Amazon had a prime day sale last week and the discounted offers saw strong off take by online shoppers. Equity markets too are currently offering highly discounted offers on many good stocks, which is a bargain for long term investors.
The broad market has corrected despite the Sensex and Nifty touching all time highs this month. Mid and small cap indices are down sharply and have corrected by 17% and 26% from all time highs seen at the beginning of 2018. Many of the mid and small cap stocks had run up very fast on excessive speculation and euphoria and did require a sharp correction to bring the market back to its senses.
However, in this correction, the market has not spared strong stocks with good growth and earnings visibility. In a way the market has become myopic and awarding Sensex and Nifty stocks valuations for perceived safety, though a few stocks do deserve high valuations on very strong growth and guidance.
There are strong bargains in stocks that have fallen sharply in the correcting in the broad market. In this market short sight, many high growth stocks with strong visibility are being ignored given sentiments in the overall market. Investors have been shell shocked in the carnage in mid and small cap stocks, leaving them numb to any positive signs.
The market nervousness is clear from the fact that in this earnings season, the initial reaction to strong results have been a sell off before the market came to its senses to the up stocks. Market is also ignoring signs of demand, growth in core business and visibility of future growth and revenue and profitability trends.
Companies that are showing strong growth are seeing their valuations come off sharply and with earnings visibility, valuations are looking even cheaper. Long term businesses with very strong growth potential too have suffered due to the market myopia and offer good entry levels for long term investors.
The market tends to get very short sighted on both uptrends and downtrends. This provides opportunities for either booking profits or buying at lower levels of valuations. The current market is definitely providing buying opportunities at lower levels of valuations.
Buy the right stock, hold and then reap the gains in this time of market myopia.
