I recently bought an ASX share for my portfolio.

It’s something that I’ve regularly written about and offers exposure to something quite different to many other ASX investments.

I’m talking about WAM Microcap Limited (ASX: WMI).

Almost every investor knows what’s going on with shares like National Australia Bank Ltd (ASX: NAB), Afterpay Ltd (ASX: APT) and Telstra Corporation Ltd (ASX: TLS).

It’s when you start going down the market capitalisation list that you start finding those unknown opportunities. Not many people are looking at shares with market caps under $300 million. That’s exactly the shares that listed investment company (LIC) WAM Microcap looks at.

Regular investors can’t be expected to know about every small cap ASX share. I believe it can be a smart idea to delegate some of that share picking to one of the best small cap investment teams in Australia, Wilson Asset Management.

How has WAM Microcap performed?

At the end of April 2020, WAM Microcap’s gross investment portfolio performance was 11.1% per annum since inception in June 2017. But of course, that includes the 21.4% drop over the previous three months from the coronavirus sell-off. But WAM Microcap outperformed its benchmark by 7.7% per annum in that time.

At the end of January 2020 its gross investment performance was 22.8% per annum since inception.

So why did I buy this ASX share?

The ASX share holds dozens of positions, so it doesn’t have too much risk from any one position. Indeed, it actually offers a lot of diversification.

The main thing to worry about, apart from potentially poor returns, is that small cap values can get smashed during times like this when market liquidity disappears. Which is exactly what happened.

But it’s this market selloff that presents the best times to buy. We’ve already seen huge share price recoveries from shares like EML Payments Ltd (ASX: EML) and City Chic Collective Ltd (ASX: CCX).

It’s not exactly a cyclical share, but there are going to be moments where it makes a lot more sense to buy this ASX share small cap LIC compared other times. Despite the huge recovery of the WAM Microcap share price from 23 March 2020, it’s still materially under the pre-crash high of $1.58 (though it has paid a dividend since then).

The dividend

The dividend of WAM Microcap is one of the best features. It has been increasing its ordinary dividend over the past few years, whilst also paying special dividends. Using an annualised dividend of 6 cents per share, it has a grossed-up dividend yield of 6.6%. A very good yield in today’s low interest era.

Foolish takeaway

I think WAM Microcap is at a fair price right now. It’s probably trading close to its net tangible asset (NTA) price, but its actual share holdings have rallied hard and aren’t as good value. There could be another market dip. I’d be very willing to buy a parcel of the ASX share and buy more the next time the market falls – whenever that is.

More reading

• ASX shares can help millennials retire before their parents
• ASX shares I’d invest $10,000 into today
• Why high yield dividend shares can be detrimental to your wealth
• Is it time to buy ASX small caps for your portfolio?

Tristan Harrison owns shares of WAM MICRO FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Emerchants Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Emerchants Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why I just bought this ASX share for the long-term appeared first on Motley Fool Australia.

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The WiseTech Global Ltd (ASX: WTC) share price is dropping lower on Thursday after the release of an update.

At the time of writing the logistics solutions company’s shares are down 3.5% to $21.60.

What was in WiseTech’s update?

This morning WiseTech provided the market with an update on the earnout arrangements it has for many of the bolt-on acquisitions it has made in recent years.

Earnouts are used during acquisitions to reward the sellers of a business if the acquired business goes on to achieve certain financial goals.

According to the release, it has worked collaboratively with 17 of its acquired businesses to simultaneously reduce and close-out future earnouts and replace significant cash payments with equity.

WiseTech Global Founder and CEO, Richard White, explained: “The current environment provided us with the opportunity to restructure previously agreed acquisition earnouts, ensuring we can better drive those resources, accelerate their contribution to CargoWise development, and further improve our commercial efficiency.”

“Our shared vision and alignment with our Founder MDs enabled us to close out these arrangements efficiently, remove significant contingent cash obligations and reduce future contingent liabilities. The leaders across our acquired organisations remain in the Group and are focused on delivering value for shareholders.,” he added.

What are the changes?

The company revealed that the negotiations have resulted in:

• Reduction in contingent liabilities overall from $215.5 million to $68.5 million.
• Removal of $151.5 million of future contingent cash liabilities.
• Equity issuance of $81.4 million of which $45.7 million remains escrowed for 12 months.
• The complete close-out of all future earnouts for ABM Data, CargoIT, Cargoguide, CargoSphere, CustomsMatters, DataFreight (LSI), Microlistics, Pierbridge, SmartFreight, Softcargo, SaaS Trans, Trinium, and Xware.
• The replacement of cash earnouts with equity for Cypress, Depot Systems, Forward, and SISA: part immediate equity close-out, and part future equity earnouts of $10.9 million based on product development.

The company will now review earnouts for the remaining acquisitions it has made.

In other news, WiseTech revealed that it remains on target to achieve its guidance for FY 2020.

Mr White advised: “In the current environment, our business continues to demonstrate resilience and tracks in line with our expectations.”

More reading

• Why Beach, Jumbo, ResMed, & WiseTech Global shares are dropping lower
• 1 key trait to look for with most top ASX growth shares
• The WiseTech share price has doubled since March. Too late to invest?
• Fund managers have been buying these ASX shares
• 2 top ASX tech shares with strong long-term growth potential

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of WiseTech Global. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post WiseTech Global share price drops lower on market update appeared first on Motley Fool Australia.

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