US stock markets tumbling and more talk of it being time for a correction can quickly chill the mood for the Australian market. That's fine by me!
A quick correction of up to 10% is common, especially after a prolonged run-up in share prices. 10% – 30% would definitely be a big sell-off, but even those are not to be feared.
The stockmarket is just a market of stocks, so if our local ASX, "the fresh stock people", suddenly had a promotional sale – everything 20% off…but only four per customer- what would you buy?
I'd snap up those companies that are not just doing well now, but have significant upside potential over the next five years. Sometimes you have to pay a premium for quality. Still, one way to get more of a "margin of safety' in purchasing stocks is to buy them in a sell-off.
Here are four stocks that I'd buy if we had a sell-off – big or small.
1) Challenger Ltd (ASX: CGF)
The investment management firm which offers annuities and other products to supplement a superannuation retirement income has been popular and successful of late. The drive towards super and self-managed super funds (SMSF) will continue for a number of years. More investment money means more fees and revenue for the company. Its dividend yield is 2.9% unfranked.
2) SEEK Limited (ASX: SEK)
The operator of the number one job search website Seek.com.au has a great track record for revenue and earnings growth. With its expansion into Asia, it can continue that in such growing economies as Malaysia, Indonesia and China. Its market-leader status is still strongly held here in Australia. Its yield is 1.5% fully franked.
3) Westpac Banking Corp (ASX: WBC)
The media has said that the Big Four banks are up in price and "fully valued", so what better time to buy than in a market sell-off! A quick hit would drop the price and raise the dividend yield. Westpac has the best record of the Big Four for increasing dividends over the last 10 years. Currently, it offers a fully franked 5.1% yield.
4) Ramsay Health Care Limited (ASX: RHC)
The private hospital operator leads its market in Australia. Even though it may be first thought of as being a good defensive stock, over the past five years it has grown earnings by a compound average 17.5% annually like a fast-growing stock. It established itself as one of the leading healthcare providers in France for hospitals and medical centres and plans to expand further in Asia. It has a 1.6% yield, but the strong growth story is very attractive.
