As a shares investor myself I don’t fear stock market crashes. The key to successful investing is to buy and hold onto companies for a number of years. Such a strategy allows people like you and me the luxury of not worrying about temporary financial market volatility. It also improves our chances of being able to retire rich.
Market crashes always cause good-to-great stocks to plummet along with the bad. And this provides investors with the chance to buy into some choice bargains. But here ISA investors need to be hugely careful and not be seduced by rock-bottom earnings multiples and market-beating dividend yields. In many cases low valuations are a sure sign of dangerous stocks that could rob you of your wealth.
It’s often said that bricks and mortar investments are some of the safest out there. In some cases that couldn’t be more wrong, however. Just ask shareholders over at Intu Properties. This shopping mall operator has seen its share price erode 98% in the past 12 months as UK high street conditions have worsened. On Friday, struggles to collect rents and reduce its debt mountain caused Intu to fall into administration.
Glass-half-full investors might be looking at other retail property owners and their low valuations, though, and thinking now is the time to get in on the action. The easing of lockdown measures in the UK has improved the profits outlook for physical retailers and their landlords, right? Not if data from the Confederation for British Industry (CBI) is anything to go by.
A survey released by the CBI reveals the chilly outlook for the country’s retailers. The easing of Covid-19 quarantine measures meant that sellers of non-essential items reopened their doors on 15 June. But according to the study such retailers have “extremely negative” sales expectations and reckon trade next month will be worse than in July 2019.
A perceived lack of demand was the biggest worry for 62% of retailers. Workforce issues due to school closures, cost pressures, and transport difficulties were also cited as serious issues that could damage profits.
The key to retiring rich lies elsewhere
It’s on the cards that Britain’s non-food retailers face a torrid task beyond next month. A severe economic downturn threatens to keep consumers’ wallets firmly tightened well into 2021 at least. The threat posed by online retailers is one that overshadows the physical operators for much longer, too. Incidentally, that CBI report shows that despite the broader malaise in the broader retail sector, online sales are expected to grow at an even faster rate in July than in June.
For all these reasons, I’m happy to pass on FTSE 100 retail property giants Land Securities and British Land. Their historically low forward price-to-earnings ratios of 15 times don’t appeal to me considering their rapidly deteriorating profits outlook. They are in significant danger of going the same way as Intu, in my opinion. And so I’d rather buy other Footsie shares to help me retire rich.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended British Land Co and Landsec. 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.