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3 cheap stocks to buy in a falling market

With the Aussie dollar, the ASX and our portfolios all falling recently, these three words are on everybody’s lips in one form or another.

Discounts! Shares moving into ‘buy’ territory after far too long trading at exorbitant prices. Or shares in ‘buy’ territory getting cheaper.

Defence! Not unlike a wall of rugby players, you have to make sure you’re positioned right to stop the market going through your portfolio like a dose of the salts.

Destruction! It’s never pretty, but we love to hear about chaos and carnage in the markets, and the media loves to tell us about it.

Three shares jump immediately to mind when I think of these categories – two of them I own, and one I’m glad I don’t.

Yellow Brick Road Holdings Ltd (ASX: YBR) is trading at a discount, having fallen nearly 10% since I purchased shares at $0.71 each a few weeks ago.

The crazy thing is I’m not even mad; because I thought $0.71 was a bargain, which makes $0.655 that little bit better.

Given this should be Yellow Brick Road’s first year of profitability and bearing in mind its rapid roll-out of branches last year, I’m looking to pick up even more shares at current prices.

Another company in my portfolio is Lifehealthcare Group Ltd (ASX: LHC), this one for its defensive properties.

Lifehealthcare laughs at the falling market, and remains unchanged from its average price through the year despite the ASX slipping 6% this month.

Strong dividend prospects and recent results in line with prospectus are major appeals of Lifehealthcare, and I expect to see investors scurry towards healthcare stocks pretty soon thanks to their attractive earnings and defensive characteristics in both upturns and downturns.

Finally BC Iron Limited (ASX: BCI) is what happens when falling commodity prices catch up with the cost of production, and provides a vivid examplar of destruction.

Down 69% since February, I actually think that ‘fair value’ for the company lies somewhere above its current price, but with iron ore markets in freefall and considerable uncertainty about future demand, readers should expect BC Iron to continue falling.

Opportunity is for those smart readers who know that downturns are inevitable, like the changing of the seasons, and have stockpiled extra cash to see them through the winter.

The Motley Fool’s free ‘10 Step Guide to Making $1 Million in the Market’ is for you, reader, because a market fall is the perfect opportunity to sharpen the discipline that is the backbone of your investing life.

You’ll need discipline to weather any serious market turmoil with your focus intact, so take the opportunity to set yourself well on the road to being financially self-sufficient.

The Motley Fool’s free guide is packed full of information on getting the most out of your financial lifestyle, and I highly recommend it to those looking to make a change to the way they live, think, and invest.

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Motley Fool contributor Sean O'Neill owns shares in Yellow Brick Road and Lifehealthcare.

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