The Sydney Royal Easter show might have been shut down but the ASX rollercoaster continues to travel at full speed. The market suffered yet another blow today, dropping 5%. Consequently, any confidence behind Morrison’s stimulus package, the RBA rate cuts, or travel bans is now squashed.
It appears the gravitational force behind the coronavirus is just too strong. Especially, as the governments ban on non-essential gatherings that consist of more than 100 people, created another major sell-off.
Today’s plunge amounts to a whopping 12% fall over the past 7 days. Today the Big Four Banks, Macquarie bank, Telstra and Qantas were slaughtered in yet another blood bath. Morrison is coining our current crisis as a “once in a hundred-year event”. Making investors wonder whether they should get in while the market is down?
Here is my analogy of the current investment opportunity that sits before us. We are all lions watching a herd of antelopes running past us. The antelopes represent fundamentally strong stocks trading at a fraction of their true value.
Now, you can either sit on the sidelines (be hesitant) and watch other lions snap up healthy stocks or you can set yourself up and pounce. Possibly scoring yourself an excellent value investment for the next few years.
Today I am discussing my strategy for investing in the Big Four banks, the entry points I am setting and the risks associated with such an investment.
Westpac Banking (ASX:WBC)
Westpac plunged 5.8% today, falling to $15.90. Creating a 40 + % drop in the past month. With WBC now trading at nearly half its true value, my eyes are stunned. Some might say, it is not that surprising because WBC fell to $15.56 on the Black Monday of 2020.
To me, I interpret WBC’s fall as just another market opportunity for Big Four opportunists. We cannot dwell on last week’s opportunity. Today’s price of $15.90 is still extremely attractive. Especially, when considering Westpac’s GFC price was $15.46. In saying all that my entry point for WBC is $15.30-$15.56. Why?
Because I see Westpac falling even lower throughout the week with the government’s announcement spreading unprecedented fear. Also, WBC pays a dividend of 80c a share (December 2019) and a dividend yield of 10.09%. Thus, I am not setting my price point south of $15 because I do not want my greed of getting in at a couple cents cheaper to be the reason why I missed out.
National Australia Bank (ASX:NAB)
The bloodbath continued as NAB got hammered by 7.2%, posting a record low of $15.98 in the afternoon. Which brought the bank under its GFC level! However, NAB’s share price has been bouncing over and under its GFC level of $17 since last Monday.
Personally, I did not think NAB would be battered again. Especially after it reported a record low of $15.58 on the Black Monday of 2020. Based on the last Monday’s and yesterday’s sell-off my entry point is now $15.85-$16.15.
To add the cherry on top, NAB distributes an 83 cents a share dividend coupled with an annual 9.65% dividend yield.
Australia and New Zealand Banking (ASX:ANZ)
ANZ crashed by 8% today, closing at $16.62. Resulting in a 39% drop in less than a month. Wow! It just goes to show how strong the gravitational force behind the coronavirus has become. ANZ’s share price is now approaching GFC territory, which was $13.31.
Source:Google search ANZ ASX
While investing in ANZ at $13.31 sounds mouth-watering it could also mean you miss out on snapping up a big bank at fraction of its true cost. In turn, becoming a lion that keeps waiting and is left without an antelope at the end.
ANZ is another strong bank with a dividend payment of 80c a share and an annual dividend yield of 8.7%. In saying all that, my entry point for ANZ is $15.85 – $16. I feel this entry point is achievable with the current news surrounding the coronavirus.
Commonwealth Bank of Australia (ASX:CBA)
CBA fell 4.3% today, closing at $65.95. NAB, ANZ and WBC are being smashed in comparison to CBA. Don’t get me wrong CBA’s 29% plummet in a single month is still significant. On the Black Monday of 2020, CBA tumbled down to $57.22, which is the current resistance level. Considering its GFC price was $26.75, which I believe is an unrealistic expectation, my entry point for CBA is $52-57.
Source: Commonwealth Bank ASX google
Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area.
My entry points do not constitute investment advice. Instead, they represent how I am personally investing in the Big Four. Your own research is still required.
If the news about the coronavirus improves or becomes worse during the week, I will re-evaluate my entry points and keep you updated.
Initially, I thought of spreading 5000 across eight fundamentally strong ASX stocks. However, I changed the plan from eight stocks to two-three.
Why?Because diversifying across eight reduces my total return. If I had $50,000 to invest then I would spread the investment across the eight decisions.
Remember the strategy is to invest now, hold for a few years, and then reap the rewards at the end. We call this type of trading value investing.
Here is our free, uncomplicated, and extensive ASX portfolio
If you enjoy our articles or are wanting to learn more, you can subscribe to us for free via email and get updates when we post new articles. From all of us at YIG, thank you for the support.
The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Written by Patrick McLoughlin, Associate of YIG.