The recent sell-off in the ASX share market has opened up plenty of opportunities, so I have been investing. And I'm planning to buy even more.
I've made the point many times that the number of interest rate cuts this year may be fewer than hoped. Share markets (and property prices) have soared amid expectations that rate cuts would be coming soon.
But, the US Federal Reserve Chair Jerome Powell noted this week that inflation wasn't making the expected downward progress, so interest rate cuts may not be coming in the next few months. According to reporting by CNBC, Powell said at a central banking forum:
The recent data have clearly not given us greater confidence, and instead indicate that it's likely to take longer than expected to achieve that confidence.
We can maintain the current level of restriction for as long as needed.
Unsurprisingly, the share prices of a number of companies have declined as investors digest this reality.
Lower prices are an opportunity
I love it when share prices fall because it means being able to buy great businesses at a more attractive price. As Warren Buffett once said:
To refer to a personal taste of mine, I'm going to buy hamburgers the rest of my life. When hamburgers go down in price, we sing the 'Hallelujah Chorus' in the Buffett household. When hamburgers go up in price, we weep.
For most people, it's the same with everything in life they will be buying — except stocks. When stocks go down and you can get more for your money, people don't like them anymore.
I'm not surprised that interest rates may be higher for longer. However, the wider picture demonstrates ongoing financial strength for individual companies and the overall economy.
Lower prices with good economic performance make some stocks seem undervalued to me, but not all of them.
Where I'm investing in ASX shares
I have been using the sell-off to invest in some of my favourites at lower prices, and I'm planning to buy more.
The Motley Fool's trading rules prevent me from writing about the ASX shares I've just bought. But I can say I recently topped up my position in Brickworks Limited (ASX: BKW).
It has dropped a little further than when I invested, but I'm pleased with the price I paid due to the large underlying net asset value (NAV) discount. And the fact that it has fallen more than 10% from 8 March.
One name I haven't bought during the latest sell-off, but I'm thinking about it, is Johns Lyng Group Ltd (ASX: JLG).
It's already one of the largest S&P/ASX 200 Index (ASX: XJO) share positions in my portfolio, and I've covered it quite a bit recently. I'm a big fan of the company's efforts to expand geographically and diversify its earnings base, as the underlying earnings grow at a rate of more than 10% per annum. Buying at a cheap price appeals to me.
I don't know if share prices will fall even lower, and I'm not sure how long they will be at this level. A week? A month? A year? But I'm positive that if earnings keep growing, then share prices will rise over time.
This period of volatility could be the most appealing time to buy shares in 2024, and I'm planning to keep buying until my investment cash is gone. In three or five years, I think they could deliver a pleasing outperformance of the ASX 200.
Keep an eye out for the articles about which ASX shares I've bought when I'm allowed to talk about them. Until then, there are a number of other ASX shares trading at attractive prices during this pullback to look at.
