Real estate investment trusts (REITs) performed poorly in the depths of the COVID-19 crisis (March-May 2020), masking what had been a period of strong outperformance (close to 30%) for REITs versus the market since 2010. As domestic prospects look set to improve, we have become more positive on the outlook for REITs. In our Wilsons Australian Equity Focus List update we:

News of early phase 3 vaccine trial results from both Pfizer and Moderna have, for the first time in 9 months, given the market a visible path out of COVID-19 lockdowns and economic dislocation. While this is undeniably good news from both a health and economic perspective, investors across different sectors in the Australian market have wildly different views around when a vaccine will become effective from an earnings perspective. This week we take a look into the market’s assumptions around the speed of the recovery across different sectors and share how Wilsons is thinking about playing the earnings recovery. We look at:

The list of ingredients needed for cyclical recovery continues to build. This month we have further rotated the Wilsons Australian Equity Focus List towards cyclical recovery beneficiaries which now comprise 60% of the Focus List, up from 45% in September. New developments in the COVID-19 vaccine race this week further support this case. In our November Australian Equities report we:

As we approach the halfway mark of the Australian AGM season, at this stage, the season is proving no threat to the improving earnings trend that first began to emerge in September. Updates on corporate profitability and trading conditions have led to small positive revisions to market earnings estimates, and positive earnings revisions are outnumbering downgrades 12:1.

Conviction Insights represents our highest conviction calls from across our coverage universe. This month we add United Malt (UMG) to our Conviction Insights lineup. A large commercial malt producer with processing plants in North America, Australia and the UK, our inclusion of UMG and our overweight recommendation rests on a number of factors: