Stock market crash: 2 of the best UK shares I’d buy for the new bull market

These two stock-market-crash bargains could be some of the best UK shares to buy to profit from the next bull market, says this Fool.

| 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.

While sentiment towards UK shares has improved marginally since the stock market crash, I’m surprised there hasn’t been more buying. Some of the market’s top blue-chip stocks continue to trade at levels not seen for decades. These valuations might make sense if these companies were facing bankruptcy. But, in many situations, that’s not the case. 

As such, I’m convinced that buying UK shares today is a sensible decision. When the new bull market arrives, I reckon these deeply undervalued businesses could produce substantial returns. 

With that in mind, here are two of my favourite blue-chip investments. 

Stock market crash bargain

Emerging markets-focused bank Standard Chartered (LSE: STAN) lowered its growth targets earlier this year due to coronavirus. However, the Asia-focused lender looks set to benefit from the region’s rapid recovery from a crisis. 

Indeed, initial figures seem positive. The lender reported credit impairment charges of $611m in the second quarter of 2020, down significantly from the $956m recorded in the first quarter. These figures are also significantly below the bank’s Western-focused peers. 

Thanks to these better-than-anticipated figures, Standard’s second-quarter pre-tax profit came in at $733m, $182m better than analysts had expected. 

Nevertheless, despite the lender’s improving operational performance, after the stock market crash, the shares are still off around 50% for the year. I think this suggests the stock offers and margin of safety at current levels. Therefore, one may benefit from buying Standard as part of a diversified basket of UK shares ahead of the new bull market. 

A leader of UK shares 

Distribution business DCC (LSE: DCC) has become one of the most successful blue-chip stocks on the market over the past decade. The company has followed a buy-and-build strategy. By reinvesting profits from operations back into acquisitions and organic growth, the firm has been able to increase sales by around 50% over the past six years. 

Thanks to economies of scale, the company’s bottom line has grown even faster. Net income has roughly doubled since 2015. 

I reckon the company can keep this up. Distribution is a very low-margin business. Therefore, the bigger better. Even though it’s one of the largest businesses in the UK, DCC’s profit margin is just 2.5%. This doesn’t leave much room for error. Even a small mistake could wipe out the group’a profit altogether. 

That’s why smaller competitors have been so happy to sell to DCC. And it’s nowhere near close to running out of potential acquisitions. Last month, the group completed two acquisitions for a total of £60m, which helped boost its presence in the US market. 

Despite the company’s potential, investors have been selling after the stock market crash. I think this is a mistake. Over the long term, DCC could have the potential to increase profits substantially, thanks to improved economies of scale and continued reinvestment. 

When the economic recovery starts to gain traction, I think DCC could be one of the best UK shares to buy to profit from the next bull market.

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.

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Standard Chartered. 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

Investing Articles

After it crashed 25%, should I buy this former stock market darling in my Stocks and Shares ISA?

Harvey Jones has a big hole in his Stocks and Shares ISA that he is keen to fill. Should he…

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

How’s the dividend forecast looking for Legal & General shares in 2025 and beyond?

As a shareholder, I like to keep track of the potential dividend returns I could make from my Legal &…

Read more »

artificial intelligence investing algorithms
Investing Articles

Could buying this stock with a $7bn market cap be like investing in Nvidia in 2010?

Where might the next Nvidia-type stock be lurking in today's market? Our writer takes a look at one candidate with…

Read more »

Investing Articles

Is GSK a bargain now the share price is near 1,333p?

Biopharma company GSK looks like a decent stock to consider for the long term, so is today's lower share price…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »