Geoff Wilson’s fund is afloat in the midst of market downturn but braces for worse

It’s been a challenging year, according to Wilson Asset Management founder and chairman Geoff Wilson, but the veteran stock market investor is bracing for worse in 2023.

In an announcement to the ASX on Monday, Wilson’s large-cap mutual fund WAM Leaders said its portfolio was up 8.8 percent for the six months to December and calendar year 2022, outperforming the S&P/ASX 200 Accumulation Index by 9, 9 percent.

The company announced a record interim dividend of 4.5 cents per share, up 12.5 percent from fiscal 2022, but the company’s shares were down 0.3 percent at opening. Dividends are fully franked.

Despite the fund’s positive performance, Wilson said he expects further downside for the local stock market as many top stocks are still overvalued.

“There have been significant headwinds, including rising interest rates as a result of inflation,” he said. “But I’m hesitant to call the bottom of the market as company valuations were very high 18 months ago due to low interest rates. Since then the Australian market has not fallen as much as it did in 1987 or during the GFC.”

WAM Leaders portfolio manager Matthew Haupt said the second half of 2022 was a particularly volatile period but that it was on a defensive strategy and benefited from expectations of China’s reopening.

“During volatile times, we stay away from the discretionary end of the spectrum and invest in more stable, defensive companies like Woolworths, Coles and Telstra,” he said. “In November and December we saw optimism rising in China, so we positioned ourselves ahead of their course change through iron ore stocks like BHP and Rio Tinto.”

Despite forecasting a global slowdown this year, Haupt said the company wanted to add more risk to the portfolio.

“The second quarter of this calendar year is going to be pretty tough because all the leading indicators that we look at for the economy are looking really bad around the world,” he said. “A slowdown is on the horizon, but we want to open up to more cyclical elements this year and make them more accessible to more discretionary retailers and builders.”