Stock market crash? I’d still buy these 3 UK shares

As whispers of a potential stock market crash get louder, I take a look at three UK shares that I wouldn’t hesitate to buy in a down market.

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The FTSE 100 index has seen its worst week since mid-August. The FTSE 100 and FTSE 250 are down 1.3% and 1.4% respectively. It looks to me like the UK share market recovery we saw in early August is slowing or even reversing.

My colleague Stuart Blair argued that a market fallback is likely and I agree. But rather than see it as a sign to pull my investments, I think it presents a good buying opportunity. This is because businesses are bouncing back well despite the looming threat of another Covid spike. I see rapid vaccination efforts driving up consumer confidence, which would likely boost consumer spending in the near future.

Also, the UK market is subject to increased merger and acquisition activity, which I see as a sign of confidence from international investors in UK businesses. In fact, this year marks the most takeover activity since 2007.

At the moment, market lows signal to me that it’s time to add some tested UK shares to my portfolio and these are my top three picks for September.

Stable UK dividend shares

I am always looking to boost my passive income portfolio. Both Legal & General (LSE: LGEN) and British American Tobacco look like bargain picks for me at the moment given their dividend yields of 6.4% and 8%, respectively.

Insurer Legal & General has been on my watchlist for some time now. With its share price down 1.7% in the last six months, it looks like a perfect time to add it to my portfolio. Its operating profits went up 14% in the first half (H1) of 2021 to £1.07bn. The insurance wing of the company reported a 52% increase in profits to £134m.

The insurance sector is highly contested in the UK with Aviva and RSA Insurance Group also performing well this year. But LGEN’s strong financials and dividend policy makes it a top UK share for my portfolio at the moment.

British American Tobacco is another dividend stock that looks cut-price to me right now. Its share price is down 3.3% in 2021 and the price-to-earnings (P/E) ratio of 9.8x points to a slightly undervalued UK share.

Combined with the mammoth 8% dividend yield, I think this stock is a great option for my portfolio. Its history of increasing dividends every year is also impressive. Although the large debt pile and dropping tobacco sales are concerning, it remains a passive income pick for my portfolio.

Defence pick

The UK’s defence industry is in the news right now over growing interest from international bidders. BAE Systems is not directly involved in any deals at the moment but could profit from the potential Meggitt and Ultra Electronics deals.

BAE Systems is a consistent performer that offers a steady 4.6% dividend yield and a history of growth in the market. Its share price has risen 12.5% in 2021 and it posted a strong showing in H1 2021. Pre-tax profits were up 27% at £1.02bn and its order book stood at £35.5bn.

Governmental restrictions in the sector could hamper its cross-border trade, which is a concern. But, I think this UK share could be resilient in the event of a market crash. I will happily buy BAE shares in the event of market crash.

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 considered so you should consider taking independent financial advice.

Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended British American Tobacco. 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.

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