Share investors find themselves in a bit of a conundrum as the coronavirus crisis rumbles on. Is it best to hold off buying stocks as the chances of a second stock market crash rise? Or is it time to break out the chequebook and go dip buying for top-quality bargains?
Investors clearly need to be careful when building a shares portfolio, what with a severe global economic downturn in store. It doesn’t mean that they need to pull up the drawbridge, though.
Buying firms with strong balance sheets and economic moats (i.e., clear advantages over their competitors) is clearly a good idea. And loading up on shares that offer clear value will provide a bigger margin of safety in case of a fresh stock market crash.
Play the market crash
I’m certainly not put off from continuing to invest in shares. I view the 2020 market crash as a once-in-a-lifetime chance to buy some of the best UK shares for next to nothing. Regardless of your tolerance of risk, and whether you invest primarily for growth or income, there’s a world of opportunity for stock investors hunting great value.
For those worried about a painful and possibly prolonged global recession, buying utilities is great idea. The essential nature of their services means that their earnings visibility will remain despite the coming storm. So they are the perfect tonic for nervous share investors following the market crash.
Top dividend stocks
So which ones would I buy today? Well I like the look of power station operators Contour Global and Drax Group, along with FTSE 100 water supplier United Utilities Group. These are ultra-defensive shares that don’t face serious competitive pressures either. And happily for income investors they sport chunky dividend yields ranging from 4.5% to 7.5%.
Buying healthcare stocks is also a good idea for those with low risk appetites. FTSE 100 stock GlaxoSmithKline can still expect sales of its life-saving drugs to hold up over the next couple of years. The yield here sits at close to 5%. I’d also buy those involved with food production like sausage casings maker Devro and agricultural products provider Wynnstay Group. Forward yields here sit at 5.5% and 5% respectively.
Great growth shares
As I said, the stock market crash provides investors the chance to grab some choice growth bargains too. I’d be very happy to splash the cash on telecoms providers like FTSE 100 company Vodafone Group and Telecom Plus following recent price falls. Their strong recurring revenues should allow them to perform more resolutely than most during the near term.
I think risk-averse investors should also look closely at sellers of essential consumer goods. Like Creightons, whose soaps, shampoos, and other hygiene and beauty products should continue to sell in large volumes. Or FTSE 100 soft drinks maker Coca-Cola HBC.
So forget about the imminent global recession. There are plenty of great UK shares to buy whatever your attitude to risk. And the recent stock market crash provides an opportunity to create a top-quality investment portfolio at little cost. With the right strategy it’s still possible for stock investors to get rich and possibly even make a million.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Devro and GlaxoSmithKline. 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.