Every stock market crash offers bargain shares. I’d grab cheap FTSE 100 stocks today

I think the FTSE 100 (INDEXFTSE:UKX) offers excellent value for money right now.

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.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The FTSE 100’s market crash of 2020 has been exceptionally fast-paced. A wide range of companies have suspended operations and look set to post disappointing financial performances in the current year. As such, investor sentiment has weakened to a point where many large-cap shares trade at significant discounts to their historic average valuations.

While this situation may persist in the short run, over the long run the FTSE 100 offers recovery potential. Its past performance shows it’s been able to overcome every previous bear market. As such, now could be the right time to buy undervalued FTSE 100 stocks prior to their likely recovery.

A challenging future

The impact of coronavirus on the economy has been unprecedented. Entire industries have shut down, while demand for sectors that are still operating has slumped at a pace that may never have been seen previously.

At the present time, the prospect of lockdown restrictions being lifted seems to be some weeks away. As such, the near-term outlook for the FTSE 100 could be highly uncertain. Investors may decide to focus on the financial challenges posed by coronavirus. Or they could begin to look ahead to a recovery. Either way, further instability for FTSE 100 share prices seems highly likely. This could mean that investors experience further paper losses in the coming weeks.

Recovery potential

Beyond the short run, a FTSE 100 recovery seems to be highly likely. The index has been able to eventually recover from every previous bear market it has faced. Sometimes it has taken a matter of months to achieve this goal while, on other occasions, it has taken several years.

However, investors who buy stocks during bear markets, such as those experienced in 1987, the early 2000s and in the financial crisis, are likely to have generated high returns.

Therefore, buying high-quality FTSE 100 shares today could be a shrewd move.  They may fail to deliver recoveries in the remainder of 2020. But, over the coming years, the FTSE 100’s current price level and its track record suggest that there is significant scope for capital gains across its variety of sectors.

Risk management

Of course, to take part in any economic recovery a company must have the financial strength to survive the present challenges. As such, focusing your capital on businesses with modest debt levels, strong market positions, and access to substantial amounts of cash, could reduce your overall risks.

Likewise, diversifying across a variety of industries and geographies could be a sound move. Some countries may return to economic normality faster than others in the coming months, and companies operating in those areas may make stronger gains versus their industry peers.

Clearly, the present time is an uncertain period for FTSE 100 shares. But it could also be the right time to buy high-quality shares while they are trading at low prices. Just as it was during previous bear markets prior to their eventual recoveries.

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 assessed. Consider taking independent financial advice.

Peter Stephens 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.

More on Investing Articles

Young Asian woman holding a cup of takeaway coffee and folders containing paperwork, on her way into the office
Investing Articles

How I could make a 10% yield for high passive income a reality

Jon Smith explains how he can target high passive income from top-yielding stocks, including one specific example he'd consider.

Read more »

Investing Articles

I’d buy 1,784 shares of this FTSE 100 stock to target £350 of monthly passive income

Muhammad Cheema takes a look at how British American Tobacco shares, with a dividend yield of 10.1%, can generate a…

Read more »

White female supervisor working at an oil rig
Investing Articles

1 ex-FTSE 100 stock that I think will get promoted soon

Jon Smith flags up an energy stock that used to be in the FTSE 100 and currently has strong momentum…

Read more »

Shot of a young Black woman doing some paperwork in a modern office
Investing Articles

With an 8% dividend yield, I think this undervalued FTSE stock is a no-brainer buy

With an impressive yield and good track record of payments, Mark David Hartley is considering adding this promising FTSE share…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

£9,500 in savings? Here’s how I’d try to turn that into £1,809 a month of passive income

Investing a relatively small amount into high-yielding stocks and reinvesting the dividends paid can generate significant passive income over time.

Read more »

Businesswoman analyses profitability of working company with digital virtual screen
Investing Articles

Dividend star Legal & General’s share price is still marked down, so should I buy more?

Legal & General’s share price looks very undervalued against its peers. But it pays an 8%+ dividend yield, and has…

Read more »

Investing Articles

Dividend shares: 1 FTSE 100 stock to consider buying for chunky shareholder income

This company’s ‘clean’ dividend record looks attractive to me and I’d consider buying some of the shares to hold long…

Read more »

Investing Articles

3 of my top FTSE 250 stocks to consider buying before April

Buying undervalued UK shares can be a great way to generate long-term wealth. Here, Royston Wild reveals a handful on…

Read more »