With a lot of investors spooked, I think it's important to take a deep breath and step back to have a look at what's happening and examine where you should go from here.
There is obviously a lot of panic in the market with the S&P/ASX 200 Index (ASX: XJO) down by 7.1% at the time of writing. I can't see how a lot the current selling right now is linked to rational thought processes.
Shares can go down in the short term, and sometimes go through steep market corrections like the one we are now experiencing. However, if we look at the history of the share market over the past century, it shows us that the market always bounces back eventually.
On average, if you add together the average return from shares including franking credits over the past few decades, shares have returned an average of 10%.
I have a feeling that the bounce back, when it does come, could be quite relatively quick once the coronavirus situation finally gets under control.
While we don't know exactly when the bottom of this market crash will be, what we do know for certain is that with share prices down sharply across the board, the price-to-earnings (P/E) ratios of most shares are much lower. This means shares can now be purchased at much more favourable prices.
With that in mind, here are two of my top ASX share picks right now, offering investors an opportunity to capitalise on heavily sold off share prices.
Commonwealth Bank of Australia (ASX: CBA)
With a recent correction to the Commonwealth Bank share price, CBA shares are now trading with a very attractive price-to-earnings (P/E) ratio of around 14. At the time of writing, they're also offering a juicy dividend yield of 6.3%, fully-franked, which grosses up to a yield of 9%. It is rare that investors get an opportunity to snap up a top-quality ASX bank share with those types of figures.
Combined with solid recent financials, I believe that this puts the Commonwealth Bank share price in the buying zone today, despite the current market challenges facing banks over the coming year.
Wesfarmers Ltd (ASX: WES)
Wesfarmers appeals to me right now in the current volatile market conditions because it is a defensive type of share with wide market diversification. This positions the ASX conglomerate well to ride out the current market volatility. Wesfarmers has a strong balance sheet with a portfolio of cash-generating businesses in market-leading positions.
Wesfarmers hasn't been immune by the market sell-off with a significant fall of more than 20% in its share price over the past couple of weeks. However, this drop puts Wesfarmers shares well in the buying zone in my opinion.
At the time of writing, Wesfarmers shares now offer a dividend yield of 4.3%, or a grossed-up yield of 6.1%. Shares are now also trading with a P/E ratio of around 22, well below what the ratio was a couple of weeks ago.
