It’s about time in the market, not timing the market
Chief Investment Officer and Chairman, Geoff Wilson AO, reflected on his experience in financial markets which has demonstrated that long-term participation throughout market cycles leads to better outcomes for investors than trying to time when to be in and out. Using the U.S. market as an example, if you invested in the S&P500 from 1926-87 your average return was 9.4% per annum but if you went to cash & missed the best 50 of those 744 months, you would have missed all the returns. From 1998-2024 the US market returned 8.2% per annum, but if you missed the best 26 days over those 26 years your return was only 1.8%. Given the impossibility of timing the market perfectly, Geoff suggests riding out the current volatility to enjoy long term gains.
Positioning for tariffs
The WAM Global (ASX: WGB) investment team took the view last year that Trump’s return to office and likelihood of increasing tariffs would be disruptive for various companies including China-exposed consumer stocks such as Lululemon (NASDAQ: LULU) and Nike (NYE: NKE). The team deliberately positioned away from these parts of the market and instead added exposure to beneficiaries of volatility including exchange operator CME Group (NASDAQ: CME) which posted record trading volumes in the March quarter.
High-quality businesses are on sale
Amid the broader tariff sell-off, quality companies with unchanged fundamentals saw share prices fall. The investment teams across our nine LICs have been taking profits in certain parts of the market and reallocating into undervalued opportunities. One example of this is the Swedish property platform company Hemnet group (OME: HEM), held in WAM Global, which was temporarily sold off despite not being directly affected by tariffs. Another example is IDEXX, global leader in diagnostics equipment and consumables for the pet healthcare industry, which was added to the WAM Global portfolio.
Scenario analysis can help investors avoid panic selling
The WAM Leaders (ASX: WLE) investment team uses scenario analysis to estimate a range of earnings declines and P/E (price to earnings) multiples to determine the share price that they would be comfortable to pay for a given stock. For example, if earnings of a company fall from $10 to $8 per annum and the historical P/E is 20x, a share price of $160 may be a reasonable entry point. This can help investors stay calm and avoid panic selling during market volatility.
The momentum investing trade is unwinding
A momentum investing strategy, whereby investors buy stocks that went up yesterday and sell those that fell, performed well in 2024. This strategy typically reverses in volatile environments which we are beginning to see unfold. Quality and dividend-yield strategies are now proving effective. The WAM Leaders portfolio was defensively positioned ahead of Trump’s tariff announcements on 2 April 2025 and has benefited from recent market dynamics.
Founder-led companies outperform over time
Founder led companies have three key pillars: obsession, simple to understand businesses and high performing teams. The WAM Capital (ASX: WAM), WAM Microcap (ASX: WMI), WAM Active (ASX: WAA) and WAM Research (ASX: WAX) investment team has numerous examples of founder led businesses that have outperformed over the long term, including telecommunications company Tuas (ASX: TUA). CEO David Teoh’s purchase of stock in 2022 prompted deeper research and eventual investment. Companies like TUAS which are supported by long-term tailwinds have buoyed the investment portfolios through market cycles and highlight the importance of sticking to a proven investment process, fundamentals and investing for the long term.
Diversification across asset classes reduces risk
Since Wilson Asset Management was appointed investment manager of WAM Alternative Assets (ASX: WMA) in October 2020 it, the underlying portfolio has generated a return of 9.3% with volatility of 3.2%. This compares to the ASX All Ordinaries Accumulation Index which generated a return of 12.0% with far higher volatility of 13.1%. The underlying assets in the investment portfolio have been largely unaffected by recent volatility and demonstrates that diversification across asset classes, particularly those with long term thematic tailwinds like healthcare real estate, can reduce risk in a portfolio. WAM Income Maximiser (ASX: WMX) aims to similarly provide diversification benefits through its exposure to both equities and debt.
WAM Income Maximiser is the only Australian LIC to invest in both high-quality equities and fixed interest/corporate debt
By combining these two asset classes, investors can capture the upside from equity markets while benefiting from the stable and predictable income of fixed interest investments. This strategy has been shown to reduce overall portfolio volatility and will support consistent monthly returns. The investment team began deploying the funds on 17 April 2025 and have flexibility to steadily invest at the most strategic time over the coming weeks and months. WAM Income Maximiser has the added benefit of being able to adjust the allocation between the two asset classes in order to maximise risk-adjusted returns for shareholders.
Avoid buying LICs at large premiums
Geoff highlighted, buying $1 worth of assets for 80c makes far more sense than paying $1.20. Investors should always compare share prices to net tangible assets (NTAs) before investing to avoid paying unsustainably large premiums. If any shareholder would like to learn more about this, please reach out to our team via email or phone.
Standing against changes to the franking system
The franking system benefits individual investors, SMSFs, and the broader economy by lowering capital-raising costs and encouraging domestic investment. We continue to oppose any potential changes by the Labor government.
