Share markets across the globe have tanked again on Tuesday. Markets continue to have little belief in lawmakers’ efforts to stem the Covid-19 crisis and to stimulate the global economy.
Regardless of the material impact of the outbreak on their operations, stocks of all colours have taken an almighty bashing. This is also regardless of whether the long-term outlook of said shares remains favourable or not. As a result, plenty of equities look quite oversold. And this provides an opportunity for eagle-eyed investors to nip in and grab a bargain.
One such stock I think merits serious attention today is B&M European Value Retail (LSE: BME).
This business does a blinding trade off a wide selection of basics and essential goods that can be found across the home. Whether it be food and drink, health and beauty products, kitchenware, clothing or cleaning products, B&M’s lines remain popular, irrespective of broader social, political and economic conditions.
In fact, demand for many of the FTSE 250 retailer’s lines have ripped higher following the coronavirus outbreak. It’s witnessing the same frantic emptying of its shelves that many major supermarkets have reported as Britons hurriedly stockpile. A message on B&M’s website illustrates just how strong demand for its soaps, disinfectants and foods have been in recent days.
In a message in which it urges “shoppers to be sensible in the quantities they buy,” it says that it has “been prioritising essential goods such as [those in the] Grocery, Household and Personal Care departments.”
B&M seems to be succeeding in meeting these elevated levels of demand too. And it remains confident that it should continue to do so as its suppliers ramp up production.
Its wide selection of non-discretionary products is one reason why B&M is such an exceptional defensive selection in these difficult times. Its broad catalogue of trusted, popular brands, from Heinz baked beans and Oral-B toothpaste to Andrex toilet rolls and Tetley tea bags, provides an extra layer of security too.
The retailer has another powerful weapon in its arsenal. As its name suggests, B&M European Value Retail operates at lower price points. It’s a characteristic that could stand it in good stead if (as is expected) the UK economy sinks because of the coronavirus, and an increasing number of cash-strapped Britons try to stretch their shopping budgets that bit further.
B&M’s share price has dropped 30% during the past month as investor panic has hit fever pitch. Consequently the company now trades on a rock-bottom forward price-to-earnings (or P/E) ratio of 11.4 times. Such a low rating fails to reflect its obvious safe-haven qualities, in my opinion.
City analysts expect earnings to rise 17% in the upcoming fiscal year (to March 2021), despite the worsening coronavirus crisis. And the retailer’s longer-term earnings outlook remains robust thanks to its rapid expansion scheme. I’d happily load this share into my Stocks and Shares ISA even as news flow surrounding the coronavirus worsens.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of B&M European Value. 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.