Is the new WAM Alternative Assets LIC a buy?

The Blue Sky Alternatives Access Fund Ltd (ASX: BAF) could be presenting a compelling value case today for investors looking for a bargain.

| More on:
wondering about asx share price represented by man surrounded by question marks

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Blue Sky Alternatives Access Fund Ltd (ASX: BAF) is about to have a face off kind of event. Not a confrontation per se, a face off in the style of the 1997 John Travolta/Nicholas Cage film. In that film (of questionable quality), Nicholas Cage's character assumes the face of John Travolta in order to do some sinister things. Sorry if that was a spoiler for anyone.

Well, Blue Sky is about to have a different face as well. It is set to rebrand as WAM Alternative Assets very shortly. So should we pick up shares in Blue Sky before it changes its face? Recent data indicates there might be a decent buying opportunity here.

What is Blue Sky?

The Blue Sky Alternatives Access Fund is a listed investment company (LIC) with something of a sordid past. Its original mandate was a focus on 'alternative assets', which refers to any assets outside the conventional circles of ASX shares, bonds and cash, such as water rights, infrastructure or venture capital. Many investors find these alternative assets attractive due to their low correlation to shares and the prospects of income in our low interest rate world.

However, Blue Sky has been in trouble for a couple of years, ever since a short-seller report exposed alleged problems and overvaluations regarding several of its underlying assets. Receivers were appointed in May 2019 to try and work through these issues, which has led the company into the arms of Wilson Asset Management (WAM).

Enter WAM

WAM is a company that has built a stellar reputation as an LIC manager. It currently offers six different ASX LICs which range from a focus on small or micro-cap ASX shares with WAM Microcap Ltd (ASX: WMI) to international growth companies with WAM Global Ltd (ASX: WGB). Its flagship LIC, WAM Capital Limited (ASX: WAM), has been around since 1999 and has delivered an average return to its investors of 16.1% per annum since (before fees and taxes).

WAM has been courting Blue Sky for a while now, but investors finally gave it the go-ahead for a takeover during an extraordinary general meeting earlier this month. As such, Blue Sky Alternatives Access Fund is set to become WAM Alternative Assets (ticker symbol to be WMA) in the near future (although an exact date has yet to be named). Under the agreement WAM struck with shareholders, the company will guarantee that the new WMA shares will return to being priced in line with its underlying net tangible assets.

Since shares of an LIC are traded in the public market, they can sometimes be priced at a level that is either above or below the value of the underlying assets. And Blue Sky has been underwater for a while now, likely reflecting the uncertainty of its future until recently.

So WAM has promised investors that if the new WMA shares don't trade at a premium to their underlying NTA for no less than one month at least three times during the next five years, shareholders will have the right to terminate the agreement with WAM.

Should investors buy BAF shares today?

So, it looks like Blue Sky has a very promising path back to potential glory. But let's look at the numbers. So, as I mentioned earlier, an LIC often trades at a premium or a discount to its underlying value. Recently (as of yesterday), Blue Sky has notified the markets of its underlying NTA for the month of August. The company advised that each share represented $1.084 in value on a pre-tax basis. At the time of writing, Blue Sky shares are going for 86 cents each. That means you can effectively purchase $1.08 worth of assets for 86 cents today in Blue Sky shares. That's a rough 20% discount to the assets' true value.

As such, I think there is definitely a value case for Blue Sky shares today. WAM is an astute and well-regarded steward of capital that I think can turn around Blue Sky's fortunes under the new name. We have here a compelling long-term value opportunity in my view.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the 'five best ASX stocks' for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor Sebastian Bowen owns shares of 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.

More on Share Market News

A man looking at his laptop and thinking.
Share Gainers

Here are the top 10 ASX 200 shares today

The markets lost their steam this Thursday.

Read more »

A young man pointing up looking amazed, indicating a surging share price movement for an ASX company
Broker Notes

3 amazing ASX 200 shares to buy and hold forever

Brokers think these shares are in the buy zone. Let's see why they could be top buy and hold picks.

Read more »

iPhone with the logo and the word Google spelt multiple times in the background.
Opinions

I've been buying these 2 US stocks in 2025. Here's why

Sometimes the US markets are a better place to go shopping for stocks.

Read more »

Ecstatic woman looking at her phone outside with her fist pumped.
Share Gainers

Why Catapult, Hutchinson, SKS, and West African shares are pushing higher today

These shares are having a strong session despite the market weakness.

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why Dexus, Mayne Pharma, Nufarm, and Treasury Wine shares are falling today

These shares are having a tough session on Thursday. But why?

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
Mergers & Acquisitions

IAG share price lifts off on strategic alliance approval

IAG shares are racing higher in Thursday’s sinking market.

Read more »

Rising gold share price represented by a green arrow on piles of gold block.
Gold

Up 72% in 2025, why is this ASX 200 gold stock racing ahead of the benchmark again today?

Investors are bidding up this high-flying ASX 200 gold stock again on Thursday. But why?

Read more »

A woman wearing a black and white striped t-shirt looks to the sky with her hand to her chin contemplating buying ASX shares today as the market rebounds
Share Market News

Where could the RBA interest rate go in the next 12 months?

Here’s what one expert thinks could happen with interest rates by early 2026.

Read more »