Really great buying opportunities rarelystick around for long. In fact, it looks like you may just have missed one. The FTSE 100 has plummetedfrom its all-time high of around 7100 in April to5900 at the end of September, a drop of almost 17%, taking it to the lowest level for nearly three years.
If thats not a buying opportunity, I dont know what is. But I suspect surprisingly few investors took advantage of it. Things are just too scary right now.
Flying High
Last week the FTSE 100 surprised almost everybody by suddenly recovering much of itslosses. Markets rebounded on the rising oil price, hopes of Chinese stimulus, and expectations of a deferred US interest rate hike. Investors were evenwilling to think positively abouttroubled mining giantGlencore. The index soared all the way6400, a rise of8.5%, although it has slipped a little today.
This goes to show how you can never second-guess stock markets. One minute all was gloom, with China crashing, US jobs data disappointing, and the IMF flashing red warning lights, the next moment the animal spirits had flooded back.
All The Fun Of The Crash
It is a truth rarely acknowledged that experienced investors relisha market crash just as much astheyenjoy a bull market run. I know I certainly do. This is an unmissablerare opportunity to snap up youfavourite stocks at bargain prices, with a view to holding them for the long-term, when markets will hopefully end up far higher. Correctly timing future market movements is impossible, but buying on dips like this one is rather easier, because you are making your decision AFTERthe facts are already in.
The problem is that you need to be brave. Picking upshares when they are selling at a discountshould be a no-brainer but in fact it is shockingly difficult to defy the crowd. Marching towards the sound of gunfire when everybody else is ducking for cover isnt easy. Especially with China crashing about ourears, the Middle East horror-show spreading and stolid institutionssuch as the IMFwarningthat anotherglobal crash is almost upon us.
Time To Buy?
It is easier to dive inafter the FTSE 100 has leapt500 points, but less profitable. The good news is there are still plenty of nicely-priced stocks out there today.
My current favourites include LloydsBanking Group, trading at 9.37 times earnings and forecastto yield6%. Pharmaceutical giant GlaxoSmithKline, a stockthat yields more than 6% and look set for a brighterfuture. AndRoyal Dutch Shell, because I dont believe oil can stay at around $50 a barrel for much longer, which makes its valuation of9.21times earnings and 6.68% yield pure black gold. That looks cheap against the FTSE 100 as a whole, which currently trades at 17.62 times earnings and yield 3.83%.
So yes, you did miss a FTSE 100 buying opportunity.The good news is that the FTSE 100 is still littered with great buying opportunities like these three stocks, and many more besides.
There areplenty more great buying opportunities on the FTSE 100 if you know where to look.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.