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My portfolios are being smashed, but here’s why I’m still smiling

Ok, I admit it, the last few weeks haven’t been much fun.

In the past 30 days, the market has ended up down on 20 of those days. Since November 7, the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has fallen 5.8%, taking my personal portfolios with it.

I can’t tell you how much my self-managed super fund (SMSF) has dropped (I’m too scared to look), but I know it’s definitely lower.

Several of my core holdings including Woolworths Limited (ASX: WOW), Flight Centre Travel Group Ltd (ASX: FLT) have been hit especially hard, falling 14.8% and 15.2% respectively since November 7.

Likewise TPG Telecom Ltd (ASX: TPM) and Collection House Limited (ASX: COH), which have dropped 14.3% and 7.5% respectively since that date.

But here’s why I’m not worried.

Has anything about these businesses changed in the past month? Not really. TPG Telecom may have been impacted by fears new NBN guidelines may restrict the telco’s plans to rollout its own version of superfast broadband – but those are fears only – nothing is set in concrete yet.

Investors have totally overblown the threat to supermarket retailer Woolworths from the likes of Aldi and Costco. But their fear is my gain, and I’ve been buying shares lately and will probably buy more in the weeks ahead.

Flight Centre is another where I think investors have sold off the stock amid unrealised fears. A classic trap many investors fall into is equating a falling Australian dollar with Australians cancelling flights and travel plans, and the subsequent negative impact on Flight Centre.  CEO Graham Turner has frequently shown that Australians will travel overseas no matter where our dollar is trading against the US dollar – nothing has changed on that front – and has little impact on the company’s earnings.

Periods of market volatility, such as we are currently experiencing, should be seen as an opportunity to pick up stocks on the cheap. Using flight Centre as an example again, the company is now trading on a prospective P/E ratio of around 13x, and paying a fully franked dividend yield of 4.3%.

Here’s another example. Woolworths is trading on a P/E ratio of 14.7x, the company’s long term average is 20.6x, and the company has only ever traded on a P/E of under 15x in two periods over the past 20 years.

You don’t often get to pick up quality stocks like Flight Centre and Woolworths at prices like you can today.

Volatility is the friend of the patient and the enemy of the impatient  – embrace it while it lasts.

Here's another stock I own that looks a bargain at today's prices. The Motley Fool's top analysts have just completed a brand-new free report on their top pick for 2015. Be among the first to get the name and code right now. (Hint: It's a sexy ASX tech company!) Simply click here for your FREE copy... BEFORE the investing crowd gets wind of this!

Motley Fool writer/analyst Mike King own shares in Woolworths, Flight Centre, Collection House & TPG Telecom. You can follow Mike on Twitter @TMFKinga

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