Yesterday’s jump for many UK shares is a reminder that stocks can go up as well as down!
But of course, there’s no guarantee that they’ll keep going up. We could yet see more volatility ahead as the markets work through the bottoming process.
Nevertheless, yesterday’s action demonstrates why it can be a good idea to search for good-value stocks when the markets are depressed. History is on the stock-picker’s side because bear markets have, so far, always been followed by the next bull run. However, timings can vary.
Quality, growth and value
And because it’s so hard to time participation in the stock market, it’s a good idea for me to focus on something else instead. So, I try to concentrate on the quality and growth prospects of the businesses behind shares. And I aim to buy shares to hold for the long term when they are assigning a modest valuation to the underlying enterprise.
There’s nothing clever about that. I didn’t think of the strategy all on my own. It’s the classic contrarian approach used so successfully by billionaire investor Warren Buffett and others. But it’s not easy to execute emotionally. Indeed, the last thing I feel like doing is buying shares when the darn things keep going down.
But it’s bear markets, setbacks and down-days that tend to create decent buying opportunities. So, I’ve been buying shares over recent days and weeks. But I admit that move hasn’t looked so clever until yesterday.
However, I’m optimistic that my long-term approach to holding shares will make recent volatility seem insignificant in the end. Just as Buffett teaches, I’m trying to take a business-like perspective. And in that, I consider myself to be a part owner of the enterprises behind my stocks. And just like any business owner, my intention is to hold on with tenacity as operational progress unfolds over time.
Upside surprises
I’m fully invested now. But if I wasn’t, I’d be considering yesterday’s up-move in the market as a call to action. My guess is it’s not to late to research UK shares with a view to buying them for the long haul. There’s plenty of good value in the London stock market as long as the macroeconomic picture continues to improve.
And I’m bullish about the future. I could be wrong, but inflation looks to me like it’s about to be cut down to size. Even if it proves to be more persistent than I expect, I’ve got faith in my investee businesses. It’s amazing how adaptable enterprises can be. They proved that during the pandemic and they’re proving it again now.
For example, food-on-the-go retailer Greggs delivered a robust set of third-quarter results yesterday. And the directors had an optimistic assessment of the outlook for the business. But other companies are also surprising the market with better-than-expected trading. So, when comments like that meet depressed share prices, we could see the beginning of a sustained upturn in the market.
I could be wrong to be upbeat. However, I’d buy shares selectively now if I had spare cash. And I’m holding on tightly to those I own.