10 good stocks to buy if markets correct

After witnessing substantial falls in good, stable stocks like Bharti & SBI (Almost 10% in 2 days), it occurred to me that what would happen if suddenly, the markets decide to correct? My first reaction was that I would start picking up good stocks.

 

But what actually happens is that when the markets fall, a large number of stocks start appearing on the buying screen. And because one is spoilt of choices, it becomes very difficult to choose among so many good stocks available at cheap prices. I faced a similar situation in early 2008 when all indices and stocks were falling like there was no tomorrow. But I was lucky to make some money during that period.

So how to be prepared for such falls?

The answer is to have a Stock Watchlist.

It is always wise to be ready to grab an opportunity rather than allowing opportunity to take us by surprise. A watchlist helps in this case. How? Once you create a watch list of great companies, you can monitor these companies. As share prices fall, sooner or later they will become good investments too (in addition to good companies).

Though we do follow a number of stocks mentioned in our Stocks We Stalk section, below is a list of stock which we would be delighted to buy in case market corrects and these stocks are available at lower prices –


Stocks to buy during market corrections

So now we know which stocks we want to buy in case markets correct. So what should we do now? Pray for a major correction, what else? 🙂
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Dividend Analysis of stocks in Dead Monk’s Portfolio

We highlighted in an earlier postthat DMP would be built, primarily around dividend investing.  The core of DMP is made up of 5 stocks, namely ONGC, Clariant Chemicals (I) Ltd., Balmer Lawrie & Company, Graphite India, Tata Investment Corp Ltd. And let us confess. We did receive a few brickbats about our stock selection for forming the core of DMP. So here we would like to offer a few thoughts –
  • These 5 stocks are selected on basis of our (not your) risk appetite.
  • These stocks have been selected for long term (10+ years) and not for trading on daily or even monthly basis.
  • We do not expect these to be multibaggers. Though we would love them if they become one.
  • Selecting these 5 stocks in core does not rule out any further addition to core in future.
  • These stocks do not disturb our sleep at night.
  • We may or may not be comfortable with stocks current price.
  • We are comfortable and very happy with present dividend policy and consistency of these 5 stocks.


As you can see in above table, all 5 stocks have been consistent dividend payers for last 5 and 10 years.

But at present, multiples at which Clariant Chemicals (I) Ltd is trading are not cheap. A P/E of 17.5 is much above our liking and so is P/BV of 3.3 (Read a good analysis on Clariant at SN). As far as we are concerned, we would start accumulating once the stock comes down on these parameters. Tata Investments is primarily an investor in famous Tata companies which include cyclicals like Tata Motors and Tata Steel. Current P/E of 15.4 is not to our liking and we would rather wait before further buying.

Part from these 5, we also proposed 7 large cap stocks in DMP. Though we picked these stocks for their stability, a good and regular dividend payout can be an added advantage.


BHEL, NTPC, BOB and NHPC have quite tempting dividend yields considering the fact that initially, we picked them for their large capitalization and stability 
(Note- NHPC has not been as stable as we would have liked and has been consistently falling after its IPO. But we feel that at CMP of 18, it can be a decent bet for long term.)

As far as growth stocks are concerned (Yes Bank, Cairn India, GSPL & Sterlite Industries), we don’t expect such stocks to pay dividends (consistent or not) for a few years as they are in growth phases and would be reinvesting money in their own businesses.


Dead Monk’s Disclaimer – No matter how careful we are, as an investor, we will never be able to eliminate the risk of being wrong.

PS – Please do check ‘Stock Screenersin widget area on right side. These can be good starting points for shortlisting good stocks.

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