A stock market crash often provides us with great opportunities to buy quality shares at bargain prices. This year, I’m calling these coronavirus stocks – businesses that have been hit by Covid-19 but that should make strong recoveries.
I reckon that buying these shares today could help you beat the market for many years to come.
You may wonder why I’m ignoring coronavirus vaccine stocks like Synairgen, which has risen by 500% in two weeks. The reason for this is simply that I think it’s too late.
Synairgen and its rivals are now priced for huge success, but at least some of them will disappoint investors. When that happens, their share prices could crash.
Coronavirus stock #1: Foxtons (LON:FOXT) Estate agents have been hit hard by the pandemic. London-focused Foxtons (LSE: FOXT) is no exception. Foxtons’ share price has fallen by 60% from its February high, but I think the shares are now looking too cheap.
The latest report from the company tells me that Foxtons is very unlikely to run out of cash, even if we see a long housing market slump. Net cash was £40.5m at the end of June and the company’s operations generated underlying positive cash flow of £4.6m during the half year.
Of course, business isn’t good at the moment. Revenue fell by 20% during the half year and the group reported an accounting loss of £4.3m for the period. But housing activity is returning and Foxtons also has a stable lettings business. Over time, I’m confident the shares will recover. I think Foxtons’ share price could double over the next few years.
Coronavirus stock #2: AG Barr Soft drinks are generally seen as a defensive product. Demand doesn’t change much, even during a recession. However, sales can suffer when every pub, café, and restaurant in the country is closed, as we saw during lockdown.
What’s interesting about Irn-Bru maker AG Barr (LSE: BAG) is that according to the firm, only 10% of sales are made to the hospitality trade. More than 80% of sales are impulse buys or are made through supermarkets. As a result of this sales profile, the company still achieved 88% of last year’s sales during the April-June lockdown period.
Revenue for the six months to 25 July is expected to be down by just 8%. Profits for the full year are expected to be lower, but I don’t see this as a concern. AG Barr has been a reliable performer for many years. I’m sure it will recover. With the stock trading at an eight-year low, I’d buy today.
Coronavirus stock #3: An overlooked insurance play? My final choice is motor insurance company Sabre Insurance (LSE: SBRE). Sabre floated on the FTSE 250 in 2017 and specialises in insuring drivers who attract high premiums. It’s a very profitable business that I believe is likely to be a good dividend stock.
Numbers released today show that profitability has remained strong during the first half of this year. Although sales were down, disciplined pricing helped to support the group’s profit margins.
Cash generation remains strong and Sabre has now restored its dividend. Shareholders will receive a total payout of 9.5p per share for the first half of the year. Analysts expect a total payout of 19p this year, giving the stock a forecast yield of 6.8%. I rate Sabre as a dividend stock to buy today.
The post Coronavirus stocks: 3 unloved shares I think could make you rich appeared first on The Motley Fool UK.
Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended AG Barr. 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