WAM Capital Limited (ASX: WAM) held its bi-annual presentation for shareholders in Sydney today. There were a few key ASX takeaways from that presentation in my opinion.
Wilson Asset Management (WAM) operates a number of listed investment companies including WAM Capital, WAM Leaders Ltd (ASX: WLE), WAM Global Limited (ASX: WGB), WAM Research Limited (ASX: WAX), WAM Microcap Limited (ASX: WMI) and WAM Active Limited (ASX: WAA).
The WAM investment team have proven that they can beat the market over the long-term, so I think it's worth hearing what they have to say.
High premiums paid for expensive growth stocks
WAM believes that the Australian technology sector is trading at extreme valuations, particularly WiseTech Global Ltd (ASX: WTC), Afterpay Touch Group Ltd (ASX: APT), Altium Limited (ASX: ALU) and Appen Ltd (ASX: APX). This group is referred to as WAAA.
The much smaller addressable market means that a slowing growth rate could hurt these businesses more significantly than the US FAANG stocks. The WAAA businesses also service large corporate clients, making it harder to keep increasing prices.
Banks may almost be getting to decent value
The big banks of Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB) have faced punishment in the Royal Commission and suffered with their share prices.
Whilst Lead Portfolio Manager Matthew Haupt doesn't think they're quite at a 'buy and hold' level, the valuations are getting interesting. If house prices don't fall significantly, leading to rising bad debts, then the current high yields offered by the banks could be attractive if the dividends hold and franking credits continue to exist.
He prefers Commonwealth Bank and NAB out of the four banks.
Continued Australian earnings per share (EPS) growth
Despite tougher consumer conditions and slower credit growth, Australian EPS growth is still 3.59% according to WAM. This isn't too much higher than inflation, but it still represents growth even with all the negative factors like rising interest rates and the Royal Commission. I think this shows the power of long-term growth for the share market.
Some of WAM's top holdings
The WAM Group is invested across a lot of different shares but some of the ones that the team believes could be market-beaters include law IP firm IPH Ltd (ASX: IPH), Specialty Fashion Group Ltd (ASX: SFH), QBE Insurance Group Ltd (ASX: QBE), Treasury Wine Estates Ltd (ASX: TWE) and Accent Group Ltd (ASX: AX1).
