Have You Just Missed A Classic FTSE 100 Buying Opportunity?

Really great buying opportunities rarely stick around for long. In fact, it looks like you may just have missed one. The FTSE 100 has plummeted from its all-time high of around 7100 in April to 5900 at the end of September, a drop of almost 17%, taking it to the lowest level for nearly three years.

If that’s not a buying opportunity, I don’t 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 its losses. Markets rebounded on the rising oil price, hopes of Chinese stimulus, and expectations of a deferred US interest rate hike. Investors were even willing to think positively about troubled mining giant Glencore. The index soared all the way 6400, a rise of 8.5%, 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 relish a market crash just as much as they enjoy a bull market run. I know I certainly do. This is an unmissable rare opportunity to snap up you favourite 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 AFTER the facts are already in.

The problem is that you need to be brave. Picking up shares when they are selling at a discount should 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 isn’t easy. Especially with China crashing about our ears, the Middle East horror-show spreading and stolid institutions such as the IMF warning that another global crash is almost upon us.

Time To Buy?

It is easier to dive in after the FTSE 100 has leapt 500 points, but less profitable.  The good news is there are still plenty of nicely-priced stocks out there today.

My current favourites include Lloyds Banking Group, trading at 9.37 times earnings and forecast to yield 6%. Pharmaceutical giant GlaxoSmithKline, a stock that yields more than 6% and look set for a brighter future. And Royal Dutch Shell, because I don’t believe oil can stay at around $50 a barrel for much longer, which makes its valuation of 9.21 times 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.