Smart stock picks for a volatile market

From ETF diversification traps to specific stock picks in healthcare and copper, three experts lay out how they’re actually positioning portfolios right now.

Henry Jennings hosted Adam Dawes (Shaw and Partners) and Andrew Wielandt (DP Wealth Advisory) for a live panel discussion on markets, ETFs and stock picks, in Marcus Today’s first live-format On the Couch session.

Budget changes have frozen client behaviour

Dawes described conditions as a perfect storm for investors right now – market volatility, an uncertain Middle East conflict, and CGT changes moving through parliament. The tax changes hit hardest: in the two weeks after the March announcement, his dealing desk went quiet, with volumes only picking back up around the end of the financial year. One client sold everything and moved to Hong Kong.

Wielandt reported the same pattern from his advisory business, with clients unsettled by what the changes could mean for existing structures and entities. He pointed to slowing auction clearance rates – down around 30 to 35% over a recent weekend – as a sign the wealth effect from housing is starting to work against consumer confidence.

Despite the mood, Dawes said clients are being steered toward buying bottomed-out stocks rather than chasing the top of the market, with healthcare and technology flagged as the two sectors offering the best value after being sold down.

AI buildout is the dominant theme

Dawes cited a UBS note estimating the local AI data centre buildout at around $21 billion, roughly 0.75% of GDP, with UBS forecasting that could rise to 2–3% of GDP within one to two years. His view is that the opportunity sits either in the picks and shovels of the buildout or further down the supply chain in maintenance and servicing.

Wielandt noted the low-cost, open-source Kimi K2 model that had drawn attention over the preceding weekend, and said the volume of tokens being burned by businesses running these models raises real questions about cost control, even setting aside the security and privacy issues.

Where the risk is being managed

Wielandt’s model portfolios are running underweight US and underweight tech, achieving market-comparable returns with roughly 20% less risk over three years. Part of that comes from holding more cash than a typical model portfolio, with fixed interest and subordinated debt exposure – including bank subordinated debt paying around 6 to 6.5% – as one way of doing this.

He also raised concern about US fiscal sustainability, noting the country is edging toward the point where interest costs exceed defence spending on its $39 trillion of debt – a warning sign popularised by Ray Dalio.

ETF diversification and the overlap problem

Dawes backed the Betashares S&P/ASX Australian Technology ETF (ASX: ATEC) as the simplest way for smaller investors to get exposure to Australian technology stocks. On international diversification, his preferred way to reduce US concentration is the Vanguard All-World ex-US Shares Index ETF (ASX: VEU), which he recommended alongside checking fund fact sheets for hidden overlap in top-10 holdings across a portfolio, since many thematic and regional ETFs end up concentrated in the same handful of mega-cap names.

Wielandt uses the iShares Global 100 AUD ETF (ASX: IOO) as a core global holding in his self-managed super fund, alongside satellite positions in the Munro Climate Change Leaders Fund Active ETF (ASX: MCCL) and Munro Global Growth Fund Complex ETF (ASX: MAET). He also raised the Betashares Australian Quality ETF (ASX: AQLT) as his preferred factor-based exposure to the local market, citing outperformance of 2 to 3% per annum from its quality overlay – a persistent theme in his portfolios over several years.

Stock picks across healthcare, infrastructure and retail

Dawes named three stock picks. CSL (ASX: CSL), now trading back near $120 after dipping below $100, which he sees as an absolute steal at that level despite the risk of further writedowns once a permanent CEO is appointed; Ventia (ASX: VNT), a low-volatility infrastructure and defence contractor with a roughly 5% yield, which he linked to more than $10 billion in committed state government water infrastructure spending over the next five years; and JB Hi-Fi (ASX: JBH), backed on continued consumer spending on technology through the AI adoption cycle.

Wielandt’s standout mention was the VanEck Morningstar International Wide Moat ETF (ASX: GOAT), which he called an extraordinarily good concept after seeing a similar AI-driven research tool in action, though he stopped short of a firm recommendation.

Gold trimmed, copper in favour

Dawes remains constructive on gold while trimming some profit after a strong run, and is rotating into copper, backing both the Global X Copper Miners AUD ETF (ASX: WIRE) and the ETFS Global Pure Play Copper Miners ETF (ASX: CPPR), which passes through franking credits from BHP’s exposure. He does not hold a strong view on silver beyond its tendency to track gold.

The risk in a crowded ETF market

With 458 ETFs now listed in Australia and global ETF assets forecast to grow around 30% over the next year, Wielandt cautioned that the market is more complex than when he started covering ETFs in 2018, when there were only around 60. His view is that a simple core-and-satellite investor has little to worry about, but warned that highly leveraged and niche thematic products – citing South Korea’s triple-leveraged semiconductor ETFs as an extreme example – are where investors are most likely to come unstuck.

Dawes closed with a reminder that volatility is opportunity, not a reason to panic, and that he keeps cash ready to buy into market falls rather than sell out of them.