Why the Australian stock market is now back to fair value

With the market correcting back to fair value at below 5,500, now is the time for investors to steel themselves and act differently from everyone else. That means looking for opportunities to buy. This stock market correction is painful for investors, but we think the market is now trading below fair value and throwing up opportunities. The good news is that if investors have been following what we’ve been saying for the past five months -- that there hasn’t been much value in the market – they should have cash available to buy. But based on our ROE modelling, we believe the market has now fallen to slightly below fair value on a required return of 10% (or 7% greater than the Australian bond yield). There are currently five major stocks we particularly like in this correction that are showing good value. (VIEW LINK)