It might feel like the sky is falling with strong blue chip stocks like the big four banks falling heavily over the last month, and the index notching up successive sessions of losses. It’s only natural for investors to panic and reach for the sell button or at the very least avoid the market in such tumultuous times.
Whilst this will sound counterintuitive, now is actually a good time to jump in the market. As Warren Buffett has famously said – ‘be fearful when others are greedy and be greedy when others are fearful’. Success in investing comes with picking good, solid companies that are likely to continue growing in the long term. It is not possible to time the market – although the above comment suggests you should time the market, it’s really a reminder that investing is safest when prices have fallen which will provide a larger margin of safety.
Here are two stocks that could give you outsized returns in the long run.
Challenger Ltd (ASX: CGF)
Superannuation is big business in Australia and is set to become even bigger as compulsory contributions from employers slowly tick up to 12% by July 2019 from the current rate of 9.5%. Some of these funds will likely filter into fund managers like Challenger, boosting their funds under management (FUM) and associated management and performance fees.
The most exciting segment of Challenger however is actually the Life business, which helps retirees convert assets they have accumulated into a periodic income flow (annuities) to spend during retirement. In a bid to reduce the burden of pensioners and retirees on the government, regulators have signalled a willingness to accelerate the growth in annuity adoption. With the Australian annuity market significantly less than other developed countries (<1% of GDP vs double digits in US and Europe) there could be significant growth in the future.
Ramsay Health Care Limited (ASX: RHC)
Ramsay has been a terrific buy for astute investors that managed to pick up this gem at $1.85 back in 1997, with capital gains alone amounting to 3,243%! Over the past decade the company has been significantly aided by favourable government incentives encouraging the uptake of private health insurance, and the pursuit of a roll up strategy that has allowed it to expand its footprint both domestically and overseas.
With an aging population a major challenge to be tackled by governments around the globe, especially in Australia, the need for healthcare will only increase over time. Domestically the overcrowded public health system and wealthy baby boomers becoming a larger portion of the elderly population should sustain growth in demand for private hospitals. Internationally the expansion into the Chinese market could be a significant driver of growth as well.
Both Ramsay and Challenger are well supported by long-term trends, making them attractive investment opportunities. However the analysts at the Motley Fool have identified an even better investment! Make sure you take a look as it could be an invaluable addition to your portfolio.
5 stocks under $5
We hear it over and over from investors, "I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" And it's true.
And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!
*Extreme Opportunities returns as of June 5th 2020
Motley Fool contributor Simon Chan has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.