Uncertainty in the markets and the global economic recovery are creating investment opportunities, a local fund manager says.
Mike Taylor, managing director of boutique firm PIE Funds, says company valuations are much lower than they were two years ago but many have built revenues back up to where they were
or even grown them since the last time the market was so uncertain.
"The last time growth looked wobbly was the beginning of 2008. Back then valuations were in the high teens. Now they are around 10-11 times price to earnings."
While there was always a chance of the market having a double dip, recent economic information suggested it was less likely.
"There are a lot of positive things going for the economy - the dairy price and next year's Rugby World Cup.
"When things are looking great you have to pay full price - when things are uncertain you can get them at a discount."
Taylor said many retail investors had not got back into the sharemarket since the global financial crisis in 2007 but falls were a good chance for investors to dip their toes in again. "It's an environment where nobody wants to touch shares - historically that has proved to be a good time to get in."
Taylor said many companies were in much better shape now. "A lot of companies have more cashflow now and are paying better dividends." Many had strong balance sheets after reducing debt levels in the past few years.
But Taylor warned that investors would need to be selective about which companies they chose.
New Zealand investors would do well to look at where the Australian economy was headed and likewise Australia needed to keep China in mind.
"China is very important to the Australian economy. Provided it slows down to a soft landing - China growing at 8 per cent to 10 per cent is fine but growing at 2 per cent to 3 per cent won't be fine for Australia."
He expected the next six months to continue to be volatile on the markets.
