Stock market volatility has rocketed in recent days. FTSE 100 stocks have taken a walloping and Britain’s premier share index has just fallen to its lowest level since November.
Concerns over high inflation and more interest rate hikes have spooked the investment community. With fear spreading like wildfire, stock markets could have further to fall too.
You’d think that now would be a good idea to avoid buying shares, right? Not a chance. Plummeting stock markets present an excellent opportunity for long-term investors like me to boost their wealth.
Buying on the dip
One thing always happens when financial markets plummet. As investors panic, they sell off top-quality stocks along with those more vulnerable companies.
By staying calm and taking a long-term view, I can pick these five-star shares up at rock-bottom prices. This in turn gives me the chance to supercharge my capital gains when markets eventually recover.
It’s a strategy that’s popular among the world’s most successful stock pickers. Billionaire investor Warren Buffett famously said that “whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”
Buffett’s has made a habit of buying up companies that have been unjustly sold off during stock market falls. It’s a strategy that has paid off big time. Forbes puts his wealth at a jaw-dropping $114.5bn!
3 FTSE stocks on my radar
Many quality stocks now trade well below the average FTSE 100 price-to-earnings (P/E) ratio of 14 times. Mining giant Glencore is one such dirt cheap share I have my eye on today.
Earnings here could suffer in the near term if raw materials demand declines sharply. But the long-term picture is bright as themes like the growing green economy look set to drive a new commodities supercycle.
I don’t think this is reflected in a forward P/E multiple of 7.2 times for Glencore shares. An added bonus is the company’s huge 8.9% dividend yield for 2023.
Aviva also offers tremendous all-round value at its current share price. It offers up an 8.8% prospective dividend yield and trades on an earnings ratio of just 7 times.
Rising costs at its general insurance arm are a problem right now. The firm could also see sales of life insurance products drop as consumers feel the pinch. But the possibilities for colossal profits growth over the next decade is huge as demographic changes push demand for its protection and retirement products.
DS Smith shares have also attracted my attention at recent prices. The company trades on a forward P/E ratio of 7.7 times, and its dividend yield sits at 6.6% for this year.
Weak consumer spending power threatens demand for its cardboard packaging in 2023. But e-commerce growth and rising awareness around sustainability should power profits skywards over the longer term.
The bottom line
I have some cash set aside for volatile times like these. And I plan to use it to pick up some top-class stocks in the coming days. Sinking FTSE 100 share prices could present the best dip-buying opportunity for investors this decade.
