Why Geoff Wilson says a Joe Biden presidency will be good for stocks in 2021

Funds manager Geoff Wilson also reveals he is cautiously optimistic about small and mid-cap stocks across several sectors.

Geoff Wilson of Wilson Asset Management. Picture: Stephen Cooper

Fund manager Geoff Wilson believes a Joe Biden presidency will be good for equity markets in 2021, revealing he is cautiously optimistic about small and mid-cap stocks across several sectors.

Wilson’s private funds management company revealed a bumper profit for the 2020 financial year in documents lodged with the corporate regulator on Monday, thanks to a series of benchmark outperformance results for the Wilson Asset Management listed investment company empire.

In what was a tumultuous year for markets, Wilson’s investment team managed to outperform just about all of its benchmarks across the various LICs it manages.

The WAM Capital investment portfolio outperformed the S&P/ASX All Ordinaries Accumulation Index by 4.4 per cent during a highly volatile 2020 financial year, marked by a big plunge in the markets in March when coronavirus shut industries around the world, and then a recovery.

Private firm Wilson Asset Management (International) made a pre-tax profit of $17m, up from $13m in 2019, according to a financial report lodged with the Australian Securities & Investments Commission on Monday.

Management and performance fees rose from $34m in 2019 to $51m, and Wilson made $2.5m worth of donations — up from $1.5m last year.

Looking to the future, Wilson says the conditions for equity markets around the globe “remain highly accommodative given the sustained commitment of central banks to stimulate economies” and that Australia has responded “with strength” to the COVID-19 pandemic.

Wilson says he believes the election of Joe Biden as US President will be positive in terms of “social, geopolitical, and, potentially economic” outcomes for the global economy.

“It is worth noting that historically the US equity market has performed better under a Democratic president,” Wilson told The Australian.

“Since the inauguration of Theodore Roosevelt in September 1901, when a Democrat was president the Dow delivered an annual return of 6.7 per cent. When a Republican was president the Dow delivered an annual return of 3.7 per cent. That is an 81 per cent outperformance.”

With that in mind, he is “cautiously optimistic” as he looks towards 2021 that small and mid-cap stocks in the retail, travel, agricultural, building materials and automotive sectors should be well positioned to benefit from the reopening of the Australian and global economies.

Wilson likes travel stocks such as Flight Centre, which was sold down heavily during the pandemic, and Corporate Travel Management, which fell sharply in February and March but is now about the same price it opened 2020 at.

When it comes to retail stocks, Wilson nominates Adairs and City Chic Collective. Adairs, a homewares retailer, has bounced back strongly since March and is up almost 40 per cent since January 1, while clothing company City Chic is now trading just above its January 1 mark. Wilson likes building materials companies such as Brickworks and Fletcher Building and BlueScope Steel has also performed well for WAM.

BlueScope, says Wilson, “has benefited from monetary and fiscal stimulus globally, which has led to increased infrastructure spending from government, strong demand for steel domestically and in Asia, and the recovery of the US automotive industry”.

He nominates Elders and United Malt Group in agriculture, as well as Bega Cheese.

In the automotive sector, Wilson likes fuel firm Viva Energy and Bapcor, an auto parts and accessories company.

Wilson’s WAM manages more than $3.5bn for more than 80,000 clients, many of whom are self-funded retirees who receive the franking credit refunds.

That topic catapulted Wilson into the spotlight during the last federal election, when he fought a campaign against the Labor Party’s proposed policy to end franking credit refunds.

Wilson is now embarking on another campaign on behalf of retail investors, who he says have been locked out of discounted capital raisings by companies during COVID in favour of wholesale investors.