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3 stocks the smart investors are buying during the downturn

The Australian stock market endured one of its worst weeks of 2014 last week when the S&P/ASX 200 (INDEXASX: XJO) retreated 2.4% as the market-wide sell-off intensified.

And investors hoping for a breath of fresh air will have to wait a little longer with the market down another 35 points today. The benchmark index is fast approaching a “technical correction” having now lost 9.3% since peaking early last month.

Indeed, the heavy falls experienced by some of the nation’s most widely-held stocks have highlighted a clear message to investors…

You can run, but you can’t hide.

In fact, it has been the stocks that investors normally turn to in times of carnage and uncertainty that have led the charge downwards. As a perfect example, more than 10% has been wiped from the value of each of the big four banks while Telstra Corporation Ltd (ASX: TLS) and Wesfarmers Ltd (ASX: WES) have also dropped heavily.

The crashing iron ore price has also seen both Rio Tinto Limited (ASX: RIO) and BHP Billiton Limited (ASX: BHP) fall to fresh 15-month lows, and most analysts seem to think there could be more pain still to come…

So what are investors doing?

Based on today’s market movements, it appears they are acting instinctively and selling in a state of panic. Many would be considering movements into the safety of government bonds or gold. Others would be throwing their money into term deposits, completely unaware that such a strategy is actually losing them money after inflation and tax effects are taken into account.

The smart investors, on the other hand, are taking full advantage of the market’s recent developments to stock up on some fantastic opportunities presenting themselves. While there is certainly the concern that the market could fall even further, or that money could be lost in the near-term, they recognise that investing is a long-term game and that times like these are where the real money can be made.

While some are throwing money behind high-yielding stocks that have been caught up in the sell-off, such as Coca-Cola Amatil Ltd (ASX: CCL) and Insurance Australia Group Ltd (ASX: IAG), others are getting behind growth stocks which could have plenty of room left to run over the coming years. Just look at Nearmap Ltd (ASX: NEA) as a perfect example; the stock is up 7.8% today after it announced its expansion into the US.

As appealing as these three companies are right now, there is an even greater opportunity for you to take advantage of.

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Motley Fool contributor Ryan Newman owns shares in Coca-Cola Amatil Ltd and Nearmap Ltd.

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