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The stock market crash: how I’d invest £10k in the FTSE 100

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Finding FTSE 100 stocks to buy after the market’s recent crash might seem like a tough process.

Many companies are experiencing challenging trading conditions. And there’s no telling how long this situation will last or if these businesses will survive.

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This has understandably dented investor sentiment.

However, not all companies are suffering. Some financially sound businesses with wide economic moats are thriving.

Considering the long-term recovery potential of these companies, now could be the time to take advantage of the recent stock market crash and snap up these FTSE 100 bargains.

FTSE 100 bargains

The best place to start looking for FTSE 100 bargains, in my opinion, is the technology sector.

Technology has become an increasingly important part of our lives over the past decade. This trend has only accelerated over the past few weeks. People are now working from home and relying on technology, and cyber security is even more important. Meanwhile AI is unearthing existing drugs that might be able to ease Covid-19 symptoms. And contact-tracing apps are a big discussion point.

It all means our relationship with technology is likely to have shifted for good. As a result, it looks as if tech stocks in general are in a strong position to capitalise on the possible economic recovery over the coming years.

Buying firms that have a definite competitive advantage over rivals could be a sound move. Focusing on companies that enjoy strong customer loyalty, lower cost bases than their opponents, or that sell unique products, could be a good starting point.

Businesses that also have access to more data may be sound investments in the long run. 

FTSE 100 growth at a reasonable price 

Valuations across the FTSE 100 are exceptionally low at present, but technology stocks continue to trade at a premium to the rest of the market. 

Considering the advantages these businesses have over the rest of the FTSE 100, it’s no surprise why. These companies have much more capacity to grow earnings over the next five or 10 years. 

Therefore, while the valuations of household names might look cheap, merely buying the FTSE 100’s cheapest stocks may not prove to be a good decision.

Instead, it could be a good idea to focus on stocks that offer growth at a reasonable price. For example, businesses that look cheap compared to their prospective earnings growth over the next few years. 

The bottom line

Many FTSE 100 stocks look cheap after the recent market crash. However, if you have £10,000 to invest today, it might be sensible to avoid the market’s cheapest companies. 

With so many businesses experiencing challenging trading conditions at present, it is no surprise some of these businesses are trading at record low levels. In some cases, these companies may not survive. 

Instead of trying to pick businesses that might survive the crisis, investors could do better by focusing on FTSE 100 market leaders. Technological champions that have a strong competitive advantage over peers, as well as bright prospects for growth over the long term.

They may not necessarily be the cheapest companies in the FTSE 100, but they could be the most likely to improve your chances of building a sizable financial nest egg. 

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Rupert Hargreaves 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.

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