Stock markets around the world have fallen in recent weeks. But stock market weakness can make it a good time to research the best shares to buy if share prices fall further.
Several factors seemed to have caused the recent weakness, many of which came from the United States. Due to the size of its economy, factors that affect US shares can often have a knock-on impact in other parts of the world like the UK.
There’s a concern that interest rates might need to be raised to battle rising inflation. Central banks such as the US Federal Reserve might also have to reduce their level of bond-buying. This could hurt growth stocks in particular.
Best shares to buy
So which could be the best shares to buy if share prices fall further? That’s the question I’m asking myself.
I’m looking at high-quality shares where the main investment case remains intact. These shares could be a bargain at lower prices… it could feel a bit like the Black Friday sales!
For my Stocks and Shares ISA, I’m considering looking at Games Workshop, Croda International and Computacenter. All three are among the best shares to buy if prices continue to fall, in my opinion. They all demonstrate quality characteristics, offering double-digit returns on capital. And they’re all trading at a lower prices than just one month ago.
I like to spread my investments across various sectors and each of these three are in very different sectors. Games Workshop is in the business of selling fantasy miniatures. Croda International is a speciality chemicals company. And Computacenter provides IT services. That’s definitely diversification.
Playing defence
In times of stock market weakness, I also consider some defensive options. If I think growth stocks could suffer further, there are plenty of value shares that I could buy instead.
The UK is home to many defensive shares. I like drinks maker Diageo, pharmaceuticals giant Astrazeneca and popular supermarket Sainsbury’s. Â Each of these offer defensive earnings. They also pay dividends, which is a nice bonus.
A word of warning
Global economic factors can affect all shares. Although growth shares could fall the most in a stock market crash, even the most defensive options might not be immune to falling prices.
Also, a falling share price isn’t guaranteed to instantly bounce back. Falling share prices can drop further. In a stock market dip, correction or full-blown crash, share prices can become more volatile so I know it’s important for me to keep a level head.
When looking for the best shares to buy in stock market weakness, I’d say it’s important to think long-term. As a stock investor, time is my friend. In the long run, the stock market has an excellent track record for providing returns. UK shares have typically averaged around 7% annually. I tend to aim for higher returns so I’m always on the lookout for the best shares at the best prices.