After March’s market crash, there is a very real possibility that the market could crash again. With that in mind, here are two stocks that represent good investment opportunities, in my opinion.
Market crash opportunity #1
I believe the UK’s largest listed tech company Sage (LSE:SGE) represents a unique opportunity. The accounting and payroll software giant was recognised in 2017 as the world’s third largest supplier of enterprise resource planning software.
Pre-market crash, Sage’s share price sat comfortably close to 800p per share. When the crash started, it hit a low of 534p. But its current per share price has recovered somewhat to be close to 750p, which is a positive sign.
Sage has been focusing on migrating its customers to its cloud-based subscription service. A trading update for the nine months to 30 June was released yesterday. Recurring revenue for this period increased by 9%. This was underpinned by the subscription growth of over 22%. Overall, total group revenue increased by 4.1%. In Q3, when the market crashed, Sage’s recurring revenue grew by over 6%. I think this shows excellent defensive quality, against a backdrop of the pandemic and economic uncertainty.
Sage possesses a healthy balance sheet with cash and available liquidity of £1.2bn. I believe market conditions will continue to normalise and Sage can shift its focus towards new customer acquisition once more. It has a good record of growing revenue, earnings and dividends, which indicates a positive outlook.
Sage is one stock I firmly place in my ‘defensive’ category and I really like the look, model and direction of the business. I still think its share price will rise as the markets attempt to recover from the market crash.
Opportunity #2
I wrote about defence, security and aerospace powerhouse BAE Systems (LSE:BAE) in February prior to the market crash.
BAE had just released its full-year results and at the time, its share price stood at close to 660p per share. Sales and revenues rose impressively, acquisitions were being negotiated and all was well.
Fast forward through the market crash and performance has been affected like every other firm, but not a lot has actually changed. However, you can pick up the shares at less than 500p. At the height of the crisis its price even lowered closer to the 420p mark. I consider it too good an opportunity to miss.
A trading update released by BAE last month focused on productivity and getting its employees back to work. BAE said orders and demand remained in line with expectations despite the pandemic, which is encouraging. As restrictions are beginning to ease, BAE also believes the second half of this year will be a normal six-month period, which is a confident stance to take.
BAE is a relatively ‘safe’ investment in my opinion. It mainly deals with governments, which means they will pay their bills on time. Furthermore, it has tens of billions worth of backlogged orders. It has a great dividend yield creeping towards the 5% mark and a cheap share price, with a price-to-earnings ratio of 10. There is not much to dislike, I feel, and since the market crash BAE is cheap to pick up.