October was, broadly speaking, another month of extreme volatility for UK share prices. The FTSE 100, for instance, slumped to multi-month lows before exploding during the second half. The UK-focused FTSE 250 has followed a similar up-and-down trajectory.
As an active Stocks and Shares ISA investor, I’m hoping for more of the same in November.
Bargain hunt
Like legendary investor Warren Buffett, I like to buy shares based on value. I also, like the Berkshire Hathaway boss, look to hold onto them for the long haul. As a result, I use market volatility like we’ve seen as a chance to go bargain-hunting.
Investing in stocks is riskier than, say, putting my spare cash in something like a cash account. The near-term risks are particularly acute today given the mix of soaring inflation and central bank rate increases, and their double-whammy impact on the global economy.
But buying shares to hold for the long haul reduces the risk by ironing out temporary volatility. So even though share markets could remain choppy in November, I’m still aiming to build my Stocks & Shares ISA.
After all, I’m not going to make any money by sitting on the sidelines and waiting for any volatility to pass. As market analyst Sam North of eToro comments: “Remember, time in the markets beats timing the markets. And on the whole, they go up more than they go down.”
A FTSE 100 stock on my radar
This is why I’m planning to buy HSBC Holdings (LSE: HSBA) shares for my Stocks & Shares ISA next month. I think it could help me to hit (or even exceed) that average annual return of 8% that long-term investors tend to make.
The HSBC share price has continued sinking in late October. Not even the release of forecast-beating financials have arrested the slide (it recorded pre-tax profits of $3.1bn between July and September).
The market has been spooked by the $1.1bn worth of loan impairments HSBC booked in the third quarter. HSBC attributed these charges to “increased economic uncertainty, inflation, rising interest rates and the ongoing developments in mainland China’s commercial real estate sector”. And these troubles look set to persist heading into 2023.
8.8% dividend yield
However, it’s my opinion that HSBC’s share price today reflects these worries. For 2022, it trades on a price-to-earnings (P/E) ratio of 6.5 times. And the multiple slides to an even lower 5.3 times for next year.
I expect the company’s shares to rebound strongly over the long term. Financial product penetration in the bank’s core Asian markets has soared in recent years yet remains low. And personal wealth levels are tipped to continue growing strongly in coming decades, likely driving banking services demand still higher.
HSBC is investing billions over the next five years in areas like wealth management to make the most of this opportunity too. What’s more, further asset sales outside Asia could be coming to boost its growth programme on the continent.
I think now’s a great time to pick HSBC up on the cheap. And the bank’s huge dividend yields of 5.8% and 8.8% for 2022 and 2023 add a considerable bonus.
