Speaking to InvestorDaily, Mr Tagliaferro said the momentum of the market coupled with lower interest rates is likely to push prices up higher in the immediate future.
But while he stressed that “no one has a crystal ball”, investors would be well served to tread carefully.
“You’ve got all this fiscal and monetary stimulus from central banks, but economic growth’s not coming through. The market’s going up 10 per cent a quarter, but earnings aren’t going up 10 per cent a quarter,” he said.
“The market is up almost 30 per cent on the last 12 months – and up 10 per cent on the September quarter. I’d warn people not to start using that for their normalised expected returns,” he said.
Speaking as a value investor, Mr Tagliaferro said it is currently very hard to find good stocks at reasonable prices.
“When everyone’s trying to pile out of cash into shares, it’s not a bad idea to take your time,” he said.
There are currently 15 company prospectuses sitting on his desk, and while his team will pore over every line, a majority of them are destined for the bin.
“I guarantee you that 90 per cent of people who fill them in won’t read the prospectus,” said Mr Tagliaferro.
He pointed to the example of Babcock & Brown, which had a number of opportunistic floats in the lead up to the global financial crisis and then collapsed in March 2009.
“There hasn’t been one legal suit [against Babcock & Brown] because it was all disclosed in the prospectus,” he said.
“The fees they took, the reasons they bought the assets for, what they sold it into the float for – that was all disclosed,” said Mr Tagliaferro.
The problem is that when markets are “effervescent”, investors rarely bother to read the fine print, he said.
“Everyone’s forgotten about the last pile of junk that was listed, and everyone thinks there are private equity people bearing gifts,” said Mr Tagliaferro.
