How Much Further Can AstraZeneca plc, Unilever plc And Rolls-Royce Holding PLC Fall?

What do you do when quality shares fall in price without the company itself doing anything wrong? If you’re a long-term investor, you buy, of course!

Look at drugs giant AstraZeneca (LSE: AZN). It was out of favour for a while when both it and rival GlaxoSmithKline were hit by the loss of patents on key products and increasing generic competition, but investors took a quick shine to new boss Pascal Soriot and his back-to-basics turnaround plan and the share price started picking up again.

But with the latest China-led stock market crunch, we’ve seen AstraZeneca shares turn tail once more — the price is down more than 8% in just the past five days, to 3,964p, and it’s fallen 18% since 2015’s high point in April. The price fall brings AstraZeneca’s forward P/E based on 2016 forecasts down to 15, which looks cheap around the expected bottom in the earnings cycle, especially with a 4.4% dividend yield forecast.

If you thought AstraZeneca was worth buying a week ago, then surely it’s a better bargain now, isn’t it?

Time to clean up?

Unilever (LSE: ULVR) is another stalwart whose price has dipped, with a loss of 13% since 6 August, to 2,572p as I write. To be fair, Unilever does sell a fair bit of its soapy things in the Asian region, but slowing Chinese growth is unlikely to cause any real upset. With EPS predicted to grow at 10% this year, Unilever shares are now on a forward P/E of around 20 — though forecasts could be downgraded a little.

Unilever always looks too highly priced to me and I fear there could be a little more downside yet, but solid defensive stocks are often afforded such premiums by institutional investors. So if you’re looking to pick up such shares in the dips, now could be your chance.

One attraction of Unilever is its dividends, and the share price fall has upped the forecast yields to 3.2% and 3.4% for this year and next. It’s not one of the biggest yields on the market, but it should be well covered by earnings and is generally considered very reliable.

Aerospace bargain?

Rolls-Royce (LSE: RR) shares have been falling after the company that has traditionally just kept on growing its earnings shocked the market with a string of profit warnings. From a peak of nearly £13 in January 2014, the shares have lost a whopping 44% to trade at 721p as I write – a little up from the 685.5p low hit on Monday in the immediate wake of the China crash.

There’s still a couple of years of earnings falls forecast for Rolls-Royce, but with a 2016 P/E of 16 and with dividends set to yield a decently-covered 3% or so, this looks like another that could be undervalued at the bottom of a cycle.

The fundamental nature of these three is unaffected by this week’s market fallout, and they’re just the same companies they were last week — but there will still be people selling out in fear of further irrational panic.

But buying through the ups and downs is a key part of a strategy that has brought great long-term rewards for a century and more.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK owns and has recommended Unilever, and has recommended Glaxo. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.