Last week was a wild one for investors with the market experiencing intra-day swings of over 1%. After five days of volatility the losses for the week were actually relatively contained with the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) recording a fall of just 0.9%.
Overall, investors have now experienced three down weeks in a row. This week thankfully things are off to a better start and there appears to be a reasonably good chance that we won't experience four down weeks in a row!
The sudden about face which saw the ASX rally 1.9% on Tuesday is a reminder for investors of the dangers of waiting on the side lines or of selling at the point of maximum pessimism. The snap-back in the market shows that there is still plenty of support with buyers prepared to swoop in when they see value.
The recent volatility has left a number of leading stocks trading at levels well below where they were just one month ago despite there being little (or perhaps no) change in their underlying business fundamentals.
The point is, make volatility your friend, rather than your foe. Long-term investors should relish the opportunity to purchase quality businesses at lower prices.
Consider, SEEK Limited (ASX: SEK) for example. SEEK is a leading online classified business which operates with high margins and has significant international growth opportunities. The stock has been sold down by 14.3% over the past month. In comparison, the index is actually up 0.6%.
Spotless Group Holdings Ltd (ASX: SPO) meanwhile is 6.4% below where it traded one month ago despite the long-term nature of its contracts and the dependable revenue streams these provide. Analyst consensus forecasts suggest earnings growth over the this financial year of 20.6% and a forecast dividend yield approaching 6%.
Magellan Financial Group Ltd (ASX: MFG) has also been sold down 5.7% at least in part because of its direct exposure to stock market levels. In less than a decade Magellan has grown to be one of the largest Australian-based global fund managers and despite recent market volatility, the company continues to enjoy a tailwind from more Australian investors allocating an increasing percentage of their funds to global equities.