Around four weeks ago we saw the market bottom of the crash (we hope). Since then, stocks have bounced back and are starting to look expensive again. But there are still opportunities out there.
Two stocks I’m interested in are Prudential (LSE:PRU) and Virgin Money (LSE:VMUK).
Market crash opportunity #1
Prudential is a life insurance and financial services company, and a FTSE 100 stalwart. The market crash saw 45% wiped off its share price value. It fell from nearly 1,500p in mid-February, to 795p at the market bottom. But the shares are currently trading at over 1,000p each, so it has clearly staged a mini-recovery.
There are a few key reasons why I think Prudential is a market crash opportunity. First of all, at current levels, its price-to-earnings ratio is close to 7, which means to me there’s value to be had here, especially with its future earnings potential. Prudential has made huge strides in the Asian market and its growth trend, as well as the general opportunity in that region, both excite me. The Asian life insurance market could be worth over $1trn, so there’s some market share to be had here as PRU starts to make an impact.
Prudential also possesses a healthy balance sheet as confirmed in a Covid-19 update at the end of March. I believe there are no issues that would see it struggling during this crash. There’s currently no decision regarding its final dividend. At current levels however, it offers a 3%+ dividend yield, which is an attractive factor.
Finally, one strong sign is that a prominent director within the business bought shares earlier this month. I always see this a positive indication of confidence in the business and its direction. So Prudential represents a great opportunity right now in this current market crash, in my opinion.
Opportunity #2
Virgin Money lost nearly 70% of its share price value when the stock market crashed. From a per share price of 190p, it plummeted to 54p per share by March 23, which was the market bottom. At the time of writing, it has only just reached over 70p per share.
VMUK’s full-year results announced at the end of last year showed a huge loss due to PPI claims. It did recover somewhat as seen in its Q1 trading update at the beginning of February, with reported increases in customer deposit growth, business lending growth and personal lending growth. Management advised that PPI was a side issue and that the rest of the business was on track.
Prior to the market crash, a £1.7bn deal in June 2018 saw the original Virgin Money bought by Clydesdale & Yorkshire Banking Group. Previously known as CYBG, the holding company changed its name to Virgin Money UK after completion and all brands now trade under VMUK. The deal meant VM shareholders received 1.2125 CBYG shares for each of their original shares. In total the VM shareholders ended up owning nearly 38% of the combined group.
Based on current projections, the now-larger Virgin Money could report earnings of over 20p per share for 2020. At that level, its price-to-earnings ratio would sit at just over 5. Furthermore, there’s a potential dividend yield of over 5% which is great value in my opinion. There’s some risk here, but with the shares so cheap right now due to the market crash, I feel it’s worth considering.
