The stars are finally aligning for Australia's stock market following a recent selldown, as cheap valuations and approval from billionaire Warren Buffet lure traders back in.
The 84-year old investor told Fairfax Media on Tuesday that he intends to spend over $2 billion a year to build stakes in Australian firms after his investment firm Berkshire Hathaway invested $388 million in insurer IAG.
"If you come back in two or three years, you will find we have got four or five Australian equities," he said in a phone interview, adding that the $2 billion cashflow will come from his investment into IAG.
"There is money to be made in Australian equities over the next 10, 20, 30 years ... If we get something we feel comfortable with, we will stick with it for a very long time."
His remarks come as the benchmark S&P ASX 200 begins to recover from a three-month selloff that has left the market unbelievably attractive, according to Goldman Sachs.
"Value looks as good as it has in a decade," said the bank's strategist Matthew Ross in a report this week. He notes Australian equities look 10 percent undervalued relative to other developed markets like the U.S., Europe and Japan.
"At 15.8 times price-to-earnings, Australia also trades at a 9 percent discount to MSCI World - well below its 1 percent average premium and just shy of its largest discount in a decade."
The S&P ASX 200 index rallied over 1 percent on Wednesday, but has lost more than 4 percent since April. Banks were largely responsible for the selloff, triggered by lackluster earnings reports and a push for stricter capital requirements by financial regulators.