It’s no surprise that investor appetite for UK shares remains pretty weak. The stock market crash may have happened months ago, but Covid-19 news flow continues to chill, fuelling the spectre of a long and painful economic recession.
It’s clear that buyers of UK shares need to be extremely careful. Dividends have fallen like dominoes in 2020 as the outlook for corporate profits has imploded. FTSE 100 colossus BP’s decision to cut the dividend last week shows that the bloodbath is not yet over either, as companies large and small scramble to protect their balance sheets. Covid-19 could even sound the death knell for many UK shares like embattled retail property owner Hammerson.
Think like an ISA millionaire! That being said, I think those who’ve stopped buying shares completely are making a huge mistake. Those who do proper research and take care to build a balanced portfolio of financially sound UK shares can expect to hurdle the worst of the Covid-19 crisis and generate brilliant returns over the long run.
I’d go one step further, in fact, and suggest that those who prefer not to invest today are wasting an exceptional opportunity to get rich with UK shares. They have a chance to buy quality stocks at rock-bottom prices and then watch them soar in value as economic conditions improve. This is how ISA millionaires who bought in at the depths of the 2008/09 financial crisis got rich in the last decade.
3 ‘too-cheap-to-miss’ UK shares There’s a wealth of cheap UK shares that I think are too cheap to miss at current prices. Give me a few minutes to go through a few of my favourites:
- DS Smith of the FTSE 100 has fallen almost a third since the start of 2020. And as I type it trades on a forward price-to-earnings (P/E) ratio of 11 times. I own this UK share and am thinking of buying more at current prices. Demand for its packaging may slip in the short term. But moves to embrace e-commerce and ‘greener’ packaging solutions should help set it up for great profits growth in the years ahead.
- I’d also buy JD Sports Fashion shares following its 20%+ price fall this year too. Okay, consumer spending will come under pressure in the near term. But I’m confident this FTSE 100 share will ride the recovery better than the broader retail (and clothing) sector. Athleisure is the fastest-growing sub-segment of the fashion segment. JD is a leader in this field and stocks the most exclusive lines on the high street. And the Footsie firm’s global expansion of recent years will help deliver stunning profits growth over the long run too.
- Those seeking undervalued UK shares should consider buying Applegreen as well, I feel. It’s dropped 30% in value in 2020 and now trades on a forward P/E ratio of just 10 times. The roadside convenience retailer has also been busy expanding overseas in recent years, chiefly through acquisition action in the UK and the US. This makes it a hot growth share to watch over the next decade.
Royston Wild owns shares of DS Smith. The Motley Fool UK has recommended Applegreen and DS Smith. 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
First published on The Motley Fool
