WAM Research’s FY2026 investment portfolio dropped 18%, dragging the company to a $28 million net loss. Despite underperformance, the LIC sustains its 10 cents per share dividend, backed by strong reserves and franking credits.
- Investment portfolio down 18% in FY2026
- Net loss after tax of $27.95 million
- Full year dividend maintained at 10 cents per share, partially franked
- Net tangible asset backing fell to $0.78 per share before tax
- Long-term portfolio return of 12.8% per annum since 2010
Sharp Portfolio Decline Drives First Loss in Years
WAM Research Limited (ASX:WAX) reported a stark reversal in fortunes for the year ended 30 June 2026, with its investment portfolio plunging 18% and dragging the company to a net loss after tax of $27.95 million. This contrasts sharply with the prior year’s $28.5 million profit and marks a significant setback amid challenging market conditions.
The loss was driven by a combination of macroeconomic headwinds and company-specific disappointments, particularly within small-cap industrial stocks that dominate the portfolio. The investment portfolio’s underperformance was pronounced against benchmarks, with the S&P/ASX All Ordinaries Accumulation Index rising 5.7% and the Small Ordinaries Accumulation Index up 8.1% over the same period.
Dividend Maintained on Strong Reserves and Franking Credits
Despite the loss, WAM Research’s board declared a full-year dividend of 10.0 cents per share, partially franked at 55% (interim 60%, final 50%). The company’s profits reserve stood at a healthy 41.4 cents per share before the final dividend payment, providing 4.1 years of dividend coverage. The franking account balance of $2.4 million, adjusted for a $1.0 million tax refund, supports the partial franking of dividends.
The dividend reinvestment plan remains active, offering shareholders the option to reinvest dividends at a 2.5% discount to the VWAP over four trading days commencing the ex-dividend date. This mechanism helps manage capital efficiently while rewarding loyal investors.
NTA and Share Price Reflect Market Pressures
Net tangible asset (NTA) backing before tax fell from $1.09 to $0.78 per share, reflecting the portfolio’s decline and dividend payments. After tax, NTA was $0.86 per share. The share price softened from $1.11 to $1.015, yet the premium to NTA widened to 29.7%, signaling investor willingness to pay above underlying asset value despite portfolio weakness.
Long-Term Performance and Investment Philosophy Remain Intact
WAM Research’s investment portfolio has delivered a robust 12.8% per annum since the 2010 strategy pivot, outperforming the S&P/ASX All Ordinaries Accumulation Index by 3.9% annually. The company emphasises its disciplined, research-driven approach focused on undervalued growth companies with identifiable catalysts for re-rating.
Lead Portfolio Manager Oscar Oberg acknowledged the tough environment, describing FY2026 as the most challenging since the Global Financial Crisis. He noted that macroeconomic events, including geopolitical tensions and rapid AI adoption, overshadowed company fundamentals and weighed on small-cap industrials. However, he expressed cautious optimism for FY2027, citing early signs of market stabilisation and recovery in sectors such as consumer discretionary, healthcare, and technology.
Portfolio Composition and Stock Selection Challenges
The portfolio remains diversified, with significant weightings in industrials (22.9%), healthcare (14.5%), and financials (12.4%). Notable holdings include Artrya, GemLife Communities, Aussie Broadband, and Maas Group Holdings. Several larger positions, including Gentrack Group and Temple & Webster Group, underperformed due to company-specific issues, contributing to the overall negative return.
WAM Research did not benefit from takeover activity in FY2026, unlike the prior year. However, recent proposed transactions in portfolio companies suggest ongoing interest from strategic and private equity buyers, which may signal latent value.
Governance, Fees, and Risk Oversight
The company’s governance structure includes a mix of independent and non-independent directors, with Geoff Wilson AO serving as Chairman. Management fees remain steady at 1% per annum of portfolio value, with no performance fee payable this year due to the portfolio decline. The company maintains robust risk management frameworks covering market, economic, strategic, operational, and cyber risks.
WAM Research continues advocacy efforts on tax reform, particularly opposing proposed capital gains tax changes and unrealised gains taxation in superannuation, highlighting potential impacts on investment and innovation.
Bottom Line?
WAM Research faces a critical test in FY2027 to restore portfolio growth and sustain dividend franking amid ongoing market and tax headwinds.
Questions in the middle?
- Can WAM Research’s investment team reverse the portfolio’s underperformance in FY2027?
- How will ongoing tax reforms affect the company’s ability to maintain fully franked dividends?
- Will the widening premium to NTA persist if portfolio returns remain under pressure?