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Stock market crash bargains: I think this is the best UK stock to buy now

Alan Gurung
Businessman looking at a red arrow crashing through the floor

Investors who adopt a buy-and-hold strategy over the long-term could capitalise on the bargain stocks that are still on offer which could soon return to normal prices. One such stock I believe is Royal Dutch Shell (LSE: RDSB). Shell has stated that while it expects a crude price of $50 a barrel in 2022, its estimates of beyond that point remain the same at $60. Admittedly, considering the current economic climate and worries of a second wave, we could continue to see low demands for crude globally in the short-term. However, the best UK stocks to buy now, in my opinion, are centred around the necessity of the use of the product the company is providing, and I’m confident that the demand for oil and gas won’t disappear overnight.

Why Shell is one of the best UK stocks to buy now

Additionally, it’s worth noting that Shell does a lot more than simply pump oil and gas out of the ground. It owns refineries, chemical plants, distribution networks, and is a world-class energy trader. I believe many of these engineering and infrastructure assets will remain relevant in an ever-changing future, especially if liquid petroleum gas or hydrogen becomes more widely used as transport fuels.

The Shell stock price has fallen drastically during this pandemic period, largely due to the bombing of oil prices in February. Shell followed BP and dropped its oil price forecasts for the next few years, leading to a £12bn-18bn reduction in its June quarter results, placing the share price at low levels of 1,250p at the time of writing.

One major opportunity arising out of the recent troubles with oil is that it may act as a catalyst to quicken efforts towards green energy. However, although the world needs to address climate change urgently, the reality is that billions of people all over the world still rely on fossil fuels through transportation, electricity, and the raw materials needed in manufacturing. Considering the dramatic fall in the share price and the necessary use of fossil fuels in people’s lives, it all adds further reason to why Shell may be one of the best UK stocks to buy now before it starts rallying once the pandemic starts to settle.

Dividend cut could help Shell shares

Shell’s share price fell when the group cut its dividend by 65% in April. This was the first cut in dividends by the company since the Second World War. However, I am confident that it was the appropriate thing to do.

The annual £11bn dividend had become a burden that limited its ability to evolve. With this cut, Shell aims to strengthen its financial position and cut costs during a very difficult time. I believe shareholders will benefit from this decision over the longer term.

With the shares trading at around 1,250p and a personal optimistic outlook on the pandemic steadying in the coming months, I rate Shell as one of the best UK stock to buy now.

The post Stock market crash bargains: I think this is the best UK stock to buy now appeared first on The Motley Fool UK.

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Alan Gurung owns shares of Royal Dutch Shell B. The Motley Fool UK has no position in any of the shares mentioned. 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