Looking at stock charts since the FTSE crash hit us, I can generally see two sets of reactions. There are some share prices that have headed down and just kept on going. But there are plenty that have already bounced back from their initial bottom.
Whether we are past the worst or there are further dips to come, is as yet unknown. But one thing does seem to be apparent – a lot of investors are seeing recovery buys out there. Here are two I like the look of.
FTSE crash victim
Shares in Galliford Try (LSE: GFRD) have pretty much followed the Footsie since the Corvid-19 pandemic arrived. They’re now down 22%, almost exactly in line with the fall in the index. But they were among the top risers Friday, with a gain of 10% by early afternoon.
It’s a sector that I’m quite certain still has tremendous long-term growth ahead of it. The big question is whether Galliford Try has the financial strength to see out the lockdown, while many of its work projects are shelved.
The firm released a Covid-19 update at the end of March, when the FTSE crash was just past its worst point so far. In it, Galliford Try told us it “remains a well-capitalised business with no debt or bank covenants.” The government is continuing to support the industry, and having 83% of its order book in the public and regulated sectors must be a strength for the company.
The dividend has been suspended, along with so many others, and I definitely think that’s wise.
Sentiment has been against construction firms since the collapse of Carillion. So Galliford Try might be a bit of a risky pick, at least in the medium term. But I reckon it could provide long-term rewards for bold investors.
Brick and concrete product maker Ibstock (LSE: IBST) was also one of the top Friday risers, up 8%.
Ibstock shares have been hit harder than most, losing 40% since the start of the FTSE crash. But they have been ticking up again since the middle of March.
Ibstock closed all its manufacturing sites across the UK, retaining just a skeleton staff during the shutdown. The board and executive leadership team took a 20% salary cut (in line with the fall in income for furloughed workers), and the 2019 final dividend has been suspended.
The company did report net debt at 31 December, of £85m. That represents a net debt/EBITDA ratio of 0.7 times (in pre-IFRS 16 terms), which I rate as pretty healthy.
I’ve always liked Ibstock as a long-term investment, being particularly attracted to its dividends. The 2018 yield (before the 2019 halt) came in at 4.8%, and analysts had been predicting rises to 5.5% by 2021. That optimism has taken a bit of a beating since the FTSE crash. But I reckon Ibstock should get back to paying healthy dividends before too long.
There’s some short-term risk, certainly. But I now rate one of my favourite income stocks as a recovery candidate too.
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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Ibstock. 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.