Stories about an impending stock market crash may be annoying to some who prefer a levelheaded approach to their portfolio, but perhaps no one is as frustrated as InvestorPlace’s Jeff Remsburg.
In an email to our readership, he cited our own Louis Navellier, who recently criticized the mainstream media for playing in the mud with fear tactics.
Primarily, Navellier took issue with articles that the smart money was exiting the markets. As you know, several high-profile executives sold equity shares in their companies. However, Navellier countered that many companies are loading up on shares.
In fact, according to the Wall Street Journal, share buybacks (and dividends) hit a record amount in 2021. So, if we’re going to have a stock market crash, the enthusiasm among the best and brightest is strange.
Second, the famed investor and analyst squared up to the thesis that a stock market crash is imminent. For one thing, Navellier suggested that the market overreacted to fears about the Federal Reserve tapering stimulus, as well as the omicron variant of the coronavirus.
Additionally, while he acknowledges that the price-to-earnings ratio for the S&P 500 is elevated, it’s not to the point where it’s unusually and dangerously high.
While I’m not about to contradict Navellier, I do think investors must realize that the probability of a stock market crash is a non-zero number. It might be close to zero but it’s not absolutely zero.
Share buybacks have been a common theme well before the pandemic but that’s not entirely beneficial. As Harvard Law School explained, one of the core risks to buybacks is that they’re often used for personal enrichment.
Even if you don’t care about the widening wealth gap, you should care that buybacks suck resources away from investments in buildings and machinery — components that drive broader economic growth.
Instead, buybacks tend to artificially prop up prices, which suggests that a stock market crash, should it happen, could be ugly. If a stock market crash does happen, these are the companies you want to pick up on discount.
- Block (NYSE:SQ)
- Lucid Group (NASDAQ:LCID)
- Upstart (NASDAQ:UPST)
- Sea Ltd (NYSE:SE)
- DraftKings (NASDAQ:DKNG)
- Twitter (NYSE:TWTR)
- Peloton (NASDAQ:PTON)
Admittedly, you should approach the idea of a stock market crash with a levelheaded perspective. At the same time, you don’t want to be so levelheaded that your optimism becomes toxic positivity. This isn’t about being a “h8er” to use the contemporary parlance; rather, it’s about preparing for what could happen.
Stock Market Crash Buys: Block (SQ)
Leading off this list of companies to consider if we suffer a stock market crash is Block, the company formerly known as Square.
As you might imagine from the new brand identity, management greenlit the change to reflect the company’s focus on advanced technologies such as the blockchain.
Block already was a powerful name in the payment processing industry for leveling the playing field between smaller and larger businesses. The Covid-19 pandemic helped accelerate dramatic enthusiasm for SQ stock following the March 2020 doldrums.
As consumers began shifting their retail habits online, Square’s web-based business platform helped entrepreneurs cope with the sudden transition. Also, the pandemic helped many cash-only folks rethink their transactional medium of choice.
However, I wouldn’t want to pull the trigger right now, at least not heavily. Over the trailing month headed into the Christmas weekend, SQ dropped 21% while over the trailing six-month period, it tanked 30%. So, say what you want about a stock market crash — SQ is definitely in one right now.
Call me crazy but given its weak technical posture, I see the possibility of SQ tanking another 20%. Long-term investors could advantage the crash now with a modicum of funds. However, I’d keep the powder keg dry for a bigger haul in the future.
Lucid Group (LCID)
Personally, I don’t see myself in an electric vehicle. Some of my closest friends have gone the hybrid route, straddling the delicate balance between clean and “dirty” energy.
But I can’t help myself. I love the whine of a supercharger — yes, an American supercharger — and the indecent crackles of the exhaust system. Take that away and you defang the automotive experience. It’s like ordering hamburgers sans fries. It’s really weird.
However, I fully respect that I’m becoming a dinosaur regarding my automotive passions: first, the manual transmission and then, the engine. If I’m going to go down, then I might as well lose to Lucid, one of the most exciting names among electric vehicle manufacturers. If we do have a stock market crash, LCID should be on your radar.
Mainly, I appreciate the company’s no-nonsense approach to EVs. In my opinion, Lucid is the EV equivalent to Las Vegas’ infamous Heart Attack Grill in that management doesn’t even have the pretense (at least not right now) of selling vehicles to average-income households.
Instead, the company’s going after the rich with pure electric decadence. I’m telling you: if LCID tumbles during a stock market crash, strongly consider advantaging the discount.
Stock Market Crash Buys: Upstart (UPST)
My InvestorPlace colleague David Moadel recently headlined Upstart as a company destined to revisit its all-time high. It’s a bold statement to be sure.
Having made a couple bold calls myself, I’m more in a mood now to avoid providing too many price-specific ideas, just in case prognostications fail to age well.
After all, we’re talking about a possible stock market crash. That’s already a topic that can lend itself to extreme ridicule if the thesis goes awry.
Nevertheless, I appreciate Moadel’s optimism here. As he put it, Upstart is “fomenting a revolution in the financial technology (fintech) space today.”
Representing one of the biggest initial public offerings over the trailing 365 days, Moadel acknowledged that the fintech firm got ahead of itself when shares topped near $400. At the time of writing, with UPST trading hands at $148, it’s worth a look.
As several of my colleagues pointed out, the younger generation is rebelling against traditional financial infrastructures. They want their finances to align with their ethos: quick, convenient and digital. Many financial dinosaurs can’t keep up, which puts UPST in the driver’s seat fundamentally.
Sea Ltd (SE)
A global consumer internet firm with businesses in digital entertainment, e-commerce and digital payment services, Sea Ltd is relevant just on its coverage toward burgeoning industries.
However, it gets high marks among long-term investors looking to advantage a possible stock market crash thanks to Sea’s location. Tied to the exciting Southeast Asia market, contrarians shouldn’t pass up a discount if it presents itself.
In many ways, it already has. Over the trailing-month period, SE has dropped 25%, although in the five days heading into the Christmas weekend, it gained 7.5%. Still, the overall picture is somewhat worrisome in the near term.
Despite tremendous revenue growth, a major criticism toward Sea is that its net losses continue to expand. Therefore, its latest retained earnings count (third quarter of 2021) is a loss of nearly $6.6 billion. That’s going to scare some investors, who see risk in a high-interest-rate environment.
But you should also realize that the internet economy in Southeast Asia is booming. According to a Reuters report, this segment is “forecast to reach $1 trillion by 2030, as tens of millions more people take up online shopping and embrace food delivery.”
Stock Market Crash Buys: DraftKings (DKNG)
Before business combinations related to special purpose acquisition companies (SPACs) started to get a bad reputation for their dilutive impact, DraftKings represented a bright spot in this unique method of going public.
While the timing was awkward since the reverse-merger disclosure occurred right before the coronavirus pandemic hit the U.S., DKNG found enough support from contrarian investors.
Essentially, the thesis was that retail revenge would eventually drive demand for sports viewership, attendance and wagering. With Americans cooped up in their homes for so long, the intensity of the consumer-demand rebound would be quite substantial.
For the most part, this thesis has held up water. People have embraced consumerism following reduced Covid restrictions.
However, the Fed’s hawkish tone regarding monetary policy in 2022 (and beyond) has taken the wind out of DraftKings’ sail. Presumably, if the economy slows based on the reversal of dovish policy, a subsequent stock market crash wouldn’t be too hot for sports betting.
Thus, DKNG has slipped badly to the tune of 43% over the trailing six months.
But the overriding point for patient investors is that industry experts project sports betting to be a huge global market, possibly up to $140 billion by 2028. That’s going to have speculators interested should we suffer a stock market crash.
Generally speaking, things aren’t looking too hot for social media, which undoubtedly would please former President Donald Trump to no end.
As you know, “The Donald” wants to take his Truth Social platform public via a reverse merger between Trump Media & Technology Group and Digital World Acquisition Corp (NASDAQ:DWAC).
Assuming that DWAC can overcome its legal woes, Truth Social can provide some serious ammunition against Twitter. Cynically, internet anger has been a sore spot regarding digitalization for years, but Truth Social can potentially profit from it, and it could do so at the expense of Twitter.
Sure enough, TWTR has been utterly devastated, shedding 35% over the trailing half-year period. The company also is adjusting to an executive shakeup, which clearly has investors worried about Twitter’s viability moving forward.
However, if a stock market crash occurs, brave contrarians might want to add TWTR to their portfolio. For one thing, you have major talking points in the 2022 midterm elections and the 2024 general election coming up.
Plus, the potential rivalry in Truth Social will make for some excellent banter between warring parties. Look, you know conflict is inevitable. You might as well profit from it.
Stock Market Crash Buys: Peloton (PTON)
With Peloton, you don’t even need to wait for a stock market crash: it’s already happened.
Over the trailing month, PTON shares have lost nearly 17% of value but that’s not the real news. Instead, over the trailing half-year period, the company has hemorrhaged a gargantuan 68%. If you think shareholders are ticked off, wait till you hear what the employees have to say.
Citing an unnamed inside source, the New York Post reported that the Peloton employee in question remarked, “People to be honest with you now are worried about layoffs. Morale is at an all-time low.”
Adding to the misery, Peloton chief executive John Foley has been living the high life while PTON shares suffer their microcosmic stock market crash. That brings up the familiar issue with these share buybacks we’ve been witnessing. Again, as Harvard Law School stated, executives often use buybacks for personal gain.
To be fair, the vaccine rollout and loosening Covid-19 restrictions have played a significant role in PTON’s implosion. Nevertheless, given Peloton’s fun, interactive fitness bikes, there’s a solid chance that it can attract a wide share of a declining market. Of course, it’s a risky thesis so only speculative investors need apply.
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.