PROMINENT funds manager Geoff Wilson says profit expectations for the coming year for the Australian sharemarket are too high and analysts will be forced to revise them in coming months.
But he says the "difficult market" is poised to offer "a great buying opportunity".
Wilson Asset Management Capital posted an 80 per cent fall in full-year net profit yesterday of $4.3 million, reflecting accounting treatment of the return on its flagship fund, which fell to 4 per cent from 17 per cent last year.
Mr Wilson said the company holds "a conservative view" for equity markets over the the next 12 months.
"We believe analyst earnings forecasts are too high for [financial year] 2013 given the current low growth environment," Mr Wilson said.
"These earnings forecasts will be revised downward by analysts over the coming period."
Company outlook statements at the coming reporting season would be "very negative", he said.
Global ructions such as the European debt crisis meant local sharemarket investors would have to expect lean returns in the medium term. Equity market returns "may not be as high as experienced in previous periods," Mr Wilson said, because the global economy is in a period of paying down debt, "which we think will continue over the medium term".
Attractive investment opportunities were emerging, he said. "We believe this difficult period provides a great buying opportunity."
Mr Wilson said "there is the prospect of one or two more interest rate cuts" this year.
WAM's revenue fell down 72 per cent and net profit was $4.3 million after $20.4 million last year.
Mr Wilson said the size of the fall resulted from accounting standards that require changes in the value of investments to be recorded on the company's profit and loss statement.
The company announced a 5.5? final dividend, up from 5?.
Mr Wilson said the fund outperformed the ASX accumulation index by 11 per cent.
Earnings per share was 4? compared with 19.1? last year.
"We are pleased that in this tough environment we can continue to deliver strong outperformance."
The best stocks in the WAM portfolio included Signature Capital, Aristocrat and Breville while the worst were Centrepoint Alliance, Symex Holdings and Austar.
The shares closed up 1.5? at $1.575.
Frequently Asked Questions about this Article…
Why does Geoff Wilson say profit expectations for the Australian sharemarket are too high?
Geoff Wilson says analyst earnings forecasts for the Australian sharemarket look too optimistic given the current low-growth environment. He expects analysts to revise those forecasts downward for the coming year and warns company outlook statements at the next reporting season could be very negative.
What caused Wilson Asset Management Capital's reported 80% fall in full-year net profit?
WAM Capital reported an 80% fall in full-year net profit to $4.3 million largely due to accounting treatment of the return on its flagship fund, which fell to about 4% from 17% the prior year. The company also said revenue fell around 72% and last year's net profit had been $20.4 million.
Does Geoff Wilson think the current market is a buying opportunity for everyday investors?
Yes. Despite a cautious outlook, Mr Wilson says the difficult market is producing attractive investment opportunities and believes this period provides a great buying opportunity for long‑term investors.
What is WAM's outlook for equity markets over the next 12 months and the medium term?
WAM takes a conservative view for equity markets over the next 12 months and expects leaner medium‑term returns. Wilson pointed to global pressures such as the European debt crisis and a period of paying down debt as reasons equity returns may not match past highs.
How did WAM's flagship fund perform versus the ASX accumulation index?
WAM said its fund outperformed the ASX accumulation index by 11%, which the company highlights as strong outperformance in a tough market.
What happened to WAM's dividend and earnings per share this year?
The company announced a final dividend of about 5.5 cents, up from 5 cents last year. Reported earnings per share were about 4 cents compared with roughly 19.1 cents in the prior year.
Which stocks were the best and worst performers in WAM's portfolio mentioned in the article?
According to the article, the best stocks in the WAM portfolio included Signature Capital, Aristocrat and Breville, while the weakest performers were Centrepoint Alliance, Symex Holdings and Austar.
Did Geoff Wilson mention any likely changes to interest rates that could affect investors?
Yes. Mr Wilson said there was the prospect of one or two more interest rate cuts this year, a factor investors may consider when assessing the market outlook and investment opportunities.
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