It's a big week for the ASX with not just the Reserve Bank of Australia (RBA) announcing the Board's decision to reduce the official cash rate to a record low 2%, but it's also reporting season for the market's most influential sector, the banks.
A combination of factors all weighed upon the market on Wednesday with the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) falling a massive 2.3%; even more telling is that the index has now slumped close to 4% in the past five trading sessions.
While plenty of pundits will try to decipher just what caused the falls and what it means for the direction of the market over the next few days, weeks and months, long-term investors need not be concerned with pondering these questions, rather they can use the volatility to their advantage to pick up quality stocks at more appealing levels if they wish…
REA Group Limited (ASX: REA) sank 10.3% with the fall first and foremost due to a third quarter trading update which disappointed investors who expect nothing less than perfection from this premium priced stock. The drop came despite REA reporting revenue growth of 21% and earnings before interest, tax, depreciation and amortisation (EBITDA) growth of 30%. Arguably, the stock received some extra selling from investors who just wanted to exit the market and move to cash.
The 7.9% selloff in veterinary consolidator and animal health retailer Greencross Limited (ASX: GXL) undid all of the gains that were achieved the previous day when investors reacted positively to a conference presentation that was released to the market.
Liquefied Natural Gas Ltd (ASX: LNG) has been on a tear, gaining over 500% in the past year. Wednesday's 6.8% drop was despite no negative news which suggests investors were prepared to indiscriminately sell stocks which have run up hard.
All else equal, many stocks are cheaper today than they were last week.
While we are certainly a long way from the type of bargains which became available back in 2009 during the depths of the Global Financial Crisis (GFC) even small rattles to the market can create individual bargains.
