The ASX market correction we're witnessing is sending most stocks sharply lower.
While that can be uncomfortable to watch, this repricing is also throwing up rare opportunities to buy quality companies at bargain prices.
In late morning trade on Wednesday, the All Ordinaries Index (ASX: XAO) is down 1.4% at 7,598.1 points.
This sees the All Ords down 13.9% since its all-time closing high on 14 February.
Which puts the ASX right in the middle of the 'market correction' territory. That's generally defined as a pullback of more than 10%, but less than 20%, from recent highs.
If the All Ords sinks by 20% or more from 14 February levels, we'll be in 'bear market' territory.
That's already happened with US tech stocks, by the way.
The Nasdaq Composite Index (NASDAQ: .IXIC) closed down 2.2% yesterday (overnight Aussie time), putting the tech-heavy index down 23.9% since its 19 February closing high.
While it can be tempting to close your eyes and just wait for the selling to end, doing so could result in missing out on some fantastic bargains that surface during this ASX market correction.
A reset and an opportunity
According to Regal Partners' Charlie Aiken (courtesy of The Australian Financial Review):
It's the fastest three-day fall since the [global financial crisis] and COVID, both of which proved excellent medium-term buying opportunities in equities.
Aiken added:
I am of the view what we have witnessed was one giant margin call which has flushed out excesses in crowded positioning in global and domestic equities.
I see it as a reset and an opportunity for investors to selectively and sensibly deploy capital, with the first place to deploy capital being where the drawdowns have been the largest.
What are the experts buying during the ASX market correction?
Yarra Capital portfolio manager Katie Hudson isn't sitting on her laurels during the current ASX market correction.
"It feels like an opportunity-rich environment," she said (quoted by the AFR).
Asked which stocks look oversold amid the Trump tariff market turmoil, Hudson named S&P/ASX 200 Index (ASX: XJO) listed electrical appliance manufacturer Breville Group Ltd (ASX: BRG).
Breville shares have plunged 19.3% since Trump's 'Liberation Day' tariff announcements on 2 April.
"We're trying to find companies that are really good businesses that have been sold off hard on short-term worries," Hudson said.
She added:
Breville looks really interesting from that perspective. It is an absolutely cracking global business, fantastic product portfolio in a very high-growth category of coffee, and they're rolling out new product, to new markets and taking a ton of market share.
Asked about the outlook for the ASX market correction, Wilson Asset Management's Geoff Wilson said, "Could there be more pain short-term? There could be".
But Wilson is decidedly bullish on the medium-term outlook for ASX shares.
"Am I confident that the market will be higher in 12 months' time? Yes," he said.
Wilson is taking advantage of the share market pullback to buy ASX 200-listed car dealer Eagers Automotive Ltd (ASX: APE). Eagers' shares have held up better than most amid the Trump tariff market sell-off, with shares down 2% since 2 April.
How about the US stock market correction?
It's not just the ASX market correction offering investment opportunities.
Fund managers are also eyeing the potential bargains on offer in US stock markets.
"We love when markets are like this, and you get to buy the best companies in the world on sale," GCQ Funds Management chief investment officer Doug Tynan said (quoted by the AFR).
Tynan said after the past month's falls, Alphabet (NASDAQ: GOOGL) and Amazon (NASDAQ: AMZN) both look to be trading at bargain prices.
Google's share price has plunged 29.4% since 4 February. And the Amazon share price is down 29.5% over this same time.
According to Tynan:
No one has been talking about the fact that Google, one of the greatest monopolies in the world, is on 10-times free cash flow, or Amazon's on the cheapest multiple it's ever traded on outside of the pandemic.
Some of the greatest monopolies in the world are at their cheapest prices.
