The big problem with Harvey Norman billionaire’s promise to make Aussies rich in four years

Billionaire Gerry Harvey claimed that anyone could get rich quick by selling all their possessions and putting the money into Harvey Norman stock.

But the business giant’s supposedly hot stock tip, released Tuesday, has been exposed as merely reused advice it originally gave five years ago.

The boss of the $1.7 billion retail giant claimed his company’s shares are undervalued by as much as 50 percent — at $3.85 — and that the market will eventually correct.

“My advice to you is to sell your house, sell your boat, sell your car, put the lot on Harvey Norman and then call me in three or four years, and you don’t have to be a journalist anymore,” he said. the Australian Financial Review’s Chanticleer column.

However, it has now been revealed that Harvey said almost exactly the same thing five years ago – when shares in his company fell to the exact same price.

In February 2018, Harvey branded his investors “crazy” for fleeing his company, claiming, “If the stock price drops to $4, sell your house.” Sell ​​your boat, sell your car, sell your house. Buy Harvey Norman stock.”

The shares closed that day at just $3.85 — the exact same price they closed at this week as Harvey trotted out of his old line again, according to Rear window columnist Joe Aston.

Harvey’s original advice was roundly mocked when in September 2019 the retailer was forced to offer free stock to existing shareholders in a bid to raise $163.8 million.

“This is called burning the furniture to keep yourself warm,” Mr Aston said.

During the five-year period between Harvey’s similar tips, the company’s stock delivered a total shareholder return, including dividends, of 67.2 percent, outperforming the ASX 200 index by more than 11.5 percent.

Meanwhile, home prices have risen just over 8 percent over the same period, meaning any investor brave or foolish enough to follow his advice may have seen a cash return on their investment.

The company revealed that sales fell 10.2 percent in January and earnings for the first half of the year were lower than expected

As Harvey Norman’s executive chairman, Harvey manages a massive real estate portfolio worth between $3.9 billion and $5 billion, which he says the market has failed to take into account the value of the stock price.

But critics argue that investors have undervalued the property because of Harvey Norman’s lack of transparency around their assets.

Interim results released Tuesday paint a grim picture for Harvey Norman.

The company revealed that sales fell 10.2 percent in January and first-half profit was lower than expected.

Investors also enjoyed a lower dividend than they had hoped for.

But Harvey has made an optimistic estimate of the company’s fortunes, claiming the stock is worth “six to eight dollars.”

After the company reported lower-than-expected earnings and sales for the six months to December 2022 by 10.4 percent, the stock price fell 7.5 percent to $3.85

He believes the scarcity of real estate for major retailers and a return to face-to-face shopping after online sales boomed during the pandemic will boost his business again.

Last week Harvey said he doubted Australia was headed for a recession as some experts have predicted.

He said life in Australia will be “tougher” due to rising electricity prices and rising interest rates.

“We don’t see how (a recession is) possible. Because when you get into a recession, you get interest rates above 8 or 10 percent. And you get unemployment over 8 or 10 percent. None of those things happen,” Harvey said.

Harvey Norman has been approached for comment.