The Australian sharemarket plunged 1% lower by midday on Monday following a 1.5% fall in the Dow Jones on Friday night after analysts started to get nervous about the US not hitting its growth targets. This is all well and good, you might say, but what does this have to do with my Australian shares?
Great question, and the answer is that unless there's a great news story between the US market closing and Australian market opening, our sharemarket, will tend to follow that of the US.
What can you do?
The best way to get through this is to buy the very best companies you can, at attractive prices, and hold them while they grow. Consider these:
Nine Entertainment Co Holdings Ltd (ASX: NEC) has been in the news because it was able to sell its Nine Live business for $640 million. While this appears to be a good price for the asset and gives Nine some scope to return cash to shareholders or reduce debt, the fact remains that Nine's success or otherwise is intrinsically linked to television advertising.
I can't see Nine significantly improving its earnings over the next few years, but also can't see them getting massively worse over the short term. Analysts agree and many believe Nine is a HOLD at the moment.
Woodside Petroleum Limited (ASX: WPL) is a great company. It has low-cost, long-life assets in generally stable countries, but it operates in an industry dominated by others and has little control of the price it accepts for the sale of the gas and oil it produces.
The fall in the oil price hasn't hit Woodside as hard as others, but analysts are starting to convert to my thinking that the share price will move lower before 2015 is out. Analysts are predicting a 30% to 40% fall in profit and dividend payout this financial year, which could hit unsuspecting shareholders hard! Analysts believe Woodside's a HOLD for the time being.
Crown Resorts Ltd (ASX: CWN), on the other hand, has been punished for its exposure to the struggling Macau gambling market. Crown remains one of the best long-term growth prospects on the ASX with projects yet to commence in Asia, the US and Australia. At the current price analysts believe Crown is a BUY.
