The market is falling and panic seems to be setting in. At the time of writing, the FTSE 100 has lost 9% in the past month.
I have been saying for a while that the stock market has been overvalued. It was clear that people were being perhaps over-optimistic, perhaps greedy, and share prices were being distorted.
Now that the stock market has significantly dropped, I believe many buying opportunities have presented themselves for investors keen to acquire good quality stocks when they are on sale.
I will be watching the following shares throughout March, to see if the stock price drops further before buying.
Unilever
Unilever (LSE: ULVR) is one of the gems of the FTSE 100. In its portfolio are household brands such as Marmite, Ben & Jerry’s and Dove. I believe that in any economic climate, these low-cost items will make it into customers’ shopping baskets.
Although Unilever’s share price has dropped by 16% in the past six months, it still carries an expensive valuation and has a price-to-earnings ratio of almost 20.
Sometimes this is the price you have to pay for a quality company. But with the market we are currently in, I am tempted to wait for the price to drop further before buying.
HSBA
The HSBC (LSE: HSBA) share price has been on a downward spiral for a lot longer than Unilever’s.
The protests in Hong Kong, Brexit, the US-China trade war, global economic worries and now concerns over the coronavirus have understandably weighed heavily on the stock.
In the past three years, the HSBC price has dropped by a whopping 18%.
In its results, which were released in February, 2019 revenue at the bank rose by 5.9%, but reported profits fell 32.9% due to $7.3bn of write-downs that related to the economic climate and anticipation of a major restructure.
Despite the disappointing results, the dividend remains unchanged. HSBC stock has an incredibly lumpy prospective dividend yield of 7.5%.
The fact that management is reviewing a restructure should be seen as a positive measure by investors.
If the HSBC share price continues to slide, I would seriously consider buying.
Diageo
Like Unilever, I believe Diageo’s (LSE: DGE) products will be purchased in whatever economic situation.
In its portfolio, Diageo owns brands such as Guinness, Gordon’s and Baileys.
In its January results, half-year net sales grew by 4.2%. Organic operating profit grew by 4.6%, which represented cost-saving measures and an improved pricing point. To sweeten investors, its interim dividend was increased by 5%. Its prospective dividend yield is now almost 2.5%.
In the past six months, Diageo’s share price has fallen by 19%. Despite this, over five years, its stock price has increased by 45%.
At 21, its price-to-earnings ratio is a bit too rich for me. However, if Diageo’s stock price drops further, it could be a great opportunity to acquire a quality stock at a bargain price.
