Today is the final day of one of the worst quarters for the FTSE 100 in history. What a wild ride it’s been, beginning with threats of war between the USA and Iran, and ending with a spectacular oil-price crash and a worldwide health crisis.
“Buy when there’s blood in the streets”
So said Baron Rothschild, after having made a fortune as other investors panic-sold shares and bonds, worrying about the Battle of Waterloo. He also added this absolutely crucial addendum, “…even if the blood is your own.”
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With the Footsie down more than 2,000 points from its mid-January peak, UK shares have taken some hammering. But, as I said in If I could buy only 1 FTSE 100 share in this market crash, it’d be this, when you’re buying for the long term, low prices are your friends!
(Only three FTSE 100 shares are up by more than 0.5% this quarter. How crazy is that?)
Buying from the FTSE 100’s bargain bin
Every major market meltdown in history seemed like the end of the world, but all are just blips in the relentless rise of global capitalism. Therefore, I’ve dived into the Footsie’s “deep bargain bin” to find three British businesses that should survive this storm, but whose shares look ruined.
Here are “2020’s fallen angels”, in order of their share-price falls this quarter:
International Consolidated Airlines
International Consolidated Airlines Group owns British Airways, Spanish airline Iberia and Irish carrier Aer Lingus. It’s the second-biggest faller in the FTSE 100 in 2020, down over three-fifths (60.8%), having peaked at 671p in mid-January. You’d need nerves of steel to buy airline shares right now, but I reckon Lord Rothschild would buy, recognising that airlines were hugely profitable in the 2010s and could well rise again.
In the throes of this global crisis, TV broadcasters are suffering horribly, as TV advertising dries up. Hovering around 64p, ITV‘s share price has cratered like IAG’s – down 59% from 2020’s peak of 150p and #5 among the fallen angels. Today, ITV may be unloved, but could easily become a future takeover target for a global content provider such as Disney.
Royal Bank of Scotland Group was an absolute basket case in the global financial crisis. It needed a £45.5 billion taxpayer bailout in November 2008 and then lost £130 billion in 10 years. Yada, yada, that’s all in the past – and we’re buying the bank’s future, do you see?
RBS cannot collapse, because the UK government owns more than three-fifths (62.4%) of its shares. It’s a boring, almost old-fashioned, British bank these days, so the current share price is a heavily geared option on RBS returning to profitability when the world returns to normal. Agreed?
Beware further FTSE 100 falls
One final warning: these three FTSE 100 shares have all been battered, but could still fall even further. As one old market saying goes, “A share that falls 90% can still fall another 90%”. In short, expect volatility, with these shares likely to yo-yo throughout the pandemic. But when the blood is cleaned from the streets, I expect at least one of these shares to be a multi-bagger – and maybe all three, who knows?