As an investor in UK shares, I’m always on the lookout for excellent opportunities. Every now and again, global stock markets tumble. This often presents a chance to buy my favourite shares at knock-down prices. It’s kind of like the January sales.
The stock market can fall sharply due to all kinds of reasons. Global economy concerns, or unfavourable news regarding a particular industry or country can cause stock market weakness. Recent sharp falls in share prices were due to concerns over Chinese property group Evergrande and its potential effect on global markets.
I reckon the concerns are overdone and it’s a great time to add my favourite shares to my Stocks and Shares ISA. But which ones?
Top UK shares
One of my favourite UK shares I’d buy is Reach (LSE:RCH). Formally known as Trinity Mirror, this news publisher is moving firmly into the digital age. Despite physical news readership falling, digital news is going from strength to strength.
Online readership figures are on the up. This is great news for Reach as it owns over 70 online brands. In addition to national newspapers, it also owns many regional publications. Online content is big business and Reach is in prime position.
Little known to many, it owns the fifth largest digital asset in the UK, behind the likes of Google and Facebook. It also has an audience of over 40m.
With such a large audience comes much customer data. This mid-sized company is trying to monetise more of its customer data by growing digital advertising. And it looks like it’s working.
That said, there are some issues to look out for. It’s possible that print revenues could fall by more than the company expects. Converting customer data into advertising revenue also comes with challenges. Regulation could make it more difficult to capture data.
Overall, this company’s updates are encouraging. In fact, I reckon it’s still early days for Reach. Its share price is up by over 550% in the past year, but the recent fall could be a great opportunity, in my opinion.
The move from physical to digital is a big trend that isn’t going away. Several industries have been disrupted by technology and many are still undergoing changes today. That’s why I like to focus much of my portfolio on technology. Even non-technology companies can use tech to their advantage to gain market share.
In particular I like firms that offer double-digit growth and recurring revenues. Sales that regularly repeat are far more valuable than a one-off purchase.
In addition, I like technology companies that have bold, global ambitions and are ready and able to disrupt their respective industries. However, many of the companies that have these qualities are based outside of the UK.
With investments focused on UK shares, I could buy Scottish Mortgage Investment Trust (LSE:SMT) instead. This UK-listed global technology fund has performed phenomenally well in recent years. In the past year it has returned around 50%. Even over a 10-year period, it has managed to produce a 27% annual return.
It owns several “exciting new businesses with deep competitive advantages, targeting large opportunities.” For example, it’s largest holding is Moderna. This US-based biotech company focuses on medicines based on mRNA technology. Scottish Mortgage also has large holdings in Tesla and Amazon.
There are some things to bear in mind, however. Fast-growing technology companies are often more volatile than some of the mature FTSE 100 firms. This can often lead to greater swings in share prices. In addition, some of the tech firms that the fund invests in are based in China. Every country operates differently, and some countries have greater regulatory risks than others.
Overall, I’d say it’s an excellent, well-managed fund that I’d be happy buying in any stock market crash.
A small slice
I like to own UK shares of all shapes and sizes. Spreading a selection across industries can diversify my investments. And having a mixture of small-cap, mid-cap and large-cap shares can create a nice mix. Scottish Mortgage Investment Trust is large-cap and Reach is mid-cap. Which leaves my small-cap idea.
One small-cap share that I’d buy in a stock market crash is franchise retailer Cake Box Holdings (LSE:CBOX). It manufactures fresh cream cakes and supplies them to its franchise-operated retail stores.
The reason why I like this firm isn’t just its delicious cakes. It also has a tasty business model. Much of its earnings come from new shop openings. It has over 150 stores and it’s growing at a reasonable pace. In fact, it opened 24 new franchise stores in the most recent financial year. And it has an encouraging pipeline of upcoming sites across the UK.
Also, demand for its cakes is strong and I reckon it’ll continue to be so over the coming months. As many restrictions were relaxed this year, I think there would have been many parties and celebrations during the summer months. This could bode well for its next trading update.
I like that it has entrepreneurial leadership, with the company founders still running the show. I also like that it offers big, fat, juicy returns and profit margins. It’s also growing at pace, the shares are relatively cheap and it even offers a 2% dividend. What’s not to like?
Well, there are some negatives. One thing to bear in mind is that the shares are relatively illiquid. This is mainly due to the founder owning a large portion of the company. Less liquid shares can make large purchases and sales more difficult. For individual private investors like me, however, this could be less of a factor. Also, I would look out for when growth of new franchises starts to slow. It’s currently growing swiftly, but any sign of a slowdown could have a negative effect on its share price.
Overall, if a stock market crash lowers its share price, I’d love to add a slice of these shares to my portfolio.
Markets around the world are reeling from the coronavirus pandemic…
And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.
But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.
Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…
You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.
That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Harshil Patel owns shares of Amazon, Cake Box Holdings, Reach, and Scottish Mortgage Inv Trust. The Motley Fool UK owns shares of and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Facebook, and Tesla. The Motley Fool UK has recommended Moderna Inc. and has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. 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.