL), Macquarie Group Ltd (ASX: MQG), Transurban Group (ASX: TCL), Westpac Banking Corp (ASX: WBC), Wesfarmers Ltd (ASX: WES), National Australia Bank Ltd. (ASX: NAB) and Woolworths Group Ltd (ASX: WOW).

Over April 2022, the CBA share price dropped 1.8%, the BHP share price fell 7.2% and the CSL share price climbed 1.9%.

Recent investment performance

Every month, AFIC tells investors about its investment performance.

Over the 12-month period to 31 March 2022, the AFIC net asset per share growth plus dividends, including franking, was 11.4%. That underperformed the 16.6% return of the All Ordinaries Total Accumulation Index (ASX: XAOA), including franking.

The last five years also show underperformance by AFIC, with an average portfolio of 10.6% compared to the 10.7% return of the index.

However, beating the index isn’t the LIC’s stated investment objective. It says:

AFIC aims to provide shareholders with attractive investment returns through access to a growing stream of fully franked dividends and enhancement of capital invested over the medium to long term.

The LIC says that its investment style is long-term, fundamental and ‘bottom-up’. Its annual management cost is 0.14%, with no performance fees.

AFIC share price premium or discount?

Investors get a monthly update about whether AFIC shares are trading at a premium or a discount.

At the end of March 2022, the AFIC share price was at a premium of more than 10%, though the size of the premium has reduced over the last couple of months. It has been a while since the AFIC share price was last trading at a discount to its NTA.

The post Why did the AFIC share price go backwards in April? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL Ltd. The Motley Fool Australia has positions in and has recommended Wesfarmers Limited. The Motley Fool Australia has recommended Macquarie Group Limited and Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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