Another stock market crash

Last week was really tough for shares. But in my opinion 2020’s market crash isn’t over yet as it seems we’re currently experiencing another coronavirus wave. This is being seen in much of Europe, with additional restrictions on normal life expected. However, it’s not the only risk investors are facing. For the UK specifically, there are also still fears around Brexit. It looks likely there will be a no-deal divorce from the EU. Some experts even think it could be more damaging for the British economy than the Covid-19 lockdown. And don’t forget other issues like the US elections and growing US-China tensions. 

So I expect another stock market crash in October. But I’m still buying. Here are the top UK shares I plan to buy next month.  

My top UK share

We at The Motley Fool consider market crashes to be wonderful opportunities to buy brilliant undervalued companies for peanuts. But there’s another way of profiting from volatility. Have you ever thought of the kind of businesses to benefit from volatile trading? One I like is London Stock Exchange (LSE:LSE). It’s a marketplace where sellers and buyers come together to buy and sell securities. So the more we all trade, the better it is for the company’s revenues. Volatility refers to a period when too much trading takes place. At the same time, when too much selling takes place, people tend to go wild and even get rid of companies directly benefiting from volatility, including LSE. The share price chart for LSE illustrates this well as there’s a clear drop that happened along with the rest of the market.

London Stock Exchange share price

Source: Google Finance

You see, when there’s a stock market crash, people don’t have enough cash. That means they’re willing to sell everything they currently have. But after situations like this, the Bank of England (BoE) pumps even more money into the financial system. Many banks and investors hold bonds and quantitative easing sees the BoE buying bonds. This is highly supportive for banks and institutional investors and they rush to high-quality assets, such as LSE.

There’s another asset class that also benefits from volatility — gold. The shiny metal isn’t rallying now though. You might be wondering why. After all it’s a safe haven-investment. But it’s seeing the same issue as LSE shares — the temporary lack of cash. But just as in the case of LSE shares, gold prices should start surging after a cash injection from the BoE. Institutional investors will start buying gold with the extra cash they will get.

But gold doesn’t pay interest or dividends. Instead, investors have to pay storage and insurance fees. Although I’m bullish on gold, I’d like to benefit from combining top UK shares and the yellow metal. In order to do so, I’d buy the largest UK-listed miners. These companies should have long histories of operations and pay dividends. 

The post The top UK share I’d buy in October to get rich and retire early appeared first on The Motley Fool UK.

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Anna Sokolidou has no position in any of the shares mentioned in this article. 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.

Shell cuts costs 

Shell is planning to cut production costs of oil and gas by up to 40%. Sounds like great news, indeed. But there’s a catch, however. Oil companies face rising pressure to become environmentally friendly. That made them set themsleves targets to get carbon neutral. Shell aims to become carbon neutral by 2050, for example. So, as part of this initiative, the corporation simply moved from oil and gas where profit margins are much higher to alternative energy sources. As you can see, it doesn’t mean the company’s total costs will go down. Instead, Shell wants to reduce only the oil and gas costs. At the same time the company is prepared to take on additional higher costs in the area of green energy.  

Doesn’t look like particularly good news for the company’s shareholders, in my opinion. 

Are Shell shares a good opportunity?

However, what is quite positive for a potential buyer is the fact the company’s stock is trading quite low. Due to the Monday market crash, it’s trading close to its record low, reached this March.

Royal Dutch Shell share price

Source: Google Finance

But let us look at some other fundamentals.

I earnestly believe the oil prices will recover in the medium term. Of course, an economic recession is always accompanied by weak demand for oil and depressed oil prices as a result. But ‘this too shall pass’, in my view. Sooner or later the demand for air and car travel will recover. And I think large players like Shell will be the first to benefit. 

What’s more, even the move to green energy might be a source of profits in the long term. Nowadays many alternative energy sources are quite costly and unprofitable. But technological progress has been really fast in the last couple of decades. So, I believe, green energy will become highly profitable one day. It will be very good news for Shell and its stockholders. After a rise in green energy profit margins, Shell shares will go up too, I suppose. 

I also like the company’s large scale and dividend yield. There has recently been plenty of hype about the dividend cut. But even after the cut, the dividend yield is still around 5%. That’s well above the Footsie’s average of about 3.6%. As concerns the corporation’s size and financial stability, it’s hard to find a more stable company selling for peanuts. In spite of the coronavirus downturn badly affecting the energy industry, Shell is still enjoying an investment-grade credit rating. The fact that it has a brilliant market position means it will probably be one of the few oil companies to actually gain from the current recession. That’s because its smaller competitors will go bankrupt. As a result, the oil market will get tighter, thus driving oil prices higher. And Shell, in my opinion, will be here to gain.

Here’s what I’d do 

It looks like investing in Big Oil is a highly risky step these days. However, patient and brave investors can end up with nice returns, I think. At the same time I wouldn’t invest my entire savings in one industry. But it’s a good addition to a portfolio of stocks, in my opinion.

The post Shell shares – A wonderful investment opportunity as the oil giant cuts costs? appeared first on The Motley Fool UK.

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Anna Sokolidou 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.

Top reasons for another stock market crash 

To start with, the coronavirus-related tougher measures will delay the long-awaited economic recovery, I think. Although there won’t probably be a second lockdown like we had this spring, there will surely be more regulations. For example, bars, hotels, and restaurants will have closing time at 22:00 starting from Thursday. Clearly, this will be an additional blow for the hospitality industry. What’s more, everyone is recommended to work from home if there is such an opportunity. The fact that tighter measures are in place is also a risk to many other sectors of the economy. Airlines and cinemas will be the first to suffer, I believe.

Then, I assume there’ll be more volatility soon due to Brexit. It’s still a big question whether there’ll be a ‘deal’ or a ‘no-deal’ divorce from the EU. There are many issues the two sides still cannot agree on. So it looks like the UK will leave without a deal. Some well-established investment banks like Goldman Sachs think a hard Brexit will be even worse for the UK economy than the coronavirus lockdown. I don’t know for sure what the future holds for UK-EU relations, but I am more than sure that any bad news will lead to volatility.

US-China tensions are a great risk too. And so are the US elections, which are a major source of uncertainty as well. These last two things to worry about might seem to be irrelevant for FTSE 100 investors. However, that’s not the case, unfortunately. That’s because major stock market crashes in the UK were all somehow linked to the US economy. The most obvious examples are the dot-com bubble and the Great Recession of 2008–09. 

Here’s what I’d do as a FTSE 100 investor

Earlier on I wrote about the steps I’d take as a Footsie investor. But I find the most important measure one can take is holding as much spare cash as possible. A stock market crash is usually a great buying opportunity. Always remember that markets go up and down. I don’t worry that much when my portfolio holdings go down. After all, it’s a normal situation for an investor. But I find it really annoying not being able to take advantage of situations like this. That’s why it’s extremely important to have some cash available to invest.

I’d recommend FTSE 100 investors to stop worrying. Instead, think about the stock market recovery record. It’s really sound. This can be seen from the graph below.

FTSE 100 history

Source: Google Finance

But obviously, it’s much better to buy soon after a major stock market crash and not just ahead of it. 

FTSE 100 is an index, which means it’s just the market average. But it’s possible to consistently overperform it. We at The Motley Fool attempt to do just that with our investment ideas.

The post FTSE 100 investors be prepared! The stock market could fall further appeared first on The Motley Fool UK.

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Anna Sokolidou 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.

Lockdown market crash 

Prime Minister Boris Johnson is expected to announce tougher measures tomorrow. These might include closing all bars, restaurants and hotels. Although many people say a second lockdown would be a complete disaster for the British economy, some say it’s a necessity as coronavirus cases have surged in recent days, due to lockdown easing measures, and especially a return to schools and offices. 

It seems investors have plenty of things to worry about as the market crash could be around the corner. So what should they do?

What would I do right now? 

To start with, I think the market hasn’t reached its bottom yet. The risk of a second lockdown isn’t the only problem we’re all facing. There’s also the probability of a hard Brexit. Then we have many geopolitical risks, including US-China relations and most importantly, the US election.

But I think there’s no need to panic. Instead, I’d look at my current portfolio holdings. I’d check the companies’ cash positions and balance sheets. But valuations matter too. So, I’d sell all my shares of unprofitable companies with low credit ratings. In some cases, they’re expensive too. But of course, I wouldn’t get rid of all my stocks. Companies with high credit ratings that trade at low price-to-earnings (P/E) and price-to-book (P/B) ratios are key to every portfolio’s success. So I always hold and cherish such businesses. 

Which brings me to where to invest if you have spare cash. It all depends on your attitude towards risk. Given that we might experience another lockdown or two, I assume airlines and cinemas aren’t for the faint of heart. However, if you’re a really patient and risk-tolerant investor, you might like to look at companies like Cineworld.  

My top picks

I’d personally refrain from investing in that type of businesses just now, however. Instead, I’d prepare a portfolio of dividend-paying companies. What’s more, I’d invest in ‘necessities’. In other words, my picks would be firms producing and selling food, hygiene items and medicine. No matter how much the economy is struggling now, we all need to buy these types of goods.

I’d go for the largest players in their fields too. Among my favourite picks are Unilever, the third largest consumer goods company globally, and GlaxoSmithKline, a top pharmaceutical company.

But would I buy them right now? No. I’d buy these companies after a major sell-off, not just ahead of it. While GlaxoSmithKline with a P/E ratio of just about 16 isn’t too expensive, Unilever with a P/E of over 20 doesn’t look like a bargain to me. I’d prefer to buy both of these companies at lower valuations. 

There’s also one key way to hedge a portfolio that I would consider now. That’s through buying gold miners’ shares. Gold is the number one safe haven when the world is facing a lockdown market crash. It’s also protection against inflation. But the yellow metal has an important disadvantage. It doesn’t pay dividends, whereas gold miners often do. 

The post What would I do now with a possible lockdown market crash looming? appeared first on The Motley Fool UK.

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Anna Sokolidou has no position in any of the shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline and Unilever. 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.

The famous investment strategy

As the favourite student of Benjamin Graham, Buffett was focused on finding financially healthy companies selling for peanuts. But then, his investment style changed somewhat. The ‘Oracle of Omaha’ now asks many qualitative questions before buying a stake in a business, in addition to considering the purely financial considerations. Some of the most important factors for him are the firm’s competitive advantage over its peers, the quality of the company’s management, and the industry’s overall chances of success. 

But there are also rumours that the latest investment actions taken by Berkshire Hathaway, Buffett’s investment holding company, don’t actually reflect the great billionaire’s own decisions. Some investors even say that his assistants have made many buys and sells the Oracle would never make. They say this about Berkshire Hathaway’s recent investment in Occidental Petroleum, one of America’s largest shale oil companies, for example. This stake was then sold completely after the spring market crash. That kind of move isn’t typical of Buffett, indeed. In fact, the great investor likes buying when everyone sells. And, of course, he likes selling when everyone rushes to buy.

But one of the most untypical Buffett investments was made quite recently. It has always been a taboo for the Oracle of Omaha to invest in IPOs. What’s more, he has always been quite skeptical about high-tech companies. However, quite recently Berkshire Hathaway backed the IPO of Snowflake, a cloud data company. Snowflake’s capitalisation more than doubled over a single trading session. Surely, the company is loss-making and too expensive. In fact, it’s a classical ‘don’t’ for a value investor like Graham or Buffett. 

In my view, the billionaire would have never done it in the past. He would’ve not approved of the companies I’ll talk about next either.

UK shares Warren Buffett would probably avoid

Due to the pandemic, many investors have got really keen to buy small healthcare companies specialising in Covid-19 tests. I don’t completely disapprove of this. But, I think, fundamentals should justify valuations. Buying profitable companies with good balance sheets is often smart. It might even seem acceptable to overpay for them a bit. But if loss-making companies are expensive, then buying them is really risky, in my opinion. This seems to be the case with small pharmaceutical firms. Let’s say an effective coronavirus vaccine gets developed by a company or a country. After that, the demand for coronavirus tests as well as Covid-19 treatment will go down. And so will these companies’ shares. 

But there are other businesses that are also a bit overvalued right now. They benefit from lockdown-related services. Among them are Ocado and Just-Eat-Takeaway, for example. I have nothing against these two companies. They have sound competitive positions. What’s more, they have been operating for a long time. But their valuations are too high for me. So, before jumping in I’d expect their shares to drop somewhat.

But we at The Motley Fool are here to offer you many all-weather investment ideas. They’d work regardless of what the market will do next.

The post Trendy UK shares Warren Buffett would probably avoid appeared first on The Motley Fool UK.

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Anna Sokolidou has no position in any of the shares mentioned. The Motley Fool UK has recommended Just Eat Takeaway.com N.V. and Snowflake Inc. 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.

What do I mean by ‘good‘ companies? Well, most importantly, they have to be profitable. This doesn’t just mean having high net profit margins. It also means a company should have a good track record of rising profits. Of course, this doesn’t guarantee the firm’s profitability will keep rising in the future. But at least it makes investing in such a company somewhat safer. Of course, dividend-paying companies have a big advantage over their peers that don’t pay dividends.

Then, a great business should also have a sound financial position. Having a large cash pile is vital. What’s more, a company should have many more assets than liabilities. It’s okay to have debts but they must be manageable. Checking a firm’s financial soundness is easy. It’s sometimes enough to just check its credit ratings. These reflect the cash and debt positions. The higher the credit rating, the better it is for the company’s investors. But it’s not enough to buy ‘sound‘ companies.

It’s also essential for sound companies to be undervalued. You can spot them out by looking at their price-to-earnings (P/E) and price-to-book (P/B) ratios.   

Warren Buffett also authored the concept of an economic moat. This simply refers to a big competitive advantage. Imagine there are several pharmaceutical companies. One of them, company A, has many more patents than any of its rivals. So, company A has an economic moat and therefore a leading market position that’s important for an investor. 

Top UK shares

When I look at many Footsie shares, it seems to me they aren’t great bargains at all. But just like Warren Buffett and my colleague Peter, I think many sound businesses will be worth buying after a major sell-off. I believe there’ll be one for many reasons. The most obvious one is a ‘no-deal’ Brexit, I think. 

So, here are some of my top picks.

Unilever is one of the largest consumer goods companies in the world. It sells essential items, most notably food and personal care goods. The company enjoys economies of scale and operates in many coutries all over the world. What’s more, the multinational’s credit rating is investment grade. Unilever’s dividend yield is around 3% now, which is reasonable. The only bad thing I see is its P/E ratio, which is above 20. So, I’d be happy to buy the company’s shares after a pullback.

GlaxoSmithKline, a leading pharmaceutical company, doesn’t look overvalued right now. It’s trading at a P/E of 16, while its dividend yield is over 5%. It has a great product pipeline and enjoys an investment-grade credit rating. But at the same time I’d prefer to acquire it at an even lower price to get better returns.

But I’d also look through the Motley Fool’s excellent library for other investment ideas.

The post Top UK shares Warren Buffett would probably buy after the market crash appeared first on The Motley Fool UK.

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Anna Sokolidou has no position in any of the shares mentioned in this article. The Motley Fool UK has recommended GlaxoSmithKline and Unilever. 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.

Why will gold prices surge?

Well, to start with, the macroeconomic recovery is quite slow. We all know the coronavirus pandemic was a great blow to the world’s economy. So, central banks, including the Bank of England and the US Federal Reserve, aren’t going to change their monetary policies any time soon. This means central banks will keep their interest rates near zero. They’ll also keep flooding the financial system with cash. That alone is bullish for gold prices since investors will seek to invest the cheap cash. But at the same time many companies’ profits will stay low for a while. When the economy isn’t doing well, many companies are struggling due to the lack of demand for their products or services. This will make many investors favour safe haven assets, including gold, I think. But this scenario is rather too optimistic, in my opinion.

There’re plenty of other factors to consider. First, investors all over the world should be worried about so much uncertainty around Brexit. It’s still unclear whether it’ll be a ‘deal’ or a ‘no-deal’ one. But the US situation is even more likely to fuel the gold price rally. Just think of the US-China trade tensions and the US elections. Any worrying news from these fronts will make investors rush to safe havens, I think. But how far can the gold prices rise? Well, Alissa Corcoran, Director of Research at Kopernik Global Investors, thinks gold could reach $5,000. She isn’t alone here. Billionaire Thomas Kaplan, head of asset management firm Electrum Group, also gave the price target of $5,000. I am not personally sure how far the gold prices can rise. But I’m highly bullish on the precious metal.    

Here’s how I’d invest

Buying gold at every pullback might seem like a very smart move. But buying the shiny yellow metal has plenty of drawbacks too. First of all, the storage and insurance costs might be high. Secondly, physical gold doesn’t pay any interest or dividends. 

But there’s a sound way to take advantage of the $5,000 gold price. I think it’s a good idea to buy gold miners’ shares. It’s prudent for UK investors to buy companies listed on the LSE to avoid currency fluctuations. My colleague Rupert wrote a wonderful article about Eurasia Mining. But I can assure you there’re many more companies available for investing. Here’re my criteria for choosing such companies. To start with, they shouldn’t be small or mid caps. They should be among the largest companies. Then, they should have long operational histories. Needless to say they should be profitable and have high credit ratings. Last but not least, they should also pay dividends. You might like to reinvest these dividends to buy more of your favourite companies’ shares. Here at The Motley Fool we offer numerous catalogues that can help you choose the best-in-class mining companies’ shares.  

The post Analysts predict $5,000 gold price! Here’s how I’d invest appeared first on The Motley Fool UK.

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Anna Sokolidou 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.

Why did the AstraZeneca share price rally?

On Monday, the pharma giant resumed phase 3 vaccine trials. As we all know, the company’s stock has been surging in recent months. That’s because people expect AstraZeneca to develop a Covid-19 vaccine. But is the future so bright for AstraZeneca and its vaccine?

Quite recently the FDA said AstraZeneca’s coronavirus vaccine trial in the US is still pending. That’s because the FDA is unsure if there is a big safety issue or not. So, many questions remain. Phase 3 vaccine trials don’t mean the vaccine will be available tomorrow. What’s more, the FDA’s investigation also suggests there are still many regulatory hurdles. That’s why the AstraZeneca share price surge isn’t quite reasonable, in my opinion.

But there’s one more issue. Everyone wants to develop an effective Covid-19 vaccine. For example, in Russia a coronavirus vaccine was developed and approved by the state. Phase 3 trials are still going on, however. Some companies are close to launching their vaccine too. For example, Johnson & Johnson is doing late-stage testing right now. But we’ve all read plenty of stories about the likes of Gilead Sciences and Moderna. The point I’m making is that no one has developed and launched an effective Covid-19 vaccine yet, and it’s hard to predict who’ll be the first one to do so.

Please don’t forget that developing a good treatment doesn’t mean it’ll be easy to commercialise. Some drugs, for example, are easy to copy. Many companies such as Teva Pharma produce generics in developing countries. They are much cheaper but the quality isn’t much worse.

The overvaluation problem

My colleague Kirsteen wrote a wonderful article about AstraZeneca shares. I fully agree that the company is one of the largest and greatest Footsie constituents.

At the same time, the multiples the company is trading at are incredibly high. In my view, investors are already certain AstraZeneca will develop a best-selling and profitable Covid-19 vaccine. Only in that case can the price-to-earnings (P/E) ratio of 104 be justified.

Let’s compare AstraZeneca to its peer GlaxoSmithKline (LSE:GSK). Both companies are large pharmaceutical businesses with large market shares. GlaxoSmithKline’s sales revenue in 2019 totaled £33.8bn, while AstraZeneca’s was just $24.4bn. AstraZeneca’s dividend yield is about 2.5%. In comparison, GlaxoSmithKline’s is over 5%. What’s more, GSK’s insiders bought some of their company’s shares in late July. AstraZeneca’s directors also acquired some of their firm’s stocks. But they did so in February and March when the stock market was crashing. And yet GlaxoSmithKline shares are trading at a P/E of just 16 as opposed to AstraZeneca’s 104.

I don’t think it’s fair. AstraZeneca shares are popular just because of the vaccine hopes, I think.      

Here’s what I’d do

I appreciate the fact AstraZeneca is a respectable FTSE 100 constituent. Indeed, it’s large and operating in a stable sector. But, in my view, it’s just too overvalued. So, I’d avoid its shares. I’d look through the Motley Fool’s excellent library for other investment ideas.

The post Is the AstraZeneca share price too high now? Here’s what you need to know appeared first on The Motley Fool UK.

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Anna Sokolidou has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Gilead Sciences. The Motley Fool UK has recommended GlaxoSmithKline and Johnson & Johnson. 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.

Recession is looming

The unemployment rate in the UK has increased in the three months to July. This is despite the fact that many restrictions have been lifted. So, even if the Covid-19 pandemic were finally over, it looks like the macroeconomic consequences will be long lasting. But will the pandemic end tomorrow? I don’t think so. The World Health Organisation has just reported a record one-day rise in coronavirus cases. This might force governments all over the world to take additional measures to fight the spread of the virus. 

But, unfortunately, the coronavirus isn’t the only challenge we are facing. Brexit is around the corner too. The big question now is if it will be a ‘deal’ or a ‘no-deal’ one. If it’s the latter, then, I am afraid there’ll be another market crash. What’s more, ‘hard’ Brexit will probably make the recession last longer.  

UK investors should also consider international challenges. Among them are US-China trade relations and the upcoming presidential elections in the US. All these factors create plenty of uncertainty. That’s because most Footsie shares are issued by international companies. Think of BP, Unilever, and Diageo, for example. They all depend on currency fluctuations and international demand.

All that sounds grim but it doesn’t mean we shouldn’t invest. But the question is how.

Investing in UK shares 

My colleagues have written about pound-cost averaging. It means investing a small fixed amount of money regularly, say, once per month. It’s a good investment approach. However, there is another quicker path to making a million, I think. It involves buying more UK shares during recessions or straight after a market crash. But when the stock market is near all-time highs, it’s much better to set aside some cash and wait for prices to plunge. After the crash it would be the best to stockpile ‘good’ UK shares.

What do I mean by this? Well, to start with, companies issuing such shares must be quite large. They should also have long operational histories. Of course, they should also have high credit ratings. This reflects financial soundness, including healthy balance sheets and cash flow positions.

What’s more, good companies should have an economic moat. It’s one of Warren Buffett’s most important criteria. It simply means a strong competitive advantage. For example, it could be a strong brand image. But economies of scale are also important because they mean lower prices for customers.

Then, I’d also prefer investing in undervalued companies. This means they have to have low price-to-earnings (P/E) and price-to-book (P/B) ratios.

Finally, ‘great’ companies should also pay dividends. These dividends can be reinvested. So, you could be growing your portfolio at a much quicker pace. It’s called the power of compounding. Hopefully, if you adopt this investment strategy, you should end up with a million or more over time.

Companies with all the features mentioned above are sometimes hard to find. But The Motley Fool catalogues can be of great help here.     

The post Investing during a recession? I’d buy UK shares to make a million appeared first on The Motley Fool UK.

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Anna Sokolidou has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo and Unilever. 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.

Nick Train

Train, one of the founders of Lindsell Train Limited, is an equity fund manager. With over 30 years of investment experience, he constantly outperforms other portfolio managers. He is considered one of the greatest investors in the UK. You might be wondering what his secret is. Well, his investment strategy is great but simple. Train just picks several great companies and holds their shares forever. These companies should be easy to understand. But they should also be brilliant businesses. Obviously, they should have been great some years ago and should remain so several years from now. Here’re two of his favourite picks. Please note they aren’t small caps that have just had they IPOs. What’s more, their market caps have not grown just because of the coronavirus lockdown.  

Diageo 

Diageo (LSE:DGE), a soft drinks producer, also owns Guinness, Johnnie Walker, and Tanqueray. Nick Train adores Diageo because it’s a well-established company and one of the sector’s leaders. The brands it owns are recognisable all over the world. The large scale allowed the corporation to grow its sales and stay profitable for many years. But, unfortunately, it suffered somewhat as a result of the pandemic. The thing is that it’s pointless for bars, pubs, and restaurants to order lots of alcohol nowadays. Although some restrictions in many countries have been lifted, customer traffic is still really low. But I hope ‘this too shall pass‘.  

Moody’s, for example, predicts the demand for soft drinks should recover by 2021. The agency rates the company as A3. This is investment grade but not premium. The thing is that Diageo has a reasonably high debt level, given it likes raising dividends. That’s quite a burden for the company’s cash position. There’s one more cause for concern. Most of the company’s cash inflows come from other countries, not the UK. Still, Diageo has to repay most of its debt in pounds. This is a risk. But if the pound stays low, Diageo will be here to gain.

Overall, I’d agree with my colleague Alan Oscroft that Diageo is a buy.

Unilever 

Unilever (LSE:ULVR), a large corporation selling food and personal care goods, is also on Nick Train’s list. The company is a low credit risk. It’s rated as A1, investment grade, by Moody’s. In fact, it’s the third-largest consumer products company in the world. People buy its products regardless of the economic cycle. So, the sales and cash flows are stable and predictable. What’s more, the company is efficient and keeps its costs under control.

Then, Unilever sells its numerous brands all over the globe. That’s great since it suggests the business is well-diversified. At the same time, it means Unilever is exposed to currency fluctuations. This is risky. But multinationals tend to be much less of a risk than local companies because of their large size. 

As you can see from the two examples above, both of the companies are big, easy to understand, and well-established. And yet they are not as trendy as the likes of Tesla, Apple, and Amazon. Here at The Motley Fool we offer excellent catalogues where you could find more investment ideas Nick Train would approve of.

The post Nick Train reckons these 2 UK shares could soar! I’d buy these to get rich appeared first on The Motley Fool UK.

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Anna Sokolidou has no position in any of the shares mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon, Apple, and Tesla. The Motley Fool UK has recommended Diageo and Unilever and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 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.