3 Unexpected Stocks to Buy in a Market Crash

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Everyone seems to be speculating that a major correction is coming to the stock market. We had an outstandingly good year in 2013, industries like tech and biotech are selling off, and we seem due for a significant dip.

stocks-to-buyThat always seems to be the case as the market climbs the wall of worry, and with several indices near all-time highs, the panic is becoming palpable. Whenever I get that vibe, I set up a shopping list of stocks to buy if such a correction or crash comes to pass. After all, the upside of a crash is that it provides a great buying opportunity for many stocks.

Rather than pick the obvious candidates, I also like to look for great stocks to buy that might not be on most investors’ radar. Here are three such stocks to buy:

InterActiveCorp (IACI)

stocks-to-buy-iacInterActiveCorp (IACI) is Barry Diller’s conglomerate of internet companies, not terribly different from John Malone’s Liberty Interactive (LINTA). The strategy for IACI stock has been to wait for a leader in a given sector to emerge and then buy it up, or at least a portion of it. These businesses either have a history of generating lots of cash flow, or have the potential to do so.

Cash flow is what Malone and Diller have always been about, and they have succeeded mightily at it. Only this past year has the market rewarded them, as analysts and investors had trouble valuing the companies because it trades more on cash flow than earnings. I like IACI stock more as it has more assets, including Ask.com, Match.com, HomeAdvisor, Vimeo, Investopedia and plenty more.

Diller then spins off some of these entities into public companies, as he did with Home Shopping Network (HSNI) and timeshare company Interval Leisure Group (IILG). The company’s 52 week high was $80.64, it trades right now at $66. I’d love to make this one of my stocks to buy in the below the $50 mark, but IACI would be a bargain under $55.

Middleby Corporation (MIDD)

stocks-to-buy-midd-stockMiddleby Corporation (MIDD) started as an oven company in 1888. Over its history, it has expanded into a global food service, processing, and residential kitchen equipment manufacturer and distributor.

MIDD stock was a $9 stock in 2005. It peaked just under $300 recently and is finally coming back to earth, presently at $255. You’ll be amazed to learn that analysts project 25% annualized earnings growth over the next five years. At FY14 earnings of $9.93, it’s essentially fairly valued, even at this price.

MIDD only has some $500 million in debt, and virtually no capex, so it’s consistently generating free cash flow in the $120 million to $140 million range annually. I would love to see it at $200, but MIDD would still make the stocks to buy list at $225.

Starbucks (SBUX)

stocks-to-buy-sbux-stockLast on our list of stocks to buy is Starbucks (SBUX).

I don’t know why I was so skeptical about SBUX stock for so long. I remember considering it back in 1998 but didn’t believe it could grow much further. Wrong!

The truth about SBUX stock is that it just continues to innovate, to leverage its brand, and to expand into areas that at first make me wonder but always manage to deliver. SBUX stock hit a high at $82.50, but now sits at $68. It continues to grow earnings at 20% per year, and on FY14 earnings of $2.66, the fair value is around $53.

But I give Starbucks a bonus for its brand and cash flow, so it may be closer to $58. I’d buy it there.

As of this writing, Lawrence Meyers was long SBUX. He is president of PDL Broker, Inc., which brokers financing, strategic investments and distressed asset purchases between private equity firms and businesses. He also has written two books and blogs about public policy, journalistic integrity, popular culture, and world affairs. Contact him at pdlcapital66@gmail.com and follow his tweets @ichabodscranium.


Article printed from InvestorPlace Media, https://investorplace.com/2014/04/stocks-to-buy-sbux-iac/.

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