The spring market crash allowed many investors to get rich. They did so by buying the best UK shares at bargain prices. I believe there’ll be another such opportunity soon.
Stock market crash
As we all know the pandemic isn’t over. And it’s highly likely there’ll be several infection waves. The macroeconomic indicators are quite poor too. What’s more, there are several political risks on the horizon, including the US elections, US-China relations, and Brexit. But as cynical as it might sound, such market crashes have always been a great opportunity to buy brilliant companies at a discount.
My best UK shares
To start with, I like to buy companies that tend to be profitable regardless of the eсonomic cycle, or any political or social upheavals. What kinds of companies are these? Well, they are usually pharmaceutical and utilities companies as well as food producers. They all specialise in essentials. But when choosing your stocks, don’t forget to look at the other fundamentals too. The companies shouldn’t be overvalued. What’s more, they should be large enough to weather downturns, and have a strong competitive advantage over their peers. I’d never invest in start ups. True, they can all theorectically become Amazons. But plenty of small businesses go bankrupt.
Your picks should also have good financial health. I check the financial health of company by looking first at their credit ratings. They should all be investment grade. Last but not least, a “good” company should pay dividends.
That sounds like a tall order! But here are my best UK shares meeting some of the criteria above.
Associated British Foods (LSE:ABF)
Primark owner ABF has a strong focus on cheap clothing and groceries. The demand for garments, it seems, is usually low during hard times. Groceries, in turn, are bought regardless of the economic cycles. ABF is enjoying really strong food sales these days. The demand for cheap clothing tends to hold up better than for more luxurious competitors. That’s particularly true when consumer incomes are low. What’s more, the company enjoys substantial cost advantages.
My colleague Stuart wrote a brilliant article about Diageo’s earnings. Unfortunately, the profits weren’t inspiring. This was mainly because of the lockdown and the fall in sales to pubs and restaurants. In spite of this, the company still pays dividends. Given Diageo’s large market share, I’d probably buy its shares after the next pullback.
In fact, this is one of my favourites. GSK is trading at a price-to-earnings (P/E) ratio of around 15, which makes it quite cheap. At the same time, this pharmaceutical giant is one of the industry’s leaders. It has one of the best pipelines of products in development. And it’s not overhyped like AstraZeneca. GSK’s dividend yield is around 5%.
How I’d get rich
These are just some of the best UK shares available for value investors today. The Motley Fool’s exclusive catalogue can give you many more investment ideas. So I’d start doing some research ahead of the market crash.
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Anna Sokolidou has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods, Diageo, 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.