The stock market recovery isn’t here yet. While the FTSE 100 rebounded strongly after the March crash, share prices are still more than 20% down on the start of the year.
This means you can still buy top FTSE 100 stocks at dirt-cheap prices, compared to the levels they were trading at in January. The recovery from the pandemic lockdown will be slow and bumpy. However, if you buy UK shares today with the aim of holding them for the long term, you should eventually reap the rewards.
I cannot tell you when stock markets will fully recover. There are some promising signs, as the Bank of England suggests we are heading for a V-shaped recovery. Today FTSE 100 stock Land Securities said it is planning to restore its dividend, as consumers start spending money again. Its share price looks dirt cheap, compared to a few months ago.
Do not invest in shares today expecting a quick return. In fact, you should never buy shares on that basis. You will almost certainly be disappointed, because nobody knows where markets will go in the short term.
Here’s why I’d buy dirt-cheap FTSE 100 shares
Even the greatest investors in the world cannot repeatedly predict market movements with any success. What makes them so successful is that they know they can’t do it and don’t even try.
Instead, they build balanced portfolios of top stocks to generate long-term income and growth. You can find plenty of opportunities right now on the FTSE 100. After the stock market crash, many top companies are trading at dirt-cheap prices.
You cannot predict the next market crash but you can go looking for bargains in the aftermath of the last one. Right now, there are plenty to be found.
The stock market recovery will come in time
FTSE 100 financial stocks such as insurer Aviva and fund manager M&G are trading at less than five times earnings. So are broadcaster ITV and tobacco giant Imperial Brands Group. Although you cannot rely too much on traditional valuation metrics right now, they are a pointer.
Housebuilders Barratt Developments and Taylor Wimpey are trading at less than 10 times earnings. So are insurer Legal & General Group, oil major Royal Dutch Shell, and global bank Barclays.
I’m not saying all these would make great investments. You would have to look at them closely, to see if they are right for your portfolio. But they are big names that have made investors a lot of money in the past. They have products people want to buy, and loyal customers.
The best time to buy FTSE 100 shares like these is when they are dirt cheap. Then aim to hold them for the long term, while investing any dividends for growth.
When the stock market recovery comes, as it finally will, you will be delighted you took a chance and bought dirt-cheap FTSE 100 shares today.
Don’t wait until after the recovery, because then it will be too late.
Markets around the world are reeling from the coronavirus pandemic…
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays, Imperial Brands, and ITV. 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.