The first market crash left some businesses fighting for survival and a second crash could prove fatal. However, a risk for some is an opportunity for others. History shows the aftermath of any financial crisis is prime time for companies to swoop in on attractive acquisition targets. Strike while the share price is low, take over a smaller company, and gain market share. With a second crash looming, here are three companies I believe have potential to be stock market crash winners.
Melrose Industries (LSE:MRO) is a FTSE 100 company that specialises in the acquisition and performance improvement of manufacturing businesses. It buys underperforming companies, improves them, and sells them for profit. It’s a no-nonsense company with expertise in efficiency and the financial backing to make big moves. An example of this was its hostile takeover of GKN back in 2018.
Manufacturing in the UK is suffering, with the aerospace industry especially under threat. Airbus announced 1,700 job cuts, which means around 10,000 job cuts in total across the UK supply chain. No doubt this will have altered any plans Melrose had for GKN and in the current climate it will need time to focus on those plans. However, it also creates the perfect opportunity for Melrose to scout out its next acquisition target. Once the true impact to the aerospace industry is realised, I wouldn’t be surprised if Melrose start shopping around again – and that’s why I believe it could be a stock market crash winner!
Risky retail option
Boohoo Group (LSE:BOO) is a FTSE AIM 100 UK online fashion retailer aimed at 16-30 year olds. It’s had quite the success story over the past five years. It holds huge influence on its young market audience as a UK festival sponsor and Love Island sponsor in 2019. It acquired Pretty Little Thing back in May, followed by Oasis and Warehouse in June.
Its story had been largely positive until this week when the news of poor working conditions and shameful pay below minimum wage was revealed at supplier factories. Its reputation is damaged and its share price has lost a third of its value at the time of writing. I think Boohoo is a risky option now as the price may continue to fall. Although, if it manages the backlash well, it could steer itself back on course for success as online retail is still thriving. Boohoo proved a winner after the first market crash this year, could it emerge a stock market crash winner again?
Broadening its beverage offering
Diageo (LSE:DGE) is another FTSE 100 company and one of the world’s largest producers of spirits and beers. It’s boasted solid performance for years and in my opinion is a long-term buy-and-hold regardless of future takeover activity. Its acquisition potential makes it that much more appealing.
In 2017 it acquired Casamigos, the fastest growing super-premium tequila brand in the US. Nothing unexpected there. Roll forward two years to 2019 though and it made a more interesting acquisition in a majority shareholding in Seedlip, the world’s first distilled non-alcoholic spirit. This shows a willingness to diversify. Could its next move be into soft drinks? Fevertree Drinks may be an opportunity for Diageo to pair its premium spirits with premium tonic mixers.
We’ll have to wait for the dust to settle from a second crash but overall, I believe these three have potential to emerge as stock market crash winners.
The post Stock market crash winners: I think these companies have an opportunity to gain market share appeared first on The Motley Fool UK.
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Ash Karandawala has no position in any of the shares mentioned in this article. The Motley Fool UK owns shares of Melrose. The Motley Fool UK has recommended boohoo group and Diageo. 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