By Cliona O’Dowd
WAM Leaders has lifted its dividend as the investment firm reaped the benefits of a move to cyclical stocks in the first half that pushed its investment portfolio up 9.7 per cent for the 2022 financial year.
Over the 12 months to June 30, the Geoff Wilson-chaired fund delivered a record outperformance of 16.2 per cent, with the benchmark S&P/ASX 200 Accumulation index delivering a return of negative 6.5 per cent over the same period.
“The back end of last calendar year we were mainly positioning for a rising interest rate environment,” WAM Leaders lead portfolio manager Matthew Haupt told The Australian.
“The market thought there’d be no interest rate increases and we took the opposite view of that and positioned in a lot of the financials.”
The ASX-listed investment company also took “a really big position in energy and commodity stocks”, early in the year and tilted toward defensives in the second half, he added.
“Positioning in consumer staples like Woolworths and Coles, as well as healthcare stocks like CSL and Ramsay Healthcare helped the performance,” Mr Haupt said.
But it is watching for opportunities to shift back to cyclicals in the months ahead, he added.
“We’ve still got a good holding in defensives but we‘re looking for opportunities to turn a little bit more cyclical, into cyclical companies, but it’s probably a bit early.
“We’ve redeployed into some REITs, we think that they look okay and are trading at a big discount to NTA.”
Looking ahead, Mr Haupt is cautious on the outlook following July’s rally. Although he sees the Reserve Bank topping out its rate hikes at between 2.5 per cent and 2.75 per cent, he expects a “tough” economic environment, with a likely slowdown.
“The backdrop for equities is still pretty tough but throughout the year there’ll be a chance, I would have thought, to get a bit more constructive on the cycle.
“I would have thought we’re not out of the woods yet. Maybe the market’s a little bit too excited that financial conditions are getting a bit easier … the impact of the hikes will hit over the next few months and shake confidence in the market.”
The RBA on Tuesday hiked the cash rate by a further 0.5 per cent, while the market thinks the central bank will top out in the current cycle at 3 per cent.
For the coming earnings season, Mr Haupt is watching for any commentary on costs and the ability of companies to pass rising costs on, but said the macro environment is the key component for the outlook right now.
“The lead indicators are all terrible at the moment, so I think there’s just a little bit of uncertainty and a little bit more pain to come this year.”
The board declared a fully franked final dividend of 4c a share, up from 3.5c last year. That takes the full-year payout to 8c a share, fully franked, which will be paid on November 30.
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