After the stock market crash in March, many good companies listed on the FTSE are still going cheap. Many investors are selling their stocks and keeping share prices down. Moreover, the short-term economic forecast is entirely pessimistic. This means anyone buying shares now is likely doing so with an eye to the future.
For a long-term investor, future gains are the silver lining to the stock market doom and gloom. And since higher returns can be made from lower share prices, a bear market is a much better time to be building your wealth. Cheap FTSE stocks are safer investments than those made at the height of a bull market.
Long-term investors need to find good cheap companies that will thrive in any market. Investing £1,000 in each of the two shares below could be a great place to start.
Ashtead Group (LSE: AHT) is a provider of industrial equipment rentals. Its main business is in North America where it operates as Sunbelt, supplying many types of customers from construction to the entertainment industry.
Ashtead boasts an impressive track record of adapting its business model to the macroeconomic backdrop. This performance is underpinned by strong returns on invested capital that have resulted in a steadily climbing share price over the last decade.
There every reason to believe Ashtead will continue its ascent. It has many business advantages at its disposal and will be able to use its scale, differentiation, and cash levers to manage the downturn. In the US, rising equipment costs and changing health and safety regulations will likely provide further rental opportunities. Additionally, the downturn itself may uncover further acquisition prospects, consolidating its position.
Ashtead’s £500m buyback policy offers alluring returns for shareholders, although a yield at under 2% may not be the most attractive. However, the dividend per share has increased every year over at least the last five years. The company’s cash reserves imply it’s affordable.
Ashtead is currently on sale for around 2,130p, with some analysts giving the firm a fair value of 2,800p.
Moneysupermarket.com (LSE: MONY) is the UK’s largest provider of online price comparison services. It owns four major trading brands in MoneySuperMarket, MoneySavingExpert, TravleSuperMarket, and Decision Tech. About half the group’s revenues come from insurance, 22% from money, and 17% from home services, such as electricity providers.
Moneysupermarket’s strong competitive position comes from its big size and ability to differentiate itself from its competitors. It aims to sustain this lead by offering a new energy switching service that tailors its offerings between low-cost products and those with other specific features.
However, since Moneysupermarket’s revenues are directly related to the services it promotes, the coming recession could adversely affect its travel and money streams. That said, this will likely be offset by growing revenues from its insurance products, as premiums rise due to increasing payouts from Ogden rate changes.
Moneysupermarket has a solid set of financials. Excellent sustained revenue growth, profitability, and cash generation ability gives the group a well-earned reputation for dependable dividends. Its current yield is a decent 3.6%.
Both Moneysupermarket and Ashtead are dependable and cheap FTSE stocks I want in my diversified portfolio. To maximise returns, I would buy them both right now.