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The spread of COVID-19 outside China has sent panic waves in global equities. Investors are abandoning high risky growth stocks and are looking for safe investments. Not just confused to go for value or growth stocks, investors are worried to even invest at all in these uncertain times.
To get an idea of how unpredictable the market is right now, take an example of gold stocks. Yesterday, several gold stocks on ASX including Saracen Mineral Holdings Limited (ASX: SAR), St Barbara Limited (ASX: SBM), were among the top gainers on ASX. Today, both of these stocks are in the top losers list.
While the global equities are being hit hard over the fear of COVID-19 outside China, many analysts are arguing that it is the right time to buy securities. Buying stocks more aggressively during periods of extreme weakness helps investors to gain higher level of returns. However, the current economic uncertainty is refraining investors to put money in high risky growth stocks.
Today, on Australian Securities Exchange (ASX), the S&P/ASX 200 index tumbled for the second straight day and was down by around 1.2% as at AEDT 1:00 PM.
Notably, several technology stocks were down this morning. Health technology company Alcidion Group Limited (ASX: ALC) fell sharply this morning. As at 1:00 PM (AEDT) the stock was down by over 6% on last day. The company yesterday released its first half results for FY20 wherein it reported 12.3% increase in revenue on pcp, driven by the added recognised revenue from several significant customer contracts signed over the past 18 months. Due to the investments made to accelerate operations in line with the company’s growth strategy, Alcidion reported a net loss of $1.8 million.
For the next half, the company expects its expenditure to expand further with more money put in sales and marketing, strengthening Group infrastructure in the UK and ANZ. “We are actively focused on ramping up sales and marketing investment in H2 as we accelerate growth and drive further adoption of our products and specialist health IT services” said Alcidion Managing Director Kate Quirke while commenting about the outlook for H2 FY2020.
Bravura Solutions Limited (ASX: BVS) also witnessed a fall of over 6% during today’s trading. The company is mainly involved in providing wealth management and funds administration related software products. Last week, Bravura had released its interim results for FY20 wherein highlighted revenue growth of 6.0%, EBITDA growth of 7.3%, and NPAT growth of 21.1%. The company declared interim dividend of 5.5 cents per share, bringing the half-year payout ratio to 68% of 1H20 NPAT.
One must note that, Bravura’s long-term growth is driven by clients’ need to address speed to market for new products, the growing importance of a seamless digital experience, ongoing changes in financial services regulation, and pressure to increase operational efficiency.
In the current uncertain environment, investors needs to keep a close eye on companies which are directly or indirectly exposed to coronavirus. It has been seen that various travel related companies have amended their travel policies to prevent travel to China and, in some cases, other countries in the near-term.
Leisure and corporate travel company, Flight Centre Travel Group Limited (ASX:FLT) is also trading low on ASX today. The stock of FLT is currently touching its 52 weeks low price. Just a few days back, FLT had informed that Coronavirus has adversely affected its small corporate travel operations in China, Singapore as well as Malaysia, which together generated around $625 million in TTV (Total transaction Value) during the last financial year.
“It is impossible to predict the virus’s impact on the company’s business or on leisure and corporate travel in general at this early stage, but it will impact travel patterns to some degree in the near-term” said Managing director Graham Turner while providing the update on the impact of Coronavirus.
Online recruitment services provider, Seek Limited (ASX: SEK) has decided to lower its H1 FY20 dividend to 13 cents, down 46% vs pcp, mainly due to the significant capital we deployed in M&A during H1 20 and increased uncertainty caused by Coronavirus.
On its Chinese subsidiary- Zhaopin, the company has informed that the Coronavirus has significantly impacted the Chinese economy in early CY20 and will impact Zhaopin’s near-term results, however, there is no change on Zhaopin’s long-term market opportunity in what we expect to be world’s largest HCM market. By AEDT 2:58 PM, SEK’s stock was trading at a price of $22.500 with a market cap of around $7.89 billion.
In the current scenario, it is very important for investors to understand different investment strategies.
Understand Different Types of Investment Strategies
Value Investing - In this strategy, Investors buy those securities which he/she think is underpriced and hold till the prices of the stock rises. Usually it takes lot of Fundamental and technical research to know whether the security is overpriced or underpriced. This technique of investing requires lot of patience, but it has a potential to help earn handsomely.
Income Investing- In this technique, the investors usually invest in fixed income securities that pay returns on a regular interval like Bonds. This type of investment is less risky and provide a reliable income stream.
Growth Investing- In this investment strategy, investors look for those securities that are showing a sign of growth, through revenues and profits. Many investors like Warren Buffet uses this strategy and invest in smaller companies that have a high potential for growth, blue chips as well as emerging markets.
Investors need to learn about different strategies, to understand best style that suits them.
