Volatility has come back with a vengeance today, wiping out the gains the US market has made during 2018.
I think now is a much more attractive time to buy shares than a few months ago. The only way you get to buy shares at good prices during market falls is by being brave and hitting the buy button.
Investing in individual shares allows us to choose the ones we think are good value, it doesn't necessarily matter what the rest of the market is doing.
With that in mind, here's how I'd invest $10,000 in this market fall:
BWX Limited (ASX: BWX) – $3,000
The longer I'm an investor the more I realise how important international growth is for an ASX business. Australia is too small of a market to deliver large, long-term growth.
Thanks to its recent US-based acquisitions and the organic geographical expansion of Sukin, BWX is now selling natural beauty products in a large number of countries. I believe it's an attractive sector to be invested in because the industry is growing at a pace materially faster than normal beauty market.
If BWX can just be a decently-sized player in each of the markets it operates in then it has a pretty good growth opportunity in the US and Asia. The share price is suffering from the failed takeover by Bain, but I think it's very attractive at under 13x FY19's estimated earnings.
MNF Group Ltd (ASX: MNF) – $2,500
MNF has a high-quality, defensive set of earnings from its main voice over internet protocol (VoIP) business.
Over the past year it has increased its growth options by expanding into Singapore, launching regional baby boomer telco brand Pennytel and acquiring the operating businesses of Inabox. MNF can extract good synergies from each of these ideas.
However, the market seems unimpressed by the initiatives. MNF even provided clarity with a projection of earnings per share (EPS) of at least 20.4 cents in FY20, which assumes no major client wins. That means it's trading at only 20x FY20's conservatively estimated earnings.
At nearly $4 I think there is now a chance of MNF to positively surprise the market over the next year or two.
InvoCare Limited (ASX: IVC) – $2,500
InvoCare is one of my favourite ultra-long-term ideas. It's the leading funeral operator in Australia and New Zealand. I believe it's an attractive opportunity at the moment because a number of short-term factors are hitting it at the same time.
The main two problems are that the number of deaths is currently below the expected trend and InvoCare is investing heavily in upgrading its facilities to be modern and brighter to reflect people's desire to celebrate life. Management believe the upgrades will lead to sustainable long-term EPS growth of 10% per annum.
It's currently trading at around 24x FY19's estimated earnings.
Kogan.Com Ltd (ASX: KGN) – $2,000
The online retailer's share price was regularly derided as being far too expensive. However, now that it's fallen more than 50% I think it could actually be attractive value. It sells a wide variety of goods of services such as phones, fridges, TVs, insurance internet plans and so on. Network effects are very useful with online tech companies.
Kogan boasts of having doubled profit in each of the past three years. With Kogan now trading at under 32x FY19's earnings its growth rate could fall by two thirds and it would still have a PEG of less than 1.
A bonus is the grossed-up dividend yield of 3.9%.
Foolish takeaway
As scary as market falls seem, I think they should be used as an opportunity to buy quality shares at discounted prices. Of the above shares, if I had to pick one it would be BWX – I think its low valuation now gives investors a decent margin of safety.
