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Coronavirus: Is there safety anywhere on the ASX?

The share market continues to be volatile because of the coronavirus, is there safety anywhere on the ASX?

The All Ordinaries (ASX: XAO) has fallen another 1.8% this morning. Highly-valued growth shares like Magellan Financial Group Ltd (ASX: MFG) and Pro Medicus Limited (ASX: PME) are both down around 5%.

But it’s not all bad news.

Funeral service company InvoCare Limited (ASX: IVC) has seen its share price rise by 13.25% after impressing the market with its result and healthcare business Healius Ltd (ASX: HLS) has also risen by almost 15% on takeover speculation. But those shares are only up because of specific (positive) reasons.

Without news, are there shares that can rise? Normally, when the market goes down we see gold and gold miners go up as a hedge. I don’t know why the investment world decided this should be the case. But, yesterday gold miners were some of the worst performers within the ASX 200 (ASX: XJO).

And again today we see gold miners falling, the share price of St Barbara Ltd (ASX: SBM) is down around 5% and the share price of Resolute Mining Limited (ASX: RSG) fell 3.8%.  

The thing is, an infection spreading across the world is different compared to any other economic ‘black swan’ event. Markets aren’t going to react the way we expect, but when do they ever? Share prices aren’t predictable.

I think it’s easier to make a judgement about what might happen to various company’s earnings in the shorter-term than its share price, and then decide if today’s valuation is attractive based on that.

Don’t forget that whilst the coronavirus is bad for humanity and is causing disruption in many places, it’s a one-off that will end at some point (hopefully) this year. A business shouldn’t be terribly sold off based on the effects of something that will very likely last less than a year. And I don’t think selling everything and turning into cash is the answer – when would you know to buy back in?

So, which shares might see their operating earnings less affected? Well, shares like InvoCare and Ansell Limited (ASX: ANN) aren’t likely to see less demand for their services.

Customers are unlikely to change their payment habits for utilities to shares like AGL Energy Ltd (ASX: AGL), Telstra Corporation Ltd (ASX: TLS) and TPG Telecom Ltd (ASX: TPM).

The problem is that many of the ASX’s most promising companies like WiseTech Global Ltd (ASX: WTC), Afterpay Ltd (ASX: APT) and Altium Limited (ASX: ALU) have been bid up so highly that any wobble in the market would cause a painful sell-off, which we’re seeing in this period.

Are these shares now buying opportunities?

They are certainly better value than they were a couple of weeks ago. However, I expect that as the coronavirus continues to appear in new cities and new countries it could lead to shares continuing to drop.

But, it’s impossible to know when the bottom will be, so I plan to steadily invest in shares which seem really good value, however I’m going to be sticking to shares that I’d be happy to keep owning even if they fell further and even if the world has economic problems because of this. I’m going to keep the 5-year and 10-year future in mind.

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Tristan Harrison owns shares of Altium. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of and has recommended Pro Medicus Ltd. and Telstra Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO, Altium, and WiseTech Global. The Motley Fool Australia has recommended Ansell Ltd. and InvoCare 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.