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It has been a rocky few weeks on global stock markets. That is true not only for American stocks, but also for UK shares. But although some shares have moved around a lot, I reckon the long-term outlook for the London market remains rosy and I have been buying shares during the recent market turbulence.
Here is why.
Taking the long-term view
It is easy to see big drops or increases in a share price and jump to conclusions. But investing is not a short-term activity. To build wealth in the stock market, I think it helps to take a long-term approach based on buying into great businesses at attractive prices and then holding the shares for years or even decades.
So no matter what the market does today or tomorrow, the question I ask myself is whether I can find what seems like a great business with strong long-term prospects and how much its current share price reflects that. If I can buy into a great business at an attractive price, the short-term fluctuations of the market do not bother me. I am upbeat about the long-term outlook for the British economy.
That does not mean I ignore those price swings however. They may offer me the chance to buy into great companies at bargain prices.
Hunting for deep value
That explains why, in the past month, I have been buying a range of UK shares such as Filtronic and JD Sports (LSE: JD). The businesses in question may be quite different, but as an investor the approach I have been taking is consistent.
As I outlined above, I have been looking for what I see as a great business with strong long-term commercial prospects but selling at a price I do not think reflects that.
Out of favour high street name
As an example, consider JD Sports. The first thing I look for when considering a business is the customer market it hopes to target. JD has a huge market to address. It is likely to stay that way and JD’s international footprint could help it build sales in new markets.
I also consider what the business has that can help set it apart from other companies that may also want to target those markets. That sort of competitive advantage can help a business earn higher profits. JD’s brand, its large estate of stores and its deep customer understanding are all examples.
But the retailer’s share price has been performing weakly of late.
There are different reasons for that. Like many UK shares, investor concern about weak consumer confidence hurting spending has not helped. Another risk is US tariff policy, as JD has large operations in the States.
On balance though, I think such risks are reflected in the share price. In fact, I think JD Sports’ share price may have fallen to a point where it offers a potential bargain for my portfolio.
It is among the UK shares I have recently added to my portfolio – and I am actively looking for more amid the ongoing stock market turbulence.
