Author: therawinformant

The share prices of the big four ASX banks like Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) are all lower. 

It is a tough day for the S&P/ASX 200 Index (ASX: XJO) with the Australian share market being down more than 2%.

The CBA share price is currently down 2.6%. It’s a similar story for the other banks. The Westpac share price is down 3.4%. National Australia Bank Ltd’s (ASX: NAB) share price is down 2.7% and the Australia and New Zealand Banking Group (ASX: ANZ) share price is down 3.4%.

What’s going on?

Most shares in the ASX 200 are down and the big four ASX banks certainly aren’t showing the worst declines at the moment. The unwanted title of worst performer in the ASX 200 currently goes to Graincorp Ltd (ASX: GNC) which is down 8.4%.

There has been large scale selling overseas. Since the start of September there has been steady selling in the US. For example, overnight the Apple share price dropped 6.7% and it’s actually down by 16% since 1 September 2020.

It’s a similar story for many of the US tech shares like Microsoft and Alphabet which have also been sold off heavily.

The selloff has been particularly painful for electric car manufacturer Tesla. It dropped 21% overnight and it’s down 34% since the end of August 2020.

The ASX is heavily influenced in the short-term by what happens in the US share market.

The US share market is often a barometer for the global market because many of the biggest US businesses generate their earnings from across the world. Facebook and Alphabet advertise across the world. Microsoft sells its software across the world. And so on.

Other negative news for the big four ASX banks

COVID-19 has already caused severe impacts across world both in human terms and economic damage.

One of the main things that the world is hoping for is a vaccine. An effective vaccine may allow the world to go back to normal. Or at least a new normal – the world may never be the same again.

However, there has been some unhelpful news from the UK. One of the main vaccine candidates, which is being developed by the University of Oxford and AstraZeneca, has been suspended because a phase 3 trial participant has suffered a potentially unexplained illness according to reporting.

There are 50,000 participants in the trial across the world, with 30,000 people in the United States.

If the whole world could go back to normal then plenty of troubled Australian businesses could see a return of activity. That would be good news for the big four ASX banks because it has loans across many different sectors. Industries like travel, tourism and international education could quickly rebound if people feel safe (and are allowed) to travel.

The big four ASX banks have already recognised billions of dollars of COVID-19 related provisions. Hopefully there aren’t any more large unwanted surprises.

Are they buys?

Every ASX share could be worth a buy if it goes cheap enough. The banks have been drifting lower since the first half of June 2020. But I’m not sure they are clear buys yet.

There is still a lot of uncertainty and the economy could still go through a rough patch, particularly if the vaccine takes longer than expected to recover.

Out of the big four banks, I’d probably prefer CBA because it has a strong balance sheet, a solid dividend in this environment and it seems to have very good leadership which is important under the current conditions.

More reading

• Here’s why some ASX dividend shares just go nowhere
• Half of ASX 200 stocks at risk as China-Australia relations hit new low
• ASX 200 up 0.95%: Big four banks rise, Scentre collections improve, Nufarm jumps
• 2 ASX dividend shares to buy instead of CBA
• Will ASX bank shares be dragged down by mortgage pain?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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When it comes to the words ‘ASX market crash’, many Australian investors will immediately start sweating about their share portfolios, regardless of whether they are held inside a superannuation fund or outside.

For many Australians, super is the only investment they have in ASX shares. And seeing as our super funds are our biggest ticket to a comfortable retirement (or lack thereof), a market crash can cause a lot of concerns about one’s retirement.

So how can an investor protect their super fund from a market crash?

Super protection fund?

I’ll just start off by saying that no one likes watching the value of their assets (and by extension their wealth) drop as a result of a market crash. It takes a lot of mental discipline to master the emotional baggage that comes with investing, even for experienced investors.

We train ourselves not to be ‘bothered’ by watching our shares fall in value and to ‘take advantage’ of a market crash to buy more. This always feels great in hindsight, but not exactly during the throes of a crash. As a personal anecdote, I was investing heavily during the March share market crash, but it was still scary, let me tell you. Of course, looking back, I’m glad I did, but it was a different story in mid-March.

But I  digress. So, what does this have to do with super?

Well, for most people, at least part of your super fund will be invested in ASX and international shares. That means your super fund will rise in value when shares do, but also fall when shares don’t.

But for anyone who is more than 10 years’ away from retirement, it’s best to ignore the movements of your super fund, especially if you have the kind of (very understandable) temperament that can’t deal with seeing your super fund fall in value.

Don’t swap returns for low volatility

There’s no getting around this, but there is no real alternative to shares if you want your super to grow at the highest rate it can. Shares are a volatile asset class, but they are also one of the only assets that have the power to get you a decent return these days. Interest rates are virtually at zero. That means that any returns you can get from ‘safer’ investments like cash and government bonds are almost negligible today.

That, in turn, means that you essentially have 2 choices in super – invest in growth assets like shares that will fluctuate in value (sometimes violently), but have the potential to give you a 7%, 10% or even higher return most years, or else stick with cash and bonds and get a ‘safe’ 1-2% return annually, if you’re lucky.

If you are nearing retirement age, by all means, stay conservative with your super. But if you’re under 50 or have more than 10 years until retirement, I don’t think you should bother trying to protect your super. The tradeoff between less and more volatility is lower returns, there’s no way around it.

More reading

• Why you should use the market sell-off to buy these ASX stocks
• Correction or crash for ASX 200 shares?
• 2 ASX ETFs that can solve your income needs
• Is the Flight Centre (ASX:FLT) share price about to take off?
• Why Althea (ASX:AGH) and these ASX cannabis shares are smoking the market today

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It’s hard to cut through the noise when markets are this volatile. But the latest sell-off is an opportunity to buy ASX iron ore miners as their fundamentals are improving.

The same can’t necessarily be said for other industries that is trying to overcome uncertainty from COVID-19, China-Australia tension, the US Presidential Election and sky-high valuations.

These anxieties triggered a 2.5% tumble on the S&P/ASX 200 Index (Index:^AXJO) during lunch time trade with every sector losing ground.

Thrown into the same hole

Our iron ore majors aren’t spared either. The BHP Group Ltd (ASX: BHP) share price tumbled 2.3% to $36.56, Fortescue Metals Group Limited (ASX: FMG) share price lost 2.4% to $18.05 and Rio Tinto Limited (ASX: RIO) share price dipped 0.5% to $98.83.

The indiscriminate selling across the market is a good thing as it presents a buying opportunity for this group of ASX stocks.

The ASX stocks looking cheap… maybe

The fact is, our iron ore miners aren’t overpriced. On a conservative outlook for the iron ore price, they represent fair value.

But if the current spot price of around US$120 a tonne is sustained over the medium-term, these stocks are looking dirt cheap!

The fundamentals for iron ore just improved as well. Shares in European automakers surged on Monday on a brighter than expected demand outlook for vehicles, noted Macquarie Group Ltd (ASX: MQG).

Outlook for iron ore improving

This is great news as it means demand for steel isn’t only coming from China, although that’s still the biggest driver for our mining majors.

The pick-up in the auto industry is also reassuring as infrastructure construction projects around the world take time to ramp up.

“Chinese steel demand has rebounded at a significantly faster pace than the rest of the world, which when combined with depressed iron ore supply in Brazil has resulted in strong iron ore prices,” said Macquarie.

“We are now seeing increased steel-intensive demand recovery in the US, EU and Indian markets, which should further support steel inputs.”

What’s the upside for BHP and friends?

If the price of the steel making mineral were to hang around current levels through 2021, the three mining majors will generate an impressive 10% free cash flow yield.

They will also see large consensus earnings upgrades to their earnings before interest, tax, depreciation and amortisation (EBITDA) of around 35%, according to JPMorgan.

The upside for these ASX stocks from the spot commodity price is much more significant than it is for gold miners as the precious metal trades near record highs.

JPMorgan said that ASX gold miners under its coverage are trading at around 10% of consensus forecast if the current gold price of US$1,900 plus an ounce is used.

More reading

• Correction or crash for ASX 200 shares?
• Top brokers name 3 ASX shares to buy today
• Why the Afterpay Ltd (ASX:APT) share price is falling again
• ASX 200 down 2.4%: Afterpay (ASX:APT) and Oil Search (ASX:OSH) sinking lower
• Gold Road (ASX:GOR) share price runs lower on HY20 results

Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited, Macquarie Group Limited, and Rio Tinto Ltd. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The S&P/ASX 200 Index (ASX: XJO) is having another not-so-nice day on the markets today. At the time of writing, the index is down another 2.48% at the time of writing to 5,858.8 points. That’s the lowest level the ASX 200 has been at since mid-June. Since last Thursday, the ASX 200 has now lost around 4.5% of its value, which means we’re not quite in official correction territory just yet. That requires a fall of 10% or more from the most recent high.

But is that the way we are headed after today’s market moves? After all, this doesn’t seem to be shaping out to be a ‘one-off’ hit, seeing as the ASX 200 has been down-trending since last week. Or could we even be heading for another 2020 market crash (which is defined by a 20% fall or more)?

US tech wiped out

Well, first thing’s first. The ASX 200 is probably only falling because of what’s happened in the US markets over the past week. The S&P 500 and the Nasdaq 100 have both been hit very hard. The Nasdaq’s blowoff has been especially spectacular. Since last Thursday (US time), the NASDAQ 100 is officially in correction territory, down 10.85%. That’s a sharp correction for just a week’s worth of trading.

The trigger? Massive sell-offs in US tech shares. The poster child for Nasdaq exuberance – Elon Musk’s electric car and battery manufacturer Tesla Inc. (NASDAQ: TSLA) – is down more than 34% over the past week. This move is apparently solely a response to the company not making the cut for the S&P 500 Index this quarter. Not a reason to devalue an entire company by a third under normal circumstances. But hey, this is apparently the world we’re living in now.

Other tech shares haven’t been spared either though. Apple Inc. (NASDAQ: AAPL) is down 15% over the past week, as is Amazon.com, Inc (NASDAQ: AMZN) with a 9.74% drop. Even lockdown wunderkind Zoom Video Communications Inc (NASDAQ: ZM) is down more than 20%.

So what’s going on? And how does this affect the ASX?

ASX 200 correction or crash?

Unfortunately, the ASX 200 is inextricably linked to the US markets, and, as the old saying goes, if the US coughs, the rest of the world catches a cold. Big falls in US markets tend to prompt ASX investors to take profits and pull of out ‘risk-on’ positions. What we’ve seen on the ASX 200 over the past week is ‘froth being blown off the top of the market’ in my view. Whilst this is not good news for investors today, I think that it’s a temporary setback for ASX shares.

Unless the US markets start tanking in a more dramatic fashion, or some other structural market issue emerges, I don’t think investors have too much to be worried about today. Markets do these kinds of things all the time, it’s a healthy pullback after things got a bit too carried away in my view. As long as you’re still happy with the holdings in your portfolio, I wouldn’t lose too much sleep just yet.

More reading

• Why you should use the market sell-off to buy these ASX stocks
• ‘We could be heading for a lot of pain’
• Why the Afterpay Ltd (ASX:APT) share price is falling again
• Tech share prices are down but not out. When should you buy?
• ASX 200 down 2.4%: Afterpay (ASX:APT) and Oil Search (ASX:OSH) sinking lower

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon, Apple, Tesla, and Zoom Video Communications and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool Australia has recommended Amazon and Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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On Tuesday I looked at a couple of exchange traded funds (ETFs) that I felt would be good for investors looking for international exposure.

Today, I thought I would look at ETFs that could be top options for income investors.

Two that I think would be worth considering right now are listed below. Here’s why I like them:

VanEck Vectors Australian Banks ETF (ASX: MVB)

The first ETF to consider buying for dividends is the VanEck Vectors Australian Banks ETF. As its name implies, it gives investors exposure to the banking sector. This could make it a great option if you want to invest in the sector but you’re not quite sure which bank to buy above others. The VanEck Vectors Australian Banks ETF gives you a piece of the big four banks, the regionals, and also investment bank Macquarie Group Ltd (ASX: MQG). Estimating what the yield will be in FY 2021 is incredibly difficult because of the pandemic. But I would expect something in the region of 4%, rising towards 6% in FY 2022 when trading conditions (hopefully) have improved materially. In light of this and the outlook for interest rates, I think now could be an opportune time to invest.

Vanguard Australian Shares High Yield ETF (ASX: VHY)

If you already have some of the banks in your income portfolio, then you might want to go for a more diversified option. The one that ticks a lot of boxes for me is the Vanguard Australian Shares High Yield ETF. This exchange traded fund has a focus on high yield shares and is invested across a total of 66 of them. This comprises a diverse group of shares, with no industry accounting for more than 40% of the fund and no single company accounting for more than 10%. Many blue chip favourites are included in the fund such as the banks, BHP Group Ltd (ASX: BHP), Coles Group Ltd (ASX: COL), Fortescue Metals Group Limited (ASX: FMG), and Telstra Corporation Ltd (ASX: TLS). I estimate that its units offer a FY 2021 dividend yield in the range of 4% to 5%.

More reading

• Forget Westpac’s term deposits and buy these ASX dividend shares
• How to earn a passive income of $50,000 with ASX dividend shares
• 2 quality ASX dividend shares for income investors to buy today
• Looking for dividends? Buy these ASX ETFS in September
• ETF provider VanEck to launch 4 new ASX ETFs

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Shares in Flight Centre Travel Group Ltd (ASX: FLT) could be in the buy zone for long-term investors. The Flight Centre share price has fallen more than 67% in year-to-date trading but could it be about to take off?

Travel restrictions and lockdowns have wreaked havoc among travel companies on the ASX. Despite the doom and gloom, the turbulent conditions could provide investors with a great opportunity.

A recent article I wrote on Corporate Travel Management Ltd (ASX: CTD) highlighted the recovery in the company’s share price. A similar recovery could be seen in the Flight Centre share price, as investors and consumers look to the future.

How did the pandemic impact Flight Centre during FY20?

Flight Centre recently reported its annual results for FY20.

The report detailed the full impact of the pandemic of the travel agent’s operations. This was reflected in Flight Centre posting its first loss since listing on the ASX.

With the introduction of domestic and international travel restrictions, Flight Centre saw operating conditions deteriorate significantly.

As such, the company saw total transaction volumes and revenue finish 35% and 38% lower respectively for the full year. This resulted in Flight Centre delivering a net loss of $662 million for FY20.

The company also revealed aggressive cost-cutting measures, effectively lowering its cost base by 70%. Flight Centre also reported $1.1 billion in available liquidity, boosted by a $700 million capital raising in April.

Silver lining for long-term investors

Although its leisure segment took a major hit during FY20, Flight Centre’s corporate travel business was a standout performer.

For FY20, Flight Centre’s corporate division was able to deliver a positive operating profit of $74 million. This was largely attributed to the company’s exposure to clients in essential service sectors, such as mining and government.

For long-term investors, the profitability of Flight Centre’s corporate segment is a silver lining.

This is because growth in the segment allows for greater understanding of Flight Centre’s growth profile. With the leisure segment eventually destined to recover post-pandemic, a thriving corporate segment could see a re-rate in the Flight Centre share price in the long term.

Should you invest in today’s Flight Centre share price?

In addition to a promising corporate segment, Flight Centre has reassured investors that the company can break even with total transaction value at 40%. This should give long-term investors some closure as they wait for a COVID-19 vaccine.

Despite the lucrative potential in buying at the current Flight Centre share price, I think investors need to remain cautious. I believe the old adage of ‘never catch a falling knife’ applies to investing in the travel sector in the current environment.

From a risk management perspective, the current Flight Centre share price looks attractive. However, if investors are inclined to invest in Flight Centre at the company’s current share price, I think a prudent strategy would be to establish a stop-loss to ensure they protect to the downside.

More reading

• The Corporate Travel Management share price is up 65% in a month: Is it too late to invest?
• These are the 10 most shorted ASX shares
• The one type of ASX company that outperforms all others
• Why Afterpay, Flight Centre, Helloworld, & QBE shares are tumbling lower
• These were the best performing ASX 200 shares in August

Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The market may be sinking lower today but that hasn’t stopped ASX cannabis shares from storming higher.

For example, at the time of writing the Althea Group Holdings Ltd (ASX: AGH) share price is up 8% to 54 cents.

Elsewhere, the Auscann Group Holdings Ltd (ASX: AC8) share price is up 3% and the Cann Group Ltd (ASX: CAN) share price is 6% higher.

Why are ASX cannabis shares on a high today?

Investors have been buying ASX cannabis shares after a positive industry development this morning.

That development is the Therapeutic Goods Administration (TGA) releasing a notice of an interim decision to amend the Poisons Standard for cannabidiol (CBD).

This amendment would see CBD supplied for therapeutic use over the counter in pharmacies without the need for a prescription.

Althea has responded to the news by revealing that it has been engaging with the TGA throughout the consultation process and is supportive of the amendment.

It notes that the proposed amendment would bring patient access into closer alignment with comparable international jurisdictions, improving access to CBD products for therapeutic use.

Althea’s CEO, Josh Fegan, commented: “We applaud the TGA’s interim decision in this matter and see it as one of the biggest developments in our industry to date. The interim decision reflects the significant shift in community and government attitudes towards medicinal cannabis since it was legalised in Australia in late 2016, which has seen it move from a fringe alternative towards an accepted mainstream option.”

“As a strong advocate for patient access, Althea has closely monitored the proposed amendment since it began and has participated in the consultation process. We are excited by the TGA’s interim decision to down schedule CBD products and see this development as a big step forward for prescription cannabis products already available in Australia,” he concluded.

More reading

• ASX cannabis shares continue progress despite pandemic

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The FBR Ltd (ASX: FBR) share price is wobbling slightly during early afternoon trade. The company announced the completion of its building pilot program agreement with Archistruct.

The FBR share price reached an intra-day high of 6.8 cents, before falling back to 6.4 cents at the time of writing.

What does FBR do?

FBR is a robotic technology company that builds robotic arms to assemble structure walls. It is considered faster, safer, more accurate and with less wastage than traditional bricklaying methods.

Its flagship product, the Hadrian X is an automated bricklaying system that can lay an estimated 1,000 bricks per hour as opposed to an output of two human bricklayers for the whole day.

The Hadrian X provides a ‘wall as a service’ and can adapt quickly to builder demands.

Commercial and community centre build

FBR updated the market advising it had built its first non-residential structure, completing the third and final stage of the building pilot program agreement with Archistruct.

The new commercial and community centre was built using the robotic company’s Hadrian X. FBR recorded bricklaying speeds of up to 228 blocks, or 1,049 standard brick equivalents per hour. In addition, the Hadrian X built both an internal and external leaf of a double brick cavity wall.

Notably, it was the first time the Hadrian X worked in hail, high winds and heavy rain.

What did management say?

FBR managing director and CEO, Mike Pivac was proud of the achievement. He said:

The construction of our first non- residential structure is a significant step forward for FBR and the commercialisation of our technology. This structure is the first demonstration of Wall as a Service® in a suburban environment for a client, and we are very pleased with how the Hadrian X® and our team performed.

Mr Pivac also said the ability to construct commercial buildings opened up a valuable global market for the company.

About the FBR share price

The FBR share price has recovered somewhat since its March lows of 1 cent, up 650% to date. However, the FBR share price is trading 36% below its 52-week high of 10.5 cents achieved in July.

I think that FBR is an exciting ASX share to watch. The Hadrian X is considered as a quantum leap in the construction industry. I will be adding the FBR share price to my watchlist for now and monitor its developments.

More reading

• Why Althea (ASX:AGH) and these ASX cannabis shares are smoking the market today
• Top brokers name 3 ASX shares to buy today
• ‘We could be heading for a lot of pain’
• Why the Afterpay Ltd (ASX:APT) share price is falling again
• Why the Qantas (ASX:QAN) share price is sinking lower today

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Many of Australia’s top brokers have been busy adjusting their financial models again, leading to the release of a large number of broker notes this week.

Three broker buy ratings that have caught my eye are summarised below. Here’s why brokers think these ASX shares are in the buy zone:

Crown Resorts Ltd (ASX: CWN)

According to a note out of Morgan Stanley, its analysts have retained their overweight rating but reduced the price target on this casino and resorts operator’s shares to $10.50. The broker believes the market is too negative on Crown and should look beyond the short term headwinds it is facing. Especially given the upcoming opening of its Sydney casino, which it expects to win market share from its rivals. I think Morgan Stanley makes some great points and Crown could be worth considering as a long term investment.

CSL Limited (ASX: CSL)

Analysts at UBS have retained their buy rating and $346.00 price target on this biotherapeutics company’s shares. Although trading conditions are tricky for CSL because of the pandemic and its impact on plasma collections, it notes that the company has opportunities elsewhere in the business to offset this. Particularly given increasing demand for flu vaccines following the outbreak of COVID-19. I agree with UBS and believe recent weakness in the CSL share price is a buying opportunity for investors.

Fortescue Metals Group Limited (ASX: FMG)

A note out of Ord Minnett reveals that its analysts have upgraded this iron ore producer’s shares to a buy rating with an increased price target of $20.00. This follows an upgrade to its iron ore price forecasts after factoring in stronger than expected Chinese steel production. In light of this and its expectations that iron ore demand will remain strong in the near term, the broker is forecasting very generous dividends for the foreseeable future. I think Ord Minnet is spot on and Fortescue would be a top option for income investors.

More reading

• Why the Qantas (ASX:QAN) share price is sinking lower today
• Top ASX shares to buy this week
• Here’s why some ASX dividend shares just go nowhere
• Half of ASX 200 stocks at risk as China-Australia relations hit new low
• 3 ASX 200 shares to buy with $3,000 this week

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has recommended Crown Resorts Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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A veteran investment executive has warned immense grief could come soon for share investors.

Wilson Asset Management chair Geoff Wilson in an investor call on Friday said the last few months of the ASX have looked “very frothy”.

“We could be heading for a lot of pain,” he said.

“The way that the market has bounced back [since COVID-19]… people are going to realise that buying shares at doubles or triples, that’s not normal.”

Wilson’s company runs a stable of popular active exchange-traded funds (ETFs), such as WAM Capital Limited (ASX: WAM), WAM Research Limited (ASX: WAX) and WAM Global Ltd (ASX: WGB).

Newbie day traders are creating volatility

Wilson blamed a flood of “non-sophisticated money” coming into the market during the virus crisis for the current bubble.

The All Ordinaries Index (ASX: XAO) has surged almost 33% since the depths of the coronavirus crash in March, even after a slight correction in recent days.

Over the long term, the Australian market has historically gained roughly 10% per year, according to Wilson, so he feels it has to eventually reach that equilibrium.

“The market does have a way of cleansing out excesses… we could be getting close to a bit of a cleansing,” he said.

“There is a lot of risk in the market at the moment, definitely.”

Tech sector is a worry

Technology sector shares were a particular concern to Wilson, who established his LIC company in 1997.

Examples include fintech Afterpay Ltd (ASX: APT), which has shot up more than 700% since March, and Tesla Inc (NASDAQ: TSLA), which surged 470% before a 30% adjustment in recent days.

“That has been looking quite bubbly. I’ve been thinking back to 1999-2000 when we had the ‘tech wreck’,” he told investors.

“There wasn’t a specific event that created the tech wreck… It was just over-evaluations, then heat coming out of the market.”

Wilson predicted that, in a similar fashion, there could be a fresh “wake-up call” coming soon for tech investors.

“There could be a reasonable-sized adjustment.”

Wilson Asset Management has more than $3 billion under management on behalf of 86,000 retail shareholders, split across 6 LIC ETF products.

More reading

• Why the Afterpay Ltd (ASX:APT) share price is falling again
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Tony Yoo owns shares of AFTERPAY T FPO, WAM Capital Limited, and WAM Research Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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