Australian stocks are cheap and supported by a robust economy, Independent Asset Management (IAM) portfolio manager and founder Greg Matthews has said.
In August, the S&P/ASX 200 Index touched a low of 3765 and Matthews said the All-Star IAM Australian Share Fund converted much of its 10 per cent cash position to stocks.
"I think we can get back to 5000 in the next 12 months. I think that's quite easy," he said, adding the level had been touched about four times on the index since 2009.
"That would be a return of 30 per cent. It's a brilliant return. When you look at the price-earnings ratio on our market, it's very cheap. When you look at the earnings growth in our market, it's very cheap."
The S&P/ASX 200 Index has traded at about 4100 for much of October after starting the month around 3800.
"At 3800, our market is actually cheaper than it was at the bottom," Matthews said.
Matthews was speaking to more than 600 advisers and planners at the annual Association of Financial Advisers (AFA) national conference. Many of those advisers have clients who have been reluctant to re-enter the stock market since the global financial crisis emerged in 2008.
Prolonged volatility emanating from debt crises in the United States and Europe have only exacerbated client jitters.
"I'm happy to buy Australian stocks because they're so cheap. Resources are even cheaper," Matthews said.
He said BHP Billiton was the exception because it was relatively expensive, although he had great faith in the China story, which was driving much of Australia's economic success.
"For most of this year, we had no resource stocks. We had a great run out of them last year, we sold out of them in January, and we've only just re-entered them in the last five or six weeks," he said.
He warned the index would not go up in a straight line and could well revisit 3800.
"If it does, it'll make a great buying opportunity," he said.
IAM has about $2 billion under management and Matthews, who formerly managed funds for Prudential, Merrill Lynch and Macquarie Bank, said he would cap it at $3 billion.
