Market shifts and contrarian opportunities: WAM Leaders on “What’s next”

With uncertainty reshaping the market and momentum trades unwinding, where should investors turn next in the large cap space? Following the 2025 Wilson Asset Management Roadshow, I caught up with Anna Milne, Senior Investment Analyst at WAM Leaders, to tell us about which stocks could struggle, where new opportunities are emerging, and the impact of global headwinds on Australian markets.

From overvalued large caps to contrarian opportunities, Milne shares where she sees risks - and where the best risk-adjusted returns might lie. We also look at which sectors are poised for a comeback, the impact of US tariffs, and why quality and value are the winning formula in today’s uncertain landscape.

The downside of extreme momentum stocks

Over the past year, large-cap momentum stocks like Commonwealth Bank (ASX: CBA), Wesfarmers (ASX: WES), and Goodman Group (ASX: GMG) have enjoyed significant gains. According to Milne, however, market volatility and crowding have triggered a shift in market leadership, leaving these high-flying stocks vulnerable to a pullback.

While all three companies boast strong earnings tailwinds, some of their performance has been driven by sentiment rather than fundamentals. Goodman Group, in particular, has seen its share price pressured by broader market weakness and a February capital raise to fund its data centre pipeline. Despite these headwinds, Milne notes:

“At $30 the risk/return is looking more compelling, even if we do see a broader slowdown in the US which could impact both their industrial and data centre businesses.”

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Among the three, CBA appears the most at risk. Milne points out that its recent rally was largely due to valuation expansion rather than earnings growth, making it especially vulnerable as market leadership shifts away from momentum trades.

“The significant share price appreciation CBA experienced was almost entirely its valuation, not earnings growth. This leaves it vulnerable to this change in market leadership.”

Where WAM is positioning now

WAM Leaders anticipated this market shift early, a strategy that initially impacted performance negatively but is now starting to pay off. Milne explains that the team has focused on a blend of quality and value - two attributes that, while seemingly at odds, can be complementary.

• Quality stocks like Telstra (ASX: TLS), IAG (ASX: IAG), and ResMed (ASX: RMD) are positioned for earnings growth through the cycle.

• Value stocks such as Ampol (ASX: ALD), Spark (ASX: SPK), Challenger (ASX: CGF), and Amcor (ASX: AMC) have been overlooked but are now benefiting from a shift in market sentiment.

Contrarian plays: WiseTech and Mineral Resources

When looking for opportunities in a volatile market, WAM has taken a contrarian approach with beaten-down names like WiseTech (ASX: WTC) and Mineral Resources (ASX: MIN).

Both stocks have been caught in negative headlines, but Milne argues that understanding the difference between a broken business model and poor management execution is key.

"Both stocks that have been in the headlines for all the wrong reasons. When assessing these names, we ask ourselves: is the business model broken, or Is this a failing from the management team and board? WiseTech remains one of the best companies on the ASX."

With market-expanding innovations that support long-term earnings growth, Milne expects that as negative headlines subside, WiseTech will refocus on product launches and its broader growth strategy.

MinRes, on the other hand, has been under pressure due to extreme market reactions. However, WAM sees balance sheet concerns as overblown, especially with iron ore prices remaining supportive. “At the current share price, you’re essentially investing in their high-quality mining services business at a discount, while getting the commodities exposure for free,” Milne says.

US Tariffs: A risk to confidence

Another factor weighing on investor sentiment is the impact of US tariffs. Milne highlights Ansell (ASX: ANN) as a company particularly affected, given its significant manufacturing exposure in Malaysia and Sri Lanka - both of which have been hit with 24% and 44% tariffs, respectively.

“It’s difficult to estimate the net impact, but logically the industry should try to pass a proportion of these costs through to customers.”

While some cost pass-through is possible, overall market uncertainty has pushed ANN’s share price lower. Investors remain cautious, with little appetite in the current environment for companies facing regulatory risks.

In conclusion

As market leadership shifts away from extreme momentum trades, WAM is positioning for opportunities in quality and value stocks while selectively identifying contrarian plays.

“Quality and value are the winning formula for this market - focused on fundamentals, there are compelling opportunities for patient investors.” she says.

Learn more

WAM Leaders provides investors with exposure to an active investment process focused on identifying large-cap companies with compelling fundamentals, a robust macroeconomic thematic and a catalyst. Find out more here.