Buying cheap UK shares after the stock market crash could be a means of generating impressive returns over the long run. The track record of the world economy suggests that it is very likely to recover from its current woes. This could produce stronger operating conditions for FTSE 100 and FTSE 250 companies that have thus far experienced tough periods since the start of the year.
As such, buying undervalued shares today could lead to high long-term returns. With that in mind, here are two UK shares I like. They appear to me to offer turnaround prospects after falling heavily in recent months.
A sharp fall in the stock market crash
Glencore’s (LSE: GLEN) share price has fallen heavily in the 2020 stock market crash. It is currently down 30% since the start of the year. Weak investor sentiment, an uncertain operating outlook and legal concerns appear to have weighed on its performance
However, the company’s recent half-year results showed that the majority of its assets have operated as normal. Moreover, its Marketing division reported record results. This highlights the diversity of the company’s business model and its capacity to offset weak operating conditions in one area with stronger performance elsewhere.
Looking ahead, Glencore is expected to experience a volatile earnings performance over the next couple of years. Investors appear to be pricing in its uncertain prospects, with the stock currently trading on a forward price-to-earnings (P/E) ratio of 12.9.
Although further share price declines cannot be ruled out in the short run due to the potential for a second stock market crash, the company’s long-term recovery prospects appear to be relatively attractive. Therefore, it may have appeal within a diverse portfolio of UK shares.
Improving prospects relative to other UK shares
Berkeley (LSE: BKG) has experienced a tough period alongside other UK shares as a result of the stock market crash. Its share price is currently down around 11% since the turn of the year, as lockdown measures have disrupted the UK housing market.
However, the company may experience improving operating conditions over the long run. A period of low interest rates looks set to remain in place over the coming years. This could support demand for new homes at a time when their supply continues to be relatively low.
Berkeley Group currently trades on a forward P/E ratio of around 12.5. This suggests to me that it offers a wide margin of safety. Furthermore, its net cash position of over £1bn suggests that it has the financial means to overcome uncertainty in the short run.
Therefore, the company could offer sound long-term investment prospects after the 2020 stock market crash, I feel. It may enable an investor like me to buy shares in a high-quality business while they trade at an attractive price relative to other UK shares.
Peter Stephens owns shares of Berkeley Group Holdings. 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.