Alex Waislitz: ‘Day of reckoning’ coming for investors

Billionaire investor Alex Waislitz says a ‘day of reckoning’ is coming for sharemarket investors.

Alex Waislitz believes government stimulus is like a sugar candy hit. Picture: Aaron Francis

Billionaire investor Alex Waislitz says a “day of reckoning” is coming for sharemarket investors as unprecedented levels of liquidity in the financial system and buying by index funds have decoupled global markets from the economic reality of a world very different to what it was six months ago.

In a forum for investors in his two listed companies, Thorney Opportunities and Thorney Technologies, on Wednesday, Mr Waislitz also warned of the “sugar candy hit” of government stimulus packages, which had given companies and individuals an ­artificial “sense of wellbeing”.

While Mr Waislitz said that in the current low interest rate environment higher price-earnings ratios could be justified for some stocks, “at the end of the day you have to go back to the fundamentals of the businesses”.

“Yes enjoy the journey, trade the market more than usual — as we are doing — but I think there will be a day of reckoning at some point. In the next six to 18 months there will be gyrations again on the downside in the market, in my view,’’ he told the forum. “You simply have to ask yourself about the world versus where it was six months ago … I don’t think any single person would say it is as good as it was six months ago.”

Mr Waislitz said the federal government had been “bold and brave as it needs to be” with stimulus packages to support workers and businesses hit hardest by the COVID-19 crisis.

But he warned that the stimulus could set an environment for inflation to re-emerge in the post-COVID world, which he speculated was already being reflected in the rising prices of precious metals such as gold and silver.

“The stimulus is a bit like a sugar candy hit,” Mr Waislitz said.

“It artificially gives companies and individuals a sense of well being. If companies or individuals remain complacent they will be caught out when that sugar candy gets switched off. There is a reason to be cautious with that massive stimulus going on.”

He said despite the simmering diplomatic and trade tensions between Australia and China, “at the end of the day China wants our iron ore because they are expanding their domestic economy and they are all after our clean food and agricultural products, which is another great industry for the future for our country”.

Reflecting on Thorney Opportunities’ investment in Geelong-based carbon wheel manufac­turer Carbon Revolution, which floated on the ASX at the end of last year, Mr Waislitz said governments would be forced to encourage manufacturing back into Australia in the months ahead.

Opportunity to re-engage in manufacturing

“(COVID) gives the opportunity for Australia to re-engage in manufacturing. The government has to be bold and brave. They have to tackle industrial reform and allow flexibility in the workplace,’’ he said, adding that high gas and electricity prices also needed to be addressed by government policymakers.

“If that happens hi-tech, smart manufacturing will come back to Australia and that will provide the employment opportunities we need,” he said. “Carbon revolution is exactly that.’’

The Thorney Technologies portfolio contains three biotech manufacturing companies that have an exposure to the corona­virus impact, including stem cells manufacturer Mesoblast, which has attracted strong interest in the potential of its cell-based therapies to treat and even cure the worst coronavirus cases.

Two of Thorney Technologies’ largest holdings are buy now, pay later companies Afterpay Touch and Zip Co, whose share prices have soared in the market rebound. “We do have a lot of smarts in this country. We are a leader in the fintech field,’’ Mr Waislitz said.

Thorney Opportunities (TOP) and Thorney Technologies (TEK) together are also the largest investors in listed fintech OneVue, which has received a $107m takeover offer from global software firm Iress.

OneVue has recommended shareholders approve the deal, but in his first public comments on the bid, Mr Waislitz said Thorney would not be accepting the offer at the current bid price.

Iress has proposed to acquire 100 per cent of OneVue’s shares at 40c a share in a deal representing a 66.7 per cent premium on its last traded price.

“The bid has only taken it back to the pre-COVID price,” Mr Waislitz said. “We are happy they have recognised the opportunity, but we don’t think that price reflects the value and the strategic value of what (OneVue managing director Connie McKeage) has built. We don’t think the price on the table is yet sufficient to reward TOP or TEK shareholders.”