How I’d identify great shares to buy in a stock market recovery

first_img Finding the best shares to buy in a stock market recovery can be a challenging task. After all, forecasts are very dependent on the economic outlook. This itself is likely to be heavily impacted by coronavirus.However, by investing money in financially sound businesses that have long-term growth potential while they trade at low prices, an investor could reduce their risks and increase their potential rewards.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Financial strength: key to long-term performanceThe past performance of equity markets suggests that a long-term stock market recovery is likely to continue in the coming years. There may be downturns in the meantime. But the stock market has always produced new record highs after each of its previous bear markets.However, companies must be able to survive present economic difficulties in order to benefit from a period of growth in the long run. As such, investors need to identify those businesses that have large cash positions, modest amounts of debt and access to liquidity (if required). Such firms may stand a better chance of surviving the short-term challenges that continue to face many sectors. And they could benefit from improved operating conditions and stronger investor sentiment in the coming years.Low valuations ahead of a stock market recoveryIn a stock market recovery, the best performing shares are often those companies that previously traded at low prices. They have greater scope to deliver capital gains, since they trade at a larger discount to intrinsic value.As such, buying undervalued stocks today could be a profitable long-term move. They can be found by, for example, looking at the value of their net assets versus share prices, or by considering their earnings track record in a variety of operating conditions. This may provide guidance as to whether they have the capacity to trade significantly higher in the long run. In cases where they seem to offer wide margins of safety, there may be opportunities to deliver market-beating performance in a stock market recovery.Identifying potential growth opportunitiesIt is difficult to assess the prospects for any stock at the moment. Ultimately, nobody knows how the economy will perform due to the ongoing pandemic. Furthermore, the financial cost of the pandemic remains unclear. This could have an impact on growth opportunities within many industries.However, buying companies that may benefit from underlying industry growth trends could be worthwhile ahead of a stock market recovery. For example, healthcare companies may capitalise on demographic changes such as an ageing population. Equally, online retailers may use digital growth opportunities to enhance their earning capacity.Through purchasing such companies when they have solid finances and trade at low prices, it is possible to capitalise on a long-term market rally. This could improve an investor’s financial position in the coming years. Peter Stephens | Monday, 15th February, 2021 I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. FREE REPORT: Why this £5 stock could be set to surge Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Enter Your Email Address Simply click below to discover how you can take advantage of this. Get the full details on this £5 stock now – while your report is free. Image source: Getty Images. Our 6 ‘Best Buys Now’ Shares How I’d identify great shares to buy in a stock market recovery Are you on the lookout for UK growth stocks?If so, get this FREE no-strings report now.While it’s available: you’ll discover what we think is a top growth stock for the decade ahead.And the performance of this company really is stunning.In 2019, it returned £150million to shareholders through buybacks and dividends.We believe its financial position is about as solid as anything we’ve seen.Since 2016, annual revenues increased 31%In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259Operating cash flow is up 47%. (Even its operating margins are rising every year!)Quite simply, we believe it’s a fantastic Foolish growth pick.What’s more, it deserves your attention today.So please don’t wait another moment. See all posts by Peter Stephenslast_img read more

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