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Volatile stock prices can create great opportunities to buy stocks. It’s moments like these that investors look back on for decades.
Investors should never take unnecessary risks in the stock market. But the way things are right now, it’s not really necessary.
What happens next?
At the moment, it is very difficult to know what stock prices will be doing a few days from now. Much depends on the Iran conflict.
By the time anyone was able to record and edit a podcast about what was going on, it changed. And that’s true for those of us who write about stocks as well.
Trying to figure out what will happen next is probably a waste of time. But what investors can do is prepare for different outcomes.
According to Warren Buffett, what creates opportunities are other people doing stupid things (his words). And that happens a lot at times like this.
The stock market tends to overreact to recent news, which can create challenges. But it is a very good thing for those who want to buy shares.
What you should look for
In some cases, it may be difficult to know what the long-term effects of the condition will be. A good example is anti-obesity drugs (GLP-1).
The use of this is growing rapidly. And they are a clear threat to many food companies.
However, assessing that threat accurately is difficult. An obvious problem hindering the potential of GLP-1 drugs is that they are expensive, which limits their availability.
That may change over time, but it’s far from guaranteed. So that makes their long-term impact difficult to assess for investors.
The conflict in Iran, however, seems much clearer. The US has said it is not interested in a long war, but the market seems to be ignoring this.
Opportunities
The list of stocks that have fallen in the past month is long. But what stands out is this Anglo American (LSE:AAL), down 19%.
The company recently sold its platinum, coal, and diamond assets to focus on what it sees as long-term opportunities. And this includes copper.
Things were looking good until recently. But the conflict in Iran has caused rising energy costs, fears of a recession, and a shortage of sulfuric acid.
On the contrary, things are very good from a long-term perspective. Demand is strong in data centers, electrification, and other big trends.
On top of this, it takes years to open a new copper mine. So unless the war lasts longer than expected, supply should be limited for a time.
Investing for the long term
Anglo American sharing looks really interesting to me right now. If the conflict in Iran is short, it seems that copper prices should rise.
In that case, copper miners should do well. And the most attractive companies are those with low production costs.
Anglo American fits this description. Its assets in Peru are cheaper to operate and it found a mine in Chile that has even lower costs.
The share price is roughly where it was five years ago. But I think this might be the best time to consider buying in a very long time.
