With market gyrations continuing, many investors are uncertain whether falls represent opportunity or are simply an indicator of an impending wipe-out.
If you've got the ability to add to your savings every couple of months, I would suggest following Warren Buffett's lead and taking advantage of attractive prices of companies on your watch-list.
After all, you can get some cheap today and then – if markets fall further – you can buy even more in a few months when you've saved up some more cash. For the record, I'm not buying at the moment, instead saving up cash after some recent purchases.
However, I do have my eye on a few companies that have recently hit 52-week lows, chief of which are:
Woolworths Limited (ASX: WOW) – last traded at $25.12, down 30% for the year
I've had my eye on Woolworths for a while, and the company recently dipped below the $25 mark yesterday for the first time since 2012. While shares recovered somewhat as investors snapped up the apparent bargain, I'm still fence-sitting on whether Woolworths is a buy or not.
As the recent annual report showed, revenues, profits and average shelf prices fell and management illustrated that profit margins were expected to shrink during 2016. Experience with other companies shows that once the need for a 'turnaround' becomes apparent, often profits and share prices will fall further before the company's efforts gain traction.
With this in mind I expect that Woolworths' shares could fall further over the next 12 months as management grapples with heavy competition and customer perceptions.
Woodside Petroleum Limited (ASX: WPL) – last traded at $29.29, down 30% for the year
It's been a while, but Woodside shares – along with a bunch of other oil stocks – are officially trading at their lowest point in the past five years as investors sell out of the oil and gas sector. It's hard to put a value on Woodside, as I expect its dividends and earnings will fall further this year – and then there's all the talk of a tie-up with Oil Search Limited (ASX: OSH).
The tie-up does make a certain kind of sense but with $12 billion on the table I would prefer to see management bid for Santos Ltd (ASX: STO) as I'm not a huge fan of the PNG-based Oil Search. Given the inherent uncertainty in the sector and the possibility that Woodside will have to bid more to win Oil Search over, I suspect shares will likely head lower in the near term.
Worleyparsons Limited (ASX: WOR) – last traded at $6.43, down 56% for the year
Shares of Worleyparsons have continued to dive in the wake of their recent annual results announcement, shedding 21% in the past month of trading. Now trading at its lowest point in over 10 years, investors may be looking to top-up on shares, especially given the apparently modest Price to Earnings (P/E) ratio of 8 and trailing dividend yield of 8.6%.
Don't be lured in though, as the full commodities downturn is yet to flow through to services companies given that much of their revenue is contracted in advance. I feel that investors might actually see a 'bottom' in the sector over the next two to three years, but how much below current levels that might be is uncertain, and I feel investors are best served by steering clear of the sector for the time being.
