Australian Investment Blog

Investors’ focus needs to be specific and on value in today's environmentGood morning everyoneOverviewThe current market volatility in equity markets can certainly be extremely scary on the surface but also by definition it can yield some great opportunities. When panic hits markets the selling is often led by the futures market, creating waves of arbitrage selling, simply pulling all stocks lower … both solid and troubled companies.Importantly, medium-long term investors who are looking to accumulate stocks for the future should embrace an equity market when it is trading below its long term P/E of 14.4x of the last decade.At the dizzy heights of March / April, when the ASX200 was testing 6000, the market’s P/E was fluctuating between 16 and 16.5x, a lofty 11-14% premium of the last decades average yet many investors felt good, not scarred.Turning to the MarketThere are numerous quotes around about buying when everyone else is selling but aligning this psychology with long term valuations is a starting point adopted by many successful investors. If the ASX200 weakens under 4900 the market will be in the cheap zone compared to its decade average.Market Matters currently remains a buyer in the 4800-4900 region and a seller in the 5350 region.Commonwealth Bank, for example, corrected 27% between March and September of this year but then rallied 16.
Show more...