WAM Active (ASX:WAA) posts 75.5% portfolio return as Oberg’s small-cap rotation finally pays

A 40.2% shareholder return and 12.3% grossed-up yield still leave shares at a 9.5% NTA discount

WAM Active Limited (ASX:WAA) has just delivered the strongest year in its 18-year history, with the investment portfolio up 75.5% for FY2026. That is 71.6% ahead of cash and 69.8% ahead of the All Ordinaries Accumulation Index over the same 12 months.

For a listed investment company that markets itself on active trading and capital preservation, the scale of the outperformance is unusual. Lead Portfolio Manager Oscar Oberg attributed it to four themes the team leaned into hard. Critical minerals, electrification and grid infrastructure, precious metals and AI.

The board has responded by lifting the fully franked full year dividend to 6.4 cents and layering on 3.0 cents of special fully franked dividends. Total franked dividends for FY2026 come to 9.4 cents per share, which at the 10 July closing price of $1.09 translates to a grossed-up yield of 12.3%.

Total shareholder return for the year landed at 40.2%. That is well below the portfolio return, and the reason is buried in the same announcement. At balance date, the share price sat at a 9.5% discount to net tangible assets because NTA ran harder than the market was willing to price in.

The 75.5% number came from a very concentrated bet on small resources

The top 20 holdings tell the story more clearly than the commentary. Lindian Resources at 10.8%, Echo IQ at 10.1%, Forrestania Resources at 8.4% and Solstice Minerals at 8.2%. Materials alone account for 40.5% of the book.

This is a portfolio that took real single-name risk in small and mid-cap resources. Oberg noted cash peaked at 35.5% in February before being deployed into what he calls dislocations in smaller, less-covered companies. That deployment clearly worked, but investors should be honest that a 75.5% year in this style also implies the drawdown scenario in a rotation away from small resources is not trivial.

The February entitlement offer raised $70.7 million and was oversubscribed. Those funds were deployed into the same themes and, according to management, contributed materially to the record result. Larger capital base, better liquidity, more attention from financial planners.

The 9.5% NTA discount is the most interesting line in the release

LIC investors know that discount and premium behaviour around NTA often matters more than raw portfolio performance in any given year. WAM Active shares traded at a 9.5% discount to NTA at 30 June despite a record year.

The skeptical read is that the market is pricing in mean reversion. A portfolio that delivered 75.5% in one year is unlikely to repeat it, and holders who bought at NTA in prior years are sitting on gains they may want to crystallise. The constructive read is that a 9.5% discount plus a 12.3% grossed-up yield plus a manager who has demonstrated the ability to deploy cash into the right themes is not a bad setup.

We think the discount is the key variable to watch from here. If Oberg and Weick can hold onto even a portion of the gains through FY2027, a re-rating back toward NTA plus the franked dividend stream is a credible total return path.

The FY2027 setup rests on copper and the China property cycle

Weick’s forward-looking commentary is refreshingly specific. China property and electrification trends are the near-term driver, copper is the trade, and several holdings have near-term catalysts. That is a very different message from the standard LIC boilerplate about staying disciplined.

Whether this thesis lands is the FY2027 question. Copper has already had a strong run, and any softening in Chinese demand data or a broader small-cap risk-off event would test the same names that drove the FY2026 outperformance.

Cash flexibility is the manager’s hedge. WAA has shown it will run cash up to a third of the book when it wants to, and that optionality matters if the small resources trade unwinds.

The Investors Takeaway for WAM Active

The FY2026 result is exceptional and the dividend increase is well covered by portfolio gains. But a record year in concentrated small-cap resources creates its own problem. Expectations for FY2027 now sit uncomfortably high, and the 9.5% NTA discount suggests the market is already sceptical.

For income-focused holders, the 12.3% grossed-up yield including specials remains the anchor. For total return investors, the interesting question is whether the discount closes or widens from here. Investors looking for more coverage of ASX-listed LICs can find our broader work at stocksdownunder.