In the current lockdown, public transportation has ground to a halt. As a result, transport companies such as airlines, train companies, and bus and coach operators have suffered.
I often like a contrarian buy. With the market crash, there a few around but here are two I feel you can pick up very cheap.
Market crash opportunity #1
National Express (LSE:NEX) is an intercity and inter-regional coach operator providing routes and services throughout the UK.
When the market crashed, shares hit a low of 90p per share. At the time of writing its share price has recovered to over 200p. If you rewind to the turn of the year, NEX’s share price was over 450p.
National Express announced last week that it has begun to sell tickets for journeys from 1 July onwards. Its services will initially focus on a core network only.
NEX has continued to keep the market informed with regular trading updates. Like many other beleaguered companies out there, it has decided to cancel its dividends. The company has enough liquidity to ward off catastrophe with approximately £1.3bn in cash and an undrawn revolving credit facility.
Past performance and current cheap share price are what make NEX enticing for me. Revenue, profit, and dividend per share have increased year on year for the past five years. Though this will be disrupted due to the current downturn, I am more excited about the longer-term results.
I expect 2021 to be a fruitful year for National Express as I believe market conditions will normalise. With its share price doubling from lockdown lows, I think it will continue to rise. In my opinion, this could be a great market crash bargain as the lockdown is eased and the economy restarts.
Opportunity #2
Stagecoach (LSE:SGC) is a bus, express coach, and tram operator. Its services are essential, giving it excellent defensive qualities in my opinion.
SGC has released regular updates during the market crash. Trading has been impacted by the Covid-19 pandemic, as expected. For April, it confirmed sales at regional bus operating companies were around 15% of normal levels.
In March and April, SGC confirmed steps it is taking to lessen the market crash impact. It confirmed that dividends are unlikely for the year ending 2 May 2020. Preliminary results are due at the end of June. It has frozen all recruitment and directors have taken a 50% pay cut as well as waiving bonuses and a pay rise next year. SGC has over £500m of liquidity according to the April update. This should see it through the turbulent time in my opinion.
When the market crashed, SGC lost over 60% of its share price value. At the time of writing its share price trades at just over 55p. Stagecoach’s defensive qualities as one of the UK’s essential public transport providers is what entices me.
I think this could be a great contrarian buy. The government has introduced a phased easing of the lockdown plan. SGC will be vital to the country getting back on its feet and the public getting around. There is short-term pain ahead but longer term, SGC could be a great market crash buy at its current rock bottom price.
