Finding the best bargain UK shares to buy after the recent stock market crash can be a difficult process. A number of companies across the FTSE 100 and FTSE 250 face difficult operating conditions that could lead to further volatility in their share prices.
However, following investment guru Warren Buffett’s advice and buying high-quality stocks when they trade at cheap prices can be a sound long-term move. The recovery potential of the stock market suggests that investing £1k, or any other amount, can lead to impressive returns in the coming years.
A long-term approach
While many UK shares face an uncertain near-term future, a number of industries could return to growth in the long run. Therefore, following Buffett’s advice in taking a long-term view of your portfolio could be a sound move. It may allow you to look beyond short-term risks that could produce high volatility in the coming months. And, instead, concentrate on the growth potential of specific industries and companies.
For example, industries such as retail and consumer goods may be experiencing relatively weak demand at present. Their sales may even decline further should factors such as higher unemployment weigh on consumer confidence. However, over the long run, there are likely to be growth opportunities in those sectors, and many others that currently face a difficult period. Investing in them now while their valuations are low could lead to high returns in the long run.
Of course, ensuring any UK shares you purchase have sufficient financial capacity to overcome operational challenges in the current economic environment is crucial. For example, modest debt levels, access to large amounts of liquidity, and a high proportion of variable costs could become important should there be further difficulties ahead for the economy.
Quality UK shares
As well as taking a long-term view of your investments, buying UK shares with a competitive advantage could be a profitable move. They may produce higher profit growth in the coming years than their peers. They could also command a higher valuation as investors focus their capital on the strongest businesses within specific industries.
Buffett has always favoured those companies that have a unique proposition. In many cases, this has been a strong brand that’s likely to remain popular among consumers. However, it may also be a business that enjoys high barriers to entry. It could also have a competitive advantage in other areas, such as costs, location, or an innovative product.
While such businesses may not be among the cheapest UK shares to buy today, they could offer the most attractive risk/reward opportunities. In an uncertain economic period, following Buffett’s advice in seeking to pay a fair price for a great company could be very useful in building a portfolio capable of delivering capital growth in the long run.
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.