Global news on the virus front hasn't exactly stirred investors' animal spirits these past few weeks.
While Australia looks to have COVID-19 almost under control, with Victoria emerging from the strictest lockdown conditions over the coming weeks, much of the rest of the world is facing sweeping second and third waves of infection.
Case numbers are spiralling across most of Europe, the United States, India and Japan… to name a few.
Aside from the tragic loss of life this portends, investors are increasingly concerned about the potential for new rounds of lockdown measures in some of the world's biggest economies. Measures that will extend their domestic recessions and almost certainly push a return to international travel further down the timeline.
Add in the dawning reality that global governments' virtual blank cheque stimulus measures can't continue indefinitely, and we have a fair picture of why share prices have been retracing in September.
However, as we'll have a look at shortly, selling quality shares now rather than buying them at a bargain could prove a costly mistake in the long-term.
But first, a quick look at some of the latest market moves.
Big tech shares buck the losing trend
Yesterday, overnight Aussie time, the major US and European share markets all lost ground.
The United Kingdom's FTSE 100 (INDEXFTSE: UKX) fell 3.8%. Year-to-date it's now down 24%.
In the US, the Dow Jones Industrial Average (INDEXDJX: .DJI) led the way lower, falling 1.8%. The Dow is also in the red for 2020, down 6%.
The broader Nasdaq Composite (INDEXNASDAQ: .IXIC) also slipped, closing down 0.1%. But the biggest 100 technology-oriented shares contained in the NASDAQ-100 (INDEXNASDAQ: NDX) bucked the losing tend, combining for a 0.4% gain.
Meanwhile the S&P/ASX 200 Index (ASX: XJO) is down 0.8% in early afternoon trading.
However, most ASX listed tech shares are heading the other way. The S&P/ASX All Technology Index (ASX: XTX) – which tracks 50 of Australia's leading and emerging technology shares – is up 1.3%.
And the Betashares Nasdaq 100 ETF (ASX: NDQ), which holds 100 of the biggest names in technology, is up 2.4%. While it's still down 10% from its 3 September highs, year-to-date the share price is up 19%.
The resilience of the big tech shares, despite what many call their "lofty valuations" won't come as a surprise to Seema Shah, the chief strategist at Principal Global Investors in London.
Here's an excerpt of what Shah revealed regarding the rise of technology shares on Bloomberg's What Goes Up podcast on 12 September:
[W]e may have increased our reliance, and we may pull back some of that dependence, on technology. But a fundamental core of that is here to stay. And also in an environment where there is so much uncertainty, we still don't know what's around the corner, you still need companies that have got those really strong balance sheets and positive cash flow. And those mega-cap tech stocks meet that criteria.
Indeed, yesterday Apple Inc. (NASDAQ: AAPL), to pick the biggest of the mega-cap shares, gained 3%. Apple's share price is still down 18% from its 1 September all-time highs. But with the share price up 47% for the year, buy-to-hold investors won't have anything to complain about.
No shortage of opportunities
It's not just tech shares offering great opportunities to patient investors.
As the Australian Financial Review reports, "some fund managers are using the sell-off to buy into companies that will benefit from an economic recovery as the number of COVID-19 cases falls."
Like UniSuper chief investment officer John Pearce, who says of the recent share market pullback:
It's providing an opportunity and there's still plenty of opportunities there. If you want to back the reopening trade, there's no shortage of opportunities in tourism, travel and property. A number of stocks are still reasonably well off their highs, and if we get a vaccine and with interest rates at zero, there's no reason those stocks can't reclaim those highs.
Let's look at 3 of those opportunities now. Shares that may continue to lag as investors focus on short term fears of second waves of infection but that could easily regain their former highs once domestic and international borders reopen for regular travel.
First up, cruise line behemoth Carnival Corp (NYSE: CCL). Carnival's share price fell almost 7% yesterday on those shorter-term fears. That puts the share price down 72% from its 17 January 2020 high. If Carnival's share price regains that level, it will represent a 257% gain from today's share price.
Second up, Sydney Airport Holdings Pty Ltd (ASX: SYD). Sydney Airport's share price is down 38% since 17 January. Investors who buy shares today would see a gain of 61% if Sydney Airport's share price revisits its January high.
Finally, there's Flight Centre Travel Group Ltd (ASX: FLT). The blue chip travel agency's share price is down 67% from 15 January. If Flight Centre's share price regains its 2020 high, that would be a gain of 203% from today's prices.
Now there's no reason these shares couldn't head lower from here over the short term. But if you have a long term investment horizon, these 3 are just some of the opportunities to potentially bank some hefty gains down the road.
