Buying UK shares today could be a sound means of capitalising on a likely long-term stock market recovery. After all, the FTSE 100 and FTSE 250 have always made successful comebacks from their worst declines in the past. As such, a similar outcome is likely after this year’s share price declines.
Therefore, an investor with a long-term view can benefit from purchasing high-quality companies at low prices today. Holding them for the long run can produce attractive returns.
With that in mind, here are 10 UK stocks that I think offer sound recovery potential after the 2020 stock market crash.
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UK shares set to benefit from a stock market recovery
Among UK shares hit the hardest in the 2020 stock market crash are banks such as Barclays, HSBC and Natwest (formerly RBS). They are experiencing difficult operating conditions as a result of weak economic growth prospects and a low interest rate environment.
However, their share price falls since the start of the year suggest that they now offer wide margins of safety. Therefore, they may have scope to deliver share price appreciation as the economic outlook improves. Moreover, their balance sheets have strengthened in recent years, while they are making strategy changes to shift resources towards business lines that are less sensitive to interest rate changes.
Commodity opportunities in a stock market recovery
Other UK shares that have experienced difficult operating conditions this year are commodity-related businesses such as BP, Shell and BHP. Demand for commodities is closely related to the prospects for the world economy. As such, all three stocks could face a tough 2021, depending on how the economic situation develops.
However, their solid balance sheets relative to sector peers indicate that they could overcome near-term challenges to benefit from likely economic growth. Moreover, their current share prices appear to be attractive based on the quality of their asset bases and strategies. They may outperform other UK shares in a long-term stock market recovery.
FTSE 100 retail opportunities
Other UK shares that could benefit the most from a stock market recovery include retailers. Although some retail stocks may find it hard to adapt to a changing operating landscape, the likes of FTSE 100 stocks Next, Tesco, Sainsbury’s and Morrisons appear to be successfully adjusting to an increasingly online world.
All four stocks have invested heavily in expanding their online presence since the start of this year. This may provide them with dominant market positions versus rivals, which may strengthen their financial prospects in the long run. They also have deep pockets through which to further shift resources from in-store offers to digital opportunities. After a mixed year for their share prices, they could offer capital appreciation opportunities relative to other UK shares in a likely long-term stock market recovery.
