The continuing 2020 stock market crash means cheap shares are with us for longer. Here are three that I think could grace any aspiring millionaire’s portfolio.
A high-street store might seem like a strange choice, but Primark‘s business is recovering well. It’s owned by Associated British Foods (LSE: ABF), of course, so there’s solid defensive back-up there too. ABF owns a number of popular brands, including Twinings, Ovaltine and Kingsmill. And there’s British Sugar too.
Primark is usually the jewel in the crown come reporting time, and Monday’s trading update was upbeat. For Q4, ABF told us “both our food businesses and Primark exceeded our expectations.” With all stores open again, “Primark achieved our highest ever value and volume shares for this time of year.“
Full-year profit will be well below last year’s, but I think Associated British Foods should recover quickly from the stock market crash. The company expects to report year-end net cash of £1.3bn, before lease liabilities, and that’s very welcome news.
The ABF share price is still down 20% in 2020, and I think that makes it a top FTSE 100 buy for the long term.
Stock market crash bargain
My next pick is an insurer, which you might think is a bit crazy. The slump has hit the whole financial sector badly, including insurance companies. We really don’t know what the final bill from Covid-19 is going to look like, and the size of the insurance burden is very uncertain.
But against that, I’d buy Prudential (LSE: PRU). The name of the company is not just coincidental. No, in my view it reflects a long history of careful and conservative management.
Prudential shares are down 21% so far in the 2020 stock market crash. That’s almost bang on the FTSE 100‘s drop. We’re looking at P/E multiples of under 10 now, and I think that’s oversold, despite the inherent dangers facing the sector.
The firm’s exposure to Asia is hurting it a bit too, but I see strong demand from the region for the long term. I’d expect some short-term volatility, which is common in the insurance business. But in my book, the Pru is still up there as one of the most desirable long-term insurance investments there is.
I’m going to finish my stock market crash trio with City of London Investment Trust (LSE: CTY). The Association of Investment Companies has it at the top of its list of Dividend Heroes, firms that have raised their dividends for 20 years or more in a row.
City of London has managed that for 54 straight years, which is a stunning record. For 2020, the company declared a 19p dividend, 2.1% up on last year and above inflation. On today’s share price, that’s a 5.9% yield.
The fallen share price, down 27% so far this year, has boosted that yield. There could be fears that its record of dividend rises could be set to end. But the firm did say it “expects to pay ordinary dividends in excess of 19p per share, thereby increasing the dividend for a 55th consecutive year” for 2021.
I don’t foresee any problems, and I think City of London could be the best of the three.
Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods and Prudential. 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.