ASX Share Market Advice for Volatile times

Richard Hemming
After another record setting fall on Wall Street the Australian market is experiencing more weakness and is down over 30% since mid-February highs.
 
We know how scary it is, but close your eyes and buy anyway.  Our mantra has always been Buy Cheap, Be Patient.
 
Now is the time to Be Cheap, and Buy Patient!
 
On days when the market is aggressively selling, initially put up to 10% of your money to work.  If you feel comfortable later in the day, put a little more in.  Only you know how you will react and factors include how much cash you have to start with.
 
As we discuss below, you should have more confidence in Big Caps than Small Caps because there is more liquidity and they’re more robust companies. But this isn’t always the case. Some Small Caps have great balance sheets as well. You would be buying some of these companies ahead of Qantas!
 
When the US Fed announced its Repo action in the middle of the day on Thursday, the market rallied 6% in 10 minutes, only to give it all back again by the close. You can expect more of the same in terms of volatility for the next few trading days.
 
Under the Radar Report’s thinking is that we’re close to a tradeable bottom. We’ll re-evaluate early on Monday, which is when we’ll next be in touch.
 
If you are buying large caps, you can buy a top bank or a pipeline company, or healthcare provider, basically for 25% less than you would have paid three weeks ago.    Maybe the stocks were overvalued before, but core stocks with a good yield, and a long history of paying dividends are unlikely to stay depressed forever unless a catastrophic outcome is on the cards. 
 
Buying smaller companies in this environment requires more patience, but these are opportunities that don’t come around often.
 
This is why we think the opportunity is there to be grabbed now: In the overwhelming majority of cases, the coronavirus symptoms do not last for longer than five days.
 
We have an associate in what may be a US hotspot who had attempted to social distance for two weeks, and still felt coronavirus symptoms coming on at the end of last week.  He was then able to self isolate completely, and the symptoms, which were not particularly bad, now seem to be passing, in accordance with the timetables provided by medical experts.
 
In the past 24 hours it has become world news that Tom Hanks and Rita Wilson caught the coronavirus in Australia. If they both recover relatively quickly, this could become a turning point for public perception.  Without wanting to deny the seriousness of the consequences of the virus, it does appear that the infections pass.
 
We are speculating that if they both recover relatively quickly, this could be a small turning point for public perception of the impact of the disease.
 
The issue is that an ageing and dense population must not be exposed to carriers, and their treatment must not overwhelm the hospital system.  But there has been enough warning in Australia and elsewhere that despite policy errors, most of the worse possible outcomes should be avoided.

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About the Author

Richard Hemming

Richard Hemming (r.hemming@undertheradarreport.com.au) is an independent analyst who edits www.undertheradarreport.com.au, which provides investment opportunities in Small Caps that you won’t get anywhere else.

Under the Radar Report is licensed to give general financial advice only (AFSL: 409518). The author does not own shares in any of the stocks mentioned.

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