Stock markets around the world have declined in recent weeks. But if the stock market weakens further, it could be a good time to research the best stocks to buy.
Several factors seemed to be the cause of the recent weakness, many of which came from the United States. Due to the size of its economy, factors that affect U.S. stocks can often hit other parts of the world, such as the United Kingdom.
There is a concern that raising interest rates may be needed to combat rising inflation. Central banks such as the US Federal Reserve may also have to reduce their bond buying levels. This can especially hurt growth stocks.
Best shares to buy
So which one can buy the best shares if the share price goes down further? This is what I am asking myself.
I’m looking at high quality stocks where the core investment issue remains intact. These shares may be bargaining at a lower price … it may seem like a bit of a Black Friday sale!
For my stock and share ISA, I’m thinking of looking Games Workshop, Croda International And Computer Center. In my opinion, if prices continue to fall, all three are best for buying shares. They all display quality features, providing a double return on capital. And they are all trading at a lower price than just a month ago.
I like to spread my investment in different sectors and each of these three is in a very different sector. Games Workshop Fantasy Miniature Sales Business. Croda International is a specialized chemical company. And ComputerCenter provides IT services. It’s definitely diversity.
Defense is playing
In times of stock market weakness, I also consider some defensive options. If I think growth stocks could be more vulnerable, there are plenty of valuable shares that I could buy instead.
There are many defensive shares in the UK. I like drinks maker Diageo, Pharmaceuticals Giant Astrageneca And popular supermarkets Sciencebury. Each of these offers a defensive gain. They also pay dividends, which is a nice bonus.
A word of warning
Global economic factors can affect all stocks. While growth stocks may fall the most in a stock market crash, even the most defensive options may not be immune to price declines.
Also, the fall in the share price is not guaranteed to return immediately. The fall in shares could be further reduced. In a stock market dive, correction or fully developed crash, stock prices can be more volatile so I know it’s important for me to keep a level head.
When looking for the best stocks to buy in the weakness of the stock market, I would say that it is important to think long term. As a stock investor, time is my friend. In the long run, the stock market has an excellent track record for delivering returns. Shares in the UK are typically around 7% per annum. I aim for higher returns so I am always looking for the best stock at the best price.
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Coronavirus epidemic disrupts markets around the world …
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Harshil Patel owns shares in Games Workshop. Motley Full owns UK shares and is recommended by Games Workshop. Motley Flowers UK has been recommended by Croda International and Diageo. The opinions expressed in the companies mentioned in this article may differ from those of the authors and therefore the official recommendations we make on our subscription services such as Share Advisors, Hidden Winners and Pro. Here at The Motley Flower we believe that considering a variety of insights makes us a better investor.