The S&P/ASX 200 (ASX: XJO) is down another 1% today. It may be falling on more worries about inflation and interest rates, or perhaps because of COVID-19 cases spiking again in the US.
Whatever the reason, the ASX 200 share market is down and it’s causing many shares to trade at a lower price.
For shares already in your portfolio, that’s not so nice. But it does present opportunities to buy shares of businesses at discounted prices.
But what ASX shares do you buy in this environment?
Well, an easy answer would be to just top up on shares that you already own. If you thought they were good to own at a higher price, then they may have stronger returns potential from a lower price.
Another idea, if inflation is indeed about to come back, is to go for businesses that can increase prices in a rising inflation environment. Businesses such as Woolworths Group Ltd (ASX: WOW), Coles Group Ltd (ASX: COL), Wesfarmers Ltd (ASX: WES), Costa Group Holdings Ltd (ASX: CGC), Bega Cheese Ltd (ASX: BGA) and iShares Global Consumer Staples ETF (ASX: IXI) could be ideas. There are plenty more. However, some of these aren’t the most exciting long term ideas in my opinion.
Another line of thinking is about businesses that would benefit from higher interest rates. There are ideas like banks such as Commonwealth Bank of Australia (ASX: CBA), Macquarie Group Ltd (ASX: MQG) and Mystate Ltd (ASX: MYS). Then there’s insurance businesses such as Suncorp Group Ltd (ASX: SUN) and Insurance Australia Group Ltd (ASX: IAG). Other ideas could be Computershare Ltd (ASX: CPU), EML Payments Ltd (ASX: EML), Hub24 Ltd (ASX: HUB) and Netwealth Group Ltd (ASX: NWL).
The smartest thinking might simply to go for the best ASX growth shares that are sold down and now we can buy them at much cheaper prices. For my own portfolio, I’d be happy to look at shares like Magellan Financial Group Ltd (ASX: MFG), MFF Capital Investments (ASX: MFF), Pushpay Holdings Ltd (ASX: PPH), Redbubble Ltd (ASX: RBL) and Kogan.com Ltd (ASX: KGN).
Summary thoughts
Sometimes ASX 200 share market sell offs can open up opportunities to buy businesses at much lower prices than normal. Who knows how long this will go on for? If you’re worried then you could always decide to dollar cost average the buys over a period of time.
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