Global equity markets continue to gradually recover from March’s multi-year troughs. The FTSE 100, for example, is still gaining ground north of 6,200 points, some distance from its recent sub-5,000 lows. The stock market crash keeps dip buyers coming in their droves.
That said, there’s an abundance of UK shares that continue to be criminally overlooked by bargain hunters, I feel. Stock investor confidence remains fragile and consequently another market crash could be around the corner. Still, in my opinion there’s a galaxy of great shares out there that are too cheap to miss right now.
Cash in on the market crash
Let me be clear. When I talk about shares that are trading ‘cheaply’, I don’t necessarily mean those that appear good value based on conventional metrics. There are plenty of Footsie shares that trade below the traditional ‘bargain benchmark’ of 10 times or below following the market crash that I still wouldn’t touch with a bargepole.
No, I’m referring to stocks where the size of their price reversals seem ridiculously exaggerated. Companies whose defensive operations (defence, utilities and so forth) should keep the profits rolling in during this economic downturn. And firms whose long-term earnings outlooks remain exceptional, and that have the balance sheet strength to see out the current turbulence in the global economy.
Remember that the key to successful share investing is to buy companies based on how they’ll be performing in five, 10, perhaps 20 or 30 years from now. The scale of some share price reversals during the stock market crash, however, suggests that the noise concerning the near-term impact of Covid-19 has caused many investors to forget this important point.
Taking this into account, here are several companies I consider to be some of the best market crash casualties to buy at recent prices.
3 of my favourites
Brick-maker Forterra has plummeted more than 40% in value during the past three months. Investors have bailed out after housebuilders downed tools during the lockdown period, kneecapping near-term demand for its products. With the construction companies returning to work, though, and Britain suffering from an entrenched homes shortage, the FTSE 250 firm’s profits picture remains bright.
Meanwhile, McCarthy & Stone is another construction-related stock that’s plummeted in recent months. The business — which builds and manages retirement properties — is actually 53% cheaper than pre-crash levels. It’s a descent that doesn’t reflect the exceptional opportunities created by the UK’s ageing population now and in the future. The business also got back to selling and building its niche properties earlier this month.
The grounding of the aviation industry has had huge implications for WH Smith’s share price which has halved since mid-February. Sales across its travel estate have plunged (down 91% year on year in April, for example) as airports have emptied. However, its aggressive worldwide expansion scheme should create huge profits in the years ahead, as should the steady rise in airborne traveller numbers.
It’s clear, then, that there are still some brilliant bargains to be had despite the recent stock market recovery. And this provides an excellent opportunity for long-term investors to supercharge their total returns.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended WH Smith. 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.