Earnings still matter and in volatile markets, stock pickers get their chance

Markets feel chaotic but the drivers are often simpler than they appear. In a live discussion that I hosted last week for AlphaSense, featuring Ten Cap's Jun Bei Liu and Wilson Asset Management's Oscar Oberg, what stood out was not the noise around geopolitics or AI, but how both investors are navigating a market where earnings risk, volatility, and positioning are doing the heavy lifting. When asked about what is dominating her thinking right now, Liu didn't hesitate: 

“Nothing else matters. It is the earnings.”

That single line captures the tone of the conversation. While headlines shift daily, both managers are focused on what companies will actually deliver and how markets react when expectations are missed.

In this wire, you will learn how Liu and Oberg are positioning portfolios through this period, where they are finding opportunities across sectors, and the specific stocks they believe could outperform as conditions stabilise.

Earnings still drive everything

Despite the macro noise, Liu’s process remains anchored in one core idea: earnings determine outcomes.

Her focus is on triangulating company guidance, analyst expectations, and real-time business conditions. In a market where even small misses are punished, that level of precision is essential.

Oberg, who focuses on small caps - which have been beaten up since the start of the year - approaches it differently, but arrives at a similar conclusion. His base case is blunt: 

“My assumption is every company is going to downgrade in the next month or two.”

Rather than avoiding that outcome, he is positioning for what comes next, ensuring the portfolio is filled with companies that can recover strongly when conditions improve.

A market defined by volatility and dispersion

Both managers highlighted a structural shift in markets - rising stock-level volatility.

Liu noted that while index-level volatility has remained relatively stable, “at the stock level, it is getting bigger and bigger,” with extreme moves becoming more common.

That has several implications. First, getting earnings wrong can be costly. Second, opportunities are increasing for investors who get them right.

She also pointed to the growing influence of passive flows and short-term trading, which amplify these moves. The result is a market where positioning and timing around catalysts, such as reporting season, matter more than ever.

Oberg reinforced this from a different angle, noting that passive money tends to move in one direction, often leaving small caps neglected for extended periods.

Where opportunities are emerging

Despite the challenging backdrop, both see opportunity across the market.

Liu’s key insight is that weakness is often indiscriminate. Entire sectors are sold off, even though earnings outcomes vary significantly between companies.

“The opportunity lies within every sector,” she said, pointing to the large dispersion in earnings outcomes.

Her approach is to identify companies where downgrades are already priced in, but the reality may prove less severe.

Oberg, meanwhile, is leaning into cyclicality. Drawing on lessons from 2022, he believes some of the hardest-hit sectors can rebound sharply.

“The sector I am most interested in is retail,” he said, expecting earnings pressure in the near term but strong recovery potential over time.

He also warned against hiding in perceived defensives, noting they can be hit hardest when expectations are reset.

Stock picks and positioning

Both managers shared specific ideas that reflect their broader frameworks.

Jun Bei Liu:

Liu sees RWC as a classic case of the market overpricing downside risk, with expectations for a downgrade already reflected in the share price.

“People think they’re going to downgrade… I think there might be a small nudging down… but that share price is down significantly,” she said.

Zip Co (ASX: ZIP)

Liu believes the market has been overly pessimistic on the US consumer, creating an opportunity after a stronger-than-feared result.

“People got so nervous about the US consumer collapse… the company came through and highlighted that they’re doing fine,” she said. 

Oscar Oberg:

EVT Limited (ASX: EVT)

Oberg views this as a classic asset-backed opportunity, with property value underpinning the stock and potential catalysts from asset sales.

“You are getting the operating business for free,” he said, highlighting the valuation disconnect.

Nufarm (ASX: NUF)

Oberg sees Nufarm as a turnaround story, with improving earnings and balance sheet repair driving upside.

“Very similar scenario” to prior cycles, he said, adding that if execution holds, “the share price could double from here.” 

Oberg sees AIH as a mispriced microcap with leverage to improving industry structure and energy investment trends.

“It’s a microcap… about $300 million market cap… largely three players going to two,” he said, pointing to consolidation and potential upside from increased global energy spend.

Tools, AI, and the evolving investment process

Both managers are increasingly incorporating AI into their workflows, but as an augmentation rather than a replacement.

Oberg noted the efficiency gains, particularly in modelling and information processing, while Liu described a broader integration across research, analysis, and communication.

“We need to use as many tools as possible,” Liu said, arguing that modern investing requires combining fundamentals, data, and technology.

Importantly, both emphasised that judgment still matters. AI can enhance decision-making, but not replace it.

The mindset that matters

When it comes to navigating the next 12 months, both converged on a similar mindset. Liu’s advice was clear:

“Ignore the noise. Focus on company earnings.”

Short-term volatility should be used as an opportunity, not a distraction, provided investors maintain a long-term view.

Oberg added another layer, focusing on management quality and insider behaviour. Strong management teams, he argued, use downturns to make strategic decisions that drive long-term value. “I have never seen so much director buying since January,” he said.

“Meaningful buying as well. That should give you a good indication of their views on the future.” 

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