Now may be the time to buy shares, says Credit Suisse

The coronavirus COVID-19 sell-down has prompted some ASX 200 investors to consider adding to their equity portfolios, as the mass sell-offs are revealing potential long-term value plays.

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The coronavirus sell-down has prompted some S&P/ASX 200 Index (ASX: XJO) investors to consider adding to their equity portfolios, as the mass sell-offs are revealing potential long-term value plays.

As reported by Bloomberg, Credit Suisse's global chief investment officer Michael Strobaek stated in a recent note that those "whose current equity allocation has declined below the strategic level and who can tolerate the elevated volatility, should begin to build up equity positions."

While some investors are also practising distancing from their shares while on self-isolation, Strobaek's note suggested there are plenty of opportunities to find undervalued plays.

That said, Strobaek cautioned that in this dynamic and precipitous climate, investors should avoid leverage and plays that are too aggressive.

In the note, Strobaek specifically pointed to potential opportunities in the IT and energy sectors. However, from a short-term perspective, the ASX has seen both industry sectors down 9.49% and 8.46%, respectively, at the time of writing.

For example, in today's trade, Australia's IT sector darling Afterpay Ltd (ASX: APT) is currently down a substantial 28% at the time of writing. Xero Limited (ASX: XRO) is down 4.79% and Appen Ltd (ASX: APX) down 4.92%. 

These drops can be partly explained by the return to normal value thesis. Some analysts believe that certain Australian IT sector stocks with great growth trajectories but unproven profitability track records are overvalued.

For example, Fiona Clark from Merricks Capital told ABC News that panic-selling is happening in an already overvalued market. As she is quoted as saying, "part of what we're seeing now is just bringing things back to normal valuations, and then part of that is just the selling for the sake of selling because we don't know where the bottom is and we don't want to be caught holding shares."

ASX 200 industry sectors like consumer staples and utilities enjoyed small gains in recent days but the stricter COVID-19 lockdown measures initiated by the federal government were enough to drag even these sectors down. For example, the consumer staples sector is currently down a significant 8.20% today (at the time of writing). 

At a time when each morning brings developments that trigger historic market moves, short-term plays may be too risk saturated for most investors. If you were to enter the equity market now, it is likely to be with a long-term time horizon that stretches long enough for a robust stock to weather the wider sell-down.

The optimistic and bullish tide that lifted all stocks is now receding fast, leaving stable and robust companies better prepared. 

As Roger Montgomery from Montgomery Investment Management said to ABC News in the same article, those who panic sold at the bottom of the GFC "missed out on essentially a tripling of prices in the market after the GFC."

Foolish takeaway

This bear market may present patient investors whose time horizon stretches beyond 5 or even 10 years with a great opportunity to shore up value stocks dragged down by the general market panic.

As they say, it is not timing the market, but time in the market.

Motley Fool contributor Kiryll Prakapenka has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO, Appen Ltd, and Xero. 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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