Has the stock market crash increased your chances of making a million? There have certainly been plenty of great shares that have plummeted along with the duds during this Covid-19 crisis. It provides an opportunity for eagle-eyed investors to maximise the eventual returns on their invested cash.
More and more people are making millions of pounds from their Stocks and Shares ISAs. It’s partly because rock-bottom interest rates are forcing individuals to seek decent returns on their money through equity markets. It’s also thanks to the acres of information that investors can draw upon to make the best stock investment decisions.
Still, these newly minted millionaires remain in the significant minority. And judging from the quality of some of the dip buying that’s been going on of late, a lot of people aren’t giving themselves the best opportunity to make a million from their own share portfolios.
A millionaire maker?
I recently explained why De La Rue – a share which has soared 200% this week on fevered investor interest – could leave many nursing a great hole in their pocket. British Land Company (LSE: BLND) is in my opinion another rocketing stock that could turn out to be a mistake for wannabe millionaires.
This particular FTSE 100 share has soared more than 25% in value during the past fortnight as government restrictions on the retail sector have been unwound. As a consequence British Land now trades on a forward price-to-earnings (P/E) ratio just shy of 17 times.
But is the office and retail property owner worthy of such a multiple? It’s a reading that sits above the broader Footsie historical average of below 15 times. And it’s one I don’t think factors in the colossal layers of risk that it currently carries.
Red alert
News that shoppers are being let off the leash again is of course good news. Retailers need to make money in order to pay their rents to British Land. But it doesn’t mean that British Land’s troubles are over, not by a long chalk.
Shops might be reopening, sure. But they still need to adhere to strict social distancing rules that limit the number of customers that’ll pass through their doors each day. This is likely to be no short-term phenomenon, either, as authorities try to curb the chances of a second wave of coronavirus infections.
The Covid-19 pandemic of course also has far-reaching economic consequences that will damage retailers’ revenues. Three former British Chancellors this week tipped UK unemployment to hit levels not seen since the 1980s during a potentially catastrophic downturn. It explains why fellow retail property operator Intu Properties predicted earlier this week that the amount of rents it will likely collect in 2020 will plummet by a shocking £180m year on year.
British Land itself recently announced the collection of just 43% of rents from its retail tenants in the March quarter. It said too that the value of its retail assets had tumbled by more than 26% in the period. This is clearly a company with significant short-to-medium term issues, and a serious long-term problem too as growing e-commerce thins footfall at its malls. I reckon this FTSE 100 share should be avoided at all costs.
