In some much-needed relief for investors, July ended up being a stellar month for ASX shares and the S&P/ASX 200 Index (ASX: XJO). Over the first month of FY2023, the ASX 200 rose by a healthy 5.7%, partly giving back some of the 8.9% the ASX 200 lost over June. So how did the Australian Foundation Investment Co Ltd (ASX: AFI), or AFIC, share price do?
AFIC is one of the oldest ASX shares on the share market, having first opened its doors in 1928. This ASX share is a listed investment company (LIC). This means it functions more like a managed fund than a traditional ASX company, investing in a portfolio of other ASX shares on behalf of its own shareholders.
So let's check out how AFIC fared over the month just gone. The LIC started July at $7.51 a share. Last week, AFIC closed at a flat $8. That puts AFIC's gains over July at a healthy 6.52%, happily outperforming the ASX 200.
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How did the AFIC share price beat the ASX 200 over July?
So how did AFIC deliver this outperformance? Well, here are two factors to consider. The first is the company's Net Tangible Asset (NTA) backing. All LICs can either trade at a discount, or at a premium, to the value of their underlying share portfolio.
As of 30 June, AFIC's NTA backing came to $6.63 per share. That's the latest figure that has been publically released, so we don't know exactly how AFIC's NTA stands today.
However, at the time, this was substantially lower than AFIC's share price, meaning the LIC was trading at a premium to its NTA value. Over July, it's possible this premium widened even further which could, in itself, be a source of outperformance.
But we must also consider AFIC's own share portfolio. Unlike an index fund, AFIC does not blindly mirror the holdings of the ASX 200.
As of June 30, it had more exposure to the Commonwealth Bank of Australia (ASX CBA), Transurban Group (ASX: TCL), and Macquarie Group Ltd (ASX: MQG) share prices, amongst others, than an ASX 200 index fund.
In contrast, it gave less room to the other big four bank shares, BHP Group Ltd (ASX: BHP), Telstra Corporation Ltd (ASX: TLS), and Woodside Energy Group Ltd (ASX: WDS), amongst others.
Since AFIC's share portfolio differs from that of the ASX 200, there is an inherent potential for a difference in performance between the two. So this could also have played a role in AFIC's outperformance of the ASX 200 over July.
Either way, it was certainly a pleasing month for AFIC shares.
At the current Australian Foundation Investment Co share price, this ASX LIC has a market capitalisation of $9.84 billion, with a dividend yield of 2.99%.
