Any stock market crash throws up some unusual opportunities for investors, and the crash of 2020 is no different. Some large stalwarts within the FTSE 100 are trading at double-digit discounts in their share prices versus the start of this year. These represent some good buying opportunities for the long run.
It makes sense to use a Stock and Shares ISA for such investments, given the size of a potential rebound, and the long-term nature of any investments. The ISA allows you to build up profits in a tax efficient way. It enables long-term potential returns to not be eaten away by tax requirements.
Growth opportunities
I recently wrote a piece on the potential that Rolls-Royce Holdings has for a longer-term turnaround. In recent news, the firm has also asked suppliers for a 5%-15% discount. I see this as a smart move. With global lockdown restrictions being slowly lifted, the pick-up in demand for air travel should see Rolls-Royce perform even better. This is due to the engines the firm manufactures for airplanes.
Another growth stock I like at the moment is Rightmove. The online real estate website that matches agents with buyers has taken a tumble as demand for housing has ground to a halt. This is understandable, as is the 12% share price fall year to date as part of the stock market crash. Yet the share price is already rallying back hard from lows seen in March as investors weigh up the timings of when the property market will be fully back up and running.
Given that Rightmove act as a middleman, it avoids paying expensive rent for office space like a traditional estate agent. This means costs are low on a relative basis. I think this should allow the firm to be financially secure until revenue recovers.
Dividends despite the stock market crash
The above are two good long-term growth stocks, I feel. But it’s also good to add in some income to support the portfolio over a shorter time frame. For this, I like British American Tobacco. I’d classify the firm as a defensive stock, meaning it will continue to perform during a recession. Consumers will buy its products in good times and bad. From an income point of view, this should support the dividend still being paid. At the moment, the dividend yield sits at 6.6%, making it an attractive buy.
Another dividend-paying share I think is safe for this year is AstraZeneca. Although the yield at the moment is only 2.6%, pharmaceuticals is another defensive sector. Revenues are unlikely to fall substantially this year due to the nature of the goods sold. So for a safe dividend, this could be a good addition to an ISA. Also, remember that interest rates in the UK are at 0.1%. So any dividend yield should be compared to this, or to so-called high-interest saving accounts that pay very low interest at present!
A mix of stocks that have good long-term share price potential and some dividend-paying stocks should do well in an ISA for 2020, I feel. Taking advantage of the stock market crash now enables investors to lock-in the discounted share price for the long term.