Make a million from the stock market crash! I’d buy these 2 cheap UK shares in an ISA today

These two UK shares appear to offer good value for money and long-term recovery potential after the stock market crash, in my opinion.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Buying UK shares after the recent stock market crash may not seem to be a sound strategy for anyone seeking to make a million. After all, indexes such as the FTSE 100 and FTSE 250 continue to face uncertain futures due to risks such as a second wave of coronavirus and Brexit.

However, a number of stocks appear to offer wide margins of safety and sound strategies that could lead to long-term growth. Here are two such businesses that could be worth buying in an ISA today, and holding over the coming years.

BP: undervalued among UK shares?

While many UK shares have fallen heavily in 2020, BP’s (LSE: BP) share price fall of 40% is relatively higher. The FTSE 100 stock has faced challenging trading conditions due to reduced demand for its products. This has led to a recently-announced major cost-cutting programme, as well as asset impairments.

The company will also pivot towards renewable energy over the coming years, since it feels coronavirus could hasten the switch towards greener forms of energy. This could mean it gradually shifts its focus towards lower carbon assets that are likely to provide a more sustainable growth outlook than fossil fuels. The end result could be a more resilient business that is able to produce more reliable profit growth in the long run.

Clearly, the process of changing BP into a leaner and greener company could be a challenging one. However, trading at a relatively low level compared to other UK shares, investors appear to have factored in a period of difficulty. As such, now could be the right time to buy the stock while it appears to offer a wide margin of safety.

British American Tobacco: a long-term income opportunity?

Another stock that I think could be worth buying in a portfolio of UK shares is British American Tobacco (LSE: BATS). Its recent update highlighted its operational strength in developed markets, where strong price growth is helping to compensate for lower volumes.

Even though the company’s performance in emerging markets has been less robust, it has maintained its dividend payout ratio of 65%. This means the stock has a dividend yield of 7.5%. This could grow at an above-inflation pace, due to the resilient prospects for the business in key markets such as the US.

At a time when the income investing prospects for many UK shares are somewhat challenging to say the least, British American Tobacco could stand out as a reliable means of obtaining a rising dividend. It has a defensive business model and long-term growth potential in next-generation products, such as e-cigarettes. And I think it could offer an attractive risk/reward opportunity. That could help to improve your chances of making a million in the coming years.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of BP and British American Tobacco. The Motley Fool UK has no position in any of the shares mentioned. 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.

More on Investing Articles

One English pound placed on a graph to represent an economic down turn
Investing Articles

FTSE 100 shares yield under 4%. Here’s why that matters!

A higher dividend yield and share price growth do not necessarily come together. So, why is this writer happy to…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

Here’s how I’d start buying shares with £5 a day

Our writer uses his market experience to consider how he might start buying shares from scratch today, for just a…

Read more »

Investing Articles

By investing £80 a week, I can target a £3k+ second income like this

By putting £80 each week into carefully chosen shares, our writer hopes to build a second income of over £3,000…

Read more »

Dividend Shares

Here’s a simple 4-stock dividend income portfolio with a 7.8% yield

With these four British dividend stocks, an investor could potentially generate income of around £780 a year from a £10,000…

Read more »

A young black man makes the symbol of a peace sign with two fingers
Investing Articles

2 FTSE shares that could get hit by Trump tariffs

Many FTSE shares rely on the US for business and the potential introduction of tariffs on foreign imports could hurt…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Finding shares to buy can be complicated. Here’s a lesson from the US election

Identifying shares to buy is difficult. But Stephen Wright thinks monitoring what directors buy might be an under-appreciated source of…

Read more »

Investing Articles

What makes a great passive income idea?

Christopher Ruane earns passive income by owning blue-chip shares like Legal & General. Here's the decision-making process that helps him…

Read more »

Midnight is celebrated along the River Thames in London with a spectacular and colourful firework display.
Investing Articles

Here’s how I’d try and use an ISA to become a multi-millionaire!

Could our writer build his ISA to a multi-million pound valuation? Potentially yes -- and here is how he'd go…

Read more »