This year’s stock market crash has hammered many top FTSE stocks, but some have fared better than others. These two have emerged in reasonably strong shape, and I’d considered buying them inside a tax-free ISA.
Premium mixer-maker Fevertree Drinks (LSE: FEVR) made the most of the gin revolution to become one of the fastest growing UK shares on the market. Early-stage investors will have made big money from Fevertree. Bandwagon jumpers won’t have been so lucky.
The excitement peaked in 2018, and those who bought at the top are still nursing their hangovers. The Fevertree share price is down almost 50% over two years, and the decline started before this year’s stock market crash. Does today’s low price offer an attractive entry point?
Stock market crash recovery play
Please don’t approach Fevertree as a whizzy growth stock. As a £2.35bn concern, those days are over. Yes, the team has spotted a global opportunity in the US, Canada, and Australia, but there’s no guarantee it’ll repeat its astonishing domestic success.
That said, the Fevertree share price has recovered strongly since the stock market crash, rising more than 80% measured over six months. That’s why we at the Fool always urge readers to buy shares when prices are down. You can do well when a bargain stock bounces back.
Last week, the group reported resilient first-half revenues, down just 11% year-on-year to £104.2m. Not bad, given that pubs and bars were shut. Fortunately, enthusiastic drinkers mixed their cocktails at home instead.
The group’s net cash balance actually increased to £136.9m, while management hiked the dividend 4% to 5.41p. Fevertree is still expensive, trading at 40 times earnings. The yield is just 0.74%.
Future growth opportunities lie abroad, but don’t buy expecting a repeat of past glories. One to buy in the next stock market crash perhaps?
Earn income in an ISA
Few investors buy stocks from the grocery sector in the hope of generating massive share price growth. These days, long-term dividend income is the main attraction. A decade ago, the Morrisons (LSE: MRW) share price traded above 300p. Today, you can buy it for 180p. Is that an attractive entry point?
While most UK shares tumbled in the March stock market crash, supermarket stocks like Morrisons were a rare exception. People still need consumer staples. Last week, the FTSE 100 group reported an 8.8% rise in total revenue (excluding fuel) to £7.6bn.
Despite that, underlying pre-tax profit fell 25.3% to £148m, because of £155m extra costs related to Covid-19, and customer preference for lower-margin products. Many investors have been intrigued by its supply arrangement with Amazon, which could help Morrison’s make up lost ground in online sales. That will take time to bear fruit though.
The main attraction for this stock market crash survivor is dividend income. Right now, Morrisons yields 3.74%. We don’t yet know whether there’ll be a special dividend this year. This depends on the pandemic.
I’d still consider buying and holding the stock for long-term income. Today’s low entry point of 12.35 times earnings looks tempting.
Harvey Jones has no position in any of the shares mentioned. 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.