With the All Ordinaries (INDEXASX: XAO) having some wobbles last week and retreating from the all-time highs that July brought us, value investors have been roused from their despondent slumber. Growth stocks were hit hard, but even blue chips have been brought back to earth somewhat. Rather than panicking, a more constructive approach might be to have a look at what bargains the market might be offering us this week.
Here are two ASX shares that I think might be worth a look for all you value investors out there.
Insurance Australia Group Ltd (ASX: IAG)
IAG may not be a household name but the insurance companies that it underwrites might be – NRMA Insurance, SGIO and Swann Insurance all come under the IAG umbrella. IAG shares got hammered last week after the company reported a 10% drop in earnings, but the nature of insurance businesses means that sudden drops like this are a common feature. After all, accidents, fires and other calamities are an unpredictable and erratic.
Additionally, IAG has finance agreements with Warren Buffett’s Berkshire Hathaway – which is a badge of honour if there ever was one. If Warren Buffett is confident in IAG, then last week’s share price drop might present a buying opportunity for the value hunters out there.
Rural Funds Group (ASX: RFF)
This may be a controversial choice, but many investors are feeling that RFF shares are offering some value at the current time, so here we are. RFF was hit by a short-seller’s allegation last week that it was cooking its books, with RFF shares being ‘essentially worthless’. RFF shares fell more than 40% on these allegations before being placed in a trading halt. Rural Funds has since come out and provided a rebuttal along with an independent audit and many of its management team have been heavily buying shares. These factors seem to have turned sentiment around and RFF shares are up almost 40% from last week’s lows, but still well below the $2.15 mark the shares were going for two weeks ago.
Both of these shares might represent some value opportunities here for the contrarian investor this week. I think IAG is obviously the safer choice here (can’t argue with Buffett) but RFF would be a lucrative value play as well if the short-sellers are dead wrong.
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. The Motley Fool Australia owns shares of Insurance Australia Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019