A Stock Market Crash Is Inevitable: 4 Surefire Stocks to Buy When It Happens

Those are the three words that can ruin an investor’s day: Stock market crash.

Even if it may be taboo to speak of a stock market crash, the fact is: a crash is imminent. We may not be able to say exactly when it will, but history is pretty clear that crashes and fixes are inevitable parts of the investment cycle.

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All signs point to a crash or steep correction in the not-too-distant future

As an example, we can look back more than six decades and find that no recovery from a bear market floor has ever been so robust or slick. In the three years after the last eight bear market lows, the benchmark S&P 500 (SNPINDEX: ^ GSPC) saw either one or two-digit declines in the double-digit percentage range. In other words, rebounding from a bear market is a non-straight up movement process that we have seen over the past 15 months.

For more evidence, take a closer look at the S&P 500’s Shiller price-to-earnings (P / E) ratio, which examines inflation-adjusted earnings over the past 10 years. On Monday June 21, its Shiller P / E of 37.5 is 123% above the 151-year average. Even more revealing, the S&P has lost at least 20% of its value as a result in the last four cases in which the Shiller P / E ratio exceeded and held 30. In this case, the story is most certainly not on the market’s side.

The use of margin is also worrying. Market analyst Yardeni Research notes that margin debt climbed to a new high of nearly $ 862 billion in May 2021, up around 60% year over year. In the past 25 years, there have been only three cases where margin debt increased 60% year over year. In the last two cases (the dot-com bubble and the Great Recession) the S&P 500 lost around half of its value.

All indications are that sooner rather than later the stock market will crash or correct sharply.

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These surefire stocks can make you rich

While this may be unnerving to some people, it is also an incredible opportunity. That’s because crashes and fixes are usually short-lived events. They also have a perfect track record of eventually being wiped out by bull market rallies. As long as you are buying good quality companies and holding your investments long-term, sharp declines are the perfect time to put your money on the stock market.

When the next crash inevitably hits, these four surefire stocks should make investors a whole lot richer.

alphabet

The idea of ​​buying a company that is heavily reliant on advertising in times when the US economy could be in recession may sound strange. But let me assure you, Alphabet (NASDAQ: GoogL) (NASDAQ: Goog) is just the kind of dominant company you’d want to add in times of increased volatility.

Long-term investors buying Alphabet would benefit from two factors. First, recessions and crashes / fixes are typically short-lived. In comparison, periods of economic expansion typically last several years, if not a decade. Alphabet simply waits during these brief downtrends and then basks in double-digit growth and strong advertising pricing power for its Google Internet search platform during lengthy expansions. According to GlobalStats, Google has controlled between 91% and 93% of the world’s internet search for the past two years.

The second reason Alphabet is such a surefire stock during a crash is because of its innovation. The content streaming platform YouTube is now one of the three most visited social sites in the world. Meanwhile, the cloud infrastructure services segment, Google Cloud, has grown steadily nearly 50% year over year. Google Cloud will be especially helpful by the middle of the decade as the higher margins from infrastructure services help catapult Alphabet’s operating cash flow.

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Innovative industrial real estate

Another surefire opportunity is cannabis-focused Real Estate Investment Trust (REIT) Innovative Industrial Properties (NYSE: IIPR). Innovative Industrial, or IIP, is acquiring medical marijuana growing and processing facilities with the aim of leasing these assets for extended periods of time.

One of the more obvious advantages of this strategy is that it generates very predictable cash flow. As of June, IIP owned 72 properties with 6.6 million square feet of lettable space in 18 states. According to the company, 100% of the properties are rented with a weighted average rental period of 16.8 years. It will likely take less than half that time for the company to fully repay its $ 1.6 billion in invested capital. In addition, IIP passes inflation-based rent increases on to its tenants annually, thus ensuring very modest organic rent growth.

In addition, Innovative Industrial is benefiting from the federal standstill in cannabis banking reform. With marijuana illegal at the federal level, cannabis companies struggle to get access to basic banking services. IIP solves this problem with its sale-leaseback program. With this program, IIP acquires real estate from Multistate Operators (MSO) against cash payment and immediately leases the purchased property back to the seller. This innovative program gives MSOs access to cash while also offsetting IIP long-term renters.

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UnitedHealth Group

Healthcare stocks are an incredibly smart place to put your money in during a crash or steep correction. That’s because the health sector is defensive. Since we cannot choose when we get sick or what ailments we develop, there will always be a demand for drugs, devices, and other health services, no matter how good or bad the economy (or the stock market) is doing. This is a big reason the UnitedHealth Group (NYSE: UNH) is such a winner.

Here’s a little thing you might not know: only a handful of stocks have made positive total returns (including dividends paid) in each of the past 12 years since the Great Recession. UnitedHealth Group is one of those 12, and their healthcare services segment is a big reason. Providing health insurance often results in predictable cash flows and strong premium pricing power. Despite this pricing power, somewhat constrained by the Affordable Care Act, UnitedHealth is bringing in more than enough new members that it remains a very profitable segment.

The other major growth driver for the UnitedHealth Group is its health services subsidiary, Optum. It has everything from pharmacy performance managers to data analytics used by hospitals and health-oriented organizations. Optum was actually UnitedHealth’s fastest growing operating segment, and it is a better choice for delivering superior long-term operating margins.

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Foreclosure

A fourth surefire stock that you can easily buy if a stock market crash or sharp corrections hit is salesforce.com (NYSE: CRM), which offers cloud-based customer relationship management (CRM) software. It is used by consumer-centric businesses to enter customer information, handle product / service issues, manage online marketing campaigns, and even offer real-time predictive sales analysis.

Worldwide CRM sales are expected to increase by a low double-digit percentage annually by the middle of the decade. Salesforce, on the other hand, will grow even faster. CEO Marc Benioff expects his company to increase total annual sales from $ 21.3 billion in the last fiscal year to over $ 50 billion in five years (fiscal year 2026). That’s certainly easy if his company controls nearly 20% of global CRM sales in the first half of 2020, according to IDC. That is more than the four closest competitors put together!

Salesforce also has a knack for integrating acquisitions and using buyouts as a platform to expand its offerings or to cross-sell its solutions. It has a $ 27.7 billion pending cash and stock deal to acquire Slack Technologies. While this deal opens up a new revenue channel for Salesforce, it’s all about the new presence in small and medium-sized businesses and the ability to use Slack’s platform to cross-sell its CRM solutions.

In short, Salesforce is unimpressed by a short-term crash or correction, which makes it a smart buy for investors.

This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.