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Note from the editor - 25 October

Lex Hall  |  27 Oct 2019Text size  Decrease  Increase  |  
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It’s a fair guess WiseTech founder Richard White spent part of this week wishing he was back in his old job, tuning guitars for The Angels and AC/DC. It’s been that kind of week for the former muso turned software billionaire.

The short-sellers arrived late last week, picked up the WiseTech guitar and basically said, “the neck’s warped, the frets buzz, and the pick-ups don’t work.” White took a little time to set the record straight and reject the claims of accounting fraud and poor software. An interview with the ABC should have done the trick.

But instead an ashen-faced White stumbled over the lyrics and was forced to admit the allegations made by short seller J Capital Research were a little outside his wheelhouse. WiseTech fell 21 per cent to $26.30 in the days after the JCap reports were published. But it rebounded in early trade on Wednesday.

In any case, the allegations were a little too shrill to be convincing for Morningstar analyst Gareth James. “Much of the information provided is non-public and unverifiable or based on conversations with unnamed former executives of subsidiaries," says James, who sees WiseTech as a one-star stock.

What the WiseTech attack did do was once again fan the debate over the role of short-sellers. Do they provide a more efficient level of scrutiny for investors? Or are they a vigilante force bent on roughing up companies and manipulating share prices?

But the most ear-piercing feedback is coming from Britain. The Brits are so resentful of their government’s tortuous divorce from the European Union that their newsmakers have devised bulletins that boast of being “Brexit free”. And several betting firms now have the odds of a December election at over 50 per cent.

But amid the maelstrom of delayed deadlines and possible election dates, there’s a garage-full of buying opportunities in the automotive sector, according to Morningstar equity analyst Richard Hilgert. And speaking of car stocks, Tesla this week staged a rather impressive burnout. It posted a rare quarterly profit and delivered a record number of cars while containing costs.

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In the interests of ignoring the hype and remembering that October is rightly or wrongly an ominous month from stocks, have a read of Tom Lauricella’s examination of bonds. Mind you, did you notice that last week Greece issued 487 million euros of short-term bills at -0.02 per cent?

The irony of this was certainly not lost on Morningstar editorial director Graham Hand. “Not long ago, Greece was a joke ('in a double-dip recession of taramasalata and tzatziki') where few locals paid taxes and bond payments were restructured,” Hand writes. “We know many governments are paying negative rates but Greece! A few years ago, its 10-year bonds reached 37 per cent and now they are 1.5 per cent.”

Warm regards,
Lex Hall

is senior editor for Morningstar Australia

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