The stock market crash in March caught many investors by surprise. Almost every single stock was caught up in the short, sharp sell-off. While some UK shares have recovered in value over the past few months, many continue to trade below their year-end 2019 levels.
I think this is an excellent opportunity for long-term investors to buy high-quality blue-chip stocks at a discount. And that’s just what I have been doing in 2020. Rather than waiting to see what happens next, I’ve been investing in my favourite businesses at discounted prices.
Stock market crash bargains
One of my favourite UK shares is the consumer goods giant Unilever (LSE: ULVR). This company owns a stable of billion-pound brands and generates more than 50% of its sales in emerging economies.
These fast-growing markets are critical to the group’s growth over the next few years. Unilever’s exposure to these regions is, in my opinion, one of the best things about this UK-listed business. It provides diversification away from Brexit and the economic problems in Europe.
Unilever sells everything from ice cream to washing powder, and this has proven to be a remarkably resilient model in 2020. Its latest trading updates have noted that while sales of products such as deodorant and ice cream have declined this year, rising sales of cleaning products offset the decline.
Therefore, it seems as if the consumer goods business is going to ride out the challenges of 2020. That’s why I have been buying the shares since the stock market crash. A dividend yield of nearly 3% also looks attractive compared to other UK shares.
Global UK shares
I have also been buying Diageo (LSE: DGE) this year. I think Unilever and Diageo have many similar qualities. While the latter has been more affected by lockdowns than the former, since it generates the majority of its sales in restaurants and bars, I think the company’s long-term potential remains robust.
I’m almost certain that in 20 years’ time, consumers will still be drinking whiskey, vodka and Guinness. That’s unlikely to change, which suggests Diageo can continue to churn out profits for its investors.
Still, the short-term nature of the market means that many investors are concentrating on the organisation’s immediate problems. I think this is a mistake. Instead, I feel investors should focus on the company’s long-term competitive advantages and potential.
Considering the challenges the business is currently facing, these are not immediately clear. However, by taking a step back, it is apparent that customers are still committed to many of the group’s flagship brands.
It may take some time for Diageo’s sales to return to 2019 levels, but in the meantime, the stock offers a dividend yield of 2.6%. Even after factoring in a 20% decline in profitability due to the coronavirus pandemic, analysts reckon this distribution will be covered 1.5 times by earnings per share for the year. Therefore, it looks as if investors like me can rely on this income stream in these uncertain times.
