It now seems like an age ago when the Covid-19 crisis exploded and UK share investors panic-sold everything including the kitchen sink.
A lack of significant interest from dip buyers, however, since the stock market crash of late February and early March means plenty of UK shares still trade on rock-bottom valuations.
A terrific dip-buying opportunity?
Our view of the 2020 stock market crash here at The Motley Fool is clear. We reckon the correction provides an exceptional opportunity for investors to get seriously rich in the years ahead.
There are too many top-quality UK shares that were oversold during the initial crash to miss. We can buy these for low cost today and possibly get stinking rich as they rebound in value once market confidence begins to recover.
That said, the tough economic landscape means you and I need to be extra careful before buying UK shares. The Covid-19 outbreak has significantly worsened the profits outlooks of a great number of London-quoted companies.
It’s likely that a large number of UK shares won’t have the balance sheet strength to survive a painful and prolonged economic downturn too.
3 cheap UK shares you might be considering
The following UK shares all trade on dirt-cheap valuations after the recent stock market crash. Are they too cheap to miss right now? Or do their cheap prices reflect their high risk profiles?
- You might think I’m daft for recommending Wizz Air Group as an attractive dip buy. The Hungarian flyer’s still slashing capacity as demand for its tickets tanks. But I’d argue this UK share remains an attractive pick for long-term investors. It has considerable balance sheet strength and a low cost base to help it fly through the current crisis. And its eventual recovery will be helped by the inevitable fall of weaker airlines this year and next. I’d use its 15% share price fall in 2020 as an opportunity to buy.
- I certainly don’t like the look of Restaurant Group though. Sales more than halved in the first half of the year. And things look certain to remain difficult as Covid-19 discourages people from visiting its restaurants and support from the government’s ‘Eat Out to Help Out’ scheme is yanked. The Restaurant Group’s shares are worth around a third what they were at the start of the year. And I see little reason to expect a rebound as infection rates keep rising and a prolonged economic downturn comes into view.
- I’d much rather invest my hard-earned cash in Aviva. This UK share’s fallen 30% in value in 2020 and today it trades on a forward P/E ratio of just 6 times. Consequently, I think it’s one of the hottest dip buys out there. It’s a particularly great pick for income hunters because of its 10% dividend yield. Through a mixture of asset sales and ambitious deleveraging I’m confident the FTSE 100 giant will remain a great dividend payer beyond the near term too.
The post Stock market crash: are these cheap UK shares brilliant bargains or investment traps? appeared first on The Motley Fool UK.
- My last call on easyJet shares was spot on. Here’s my view on the stock now
- How I'm planning to turn £6.74 of UK shares into a £10,000 passive income for life
- Hargreaves Lansdown investors are buying IAG shares. Should you buy too?
- Forget your State Pension worries! I’d listen to Warren Buffett and buy cheap UK shares
- Top British stocks for October 2020
- Top shares for 2020
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Wizz Air Holdings. 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