With global financial markets facing up to the coronavirus outbreak and an international recession possibly on the cards, it’s tempting for investors with a bit of spare cash to look to buy up stocks.
Many central banks have now pledged to fight economic fallout. This may include short-term loans, asset purchases or possibly quantitative easing, so this has injected a little more certainty into the markets and the FTSE 350 has been rising again today.
If you’re confident in what you’re buying and aware of the risks, then there may well be some value stocks to be had. However, I’m not sure that we’ve seen the bottom yet, and thus it may be premature to buy stocks today. However, it’s a good time to research and discover shares that are worth investing in over the coming weeks.
Follow Warren Buffett’s lead
Warren Buffett has decades of experience of buying shares in troubled times. I think his advice is worth heeding, particularly when the stock market looks a scary place.
One of Buffett’s key principles is looking for businesses with intrinsic value. What this means is a company that won’t easily go bust because it plays a vital part in society. Examples that spring to mind include healthcare, utility companies, telecoms, defence contractors and energy companies.
However, I don’t think it’s wise to believe all companies involved in these sectors will thrive. The price of oil has plummeted in recent weeks thanks to a global economic slowdown; plus there has been a reduction in international travel caused by the coronavirus, and increasing pressure from climate change activists. For this reason, I expect the smaller oil and gas companies to be at risk of failures or possibly takeover targets.
There are businesses that are so well known in the homes of UK citizens, it’s difficult to imagine them ever going bust. This includes BT Group, Tesco, National Grid and The London Stock Exchange.
Grow your £1k
If you have £1k to invest today, then I think an index fund is worth considering. £1k won’t go very far on individual stocks alone, so a fund gives you the chance to own a diversified selection of assets for your cash.
If you’d prefer to own individual equities, a stock I like is Primary Health Properties (LSE:PHP). I chose it as my top UK stock for March as it has no obvious ties to China and being in the healthcare sector, it’s defensive.
Part of the FTSE 250 index, this company invests in properties that it rents to various healthcare facilities in the UK and Ireland. It now has 485 properties in its portfolio, on long-term lease to GPs, government healthcare bodies and pharmacies.
PHP’s latest full-year profit before tax was up 2.2% to £75.9m and its net rental income receivable rose 51% to £115.7m in 2019.
Year-to-date, the PHP share price is down almost 6%, purely because of the market correction last week.
Today it has a 4% dividend yield, which provides steady income potential. The net asset value per share is 101p, which means it’s priced at a premium of 32%, but considering it’s got a manageable level of debt and assets worth £2.3bn, I don’t think this is too high.
It’s official: global stock markets have been on a tear for more than a decade, making this the longest bull market in history.
But this seemingly unstoppable run of success poses an uncomfortable question for investors: when will the current bull market finally run out of steam?
Opinions are split about whether we’re about to see a pullback — or even a bear market — in 2020. But one thing is crystal clear: right now there’s plenty of uncertainty and bad news out there!
It’s not just the threat posed by the coronavirus outbreak that could cause disruption — Trump’s ongoing trade-war with China and the UK’s Brexit trade negotiations with the EU rumble on... and then there’s the potential threat of both the German and Japanese economies entering recession...
It all adds up to a nasty cocktail with the potential to wreak havoc and send your portfolio into a tailspin.
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Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has recommended Primary Health Properties and Tesco. 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.