Yahoo Finance The bargain stocks left behind by Britain's booming market
Britain’s stock market has recovered from its pandemic lows but bargain-hunting investors can still find stocks trading much more cheaply than before share prices went spiralling.
The FTSE All-Share index, a barometer for British stocks, has now reclaimed all of its 30pc fall in March last year, once dividends are included. This is after a rally that started on positive vaccine news in November and gathered pace as restrictions have been lifted.
However, some shares still have ground to make up even as economies have reopened and the general optimism has infected investors. There are bargains to be found on the London stock market, experts have said, particularly for those willing to be brave and invest in businesses and industries that remain out of favour.
Rob Burgeman of Brewin Dolphin, the wealth manager, said airline share prices had the potential to soar, especially after Britain’s ban on international travel is lifted. Shares in International Airlines Group, owner of British Airways, Iberia and Vueling, are trading at around 210p, having tumbled from more than 400p when the pandemic struck.
“IAG is 50pc cheaper than it was pre-pandemic, which is unfair given its collection of well-known brands and diversified short and long-haul offerings,” Mr Burgeman said.
On Friday the company reported a loss of €1.1bn (£1bn) in the first three months of the year, with flights running at just 20pc of capacity. But Mr Burgeman said the business, which is pursuing a takeover of Spanish budget airline Air Europa, was well placed to recover as air travel returned.
“The acquisition of Air Europa, if approved, would give it an even stronger foothold in Europe. IAG is in reasonably good shape despite the past year and some analysts have said that, all going smoothly, the company could return to its pre-Covid profit margin levels as soon as 2023,” he said.
Shares in easyJet, which trade at around the £10 mark, down from £15 before markets fell last year, are another potential bargain, according to Mr Burgeman.
“The shares are 30pc lower than they were before the crisis but things are looking up for budget travel once again. Of the short-haul airlines, easyJet looks the best placed to benefit when tourists flock to sunnier climes for a well deserved break,” he added.
Alex Wright, a fund manager at Fidelity, said housebuilders’ stocks were still cheaper than they were at the start of last year. However, the outlook for the industry had improved substantially, which made them great investments.
“If we look at the conditions in the housing market right now it’s obvious that there’s a real spike in demand and prices are going up at the fastest pace we’ve seen for years,” he said.
“Housebuilders have sold out of stock for the entire year already, which is unusual; they normally sell out about three months in advance. While the stamp duty holiday has supported this, the same is happening in Australia, New Zealand and Canada, so it is not just down to that.”
Despite this, their shares are cheap. Mr Wright said he had just bought shares in Vistry, owner of the Bovis brand, which trade 12pc below their pre-pandemic level. He also bought Redrow, now 16pc down on its February 2020 price, last summer.
Companies that benefit from housing booms, such as Kingfisher, which owns B&Q, and the building materials group Grafton, had also been worthy holdings. Mr Wright said the shares, which have risen by 65pc and 25pc since early 2020, illustrated where housebuilders’ share prices could go.
Potential stock market winners from a relaxation of travel restrictions are not limited to airlines, added Mr Burgeman. He said WH Smith, whose stores in airports and stations account for a large portion of its earnings, and Saga, the over-50s insurer and cruise operator, were worth investigating. WH Smith shares stand 21pc cheaper than before Covid-19 sent markets falling, while Saga is down by more than 40pc.
“WH Smith has an enviable position at most major transport hubs and is growing internationally. Saga offers international holidays and cruises to a segment of the market who will be the first to be vaccinated and with the surplus income to take advantage,” he said.
