One saying I often quote is, “When the facts change, I change my mind”, attributed both to Sir Winston Churchill and economist John Maynard Keynes. I change my mind frequently, so I often rely on this saying. For example, as 2019 went on, I saw US stocks as increasingly expensive. Hence, my wife and I moved 50% of our holdings into cash in late 2019. Then came the stock market crash of spring 2020, when the S&P 500 and FTSE 100 both collapsed by more than a third (-35%) within weeks.
Thus, shortly after ‘Meltdown Monday’ (23 March 2020), we reinvested our cash into (much cheaper) stocks. Instead of buying UK shares, the vast bulk went into US and global stocks. This proved to be fortuitous, as the S&P 500 has skyrocketed since its 2020 low. At its current level of 4,461.49 points, the main US market index has more than doubled (+103.5%) from its March 2020 intra-day low. However, after such a sharp and steep rebound, I see US stocks in bubble territory. Therefore, we’re directing future cash into quality FTSE 100 stocks, which I view as unloved and under-valued. Here are two solid UK shares I’d happily buy during the next stock market crash — when it finally arrives, that is.
Stock market crash share #1: Imperial Brands
One cheap UK share I’d buy in the next stock market crash is Imperial Brands (LSE: IMB), a major producer of tobacco, cigarettes and vaping products. Across the developed world, smoking is dying out. Also, Imperial is hardly a stock popular among ESG (environmental, social and governance) investors. However, due to growth in developing countries, cigarette sales actually rose in Q1 2021. This Bristol-based British business generates huge cash flows from selling cigarette brands such as Davidoff, Gauloises, JPS, Kool, West, and Winston.
The group uses this cash torrent to reduce its net debt, buy back its shares and pay chunky (but not guaranteed) cash dividends to shareholders. At Monday’s closing price of 1,538p, Imperial is valued at £14.6bn. Its shares trade on a price-to-earnings ratio of 5.2 and an earnings yield of 19.1%, and offer a dividend yield of 9.0% a year. To me, this stock looks too cheap today, never mind during the next stock market crash. Imperial’s high levels of debt make this share riskier than most, but I’d still buy it as a post-crash winner.
Slump stock #2: Unilever
My second stock to buy to survive the next stock market crash is consumer-goods giant Unilever (LSE: ULVR). While no share can be totally bomb-proof during market meltdowns, Unilever stock has been a long-term winner. Recently, Unilever shares have been weakening, but check out its price chart over several decades. ULVR is down 3.2% over the past month, 7.5% over three months, and 16.7% over 12 months. However, the stock has risen by 13.7% over the past five years.
At Monday’s closing price of just under 3,999p, this Anglo-Dutch behemoth is valued at £103.7bn, ranking it at #2 among the FTSE 100’s super-heavyweights. Trading on 22.7 times earnings and with an earnings yield of 4.4%, Unilever stock isn’t cheap. But it’s worth paying extra for quality — and I like the 3.8% dividend yield. At almost £10 below their 52-week high, Unilever shares are selling at a discount today. What’s more, they look good to me to survive the next stock market crash!
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Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has recommended Imperial Brands and Unilever. 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.