The coronavirus has caused a widespread share market selloff across the world. So far the S&P/ASX 200 Index (ASX: XJO) is down another 2.9%.
I think these lower share prices are an opportunity for all investors. In my opinion there are some shares like Altium Limited (ASX: ALU) and Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) that would be great buys after falling.
However, there are some shares that are now so cheap. As long as they don't go broke, and preferably not have to do a capital raising, they could be some of the strongest performers when this is over. Looking ahead to FY22 and onwards, they look attractively cheap.
These are three higher-risk, higher-reward options:
Kogan.com Ltd (ASX: KGN)
The online retailer is expecting somewhat of a disruption to supply chains. But people will keep buying products, particularly once this is over. Indeed, ordering online could see a boost during this period.
Kogan.com is building good network effects with its wide array of cheap services for its customers. It's also steadily growing its profit margins, which means each additional revenue dollar more profitable. It has a good setup for long-term returns.
Looking at a projection for FY22 earnings, it's trading at 14x FY22's estimated earnings. It also pays an attractive dividend, so that could be a good boost to returns over the next few years.
Webjet Limited (ASX: WEB)
It's clear that travel businesses will be some of the most affected during this time. However, the slowdown in travel won't be a permanent change, even if it takes a while to get back to normal.
The Webjet share price is down 53% since 21 February 2020. Ouch. In this type of event, investors have a habit of overselling. Webjet says that it's well positioned to get through this and it's cutting costs to soften the blow.
FY22 may be the year that things are back to normal. It's trading at 7x FY22's estimated earnings. Even at 10x FY22's earnings Webjet would seem very cheap.
WiseTech Global Ltd (ASX: WTC)
The software logistics business has seen its share price plummet since the outbreak became problematic in China.
It's obvious that FY20's earnings will be reduced because there are less shipments. Perhaps WiseTech is now at a more reasonable price after having an expensive p/e ratio for so long.
At some point global shipping will get back to more normal levels. China is already seeing things get back to normal.
By FY22 you'd expect the coronavirus effects to have passed on. That's why WiseTech's valuation of 45x FY22's estimated earnings seems more manageable. It's not cheap in the low p/e sense, but its share price has dropped 53% since 21 February 2020.
Foolish takeaway
It will be interesting to see what happens as this unfolds. Don't forget that Australia's interest rate is now at another record low, so once the market stops falling the low interest rate will make Australian shares seem very cheap.
Kogan.com would be my pick of the three, as there may be wider outbreaks in the weeks to come in different countries and lead to lower prices for Webjet and WiseTech – but who knows?
