3 obvious stocks to buy in the event of a stock market crash

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EExcept for one or two big drops along the way, like the one caused by the start of the pandemic last year, the S&P 500 has been on what is essentially a decades-higher run. Such a long bull market can make people nervous.

Chinese owner Evergrande looks like he could default on his debts, and many fear this could trigger a domino effect causing a global economic recession, which is why the stock market plunged last week.

While the market has since recovered all of that lost ground, it’s never too early to predict another crash. Colgate-Palmolive (NYSE: CL), Airbnb (NASDAQ: ABNB), and Altria (NYSE: MO) are three stocks that could help insulate your portfolio from the next downturn.

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Invest in your own pharmacy

Eric Volkman (Colgate-Palmolive): Before a bomb hits the market, run to the shelters. A safe place with thick walls and a well-stocked pantry is the consumer staples industry, and Colgate-Palmolive is one of the strongest companies in the industry.

No matter how tight the economy is, people will always need toothpaste and hygiene products to make their way through life. They could save money by forgoing the last whiz-bang Apple gadget or You’re here car, but they do not go without detergent. This is one of the main reasons why manufacturers of unglamorous but necessary products like Colgate-Palmolive are such effective crash / recession hedges.

The company makes consumer products that are purchased regularly by consumers around the world, and chances are you have at least one of these products in your own closet or drugstore. In addition to the Colgate line of toothpaste and Palmolive dishwashing liquid that make up its name, the company also owns the Softsoap, Irish Spring and Speed ​​Stick deodorant brands in its bulky portfolio.

As a result, Colgate-Palmolive consistently shows high revenue, throws away heaps of money, and generally makes bottom lines with comfortable margins. In 2020, for example, it had revenue of nearly $ 16.5 million, with GAAP net income of just under $ 2.7 million and free cash flow of over 3.3 million. billions of dollars.

The latter still leaves a lot of room for the company’s relatively generous dividend (which now yields 2.4%). Colgate-Palmolive can easily increase this level with such cushioning. Therefore, it’s a frequent increase in his payout, to the point where he achieved Dividend King status years ago.

Some fear that the particularly strong quarterly growth of recent times is fading. After all, net sales were up nearly 10% year-on-year in the most recent published quarter, with earnings per share up 12%. The concern is that the trend towards stocking basic consumer goods that we saw during the pandemic will dissipate as we (at least hopefully) finally begin to overcome COVID-19.

Understandable, but Colgate-Palmolive has proven over its long history that it can improve both revenue and profitability in the toughest times – if not at double-digit rates, at least by amounts. respectable. So even if growth declines, the company should still manage to maintain both its results and its results north.

Meanwhile, there’s this rock solid dividend and this great suite of products that will never go out of style. This is one of the best defensive stocks you can buy, a good cover against any storm to come.

Family entering house for rent

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Book a reservation for huge growth

Keith Noonan (Airbnb): The share price of short-term vacation rental company Airbnb has climbed about 20% from the market close on the day it went public last December. Even at current prices, I plan to increase my stakes in the company in the near future, and this is a stock that is at the top of my shopping list in case a stock market crash creates even more buying opportunities. attractive.

Despite the incredible challenges the company has faced in the era of the pandemic, Airbnb’s business has proven to be remarkably resilient and is poised to show record performance in the current quarter. Keep in mind that a variety of international and domestic travel restrictions and consumer reluctance are still pressures, but Airbnb is showing impressive growth nonetheless. This is a fantastic sign, and it bodes incredibly well for the long-term performance of the company.

Airbnb is a leader in its field of the travel and hospitality industry, and it has become virtually synonymous with its category. Even if a friend or acquaintance ends up booking through a competing service, you might still hear them say that they “got an Airbnb”. This is a testament to the remarkable strength of the company’s brand and another encouraging sign that the title is poised to show exceptional long-term performance.

In the last quarter, Airbnb managed to roughly quadruple its sales compared to the period of the previous year and posted a 10% growth compared to the quarter before the pandemic in 2019. The company also has strong gross margins and shows impressive growth despite reduced spending in response to headwinds associated with the pandemic. More and more hosts and guests are joining the platform all the time, and Airbnb’s highly scalable business model offers huge potential for long-term profit.

There is a fantastic avenue for growth here, and I think investors will be well rewarded if they jump into the stock in the event of a downturn.

The man blows a cloud of vapor.

Image source: Getty Images.

A stock to weather any storm

Rich Duprey (Altria): Tobacco stocks like Altria may seem like the ultimate “cigar butt” investments, bringing down companies that are trading below their intrinsic value. Over the past decade, the S&P 500 has outperformed Altria, Philip Morris International, and British American Tobacco from 2 to 1 or more.

Warren Buffett gave these stocks his name, likening them to an investor picking up a cigar butt from the ground to take a few final puffs before it goes out. Tobacco stocks actually have a lot more to offer investors, and despite the headwinds Altria faces – or perhaps because of them – the company is in the best position to do so.

Like all cigarette manufacturers, the Marlboro brand owner is facing a secular decline in smoking and is exploring ways to alleviate user loss. The main route has been electronic cigarettes, such as the IQOS heated tobacco device from Juul and Philip Morris, but there are also a plethora of smoke-free alternatives, including nicotine sachets and chewing tobacco, and Altria has some. of the biggest brands in these spaces. , like Copenhagen and Skoal.

However, Altria is encountering difficulties with its various platforms. For example, the Juul e-cig has undergone rigorous regulatory scrutiny for its alleged contribution to teen vaping, and the FDA recently said it needed more time to decide whether to allow its e-cigs to stay in the market.

Likewise, Altria is responsible for the manufacture, marketing and sale of IQOS in the United States, but has so far only deployed it in a handful of markets (although the device is approved by the FDA for two years now). British American is suing him and Philip Morris for patent infringement, forcing Altria to suspend the planned national deployment.

Despite this, Altria still derives most of its money from traditional cigarettes and is able to increase prices several times a year to keep pace with the tax burden that state and local communities continue to impose on the country. cost of a cartridge. It is certainly the addictive nature of nicotine that keeps smokers coming back again and again, even if their numbers slowly decline over time.

This gives investors stability during a stock market crash, and Altria’s dividend, which currently earns 7% a year, provides a steady stream of income to weather any kind of storm.

10 stocks we prefer over Airbnb, Inc.
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Eric Volkman owns shares of Apple. Keith Noonan owns shares of Airbnb, Inc. Rich Duprey owns shares of Altria Group and Colgate-Palmolive. The Motley Fool owns shares and recommends Airbnb, Inc., Apple and Tesla. The Motley Fool recommends British American Tobacco and recommends the following options: March 2023 long calls at $ 120 on Apple and March 2023 short calls at $ 130 on Apple. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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