Why Are These 2 Stocks Down Lately - WAM, WAX?

WAM Capital Limited and WAM Research Limited both forms part of the financial group Wilson Asset Management led by Chairman Geoff Wilson. It has been observed that both the stocks have been trading on the downside of the market demonstrating the significant volatility in the global financial sector industry. Let’s take a deep dive into why these two stocks are down lately:

WAM Capital Limited (ASX: WAM)

Financial sector company WAM Capital Limited has seen a massive downtrend in the long-run performance of its stock on the Australian Securities Exchange. The stock has declined by 15.66% over the past 12 months with the continued downtrend in the near-to-midterm.

The negative market sentiments describe the continued impact of macro-economic factors which were again mixed in March 2019. Results from the March German purchasing managers’ index (PMI) survey reportedly showed that manufacturers’ expectations were at their worst level in six-and-a-half years.

The major headwind in the financial industry includes the recent inversion in US Treasury bond yield curve. On 22 March 2019, United States 10-years Treasury bond yield fell below the three-month yield for the first time in over a decade. The inversion in March was driven in part by the flow of funds from German Bonds into US Treasuries which are expected to offset its predictive nature.

WAM Leaders, Lead Portfolio Manager, Mattew Haupt stated that the outlook for the Australian economy is bleak as neither monetary nor fiscal policy appear to save the economy. This again puts the Australian economy to be highly dependent on China to avoid a recession, he added.

The investment companies of WAM Capital have started trading ex-dividend, thereby indicating another major factor for the decline in WAM Capital stock price.

WAM Capital stock last traded at $2.080, down 0.952%, on 12 April 2019. The stock has declined by 6.25% and 5.83% in the past three months and one month, respectively.

WAM Research Limited (ASX: WAX)

WAX stock price has declined 15.19% over the past 12 months including a negative price change of 7.59% in the past three months.

Driven by the above mentioned macro-economic factors and the related volatility in the equity market, WAM Research reported the decline of 11.1% in the half year to 31 December 2018. This resulted in a reduction of $26 million in assets which led to an operating loss after tax of $18.6 million.

The company’s cash levels have increased from 25.6% to 53.3% during the half-year ended 31 December 2018, thereby reducing the group’s exposure from 45 to 38 individual companies. However, the cash levels have been softened in the recent past as the fixed interest and cash component declined to 23.9% of $220.4 million gross assets in March 2019.

WAX fell 1.866% to last trade at $1.315 on 12 April 2019.

To end on the positive note, it can be observed that Chairman, Geoff Wilson has expressed the optimism towards the global equity market, underpinned by the dovish stance of US Federal Reserve. It becomes more evident by the shift in WAM’s fixed interest and cash percentage of total gross assets from 32.7% in February 2019 to 27.0% of its $1,322.2 million gross assets in March 2019.

Mr Wilson stated that now he is ‘only a little bit bearish’ compared to his ultra-bearish outlook at the end of last year.

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