Trump’s tariffs create bargains, says AEF's John Woods. Picture via Getty Images
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Donald Trump’s presidency might seem like a recipe for market chaos, but for John Woods, Deputy CIO and head of multi-asset at Australian Ethical Investment (ASX:AEF), it’s a chance to spot undervalued opportunities.
He believes that chaotic markets are when the best opportunities appear.
While many investors have hit the panic button in the early days of Trump’s new administration, Woods sees opportunities to pick up stocks that have been unfairly punished, and he’s confident that AEF’s strategy will continue to generate solid returns in the years ahead.
Woods indeed has a reputation for spotting opportunities when others see only uncertainty.
Back in Trump’s first term (2016-2020), AEF’s balanced fund outperformed the market benchmark by 12.75% (cumulative total over four years).
So as Donald Trump settles into office again, he’s embracing this renewed opportunity.
“Finally, there’s room for surprise. Every time there is volatility, it presents an opportunity for price misalignment – that’s value we love,” he told Stockhead.
“Trump is a whirlwind, and he brings volatility to global markets. We’re well-positioned to take advantage of that volatility.
“It’s a little bit counterintuitive, but when you enter a period of market volatility that someone like Trump brings, for active investors like ourselves, from a returns perspective, it can be quite helpful.”
Many would expect Trump’s pro-fossil fuel stance to hurt the ethical investing space, but Woods doesn’t see it that way.
He’s invested in a few dual-listed New Zealand based renewable energy ‘gentailers’.
Companies like Mercury NZ (ASX:MCY), which is relatively immune to Trump’s energy policies because they rely on renewable energy.
Other similar names that he likes include Meridian (ASX:MEZ) and Contact Energy (ASX:CEN).
“These are companies supported by the long-term transition towards renewable energy,” Woods said.
At the same time, he said that AEF is not invested in pure-play fossil energy companies like Woodside Energy Group (ASX:WDS).
He also pointed out that not all companies will be equally affected by Trump’s tariffs.
For instance, while companies like BHP (ASX:BHP) may suffer, others such as Sims Metal Management (ASX:SGM) are less affected.
Sims is a global leader in metal recycling and the provision of circular solutions for technology. Founded in Australia, it does everything from curb-side recycling, decommissioning, disposal and data destruction services, as well as metal upcycling.
“Sims is a really interesting name. It deals in scrap steel. Its secret weapon is its operations in the US, which provide it more shelter from the threat of Trump’s tariffs.”
And for those who may have missed out on the renewable energy boom, Wood’s message is simple: get into it now.
“The price of these companies in this space has already sold off 25 to 30%. These are good companies, global leaders in their field, and now we’re able to acquire them at a good price.
“Long-term capital is moving into this space. You’ve got to be active and looking for those opportunities,” he urged.
AEF also believes in the potential of Australian companies involved in the lithium market.
While the price of lithium has been under a cloud for a while, Woods thinks the longer trend towards demand for lithium will persist as the world continues to transition towards net-zero.
He’s seeing a few quality ASX companies that are “beginning to be mispriced” in this sector.
These include: Pilbara Minerals (ASX:PLS) and IGO (ASX:IGO).
“They are significantly down since Trump’s election, which makes them more attractive picks.”
With the long-term trend of renewable energy in mind, he believes Australian companies like those two are well-positioned to benefit from the global shift towards sustainable energy.
“We believe some of those longer-term trends in renewables persist, and there will be demand for lithium again.”
Meanwhile, Fisher & Paykel Healthcare- FPH (ASX:) is one company that Woods and his team have been watching for a while.
FPH is a manufacturer, designer, and marketer of products and systems for use in respiratory care, acute care, and the treatment of obstructive sleep apnea.
“The business has taken a hit from Trump’s tariffs, so is now trading 10% cheaper than prior to his election.
“As active investors in future focused companies, that’s a good discount on a high-quality company,” said Woods.
As someone who’s been in the investment game for almost two decades, Woods knows that identifying these long-term trends early is key.
Ethical investing isn’t just a trend, he said, it’s a long-term commitment.
It’s all about being ahead of the curve – looking for companies that align with sustainable values and are poised for growth, even when the market is volatile.
While some fundies may jump on the latest ESG bandwagon, Woods pointed out that AEF has been staying true to its ethical charter since 1986.
“One of the disappointing things I’ve seen in recent years is that some companies latch onto the latest ESG trend, but then shy away when it gets hard,” he noted.
“You need to find someone you can work with who has a track record and is still investing in a way that meets your requirements.”
The views, information, or opinions expressed in this article are solely those of the interviewee and do not represent the views of Stockhead.
Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.
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