Why Geoff Wilson is keeping some dry powder for the coming cycle

This interview was recorded on 7 November 2024.

In our high-tech world, the thought of wandering over to the stock exchange for a printout of BHP’s results sounds foreign. 

That, however, is exactly what Hall of Famer and industry stalwart Geoff Wilson AO found himself doing 44 years ago, fresh to the industry. It’s also why he believes it’s far easier to be an investor today.

“What’s happened is communications, just the speed of information and how information flows around the market. That has increased significantly. And to me, it’s made it a lot easier for a lot more people to do the research and to be professional investors,” he says.

The veteran investor has seen his fair share of market cycles and has learnt a lot along the way, which he shared in this episode of Views from the Top. A thirst for information coupled with maintaining some dry powder has served him well over the journey – and he’s seeing plenty of opportunity to spend in the coming 12 months.

Watching the cycles

Wilson points out you can never truly guess the top or bottom of the market – it’s time in the market that counts rather than timing the market. From that perspective, he focuses on careful stock selection and a contrarian approach.

“We buy undervalued growth companies where we’re going to see a catalyst change the valuation. So, very focused on keeping your money in cash unless there’s an opportunity to maximise your return,” he says.

Similarly, he prefers “when everyone is negative, be buying, and when everyone’s positive, you’re more likely selling.”

He applies this to sectors and industries – when he sees valuations run hard, it is often a trigger to reconsider a position. For example, the banking sector is running at highs and whilst Wilson notes it gained off the back of Trump’s win, he views valuations as stretched and doesn’t hold Commonwealth Bank (ASX: CBA). But he cautions, “The market changes every day, probably every minute, and you need to be flexible”, so it’s a position that could be added at any point if he or the team see an opportunity.

Small and mid-caps are set to fly

There’s been much speculation and hope for the small and mid-cap space in Australia over the past few years – it’s struggled over the last 15 years - and Wilson believes the coming year could finally be its time.

“Once interest rates start falling in Australia, that sector will perform well. We’ve seen that in the US with interest rates coming off, the sector is performing well. We’ve seen that in New Zealand,” he says.

With interest rates tipped to fall in Australia in early 2025, Wilson expects those companies with a domestic focus to benefit particularly.

He is also banking on an extra boost courtesy of the US election.

Wilson learned the value of investing in the year of a presidential election from a boss in the early eighties, highlighting that money is being pumped into the system in these periods. He has kept dry powder aside for it.

Wilson notes that Trump intends to reduce corporate tax rates which should enhance company profitability and valuations.

Watch the video

In this episode of Views from the Top, Wilson shares his lessons from 44 years of investing and more than a few anecdotes about the challenges of starting his own investment management firm.

He also discusses why he is holding dry powder for the coming cycle and answers the question: will he retire?

Time codes

0:00 - Introduction
0:43 - Early days and the start of Wilson Asset Management
2:33 - Pivotal moments in Geoff Wilson’s career
3:44 - A critical change in the investing landscape
4:48 - The future for listed investment companies (LICs)
6:06 - Where are we in the market cycle?
9:43 - How much cash is Wilson Asset Management holding?
11:16 - What Geoff Wilson is avoiding in markets today
12:45 - An unfair proposal investors should oppose
14:00 - Retirement and legacy plans
15:25 - Geoff Wilson's View from the Top

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