As you already know, the current market crisis has discounted the value (stock price) of some of the biggest corporations across the USA and the rest of the world.  These Bluechip stocks are becoming devalued due to the current bearish trend, meaning fundamentally these huge corporations may only be impacted over a short period of time. The current market environment is one of which people usually only experience a few times over the span of their life. With such a significant dip in Index’s across the globe, it gives investors the opportunity to buy these Bluechip stocks for 30-40% cheaper than their valued price at the start of 2020.

Strategy analysis

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.

If you have been following our portfolio over the past few weeks, you’ll know that we have kept a very close eye on Macquarie Bank (ASX:MQG) in particular. With recent market trends, the investment firm has been dumped by the Coronavirus wave causing a 40% decrease over the past month. Currently trading at $79.30, it is blindingly obvious that this company is currently undervalued. With markets likely to remain bitter over the next weeks, this gives me enough time to spot an entry that attracts me. With the current market valuation, in 1-2 weeks I am planning on moving at least 60% of capital towards this stock. This decision is coming off the back of a lot of research and evaluating the Macquarie Group’s undervalued and overvalued margins over the past 6 months. This is my own strategy and remember to conduct your own research. 

Now my expectation with this investment will be to turn around a 25% capital gain over the next 12-18 months. The markets will not behave the same way as they did before the virus (Bullish), causing for some concern over how long this investment will take to make a profit. Over the 18 months if Macquarie chooses to still pay dividends, the 3 payments should cover 12% of the initial investment, mitigating the short term uncertainty of the investment. If we are talking entry prices, I am waiting on MQG to fall below $60. In my opinion, as a long term strategy an entry below $60 will be sufficient enough to make a 25% turnover -18 months (My research suggests this margin- this is not advice).

With the other 30%-40% left from my $10,000 strategy, I aim to buy into firms that are being hurt by the virus however hold no Un-Systematic risk (Direct/Internal). Simply put- this means avoiding any companies that will be effected over the next few years after this Virus blows over. The volatile stocks are ones with huge Un-Systematic risk such as Qantas, Webjet and Z1P (linked with lower non-essential spending).

Bear Case 30%-40%

In the result over markets remaining low in the next few months, my strategy is to buy Telstra with the remaining 30%-40% of funds due to it’s low Beta and it’s low un-systematic risk count. The dividends will also offset some short term losses. The market has discounted Telstra slightly however the low Beta is the reason why it should turn around and make me a steady return over the next 12 months.

Bull Case 30%-40%

In the unlikely event of a full market recovery in the next 3 weeks, I will be purchasing some stocks that may be seen as higher Beta or high Risk stocks. These stocks include Paradigm Bio-Pharma (ASX:PAR) trading well under 50% of it’s value, Westpac (ASX:WBC) (had a rough year of trading but bound to hit back), Clinivul (ASX:CUV) a very popular stock in Germany with room to grow and lastly a small hit on Imugene (ASX:IMU) cancer research that has human trial results by the end of the year.

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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.

 

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