Ask FNArena: What To Buy (Pre & Post Correction)

This story features QUALITAS LIMITED, and other companies. For more info SHARE ANALYSIS: QAL

Earlier this month we asked investors to send in their questions. Today, we answer the final two questions of 2024.

By Rudi Filapek-Vandyck, Editor

Question: Which stock would you buy right now? Which stock(s) would you buy after the next correction?

I am an avid user of all the information and tools available through FNArena.

When it comes to finding interesting ASX-listed ideas, The Australian Broker Call can be a great inspiration, and so are the multiple lists of Best Buy ideas and Conviction Calls included in my Rudi’s View updates every Thursday.

As such, Qualitas ((QAL)), Integral Diagnostics ((IDX)), Redox ((RDX)) and Chemist Warehouse/Sigma Healthcare ((SIG)) have caught my attention recently.

As far as my own research and the All-Weather Model Portfolio are concerned, there have been disappointments in 2024, as happens every year, but I see no reason to change my positive view on the likes of CSL ((CSL)), Woolworths ((WOW)), Dicker Data ((DDR)) or IDP Education ((IEL)).

I suspect the second part of that question relates to the names that have performed very strongly this year.

I cannot possibly pick any favourites as all companies on my curated lists are included for very good reason: they have something special that most ASX-listed companies do not have.

So my best advice is to draw up your own most favoured companies from this year’s list of outperformers, and be ready when they fall, or do as I do, let the market present the opportunity.

Part of my own bias in this context is guided by what is already in the Portfolio, but this does not necessarily reflect everyone’s else’s situation.

My curated lists: https://fnarena.com/index.php/analysis-data/all-weather-stocks/

Question: Many of the All-Weather Stocks have been among the momentum leaders in 2024. What are the odds for a regime change in 2025?

Everyone’s preferred scenario for next year is a broadening of the share market uptrend including many parts that have not participated in 2024 (or 2023).

For this to actually happen, I believe we need to see a reasonable prospect of earnings growth beyond the companies that stood above the pack this year (and remain poised for continued growth).

Simply claiming a ‘cheap’ valuation, in my view, won’t be enough.

When the share market is as one-sided as it has been in 2024 there’s always the risk that portfolio rotation by large institutions might have a significant impact on the shares of the winners we own.

The last time this happened was in late 2016 and it lasted a painful four months if you were on the wrong side of market momentum, as I was at the time, but when 2017 arrived those stocks came back to life and resumed their prior uptrend.

Today, share prices in Goodman Group ((GMG)), NextDC ((NXT)), TechnologyOne ((TNE)), Car Group ((CAR)), et cetera are a whole lot higher than where they were trading at back then.

Portfolio rotation, while of potential significant impact in the here and now, is still far off from a genuine switch in market leadership.

For that to happen, a lot needs to change from what is on the horizon right now. For starters, I don’t see runaway positive economic momentum — anywhere. I don’t see China repeating the role it played back in 2008/09 either.

It is possible, of course, things might change so we always must keep our eyes and mind open to the fact that next year might be a completely different experience.

But I wouldn’t dismiss the scenario either that sees momentum continuing for AI and Growth and Technology, even with the knowledge there will be temporary interruptions along the way in what could well turn out the most important event in our lives and experience as an investor.

As per always, the real challenge is to not get too distracted by events in the short term and keep our focus firmly on the longer term.

Owning High Quality companies helps with this task, as such companies tend to surprise more often than not in a positive sense and, in case of short-term headwinds and disappointment, they tend to recover a lot quicker than their lower-quality peers.

It’s good to always keep this in mind. Just in case.

As an investor, I find the biggest challenge is to get comfortable with volatility. Volatility does not equal risk. It’s mostly short-term noise.

But we all have to travel our own journey to realise this, and to get comfortable with what cannot be controlled and will always be part and parcel of that brutal monster called the share market.

(Do note that, in line with all my analyses, appearances and presentations, all of the above names and calculations are provided for educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions.)  

P.S. I – All paying members at FNArena are being reminded they can set an email alert for my Rudi’s View stories. Go to My Alerts (top bar of the website) and tick the box in front of ‘Rudi’s View’. You will receive an email alert every time a new Rudi’s View story has been published on the website. 

P.S. II – If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

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