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.
