Get ’em quick: How to profit from the market meltdown

Yesterday I found myself in the unusual position of explaining to a person from a communist country why the Australian stock market was crashing.

This person – from a country with no free markets, where people aspire to become business owners as a way of improving their wealth – couldn’t understand why Aussies were dumping their business interests in response to the US election.

“What does Australian business have to do with the US elections?” My friend asked.

I had to explain that 1/3rd of the Australians (pessimists) think the world will end with Trump as president. The second 1/3rd  (opportunists) knows that the first 1/3rd is going to sell their stocks and cause the market to plunge, so they also sell their stocks to “avert” losses.

They sell to the final 1/3rd, optimists like me and hopefully, you.

Sell everything and head for the hills

The list of stocks being sold off is almost too numerous to count. Westfield Corp Ltd (ASX: WFD) and ResMed Inc. (CHESS) (ASX: RMD) were among the hardest hit, but our big four banks also dived, led by Australia and New Zealand Banking Group (ASX: ANZ).

With their cosy self-contained oligopoly over the Australian market, it’s hard to imagine a business that needs selling less than one of our big four banks. Oh they have other problems, and theoretically a change to business conditions in the US could affect their cost of funding, but the impact of Trump’s election on their ability to sell their products has got to be close to zero.

Aconex Ltd (ASX: ACX) shares dived 5% over fears the Trump election would hurt US construction markets. Brambles Limited (ASX: BXB) fell a further 1% for no real reason. CSL Limited (ASX: CSL) now trades at $97, while Sirtex Medical Limited (ASX: SRX) has fallen to $26.50. The US is a significant market for them, but the idea that they won’t be able to sell their vital blood or cancer treatments is frankly not grounded in reality.

Even shares in consumer staples A2 Milk Company Ltd (Australia) (ASX: A2M) and Bellamy’s Australia Ltd (ASX: BAL) are down, losing 5% and 4% respectively yesterday. The majority of A2’s sales come from Australia, and Bellamy’s from Australia and China. The USA might be an important growth market for these companies, but again it’s bizarre to think that baby formula and milk sales in Australia and China will be impacted by Trump’s election.

Foolish takeaway

These are just some of the many, many Australian stocks getting sold off in the wake of Trump’s election yesterday. As I hope I have outlined above, not many of these sales make sense and in fact I consider all of the above businesses to offer either good or great value today, with the exception of ANZ Bank.

For those feeling unusually gloomy about the state of the world, remember that a 4-year term is just long enough for a good man to do some good, but not long enough for a fool – and there’s been plenty of those – to do irreparable damage. 

The stock market might be fuelled by a herd mentality, where some people decide to sell and everybody else sells because they know people will sell, but it’s times like this that investors can pick up a real bargain. Grit your teeth Foolish reader, and think about buying one of those companies you’ve been eyeing off for so long.

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Motley Fool contributor Sean O'Neill owns shares of A2 Milk and Sirtex Medical Limited. The Motley Fool Australia owns shares of A2 Milk and Bellamy's Australia. 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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