I reckon that the best UK shares to buy now are those that are still recovering from the stock market crash. They aren’t easy to come by now, though. The FTSE 100 index has made consistent gains in the last two months. It rose 4% in May and has seen an almost 5% increase in June. As a result many shares’ prices are back to their pre-crash levels.
But for the eagle-eyed investor, there are still some good buys to be made. Think about this. Sure, the FTSE 100 index has risen, but it’s still not at the pre-crash levels. As a matter of fact, it’s 17% lower in June than in January. This means that at least some FTSE 100 shares are still at muted prices. Some of these were underperformers even before the stock market crash occurred. But there are others too. These ones have been hit disproportionately by the corona crisis.
Best UK share to buy in the recession
One of them is medical devices manufacturer Smith & Nephew (LSE: SN). Typically , it would be relatively insulated in a recession. Healthcare spending is less likely to be hit during such times than say, spending on luxury goods and holidays. As a result, stocks like healthcare are among the best UK shares to hold during economic slowdowns.
But this recession is an exception. It has gone hand in hand with cross-country lockdowns. As a result, elective surgeries have taken a backseat. Some of SN’s products are associated with these. For instance, it manufactures knee and hip implants for replacement surgeries, which aren’t always urgent even if they are important.
Expect a bounce back
Smith & Nephew’s performance has been hit because of this. It showed a 7.6% revenue fall in the first quarter of the year. With lockdowns easing only well into the second quarter, I think investors should be prepared for one more poor update. After that, though, I think it will bounce back. It has been a profit-making company in the past, and much like other companies, its 2020 performance should be seen as a blip.
SN’s share price sensitivity can also be high. I wrote about it in October last year, after it fell 8% in a day on the sudden news that it’s then CEO, Kamal Nawana, had resigned. However, his replacement was appointed quickly and the stock price was well on it’s way up again. Covid-19 and the ensuing stock market crash have taken the wind out of its sails, for sure. But I do think that the share has the potential to start rising fast again.
Until then, I think it’s one of the best UK shares to consider buying. At its last close, the SN share price was at £15.2, which is 23% below the highs seen earlier in 2020. I think it’s only a matter of time before FTSE 100 investors see its potential. I’d buy SN before that happens, and its price starts running up.
Manika Premsingh 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.