“Be fearful when others are greedy. Be greedy when others are fearful.” It’s a trope that’s well-worn but worth reminding yourself of in times like these. It’s a philosophy which, if good enough to influence the actions of legendary investment guru Warren Buffett, it’s one I feel we should all pay close attention to.
Look, I get it. With blood spreading across the world’s trading floors, it can seem mighty tempting to offload everything, sit tight, and wait for the storm to pass. And if recent macroeconomic and geopolitical events are anything to go by, things threaten to get a whole lot worse.
The FTSE 100 just toppled to its cheapest since early February amid these fresh developments. And while its bounced off these lows, a plunge through the 7,000 marker could be imminent. My advice, however, is not to be fearful. For long-term investors there’s a sea of brilliant shares out there too good to miss at current prices.
12%+ dividend yields
One of these recent sinkers is Persimmon (LSE: PSN), a blue-chip which I myself own and a share which I’m tempted to buy some more of right now. Its recent plunge to prices not seen since last December leaves it trading on a forward price-to-earnings (P/E) ratio of 6.7 times and carrying a gargantuan corresponding dividend yield of 12.7%.
Enduring fears over Brexit, and the possibility of a no-deal exit from the European Union, are dominating sentiment towards Persimmon rather than concerns over violence in Hong Kong or Trans-Pacific trade wars. Of course, the threat of diving homebuyer activity in the event of an economically-damaging EU withdrawal is something stock pickers need to be aware of. But I would argue these risks are heavily baked into the housebuilder’s bargain-basement share price right now.
In fact, I expect trading to remain resolute at Persimmon, given the size of the homes shortfall in the UK, and expect this to remain the case for many years to come. People always need a place to live, after all, and Britain’s expanding population should keep demand for newbuild properties, and thus earnings across this construction sub-sector, trucking broadly higher.
A medical superstar
I also reckon GlaxoSmithKline’s (LSE: GSK) a top-tier buy at the present time. Despite the obvious defensive qualities healthcare stocks carry, this particular medical mammoth hasn’t been immune to the sell-off which kicked off in late July. Recent dips leave it dealing on a forward P/E multiple of just 14.3 times.
For a company whose profits outlook is much more secure than that of the general market in tough times like these, I reckon GlaxoSmithKline should be trading at a hefty premium to the Footsie’s other constituents at present. And especially so given the steady flow of positive news concerning its mammoth product pipeline in recent times. Its impressive pipeline has already delivered some mighty future blockbusters such as Shingrix and Nucala and there appear to be plenty more to come, products that will surely create some stunning returns in the years ahead.
So capitalise on that dirt-cheap valuation, I say, as well as a chubby 4.9% dividend yield and grab a slice of GlaxoSmithKline today.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended AstraZeneca. 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.
Motley Fool UK 2019