The Aussie sharemarket was more upbeat last week with the ASX200 rising 2.7% over the five days to Friday – although this still didn’t make up for the heavy losses from the week before (-5.9%). Admittedly all of those gains came on Tuesday when the market jumped 3.6% on the back of more positive comments from the IMF and the World Bank. Then yesterday rolled around, and the ASX200 was off another 2.8%.
When will it all end?
Not today, it seems. The markets are skittish with heavy selling across the globe on Friday and continuing into Monday as Greece announced that deficit reduction targets – part of its bailout deal – will not be met. US markets are now sitting at annual lows, with the Dow, S&P and Nasdaq tumbling 2% overnight.
Aussie investors have been faced with falling share prices for over six months. Investment portfolios are starting to suffer, retirement pensions are dwindling, and investors are looking for clues as to how much longer – and lower – this can go. With the GFC bear market so fresh in our memories, it’s hard to be going through this all over again.
The GFC bear market lasted 23 weeks before it found a bottom; conversely, the 9/11 bear market dragged on for 78 weeks before finally hitting a low. What’s important to note is that there was a low, a bottom was reached, and the market ultimately headed north again. And those brave enough to get on board the right stocks at the right time made a fortune in the upswing. BHP went as low as $21.10 in late 2008 before hitting almost $50 earlier this year, while CBA dropped to $24.07 in early 2009 before racing to $60 over the next fifteen months. Quality mid-caps performed even bettter, for example SMS Technology (SMX) fell from $7.75 to $1.70 in the GFC before quadrupling over the following year.
It’s important to stress that although bargains can be found, investors shouldn’t be taking on too much risk in this climate. The volatility in the sharemarket is at extreme levels. Ultimately, a well-constructed stock portfolio will hold a mix of cashed-up companies with wide economic moats that can withstand slower economic conditions. If things do indeed get worse as the doomsdayers would have us believe, then you’ll be protected from the fallout. Meanwhile you’ll be well placed to take advantage of strong gains when the market turns around.
Below is a list of broker buys over the past week, with a good range of sold-off blue chips like CSL, Origin Energy, Woodside, QBE, Brambles, Suncorp and Flight Centre. In the mix there’s also a few speculative miners such as Metminco, UraniumSA and Perilya. Even the down and out Centro makes the list as its shares wallow at a paltry 2.3 cents; Merrills believes that the NTA of 44 cents makes this stock appealing, although it does attach a ‘High Risk’ to its buy recommendation.
Please note that TheBull.com.au simply publishes broker recommendations on this page. The publication of these recommendations does not in any way constitute a recommendation on the part of TheBull.com.au. You should seek professional advice before making any investment decisions.