By Sarah Jones
Anna Milne is the deputy portfolio manager for Wilson Asset Management’s WAM Leaders fund and WAM Income Maximiser. The Sydney-based firm oversees around $5.8 billion in assets.
With the Australian sharemarket back at record highs, have you been surprised by the market’s recovery from the turmoil caused by Donald Trump’s trade agenda?
Yes and no. Yes, in that heightened uncertainty would usually lead to global growth downgrades and a material cut to earnings estimates – but not this time. No, in the sense that policymakers have cushioned the impact on money markets, encouraging leverage, suppressing bond yields and supporting equity markets. The Reserve Bank of Australia’s more recent dovish stance on interest rates has also further buoyed the domestic market sentiment.
What are some of the changes made on the funds that you help manage through this volatile period?
We have added to oversold growth exposures and maintained a constructive view on resources. Growth stocks can continue to perform well, as long as the current regime of policy support and leverage remains in place. We have balanced this positioning by including some less loved stocks that could benefit in the event of deleveraging. For that to happen, we would likely need a market shock, such as an inflation shock removing rate cuts from the forward curve. China could contribute to global inflation pressures should they announce further significant stimulus measures.
Where are you seeing value on the ASX?
Stocks are clearly not cheap, by historical or global standards. The exception to this is resources. In addition, growth stocks like Goodman Group, WiseTech and NextDC are strong performers that should continue to do well under current market conditions. These names also align with our investment process as they are high-quality businesses with earnings upside.
Which stocks in your funds do you believe has the most near-term upside?
Challenger has performed strongly, but we believe it has further to run, with clarity around Australian Prudential Regulation Authority’s capital settings expected this month and excess capital likely to be returned to shareholders.
Spark NZ has come under share price pressure, but with a data centre sell-down underway and the New Zealand economy passing its trough, it is another name to watch.
And CAR Group sold off earlier this year over concerns around the macroeconomic environment for their US business, Trader Interactive. However, our channel checks suggest these concerns are overblown, providing an attractive entry point for this high-quality name.
What’s a stock you like and own that (most) people haven’t heard of?
A tougher ask in the ASX 200. One stock that flies slightly under the radar is Orica, a B2B explosives and blasting technology company with a relatively small retail shareholder base.
At a macro level, despite being a global operator, Orica is exempt from tariffs. Another megatrend assisting Orica is miners delaying capex and focusing on cost efficiencies, therefore driving demand for Orica’s value-added product suit delivering more efficient blasting.
Fundamentally, earnings momentum is continuing aided by a buoyant recontracting cycle and contribution from acquisitions. From a market flow perspective, Orica remains inexpensive and after a period of capital raisings to fund inorganic growth, it has entered a capital return phase, which should further support the share price.
What piece of advice has influenced your approach to investing?
Markets are not efficient. However, when doing fundamental research, sometimes it’s best to assume everything is known and priced in, then invest on incremental information and shifting probabilities of outcomes.
This holds true particularly in the current market environment, where valuation discipline hasn’t been rewarded. You can’t afford to discount a stock only because it is “expensive”, if it has always traded at a premium and the incremental data points to a positive earnings surprise, there are likely returns to be captured.
Are there any podcasts that you’d recommend?
I digest overnight moves with a queue of short podcasts every morning. My lineup includes the NAB Morning Call for its macro focus, CommSec Market Update for colour on share price moves, and then a variety of more global, broader news. The Rest Is Politics is a favourite listen at the moment too for thoughtful analysis through the noise.
What is your favourite local bar/restaurant?
Bart Jr in Redfern in Sydney for a relaxed weekend bite.
