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Get greedy with these top quality, beaten-down companies

Warren Buffett

After a long stretch of solid gains in 2013 the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) is finally showing signs of offering a few bargains for investors who are after quality companies at knock-down prices.

The recent eruption of political tension in the Ukraine has prompted investor fears around the world that the good times could be derailed. But the fear also means shares in a number of top quality companies have been on the slide recently, which has me tempted to greedily snap up some bargains for the long-term.

One in particular to catch my eye is Santos Limited (ASX: STO). Shares in Santos were already receding from 2013 highs, but current worries mean the company has lost 10.5% in the last six months. Investors seem to be worried that falling oil prices, driven by uncertainty in the Ukraine, may have an impact on the oil and gas producer. Although 50% of Santos’ production is gas, LNG contracts are often linked to oil prices.

Another fear is rising costs for the completion of the company’s 30% stake in the massive Gladstone LNG (GLNG) project. However both fears ignore the very real long-term growth headed Santos’ way, driven by massive production increases and rising prices for east-coast gas.

Another company to catch my eye is ResMed Inc (ASX: RMD), with shares down 15.5% over the last six months. Slower growth from the company’s U.S market sparked investor fears the good times may be over. However ResMed is a geographically diverse company and the prospect for moderate long-term earnings growth remains across its international markets. Ageing populations and increased healthcare spending are key support trends.

Shares in casino operator Skycity Entertainment Ltd (ASX: SKC) have also been soft in the last week as the New Zealand dollar inches higher against the Aussie. Skycity earns just over 40% of profit from Australia and the strengthening NZD cost the company NZ$5.8 million of normalised EBITDA in the first half of 2014.

However the impact could also save the company tens of millions more as it funds a $350 million expansion of its Adelaide casino. The higher dollar will also mean a bigger dividend for Australian investors.

Foolish takeaway

The recent bout of fear sweeping markets makes it a great time to be selective and greedy. With quality companies like Santos, ResMed and Skycity up for grabs, investors with a long time horizon and an eye for quality companies should be prepared to snap up some bargains.

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Motley Fool contributor Regan Pearson owns shares in Skycity Entertainment.

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