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Mr Market is a very strange individual. Just last month he was offering me a collection of his largest 100 UK stocks with a record high price attached.
Now, just 20-odd days later, he’s offering me the same FTSE 100 for 8% less.
I have a much longer time horizon than Mr Market, so I’m inclined to take him up on his offer. Here’s why.
Why is he spooked?
Firstly, before I look at what this character is offering me today, why exactly is he so spooked?
Well, to be clear, he has reason to be worried. When the US President himself is obliged to tell citizens that their bank deposits are safe, then we can assume financial markets are in for a choppy time.
The knock-on effects from the collapse of Silicon Valley Bank late last week are still emerging. But already two cryptocurrency banks, Silvergate Capital and Signature Bank, have closed. And Credit Suisse shares today plunged to a new low.
All this has many investors concerned that another widespread banking sector crisis could be unfolding. That would obviously be worrying and explains the decline of UK-listed bank stocks in recent days.
| 5-day share price performance | 1-year share price performance | 5-year share price performance | |
| Barclays | -16.2% | -19.5% | -32.6% |
| HSBC Holdings | -12.4% | +10.8% | -22.5% |
| NatWest Group | -9.8% | +3.2% | -20.5% |
| Lloyds | -9.5% | -3.1% | -30.1% |
I should note these share price figures don’t include dividends, and therefore don’t constitute the total returns received from these stocks. But they do demonstrate the extraordinary volatility seen in recent days.
Beyond index tracker funds, my portfolio doesn’t have exposure to banks. Of course, that hasn’t stopped it from taking a hit in recent days.
But because the sell-off has been broadly indiscriminate, I just see it as a buying opportunity.
What I’m doing
This volatility has arrived at an opportune time for me because I have some spare cash to invest. So what am I looking at buying?
Well, I’m a big fan of the Peter Lynch idea that “the best stock to buy is the one you already own.”
The gist of this is that there was a reason I bought a stock in the first place. So unless the company’s fundamentals have deteriorated, why not double down on that stock?
This brings me to Ashtead. The construction equipment rental firm recently raised its full-year revenue guidance. Underlying profit before tax was up and the dividend was increased. Yet the stock is down 13.5% in less than a week now.
Other FTSE 100 stocks I own that are down over the last five days include insurer Legal & General (-11%) and mining giant Glencore (-13.5%).
I may add to all of these stocks, despite the risk that they may have further to fall.
Long-term mindset
At times like these, I’m glad I’m just an ordinary buy-and-hold investor.
Unlike some fund managers, I don’t have to time the market and get out before it tumbles. I don’t have to obsess about achieving quarterly performance targets or worry about whether share prices could drop further.
I can just wait for weeks like this one and seize buying opportunities when they arise.