Global markets are under immense pressure at the moment as the outlook for the global economy becomes increasingly bearish. Investors around the world were panic-selling this week in fear of markets falling further. Even though we have seen a recovery in the last two days, the bears still have the momentum and many believe we will see lows tested again. The easy thing to do is to sell your holdings and sit on cash at the moment, but if you want big returns and are willing to take some risk then now is the time to be accumulating quality shares at cheap prices.
Keep Your Head
There is nothing worse than watching the value of your portfolio dropping like a stone. Private investors occasionally fail to remember that investing in the markets is a long-term game and day to day volatility will always happen. This long-term view must also be taken when watching your portfolio: investors should take the opportunity to add a few cheap shares of your favourite stocks. As Warren Buffett said, “Be fearful when others are greedy and greedy when others are fearful”.
Research Is Key
Research is always the most important factor in playing the markets. If you have ultimate faith in your investment and its future potential then the volatility should not matter as you believe the company will outperform. I would encourage investors that are researching stocks to email or get on the phone and call the company with any questions you may have. For those that do this, it is an integral part of the research process and I believe more should take the time and ask them the hard questions. Any investors that are worrying about their portfolio should look at each company and work out if anything has fundamentally changed in the business in the last week. If not then hold or buy; if something has changed then that could indicate time to sell and move on.
Quality Companies Are Looking Cheap
Even after the rally in the markets of the last few days, there are bargains out there. This has become an opportunity to buy quality companies at a discount and hold for the long term. In the FTSE 100, companies like Royal Mail Group and Persimmon both trade below highs of last year and have dividend yields of over 5%. The commodities giants BHP Billiton, Glencore and BP all trade at lows after the commodities rout of the last 18 months, but could surge if commodity prices start to turn.
The growth FTSE 250 index also has some quality companies trading at attractive levels: I think Wizz Air Holdings is one to watch for 2016. Also, Pendragon has fallen over 10% this year as has WS Atkins, two undervalued compared to the market and could see a quick recovery.
