Since May 15, the S&P/ASX 200 (ASX: XJO)(Index: ^AXJO) has dropped from 5,249.60 to open today at 4,802.60 — an 8.5% discount on Australia's top 200 stocks. Thomas Murphy, of Family Office Research and Management said that, "At today's levels the Australian share market looks very cheap" and tipped the index to finish the year between 5,300 and 5,400 points.
With interest rates also tipped to fall hard and NAB (ASX: NAB) expecting the dollar to fall further before the end of the year, investors should be focusing on finding stocks that haven't already inflated in price due to investors' expectations. Stocks like Treasury Wine Estates (ASX: TWE) and CSL (ASX: CSL) have already risen 37% and 59%, respectively, in the past 12 months and are operating at high earnings ratios.
Amcor (ASX: AMC) is a blue chip that is likely to be cheering on the lower Australian dollar, with over 30% of revenue coming from its US operations. Together with acquisitions and organic expansion in Europe, a comfortable current price to earnings and a 3.8% dividend, investors could do worse.
If you're after a defensive play but still want exposure to overseas markets, Westfield (ASX: WDC) pays a healthy 4.4% dividend and has a huge market cap for reassurance. After dropping 7% in the past two months and 40.9% of revenue coming from the USA and Brazil, it might be trading at a discount.
This small cap has recently made a breakthrough in US markets with its offering of lottery promotions through a number of major American retail chains. Although profit is likely to remain steady for the next year, Jumbo Interactive (ASX: JIN) maybe just about to take off.
Foolish takeaway
Setting your portfolio to take advantage of currency fluctuations and market expectations is important but the best way to make money is to find good long-term stocks. Large upsides and competent management will help your investments on their way. If the recent run-up and sudden fall of the ASX has taught us anything, it's that you must find good companies at the right price and except volatility in the short term.
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More reading
- 10 stocks to hold forever
- 10 of the ASX's best dividend plays
- 5 stocks, 10 years – 1,000% return
- A punt on Aristocrat
Motley Fool contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies.
