The FTSE 100 spent most of last week below 7,000 points. This isn’t that far off the lows of the past year. Given that the index is made up of different companies, it’s logical to conclude that if the index is down, individual stocks will also have fallen. As a result, there are some good opportunities that I can find based on the recent movements, especially if the stock market recovers.
Overly fearful sentiment in property
Rightmove (LSE:RMV) is one company that has been caught up in the recent sell-off. The stock is down almost 20% in the past month and 33% in the past year.
The property marketplace generates revenue from the advertisers and estate agents that list on the site. In this way, it can make money regardless of whether properties are listed for sale or to rent. One of the largest positives for the business is driving customers to the website, generating hits in the process.
I understand that people could be selling the stock due to concerns around the property market. Rising interest rates will make buying a home more expensive. Yet I don’t think this fundamentally ruins the Rightmove business model. After all, if people can’t afford to buy, they will still visit Rightmove and look for properties to rent.
On that basis, I think the 20% fall more than compensates for any fears around the market in general. I think it looks like a great level to be buying the share. It’s on my watchlist to purchase in the coming month.
A FTSE 100 stalwart
The drop in the FTSE 100 has also dragged down Scottish Mortgage Investment Trust (LSE:SMT). It might surprise some, given that the fund only holds 1.9% of invested money in UK assets. However, the stock market stumble has been evident worldwide. The US stock market has also had a tough time recently. So, the 33.56% of allocation to the US has also been negatively impacted.
In the past year, the share price is down 48.4%. However, one point worth noting is the difference between the share price and the net asset value. In theory, these should be the same. If the trust owns 75 stocks, the value of these stocks combined should correlate to the price of the trust. It’s hard to accurately price this in real time, but the latest valuation shows that the share price is 10.18% lower than the net asset value.
This is one reason why I think it should be a stock on my watchlist now. Within the space of the next year, I’d expect the discount to return to a fair value.
Another reason why I like the stock is because I’m optimistic about the outlook for two of the largest areas the trust is invested in. These are healthcare and technology, comprising just under a third of the portfolio. By purchasing shares in the trust, I get exposure to these sectors, leaving the individual stock selection to the professionals.
Thanks to the fall in the FTSE 100, I’m considering buying both of the above stocks before the market rallies back.