The stock market crash of 2020 is far from over, I think. Although some UK shares have surged to record highs, some look cheap now. I’d probably buy them.
Stock market crash
The coronavirus has led to consequences for the UK’s economy that we’ve never seen before. The GDP fall, the rising unemployment rate, and low consumer demand are just some of the problems we face. But some industries have suffered more than others. Among them are the tourist sector, the oil companies, and the financials.
Many analysts reckon it will take these sectors several years to return to normal. It’s especially true of the tourist industry – the airlines and the cruise companies, for example. Although I consider myself to be a risk-averse investor, I’d still be willing to invest some money in the ‘big guys’ operating in these sectors. Here are some UK shares that I am considering.
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Carnival Corporation – cheap UK shares
We all remember the Diamond Princess incident, when thousands of passengers got stuck on the board the cruise ship. Well, the ship was owned by Carnival Corporation, the world’s largest cruise company. Since then the tourist industry has been a disaster. Cruise ships still have plenty of cash expenses, even when they are not operating tours, including servicing and repairs. At the same time, the demand for cruises is now historically low. So, the company ended up reporting losses this year and had to cancel its dividends. But I am sure that this ‘this too shall pass’ and brave investors will eventually get rewarded.
HSBC – a buy at current levels?
This large well-established bank has suffered from the financials sector’s overall weakness since the beginning of the pandemic. What’s, the escalating tensions between the US and China are a threat to this Hong Kong bank. But its problems had started long before that. The thing is that Asia is HSBC‘s main source of revenue and profits. Operations in Europe and the US have always been quite costly to the bank. So, even before the March stock market crash, HSBC tried to cut costs by closing some of its branches in the EU and the US, making employees redundant. It all sounds grim. But I believe the bank will survive and flourish after the recession.
Buy Shell after the crash?
The oil industry was also badly hurt as a result of the pandemic. The oil price war between Russia and Saudi Arabia also made oil futures turn negative this spring. This made all the oil companies struggle. But Shell and BP are the largest FTSE 100 companies and are well-suited to survive the current crisis. However, Shell has a lower debt load than BP.
This is what I’d do
Surely, the risks of investing in businesses that aren’t currently profitable are substantial. But the companies I’ve just mentioned are really big. So, I think they’ll be the first to benefit from economic recovery. Patience and willingness to buy when most other investors are scared to is a good way to get rich and retire early. At the same time, I’d only invest quite a small sum of money in these companies.
