The market has been incredibly volatile recently. This has left many stocks from across the globe trading at deep discounts to what investors were willing to pay just a matter of months ago.
The team at Bell Potter thinks that this has created a compelling buying opportunity for investors.
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What is it saying?
The broker highlights that there are high-quality stocks trading at attractive levels. It notes that this valuation reset comes despite earnings remaining robust and fundamentals not weakening. It said:
A wide range of quality companies are currently trading at valuations that are attractive relative to historical norms and their long-term earnings potential. These companies have strong balance sheets, providing insulation against both the rising cost of capital and geopolitical volatility. Importantly, the structural tailwinds for some of these companies from AI and digital transformation remain largely independent of Middle Eastern tensions or fluctuating oil prices.
This valuation reset is underpinned by robust earnings rather than weakening fundamentals. While not cheap in absolute terms, this shift represents an attractive entry point relative to recent history. Importantly, earnings revisions remain positive despite higher oil prices; the S&P 500 has seen 2.5% upgrades in the past month. The recent sell-off appears indiscriminate, but we expect a rotation towards quality given positive fundamentals and the heightened uncertainty we expect to persist.
But if you're not a fan of stock picking, don't worry. That's because Bell Potter thinks two ASX ETFs could be a way to take advantage of the weakness.
Global X Fang+ ETF (ASX: FANG)
The first ASX ETF it is recommending is the Global X FANG ETF. It gives investors access to 10 of the best stocks from across the globe. It explains:
The Global X FANG ETF (FANG) provides concentrated, high conviction exposure to the leaders of the modern economy. It tracks the NYSE FANG Plus Index, which is composed of 10 highly traded growth stocks across the technology and communication services sectors. This includes the original FANG names alongside other innovative giants such as Nvidia and Microsoft. With a management fee of 0.35% per annum, it offers an efficient way to target the specific mega cap tech names that have seen the most significant sentiment-driven de-rating despite their robust balance sheets and leading roles in the AI revolution.
VanEck MSCI International Quality ETF (ASX: QUAL)
Another ASX ETF that the broker is recommending is the VanEck MSCI International Quality ETF.
It gives investors exposure to 300 of the best stocks from across the world. It said:
For those preferring a more diversified approach, the VanEck MSCI International Quality ETF (QUAL), offers exposure to approximately 300 of the world's highest quality companies. This fund follows a rules-based methodology that selects stocks based on three key fundamental factors: high return on equity, stable year-on-year earnings growth, and low financial leverage. While still heavily weighted towards US technology giants like Apple and Microsoft, QUAL provides a broader safety net by including high quality names across healthcare, industrials, and consumer staples.
