Can UK share prices continue their recent surge through the roof?
I’m not wise enough to forecast whether or not the FTSE 100 and FTSE 250 will extend their recent gains, or whether UK share prices will come crashing down again. The fluid coronavirus crisis means that making a solid prediction either way is nigh on impossible.
Buying wisely after the stock market crash
However, I am prepared to say that now is a great time to buy UK shares. The FTSE 100 for instance continues to trade at a 15% discount to levels recorded at the start of 2020. There are plenty of quality stocks inside and outside the London Stock Exchange’s blue-chip index that continue to trade more cheaply than they were before 1 January. Consequently a lot of companies are trading on ultra-low valuations.
Clearly the Covid-19 crisis has changed the earnings picture for a great many UK shares for the worse. A lot of stocks will suffer serious long-term impacts as a result of the consequent economic downturn. However, many companies still have very bright futures and strong balance sheets to ride out the crisis. This means that eagle-eyed investors can nip in and grab a bargain or two.
A top UK share for growth investors
Boohoo Group (LSE: BOO), for instance, is a UK share that offers plenty for growth and value investors to savour. Rampant e-commerce growth means that City analysts reckon its annual earnings will soar 36% this financial period (ending February 2021). And this leaves the retailer trading on a bargain-basement forward price-to-earnings growth (PEG) ratio of 1.
The English Covid-19 lockdown might be about to expire. But it’s been reported that the government’s planning for restrictions of some kind to remain in place until next April. This would of course provide a serious medium-term boost to online-only operators like Boohoo. To illustrate the point, the Confederation of British Industry says that 55% of retailers saw the volume of goods shifted via the Internet rise in November amid new lockdown restrictions.
Buying the dip
Even in the absence of additional Covid-19 restrictions, though, I’m tipping Boohoo to deliver excellent long-term profits growth. And not just because the e-commerce segment is expected to keep expanding at a terrific pace during the 2020s.
Its eponymous clothing lines have splendid brand power, boosted by significant investment in marketing in recent years. The acquisitions of PrettyLittleThing and Nasty Gal in recent years has bolstered the UK share’s clout in this area, too.
Predictions that the leisurewear market will keep growing at a terrific rate bode extremely well for Boohoo, too. And like Primark and H&M, the retailer’s also in a strong position to ride roaring demand for low-cost fashion. Boohoo’s shares have fallen slightly in value during 2020. They are down 23% in just a couple of months too. I believe this provides an exceptional buying opportunity for savvy ISA investors.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended boohoo group. 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.