“Be fearful when others are greedy and greedy when others are fearful.” — Warren Buffett
By picking up shares when others are selling, contrarian investors can often buy stocks on the cheap.
Armed with this advice, I dug around for fundamentally-sound companies that have seen steep market sell-offs. Here are two shares that have near-term issues, but their long-term prospects remain rosy.
An opportune time to recruit this company to your portfolio
Recruitment firm HRnetgroup Ltd (SGX: CHZ) has seen its share price fall 25% from its recent high of S$0.90 to S$068.
The market reacted extremely harshly to the firm’s poor first-quarter showing, where revenue and gross profit both declined by 2.8%. That poor performance also led some analysts to downgrade the company from buy to hold, which has exacerbated the steep fall in price.
However, the firm’s long-term prospects remain bright.
The poor 2019 first-quarter results were mostly due to the uncertain economic environment, which resulted in some companies holding off on expansions plans. This is most likely a short- to medium-term problem as the professional recruitment market is expected to grow at around 4% in Singapore between 2016 and 2021.
On top of that, HRnetgroup has already set up corporate offices at important regional cities in a bid to tap into the fast-growing markets outside of Singapore. The group also announced a few acquisitions in 2018 and 2019, which could start to bear fruit later this year.
And importantly, HRnetgroup has a robust balance sheet and is a steady generator of cash. As of 31 March 2019, the group had a net cash position of S$242 million.
At its current price of S$0.68, HRnetgroup has a low price-to-earnings multiple of just 13.6 and a decent dividend yield of 4.1%.
For a company that’s flush with cash, is a consistent generator of profits, and has a long runway of growth ahead of it, this seems to be a great entry point for bargain hunters.
Riding on Singapore’s property market
Real estate brokerage company APAC Realty (SGX: CLN) shares have tumbled more than 33% from their peak in mid-2018.
The company, which owns the ERA regional master franchise rights in Singapore and 16 other countries in the Asia Pacific, saw its first-quarter revenue and earnings per share plunge 26% and 70%, respectively.
The main reason for the slump was fewer home transactions in the quarter, compared to the same period last year. This was due to the additional property cooling measures that the government implemented in July of 2018.
However, the Monetary Authority of Singapore did stress that the cooling measures are not there to depress property prices, but rather keep prices in line with economic fundamentals. As such, we can expect property prices to continue to keep pace with both GDP and wage increases.
On top of that, the volume of transactions is also expected to increase over the long term. This is natural as transactions will likely grow as population and the number of homes in the market increase.
Despite the uncertainty surrounding the near-term Singapore property market, ERA, with 6,600 registered agents as of 28 February 2019, is well-placed to benefit from the longer-term tailwinds.
After the steep fall in price, APAC Realty shares sport a relatively low trailing-12-month price-to-earnings ratio of 9.6, which could be a good entry point for value investors.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of HRnet Group Ltd. Motley Fool Singapore contributor Jeremy Chia owns shares in HRnet Group Ltd.