Markets: Wilson wills a rate cut offensive

Wilson Asset Management predicts further rate cuts will boost cyclical stocks, while a falling dollar will aid others.

Investor Geoff Wilson is bullish on the Australian economy and its stock market.

“We expect softer economic conditions for the near term,” WAM Capital said in an ASX statement today.

“We remain optimistic about the longer term outlook for the Australian economy ... We expect the Reserve Bank of Australia to make further cuts to the official cash rate and we anticipate that the lower interest rate environment, coupled with rising house prices, will stimulate consumer confidence. In turn, this would boost the economy and encourage cyclical stocks to rally, such as retailers and building materials companies.”

WAM Capital, Australia’s eighth largest listed investment company with assets of $486.5 million, said its operating profit after tax was 44.2 million in the 12 months to June 30. The value of the company’s investment portfolio rose 22.7 per cent during the same period as WAM Capital’s bets on Magellan Financial Group, Ingenia Communications Group, G8 Education, REA Group and Amcom Telecommunications paid off. The company will pay a fully franked 6 cent per share dividend on October 18.

Since August 1999 when the WAM Capital fund started, it has gained 17.9 per cent annually compared with the 7.8 per cent yearly increase in the S&P/ASX All Ordinaries Accumulation Index.  

The 15 per cent decline in the Australian dollar since April 11 will further help many businesses, WAM Capital says. These include tourism, manufacturing and those with an export focus.

“In the mining services sector we believe there are deep value opportunities,” says WAM.

WAM Capital shares have gained 5.3 per cent in the last 12 months and 2.1 per cent this year, according to Bloomberg data. The S&P/ASX200 index is up 20 per cent in the last 12 months and 10 per cent in 2013, according to Bloomberg.