Today’s volatile markets may deter some people from deploying their Stocks and Shares ISA allowance but I’m taking the opposite view. Every time share prices dip – as they’re doing now – I go on the hunt for top stocks to buy at freshly discounted prices.
Global mining giant Rio Tinto has been on my watchlist for weeks. Its shares tumbled on growing fears of a Chinese economic meltdown, which would smash demand for commodities. It’s down 3.18% so far today, one of the biggest fallers on the FTSE 100.
Rio Tinto’s shares look dirt cheap trading at 7.74 times earnings, while the yield has edged up to 8.11%. Those two numbers don’t make a good investment on their own, but they alert me to a potential opportunity and I hope to buy after doing my due diligence.
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Dip is a great time to buy
I’ve had my eye on FTSE 100-listed insurance conglomerate Phoenix Group Holdings for some weeks. It’s even cheaper than Rio Tinto, trading at 6.47 times earnings, while the yield is a staggering 9.86%.
There have been questions over whether the dizzying Phoenix dividend is sustainable, and lately I’ve argued that it is. My case got a boost on 18 September, when management lifted the interim dividend 5% after the group’s first-half incremental new business long-term cash generation more than doubled to £885m.
The recent purchase of Sun Life of Canada UK is already paying off and Phoenix plans to continue its active acquisition strategy. Yet today its shares are down 2.35% for no reason I can see so I could buy it at an even lower price.
Tobacco giant Imperial Brands is really on the rack today, falling 5.18% at time of writing. It was already shockingly cheap, but now trades at just 6.55 times earnings, while the yield has clicked up to 8.57%. Tobacco stocks haven’t delivered much capital growth in recent years, but they still offer some of the best income around. Investors who buy today get a little more of it than last week.
Here’s my favourite
I like to follow FTSE 100 risers too, and I’m pleased to see wealth manager M&G is up 0.89% today, even as the index falls. In one respect, I’m surprised. I thought this was a play on rising markets, not falling ones. But I’m not completely gobsmacked, M&G has been building up a head of steam for some weeks. I’ve bought its shares twice in recent months. Now it looks like others are waking up to its juicy 9.58% yield.
I’m impressed to see pharmaceutical giant AstraZeneca climbing 1.27% today (25 September). I’d love to hold the stock but with a valuation of 63.78 times earnings following its strong share price run, it looks too expensive to me. I’m curious to see that it has some life left in it though. So maybe I haven’t missed my moment.
I’ve no idea where this market will go next, but I do think today’s little dip is a brilliant opportunity to grab Rio Tinto, Phoenix and Imperial Brands at an extra discount. Of the stocks listed here, Phoenix is my favourite. I’ll buy when I have some money. Ideally that will be before its share price recovers, rather than afterwards.
