The UK stock market has started the week with a sharp fall. News about a new Covid-19 mutation, foreign travel bans, and Brexit negotiations combined to deal a blow to UK shares. However, a weakened stock market can provide a buying opportunity. There are some FTSE fallers today I’d consider buying now, while their prices are depressed.
I’d buy UK shares in the transport sector
Transport shares were hard hit. For example, FTSE 250 constituent National Express fell around 7%. But the underlying business is strong. It has proven to be well-run this year, and has already staged a steady recovery since its lows earlier in 2020. But I think it has further fuel in the tank. With its price fall today, I see a buying opportunity.
Similarly, British Airways parent IAG was one of the most notable FTSE fallers today. Its UK shares fell around 11% on Monday morning. Clearly a flight ban imposed by many countries is bad news for the aviation group. However, it owns non-British airlines such as Iberia and Aer Lingus. I also don’t expect that the latest travel ban will be a long-term measure. So the IAG share price pullback could be a buying opportunity, in my opinion.
FTSE fallers today include energy majors
In broad-based market selling, international energy groups such as BP and Shell followed the board sharply lower. But I see little immediate impact on them from the latest round of headlines. They look oversold to me.
BP has had a tough year, like many oil multinationals. But it had started to recover. From a point below 200p last month, it had already increased by a quarter. With oil prices increasing and world trade recovering, the share price has been on an upwards trajectory in recent weeks. Being one of the FTSE fallers provides a buying opportunity for BP shares, in my opinion.
I’d buy quality stocks to buy and hold
I keep an eye on a number of shares I like in case a market tumble like today’s provides a buying opportunity.
For example, I hold the general insurer Legal and General. I like its reliable income stream, which translates into a good dividend yield. Its business shouldn’t be much affected by a travel ban, but it was one of the bigger FTSE fallers today, losing over 6% of its value in morning trading. I see that as an opportunity to buy shares in a stable, quality company with attractive yield.
Similarly, shares in high street bank Lloyds tumbled on Monday. But I don’t see significant changes to the prospects for the company’s continued recovery. I expect the bank may restart dividends in 2021, so this latest fall provides a chance to get in at a lower price. I am considering starting a position before the end of December.
In fact, Monday’s market fall overall has led me to sit back and think about how best to position my portfolio for 2021. I think a few well-informed choices in a falling market now could reward me handsomely in 2021.