UNICORN Discount

[scotia]

Unicorn AIM VCT announced a purchase (yesterday) of 74753 of its own shares at 135.5p The current bid/offer is 135/137.
The last announced NAV at 30/11/2016 was 157.9. While I applaud the purchase of its own shares, I feel they could try a bit harder. Their Discount of greater than 14% is considerably out of line with other VCTs - especially AIM VCTs. Their dividend policy is also less than generous, so the overall return is weighted on increasing NAV. Although their past performance has been reasonable/good, this focus on NAV and a poor Discount control significantly reduces their attraction on a 5-year purchase and sale strategy in order to benefit from the tax rebate - since the rebate is effectively halved by the discount policy.

[oxmatt]

I fully agree with this. I think it is fine to have a conservative dividend policy if their main target is capital growth but in that case they should have a narrower discount policy.

[UncleEbenezer]

We had this discussion in Another Foolish Place.

Unicorn as an investment should be seen more as a micro-cap IT. In that universe it looks good: the divi is high, the discount is moderate, and capital growth makes it an all-round decent investment.

I believe it's now my second-biggest single VCT shareholding, and I regard it as a forever-hold that will feed my pension in due course.

[ali1947fish]

does not this also make it a good buy on the secondary market? i would appreciate a commnet on this- many thanks

[scotia]

does not this also make it a good buy on the secondary market?

Its not a high enough discount to tempt me to buy on the secondary market, but is too high to tempt me to buy new!
It has a history of a discount in the 12% to 15% range - with no sign of wanting to change this, so I wouldn't gamble on it suddenly reducing the discount.
If I were simply looking at a non-VCT micro cap fund, I'd go for Marlborough UK Micro Cap (which I hold). My wife holds Unicorn AIM VCT (and Marlborough UK Micro Cap) .
Marlborough UK Micro Cap is an Accumulation fund - so any income is reinvested. It has returned 119% over five years
On a simple computation of Price plus dividends (not reinvested) over 5 years, I estimate the Unicorn Return is approximately 84%
But - as is often stated - past performance is no guide to future performance.

[UncleEbenezer]

Marlborough UK Micro Cap is an Accumulation fund - so any income is reinvested. It has returned 119% over five years
On a simple computation of Price plus dividends (not reinvested) over 5 years, I estimate the Unicorn Return is approximately 84%.

Using H-L's charting, I see 5-year total return of 120% for the Marlborough, compared to 131% for Unicorn AIM VCT. In the same ballpark, and kind-of supports the proposition that UAV is a worthy competitor in the same space. Add the tax advantages and I'm happy to hold Unicorn.

Though over shorter timespans, Marlborough wins, as Unicorn has not had a good year. Wonder if we lost out / overpaid when we took on Rensburg?

[scotia]

Using H-L's charting, I see 5-year total return of 120% for the Marlborough, compared to 131% for Unicorn AIM VCT

Intriguing. I used HL's fund charting for the Marlborough - and agree with your figure. I have now returned to HL and used this charting app for Unicorn as well - and I agree with your values
However I originally checked out Unicorn on HL's separate equity charting app.
Over 5 years the Unicorn NAV has increased from 98.4 to 157.92. And there have been dividends of 23.25. So on a simple calculation, ignoring any reinvestment, I get 84%
If I go for Price (and one can argue whether or not this is a better comparison) then it has increased from 75.6 to 136, and again there are dividends of 23.5. So repeating the simple calculation I get 111%
Why the difference? Is the HL fund charting app using price, and is it reinvesting dividends - i.e. is 111 to 131 the power of compounding?

[UncleEbenezer]

If I go for Price (and one can argue whether or not this is a better comparison) then it has increased from 75.6 to 136, and again there are dividends of 23.5. So repeating the simple calculation I get 111%
Why the difference? Is the HL fund charting app using price, and is it reinvesting dividends - i.e. is 111 to 131 the power of compounding?

23.25p looks like four year's divis, but five have been paid over the period. Or possibly your source is the same as Google's which erroneously lists the February 2016 payment of 6.25p as GBX1.

The rest of the difference is indeed down to compounding.