The 2020 stock market crash: 3 steps I’d take to buy the best shares now

The 2020 stock market crash could provide opportunities to buy the best shares at cheap prices to benefit from a long-term stock market recovery.

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Through identifying sectors with strong long-term growth prospects, it is possible to unearth companies with sound prospects. Furthermore, concentrating on company fundamentals may allow an investor to find businesses with solid market positions that can lead to higher profitability in the coming years.

Buying such companies at discounts to their peers may mean higher returns in the long run after the 2020 stock market crash.

Identifying the most attractive sectors to find the best shares

The best shares to buy today could be those companies that operate in industries with strong long-term growth outlooks. Certainly, many sectors are likely to experience fast-paced change in the coming years, as the full impact of the coronavirus pandemic on consumer trends becomes clearer. However, some industries may have clearer paths to growth than others.

For example, trends in the healthcare and retailing sectors may provide growth opportunities for businesses operating within them. In healthcare, factors such as a growing world population and an ageing population may mean that demand for products and services increases over the coming years. Similarly, online retailers may be able to produce higher rates of sales and profit growth than their bricks-and-mortar peers.

Of course, market trends may be difficult to identify when seeking to find the best shares to buy today. However, investing money in a diverse range of sectors that have positive long-term growth outlooks may lead to relatively high returns in the coming years.

Focusing on high-quality stocks

Some of the best shares to buy today may be those companies with sound financial positions, as well as wide economic moats. They may be better able to survive a period of uncertain economic performance. They may even strengthen their positions relative to peers by investing in cheap assets or in developing new products and services to react to changing consumer demand.

Company fundamentals can provide guidance on the financial strength of a business. For example, low debt levels within a company’s balance sheet suggest sound finances. Meanwhile, an economic moat can be identified by considering factors such as the uniqueness of a company’s products, as well as its degree of customer loyalty.

Buying cheap shares for a stock market recovery

The best shares within a specific sector may be those that trade at cheap prices relative to their peers. For example, a company that has a better financial position and a wider economic moat than its peers, but that trades at a discount to its rivals, may provide greater scope for capital appreciation over the long run.

Therefore, considering a wide range of companies within a specific sector could be a useful step to find the best shares to buy today. It may provide an insight into which stocks offer the best value for money on a long-term basis.

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Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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