Although there is still a lot of uncertainty in the global economy at the moment, the chance to purchase stocks at discounted prices remains hard to resist.
Fear is playing a large role in the markets' recent volatility and it is at these times when investors should get greedy and start buying stocks that remain fundamentally strong.
With that in mind, here are three stocks trading well below their yearly highs, that long-term investors could consider:
1. ResMed Inc. (CHESS) (ASX: RMD) – ResMed remains one of the highest quality healthcare stocks on the ASX. The stock is a proven performer with shareholders benefiting from, on average, double-digit returns over each of the last 10 years. The growth potential for ResMed is impressive, with tens of millions of potential patients worldwide yet to be even diagnosed with sleep-related conditions. The shares were sold off heavily following disappointing trial results in May but bounced back towards $8.00 per share shortly after. ResMed has once again fallen back towards $7.00 per share and this looks like a reasonable buying opportunity, considering the shares are now trading on a multiple of around 21.5x. Despite this being a premium to the rest of the market, ResMed's growth potential should not be underestimated and I would be comfortable buying at the current levels.
2. Crown Resorts Ltd (ASX: CWN) – Crown's Financial Year 2015 (FY15) result was below my expectations but nevertheless, it remains an attractive long-term investment. The problems it is facing in Macau have been well publicised and this will continue to impact its earnings in the short term. The underlying fundamentals of Crown remain intact, however, and the recent sharp sell-off looks somewhat overdone. The shares are now trading near $10.00 per share, a level not seen since late 2012. The market is clearly taking a short-term view on Crown and dismissing the pipeline of world-class projects the company will be delivering over the coming years. At the current share price, Crown is trading on a multiple of 16.5x and investors will receive a dividend yield of 3.7%.
3. G8 Education Ltd (ASX: GEM) – Shareholders of G8 Education (including myself) have endured a tough six months with the share price failing to rebound after producing a solid half year result. Revenue growth of 63% and a 75% increase in underlying earnings clearly didn't meet the market's expectations with the share price now floundering near $3.15 – down more than 40% from its 52-week high of $5.44. The market has remained concerned about G8's acquisition strategy and the potential issues it may face to secure more funding for further acquisitions. On top of this, G8's failed bid for rival childcare operator Affinity Education Group Ltd (ASX: AFJ) has left some sections of the market wondering where to next for the consolidator. Despite this, I still believe G8 Education is currently undervalued and investors could do far worse than considering buying shares at these levels. The stock is trading at around 13x earnings and is offering investors a fully franked dividend yield of 7.7%. The underlying fundamentals of the childcare sector remain strong, and G8 Education remains well placed to take advantage of the ongoing consolidation in the sector.
