Why this time of year is often the best time to buy Australian stocks, in one chart

(Ralph Freso / Getty Images)
  • Bell Potter analyst Richard Coppleson says October to April has historically been the strongest period for investment returns on the ASX200.
  • Coppleson says he expects a short-term bounce from current levels, as strong dividend yields attract buyers back to the big banks.

After reaching new 10-year highs in July this year, Australian stocks have had a rough trot.

The month of October has been particularly volatile, with the ASX200 falling by as much as 6%.

But according to Bell Potter securities analyst Richard Coppleson, now is not the time to get out of the market.

To illustrate his point, Coppleson compiled data which shows October to April is often the most profitable period for the ASX200:

Richard Coppleson, Bell Potter Securities

The only two years when stocks under-performed from October to April were 2007 and 2008, which coincided with the end of a bull market and the fallout from the global financial crisis.

“It’s something I think anyone who invests should be aware of,” Coppleson says.

In the short term, Coppleson expects the market to turn higher as support returns for the big banks.

Collectively, the share prices of the big four bank have lost around 15% this year.

Yesterday, Morgan Stanley pointed to a subdued profit outlook for the sector as the 25-year mortgage bull market comes to an end.

The banks also face the threat of technological disruption, margin pressures from tighter lending standards and the fallout from Hayne royal commission.

However, Coppleson says the time to buy banking stocks is “when they are hated, on the nose, and in the headlines”.

For one thing, he says dividend yields for the big banks now look attractive. The collective battering that big bank shares have taken has increased dividend yields to a historically high 7%.

Coppleson says the dividend policy of the big banks won’t change for at least a year, which will leave dividends looking increasingly attractive in the event of further price falls.

“The bank dividend yields provide a huge level of support and income-buyers will buy them for their huge dividends,” he says.

“This is when you buy the banks for a 5-7% rally, from here into early November.”

However, he added it’s more a short term trade as the annual growth outlook for the banks remains subdued.

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