Stock market crashes on the scale of early 2020 only come round every quarter of a century or so. When they happen, you need to be ready to spring into action. Those who load up on UK shares after serious corrections tend to make magnificent returns during subsequent economic recoveries.
The London stock market recovered strongly following the 2008 global financial crisis. It allowed Stocks and Shares ISA investors who bought heavily at the bottom of the market to make fortunes. A great many even became millionaires. Between 2009 and 2018, the FTSE 100 more than doubled in value as economic conditions recovered and central bank monetary policy inflated asset prices.
Getting rich after stock market crashes
The near-term macroeconomic outlook is muddy as hell right now. But history shows us that UK share prices always recover strongly from stock market crashes, prompted by significant social, economic and political upheaval. I don’t believe there’s any reason why stock prices won’t surge again during the 2020s either.
UK share investors need to be prepared for a severe and drawn-out downturn in the global economy. They should avoid companies with debt-heavy balance sheets and which suffer significant damage from rising Covid-19 infection rates. Shares like Cineworld, for example.
But they shouldn’t stop buying UK shares completely. There are still plenty of top-quality stocks that should deliver exceptional shareholder returns even in the event of a prolonged economic depression. And a great many of these classy operators trade at rock-bottom prices following the stock market crash of early 2020.
I’ve continued to buy UK shares for my own Stocks and Shares ISA. Let me fill you in on another quality — and cheap — stock I’m thinking of adding to my investment portfolio:
A cheap UK share on my radar
Having some exposure to gold is always a good idea as corrections can happen at any time. And another stock market correction could be just around the corner. I think this makes Ariana Resources (LSE: AAU) a brilliant UK share to buy today.
When stock markets crash precious metal prices tend to soar, as has happened following the initial Covid-19 outbreak. Owning some gold-producing stocks is a good way to save your Stocks and Shares ISA from total meltdown.
Ariana Resources has risen in value by almost 150% since the beginning of 2020 as gold prices soared (it famously hit fresh record highs above $2,000 per ounce in August). A bright outlook for gold prices suggests it could continue its northwards ascent as well.
What’s more, I’m encouraged by the progress Ariana is making on the exploration front. And it’s also slowly getting back to business after Covid-19 disrupted activity. The digger said it produced 5,125 ounces of gold in the third quarter, up from 4,679 ounces in quarter two. Signs of further operational advances will give its share price an extra boost too.
Today, this UK share trades on a forward price-to-earnings (P/E) ratio of around 13 times. And, in my opinion, it makes Ariana a bargain.
Royston Wild 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.