In mid-July, iron ore was worth $ 228, but then China announced it was cutting steel production, and by Sept. 22, iron ore had fallen more than 50 percent and traded just under $ 100. Over the same period, major Australian miners fell, BHP and RIO fell by about 30%, and FMG fell by more than 40%. Given this, many investors are wondering if they should buy a major miner right now.
Investors love to chase a deal, and if a good stock has fallen sharply, it can provide a good opportunity to enter while it is undervalued.
However, investors tend to buy too early, only to find that they have caught a falling knife, as they watch as the price of cheap stocks continues to fall.
Given that BHP, RIO and FMG are affected by the price of iron ore, the first question to ask investors is whether the price of iron ore has stopped falling, which I do not believe.
The second question to ask investors is whether the share price has stopped falling. Unfortunately, many investors misunderstand this because they look at how much the price has fallen compared to a few weeks or months ago to determine if stocks are a bargain.
Take RIO, for example, at the end of July it was $ 137, and last week it fell to $ 94, and some investors who bought the stock thought it was cheap, which raised the price to about $ 100 this week. But RIO stopped falling? Maybe, but we can’t confirm that yet.
We have also not yet confirmed whether iron ore has stopped falling, as it may fall another 20% in the coming weeks or months, which is likely to affect the share price of BHP, RIO and FMG. However, I believe we have already seen how the price of these stocks has fallen by 80-90% of the total impact.
Given this, while investors need to start worrying about the upcoming opportunity, it is still too early to buy these stocks. The time to take advantage of these low prices will most likely be in November, but this will only be confirmed when we learn that they will stop falling.
The best and worst sectors this week
The best sectors include energy, which grew by more than 6%, followed by finance and utilities, which grew by more than 1%. The sectors with the worst performance include a reduction of information technology by more than 5%, health care – by more than 4% and materials – by almost 1%.
The best figures in the top 100 ASX / S&P stocks include Orica by more than 14% after brokers updated their target expectations for that stock. Followed by a2 Milk by more than 9% and Oil Search by more than 8%. Among the worst stocks NextDc fell more than 11%, followed by Afterpay fell more than 8% and Xero – more than 7%
What will happen next with the Australian stock market
The Australian stock market was again hesitant, given that this week it stopped to trade lower than last week, only to climb to where it opened during the week.
While this is a good sign, as I mentioned last week, I’m not very excited yet.
The absolute maximum in our market took place on August 13, and by Wednesday of this week the market had fallen by almost 6%, although I suspect it should still fall.
We are on time for the minimum to happen, and while the market showed some resilience last week, I don’t believe the All Ordinaries index has fallen in price enough to confirm the minimum. I expect the minimum to happen at any time from now until mid-October or maybe a little later with my goal below 7,200 points.
Many stocks now look quite attractive, although I urge investors to exercise caution in the short term until we receive confirmation that the market has turned. Those who are patient will be rewarded, because in November they will have many good opportunities to buy.
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