With stock markets across the globe collapsing after weak Chinese data in recent days, it is understandable that many Aussie investors are considering selling up and moving into other assets. After all, the returns from the ASX in the last month have been hugely disappointing, with the index falling by over 10%.
However, selling up could prove to be the exact opposite of the right thing to do at the present time. Certainly, things may worsen before they improve and volatility looks set to be a feature of the second half of 2015. But, for long term investors, there are a number of top quality stocks that are now trading at even more appealing prices; making now an ideal time to move into shares, rather than out of them.
For example, Rio Tinto Limited (ASX: RIO) has seen its share price plunge by 23% in the last six months alone. While disappointing, the company continues to do all of the right things to lessen the impact of weak demand for iron ore that has caused a decade-low in the price of the steel-making ingredient. Rio Tinto has increased production, become increasingly efficient, reduced costs and mothballed major projects so as to moderate capital expenditure during an uncertain period.
This, though, is unlikely to be enough to prevent a forecast 51% fall in the company's bottom line in the current financial year. And, while Rio Tinto's share price may not yet have bottomed out, its low cost curve and higher production mean that its position relative to its peers is improving, thereby offering the potential for higher profitability over the long term. Additionally, Rio Tinto is expected to increase its earnings per share from $3.02 to $3.35 next financial year and this means that it trades on a price to earnings growth (PEG) ratio of just 1.5.
Similarly, private hospital operator, Ramsay Health Care Limited (ASX: RHC), also offers good value for money with it trading on a PEG ratio of 1.53. Like Rio Tinto, it has exposure to China and, as such, a slower growth rate from the world's second largest economy would be bad news for its outlook. However, unlike Rio Tinto, the bulk of Ramsay's business is focused on Europe and Australia and, as a health care provider, its financial performance is relatively less dependent upon the wider macroeconomic outlook.
As a result, Ramsay's forecasts remain very strong, with the company expected to increase its earnings by 27.6% in the current year, and by a further 14.7% next year. This, though, is not particularly surprising when it has an excellent track record of increasing its bottom line at an annualised rate of almost 17% during the last five years. And, with Ramsay having a beta of just 0.5, its shares are expected to change in value by half as much as the wider index, thereby offering reduced volatility.
So, while Rio Tinto and Ramsay have been hurt by the recent falls in the ASX, now appears to be an excellent opportunity to buy both stocks. Moreover, with their differing risk profiles, a combination of the two could prove to be a sound long term partnership in Foolish portfolios.
