Stock market rally: A cheap UK share from the FTSE 100 I’d buy in my ISA today

I think this FTSE 100 giant is too cheap to miss after the 2020 stock market crash. Here is why I think I’ll get rich from this UK share in years to come.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

UK share markets continue to have a terrific tear-up in the wake of positive Covid-19 vaccine news. The FTSE 100 is knocking on the door of fresh five-month highs. Meanwhile the FTSE 250 has just hit levels not seen since late February.

It’s too early to say whether UK share investors have got a bit carried away with the latest coronavirus news. What I am prepared to say, though, is that now is a great time to go shopping for UK shares. There are too many top stocks trading much too cheaply following the 2020 stock market crash to miss out on. I’ve continued buying for my Stocks and Shares ISA despite the uncertain macroeconomic environment. And I plan to keep on investing in the weeks and months ahead.

Time to go UK share shopping!

I already own shares in boxbuilder DS Smith (LSE: SMDS). But I’m tempted to add more following significant share price weakness in 2020. Right now this FTSE 100 stock trades on a forward price-to-earnings (P/E) ratio of 13.5 times. And its corresponding dividend yield of 4% also beats the broader UK share price average by half a percentage point.

Image of person checking their shares portfolio on mobile phone and computer

I bought this UK share for my ISA a few years back. Its acquisition-led growth strategy, which bolstered its position in European emerging markets and more recently took it into the US, appealed greatly to me. I also liked the significant uplift that M&A gave to its product ranges, and the huge sums it’s investing in packaging design to capitalise on a fast-moving retail landscape and a growing demand for sustainability.

What’s become particularly apparent in 2020, though, is the profits boost DS Smith will receive in the years ahead as e-commerce takes off. Online shopping activity has been rising steadily over the past decade. But Covid-19 lockdowns have changed the game, with new shoppers logging on for the first time in 2020 and existing e-commerce users hitting the virtual high street too.

A FTSE 100 firecracker I bought for my ISA

You don’t just need to take my word for it though. DS Smith itself commented earlier this month that “the step-change in use of e-commerce is clearly established across our territories,” the business noting “very high demand from customers for e-commerce packaging as we head into the festive season.”

The explosion in online shopping in 2020 has significantly changed the long-term outlook for the likes of DS Smith. Companies across the world have invested heavily to grab onto this exciting trend by improving their websites, logistics operations, and other e-commerce-critical systems. At the same time fast broadband is becoming more widespread and deliver infrastructure and services improving, boosting the user experience and lifting online shopping activity still further.

I think DS Smith has all the tools to deliver stunning earnings growth in the years ahead. And I expect to make a lot of money from my Stocks and Shares ISA as a result. But it’s just one of many top UK shares I’m thinking of buying after the stock market crash…

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild owns shares of DS Smith. The Motley Fool UK has recommended DS Smith. 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.

More on Investing Articles

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »