While there is no guarantee written in stone, it is as certain as anything connected to financial markets can be that sooner or later the long bull run we’ve seen in equities will finally end in a significant correction. Analysts have been speculating when the moment will come for most of this year. It hasn’t yet and forecasting when it finally will is probably unwise for anyone who wants to avoid looking foolish. However, it is still a good idea for investors to have a plan in place for when it does.
A recent Telegraph article picks out a number of companies that it considers to be top picks that stocks and shares ISA investors, or anyone else investing in equities markets, should look to if markets do crash. The upside to a correction is that significant stock market plunges pull down all equities, often regardless of the performance of the company. This can create great buying opportunities for shares that have previously been pricey. So, let’s take a look at 4 potential opportunities:
MedicX is the first pick highlighted. The company holds GP clinics and other medical facilities across the UK and Ireland. Leases have an average of 14 years to run and the main client paying rent is the NHS. Dividends yield around 6.8% at the current 88p share price but there is a premium to the value of the underlying property portfolio, which is 73p a share. A stock market correction sending MedicX shares down to 75p or lower would mean a dividend yield of around 8% on this stock, which is when the Telegraph’s analysts suggest to buy.
HICL is an infrastructure-focused fund currently yielding 5%. Water, toll roads and public buildings such as schools and hospitals are the main focus and much of the company’s revenue is government-backed. This has led to shares trading at a premium to the value of underlying assets, currently 6%. If share price were to drop to 140p from the current 155p level, dividends at the same level to this year would mean a yield of 5.5%.
F&C Commercial Property Trust has a current share price of 142p and yields 4.2%. The trust owns £1.3 billion of nicely diversified UK-based commercial property, much of which has good tenants locked into attractive, long-term contracts. Seen as a stable horse to back, paying monthly dividends of 0.5p per share, the current share price has also risen above the value of underlying assets. A future drop to 130p a share would see returns rise to 4.6%.
An alternative play on the property market, Real Estate Credit Investments, invests in mortgages and property-backed bonds. It currently yields 6.4% from a share price of 174p. If a stock market slump is accompanied by a major hit to sentiment on the commercial property market the share price could take a significant hit. A fall to 150p would see shares in the company then yielding an impressive 7.4%.