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Will lockdown’s losers supercharge your portfolio?

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What a difference a few days makes.

On the last trading day in October, the FTSE 100 was lingering below 5,600. Granted, that was comfortably up on the 4,993 that it had crashed to on 23 March, as lockdown loomed.

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But even so, a far cry from the 7,674 that it had touched on 17 January, before the full import of the approaching pandemic became clear.

Today, as I write these words, the Footsie is above 6,400, boosted by news of not one but two promising new vaccines for Covid-19.

Put another way, it’s risen 15% in as many days.

Steroid injection

Some individual shares, though, have performed far, far better.

A few weeks ago, I was buying HSBC at a whisker over £3. Now, it’s a whisker under £4. International Consolidated Airlines – owner of British Airways and Iberia – is up 76%. Aero-engine manufacturer Rolls Royce Holdings is up 158%. Hotel operator Whitbread – which owns Premier Inns – is up 45%. And pub owner and brewer Marston’s is up 48%.

The list goes on, and on.

Nor is it difficult to see why these stocks have experienced such strong growth in their share prices. Without exception, these are companies whose businesses have been ravaged by the pandemic.

And now, the clouds are lifting. Airlines will be flying again. Bars, hotels, and pubs will be open. Shops will be thronged with people. And with consumers spending freely, the broader economy will benefit, too.

We’ve seen this before

As we entered lockdown, with share prices cratering, these columns of mine were drawing parallels with 2008.

The comparison holds up well now, as well: just as in early 2009, when the recovery started, some stocks soared upwards much faster than others. Which is exactly what we see happening now.

Back then, those who stood dithering on the sidelines missed the boat – and there were some who remained resolutely in cash even into 2010, waiting for a double-dip recession that never happened.

Needless to say, they subsequently regretted it.

Bargains on offer

What to do?

The safest thing to do, of course, is to buy a FTSE All-Share index tracker. That way, you’ll capture the post-pandemic recovery of the market as a whole.

And – let’s face – that isn’t to be sniffed at. For if the market recovers back to where it was back in mid-January this year, your tracker purchase would show a 20% gain.

But that’s not what I’ve been doing.

And it’s not what I’ll be doing going forward. Instead, I’ve been targeting individual shares that have been hit by the pandemic, and where I believe the prospects for a decent increase in share price look good.

Not to mention a decent income, secured at a purchase price that represents a tempting yield.

As I say, I’ve been buying into HSBC. And a handful of beaten-down REITs. Next up will likely be Marston’s, my favourite pub company.

Obvious appeal

Granted, the pandemic has hit many businesses hard. The arrival of vaccines won’t be an instant cure-all: airlines, pub chains, retailers – all have cut deeply, and it will take time for both confidence and capacity to recover.

Dividends and yields will need watching carefully, too. Some companies are likely to restore dividends to pre-pandemic levels quite quickly, but many won’t.

Even so, the appeal of buying into today’s market is obvious. For as I remarked a few months ago, if you don’t buy shares when they’re cheap, when do you buy them?

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Malcolm owns shares in HSBC, Rolls Royce Holdings, and Marston’s. The Motley Fool has recommended shares in HSBC and Marston's. 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.

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