It may not feel like it, but now could be a superb moment to buy high-quality stocks listed on the ASX. Clearly, there is scope for share price falls in the short run and there are a number of challenges facing investors.
Chief among these is the potential for a recession in Australia as well as further falls in the prices of commodities. But, for long-term investors, history has shown that when the future is bleak, opportunities for capital gains often present themselves.
For example, shares in gold producer Newcrest Mining Limited (ASX: NCM) have fallen by 25% in the last month. This is partly due to production delays at its Cadia mine which could last for a number of weeks and mean that full-year production may not meet previous guidance.
Although that news is disappointing, Newcrest remains a top-quality stock which has been through the process of cost-cutting and improving its efficiencies prior to the current commodity price collapse, and so is in good shape to deliver improved earnings over the medium term. And, with the price of gold having the potential to rise due to investors viewing it as a store of wealth during potentially turbulent economic times, Newcrest's price to earnings (P/E) ratio of 17.2 holds appeal while the company's bottom line is expected to bounce back to deliver growth of 9.4% next year.
Similarly, shares in wealth manager and diversified financial company AMP Limited (ASX: AMP) have fallen by 14% in the last six months. However, the company's near-term prospects remain upbeat, with earnings per share forecast to rise at an annualised rate of over 19% during the next two years.
Looking further ahead, AMP is focused on positioning itself to capitalise on the expected growth in demand for wealth management and other financial products across Asia. This could prove to be a major growth area for the company and, alongside a number of measures taken to improve productivity, reduce costs and generate efficiencies, AMP's outlook remains upbeat – especially when it has a price to earnings growth (PEG) ratio of 0.8 versus 1.3 for the ASX.
Of course, AMP's growth rate may be impressive, but Domino's Pizza Enterprises Ltd. (ASX: DMP) is due to witness a rise in its bottom line of 29% per annum during the next two years. A key part of this growth is centred around Asia, where Domino's is aiming to double its store footprint, while acquisitions such as the recent Pizza Sprint chain in France form part of an acquisition strategy which is set to double the company's store numbers over the next decade.
Domino's is also rumoured to be contemplating a bid for a non-pizza fast food rival in Australia, but even if that proves untrue the company is diversifying its menu and is seeking to broaden its appeal as it aims to increase its 8% share of the $14bn fast-food market. While its shares are hardly cheap after their 80% gain year-to-date, a P/E ratio of 56.3 may still appeal if growth prospects for many ASX companies deteriorate in the coming months.
