Let investor beware FIND SHARE BARGAINS HARD TO

FINDING a bargain on the sharemarket is becoming tougher as Aussie stocks rebound from their COVID-19 collapse.

Shares are still almost 20 per cent below their February highs but analysts are concerned they are still too high given the level of global uncertainty, and warn bargain hunters to be wary.

Some companies — such as Afterpay and Fortescue Metals — are back near record highs, but others are still weak. The big four banks, despite some gains this week, are still down between 28 and 34 per cent.

AMP head of investment strategy Shane Oliver said there were still short-term risks and any sharemarket growth in the next 12 months would probably be modest.

“Look for those stocks that have had big falls but with the potential to come back quicker,” Dr Oliver said.

Those included mining, energy and, possibly, some industrial stocks, he said.

However, he was not confident about consumer stocks as many buyers had switched to online, “and I would be a little wary of property stocks”.

“We don’t know what the full fallout of declining rents will be,” Dr Oliver said.

Investment specialist Danielle Ecuyer, author of new book Shareplicity, said finding a bargain was challenging after the market’s rebound.

“Most of the stocks with earnings and a resilient dividend are pretty fully priced,” Ms Ecuyer said.

She said shares in banks, resources, property and travel companies were looking “pretty beaten up from the preCOVID-19 levels” and might offer long-term opportunities.

“However, until we have a vaccine or a complete return to normal, do not expect those shares to return to the preMarch 2020 highs any time soon,” she said.

Ms Ecuyer said she preferred growth shares and those with resilient earnings — such as Amcor, Ansell, Coles and

Woolworths, —and saw any pullback as a buying opportunity.

“Be wary of chasing socalled cheap or value shares — they are often cheap for a reason and offer a false economy, like negative to slow growth in the next few years, or longterm disruption in our changing world,” she said.

“Keep your powder dry — cash on hand — to buy your preferred shares when markets retrace.”

CMC Markets chief market strategist Michael McCarthy said he expected another big fall in the sharemarket soon.

“I think the markets are way too optimistic at the moment,” Mr McCarthy said.

“On the macro level there’s been a lot of serious damage done to economies and the world.”

He said investment decisions should depend on people’s circumstances, financial goals, risk tolerance and time frame.

“My view is the market is going to fall further and significantly,” he said.

But people who expected a rise could consider oil and gas stocks, Mr McCarthy said, as some were attractive takeover targets. He also liked pure food stocks, including A2 Milk and Costa Group Holdings.

Mr McCarthy said managing risk was important for share buyers. “Put some in now, put some in later if you’re proved right,” he said.

LOOK FOR THOSE STOCKS THAT HAVE HAD BIG FALLS BUT WITH THE POTENTIAL TO COME BACK QUICKER.” AMP HEAD OF INVESTMENT STRATEGY SHANE OLIVER, right