Anyone remember Brexit? Well how about what happened to the market for the five trading days immediately following the vote? How did your portfolio perform? I remember very well my portfolio fell by 5% over those five days. What I didn’t remember so well was that over the next thirty days my portfolio actually rose 10%.
Whenever the market starts to fall, I like to take a look back at recent share market falls just to reassure myself that yes, the share market will once again head north rather than continue indefinitely on its southern trajectory.
Below is a six-month share price graph of the four companies I will be interested in buying if Donald Trump is elected as President of the United States. The companies are CSL Limited (ASX: CSL), Fisher & Paykel Healthcare Corp Ltd (ASX: FPH), Cochlear Ltd (ASX:COH) and Sonic Healthcare Limited (ASX:SHL).
Without looking at the dates, can you guess when Brexit actually occurred from the share price movements? I will be honest and admit that at first I couldn’t. I had to look up the actual date Brexit occurred before I could find the small dip in share price related to the Brexit vote.
The reasons I am particularly interested in these four companies are twofold. Firstly, during times of market turmoil the healthcare sector is perceived as a safe haven. The second and more important reason is the changes proposed by each candidate. Donald Trump proposes to slash company tax rates, while Hillary Clinton is proposing cutbacks in government subsidies to the healthcare industry.
The fact is that no one knows exactly what will happen if Donald Trump or Hilary Clinton is elected, but if the market’s reaction to Brexit is any guide, the market will shoot first and ask questions later.
I am of the firm belief that this will present opportunities for investors who are able to tolerate short-term price movements.
During times of market turmoil I take the approach of sticking to top-shelf companies while reducing my buy size to make falling share prices more emotionally palatable. As an example, if I wanted to buy 1,000 CSL shares I would ordinarily buy 4 lots of 250 over time, but in volatile markets I may change to purchases of 8 lots of 125 shares.
For me this makes the emotional roller coaster ride easier to cope with, along with saving ammunition in case a larger fall occurs or another opportunity arises.
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Motley Fool contributor Alan Edmunds owns shares of Cochlear Ltd., CSL Ltd., Fisher & Paykel Healthcare Limited, and Sonic Healthcare Limited. 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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