Many share investors are facing a dilemma today. Fears of a second stock market crash remain high as Covid-19 infection rates boom and lockdowns return. Gold’s spike to fresh multi-year peaks illustrates just how worried investors remain today, and how expectations of another market crash are high.
On the other hand, there are still plenty of stocks that look mighty appetising following the 2020 stock market crash. London stock indexes might be off their 10-year lows, sure. But a great many UK shares continue to trade at prices that appear too good to miss.
I personally believe that now’s a great time to go bargain shopping on equity markets. Remembering that big investment returns are usually created over a number of years, I’d treat the recent market crash as an opportunity to maximise long-term returns by buying some excellent shares at rock-bottom prices. If you’re looking to make a million from share investing this could be the once-in-a-lifetime chance that you’ve been looking for.
Buy the stock market crash!
In times like this it’s important to take a step back, ignore the news flow that’s damaging investor confidence and look at how share markets have behaved in the past. Stock market crashes are nothing new, but share indexes always come roaring back as broader economic conditions improve.
Someone who buys UK shares today, then, can expect the value of their investments to climb steadily during the early part of the 2020s as the global economy bounces back from the coronavirus shock.
It’s still a good idea to tailor your share purchases on the expectations of a painful (and possibly prolonged) economic downturn, though. That means buying companies with robust balance sheets that can handle long periods of profits weakness.
It also means that snapping up companies with big advantages over the competition (so-called economic moats) – whether that be an ability to source materials at a lower cost than rivals, or owning a stable of products with supreme brand power – is a sound plan. This can allow them to continue growing profits whatever the state of the wider economy and in some cases safeguard their market share.
FTSE 100 economic moats
With this in mind I reckon FTSE 100 shares Unilever and Reckitt Benckiser are great buys following the market crash. Their products (like Dove soap, Magnum ice cream, and Durex condoms) have the sort of brand power that few competitors can rival. This allows them to keep growing sales however strong or weak the retail landscape.
Patent protections are also a formidable economic moats and so buying FTSE 100 share BAE Systems is a good idea. The defence contractor has notched up hundreds of patents in recent decades alone. Or you can buy companies with low cost bases like Footsie packaging manufacturer Mondi and essential goods supplier Bunzl.
These FTSE 100 companies show that you don’t need to stop buying shares despite the prospect of a global economic downturn. In fact, as the stock market crash means they can be bought at big discounts, I think many Footsie shares are too good to miss right now.
Royston Wild owns shares of Bunzl and Unilever. The Motley Fool UK owns shares of and has recommended Unilever. 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.