Brexit uncertainty has brought some volatility to the market this week. Some of this will be resolved with a vote on 23 June 2016. But one thing is for sure – there is always something to be uncertain about in the markets, and there will be more uncertainty to come.
Sooner or later the volatility is likely to create some good opportunities. Because opportunities can come and go quickly, it makes sense to always have a watch list of companies you are interested in, and an idea of what price you're willing to pay.
Here are three great businesses I would love to invest in at the right price:
REA Group Limited (ASX: REA) dominates the market for Australian online property advertising through realestate.com.au, and has a promising global portfolio of similar websites.
REA Group has a strong network effect – it has shown it can increase prices without losing business. This is a good sign of a sustainable competitive advantage.
Shares don't look cheap after a 45% gain in the last 12 months. Sitting at around $55, they are on my watch list to buy if they ever drop back to $45.
I have been a fan of Challenger Ltd (ASX: CGF) for a while. Challenger is a fund manager and annuity provider. It is also a great dividend stock, with distributions averaging growth of 14% a year over the last decade.
Australia's ageing population means more retirees, which should prove to be a good tailwind for the annuities business.
After hitting $6.62 earlier in the year, it has delivered a strong run-up to $8.86, unfortunately diluting the dividend yield to around 3.5%, and eating up any margin of safety which may have existed for new investors.
A pullback of 15% to around $7.50 would have me interested in buying.
It's hard to go past CSL Limited (ASX: CSL) as one of Australia's great healthcare success stories.
It has a return on equity of around 50%, strong margins and earnings growth, and manageable debt. The metrics for CSL all look great – except for the valuation.
With shares currently at around $110, a pullback to $95 would mean a P/E ratio of 23 and a great entry point for long-term investors.
There is a chance that these stocks will never reach my buy price. But that's ok, as there are plenty of other great businesses on the ASX, and currently better value elsewhere in my view.
