There’s an ongoing threat of a second stock market crash. Risks such as Brexit and coronavirus could cause worsening investor sentiment over the coming months. And of course, that could negatively impact the prices of UK shares.
However, over the long run, the FTSE 100 and FTSE 250 are set to experience strong growth. Their past performances show that bear markets have always been followed by sustained bull markets. And that eventually leads to new record highs.
As such, buying the best UK shares available today could be a sound move. Doing so may enable you to capitalise on the stock market’s recovery.
Financial strength in a stock market crash
Companies with solid financial positions may be better able to survive a stock market crash caused by a weak economic outlook. They may not only deliver more robust financial performances. They could also be viewed more favourably by investors during a period of economic uncertainty.
Finding financially-sound businesses can be done through analysing their annual reports and investor updates. Look for companies with balance sheets that contain modest amounts of debt and large cash balances. These may be under less financial strain in a recession than their highly-indebted peers.
Similarly, companies with a long track record of delivering solid financial performances with prudent financial management may be viewed as less risky by investors.
Buying the best UK shares with growth potential
As well as being able to survive a possible second stock market crash, the best UK shares are likely to be those companies that can adapt to changing market conditions. The full impact of coronavirus on consumer habits and the wider economy is still a known unknown.
However, it appears as though some trends are starting to emerge. They include an increasing focus on digital opportunities, new technology and a greater environmental focus.
Companies that can adapt their business models to fit with a rapidly-changing economic outlook could gain a competitive advantage over their peers. They may be able to deliver higher profitability over the long run.
As such, assessing a company’s strategy and its business model through analysing its investor updates could be a sound move. That will allow you to benefit from the long-term bull market that’s likely to be ahead.
A long-term view
As mentioned, a stock market crash could happen in the short run. Therefore, even those companies with solid financial positions and sound business models could deliver disappointing share price performances in the coming months.
However, over the long run, buying the best UK shares could lead to impressive returns as a bull market lifts valuations across indexes such as the FTSE 100 and FTSE 250. Buying a diverse range of British shares today could prove to be a profitable move while they trade at low prices.
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.