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In early April, investing felt very uncomfortable. At the time, fear levels were high and the stock market was in freefall. Selling out of stocks at the time would have been a major mistake however. Since then, the market’s experienced an explosive, ‘face-ripping’ (Wall Street slang) rally.
A huge rebound
The rebounds that major stock market indexes have experienced in recent weeks have been nothing short of astonishing.
Take the S&P 500 index – the most common benchmark for US stocks – for example. In April, it fell to near-4,825. As I write this however (Friday 16 May), it’s sitting near 5,900 – roughly 22% higher.
The tech-focused Nasdaq Composite has experienced an even larger rebound. In April, it fell to near 14,770, however, it’s now near 19,100 – around 29% higher.
As for the UK’s FTSE 100, it has experienced a strong rebound too. It’s currently trading near 8,630 – about 14% higher than its April low of 7,540.
Timing the market’s hard
If there’s one takeaway from these numbers it’s that timing the market’s a tough gig. Back in mid-April, the economic backdrop looked grim and it felt like major indexes could potentially go lower.
However instead, they’ve exploded higher. Therefore, anyone who was out of the market and hiding out in cash has missed huge gains.
The case for investing now
Is it too late to consider buying stocks now? I don’t think so. But I wouldn’t be rushing into broad market-based funds (ie index funds) at current levels after the recent double-digit jump. Instead, I’d look for opportunities within the market (ie individual stocks).
As a whole, markets now look quite expensive. However, look under the surface and there’s plenty of value to be found.
An opportunity to consider
One stock I think looks quite interesting today – and could be worth considering – is Prudential (LSE: PRU). It’s a FTSE 100 insurance company that’s focused on the Asia and African markets.
This stock’s had a dreadful few years due to the slowdown in, and sentiment towards, China. However, it now appears to be in the early stages of a powerful rebound.
I’m not surprised by the rebound in the share price. For a start, recent trading updates have been encouraging.
For example, in late April, the company told investors that in Q1, new business profit was up 12% year on year, thanks to strong performances in China, Hong Kong, Taiwan, and the Philippines.
CEO Anil Wadhwani also downplayed concerns about global trade tensions, saying: “The current tariff uncertainty does not directly impact our business.”
Second, the stock looks dirt cheap. At present, it trades on a forward-looking price-to-earnings (P/E) ratio of about 11.4 – well below the UK market average.
Of course, there are no guarantees the stock will keep rising from here. If economic conditions in Asia and Africa deteriorate in the near term, business performance could suffer.
I like the set-up right now however. It’s worth noting that in recent days analysts at Jefferies have raised their target price for the stock from 1,310p to 1,350p – that new price target’s about 55% above the current share price.
