Stock market crash: I’m following Warren Buffett’s strategy and buying cheap UK shares

| Last Updated May 12, 2022

growing capital from a piggy bank

  • Value investing is one of the best pieces of advice of Warren Buffett
  • B&M European Value Retail is likely to benefit from the rise in retail within the UK
  • Safestore Holdings financial strength speaks volumes about its future growth

One thing I have learned in the investor world is to learn from the pros in the community. Therefore, I diligently follow the investment patterns and advice from legendary investors like Warren Buffett. In fact, following their advice also keeps me safe from unexpected losses in case of a stock market crash. I previously discussed Warren Buffett strategies I’d use in the next stock market crash. Here I will be discussing that buying cheap UK shares is the best strategy to be adopted in case of a stock market crash, as per Warren Buffett.

Following Warren Buffett’s advice on buying cheap UK shares

The Oracle of Omaha is known for value investing. According to this approach, his managers seek cheap UK shares, which have great potential to grow and outperform in the future. It is worth mentioning that cheap does not mean cheap in price. But it indicates a low price compared to the expected growth in the future.

In addition to it, the companies Warren Buffett chooses to invest in always have a competitive advantage within the sector it is operating. Undoubtedly, this strategy has been proven to guard his portfolio in case of a stock market crash.

The boom in retail

In line with the legendary investor’s advice, I am looking to buy B&M European Value Retail (LSE:BME). This value retailer is currently positioned to benefit from the boom in the retail sector in the post-pandemic period. The company recently opened 9 new B&M UK fascia stores, as reported in the recent quarterly earnings report. Also, the retailer is expected to open 13 new stores in the fiscal year 2022.

Despite the expansion, the revenue stream of this value retailer is highly dependent upon consumer spending capacity. Since there is still a lot of uncertainty revolving around the direction of consumer spending, the risk of these cheap UK shares losing their price is elevated.

UK’s leading self storage company

Finding profitable companies with strong balance sheets is one of the key hunting techniques of Warren Buffett’s investment managers. An example of such a company, which falls under the category of cheap UK shares, is the self-storage company Safestore Holdings (LSE:SAFE).

What makes this company the best guard against a stock market crash is its financial strength. Not only the company is thriving upon high cash flow generation, but its high operating margins are also leading it towards growth. Moreover, a decent return to shareholders in terms of increase in stock value and increased dividend makes this share an investor favourite, I believe.

No doubt, Safestore holdings holds the leading position in its industry. But with very low entry barriers in the industry, the storage company is at risk of losing profits if competition increases.

Final thoughts on cheap UK shares

When the risks of a stock market crash increase, value investing comes in handy. Therefore, investing in good quality companies will act as the best guard against losses when the market falls.

Following Warren Buffett’s advice, I look for cheap UK shares which offer high expected future growth. In addition to it, these companies can retain profits due to their financial strength. Hence, the above-mentioned companies are the gems of the stock market, and I’m keen to add them to my portfolio.

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Saima Naveed does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned. Views expressed on the companies and assets mentioned in this article are those of the writer and, therefore, may differ from the opinions of analysts in The Money Cog Premium services.