3 great stocks to own in a stock market crash
A stock market crash is on the way. I’m convinced. What I’m not sure, however, is when this will happen. Maybe the market will crater this week. Maybe stocks will drop next year. It is possible that a major slowdown will occur in several years.
However, there is a virtual certainty that the market will tip over sooner or later. Does that mean that all stocks will be radioactive when this happens? Not at all. Here are three great stocks to own during a stock market crash – whenever the next one happens.
Some stocks go against the trend during major market downturns. Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) is usually not one of them. The stock fell almost as much as the S&P 500 Index during the huge market sell-off of 2008-2009 and the COVID-19 collapse in 2020.
So why is Berkshire a good stock to own during a stock market crash? On the one hand, the company’s core businesses, including insurance and railroads, tend to help its stocks rebound strongly after a major economic downturn. We see that happening so far this year, with Berkshire stock having jumped almost twice as much as the S&P.
However, I think there is an even better reason to own Berkshire Hathaway during the next stock market crash: its massive stockpile of cash. When the company announced its first quarter results earlier this month, it reported a cash position of $ 145.4 billion.
Warren Buffett is unlikely to spend much of that money on stocks that trade at a premium. This means that Berkshire will likely keep a large stock of cash until the next stock sale. Buffett and his lieutenants could save the truck and stock up on inventory during the next stock market crash. If they do, shareholders will likely reap the rewards for years to come.
General dollar (NYSE: DG) is one of those stocks that often perform well when the market is booming. Of course, it dropped last year when the COVID-19 pandemic first hit. However, the decline of discount retailers was much smaller than that of the major indices. Dollar General’s share price also retreated rapidly, and then beat the performance of the S&P 500 throughout 2020.
There’s a reason Dollar General often goes against the grain. Massive market sales are usually related to negative economic news. When the economy goes south, consumers have to tighten their purse strings. This makes everyday low prices at discount retailers like Dollar General more attractive than they normally would be.
But what if the next stock market crash is far away? Will the general dollar collapse if the economy is good? Fortunately, the answer is a resounding “no”. Retail stock more than doubled the returns of the S&P 500 in the five boom years leading up to 2020.
To be sure, reopening the economy after COVID-19 lockdowns could hurt Dollar General’s year-to-year comparisons in the coming quarters. However, this will only be a reflection of the strength of the company’s operations last year. Dollar General plans to continue to open new stores and renovate existing locations. Look for solid growth from discount retailers for a long time to come.
We can’t go back and see how the shares of Viatris (NASDAQ: VTRS) carried out during previous stock market crashes. This is because the generic drug maker was not a stand-alone entity until November 2020, when Pfizer (NYSE: PFE) merged its Upjohn unit with Mylan.
However, Viatris is on this list for one simple and straightforward reason: Pharmaceuticals stock is so cheap that it doesn’t have much room to drop. I am not joking. Viatris shares are currently trading at less than 4.5 times expected earnings.
I don’t expect Viatris to ever be a phenomenal growth story. There is a good chance, however, that it will be able to generate respectable sales and profit growth over the next several years as the company launches new products and realizes synergies through the Upjohn-Mylan merger. .
What Viatris will be is a solid dividend. The company recently launched a dividend program with a 2.9% dividend yield. Generics and biosimilars may not be the best deals. In the next stock market crash, however, I predict that investors who own Viatris will be glad they did.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.