by Ben Wilmot
Veteran share investor Geoff Wilson AO is taking a cautious stance on the direction of equity markets, saying the US is in the mature phase of a bull market and the end of quantitative easing would present challenges for central banks.
Despite this prognosis, Mr Wilson AO said his fund, which focuses on large capitalisation stocks on the Australian Securities Exchange, is well positioned after it outperformed the major sharemarket index last year.
The WAM Leaders Limited announced its investment portfolio had increased 17.8 per cent in the last financial year, beating the S&P/ASX 200 Accumulation Index by 4.8 per cent.
The strong performance led the listed investment company to unveil a fully franked full-year dividend of 5c per share, a jump of two thirds on the previous year, as the company grows its investing track record. The payout represents a yield of 4.3 per cent, ahead of the broader market, and the stock trades at a slight discount to its net tangible asset backing.
Mr Wilson AO said the company had turned in a “very solid” performance, noting the difficulties of picking stocks at the larger end of the ASX, where it was “always a challenge to add value”. When it sees markets as toppy, the listed WAM Leaders can hold cash and it held about 10 per cent at the end of June.
Mr Wilson AO said the company had benefited by not owning Telstra and had traded its holdings in banks. “At the start of the royal commission we had very little and we’ve dialled that up a bit as their share prices have come under pressure,” he said.
He also cited the strength of the energy sector where WAM Leaders held positions in Santos, Origin Energy, WorleyParsons and Woodside Petroleum.
But he is “nervous” about where markets are headed as the US sharemarket is in its second longest bull run.
“We are at the mature stage of the US bull market,” he said. “Bull markets don’t last forever.”
Mr Wilson AO is also cautious about the impact of monetary policy. “There is no doubt that the central banks are now starting to unwind the quantitative easing, which in theory will cause challenges in how successfully that’s done and the impact that has on valuations and growth,” he said.
Mr Wilson AO said bank stocks would have to deal with the remainder of the royal commission and market sentiment would be influenced by the holdings of a federal election in the next period.