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Coronavirus sell-off means watchlist mode

Results from our growth at right price screen can be left to sizzle a while longer.
Coronavirus sell-off means watchlist mode

Whenever turmoil hits markets, it's not a smart move to sell out of holdings in a panic - volatility is just part of being a long-term investor. The best policy is to choose an asset allocation you're comfortable with and stick with it, that way you avoid missing out on recoveries. It's slightly different however, if you're looking for an entry point. Buying into cyclical shares during an uncertain period could see you make losses right away. Our growth at right price screen throws up plenty of watchlist ideas but it's probably better to sit on the sidelines for now, especially as there is potential for the earnings outlooks in the screen to be revised down if the economic outlook worsens.  

  • Markets have sold off at the start of this week, on renewed fears of the COVID-19 coronavirus spreading. With any company flagged by this month’s growth at right price (GARP) screen, it is worth considering its core operations. Some companies may be at risk of an earnings outlook downgrade and on the other hand, some businesses could see their valuation dragged down by the market to a level that investors might consider buying in at.
  • Insurer Legal and General (LGEN) is the highest ranked large company in this month’s growth-at-right price (GARP) screen. The only test it fails is the requirement to have positive free cash flow in each of the last three years. Insurers have a complex business model with lots of moving parts, so in uncertain times this may be more one for the watchlist than a share to buy into amid current turbulence.
  • Property-related businesses continue to rank highly (although the usual caveat about looking further under the bonnet of companies highlighted by screens especially applies here). 
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