The FTSE 100 has recoverd somewhat from the March crash, although the British economy is in terrible shape. But, despite the rise, there are still good UK shares trading at what I think are bargain prices. Three companies that I think worth consideration are BP (LSE:BP), Royal Dutch Shell (LSE:RDSB), and Legal & General (LSE:LGEN).
UK shares worth considering
It looks like the dividends of all British companies are under threat this year. In fact, about half of the Footsie companies have cancelled or significantly reduced their payouts.
The same is particularly true of the first two companies on my list. Both BP and Shell cut their dividends substantially. As we all know, BP and Shell are oil companies. And the oil industry is having a hard time right now due to Covid-19 restrictions.
What’s more, I am more inclined to think that it will take the governments all over the world ages to win the coronavirus battle. So, travel restrictions will last for some time. This will put pressure on oil prices for quite some time.
However, the oil market is now really tight. Smaller companies have gone bankrupt. Then, the industry itself has been extremely underinvested for a long time. The majority of the supply cuts will most probably come from US shale. This will lead to a rise in oil prices in the long run. All that is obviously a positive for the ‘big guys’. Both Shell and BP have investment-grade credit ratings. So, it looks highly likely they will survive the current crisis and come back to normal as soon as the situation improves.
Legal & General
As concerns Legal & General, a large insurance company, it seems to be quite a risky investment just like the whole financial sector. The thing is that many clients are still making claims. But fewer of them are willing to buy new insurance products because they tend to have less cash these days.
However, after the company released its half-year results, it became clear that the insurance company’s sales revenues are quite resilient, in spite of the crisis. The Group’s net profit did decrease, because of stock market volatility and lower interest rates. The good thing is that Legal & General’s shareholders can still enjoy their dividends. The Group hasn’t cut them. Although the company is the leader in the market and has a strong financial position, its shares are trading down about a third from their February highs.
Cheap British shares for brave investors?
These UK shares are in no way the kind of momentum stocks my colleague Matthew wrote about. However, in my view, they are quite suitable for a patient investor who is willing to take on some additional risks. There’s indeed a risk that these British shares can go down. But long-term investors might be richly rewarded for taking these opportunities.
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Anna Sokolidou has no position in any of the companies mentioned in this article. The Motley Fool UK has no position in any of the shares mentioned. 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.