Stock market crash: one dirt-cheap FTSE stock I’d buy today and one I’d avoid

These two shares have taken a beating during the stock market crash, but one could make a tempting bargain buy today.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The stock market crash has hammered so many top FTSE companies, but some look better placed to recover than others. I’d shun one of these two stocks, but might just be tempted by the other.

Things just get worse for the Hammerson (LSE: HMSO) share price. The shopping centre operator’s stock has lost 90% of its value over the last five years. It’s down another 7% this morning after revealing an 84% drop in first-half adjusted profits to £17.7m, due to Covid-19 lockdowns.

Hammerson also announced plans to raise £552m through a rights issue, and another £274m by selling its 50% interest in Via Outlets to venture partner APG. The FTSE 250 group hopes this will strengthen its balance sheet, reduce debt, and boost liquidity. Investors are clearly unconvinced, amid fears of a fresh stock market crash.

Hammerson gets hammered

Previous plans to raise £400m by selling retail parks collapsed after private equity firm Orion pulled out in May. Chief executive David Atkins is now overhauling the business to cope with “unprecedented conditions,” but it won’t be easy. He hopes to focus on “flagship destinations and mixed-use City Quarters,” and today highlighted an encouraging recent increase in footfall, as shoppers return. Good luck to him.

The only thing to go right for Hammerson was the collapse in merger talks with rival Intu two years ago. Intu has since gone bust in the stock market crash, showing just how hard this sector has been hit. Hammerson has net debt of £3bn and a market-cap of £396m. It trades at just two times earnings, but even at that dirt-cheap price I wouldn’t buy it today.

Broadcaster ITV (LSE: ITV) is another company whose share price was in decline even before the stock market crash, falling by three quarters over five years. 

Today, it reported a collapse in pre-tax profits for the six months to 30 June, down 93%, from £222m to just £15m. While more people sat in front of their TV screens during the lockdown, advertising revenue “slowed to a trickle” as worried companies conserved cash. The postponement of big sporting events, such as the Euro 2020 football championships, didn’t help.

ITV can survive the stock market crash

With the economy heading for dark times, that advertising revenue isn’t going to recover in a hurry. Social distancing rules forced ITV to put 230 programmes on ice, hitting production sales too.

CEO Carolyn McCall talked of “an upward trajectory with productions restarting and advertisers returning.” But the outlook remains uncertain. Shareholders took the bad news on the chin, with the ITV share price down about 1%.

ITV could be a stock market crash buying opportunity, if you understand the risks. Today’s bargain valuation, of just 4.38 times earnings, is tempting. Revenues today were slightly better than analysts expected, and could recover when the economy picks up. Net debt looks manageable at £783m. A strong balance sheet helps in days like these.

I would certainly pick the ITV share price ahead of Hammerson.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended 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.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »