FTSE 100 stock prices have been rocked by the Covid-19 outbreak. The pandemic is unprecedented and no one is sure how it will alter everyday life.
Since the start of the year, the index has fallen by 23%. But there is hope. Since 23 March, the FTSE 100 has rebounded by 16%, as investors have gained confidence that governments might be successfully managing the coronavirus crisis.
FTSE 100 stocks
With share prices in the index dropping substantially since the start of the year, I believe now could be a great time to start buying FTSE 100 stocks.
The index comprises the UK’s top 100 listed companies. These businesses are involved in a range of industries like finance, leisure, industrials and tech. The FTSE 100 contains many global corporations with global revenues, and these stocks have been hit particularly hard in the market crash.
Take a look at HSBC, for example. The bank is exposed to Asian economies, which now seem to be recovering from the coronavirus outbreak fairly well. In the year-to-date, HSBC’s share price has dropped by roughly 32%. This fall in its share price means its price-to-earnings ratio is just 16. Although the bank might be exposed to bad loans following the Covid-19 crisis and the recovery of the global economy, I think its stock could be a great buy for those FTSE 100 investors with a long-term horizon.
Buying the business
With the coronavirus outbreak, it is tempting to look for companies that could offer large returns in the short term.
However, we should remember that investing is a long-term game. Warren Buffett’s favourite holding period is “forever“, and I believe this is a good mentality to have. When assessing the worth of a company, it is sometimes helpful to imagine you are buying the whole business. You are unlikely to buy a local business, only to sell your interest within a month or two.
Recently, I wrote about Rightmove, which is one of my favourite FTSE 100 stocks. Due to a stalling housing market, its share price has slumped, falling 24% in the year-to-date. Although the short-term outlook for the company is bleak, I believe it will remain a dominant player in the field and will be the first resource potential house-buyers check when things return to normal.
Trying to get rich quick is a risky strategy. Even professional investors like Buffett admit that they cannot accurately predict what the market will do in the short term.
However, for a long-term investor, the opportunities are ripe. There are plenty of quality FTSE 100 stocks that look like they are trading at a price below intrinsic value and I would look for these instead.
Since the inception of the FTSE 100 in 1984, the stock market has crashed multiple times. It has always recovered.
I do not think this time will be any different, which is why I am looking to buy stocks that will benefit from the market’s rebound.
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T Sligo has no position in any of the shares mentioned. The Motley Fool UK has recommended HSBC Holdings and Rightmove. 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.