3 shares I’m buying for a stock market recovery

With a potential stock market recovery on the horizon, Andrew Woods looks at three companies that could stand to benefit.

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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.

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For the past few months, I’ve had to be patient and ride out the downturn in equity markets. The war in Ukraine, pandemic supply chain issues, and rising energy costs have all weighed heavily on share prices.

In recent weeks, however, there have been some signs that there may be a stock market recovery in the near future with share prices rising simultaneously. I’ve found three stocks that could perform well if the market does indeed recover. Let’s take a closer look.

Recovery stock #1: easyJet

easyJet (LSE:EZJ) is an airline that operates short-haul flights across Europe and North Africa. It was battered during the pandemic as international travel ground to a halt.

The company expects passenger capacity to hit 90% of pre-pandemic levels for the three months to 30 June. Furthermore, the following three months, to 30 September, could see 97% passenger capacity levels.

In its half-year results for the six months to 31 March, pre-tax losses narrowed from £645m to £557m, year on year.

In addition, revenue grew massively from £240m to £1.5bn. This is a strong indication that international travel is returning to something close to normal.

Although many restrictions are now gone, easyJet has faced staff shortages as it struggles to keep up with demand. Until it solves this problem, many flights will continue to be cancelled.

Recovery stock #2: BP

The next firm, BP (LSE:BP), is a global oil and gas business. Financially, it had a bumper year in 2021, with revenue jumping around 50% compared with 2020.

Furthermore, the company swung from a 2020 pre-tax loss of $24bn to a pre-tax profit of $15bn in 2021. Much of this is due to the reopening of economies following the pandemic, causing greater demand for oil and gas.

In addition, the war in Ukraine has directly resulted in significantly higher oil prices as concerns mount over supply. At the time of writing, Brent crude oil is trading at $119 per barrel, up from $71 one year ago.

While these high prices could stay for a while, there is the real possibility of a windfall tax on oil companies by the UK government. This could be bad news for BP shares.

Recovery stock #3: Barclays

Finally, Barclays (LSE:BARC) is an investment bank, operating globally. In recent months, the Bank of England has been increasing interest rates. 

Interest rates are important for banks, because they largely dictate how much banks can charge for loans and mortgages. Higher rates could be good news for the company.

Between 2020 and 2021, pre-tax profits more than doubled to £8.4bn while revenue remained steady.

Furthermore, with a forward price-to-earnings (P/E) ratio of 5.41, Barclays shares may be a bargain at current levels. A major competitor, HSBC, has a forward P/E ratio of 8.59.

However, the cost-of-living crisis, combined with rising energy costs, may lead to a decline in the number of people seeking loans and mortgages.

Overall, these three firms could do very well if a stock market recovery is on the horizon. I will be buying shares in all three companies soon for long-term growth. 

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 considered so you should consider taking independent financial advice.

Andrew Woods has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays and HSBC Holdings. 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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