After the long bull market last decade, this year’s market crash offers a great opportunity to start investing. Here are 10 UK shares I’d be happy to buy and hold for the long term, and the reasons I think this selection of companies could help you on the road to riches.
Nobody knows the shape the recovery of the stock market and economy will take. It could be quick, or things could get worse before they get better. As such, I think it’s sensible to buy a mix of shares in businesses whose earnings are relatively resilient in hard times (‘defensive’ stocks), and in businesses that are more highly geared to the economy (‘cyclical’ stocks).
Defensive UK shares
National Grid owns and operates much of the UK’s vital energy infrastructure. Indeed, it has a near-monopoly position. It also has a growing portfolio of regulated energy assets in the US. Due to the regulated nature of its businesses, its earnings and dividends tend to be resilient throughout the economic cycle.
Even during recessions, consumers are loath to desert Unilever‘s loved and trusted food and homecare brands, like Marmite and Domestos. This loyalty makes Unilever another business whose earnings and dividends tend to be relatively resilient through the ups and downs of the economy.
The same goes for Diageo, thanks to its world-class stable of drinks brands, like Johnnie Walker and Guinness. Both Unilever and Diageo have strong long-term growth prospects, due to their good exposure to rising wealth in emerging markets.
Healthcare is another defensive sector. Ageing populations, as well as increasing health spending in emerging markets, are long-term growth drivers for companies in the sector. I see Hikma Pharmaceuticals and medical devices group Smith & Nephew as two good stocks to play this theme.
Cyclical UK shares
As is to be expected, cyclical stocks have generally fallen harder than defensives in the market crash. Such stocks could soar into the economic recovery as it unfolds. I think it’s a good idea to have some exposure to these potential strong gains, if you’re starting investing today.
In the cyclical banking sector, Barclays‘ shares are as cheap as they come. Similarly, in residential property, you’ll be hard-pressed to find a better-value stock than retirement home specialist McCarthy & Stone. The shares of both companies are trading at deep discounts to the value of their assets.
Travel and hospitality are sectors that struggle during recessions at the best of times. But they’ve been particularly hard hit this time, due to the extraordinary impact of the Covid-19 pandemic. There could be some huge share-price gains to come for companies in these sectors with the financial strength to survive. I think travel group National Express and Premier Inn-owner Whitbread fit the bill nicely.
My final tip to start investing in UK shares after the market crash, is to look for a little exposure to gold, via shares in a gold miner. These often do well (and pay generous dividends) when many other shares are struggling. If I had to choose one gold miner to invest in, I’d plump for debt-free, low-cost producer Centamin.
G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays, Diageo, Hikma Pharmaceuticals, and Unilever. 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.