I like to make the most of a stock market crash, by taking the opportunity to buy cheap UK shares. That doesn’t mean I only invest in a crash, though. I’m always on the lookout for bargains, and I think there are plenty on the FTSE 100 today.
I’m treading carefully, though, because there are also plenty of dangers out there right now. My biggest worry is that mutant Covid-19 variations will slow the recovery, despite the government’s vaccination success. Just because UK shares are cheaper than they were, does not automatically make them better value.
We live in unprecedented times. I have never seen anything like this in 30 years as a journalist and investor. People are living under hitherto unimaginable restrictions, preventing them from earning and spending money as they normally would. Countries including the UK have seen GDP fall by up to a fifth in that time. UK shares are cheap for a reason.
I’m starting with FTSE 100 shares
More than 30 years of globalisation appears to be going into reverse, as countries shut their borders and look to move production back home. That will have an impact on the FTSE 100. The companies listed on the index generate three-quarters of their earnings overseas. I will bear this in mind and pick my targets carefully.
I am continuing to shun airlines such as easyJet and Ryanair, because I still think the travel industry faces too many unknowables. When exactly will we be able to go flying again? As countries such as Australia and New Zealand shut their borders for a year, the answer is blowing in the wind.
Will people feel comfortable sitting shoulder to shoulder in a crowded cinema, when they can stream safely at home? I don’t know, but the thought puts me off buying Cineworld Group, which is now a very, very cheap share, trading at less than five times earnings. This UK share is too cheap for me.
Buying cheap UK shares beats gambling
I’m not in the mood to take outsize risks. I certainly won’t be joining the Reddit revolution, and diving into old school stocks such as GameStop, AMC Entertainment, Nokia, and Blackberry. In my opinion, that isn’t investing, it’s gambling.
I don’t think it’s a major gamble to buy cheap UK shares today, given that I plan to hold my purchases for the long term. Stocks I like now include household good firms Unilever and Reckitt Benckiser Group, outsourcer Bunzl, insurance company Legal & General Group, power giant SSE, and pharmaceutical favourite GlaxoSmithKline.
My favourite stocks all have strong balance sheets, steady revenues, and aim to reward shareholders by paying increasing dividend payouts over time.
These are the type of FTSE 100 shares I’m focusing on today. I like to buy cheap UK shares, but I also like to keep my risks to a minimum.