Why I may change my mind on selling WAM Research Limited (ASX:WAX) shares

I may sell my WAM Research Limited (ASX:WAX) shares.

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In my previous WAM Research Limited (ASX: WAX) article I said that legendary investor Geoff Wilson sold a small portion of his WAM Research shares and re-invested the money into WAM Global Limited (ASX: WGB) shares.

I said it could make sense to sell WAM Research shares because it's trading at a very large premium to its NTA, with the ex-dividend date soon approaching. However, WAM Global is trading at around (or under) its current NTA.

In my other article I said I would hold onto my WAM Research shares, however now I'm not so sure after thinking about it.

Don't get me wrong. WAM Research has been, and is, one of the best listed investment companies (LICs) on the ASX. Strong returns, a healthy level of cash, a large dividend yield and an impressive dividend history.

However, no share is a 'buy' at any price and you could also say it's not worth holding a share if it's significantly higher than its underlying value. I believe all the WAM LICs are worthy of trading at a small premium due to the long-term outperformance of their benchmarks. But a premium of almost 30% is very high.

Another issue is that Labor plan on reducing the attractiveness of franking credits. With the recent Turnbull removal the polls are saying Labor look more likely to win. Labor's Chris Bowen re-iterated to Geoff Wilson that Labor won't be changing its mind on the policy despite pressure from the WAM petition which now has over 17,000 signatures.

Our Scott Phillips had his say on the Labor plan a few months ago. In summary, he also thought it wasn't the perfect solution to the 'problem'.

However, if Labor do legislate the change then it could seriously harm the attractiveness to the shareholders of high-yield shares who own them for income.

There's a lot of ifs and maybes in that scenario, but it adds an additional reason to question holding WAM Research at this high premium, when I could do what Geoff Wilson did and put the money into WAM Global shares.

Foolish takeaway

As my title indicates, I may sell my WAM Research shares. Or I may not. I'm not sure, I will think about it this weekend. However, to remain 'Foolish' and transparent for readers I thought it was right to announce my possible intentions next week before I did anythign. There's a very good chance I'd put the money into WAM Global shares.

If I do sell I'm sure I will buy WAM Research shares again in the future (at a much lower premium!).

Motley Fool contributor Tristan Harrison owns shares of WAM Research Limited and WAMGLOBAL FPO. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

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