Even though the worst of the stock market crash seems a long while ago now, some shares are still struggling to recover. Some companies face major ongoing challenges, such as Cineworld, but others could bounce back strongly, especially if investors are patient.
Cheap after the stock market crash Lloyds Banking Group (LSE: LON:LLOY) shares were hit hard by the pandemic. They haven’t really recovered. Fears over the economy, bad debts, and possibly also on the horizon Brexit once again coming to the fore, have all conspired to keep the share price suppressed.
Like other banks – all of which have also struggled – Lloyds has scrapped its dividend. I think this was a massive disappointment and one of the major reasons, pre-pandemic, for holding the shares.
Change is around the corner though. The CEO will be leaving next year after around a decade in charge. Over those 10 years, the share price has fallen, by roughly half. Even after the stock market crash, the FTSE 100 overall is up over the last decade. Perhaps new management can inject some energy into the share price and build on the bank’s solid foundations.
I expect the Lloyds share price to remain in a fragile state as long as the economy does. However, when things improve, it could be a winner. I think the share price at that point could rise rapidly.
Cheap share that could reintroduce its dividend The same fears that have hit the share prices of banks have also hit housebuilders such as Taylor Wimpey (LSE: LON:TW). Housebuilders also have specific challenges with the likely end of Help to Buy next year – unless the government extends the support.
Rival Persimmon (LON:PSN) has already reinstated its dividend. There’s no reason to think Taylor Wimpey will be far behind. Like my colleague recently pointed out, it’s better to buy the shares before the dividend is reintroduced. That way you can benefit from a boost in demand for the shares from income investors and from the improved sentiment towards the stock.
The pandemic will hit completions in the short term. But the group is raising money and buying land, which should boost future margins. The group has historically performed well and I believe it will emerge stronger from the pandemic.
A riskier cheap share I’m not a bull on oil but if you believe the oil price will keep bouncing back then Royal Dutch Shell (LON:RDSa) (LSE: RDSB) could be a very profitable investment. The decision to slash the dividend was unpopular with investors, but it does give management breathing room. That is important in a tricky operating environment like the current one.
The world is moving away from oil, and so is Shell to some degree, but for now the shares are much cheaper than they were and could be a profitable investment.
I think Lloyds and Taylor Wimpey especially are still very cheap following the stock market crash. I fully expect the share prices to bounce back and reward patient investors.
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Andy Ross owns shares in Lloyds Banking Group and Persimmon. The Motley Fool UK has recommended Lloyds Banking Group. 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