The market sell-off on Monday is worsening. The FTSE 100 may be off early morning’s near-four-year lows below 6,000 points but it’s moving back towards these troughs again. A dive even further below these levels could arrive at any moment.
We here at The Motley Fool don’t believe that now’s the time to pull up the drawbridge and panic. Volatility is part and parcel of share investing, of course. The falls we are seeing today might be the biggest since the 2008/09 global financial meltdown, but before you think of selling up, it’s important to remember that investing in stocks is a long-term endeavour.
Studies show that individuals who buy into stocks and hold them for, say, a minimum of 10 years, can be expected to generate a return of at least 8% per year. Speaking as a share investor myself, I haven’t been minded to sell my holdings and run for the hills. I believe in the quality of my stocks and reckon they will bounce back and strongly too.
In fact, there are a number of London-quoted companies I have my eye on right now. In the words of billionaire investor Warren Buffett it pays to “be fearful when others are greedy and greedy when others are fearful.”
There are many good-looking shares changing hands at rock-bottom prices today. Stocks of all shapes and sizes, irrespective of their risk profiles, are sinking right now. FTSE 100 stalwart J Sainsbury (LSE: SBRY), for instance, is down 5% in Monday business. It’s also within striking distance of the six-month lows of below 200p struck in recent sessions.
This weakness leaves the supermarket looking quite attractive on paper. A predicted 4% earnings rise in the fiscal year to March 2020 leaves it dealing on a price-to-earnings (P/E) multiple of 10.3 times. Moreover, right now Sainsbury’s carries a gigantic 5.3% forward dividend yield.
I think I’ll pass
The selling fever that’s gripped share markets is smashing cyclical and safe-haven shares alike. Even defence companies, pharmaceutical developers, food producers, consumer goods manufacturers and utilities are falling. Investors don’t care about their proven resilience in troubled times. Everything is going into the bin.
I remain confident that many of these fallers can recover their losses once the worst of the washout passes though. But this doesn’t mean that I’m backing Sainsbury’s to make a terrific recovery. You could argue that food retailers, like producers will never go out of fashion. We always need to eat, of course. And the products over at Sainsbury’s aren’t so expensive that sales would collapse should broader economic conditions in the UK suffer and the coronavirus keep spreading.
For me though, the threat posed by rising competition in the supermarket space makes the Footsie supermarket a risk too far, even at the current share price. The likes of Aldi and Lidl are running roughshod over the Big Four established chains. With these firms expanding their estates, it’s likely that revenues over at Sainsbury’s et al will continue to struggle (these fell 0.7% on a like-for-like basis in the 15 weeks to January 4). And things could get really miserable should the Germans expand into online retailing, as many are tipping.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.