It's been a worrisome three weeks or so for local investors who have watched the Australian sharemarket plunge from a near seven-year high of 5,985 points, to just 5,696 points on Thursday.
That represents a 4.8% fall for the benchmark S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) which may well be enough to panic some investors out of the market, with many likely to have sold their shares at a loss to limit the downside risk. While some investors are running scared, the smart investors are recognising this as a great opportunity to buy.
The market's dip has been driven by a number of key factors, including indications from the Reserve Bank that the interest rate cutting cycle is now over; the subsequent surge by the Australian dollar; and poor earnings results presented by each of the Big Four banks.
Indeed, falling interest rates and the nation's high-yielding dividend stocks have played a key role in driving the market higher over the last few years, so a slowdown on either of those fronts was bound to send a shiver down the market's spine.
In fact, each of the Big Four banks have fallen into a "technical correction", having fallen by more than 10% from their peak. Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) have been hit the hardest, down 13.5% and 17.6% respectively, while Australia and New Zealand Banking Group (ASX: ANZ) is down 11.4%.
While a number of analysts are expecting further falls from the banks and the market in general their pessimism is acting as a temporary drag on the sharemarket's overall performance. Indeed, the banks could fall further, given that their shares are still overpriced despite their recent retreat, but other stocks on the market are looking reasonable today.
As a perfect example, while the ASX 200 in general has clicked into reverse, childcare operator G8 Education Ltd (ASX: GEM) has been firing on all cylinders. It's up 28% since hitting a 52-week low in April and by all means looks set to continue climbing thanks, in large part, to Joe Hockey's latest Federal Budget.
Westfield Corp Ltd (ASX: WFD) and QBE Insurance Group Ltd (ASX: QBE) are two other market behemoths you should at least add to your watchlist. The pair are both trading at reasonable prices and could be set to deliver outstanding returns over the coming years.
Notably, all three of these companies offer compelling dividend yields, which makes them very attractive in today's market, with interest rates set to remain low until at least 2018.
