Stock markets around the world have fallen in recent weeks. But stock market weakness can make it a good time to research the best shares to buy if share prices fall further.
Several factors seemed to have caused the recent weakness, many of which came from the United States. Due to the size of its economy, factors that affect US shares can often have a knock-on impact in other parts of the world like the UK.
There’s a concern that interest rates might need to be raised to battle rising inflation. Central banks such as the US Federal Reserve might also have to reduce their level of bond-buying. This could hurt growth stocks in particular.
Best shares to buy
So which could be the best shares to buy if share prices fall further? That’s the question I’m asking myself.
I’m looking at high-quality shares where the main investment case remains intact. These shares could be a bargain at lower prices… it could feel a bit like the Black Friday sales!
For my Stocks and Shares ISA, I’m considering looking at Games Workshop, Croda International and Computacenter. All three are among the best shares to buy if prices continue to fall, in my opinion. They all demonstrate quality characteristics, offering double-digit returns on capital. And they’re all trading at a lower prices than just one month ago.
I like to spread my investments across various sectors and each of these three are in very different sectors. Games Workshop is in the business of selling fantasy miniatures. Croda International is a speciality chemicals company. And Computacenter provides IT services. That’s definitely diversification.
Playing defence
In times of stock market weakness, I also consider some defensive options. If I think growth stocks could suffer further, there are plenty of value shares that I could buy instead.
The UK is home to many defensive shares. I like drinks maker Diageo, pharmaceuticals giant Astrazeneca and popular supermarket Sainsbury’s. Each of these offer defensive earnings. They also pay dividends, which is a nice bonus.
A word of warning
Global economic factors can affect all shares. Although growth shares could fall the most in a stock market crash, even the most defensive options might not be immune to falling prices.
Also, a falling share price isn’t guaranteed to instantly bounce back. Falling share prices can drop further. In a stock market dip, correction or full-blown crash, share prices can become more volatile so I know it’s important for me to keep a level head.
When looking for the best shares to buy in stock market weakness, I’d say it’s important to think long-term. As a stock investor, time is my friend. In the long run, the stock market has an excellent track record for providing returns. UK shares have typically averaged around 7% annually. I tend to aim for higher returns so I’m always on the lookout for the best shares at the best prices.
5 Stocks For Trying To Build Wealth After 50
Markets around the world are reeling from the coronavirus pandemic…
And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.
But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.
Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…
You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.
That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.
Click here to claim your free copy of this special investing report now!
Harshil Patel owns shares of Games Workshop. The Motley Fool UK owns shares of and has recommended Games Workshop. The Motley Fool UK has recommended Croda International and Diageo. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
This post was originally published on Motley Fool
