One of the advantages of a stock market fall is that it can make great companies available at more attractive prices. We don’t know whether the recent stock market wobble is a sign of worse things to come or not. Either way, I always keep on hand a list of quality companies whose shares I wouldn’t mind owning in my portfolio. Here are five names from my list of UK shares to buy for my portfolio if their prices crash.
Large mortgage lender: Lloyds
UK bank Lloyds is already one of the banking shares I own. But I reckon its business has certain desirable characteristics which continue to attract me for the long term. For example, its reliance on the UK is a risk if the British economy weakens. But by the same token, I like the fact it simplifies the business and allows management to focus more clearly.
I reckon Lloyds’ collection of banks, including Halifax and Bank of Scotland, can allow it to target customers beyond its traditional heartland. As the UK’s largest mortgage lender, it is well-placed to benefit from a strong housing market.
Resilient business model: Howdens Joinery
Another company that is set to benefit from ongoing strength in housing demand is builders’ merchant Howden Joinery. I think the basic strength here is an established network of sites combined with smart marketing. That has built customer loyalty, which can translate into sustained revenues and profits. Joinery products are heavy to transport, so having local sites gives a company such as Howden a strong competitive advantage.
That’s reflected in its share price, which has climbed 42% in the past year, at the time of writing this article earlier today. There are risks here too, though, including cost inflation and availability issues eating into profit margins. If the Howdens share price falls enough, it would be on my list of UK shares to buy and hold in my portfolio.
UK shares to buy: Legal & General
Legal & General is in the insurance and financial services business. Although that can seem staid, like Lloyds I think it could benefit from sustained strength in the economy. The company’s business model combines the customer appeal of the iconic brand with a wider business in investment management targeting professional clients.
The Legal & General yield of over 6% could rise if the share price falls. Risks include a stock market crash hurting the company’s investment results. That could lead to smaller revenues.
Dull but profitable: Victrex
Another share I regard as high-quality is Victrex. The company is unknown by many investors. That reflects its industrial nature and fairly dull seeming line of chemically based products. While they may seem dull to me, they have applications in areas where safety is critical, such as aviation and automotive manufacture. That means customers are willing to pay a premium for quality, giving Victrex pricing power.
Victrex has risks, such as a limited manufacturing footprint. That makes it vulnerable to problems at one of its supply sites, which could severely harm revenues and profits. But ordinarily, Victrex is a boring but profitable company. I’d happily tuck it away in my portfolio if I could pick it up at the right price.
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Christopher Ruane owns shares in Lloyds Banking Group. The Motley Fool UK has recommended Howden Joinery Group, Lloyds Banking Group, and Victrex. 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.
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