Which All Stocks One Should Look for In Case of Market Crash?

As the pandemic washed up the shores of the UK, the FTSE 100 index took a real hammering as it plummeted by more than 20 per cent. The London’s broader equity benchmark index FTSE 100 ended 0.09 per cent higher at 6,032.18 on Friday 8 August 2020.

The outbreak of the novel coronavirus struck the global markets at the beginning of this year. The stock markets saw severe wealth erosion which left investors high and dry. This triggered panic selling by investors. Most of the markets across the globe bled due to the economic impact of the deadly pandemic. The FTSE 100 was hovering near 7,500 mark in the mid of February. It slipped to below 5,000 mark by the mid of March. Market experts believe that most of the blue-chip companies have undergone a steep price correction and have created a bottom in the mid of March when the nation went under lockdown phase.

The stock markets after going through steep corrections and have recovered to a certain extent. However, the threat of a second wave of the pandemic is always there, due to the consistent rise in the number of Covid-19 patients across the globe. The markets are still volatile and are starting to find some footing as the economy is reopening gradually. The British government has launched several bailout packages for the businesses to help them stay afloat during the unprecedented crisis.

FTSE 100 or Footsie index represents the hundred largest blue-chip companies in the UK, ranked by market capitalisation. Due to the economic impact of the novel coronavirus, the FTSE 100 index has taken a real hammering along with the rest of the stock market. The blue-chip companies have a global footprint, and chances of any price manipulations are close to zero. Investing in these stocks is considered more stable and less risky. These stocks are reasonably priced now.

In this article, we would be discussing some stocks which have resilient business models and have gone through various market cycles and withered the storm.

1. Lloyds Banking Group Plc

Lloyds Banking Group Plc (LON: LLOY) provides a wide array of products and services in banking and financial services domain focused at both retail and corporate customers. During the first quarter of 2020, the bank’s profits plunged by 95 per cent as it incorporated £1.4 billion of impairment charge based on the revised economic outlook.

This provision incorporated by the company is expected to cover for potential defaults by customers over the coming months due to the economic impact of the novel coronavirus. There are a few other challenges that are emerging in the banking space like the emergence of P2P lenders which is impacting the banking business.

Also read: P2P Lenders Draw A Parallel Banking Industry Amid Covid-19 Crisis

Increased exposure to assets, which could turn bad- During the unprecedented crisis, the businesses have been piling debts to stay afloat. Most of the debt is in the form of government backed schemes, which usually come with a mortgage holiday of 12 to 24 months. Given the prevalent uncertainties in the economy such as Brexit, plunge in oil prices, lesser interest rates, and global recession, things could go terribly wrong, and assets (loans) could turn bad.

The UK’s largest provider of home loans, Lloyds Banking Group has the potential to bounce back. The bank has a prudent approach to lending along with a strong balance sheet. Nearly 80 per cent of the loan book comprises of secured loans. The CET1 ratio of 14.2 per cent allows the bank to absorb expected credit losses with ease.

The stock has lost nearly 50 per cent of its value and is trading near its 52-week low. On 7 August 2020, after the market close, LLOY shares were at GBX 27.79, down by 1.33 per cent against the previous day closing price.

2. NatWest Group Plc

NatWest Group Plc (LON:NWG) comes in UK’s top five banks in terms of market capitalisation. Formerly Royal Bank of Scotland has provisioned for more than £800 million as it expects a surge in the number of assets which could turn bad given the prevalent conditions in the economy due to Covid-19 crisis.

The CET1 ratio of 16.6 per cent allows the bank to absorb expected credit losses with ease. In comparison to Q4 2019, the deposits soared to £15.6 billion as customers sought to more savings during the unprecedented crisis.

The stock has lost more than 45 per cent of its value and is trading near its 52-week low. On 7 August 2020, after the market close, NWG shares were at GBX 110.60, down by 1.16 per cent against the previous day closing price.

Also read: 5 FTSE 100 Stocks That Are Going Strong and Opted For 'No Dividend Cut’ During the Pandemic Era

3. BT Group Plc

BT Group (LON: BT.A) is one of the oldest telecom providers in the United Kingdom. For the three months to 30 June 2020, the company reported revenue of £5,248 million, lower by 7 per cent largely due to the impact of Covid-19. It expects the 2020/21 adjusted revenue to be lower by 5-6 per cent and the adjusted EBITDA to be down by £7.2- £7.5 billion. The company is preparing to face stiff competition from the recent merger of O2 and Virgin Media.

The stock has lost nearly 40 per cent of its value and is trading near its 52-week low. On 7 August 2020, atmarket close, BT.A shares were at GBX 105.75, up by 2.08 per cent against the previous day closing price. The telecom company is making major strides to improve its market share further. The company has scrapped its dividend to fibre up rural household in the UK.

4. Aviva Plc

Aviva Plc (LON: AV.) is a global insurer group. The company has completed the sale of Friends Provident International Limited (FPIL) to a subsidiary of International Financial Group Limited, RL360 Holding Company Limited and received an amount of £209 million in cash and will be getting £50 million in deferred cash consideration. The prolonged duration of Covid-19 could severely impact the company.

The stock has lost nearly 30 per cent of its value and is trading near its 52-week low. On 7 August 2020, at the market close, AV. shares were at GBX 293.60, down by 1.13 per cent against the previous day closing price. The company has strong financial disciplines and is on-track to manage an unprecedented crisis.

Amid the ongoing uncertainties around Brexit and COVID-19 crisis, these companies have managed to stay afloat; however, they are exposed to political, financial, and operational risks. In recent times, these stocks have undergone steep price corrections. These businesses have proved their resilience in these testing times.