One of the simplest and arguably most effective investment strategies is buy and hold investing.

This strategy sees investors buy the shares of quality companies with positive long term outlooks and hold onto them for as long as the investment thesis remains intact.

This is a strategy that has been used by legendary investor Warren Buffett. And you can’t argue with his track record, can you?

With that in mind, here are two top S&P/ASX 200 Index (ASX: XJO) shares that I think would be quality buy and hold options:

Nanosonics Ltd (ASX: NAN)

The first buy and hold option to consider is Nanosonics. It is best-known for its trophon EPR disinfection system for ultrasound probes. It has been growing its installed base at a rapid rate over the last few years and has continued this trend in FY 2020. During the first half it increased 17% on the prior corresponding period to 22,500 units. This is still well short of its addressable market of 120,000 units.

Which is positive for two reasons. As well as benefiting from unit sales, Nanosonics earnings lucrative recurring revenues from the consumable products the system requires. Consumable and service sales were up 40% to $34.1 million in the first half. This represents 70% of its total sales during the period. As its market share grows, so too will these sales. Combined with the impending launch of several new products, I believe the future is bright for Nanosonics.

REA Group Limited (ASX: REA)

I think REA Group would be a great buy and hold option. I’ve been very impressed with the way the realestate.com.au operator can still deliver earnings growth in the toughest of trading conditions. This was evident in its third quarter update which revealed a 1% increase in revenue to $199.8 million and an 8% lift in EBITDA to $119.6 million. This was despite a 7% decline in listings during the quarter.

While listings volumes are likely to remain subdued for the immediate term, when conditions do improve I expect REA Group’s earnings growth to accelerate. So with its shares down 23% from their 52-week high, now could be an opportune time to snap them up.

More reading

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• These ASX 200 shares just crashed to multi-year lows
• 5 things to watch on the ASX 200 on Friday
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• ASX 200 drops 1.7%, Xero reports a profit

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nanosonics Limited. The Motley Fool Australia has recommended Nanosonics Limited and REA 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.

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I think it’s important to take advantage of ASX share market volatility when we can.

Volatility is a key feature of shares. Each day there are different buyers and sellers. Obviously there will be different views about what price people are willing to buy and sell at.

This coronavirus period of time has seen some of the strongest volatility in decades. I think it’s important to take advantage of the lower share prices. Collectively, investors are only willing to sell their shares at lower prices when there’s something to actually worry about. And there’s always something to worry about. Eventually that particular worry will pass, just like the GFC. 

The price we pay for our investments is the biggest factor for deciding our future returns. If you can buy during periods like this when prices are a lot lower then you’ll boost your future returns significantly.

These low share prices don’t last forever. Just look at how the ASX share market volatility has lowered and prices have recovered strongly since 23 March 2020 even though the actual economic numbers like unemployment just get worse and worse.

What ASX shares on the share market are opportunistic buys due to volatility?

A number of exciting shares like Pushpay Holdings Ltd (ASX: PPH) were a lot cheaper a few weeks ago, but I wouldn’t describe those shares as opportunistic any more. They’re still solid buys though.

I think ASX share market volatility have made these shares buys: diversified property business Brickworks Limited (ASX: BKW), water entitlement business Duxton Water Ltd (ASX: D2O) and investment business Magellan Global Trust (ASX: MGG).

More reading

• 3 ASX shares to buy for growth and income
• Double your money with these high quality ASX shares
• 3 top ASX 200 shares every investor should buy
• 3 quality mid cap ASX shares to buy with $3,000
• 1 of my favourite dividend shares just forecast growing dividends to March 2022

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ASX energy shares are poised to finish the trading week on a stronger footing after the oil price rallied overnight.

But the dramatic recovery for these stocks from their bear market low may have run out of fuel!

Morgans is sounding the warning bell even as the WTI oil price surged by US$65 to US$27.66 a barrel in less than four weeks since crashing into negative territory. I suspect that’s a record bounce over the timeframe for the WTI benchmark.

The more relevant (to Australia) Brent crude price didn’t slip into negative, but it’s staged a pretty stellar 62% climb over the same period to trade at US$31.13 a barrel.

Running ahead of the market

“We remain long-term oil bulls, but it is hard to maintain this positivity towards the sector when key energy stocks so strongly outperform oil prices,” said the broker.

By its reckoning, the jump in Woodside Petroleum Limited (ASX: WPL) share price and Oil Search Limited (ASX: OSH) share price imply an oil price of around US$47 a barrel.

Meanwhile, the Santos Ltd (ASX: STO) share price will need an oil price of US$42 a barrel to justify its recovery.

The long road to recovery

“We view this level of market optimism as dangerous given not only the massive demand impact from Covid-19 restrictions, but also because of new macro risks emerging,” said Morgans.

“Key amongst these is the growing risk of a new Trade War breaking out between the US and China, with tensions escalating from the ongoing health and economic crisis.

“Even barring a new trade war, we expect oil demand loss (currently at an unprecedented c.30mb/d) will take multiple years to recover, with the market not yet in a position to accurately analyse all of the fallout.”

Going nowhere fast

The chance of oil prices jumping back to over US$40 a barrel looks pretty slim even as Goldman Sachs sounded a positive note on the commodity.

The broker believes that the oversupplied market is heading back towards a deficit next month, according to a report on Reuters.

Oil production cuts by OPEC and Russia will limit supply as demand picks up pace from the restarting of major economies like China and the US.

Oil price forecasts

While that means we may have seen the lows for oil, Goldman Sachs thinks oil prices may be stuck at current levels for a while. It’s forecasting US$30 a barrel for Brent and US$28 per barrel for WTI during the Northern Hemisphere summer months.

“We believe that the next stage of the oil market rebalancing will be one of range-bound spot prices with the most notable shifts being a decline in implied volatility as well as a continued flattening of the forward curve without long-dated prices rising yet,” said Goldman Sachs.

Here come the downgrades

Investors may have to wait a few years to see the oil price catch up to the share prices of our major energy stocks.

On that sombre note, Morgans lowered its medium- to long-term forecasts on the Brent oil price. This meant that the broker also had to downgrade its recommendation on Oil Search, Woodside and Santos to “hold” from “add”.

More reading

• 5 things to watch on the ASX 200 on Friday
• 5 things to watch on the ASX 200 on Thursday
• LNG spot price surge benefits ASX 200 shares
• 5 things to watch on the ASX 200 on Wednesday
• How many ASX shares should you have in your portfolio?

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 post Big bounce in these ASX stocks may be over before it began appeared first on Motley Fool Australia.

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