Phrases like ‘once in a lifetime’ and ‘can you afford to miss’ are thrown around like confetti nowadays. It’s easy to dismiss such comments as hyperbole in the context of the recent stock market crash. Diving equity markets are nothing new, right?
You only need to wait several years before a major macroeconomic or geopolitical event occurs. One that causes investors to panic and sell everything in sight. But all of that being said, I believe the recent market crash has created a wealth of investment opportunities too good to overlook. In my opinion, some of the selling following the Covid-19 outbreak has been quite extraordinary.
Water way to invest
What doesn’t make sense is the abundance of safe-haven shares. Those whose operations will be largely immune from the coming economic storm but have collapsed in price during this latest crash. That’s panic for you, I suppose. The impact of plummeting investor confidence is often non-discriminatory.
There’s plenty of defensive shares which, although bouncing from the troughs ploughed during the recent stock market crash, continue to trade at a meaty discount to pre-crisis levels. Let me give you some examples.
It’s clear why United Utilities Group should be able to weather the worst of a downturn in the UK economy. And keep growing profits. Our need for electricity and water doesn’t change according to economic and political circumstances. Rising customer debts can be expected. But, for the most part, revenues should continue flowing in as usual.
Yet this FTSE 100 share lost around a quarter of its value during the worst of the market crash. It also continues to trade at a 10% discount to the two-decade peaks struck in February. This leaves it carrying a prospective 4.5% dividend yield.
More great buys following the market crash
Telecoms operators like Vodafone Group share the same qualities as the power and water suppliers. Their operations are a bit more cyclical in that we can theoretically do without a phone, unlike those other services.
But few of us will willingly hand over our mobiles without a fight. Still, Vodafone has dropped almost a fifth of its value following the stock market crash. And this results in the Footsie firm wielding a huge 6.3% forward dividend yield.
The market crash has also been unkind to the BAE Systems share price, a firm whose yield sits at 4.7%. This blue-chip’s stock is exactly 20% lower from three months ago. Yet there’s little chance the upcoming global recession will damage its profits over the medium-to-long term.
Theoretically, nations will scale back their defence spend to reflect their contracting economies. But, in practice, it’s unlikely the US and UK will be reducing their military spend. It might seem a lifetime ago following more recent events, but don’t forget the US was involved in military action in the Middle East at the start of 2020. Concerns over Chinese and Russian expansionism continue to rumble on in the background too. As does the so-called war against terror.
The FTSE 100 is packed with opportunity for investors who love cheap, dividend-paying shares. I reckon it’s time to go shopping for some of these big-cap bargains.
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Royston Wild 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.