Global stock markets are back on the defensive as Covid-19 news flow chills investor confidence again. The FTSE 100 is dropping at a pace not seen since the middle of June as UK shares of all shapes and sizes plummet in value.
I’m not panicking though. Indeed, I plan to use another stock market crash as an opportunity to buy high-quality UK shares for next to nothing. The challenges created by Covid-19 mean stock investors need to be that bit more careful before taking the plunge. However, there remain stacks of top-notch UK shares that should still provide exceptional returns over the long run.
Boosting your long-term returns
Studies show that long-term investors — those individuals that buy UK shares and cling onto them for a decade or longer — make an average yearly return of 8-10% on their money. Those who seek to supercharge their returns need to buy in the aftermath of stock market crashes though. This way they can buy oversold stocks during panicked times and watch them soar in value as confidence returns to the market.
I’ve continued to buy UK shares for my Stocks and Shares ISA in 2020. And I’ve got the following quality stocks on my watchlist too. If the stock market crashes again I reckon they could end up being too good to miss.
A top FTSE 100 stock I’m looking at
FTSE 100 royalty BAE Systems already looks terrific value on paper. It trades on a forward price-to-earnings (P/E) ratio of 12 times, while it offers a bulky 4.6% dividend yield too. Speculation remains abundant that defence budgets will drop as Covid-19 smacks governments’s spending power. I’m not convinced however. Geopolitical tensions are rising across the globe and the recent arms race is unlikely to abate any time soon.
Indeed, BAE Systems continues to rack up major contracts in the US and UK. Today, it signed off an £87m contract with the US Navy to supply mine neutralisers. It’s a deal that illustrates perfectly BAE Systems’ exceptional relationships with major Western militaries that continues to drive business. This latest Archerfish contract is the fourth the UK share has racked up on the spin since 2003.
Another quality UK share on my radar
I’d also use a fresh stock market crash to buy shares in QinetiQ Group. Like BAE Systems, this defence giant continues to rack up contracts at an encouraging rate. It’s not just the FTSE 250 firm’s resilience in these troubled times that reassures me though. It’s currently the second-largest supplier to the Ministry of Defence, a position build over many years and reflecting the quality of its technologies.
QinetiQ trades on a cheap forward P/E multiple of 14 times today. It carries a meaty 3.2% dividend yield as well. It clearly offers top value to UK share investors today. And I reckon it’ll look unmissable in the event of another stock market crash.