The Motley Fool

Stock market crash? I’d buy this UK share for the next bull market

Image source: Getty Images

Stock market crashes are a fact of life. Although this year’s crash was triggered by the coronavirus, over the last 30 years we’ve seen a market crash every decade or so.

The good news is that buying cheap shares during a slump can be a great way to lock in future profits. Today I want to look at a UK share I’m thinking about buying for when the market recovers.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Strong foundations

The company that’s caught my eye is Whitbread (LSE: WTB), which owns the Premier Inn budget hotel chain. I’ve been a fan of this business for a while. In my experience as a customer, the firm’s product is good quality, consistent, and reasonably priced. I’m also attracted to the strength of the brand and its £3bn property portfolio — about 60% of hotels are owned freehold.

This year has obviously been difficult. Sales fell by 77% to just £250.8m during the six months to 27 August, and the group reported a £660.5m loss for the first half of the year. Whitbread’s share price has fallen by nearly 50% since the stock market crashed.

However, Whitbread boss Alison Brittain moved fast to protect the business at the start of the pandemic, raising £1bn in a rights issue and securing other lines of credit. As a result, the company had £936m of cash on hand at the end of August, plus undrawn debt facilities of £1,550m. I don’t see any short-term risk to Whitbread’s financial health.

Growing market share

With much of the UK now back under partial lockdown restrictions, I suspect Premier Inn’s trading is worsening again. But in a way, I don’t think it matters. Historically, market-leading companies often increase their share of the market during a stock market crash, because weaker rivals fail.

I think we’re already seeing evidence of that with Premier Inn. The company says that its sales growth outperformed the wider market by 4.3% in August and by 6% in September. Premier Inn now has a UK hotel market share of around 11%. I’m confident this business should recover strongly when pandemic conditions ease.

There’s also a second attraction, in my view. Premier Inn is rolling out its business in Germany, which has a much more fragmented hotel market than the UK. Whitbread has used the lockdown period to speed up this rollout and has increased its German estate from six to 21 hotels so far this year. I reckon this could be a big growth story over the next five to 10 years.

This could be one of my top stock market crash buys

Whitbread’s falling share price has halved this year. As I write, the stock is changing hands for about £21, down from nearly £42 at the start of the year.

This slump means that Whitbread shares are trading at around 11 times last year’s earnings. Although it could be a while until profits return to last year’s level, the current valuation looks cheap to me.

I’m tempted to buy Whitbread at current levels, as I believe the group has a strong future. I’ve added the stock to my short list of stocks for further research.

There’s a ‘double agent’ hiding in the FTSE… we recommend you buy it!

Don’t miss our special stock presentation.

It contains details of a UK-listed company our Motley Fool UK analysts are extremely enthusiastic about.

They think it’s offering an incredible opportunity to grow your wealth over the long term – at its current price – regardless of what happens in the wider market.

That’s why they’re referring to it as the FTSE’s ‘double agent’.

Because they believe it’s working both with the market… And against it.

To find out why we think you should add it to your portfolio today…

Click here to get access to our presentation, and learn how to get the name of this 'double agent'!

Roland Head 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.