Everything seems more expensive these days, but our Gen Z columnist knows where to discover better value.
Froth is spilling over. No, not the kind that is atop your beers and baths, the (unwanted) sort that erupts from red-hot markets spurred on by seemingly endless money printing. (Warning: the ink is running low!) Even bitcoin is back above $50,000 and there’s a house price boom underway.
The S&P 500 and its tech buddy the Nasdaq have soared to new heights only to (finally) break their winning streaks and come up for air. The pack was led by the golden boys (dominating 50% of the Nasdaq index) who have all smashed earnings season. Yippee.
Now, if you’re a sceptic like me, you may be asking whether all the good news is already priced in; markets are, after all, forward-looking creatures.
While the US market is undoubtedly trading at chunky premiums (to put it mildly), there are still bargains to be bagged. But you’ll have to be prepared to cast your net a little further afield.
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Beijing’s recent wave of regulation sent stock market investors fleeing as they ditched their (now pre-loved) Chinese tech stocks. Just look at Tencent (SEHK:700) and Alibaba’s (NYSE:BABA) recent tumble. Ouch!
But it’s precisely times like these, when everyone is scrambling for the exit, that you should walk right in. Or, as Warren Buffett likes to put it: “Be greedy when others are fearful”.
To add some spice to the mix, a handful of rather smart folk reckon that China is no longer an emerging market. If this is the case, you’ll certainly want this superpower to take up (a lot) more space on your (already crowded) sofas. Grab your popcorn and make some room.
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Moving on to the UK, my nearest and dearest.
This market remains (very, very) cheap by all accounts. Many investors make the mistake of thinking that the UK is oil & gas and all things mining. Yes, there is that, but our stock market is so much more.
If you’re on the lookout for some growth, there are a host of companies waiting to be snapped up.
Deliveroo (LSE:ROO) has recovered from its soggy (and ever-so-slightly embarrassing) IPO and is now dishing out tasty returns for my portfolio (I’m up 40%). Darktrace (LSE:DARK) has shed 23% of its share price since doubling in value to its July peak. With the door left ajar, I opened it wide and liked what was inside.
After bagging these newbies and glamming up my ISA, I realised that some oldies were left behind. Take insurer Legal & General (LSE:LGEN): it’s trading at a piddly price/earnings (PE) ratio of 6.9 (50% below the market average) and gifts investors a whopping 6.6% dividend yield. Don’t mind if I do!
Go on, have a rummage through the FTSE, for there are some stellar bargains to be found. Tip: Look for stocks trading at historically low PE ratios paying hefty dividends.
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I believe there’s (always) a seat for growth in a portfolio but don’t neglect the suite of solid, established cash cows because when inflation bites, they’ll be your saving grace.
So, loosen those purse-strings and snap up these beautiful bargains. Something tells me they won’t stick around forever.
Dinah owns shares in Deliveroo, Darktrace and L&G.
Dinah Wolf is a freelance contributor and not a direct employee of interactive investor.
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