With the new ISA tax year having just started at the same time as share prices have fallen because of coronavirus, I think now’s a good time to pick up some bargain stocks.
A great company in a battered industry
Vistry Group (LSE: VTY) represents a great opportunity for investors, in my opinion. The value of shares across housebuilders has been buffeted by the imposed lockdown. Undoubtedly it will hit sales for some time to come. For the bigger housebuilders though, balance sheets should survive once this is over. There’ll be opportunities to gain market share and new plots to build on.
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The government will still be committed to levelling up the regions of the UK. There’s also a systemic imbalance between supply and demand in the UK housing market that favours the builders. This situation is unlikely to change even if the number of houses being built rises.
Vistry Group is the combination of the former Bovis Homes and Linden Homes, which was acquired from Galliford Try. I think this increased scale will give it opportunities to grow in the future.
A challenger in a traditional industry
OneSavings Bank (LSE: OSB) is another company that’s scaled up, the bank completing its acquisition of Charter Court Financial Services in October 2019.
Although coronavirus will have a massive impact on banks, looking longer term, there are reasons for optimism. OneSavings is likely to make it through this crisis as it’s well capitalised. The bank’s capital base has been designed to weather a significant deterioration in credit conditions and loan quality.
The broker Numis forecasts 2020 pre-tax profit will still be £310m. Down slightly on 2019, this is still above where it was in 2018. The b0ttom line tells us this is a profitable business.
I think the share price has fallen too far. The shares trade on a P/E of less than four, so there could be significant upside when markets recover. The net asset value of the shares is 332p versus a current share price around 220p.
People will keep gambling
Shares in William Hill (LSE: WMH) are at 10-year lows. With sporting events cancelled until who-knows-when, this is understandable. It makes the shares very cheap and, I think, good value.
Management moved quickly to conserve cash by cutting the dividend. The impact of coronavirus will certainly be felt by the business, especially in the US, an area where it was looking to grow before the virus struck.
Despite the challenges of £2 limits on fixed-odds betting terminals in UK shops, William Hill was trading ahead of expectations before the virus. In February, it announced full-year net revenues of £1.6bn, down just 2% year-on-year. That’s despite the regulatory challenges. Online is another area where it can grow and the lockdown might help it grow that part of the business.
I believe with its valuation now so low, the shares offer long-term recovery potential.