A top fund manager has revealed which ASX shares he thinks are worth holding during this coronavirus infection on the ASX share market.
Most of the ASX 200 (ASX: XJO) shares have seen share price falls. But some shares are more in danger of earnings falls and dividend cuts than others.
The Australian Financial Review quoted Investors Mutual’s investment director Anton Tagliaferro talking about how the coronavirus has caught the global share market when stocks were at close to all-time highs and arguably overvalued.
He was quoted as saying, “These types of markets, where uncertainty and fear are leading to many investors selling indiscriminately – while not that frequent – are nothing new. In these types of markets ‘the good the bad and the ugly’ all get sold down heavily as investors reduce their overall exposure to the equity market. Many stocks with unproven business models that have been optimistically valued by speculators for some years now usually perform much worse than companies with established operations.”
So what shares are good ideas?
Mr Tagliaferro thinks that there are some shares whose operations won’t really be affected such as telco Telstra Corporation Ltd (ASX: TLS), supermarket giant Coles Group Limited (ASX: COL), healthcare diagnostic company Sonic Healthcare Limited (ASX: SHL) and Australian energy company Ausnet Services Ltd (ASX: AST) which he thinks have attractive sustainable dividends.
He also pointed to casino giants Crown Resorts Ltd (ASX: CWN) and SKYCITY Entertainment Group Limited (ASX: SKC) as two ideas that could suffer from a tourist recession, but they have good balance sheets with very valuable property that should see them through.
I would tend to agree with him. There are some shares that have seen their share prices fall, but their earnings will fall too – so the FY20 price/earnings ratio hasn’t actually improved. Whereas there are some shares, perhaps ones like Telstra and Coles, which won’t see the earnings fall significantly because of the coronavirus yet their share prices are down as though they would see earnings fall materially.
The sell-off is indiscriminate, but it’s opening up some opportunities.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Crown Resorts Limited and Telstra Limited. The Motley Fool Australia has recommended Sky City Entertainment Group Ltd. and Sonic Healthcare 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.