Is anyone really surprised that investor confidence has begun to sink again? The fluid nature of the coronavirus crisis, allied with the huge economic and political implications of the pandemic, always meant that more stock market volatility was likely. The FTSE 100 index for one is currently down 220 points in Thursday trade and dealing at three-week lows.
Another indicator of this rising tension is illustrated by today’s spike in the VIX gauge. The so-called Fear Index has jumped to its highest level since mid-March, a time when market makers were of course selling everything, including the kitchen sink.
Sage advice
Is the start of fresh volatility something that long-term investors need be concerned with, though? Not likely. When it comes to calculating the returns from your shares portfolio 10, 20, or 30 years from now, the impact of current choppy conditions will hardly make a dent.
That’s not to say that investors should ignore the social, macroeconomic, and geopolitical issues that are shaking investor confidence today, however. Indeed, I recently explained why the Covid-19 outbreak – again a major strain on stock markets in Thursday business – could have serious long-term implications for banking stocks.
As I say, though, the volatility itself shouldn’t put you off from pursuing your investment goals. Instead, share pickers should be using fresh falls across share bourses as an opportunity for some savvy dip buying. Warren Buffett famously opined that “be fearful when others are greedy and greedy when others are fearful.” When the Sage of Omaha speaks, it’s clearly worth sitting up and taking notice.
Buy some FTSE 100 stars
Again, any rounds of dip buying are unlikely to make a massive difference to overall profits over the longer term. But we all love to nab a bargain, right? And these new drops on the FTSE 100 make some terrific blue chips look even more attractive.
Take DS Smith as an example. As a shareholder in the packaging play myself, I consider the 22% share price dip during the past three months as an inconvenience and nothing more.
This is a Footsie share that has roughly trebled in value since 2010 and one which, owing to its terrific geographic span across both developed and emerging markets and its focus on the exploding e-commerce segment, should create mighty returns over the next decade too. Its low forward price-to-earnings (P/E) ratio of 11 times provides brilliant value in light of all the above.
I don’t own SSE shares but I consider this one to be too cheap to miss, too. It carries an undemanding P/E multiple of around 14 times and a mighty 6.5% dividend yield. This share has fallen 26% in value since mid-February, an even greater decline than that of DS Smith. It’s a mystery to me given that the utilities giant’s operations won’t be subject to the same near-term cyclical headwinds as the boxbuilder. It therefore looks quite oversold in my book and, like many other FTSE 100 companies, worthy of serious attention.