Everyone loves a bargain. For long-term Foolish investors like us, the best time to buy high quality stocks is when other investors have dealt them harshly. The best companies will disappoint investors very rarely, so Foolish investors should remain vigilant for special opportunities when they arise.
I believe there are a few opportunities out there right now, where companies have been oversold.
The first company I would like to highlight is ResMed Inc (ASX: RMD). ResMed released earnings for the half to 31December 2013 that were below the expectations of analysts. The poor result and continued dip in the share price is to do with the ongoing uncertainty surrounding new healthcare rebate rules in the US, and how it will impact ResMed’s earnings in the future. While I’m not in a position to shed any more light on the situation, ResMed’s shares are down over 14% over the past six months, and for a company with its global presence, ability to consistently grow earnings, and technological advantage, one would expect that the share price will recover soon enough.
The next company that has been treated harshly by investors is Amcor Limited (ASX: AMC). The leader in the global packaging market reports the majority of earnings in US dollars and will be one of the biggest beneficiaries of a lower Australian dollar. Since demerging its lower growth segment Orora Ltd (ASX: ORA) in 2013, Amcor is now favoured by analysts as a growth play, however it still pays a 4% dividend. While its first-half result was slightly below expectations, Amcor is well placed to grow earnings by more than 20% this year and the 10% fall in the share price should prove to be a good buying opportunity.
Finally, I believe Australia’s two largest mining stocks deserve a mention. BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) have been punished over the last month as the global iron ore price has come under pressure due to lower growth expectations from China. While economists are expecting China GDP growth to slow this year, I believe we will see the iron ore price recover, and the Australian dollar weaken, to leave our big miners in a similar position to last year. Rio is down nearly 10% over the last month, while BHP has dropped nearly 6%.
Its not often that Foolish investors are offered a discount on some of the best companies going. The four companies above have all been punished in recent months and the current share prices now look like a cheap entry point for long-term investors.
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Motley Fool contributor Andrew Mudie does not own shares in any companies mentioned