Many share prices have started climbing back after their Covid-19 crashes, and plenty still have that to come. Here are three I think could emerge strongly from a 2020 stock market recovery.
My first pick is Gulf Keystone Petroleum (LSE: GKP), whose share price is down 55% since the start of the year. But it has been worse – it was down 75% at one stage. The price of oil is obviously a big factor, with a barrel briefly plunging below $20 at its lowest. We’re looking at twice that figure now, at around $40 per barrel. That’s still not as high as the $60–$70 levels of the early part of the year, but it’s moving in the right direction, along with the stock market recovery.
You might prefer the big oil companies, like BP and Shell, for more safety. But I think Gulf Keystone is far safer than many small competitors, for two main reasons. One is that it’s been profitable for years, though there is a loss forecast for 2020.
The other is that Gulf Keystone carries no debt. It returned nearly $100m to shareholders in 2019, and had $164m in cash on the books at 22 April. I see strong upside potential for Gulf Keystone, and only limited downside.
Doors opening soon
My second pick is Greggs (LSE: GRG), whose shops have been closed throughout the lockdown. Despite that, the Greggs share price hasn’t been as badly hammered as you might fear. And there’s already been room for Greggs in the stock market recovery so far. Greggs shares now stand 22% down year-to-date, a little worse than the FTSE 100’s 17%. At their lowest, they were 47% down, but we’ve seen a 40% gain since then.
Greggs has announced cautions plans for its return to opening up its shops. The company’s phased reopening should see all of its stores with the doors open by early July.
Greggs is financially secure, and has been a good dividend payer for years. What might happen this year is still open. But I can see the stock’s attraction for dividend investors continuing over the long term. If you’d managed to bag some Greggs shares at the bottom of the market, I think you’d have locked in a very solid income stream. But it’s not too late, and Greggs shares are a buy for me at current prices.
Biggest stock market recovery?
Cineworld Group (LSE: CINE) has seen its share price crash 64% so far this year. Things have been much worse, though, with an early 90% fall by mid-March. But the stock market recovery hasn’t been as kind to Cineworld so far.
Now, if Cineworld is the hardest hit, I think it’s also the riskiest of the three here. As my Motley Fool colleague T Sligo has pointed out, Cineworld carries a lot of debt. And that really will take some sorting out over the next few years. Some fear for the future of the cinema business in general, facing the onslaught of online streaming services. But cinema audiences have been robust in recent years. And I think responding to an easing of lockdown won’t be as hard as some might fear.
I’d say Cineworld is not a pick for those looking for safety. But I do see potential upside for those prepared to risk a modest sum.
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Alan Oscroft 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.