Local investors should brace for another nervous week of trading after global markets plunged on Friday night following the shock Brexit vote.
The exact implications of Britain leaving the European Union are unclear at this stage and it is this uncertainty which is expected to create further short-term volatility in currency and equity markets.
Despite this, I think it is important for Australian investors to remain calm and reflect on the point that many Australian companies in the real economy will be unaffected by Brexit.
This doesn't mean that share prices will be immune to a market wide sell-off but I think a market wide sell-off could create buying opportunities for investors who keep their emotions in check.
With that said, I would avoid shares in the banking and funds management sectors for the time being as these are the sectors most likely to be affected by the global market turmoil. Oil stocks could also come under pressure with a stronger US dollar likely to bring about a further decline in crude oil prices.
Although it is unknown when markets will become less volatile, I am watching a number of shares closely that I think could offer good value if they are hit by a market wide sell-off, including:
G8 Education Ltd (ASX: GEM) – G8 Education shares have already lost more than 13% since the start of June and are now once again trading on a dividend yield of more than 6.4%. The childcare operator has some attractive long-term tailwinds and I will definitely look to add to my position if the shares fall much further from here.
Greencross Limited (ASX: GXL) – Greencross is the market leader in the ever-growing veterinary and pet care sector in Australia. The shares were previously trading on a large takeover premium but this has now been knocked out of the share price with a 17% fall from their recent highs. The shares are already attractively priced but I'm hopeful for a further pullback to once again become a shareholder of this fast-growing company.
Sirtex Medical Limited (ASX: SRX) – Sirtex shares have fallen by nearly 35% since the start of the year and are at their lowest levels for more than 12 months. The company disappointed the market by announcing it would miss its full year dose sales growth forecast but I don't believe this changes the biotechnology company's long term growth prospects. Another 4.2% fall in the share price will see the shares trade below $25 per share – a very attractive entry level for long term investors.
TPG Telecom Ltd (ASX: TPM) – Like a lot of other investors, I have always liked TPG as a company but believed it was overpriced and have refrained from buying the shares. This has obviously been a terrible decision on my part considering the shares have continued to perform extremely well despite the various market downturns over the past five years. Nevertheless, there is still the possibility the shares could come under pressure if markets remain negative during the week and this could create a rare chance to buy TPG shares at a discount.
