Times have been tough for investors lately, and days of declining stock prices can be a source of distress for many of us. For others however, a falling stock market means an opportunity to invest in great companies at bargain prices. In an ideal world we’d buy at the very bottom of a market dip and then sell at the height of a boom. In the real world, only hindsight can tell us exactly when a peak or trough occurred, and trying to time your trades to the day-to-day movements of the market is a fool’s errand (lower case ‘f’)….
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Times have been tough for investors lately, and days of declining stock prices can be a source of distress for many of us. For others however, a falling stock market means an opportunity to invest in great companies at bargain prices.
In an ideal world we’d buy at the very bottom of a market dip and then sell at the height of a boom. In the real world, only hindsight can tell us exactly when a peak or trough occurred, and trying to time your trades to the day-to-day movements of the market is a fool’s errand (lower case ‘f’).
Contrarily, the Fool’s errand (capital ‘f’) is to seek out great companies and buy shares in those companies at attractive prices. It’s this strategy that has successfully built wealth safely and consistently for investors everywhere. So when a company’s stock price falls without apparent reason, as often happens during a market downturn, this can represent an opportunity for investors looking for a bargain.
Here are three companies that have seen their stocks drop to near 52-week lows. Let’s take a closer look to see if any deserve your investing dollars.
Crown Resorts Ltd. (ASX: CWN): Currently trading at a price of around $13.70, barely above its 52-week low of $13.22, this is one stock that has suffered in the last few months. This is despite announcing in August that net profit after tax had increased a stunning 65% over the previous year. The announcement of an agreement with the Victorian state government to reform the Melbourne casino license to improve competitiveness also did little to satisfy investors. It’s time to start wondering whether or not this stock is being fairly valued by the market.
At $13.70, Crown Resorts trades at a price-to-earnings ratio of 15.52 and delivers a partially franked 2.8% dividend yield. Given the attractive price, modest growth prospects and stable dividend, I think Crown Resorts is particularly attractive at this time.
Wesfarmers Ltd. (ASX: WES): Coles, Bunnings, Officeworks and K-mart are all staples of living in Australia and it’s their scope, brand and sheer size that make Wesfarmers a very safe stock in which to invest your hard-earned money. At a price of $41.42, a share in this company is trading at just higher than its 52-week low of $39.80. Particularly in recent months, the Wesfarmers stock price has taken a hit – its 52-week high of $45.88 a share occurred less than three months ago.
At these prices Wesfarmers delivers a 4.8% dividend yield – fully franked. Because of this dividend, even ignoring the predicted growth, its current share price could reflect a very attractive entry point into a business that is firmly part of Australia. This could be a share to buy and hold for the very long term, and enjoy the dividends for years to come.
Coca-Cola Amatil Ltd. (ASX: CCL): Coca-Cola Amatil has taken a beating over the past year. From a 52-week high of $13.05 per share down to a recent price of about $8.60, this reflects roughly a 35% drop. It must be said that not all of this drop came from market fluctuations – Coca-Cola Amatil’s business has had a rough year, announcing a profit downgrade and planned restructuring.
However, in part due to the strength of the Coca-Cola brand, it’s easy to imagine the business recovering in the medium to long term. Meanwhile, despite its recent troubles it still maintained a partially franked dividend worth 5.6%. Although it’s difficult to ignore the short-term troubles the business is facing, the dividend offered, coupled with mid-term recovery prospects could make Coca-Cola Amatil a very timely buy.
Investing in any or all of these three stocks could be a defensive move that could still grow your money in a falling market.
Motley Fool contributor Mitch Aoki holds an interest in Crown Resorts Ltd.