Initially, when the mysterious novel coronavirus first hit our nation, it felt as if the world had come to a standstill. In a way, it did, with major metropolitan across the globe looking like ghost towns. Then, a remarkable event occurred. People began pouring their money into the equities sector, boosting popular stocks to buy. Nevertheless, with such rampant speculation comes fears of a potential market crash.
Throughout much of this year, the major indices shrugged off concerns about a severe correction. However, the week of May 10, 2021 was a wake-up call, with many equity units that found favor with Wall Street pinging red ink. It brought to the forefront the idea that the market cannot go up indefinitely. Therefore, it behooves everyone to consider which stocks to buy in case of a market crash.
First, the biggest concern is that there’s simply too much speculation baked into the equities sector. Data from the Financial Industry Regulatory Authority (FINRA) shows that stock trading on margin continued to hit record high after record high this year. With so many folks levered up to risk-on names, a bout of volatility could spark a massive downturn. This should incentivize consideration for more stable, resilient stocks to buy.
Second, what investors should watch out for is deflation, not necessarily inflation. Yes, several consumer segments show inflation threats in the immediate term. But look at it this way. The national annualized gross domestic product (GDP) is at $22 trillion, meaning that statistically, the U.S. economy has already recovered. What’s changed is the employment level, which is down roughly 5%. Higher productivity and lower overhead translate to deflation, and investors should strategize their stocks to buy accordingly.
Third, due to the unprecedented circumstances of the trailing year, demand could be pulled in from future years into the present. That’s “good” for sentiment today, but what about tomorrow? This relates to the concept of extreme speculation, which is why you should research stocks to buy if you think a market crash is coming.
Finally, it’s important to note that the wealth gap is widening substantially since the pandemic lows. This is the problem with speculative markets — they end up funneling more wealth into fewer hands. Therefore, you should consider mitigating your exposure to risk-on names and into these relatively more resilient stocks to buy.
- Duke Energy (NYSE:DUK)
- Bunge (NYSE:BG)
- Murphy USA (NYSE:MUSA)
- Kroger (NYSE:KR)
- Unilever (NYSE:UL)
- Dollar General (NYSE:DG)
- American Tower (NYSE:AMT)
Stocks to Buy: Duke Energy (DUK)
If a market crash were to occur, the initial shock could affect every name due to the mass-panic effect. But in such a scenario, you would want to be levered more heavily toward stocks to buy that are tied to indispensable industries, such as the utilities sector. For most folks, that translates to well-established firms like Duke Energy.
Though not typically known for flair, DUK stock is performing rather well. On a year-to-date basis, shares are up nearly 12%, while during the trailing year, they’re up over 26%. Part of the upside momentum could be stemming from investor recognition of Duke Energy’s potential.
When a market crash occurs, this implies a deflationary environment where consumers cut their spending on discretionary goods and services. But the one service they can’t afford to cut is utilities. Beyond just the basic standard of living argument, we live in a modern, hyper-connected world. Losing electricity means losing the internet and other communication channels.
That’s just too devastating of a sacrifice, and thus, most will do anything to avoid going that route. This argument might be a little bit cynical. Nevertheless, you can trust DUK stock during a downturn.
Bunge may not immediately strike you as one of the more recognizable stocks to buy. However, it’s one of the most important, especially if we suffer a market crash. As an agribusiness and food company, Bunge has more than two centuries of experience. Further, its ingredients and acumen are represented in some of the world’s top brands. This is a business that’s not going anywhere.
Typically, though, you pay an opportunity cost for this kind of relative safety. The more of a sure thing an investment is, the less likely it is to deliver robust returns. But for the time being, BG stock is having its cake and eating it too. On a year-to-date basis, shares are up nearly 36%. That’s not just impressive for so-called safe stocks to buy but for almost any other investment category.
Better yet, the financial performance justifies the newfound enthusiasm for Bunge’s equity unit. In its latest quarter ended March 31, 2021, the company generated nearly $13 billion in revenue, up 41% from the year-ago quarter. Over the trailing-12-month period, revenue is at $45.2 billion, reflective of a conspicuous recovery in its business.
Stocks to Buy: Murphy USA (MUSA)
After a devastating ransomware attack, the Colonial Pipeline is now back online, delivering millions of gallons of fuel each hour in a bid to make up for lost time. Nevertheless, widespread shortages on the eastern side of the U.S. remain, according to a CNBC report.
On the surface, this is yet another argument for electric vehicle (EV) advocates. By moving to electricity and other alternative transportation solutions, we can move away from fossil-fuel dependency. Not only is this an economically favorable solution but also having other options available will make us less vulnerable to cyberattacks.
Still, the harsh reality is that only a fraction of automotive sales, whether you’re talking domestic or international, are earmarked for EVs. Americans just haven’t made the transition at scale, which keeps fuel-distribution companies like Murphy USA firmly within the list of stocks to buy.
What makes Murphy USA intriguing is its lower-cost service. Primarily located near Walmart (NYSE:WMT) stores, the company benefits from the old business adage — location, location, location. Further, the pandemic’s impact is still painful for millions of households, which keeps MUSA stock relevant.
And if a crash occurs, you can bet that more drivers will make the switch to Murphy.
When news started trickling in about the spread of Covid-19 from China into other countries, it was only a matter of time before we got hit with the outbreak. Therefore, weeks before the crisis, I began securing the essentials. Nothing crazy, mind you, just enough to keep my household secure to ride out the craziness.
Nevertheless, I wasn’t prepared for what I saw in my local Kroger store (Ralph’s). For one thing, the entire aisle of toilet paper was gone. Distinctly, I recall a younger gentleman, possibly a college kid, blurt out what the heck — but with a different word for heck.
It was a surreal circumstance, one that probably won’t happen again. Still, if we incur a market crash, you’ll want to consider KR stock (or other grocery investments) for your list of stocks to buy.
Primarily, the April retail sales report shows a significant rotation of pent-up demand toward the service sector, such as bars and the restaurant industry. That makes sense given how much we’ve been cooped up at home. But if we have economic troubles, that demand will likely rotate into grocery stores as consumers try to save money.
Stocks to Buy: Unilever (UL)
It might be a peculiar situation, but at the same time, it’s not all that surprising. Last year, during the peak of lockdown mania, Unilever encountered the two-faced nature of the SARS-Cov-2 virus. On one hand, Unilever’s ice cream brands went up, which made perfect sense. More people were stuck at home, driving up demand for premium grocery items.
However, it also got hit with a pandemic-related tailwind. The company’s deodorant and soap brands suffered a nosedive as the personal care industry tanked. Basically, people didn’t have an incentive to look good (or smell good). That may have played some role in the choppiness of UL stock.
But as we get out of the pandemic, we should see a substantial improvement in the company’s personal care revenue. For one thing, people will be eager to get out — and not look like they’ve been in quarantine for a year.
Second, if we succumb to a market crash, people will want to present the best version of themselves to potential employers, which may be limited in number. While Unilever isn’t exactly an exciting business, it could be one of the more important stocks to buy under duress.
Dollar General (DG)
With so much speculation driving up growth stocks to buy, investors haven’t given much love to Dollar General. While DG stock is up a respectable 13% over the trailing year, it’s actually down about 2% year to date. People just don’t get dollar stores right now, despite DG generating nearly 18% growth year-over-over for the quarter ended Jan. 31, 2021.
I’ve got a feeling that might change. Late last year, Dollar General launched a new concept called popshelf. Designed to attract customers with greater household income — we’re talking about $50,000 to $125,000 annually — popshelf stores are clean, clutter-free retail outlets where consumers can find whatever they need.
Better yet, everything will be priced $5 or lower. Therefore, the popshelf concept will stay true to Dollar General’s core mission, while giving those with more disposable income better quality products to choose from.
However, if the markets tumble, that implies economic pain, as the recovery narrative is a fragile one. In this circumstance, both popshelf stores and the namesake stores will likely benefit as consumers look to batten down the hatch.
Stocks to Buy: American Tower (AMT)
Although American Tower is levered to technology — specifically, the wireless and broadcast communications sector — AMT stock is really an investment in infrastructure. And that makes it one of the more compelling stocks to buy if you believe we’re at risk of a market crash.
While you could try to pick out an individual telecom firm, I like American Tower because it’s akin to selling tickets to the big game rather than betting on a certain team. Yes, the latter brings more rewards, but you just don’t know which individual company is going to win out. With a telecom infrastructure play like AMT, you’re bringing probabilities to your favor while capping your maximum return potential.
Should things go awry in the global markets, that’s a tradeoff many investors will be willing to make. Nowadays, you can’t get anything done if you’re not connected to the wireless network. Therefore, nothing short of a cataclysmic event will strip AMT stock of its relevance.
As evidence, even the pandemic couldn’t strip American Tower of its long streak of consecutive annual revenue growth. If you can’t trust AMT as a crisis play, I’m not sure what else you can trust.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.