The outlook for the UK economy is highly uncertain at present. However, despite this unsettled backdrop, now could be the perfect time for investors to buy crashing UK shares.
Indeed, research shows that buying shares at low levels after a stock market crash can produce the best returns in the long run. As such, here are some crashing UK shares that could be worth buying today before the economic recovery.
Crashing UK shares on offer
While there’s no shortage of low-priced shares on the market at present, investors need to be careful where they look. Some crashing UK shares are falling for a reason. Companies with lots of debt and no revenue, such as cruise operator Carnival, may not survive the coronavirus crisis.
That doesn’t mean investors should avoid every depressed stock. Companies with strong balance sheets and sustainable competitive advantages may be best-placed to weather the storm.
Consumer goods giant Unilever is a great example. This company doesn’t exactly qualify as one of the crashing UK shares, but the stock is down 10% over the past 12 months.
Unilever owns some of the most valuable consumer brands in the world, has a strong balance sheet, and large profit margins. Therefore, it could be worth buying the depressed shares as part of a diversified portfolio.
Other crashing UK shares that exhibit similar qualities include IAG. The owner of British Airways has one of the most robust balance sheets in the European airline sector. It also owns valuable takeoff and landing slots at key airports.
These slots are the firm’s most significant competitive advantage. It means IAG and its fleet can offer routes other airlines are unable to provide to customers. This should help the airline group build on its recovery when the travel market begins to wake up again.
ITV also has a critical competitive advantage. As the UK’s largest free-to-air broadcaster, the firm offers advertisers a direct route into consumers living rooms. It also has a valuable content library. This provides the business with a recurring revenue stream from production sales and streaming deals.
Viewing figures rose to a multi-year high at the peak of the pandemic. Despite this, shares in the company have plunged in 2020. This disconnect between the company’s underlying performance and share price performance suggests that now may be a good time to buy the shares. As the economy recovers, ITV may wake up.
The bottom line
History shows that the best time to buy shares is when they’re trading at low levels. Therefore, buying a basket of the crashing UK shares listed above may help investors retire early.
The outlook for these businesses may be uncertain in the near term. Still, their competitive advantages suggest they could have what it take to yield high total returns as the economic recovery gets underway.
The post £3k to invest in an ISA? I’d buy these crashing UK shares to retire early appeared first on The Motley Fool UK.
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Rupert Hargreaves owns shares in ITV and Unilever. The Motley Fool UK has recommended ITV and Unilever. 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.
Motley Fool UK 2020