In the 2020 stock market crash, there’s been a big spike in the number of people buying UK shares. That’s great news, and I hope it gets folk into investing in shares for life — because it really is a long-term adventure. But which are the best shares to buy now? Here are five I think would make a great start.
A growth stock
Growth stocks are exciting, aren’t they? The thing is, the best ones haven’t been hurt by the stock market crash. Stocks like ASOS and Just Eat are climbing in 2020, and for good reason.
But my pick would be Boohoo, whose share price has risen in single-digit percentages this year. It’s been a bit rocky during the worst of the stock market crash, but I think it represents good value now. We’re looking at P/E multiples around the 30 to 40 range, which is a lot higher than average. But with EPS growth of around 30% per year forecast, I see that as a modest valuation.
An income stock
While I like the occasional growth stock, I still think dividend stocks make the best bedrock for a long-term portfolio. National Grid is one of my favourites. It doesn’t offer the best yield, at around 5.5%. But it’s dependable, and keeps up with inflation. And I reckon it will keep doing that for decades to come.
Like those who sold picks and shovels to the miners in the gold rush, National Grid should prosper whoever is selling the gas and electricity distributed through its networks.
A stock market crash casualty
Plenty of shares have been hammered by the stock market crash, and many of them are surely good value now. How about Lloyds Banking Group, whose shares have lost more than half their value this year? Lloyds has suffered a series of blows in recent years, and the coronavirus slump is just the latest.
But we’re now looking at shares on a P/E of only around eight based on 2021 forecasts. Banking dividends were suspended this year, but they’ll surely be back. And in the long term, banks will remain at the centre of our economy, whatever’s happened this year.
One we all understand
It’s important to understand the companies we buy. And they don’t get much more understandable than Tesco. It has suffered in the stock market crash, but hasn’t been too badly punished. The shares are down less than 15%, which many would be envious of.
The pandemic has changed the shape of our shopping environment. I think that’s permanent, and it’s turned me bullish on Tesco. Estimates for its 2020 online sales put their value at around £5.5bn, from about £3.3bn in 2019. And online sales still only account for around 16% of Tesco’s total. There’s surely more to come.
An ‘all of the above’ stock
Housebuilders suffered in the early part of the crisis. But the companies have healthy balance sheets, should be easily able to ride out the downturn, and they’re already reporting growing demand as people are able to get back into the market.
My pick is Taylor Wimpey, whose shares are down around 35% this year. I think our chronic housing shortage will support growth over the next few years. And while the dividend has been cut this year, analysts are already forecasting a 6.5% yield for 2021.
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Alan Oscroft owns shares of Lloyds Banking Group. The Motley Fool UK has recommended ASOS, boohoo group, Just Eat Takeaway.com N.V., Lloyds Banking Group, and Tesco. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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