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More than a few people (including me) are feeling nervous about the outlook for the global economy right now. We have already seen a crash this year in a leading US index, the S&P 500. It remains to be seen how soon we may witness the next stock market crash. Given such uncertainty, it might not seem like an obvious moment to be on the hunt for stocks to buy.
Yet that is exactly what I am doing. In fact, not only have I been hunting, I have been buying.
Here are a couple of reasons why I think now could turn out to be a lucrative moment for doing that.
1. One share does not make a market
In the past few years, a lot of stock market commentary has focussed on just a few shares, like Apple and Nvidia.
Their strong performance for much of that period had a big impact on how the S&P 500 did. The same has happened this year, just in the other direction.
As an investor, though, I am not ‘buying the index’.
I could if I chose to, for example, by investing in an index tracker fund. Instead, I prefer to buy individual stocks that I think are significantly undervalued relative to their long-term business prospects.
No matter how well or poorly the stock market may be doing overall, at any one moment some individual shares are likely overpriced, while others are potential bargains.
2. The unknown is harder to price than the known
A lot of the recent volatility in the stock market is easily explained. Both buyers and sellers are uncertain about what will happen next in key economic markets and what it may mean for companies’ financial performance.
I think many investors have focussed too much on trying to price those uncertainties. Instead, I think it’s better to price what is at least well-established, if not certain.
As an example, consider storied shipbroker Clarkson (LSE: CKN). Its share price has fallen 16% so far this year.
There are indeed uncertainties here. Tariffs could hurt demand for shipping. Customers may try to take advantage of weaker shipping demand by asking for lower rates. Increasingly erratic US policy on port charges could make it hard for brokers to match demand with supply.
But, as I see it, a lot of relevant facts for the Clarkson investment case are both well-established and easy to consider.
Global seaborne trade is huge and likely to remain that way. Ship owners, operators, and shippers need efficient ways to match cargo demand with empty space.
Clarkson has the contacts, expertise, trusted name, and customer base on both sides of the deal to play an important role in shipbroking not only for years but likely decades to come.
Part of the advantage a long-term investor enjoys in the stock market, even if only putting a few hundred pounds to work, is that they can find stocks to buy and hold based on an analysis of the long-term outlook, not short-term noise.
