I believe there is currently a great opportunity to capitalise on stock market volatility and buy shares for my holdings.
How I search for stock market opportunities
I have some key principles when looking to add any stock to my holdings.
- What does it do? I want to understand what a company does, and where it sits in its respective market. Is it a market leader with established operations and a customer base? If so, does it dominate the market and could it continue to do so? How does it plan to grow? On the other side of the coin, is it a small-cap growth prospect that is entering the market with a revolutionary product that could propel it to new heights?
- Performance and history. Although past performance is never a guarantee of the future, I think it’s important to build a picture of a stock’s history. Has it met expectations it set? Has it had any issues or scandals that could impact performance, returns, and sentiment?
- Valuation. With the current stock market volatility, I want to ideally pick up quality shares at bargain levels or at least pay a fair price for a good company.
- Passive income. One of the biggest things I look for is dividends. Sometimes a high yield is enticing. I’m experienced enough to understand that consistent, stable dividends are much better, which is what I look for. However, I do understand that dividends are never guaranteed.
One stock I like the look of during the current stock market volatility is HSBC (LSE: HSBA). Here’s why I would buy the shares if I had the cash to invest.
Banking giant
HSBC is one of the largest financial services providers in the world, serving around 39m customers across all its businesses. It is listed on four different stock exchanges across the world.
As I write, HSBC shares are trading for 588p. At this time last year, they were trading for 523p, which is a 12% increase over a 12-month period. The shares are down by 9% from 647p in March to current levels.
From a bullish perspective, HSBC shares look great value for money on a price-to-earnings ratio of six. In addition to this, a dividend yield of 5.8% is higher than the FTSE 100 average of 3%-4%.
From a growth perspective, I believe HSBC is well-placed to benefit from its expansion strategy, which is to expand into emerging territories, especially China and surrounding areas. Demand for financial services products in this area is rising due to a spike in disposable income.
One risk associated with HSBC’s plans is the fact that China and the surrounding region can be impacted by geopolitical volatility. Also, the current macroeconomic environment, namely rising interest rates, could hinder HSBC’s performance and returns. For example, rising rates have led to loan defaults and a lack of new mortgage business due to higher rates.
Overall, HSBC shares look cheap, there’s a good passive income opportunity, and an established reputation with exciting growth plans make it a great opportunity, in my opinion. I believe the shares could rise, as well as any returns I hope to make, if a bull run were to occur.
