Stock market crash: with prices weakening, I’d buy cheap shares like these

Weakening share prices now could be our chance to have a second bite of the cherry and buy quality stocks at better prices. Here’s where I’d look.

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.

Scary Covid-19 case numbers around the world are causing the markets to weaken again. But my guess is we won’t see another sudden stock market crash as we saw in the spring.

However, weakening share prices now could be our chance to have a second bite of the cherry and buy quality stocks at better prices.

Recovery following the stock market crash

On Thursday, the Bank of England (BoE) slipped out a useful report aimed at gauging the state of the economy and how UK businesses are faring. The central bank’s report is the latest in a regular series based on consultation with its 12 regional agents. And the conclusions follow discussions with around 700 businesses across the UK.

Thursday’s publication summarises intelligence gathered between early August and early September. As we might expect, businesses from many sectors reported something of a recovery in trading from the lockdown lows but many are still operating at reduced levels.

However, there are some sectors that have been thriving in the current economic environment. For example, the BoE reckons activity remains strong for companies operating in IT, telecoms, employment law, audit, debt management, corporate restructuring & banking, and insurance. On top of that, firms offering Brexit planning advice reported activity “starting to pick up again.” 

One simple way to scour the stock market for potential investment ideas is to look for strength in share prices. I reckon we have a big advantage in the current weak stock market environment because we already know which shares performed well coming out of the spring crash. Indeed, strong stocks can indicate good underlying trading, which we can verify with research.

Quality at fair prices

And I reckon investing in strong businesses can be a decent investment strategy. Billionaire investor Warren Buffett, for example, tends to buy shares in what he calls “wonderful” businesses at a “fair” price. Indeed, he focuses on quality. And he tends to buy shares when they are weak. So that means he’s often out shopping for stocks in times like these. There’s usually plenty to worry about in the economy when he’s hunting, but that’s why he gets his share bargains.

In one example, we’ve seen a strong stock performance from information technology (IT) infrastructure services provider Computacenter. The company has been growing nicely with a resilient operating performance over the past decade or so. I think the share looks interesting now and is worthy of further research. I’d also look at veterinary pharmaceutical operator Dechra Pharmaceuticals.

Meanwhile, toilet rolls, kitchen rolls, and facial tissue manufacturer Accrol has been thriving lately. City analysts have pencilled in a more than 50% increase in earnings for the trading year to April 2022. I think the stock looks attractive. And I’m also keen on communications and information technology firm Spirent Communications.

Meanwhile, in the fast-moving consumer goods space, I’m watching both Premier Foods and PZ Cussons closely. The companies are engaged in different stages of encouraging turnaround strategies.

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.

Kevin Godbold owns shares in Computacenter and PZ Cussons. The Motley Fool UK has recommended PZ Cussons. 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

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

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

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »