Ever since the March stock market crash, there’s been wide-spread speculation that a second market crash is coming. So far, the markets have resisted another major drop. But with a second wave of coronavirus taking hold around the globe, the markets are in shaky territory. This, along with the impending US election, is making investors nervous as no-one knows what to expect next. Once a vaccine is in widespread circulation, I’d expect the markets to bounce back nicely, but presently that seems a distant dream.
Buy quality stocks
Nevertheless, a second market crash need not be the terrifying reality people fear. In fact, it can offer savvy investors the perfect opportunity to snap up their favourite stocks cheaply. I like to maintain a wish list of stocks I’d like to buy when the conditions are right, such as during a market correction.
In the throes of a market crash many top stocks are ripe for the picking, but during a second lockdown if the markets remain buoyant it’s difficult to know where to invest. Some sectors seem to thrive while others dive for obvious reasons. Airlines, retail, and restaurants are out of favour as most of them can’t operate to full capacity, meaning they’re not making profits. Without profits, there’s not much appeal left for investors. Meanwhile, pharmaceuticals and technology stocks have seen their stock prices soar, but many of them now seem overpriced.
So, what’s the answer? Well, although some may seem expensive for now, if the company is providing a product in demand, maintains a competitive edge, and is not running up high debt, then chances are it will maintain its positive streak.
Market crash bargains
AstraZeneca is currently the UK’s largest listed company. Its stock price has done very well this year. Its debt ratio is around 66%. In August it issued $3bn worth of bonds with a 0.7% interest rate. It offers a 2.7% dividend yield, and earnings per share are 79p. It now has a very high price-to-earnings ratio of 97, but that’s because investors see its strength and potential. It’s a durable company with a diverse portfolio of drugs and, as such, AstraZeneca is on my market crash list of stocks to buy.
Another stock I like is Coca Cola HBC AG. Its instantly recognisable brand name stands it in good stead, but I also think it sells an evergreen product range for which sales should bounce back nicely in the future. It’s a bottling partner of the Coca-Cola company and distributes a wide range of its products. These vary from soft drinks to energy drinks to alcohol and brand names include Fanta, Monster Espresso, and Schweppes. The company supplies retailers and hospitality, but its strong product offering has kept sales fairly resilient throughout the pandemic. Once the hospitality trade is back in the swing of things, I imagine profits will return too.
Hopefully, a vaccine will soon emerge to save us all, but until then I’m not panicking about the prospect of a second market crash. Instead, I’m preparing by diligently researching the companies that look to be resilient for the foreseeable future and making a list of the best shares to buy.
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Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.
Motley Fool UK 2020