I think these small-cap stocks are the best buy-and-hold UK shares in a post-pandemic world

These stocks have seen their share prices plunge in the market crash. But I think they could be among the best UK shares buy and hold for the long term.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The significant upside growth potential of investing in small-cap stocks is a huge advantage they have over their FTSE 100 blue-chip counterparts. Combine this with depressed share prices as a result of the coronavirus pandemic and subsequent stock market crash, and I think there’s a lucrative investment opportunity on the cards.

As lockdown restrictions in the UK are gently eased, pubs, restaurants, and non-essential retailers are back open for business. Much of the impact remains to be seen, but the economy is showing early signs of a steady recovery. For investors chasing market-beating returns, I think these small-cap stocks are among the best UK shares to buy-and-hold over the coming years.

Best UK shares to buy and hold in a post-pandemic world

Perhaps unsurprisingly, The Gym Group’s (LSE: GYM) share price is down 52% since mid-February after plunging 75% in the depths of the sell-off. After all, the budget fitness provider lost around a fifth of its membership during the lockdown period as facilities closed across the nation. However, with indoor gyms given the go-ahead to re-open their doors from 25 July, things are beginning to look up.

The group had been growing at an impressive rate prior to outbreak of Covid-19 thanks to the strength of its low-cost business model. Moreover, provided the company can recover a sufficient portion of its membership, the shares should continue to rise. For those able to stomach the additional risk, I reckon that on balance, the risk-reward picture is sufficiently attractive to justify a buy-and-hold purchase.

Another company lifted by the easing of lockdown restrictions is Marston’s (LSE: MARS). Hit hard by the sell-off, the pub stock’s share price is still down by 62% in 2020. The company will inevitably face financial hardship over the coming months given its first-half profit fell by more than 70%.

That said, Marston’s dominant market position and large customer base will be of immense help. As Brits make a swift return to local pubs and restaurants, Marston’s will be a huge beneficiary. I expect significant share price appreciation and healthy dividends in the years to come.

A contrarian pick

Finally, as a perhaps contrarian pick, I think Boohoo (LSE: BOO) could be a fantastic buy-and-hold investment. The company has stumbled upon difficult times recently regarding working conditions, and its share price has tanked as a result. However, the company has since pledged to raise standards. Hence, its brand may not be affected poorly over the long term.

Boohoo’s popularity, especially among young people, should not be underestimated and the underlying business strategy is extremely effective. In fact, I think there’s plenty more room for the company to grow over the coming years. Consequently, I see the share price pullback as an opportunity to buy at a discount.

Ultimately, each of these small-cap stocks boasts huge upside potential over the long term, in my eyes. As such, I reckon they justify their place among the best UK shares to buy and hold in a post-pandemic world.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Matthew Dumigan has no position in any of the shares mentioned. The Motley Fool UK has recommended boohoo group, Marstons, and The Gym Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

2 FTSE income stocks investors should consider buying in April

Income stocks are a great way to build wealth. Our writer details two picks she believes investors should consider snapping…

Read more »

Investing Articles

What might the 5-year price chart tell us about BT shares?

Christopher Ruane considers what clues the long-term performance of BT shares might offer him about business performance and whether to…

Read more »