Why now is a great time to buy ASX shares

The S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is on track for its eighth consecutive day of losses, down 0.4% as we head into the close.

As I wrote yesterday, so far in 2016, we’ve seen at least $114 billion in value wiped off the share market with the major losers resources companies and the big four banks.

Overnight, analysts from investment bank RBS wrote a note to clients telling them to sell everything bar high-quality bonds, while other investment banking analysts are highly pessimistic about global share markets, in particular, those that are exposed to slowing growth in China and dominated by resources and energy companies.

That’s pointing the finger directly at our own ASX – with its heavyweight miners and oil companies.

But now could also be the best time to buy shares, as it’s not often investors get a chance to pick up shares in high-quality companies at cheaper prices. Here’s a small selection of high-quality companies listed on the ASX – and their share price changes since the start of this year.

Company Year-to-date price change
CSL Limited (ASX: CSL) Down 2%
Cochlear Limited (ASX: COH) Down 4.7%
ResMed Inc. (CHESS) (ASX: RMD) Up 0.1%
REA Group Limited (ASX: REA) Down 7%
Ramsay Health Care Limited (ASX: RHC) Down 6%
Domino’s Pizza Enterprises Ltd. (ASX: DMP) Down 2.7%
SEEK Limited (ASX: SEK) Down 9%
Carsales.Com Ltd (ASX: CAR) Down 2%
Reece Ltd (ASX: REH) Down 6%
Challenger Ltd (ASX: CGF) Down 5%
Technology One Limited (ASX: TNE) Down 6.5%

Source: CapitalIQ

By comparison, the S&P/ASX 200 is down more than 7%.

If you ignored all the market noise and saw that REA Group’s share price was down 7% and Seek’s 9%, would that make you more interested in buying shares? It should because it means shares are cheaper than they were last year, despite no news that would indicate that these companies are feeling or seeing any pain.

They are all the same businesses from just over a week ago. Many of the companies above will likely report higher revenues, profits, earnings and dividends in the 2016 financial year than they did last financial year. The only difference is that investors now have the chance to buy them at a cheaper price.

Sure, the share prices may fall and get even cheaper – giving you an even better price to get in.

Foolish takeaway

If you are a long-term investor, it’s time to embrace the volatility, keep an eye on the quality companies on your watchlist, and maybe dip your toe into the market.

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Motley Fool writer/analyst Mike King owns shares in, Seek, Resmed, Cochlear and CSL. You can follow Mike on Twitter @TMFKinga

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. 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.

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