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Friday’s mini-stock market crash threw up these bargain shares!

Businessman looking at a red arrow crashing through the floor
Image source: Getty Images.

For the record, Friday was the worst day for the FTSE 100 index since June 2020. The Footsie dropped 266.34 points to 7,044.03 in a mini stock market crash. This left it down over 3.6% since Thursday’s close, erasing £72bn of market value in a single day. It meant the FTSE 100 was down 2.5% over one week and 2.9% down over one month. Also, the index is barely ahead since late May, rising by only 0.4% over six months, although it’s up over 12% year-on-year.

But here’s one thing I’ve learnt about stock market crashes since witnessing the October 1987, 2000-03, 2007-09 and March 2020 collapses. By sending sending share prices southwards, market meltdowns make it cheaper to buy into good companies. And, generally speaking, since stock markets tend to rise over the long term, buying at discounts has frequently boosted my returns.

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Stock market crash: a rational response?

On Friday, 20 FTSE 100 shares closed down by more 6%. Among the stocks worst hit were big banks, oil & gas producers, and travel & leisure companies. Of course, this could be a rational reaction to the discovery of the new Omicron Covid-19 variant. If this variant is deadlier, more transmissible or more vaccine-resistant than previous forms, then this would be bad news. A nastier virus could lead to more social restrictions and new lockdowns across the globe.

However, what if market fears are overdone and the latest coronavirus variant proves no more harmful/vaccine-resistant than previous variations? Then the mini stock market crash on ‘Red Friday’ might actually be ‘Black Friday’ — a day for buying quality stocks on the cheap.

Bargain-bin buys?

I had a rummage through the FTSE 100’s top 20 fallers on Saturday afternoon, looking for bargains. Here are six stocks I’ve had my eye on for a while that fell steeply in Friday’s mini crash.

Company

Share price (p)

Change (p) Change (%)
Intermediate Capital Group 2109.0 -191.0 -8.3%
Prudential 1303.5 -116.0 -8.2%
BP 317.65 -27.1 -7.9%
NatWest Group 208.2 -16.8 -7.5%
Lloyds Banking Group 46.0 -3.69 -7.4%
ITV 108.6 -8.3 -7.1%

As you can see, each of these six slumping stocks lost between 7.1% and 8.3% in value on Friday. Four of these are financial companies (two well-known banks, a leading insurer and a broker). The remaining two company shares are oil giant BP and broadcaster/producer ITV. Obviously, with financial markets turning down, financial stocks suffer. Likewise, BP’s fall is explained by the 10%+ dive in the price of Brent Crude oil on Friday. And ITV’s financial performance definitely suffered during the 2020-21 lockdowns.

Which of these six shares would I buy now?

I don’t own any of these six sliding shares, but which would I be happy to buy today?

First, I like the look of ICG, the world’s leading inter-dealer broker. This stock trades a whisker above its 52-week low, yet offers a decent dividend yield of 4.6% a year. Second, I’d buy BP, whose shares trade nearly 50p below their 18 October high and offer 5% a year in cash dividends. Third, I’d snap up Lloyds Banking Group, whose shares now lie more than 5.5p short of their 52-week high on 2 November. Fourth, I’d pick up ITV, a £4.4bn firm that I see as a potential takeover target by a larger media conglomerate.

Finally, given the latest Covid-19 uncertainty, I’d expect a fair degree of volatility and unpredictability in these share prices in 2021-22 (and maybe more mini stock market crashes). But I suspect this won’t matter quite so much five or 10 years down the line!

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Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has recommended ITV, Lloyds Banking Group, and Prudential. 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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