The recent stock market crash has caused a wide range of UK shares to trade on more attractive prices than at the start of the year. As such, there may be buying opportunities for ISA investors who can look beyond short-term risks to a likely long-term recovery for indexes such as the FTSE 100 and FTSE 250.
With that in mind, here are two UK shares that appear to offer good value for money after their recent stock prices falls. Investing £2k, or any other amount, in them could lead to high returns in the coming years that helps to boost the size of your ISA portfolio.
Next: undervalued retailer after the market crash
The recent update from FTSE 100 retailer Next (LSE: NXT) showed it could offer good value for money after the market crash. The company’s second quarter performance was better than its own guidance, with store sales more robust than expected. It was also able to bring back warehouse capacity faster than anticipated to meet a larger proportion of online demand for its products.
Looking ahead, further challenges could be ahead for the wider retail sector. Weak consumer confidence may mean it takes a prolonged period of time for demand to return to 2019 levels. However, Next’s online retail exposure could allow it to successfully adapt to changing consumer trends that may quicken as a result of the pandemic.
Therefore, now could be the right time to buy a slice of the company. Its share price is still trading 18% lower that at the start of the year following the market crash. As such, it appears to offer a wide margin of safety for long-term ISA investors.
British American Tobacco’s income appeal
Another UK share that could be worth buying after the market crash is British American Tobacco (LSE: BATS). The company’s recent half-year results showed it’s performing relatively well in a weak economic environment. For example, its adjusted revenue increased by 2.4%, while adjusted operating profit moved 3.3% higher.
The business is continuing to diversify into non-combustible categories, with 10% of its revenue now derived from that sector. This could allow it to capitalise on changing consumer trends, while continuing to experience rising revenue and profit from cigarette sales due to its pricing power.
With British American Tobacco committed to a 65% dividend payout ratio, its income appeal could increase after the market crash. It currently has a strong dividend yield of around 8.5%. With its profitability rising, it could realistically deliver an inflation-beating dividend while, at the same time, providing a significantly higher income return than other stocks.
As such, demand for its shares could increase in a low interest rate environment, which may lead to a rising price level over the long term.
The post Stock market crash: I’d invest £2k in these 2 cheap UK shares in an ISA today appeared first on The Motley Fool UK.
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Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK owns shares of Next. 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