Investor confidence has remained wafer-thin as the Covid-19 emergency drags on. So it’s perhaps no surprise that news of a new ‘super variant’ has sent the market into meltdown in recent hours. The FTSE 100 and FTSE 250 have slumped 2.8% and 2.3% respectively on Friday as fears over a new stock market crash in 2021 have spiked.
A fresh jerk higher for the VIX index also illustrates concerns over the B.1.1.529 variant. The so-called ‘fear index’ has jumped 33% in end-of-week trading, to multi-month peaks above 26, as investors chew over the prospect of a more transmissible, more resistant strain of the coronavirus.
Buying stocks during a stock market crash
It’s clear that UK share investors like me need to be prepared for a fresh stock market crash. But the emergence of B.1.1.529 hasn’t encouraged me to run for the hills. This is because I buy stocks with a long-term view in mind. And I’m confident that the companies I invest in will rise in value over a period of years, even taking into account periods of extreme volatility like this.
Should you invest £1,000 in Direct Line right now?
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If stock markets do indeed crash again I’ll be hunting for quality UK shares to buy. I’ll follow the lead of master investor Warren Buffett who has made a fortune by, in his own words, being “greedy when others are fearful” (and vice versa).
Here are two exceptional British stocks I’ll be looking to buy if they sink in the days and weeks ahead.
#1: Clipper Logistics
This warehouse and logistics services provider has leapt in price since I bought in last October. I think Clipper Logistics (LSE: CLG) could have much further to go too as e-commerce enjoys strong and sustained growth. Indeed, it may actually benefit from extra Covid-19 lockdowns in the months ahead as online shopping volumes will likely rise.
I don’t think Clipper Logistics’ share price reflects its bright outlook. City analysts think earnings here will jump 27% this fiscal year (to April 2022). Consequently it trades on a forward price-to-earnings growth (PEG) ratio of 0.9. I’d buy it even though an economic downturn could have a catastrophic effect on broader consumer spending, and by extension demand for its services as well as rent collection from its tenants.
#2: Direct Line Insurance Group
I think the Direct Line Insurance Group (LSE: DLG) share price already provides excellent value for money today. And I might take the plunge and buy it if the insurance colossus slumps in price. Today Direct Line trades on a rock-bottom forward price-to-earnings (P/E) ratio of 11 times. It also carries a mighty 9% dividend yield.
Unlike other insurance segments, spending on general and motor insurance products tends to remain resilient even during economic downturns. So I think Direct Line could be an ideal stock to buy if the Covid-19 crisis significantly worsens. Its true that the FTSE 250 firm faces significant competition that might dent profits growth. However, I think Direct Line’s excellent brand should help offset this.
