For long-term investors, the recent falls in the S&P/ASX 200 (INDEXASX: XJO) should be exciting.
As we know, share prices rise and fall every day. So, on the down days, investors who've wisely maintained a healthy cash balance, go shopping for cheaper stocks.
Whilst investors must insure that what they're preparing to catch on the way down, isn't a falling knife, broader market selloffs provide the perfect opportunity to pick up quality blue-chips that are trading at discount prices.
For example, over the past month, Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) ("WHSP"), Telstra Corporation Ltd (ASX: TLS) and Australia and New Zealand Banking Group (ASX: ANZ) have all been sold off. Down 1.5%, 4.3% and 5.2%, respectively.
So are they now a stellar buying opportunity or a falling knife?
WHSP, a diversified holding company which is likened to Warren Buffett's Berkshire Hathaway, is a great defensive investment for ultra-long-term investors. Over the past 15 years, WHSP's share price has appreciated 346% and paid a dividend every single year. In fact, WHSP – who listed in 1903 – has paid a dividend every year and never raised capital. It currently has $1.33 billion in cash and term deposits, trades at 1.14x net tangible assets, with an EV/EBITDA multiple of 21, which seems pretty good. It currently yields 3.4% fully franked (4.8% grossed-up).
Telstra is our premier telecommunications company, boasting dominant positions in mobiles, pay-tv, fixed internet, fixed voice and more. In coming years, the group will continue its push into Asia and look to grow its Network Application Services (NAS) division. It houses services such as cloud computing, unified communications and managed networks. At current prices, however, Telstra doesn't appear cheap, despite yielding 5.6% fully franked (7.99% grossed-up).
ANZ, our third largest bank by market capitalisation, is also pushing into Asian markets. In fact, by 2017, CEO Mike Smith hopes the bank will derive between 25% and 30% of revenues from Asia, the Pacific, Europe and Americas (APEA) markets. Indeed, cash profits from Asia accounted for over 19% of the group's total in the first half of 2014. Its 'Super Regional Strategy' is what differentiates ANZ from the other big four banks and will likely enable it to grow earnings at a faster rate in coming years. However, a lower share price would be desirable before making an investment.
Buy, Hold, or Sell?
Ultra-long-term investors could do a lot worse than add all three of these stocks to their portfolios. However, personally, I think only WHSP is a good buy at today's prices. I'm waiting for a lower share price before hitting the buy button on ANZ (I think anything below $30.00 per share would create a great buying opportunity – writing put options could be a good way to enter the stock), and I think Telstra would have to fall below $4.80 before I'd begin to get excited…
