The stock market crash of the spring has made many decent shares cheaper than they were before. The pandemic is affecting the underlying businesses to varying degrees. But buying shares when they are lower because of a setback is often a good idea.
If you plan to hold shares for many years, there’s a good chance the operations behind them will recover. And that could lead to strong returns from your investments in the years ahead. If you invest like that, you’ll be following in the footsteps of famous investors such as Warren Buffett. He’s known for the way he buys shares when the economic outlook is uncertain. That way, he tends to get a better deal because of lower valuations.
Recovering from the stock market crash Right now, I’m keen on FTSE 250 soft drinks supplier Britvic (LSE: LON:BVIC). The firm has a decent multi-year record of gradually rising revenue, earnings cash flow and shareholder dividends. Although the coronavirus has caused a dip in the figures for the current trading year to September.
Last week, the company updated the market with its third-quarter trading statement covering the period to 30 June. Compared to 2019, year-to-date revenue declined by just over 5%. The biggest fall arrived in the third quarter when the lockdown bit into trading with a drop in revenue of just over 16%. However, it wasn’t all bad news. The company reckons “significant” declines in Out-of-Home consumption were partly offset by “strong” growth in At-Home consumption. And Britvic saw gains in its market share in all its business units.
The easing of lockdowns means business is gradually returning to prior levels, and these figures look likely to mark the low point for Britvic. However, the directors acknowledge the future is uncertain. Although they have faith in the long-term prospects of the business.
Investing for a million Meanwhile, with the share price near 814p, it’s still around 11% down from its pre-Covid level. And City analysts have pencilled in a strong rebound in earnings for next year more than 30%. That puts the forward-looking earnings multiple just below 15. And, although the directors stopped the recent interim dividend, the anticipated dividend yield is around 3.5%.
Britvic has adapted well to the challenges caused by the pandemic. And although the threat of a second wave of the virus is ever-present, it seems unlikely the country will go back into full lockdown. Meanwhile, trading is picking up for the firm.
I see Britvic as a solid ‘buy’ for the long term. As part of a diversified portfolio of quality shares, I’d put £5k into the stock and hold it within a Stocks and Shares ISA. I reckon the stock would make a decent building block in my quest to invest my way to a million for retirement.
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Kevin Godbold has no position in any share mentioned. The Motley Fool UK has recommended Britvic. 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