It would be a mistake to call the bottom of the recent share market rout with any conviction. We may well be there, but the coronavirus crisis remains a fluid one. Any signs of escalation could see share pickers selling heavily and running for cover again.
That’s not to say that now isn’t a great time for long-term investors to nip in and grab a bargain, however. Sure, more volatility could be just around the corner. But it’s worth remembering the wise words of Berkshire Hathaway’s Warren Buffett at times like this. The stocks guru once said that “if we think a business is attractive, it would be very foolish for us to not take action on that because we thought something about what the market was going to do.”
The key to successful investing is with a view to buying and holding a stock for say 10, 20, perhaps even 30 years. So who cares if markets become choppy again? If you’ve loaded your Stocks and Shares ISA with quality, then you’ll still make a whopping return over a number of years.
Get wise
The prospect of a severe and drawn out global recession means that share pickers need to be a bit more careful, of course. There are plenty of firms with strong long-term outlooks but that will still fold soon because of a painful lack of cash during the Covid-19 outbreak.
One way that investors can avoid this pitfall is by buying shares in FTSE 100 companies. These blue-chips tend to have the colossal finances to ride out any short-to-medium-term trouble (though there are also some exceptions here. Intu Properties for one is teetering on the brink as it struggles to raise cash).
With the right research you can hurdle such investment traps and make some serious returns on some Footsie firecrackers. There are certainly plenty of brilliant blue-chips that seem to be trading far too cheaply right now.
2 FTSE 100 bargains
HSBC is one share I’m tipping to thrive over the next decade and beyond. The banking leviathan has tipped lower more recently on fears of declining revenues from coronavirus-hit Asian regions. It warned at the top of the month that the impact of the pandemic on “interest rates, market levels and the forward economic outlook” would hit revenues in the near term. Still, rising population and wealth levels in its core regions should create exceptional profits growth once macroeconomic conditions normalise. And a forward price-to-earnings (P/E) ratio below 10 times is quite undemanding when you consider this.
Another is Bunzl, a FTSE 100 bargain that I myself own. This company trades on a forward earnings multiple of 14.7 times following recent price weakness. That’s way below its historical norms of closer to 20 times. This share has long commanded a premium because of its exceptional defensive qualities. It supplies a vast range of essential products to business across many territories and industries. And this, along with its insatiable appetite for acquisitions, makes it a dependable long-term growth generator.