By Cliona O’Dowd
WAM Leaders is tipping China to be a tailwind for iron ore miners this year and believes the worst is over for the banking sector, as the investment firm reaped the benefits of a move to cyclical stocks that pushed its investment portfolio up 9.6 per cent.
The company, chaired by Geoff Wilson, rewarded investors with a 14 per cent lift in its interim dividend to 4c a share from 3.5c last year.
Lead portfolio manager Matthew Haupt said the strong performance was achieved by the fund positioning for a shift to more normalised policy settings.
“It was really just positioning the portfolio for a regime shift from the abnormal post-Covid period to more normal settings,” Mr Haupt said in an interview.
“It was also stock selection: there were a lot of opportunities out there as money was going into the growth stocks and we were positioned for that money to return to the stocks that were out of favour. So they were the main drivers (of the outperformance).”
The fund is on the hunt for buying opportunities in the current market, he added.
“We believe upcoming periods of volatility will present further inflection points and opportunities for the investment team to deliver performance for the benefit of our shareholders.”
The outlook for iron ore miners is positive this year, Mr Haupt said on Thursday.
“We can trade through all periods of the market and you really want to invest with tailwinds. China is in a loosening phase right now so that’s why we’re invested in some of those miners, particularly iron ore. We think China is potentially a tailwind this year.” The fund holds positions in Rio Tinto and BHP.
The LIC’s biggest sector holding at December 31 was financials, at 30 per cent of the total fund, with Commonwealth Bank, NAB and ANZ Bank among its top positions.
Like much of the market, the major lenders have seen their share prices tumble in the first few weeks of 2022, with CBA down 7.5 per cent, ANZ falling 3.7 per cent and NAB losing 5 per cent.
But the banks are at a low point for net interest margins, Mr Haupt said.
“I wouldn’t be too bearish the banks. Once they get past these results, things could improve for them. I’m not suggesting go overweight the banks, but I just wouldn’t be too negative on them either.”
Westpac on Thursday handed down its quarterly numbers, showing an 8 basis-point collapse in the net interest margin from 1.91 per cent in the second half of last year to 1.91 per cent in the December quarter, with the exit margin in December a further 4 basis points lower.
WAM Leader’s 4c per share dividend means that based on the February 2 closing share price of $1.46, the ASX-listed securities are trading on an annualised fully franked dividend yield of 5.5 per cent, or 7.8 per cent grossed-up.
The dividend boost is its seventh increase since inception in 2016 and comes after the LIC beat its benchmark, the S&P/ASX 200 Accumulation index, by 5.8 per cent over the six-months to December 31.
Over calendar 2021, the WAM Leaders investment portfolio surged 28.3 per cent, outperforming the index by 11.1 per cent. All performance figures are before taxes and fees.
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