Whether or not a market crash comes soon, I find it helpful to know what I would do in such an event. Here are five shares I’d consider buying for my portfolio should the market crash.
A market crash could put growth shares on sale
Selling building products might not be glamorous, but it can be lucrative. There is always some demand, not just for new build projects but also maintenance. Timber merchant Howdens Joinery has a strong branch network, well-established professional relationships, and a history of growth. That is why it often trades expensively. Currently, for example, the price-to-earnings valuation is 39, which I think is steep. But in last March’s market crash, shares fell to less than half their current price. If they tumble again, I would consider buying. One risk is supply problems making it hard to meet customer demand, which could dent profits.
I continue to be bullish on S4 Capital. Its interim results yesterday showed continued strong growth. The digital ad group upgraded — for the third time — its like-for-like gross profit growth target for the full year. That now stands at 40%. With its acquisition firepower and deal appetite, the company should also benefit from bolt-on growth.
The shares are increasingly priced like a tech group rather than a marketing network. If a stock market crash leads to a tech sell off, I think that could spill over to hit the S4 Capital share price. Indeed, one risk I see with the company is that its heavy dependence on tech sector clients means that any belt tightening by tech firms could damage revenues. But if S4 gets marked down in a market crash, I’d be happy to add to my position.
UK dividend stocks I’d buy in a crash
Insurer and financial services company Legal & General is now 78% higher than its low last March. Despite that, it still yields 6.3%. If I had been able to get into the name at its low point, I’d currently be earning a double-digit yield. A market crash often accompanies broader financial turmoil – or fears of it. So I wouldn’t be surprised to see the Legal & General share price marked down in the next stock market crash. I would see that as a buying opportunity for my portfolio. There are risks here – a recession could force customers to cut back on some discretionary financial services spending, hurting revenues.
Another high yielder I like is British American Tobacco. The owner of Lucky Strikes dipped during last year’s market crash, and is only 3% higher today than it was then. With a 7.9% yield, I consider the tobacco company to be attractive at today’s share price. Tobacco stocks are often seen as defensive, so they don’t necessarily move downwards in a market crash. But if BAT does lose altitude in a correction, I’ll continue to be a buyer.
Buying the market in a crash
In a market crash it can sometimes be hard to spot winners and losers immediately. So I’d also consider buying a FTSE 100 index tracker such as Vanguard FTSE 100 Index Unit Trust. That would offer me exposure to a broad basket of blue chip shares. But one risk is that a market crash could be a harbinger of further falls, which would negatively impact the FTSE 100 price.
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Christopher Ruane owns shares in British American Tobacco and S4 Capital. The Motley Fool UK has recommended British American Tobacco and Howden Joinery Group. 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.