Stock market correction: 2 stocks I’m buying during the dip

As investors panicked late last week, many stocks fell dramatically but some bounced back too. Here are two companies I’m buying during this stock market correction.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

A beach at sunset where there is an inscription on the sand "Breathe Deeeply".

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Key points

  • A number of companies with links to Russia and Ukraine fell as much as 33.9% in a single day
  • Beazley is a strong insurance firm, with very solid results
  • The TUI share price is still low and the business will benefit from relaxed pandemic restrictions

Towards the end of last week, the stock market declined dramatically. Indeed, the FTSE 100 index fell 4% in a single day. This was primarily caused by the Russian invasion of Ukraine. While most firms fell to some degree, some companies with Russian or Ukrainian exposure saw their share prices plummeting. Evraz, the iron ore miner controlled by Russian businessman Roman Abramovich, fell 29.5%. Furthermore, the gold company Polymetal dropped 33.9%. Wizz Air, an airline based in Hungary, crashed 11.3%. Due to their locations, all three of these firms were directly impacted by the military action. The next day, however, they were up 19.5%, 17%, and 12% respectively. That’s why I’m writing about a stock market correction, not a stock market crash. During this dip, I think I’ve found two strong companies to purchase for the long term as market volatility continues. Let’s take a closer look.

An insurance firm for a stock market correction

The first business, Beazley (LSE: BEZ), is a non-life insurance company operating across the globe. Its share price fell 6% last Thursday, to 448p, and rebounded 3.9% the following day. At the time of writing, it’s trading at 454p and is still below where it was this time last week, despite being up 28% year-on-year. Between calendar years 2017 and 2021, its earnings-per-share (EPS) increased from ¢25 ¢50.9. By my calculations, this means that the firm has a compound annual EPS growth rate of 15.3%. This is very strong and consistent.

Furthermore, revenue increased over the same period from $2.3bn to $4.6bn. Needless to say, things are going in the right direction. Investment firm ShoreCap also recently stated that Beazley was “well capitalised”. This is attractive, given the current stock market correction. On the other hand, its forward price-to-earnings (P/E) ratio is slightly higher than major rival, Axis Capital. This may indicate that the company is not necessarily cheap.

A FTSE 250 travel firm

The second company, TUI (LSE: TUI), is a travel business operating flights, hotels, and cruises. It fell 4% during the initial sell-off, to 237p, gaining 6% the next day. At the time of writing, it’s again trading at 237p, down 22% in a year.

In a trading update for the three months to 31 December 2021, the company announced that revenue had risen to €2.4bn. This was an increase from just €0.5bn for the same period in 2020. Furthermore, its losses narrowed from €675.8m to just €273.6m over the same period. These improving figures are exactly what I want to see when responding to a stock market correction. It’s worth noting, however, that progress may be impacted if another Covid variant emerges.

It may also be cheap when compared with easyJet. TUI has a forward P/E ratio of just 21.19, while easyJet’s is 142.86. Although the share price is low on account of the recent market volatility, I’m pleased that the company may also be undervalued. 

The stock market correction has caused panic, but I’m staying calm and sticking to my principle of buying quality growth stocks at bargain prices. I will be purchasing both Beazley and TUI today for my long-term portfolio. 

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 assessed. Consider taking independent financial advice.

Andrew Woods has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

More on Investing Articles

Two white male workmen working on site at an oil rig
Investing Articles

Shell hints at UK exit: will the BP share price take a hit?

I’m checking the pulse of the BP share price after UK markets reeled recently at the mere thought of FTSE…

Read more »

Investing Articles

Why I’m confident Tesco shares can provide a reliable income for investors

This FTSE 100 stalwart generated £2bn of surplus cash last year. Roland Head thinks Tesco shares look like a solid…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

£20,000 in savings? I’d buy 532 shares of this FTSE 100 stock to aim for a £10,100 second income

Stephen Wright thinks an unusually high dividend yield means Unilever shares could be a great opportunity for investors looking to…

Read more »

Investing Articles

Everyone’s talking about AI again! Which FTSE 100 shares can I buy for exposure?

Our writer highlights a number of FTSE 100 stocks that offer different ways of investing in the artificial intelligence revolution.

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

3 top US dividend stocks for value investors to consider in 2024

I’m searching far and wide to find the best dividend stocks that money can buy. Do the Americans have more…

Read more »

Investing Articles

1 FTSE dividend stock I’d put 100% of my money into for passive income!

If I could invest in just one stock to generate a regular passive income stream, I'd choose this FTSE 100…

Read more »

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

Forecasts are down, but I see a bright future for FTSE 100 dividend stocks

Cash forecasts for UK dividend stocks are falling... time to panic! Actually, no. I reckon the future has never looked…

Read more »

Young female analyst working at her desk in the office
Investing Articles

Down 13% in April, AIM stock YouGov now looks like a top-notch bargain

YouGov is an AIM stock that has fallen into potential bargain territory. Its vast quantity of data sets it up…

Read more »