Throughout the booms and busts of the share market, the best bargains usually come at a time where pessimism is at its peak.
The late Sir John Templeton, dubbed as the greatest global stock picker of the century by Money Magazine in 1999, once said, “Bull markets are born in pessimism, grow on scepticism, mature on optimism and die on euphoria”.
Hence, some might believe that the time of maximum pessimism could be the best time to buy, and the time of maximum optimism could be the best time to sell.
Australian real estate prices fell by 4.8% in 2018 and there is an ever-increasing pessimism in the property market currently. I would think that this is the time to search for potential buys.
These are three ASX shares to watch during the property downturn.
REA Group Limited (ASX: REA)
This garage start-up in 1995 is now a global advertising business focussing on real estate. In Australia, REA owns the leading property listing website, realestate.com.au.
This growth company could see gains from an increase in listings once the property market lifts.
I foresee a surge in listings almost certainly translating into a stronger bottom line and growth for REA Group.
The REA Group share price is now trading at around 38 times its earnings. This growth share has a gross dividend yield of about 2%
Boral Limited (ASX: BLD)
Boral is now actively expanding its footprint in the U.S and gaining exposure to the Asian market with its joint venture partner, USG Corp.
In Australia, it is the largest construction materials and building supplier. I think Boral is well positioned to capitalise on Australia’s property market once the dark cloud is lifted.
Boral has a current price to earnings of 13.5 times. Boral’s gross dividend yield is at 6.5%.
DuluxGroup Limited (ASX: DLX)
Once the property market recovers, you can expect many properties to go on sale again.
For property sellers, giving your home a fresh coat of paint is one way to make it more attractive to potential buyers, and for many homebuyers, repainting is seen as an essential part of the renovation process.
Hence, DuluxGroup, which owns some of Australia’s leading home improvements brands, such as Dulux, Selleys, Cabot’s, Yates and British Paints, will no doubt benefit from increased properties sales.
DuluxGroup share price is currently trading at about 18 times its earnings and a gross dividend yield of 5.8%.
While the property market is still facing headwinds, it is never too early to start looking out for potential buys on the ASX. As long as investors are patient, I am sure they will have the opportunity to capture some bargain buys.
Motley Fool contributor Ivan Loh has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA Group Limited. 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 Scott Phillips.
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