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Is now a good time to buy stocks? With artificial intelligence (AI) and conflict in the Middle East creating volatility in the stock market, it sounds like a risky time to invest.
In fact, it’s often times like these that investors can find the best opportunities. When there is uncertainty and the future is unclear, the best investors decide.
Warren Buffett
As with most things related to investing, something Warren Buffett said sums up the situation very well: “The future is never clear – you’re paying too much in the stock market to get a happy compromise. Uncertainty is actually the friend of the long-term value buyer.”
You’re right, of course. Share prices don’t fall when investors feel good about businesses and their future prospects – that’s where those changes come from.
One of the best examples from FTSE 100 is something Rolls-Royce. During the crisis, the company was losing money and taking on debt to avoid bankruptcy.
Fast forward to today and that worry is gone – for now, at least. But the cost of waiting for the best idea is missing out on a nearly 2,000% return.
Investors should not just buy every falling stock. However, they should look for situations where short-term problems affect the stock market’s long-term potential.
Private equity
One of the worst industries for this is private equity, where firms raise money from outside investors and look to deliver a return on it in the future. But that has been difficult lately.
Companies are struggling to exit investments because prices are unusually low. As a result, investors are always absent at the very time they should be enjoying it.
That’s one operation this is not the case you have this problem anyway 3 i (LSE:III). A private FTSE 100 company invests its own funds, rather than looking to outside investors.
That means it can invest on its own timeline, buying and selling when it sees opportunities. And in a market where other companies can’t do this, that’s a huge advantage.
Another attractive feature of this business is that it gives investors access to private companies that they cannot buy otherwise. In the case of 3i, the main one is Action, the fastest growing European retailer.
Action is a big part of an FTSE 100 firm’s portfolio and that kind of concentration brings risk. But I think that’s something investors should look to carry in their portfolios.
Time to shop?
Investors should not simply ignore the risks. But I think concerns about AI and oil prices mean that looking for buying opportunities now is a good idea.
Being able to take advantage of uncertainty is the main reason why 3i shares have risen more than 600% in the last 10 years. And its unique approach isn’t going to change anytime soon.
I think it is an excellent stock for investors to consider buying at a time like this. Private equity can be tough, but this company is unlike any other in the industry.
