Stock market crashes are hideous things. It’s no fun to watch the value of your investments collapse. All that time and energy spent on researching and then buying UK shares, only to see all of it go up in smoke. It can derail the plans many of us might have had to invest after identifying which stocks to buy as well.
We here at The Motley Fool don’t panic when we see our shares slump in value though. History shows us that stock market crashes are nothing new. And that over the long term their impact on total returns tends to be rather superficial.
If you’ve taken steps to build a well-balanced investment portfolio comprising top-quality shares then, over the longer term (say five years or more), your UK shares should still deliver titanic returns.
Our view is that the stock market crash provides a brilliant buying opportunity for investors. It allows you and I to buy UK shares at rock-bottom prices and then watch them rise in value as the economic recovery takes hold.
There are plenty of FTSE 100 stocks that look too good to miss following the market meltdown, companies that could deliver spectacular long-term returns.
8% dividend yields!
I reckon Legal & General Group (LSE: LGEN) is one of the best shares to buy following the stock market crash. Its 32% price decline since the start of the year leaves it trading on a forward price-to-earnings (P/E) ratio of 8 times. The FTSE 100 stock carries a mighty 8% dividend yield to boot.
Legal & General’s been heavily sold during the broader stock market crash. Fears of a global recession denting demand for its financial products did the damage. Investors are concerned about the amount of leverage on its balance sheet too.
I’d argue these concerns could be overcooked though. Latest financials showed that the Footsie giant’s solvency position remains extremely healthy. Its Solvency II ratio ranged between 162% and 167% for the first half of 2020.
A top stock to buy after the market crash
It’s true Legal & General’s product sales might suffer in the near term amid the global economic downturn. However, over a longer time horizon, the FTSE 100 firm’s profits outlook remains quite secure. It will be a major beneficiary of key demographic trends in the years ahead, like ageing populations in its developed markets, and rising wealth levels in its Asian territories.
And Legal & General is investing heavily in these areas to drive long-term profits. It’s expanding its geographical footprint to benefit from the globalisation of asset markets, for example, and is ploughing large sums into its technologies to capitalise on increased digitalisation.
Buying Legal & General shares at current prices leaves plenty of scope for big investment returns in the years ahead. But, in truth, it’s just one of many FTSE 100 stocks that’s worth a close look following the market crash.
I reckon now’s a great time for ISA investors to go bargain hunting on the Footsie.