The Motley Fool

Stock market crash 2020: a rare chance to buy cheap UK shares ahead of a recovery?

Image source: Getty Images.

Despite a recent rebound after the 2020 stock market crash, there are a wide range of cheap UK shares available to buy. In fact, indexes such as the FTSE 100 and FTSE 250 continue to trade significantly below their levels from the start of the year. Within them, some sectors remain unpopular among investors due to the uncertainty they currently face.

Therefore, now could be a rare opportunity to buy high-quality companies while they offer wide margins of safety. Certainly, short-term risks are likely to persist at high levels. But, over the coming years, a stock market recovery could lead to impressive capital gains across the equity market.

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...

A rare opportunity to buy cheap UK shares

As mentioned, the 2020 stock market crash has left many cheap UK shares available to purchase. Such events don’t happen all that frequently. For example, this year’s bear market was the first decline of such a size in indexes such as the FTSE 100 and FTSE 250 for over a decade. Therefore, while today’s low share prices may return in future, such a situation may not take place for a number of years.

In some cases, FTSE 100 and FTSE 250 shares are trading at extremely low valuations. Sectors that are relatively cyclical, in terms of being reliant on the economic outlook to a large extent, are currently very unpopular among investors.

They include companies trading in industries such as banking, energy, travel & leisure and some retailers. As such, some businesses are trading at prices significantly below their long-term averages following the stock market crash. This may mean their valuations include wide margins of safety that account for the risks they face in the coming months.

A recovery after the stock market crash

Of course, a recovery that pushes the values of cheap UK shares higher may currently seem unlikely. Especially after the 2020 stock market crash that caused significant disappointment. Certainly, excitement among investors has risen recently due to encouraging news regarding vaccine development.

However, the process of vaccinating the population en masse is likely to take a considerable amount of time. Meanwhile, risks such as Brexit and a weak economic outlook are set to remain in place in the coming months. They could cause investor sentiment to remain very volatile.

Despite this, the stock market has a long track record of recovering from even its very worst declines. For example, the last major bear market prior to the 2020 stock market crash saw over 50% wiped off the value of the FTSE 100.

However, within a few years the market had doubled to fully recover, before pushing on to new record highs. Therefore, purchasing high-quality businesses likely to survive short-term challenges to benefit from a long-term recovery after the stock market crash may prove to be a profitable strategy.

A Top Share with Enormous Growth Potential

Savvy investors like you won’t want to miss out on this timely opportunity…

Here’s your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this ‘pure-play’ online business (yes, despite the pandemic!).

Not only does this company enjoy a dominant market-leading position…

But its capital-light, highly scalable business model has previously helped it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns … in fact, in 2019 it returned a whopping £150m+ to shareholders in dividends and buybacks!

And here’s the really exciting part…

While COVID-19 may have thrown the company a curveball, management have acted swiftly to ensure this business is as well placed as it can be to ride out the current period of uncertainty… in fact, our analyst believes it should come roaring back to life, just as soon as normal economic activity resumes.

That’s why we think now could be the perfect time for you to start building your own stake in this exceptional business – especially given the shares look to be trading on a fairly undemanding valuation for the year to March 2021.

Click here to claim your copy of this special report now — and we’ll tell you the name of this Top Growth Share… free of charge!

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.