Will the stock market crash again? I think the worst is over, but I think we could see another sharp drop at some point. In this piece I’m going to look at three stocks I’d buy in the next market crash if I had £1,000 to invest.
The best UK share?
One month ago, I asked if Games Workshop (LSE: GAW) was the best UK share to buy. Since my last article, Games Workshop’s share price has risen by another 15%. The wargaming and modelling specialist has had an amazing year.
Revenue during the three months to 30 August was £90m, 15% ahead of the same period last year. Operating profits for the quarter almost doubled, rising from £28m to £45m. However, any boost Games Workshop has received from locked-down gamers has only been the icing on the cake.
Games Workshop’s share price has risen by more than 1,800% over the last five years, as its annual profits have climbed from £13.5m to £71m. This business has high profit margins, no debt, and generates plenty of cash.
However, I can’t help feeling that a lot of this good news is in the price. Games Workshop shares now trade on 43 times 2020–21 forecast earnings and yield just 1.6%. Perhaps I should buy anyway – I’ve missed out before. For me, it’s a little too expensive. But I’d certainly buy on the dips.
£1,000 to invest? I’d buy this stock first
Shares in FTSE 250 IT services group Computacenter (LSE: CCC) have doubled over the last 12 months, but they fell sharply in March and looked cheap for a short while before rapidly bouncing back to new highs.
Trading this year has been strong, with pre-tax profit up by 42% to £72.4m during the first half of the year. However, most of this gain came from the UK as demand surged for hardware and services needed to support working from home. Profits in Germany only rose by 15%, while profits at the group’s French business fell by 55% due to an industrial slowdown.
Computacenter has a long record of consistent growth and strong profitability. But the group’s mixed performance during the first half of this year suggests to me that the next 12 months could be more difficult.
This year’s share price gains mean that Computacenter shares now trade on 22 times forecast earnings and yield of just 1.8%. This is a stock I’d like to buy on the dips.
Invest £1,000 for a 4% income
Top cash savings rates now seem to be dipping below 1%. That’s not much of a return if you’re trying to build retirement savings. If you’re willing to accept a little more risk to your capital, I think that warehouse property stock Tritax Big Box REIT (LSE: BBOX) could be a better alternative for income investors.
Shares in this FTSE 250 real estate investment trust currently offer a forecast yield of 4% for 2021. During a year when many property stocks have had to cut their payouts, this looks quite attractive to me.
Tritax’s attractions aren’t exactly a secret, however. Investors have pushed the BBOX share price up this year so that the stock trades at a 10% premium to its book value. I prefer to buy property stocks at book value or less, so I’m not buying right now. But if the shares dipped again, I’d see this as a good way to invest £1,000 for income.
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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Tritax Big Box REIT. 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.