The 2020 stock market crash: 3 steps I’d take to buy the best shares now

I think today’s best shares could offer capital appreciation potential as a stock market recovery takes hold following the 2020 stock market crash.

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.

The 2020 stock market crash could provide opportunities to buy the best shares at cheap prices to benefit from a long-term stock market recovery.

Through identifying sectors with strong long-term growth prospects, it is possible to unearth companies with sound prospects. Furthermore, concentrating on company fundamentals may allow an investor to find businesses with solid market positions that can lead to higher profitability in the coming years.

Buying such companies at discounts to their peers may mean higher returns in the long run after the 2020 stock market crash.

Identifying the most attractive sectors to find the best shares

The best shares to buy today could be those companies that operate in industries with strong long-term growth outlooks. Certainly, many sectors are likely to experience fast-paced change in the coming years, as the full impact of the coronavirus pandemic on consumer trends becomes clearer. However, some industries may have clearer paths to growth than others.

For example, trends in the healthcare and retailing sectors may provide growth opportunities for businesses operating within them. In healthcare, factors such as a growing world population and an ageing population may mean that demand for products and services increases over the coming years. Similarly, online retailers may be able to produce higher rates of sales and profit growth than their bricks-and-mortar peers.

Of course, market trends may be difficult to identify when seeking to find the best shares to buy today. However, investing money in a diverse range of sectors that have positive long-term growth outlooks may lead to relatively high returns in the coming years.

Focusing on high-quality stocks

Some of the best shares to buy today may be those companies with sound financial positions, as well as wide economic moats. They may be better able to survive a period of uncertain economic performance. They may even strengthen their positions relative to peers by investing in cheap assets or in developing new products and services to react to changing consumer demand.

Company fundamentals can provide guidance on the financial strength of a business. For example, low debt levels within a company’s balance sheet suggest sound finances. Meanwhile, an economic moat can be identified by considering factors such as the uniqueness of a company’s products, as well as its degree of customer loyalty.

Buying cheap shares for a stock market recovery

The best shares within a specific sector may be those that trade at cheap prices relative to their peers. For example, a company that has a better financial position and a wider economic moat than its peers, but that trades at a discount to its rivals, may provide greater scope for capital appreciation over the long run.

Therefore, considering a wide range of companies within a specific sector could be a useful step to find the best shares to buy today. It may provide an insight into which stocks offer the best value for money on a long-term basis.

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.

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

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

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 »