Wilson Asset Management says the bull run is over; but when the next one begins these sectors will gain
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One of Australia’s most well known money managers Geoff Wilson has declared the bull run is over.
Wilson made the declaration in a conference call to investors yesterday afternoon.
“We’ve talked about when will the longest bull run market end, unfortunately the bull market is over,” he said.
“We’ve seen that with the Dow last night and the All Ords dropping more than 20 per cent. Everyone is taking risk off the table”.
Wilson said more national lockdowns wouldn’t be a surprise. While economic data out of China shows people are getting back to work, it has been a slow process.
Wilson analyst Catriona Burns joined the conference call having just returned from a work trip to Europe.
She visited 60 countries across Europe and the US during her travel. Burns said the uniform message she heard was that businesses just want themselves and their staff to survive.
“Businesses have been focused on the safety of staff and continuity,” she said.
“Some companies in the payments space are adapting pretty well, but others are at risk should further regions go into lockdown.
“If you work in retail or for an airline you cannot work from home and you won’t get paid if you can’t go to work.
“I flew from Munich to Paris and the airport was empty. My taxi driver had waited six hours for someone.”
But of course Wilson Asset Management analysts expect this tumultuous period will eventually end and another bull run will begin.
Matt Haupt was optimistic about the medium to long term future of mining companies, especially those in iron ore.
“Mining companies look good. They have large cash balances as opposed to the GFC when they had high levels of debt,” he said.
“Iron ore usage will be as good as in previous years but base metals look tough.
Oscar Oberg named one stock he thought was completely unexposed to the situation — emergency repairer John Lyng Group (ASX:JLG).
“They have a big order book, a strong balance sheet, no debt and have just started consolidating their strata services space,” he said.
They noted that these needed a confidence boost and the lifting of travel bans, but that the stocks stood to gain once it happened. Haupt said Qantas would be “an incredible buy at that point in time”, and it would also gain from low oil prices.
Haupt also had a few words to say on the banking sector.
“Two months ago we were positive about banks with interest rates on hold. But now the RBA have pivoted and are looking at quantitative easing, which hurts the bank earnings,” he explained.
“If this is a short-term impact and there’s some containment, the banking sector could look good but it’s hard to determine. If they got cheaper, they’d look okay.
“[They are] at sort of the end of their trading ranges and some look attractive. Slowly they’re pricing in bad news but we’re not there yet.”